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Kansas City to Denver to Cheyenne: Pacific Railroad Construction Costs and Profits*

  • William R. Petrowski (a1)

Professor Petrowski examines the question of promoters' profits from the building of the Kansas Pacific and the Denver Pacific railroads.

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1 This is even true of the best effort, by Fishlow, Albert, in his American Railroads and the Transformation of the Ante-Bellum Economy (Cambridge, Mass., 1965), 341401.

2 Fogel, Robert W., The Union Pacific Railroad: A Case in Premature Enterprise (Baltimore, 1960), 5190.

3 Working Papers of the Bureau of Valuation, Records of the Interstate Commerce Commission (RG 134), Federal Records Center (FRC), Suitland, Maryland.

4 Gates, Paul Wallace, Fifty Million Acres: Conflicts over Kansas Land Policy, 1854–1890 (Ithaca, N.Y., 1954), 120123; Glaab, Charles N., Kansas City and the Railroads: Community Policy in the Growth of a Regional Metropolis (Madison, Wisc, 1962), 103109; Farley, Alan W., “Samuel Hallett and the Union Pacific Railway Company in Kansas,” Kansas Historical Quarterly, XXV (Spring, 1959), 116; Farnham, Wallace D., “The Pacific Railroad Act of 1862,” Nebraska History, XLIII (September, 1962), 148150, 159–160; Petrowski, William R., “Thomas C. Durant and the Union Pacific, Eastern Division: 1864–1866,” Kansas Quarterly, II (Summer, 1970), 5865; Petrowski, William R., “The Kansas Pacific Railroad in the Southwest,” Arizona and the West, XI (Summer, 1969), 129146; Storey, Brit Allan, “The Kansas Pacific Seeks the Pacific,” Journal of the West, VIII (July, 1969), 402415.

5 U.S. Senate, Majority and Minority Reports of the United States Pacific Railway Commission, with Testimony, Executive Document 51, 50th Cong., 1st Sess. (Serials 2505–2509), p. 1685. Hereafter cited as PRC.

6 Memorandum in file “1869,” Anderson Family Papers, Kansas State Historical Society, Topeka, Kansas.

7 Durant to Hallett, March 22, 1864, in file V-l-3, Levi Leonard Collection, State University of Iowa Library, Iowa City, Iowa.

8 Schedule 11 (Investment in Road and Equipment), Subschedule 1, p. 11, Volume 5–15–31 (Kansas Pacific Railway), RG 134, Suitland.

9 PRC, 4875.

10 Schedule 21 (Contracts), Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

11 PRC, 4875.

12 PRC, 122–124.

13 Robert M. Shoemaker to Greeley, Filley, Edgell, Archer, Miller, and Baird, February 27, 1867, in box 13, William Jackson Palmer Papers, Colorado State Historical Society, Denver, Colorado.

14 Schedule 21 (Contracts), Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

15 PRC, 125–127.

16 Schedule 11 (Investment in Road and Equipment), p. 13, Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

17 Based upon travel in the area and examination of U.S. Geological Survey maps NJ 13–2, 13–3, 13–6, NK 13–8, 13–11, and NV 14–1 (scale of 1:250,000).

18 PRC, 4891.

19 Hallett's Heirs v. Kansas Pacific Railway Company, et al. Appellate Case File No. 7259, pp. 12–14, Records of the Supreme Court of the United States (RG 267), National Archives, Washington, D.C.

20 PRC, 4907–4911; Joseph B. Stewart v. the Union Pacific Railway Company, Eastern Division, et al. [#153], Circuit Court of the United States for the District of Kansas. RG 21, FRC, Kansas City, Missouri.

21 13 Statutes at Large 504. Despite all the hand-wringing by the promoters about the lack of funds, there is no evidence any of the Pacific railroads ever sought publicly to market its bonds under the terms of this act.

22 PRC 4880–4882, 4884; Schedule 21 (Contracts), Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

23 For example, J. Edgar Thomson and Thomas A. Scott of the Pennsylvania Railroad.

24 See the lists of railroad security prices in the American Railroad Journal for the several months before and after the failure of the Ohio Life and Trust Company and the announcement, on October 17, of the financial distress of the Erie, Michigan Central and Illinois Central.

25 Gates, Paul Wallace, The Illinois Central Railroad and Its Colonization Work (Cambridge, Mass. 1934), 7475.

26 Ibid., 75–76; Adler, Dorothy R. (Hidy, Muriel E., ed.), British Investment in American Railways, 1834–1898 (Charlottesville, Va., 1970), 2022.

27 Gates, Illinois Central Railroad, 79–80.

28 American Railroad Journal, XXX (November 28, 1857), 758–759.

29 PRC, 4885–4886, 4891.

30 Schedule 11 (Investment in Road and Equipment), Subschedule 1, p. 11, Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

31 PRC, 4922.

32 PRC, 4891.

33 This balance, and that in Table 1, ought to more than offset any understatement of costs.

34 PRC, 128–129.

35 Schedule 11 (Investment in Road and Equipment), p. 12, Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

36 PRC, 4904. No value is attached to the Income Bonds here.

37 PRC, 4988.

38 Exhibit D. Carlos S. Greeley v. Denver Pacific Railway and Telegraph Company, et al. [#156], Circuit Court of the United States for the District of Colorado. RG 21, FRC, Denver, Colorado.

39 This excludes whatever value the KP Income Bonds may have been worth.

40 Commercial and Financial Chronicle, VIII (June 5, 1869), 724 for 1867 and 1868; XIV (June 15, 1872), 795 for 1870 and 1871; XVI (June 7, 1873), 764 for 1872.

41 Schedule 2 (Comparative Income Account), p. 2, Volume 5–15–31 (Kansas Pacific Railway), RG 134, FRC, Suitland.

42 PRC, 4987, 5244.

43 Ibid., 4897.

44 Ibid., 4902.

45 Low values were not calculated on the 1874 annual averages (which generally were lower than the 1876 averages) because of the fact that even though the KP-DP system was in obvious financial trouble, holders of its securities had opportunities (in 1875 and 1876) to unload at higher prices.

46 Homer, Sidney, A History of Interest Rates (New Brunswick, N.J., 1963), 285290.

47 Ibid., 287.

48 The exception is the KP second mortgage land grant bonds, for which the first quarter of 1873 was used. Securities may be bought and sold by individuals without being listed in published quotations.

49 Commercial and Financial Chronicle, XX (June 26, 1875), supplement, xx.

50 These figures are conservative, for they do not include securities issued to the promoters for which no quotations could be obtained. These include $250,000 in Leavenworth County (Kansas) bonds (see note 1, Table 4) and $300,000 in Arapahoe County (Colorado) bonds and $3,400,000 in DP stock (see note 1, Table 5). In addition, no consideration has been given to salaries earned by those promoters who also served as officers of the KP (or DP). For salaries of those earning in excess of $5,000 per year, see PRC, 4311, 5242–3.

* I wish to acknowledge gratefully the comments of the major referee of an earlier version of this paper, for they resulted in a significant change in emphasis and conclusions.

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