THE
Vermont Central
vkieiont and canada
railroads.
REPOKT ÜF TRUSTEES AND .MANAGERS, AND ACTION OF
THE STOCK AND BOND HOLDERS, AT HORTICULTURAL
HALL, BOSTON. OCT. 2, 1872.
/
/
BOSTON :
PRINTED BY RAND, AVERA^ & CO., 3 CORNHILL
1872.
M 'i
THE
Vermont Central
AND
VERMOxXT AND CANADA
railroads.
EEPORT OF TRUSTEES AXD MANAGERS, AND ACTION OF
THE STOCK AND BOND HOLDERS, AT HORTICULTURAL
HALL, BOSTON, OCT. 2. 1872.
BOSTON :
PRINTED BY RAND, AVERY, & CO., 3 CORNHILL.
1872.
REPORT OP THE TRUSTEES AND MANAGERS
«
OF THE
VERMONT CENTRAL RAILROAD.
A MEETING of tile Stock nnd bond holders of the Vermont Central
and the Vermont and Canada Railroads was held in Iloi'ticnitural Hall
in Boston on the "2(1 of October, to hear the report of the trustees
and managers of the line in regaril to its present financial condition.
There was a large attendance. The meeting was called to order by J.
Gregory Smith, President of the Board of Managers, who said that the
ti'ustees and managers, under the peculiar coiulition of the Vermont
Central and Vermont and Canad.i Railroads, have thought it wise and
proper to ask their security-holders to meet the trustees, and hear from
them a report in regard to the charges which are so widely made
against them ; and they were here to-day for that purpose. He would
suggest the propriety of organizing the meeting by the appointment of
a chairman.
Gen. James S. Whitney of Brookline, Mass., was chosen chairman,
and Mr. Charles E. Billings of Newton, secretary.
The chairman then read the call for the meeting, as published in the
daily papers, and called upon Mr. Smith to read the official report of the
managers and trustees u|)on the condition of the road. That gentle¬
man proceeded to do so, and prefaced it with the following remarks :
"Before beginning to read my report, it may perhajis be pi'oper for me
to say that the e.xtraordinary character of the assaults which have been
made upon the manngei's of the Vermont Central and the Vermont and
Canada roads, seem to demand from them as full an e.xposition of the
affairs of the company as it was possible for them in the limited period
of time allotted them to make it. Therefore, if the report of the man¬
agers is somewhat length}-, I have only to ask your patient indulgence
while I submit it to you."
4
the eepoet.
To the Security-llolders of the Vermont and Canada and Vermont
Central liuilroads : —
Gexti.emex, — In submitting their rejiort, tlie trustees and managers
do not feel called upon to reply to the wanton attack made upon their
personal character, nor to altenipt any specific refutation of the charges
of corrupt practices preferred against them in the public ju'ess, fiirther
than a simple statement of facts and a truthful history of the adminis¬
tration of their trust may in themselves afford a denial of the truth of
these charges.
The duties of the trustees and managers are of a higher character
than a sim]de vindication of themselves. The charges which have been
made so publicly of maladministration stiike a fearful blow at parties
and interests beyond and of higher importance than the personal status
of the individuals who compose the board of management. They affect
the values of all the securities of the road held by innocent jiarties.
They strike at the vital energies of a great public enterprise, valuable to
the State and community through which it runs, and of immense
im])ortanoe to all the commercial relations and interests of a great city.
Wanton assaults upon it, therefore, and in such a public manner, even
if the grounds for such charges were true, cannot be justified upon any
principle of sound ])olicy; and when, as in this case, these sweeping
charges of coi-ruption and ¡lersonal aggranilizement are without real
foundation, it becomes only the more reprehensible and inexcusable.
If wrong existed in the management, it was easy to reach and correct
it without ruining the enterprise; it was easy to reach and ])unish the
wrong-doers without utterly prostrating all the securities held by inno¬
cent jiarties. It is a source of regret, therefore, to the managers, th.at
any public journal claiming a position of respectability should lend its
columns and its influence to assail in so violent a manner the standing
and credit of a road like this, until at least it was well assured from a
ju'oper examination of all the facts that its charges could be sustained
and were, in fact, true.
coxditiox of the eoad when the teustees weee appointed.
A brief reference to the history of the road, from the date of the first
connection of a portion of the present managers with it, is necessary to a
proper understanding of the true position of the road, and its relations
to its security-holders.
At the date of their entering upon the management of the property,
the road was deeply involved in litigation. The rent of the Vermont
and Canada Road was largely iu arrears ; and a bill in chancery was pend-
5
ing to establish the right of that company under the lease to the
possession of its own and of the Vermont Central Road.
The fi rst and second mortgage bondlioldei-s, parties defendant to this
bill, denied the validity of the Vermont ami Canada lease, and their
right to the possession of the Vei'inont Central for the recovery of their
overdue rents.
Tire first-mortgage bondholders also had a bill in chancery pending to
foreclose their mortgage ; and various other suits growing out of and
incidental to these were ]iending. In addition to this, the legislature
of the State of Vermont had at its jrrevious session passed an act imposing
u]ron the Vermont and Canada Company, as a conclition to the preserva¬
tion of its charter, the necessity of constructing a branch into Biulington
to connect with the Rutland and Burlington Road by a circuitous and
e.vpensive route, which, according to the estimate made, would involve
the Vermont and Canada Company in the expenditure of over a million
of dollars.
In this condition of the affairs of the company, the road had become
greatly impoverished ; its road-bed and track were in a sadly depreciated
condition, tlie iron hardly safe to run over, nearly two-thirds of the
Vermont Central between Windsor and Burlington at sub-grade, and
nearly all the Vermont and Canada without ballast, and a portion of it
on trestles, the ecjuipment largely depreciated, the bridges badly deca)'ed,
and many of them requiring immediate reconstruction. The attention
of the managers was absorbed and distracted in attending to the law¬
suits which were prosecuted with great hitteruess, and no time left them
to look after the business of the road nor to develop its resources and
traffic.
COMPROMISE OF PARTIES.
At this juncture of its affairs, an effort was made to compromise and
settle on a satisfactory basis all the then pending litigation. After a
pi'oiracted negotiation, a settlement was effected establishing the validity
of the Vermont and Canada lease, and providing for the payment of its
accruing rents, and also for the I'ents overdue, which had accumulated
during the period of litigation. Provision was also made for the construc¬
tion of the branch into Burlington on an improved line and at a reduced
cost. The change in the route reduced the cost to less than 8100,000. To
accomplish this change in the route, however, the sanction of the legis¬
lature was necessary, and the consent of the Rutland and Burlington
Road was required. These were obtained in the fall of 1859, but on
condition that the branch should be completed within a brief period.
Subsequently a new compromise between the bondholders of the first
and second mortgages and the Vermont and Canada was made, by which
6
the overdue rents of the Vermont and Canada Railroad were capitalized
in part, and the capital of that cotnjiany increased from one million three
hundred and forty-eiglit thousand five hundred dollars to two millions
of dollars ; and the overilue coupons of tiie first-mortgage bonds,
amounting to over a million of dollars, were funded, and the fii'st moit-
gage increased from two millions to three millions of dollars, and ex¬
tended for twenty years. The trustees and managers were also required
to pay to the Vermont and Canada stockholders the sum of $97,000,
balance of overdue rents, in three years after date, with intei-est. The
second mortgage was to surrender its coupons, — all of which, together
with the ]irinci])al of the mortgage, were overdue, and the same was to
be extended for twenty-five yeai-s.
The stock of the Vermont and Canada was also further increased to
the extent »f $250,000, to be distributed among the holders of the first-
mortgage bonds in payment of their cou|ions.
This compromise, effected by negotiation of leading representatives of
the various classes of securities, was subsequently embodied in a deci'ee
of the court of chancery of the Stale. The decree of the court, how¬
ever, being only professedly an aid to the jiarties in carrying out the
compromise, could not, of course, become bimiing upon all so as to jier-
manently establish the rights of the parties, except in one of two ways;
Ist, by the individual assent of all the holders of the securities embraced
within the scope of the decree ; or, 2d, by the acquiescence of the
parties.
In order, therefore, to give validity to this decree, and so render it
obligatory upon all, the several stockholders and bondholders, as they
received the new shares allotted to them in the Vermont and Canada
stock under the decree, and the now coupons under the two mortgages
by which the time on each was extended, were invited to execute their
receipt therefor, and assent to the conditions of the compromise. In
this way the decree became of binding force upon all.
By the terms of this compromise it was provided that the road should
be held permanently in the hands of the court of chancery, and the
earnings, after paying the expenses of operating and maintaining the
property, should be distributed among the holders of the several classes
of securities according to their order of ¡uiority.
By the provisions of this last decree, the status of the parties became
fixed, and the relations of the trustees and managers to the properly
and to the security-holders were established; while at the same time
their relations to the public as common carriers, charged with the duties
aud incidents attaching to such a position, were defined.
7
DEVELOPMENT OF THE EOAD.
From the date of the settlement of the conflict among the security¬
holders, the road began to develop its business.
The fact tbat harmony was restored inspired confidence: the public
were re-assured ; and all the material elements of growth and prosperity
began to manifest themselves along the whole line. The stimulus thus
given to the business created new and constantly-increasing demands
for enlarged facilities, and these, in their turn, created the necessity for
increased expenditure. The limited and depreciated equipment was
soon found to be inadequate to meet the demands of the increasing busi¬
ness. Additional trains were required, and, as these increased in number,
tbe necessity for improved track in order to secure an economical work¬
ing of the road was rendered more imperative.
