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INCEPTION OF THE PROJECT

Significance of the History

The history of the Southern Pacific and the railroad companies connected with it affords one of the many examples in American economic life of a great industrial organization built up from small beginnings within the lifetime of one group of men. It is a story full of the interest which attaches to constructive achievement in any line. When we remember that as late as 1870 there was no railroad west of the Mississippi-Missouri River except the Northern, Union, Kansas, and Central Pacific railroads, which possessed a mileage as great as 300 miles, and when we recall that in 1860 the total railroad mileage of the states in this same territory amounted to only 6,000 miles, we are able to form some idea of the successful energy which created a system of 861 miles of railroad in the course of six and one-half years, across an unsettled country, in the face of obstacles due to climate, altitude, and distance from centers of traffic and of finance.

The history of the Southern Pacific is significant, however, for still other reasons than because it illustrates what men can do in spite of serious difficulties. The company’s record is important to the student of transportation problems because there is embodied in it much of the experience of the Pacific Coast with respect to railroad construction, railroad finance, railroad rate-making, and the relation of railroad corporations to the public at large, as represented by local, state, and national governments. What the Pacific Coast, and what in particular the state of California know, first hand, of the habits and policies of railroad corporations, is mainly derived from contact with the Southern Pacific Railroad and its auxiliary companies.

The narrative that follows is offered as a contribution from the far western portion of the United States which may help to explain the attitude of that section toward transportation matters; as well as an account of some phases of the earlier development of a railroad system which is now one of the most powerful in all the country, whether we compare this system with the railroads of the East or with those of the West.

The Southern Pacific system today embraces lines from Ogden and New Orleans on the east, to Portland, San Francisco, and Los Angeles on the west. The part of the system first built, however, and at all times the most important part of it, is that section reaching from a few miles west of Ogden, Utah, to the cities of Sacramento and San Francisco. This portion of the larger system was built and is owned by the Central Pacific Railroad Company.[1] It is therefore to the circumstances attending the construction of this portion of the line that attention will first be directed.

Early Activities of Theodore Dehone Judah

The promoter of the Central Pacific Railroad was a young engineer named Theodore Dehone Judah. Judah was born in Bridgeport, Connecticut. He obtained his first experience in railroad building on the Troy and Schenectady Railroad in New York. Later he built a railroad down the gorge of the Niagara River to Lewiston, served as resident engineer on the Erie Canal, and in 1854 had charge of the Buffalo and New York Railroad then building to connect with the Erie. This was a responsible position for a man with so brief a period of training. When Judah came to California in 1854 he was only twenty-eight years of age. He was soon to make it evident, however, that he possessed more than respectable engineering ability, while he also displayed a capacity for sustained enthusiasm in connection with the project for a transcontinental railroad which eventually overcame all obstacles and resulted in the formulation of definite and successful plans for a transcontinental line.[2]

Judah began work in California as engineer of the Sacramento Valley Railroad. He left the service of the company, however, before the road was finished to Folsom. Subsequently he made a survey for a railroad from Sacramento to Benicia, and also one for a short branch on the California Central Railroad. Still later he was employed by the trustee of the Sacramento Valley Railroad, J. Mora Moss, and the superintendent, J. P. Robinson, to explore the Sierra Nevada Mountains for wagon road routes north of the south fork of the American River, and at the same time to act as agent for the Sacramento Valley Railroad in soliciting freight.

Details of Judah’s activities between 1854 and 1860 are difficult to obtain. We know that he visited Washington in order to procure the passage of a bill making grants of land to California for railroad purposes. In 1859 he was the delegate from Sacramento to the Pacific Railroad Convention, where he urged the importance of a thorough survey before any decision should be made regarding the route of a transcontinental railroad. When the convention adjourned he was sent to Washington at his own expense to urge the passage of a bill such as the convention favored. He returned in 1860 without having accomplished his purpose, but convinced that Congress was in favor of granting federal aid to a railroad to California from the East, and that it would act when more important matters had been disposed of.[3]

