LIBRARY
BUREAU OF RAILWAY ECONOMICS,
WASHINGTON, D. C..
)N EXCHAKdC
COMMUNICATION
KO°K»NS HMLWAY LI1«AHY
EROM ■
J UN 3 0 1911
LELAND STANFORD
TO THE
• " *
COMMITTEE ON CORPORATIONS OF THE SENATE.
To the Honorable the Committee on Corporations of the Senate:
The various bills before the Legislature upon the ^subject
of railroads are calculated to affect so seriously the interests of the
railroad companies, as well as that of the people, that I do not deem
apology necessary for desiring to place before your Committee a few
suggestions that occur to me as especially important for your Commit¬
tee to consider in connection with the proposed legislation.
From the high character of your Committee, it is safe to assume it
will approach the consideration of the various bills without perjudice,
and with the determination to act justly and as wisely as possible
towards individuals and the people.
A more important subject than that of transportation can scarcely
come before the Legislature of a State.
I shall not err much in the statement that the present system of rail¬
roads of this State is saving to the people, in the difference of the
present cost of transportation from what it would be for the same busi¬
ness by other means of transportation, about fifteen million dollars an¬
nually. Other benefits, such as increased value and developments, may
well be considered, but though immense, they are not so definite.
The bonded indebtedness of one railroad company with which I am
connected, including lien of the Government of the United States, is, in
round numbers, eighty-one million dollars.
There are large amounts of bonded indebtedness of other roads.
Need more be said of the importance of the subject to secure your
gravest attention ?
These railroads have been built, the indebtedness incurred upon the
faith of the people, that the laws as they existed, and which brought
the companies into existence, should not be changed to their prejudice. Is
not the good faith of the people so pledged ? Have no rights vested in
the investors in railroads and railroad securities ? These are questions
that every stockholder and every creditor of railroad companies has a
right to ask; and if the answer is in the negative, then what is the re¬
sult ? Why, that the investors may find that their property may be
confiscated without compensation; and such, let me add, would in great
part be the case should the present bills before the Legislature become
laws. Would or could the railroads have been built and the bonds
negotiated had the parties anticipated such laws possible ?
If there are no vested rights attaching to the investments in rail¬
roads, then, of course, from the announcement of the fact, future invest-
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ments in railroads must cease, and it must be assumed that the build¬
ing of railroads, by or through individuals, is not desired nor to be
allowed in this State.
If this be the case, then we are to have no more railroads constructed,
or the State.itself is to construct them
. Are not the deductions and the queries above stated legitimate, from
the proposition to legislate injuriously to the interests of railroads ?
The causes for adverse legislation to railroads, with all the attendant
uncertainty and instability, will always exist as they do now.
I submit that if the State does not choose to assume the ownership
and construction of railroads, that the true way to secure cheapness is
to secure investors against injurious change of their charters, and to
place as few burdens as possible upon the operations of the railroads.
The cheapest transportation by railroad in the world—the amount of
business, character of roads and attendant circumstances considered
—is in the State of California. If your Committee choose to inquire, it
will find that several railroads of this State have not yet reached a pay¬
ing basis, and none a dividend basis, aside from the Central Pacific, to
the main line of which this legislation is not applicable. Should the
bills before the Ligislature become laws, they will cause practical repu¬
diation, because of the inability of the railroad companies under them to
meet their obligations. Are there any prepared to assume or justify
this responsibility ?
Certainly the people of the State will not tolerate such a result, and
will not knowingly be unjust; nor will they permit it in their repre¬
sentatives—their good faith untarnished and inviolable they will main¬
tain. I am convinced the agitation now existing upon the subject of
railroads, which, coming naturally in part from the desire of the people
to do their business at the lowest possible expense, arises from misap¬
prehension of the facts. It is for your Committee to make an exhaus¬
tive examination into the facts appertaining to rates, that you and the
people may understand the important question before you. Nothing-
short of this will settle anything, or give security or satisfaction to any,
save perhaj^s a few who may find an individual advantage in the ob¬
scurity that permits of agitation. But may it not well be asked why
should investments in railroads not be encouraged, and their stability
permitted and secured ? Are not these investments of a highly benefi¬
cial character ? If additional railroads are to be had, and competition
secured, then there must be stability to the laws, and security to the
rights under them. The mere suggestion of the instability of laws af¬
fecting railroads has already substantially destroyed their credit
abroard, and stopped construction, and inflicted incalculable injury to
the country.
Any information calculated to elucidate the questions involved by the
subject before your Committee, and in my power to supply, will be
cheerfully furnished.
So far as alleged abuses are concerned, investigation will show that
they are mostly imaginary; but the companies will gladly correct any
that exists upon their being pointed out, and will welcome any assist¬
ance to prevent the occurrence of similar, or others, in the future.
I am, very respectfully, your obedient servant,
LELAND STANFORD.
San Francisco, Jan. 1874'