The Cincinnati Southern Railway : a study in municipal activity

Table Of Contents

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I-II. The Cincinnati Southern Kailway : A Study in Municipal Activity. By J. H. Hollander. With a Memorial of Dr. Lucius S. Merriam 7

III. The Constitutional Beginnings of North Carolina (1663-

II. The IiTeoessity of the Eailway

During the early decades of the present century, Cincinnati was the most important commercial center of the West. In 1820, Chicago had not yet come into existence, St. Louis was a mere trader's settlement, and Louisville a modest town of some four thousand inhabitants. The traffic of the entire region drained by the Mississippi river and its tributaries was transported by water, and Cincinnati was practically the only market in which the surplus products of the South and West could be exchanged for eastern and northern manufactures. The application of steam to river navigation in the decade between 1820 and 1830 greatly strengthened and developed these natural advantages. Louisville and St. Louis rose about the same time to commercial importance, but their competition only served to stimulate the growth of the older city. Population increased from 9,642 in 1820 to 161,044 in i860, and remained throughout this entire period the largest of any city west of the seaboard.^ Commercial relations extended from Pittsburgh to Fort Benton, Montana, and from St. Paul to New Orleans. Particularly with the South, as a result of advantageous location and intimate acquaintance with the tastes and habits of southern merchants, a large and profitable business was enjoyed.

^ The population of the four cities, as

shown by

the several census

reports, was as follows :

Cincinnati

9,642

24831

46.338

115,435

161,044 216,239

Chicago

4,470

29,463

112,172 298,977

St. Louis

5,862

16,469

77,860

160,773 310,864

Louisville

4,012

10.341

21,210

43.194

68,033 100,753

See Report on Internal Commerce and Navigation of the United States, 1880, p. 73.

Recognizing that the natural empire of trade lay in this direction, clear-headed Cincinnati merchants early urged the improvement of existent means of communication. Already in 1835, five years after the feasibility of steam locomotion had been demonstrated, a public meeting was held for the purpose of considering the subject of railway transportation between Cincinnati and the cities of the South Atlantic. An active part was taken in the agitation which, in the following year, secured the charter of the Cincinnati, Louisville and Charleston Railway, and a memorable event in early municipal history was a wonderful illumination of the city, amid falling snow, in February, 1836, in celebration of the grant of right of way to this road by the Legislature of Kentucky. Cincinnati sent a strong delegation to "the great southwestern railroad convention," held in furtherance of the project in Knoxville, in the following July, at which delegates were present from Indiana, Ohio, Kentucky, Virginia, Tennessee, Georgia, Alabama, South Carolina, and North Carolina, and over which Governor Hayne of South Carolina presided. The proposed road was here endorsed, and a route selected from Charleston, South Carolina, along the French Broad through Cumberland to Cincinnati. The Kentucky charter required the construction of branch roads from some point in the southern portion of the State to Maysville and Louisville. This burdensome condition delayed the commencement of work until the financial crash of 1837, when, under the general industrial and financial depression, the project, with all that it promised, was for the time abandoned. Agitation for a southern railroad was renewed at intervals in Cincinnati during the next fifteen years. The constitution of Ohio permitted special acts of legislation authorizing cities, towns or townships to become stockholders in private corporations, and in the general spirit of the period, encouragement was given to various unsuccessful railroad companies organized for the purpose of providing direct access to the South.

By the year 1850, the reaction against public works in

12 The Cincinnati Southern Railicay, [12

Ohio had fairly developed. The State debt at that time amounted to over eighteen millions of dollars, and " as business enterprises both the public works and the private concerns aided by the State were failures."' The abuses of rash wild-cat speculations made in the mad fever for internal improvements by cities and counties throughout the State had grown very serious. Most of the stock so subscribed had become utterly worthless, and the greatest difficulty was experienced in the assessment and collection of the heavy taxes necessary to meet the bonds by which the subscriptions were paid. Legal processes had repeatedly to be employed, counties attempted repudiation, and the public credit was greatly shaken.^ The general situation was so ominous that the Constitutional Convention which met in 1850 not only prohibited State aid of any kind to public works, but inserted, by a decisive vote of 78 to 16, the following clause in the new document:^

Art. VIII. Sect. 6. — "The General Assembly shall never authorize any county, city or township, by vote of its members or otherwise, to become a stockholder in any joint stock company, corporation or association whatever, or to raise money for, or loan its credit to or in aid of such company, corporation or association."

