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Baltimore's Aid to Railroads: A Study in the Municipal Planning of Internal Improvements

Published online by Cambridge University Press:  03 February 2011

Carter Goodrich  and
Harvey H. Segal
Carter Goodrich
Affiliation:
Columbia University
Harvey H. Segal
Affiliation:
Rutgers University
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Extract

Local governments played a notable and somewhat neglected part in the American movement for internal improvements. Their activities in aid of canals and railroads varied greatly in scale and method and in the scope of planning involved. They ran the gamut from the far-flung projects of great commercial cities striving for the dominance of the trade of vast areas to the donations of obscure rural townships trying only to make sure that the promised railroad should pass through their village rather than the adjacent crossroads. Among the greater cities, none played a more notable role than Baltimore in the promotion of internal improvements. Its total of railroad subscriptions, loans, and bond endorsements was about twenty million dollars—a figure of municipal contribution only exceeded by Cincinnati's investment in a city-owned railroad. Baltimore was in the field of internal improvements well before Cincinnati and remained in it long after such early rivals as Philadelphia had withdrawn. Baltimore's first investment in the Baltimore and Ohio was audaorized in 1827, and its last loan to the Western Maryland was made in 1886. It continued to vote stock and to appoint public directors to the board of railroad corporations until it sold its interest in the Baltimore and Ohio in 1890 and in the Western Maryland in 1902.

Type
Articles
Information
The Journal of Economic History , Volume 13 , Issue 1 , Winter 1953 , pp. 2 - 35
Copyright
Copyright © The Economic History Association 1953

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References

1 This is the theme of a previous article prepared, like the present one, under the auspices of the Council for Research in the Social Sciences of Columbia University: Goodrich, Carter, “Local Government Planning of Internal Improvements,” Political Science Quarterly, LXVI (1951), 411–45CrossRefGoogle Scholar. Other articles prepared under the same grant are: “The National Planning of Internal Improvements,” ibid., LXIII (1948), 16–44; “Public Spirit and American Improvements,” Proceedings of the American Philosophical Society, XCII (1948), 305–9Google Scholar; “The Virginia System of Mixed Enterprise,” Political Science Quarterly, LXIV (1949), 355–87Google Scholar; “The Revulsion Against Internal Improvements,” The Journal of Economic History, X (1950), 145–69.Google Scholar

Mr. Segal's contribution is partly based on studies made under a fellowship of the Social Science Research Council granted on the recommendation of the Committee on Research in Economic History. Acknowledgment should also be made to the assistance of Mrs. Vivian Carlip.

Indebtedness is expressed for the courteous co-operation extended by Dr. Horace E. Flack and his staff at the Legislative Reference Department of Baltimore, by Miss Elizabeth C. Litsinger and her staff of the Maryland Department of the Enoch Pratt Library of Baltimore, and by Miss Elva M. Ferguson of the General Office Library of the Pennsylvania Railroad in Philadelphia.

Professor Arthur F. Burns of Columbia University and Dr. Howard H. Greenbaum were kind enough to examine the statistical tables and offered valuable criticisms. Needless to add, they are not responsible for the errors which may have remained.

2 The Journal of Proceedings of the First and Second Branches of the City Council will be abbreviated as First Branch Journal and Second Branch Journal. City Ordinances and Resolutions will be abbreviated as Ord. and Res.

3 On Garrett's plans, see Remarks of John W. Garrett … made on April 14, 1869 at the Regular Monthly meeting of the Board of Directors of the Baltimore and Ohio Railroad, p. 14, and Hungerford, Edward, The Story of the Baltimore and Ohio Railroad (New York: G. P. Putnam's Sons, 1928), II, 113–19Google Scholar. Garrett abandoned a second southern route to New Orleans by way of Washington, Lynchburg, Danville, Atlanta, and Montgomery when he sold his interest in the Virginia Midland in 1882. See the Baltimore and Ohio Annual Report, 1882.

4 Burgess, George H. and Kennedy, Miles C., Centennial History of the Pennsylvania Railroad (Philadelphia: Pennsylvania Railroad Company, 1949), pp. 137–38Google Scholar. For an account of the development of the Northern Central and its relations with the state of Maryland and city of Baltimore, see Address of the President and Directors of the Northern Central Railway Company to the Stockholders, May 17, 1855.