These improvements and enlargements required a large outlay of
money, and, with a road under corporate management, would have been
supplied by an increase of its capital account, ami thus the earnings of
the road would have been held legitimately to be applied to the payment
of dividends. But, under the peculiar management incident to a road in
the charge of the court, the road had no means out of which to meet
these necessary expenditures but the earnings of the road itself, except as
money was from time to time obtained upon the credit of the manage¬
ment. As these necessities forced themselves upon the managers,
authority was given by the court to make, in some instance.s, long loans,
or to convert temporary loans into funded loans, and these loans now
constitute the trust liabilities oí tiie management, and are, from the very
necessities of tbe case, a first charge upon all the property in the hands
of the managers.
The branch into Burlington was constructed out of the earnings of
the road. The wharves at Burlington, to accommodate the large lum¬
ber-business, were built ; then followed the purchase of the Staiistead,
ShcflTord, and Chambly Railroad, and immediately thereafter came the
demand for the construction of the new road to Canada line in the
town of Highgate, in compliance with the charter of the Vermont and
Canada.
LOANS AUTHORIZED BY THE COURT.
In 1865, the wants of the road, thus rajiidly expanding by the opening
of new avenues for busine.ss, demanded large increase of facilities; and
for this ])urpose authority was given to make a loan on ten years' time,
and the first equipment bonds were issued. This loan, as stated in the
8
order made by the chancellor, was for the purpose of purchasing equip¬
ment, and for necessary improvements.
In 1807, an addilii)nal increase of the cajiital stock of the Vermont
and Canada Road was authorizeil to the e.vtent of two hundred and
fifty thousand dollars, which was to be exjiended, first, in payment of
the 897,000 and interest, amounting in all to about $114,500, due that
company under a former decree, and which was about maturing, and to
pay dividends falling due 1st June, 1867 ; and the balance was to be sold
to supply the extinguishment of trust liabilities.
Authority was also given to issue the notes of the trustees and mana¬
gers to the amount of five hundred thousand dollar.s, and to secure the
same by a pledge of the stock and first-mortgage bonds of the Stan-
stead, Shefford, and Chambly Railroad, in the hands of the trustees and
managers, and which are now held by the managers as assets for the se¬
curity of these notes.
The said notes thus issued were to be delivered to the holders of the
first and second mortgage bonds in payment of coupons maturing in
June and December then following. Of these notes $443,800 have
been issued and disposed of in accordance with the decree of the court.
The balance are now in the hands of the trustees and managers as
assets.
The trustees and managers were also authorized to borrow three hun¬
dred thousand dollars to extinguish the liabilities of the trustees and
managers incurred in the development and improvement of the prop¬
erty.
In 1869, a further loan of five hundred thousand dollars was author¬
ized, and if approved by the committee of the first and second bond¬
holders, and the necessities of the road required it, an additional five
hundred thousand ; making in all one million of dollars.
In 1871, authority was'granted the Vermont and Canada to further
increase their capital stock to the amount of five hundred thousand
dollars, and to deliver the same to the trustees and managers in settle¬
ment of certain exjienditures made by the trustees and managers for
and in behalf of the Vermont and Canada Road ; and also authoilzed and
empowered the trustees and managers to issue their notes to the amount
of one million of dollars, to be indorsed and guaranteed by the Ver¬
mont and Canada Company, for the purpose of paying the liabilities
incurred by the trustees and managers in supplying equipment and in
other necessary improvements of the property.
All these several orders and decrees were made by the consent and
with the approbation of the Vermont and Canada Company and the
committee of the first and second mortgage bondholders.
9
AMOUXT OF THE SECURITIES.
The amount of all these securities may, therefore, be stated thus :—■
Vermont and Canada original stock $1,348,500
Addition by compromise decree to pay back rents » ' 651,500
Addition to pay bondholders 250,000
Toward building Swanton branch 250,000
To reimburse trustees and managers for expenditures on their
account 500,000
$3,000,000
Original first mortgage $2,000,000
Increase to pay back coupons 1,000,000
S. S. and 0. bonds to pay coupons of first and second
" mortgages 500,000
Equipment bonds 2,000,000
Vei-mont and Canada guaranteed 8's 1,000,000
6,500,000
$9,500,000
The interest on this debt, chargeable upon the funds of the road, is as
follows ; —
Vermont and Canada stock $3,000,000 8 per ct. $240,000
First-mortgage bonds 3,000,000 7 " " 210,000
S. S. and C. bonds 500,000 7 " " 35,000
Equipment loan 2,000,000 8 " " 160,000
Vt. and Can. guaranteed 8 per ct 1,000,000 8 " " 80,000
$9,500,000 $725,000
THE TRUST DEBT.
Of this sum there is properly chargeable to the trust, as funds for
which they should account, the following : —
1. Issue Vermont and Canada stock towards constructing
S wanton branch 250,000
2. Issue of Vermont and Canada stock to reimburse fund for
building Burlington branch, and other expenditures.... 500,000
3. Equipment loans 2,000,000
4. Vermont and Canada 8's 1,000,000
The bonds known as the Stanstead, Shefibrd, and Chambly bonds,
.although perhaps properly a trust debt, are nevertheless secured by the
10
bonds of the Stanstead, SheiFord, and Chambly Railroad, amounting to
over six hundred thousand dollars, and about five hundred thousand dol¬
lars of the stock of that road.
Tlie bonds and stock of the S. S. and C. Railroad thus held by the
trustees and managers carry, in fact, the title to tliat property ; and the
notes of the trustees and managers issued on the strength of the pledge
of those are therefore substantially the first-mortgage bonds of the S. S.
and C. Railroad, and, having been issued for the specific purpose of dis¬
tribution to the bondholders, ought not, in fairness, to be reckoned as
part of the trust debt against the management.
Th ese bonds and stocks are, however, entered jjroperly as assets in
the statement of the treasurer given below, and it is believed that they
are a good and ample security for the notes of the trustees and mana¬
gers.
THE 5IISSISQU0I nOAD.
There should be added to the above interest account the interest on
the Missisquoi bonds, so called. The principal of these bonds is not a
trust liability. The bonds are issued by the Blissisquoi Railroad, and
secured by a first mortgage on that road. The road is about twenty-
eight miles in length, extending from St. Albans to Ricbford, and runs
through the rich and fertile valley of the Missisquoi River, — the great
dairy-producing portion of Franklin County. The trustees and mana¬
gers liave leased the road on a durable lease, agreeing to pay therefor as
rental forty per cent of the gross receipts of the road, and have guaran¬
teed that the forty per cent shall be equivalent to the interest on the
$500,000 of the first-mortgage bonds.
If in any year the forty per cent of the gross receipts shall be insuffi¬
cient to pay this interest, then the deficiency advanced by the trustees
and managers constitutes a debt against the road, to be paid back out of
the earnings.
The road is one that can, be economically operated. The country
through which it passes is thickly populated, and is an exceedingly rich
one. Besides the dairy-products, there are extensive timber-districts,
composed principally of the finest spruce and hemlock, which will thus
be opened to market. There are also rich mineral deposits along the
line, prominent among which are iron ore and yellow ochre, existing, it
is believed, in large quantities, and of the richest quality.
The towns on the line of the road contributed, by way of town-bonds
authorized by act of the legislature, to the extent of $231,000, the pro¬
ceeds of which were expended upon the road, and formed the basis of
the first-mortgage bonds. It is a valuable feeder, and will soon be a
remunerative one.
11
The interest on these bonds, therefore, added to the above interest
to be provided for, makes the total snni annually chargeable upon the
earnings of the road at the present time seven hundred and sixty thou¬
sand dollars.
It will be noticed that, in this calculation, the second-mortgage bonds
are omitted, for the reason, that, in the compromise above referred to, it
was the understanding that these bonds should not be considered until
the development of the road fully justified their being taken on as an
interest-bearing security.
THE TOTAL CAPITAL.
Adding these, however, and the total capital chargeable to the Ver¬
mont and Canada and Vermont Central roads proper, with their exten¬
sive and valu.able properties and business relations, stands at 811,500,000.
From this deducting the S. S. and C. bonds, which in fairness should
not be reckoned as part of the Vermont Central capital ($500,000), and
we have 811,000,000. From this deducting again the second-mortgage
bonds, and we have a capital chargeable at this present time to the road
for interest and dividends,—-89,500,000.
On this latter basis the average per mile of the two roads — Vermont
Central and Vermont and Canada railroads, 184 miles—is about
851,000 ; or, including the second mortgage at its full fiice-value, the
average per mile would be about 858,700.
The managers submit to any candid mind, whether, even on the latter
and fairest basis of the computation, the road in its high condition, with
its equipment and its valuable real estate and property, does not stand
at a very low average of cost.
DIFFICULTIES EXCOU>'TERED.
The injustice and untruthfulness of the criticisms which have been so
freely indulged in recently are made most glaringly apparent when it
is remembered how much the road has had to contend against to attain
its present position of power and productive capacity.
