FEDERAL LAND GRANTS AND SUBSIDIES
Government Aid Deemed Necessary
Serviceable as local subsidies were, there is no question that the
most important aid granted to the Central Pacific Railroad came from
Congress.[70] It was perfectly well understood on the Pacific Coast
that no transcontinental railroad could be built without the assistance
of the national government. This was the attitude of the California
legislature in 1852, when it instructed its senators in Congress, and
requested its representatives, to vote for an act providing for the
construction of a railway from the Missouri or Mississippi River to
the Pacific Ocean, the cost of which should be borne by the general
government.[71] It was also the position of the Railroad Convention
of 1853, which sat at San Francisco under the presidency of Governor
Bigler, and of that better advertised gathering known as the Pacific
Railroad Convention of 1859, the resolutions of which concerning routes
and state bond issues in aid of railroads gave rise to so much heated
discussion.[72]
Judah’s Activities in Washington
Not only was it the attitude of the Pacific Coast that federal aid
was necessary, but, still more important, Judah was able to advise
his associates that Congress looked with favor upon the plan. He was
convinced of this of his own personal knowledge, for he had been in
Washington both on his own account and as a delegate of the Convention
of 1859, and had reported to his constituents that only the pressure of
more important matters arising out of the Civil War prevented favorable
action upon the bill which they had sent him east to support. Upon this
information, indeed, much of the plans of the Huntington-Stanford group
was based.
Late in 1861, the Central Pacific Railroad sent Mr. Judah to Washington
to solicit whatever aid the federal government might be disposed to
give. We have in Judah’s report upon this visit, dated September
1, 1862, a very full account of his negotiations. Judah sailed for
the Atlantic states on October 10, 1861. During the trip he busied
himself in talking with Mr. Sargent, Congressional representative from
California, who was his fellow passenger, and in writing up the results
of the survey which he had made during the summer of 1861. On his
arrival in New York he completed this report, caused 1,000 copies of it
to be printed, and distributed the copies widely where he thought they
would do most good. Late in November, after conference with Senator
McDougal, of California, chairman of the Senate Pacific Railroad
Committee, he proceeded to Washington.
From the time of his arrival there to the following July, Judah was
engaged in energetic lobbying. His brief previous visits to the
capitol had acquainted him with the routine of business there, as well
as with the personalities of a considerable number of Congressmen.
He was aided, also, by the fact that Sargent, at the opening of the
session, was assigned to the Pacific Railroad Committee of the House,
and by the further circumstance that, with questionable propriety,
he, Judah—interested in the outcome of the pending legislation as he
was—was made clerk of a subcommittee of the House Committee on Pacific
Railroads and secretary of the Senate Pacific Railroad Committee, with
the privilege of the floor of the Senate and of the House, and charge
of all the papers of the Senate committee.
From this position of advantage Judah was able to watch the progress
of the Pacific Railroad bill which Mr. Sargent presently introduced,
and to guide it to a certain extent. We know that it was Judah who
procured the assent of the Kansas company mentioned in the bill to a
change which required its road to meet the Union Pacific at the 100th
meridian instead of at the 102d meridian. It was Judah also who secured
the passage of the amendment retaining for the Central Pacific the
timber on mineral land. Mineral lands were excepted from the lands
granted to the Pacific railroads, and Judah was afraid lest this clause
should deprive the Central Pacific of all benefit from a large part of
the lands nominally given it. It was probably Judah, also, though this
is less certain, who secured a change in the terms of the government
subsidy increasing the amount and altering the distribution so that the
largest payments were made for the road across the Sierras and not for
the section east of the California state line, where the difficulties
of construction were less. These were important matters, and Judah
should not have been permitted to urge them from the vantage point of
an official position.[73]
It is perhaps natural to ask whether there is any evidence of improper
methods used by the Central Pacific to obtain the passage of the
Pacific Railroad bill beyond that just referred to. The weight of the
record is in the negative. According to Stanford, Judah had $100,000
in Central Pacific stock at his disposal to cover his expenses in the
East. This stock was not worth much, and Judah did not use all of it.
