Our true policy is to maintain unimpaired our four routes to the West, and under whatever management they may be, at all events maintain that they shall be independent of each other. If a consolidation is to be made of the Tunnel line we are clearly of the opinion that it should be of the direct line only between Boston and Troy, including the Fitchburg, Vermont and Massachusetts, Troy and Greenfield, and Troy and Boston, and the Massachusetts Central if it desires to form part of such a line. The Boston and Lowell Railroad, and Nashua Railroad should be studiously kept apart from such a line, because it forms no natural part, and does form a natural part of another line. It is urged that the possession of terminal facilities in Boston should be allowed a controlling influence in this matter; that the Boston and Lowell Railroad has obtained the only convenient terminus in Boston for a great Western line—more than is needed for its own business, or the business of the Northern line, and therefore that the railroad policy of the Commonwealth should be compelled to yield to its position. To this there are two answers.
First.—That these facilities were obtained for the Northern line, and by urgent representations of its necessities, and if they are not needed forthat business they should be transferred to other corporations that do need them.
The Commonwealth has full power in the case, and it is only necessary to invoke the same power which the majority bill gives the consolidation company to take property from the Fitchburg, to take from the Lowell Railroad Company the property which it now represents as not needed for its business which it has obtained under the representation of a public necessity.
Secondly.—The question of terminal facilities is too unimportant in itself to be permitted to determine in the least degree the decision of a great State policy; other facilities can be obtained as good as the Lowell.
Finally.—We object to the plan of the majority because it continues the policy of placing our last remaining line to the West under the control and management of a stock corporation.
It cannot be denied that there is great and wide-spread dissatisfaction with our present railroad system, and its management. We have tried in vain to control by special legislation, and it may well be acknowledged that the trial has not been very successful.
REGULATION BY SPECIAL LEGISLATION.
No system has ever been devised better calculated to introduce corruption into our state governmentthan the present method of regulating railroads by special laws. Every senator knows what influences are brought to bear to promote and defeat the various projects of special legislation. No! Mr. President, I have over-stated—I am sure that no senator at this board does knowallthe "ways and means" that are used to influence members to secure votes for the passage of various bills in the interest of railroads. Every senator is aware how powerful and wide-spread is the pressure when public railroad legislation is under consideration. If these influences were confined to the questions of special or general railroad legislation, great as the evil is, it would not be irreparable. But unhappily the evil does not stop here. Hardly a question of special or general legislation is decided by either branch of the legislature without being affected in a greater or less degree by these railroad questions. It prolongs our sessions and fills our lobbies with the advocates of private corporations, and these special guardians of the rights of the people in the service and pay of railroad corporations astonish the members from the rural districts by their disinterestedness in their "labors of love" and benevolence—making their stay at the capital so pleasant and agreeable without money, but not without price—as to create a strong desire to serve the "dear people" another term, and obligations are exchanged that demand the presenceand service of these men. No I not men alone, but men and women at our town caucuses and conventions, that favors granted may be reciprocated in securing the nomination, and thereby the election of the men who are willing to be run by rail road interests.
If this state of things does not corrupt legislators, it is because legislators are incorruptible. We know its results in other States, and we may well fear it here. Special legislation has totally failed in securing the results intended, and left behind a train of unmitigated evils which must increase with the increased magnitude of the railroad interest, and the growth of railroad corporations. The establishment of such a corporation as is provided for in the majority bill may well be dreaded. The creature will be more powerful than its creator.
CONTROL OF THE TUNNEL.
The committee were clear and unanimous in the opinion that the State should under no circumstances part with the absolute control of the Tunnel to a private corporation.
The majority bill is the first step in giving up the control of the Tunnel to a private corporation. It gives to that corporation control of the whole line, except the Tunnel; and entrusts it with the operators of the Tunnel itself.
The pressure upon the State to part with the Tunnel will grow with the increase of business; the whole power and usefulness of the line must rest in the hands of the corporation which owns the railroad entering the Tunnel on either side. I am not old in railroad tactics—but, Mr. President—with the bill reported by the majority of the committee, I think I should have no difficulty—with less than one-half of the amount of the money expended in the efforts to pass the bill—to capture the Tunnel from the State in three years, and it would be accomplished in such a manner through the representatives of the people, that no one would presume to question my honesty.
