FINANCING OHIO'S PRE-CIVIL WAR RAILROADS
by EUGENE 0. PORTER
Associate Professor of History,
College of Mines and Metallurgy,
University of Texas
The financial history of early railroads
in the United States is
nowhere better illustrated than in the
history of railroad building
in Ohio. The lack of trained engineers
and the consequent indefi-
niteness of plans, the insufficiency of
the original capitalization, the
use of state, county, and municipal
credit, and the issuance of
mortgage bonds as the chief means of
raising capital, were charac-
teristics of the railroads not only of
Ohio but also of other middle-
western states and even of some of the
southern and New England
states. It should be remembered, however,
that railroads in this
country were comparatively young in
1860, scarcely more than
thirty years of age. It is small wonder
therefore that so many roads
were brought into existence with
inexperienced engineers and boards
of directors.
From the first settlement the people of
Ohio manifested a
lively interest in the subject of
transportation. Although the lands
bordering on the Ohio River were the
first to be populated, settlers
soon pressed forward into the interior.
Thus with the growth of
population1 and the consequent increased
production the need for
markets became increasingly important.
The route down the Ohio
and Mississippi rivers to New Orleans
was never entirely satis-
factory and moreover did not afford an
outlet for the interior
settlements. The state and counties
built roads, generally to afford
access to navigable waterways, and in
1825 the state began con-
structing canals. These ran north and
south, connecting the Ohio
River with Lake Erie and thereby
providing a route to the eastern
seaboard by way of the Erie Canal.
Nevertheless many of the
interior towns and villages remained
without transportation facil-
ities and consequently began demanding
that railroads be built as
supplementary or feeder lines to the
canals. Because the state was
1 The population of Ohio in 1800 was
45,365. Twenty years later it was
581,295.
215
216
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
undertaking large financial obligations
for canal construction, rail-
roads became without any considerable
discussion private enter-
prises.
The first movement for a railroad in
Ohio and in fact west of
the Allegheny Mountains took place in
Sandusky in 1825. The
citizens of that city had believed that
but one canal would be built
through the state and the report of the
chief engineer had been
in favor of the central or Sandusky
route. But when a political
bargain forced two canals upon the state
and the central route was
abandoned, the people of Sandusky began
agitation for a railroad
to be built along the first proposed
canal route.2 From this agita-
tion there was born the Mad River and
Lake Erie Railroad which
was chartered in 1832.3
Meanwhile, in 1830, the legislature had
granted its first charter
to the Ohio Canal and Steubenville
Railroad Company.4 Although
this road was never built, its charter
is of interest as it served as the
legislature's guide in drafting
subsequent ones. Like all the early
charters, both in the United States and
Great Britain, it provided
for the use of the tracks by all
shippers who were expected to furnish
their own cars or carriages.
Maximum rates of toll were
pre-
scribed for freight and passengers. The
capital stock was limited
to $500,000, and the stipulation was
made that no part of it could
be used for banking.5 The right
of eminent domain was also
granted to the company. The
following year a second charter
was granted,6 and in 1832 ten such
charters were issued. By that
year so many petitions for charters were
being received by the legis-
2 J. H. Kennedy, "The American
Railroad: Its Inception, Evolution and Results,"
in Magazine of Western History, VIII (1888),
123.
3 Laws of Ohio, XXX, 146.
4 Ibid., XXVIII, 184.
5 The Ohio Railroad Company, chartered
in 1836, was the only railroad permitted
to engage in banking. Before it failed
in 1842 the company had succeeded in circu-
lating approximately $400,000 in
worthless currency. See C. P. Leland, "The Ohio
Railroad: That Famous Structure Built on
Stilts," in Western Reserve Historical Society,
Tract No. 81, in
Tracts III, 276-277.
The company was to build a railway from
the Pennsylvania state line through
the northern tier of Ohio counties to
the Maumee River at Manhattan, "then a paper
city rival of Toledo, now a part of
it." Built on piles ten feet apart, it was patterned
after the projected Great Western
Railway from New York to the Mississippi River.