Discovery of Transcontinental Route

It was after Judah’s return from Washington in 1860 that he undertook the explorations for the Sacramento Valley Railroad to which reference has been made. Doubtless while engaged on this work he visited Dutch Flat, and doubtless also his enthusiasm for a transcontinental railroad became generally known. Judah was no mountaineer, but he could readily profit by the knowledge of men acquainted with the country. Such a man he found in Daniel W. Strong, a druggist at Dutch Flat, who accompanied him on his explorations. We have Strong’s statement that he himself conceived the idea that immigrant travel could be diverted through the Dutch Flat country by the construction of a railroad, and that he hired assistants, made a reconnaissance, and found a continuous divide over which he thought a road could pass. Knowing that Mr. Judah was trying to find a pass over the mountains, he wrote to him, and Judah came from Sacramento to Dutch Flat. Strong says that he showed Judah the route he had discovered, and that Judah thought well of it.[4]

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Theodore Dehone Judah

Such is Strong’s testimony given years afterwards, when the Central Pacific had proved a success, and it was a distinction to have been connected with it. It is possible that Strong overestimated his contribution to the work. Yet the essential fact is that Judah was in the mountains in August, 1860, and that he or Strong, or both of them hit upon a route which Judah pronounced practicable. One may hazard the guess that Strong pointed out a pass and Judah tested it with instruments.[5] Mrs. Judah repeats the story as she heard it:

It was in the drug store of Dr. Strong at Dutch Flat that the first profile was marked out from notes taken by them (Judah and Strong). Judah could not sleep or rest after they got into town and the store, till he had stretched his paper on the counter and made his figures thereon. Then, turning to Dr. Strong, [he] said for the first time, “Doctor, I shall make my survey over this, the Donner Pass, or Dutch Flat route, above every other.”[6]

Appeal for Funds

Judah drew up articles of association for a company late in 1860, and endeavored to get subscriptions for stock, but without much success. Meanwhile, the publication in the newspapers of information relating to the Dutch Flat route cost him his position with the Sacramento Valley Railroad, for the trustee of the company, J. Mora Moss, took the position that the information acquired by Judah while an employee of the Sacramento Valley belonged to the railroad company, and should not have been published without its consent. It is said that Judah was very indignant, but to no avail.[7]

By October or November, 1860, the record thus shows that Judah had satisfied himself of the existence of a railroad route across the Sierras, and that he was intensely interested in having this railroad built. He was not personally a man of capital, although not entirely without means, and success in transforming his bare project into an actual operating line depended entirely upon the financial support which he could obtain. In November, accordingly, we find Judah endeavoring to give wide circulation to the results of his discoveries.

Under date of November 1, 1860, a circular letter was issued directing the attention of the public to “some newly discovered facts with reference to the route of the Pacific Railroad through California.” This letter asserted that a practicable line had been discovered “from the city of Sacramento upon the divide between Bear River and North Fork of the American, via Illinois Town and Dutch Flat, through Lake Pass on the Truckee River, which gives nearly a direct line to Washoe, with maximum grades of 100 feet per mile.” The estimated length of line in California was 115 miles. It was said that if the Pacific Railroad bill then pending in Congress should be passed, providing an appropriation of $13,000 per mile from the navigable waters of the Sacramento River to the base of the Sierra Nevadas; thence $24,000 per mile to the summit; thence an additional $3,000 per mile for each degree of longitude crossed until the 109th degree was reached, the entire road could be graded without appeal to private investors, leaving only the iron, rolling stock, etc., to be provided from private means. The projected railroad might connect with the Sacramento Valley Railroad at Folsom, or with the California Central Railroad at Lincoln. Subscriptions were asked to an amount of $1,000 per mile for 115 miles, with 10 per cent paid in, to allow the organization of a company under the state law; and it was promised that the money subscribed would be used to make a thorough, practical railroad survey.[8]

In a letter dated the previous day, and addressed to John C. Burck, member of Congress from California, Judah added a few details:

We go out of Summit Valley through what I call Lake Pass, while Fremont’s route, or the old Emigrant road, goes over Truckee Pass, which is about 700 feet higher, and a few miles off my route. We strike the foot of Truckee Lake, or the cabins of the Donner party, nine miles from the summit, and from there it is an easy grade down the Truckee River, descending about 40 feet per mile, over a smooth country. The elevation of the pass is 6,690 feet. There are two other passes leading out of Summit Valley, which I had not time to explore, but either of them are practicable, although a little higher. This route is at least 150 miles shorter than the Beckwourth route; crosses the state at the narrowest point, and is on a direct line to the Washoe mines. I will undertake to build a railroad over this route in two years, for $70,000 per mile, from Sacramento City to the state line or Washoe. Thus the question of crossing the Sierra Nevada, I consider solved.

