Show THE UNION P ACI lOA lO-A Statement of Its Financial Condition b i 1 REPORT OF THE DIRECTORS The Relation of the Road to the Government Other Telegrams Tele-grams of Intei en Tjho Union Pacific WASHINGTON February 3The report re-port of the government director of tne Union Pacific Railway Company was received by Secretary Lamar this afternoon after-noon Under the head of Relations of the Railway Company to the Government Gov-ernment the report says The salient sali-ent feature in the relations of the Union Pacific to the government is that the road is a debtor to the government to avery a-very large amount the debt bemp secured cured only byaTsecotid mortgage upon J portion of the property the com I pany Under these circumstances there has grown up an uneasiness on the part of Congress lest the debt to the United States might be finally lost and legislation has been had with a view to prevent tbat result but the legislation had so far it seems admitted on all sides to have failed of its object and to have brought a out a state of affairs which calls for early action For some years every Secretary of Treasury every commissioner ot railroads and every board of government directors hal reported Congress that the Thur I man act b yearly locking comparative dleness large sums of money to the mutual loss and injury of the debtor and creditor It is probable therefore and certainly seems dir able that early congressional islation be had upon this subject In the con fcideration of the various measures that will doubtless be proposed noth I ng can be more important than that the government should have as clear an estimate as possible of the real value of the property upon which its debt rests of the load which its debtor carries and of his ability to carry it The following statement state-ment exhibits the entire mil ge system sys-tem including all its finished branches on Seotember 30th 1855 and its liabilities liabili-ties in bonds and stock in the hands of the public and its floating debt In the Bonded debt is included 3j140000 United States subsidy bonds issued in aid of the Union 1 < Pacific Pa-cific and Central brarich v ana 1G5C4531 balance of interest on same less sinking fund in the hands of thegovernment mile Debt nd stock per t S O a E t1 c c t1z 1 C A C C 3s 0 = 0 55 p e ze tu l o i 1832 70613 150033150104803 Er lines 335 9263 3i2 12665 UPSym 5HO30993 35314000 4546 But against this indebtedness the company has other assets than the road itself consisting principally of land and land assets and stock and bonds its brlnch lines andother corporations corpor-ations To arrive now at what an average mile of system is worth in earning power and what the annual charge is imposed upon it by the above obligations we will take the business for twelve months ending September 30th 1855 and show the earning of then the-n hole system apd the disposition made of thorn The whole system 5149 miles gross earnings 23064168 expenses and taxes 17717000 net earnings 10 917100 Income from investments 754 357 total income 11671525 coupons interest etc 7593850 land taxes and expenses 10249 sinking fund requirements require-ments 597535 total fixed charges 8 325623 Net income 3 439000 United States requirements 1134661 surplus 2307239 debt and earning power of the Union Pacific system per mile 514 miles gross debt bonded floating and United States 3993 land and assets 5330 net debt 25463 stock outstanding 14000gross earnings earn-ings 5577 net earnings 2124 income in-come from investments 1J7 total income in-come 2271 fixed charges and sinking fund 1601 net income 6C9 United States requirements 220 surplus 449 The directors speak of the value of the branch line system and say that without with-out it the mam line would today be bankrupt property They consider that of the most importance to the road and to the government as its creditor that the Union Pacific should be as free as any of its competitors to build or acquire branch lines or valuabe connections by any such arrangement ar-rangement among the railroads for such ends otherwise it would be a fatsl disadvantage to competition for territory terri-tory and future business and the development devel-opment of the country tributary to it I must languish As matters now stand the debit of the road is growing larger I from year to year and the time of its maturity is not far distant The uncertain uncer-tain attitude and Intentions of the government gov-ernment are calculated to impair the credit of the company and not only hamper it in its elforts to secure Its present and future business on a safe foundation but even in the case of a serious financial crisis to threaten grave present disaster This is so clear and so simple that no argument seems necessary to enforce it Government is the principal creditor credi-tor of the company and has the power to precipitate it into bankruptcy should it choose to exercise it To letmatters alone practically to exercise power for every year that settlement is postponed post-poned the present company is weakened weak-ened The course of the government should be that which any practical business busi-ness man would pursue with a pnvate debtor ina similar situation It is for Congress so applvr those principles to the case of the Union Pacific road The report says the provision of the twoS bills reported from the Senate judiciary committee last session and after discussing the various plans proposed pro-posed for adjusting the annual payments to be made by the company the board commends the plan of equalized pay tents whiehla3 been adopted bv the Senate Judiciary committee in framing the eightyvear bill reported this season The report continues It has been sutj uested that the government should reserve re-serve Upright to take up the underly ing first mortgage bonds of the company com-pany when they fall due and acquire a lien which their bonds have on the property pro-perty The arrangement would seem to be adesirable oneon both sides It would make th lien of the government upon the whole system absolute and en tire and as government can borrow money at 3 per cent it would re duce the fixed charges upon the property about 1000000 per annum an-num below the present requirements This saving would soon retire the whole Ii issue of bondsabout 35000000 It is most desirablesays the icport that in any new legislation about the annual payments should be definite and fixed the same to be paid absolutely without regard to the net earnings gross earn ings or any contingency whatever and when this change is made in the present laws restrictions upon the financial I operations of the company imposed to protect the annual net earnings should be removed that the company may be unembarrassed in the use of credit Governent cannot undertake to manage the company on the whole and should not assume any partial responsibility but may feel en tire confidence tbat it is in no danger losing its debt As has been shown above the entire issue of the bonds and floating debt upon the whole system is hut about 25000 per nile Should it become necessary for the government to foreclose and take possession by any default of the com nny it could put a blanket mortgage upon the whole at 3 per cent which would make the annual fixed chargs I only 750 permile on the line now earn ing an average of about 5500 per mile TOSS and 3000 net It is understood bv the government directors that the company does not wish to be considered as itself suggesting or advocating any specific measures which have been discussed dis-cussed above or which may be brought before Congress further than to point out to the best of its ability the probable prob-able result of their operations It claims that if it had been left to itself it would have been in a position to meet all its obligations to the government an then maturely in Us own way which waslto build up alarge system capable of rats lug the amount necessary by the blanket blan-ket mortgage The present and future must now oe dealt with and some early action is pressing necessity And jas some action is necessary it is most desirable de-sirable that it may be st once comprehensive compre-hensive and final For this reason the government directors confidently recommend recom-mend early action andthat it should be based upon the principals of be Hoar bill the period being ixed at eighty yeats under the continued operation of the Thurman bill some further legislation would still be absolutely necessary bofore the ma turityof the debt This would keep the company and its affiairs in Congress for I twelve years longer and under any bill requiring payment of I contingent I upon the net earnings difficulties and the question will continually arise between I I be-tween the company and the Depart nient Under the principles of the Hoar bill the matter may be settled at once and forever and no longer trouble either Congress or the courts The company would simply have to make semiannual payment lose allits property pro-perty and the amount at a risk by the government would grow less and its security se-curity greater year by year Thereportis signed by E P Alexander J W 1 Savage Mr A Hannah P Rl Coudert I and Franklin MacVeagh |