Chapters on the History of the Southern Pacific

by Stuart Daggett

The San Fernando tunnel to which Mr. Newmark refers is located 27 miles north of Los Angeles in the valley of the same name. It lies along the most direct and convenient route from Los Angeles into the San Joaquin Valley. Because of its length, nearly one and a quarter miles, and the unfamiliarity of the people of the coast with projects of this kind, there was much interest in the work and many doubts as to whether it could succeed. Governor Stevenson was credited with the statement that a tunnel could not be constructed. Other critics maintained that people could never be induced to travel through so long a tunnel, and that in any case the winter rains would cause it to cave in, to which Stanford replied that it was “too damned dry in Southern California for any such catastrophe.” So far as the records now show, however, there was no unusual obstacle encountered in the work, although the slowness with which the bore advanced and the large expense connected with construction caused considerable anxiety to the management of the Southern Pacific.

Western Development Company

In carrying out their plans for the occupation of Southern California, the Huntington group naturally followed the same general policy that had proved profitable to them in the case of the Central Pacific. That is to say, they organized construction companies, controlled by themselves, caused these companies to contract with the Southern Pacific for the construction of specified sections of line, and in their capacity as stockholders of the Southern Pacific required that company to issue and turn over large quantities of stocks and bonds in payment for work done. No further comment upon this method of procedure is necessary.

The first construction company which did work for the Southern Pacific, under the plan outlined in the preceding paragraph, was the Contract and Finance Company. This was the same organization that had completed the Central Pacific. It appears that the Contract and Finance Company simply shifted men, teams and equipment from the Central Pacific to the Southern Pacific line between San José and Tres Pinos. Later it built the road from Goshen to Sumner, and that from San Fernando via Los Angeles to Spadra. In all, it built for the Southern Pacific 143.65 miles, including the stretch from Gilroy to Tres Pinos. In 1874 the Contract and Finance Company was dissolved and the Western Development Company took its place.

The Western Development Company was incorporated December 15, 1874, for the announced purpose, among other things, of carrying on construction, manufacturing, mining, mercantile, mechanical, banking, and commercial business in all their branches, and also for the purpose of constructing, leasing, and operating all kinds of public and private improvements. That is to say, its powers were made as extensive as could well be imagined. Stanford, Hopkins, Huntington, and Crocker each held one-fourth of the stock.[180]

Under date of February 2, 1875, the Western Development Company agreed to construct a railroad and a telegraph line on the routes selected by the Southern Pacific, between certain specified termini. The mileage actually built was that from Sumner to San Fernando, from Spadra to Fort Yuma, and from Goshen to Huron. Bills were rendered for this work on the basis of $72,000 per mile, or $29,153,520 for 404.91 miles, half in Southern Pacific first mortgage bonds and half in stock.[181]

In addition to its contract with the Southern Pacific, the Western Development Company undertook certain miscellaneous construction, including work on the Northern Railway, and the San Pablo and Tulare Railroad, the building of steamers for the Central Pacific, bridges and buildings for the Central Pacific and Southern Pacific, general repairs for the various companies controlled by the associates, and even finally private residences for Hopkins, Stanford, and Crocker. In short, during its existence the Western Development Company, besides completing the major part of the Southern Pacific, did incidental building of any sort which the associates desired to have done.

Pacific Improvement Company

The death of Mr. Hopkins in 1878, and the temporary unwillingness of Mrs. Hopkins to participate in the financing of new construction, together with the death of Mr. Colton in the same year, led Stanford, Huntington, and Crocker to close up the affairs of the Western Development Company, and to continue their more or less speculative building enterprises under a new organization. This new company, incorporated November 4, 1878, was known as the “Pacific Improvement Company.” Its relations to the Southern Pacific and to the associates were the same as those of the Western Development Company, except that Mr. Colton, who had taken one-ninth of the Western Development Company stock in 1875, was not a stockholder, and that Mrs. Hopkins at the beginning took no part. Even the capital stock was placed at the same amount, $5,000,000.

The main accomplishment of the Pacific Improvement Company was the construction of the Southern Pacific between Mojave and The Needles. Besides this, however, it extended the Southern Pacific from Soledad to San Miguel, built the Southern Pacific in Arizona and the Southern Pacific in New Mexico, completed the California and Oregon, and Oregon and California railroads, and continued the Northern Railroad from Willows to Tehama. The contracts made were similar to those executed by the Western Development Company, although the consideration varied.[182]