The story of the first trans-continental railroad

by William Francis Bailey

Upon the completion of the Union Pacific the rates for both freight and passengers were fixed at what now seems a very high figure. Thus passenger fares locally were ten cents per mile. Complaints arising, the matter was taken up in Congress and steps taken towards the appointment of a Board of Commissioners who should have authority to fix rates, both freight and passengers.

The whole question of earnings and expenses of the line was an unknown quantity and as soon as experience demonstrated what was reasonable and just, the Company voluntarily adjusted their schedules,—until today the rates over the line are about on a parity with those charged by eastern lines through much more thickly settled states.

In 1869 the agitation looking to a bridge across the Missouri River in place of the slow and often unreliable ferry culminated, and on March 11th of that year the structure was commenced. Three years were required for the work and the first train crossed on March 11th, 1872. By an agreement made with the city of Omaha that city was to be made the eastern terminus regardless of the bridge. This, however, was upset by the decision of the Supreme Court of the United States declaring the bridge an integral part of the line and that it commenced in Iowa not Nebraska.

In 1870 the question of repayment of the Government Loans made in the shape of Bonds arose,—more particularly that of the interests accruing thereon,—the bonds themselves not falling due until 1895-1899. It was a question whether the lines were to pay this interest in cash or through services rendered in transporting men, materials, and mails for the Government. The matter soon got into the Courts and their decision as rendered by Justice Davis of the Supreme Court of the United States so fully and explicitly covers the ground as to warrant the somewhat lengthy extracts given below:

In his opinion, Judge Davis said, "This enterprise (the building of the Pacific Railroads) was viewed as a national undertaking for national purposes and the public mind was directed to the end rather than the particular means to be employed for the purpose. Although the road was a military necessity, there were other reasons active at the time in producing an opinion as to its necessity besides the protection of our exposed frontiers. There was a vast unpeopled territory between the Missouri River and Sacramento which was practically worthless without the facilities afforded by a railroad for the transportation of persons and property. With its construction the agricultural and mineral resources could be developed, settlements made, and the wealth and power of the United States essentially increased. And then there was also the pressing want in times of peace even of an improved and cheaper method for the transportation of the mails and supplies for the army and the Indians."

The policy of the country, to say nothing of the supposed want of power, stood in the way of the United States taking the work into its own hands. Even if this were not so, reasons of economy suggested it were better to enlist private capital and individual enterprise in the project. This Congress undertook to do, and the inducements held out were such as it was believed would procure the requisite capital and enterprise. But the purpose in presenting these inducements was to promote the construction and operation of a work deemed essential to the security of great public interests. Besides it is fair to infer that Congress supposed that the services to be rendered by the road to the Government would equal the interest to be paid. Congress well knew that the Government bound itself to pay interest every six months and the principal at the time the bond matured, resting satisfied with the entire property of the Company as security for the ultimate payment of the principal and interest.

This settled the interest question and the next one to arise was the question as to the payment of five per cent, of the net earnings towards the extinguishment of the Government indebtedness, as provided for in the act of 1862, viz., "And after said road is completed, until said bonds and interest are paid, at least five per centum of the net earnings shall be annually applied to the payment thereof." By act of Congress, June 22nd, 1874, the Secretary of the Treasury was directed to require this payment, failing which, to bring suit. The Supreme Court decided this in 1878 that the Company must pay this five per cent and defined net earnings as what was left out of the gross earnings after deducting all the expense of organization, operation, or for betterments paid out of earnings.

In 1878 the so called "Thurman Act" became law, by which a sinking fund was established looking to the extinguishing of the Company's indebtedness to the Government. This sinking fund was to be made up of one half the amount accruing on Government Transportation, the five per cent of net earnings, plus enough more of the earnings to make up in all twenty-five per cent of the total net earnings, but not to exceed eighty-five thousand dollars per annum,—this sinking fund to be invested by the Secretary of the Treasury in Government Bonds.

Up to 1879 the policy of the Company was to transfer all through freight at its eastern termini, none of its equipment being allowed to leave its own rails.

Soon after the absorption of the Kansas Pacific Railroad and through it the Denver Pacific Railroad, the Union Pacific entered upon a policy of extension by the absorption of other roads and building of branch lines.