But there was trouble with the finances from the start. On August 4 Governor Sibley gave warning (why should it have been needed?) to the companies that he should hold them to a strict compliance with the obligations they had assumed. In particular he demanded that when they came to exchange their company bonds for the special state bonds they must secure to the state a prior lien on their properties and franchises. The companies balked at this, and by their attorneys applied to the supreme court of the state for a mandamus requiring the governor to issue them bonds without such priority. To obtain a construction of the law Governor Sibley waived objection to being governed by the court in a matter within his own official discretion. The mandamus issued. The text of the amendment of April 15 showed no requirement of priority, and the legislative journals show that efforts to inject such requirement had been vain. The state railroad bonds, issued to the companies as they severally completed their ten-mile stretches of grading, when placed upon the market did not go off like hot cakes. In form they were bonds of Minnesota acknowledging to owe and promising to pay dollars, signed, countersigned, and sealed like other bonds. The faith and credit of the state were pledged in the constitutional amendment to the payment of the interest and redemption of the principal. But the people understood that all this was mere form; the railroad companies, not the state, were to pay. The newspapers industriously circulated this idea. Sixty-seven members of the legislature who had voted for the issue of the bonds signed a published declaration that none of them would ever vote for a tax to pay them. When offered in the New York market they were not wanted, unless by speculative operators at a figure warranting risk. Governor Sibley’s personal representations in Wall Street did not increase confidence. He attributed his failure to factious interference of citizens and Republican newspapers.
Construction was resumed with the season of 1859 by contractors willing and able to take bonds in pay, but by midsummer this plan ceased to work. One firm in July was obliged to put up $30,000 to raise $8000 in cash. Railroad building ceased, and Minnesota sat in ashes. The surprise and exasperation of the people can easily be imagined. The companies had not followed the course expected of them to complete and put in operation successive ten-mile stretches, but preferred to push the grading for many such stretches and postpone track-laying and other work of completion. This aroused a suspicion that they did not intend to complete any sections, but to secure their $10,000 per mile, a sum far in excess of the actual cost, and quit. This suspicion was intensified by rumors that the grading had been confined to discontinuous earthwork alone, on the level prairie where it could be cheaply done. These rumors had but slight foundation, but they were accepted as true and to this day there are those who believe them. When the legislature of 1860 met (there was no session in 1859), Governor Sibley in his retiring message informed that body that the four companies had graded 239.36 miles, and had received 2275 one thousand-dollar special state bonds in exchange for an equal amount of company bonds.