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Documentary journal of Indiana 1856, part 1 (Volume 1856, pt.1) online

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M^W^



REPORT

OF THE PRESIDENT OF THE MADISON AND INDIANA-
POLIS RAILROAD COMPANY,



Indianapolis, April 10, 1855.

To His Excellency, Joseph A. Wright, Hon. T. S. Stanfield, and
Hon. Elijah Newland, Commissioners, &c.

Gentlemen: — The undersigned, on behalf of the Madison and
Indianapolis Railroad Company, herewith submits for your con-
sideration, the replies of John A. Reynolds, Secretary, and John
O. D. Lilly, Superintendent of the Road, to certain interrogatories,
embracing all the points upon which your Board, at a former meet-
ing, desired to be informed.

These statements are made under the solemnity of an oath, and
can be further substantiated, if necessary, by other testimony.

They show conclusively, that the Madison Road, from occupy-
ing the first position among Western Roads, from being crowded
with business to its utmost capacity, lrom being a remunerative
enterprise to its stockholders, has been reduced to the position of
a road of an inferior class, has been stripped of its business by
rivalship and competition, and hangs upon the hands of its owners
as a property nearly worthless. The reasons for this change are
apparent. For several years it was the only railway communi-
cation between central Indiana and the markets of the South and
East. It was the connecting link between the interior and the
great commercial cities of Cincinnati and Louisville. The State
was a joint owner of the work, and deemed it her duty, and made
it her policy, to foster and protect its interests, and following up
this policy, refused through her Legislature, again and again, to
grant charters to other lines of road, whose completion might
endanger those interests.

The stockholders of the road were led to believe that this pros-
perity would be permanent, and that no competition could ever
retard or diminish it. Its stock was therefore eagerly sought, not



352

only by capitalists anxious for profitable investments, bat by those
whose slender means it was necessary to husband and make as
largely available as possible, by savings institutions, by widows and
orphans, guardians and executors, by clergymen in the decline of
life, and the aged of every class. It was the policy too of those
who managed and directed its affairs, to increase its capacity for
business to the utmost extent, so that the wants of the public
should be fully met, and every facility furnished to the increasing
commerce of the country. With this view extensive machine
shops were erected, the road fully stocked with cars and machin-
ery, an immense expenditure made for the safe operation of the
plane at Madison, and they even projected an expenditure of
several hundred thousand dollars upon a new terminus, to avoid
the difficulties of the descent to the river.

With these exhilarating prospects the stockholders applied to the
Legislature of 1851-'2 fur the purchase of the State's interest in
the road, and the result was the enactment of the law approved
Feb 28, 1852, by which the Company agreed to pay tor said inte-
rest, either the sum of six hundred thousand dollars of the two and
a half per cent, stocks of the State, or three hundred thousand
dollars in cash, in four equal annual installments, and obligated
themselves to commence arid complete the new terminus at Madi-
son within a limited time. That work was immediately com-
menced, over three hundred thousand dollars expended thereon,
and was finally abandoned.

After the sale o! this interest of the State, by act approved
May 11, 1852, the State opened the door for the construction of
railroads within her limits, wherever capitalists at home or abroad
might think proper. The Lavvrenceburgh and Upper Mississippi
Road was changed from its original direction to Indianapolis, thus
affording a more direct communication with Cincinnati, «nd the
Jefferson ville Road was constructed, affording a direct route to
Louisville. The business of the Madison Road began at once to
decline, at the most rapid rate, and the line, instead of being the
great thoroughfare for trade and travel, became a local road, shorn
of its business and its profits. A desperate effort was made by its
managers to retain its business by the construction of the
Columbus and Shelby Road, and the purchase of the controlling
interest of a line of steamers. Upon the former, which has proven
nearly worthless, the expenditures were near four hundred thou-
sand dollars, while the latter proved a loss of over sixty thousand
dollars.

All these exertions were unavailing, as will be seen by the fol-
lowing statement of the gross earnings of the road, to-wit:

In 1 85 1 $349,403

In 1852 470,892

In 1853 385,705

In 1854 275,557



353

The gross earnings -for 1S55 ran with ceitainty be estimated at
$225,001), and a still further diminution must be anticipated, when
the Jeffeisonville Road shall be extended to Indianapolis, and the
Lavvrenceburgh to Cincinnati, both of which are in train of con-
summation.