Besides this, Judah made an agreement with Hon. S. A. McDougal and
Hon. T. G. Phelps, according to which he assigned to certain parties
representing the interests of the San Francisco and San José Railroad,
the rights, grants, and franchises of the Central Pacific for the
portion of road between Sacramento and San Francisco. This looks like
an attempt to quiet opposition in California, from which some of the
California delegation may have profited. There is no further evidence,
however, of any improper bargaining in connection with the passage
of the bill, and it is probable that no money was corruptly used. If
there had been, Campbell and Sargent would hardly have been naïve
enough to send a letter to Judah in behalf of sixty-three senators and
representatives, thanking him for his valuable assistance in aiding the
passage of the Pacific Railroad bill.
The Pacific Railroad Act
Let us now consider the terms of the federal legislation of 1862 and
1864. The Pacific Railroad Act in its first form was signed on July 1,
1862,[74] and accepted by the company by letter dated November 1.[75]
Bancroft says that the company was aware that the assistance offered
in this act was not sufficient. The subsidy alone would not build the
road, and capitalists would not subscribe on the security offered.
However this may be, Judah arranged for the purchase of locomotives,
cars, and railroad iron before he left the East, and took measures
also to secure early action by the President on the question of gauge,
and on the establishment of the western base of the Sierra Nevada
Mountains.[76]
In December, after Judah’s departure, a bill was introduced to amend
the Act of July, 1862. This measure passed the Senate but was not acted
upon by the House. A year and a half later, however, a new act was
passed by both houses, and became law on the 2d of July, 1864, amending
the Act of 1862, and materially increasing the aid which the Central
Pacific was to enjoy.[77] To all intents and purposes the Acts of 1862
and 1864 were one piece of legislation, and will be treated as such in
the analysis which follows.[78]
Grant of Right-of-Way
What now were the advantages secured to the Central Pacific by the
Acts of 1862 and 1864, and what were the obligations placed upon that
company? We will take up first the advantages, not necessarily in order
of importance.
The first concession which the Central Pacific received under this
legislation was the authority to complete its line from Sacramento to
the eastern boundary of the state of California and thence eastward 150
miles, provided that the Union Pacific had not by that time built west
to a connection with it. The company was also authorized to build west
and south from Sacramento to San Francisco, or to a point nearby. The
Act of 1862 had contained no limitation on construction eastward beyond
the reference to a Union Pacific connection. Huntington said later that
the restriction of 150 miles should not have been inserted in 1864. He
added, however:
I said to Mr. Union Pacific when I saw it, I would take that out
as soon as I wanted it out. In 1866 I went to Washington.... I saw
probably every member of Congress and the Senate except a few men who
were interested in the Union Pacific, or had a direct interest in the
Credit Mobilier.... We passed it through the Senate; I think we got
thirty-four against eight opposed to it. I took it over to the House
and old Thad Stevens attended to the bill for me, and it went through
the House with a vote, I think, of ninety-four for the bill and
thirty-three against it.[79]
Judah said of the clause as it stood in 1862, that it virtually
conceded to the company the right to construct at least one-half of the
line of the Pacific Railroad. He was positive that it would be found
advisable to undertake construction for about 300 miles easterly from
the state line of California.[80]
In addition to the authority to build, the Central Pacific was given a
free right-of-way 400 feet wide across all government lands, besides
necessary grounds for stations, machine shops, etc., with the privilege
of taking earth, stone, timber, and other materials from the public
lands adjacent to the line of said road for purposes of construction.
