Chapter 11

RAILROADS AND RAILROAD LEGISLATION IN IOWA.

The first survey for a railroad in the State of Iowa was made in the fall of 1852. The proposed road had its initial point at Davenport and followed a westerly course. It was practically an extension of the Chicago and Rock Island Railroad, which was then being built between Chicago and the Mississippi River. On the 22d day of December, 1852, the Mississippi and Missouri Railroad Company was formed, its object being to build, maintain and operate a railroad from Davenport to Council Bluffs. The articles of association were acknowledged before John F. Dillon, notary public, and filed for record in the office of the Recorder of Scott County, on the 26th of January, 1853, and in the office of the Secretary of State on the first day of February following. In 1853 the Mississippi and Missouri Railroad Company entered into an agreement with the Railroad Bridge Company of Illinois for the construction and maintenance of a bridge over the Mississippi at Rock Island. The work was commenced in the fall of that year, and the bridge was completed on April 21, 1856, it being then the only bridge spanning the Mississippi River. The first division of the Mississippi and Missouri Railroad, extending from Davenport to Iowa City, was completed on the first of January, 1856, and was formally opened two days later. A branch line to Muscatine was completed shortly thereafter. On the first day of July the State of Iowa had in all sixty-seven miles of railroad, bonded at $14,925 a mile, which at that time probably represented the total cost of construction. The earnings of these sixty-seven miles of road during the six months following July 1, 1856, amounted to $184,193, or $2,749 per mile, which was equal to an annual income of about $5,500 per mile.

On the 15th of May, 1856, Congress granted to the State of Iowa certain lands for the purpose of "aiding in the construction of railroads from Burlington, on the Mississippi River, to a point on the Missouri River near the mouth of the Platte River; from the city of Davenport, Iowa, by way of Iowa City and Fort Des Moines, to Council Bluffs; from Lyons City northwesterly to a point of intersection with the main line of the Iowa Central Air Line Railroad near Maquoketa, thence on said line running as near as practical to the forty-second parallel across the State; and from the city of Dubuque to the Missouri River near Sioux City." The grant comprised the alternate sections designated by odd numbers and lying within six miles from each of the proposed roads. Provision was also made for indemnity for all lands covered by the grant which were already sold or otherwise disposed of.

The wisdom of the land-grant policy has been questioned. When these grants were made it was believed by many that railroads would not and could not be built in the West without such aid. While others did not share this opinion, they at least supposed that land grants would greatly stimulate railroad enterprise and lead to the early construction of the lines thus favored.

The land grant of the Mississippi and Missouri Railroad was a mere donation for that part of the line which was already completed at the time the grant was made; and the extension of this line, as well as the construction of the other lines to which the grant applied, was not made as fast as had been anticipated. The price of all Government lands lying outside of the land-grant belts was $1.25 per acre. To reimburse the public treasury for the loss resulting from these grants, the price of lands situated within the land-grant belts was advanced to $2.50 per acre, practically compelling the purchasers of the even-numbered sections of land, instead of the Government, to make the donation to the railroads, it being supposed that the benefits resulting to those regions from the immediate construction of railroads would correspondingly enhance the value of the alternate sections of land reserved by the Government. Designing men soon saw the advantages which the situation offered. They combined with their friends to organize companies for the construction of the land-grant roads, built a small portion of the proposed line, to hold the grant, and then awaited further developments, or rather the settlement of the country beyond. There are those who believe that the doubling of the price of Government land within the belt of the proposed land-grant roads greatly retarded immigration and with it the construction of roads. They hold that, had no grant whatever been made to any railroad company and had equal competition in railroad construction been permitted, the Iowa through lines, instead of following, would have led, the tide of immigration.