After the tentative organization of his proposed railroad, and the publication of the news of his discoveries in the newspapers, Judah went to San Francisco. He managed to get in touch with some capitalists, but was unable to secure their support. If Congress did not pass a Pacific Railroad bill, they said, no railroad could be built; if a bill was passed, the road still could not be completed for ten or twenty years. They had other interests, and were disinclined to consider a scheme of this sort, however technically feasible. If we may believe the newspapers of the time, no inconsiderable reason for the reluctance of the men approached was the provision of the constitution of California making stockholders liable for their proportion of all the debts and liabilities of any company in which they held stock.[9]

Sacramento Meetings

When he failed to secure support in San Francisco, Judah went to Sacramento. The city of the plains, as it was then affectionately called by its inhabitants, was less wealthy than San Francisco, but for that very reason might be expected to take an interest in a project which promised her, for some years at least, a position of relative advantage with respect to the trade of the interior. The leading newspaper in that city, the Sacramento Union, could be counted on to support any plausible Pacific railroad scheme for political reasons. The citizens had further the advantage of first-hand experience with the workings of the Sacramento Valley Railroad, which had been opened from Sacramento to Folsom in 1856, and was still the only railroad in the state.

It does not, however, appear that these various factors stirred the people of Sacramento to any extraordinary enthusiasm over Judah’s scheme, or that they regarded him in any other light than that of an engineer with a risky plan, which it was very desirable to have someone other than themselves finance. Judah, however, called a meeting at a local hotel, and people came. He told them he had made twenty-three barometrical reconnaissances over the Sierras, and had found a line. He needed money to carry the project further, in particular to make a thorough instrumental survey, and he asked them what they would subscribe. Nobody subscribed very much. Huntington says that some gave a barrel of flour, and some a sack of potatoes. Still, the additional subscriptions necessary to the legal organization of Judah’s company probably amounted to as much as $56,500[10] on the 115 miles of line contemplated, and small miscellaneous offerings were not likely to carry the promoter very far.

Collis P. Huntington

It is at this juncture that we first hear the names of Collis P. Huntington, Leland Stanford, Charles Crocker, and Mark Hopkins, all prosperous business men in Sacramento. Huntington and Hopkins ran one of the largest hardware stores in the town. Stanford and Crocker were merchants, and in addition, Stanford had dabbled in California politics to the extent of becoming a candidate for the position of state treasurer in 1857 and for that of governor in 1859, getting badly beaten on both occasions. It is difficult, even at this late date, to estimate the qualities of the four men with confidence. Beyond question, Huntington had the greatest genius for business of the four. Born in Connecticut, and self-supporting from the age of fourteen, he was a trader par excellence. In his youth he peddled watch findings from New York to the Missouri River. Later, it is related of him that he started for California with a capital of $1,200, which he increased to $4,000 during an enforced stay of three months on the Isthmus of Panama. He was cool, calculating, unscrupulous, a tireless worker, and a man with few interests outside of work. Enterprise for the public good interested him little. He had few friends, and some of these he lost in later years. Narrow in his sympathies, vindictive, sometimes untruthful, sarcastic, and domineering, he gained his success through the keenness of his mind and the energy and persistence of his character, and also through qualities of courage and imagination which were not absent from his business plans.

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Sketch of train on the Sacramento Valley Railroad, 1860

Leland Stanford

Stanford was a New York lawyer, who had practiced four years in Wisconsin between 1848 and 1852, and had emigrated to California in the last-named year to seek his fortunes in that state. Stanford came to California poor as the proverbial church mouse. Bassett, who was later his secretary, and who was likely to know the facts, says that two of Stanford’s brothers set him up in business in El Dorado County, near Latrobe, with a stock of miners’ supplies. Here Stanford remained a while, in partnership with a man named Smith. Stanford and Smith were said to have done a good business. They thought they were making money until they found that the San Francisco firm with which they dealt was charging them interest on unpaid balances; whereupon they promptly closed up, retiring with their debts paid, but with very little cash.