The extraordinary efforts made to retain the business of the
road, and other natural and inevitable causes, have placed it in a
very embarrassing condition, and at a time when its diminished
incomes afford li i tie hope of relief. The road itself requires extra-
ordinary repairs to enable it to transport freight and passengers
in safety, to the extent, as estimated by the Superintendent, of
$151,967. Many of these repairs are immediately required, and
cannot under any circumstances be postponed beyond the present,
season, and all are necessary to be made at the earliest possible
day. The motive power and rolling stock demand constant and
heavy expenditures to keep them fit for service. At the same time
the debt of the company has grown to an enormous magnitude.

The present, indebtedness of the company, aside from the pur-
chase of the State's interest, is very nearly as follows :

Seven per cent. Mortgage Bonds $o00,000

Domestic Boijds - • • 2,300

Income, or third Mortgage Bonds sold 266,000

Floating debt or unfunded, as stated by the Secretary, • 182,286

Unsettled claims estimated 40,000

Judgments, or claims in suit 55,000

Interest, coupons in default • • • ■ 25,310

Capital Stocks 1,647,800

Total $2,818,696

Most of the flo&ting debt is due to citizens of the State for labor
and materials, many of whom are in a state of destitution and suf-
fering for the want of the money, which is thus unavoidably with-
held. For nearly $50,000 of this debt the directors have made
themselves individually responsible, with a view of relieving the
company from its embarrassments, and who must suffer to this
amount unless relief is obtained.

The last cash dividend made to the stockholders was in July,
1853, and under the most favorable circumstances no further divi-
dend can be paid for some years to come, as the present average
of earnings will barely be sufficient to pay for repairs, running ex-
p nses, and interest on the funded debt.

These facts, in the opinion of the undersigned, fully justify the
company in appealing to the justice and liberality of the State — to
her justice, because her own act has greatly reduced the value of
the property conveyed by her, and to her liberality, because her
own citizens are to be benefitted or injured by her action.



354

But if her policy were to demand and receive from the company
every dollar that can be extorted, it can readily be shown that her
interest would not thereby be promoted.

From an examination of the several acts under which the Madi-
son and Indianapolis Railroad Company was organized, and which
affect its relations to the State, it is evident to the undersigned
that the State merged her entire interest in the road with the
interest of the company, and that instead of retaining a specific
portion of the road, she only retained "the right to a full share of
the net receipts of said road, in proportion as the length of said
part of the road finished by the State bears to length of the whole
road completed," as specified in sec. 4 of the act of Jan. 13, 1845,
and in the act of Jan 8 2, 1842.

The act of Jan. 28, 1S42, sui rendered to the company the " un-
finished " portion of the work, and the act of Jan. 31, 1^43, ex-
pressly declares, " that the Madison and Indianapolis Railroad be
surrendered to the Madison and Indianapolis Railroad Company,"
evidently embracing every portion of the road. And under sec.
six of the same act it was made " the duty of the Governor, to issue
his oider to the agent having charge of said road to deliver over
to said company, on a day to be named in such order, all and every
part of such road of which he has charge, with all the fixtures,
cars, locomotives, depots, toll-houses and other property and
appendages belonging to the State and appertaining to said road;
and from the time fixed for the surrender of said road as afore-
said, the duties of the agent having charge of said office shall be
abolished." The road was so surrendered, the office of Agent
was abolished as the act provided, and the company became there-
after liable to the State for her portion of the net receipts, as the
several statutes stipulated.

In the exercise of their undisputed control of the road, the
company, on the 1st of April, 1S51, executed a mortgage upon the
entire line of the road and all its property, for the security of the
payment of the principal and interest of $600,000 of seven per
cent, bonds. This lien has priority therefore over that of the State
which bears date of 12th of August, 1853. If the State has secu-
rity, therefore, upon the entire line of the road, she holds it sub-
ject to the original or first mortgage of §600,000. This condition
is specifically recognized in the mortgage executed to the State,
which provides that the Trustees may either take possession of the
road, or may sell it subject to such mortgage.

This first mortgage, a copy of which is herewith presented, pro-
vides two remedies for the holders of the Bonds secured thereby
on "default of the payment of the principal or any part thereof, or
any of the interest of said bonds." One remedy is the sale of the
road by the mortgage trustees ; the other is that said trustees shall
have power to enter into and take possession of said railroad and
all the property therewith connected, and use and employ the
same, making from time to time all needful repairs, alterations and



355

additions, and, after deducting the expenses of such use, repairs,
alterations and additions, apply the proceeds thereof to the pay-
ment of the principal and interest of all of said bonds remaining
unp iid.