It has been seen that in 1856 the Mississippi and Missouri Railroad was completed as far as Iowa City. On the second day of June of that year its Board of Directors asked the Governor of the State to convene the General Assembly in extra session, to consider the disposition which should be made of the recent Congressional grant. This urgency might lead one to suppose that the company was anxious to extend its line at the earliest opportunity. The General Assembly was convened, and the land given to the State by Congress for the purpose of aiding in the construction of a railroad from Davenport to Council Bluffs was given to the Mississippi and Missouri Railroad Company. The act was approved by the Governor on July 14, 1856, and three days later the company "assented to and accepted the grant." It then executed mortgage after mortgage, and built a branch line through quite a populous territory, from Muscatine to Washington, but the main line made very slow progress. In 1865 the bonded debt of the company amounted to $6,851,754, although the line was completed only to Kellogg, in Jasper County, about forty miles east of Des Moines. In spite of the fact that the cost of operating the road had from the beginning varied but little from 60 per cent. of its gross receipts, its president, in a circular letter to the stock-and bondholders, dated October 20th, 1865, made the statement that the company was "driven to the necessity of selling the road or reorganizing." In 1866 suit was brought in the Circuit Court of the United States for the District of Iowa for the foreclosure of the company's mortgages, and a decree of foreclosure was entered on the 11th day of May of that year. The property was sold on the 9th day of July following at Davenport, and was purchased by the Chicago, Rock Island and Pacific Railroad Company, which was incorporated in this State a few weeks previous to the sale, for the purpose of acquiring the railroads built by the Mississippi and Missouri Railroad Company with all its appurtenant property, "and all the rights, privileges and franchises granted by the act of Congress of May 15th, 1856, to the State of Iowa, and by the State of Iowa granted to the said Mississippi and Missouri Railroad Company, and when so acquired to maintain and operate the said railroad." It is a significant fact that all the corporators of the new company, except one, were directors of the bankrupt company. On the 20th of August, 1866, the Chicago, Rock Island and Pacific Company of the State of Iowa consolidated with the Chicago, Rock Island and Pacific Railroad Company of Illinois, and conveyed all its property, powers and franchises to the consolidated company. The validity of the consolidation was questioned by a large number of stock-and bondholders, and the courts were appealed to to issue injunctions restraining the consolidated company from extending its line or expending any money obtained through the sale of its securities. In this predicament the company turned to the Iowa legislature for protection. Anxious to secure the early completion of the road, the Twelfth General Assembly, by an act approved February 11th, 1868, recognized the consolidated company, and resumed and granted to it "all right or interest" which the State had in the lands previously granted to the Mississippi and Missouri Railroad Company. The act expressly provided, however, that the Chicago, Rock Island and Pacific Railway Company should "at all times be subject to such rules, regulations and rates of tariff for transportation of freight and passengers as may from time to time be enacted and provided for by the General Assembly of the State of Iowa," and that if the company should neglect to comply with any of the requirements of the act, it should forfeit to the State all its franchises and corporate rights acquired by or under the laws of the State, and all lands granted to aid in the construction of its road. The line was completed to Council Bluffs in June, 1869.

The lands in aid of the construction of a railroad running across the State, as nearly as practicable along the forty-second parallel, were granted by the General Assembly to the Iowa Central Air Line on the 14th of July, 1856, but as this company failed to fulfill the conditions of its grant, it was, on the 17th of March, 1860, transferred to the Cedar Rapids and Missouri River Railroad Company. This company completed the road to Marshalltown in 1862, to Nevada in 1864, to Boone in 1865, and to Council Bluffs in the fall of 1867.

The Burlington and Missouri River road reached the Missouri River but a few months later. Ten years after this company had received its grant, its line had only been completed as far as Albia, in Monroe County. In 1867 the road was built little more than half across the State. But it managed not to be far behind its two rivals on the north in reaching the Missouri River.

At first sight it might seem as if these companies had all at once become awake to their obligations. When it is remembered, however, that in 1869 the junction of the Union Pacific and Central Pacific railroads was effected, and thus a continuous line across the continent formed, the conclusion lies near that the haste with which the three Iowa land-grant roads were completed was simply the result of a strife for the large amount of through business which the completion of the Pacific route promised to bring to them.