Ibid., 276.
6 The Richmond, Eaton, and Miami
Railroad. See Laws of Ohio, XXX, 11.
PRE-CIVIL WAR RAILROADS 217
lature7 that the house of
representatives established a standing com-
mittee on railroads.8
As the first charter was granted in
1830, that date may be said
to mark the beginning of the railroad
era in Ohio.9 Roughly
speaking, the pre-Civil War era may be
divided into three periods:
the first, 1830 to 1840, was one of
agitation and charters; the
second, 1840 to 1850, one of pioneering;
and the third, 1850 to
1860, one of extensive construction. To
be more explicit, during
the first period charters were granted
to 56 companies, but of that
number only one road was built, the Mad
River and Lake Erie.10
During the second period 25 charters
were granted and four lines
constructed for an approximate total of
300 miles. The third period
saw the granting of 67 charters and the
construction of 16 roads
for a total of nearly 3,000 miles.
Actually, as will be pointed out
in greater detail presently, the
pre-Civil War railroad era dated
from the enactment of the "Plunder
Law" in 1837 and ended with
the panic of 1857. Dividing this era
into two periods, the first,
which ended in 1847, was characterized
by state aid, while the char-
acteristics of the second were local aid
and mortgage bonds.
The contrast between the large number of
charters granted
and the few roads built indicates
clearly the speculative and even
visionary nature of many of these early
enterprises and also the
lack of sufficient capital to carry them
through. As stock subscrip-
tions failed to secure the money needed
to build the roads, the state
was compelled to grant to companies, by
new charters or by
amendments to the old ones, the right to
borrow money and to
7 Until the state constitution of 1851
went into effect, all charters were granted
by special acts of the legislature.
8 30th Ohio General Assembly, 1 sess., House
Journal, XXX, 307.
9 In 1830 there were only 23 miles of
railroad in actual operation within the
boundaries of the United States,
Maryland having 13 miles and South Carolina, 10.
10 There is an unimportant antiquarian
controversy concerning the first railroad
to be constructed in Ohio. There is no
doubt but that the Toledo and Kalamazoo,
also called the Kalamazoo and Lake Erie,
was the first road to begin operations not
only in Ohio but also west of the
Alleghenies. But that road was chartered by the
territorial legislature of Michigan and
at the time (1833) was believed to be entirely
within that territory. With the final
adjustment of the boundaries which followed
the celebrated and somewhat ludicrous
"Toledo War," about one-third of the line-
eleven miles-was found to be in Ohio.
This road began operations in the spring of
1837 whereas the Mad River and Lake Erie
did not begin running trains until the
spring of 1838. See C. P. Leland,
"History of the Lake Shore & Michigan Southern
Railway," in the Journal of the
Association of Engineering Societies, VI (1887), 342.
See also Caleb Atwater, A History of
the State of Ohio, Natural and Civil (Cincinnati,
1838), 279. Atwater prophesied,
"There are many charters for railroads which will
never be made." P. 280.
218
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
pledge their income and stock for its
repayment. In most cases
the amount permitted to be borrowed was
limited to the amount of
the stock paid in or subscribed. Later
charters and amendments
gave the railroads power to pledge the
income and property of the
company and, in some instances, the
franchise, as security for the
loans.11 Nevertheless, the companies were unable to
command
sufficient funds to build their lines
and consequently those com-
munities which were without
transportation facilities began
demanding that the state itself give
financial aid. For example,
at a meeting of citizens held in
Springfield to consider the con-
struction of a feeder line from that
city to Cincinnati, where it
would
connect with the proposed
Louisville, Cincinnati, and
Charleston (South Carolina) Railroad,
the following resolution
was passed:12
That, in the opinion of this meeting, a
great system of railways ought to
be commenced in Ohio, and promoted by
aid from the state, in order, as much
as possible, to restore an equilibrium
of the unequal benefits derived from
her canals.
That we approve of the plan adopted in
Kentucky, establishing a board of
internal improvements with authority to
take stock on behalf of the state, in
such works of internal improvement as
the citizens shall approve by their
subscription of stock, and in proportion
thereto.