5 United States Senate Committee on Interstate Commerce, “George Gould Moves Eastward,” Investigations of Holding Companies and Affiliated Companies in the Eastern Region (Washington: United States Government Printing Office, 1940)Google Scholar, Part I (Before 1920), chap. iii. The Western Maryland also operated a network of roads in Pennsylvania. For a history and map of these, see Killough, Edward M., History of the Western Maryland Railway Company (Baltimore: The Western Maryland Railway Company, 1940)Google Scholar.

6 Over 75 per cent of the total of stock subscriptions and loans were discharged by the transfer of municipal bonds to the railroad companies.

7 This happened in the cases of the Pittsburgh and Connellsville and Baltimore and Ohio loans. Ord. #74, 1853. Ords. #2 and #5, extra sess. 1853. Ord. #29, 1856.

8 Ord. #2, extra sess., 1839. At this time, there were more than six millions of Maryland bonds on the market, and the state and company officials were meeting with little success in negotiating their sales.

9 This episode will be treated in detail in Harvey H. Segal's dissertation, “Public Investments and Business Cycles, 1834–1861,” now in preparation.

10 The Baltimore and Ohio borrowed over $500,000 from various city banks in 1840 and 1841 (see the fourteenth annual report). The Pittsburgh and Connellsville and the Western Maryland also made use of this device.

11 The reference cycle dates of the National Bureau of Economic Research were employed in designating the phases and stages of the successive business cycles after 1834.—Burns, Arthur F. and Mitchell, Wesley C., Measuring Business Cycles (New York: National Bureau of Economic Research, 1946)Google Scholar, chap, iv; Handbook, of Historical Statistics of the United States, 1789–1945 (Washington: United States Government Printing Office, 1949), p. 320.Google Scholar

12 See the Baltimore and Ohio Annual Reports, 1854–1860.

13 The $5,000,000 Baltimore and Ohio loan was extended after the road between Cumberland and Wheeling had been completed, in order to finance a double-tracking program and to enable the financially exhausted company to retire old debts.—Ord. #57, 1854.

14 See Address of John W. Garrett to the Baltimore and Ohio Board of Directors upon his Re-Election as President of that Company, December, 1865, p. 6, and Burgess and Kennedy, Centennial History of the Pennsylvania Railroad, p. 344.

15 Hence, the $5,000,000 Baltimore and Ohio loans and the endorsement of the bonds of the Union (of Baltimore) and York and Cumberland roads are not included because those companies paid interest and principal.

16 Just as the city would have recorded premiums and discounts on the cash purchases of securities.

17 On the standard practice, see Chatters, Carl H. and Tenner, Irving, Municipal and Governmental Accounting (New York: Prentice-Hall, 1940)Google Scholar, chap, xviii.

18 The city, as mortgagor, included the interest due on arrearages in computing its total claim. See the records of the mortgage interest in the Western Maryland in the Report of the Commissioners of Finance, 1901. About four millions in interest on arrearages is charged against the road.

19 Ord. #5, 1854, passed over the mayor's veto by the First Branch on June 2 and by the Second Branch on June 21.

20 For the city's activities up to this time, see Table I. The state aided the Baltimore and Ohio Railroad to the extent of $1,000,000 in subscriptions and loans, and subscribed to $100,000 of the stock of the Baltimore and Susquehanna Railroad.—Maryland Laws, chaps. 104 and 105 of 1827, chap. 119 of 1830, and chaps. 33 and 105 of 1833.

21 First Branch Journal, March 14, 1836, p. 243. The report was also published in Niles' Weekly Register, L, 68.

22 First Branch Journal, March 14, 1848, p. 292.

23 Mayor's Annual Message, January 1856, p. 23.

24 See First Branch Journal, May 5, 1890.

25 Mayor's Annual Message, January 1888, p. 10. It should be noted that Latrobe was a member of a family which had long been associated with the Baltimore and Ohio. He was the nephew of B. H. Latrobe, and had himself served as a counsel for the road in 1858.—Coyle, Wilbur F., The Mayors of Baltimore (Baltimore: The Baltimore Municipal Journal, 1919)Google Scholar.

26 First Branch Journal, February 27, 1888, pp. 277–88. The financial condition of the road at this time is discussed in Daggett, Stuart, Railroad Reorganization (Cambridge: Harvard University Press, 1908), pp. 13–14.CrossRefGoogle Scholar

27 Dictionary of American Biography (New York: Charles Scribner's Sons, 1928 and 1936), XVIII, 237–38Google Scholar. Swann was later elected Governor of Maryland on the Union party ticket. He returned to the Democratic party and was elected to the House of Representatives in 1868.