The insertion of this clause definitely removed the possibility of Cincinnati securing railroad connection by subscription to any private enterprise.

In the meantime, the local necessity for improved means of communication with the South had grown in urgency. Commercial supremacy in the West and Northwest departed from Cincinnati with the inauguration of railroad transportation in the valley of the Mississippi. The area of trade was

^ Charles N. Morris, Internal Improvements in Ohio ; in Papers of the American Historical Association^ vol. iii., p. 107.

2 Walker vs. City of Cincinnati, 21 Ohio St., 14.

^Poore, Charters and Constitutions, ii., p. 1473. For the long and interesting debate which preceded its adoption, see Debates of Constitutional Convention of Ohio, 1850-51, ii., p. 800 et seq.

greatly enlarged, but the number of competing points more than proportionately increased. Three distinct lines to the sea-board brought in New York, Philadelphia, Baltimore and Boston as active competitors for trade north of the Ohio river. The Chicago and Rock Island [Railroad, with connections completed in 1854, gave Chicago access to the northwestern region of Dakota, Nebraska, Minnesota, and Iowa. St. Louis reached out in all directions, increasing connecting mileage in Indiana, Illinois, and Missouri from 339 miles in 1850 to 4186 miles in 1856.'' Cincinnati responded to this general movement by active railroad construction and extension. The mileage of Ohio grew from 299 miles in 1850 to 1869 miles in 1856." But the exclusive advantages that had existed with respect to water transportation no longer prevailed. The closer proximity and momentum of growth of the new cities, the ease of railroad construction in the West, more than compensated for the advantages of established industries and defined lines of trade.

In the South, Cincinnati retained a dominating position for some years longer. Railroads constructed during the early part of the decade were largely tributary to river transportation, or local lines offering little competition to river traffic. In 1859, however, the Louisville and Nashville Railroad was opened for through travel, and Louisville, the most active competitor of Cincinnati for Southern trade, was placed in direct communication with Nashville, thence by connecting roads, with Knoxville, Chattanooga, Memphis, Augusta, Charleston, and almost every important point in the South. The superior rapidity and regularity of railroad transportation at once asserted itself, and a steady deflection of traffic from the river to the railroad, that is, from Cincinnati to Louisville, set in.

The graver aspect of the situation now engaged general

' Internal Commerce of the United States, 1882 : Appendix, p. 235. "^Report of Secretary of State of Ohio, 1880, p. 625. The greater part of this was directly tributary to Cincinnati.

attention. Efforts were renewed to secure the construction of an independent Southern railroad by private enterprise, but without success. It was a period of quick active speculation, with abundant opportunities for secure investment and immediate returns. The length of the proposed road, the unusual topographical difificulties of the route, the probable cost of construction, the slow development of local traffic, the certainty of bitter competition from an intrenched corporation, and the necessity for practically completing the line before profitable connections could be secured, presented difficulties to outside capital which the obvious local desirability of die road could not overcome. Various propositions were suggested to evade the constitutional prohibition of municipal aid, but these were one after another demonstrated impracticable.

In 1859, an attempt was made to stimulate private enterprise by the offer of a cash bonus to be raised by individual subscription. After some negotiation, the Cincinnati, Lexington and East Tennessee Railroad, in operation from Lexington to Nicholasville, Kentucky, proposed to extend its rails to Knoxville, Tennessee, upon the condition that the sum of one million dollars should be so provided. The Kentucky Central Railroad was already in operation between Cincinnati and Lexington, and the proposed extension would practically give Cincinnati an independent line into the heart of Southern territory. The offer was conditionally accepted, and subscription lists circulated. Many persons, whether convinced of the futility of the project, or believing that the necessary amount would be raised independently, failed to respond as expected, and after a little more than half of the entire sum had been secured, no further progress was made. Modifications of the original plan were suggested, but before anything could be accomplished the muttering of the approaching civil storm had diverted public attention in other directions, and all agitation was abandoned.