Forced by the requirements of the charter to build two expensive
branches to the main line; obliged to ballast almost the entire length of
the track of both roads ; to reconstruct almost the entire rolling-stock and
equipment, and at the same time to more than double both the cars and
motive power; to construct new and enlarged shops; to rebuild almost
every bridge on the line, and at the same time to meet with regularity
and promptness the dividends and interests on all the securities, while
the only resources at the command of the managers have been the earn¬
ings of the road, and the comparatively small amount of loans which
12
tliey have been enabled to make,— when all these are considered, the
managers do not hesitate to say that bnt few, if any, roads in theconntry
can show a more rapid or a more satisfactory and successful development ;
nor do they believe that any evidence of a want of fidelity to their trust
can be discovered.
The argument that, bec.ause the annual reports do not show a large net
over the operating expenses, thei'efore it is to be accepted as proof
of mismanagement, and that the road does not and can not earn its divi¬
dends and interest, is not altogether sound.
The construction-account was closed on their assuming the manage¬
ment, and all expenditures were ch.arged to operating expenses. The
reports have, therefore, always sliown the worst against the managers.
Nevertheless the fact remains, that, as each half-year revolved, the
dividends and intei'est on all the securities chargeable upon the trust
h.ave been regularly paid. The additional fact also remains, that each
year has exhibited a steady improvement in the condition and value of
the property. Each year has exhibited a growth of its business, an in¬
crease of its earnings, and a large augmentation of tonnage; while the
other and not less imjiortant fact remains, that the only source of supply
from which to create all this was simply the earnings of the road, and
the money borrowed and funded from time to time. How small a portion
of the amount expemled in developing this property was derived from
added capital will fully appear from the report of the treasurer here¬
with submitted ; while, on the other hand, the question whether the
ro.ad has legitimately earned its dividends and interest will find a ready
and affirmative solution. The managers commend the statement so care¬
fully prepared by the treasurer to the thoughtful consideration of the
security-holders, as also to those who, from whatever motive, are so re.ady
to malign and di.sparage the management.
In consequence of the continued and persistent assault of the enemies
of the road upon its credit, and the stringent, close money-market, the
trustees .and man.agers were compelled temporarily to pass their matur¬
ing obligations. With resources more than abundant to pay all its
liabilities, but not for the moment available, with a road never in .all its
history more prosperous, with business and earnings in excess of any
former period, in all its ajipointments in the highest state of efficiency,
it was nevertheless forced to yield to the combined pressure.
With the motives wliieh have actuated those who have thus .assailed
the char.acter and standing of a great .and successful enterprise, the
man.agers have at this time and in this place nothing to do. They have
here to do only with the causes which produced the result so far .as they
themselves are conceiaied in it.
THE FLOATING DEBT, AND THE CAUSE OF IT.
The statement of the treasurer accompanying tliis will give the
amount of tlie floating debt and the cause of it, together with the re¬
sources of the road.
From this report it appears, that, on the first day of June, the total
floating debt was $2,878,164.42, and the available assets were §1,349,-
249.57, leaving the actual floating debt $1,528,914.85.
This debt consists, in large part, of the deficiencies in the earnings of
the Odgensburg and Rutland roads to meet the expenses of the rentals.
The reasons wldch existed at the time for making the contract for
operating the Ogdensburg and Lake Chainplain Road were considered
good and sufficient by all the parties to the negotiation.
The subject was well and carefully matured ; and the value and impor¬
tance of the road to the Vermont Central and Vermont and Canada
Road, as well as to the interests of the whole line, were fully conceded.
Present at the negotiation, and participating with the trustees and
managers, were the committee of the Vermont and Canada Company
specially appointed by the board of directors for that purpose.
After the completion of the negotiations and the terms of the contract
had been agreed upon, and the preliminary contract had been drawn,
the directors of the Vermont and Canada Company called a special
meeting of their stockholders, specifying the object of the meeting to
be the consideration of the question of authorizing the lease.
At this meeting the whole question was fully discussed by the stock¬
holders, and they voted unanimously to authorize the execution of the
contract.
The contract is in the name of the Vermont and Canada Company;
the trustees and managers joining in the contract, and agreeing to carry
out its terms and provisioná^
The rental paid for the road, while considered large at the outset, and
with a full recognition of the fact that loss would ensue in all probability
for the first few years, yet as the term of the period of management
extended for twenty years, it was believed that the growth and develop¬
ment of the property during that period would fully justify the under¬
taking, and that all losses which might arise for the early period of the
contract would be more than covered during the whole term, and a
handsome profit result to the Vermont Central and Vermont and Canada
ro.ads.
In this view, the other roads in the line from White River Junction
to Boston, who are also in interest in the contract, fully shared. Yet,
with this fact fully in view, it w.as thought advisable to secure the con¬
trol of the road; and the contract was accordingly executed by ^le
14
Vermont nnd Cnnada Company by their committee appointed for that
purpose, and by the trustees and managers.
The deficiencies, therefore, have not come unexpectedly ; nor are the
trustees and managers surprised ; nor is their faith and confidence in any
manner shaken in the value of the contract; nor are their views changed
as to the wisdom of making it. Tlie deficiencies are by no means alto¬
gether losses, as has been erroneously stated. On the contrary, while
the deficiencies go to constitute a portion of the present debt of the
trustees and managers, a large sum should be charged to account of
assets.
Precisely to what extent this should be done can only be determined
by a revaluation and appraisal of all the property embraced in the con¬
tract. Certain it is that to the extent of the new equipment added, and
the large amount of wood and other materials on hand, together with
the new station and other buildings added to replace old ones burned
or otherwise destroyed, the improved condition of the track, expendi¬
tures on wharf and termiu.al jiroperty, — all these, n hieb constitute a
large expenditure, enhancing the value of the property, and are embraced
in the current operating ex]ienses of the road, are, in fact, assets, and
should not, in any sense, be charged to the account of loss, as, at the final
or other sooner determination of the lease, the whole property is to be
revalued and ap|)raised, and the lessees have the full benefit of the im¬
provement and enhanced v.aluation.
The same remarks hold true in reference to the lease of the Eutland
Road. The deficiency there is larger in proportion than on the Ogdens-
burg and Lake Champlain Railroad. Vet large expenditures have been
made which are properly assets, and, to some extent, available to apply
toward the rents to be paid.
The account of the trustees and managers for work done on the
Addison Road in order to put it in proper condition to be operated is a
clear asset, and applicable, in the hands of the trustees and man.agers, to
the rents to become due to the Rutland Road. Yet this sum is included
in and constitutes a part of the operating expenses of the road, and
hence swells the deficit .against the trustees and managers, and consti¬
tutes a part of their present debt.
In addition to this, a considerable outlay of money bas been required
to complete and protect the road where it was washed away by the
terrible freshet of 1809.
Equipment has also been added, the track greatly improved, two old
station-houses which were burned, rebuilt in substantial form, all em¬
braced in operating expenses, yet not chargeable to loss.
Thus reduced, the actual losses on these roads will fall below the
^amount estimated by the trustees and man.agers at the time of t.aking
15
the lease. The trustees and managers do not by this mean to underesti¬
mate the real losses on these roads ; yet the extravagant statements made
in reference to them in the public prints are not justified by the facts in
the case. The large expenditures immediately demanded are, however,
made, and will not probably be required again to any thing near the
same extent; while on the other hand both roads are improving in their
earnings, and it is not unreasonable to believe that tlie coming year
will show a large and favorable reduction of deficit. Indeed, at the
present ratio of increase of earnings and such reduction of expenses as
can now be safely made, there is good ground for hope that the Ogdens-
burg at least will be self-sustaining, and that the Rutland proper, the
Vermont Valley, and Vermont and Massachusetts will also pay the rents
out of their earnings, leaving the deficienc}', if any, to fall upon the other
branches.
Another item in the floating debt of the trustees and managers is the
amount paid for the wood, shop, stock, and materials on hand on the
Rutland Road at the date of their taking possession of the same. This
was largely in excess of what was estimated by the parties. It was
taken at an appraised value, and was worth what it was valued at. This
amounted to $418,000.
The question of attempting to retain these leases, or of abandoning
them, is one of too much importance to be lightly passed upon. They
were assumed not by the trustees and managers alone, but as the delib¬
erate sense of the stockholders and bondholders, as, under all the
circumstances, the wisest and best thing to be done.
Row, after a proper and careful examination of ail the facts, it may be
the most desirable thing to negotiate with the parties for a surrender of
them ; but the question is of too grave importance to be disposed of
rashly. Even if thought advisable under all the circumstances to seek
a release, it should be done as a matter of negotiation with the parties
in interest in those roads. To seek to accomplish it by a rash forfeiture
under a momentary excitement would only be to expose,the trust-
property and the Vermont and Canada Company to excessive demands
for damages, and seriously inqiair and retard their claims for I'eimburse-
ment for the moneys expended in the improvements made upon both
roads.
The trustees and managers have at this time no opinion to express in
reference to the question of what action is wisest.
They simply acted in concert with the other parties in interest in the
property which they manage in making the leases, and therefore can
only signify their readiness and willingness to confer, if desired, with
the same interest, in carefully considering the question of release.
16
THE NATIONAL DESPATCH CAE COMPANY.
Hrtving tlius briefly, and yet as fully as the limited time at their com¬
mand and the pressing nature of their engagements would permit,
alluded to the immediate causes which have produced the present state
of affairs on the road, the trustees and managers come to the spe¬
cific charges brought against them in the public prints of misman¬
agement.