The Commonwealth, owning the Tunnel,—the most valuable portion of the line, thekeyto the whole line,—has no voice in its management except a minority in the board of direction; no voice in fixing rates, no influence in its operations. This is all placed in the hands of a private corporation, governed by stockholders, whose stock is at all times in the market, and may be purchased at any time by any parties who deem it for their interest to control the line. The corporation may at any time combine with existing corporations to fix rates, and thus the main object sought by the State in constructing the Tunnel—an independent and competing line—be defeated.
THE PURPOSES OF THE MINORITY.
The minority of the committee in the plan which they propose to the legislature, have had two purposes in view.First:Absolute and perpetual control of the Tunnel, built with the public money for the benefit of the people of the whole Commonwealth; andsecond:state controlof the Tunnel line. I use the wordsstate controldesignedly, as distinguished from state ownership, or state management.
State ownership of a railroad without state management is useless. State management may sink into political management which might be disastrous to the public, and to the railroad. But state control is a very different thing; precisely what legislatures have sought in vain to attain. We have endeavored to give it by special legislation, but all in vain; and yet just this is what we want.
The idea is too firmly fixed in the public mind to be eradicated without a fair and conclusive trial, that fares and freights are now too high—that cheap transportationisnecessary, and can be furnished without interfering with a fair return for the capital invested. You cannot expect private corporations whose whole object is to make money for stockholders, to try this experiment fairly, and ascertain how cheaply transportationcan be afforded. Railroad corporations do sometimes compete, but the sole object and purpose of such competition is eventual combination, and in that combination, the public must suffer. We want to establish a corporation which shall compete to increase its business without any ulterior view of combination to raise rates, and such a corporation is found under the plan presented by the minority of the committee.
THE MINORITY BILL.
This bill proposes first that the Troy and Green field Railroad and Tunnel shall remain the property of the State.
Second.That the State shall obtain by lease the control of the railroads forming the direct Tunnel line. We have reason to believe that this can be effected. We have assurances that the Fitchburg Railroad Company will assent to the terms of this bill. If the only result of this bill is to secure the control of the Fitchburg Railroad it will be worth the trial. The Fitchburg Railroad with its connection with the Tunnel, has a commanding position with reference to the railroads of the State. What we want to secure is a free system of competition, without the power of combination, which is now the bane of our railroad system, in the hands of private corporations.
Rates are now fixed to a remarkable extent by combination, and not by competition. Every business man knows that the freight rates between important points are fixed at meetings of freight agents, who consider not what is a fair price for rendering the service, but what will best pay the corporations which control the business.
The great need of the business community of Boston and Massachusetts, is a line to the West, making the nearest connection with the Lakes, which will do the business at fair and uniform rates, and which shall be managed in the interest of the public, and not of stockholders. Such a line can be secured under the provisions of the minority bill, which will establish a through line with power to connect with Lake navigation at Oswego, on Lake Ontario, and be substantially under state control. The necessity of extending the line to Oswego, to some point on the Lake is obvious, because every other railroad communicating with the West, except the Great Northern route, is now under the control of New York. At any Lake port navigation is open for seven or eight months in the year, and gives a direct communication with the great centres of Western commerce.
The Tunnel line ending at Troy can give little advantage over the present Western line—the Boston and Albany Railroad.
THE EFFECT OF STATE CONTROL OF THE TUNNEL LINE.
One great purpose of controlling one important line, is the effect upon other lines. Our system of railroads is so interwoven that all our railroads are to some extent competing, and the operation of one railroad by a corporation in the interest of the public will to a great extent control the whole railroad system of the State. The direct Tunnel line probably now occupies the most important controlling position of any in the State. It can be made a regulator of the Western business of the State. It can by its connections with the Cheshire and other Vermont and Massachusetts railroads, largely control the northern lines.
