(4) The connection with Chicago.
As the system neared completion, and its territory came to be invaded by other roads, there were added to this systematic extension what may be called competitive extensions, consisting largely in the construction of branch lines, and multiplied beyond anything which the country could need for years to come. This sort of building was most prominent from 1884 to 1888 and will be considered in its place.
The first stretch of road was built with few difficulties or complications. It was commenced in 1869, and, after numerous delays, it reached the western border of the state of Kansas on December 28 of the same year; from this point it went on more leisurely, first west and then southwest, to Albuquerque.[401] These early miles were paid for from the proceeds of both stocks and bonds. From Albuquerque a variety of routes presented themselves. The Southern Pacific had by that time built to El Paso, and it was feasible to extend the Atchison to that point and to rely on a traffic agreement for the handling of the western business. Or, building to Deming near El Paso, Atchison might have extended its line down the river valleys in the northwestern part of Mexico to Guaymas on the Gulf of California. Or, Atchison might have built directly west from Albuquerque. All three of these routes were considered, and all three were eventually carried out.[402]
The connection with the Southern Pacific was not a very difficult one to make, and the Atchison reached Deming in March, 1881. By the traffic agreement then concluded the Atchison secured the use of the Southern Pacific tracks from Deming to Benson, Arizona, and arranged to build south into Mexico from this point; while the Southern Pacific was allotted 51 per cent of the through rate on traffic passing over Southern Pacific lines.[403] This formed the second through route from the East, and in September, 1881, it took one-quarter as much business as the Central Pacific. It was also the first of Atchison’s projected routes to be completed. The line to Guaymas was added by purchase. Instead of building, Atchison exchanged its stock for the stock of the already existing Sonora Railroad in the proportion of one to two, and guaranteed the interest on the Sonora first mortgage 7 per cent bonds.[404] This made up for the lack of an independent line to the coast further north. The total of Sonora stock was $5,400,000, requiring $2,700,000 Atchison stock in exchange. The total first mortgage 7 per cent bond issue was $4,050,000. With the railroad came a subsidy of $2,608,200 (American gold), equal to $11,270 (Mexican) per mile. This subsidy kept cropping up in Atchison finance for some time, and was finally adjusted in 1896 by the transfer to the company of $1,159,800 in 3 per cent bonds of the Mexican Interior Consolidated Debt.
For the direct route President Strong sought the help of the St. Louis & San Francisco, and the use of the charter of the Atlantic & Pacific which it owned. The Atlantic & Pacific was a road incorporated in 1886, with a charter to build from St. Louis to California. In spite both of its charter and of its name it had never gone further west than Vinita, in the northeast corner of Indian Territory.[405] President Strong and the Frisco now agreed to continue construction under the name of the Atlantic & Pacific, both from Vinita and from Albuquerque. The Atchison was to be given a half-interest in the charter, directors were to be chosen equally from the two companies, and the cost was to be met by a $25,000,000 loan, which the Atchison and the Frisco were to guarantee jointly but not severally.[406] Before the new construction neared completion, however, the St. Louis & San Francisco fell under the control of Messrs. Gould and Huntington, who, as owners of the Texas & Pacific and the Southern Pacific respectively, naturally disapproved of the plan to extend the Atlantic & Pacific to the coast. The Atchison, therefore, agreed to build no further west than the Colorado River. At that point the Southern Pacific was to meet it with a line from Mojave. The Southern Pacific gave to the Atlantic & Pacific an interest guarantee on its bonds to the extent of 25 per cent of the gross earnings derived from Atlantic & Pacific through business, and the latter road retained all its rights for a line in California.[407] This proved unprofitable, for the Southern Pacific persistently diverted traffic to Ogden and El Paso, and in 1884 still another arrangement was made. By this—
(a) The Atlantic & Pacific bought the Southern Pacific division between the Needles (the Colorado River) and Mojave, 242 miles, for $30,000 per mile, and, until such time as title could be given by the discharge of the mortgage upon it, took a lease at an annual rental of 6 per cent on the purchase price.
(b) The Atlantic & Pacific secured trackage and traffic rights and facilities between Mojave and Oakland and San Francisco, as well as the use of terminals at the latter point.
(c) The Atchison (and the St. Louis & San Francisco likewise) agreed to buy from the Pacific Improvement Company first mortgage bonds and other securities of the Atlantic & Pacific of the par value of $3,096,768, at the actual cost to the Improvement Company, to wit, $1,524,356.
To complete the connection to the coast the Atchison built from Waterman, some seventy miles east of Mojave on the Atlantic & Pacific, to Colton on the Southern Pacific, and secured control of the California Southern from Colton to San Diego.[408] In 1885 entrance was obtained to Los Angeles by lease of the Southern Pacific track between Colton and that city.[409]
The money for this rapid progress was obtained by the sale of both stocks and bonds, but on the whole stock predominated. The directors rightly considered it much more conservative to issue stock and sell it at par than to load the road down with a heavy debt in the shape of bonds; and what is more, they were able to make good their word, and to sell stock at or near par in spite of the risk incident to operations such as the Atchison was conducting and the frequent bonuses or stock dividends declared.