28 Killough, History of the Western Maryland, pp. 95–96, 100.

29 First Branch Journal, February 27, 1860, p. 155.

30 Garrett, Address of John W. Garrett, p. 14.

31 Mayor's Annual Message, January 1864, pp. 29–30.

32 Benjamin H. Latrobe, the president of the Pittsburgh and Connellsville, confessed to having authored The Western Maryland Railroad and His Honor the Mayor versus the Baltimore and Ohio Railroad (1863), a pamphlet which he signed “expositor.”—First Branch Journal, 1864, p. 107. Chapman's version of the battle may be followed in the Mayor's Annual Message for 1864, 1865, and 1866. After the 1866 message, which contained a particularly strong attack on the Baltimore and Ohio, Garrett replied that Baltimore could not afford to see its leading work “crippled by an unnecessary and certainly unremunerative parallel line.” He characterized Chapman as a “monomaniac, subject to phantasies,” in his devotion to the Western Maryland and hatred of the Baltimore and Ohio.—Baltimore Sun, February 15, 1866.

33 First Branch Journal, April 23, 1868, pp. 678, 684–85, 903. The three bribed councilmen were expelled from the First Branch. The journal gives names and full details of the transactions.

34 “The Brownsville Railroad Convention,” Niles' Weekly Register, XLIX, 237–38; Journal of the Proceedings of the Convention on Internal Improvements of Maryland, Held in Baltimore, May 2, 1836. Similar meetings were held by Baltimore and Susquehanna interests in launching the York and Cumberland and Susquehanna roads. See the Baltimore Sun, January 20 and 23, 1849, for an account of the York and Cumberland meeting; also Report of the Committee Composing the Delegates Appointed by the Citizens of Baltimore to the Susquehanna Railroad Convention, Held at Sunbury, May 20, 1851.

35 Proceedings of Sundry Citizens of Baltimore Convened for the Purpose of Devising the most Efficient Means of Improving Intercourse between that City and the Western States, February 12–19, 1827, p. 31.

36 Niles' Weekly Register, XLIX, 190–91.

37 Baltimore Sun, January 23, 1849. Mayor J. H. T. Jerome presided over a Susquehanna Railroad meeting in 1852.—American Railroad Journal, XXV, 181–82.

38 The Maryland Constitution of 1851, art. III, sec. 47, provided for incorporation under general laws.—Thorpe, Francis Newton, Federal and State Constitutions (Washington: United States Government Printing Office, 1909), III, 1726–27Google Scholar. Local aid measures still required legislative authorization.

39 For Lee's letter, see First Branch Journal, 1869, p. 454. Garrett outlined his plans for the Valley and discussed the forthcoming visit of a Virginia delegation in a directors meeting of the Baltimore and Ohio, Remarks of John W. Garrett … made on April 14, 1869, pp. 13–14.

40 Baltimore Sun, May 18, 1870. Balloting took place on May 18 and the measure was defeated 5,733 to 3,983. In one instance, involving the Maryland Central Railroad, the Council repealed an aid ordinance which had been approved by the voters because the company could not comply with its provisions.

41 Garrett, Address of John W. Garrett, p. 14.

42 First Branch Journal, May 15, 1870, p. 403.

43 Projected by New York Central interests in order to parallel the Pennsylvania Railroad, the South Pennsylvania was abandoned after a “peace treaty” was arranged between the warring parties by J. P. Morgan. For an abbreviated account of the incident, see Harlow, Alvin, The Road of the Century: The Story of the New York, Central (New York: Creative Age Press, 1947), pp. 327–29Google Scholar. Agreements between the Western Maryland and the South Pennsylvania are discussed in the 22nd Annual Report of the Western Maryland Railroad, 1884, pp. 9–11.

44 23rd Annual Report of the Western Maryland Railroad, 1885, p. 8.

45 Maryland Laws, 1826, chap. 123, sec. 7, passed February 28, 1827.

46 ibid., 1835, chaps. 127 and 395.

47 ibid., p. 251.

48 The city and the state were each entitled to two directors for the $500,000 subscriptions authorized in 1827 and to six directors each for the $3,000,000 subscriptions of 1836. A $500,000 subscription to the Washington Branch, made in 1834, entitled the state to appoint two more directors than the city.—Maryland Laws, 1833, chap. 105, passed February 27, 1834.

49 Maryland Laws, 1827, chap. 123, passed February 13, 1828.

50 ibid., 1838, chap. 395, passed April 5, 1839.