During the war the absence of a Southern railroad was keenly felt. A direct line connecting Cincinnati with some

15] Tlie 'Necessity of the Railway, 15

commanding point in the South, appeared so obviously necessary to successful military operations that one of the early messages of President Lincoln to Congress urged its construction.'' Surveys were ordered by General Burnside, and lines run by Mr. W. A. Gunn, of Lexington, Kentucky, from Nicholasville, south to the Cumberland river." Somewhat later a draft of negroes was actually made for the preparation of grades. No immediate action was, however, taken by Congress, and in the excitement of immediate developments the enterprise was allowed to drop. But for the failure of local representatives to press the President's recommendations upon Congress, and the abandonment of the projected advance against Cumberland Gap, it is probable that the construction of a Southern railway would have been at least undertaken by the national government.'

The commercial interests of Cincinnati suffered much from the events of the war. Trade with the Southern States was practically cut off, and manufacturing and commercial interests were paralyzed. The demand for military supplies later developed feverish activity in certain industries, but the stimulus was artificial, and its evil effects were felt in the reaction which followed the close of the struggle. When business interests returned to normal development with the revival of the prostrate industrial life of the South, it appeared that the four years of strife had firmly established the deflecting tendencies of the preceding period. Just as the rich stream of immigration had been diverted from the valley of the Ohio to the fertile region of the Northwest, so the new channels of trade, which the dawning revolution in means of transportation had indicated, were now permanent and predominant. By 1868, the general traffic of the North

^ Congressional Globe, Dec. 3, 1861: Appendix, p. 1.

'Mr. Gunn was subsequently appointed Chief Engineer of the Cincinnati Southern Railway and directed the preliminary surveys made for this purpose. The line, as finally located, included a portion of the earlier military survey.

^ Cf. Nicolay and Hay, Abraham Lincoln, v., pp. 66-67.

Ip The Cincinnati Southern Railway, [16

and West had passed from Cincinnati to the new cities of the Mississippi and the Lakes, — St. Louis, Chicago, Cleveland, Toledo, and Indianapolis.

A no less critical situation was developing in the South. Years before a Southern railway had been urged as an advantageous outlet from the Ohio river to the southeastern seaboard. Such was the plan of the Cincinnati, Louisville and Charleston Railway, and the significance of the agitation of 1835-6. But now the situation had changed. Cincinnati reached the seaboard through New York, Philadelphia, and Baltimore, and sought southern territory for its own sake. Moreover, throughout the South, the river had definitely yielded to the railroad. Two large systems of railroads, embracing some 4000 miles, had grown up, — the one extending from the southeastern seaboard in a northwesterly direction, the other bearing from the southwestern Gulf cities toward the northeast, and converging with the former in eastern Tennessee. Louisville tapped this network by means of the Louisville and Nashville, and the Nashville and Chattanooga railroads at the precise juncture of the two branches, Chattanooga, Tennessee.

The only connection of Cincinnati with the South, aside from the all-water route, was by river to Louisville, thence via Nashville and Chattanooga by the Louisville and Nashville Railroad. As a means of transportation in competitive trade, it was both indirect and inadequate. Shipments to a distributing point due south from Cincinnati, as Chattanooga, described a wide circuit, going successively west, south, east, and north. The legitimate difference in freight charges, other things being equal, tended to swell the stream of Louisville trade at the expense of that of Cincinnati. The Louisville and Nashville Railroad was moreover, at that time, " a Louisville road," controlled by, and operated in the interests of Louisville merchants. Rail rates between Cincinnati and local points were made by adding the rate between Cincinnati and Louisville to the rate between Louisville and those points. Between Cincinnati and competitive points, the rates were formed by adding an arbitrary charge between Cincinnati and Louisville to the rate from Louisville to such points/ The facilities of the road for shipments from Cincinnati to Southern points were entirely inadequate. Through freight was delayed in Louisville, and merchants still tell of pork destined for this section, unladen at Louisville and piled up for days outside of the city. For several years the Board of Trade of Cincinnati maintained a special agent at Louisville to trace out and hurry through Southern consignments.