The first, and indeed the most prominent, is the existence of the car
companies, known as the National Despatch and Vermont Iron and Car
Company, whose cars run upon and over the Vermont Central Road.
The history of these is very brief and simple.
First, The National Car Company. This company was org.anized
in 1868. Up to this date the Vermont Central line, as it was denomi¬
nated, was composed of the Boston and Lowell, Concord, Northern New
Hanii)shire, Vermont Central, Vermont and Canada, and Ogdens-
burg roads. Its connection for its Western business to and from points
west of Ogdensburg was by means of the propellers on the Upper Lakes,
and formed during the season of navigation a good and efficient line.
The business accommodated by the line was what is known and
termed the interior New-England business, consisting of the supply of
Western products to great manufacturing districts and other points in
New England.
This traflic formed the most remunerative business of the line. In
addition to this, during the season of navigation through freights to and
from Boston and the West found a convenient and natural route by this
line. The Propeller line at that time consisted of thirteen boats, mak¬
ing a semi-weekly line between Chicago and Boston. Thus, during the
season of navigation, this line did a fair business ; but, on the closing of
navigation, it could only be operated as a line for local business be¬
tween Ogdensburg and Boston.
The organization of the car companies known as the " colored lines,"
under various names of Red, Blue, White, Merchants' Despatch, and the
like, was admitted upon the competing roads leading from Boston to
Western points, and being unable to transport freights by all rail to all
points West without breaking bulk and on time contracts, and having
the advantage of continuous lines all the year round, offered great
inducements to the patrons of the Vermont Central line to withdraw
from it, and send their business over those lines, offering as additional
inducement contracts for the entire year at uniform rates.
Many strong patrons of the Vermont Central line were thus induced
to withdraw, and the business of the line seriously threatened. The
" colored ears " from other lines were reaching far into the interior points
of New England, and were drawing away a business which fairly be-
17
longed to this line, and which it could, properly equipped, better and
more naturally supply than any other. A conference with the other
roads now forming the line over which the National Car Company run
their cai-s was had, and it was agreed that an effort should be made to
hold this business. The change in gauge, however, constituted a serious
drawback. The patent which had been obtained for adjusting the
wheels and axle to a difference in gauge was an experiment, and so un¬
certain in its results that the several companies constituting the line did
not feel justified in investing in the enterprise as corporations. It was
therefore agreed, that, if outside capital could be induced to take the
risk, a liberal contract would be given by the roads in the way of
car-service to test the experiment. The parties owning the patent,
therefore, with confidence in the success of their invention, undertook
to organize a company; and a contract was entered into with that com¬
pany, signed by all the roads composing the line, permitting the De¬
spatch Company to build and place upon the road two hundred cars to
test the experiment, and agreeing to allow for that number three cents per
mile run for car-service. That company was, however, restricted to the
original number, and could not add more without the written consent of
all the roads in the line. The contract also contained a provision au¬
thorizing any road in the line to terminate the contract by purchasing
the cars at cost. With a contract thus guarded, the company was organ¬
ized. Being entirely an experiment, and, in the judgment of many rail-
ro.ad men, somewhat doubtful of success, it was not easy to enlist
sufficient capital at first to give it a trial. To encourage it, therefore,
many gentlemen connected wi,.h the different roads in the line came for¬
ward and subscribed for a portion of the capital stock. The number of
cars limited in the contract were built, and were put into the line, and
the experiment proved a success. After a year's working, or there¬
abouts, the managers of the several roads in the line became satisfied
that although the cost of these cars was somewhat in excess of ordinary
cars, yet they could not feel justified in paying the high rate of service
called for by the contract, and declined to admit any more cars unless
the rate was reduced.
This was done, and the rate (two and a half cents) fixed for a limited
and small number of additional cars. Then the rate was afterward re¬
duced to two cents on the additional cars put in. Negotiations have
been pending for the past three months for a still further reduction.
Every effort has been persistently made, not only by the trustees and
managers of the Vermont Central, but by the managers of the other
roads in the line, to reduce this car-service.
There was not at the first, nor has there been since any element of
speculation or private or personal aggrandizement in it whatever; nor
3
18
have the cars, in the opinion of the trustees and managers, been per¬
mitted any undue preference or advantage over the ordinary ears of the
road. The instructions of the trustees and managers, from the outset, to
the heads of the departments cliarged -with the duty of looking after
such matters, have always and uniformly from the first been explicit
upon this point; and they are fully assured by the several departments
that these orders have been strictly obeyed.
The rates of freight between Boston and the IVest are not regulated
by the trustees and managers of this road alone. These are under the
general control of a board of managers of through-line business; which
board is composed of representatives of each road constituting the line
between Ogdensburg and Boston, and this board is organized again by
a chairman and an executive committee. To this organization all ques¬
tions of rates on through freights are referred, and are under their con¬
trol. The instances cited in the public print where the amount paid for
car-service e.xceeded the amount received for freight may or may not be
true. ISTo such instances on the Vermont Central Road have come to the
knowledge of the managers, nor do they believe they exist. If found
on other roads, it is believed that they are isolated cases, and, if all the
facts were given, would find a satisfactory explanation.
No such instances have, however, been brought to the notice of the
managers of this road by any of the connecting roads.
That the organization of this despatch line has been of actual and
essential benefit to the Vermont Central Road, any candid examination
of the business will be forced to admit. That it would be desirable
that the road itself should own the cars there can be no room for doubt,
and the managers cannot too strongly urge the importance of the pur¬
chase. It is simply a question of capital. If the road were relieved of
its present restricted and awkward position as regards the management,
and were placed in the hands of a corporation where the proper addi¬
tions to its plant and the things necessary for its expansion and growth
could in its own legitimate and natural way be capitalized, all the diflB-
culties and embarrassments which now hang over the enterprise would
be relieved. It would add new zest to every department of the road;
it would give it credit which a trustee management can never possess ;
it would bring a development and growth which would surprise even its
most sanguine friends ; and it would remove all the causes for jealousy
and suspicion which must ever attach to the managers of a road, how¬
ever faithful and honest, whose term of office is not dependent on the
will and choice of the true constituents of the road, but is derived from
another and independent power. It needs only a fair and just apprecia¬
tion of the real value of their own property by the security-holder, and
a proper knowledge of the fertility of the resources of the road which
19
only wait to be developed, to inspire the necessary confidence to com¬
mand the capital to accomplish all this.
Scarce one of the security-holders even to-day realizes what his
property is : few ever visit it to watch its growth, to study its chai-ac-
teristics, to understand its wants and the difficulties under which it
labors; much less are they in any condition to judge of what is just and
right, or what is true or false, when their property or its managers, from
whatever motive, are unjustly assailed.
THE VEKMOIsT IRON AND CAE CO.
This is another organization formed in 1870. The new extension of
the Ottawa and Prescott Railroad to the great lumber-mills at Ottawa
seemed to give promise of opening a largely-increased traffic in lumber
from that section. A meeting was held at Ottawa by the lumbermen
and the managers of the Ottawa Railroad and those of the Vermont
Central Road, and, after a full consideration of the proposals made by the
lumbermen, the Ottawa Road determined to proceed at once with the
construction of their branch Road, extending it directly to the mills and
lumber-yards, provided the Vermont Central would supply the neces¬
sary cars, to be devoted entirely to the lumber-business, transporting it
without breaking bulk direct from the place of its manufacture to
market. To do this efficiently required, as it was estimated, five hun¬
dred box cars, to be increased from time to time as the growth of the
business demanded.
The trustees and managers were in no condition financially to under¬
take this outlay of money, and hence were obliged to forego the busi¬
ness, or encourage the building of the cars from other sources. A car
company was formed under the above name, and two hundred cars were
contracted for at the rate of two and a half cents per mile car-service ;
the trustees and managers reserving the right at any time to terminate
said contract by purchasing the cars.
The result of this contract, so far from exhibiting a loss to the Ver¬
mont Central Company, has been an actual profit to them; the revenues
derived from connecting roads on the usual rate for car-service per ton
per mile for the use of these same cars having yielded to the railroad
more than has been paid to the car company at the contract rate. The
trustees and managers have, therefore, been actual gainers under the
contract. The cars of that company, as will appear from the state¬
ments of the master of freight transportation, have never been per¬
mitted to take precedence of the oars belonging to the road, but have
always been set aside on the sidings whenever the business was slack,
so as to keep the cars of the road fully occupied.
20
THE NEW-LONDON LEASE.
This road was leased by three of the managers in December, 1871.
There existed at the time of its lease substantial and satisfactory rea¬
sons why the lease could not then be taken directly to the trustees and
managers.
The parties had no idea of any personal speculation in it, but took it
temporarily in thfs form for the benefit of the line. They have never
in any form received one cent from it individually, nor has there been
any discrimination in favor of it in division of rates, or in any other
possible form for the benefit of the lessees.
The lease itself contains the provision for its transfer to the Vermont
Central Road at a proper time, and they are the only parties to whom
the trausler can bo made.
The managers deemed it important for the interests of their line that
this lease should be made. That it has been of great value to all its
interests can, as they believe, be satisfactorily shown.
