These were the results which voters were led to expect. What happened was that the assessed valuation of the property of the Central Pacific in Placer County was $6,000 per mile as late as 1870, when the county sold its railroad stock; that the total railroad valuation was therefore $553,500, and that the county tax rate rose from 35 cents to $1.73½. Moreover, the railroad taxes for 1868 and 1869 were still unsettled and in dispute in 1870 and remained so until 1873. The total receipts of the county from all sources in 1869 were $127,492.54, of which $46,499.66 were for the state. Against the $80,992.88 remaining, the $20,000 of interest on the subsidy bonds was evidently a material charge.
It was probably not true in general that the financial embarrassment in which many of the counties of California were plunged late in the sixties was due to the pressure of interest charges on bonds issued in aid of railroad construction. The highest rates of taxation for county purposes uncovered by the special legislative committee of 1868 which investigated this matter, were $36.70 per $1,000 for Tuolumne County, and $40 per $1,000 for Calaveras County, neither of which counties had issued bonds in aid of railroads. Extravagance in assistance tendered to railroads was only one of the financial sins of which the counties had been guilty. Nevertheless the burden of outstanding indebtedness for railroads was often severe on communities of declining industry and population, and contributed to the later severe revulsion in popular sentiment with regard to the desirability of local aid to railroad enterprise.
Opposition by Other Transportation Interests
It is proper to mention at this point, also, as throwing light upon popular sentiment, the opposition of the smaller transportation interests of the state to the development of the Central Pacific project. These interests included the stage companies, the express companies, the toll roads, and the Pacific Mail Steamship Company. In the aggregate their influence was considerable, and it was constantly thrown against the granting of aid to the Central Pacific.
It is a curious commentary upon the effect of government subsidies, that the Huntington-Stanford group brought part of this opposition upon themselves by a deliberate refusal to buy up the Sacramento Valley Railroad for the reason that it was cheaper to build at the expense of the federal government from Sacramento to Auburn than to buy a railroad already in active operation for most of the distance between these points. In cold figures, it would have cost $400,000 to build a new line out of Sacramento, and $285,000, according to Central Pacific engineers, to put the Sacramento Valley Railroad in thoroughly good physical condition. But under federal legislation, to be described in a later chapter, only $250,000 out of the $400,000 would have to be paid by the Central Pacific in cash, leaving a clear gain of $35,000 if the policy of construction were pursued.[66]
The result of this decision was to cause the backers of the Sacramento Valley project to denounce the Central Pacific enterprise as a fraud.[67]
End of Local Subsidies
In the year 1868, a resolution was introduced into the California State Senate urging the appointment of a committee to investigate the use of moneys contributed by the state toward the construction of the Central Pacific Railroad. This resolution was indefinitely postponed by a vote of 18 to 17. The same year notices began to appear in the press, urging the legislature to oppose further railroad-aid legislation. In 1869, the Sacramento Union, while in favor of a grant to the Stockton and Tulare Railroad, urged the counties to go slow and to secure an amendment to the general railway law, reducing maximum transportation charges to 10 cents per passenger per mile, and 15 cents per ton per mile, before voting aid.
These were but symptoms of a profound dissatisfaction with the results of railroad subsidies. In the fall of 1869 both political parties pronounced against grants of state aid to railroads, but this could not prevent the passage of the so-called “Five Per Cent Act” of 1870, authorizing counties to subscribe to railroad stock up to 5 per cent of their assessed valuation; although it did encourage Governor Haight to veto two bills in March, 1870, the one authorizing the voters of certain counties in the San Joaquin Valley to donate their bonds to the San Joaquin Railroad Company at the rate of $6,000 per mile,[68] and the other providing for the construction of a railroad by the Southern Pacific through Monterey and San Luis Obispo counties, and permitting the counties interested to grant aid. The governor took the position that the proposed subsidies were not only unwise, but that they were unconstitutional for the reason that a donation to a private corporation was not a use of funds for a proper purpose.[69] After a fight which attracted much popular attention, the vetoes of the governor were sustained.
In 1871, Governor Haight was defeated for re-election by Newton Booth, the Republican candidate. In the following year, however, the Five Per Cent Act was repealed, and the period of local subsidies in California came to an end.