No such inducement existed for the Dubuque and Sioux City Company, and twelve years after receiving its grant it had not yet built half of its line. In his message to the Twelfth General Assembly, delivered January 14, 1868, Governor Stone said: "Under the provisions of the act adopted by the General Assembly, at its extra session (in July, 1856), this (the Dubuque and Sioux City) company became the beneficiary of the grant designed to secure the construction of a railroad leading from Dubuque to Sioux City, and this valuable donation was accepted from the State, with all the terms and conditions imposed. A large portion of this grant has already been absorbed by the company, in various ways, by pretended sales and incumbrances. This road has been constructed to Iowa Falls, a distance of 143 miles from Dubuque, but I am unable to discover any reliable evidence of earnest intention on the part of this company to construct the line to its terminal point on the Missouri River."

The Governor further recommended that the General Assembly pass an act resuming the control over these lands. At about the same time an agreement was effected between the Iowa Falls and Sioux City Railroad Company (which was organized in the fall of 1867) and the Dubuque and Sioux City Railroad Company, by which the latter transferred to the former its land grant for the unfinished portion of the Dubuque and Sioux City road. This agreement was confirmed by the General Assembly, through an act approved April 7, 1868. The road was completed to Fort Dodge in August, 1869, and to Sioux City a year or two later. The entire line was then leased to the Illinois Central.

The land grant to this line of road embraced over 1,000,000 acres of the finest lands of the State. We can appreciate the magnitude of this donation when we consider that, had these lands been sold at only $8 per acre, the proceeds would have paid the whole expense of building and equipping the road from Dubuque to Sioux City. The lands granted to the C., R. I. & P. R. R. were sold at an average price of over $8 per acre, and those of the B. & M. at over $12 per acre.

Among the other important land grants is that made to the McGregor Western Railroad Company. This company was the successor of the McGregor, St. Peters and Missouri River Railroad Company, which was organized in 1857 for the purpose of constructing a railroad from McGregor to the Missouri River. The construction of the road was commenced in 1857 at McGregor. Large local subscriptions were taken along the proposed line, the writer being one of the subscribers. Work was continued the next year until much of the heavy grading had been done, when the road was allowed to go through the process of foreclosure, like many other roads built in the West at that time. The old stock was completely wiped out, and new owners came into possession of the property, reorganizing under the name of the McGregor Western Railway Company. Nearly all the early investments of Iowa people were thus confiscated by the same class of men who now cry out loudly against confiscatory measures. By an act of Congress approved May 12, 1864, the State of Iowa was granted, for the use and benefit of the McGregor Western Railroad Company, every alternate section of land designated by odd numbers for ten sections in width on each side of the proposed road. The act contained the condition that in the event of the failure of said McGregor Western Railroad Company to build twenty miles of said road during each and every year from the date of its acceptance of the grant the State might resume the grant and so dispose of it as to secure the completion of the road in question. The McGregor Western Railroad Company failing to comply with the conditions of the grant, the General Assembly on the 27th day of February, 1868, resumed the lands and on the 31st day of March of the same year regranted them to the McGregor and Sioux City Railway Company. The act specially provided that the company accepting the grant "shall at all times be subject to such rules, regulations and rates of tariff for the transportation of freight and passengers as may from time to time be enacted and provided for by the General Assembly of the State of Iowa, and further subject to the conditions, limitations, restrictions and provisions contained in this act and in the acts of Congress granting said lands to the State of Iowa." It also contained the condition that at least twenty miles of road should be built by the company every year and that the whole road should be completed to the intersection of the then proposed railway from Sioux City to the Minnesota State line by the first day of December, 1875.

The McGregor and Sioux City Railway Company also failing to comply with the terms of the grant, the lands were again resumed by the General Assembly on March 15th, 1876, and regranted to the McGregor and Missouri River Railroad Company upon the condition that it complete the road to the intersection of the Sioux City and St. Paul Railroad on or before the first day of December, 1877.