The disadvantages thus indicated were emphasized by the radical changes in business methods which the economic revolution in the South had effected. Formerly the needs of a large portion of the population had been uniform and supplied by the planter, who purchased his stores in the larger Southern cities and retailed them to his body of dependents. Now, however, the negro bought for himself where and what he wished. General merchandise stores sprang up at every cross-road, and Southern merchants poured into Northern centers ready to buy for cash or on short time larger and more varied supplies.^ The natural tendency was for these buyers to stop off at Louisville, rather than continue for 1 50 miles to Cincinnati, where any advantage gained in purchase would be lost in additional freight charge and delay in transmission.

By the spring of 1868, the construction of an independent Southern railroad had passed from a matter of general expediency to one of commercial necessity. The subject was under constant discussion in Cincinnati, and various projects of more or less impracticability were proposed. The bonus plan was revived by a proposition from the Atlantic and Great Western Railroad to acquire the Lexington and Danville Railroad and extend it in connection with the Kentucky Central to a Southern center, provided that a partial

^Internal Commerce of United States, 1880, p. 90. ^See Merchanfs Magazine^ vol. Ivi., 1869, p. 363.

guarantee fund would be subscribed. Like the earlier attempt, this proved unsuccessful. Attention was also given to " the Dickson plan," based upon the claim that, while the State constitution forbade a municipal gift or loan to " any stock company, corporation or association," there was nothing in it to prevent such action with respect to an individual who should engage to build the road. The doubtful validity of the interpretation, and at any rate the impossibility of securing such an " individual," were soon pointed out.

The situation, to summarize, was this: Cincinnati and Louisville were active competitors for Southern trade. This trade was definitely established upon the basis of railroad transportation. Cincinnati possessed no direct railroad to the South; Louisville did. The advantages enjoyed by the former city in the era of water transportation were now held by the latter. Southern merchants dealing directly with the North were diverted from Cincinnati by the closer proximity of Louisville. The advantages of commercial traveling were minimized by inadequate transportation facilities, unreasonable delays, and arbitrary freight charges upon Southern consignments shipped ma Louisville. Louisville, in a word, threatened to displace Cincinnati as the chief distributing point of Northern manufactures to Southern consumers. Various unsuccessful attempts had been made to secure the construction of an independent Southern road. Serious obstacles stood in the way of unaided construction by private capital ; on the other hand, a specific clause of the Ohio Constitution prevented municipal aid to private enterprises, the most feasible method of securing at least its projection.

In the winter of 1868, the remarkable proposition was first broached by Mr. Edward A. Ferguson, a skilled constitutional lawyer of Cincinnati, that, failing all other means, the city should itself construct the road. Mr. Ferguson had long felt the necessity of direct communication with the South and the improbability of private enterprise establishing it. Careful study of the constitutional limitation and related judicial decisions led him to believe that, while Cincinnati was disqualified from lending aid to private enterprise, the city was not forbidden the exercise of independent activity. The circumstances of the inception of the idea, as told by Mr. Ferguson himself, are interesting:^

" In July, 1868, I had been preparing a brief for an argument in the Supreme Court, in the case of Hatch vs. The Cincinnati and Indiana Railroad Company, involving the title of the company to the canal-bed, which had been appropriated for railway purposes. After the preparation of that brief I took a short vacation and went to New York City. One Sunday evening, while there, a freight agent of one of the railroads came up to certain Cincinnati merchants to give tliem a hint that there was to be a change of rates and that they had better hurry their shipments. This led to a talk about railway facilities at Cincinnati and about the fact that Cincinnati was losing her business; that she was being cut off from the entire trade of the Northwest; that she formerly had a large trade in Iowa, but that was leaving, or had about left her; that the great want of the city was a railroad to establish an empire of trade, and that empire of trade was the South ; that was the only place for Cincinnati trade. It was lamented that, under the constitution, the city, without co-operative capacity, could do nothing toward building the road. The brief of which I have spoken had led me to consider the legal and constitutional questions which were involved in this subject of the city's building the road, — ^not the question so much as the case bearing upon it. I said to the gentlemen : ^ You are mistaken about the constitution of Ohio; it is not as you suppose. Under the present constitution Cincinnati can do what she could have done under the former constitution.' I instanced to them the fact that