Land Grant
The company was also granted ten alternate sections per mile of public
land on each side of the railroad on the line thereof, and within the
limits of 20 miles on each side of the road. The government undertook
to extinguish Indian titles, but did not include in its grant mineral
lands except coal and iron lands, or lands sold, reserved, or otherwise
disposed of by the United States, or lands to which a pre-emption,
homestead, swamp-land, or other lawful claim might have attached at the
time the line of the road should have been definitely fixed. The grant
was thus not of a specified number of acres, and no compensation was
provided to the company for lands which might prove to be occupied;
but in order to prevent speculation and in a measure to safeguard the
company’s interests, it was provided that at any time after the passage
of the act, and before July 1, 1865, without waiting for definite
location of the road, the company might designate the general route and
file a map, whereupon the Secretary of the Interior should cause the
lands within 25 miles of said route to be withdrawn from pre-emption,
private entry, and sale. When any portion of the route should be
finally located, the Secretary of the Interior should cause the granted
lands to be surveyed and set off so far as might be necessary. As a
matter of fact, Judah filed his map and general designation before he
left Washington in 1862. Lands were to be conveyed to the company on
completion of stretches of 20 consecutive miles. A special clause,
never enforced, provided that all granted lands not sold or disposed
of by the company within three years after the entire road should have
been completed, should be subject to settlement and pre-emption like
other lands, at a price not exceeding $1.25 per acre to be paid to the
company.
Government Subsidy
In the way of a subsidy, Congress ordered the Secretary of the Treasury
to issue to the Central Pacific, United States 6 per cent 30-year
bonds, in amounts varying from $16,000 to $48,000 per mile. The
subsidy of $48,000 was granted for the 150 miles east of the western
base of the Sierra Nevada Mountains, this being the most mountainous
and difficult portion of the road. East of this section of line the
Central Pacific bond subsidy was to be $32,000 per mile, but west of
it, it was to be only $16,000 per mile. It was the understanding of the
company that these bonds were not redeemable by the government before
maturity, and that until that time the interest charges were to be
taken care of by the government. This last point was later the subject
of litigation in which the company’s contention was sustained.[81]
The subsidy offered by the government inured to the company on the
completion of sections of 20 consecutive miles over the greater part
of the road, except that bonds might be issued up to two-thirds of the
value of uncompleted work when the chief engineer of the company should
certify that a certain proportion of the work required to prepare the
road for its superstructure had been done.
Company’s Obligations
In return for these very considerable privileges, the demands made
upon the Central Pacific do not seem to have been excessive. First and
foremost, the company was required to build its road at the rate of
25 miles each year after filing its assent to the provisions of the
act, and to reach the state line within four years. The track upon
the entire line was to be of a uniform width, to be determined by the
President of the United States, so that, when completed, cars could be
run from the Missouri River to the Pacific Coast. The grades and curves
were not to exceed the maximum grades and curves of the Baltimore and
Ohio Railroad, and the whole line of railroad and branches, Union
Pacific and Central Pacific included, was to be operated and used for
all purposes of communication, travel, and transportation, so far
as the public and the government were concerned, as one connected,
continuous line.
In the second place, demand was made that the company should pay the
principal of the government bonds at maturity, and should meanwhile
make certain payments on account of principal and interest. The
following section taken from the Act of 1862 shows that there is no
basis for the contention sometimes made that the government originally
expected no repayment of its loan.
_And be it further enacted_ that the grants aforesaid are made upon
condition that said Company shall pay said bonds at maturity, and
shall keep said railroad and telegraph line in repair and use, and
shall at all times transmit dispatches over said telegraph line, and
transport mail, troops and munitions of war, supplies and public
stores upon said railroad for the Government, whenever required to do
so by any department thereof, and that the department shall at all
times have the preference in the use of the same for all the purposes
aforesaid (at fair and reasonable rates of compensation, not to exceed
the amounts paid by private parties for the same kind of service),
and all compensation for services rendered for the Government shall
be applied to the payment of said bonds and interest until the whole
amount is fully paid. Said Company may also pay the United States,
wholly or in part, in the same or other bonds, treasury notes, or
other evidences of debt against the United States, to be allowed at
par, and after said road is completed, until said bonds and interest
are paid, at least five per-centum of the net earnings of said road
shall also be annually applied to the payment hereof.[82]
In 1864 this section was changed by requiring only one-half of the
compensation for services rendered to the government to be applied to
the payment of bonds issued by the government in aid of construction,
but the declaration that the bonds should be paid was not altered. Not
only was this true, but the government demanded security for repayment.