The same is also true of the Sullivan Road. There existed at the
time of its lease difficulties in the way of its being then brought in as
part of the Vermont Central line. The question was submitted to
ilon. L. B. Peck and Hon. Andrew Tracey, then counsel for the trust,
and, after a careful examination, they advised that the lease be taken in
the form it was. It has been held since that time steadily to the pur¬
pose for which it was taken, and at no time has it been used in any
sense whatever to the injury of the Vermont Central.
The lessees of the road will at any time be only too happy and
willing to transfer it entire to the Vermont Central system.
THE MONTliKAL AND VBKMONT JUNCTION.
The Montreal and Vermont Junction Road is not a leased road. That
road in its inception was sought for by parties adverse to the Vermont
Central Road. When it became evident that it would be built, the man¬
agers of the Vermont Central sought to place themselves in a relation
to it that would secure all its advantages to their road.
They, therefore, became somewhat active in securing a friendly rela¬
tion to the parties in interest in the charter, and so became prominently
identified with it.
After the municipalities had made their subscriptions to the stock, and
had secured sufficient means to justify placing the work under construc¬
tion, a contract was let, after public advertising, for a specified sum, to
be paid in the stock and bonds of the road. The work was commenced
just as the civil war in this country broke out. The currency of this
21
country was then undisturbed, and, like the currency of Canada, was at
its gold value. The contract, being made in Canada, was payable in the
currency of Canada. To induce the contractors to accept the stock and
bonds in payment for this work, two of the managers of this Road, who
were then directors in the Montreal and Vermont Junction road, gave
personal assurances that the}' would negotiate for the contractors a cer¬
tain amount of the bonds and stock which they were to receive.
The currency of this country, in consequence of the war, soon became
disturbed, and gold rose to an exorbitant premium. The currency of
Canada had become seriously disturbed, and the contractor was obliged
to surrender his contract from inability to go on. Meantime the work
on the Vermont and Canada branch to the Canada line had been com¬
menced, and, to prevent a failure of the whole enterprise, two of the
managers of the Vermont Central, having pledged their faith to the
parties in Canada that they would in good faith aid in building the road,
undertook out of their own means, and on their own personal credit, to
carry the enterprise through, taking the securities of the road. The
road was thus completed. A temporary arrangement was made for oper¬
ating it by the Vermont Central, and a basis of fifty per cent of the
gross receipts was, on consultation with the other managers, agreed upon
for the time being. Wliiie the road was new, and in high condition, and
as it was an easy road to operate, this was considered not an unfair divi¬
sion, especially as, by the arrangement, the trustees and managers only
assumed to furnish the motive-power and keep the track in repair; all
the other expenses of maintenance and repairs, of building and roail-
bed, including bridges, being paid by the parties on the other side. The
attention of the committee of the bondholders and of the Vermont and
Canada Road has been frequently called to the matter since that time ;
and it has been strongly urged by the managers interested in the prop¬
erty that they should be relieved of this position in some form, and that
some basis satisfactory to all parties should be arrived at. They have at
all times been ready and extremely desirous of having the matter dis¬
posed of, either by assuming the road at a price, or by permanent lease
of it, or by some agreement which would be equitable to all parties.
Thus far no settlement has been arrived at. They have been exposed
to unjust suspicion that they were taking advantage of the double posi¬
tion which they occupied, while they have been anxious all the time to
dispose of the question on any fair and just basis. They can only repeat
here what they have so often said to the parties above referred to, — that
they have but one desire ; and that is that a basis should be agreed upon
which will be satisfactory to the security-holders of the Vermont Cen¬
tral and Vermont and Canada, preferring even to do injustice to them¬
selves rather than to occupy any doubtful position.
22
THE AIM OF THE TRUSTEES AND MANAGERS.
The mnnagers have thus endeavored to meet fully all the questions
which have been raised against them, seeking no concealment or evasion
of any responsihililies resting upon them, nor attempting any vindication
that is not warranted by the facts.
In the administration of their trust they have endeavored to discharge
their duties with fidelity, always inviting the closest scrutiny of their
affairs, and willing to impart full information to all who were interested
to inquire and who had a right to know.
The accounts and vouchers of the trustees and managers have been
always freely open to the inspection of the committee of the bondhold¬
ers, elected annually, and who, by the provisions of the compromise
decree, are constituted an advisory committee, and are the special audi¬
tors of the accounts.
This duty of examination has been performed by that committee peri¬
odically, at least as often as once in six months since the date of the de¬
cree.
In all important matters, relating to the trust matters, on all questions
of policy, they have been freely consulted and advised with ; and when
matters of graver moment have been before the trustees, affecting the
interests of the property, the advice and consent of the Vermont and
Canada directors have been sought in addition.
The aim of all has been to bring the property to its highest state of
efficiency and to develop all its elements of strength in the fullest and
most juilicious manner possible.
That the property itself is capable of meeting in a little while the full
expectations of its warmest friends, none fiimiiiai'with it can entertain a
serious doubt. Tiie question of how soon it can reach this point, and how
rapidly it shall develop, is a question of easy solution. It is now in all
its ajipointments in high condition. It can be worked now safely on a
low scale of economy, and hold its present earnings, and be made to pay
on all the securities hitherto interest-bearing ; but, under sucha policy,
the road cannot develop as rapidly as with a liberal policy it can be
made to do. The present capital, adding to the interest-bearing securi¬
ties the present délit of the trust, is not large for the property repre¬
sented. The ratio of annual increase of earnings for the past ton years
has been a little over an average of thirteen per cent. There is no rea¬
son why the road cannot continue to increase annually in a ste.ady ratio
for years to come.
THE NEW LOAN.
The question of disposing of the present floating debt is the one . of
pressing importance in order to restore the credit of the road.
23
To provide for this, authority has been granted to the trustees and
managers to issue their notes for §2,500,000, payable in thirty years,
with 8 per cent interest, and constituting them a special lien upon the
trust property and income of the road. Of this sum 8700,000 is to be
deposited with the New-England Trust Company, for the purpose of
retiring the first equipment loan for that amount, wliich matures in 1875.
The balance, 81,800,000, is to be disposed of for the purpose of retiring
the floating debt of the trust.
If these are taken by the holders of the present securities, or sold at
once, the trust would be relieved from their present embarrassments,
and the credit of the road would be promptly restored.
When this is done, the question arises. What plan can be adopted for
placing the road on some jiermanent footing to relieve it of a trust
management ?
The managers cannot too strongly urge upon the security-holders the
necessity for devising some plan to place the road under a corporate
management. It is a subject which the managers have more than once
before urged upon the attention of the parties in interest.
The property is too large, and involves too important interests, to be
continued in its present form of Tiianagement.
The managers would, therefore, suggest the appointment of a com¬
mittee of conference, from the various classes of securities, to meet with
them at an early day to take this subject into consideration.
The managers will most cordially co-operate in any plan that may be
deemed safe and best for all interests.
TREASUREK'S REPORT.
Bostox, Oct. 1, 1872.
To the Trustees and Managers of the Vermont Central and Vermont
and Canada Railroads:—
Gentlemen, — I hand you herewith sundry statements made up
from your books after closing them to June 1, last, by which you may
see the results of your business for two years ending that day, and your
financial condition at that time.
These statements show the results of your business for the two years
ending June 1, 1872, as follows : —
The gross earnings of the Vermont Central and Vermont
and Canada, including the S. S. and C. R. R 84,395,384.17
The expenses 3,004,890.84
Net
81,890,493.83
24
The gross earnings of the Rutland Road
and branches from the time of lease to
June 1, 1872, seventeen months SI,869,589.64
The expenses 1,8.33,6.36.48
The net $535,953.16
The gross earnings of the Ogsdensburg and
Lake Champlain Railroad from time of
lease to June 1, 1872, 27 months $2,232,467.64
The expenses 1,568,281.75
The net 6^185.89
Total not $2,590,632.38
The gross earnings being ■... . $8,497,441.45
The gross expenses being 5,906,809.07
The net being $2,590,632.38
The proportion of expenses to earnings being 09|- per cent.
From the above net earnings is to be deducted the amount piaid to
the Vermont and Canada Railroad, and the rents of leased roads, as
follows : —
Two years' interest to Vermont and Canada
Railroad on $2,500,000, and one year on
$500,000, at 8 per cent per annum $440,000.00
Seventeen months' rent of Rutland Railroad
and branches to June 1, 1872, at $562,000
]ier year 843,000.00
Twenty-seven months' rent O.
and L. C. Railroad $899,145.00
Less lower road's part of loss, say 85,000.00
814,145.00
Total rents and interest on Vt. and C. stock $2,097,145.00
Which deducted leaves the sum of 493,487.38
as the balance of net earnings after payment of all rents
and the interest on Vermont and Canada stock.
