|Tuesday, May 25, 1875||The Globe (Toronto)||Page 1|
The Northern Railway Stock.
We have waited patiently for a week in expectation that the Committee of the City Council, who have in charge the subject of the city's stock in the Northern Railway, would obtain from the officials of the Company, and place fully and fairly before the tax-payers of Toronto, the exact financial position of the road at this moment, so that all might judge what truth there is in the pretension that the stock held by the city is worthless, and what possible advantages can accrue to the city from throwing it away. We have, however, waited in vain; and we now learn, with deep regret—we cannot truthfully say with astonishment—that a majority of the City Council, without any reliable statistics before them, and without any authority from the ratepayers, will this very night surrender to Mr. Cumberland and his friends, for a mere nominal consideration, the entire stock of the city to the large amount of $190,000.
Before this act of utter folly is consummated, we ask the members of the City Council to bear with us while we seek, in the interest of the city and that alon, to press upon them some reasons, beyond those we have already urged, why this thing should not be done.
And befre doing so we desire to say this: that if we had thought this great sacrifice demanded of our citizens was necessary to the prosperity of the Northern Railway, we would not only have gone for it promptly and frankly, but would have been among the first and the most earnest to urge its adoption on the city.
We are of the opinion, and we have always held that opinion, that the Northern Railway has been more conducive to the prosperity of the city than any other Railway. We stood by the enterprise firmly and steadfastly, through a long term of tribulation. We lent all our weight for many years to the wise policy of applying every sixpence of revenue that the law of the land or the good nature of creditors permitted to be spent on the improvement of the line; and we heartily rejoiced with Mr. Cumberland when, from year to year, the rapidly increasing earnings and profits of the road proved the sagacity of this course and the ability of this administration. And to show how steady and rapid was the progress made by the road. In spite of a great load of debt and various other embarrassments, here is a statement of its gross earnings for sixteen years past, from the official returns:—
1859 .. .. . $240,044 1860 .. .. . 332,967 1861 .. .. . 410.939 1862 .. .. . 406,238 1863 .. .. . 406,606 1864 .. .. . 467,286 1865 .. .. . 506,748 1866 .. .. . 512,874 1867 .. .. . 561,370 1868 .. .. . 660,070 1869 .. .. . 671,076 1870 .. .. . 733,567 1871 .. .. . 777,498 1872 .. .. . 804,774 1873 .. .. . 841,589 1874 .. .. . 816,936
Besides these large earnings in 1873 and 1874, when almost every other railway suffered a much greater proportionate loss of business from the universal shrinkage of traffic and reduction of rates all over the continent, very large sums were earned in these years by the Company from work done by it, on the construction of extension lines.
Now, let it be borne in mind that all this great increase of business was effected when the Government lien of many millions hung perilously over the road, when the credit of the Company was at zero, and when the stock of private shareholders was sold at auction for one cent in the dollar! And if all this could be done under such discouragements, what must now be the high hope of infinitely greater results when the vast Government debt has been lifted off the enterprise; when nearly sixty miles of new lines extending northward have been added to the road, and already contribute largely to its resources; when the trade of Lake Superior, so rapidly and vastly extending, begins to pour its traffic over the road; when the opening up of the North-western Provinces to settlement and civilization begins to add its volume to the stream; and when the construction of the Canadian Pacific Railway, with direct connection with Toronto and Lake Ontario over this same Northern Railway, is no longer matter of doubt? Who can estimate the volume of business that must pass over this road within five years from now? Who can estimate the increase to the business of our city that must result from the judicious management of this vitally important highway—And what citizen of Toronto, in possession of his senses, would dream of throwing away the influence over the management of such a road that the ownership of $190,000 of stock would secure?
They tell us we may get five cents in the dollar, or ten cents in the dollar, or even more if we dicker hard for it—and we had better jump at it while we have the chance. Were every word of this true, and were we offered every penny of its face value—we should hold on to the stock. Our citizens have borne the annual burden of this debt for many years without a word of impatience or regret; and an award of $60,000 more against the Company for city land has, for years, stood due to the Corporation with hardly a complaint. The city stood by the road in its day of trouble—and it is about to have its reward. Let us hold on to our stock.
Why should we not hold on to it? Why should we surrender it to Mr. Cumberland and his friends? Let us see what the report of the Committee of Council recommended;—
"The Committee recommend that the stock held by the city in the Northern Railway be surrendered to that Company on the following conditions;—
"(1.) That the Company undertake to complete railway connection between Toronto and the waters of Lake Muskoka at Gravenhurst.
"(2.) That such work be completed and the trains running by the 1st January, 1876.
"(3.) That the stock be then surrendered to the Northern Railway Company.
"The above recommendations being conditional upon satisfactory arrangements being also concluded between the Company and the county of Simcoe for the surrender of the stock held by the latter to the Company, and in view of the provision of the Bill to the effect that the right of the Corporation to a seat at the Board of Directors is to be permanently maintained."
It will be observed that the Committee does not include among the inducements for the surrender of our stock all the baits held out by Mr. Cumberland. It modestly confines its observation to two points—the construction of the Barrie and Gravenhurst extension, and the right of the City Corporation to send one member to the Directors' Board of the Northern Railway. As to this right of naming a director we shall speak hereafter; and to show what the other inducement amounts to, let us quote from the Annual Report of the Company of 13th February, 1874:—
"The leased lines of the Northern Extension Railways Company now in traffic operation represent a mileage of fifty-six miles, viz: From Collingwood to Meaford, 20.50 miles, and from Barrie to Washago, 35.50 miles. The traffic upon these lines has sensibly increased, while their contributions in freight and passengers to the main line have been very satisfactory, notwithstanding that the system is yet incomplete, and the objective and most valuable point (Gravenhurst), sixteen miles from Washago, has yet to be reached.