In 1862 it declared that the issue of said bonds and delivery to the
company should _ipso facto_ constitute a first mortgage on the whole
line of the railroad and telegraph, together with the rolling stock,
fixtures, and property of every kind and description. In 1864 the
lien of the United States bonds was subordinated to that of a second
mortgage, but the idea of some security was preserved.
Third, the government reserved the right to reduce the rates of fare
upon the Central Pacific, as well as upon the other railroads provided
for in the Act of 1862, as unreasonable, when net earnings should
exceed 10 per cent upon cost, exclusive of the 5 per cent to be paid to
the United States.
Fourth and last, an annual report was asked for, which was to set forth
earnings, expenses, indebtedness, the amount of stock subscribed, a
description of the lines of road surveyed, and the names and residences
of the stockholders.
Amounts Granted
It is evident that these demands were very moderate indeed. Under
the provisions of the Acts of 1862 and 1864, the Central Pacific and
Western Pacific railroads received $27,855,680 in government bonds,
and 10,081,945.18 acres in public lands (up to June 30, 1920). From
the bonds the companies realized $20,735,000, or $24,092 per mile.
From the lands, the Central Pacific received, up to June 30, 1919, the
approximate sum of $17,430,000, about equally divided between receipts
from sales and receipts from other sources, including leases, stumpage,
timber, and miscellaneous. The expenses of the land department may be
estimated at $7,000,000, and the net return therefore was $10,000,000.
The yield of the bond subsidy not only exceeded the returns from the
granted lands, but the subsidy was ten times the aid received from
the state and counties put together, and of course many times the
contribution of the partners themselves. What was almost as important,
the grant of this federal assistance at once raised the company’s
credit, so that it could sell its own first mortgage bonds. The sale
of company bonds yielded $20,750,000, or a total of $41,485,000, for
government and company bonds together, directly attributable to federal
aid, and almost immediately available.
From the point of view of serviceability, the land grant referred
to in the Pacific Railroad legislation was much less important than
the subsidy in bonds. Government lands along the line of the Central
Pacific had no value until the road was completed, nor even then
until the slow process of settlement had filled up in a measure the
territory through which the railroad ran. Nor was the amount of the
grant so definite as to make it a satisfactory basis for credit,
although land grant bonds were sold in and after 1870. The theoretical
grant was twenty sections, of 12,800 acres to the mile. The grant did
not, however, follow the sinuosities in the track, so that in the
mountain sections it was quite possible for two miles of railroad to be
constructed and yet only one mile of land grant to be obtained.
Not only was this true, but the exceptions provided for in the
legislation were important. The records show that the saving clauses
in the statutes, coupled with the inaccessibility of some of the lands
within the nominal grants, and the differences between the actual
mileage of the railroad and the mileage upon which land was awarded,
reduced the area passing to the railroad by many hundred thousand
acres. In California the Central Pacific was entitled to a nominal
grant of 1,843,000 acres, at the rate of twenty sections per mile
for a mileage of 144 miles. At least 887,000 acres of this amount
were known to be lost to the grant as early as 1895, while the final
adjustment will scarcely secure for the company more than half the
amount originally expected. In Nevada the company’s losses approximated
one-ninth and in Utah one-quarter of the nominal grant. The losses on
the California and Oregon up to 1897 were 962,703 acres out of a total
grant of 3,266,729 acres, but in this case the law permitted the
company to select additional lands within “indemnity” limits.
