In addition to the advances made by the Huntington group, the construction companies benefited substantially by the assistance rendered them by the Central Pacific. This was a sort of help which the Central Pacific itself and the persons who built it had never known. It took a variety of forms. A very obvious service which the Central Pacific could and did offer was the operation of sections of the Southern Pacific as fast as completed in connection with the Central Pacific main line. Besides this, the Central Pacific acted as banker when the construction companies had spare funds. More important still, the Central Pacific on occasion lent considerable sums to the Western Development Company. This was later denied by representatives of the Central Pacific, but the evidence seems conclusive that the loans were made.[186]
Similar advances were probably made by the Central Pacific to the Pacific Improvement Company,[187] and to the Contract and Finance Company, sometimes without interest. Money in the Central Pacific sinking fund was invested in this way, at interest.[188] Like use was made of surplus funds belonging to the Occidental and Oriental Steamship Company, which the Central Pacific was holding, until the Union Pacific discovered the matter, and, being interested in the money, demanded that its share be handed over.[189] There is even evidence that the associates borrowed money from the Central Pacific between 1874 and 1878, and that the treasurer of the company entered the sums taken on so-called “cash-tags,” carrying them as cash in his accounts.[190] How much all these transactions amounted to, it is very difficult to say, but it is probable that the aggregate was large.
Profits of Associates
There is no way of estimating the profits which Stanford, Huntington, Hopkins, and Crocker drew out of the Western Development, Pacific Improvement, and Southern Development companies. We know they were great, because the associates died very rich men. Mark Hopkins engaged in no important enterprise outside of his hardware business, except in railroad construction and operation, and yet in 1878 he left an estate appraised at over $19,000,000. Eleven years later, Charles Crocker’s estate was appraised at $24,142,475.84.[191] Stanford’s estate was not appraised in 1893, or at least no figures of value were made public, and Huntington did not die until long afterwards. Inasmuch as the associates up to 1878 were all interested in the same business together, and since the most important of their investments were in railroad construction work, it is fair to assume that the profits of the construction companies were considerable. Whatever they were it must, however, be remembered that they consisted in the main of Southern Pacific securities and of California real estate, neither of which were immediately salable. As a construction enterprise, the whole Southern Pacific affair was speculative. It was from the point of view of the owners of the Central Pacific alone that the construction of the Southern Pacific presented itself as a necessary policy, both for the protection of an existing investment, and for the full exploitation of the possibilities of monopoly in California.[192]
CHAPTER VIII
ORGANIZATION OF THE CENTRAL PACIFIC-SOUTHERN PACIFIC SYSTEM, FROM 1870 TO 1893
Extent of System
By 1877 the Central Pacific-Southern Pacific combination was in control of over 85 per cent of all the railroads in California, including all the lines of importance around San Francisco Bay, except the San Francisco and North Pacific Railroad, and in the Sacramento and San Joaquin valleys. Not only had the associates established the monopoly which they desired, but the operations of their system had reached an extent which they themselves would have thought inconceivable a few years before. The operated mileage of the Central Pacific-Southern Pacific line on June 30, 1877, was 2,337.66 miles, the capitalization $224,952,580, and the gross earnings $22,247,030. There was a continuous stretch of road from Ogden to Sacramento, San Francisco, and Oakland, and from these cities to Los Angeles and Yuma, by way of the San Joaquin Valley; while a line from Mojave to the Colorado River and The Needles was in course of construction.