It is remarkable that the same legislature which passed the 500,000 acre land grab also enacted one of the first and most stringent acts for railroad regulation. It is chapter 24 of the General Laws of 1871. It classified all freight and fixed a maximum rate for each of the five classes, according to distance. It determined a maximum passenger fare of five cents per mile. It declared all railroads in the state to be public highways, and fixed a penalty of $1000 for every denial of the right of any person to travel or ship goods at the prescribed rates. The law finally declared the rates therein established to be “maximum reasonable rates,” and any corporation demanding or receiving more should, on conviction, forfeit its charter.
The same legislature (1871) provided for the appointment by the governor of a state railroad commissioner to observe the behavior of the corporations under the new law. The first incumbent was General Alonzo J. Edgerton, who had given proof of ability by gallant military service and successful practice as an attorney. The three reports of this official are a pitiful record of the unequal struggle of the legislatures with their informally confederate creatures, the railroad corporations. To the regulative act of 1871 the corporations gave not the slightest heed, partly on the ground of their rights as quasi-persons, partly because in their territorial charters they had been authorized to make “reasonable charges” for services, and the legislature had not reserved the right to determine what charges were reasonable. If some of the roads somewhat abated their rates, it was not because of the legal mandate. Gross discriminations continued to be practiced. The evasion of taxes by the companies by various devices added to public exasperation. The commissioner was gratified to have exacted an increase of railroad taxes from $56,505.54 in 1871 to $106,876.35 in the year after, and regretted his inability to reach $250,000 more illegally withheld. One company, the Minnesota Central, sold its entire railroad property to the Milwaukee interest, retaining its unsold lands, and claimed to survive as a railroad company entitled to hold its lands free of taxation. For lack of authority to make personal inspections of company accounts and property the commissioner could not verify their reluctant reports, which, because not made on a prescribed uniform plan, were of slight practical service. In his report for 1873 he reminded the legislature that the companies, which had by the beginning of that year constructed 1900 miles of road, had received from the nation, state, and municipalities, grants and gifts to the value of $51,000,000, being about $27,000 per mile of completed road. The average necessary cost of construction and equipment, according to an expert computation, would have been a trifle over $23,000 to the mile. In that year the bonded debt of the roads amounted to $54,500,000. The aggregate of capital stock, $20,000,000, raised the “capitalization” of the roads to $74,500,000; nearly $48,000 per mile. Only nominal amounts of stock-proceeds had gone into construction and equipment, and there were wide margins between the face value of the bonds sold and the actual expenditures. In some instances, says the commissioner, not more than forty per cent. went into construction. In these years in which building was going on so swimmingly, operation was far from encouraging. The managers had been more concerned to increase mileage than to build substantially. Heavy grades, sharp curves, and slight construction were the result. The iron rails weighed for the most part but fifty pounds to the yard. Equipment corresponded, of course, with track and rail. The amount of business obtained at the fares and rates exacted was disappointingly small. After the grain crop was moved the amount of paying freight was meagre and backloading trifling in amount. Operating expenses rose to eighty per cent. of the gross earnings. The balance of earnings and expenses for the year 1873 was but $1,400,000 for all the Minnesota roads, a sum which must have seemed pitifully small in the eyes of the men whose money had built them. The reader need hardly be told that the Minnesota railroad corporations went down in the crash which came upon the country in 1873. Three defaulted in their interest, two borrowed money to pay it, two went into receivers’ hands, and others attempted assessments on their stockholders. In the next four years but eighty-seven miles of new road were built.