Delays in Transferring Title
How far the government lands failed in providing the Central
Pacific with funds with which to build its road, however, can best
be understood when attention is paid to the delays incident to the
transfer of title. The general procedure in transferring title from the
government to the company was as follows:
Under the Act of 1864, the Central Pacific was entitled to receive its
lands upon completion of stretches of 20 consecutive miles in a fashion
acceptable to commissioners appointed by the President of the United
States. Upon acceptance by the government, the sections of land to
which the company was entitled were listed and mapped and sent to the
United States Land Office in the land district in which the land was
located. The lists were examined there by registrars and receivers, and
when declared cleared, the railroad company paid for the surveying,
selecting, and conveying. Upon the payment of the fees, the lists were
certified by the Surveyor-General of the state, and forwarded to the
General Land Office at Washington for further examination. If found
correct by the office in Washington, patents were issued. If there was
doubt, the questionable cases were held for further examination.
In all this procedure delays were frequent. The initiative in the
process of conveyance of land lay with the railroad company and not
with the government, so that failure to file lists with the local land
office or failure to pay into the United States Treasury the cost of
surveys of listed lands prevented progress in the distribution of the
grant. On the other hand, the slowness of the government in making
surveys hindered the railroad in its selections. Still another reason
for delay was the fact that within the mineral belt the Commissioner
of the General Land Office required the railroad to file affidavits
defining the mineral or non-mineral character of lands by 40-acre
tracts. This requirement arrested the selection and patenting of lands,
because the government survey did not subdivide tracts of 640 acres,
and there was no way of identifying any particular sixteenth section
of a tract. There were delays also in determining the title to lands
claimed by homesteaders and pre-emptors, and there were delays due to
the faulty organization of the Federal Land Office.
Land Office Responsible for Delays
Opponents of the Central Pacific freely charged that the company
refrained from patenting its land in order to avoid the payment of
taxes. This the company denied, pointing to the fact that the lands
listed to June 1, 1887, exceeded the lands patented by 622,612.54
acres, and that the cash deposited with the United States Land
Department to cover the cost of surveys exceeds the amount charged
against the company up to January 15, 1886, by $28,771.92.[83] Mr.
Stanford declared that it was the policy of the company to select its
lands and present lists as promptly as possible, in order that lands
might be disposed of to settlers, and it does appear that it was to
the advantage of the Central Pacific to secure title as quickly as it
could in the mineral belts, because the company was protected in its
possession of land, which later turned out to contain minerals, if at
the time of patenting no minerals had been discovered.
The evidence is clear enough that the delay in the patenting of lands
to the Central Pacific Railroad was due mainly to the inadequacy of
the staff in the General Land Office at Washington and not to the
policies of the railroad itself. This is shown by the wide disparity
between listings and patents. The excess of lands selected over lands
patented averaged 57,000 acres during the five years ending June 30,
1869. During the next five years the average excess was 64,000 acres,
and during the five years ending June 30, 1886, it rose to 248,000. In
1887, as has been pointed out, there was a difference of 622,612.54
acres between the amount of acres which had been listed and those
which had been passed to patent. Between 1887 and 1897, there was no
year in which the Central Pacific had less than 300,000 acres of land
listed and selected and the selections on file in the General Land
Office for land in California alone. Yet it is not so important to fix
responsibility in this matter, as to observe that the construction
of the Central Pacific was not aided to any material degree by the
lands offered to it under the legislation of 1862 and 1864. Up to
the beginning of 1870, the company had received only four patents,
totaling 144,386.63 acres,[84] which if sold at $2.50 per acre would
have brought it $360,966.57. As a matter of fact, less than this was
disposed of in the early years, and what was sold was on terms, not for
cash in hand. In the later period, land-grant bonds with a lien on the
land grant were sold to investors. The first issue of such bonds was,
however, in 1871.
The bearing of these conditions on the land-grant policy of the United
States is very plain. Congress was legislating in order to get a
transcontinental railroad built. Every form of assistance which could
be immediately transmuted into funds facilitated construction to the
full value of those funds. In contrast with this, assistance which
could be realized on only after a lapse of years, served not as an aid
to construction, but as a reward to promoters for having taken risks.
While to some extent the land grant to the Central Pacific may have
aided the sale of Central Pacific first mortgage bonds, in the main its
effect was to give a grossly excessive and unnecessary profit to a
few persons who held most of the stock of the company, without having
invested any considerable capital of their own. Such a policy needs
only to be understood to be condemned.