In the last two years the interest paid on your bonded debt has been
as follows : —■
On 3,000,000 first-mortgage bonds, 7 per cent $420,000.00
On 2,000,000 equipment loan bonds, 8 per cent 320,000.00
On 443,800 S. S. and C. bonds, 7 per cent 62,132.00
On 795,500 Vermont Central guaranteed 11 months, 8 per
cent 58,336.67
Total on all $860,468.67
25
During this time you have also paid for new locomotives, cars, new-
stations, new side-tracks, &c., and extraordinary expenses not in-
'cluded in the statement of expenses, and not properly chargeable in
them, they being such expenditures as other roads have capital furnished
them to meet, the following sums, which are detailed in accounts
handed you herewith, viz. : —
Ou Vermont Central Railroad ^1,016,580.60
On Rutland Railroad and branches 185,568.55
On Ogdensburg and L. C. Railroad 93,516.40
Amounting in all Sl,295,665.55
Which, added to the interest paid on your bonds as above,
gives as the sum of your expenditures ■S'2,156,134.22
If from this you deduct the balance left of your net earn¬
ings after paying the rents, viz 393,487.38
The balance shows an excess of expenditures over net
earnings for the two years of 81,662,646.84
The result of your last two years' business
may be briefly stated as follows: You have
paid the interest on all your bonds : this
interest amounts to 8860,468.67
You have paid the rents of all your leased
roads and the intei'est on the Vermont
and Canada stock amounting to 2,097,145.00
In all amounting to 82,957,613.67
Your net earnings have been sufficient to meet of this. . 2,590,632.38
The deficit for two years being
You have increased your rolling-stock and improved your
own and the leased roads to the amount of
8366,981.29
1,205,665.55
Making in all an expenditure of
over and above the net earnings of the roads.
81,662,646.84
Your financial condition June 1, 1872, as may be seen by the state¬
ments hereto appended, was as follows: —
4
26
BONDED DEBT.
Equipment bonds, 8 per cent $2,000,000
Fiist-inortgage bonds, 7 percent 3,000,000
Vermont Centr.al gu.aranteed bonds, 8 per cent 795,.500
S. S. & C. bonds, 7 per cent 443,800
$6,239,300
Second-mortgage bonds 1,500,000
Total $7,739,300
Your assets to meet ibis debt are tbe road, tbe i-olling-stock and the
S. S. and C. jnircliase. Your books do not give tbe cost of tbe road nor
of the rolling-stock.
In your printed re])ort for 1865, it is stated that tbe origi¬
nal total cost of tbe construction of tin; Vermont Cen¬
tral Railroad was $8,500,000.00
The appraised value of your rolling-stock now is 1,895,097.37
The S. S. and Chambly ]iurchase is that road, 43 miles in
length, and valued at 860,000.00
These sums amount to $11,255,097.37
And more than cover your funded debt.
FLOATING DEBT.
The floating or unfunded debt June 1, 1872, as shown in
<letailed statement, is, $2,878,164.42
Your assets to account for this are cash,
notes, stocks, and book accounts, to tbe
amount of $1,816,029.95
Wood, shop-stock, and other supplies on
hand, to amount of 1,198,595.22
S. S. and C. bonds on hand 56,200.00
Vt. C. gu.aranteed bonds on hand 204,500.00
In all amounting to 3,275,325.17
Being a surplus of assets of $397,160.75
Your assets available in time to meet your liabilities I estimate at
$1,349,249.57.
The balance of your assets are doubtless worth the amount set against
them ; but tbey are investments for the beneiit of the road, .and invest¬
ments in supplies for the future use of the road, and cannot well be
turned into money.
27
The amount of the debt over the available assets is 81,528,914.85
The cause of this debt is seen in the fact, that, during the
last two years, your expenditures have exceeded your
net earnings by the sum of 1,662,646.84
The following statement, prepared for your meeting, Sept. 17, will
perhaps exhibit more fully the statement of the floating debt, its causes,
and the means on hand to meet it : —
FL0ATIX"G DEBT, JUNE 1, 1872.
Notes payable and demand loans $1,716,654.69
Unpaid bills 450,441.27
Unpaid pay-rolls 227,559.67
Sundry book-accounts 185,102.59
Sundry railroad-accounts 203,062.46
Unpaid coupons ". 95,-343.74
Total debt $2,878,164.42
AVAILABLE ASSETS, JUNE 1, 1872.
Notes receivable and stock $146,609.29
Post-oflice, express, etc 59,336.68
Cash and cash memoranda 251,488.79
Station-agents' balances 234,454.17
Sundry accounts 200,000.00
Sundry railroad accounts 457,360.64
1,349,249.57
Balance of debt above assets $1,528,914.85
CAUSE OF THIS DEFICIENCY.
Losses on Ogdensburg and Lake Champlain Railroad $159,842.00
Losses on Rutland Railroad 396,981.00
Advances on Missisquoi 49,652.00
Northern Transportation Company investment 191,337.00
Notes to Rutland Railroad for materials 418,000.00
Shop-stock, wood, &c., in excess of amount two years
since ' 377,000.00
81,592,812.00
28
Sundries on hand to account for the debt, and which are working
Sliop-stoek, wood, rails, &c $1,198,595.00
Work done on Addison Railroad in completing road,
chargeable to Rutland Railroad 102,000.00
Missisquoi bonds 25,000.00
Eight per cent bonds unsold 204,500.00
Sundry accounts 200,000.00
Sinking fund N. T. Co. ])rovided for in contract of pur¬
chase of N. T. boats to extingui.sh the notes given in
payment for the boats 104,625.00
$1,886,720.00
I hand you herewith a condensed statement of your account as
trustees and managers from June, 1858, to June, 1872, by which it may
be seen that during the fourteen years ending June 1, 1872, the net
earnings have been sufficient to pay the interest on all your bonds, the
interest on the Vermont and Canada stock, and the rents on all your
leased roads.
All of which is i-espectfully submitted.
(Signed) H. B. Wilbur, Treasurer.
STATEMENT.
The following statement was also submitted ; —
Trustees and Managers Yerinont Central and Vermont and Canada
llailroad in account with bondholders from June., 1858, to June.,
1872: —
RECEIPTS.
Wood, shop-stock, &c., and accounts collectible, on hand
June, 1858 $239,416.21
42 locomotives on hand June, 1858 $242,250.00
767 freight-cars do. 283,985.00
26 passenger-cars do. 35,600.00
9 baggage-cars do. 7,000.00
Amounts received since June, 1858: —
From equipment loans $2,000,000.00
From Vermont and Canada stock on account
of Swanton Branch 250,000.00
On account of certificates of indebtedness, &c. 250,000.00
568,835.00
29
On account of expenditures on Vermont and
Canada Road ' $500,000.00
From S. S. and C. bonds 44.3,800.00
From Vermont Central guaranteed bonds. . . 795,500.00
4,289,300.00
From notes, bills, and accounts now unpaid 2,878,164.42
$7,925,715.63
PAYMENTS.
Debts paid that were outstanding in June,
1858 $130,955.91
Interest on bonds since June, 1858 $2,054,193.31
Coupons, 1st and 2d mortgage bonds 326,791.61
$2,380,984.92
EENTS.
Vermont and Canada, from
June, 1862, to June, 1872. . .$1,925,761.21
Missisquoi Road, one year.. .. 35,000.00
Rutland and branches, 17
months 843,000.00
O. and L. C., 27 months 814,145.00
$.3,617,906.21
Total interest and rents 5,998,891.13
Burlington Branch 327,221.02
Wharfing 207,509.16
Certificates of indebtedness 114,460.00
Depots, tfcc 96,310.81
Tracks at St. Albans 89,229.19
Decretal payments 229,564.30
Legal expenses 87,368.42
S. S. and Chambly purchase 475,336.67
Swanton Branch 340,308.98
Shops at St. Albans and Round House 181,147.46
Depots at St. Albans and Burlington, and
engine-house at Burlington and White
River Junction and Essex 252,364.17
Telegraph line and depot at Essex 10,075.96
Hew side-tracks and real estate, estimated
cost 100,000,00
Tramro.ad 76,000.00
85 locomotives $637,672.27
1,425 freight-cars 1,004,625.00
30
49 passenger-cavs $207,700.00
20 other cars 45,100.00
Appraised value $1,895,097.27
Estimated cost $2,262,410.00
$4,799,306.14
Wood, shop-stock and notes, stocks and ac¬
counts, &c., now on hand 8,014,625.17
$13,943,778.35
Payments $13,943,778.35
Receipts 7,925,715.63
Balance received from earnings $6,018,062.72
This balance was suffieient to pay your interest and rents, which
amounted to $5,998,891.13 : your other receipts were sufficient to meet
ail your other payments.
Tlie Report was listened to with the closest attention, and was
greeted with frequent n¡iplause.
THE UISCUSSIOX (AS KEPOKTED IN THE DAILY ADVBRTISEE).
At the close of the reading, which occupied about an hour and a quar¬
ter, the chairman rose and said that as the trustees and managers, in
their very exhaustive report, had suggested the appointment of a com¬
mittee of conference with the various classes of stockholders, to meet
with them at an early day and take the subject of the condition of the
road into consideration, and the '^est way to meet the liabilities it had
incurred, he would suggest that immediate action should be taken, as it
was a very important matter.
Mr. Reildington of St. Johnsbury, Vt., was the first to open the dis¬
cussion. He said he supposed that the meeting represented all classes
of proprietors, and that gentlemen had come there who owned shares in
the Vermont and Canada and the Vermont Central lines, and all the
interests connected with that great thoroughfiire. For his own part, he
represented the interest of some Vermont an.d Canada stockholders, and
he lelt that, although he had no charges to make against the trustees,
there were some things in eonneetion with the account that he could
not understand. He was called a Vermont old fogy, and he confessed
he was one. But there was one thing he had learned, however, and that
was, you can never pay a debt by borrowing money to pay the interest.