Similar resolutions were adopted
by other communities
throughout the state until finally, on
March 24, 1837, the legis-
lature passed "An Act to authorize
a loan of credit by the state, to
Railroad Companies, and to authorize
subscriptions by the state, to
the capital stock of Turnpike, Canal,
and Slackwater Navigation
Companies."13 This act, which became known as the
"Plunder
Law," provided:
Every Railroad Company that now is, or
shall hereafter become duly
organized; and to the capital stock of
which there shall be subscribed an
11 An excellent example is the "Act
to amend the act to incorporate the Mad
River and Lake Erie Railway
Company." This amendment read: "The said corporation
shall have power to borrow, on the
credit of the company, any amount of money not
exceeding three-fourths of the whole
authorized capital, and to pledge the estate,
funds, rents, and other resources." See Laws of
Ohio, XXXVI, 394.
12 Western Star (Lebanon, Ohio), November 13, 1835.
13 Laws of Ohio, XXXV, 76-82. It is claimed that the governor
encouraged
passage of the law as he favored
financial aid by the state for the proposed Louisville,
Cincinnati, and Charleston Railroad
which would give a more direct and cheaper outlet
to the eastern seaboard. See A. L.
Kohlmeier, The Old Northwest as the Keystone
of the Arch of the American Federal
Union (Bloomington, Indiana, 1938),
24-25.
PRE-CIVIL WAR RAILROADS 219
amount equal to two-thirds of its
authorized capital, or an amount equal to
two-thirds of the estimated cost of the
road and fixtures, shall be entitled to a
loan of credit from the state, equal to
one-third of such authorized capital,
or equal to one-third of the estimated
cost of such road and fixtures, to be
delivered to the company in negotiable
scrip, on transferable certificates of
stock of the state of Ohio, bearing an
annual interest of not exceeding six
per cent and redeemable at periods not
exceeding 20 years.
Where the amount of the loan applied for
at any one time was less
than $50,000 the fund commissioners were
empowered to make the
loan in money instead of scrip. The
total amount of credit to be
loaned and stock subscribed under the
authority of this act, within
one year from its passage, was not to
exceed three million dollars.
The law also contained provisions to
insure the state against
loss due to mismanagement or fraud and
prescribed certain condi-
tions which had to be complied with
before loans would be made
to the companies. For instance, it was
required that the fund com-
missioners be satisfied that the stock
subscriptions were subscribed
by responsible individuals or
corporations (the kind of proof was
not specified) and further that the
president and directors of the
company execute a written pledge of the
capital stock, estate, tolls,
and profits to insure repayment of the
loan. But the records show
noncompliance with the law to have been
the rule rather than the
exception. The term
"subscribed" was construed with such extreme
liberality by the fund commissioners
that subscribers were permitted
to pay for stock with deeds of their
houses and farms at their own
evaluation. To cite but one example, in
the case of the Ohio
Railroad seven men "who could
probably have raised with difficulty
$25,000," subscribed to the capital
stock in property deeds in excess
of $600,000.14
Altogether under the "Plunder
Law" the state loaned its credit
to six railroad companies in the amount
of $717,515.15 The com-
panies receiving the loans and the
amounts thereof were as follows:
14 Kennedy, loc. cit., IX
(1888-89), 48.
15 Under the authority of this act the
state also loaned $600,000 to private canal
companies and $1,853,365 to turnpike companies. See
Leland, "The Ohio Railroad,"
270.
220 OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
Ohio
.................. ............. .... 249,000.
Painesville and
Fairport .... .............. ..... 6,182.
Ashland and
Vermillion
...................................... 44,000.
Little Miami .............. ................. ......
......... . 115,000.
Mansfield and Sandusky
................................ 33,333.
Mad River and Lake
Erie ........................... ....... 270,000.16
But the panic of 1837
which followed the nation-wide currency
inflation and
speculation affected Ohio along with the rest of the
country. As a
consequence the legislative session of 1840 brought
about a large number
of drastic economies which included the repeal
of the "Plunder
Law."17 Of the amount loaned by the state to the
railroads during the
three years the law was in effect, three-fifths
was never recovered.
