Founding of the Cincinnati southern railway with an autobiographical sketch

Contents

PAGE V

I. Autobiographical sketch of E. A. Ferguson, II. The Necessity of the Railway, by Dr. J. H. Hollander,

III. Legislation and Litigation, by Dr. J. H. Hollander,

Appendix

A. Text of Ferguson Act 131

B. Opinion of Judge Alphonso Taft, and concurring opinions 135

C. Common Carrier Act 142

D. Memorandum of Agreement between the Trustees of

The Cincinnati Southern Railway and The Cincinnati Southern Railway Co. - - - - - 145

E. Form of Lease prepared by E. A. Ferguson - - - 152

(iii)

Preface

With the exception of the autobiographical sketch this work is a compilation from various scattered sources. It is not a history of the efforts made before the passage of the Ferguson Act to get a railway from Cincinnati to the South Atlantic Seaboard or to the south. Incidentally allusions are made to these efforts. It begins with the drafting of the Ferguson Bill and ends with a short account of the grand banquet given by the citizens of Cincinnati on March 18, 1880, upon the opening of the Cincinnati Southern Railway for traffic between its termini, the city of Cincinnati, and the city of Chattanooga, Tennessee, a distance of 336 miles.

From the dissertation of Mr. J. H. Hollander, a student at the Johns Hopkins University, presented to the Board of University Studies for the degree of Doctor of Philosophy, I have taken and used, with his and the University's consent, the chapter on "The Necessity of the Railway" and that on "Legislation and Litigation." After the degree was conferred on him, his dissertation was published in January, 1894, in the Twelfth Series of the Johns Hopkins University Studies, with the title, "The Cincinnati Southern Railway, a Study in Municipal Activity."

Dr. Hollander spent several months in making a thorough investigation of the subject of his essay. In matter, thought and style it is believed to be unexcelled by any similar dissertation. It is regretable that there are but few copies of it left, and it is hoped that if he should prepare a supplement, giving his views of the municipal results of the operation of the railway under the lease to The Cincinnati, New Orleans & Texas Pacific Railway vi PREFACE.

Company, that his original monograph will be reprinted with it. Dr. Hollander is now a Professor of Political Economy in the Johns Hopkins University. He has made a national reputation for himself by his work for the United States Government in devising for Porto Rico a system of local taxation to meet the expenses of its domestic government which was adopted and went into force in July, 1901, and under which, with free trade with this country, that island has been greatly benefited.

For a sketch of the frequent vacillation of public opinion and the consequent delay in the completion of the railway, reference is made to a pamphlet, entitled "The Beginnings of the Cincinnati Southern Railway/' published by Mr. H. P. Boyden, November 9, 1901. Mr. Boyden 's experience as a journalist and as City Auditor of Cincinnati amply fitted him for his task. It will repay perusal.

For laws relating to the railway, other than the Ohio Acts, published in the appendix hereto, reference is made to a compilation published by the Trustees which contains them and the Tennessee and Kentucky acts, authorizing the Trustees to exercise the powers in those states conferred on them by the Ferguson Act. As there was but a mile of the original road in Ohio, it is evident that without the Tennessee and Kentucky enabling acts, the plan would have failed, unless congress had intervened, and authorized the construction of the railway by the Trustees as a military and post road.

To the Hon. John G. Carlisle, then Lieutenant Governor of Kentucky, credit is principally due for the passage of the Kentucky acts.

For the use of the plates of the railway, as finally built, and the view of the Grand Banquet, I am indebted to the Lessee Company.

I

Autobiographical Sketch of E. A. Ferguson.