Fixing Western Base of Sierras
Both the subsidy and the land-grant clauses of the Acts of 1862
and 1864 were to receive interpretation by the courts. The subsidy
provisions will be discussed again in a later chapter, so that the
provisions designated to secure repayment of the government loan need
not be considered at this time. Mention may be made, however, of
President Lincoln’s action in fixing the western base of the Sierras at
the point where the line of the Central Pacific crossed Arcade Creek
in the Sacramento Valley, a location 7 miles east of Sacramento, in a
country which a casual observer would not be likely to call mountainous.
It is not at first sight evident why this point was chosen. The
junction of Arcade Creek and the Central Pacific Railroad happens to be
at about the edge of the alluvial plain of the Sacramento River, and so
is marked by a slight rising of the ground. The rise is not, however,
great. The beginning of the Sierra granite is at Rocklin, 22 miles
east of Sacramento, and this spot rather than the one selected has the
better right to be considered the real beginning of the mountains, so
far as any single point can be fixed. As a matter of fact, the advisers
of the President, who were in this instance the political authorities
of the state of California, made their recommendation on the strength
of what they conceived to be the purpose of the federal act rather
than on scientific grounds. Mr. Whitney, state geologist, told the
government that the intent of Congress was clearly to give a subsidy
of $48,000 per mile over the most mountainous section of the road. If,
therefore, he said, a distance of 150 miles measured east from the
point in the Sacramento Valley where the ascent commenced would clear
the most difficult and mountainous portion of the Sierra Nevadas and
reach the valley on the eastern slope, then it seemed reasonable that
the base of the Sierra Nevadas should be taken as beginning at that
point. He recommended the place where the line of the Central Pacific
crossed Arcade Creek as such a point.
The same place was selected by the Surveyor-General of the state of
California, on the principle that the two extremities of the 150
miles upon which the maximum subsidy was to be given should rest upon
corresponding grades, the one to the west, the other to the east of the
mountains. These two recommendations seem to have been controlling,
although the United States Surveyor-General for California suggested a
location further east, where the ascending grade of the Sierras became
plainly perceptible to the naked eye.[85] Since this interpretation of
the act increased the bond subsidy which the Central Pacific was to
receive, the company naturally made no objection.
Conditions of Land Grant
In regard to the land grant, the Land Office was called on for a great
many decisions after 1864, mostly in interpretation of the exemptions
carried in the federal legislation. The cases were not all brought by
or against the Central Pacific, but they nevertheless affected its
rights.
In general, the grant of land to the Central Pacific was held to be
an absolute unconditional present grant. The route not being at the
time determined, the grant was in the nature of a float, and the title
did not attach to any specific sections until they were capable of
identification. When once identified, however, the title attached to
specific sections as of the date of the grant, except in the case of
sections which were specifically reserved.[86] While the grant was
a present grant, it conveyed only land which was public land, that
is to say, portions of the public domain which were open to sale or
other disposition under general laws at the time the grant was made.
This definition did not include lands which became public subsequent
to the date of the grant, or lands reserved by competent authority for
any purpose or in any manner, whether or not the reservations were
mentioned in the granting act.[87]
It followed from the theory that the land grant was a present grant,
that a valid homestead entry existing at the date of the passage of
the Land Grant Act excepted the land covered from the area granted to
the railroad even though the entry were canceled prior to the definite
location of the railroad line.[88] The same effect was produced by an
uncanceled and unexpired pre-emption claim, or by any other valid claim
or reservation which was alive at the date of approval of the granting
act. In cases like these the cancellation of the claim restored the
land in question to the public domain, but did not operate to replace
it within the railroad grant.[89]
Yet, although the theory that the grant took effect as of the date of
the granting act was strictly applied against the railroad, the settler
enjoyed the protection of a milder rule laid down in the statute
itself. Section 7 of the Act of 1862 required the railroad company
to designate the general route of the road within a stated time, and
instructed the Secretary of the Interior thereupon to withdraw lands
within 15 miles (changed to 25 miles in 1864) of the route designated
from pre-emption, private entry, and sale; and Section 3 provided that
the land grant to the railroad should not include lands to which a
pre-emption or homestead claim might have attached at the time the
line of road was definitely fixed. Pre-emption or homestead claims
might therefore be established after the passage of the land-grant
statute, provided that this was done before the lands were withdrawn
from settlement.[90] Indeed, the Secretary of the Interior ruled that
settlement and occupation exempted land from the grant even though
the settler failed formally to assert his claim.[91] After the lands
embraced in the grant were withdrawn from pre-emption, private entry,
and sale, a settler could not secure acreage by subsequent occupation,
although he settled prior to the time when the Central Pacific acquired
actual title.