Should the latter remedy be adopted and the holders of said
mortgage bonds be compelled to look to their mortgage for pro-
tection, it would involve the immediate sacrifice of every dollar
of the stock of the company, a heavy pecuniary loss to the
endorsers of its paper, and a total loss of more than two hun-
dred thousand dollars to citizens of the State who are its creditors ;
and if the earnings of the road are to be applied according to the
provisions of said mortgage to the ordinary expenses, repairs, al-
terations and additions, and the payment of the principal and in-
terest on all such mortgage bonds remaining unpaid, what time in
the future can be named when the State will receive anything on
account of her interest in said road 1

The value of that interest with these incumbrances, and its re-
duced revenues, it is for the commissioners to determine.

If, however, they are of opinion that the State still holds a
specific portion of the road, that is to say, the twenty-eight miles
completed by her, the value thereof may be ascertained by the de-
position of the superintendent. According to that statement, the
State owns but eighteen miles of the iron upon the road, valued at
$'23,760, and is not the proprietor of a single locomotive, car, or
depot, and has no interest in Cathcart's patent engines, without
which the plane cannot be successfully operated. At the same
time the necessary repairs required upon that portion of the road
are estimated at over $123,000. The conviction is inevitable, that
the property is of no value whatever to any party except the
Madison and Indianapolis Railroad Company.

In the passage of the law under which the commissioners are
acting, the undersigned feels assured that the Legislature intended
that a fair and liberal compromise of this matter should be effected.
It was not their policy, nor will it ever be of an enlightened State,
to find its own aggrandizement in the oppression or injury of any
portion of her citizens, nor to discourage the introduction ot capi-
tal from abroad by rendering it insecure and valueless. It is not
« her interest to compel the abandonment and destruction of any
work of public improvement within her limits, nor to remain con-
nected with any such work as a stockholder. Even if she should
never receive a dollar from this work, she has been many times
repaid by the increase of wealth and population, resulting Irom its
construction.

The undersigned desires to state, explicitly, on behalf of the
stockholders and those heretofore concerned in the management of
the road, that they have themselves been greatly deceived as to
the effect the opening of competing lines was likely to have on the
business of their road. They anticipated, it is true, a decrease of
business when rival lines should be opened, but not to so great and



356

so fatal a result to their interests as the facts have shown. Nor
did they so soon expect to realize the effects of this competition.
The Madison Road siruggled through years of embai raiment to
reach the city of Indianapolis, and its friends could not foresee
that railroad enterprises were suddenly to obtain such credit with
capitalists as to ensure their prompt construction. They expected
to be able to meet the indebtedness to ihe State long before com-
peting lines should seriously affect their business; but shortly after
the contract with the State was made, the Bellsfontaine Road was
completed, and, from being a tributary to the Madison Road, at
once took from it its eastern business from the interior of Indiana.
The Lawrenceburgh Road followed, opening a more direct com-
munication with Cincinnati, and diverting from the Madison Road
its most valuable business.

Through the completion of the Lawrenceburgh Road the Jeffer-
sonville Road was enabled to make a connection with Indianapolis
via Shelby ville, and thereby forced the Madison Road to give her
a direct connection with Indianapolis over the Madison Road, on
such terms as makes the Jeffersonville Road, in effect, a line by its
side from Indianapolis to Columbus, nearly half the length of the
Madison Road.

In addition to these competitors, the Ohio and Mississippi Road,
and the Indiana Central Road, have served to draw off a large
amount of business from the Madison Road.

The undersigned, in consideration of the foregoing premises, on
behalf of the Madison and Indianapolis Railroad Company, pro-
poses to pay to the State of Indiana, for her interest in said road,
the sum of seventy-five thousand dollars of the five per cent,
stocks of the State of Indiana, within one year Irom the date
hereof, and, on or before the 10th day of July, IS55, to give
security, to the satisfaction of the commissioners, for the compliace
with this proposition on the part of said company.

The undersigned regards this sum as more than an equivalent
for the interest held by the Sta"te, and more than strict justice
either to the company or to her would require; but as it is the
minimum named in the law under which the board are acting, and
as it is desirable that the connection between the State and the
company should be dissolved, this sum is proposed.

It is proper to state that neither this sum, nor any portion of it,
can be appropriated from the earnings of the road, but that it
must be contributed, if so awarded by the commissioners, by such
of the stockholders as still hope to release the road from its em-
barrassments and save something from the wreck. Many already
regard their investment in the road as a total loss, and have aban-
doned all hopes of a resuscitation; but it is believed that others
may be induced to make a further effort, in the manner and for the
end already indicated.