From El Dorado County Stanford went to Michigan Bluffs, in Placer County, still trading, and in 1855 he moved to Sacramento to take over the business which his brothers had established there. Presumably his operations in Michigan Bluffs had provided him with a little capital. What was quite as much to the point, he had made a number of friends in the mining district, and it is not unreasonable to suppose that his attention had been directed toward politics. In 1857 and 1859, as has been mentioned, he ran for office, but without success. About this time a prospector in the vicinity of Auburn struck a rich pocket of decayed quartz. He knew Stanford, and put his name down for an interest in the claim. From this mine Stanford is reported to have cleaned up about $60,000, a sum which put him in comparatively easy circumstances. In 1861 Stanford ran again for the office of governor, and this time was elected on the Republican ticket. He cannot be said to have yet shown any talent for statesmanship, but he was known as a staunch Union man and a faithful Republican, and he had a local popularity besides, which could be trusted to bring in some votes. After his term of office as governor, Stanford held no political position until 1885, when he was elected United States senator in place of A. A. Sargent. This office he retained until his death. He appears at one time to have had aspirations towards the presidency of the United States, though his candidacy could hardly have been considered seriously. Certainly he served with distinction neither as governor nor as senator.

Stanford’s most marked traits were tenacity of purpose, and a certain rude energy in execution. His associates credited him with great solidity of judgment. Like Huntington, he was unscrupulous in the methods which he employed to reach his ends, but, unlike him, he showed ambition if not capacity outside of the business field. In private life, Stanford was distinguished by his love of horses, and by his donations to the university founded in memory of his son. One must hold him inferior to Huntington in business affairs, vain and extravagant. Yet not only his political influence, but the virile power of the man, the attitude of mind which once led an enemy to say of him that “no she lion defending her whelps or a bear her cubs, will make a more savage fight than will Mr. Stanford in defense of his material interests,” were invaluable to the transcontinental railroad project in the years of its development.[11]

Crocker and Hopkins

The other two members of the quartette may be dismissed with fewer words. Charles Crocker had no more education than Huntington. He had been peddler, iron maker, gold miner, and trader. In 1855 he was alderman of the city of Sacramento. First and last, his strong point was the handling of men. It was Crocker who drove the work of construction, roaring up and down the line, as he put it, like a mad bull. In deciding the larger problems of policy which arose later, there is no evidence that he had an important part. Indeed, Crocker endeavored to sell his holdings to his associates in 1871, and only continued in the organization because the others proved unable to buy him out.[12]

Last of all, we have to mention Mark Hopkins, the “inside man.” Hopkins died in 1878, so that his connection with railroad work lasted only fourteen years, and during part of this time he was ill. Less is known of him than of any of his associates. He was the man of detail, the careful scrutinizer of contracts. He was Huntington’s partner in the hardware business for twenty-four years, and yet in all that time, according to Huntington, he never bought or sold as much as $10,000 worth of goods.[13] That is to say, he was no trader. Bancroft speaks of him as the balance wheel in the business. We hear of him later as objecting to personal indorsements by the partners of Central Pacific notes. Mr. Crocker once said of him that he was a long-headed man without much executive ability but a wonderfully good man for an executive officer to counsel with. Possibly such a man played a useful part in the Central Pacific organization.

Survey Financed

Huntington, Stanford, Hopkins, and Crocker knew each other as merchants will. Crocker and Stanford may also have met in a political way. The four of them seem to have been friends, at least as early as 1860. Now it appears that Huntington and Crocker, and possibly Stanford and Hopkins also, attended one of Judah’s meetings in Sacramento, and were somewhat impressed by his statements. This was the second stage in the Central Pacific enterprise, when the promoter was in the presence of capitalists, and was seeking to convince them that a probability of profit lay in his plans. Huntington says that he spoke to Judah after the public meeting, and that Judah came to his house the following evening. He adds that subsequently he, Huntington, talked with Hopkins and Stanford, and persuaded them to join him in contributing the money necessary to finance an instrumental survey across the mountains. Other persons who agreed to share in the expense were Charles Marsh, James Peel, L. A. Booth, and Judah himself—each assuming one-seventh of the cost.[14] Charles Crocker was brought in a little later.