I was born in the city of New York, November 6, A. D. 1826. In 1830, my parents moved to the city of Cincinnati, bringing with them their two children, my elder brother, William Gribbon Ferguson, and myself, Edward Alexander Ferguson. I was educated in the public schools of this city, at Talbot's Academy and Woodward College, from which I was graduated in the English Department in June, 1843. I had also studied Latin and Greek, enough of the former to be useful as a student and practitioner of law. When I entered Woodward College my desk-mate was Charles Nordhoff, who became a noted author. Having imbibed a strong desire to become a lawyer, I entered my name with Henry Snow, Esq., of the Cincinnati Bar, who had been Professor of Languages in Woodward College while I was a student. I pursued my studies at home, my method being to read not less than thirty pages of law each week-day, except Saturday. Saturday morning I reviewed what I had previously read, and on Saturday afternoon was examined by Mr. Snow. In this way I acquired, in the course of five years, a good knowledge of the principles of law. W r hile studying law I read history, political economy, and the best of the English Classics. One of the books that had probably the most to do in forming my opinions was the Edinburgh Review, the bound volumes of which I read from its first issue.

At the May term, 1848, of the old Ohio Supreme Court, on the Circuit, I was admitted to the bar; but did not commence practice until December of that year, having for the previous eighteen months taught in the public schools of Cincinnati. On September 17, 1851, I married Miss Agnes Moore, a grand- CD daughter of Adam Moore, an early pioneer and a leading merchant of Cincinnati.

In April, 1852, in my twenty-sixth year, I was elected by the City Council of Cincinnati, City Solicitor. My first duty as Solicitor was to go to Columbus, Ohio, where the First General Assembly under the Constitution of 1851 was in session. A general tax law had been passed, a section of which so restricted, it was thought by the city officers, the levy for city purposes, that under it there could not be a sufficient amount raised for municipal purposes to carry on the city government. There were two bills pending for the organization and government of municipalities, one drawn by William G. Williams, the City Clerk, and introduced in the House by Benjamin T. Dale; the other drawn by William Y. Gholson, my predecessor in office, afterwards a Judge of the Superior Court of Cincinnati and the Supreme Court of Ohio, which was introduced in the Senate by Adam N. Riddle, a Senator from Hamilton County. Mr. Dale felt aggrieved that Senator Riddle had introduced the Gholson Bill without first consulting with him, as he had first introduced the Williams Bill. Mr. Dale also complained that he could not get his colleagues, the Hamilton County Delegation, who were mostly young men, to give attention to this important subject. Upon my suggestion Mr. Dale agreed that we should meet at his room in the evening and take up both bills. As the Gholson Bill was drawn by a learned lawyer, and contained provisions for the organization as well as the government of municipalities which the Williams Bill did not, we took up the Gholson Bill first, and by twenty-seven amendments taken principally from the Williams Bill, that evening prepared a new bill which became the Municipal Code of May 2, 1852.

One of the amendments repealed the restricting clause in the general tax law; another created the Police Court. This was my first experience in legislation. My term as City Solicitor expired in May, 1853, and soon thereafter I was retained by the Commissioners of Hamilton County as their legal adviser, and was such for about eight years. During this time a new court house, jail, lunatic asylum, and other public works were constructed, which required the drafting of bills and contracts which became the subject of litigation.

In addition to a general practice I was engaged as one of the Counsel in all the important street and steam railway cases.

In May, 1855, I went abroad on a vacation trip. While in London I visited the Courts of Law and Equity then in session and had an opportunity of listening to debates in the House of Commons. From London I crossed to the continent landing at Ostencl and from thence to Brussels and the field of Waterloo, then to Cologne and through the Rhine Country into Switzerland. From Switzerland I went through France, stopping two weeks at Paris during the Exposition, returning to England and going as far north into Scotland as Edinburgh.

At the October election in 1859, I was elected one of the three Senators from Hamilton County to the General Assembly of 1860-1861. While in the Senate I drew various bills which became laws relating to the City and County government and street railways. I also drew the Bribery Act, the Canal Leasing Act, and after the outbreak of the Civil War in 1861 with the aid of General George B. McClellan, the act under which was organized the Ohio Volunteer Force. Among the Senators who afterwards became distinguished were James A. Garfield, Jacob D. Cox, and Thomas M. Key. In the House was William B. Woods, who became distinguished as a soldier, and afterwards a Judge of the Supreme Court of the United States. General Benjamin R. Cowen was Clerk of the House; two of the reporters were Whitelaw Reid, now of the New York Tribune and Ambassador to England, and William Dean Howells, one of the editors of Harper's Magazine, and a distinguished author.