Losses Due to Spanish and Mexican Grants
A class of cases distinct from those of ordinary settlers arose in
connection with Spanish and Mexican grants. It appeared that when
California became a state, the Spanish and Mexican grants were both
indefinite and unrecorded, so that it was not known just what lands
were public domain and what lands were private. On March 3, 1861,
Congress passed an act creating a Board of Land Commissioners in
California, and provided that all persons claiming land in California
by virtue of any right or title derived from either the Spanish or
Mexican governments, should present the same to the board within two
years for adjudication, with privilege of appeal to the United States
courts.[92]
Following this act, many claims were presented. The United States
Supreme Court held that land within the boundaries of alleged Spanish
or Mexican lands which were _sub judice_ at the time the Secretary of
the Interior ordered the withdrawal of lands along the route of the
road, were not embraced in the land granted to the company. There were
many sections of California lands which were _sub judice_ on August
2, 1862, and this fact caused serious loss to the Central Pacific in
its grant in California. In addition to losses from the cause just
mentioned, the company suffered from the indefiniteness of the Spanish
and Mexican grants, and from the delay in determining the extent and
boundaries of the Spanish and Mexican claims.
Policy Toward Settlers
It was the policy of the company to invite settlers upon its lands
before the lands were patented, and then to select and apply for
patents on lands which settlers desired to buy.[93] Sometimes, indeed,
the company leased unpatented land to cattlemen at low rates, in spite
of its lack of title. Actual transfers were made by bargain and sale
deed warranting to the purchaser the entire title acquired by the
company from the federal government. The prices ranged from $2.50 to
$20 per acre, but little was sold at a price above $5. Usually land
covered with tall timber was held at $5, and that covered with pine at
$10. The actual cost to the purchaser was slightly greater, because
he was compelled to pay for the acknowledgment of three signatures to
the deed, and for the recording, amounting in all to perhaps $5.50
or $6. On the other hand, the company granted as much as five years’
credit, and through the practice of selling land seekers’ tickets
from San Francisco, Sacramento, San José, Lathrop, and Los Angeles to
points along the line of railroad, which were accepted as cash on the
purchaser’s first payment for his land, it practically furnished free
transportation for California terminals to the sections bought. This
last practice, at least, was in force on the Southern Pacific in 1880,
and presumably on the Central Pacific also.
All in all, the Central Pacific does not seem to have attempted to
withhold its lands from the market, and there is no evidence that the
settlement of the coast was retarded by the inability of prospective
settlers to get land. The price which the Central Pacific could exact
was held in check by the retention by the government of alternate
sections, while the large sums which the company spent for advertising
redounded to the advantage of the government as well as to that of the
railroad. To the general statement that the Central Pacific was not
unreasonably grasping in its capacity as landed proprietor, exception
must be made of its treatment of timber lands in the North, of which
mention will be made elsewhere.
The land-grant policy of the government was a mistake, but it was a
mistake because it unnecessarily enriched a few men by securing to them
an extravagant share in the unearned increment due to the development
of the state of California, without aiding them materially in the task
which the government most desired them to perform—not because the
grantees endeavored to build up landed estates or to discourage the
growth of population. Compared with the land grant, the bond subsidy
was distinctly the better policy.