51 First Branch Journal, January 25, 1836, pp. 46–48. Capitals in the original.

52 Directors of the Baltimore and Ohio, Baltimore and Susquehanna, and Western Maryland were elected by the Council, although at first they had been appointed by the mayor.

53 See the ordinances authorizing subscriptions to the stock of the Baltimore and Ohio, Baltimore and Susquehanna, and Valley railroads: Ord. #37, 1830; Ord. #1, extra sess. 1830; and Ord. #59, 1869.

54 See the report submitted by the Baltimore and Susquehanna, First Branch Journal, 1837, pp. 83–84.

55 Res. #37, March 8, 1842.

56 First Branch Journal, 1857, pp. 190–93.

57 Res. #101, 1880.

58 Maryland Court of Appeals, 6 Gill 297.

59 Scharf, John Thomas, History of Western Maryland (Philadelphia: L. H. Everts, 1882), II, 1513Google Scholar. Garrett entered the directorate in October 1857.

60 Res. #7, passed December 10, 1856.

61 First Branch Journal, December 1856, pp. 110–47. This was the first time in which directors appointed by the city had defied the wishes of the Council. Directors appointed by the state voted against the city on several occasions, as they did in the extra-dividend case. In 1850, for example, the state's directors on the Baltimore and Susquehanna company joined the private directors in securing the passage of an act which permitted the company to extend its line within the city limits, and which was opposed by the City Council.—First Branch Journal, 1850, pp. 304–5, 326–33.

62 ibid., January 2, 1857, p. 193.

63 Res. #29, passed January 5, 1857.

64 The history of the case is discussed in Baltimore and Ohio Company Extra Dividend Case (1860), a pamphlet which contains several relevant documents, among them a letter to Garrett from John Lee Chapman. On the Council's decision to withdraw its suit, see First Branch Journal, July 17, 1860, pp. 609–10.

65 Scharf, History of Western Maryland, chap, lix, and Summers, Festus P., The Baltimore and Ohio in the Civil War (New York: G. P. Putnam's Sons, 1939), pp. 37–40.Google Scholar

66 First Branch Journal, March 5, 1860, p. 186.

67 Objections to yielding to Northerners the Control of the Baltimore and Ohio Rail Road on which Depends the Development of the Farms, Mines, Manufactures and Trade of the State of Maryland, by a Marylander (1860), p. 4. Italics in the original.

68 Second Branch Journal, July 3, 1861, pp. 300–9.

69 See Table I. Ord. #6, passed February 18, 1862, repealed Ord. #100 of 1859, which provided for the extension of aid to both the Northwestern Virginia and the Union (of Ohio) roads.

70 Second Branch Journal, March 11, 1863, pp. 187–88.

71 First Branch Journal, March 1863, pp. 287–93.

72 ibid., p. 315.

73 21 Maryland Reports, p. 91.

74 Maryland Constitution, adopted October 13, 1864, art. 3, sec. 52. Thorpe, Federal and State Constitutions, pp. 1758–59.

75 Annual Report of the Comptroller of the Treasury Department, 1867 and 1868. Also the Annual Message of Governor Thomas Swann, January 1868, pp. 5–6. The city sold 2,500 shares of its stocks at the same time. See Table III.

76 Objections to Yielding to Northerners, p. 9; Winchester, Paul, Graphic Sketches from the History of the Baltimore and Ohio Railroad (Baltimore: The Maryland and County Press Syndicate, 1927), I, 21–22.Google Scholar

77 See Mayor Swann's Annual Message, January 19, 1857, p. 16.

78 Ord. #22.

79 The sales agreements contained provisions for the completion of both roads by the Baltimore and Ohio.—Res. #7, 1864, and Ord. #47, 1875.

80 Ord. #11, passed January 21, 1870.

81 Report of the Commission to Investigate the Affairs of the Western Maryland Railroad and the Interest of the City Therein, to the Mayor and City Council of Baltimore … together with the Reports of Stephen Little, Expert Accountant, and H. T. Douglas, Expert Engineer (1893), pp. 34–35.

82 The interest in arrears on the city loans and endorsements, which amounted to over $3,000,000, never appeared in the annual statements of the company's treasurer.

83 First Branch Journal, April 20, 1902, pp. 823–24.

84 ibid., April 21, 1902, pp. 754–816.

85 ibid., May 5, 1902, pp. 951–53, from the statement of the Merchants and Manufacturer's Association in support of the sale to the Fuller Syndicate.