[Applause.] He did not wish to find the least fault with the report : it
was an excellent document, and he thought the stockholders should
stand up and aid the trustees. Every oue would Join him in the opinion
31
that the road was worth more money than tlie report stated it to be ; and
if they aided tlie road, and then sustained the effort to make a corpora¬
tion, and put the road under its control, and take it out of the chancel¬
lor's hands, he thought it could be made one of the greatest roads in the
world, and they would have the advantage of helping the greatest main
road in the country. He would say nothing about the leases that had
been entered into : he cared but little about it, for his own part ; but
when he was at home he could look across the street, and behold a woman
who was almost sightless, who held some of the stock; and it was for
her, and unfortunate people like her, that he mostly cared. It had been
represented that the bonds of the Vermont and Canada had preference
over eveiy thing else, and, as such, people considered it the best security
they had on their books. When it was voted to issue $500,000 more of
stock, making $3,000,000 in all, he received a notice to the effect that he
was entitled to so much of the stock; and it was then distinctly stated
that it would have preference over every thing else. He hoped it would
turn out to be so. He had known the trustees four or five years, or
perhaps more, and had the greatest respect for them. When there was
imputed to them any thing but an honest purpose and the strictest integ¬
rity, when it was said they had done any thing to fill their own pockts,
he made bold to say that he did not believe a word of it. [Applause.]
But that they may have erred in judgment, as we all do, he would allow ;
and he rather thought they had. " We have got into tliis difficulty," con¬
tinued the speaker, " and we have to get out of it, and get rid of and
separated from our chancellorship. I don't want to get into a litigation,
because it will cost far too much. I do not represent a large amount ;
but some of my friends of the Vermont and Canada Road wanted me
to corne down here and see about this matter. I think that just so long
as a mail can get his eight and ten per cent, and can get it I'eadily, he
gives very little attention to the dii'ectors or the treasurer'; and the fir'st
thing he knows, he is looking after his profits. If there is any thing
wrong, the man who owns an interest is to blame for not looking after
his intereists. So, if matter's have gone wrong with this road, we must
look to the stockholder's, and not to the men who have been doing their',
wor'k for them. Let us'firid no fault with onr trustees and managers,
but look after our own inter'csts, and it will all be well."
Mr. E.G. Bailey of Boston.— "I can only say, sir', that I have been
delighted with the repoi't which the president of the tr'ustees has pre¬
sented to us, which has very fully and explicitly set forth the facts which
we all ought to have known long ago ; and, if they had been known as
thor'oughly as they are now, I believe that the cr'iticisms of the public
pi'ess would have been avoided. Any gentlemen who assume a public
resporrsibility mrrst expect tlnrt the press will look after them, mnl they
32
must not find fault if they do so. I think it has been a good thing for
us ; for our good Gov. Smith has come down here and told us the
whole story. Now, sir, this property is worth all it cost, and a great
deal more ; and I think it is for the interest of every man who owns a
dollar of the stock to stand by that road and see it through.
[Apjfiause.] Let this committee of conference be appointed, and let all
the various securities be merged into one security, or you may call it
stock, if you please, and let it be managed by the people, and run in
their interest, and I have no douht that all the litigation of the Vermont
Central will he ended. I believe that the honorable men who compose
the board of managers have had no personal or piivate end in view.
They have watched the development of the property for a long time,
until it has got to he a very valuable property,— worth, I believe,
$15,000,(100, and earning something like $2,000,000 yearly. I think the
running expenses have hecn rather high, — 70 or 69 per cent. I think
the trustees are now ready to reduce this expense ; and I say, let us
stand by them. I have $25,000 in this matter, and I purpose to do
what I can to sustain it, and not come here to cry it down. If we do
so, I helieve its stock will soon be above par, instead of depreciated
below it. I have no douht that the lease 'of the Rutland and of the
Ogdensburg roads will, in five years, pay their expenses, and pay a large
profit heside. Already their receipts are increasing, and expenses
decreasing. I hope the trustees will stop borrowing money to pay
dividends, and let them pass until they earn the money. I hope the
suggestion lor the appointment of a committee of the holders of the
various securities to confer with the trustees, and arrange for a grand
organization, to be managed by the people, will be adopted, and it will
be successful."
Mr. Thomas M. Edwards of Kecne, N. H., said he valued the time of
the gentlemen present too highly to make a s])eech. He only wished to
say, prefatory to a motion he proposed to submit, that it is no new thing
for a railroad enterpi'ise to be struggling in embarrassments, and he did
not think it strange, that, in the state of the times, the managers of the
Vermont Central Railroad had found themselves in difficulties. Some
roads had fallen under the pressure that had been brought to bear upon
them, whilst others had rallied, and had successfuHy managed the branches
that sucked their life-blood. When they find a l oad stretching out its
arms and endeavoring to cover the surface of a large section of country,
and find that it has numerous interests, they must expect it to have great
strength in order to get through without difficulty. If the managers of
the Vermont Central and Vermont and Canada Railroads had the
advantage of a corporate organization, or had the power to relieve
themselves of what seemed to he huge expenditures in the general man-
33
agement of the road by an open construction-account, it would have
been a great deal better for it. He had heard experienced railroad-men
say that if the Boston and Albany Railroad had not had an open con¬
struction account, by which they could carry the expenses of their great
improvements all round, that they could not have paid their dividends
to-day. He believed the Vermont Central managers would be able to
carry on the enterprise if they were relieved now from their present
exigencies ; for it seemed impossible to him that there could be any diffi¬
culty of so running it under economical management. He did not
suppose (having some knowledge of the business of the country, and of
the condition of the roads that connected here) th.at the net incomes of
the leased roads for the time would enable them to meet the liabilities
they have incurred, and he was not surprised at the fact that they had
been a charge, and nothing else, upon the Vermont and Canada railroads.
But in looking to the future, and speaking from the experience of the
past, he fully believed that the present deficiency would be made up by
an increased economy and the traffic that must of necessity increase. In
conclusion, he moved the appointment of a committee of conference,
representing the various interests of the road, and suggested the names
of William Perkins, James S. Whitney, Lemuel Shaw, Ivers Phillips, and
F. A. Brooks.
The chairman declined to stand on the committee, and Mr. Bailey
wanted a nominating committee appointed, who should select the com¬
mittee of action and conference on the suggestions of the trustees.
Ex-Gov. Smith then rose and s.aid, " With reference to the appoint
ment of a committee of conference with the trustees, there are many
things to be considered. If it is desirable, as the trustees and managers
have no doubt it is, that important steps be taken toward the working
of this enterprise into a more satisfactory condition than it is to-day
under this management, and placing it in the hands of a corporation, it
should receive at the hands of the security-holders here a prompt atten¬
tion, and for this reason. There are many ways which will naturally
suggest themselves to almost every man's mind by which this can be
done; but the chief question to determine is what is the best way.
Whatever way may be adopted, it will involve, undoubtedly, an applica¬
tion to the legislature for aid in order that we may bring all the interests
together in legal form and on a substantial and permanent basis. And
as that legislature is now in session, and will not be again for two years
in Vermont, it seemed desirable to the trustees and managers, that, if the
proposition strikes the security-holders with favor, it should be acted
upon with great promptitude, because a great deal of work must be done
before any bill which should embody all the vmrious interests can be pre¬
pared. The regret of the managers and trustees has always heen that
34
the security-holders have not watched their property with more care ;
that they have not known what it is. While they desire a large number,
yet in this emergency a large, unwieldy committee, where you cannot
act without a majority, would be rather an act of embarrassment than
otherwise. A committee of ten, who have their minds on their business,
cannot always be got together. This subject needs consultation, study,
and close .attention, and should have a committee appointed which can
act with promptitude, and yet have deliberate action. The committee
stands charged with no common duty. The creditors are to be taken
care'of. They are all patient; and I will say this, that notwithstanding
the very strong pressure that has been brought to bear upon us, notwith¬
standing the reports that have been flying around the State, I do not
believe a par.allel can be found anywhere, where the creditors have stood
with more confidence, and h.ave been more steadfast to us, than they have
here. [Applause.] With all the pressure brought to bear in this city,
with the statements that have been made that the whole road was under
attachment, that all its c.ars and engines were attached, I say to the
credit and the honor of my own State that less than $5,000 in all has
been the result of attachment or disturbances on the road. It tells you
of the confidence the people there have in the security of the ro.ad, and
in its permanency and in its value. And from all quarters of the State
I have received but one single response, and that is only to stand firm.
That is all they ask. They know the v.alue of the property; and if
security-holders would go over the road, and m.ake their inspection, — it
is always open, and the man.agers have always done every thing with an
open hand, inviting the closest scrutiny of their m.anagement and
policy, — they would see for themselves a property vast in extent, fertile
in its resources. Without descending to make any invidious comparison
with any enterprise in New England, I do not hesitate to say, that with
the vast extent of territory beyond the Vermont Central Railroad which
is yet to be developed, and which lies ready to pour its wealth into this
city, not a solitary enterprise can to-day show such a territory and
such resources. The gre.at firvorite Tine of Boston empties herself right
into the interests th.at control it at Pludson River, and has made its boast
that nothing shall pass there unless it be at the mercy of New York, and
here lies an enterprise reaching up into a country yet to be developed,
and which is growing faster than you know of, a direct line to the great
country beyond. It only needs the careful nursing and the attention
which the father will give to his child to build it up and make it realize
more than you ever dreamed of in the most sanguine moments of your
life.