It will, by its many connections, bring the whole State in direct connection with the North and West. The great success of the so-called Belgium system is founded on this principle,—the control of the whole by the direct operation of a small portion. The position of our Massachusetts railroads is, in this respect, not unlike that of Belgium. Our railroads are so closely connected together that the state control of one road will be felt throughout the whole system.
THE POPULAR FEELING IN FAVOR OF STATE CONTROL.
It cannot be denied that the popular feeling has been steadily growing in favor of state operation of railroads in spite of all that has been said of the danger of corruption and of the inefficiency of state management. The people, confident in their own integrity and their own power, have not indistinctly shown their desire to fairly try the experiment, and the circumstances are more favorable for such an experiment than will probably again occur. The State now owns the important part of the line,—that part which is necessary to change the line from a disconnected local line of railroads to a great through line. It has been built at great cost. Its opening gives great value to the connecting roads. If it was worth the cost of construction, this value can only be shown by a development of business which will require a series of years, and will be attended with corresponding advantages to all connecting roads. This development of business can hardly be expected without substantially giving up the control of the Tunnel to the line which operates it. The majority bill does give such a control. We deem it the best way for the State retaining the Tunnel to obtain upon fair terms the control of the connecting roads, and fairly try the experiment of operatinga railroad to ascertain how cheaply transportation can be furnished, and yet return a fair remuneration for the capital employed. The public demands such an experiment to be tried, and a better opportunity to try can never exist.
SAFETY OF THE EXPERIMENT.
Of this there can be no reasonable doubt, for a corporation formed under the provisions of the minority bill possesses all the advantages that can be obtained by consolidation under one private corporation, as authorized by the majority bill, and the additional advantages of state and corporate management combined, which would be efficient and reliable, beyond that of ordinary railroad corporations, inasmuch as their acts would be most carefully watched and criticised by others than stockholders, and the honor of securing a successful result to so great an experiment and enterprise in the interests of the people, would be a far greater incentive to even political ambition, than the compensation received; for "great deeds foreshadow great men," and the people are not slow in their rewards to those who are honest and earnest in their service.
Why, Mr. President, if I had the ability to manage this enterprise, I should hold thehonorof making this enterprise in the interest of the State a success of more importance than the honor ofbeing the governor of Massachusetts. And when a man's reputation is thus at stake, he cannot afford to cheat himself by withholding from the State his best talents and energies. It has another and still greater advantage,—the endorsement of the Commonwealth of Massachusetts, which furnishes power and capital for terminal facilities, equipment and the improvement of the line at a cheaper rate than any consolidated company can procure it; and cheap capital in disinterested hands securescheaptransportation.
Can there be any doubt that a corporation thus formed and managed will prove a financial success? If not a success, then we have great reason to distrust a private corporation; with far less advantages, and a larger capital, for doing the same business must prove a financial failure.
To demonstrate this point in a more practical manner, we will assume a proposition and verify this proposition by figures.
Judging from the present local business now done on the several roads—forming what is anticipated as the Tunnel line, and the testimony of eminent railroad men of the business that is sure to come to this great through route to the West—it is fair to assume that the whole will do a business that will average six millions a year for the first five years; twenty-five per cent. of the gross earnings of the leased roads, and propertyare reserved to provide for settlement of the conditions of the said leases; and as they are not guaranteed the payment of any amount beyond what their present business pays, can there be any doubt but what the twenty-five per cent. on the increased business will pay the six per cent. interest on the capital loaned to increase the facilities for extending the business over the line?
