entire indebtedness of the company is $19,264,684.99. There are 443.86 miles of the main line of this road in operation, (and 36.94 miles of sidings,) 111 miles of which has been completed since the date of their last report. On the 8th March last you accepted 127 miles of this company's road. Denver Pacific Railroad stock to the amount of $4,000,000 has been subscribed and paid, being the total amount authorized by law. The receipts for the year ending 30th June, 1877, were, for transportation of passengers, $161,722.96; of freight, $171,165.29; miscellaneous, $2,880,65; total, $335,768.90. The expenses for said year were $189,370.20; leaving net earnings $146,398.70. The cost of construction and equipment of the road (106 miles) has been $6,495,350. The indebtedness of the company is $2,595,829.91. INDEBTEDNESS OF THE RAILROAD COMPANIES TO THE UNITED STATES. Under the act of 1st July, 1862, and 2d July, 1864, subsidy bonds were issued by the United States to six railway companies (Central Pacific, Kansas Pacific, Union Pacific, Central Branch Union Pacific, Western Pacific, and Sioux City and Pacific) to the amount of $64,623,512. These bonds, having thirty years from date to run, will mature, some in 1896, others in 1897, and others in 1898. The semi-annual interest paid on them will amount, at maturity of the bonds, to $116,322,321.60 at simple interest, and to $316,112,571.79 if compounded, or, the principal added thereto, $180,945,833.60 and $380,736,083.79 respectively. WHAT THE PACIFIC RAILROAD COMPANIES HAVE PAID THE GOVERNMENT. Section 6 of the act approved July 1, 1862, provides that "all compensation for services rendered for the government shall be applied to the payment of said bonds and interest until the whole amount is fully paid." This, however, was amended by section 5 of the act approved July 2, 1864, which provides that "only one-half of the compensation for services rendered for the government by said companies shall be required to be applied to the payment of the bonds issued by the government in aid of the construction of said roads;" which amendment was confirmed by section 9 of the act approved March 3, 1871, enacting "that the Secretary of the Treasury is hereby directed to pay over in money to the Pa cific railroad companies for * * * * * * * one-half of the compensation services heretofore or hereafter rendered." The amount of one-half of transportation-accounts for carrying mails, troops, supplies, &c., which has not been paid to the companies, but which has been applied by the government to the payment of their indebtedness, and covered into the Treasury for that purpose, to October 31, 1877, is as follows, viz: Union Pacific Railroad Company................... ... ........... $3, 657, 139 95 1, 423, 555 74 The amount of one-half of the same accounts, which has not been paid to the companies, but withheld under provision of section 2 of the act approved March 3, 1873, whereby the Secretary of the Treasury was directed to withhold all payments, &c., and also under a stipulation entered into as regards the Union Pacific Railroad Company, whereby the judgment against the United States in case No. 571, Осtober term, 1875, of the Supreme Court, was not to be collected until after final judgment in the suit to recover sums claimed to be due to the United States as the five per cent. of net earnings, and which has been applied by the government to the payment of their indebtedness and covered into the Treasury for that purpose, is as follows, viz: In addition to this sum, the amount of transportation-accounts rendered by the companies for services performed, and which remained unpaid October 31, 1877, for lack of proper appropriations or for reason that they were in process of settlement, is quite large, and, from the best information to be obtained, is as follows, viz: Total amount paid and to be paid as one-half of transportation-accounts to October 31, 1877, is, on above basis, $7,703,697.34. The indebtedness of the companies to the government to October 31, 1877, is as follows, viz: Total..... 64, 623, 512 00 28, 493, 685 86 93, 117, 197 86 These amounts are subject to increase or decrease as to total indebtedness by the application of the $2,285,216.18 and the $2,465,000 before stated, as the Supreme Court may decide in the suits now pending. SINKING-FUND. The Supreme Court of the United States, at the October term, 1875, held, in the case of The United States vs. The Union Pacific Railroad Company, (1 Otto, 72,) that the companies cannot be required to pay the interest on the bonds until the maturity of the principal. This decision of the court of last resort leaves the United States powerless, under present laws, to obtain, before the maturity of the bonds, any return for the large sums advanced and to be advanced to the companies, except the one-half compensation for services rendered to the government, and the 5 per cent. of the net earnings of the roads after completion. These sources are so entirely inadequate to reimburse the United States, that various measures have been suggested for securing payment at the maturity of the bonds. The president of the Union Pacific Company, in a letter addressed to the Secretary of the Treasury on the 9th February, 1875, proposed the establishment of a sinking-fund by the annual payment of $500,000 for twenty years, and of $750,000 thereafter. This proposition