^Report of the Commission on the Affairs of the Trustees of the Cincinnati Southern Railway., the Management of their Trust and the Disbursement of Moneys entrusted to their Care. Cincinnati, 1879. Testimony of Mr. E. A. Ferguson, pp. 99-100. Henceforth this report will be referred to simply as, Report of Investigating Commission.

while the city of Cincinnati could not own a share in the gas company, and it was not essential to her interest that she should, as she had a contract with the present gas company, who were able to furnish gas cheaper, probably, than she could make it herself, that the city could buy the gas works and become a gas manufacturer, and supply private consumers, and that the people had voted three millions of dollars for that purpose. In other words, the prohibition was against the city being a stockholder and not against accomplishing a public object out of her own means. I wound up by saying: 'I believe, when I get home, I will draw a little bill to see what can be done under the Democratic constitution.' The constitution had been spoken of as a Democratic constitution, and all the gentlemen present, I believe, were Republicans but myself. After I returned home in the fall of that year I was taken sick, and having leisure, I thought of this project, and sat down one day to see how I could draft a bill to meet the case. I roughly sketched the first section; when I had done that, I became satisfied that it could be done."

Some weeks elapsed before Mr. Ferguson prepared a satisfactory revision of the first draft of the bill. It was finally completed and given to the press on November 25, 1868. The measure was drawn in general terms, according to constitutional requirement, and entitled "An act relating to cities of the first class having a population exceeding one hundred and fifty thousand inhabitants." Cincinnati was, of course, the only city in the State whose population reached that number.

The measure provided that, whenever the City Council of Cincinnati should pass a resolution declaring it essential to the interests of the city that a railway be provided between two designated termini, one of which should be Cincinnati, and a majority of qualified electors should have decided at a special election in favor of the construction of the railway, then the Superior Court of the city should appoint a board of five trustees, holding office during good behavior, to carry out the object of the resolution. The board of trustees so appointed were authorized to issue bonds of such an amount and kind as might be determined, to be secured by a mortgage on the Hne of railway and its net income, by the faith of the city and by a tax levied annually sufficient to pay the interest and provide a sinking fund for the final redemption of the bonds. This fund should be expended in the construction of a railway with all the usual appendages, between the specified termini. For this purpose the trustees should have power to make contracts, to employ officers and agents, to acquire necessary real and personal property and franchises, to receive donations of land, money or bonds, and to dispose of the same in aid of the fund. They should keep a record of their proceedings and a full and accurate account of their receipts and disbursements, and make an annual report of the same to the City Council and whenever requested by a resolution of the same body. Compensation should be proportioned to respective services and determined by the appointing court. The trustees should not be interested either directly or indirectly in any contract relating to the railway. Whenever the city solicitor or any bondholder should have reason to believe that a trustee had failed in the faithful performance of his duty, he should apply to the appointing court for the removal of the delinquent and the appointment of a successor. A vacancy occurring in the board from any other cause should be filled in like manner. The trustees were finally empowered to rent or lease portions of the line as soon as completed, such rights to terminate on the final completion of the railway, when it should be leased on terms and conditions to be determined by the City Council of Cincinnati.^

' For the full text of the measure in the form in which it subsequently became a law, see Appendix, A.

III. Legislation and Litigation

The Ferguson bill was widely circulated and generally discussed. It was favored by the commercial bodies of the city and heartily commended by the local press. Intelligent sentiment recognized the very unusual chai'acter of the plan, but urged it as an heroic measure.^ A more conservative element, to whom the proposition appeared a hazardous dernier r^.y.y^r/, presented an untried alternative plan, — an amendment to the ninth article of the constitution of Ohio, so as to enable Cincinnati to lend credit to private enterprise. The Knoxville Southern Railroad was at that time contemplating a northern extension, and a liberal municipal subscription would, it was thought, secure for Cincinnati this outlet. A carefully prepared amendment was presented to the Ohio legislature immediately after that body convened in 1869, but failed of passage.