The Ohio Railroad was a gigantic fraud.
The road was never
built and the entire amount loaned to the
company was wasted.
Likewise the Painesville-Fairport and the
Ashland-Vermillion
companies were failures, the roads being
abandoned and the
whole amount of the state loans being lost. The
law of 1837 had
provided for the prompt payment of interest on
the loans but the
companies had failed to meet even this obligation.18
Consequently an act
was passed in 1843 providing that certificates
of stock be issued by
each company for the amount the state had
loaned, together with
the interest then due and unpaid. By that
date the three
companies mentioned above had failed. Of the three
remaining ones, the
Little Miami gave the state a total of $200,000
in common stock and
$56,000 in bonds. These the state sold for
par in 1862. Four
years later the state sold its $33,333 worth of
stock in the Mansfield
road for $583. At the same time the common
stock in the Mad River
and Lake Erie, then amounting to $395,000
was disposed of for
$33,841 and the preferred stock, amounting to
$4,588, was sold for
$2,234.19 Thus in return for loans totaling
$717,515, the state
received only $292,658.20
16 Ernest L. Bogart, Financial
History of Ohio (Urbana and Champaign, Illinois,
1912), 307. Leland
claims that the state loaned $751,915 to the railroads. "The
Ohio Railroad,"
270.
17 Laws of Ohio, XXXVIII, 55-56.
18 The Mansfield
company was the one exception. It met all of its interest
payments. See Bogart, Financial
History of Ohio, 309.
19 The stock in the
Mad River and Lake Erie was sold to Rush R. Sloane. That
was the entering wedge
of Sloane's control of that road for so many years. See Leland,
"History of the
Lake Shore & Michigan Southern Railway," 281.
20 Bogart, Financial History, 309.
PRE-CIVIL WAR RAILROADS 221
The repeal of the "Plunder
Law" and the exercise of economy
on the part of the legislature gradually
restored order to the state's
finances. Prosperity returned in 1846
and from that date until the
panic of 1857, the state finances were
handled with extraordinary
looseness and even corruption.21 The
year 1847, however, ended
with only 36 miles of railways in
operation,22 and as late as
December 1851, there were only four
railroads operating in the
state.23 Thus as active
agencies of transportation, railroads did not
exist in Ohio until after the Mexican
War. The lines undertaken
prior to 1847 are to be regarded as
"pioneer enterprises conceived
in poverty and inexperience, prostrated
by general bankruptcy, and
revived only in another decade.24
After the breakdown of state aid and the
return of prosperity,
the legislature adopted the policy of
granting local governments
the power of subscribing to the capital
stock of railroad companies.
In the beginning this policy was a
popular one as the railroads,
when first planned, were short local
affairs; it was regarded, there-
fore, as a local question whether aid
should be given and if so to
what extent. It is necessary to cite but
one company as an example
of local aid. The Central Ohio Railroad,
chartered in February
1847, was vested with the right and
authority to construct a road
from Columbus eastward through Newark
and Zanesville to such
a point on the Ohio River as the
directors might select. Between
the date of incorporation and the
completion of the road in July
1854, twelve amendments to the charter
were enacted by the legis-
lature. Most of these authorized various
political units along the
proposed route to subscribe by popular
vote to the capital stock of
the company. For instance, in February
1848 Muskingum County
was authorized to subscribe $60,000 and
the village of Zanesville,
$30,000. One year later Muskingum County
was authorized to sub-
scribe an additional $90,000 and
Zanesville an additional $20,000.
In 1850, the town of Newark was
authorized to subscribe not less
21 Ibid., 83.
22 Emilius O. Randall and Daniel J.
Ryan, History of Ohio (New York, 1912),
IV, 83.
23 Bogart, Financial History, 311.
Three years later, however, Ohio had 2,367
miles of operating railroads, more than
any other state in the Union. See ibid., 54.