After the expiration of my term as Senator in 1861, upon the election of Charles Fox, Esq., as a Judge of the Superior Court of Cincinnati, who had been solicitor of the Cincinnati Gas Light and Coke Company, I was retained by that company in his place, and continued such for about thirty-three years.

The foregoing is a partial statement of my experience as a lawyer and legislator before drafting, in my forty-second year, the Cincinnati Southern Railway Act of May 4, 1869.

As to the part I took in the execution of the trust after my appointment as Trustee, Dr. Hollander in his review of the trust has this to say (Essay page 73) :

"In the objective study of an institution, it is rarely possible to recognize personal elements. Yet any survey of the influences at work in the history of the Cincinnati Southern Railway would be imperfect without a clear recognition of the part contributed by a single personality, Mr. Edward A. Ferguson, the author of the original enabling act, and a member of the Board of Trustees since its creation. In so far as it is possible to speak of any large work as the product of a single agent, the Railway is to be associated with his name. The inception of the project, every piece of legislation, is traceable to his legal ingenuity. He is closely identified with the actual construction and ultimate disposition of the Railway, and but few details in its history fail to reveal the impress of his activity. Material interests, political preferment have been sacrificed, and a life of high possibilities devoted with rare unselfishness to this one end."

To this may be added the testimony of Mr. H. P. Boyd en, in his pamphlet entitled "The Beginnings of the Cincinnati Southern Railway." On page 110 he says:

"Mr. Hollander says in his intensely interesting sketch, 'The experiment was unique as it was remarkable.' So it was as hazardous as it was unprecedented. It was not in the power of the capacity of many men to steer a straight course in the nine years from the time the building of the road was decided on to the decisive vote of 1878.

' ' But no one can read the history of those years as meagerly set forth in the various extracts that have been given, and call back to mind what happened in the years that came after, and fail to recognize the dominant, controlling power of one man and his consistency of purpose. The man whose ingenuity and knowledge of the law drew the first act ; who as ■ Trustee thought out a plan for the construction of the road which was finally carried out almost to the letter; whose faith never wavered and who cheered in times of despondency ; whose indomitable courage withstood attacks from fellow Trustees, from newspapers, from the Avealthiest men in the city, whose steadfast conviction as to policy sustained him through criticism and objection, whose fertility of resource, capacity to meet obstacles and overcome them, whether interposed by General Assemblies or Chamber of Commerce, never failed him— Mr. Ferguson is the one above all others who, from first to last, hewed close to the line. ' '

II. The Necessity of the Railway

(By Dr. J. H. Hollander.)

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 1860, and remained throughout this entire period the largest of any city west of the seaboard. 1 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

1 The population of the four cities, as shown by the several census reports, was as follows:

Cincinnati

9,642

24,831

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.

and intimate acquaintance with the tastes and habits of southern merchants, a large and profitable business was enjoyed.

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 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. ' ' 1 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. 2 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 : 3

Art. VIII. Sec. 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. Com-

1 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.

3 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. 300 et seq.

mercial 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 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. 1 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. 2 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

1 Internal Commerce of the United States, 1882; Appendix, p. 235.

2 Report of Secretary of State of Ohio, 1880, p. 625. The greater part of this was directly tributary to Cincinnati.

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 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 difficulties 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 the 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 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. 1 Surveys were ordered by General Burnside, and lines run by Mr. W. A. Gunn, of Lexington, Kentucky, from Nicholas ville, south to the Cumberland river. 2 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. 3

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

2 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.

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 and West had passed from Cincinnati to the new cities of the Mississipppi 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 4,000 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. 1 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. 2 The natural tendency was for these buyers to stop off at Louisville, rather than continue for 150 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 ex-

1 Internal Commerce of United States, 1880, p. 90.

U, FOUNDING OF CINCINNATI SOUTHERN RAILWAY

pediency 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 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 via 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 : *