The attitude of all these men was of course cautious. Judah had caught their attention, but as yet they would not commit themselves very far. The survey might cost them fifteen or twenty thousand dollars apiece, and they might never go further with the scheme. They thought they could build a railroad if anyone could, and there might be money in it, yet they knew that even to finance surveys involved considerable risk.[15]

Likelihood of Government Aid

Although we have no direct evidence to this effect, it seems very probable that the chance of profit to be secured in building a transcontinental railroad under government auspices stood out more prominently in the eyes of Huntington and his friends than any consideration of the ultimate earnings of the railroad, once it should have been built. What should two dry goods merchants and two dealers in hardware, who knew nothing first hand about railroad operation, have cared about the administration of a railroad 800 miles long? If they wanted interest on an investment, why money commanded 2 per cent a month in Sacramento itself. Only the prospect of still greater gains was likely to attract a speculative trader like Huntington, and the source of such profit could be found only in construction of the road. If this was the real inducement, and if the likelihood of a government subsidy was kept in mind from the first, it was fortunate for Mr. Judah that, owing to his familiarity with conditions both at Washington and in California, he was in a position to inform his prospective clients of the likelihood of government aid no less fully and authoritatively than he could advise them concerning routes over the Sierras.

Indeed it was only on the question of government assistance that Judah could supply business men of Sacramento with information of a definite sort. He really knew little about the probable cost of a transcontinental line. In his original report of November, 1860, he had declared that the Central Pacific could be built for an appropriation ranging from $30,000 to $72,000 per mile, varying with the difficulty of the ground; but this was an estimate based on a very cursory examination of the line, and could pretend to no exactness. Possibly he was influenced by the fact that the Sacramento Valley Railroad had been contracted for in 1854 at $45,000 per mile, payable 44 per cent in capital stock of the company, 39 per cent in 10 per cent bonds, and 17 per cent in cash. This was equivalent to perhaps $33,000 in cash. The contract price in this case did not include, however, the cost of right-of-way, depot grounds, and engineering expenses, for which additional stock was reserved.[16] Only one year later, when the first instrumental survey of the Central Pacific was completed, Judah was forced to change his estimate to $88,428 per mile for the first 140 miles of that railroad, including 51 miles estimated at $1,000,000 per mile or above. Even these figures were later revised.

Estimating Probable Earnings

Nor was Judah’s information about probable earnings a great deal more trustworthy than that relating to probable costs. There are various ways of estimating the earnings which a new railroad is likely to secure—yet all of them may give curious results when applied to territory which has never enjoyed the benefits of any rail transportation at all, as was substantially the case with California before the Civil War. In general, engineers in California had to reckon with the facts that the population of the state was small; that it had only three cities of importance—San Francisco, Sacramento, and Stockton; that there was but one important business, mining; and that a dense traffic could accordingly be expected only in the distant future after the development of the country served. As a practical expedient most engineers in California who desired elaborate data had some more or less careful count made of the business moving over their projected route by pack train, wagon train, stage, or boat, and then made the broad assumption that this same volume, or this volume increased by an assumed factor, would move over a railroad during its early years. Such was the nature of the estimate made by the incorporators of the Sacramento Valley Railroad in 1853,[17] of the Stockton and Copperopolis in 1862,[18] of the Placerville and Sacramento Valley Railroad in 1863,[19] and of the North Pacific Coast in 1873.[20] Judah had no greater facilities than other engineers of the time, and in his own estimates followed the prevailing custom.[21]

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Estimates of this nature were not accurate, and it was unreasonable to suppose that they should be accurate. Judah in 1862 put the probable gross receipts of the Central Pacific on the first 160 miles out of Sacramento at $4,654,240, or $29,089 per mile. Mr. Montague, who succeeded him, estimated the annual receipts as far as Dutch Flat at $27,209 per mile and for the whole road, as far as Nevada Territory, he named the figures of $5,456,050, or $34,100 per mile. These were very optimistic figures. As a matter of fact, the earnings of the Central Pacific never much exceeded $14,000 a mile, and during the early period, up to 1870, were as often below $10,000 a mile as they were above it. If it had not been for an operating ratio which in 1866 and 1867 touched the extraordinary figure of 23 per cent, and which did not reach 50 per cent until 1877, the owners of this road could scarcely have kept it out of receivers’ hands, so great was the miscalculation.