24 Frederic
L. Paxson, "The Railroads of the 'Old Northwest' Before the Civil
War," in Wisconsin Academy of
Science, Arts, and Letters, Transactions, XVII (1914),
Part I, 248-249.
222
OHIO ARCHAEOLOGICAL AND HISTORICAL QUARTERLY
than $5,000 nor more than $25,000;
Franklin County, $50,000;
and
the city of Columbus,
$20,000. Subsequent amendments
allowed the village of Cambridge to
subscribe $10,000; Guernsey
County, $100,000; and the village of
Washington in Guernsey
County, $20,000.25 Each amendment
proposed that the subscrip-
tions be made with bonds, which the
directors of the company were
empowered to sell in or out of the state
at above or below par.26
The subscriptions were generally made
without regard to busi-
ness principles, and the funds thus
obtained were often carelessly
used. Naturally opposition arose to the
profligate use of govern-
ment credit, and many political
subdivisions refused to vote sub-
scriptions. The citizens of Columbus
voted against subscribing to
the capital stock of the Central Ohio,
as did the people of Franklin
County.27 Belmont County also
refused at first to subscribe,28 but
another vote was taken and the measure
carried by a small ma-
jority.29 Cuyahoga County refused by vote to subscribe to the
stock of any railroad company, although
the city of Cleveland sub-
scribed to the capital stock of three
companies in the total amount
of $400,000.30
This opposition was given further
expression in the new con-
stitution of 1851, which forbade all
local governments as well as
the state government to raise money for
or to loan their credit to
any association.31 As a
matter of fact, one of the chief reasons the
constitution was ratified was that it
curtailed the powers of the
corporations. The small taxpayer was
becoming tired of the high
pressure methods used by the
railroad promoters. During the
entire campaign for ratification
Democratic newspapers which fa-
vored ratification, asked: "Do you
want a railroad to connect every
little town? The new constitution says
it is time to stop."32 At
that
25 The citizens of Wheeling, Virginia
(now West Virginia), voted a $250,000
subscription to the stock of the Central
Ohio. Zanesville Courier, January 28, 1851.
26 These figures were taken from the Annual
Report of the Commissioner of
Railroads and Telegraphs, for the
Year 1870, I, 467-470. Hereinafter this
work will
be cited as Annual Report.
27 Zanesville Courier, May 14, 1850.
28 Ibid., April 10, 1851.
29 Belmont Chronicle (St. Clairsville), June 13, 1851.
30 Annual Report, 1870, II, 315.
31 Constitution of 1851, art. 8, sec. 6.
32 Editorial, Ohio Statesman (Columbus), May 20,
1851. The Whigs opposed
ratification. The Cleveland Herald, June
8, 1851, stated editorially, "The restrictions
upon corporations for public
improvement, the improper attempts to interfere with
public stocks, . . . will be found
impolitic, unwise, and not fit to be made."
PRE-CIVIL WAR
RAILROADS 223
time the state debt
was more than $20,000,000, and it had been
created largely by
subscriptions to the stock of railroads, turnpikes,
plank roads, and
private canals.33 The
annual interest on the public
debt amounted to
$1,500,000.34
Before the era of
local aid came to a close, however, counties,
townships, cities, and
towns had either subscribed to the capital
stock or loaned their
credit to railroad companies for an estimated
total of $7,542,500.35
Broken down these figures show:
37 counties subscribed
................................ $4,173,000
55 townships
subscribed ...................................... 1,005,000
16 cities and towns
subscribed ........................ 1,672,000
1 county loaned
......................................... 92,500
1 city loaned
...................................... 600,000
Another item of local
aid that should be included was indi-
vidual subsidies.