" I am not here to exaggerate ; but my relation to an enterprise which
bears close relations to this for the last six years has brought me into a
35
position where I have been enabled to see what lay before this enter¬
prise. I speak of the Northern Pacific Railroad, which will bring here
in the spring, to the commerce of New England, not only the great
grain-fields along its line, but which will prove to be the nearest, short¬
est, and quickest line to the heart of Montana. The Canadian parlia¬
ment has voted lands and money for the purpose of completing this en¬
terprise. It will strike not only an all-rail line, but it will give you
the shortest water-line to Lake Superior. That road to-day is organ¬
ized. It is now being prepared to put under contract in the spring ; and,
before this road can organize its corporation, Canada will have this road
built and organized, and you will be in direct communication with the
great Northern Pacific. Now, see what the trustees have done for this
road in the trying circumstances, with no elasticity of resources, nothing
but what they could borrow on their personal indorsements of paper to
carry the business along and pay the dividends ! Look at what the other
roads have done! Take the Pennsylvania Central, for instance. For
five years past, the president has gone to the stockholders, asking for in¬
creased capital, increased equipment ; and this year he goes again, and
they give it to him. Look on its consequent expansion, and how it has
made itself a power. Tlie Boston and Albany Railroad has asked from
time to time the power to expand ; and see how she has grown ! The
Vermont Central Railroad has never had any assistance since 1852, when
the old corporation went into bankruptcy, and surrendered itself into
the hands of the trustees : she has had to sustain herself. Had she the
power to expand herself on capital, as these other roads have done,
she would have to-day a double track from Concord to Ogdensburg, she
would have her equipments adequ.ate to meet the wants of her business ;
and her income, instead of being $2,000,000 a year, would have equalled
and exceeded that of the Boston and Albany, simply for the reason th.at
the power, the resources, and the wealth are there. Give it to her to-day,
and you place the Vermont Central in an independent position, not to
be surpassed by any railroad in the United States." [Applause.]
Some discussion ensued on the «appointment of the committee. Mr.
J. R. Nichols hoped that the meeting would nominate five men, to be
chosen from the floor, to retire and select a committee of ten to act
according to Gov. Smith's recommendation. Mr. Edwards ex-
*
plained that he had no individual preference in relation to the m.atter.
He thought a committee of ten would be too large. He coincided with
the belief that a committee of five be appointed on nominations. Mr.
Bailey seconded Mr. Edward.s's proposition, and it was can-led. The
chairman constituted the committee as follows : Messrs. William Per¬
kins, E. C. Bailey, Lemuel Shaw, Ivers Phillips, and F. A. Brook,s.
Whilst the committee were absent, Mr. C. C. Coffin took the floor and
36
briefly addressed the meeting. He said he was not a very large stock-
holder in the line; but he did something years ago as engineer for the
road. In reference to the grade between Boston and the St. Lawrence by
this line, he said it exceeded nowliere fifty-gi». feet to the mile. He then
gave the grades by the other lines, which were far larger than that of
the Vermont Centr.al Railroad. Speaking of the growth of the Horth-
west, he stated that Boston was a linndred miles nearer to the Red
River Valley than Rew York can ever be, and therefore Boston had it
in her power to control all the trade of that section of the country. He
was very glad Gov. Smith had suggested to the stockholders to take
tlie roads out of the hands of the courts, and form a corporation. He
believed the stockholders should demand from the State of Vermont a
double track for this road from Boston to the St. Lawrence. In time,
he believed the people of llie East would receive their tea and all other
commerce from China and Japan by this route, in place of the cum¬
brous and long voyage around the Cape. In conclusion, he depicted a
glorious future for Boston and the roads in question.
The nominating committee reported as follows: Representing tlie
Vermont and Canada Railroad, William Perkins and Lemuel Shaw of
Boston ; first-mortgage bonds, Edwin C. Bailey of Boston ; second-
mortgage bonds, J. Converse of Boston ; equipment bonds, Ivers
Phillips of Worcester. The Report was accejited ; and the gontlemon
named were np])ointed the committee of conference with the managers
and trustees of the road.
The Chaikmax. — "I wisli to say a single word in relation to a point
that has not been touched u[)on by any speaker of the. assembly It
was altogether unexpected to myself that I should oceujiy the position
in this meeting in which you have ])laced me. The idea had never
been suggested to me until I entered the room. There is one subject
for you gentlemen, stockholdei's, bondholders, and security-holders, to
consider, — that tiiis link of road is to lie between two very rich roads.
The Boston and Lowell and the Concord and Montreal roads are very
rich roads ; but no such road fur wealth has ever been incorporated in the
United States as the Northern Pacific. The government gave them
75,00(1,(100 acres of land, — land enough, if well husbanded and taken
care of, to build three railroads from here to the line of the Pacific
Ocean. Why, it is not such land as the Union-Pacific Road had,—
desert and mountain land, — but it crosses the continent along a line of
rivers, and over a rise 4,000 feet less in altitude to reach the Pacific
than the Union-Pacific Road ; and a thousand feet in altitude is esti¬
mated to be equal to .about a degree of latitude : therefore your
Northern-Pacific Road is farther south for all practical jmrposes of busi¬
ness than the Union-Pacific. It is to be one of the wealthiest roads
37
ever inaugurated by any government under heaven ; for these lands are
the most fertile for cereal crops of any on the continent. They have
alternate sections twenty miles in width, forty miles of the fertile land
of these prairies, and along the borders of these rivers. Therefore what
is the advantage of the Vermont-Central Railroad to-day? It is in
condition to receive by its northern terminations this vast amount of
freight that is soon to pour into it from the Northern-Pacific. You
have not to go and build a trunk road for Boston to take care of it; but
it is already and practically provided for it now. Here is a railroad, so
far as I can understand the Report, that has been well and ably man¬
aged. It is good management for a railroad to run since 1858 without
the power to add one single dollar to its construction account ; to build
every bridge that has been burned down, build every station, lay every
foot of new rail, out of its current running account, and report that it
has done all this, with other expenses, from 69| or 70 per cent of their
gross earnings. I submit to you, gentlemen, that this is a magnificent
report. But I am not here to whitewash Gov. Smith. I scarcely
ever spoke to him until to-day ; but we all know sometliing about rail¬
roads. We know that the old railroad of which we all feel so proud,
the Boston and Albany, has continually added to the amount of its
stock. It has often asked the old Commonwealth of Massachusetts to
loan the corporation its credit within the last four years, to extend its
bonds. It has carried its stock upward until its bonds and equipment
are in amount almost §30,000,000. This road, run by trustees and
managers under a court, without any resources except their running-
receipts to meet the expenses of such an enterprise as this, lying
between two rich roads, with the Northern-Pacific touching the Pacific
Ocean by a route 400 miles shorter than that of the Union-Pacific, and
when you are 700 miles nearer Japan than at the terminus of the Union-
Pacific,— with all this and with a capital of six hundred and ninety odd
million of dollars in this city, are you to let this little link of railroad, that
will pour uncounted wealth into the lap of your city in the future,— are
you going to allow it to waver and crawl along, blocking up this tide
of wealth that it is ready to bring you ? I trust not. If I were a rich
man, I would take every dollar of it myself." [Applause.].
After a statement from Mr. Smith, to the effect that the matter of
subscription-papers would be left in the hands of the Committee of Con¬
ference, it was decided to print the report of the managers in pamphlet
form; and the meeting adjourned to Wednesday next at the same time
and place.
THE MAP.
The map accompanying this Report is a transfer from Johnson's Atlas of the
United States and Canada. It shows the exact relations of the Vermont Central
Railroad to Boston and Xew England on the one hand, and to the St. Lawrence
and Ottawa Valleys, the Lakes, the grain-fields of the North-AVest, and the North¬
ern Pacific Railroad, on the other. The New-York, Boston, and Montreal Rail¬
road, from New York to Rutland, and the Portland and Ogdensburg, are also indi¬
cated, as well as the present and probable future routes for the transportation of
grain upon the Lakes during the season of navigation.
relative distances of boston and new york to the grain-fields of
the north-west,
miles
From Boston to Essex Junction 238
" Essex Junction via Ottawa Valley, Sioux Ste, Mary, to
Glyndon, Minn 1,281
Total from Boston to Glyndon 1,519
From New Y''ork via New York, Boston, Montreal, and Rutland
roads, to Essex Junction 318
" Essex Junction to Glyndon 1,281
Total from New York to Glyndon via Rutland and Vermont
and Canada roads 1,599
Difference in favor of Boston 80
From New York via N, Y. Central, Lake Shore, Chicago and
North-Western, St, Paul and Pacific railroads, to Glyndon 1,645
" Boston i!ia Ottawa Valley 1,519
Difference in favor of Boston 126
39
MAXIMUM GRADES ON RAILROADS LEADING FROM THE ATLANTIC TO
THE WEST.
Boston and Albany 83 feet to the mile
New York and Erie 98 " " " "
Pennsylvania Central 95 " " " "
Baltimore and Ohio 116 " " " "
Boston to Ogdensburg via Northern New Hampshire
and Vt. Central 50 " " " "
OWER OF A THIRTY TON LOCOMOTIVE ON DIFFERENT GRADES. (FROM TI
CATALOGUE OF BALDWIN LOCOMOTIVE WORKS.)
On a level 930 gross tons
20 feet grade 430 " "
40 " " 270 "
60 " " 190 "
80 " " 140 "
100 " " 110 " "
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