The failure of this final substitute strengthened sentiment in favor of the Ferguson plan. Formal resolutions of endorsement were adopted by the City Council, the Board of Trade, and the Chamber of Commerce. Doubt raised as to the constitutionality of the measure was allayed by eminent

' " We are aware that many persons think city gas works, water works, and all other improvements can be more economically managed by individuals or by stock companies than by municipal or State authority, and we see no reason to doubt this is the case ; but when it comes to be a matter of life or death, where our future prosperity or decay is in such scales, then extreme cases need extreme remedies ; and as a skilful physician might prescribe croton oil to a patient who without its use seemed to be on the very point of death, so may we let our city authorities build and operate a Southern railway for the benefit of our citizens." — Cincinnati Daily Times, November 28, 1868.

legal opinion. Hon. Thomas M. Cooley, the distinguished jurist and legal authority, wrote that while the constitution of Ohio forbade cities giving aid to works of public improvement, there was nothing in it to prevent local authorities from levying taxes for the construction of a railroad, when their own agencies were employed for the purpose. Such action would be in entire harmony with the established principle and usages of local self-government. Nor did the fact that this particular railroad extended beyond Ohio vitiate the rule. The local importance of a road depends upon the local facilities it affords to travel and commerce, and not upon the question whether it is entirely within the State or not.^

In April, 1869, the Ferguson bill, with a memorial urging its passage, was presented to the General Assembly of Ohio by a joint committee of the City Council, the Board of Trade, and the Chamber of Commerce. It was introduced in the Senate and referred to the Committee on Judiciary. Conferences with friends of the measure led to the insertion of ten million dollars as the amount of the loan and 7 3-10 per cent, as the maximum rate of interest. A clause was added, significant in the later history of the railway, prohibiting the sale of bonds at less than par. The trustees were required to enter into bond in such sum as the appointing court might direct, and a taxpayer was given co-ordinate right with a bondholder of applying for the removal of an inefficient trustee.' On April 28 the bill, as thUiS amended, was adopted in the Senate by a vote of 2^ yeas to 7 nays. It encountered no difficulty in the House, passing by a vote of 73 to 21, and on May 4, the measure became a law.

The Ferguson bill was merely an enabling act, operative upon, first, the passage by the City Council of a formal resolution, declaring the construction of the railway necessary, and designating the terminal points; secondly, upon the subsequent ratification of this resolution by popular vote.

' For the full text of Judge Cooley 's letter, v. Appendix, B. '^Ohio Senate Journal, 1869, p. 622.

A special committee of the City Council was immediately appointed to select a southern temiinus. The respective advantages of Atlanta, Georgia, and Knoxville and Chattanooga, Tennessee, were discussed, the last-named city being, after mature deliberation, selected. On June 4 a resolution was passed, reciting the powers conferred by the Ferguson Act, and declaring it " essential to the interests of the said city of Cincinnati that a line of railway, to be named the Cincinnati Southern Railway, should be provided between the said city of Cincinnati and the city of Chattanooga." A special election was held on June 26, 1869, at which 15,435 votes were cast "for providing said line of railway," and but 1500 "against." This unanimity of sentiment stimulated subsequent proceedings. Four days later, the Superior Court of Cincinnati, upon petition of the City Solicitor, appointed a Board of Trustees, consisting of Edward A. Ferguson, the author of the act, Richard M. Bishop, ex-mayor of Cincinnati and later governor of Ohio, Miles Greenwood, William Hooper, and Philip Heidelbach, — the last three public-spirited citizens of means and influence, representing in a general way, the manufacturing, commercial and financial interests of the city. The Board was in no sense a technical body; indeed, no one of its members had, prior to his appointment, any practical experience in railroad construction. The theory of selection, in so far as theory operated, was that the variety of duties devolving upon the trust, — including the passage of complex legislation and the negotiation of large bond issues, — made it impossible to appoint a body composed exclusively of skilled engineers; that, on the other hand, the influence of but a single person of this kind upon unskilled associates would be predominant and ultimate to an undesirable degree. Accordingly, men of sterling integrity and large public spirit, enjoying unlimited public confidence, rather than experts in railroad construction, were selected for the execution of the work. The correctness or error of this policy will be discussed in another place. It is here sufficient to repeat that the composition of the Board of Trustees was, in so far, conscious and deliberate.