Very respectfully, &c,

E. W. H. ELLIS,
President of M. $ I. R. R. Co.



REPORT



OP THE SUPERINTENDENT OF THE MADISON AND
INDIANAPOLIS RAILROAD COMPANY,



MADISON, April 2, 1855.

E. W. II. Ellis. Esq.:

Deui- Sir: — In reply to your letter of the 22d of March, allovr
me to submit the following:

Question 1.— State the entire length of the Road, including side
tracks and switches, and the length of the same finished by the
State at the date of surrender to the company?

Answer 1. — Whole length of Road including side tracks, 98^
miles; the State laid the iron and finished the road to Griffith's,
now known as Queensville, 28 miles.

Question 2. — State the total value of depots, blacksmith and
machine shops, and other structures on the whole line of ,road, and
h description and value of all such structures and improvements
upon the State's portion of the road at the date of surrender?

Answer 2. — Depots on the whole road, (eight in all,) worth to

the road * $19,800 00

Machine shops, two in all 12,000 00

Blacksmith shops, two in all 3,500 00

Engine houses, three in all 7,000 00

Car shops and car houses, five in all 5,600 00

Wood houses, eight in all • 3,500 00

$51,400 00



358

The State finished one small depot at North Madison, say worth
$300; als^, a small machine shop at same place, say $100; these
were both wooden structuies, and have both been removed lon<z
since. If the above structures were sold they would not bring
over 40 per cent, of their estimated value for other purposes.

Question 3. — State the number of miles of iron furnished by the
State now remaining upon the road, and the condition and value
thereof?

Answer 3. — The State furnished iron for twenty-eight miles,
which weighed forty-two pounds to the yard There has since
been removed, ten miles — remaining eighteen miles, of which the
greater portion is worn out and none of it fit to remain or relay
in main track. A small portion of it will answer for side tracks.
It will perhaps average 30 pounds to the yard, which is 47 tuns
per mile, and is worth 1} cents per pound, making $1,320 per mile
— eighteen miles, worth $23,760 00

Question 4. — State the nature and cost of repairs necessary
within the current year upon the State's portion of the road, to
keep the same in condition for transportation o! persons and prop-
erty in safety ?

Answer 4. — Eighteen miles to be relaid with new iron, 60
pounds to the yard, 94} tuns per mile — it will cost $55 per tun
delivered at Madison, making $5,1 S3 75 per mile — eighteen miles,

worth • $93,307 50

Cross ties 2,300 per mile, 18 cents each, $414 per

mile — eighteen miles • • 7,452 00

Spikes for laying eighteen miles 2,500 00

Wrought chairs for eighteen miles 4,158 00

Distributing iron, spikes, chairs and cross ties, $175

per mile — eighteen miles 3,150 00

Laving the iron while trains are running, $500 per

mile — eighteen miles 9,000 00

There is about twenty-four miles that will need
gravel ballast, and there is no gravel south of Co-
lumbus except at the Ohio River, and bringing it
up the hill is about equal to bringing from north

of Columbus, it will cost $375 per mile 9,000 00

There are three high and long bridges which will
require repairs to the amount of about $500 each,
(this will make them last about two years, when
they will require new structures entire, this will
cost $22 per foot — there being 1,106 feet, making

$24,332,) 1,500 00

The incline plane track must be relaid with new
cross ties, mud sill, segment timber, and the cast
iron segment or rack is continually breaking from



359

defective foundation, and a portion of it must be
removed — labor and material for relaying plane- • 8,500 00

There is a very heavy land slide at Vernon, which
will require a removal of the track some ten feet
nearer the hill side — excavating, building a strong
stone protection wall to make all safe, cost about, 600 00

Total cost of repairing State's portion of the road, $128,767 50

Question 5. — State the amount of repairs required on the re-
maining portion of the road?

Answer 5. — Relaying half mile of side tracks at Indianapolis —

spikes, chairs, cross ties, iron and labor $1,800 00

Rebuilding three trestle bridges, .$300 each 900 00

A turning table or pivot at Indianapolis 750 00

The road having been laid on mud sills, they are
now decaying and need gravel fifty-seven miles,
but if twenty miles is graveled this year and the
balance next, it may answer — twenty miles at

$375 per mile- - 7,500 00

There is two depot buildings needed badly, one at
Columbus station and one at Edinburgh station —
they should be brick structures, and will cost
$2,500 each, (the old are very unsafe having been

built of wood) 5,000 00

There are three water stations that need renewing
with water station pumps, pipes and fixtures, $350

each " 1,050 00

The tracks will require 15,000 new cross ties, these
can be put in by the ordinary track hands — 18



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