Edit post

Edit your reply below.

Post Body
Enter your post below.
[quote user="HarveyK400"] The reduced rates for government transportation alone, including moving material and troops in both wars, far exceeded the value of the land grants.  This was no on-going revenue stream and subsidy, a misconception that will not die.[/quote]The Pacific Railroad Act of 1862, as well as subsequent acts through 1874, is a little more complex than meets the eye.  To encourage the development of a Trans continental railroad, the U.S. government offered the Union Pacific and Central Pacific the rights-of-way through public lands.  It also granted them permission to take from the public lands adjacent to their lines the earth, stone, timber, and other materials required for the construction of the roads.  The UP and CP were also granted every alternate section of public land, designated by odd numbers, to the amount of five sections per mile on each side of the railroad's right-of-way and within ten miles on each side of the road.  Subsequently, the Act was modified to increase the size of the land grants and convey the mineral rights under them to the railroads.  The mineral rights proved to be the real pay dirt. The justification for the grants was to aid the construction of the railroads to secure the safe and speedy transportation of mails, troops, munitions of war and public stores.  To finance the roads, the Sectary of the Treasury issued six per cent thirty years bonds to the railroads.  They were issued in $1,000 denominations, with 16, 32, or 48 bonds per mile, depending on the difficulty of the terrain being crossed. The government stipulated that the grants were made with the understanding that the bonds would be paid upon maturity.  Furthermore, the legislation required the companies to keep the railroad and parallel telegraph line in good repair and use.  It required the railroads to transmit dispatches over the telegraph lines at all time and transport mails, troops, and munitions of war, supplies, and public stores for the government, whenever required to do so by any department, and that the government shall at all times have the preference in the use of the same for all the purposes aforesaid, at fair and reasonable rates of compensation, not to exceed the amounts paid by private parties for the same kind of service.  Other language in the Act stipulated that Congress could require the UP and CP to transport dispatches, as well as goods and people, at below market rates if the net earnings of either road exceeded an agreed upon threshold as determined by a complex accounting formula.  Initially, the land grants were of little value, primarily because much of the land could not be used for farming or ranching.  Over time, however, the value of the land grants grew greatly.  As settlers moved west, the UP and CP were able to sell their lands at a significant profit.  But it was the mineral rights that really rang the cash register bells.  Many of the roads are benefiting to this day from their large mineral holdings.  The railroads that received land grants carried government goods and personnel, or transmitted dispatches below fair market rates but not below cost.  Determining the present value of the lost revenue due to the rate reductions would be a daunting task.  One would have to determine the present value of the reduced government tariffs by year and match them against the present value of the value (sale price) of the grants.  It would take an army of accountants to come up with a valid answer.  It is unlikely that the reduced rates provided to the government for the movement of goods and personnel exceeded the value of the land grants and the minerals under them.    The 1940 Transportation Act relieved the railroads from carrying government freight at reduced rates, except for military traffic, which was ended in 1947.
Tags (Optional)
Tags are keywords that get attached to your post. They are used to categorize your submission and make it easier to search for. To add tags to your post type a tag into the box below and click the "Add Tag" button.
Add Tag