was afterward modified so as to offer to pay $500,000 for ten years, $750,000 for ten years, and $1,000,000 beginning 1st July, 1895. These sums include the charges against the government for transportation and mail-service. The Central Pacific Company shortly afterward made propositions on the same subject. What is known as the Lawrence bill, which passed the House of Representatives at the first session of the Forty-fourth Congress, requires the Union Pacific Company to pay semi-annually the sum of $994,731, which sum, according to the statement of the Judiciary Committee of the House of Representatives, is necessary to meet the principal and interest due at the maturity of the bonds. Other sums are required by said bill to be paid by the other companies. The proceeds from transportation and mail-service, and 5 per cent. of net earnings, are not included in these sums. The government directors of the Union Pacific Company, in their last annual report, express the opinion that a semi-annual payment of $500,000, compounded at 6 per cent., together with the one-half of the charges for transportation and the 5 per cent. of the net earnings, will suffice to meet all the liabilities of said company to the United States at the maturity of its bonds. According to their figures, these three items would amount to nearly two millions of dollars a year, and on their estimate of the amount that would be received from the one-half transportation and 5 per cent. of net earnings, the sum-total received would vary but little from that named in the Lawrence bill. As this important subject is already receiving in Congress that earnest attention which the magnitude of the interests involved deserves, I deem it unnecessary to go into an elaborate discussion of any of the plans proposed. That the law contemplates, and the public interest demands, the full reimbursement to the United States of the whole amount, principal and interest, advanced for the railroad companies, is unquestionable, and I beg leave to offer the following presentation of the ability of the Pacific Railroad Companies to discharge their indebtedness to the government. THE ABILITY OF THE PACIFIC RAILROAD COMPANIES TO PAY. In addition to the one-half of transportation accounts for services rendered, the amount of which has been withheld and applied upon the indebtedness of the companies, the act approved July 1, 1862, section six, requires "that, after said road is completed, until said bonds and interest are paid, at least five per centum of the net earnings of said road shall also be annually applied to the payment thereof." The following approximation is made of the amount due from the companies on this account, exclusive of interest accrued by reason of nonpayment annually, to October 31, 1877, viz: Including Omaha bridge earnings and operating-expenses, which are omitted from the published reports of the company. Upon the basis of fifs of the total earnings and expenses, which is subject, however, to investigation as to the actual earnings and expenses of the remaining portion of the road. Consolidated with C. P. R. R. June 22, 1870. An inquiry into this deficit is in progress. Interest at the rate of 6 per cent. per annum being added to this sum of $4,950,000, from the time when the annual applications thereof should have been made, will increase it to more than $6,000,000, which is the amount immediately involved in the pending "Five-per-cent." suits. The ability of the Union Pacific and Central Pacific Railroad Companies to pay the above sums is fully demonstrated by the following facts, figures, and comparisons: Omitting the Union Pacific and Central Pacific Railroad Companies from the enumeration, there were at the close of the year 1876, eight hundred and nine (809) railroad companies in operation in the United States, owning 76,258 miles of road. Of these, 181 only paid dividends; 30 paid 8 per cent., 36 paid over 8 per cent., 115 paid under 8 per cent., and 628 paid no dividends. Of these 809 companies, the earnings of 31 were insufficient to pay "operating-expenses," the earnings of 170 were insufficient to pay "operating-expenses" and "interest," and 216 defaulted on their "bond-interest." The Union Pacific Railroad Company, and the Central Pacific Railroad Company, did better than ever before in the year 1876, notwithstanding the fact that all other railroad companies suffered from the great depression of trade and industrial enterprise. (See pages XV and XVI of Poor's Manual, 1877.) Excepting these two companies from the calculation, but 344 per cent. of the capital stock invested in railroads pays a dividend; the average rate per cent. of dividends paid is but ; but 684 per cent. of the bonded investment in railroads receives interest, and the average rate of interest is but 4 per cent. The two railroads named pay 8 per cent. dividends on capital stock, and 6 per cent. interest on their bonded debt. On the "one-hundred miles basis" a comparison between all other roads in the United States and these two roads for the year 1876, is as follows, viz: *Construction, new equipment, and improvements evidently enter largely into this amount for "operating-expenses." To illustrate still more fully the ability of the Union Pacific and Central Pacific Railroad Companies to earn money, and with a proper disposal of their earnings in due time to pay off all of their indebtedness |