But the State found itself again disappointed, and two years later the General Assembly for the third and last time resumed its grant and then conferred it upon the Chicago, Milwaukee and St. Paul Railway Company upon the express conditions that it complete the road to Spencer on or before the first day of January, 1879, and to Sheldon within a year thereafter, and that the road should at all times be subject to State control. The road was completed to Sheldon without delay, and on the 30th of November, 1878, the Governor of the State certified to the Secretary of the Interior that the Chicago, Milwaukee and St. Paul Railway Company had completed its road from Algona to Sheldon in compliance with the conditions of the original grant and the laws of the State.

It thus took over twenty years to complete this road. Ten years after its construction had commenced it had only reached Calmar in Winneshiek County. In 1869 the road was completed to Clear Lake and in 1870 to Algona. This point remained its terminus until it passed into the hands of the Chicago, Milwaukee and St. Paul Railway Company.

The State of Iowa has not derived that benefit from the large land grants made to its railroads which her people had a right to expect. In spite of these grants roads were built only when there was reason to believe that they would be immediately profitable to their owners. The land grants enriched the promoters of these enterprises much more than they did the State in whose interest the grants were presumed to be made. As a rule they enabled scheming men to hold the selected territory until a railroad through it promised to be a safe and profitable investment, and to avoid the payment of taxes on their millions of acres of land, which in the meantime became very valuable. Other roads were built at an early day without Government aid. They were pushed forward by the current of immigration until the threatened competition of roads favored by these grants checked their progress. The Chicago, Iowa and Nebraska road may be cited as a fair illustration. It was projected on the 26th of January, 1856, in the town of Clinton, to be built from Clinton to the Missouri River via Cedar Rapids. It was opened to De Witt in 1858 and completed to Cedar Rapids the following year. The road was 82-1/2 miles long and was built entirely with private means, receiving neither legislative aid nor local subsidy. It is more than probable that this road would at an early day have been completed to the Missouri River, had it not feared the rivalry of the subsidized Cedar Rapids and Missouri road.

The total number of acres of land granted by Congress to aid the construction of Iowa roads is 4,069,942. A fair idea of the value of these lands may be obtained from the fact that the Chicago, Rock Island and Pacific Railroad Company sold over half a million acres of its lands at an average of $8.68 per acre, and the Chicago Burlington and Quincy sold nearly 350,000 acres at an average of $12.17 per acre.

But land grants form only a small part of the public and private donations which have been made to Iowa roads. Including the railroad taxes voted by counties, townships and municipalities, the grants of rights of way and depot sites and public and private gifts in money, these roads have received subsidies amounting to more than $50,000,000, or enough to build 40 per cent. of all the roads of the State. There is no doubt that the contributions of the public toward the construction of the railroads of Iowa is several times as large as the actual contributions of their stockholders for that purpose.

The people of Iowa were from the first very favorably disposed towards railroads. Every inducement was held out to railroad builders to come here and help to multiply the tracks for the iron horse. They came and brought with them many abuses which since the first introduction of railroads had gradually been developed in other States.

The contrast between the old and the new mode of transportation was so great, and the public appreciated so highly the superior conveniences afforded by the latter, that for years the abuses practiced by the early railroads were scarcely noticed, or, if they did attract the attention of the public, they appeared more like necessary features of the new system of transportation than like abuses. The evil gradually increased, but for years no attempt was made to check its growth. The railroad managers construed this failure of the people to interfere with, or even protest against, their unjust practices as a quasi-sanction of their course, and soon claimed to do by right what they had formerly done by sufferance. The evils increased until the patience of the people finally became exhausted.

While the State thus for years dealt very leniently with the railroad companies, the laws of Iowa had from the beginning of railroad building emphasized the principle of State control. This principle was asserted in the very first railroad act ever passed in the State. Section 14 of