These took the form of subscriptions to cover
the expense of
surveys, releases of right of ways, and the donation
of land, stone,
gravel, timber, and other material. In fact, individual
subsidies were granted
in all sections of the state to an extent which
is impossible to
determine. Moreover, the railroad directors often
forced the contractors
to take part of their fees in the stock of the
company. Bradley,
Whittermore, and Company of Vermont, for
instance, received the
contract to build that portion of the Central
Ohio Railroad from
Cambridge to the Ohio River and were com-
pelled to accept
thirty per cent of the contractual price in the
common stock of the
company.36
But regardless of the
large amounts of local aid, railroads
before the Civil War
were constructed largely from
the proceeds
of mortgage bonds
negotiated in the East and in London and
33 Randall and Ryan, History
of Ohio, IV, 106.
34 Ohio Statesman, May
21, 1851.
35 Bogart, Financial
History, 310. The total amount can be only an estimation
as some laws were
passed which did not specify the amount the local government
might subscribe and
the records of many counties and other local political units have
been either lost or destroyed.
William F. Gephart, Transportation and Industrial
Development in the Middle
West (Columbia University Studies
in History, Economics
and Public Law, XXXIV, New York, 1909), 167, estimates the total amount
of local
aid at not less than
$40,000,000. Most authorities, however,
believe this figure
too high.
36 Belmont Chronicle,
September 7, 1852. Frederick A. Cleveland and Fred W.
Powers, in their Railroad
Finance (New York, 1909), 58, point out that in most
instances throughout the
nation contractors received part payment in securities of the
road and often in public
subsidy bonds. These authorities also state (p. 31) that
individual subscriptions were
made to an indeterminate extent.
224
OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
Amsterdam.37 The use of bonds as a means
of raising money for
construction was usually the result of
miscalculation due to lack
of engineering experience,
indefiniteness of plans, and estimates
based upon the analogy of turnpikes.
Furthermore, where the local
supply of investment capital made the
issuing of new shares of stock
impossible, there was no alternative but
to issue long-term obliga-
tions secured by mortgages which gave
the bondholders prior claim
against the corporation.38 And
as the first issue of bonds was
generally found insufficient, a second,
third, and even a fourth series
were sometimes issued, each bearing a
heavier discount.39
The petition for the appointment of a
receiver for the Central
Ohio Railroad, entered in the Circuit
Court for the Southern District
of Ohio in 1859, gives an excellent idea
of this type of financing.
George C. Cole of New York set forth in
his suit that on February
25, 1851, the directors had conveyed to
him so much of the road
as was then already made or to be made
between Zanesville and
Columbus, including the right of way and
superstructure, to secure
payment on bonds in the amount of
$400,000, payable in February
1861. In case the interest remained
unpaid the complainant was
to have the right to enter into
possession of the road and to have
the use and control of same and, after
paying the running expenses
and repairs, to apply the surplus
receipts to the payment of the
principle and interest of the bonds
remaining unpaid, or upon the
written request of the holders of at
least one-half of the bonds
remaining unpaid and unconverted into
stock, he could cause the
road to be sold at public auction. The
bill further stated that the
company had failed to pay interest
coupons on the whole amount
of such bonds as fell due on the first
days of February and August
1858, and February 1859, and that such
interest remained unpaid.
In April 1852 the company had executed
and delivered to the
complainant a second mortgage for
$800,000 to secure payment on
bonds issued in that amount and payable
in 1864 with interest at
seven per cent. The bill also alleged
that the company had mort-
37 William K. Ackerman, "Notes on
Railway Management," in North American
Review, CXXXIX, (1884), 532.
38 An excellent example is the Dayton
and Union Railway with 32 miles of
track. Its capitalization was only
$63,500, whereas its bonded indebtedness was
$542,327. See Annual Report, 1867,
181-182.