"Under the powers of Act 35 Vic., cap 66, and with a view to expediting the completion of the line to Gravenhurst, this Company has recently enlarged its guarantee of interest upon the authorized issue of debentures made on the [illegible] of the extension lines, and the works between Washago and Gravenhurst (a length of sixteen miles) are now in progress."
It will thus be soon that this immense concession, for which the Committee proposes our whole stock shall be surrendered to Mr. Cumberland and his friends, is the completion of sixteen miles of road from Washago to Gravenhurst, the work on which has been in progress since January 1874, and to complete which the Northern Company has "enlarged its guarantee of interest upon debentures, made on the security of the extension lines." The annual report of the Northern Railway Company have for years in succession admitted the great profit already derived from the Gravenhurst extension line, and the vast increase of profit that will result from its completion; and seeing that this road has been largely built with bonuses from Toronto and other municipal Corporations, and that much of the work upon it has been done, and much of the rolling stock has been supplied, from surplus revenues of the Northern in the past few years—what necessity can there be for the people of Toronto surrendering their stock to complete the few remaining miles? The extension road is good security for all the money wanted—the Northern Railway endorsement makes it absolutely safe—and the earnings of the extension road are admittedly more than adequate to meet the annual interests. Why then should we surrender our $190,000 of stock—when the money can be obtained without our help?
But Mr. Cumberland's argument is different from that of the Committee. As we understand it, his position is that he wants:—
To pay off the Government Lien .. .. . $500,000 To change the gauge .. .. . $350,000 To pay amalgamate with the extension lines .. .. . $400,000 To buy new rolling stock .. .. . $225,000 To construct new works .. .. . $225,000 Total .. .. . $1,700,000
To accomplish this, Mr. Cumberland, as we understand it, proposes that the city of Toronto and the county of Simcoe and all the private stockholders shall surrender to him their entire stock, amounting to nearly $850,000; and that he shall thereupon issue $2,000,000 of new stock (already agreed to be taken up by his friends in England), which shall be the only burden on the road beyond the bonded debt of about $3,400,000. The three hundred thousand dollars of difference between the new stock to be paid, and the $1,700,000 estimated above as needed—is to be applied, we suppose, in compounding with the municipal and other shareholders for their $850,000 of surrendered stock.
Now, then, mark the result of this nice operation. The debt of the Northern Railway Company proper would stand thus:—
Bonds held in England .. .. . £683,000 Stock held in England .. .. . £400,000 Total .. .. . £1,083,000
which, at six per cent. interest for bondholders and stockholders, would entail a burden of about £65,000, or $325,000, annually—a sum which the net earnings of the road have surpassed for several years past. And this without a shilling of profit included from the completed extension lines, the change of gauge, the substitution of steel rails, and any quantity of new equipment!
And who are to be benefited by this neat operation? "Oh," says Mr. Cumberland, "the company of course!" And who constitute the company? Why, in the first place the bondholders, who get their money to the hour and run no risk—they all have votes, and Mr. Cumberland holds their proxies. The Government appoint one Director, but the moment ifs $500,000 is paid, out he goes. The City and the County send one Director each; but what signify two among so many? The private stockholders hold one dollar for eight dollars held by the bondholders, and what influence have they against such odds?
It is too broad a farce to talk of "the Company." The Company has been for years, and is now—Mr. Frederick Cumberland. With the proxies of the English bondholders in his pocket, Mr. Cumberland has put in and put out just whom he pleased as Directors of the road, and all the officials and employees, great and small, throughout the concern. There has been some little check over his proceedings in past years through the debt due the Government and the stock held by the municipalities; but once let this proposed folly be perpetrated by the Corporation and all pretence, of Canadian influence over the management of the road would be gone forever.
Let the citizens of Toronto perfectly comprehend what is threatened. The Northern Railway, under local control, is beyond all question the best feeder of the trade of Toronto—but with the success of Mr. Cumberland's scheme all local control over it will be gone. Mr. Cumberland and his friend Mr. H. M. Jackson, Chairman of the London Board, will have the entire property in their hands or five millions of dollars, with a nett revenue from it in all probability ere five years go round, of half a million per annun. The gauge will be altered—be placed in alliance with the Grand Trunk or the Great Western—the trains of cars will pass unopened through our streets—the ships and steamboats which now throng the Queen's wharf, will be few and far between—and from being the main terminus of the road, Toronto will soon find itself in a very inferior position.
And what shall prevent a great stockjobbing operation being made of the entire concern? Why shall it not be sold to one of the great roads as a rich feeder of North-western traffic, for a good sound profit to the operators who hold it? How much of the present traffic now done in this city would then remain? and what danger would there then be that the busy workshops and foundries of the road would be closed for economy, and all work transferred to the shops of the main line?
The whole proposal is an utter absurdity, and ought not to be entertained for a single moment. The changes proposed to be made are not for the interests of Toronto; and if they were, the money could easily be got by the issue of new bonds or new stock, without any further sacrifice by the stockholders, either municipal or private. Let Mr. Cumberland come out with a full and clear statement of the financial condition of his own Company and of that of the extension lines; let him show clearly the net revenues of all the lines at present, and for two years past; let the citizens have time to consider these statements; and let the City Council stay its hand until this has been done. Is this an unreasonable demand? Would any member of the City Council, in a personal affair of his own, ever dream of throwing away $190,000 without knowing all the facts and arguments for doing so? And if he would not do so silly an act in his own matters, how shall he justify such reckless dealing with the property of the city?
Railways: N.Ry. of Can.