The Railroad Commissioners report that the average expenses of all the railroads of the Commonwealth is seventy-five per cent. of their gross earnings; but there is no doubt but what it can be proved that it cost less than seventy per cent. on the great trunk lines, and one of the oldest and most successful railroad managers assured me that this Tunnel line could be run for sixty per cent., but we will call it seventy per cent., which makes with the twenty-five per cent. ninety-five per cent., leaving five per cent. for net profit on the whole business of six millions, which is $300,000. What next? We have for the credit of the corporation or State, twenty-five per cent. of the gross earnings of the business done on the Troy and Greenfield Railroad and through the Tunnel. Calling the Tunnel twenty-three miles in length,—which it is conceded it should be called for what it saves in distance and grades,—and with the Troy and Greenfield Railroad, which is forty-four miles, we have one-third of the whole distance, and it is the judgmentof practical railroad men that out of the six millions of business, two millions would pass over this division and through the Tunnel; and twenty-five per cent. on two millions is $500,000 income, which, added to the $300,000, gives a net income of $800,000 to the State, which is nearly six per cent. on thirteen and one-half millions, the cost of the Tunnel and Troy and Greenfield Railroad, with an additional expenditure of one and one-half millions needed to make this division of the route what it should be as a part of the great through line. In proportion as the business increases, in that same proportion will the profits increase, and when the business shall amount to ten millions, which I have no doubt it will in less than ten years, you create a fund over and above the interest on the whole cost that can be used for extinguishing the debt, purchasing the stock of the leased roads, as the value is fixed by the terms of the lease, or for the reduction of rates of fares and freights. If this proposition will not bear investigation, pray tell me how the stockholders of the consolidated corporations are to receive dividends on their watered stock, with increased cost of improvements of the line, and equipment for doing the same business.
THE ALLEGED DANGER OF POLITICAL CORRUPTION.
A chief argument against the system proposed is the danger of political corruption likely to followthe employment of a large number of men in public business.
Second.—It is alleged that the public management of any great public service is less efficient than private management.
The purpose of the minority of the Committee in proposing their plan, was to provide a corporate body removed as far as possible from political influence.
The State Trustees are appointed by the Governor and Council. They are appointed forfiveyears. A single vacancy occurs each year. They hold nearly the same position in regard to the operatives employed ill the operation of the corporation, as directors of corporations, and no one ever heard of directors exerting any great political influence, particularly State directors. I doubt if any director of any railroad corporation in the State ever knew or thought to influence the political vote of an operative.
If they choose, the managers of any private corporation could exert a greater and more injurious political influence than these State trustees.
If the power is dangerous in State trustees, who must be selected by your Governor, it is far more dangerous in the hands of persons elected by stockholders of a private, money-making corporation, whose interests are in direct antagonism to the interests of the public.
This argument applies to corporate management only with a much greater force. Let corporate management be unmasked and it would make State management hide its face with shame. (See extract New York State Committee on Erie.)
"If the principle is to be established that a few interested parties of stock-jobbers, having no permanent interest, can, by the corrupt use of money or by violence, take and hold possession of a great railroad corporation, and reimburse themselves out of its treasury, it is time the matter was understood by the public. As to the payment of money to influence legislation connected with said company, or other irregularities, the testimony was enough to show that the railroad companies have been in the habit of expending large sums from year to year, either to secure or defeat the passage of bills. It appears conclusive that a large amount, reported by one witness at $100,000, was appropriated for legislative purposes by the railroad interest in 1872, and that $30,000 was the Erie's portion. In this connection the committee denounce the lobby roundly. It is further in evidence that it has been the custom of the managers of the Erie Railroad from year to year in the past to expend large sums to control elections and to influence legislation. In 1868 more than one million dollars was disbursed from the treasury for 'extra and legal services.' What the Erie has done, other great corporations are doubtless doing from year to year. We have here simply an acknowledgment, of the fact. Combined as they are, the power of the great moneyed corporations of this country are a standing menace to the liberties of the people. The railroad lobby flaunts its ill-gotten gains in the faces of our legislators, and in all our politics the debasing effect of its influence is felt."
This cry of political corruption against State management is but the resurrection of the old party ghost which has always been retained in the service of all political parties to frighten people that are naturally timid and conservative; and this terrible spectre has often been the means of delaying and defeating enterprises that were for the best interests of the people.
I remember, Mr. President, when this ghost was exhibited by the Democratic party in every town in this State; and the people were made to believe that the loan made by the State to the Boston and Albany (Western) Railroad would ruin the State; that every man's farm was mortgaged at nine dollars per acre; and men believed it, for that was in times when the people followed party leaders through faith; when it was said that the true test of the political faith of a New Hampshire Democrat was to wake him up with the inquiry, "Who made you?" and if he answered promptly, "Isaac Hill, sir," he was to be trusted as one of the faithful.