39 Ibid., 9.
PRE-CIVIL WAR
RAILROADS 225
gaged the same
property to other parties to secure payment on other
bonds. The result of
the suit was the appointment of a receiver
with orders to
operate the road under the directions of the court.40
The directors,
cooperating with the receiver, prepared a plan for
the capitalization of
stocks and debts and the reorganization of the
company. Under the
terms of the reorganization, concessions were
demanded of all
classes of creditors and stockholders, by which
nearly $4,000,000 of
stocks and debts were sunk.41
Similar suits of
foreclosure were brought against practically all
the railroads,
especially after the panic of 1857, when "the rosy
dreams of the railway
promoters ended in the general collapse of
speculative
enterprises."42 Then followed plans for the reorganization
and adjustment of
stock and debt. Many of the original proprietors
and creditors sold
their holdings at heavy reductions, sometimes at
two and three cents
on the dollar. Others lost their entire invest-
ments. Athens County,
for example, lost $200,000 by its subscription
to the Marietta and
Cincinnati Railroad. Thus there remained to the
people of Ohio little
except the roads themselves, "under the control
and management of
foreign capitalists."43
In 1867 the railroad
commission estimated the cost of Ohio's
railways. Although
the total mileage in that year was 3,877, whereas
in 1857 it was only
2,844,44 the figures will serve as a rough estimate
of the cost of the
pre-Civil War roads:
Capital stock
............................................ $92,528,515.80
Debt
.............................................. 72,020,382.89
Total cost
.............................. 164,548,898.69
Cost per
mile
............................................ 42,441.3345
The report of the
commissioners was careful to point out
that these figures
did not "include the amount sunk by concessions
40 Cincinnati
Gazette, April 29, 1859.
41 Annual Report, 1867, 61.
42 Eugene H. Roseboom
and Francis P. Weisenburger, A History of Ohio (New
York, 1934), 320-323.
43 Annual Report, 1867,
9.
44 Bogart, Financial
History, 54. In 1860 Ohio had 2,946 miles of railways
in operation.
45 This cost is not
exorbitantly high when compared with the mileage cost for
the United States as
a whole and with that of other countries. For instance, in 1870
it was estimated that
the average mileage cost for the United States was $44,255; for
Ontario Province,
Canada, $76,344; Great Britain and Ireland, $176,269; France,
$158,714; and
Columbia, South America, $166,667. See L. W. Reavis, Saint Louis:
the Future Great
City of the World (St. Louis, 1871),
104.
226
OHIO ARCHAEOLOGICAL AND HISTORICAL
QUARTERLY
and surrender of stock and debt, ... or
the millions of dollars lost
by the original stockholders and
creditors." For those persons, the
report continued, the only compensation
was "the enhanced value
of their other property, the development
of the State, and the
enlarged facilities for commerce and
general business."46
46 Annual Report, 1867, 5.
FINANCING OHIO'S PRE-CIVIL WAR RAILROADS
by EUGENE 0. PORTER
Associate Professor of History,
College of Mines and Metallurgy,
University of Texas
The financial history of early railroads
in the United States is
nowhere better illustrated than in the
history of railroad building
in Ohio. The lack of trained engineers
and the consequent indefi-
niteness of plans, the insufficiency of
the original capitalization, the
use of state, county, and municipal
credit, and the issuance of
mortgage bonds as the chief means of
raising capital, were charac-
teristics of the railroads not only of
Ohio but also of other middle-
western states and even of some of the
southern and New England
states. It should be remembered, however,
that railroads in this
country were comparatively young in
1860, scarcely more than
thirty years of age. It is small wonder
therefore that so many roads
were brought into existence with
inexperienced engineers and boards
of directors.
From the first settlement the people of
Ohio manifested a
lively interest in the subject of
transportation. Although the lands
bordering on the Ohio River were the
first to be populated, settlers
soon pressed forward into the interior.
Thus with the growth of
population1 and the consequent increased
production the need for
markets became increasingly important.
The route down the Ohio
and Mississippi rivers to New Orleans
was never entirely satis-
factory and moreover did not afford an
outlet for the interior
settlements. The state and counties
built roads, generally to afford
access to navigable waterways, and in
1825 the state began con-
structing canals. These ran north and
south, connecting the Ohio
River with Lake Erie and thereby
providing a route to the eastern
seaboard by way of the Erie Canal.
Nevertheless many of the
interior towns and villages remained
without transportation facil-
ities and consequently began demanding
that railroads be built as
supplementary or feeder lines to the
canals. Because the state was
1 The population of Ohio in 1800 was
45,365. Twenty years later it was
581,295.
215