Organization of Company

We may assume, then, that Huntington and his friends went into the Central Pacific project as a speculation from which they hoped to retire with a profit derived largely from construction paid for out of government funds. Adopting this assumption, the next steps in advancing the enterprise may be briefly described. The meetings in Sacramento which have been mentioned took place in the winter of 1860-61. No progress in surveys could be made at that time, while the Sierra passes were covered with snow. In April, however, a meeting of subscribers to the stock of the Central Pacific Railroad was held in Sacramento, and on the 28th of June, 1861, a company was organized under the general law of the state, to be known as the Central Pacific Railroad of California. The capital of this corporation was set at $8,500,000, divided into shares of $100 each. The railroad contemplated was to run from Sacramento to the eastern boundary of California, over an estimated distance of 115 miles. Huntington, Hopkins, Stanford, and Crocker subscribed to 150 shares each, as did James Bailey and Theodore Judah. Charles Marsh took 50 shares, and other parties varying, but lesser amounts, to a total of 1,245 shares, or more than the $1,000 per mile required by the law. Leland Stanford, Charles Crocker, James Bailey, Theodore D. Judah, L. A. Booth, C. P. Huntington, Mark Hopkins, D. W. Strong, and Charles Marsh were the first directors.

Instrumental Survey Made

As soon as the season permitted, Judah was sent back into the mountains, and in October, 1861, the directors had before them the substance of his second report, this time based on an instrumental survey. Judah now thought that a railroad from Sacramento to the state line would cost $12,380,000, or $88,428 per mile. He did not push his surveys beyond the point at which he reached the Truckee River, but from his general knowledge of the country he estimated that the 451 miles between Lassen’s Meadows and Salt Lake could be built for $45,000 per mile, and that the whole road of 733 miles could be constructed for $41,415,000, or an average of $56,500 per mile.[22]

In every way this second report was a more careful piece of work than the one which had preceded it. The new route differed from that recommended in November, 1860, mainly in that it ran from Sacramento through Lincoln and Centralia instead of through Folsom, and also in the greater detail of its location. The principal characteristics of the line were two: (1) that it followed a nearly continuous ridge from Lincoln to the summit of the mountains, and (2) that east of the summit the road wound down the side of the mountain to Lake Truckee, following the Truckee River from the lake in the direction of Humbolt Sink, and entirely avoiding the second summit of the Sierras and the crossing of the Washoe Mountains.

This is substantially the line of the Central Pacific today. The maximum grade which Judah allowed himself was 105 feet to the mile. Judah did not at this time re-examine alternative routes via Georgetown and via Henness Pass, which he had considered and rejected the previous fall. Nor did he refer to the line via Beckwourth’s Pass, the present route of the Western Pacific, which he later admitted to be easier in grade, if longer in distance, or to the possibility of a route directly east from Folsom via Placerville around the south end of Lake Tahoe. It is probable, however, that these two last-named routes were familiar to him in a general way, as considerable quantities of freight consigned to the Nevada mines were already moving over them.

Emphasis should be laid upon Judah’s survey of October, 1861, because the continuance of the Sacramento capitalists in the enterprise depended upon its favorable outcome. After it was completed Huntington and his friends became, on the whole and except during certain intervals of weakness, inclined to see the project through even at the risk of their personal fortunes, provided reasonable government assistance could be secured. It was with this understanding that Judah went back to Washington in 1861 to procure the passage of needed legislation, and it was in this spirit that a formal beginning of construction upon the Central Pacific was made at Sacramento on January 8, 1863.