The effect of this great outcry was to destroy confidence in the enterprise and the stock at one time could not begivenaway for fear of assessments. And if the people at that time could have been guaranteed that the loss of the State should not exceed the four million loaned, they would have gladly given another million as a guarantee.But they could not rid themselves of the supposed burden, and the result has been the development of a great enterprise in the interests of the State in spite of their fears. This was in a measure to the credit of State management.
As to the efficiency of the plan, it remains to be tried; but in the language of the minority report we believe such a management would be efficient and reliable beyond that of ordinary railroad corporations. It combines State control with corporate management.
The Governor and Council could be depended upon to appoint suitable persons as trustees. The railroad corporations would naturally appoint their most efficient agents as trustees. Such a board could find no difficulty in securing the services of the ablest railroad officers to direct and aid in the management.
As the plan has no precedent it cannot be judged from the record, and the prejudice existing against State management cannot fairly apply to this plan; but if it could have a fair trial we have no doubt of its efficiency and success; and we are not alone in this opinion, for this plan has received the full endorsement of eminent railroad managers, successful and prominent manufacturers and merchants, and the Chairman of the Railroad Commissioners, together with many of our most enterprising and conservative citizens.
STATE PENSIONERS.
It is urged that the plan proposed creates a large class of state pensioners to whom the revenues of the treasury are pledged. They are State pensioners in the same sense as any individual who leases property to the State for a fixed rent, is a State pensioner. Every railroad charter contains a provision for the acquisition of the corporate property by the State, by payment of its presumed value. As well say that all these charters are pension bills.
The minority bill simply provides that stockholders yielding their property to the State, shall have a remuneration for the property surrendered. It makes little difference to the individual whether his compensation comes in the form of the payment of a fixed sum or of an annual annuity. It does make some difference to the State, whether it increases a debt to payoff these stockholders at once, or pays such interest as the property acquired may be fairly presumed to earn. The guarantee does not exceed the dividends which the property may be expected to earn, and the advantage which a lease gives over a purchase by avoiding the transfer and changing of capital should not be overlooked.
In a word, these stockholders are pensioners only in the sense that they become entitled tosecure annuities from the State for which they pay beforehand a full equivalent into the treasury.
THE BENEFITS OF THE PROPOSED PLAN.
It makes absolutely certain the perpetual control of the Tunnel for the benefit of the people of the whole State.
It secures to the people by whose money it has been built, the ultimate value of the enterprise, whatever that value may prove to be.
It secures to the people an independent Western line, to be managed for the benefit of the people, free from any danger of combinations by which rates are fixed.
It secures to all corporations desiring to use the Tunnel, equal rights.
It secures a line stronger than any other, amply able to provide equipment and facilities, and to compete with powerful corporations in neighboring States.
It fixes the capital of the corporation without danger of inflation, and without risk of speculative control.
It enables the people to try fairly the experiment of cheap transportation.
It provides equally with the plan of the majority for the interchange of depots, by which the crossings at the north side of the city may be avoided.
If only one-half of these advantages can begained the experiment is worth trying. If it succeeds and our expectations are fully realized, it will confer upon the people the greatest boon since the introduction of railroads.
Senators will bear me witness that I have never solicited their vote on any personal consideration, and in the decision of this great question, I can only appeal to you as legislators to record your votes in accordance with your convictions of duty to the people of this Commonwealth, and for the protection of her six hundred millions of industrial interests; unbiased by any local or personal interest, keeping in mind that there is no power but that of the State that is safe to trust in the great exigency that now exists.
Transcriber's Notes:All obvious typos were corrected. Hyphenation was standardized. The placement of quotation marks were not standardized; but left as in the original printed version.
Transcriber's Notes:
All obvious typos were corrected. Hyphenation was standardized. The placement of quotation marks were not standardized; but left as in the original printed version.