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Michigan Railroads and Railroad Companies
By Graydon Meints
Michigan State University PressCopyright © 1992 Graydon Meints
All rights reserved.
INTRODUCTION TO MICHIGAN RAILROADS
A railroad is a business. And the purpose of any business is to make a profit for its owners. A railroad employs land, people, technology, and money to accomplish its purpose. Of all of these tools, money is the most critical. Without the ability to raise capital the railroad enterprise cannot be started. Without the ability to arrange additional financing the company will fail to grow or remain competitive. Without a continuing flow of profits the railroad company will ultimately fail. The history of railroading, and of each of its constituent companies, can be viewed from many perspectives. But underlying each of them is the need to consider it in terms of its first and most fundamental basis—money.
FROM THE BEGINNING TO THE SALE OF THE STATE'S RAILROADS
Late in July 1830 Lewis Cass, Governor of the Territory of Michigan, was busy wrapping up his affairs in Michigan and preparing to move to Washington to take the office of Secretary of War in President Jackson's cabinet. On July 31, he signed legislation granting a charter for "the President, Directors, and Company of the Pontiac and Detroit Railway Company." This charter, the first in Michigan and one of the first in the Northwest Territory, came at a time when the railroad was a novel and untried means of transport. The Baltimore & Ohio had begun operations in May 1830 with a horse pulling carriages on its thirteen-mile line. Construction had begun on the Mohawk & Schenectady and on the South Carolina, but there was not much else except the charters that several states and territories had granted. The Pontiac & Detroit was planned by five Pontiac businessmen—several of them also involved with the Pontiac Company, the townsite company promoting Pontiac—to link Pontiac with Detroit. Capital was authorized at $100,000, or about $5,000 per mile of road to be built. The charter allowed the company use of twenty feet of the Saginaw Road. In exchange, the company was to be "constructed as to admit of the easy and safe passage of wagons, carts, sleds, and trams, at the points where public and private roads intersect said Saginaw Road, and when new highways or private roads shall be built."
Nearly two years later, on June 29, 1832, Michigan's second railroad charter was granted to the Detroit & St. Joseph Railroad. This far more ambitious undertaking was projected to cross the state from Detroit to the mouth of the St. Joseph River, serving as a rail equivalent to the Erie Canal. Expected to be about two hundred miles long, the capital authorized was $1,500,000-$7,500 a mile. Such a sum was well above the means of any of the organizers individually or even all of them joined as a partnership. The list of commissioners to sell the stock was impressive—John R. Williams, Charles Larned, Eurotas P. Hastings, John Allen of Ann Arbor, Samuel W. Dexter, Isaac E. Crary, Caleb Eldred, and Calvin Brittain were among them—and probably many were picked for their name recognition. But subscriptions to the stock sold slowly and, despite minimal down payment requirements, little cash was raised. The promoters took to petitioning the federal government for assistance of any sort. With Lewis Cass in Washington they must have had hopes of a supportive voice, but help was scanty, and none of it in cash. The War Department finally did authorize Col. John M. Berrien to go out in 1834 and make harbor surveys and, while in Michigan, to make a survey for the D&SJ line.
By the end of Michigan's territorial status in 1837, the Legislative Council and the newly formed state legislature had granted charters for nineteen more railroads. A number of these were very local projects, such as the Monroe & Ann Arbor, the Clinton & Adrian, the St. Clair & Romeo, the Romeo & Mt. Clemens, and the Kalamazoo & Lake Michigan. Others were to connect a town with a port. The Constantine & Niles was to be a shortcut for the circuitous St. Joseph River and could build either a railroad or a canal. Others were more ambitious. The River Raisin & Grand River was proposed to build across the state. The Erie & Kalamazoo line was to be built from Port Lawrence (now downtown Toledo and then considered to be in Michigan) to the Kalamazoo River.
Of the twenty-one charters granted before 1837, only five ever built any rail line: the Erie & Kalamazoo from Toledo to Adrian, the Detroit & Pontiac from Detroit to Pontiac, the Shelby & Detroit from Shelby (now Utica) to Detroit, the Palmyra & Jacksonburgh from Palmyra to Tecumseh, and the River Raisin & Lake Erie in Monroe. The Detroit & St. Joseph did grade some of its line between Detroit and Ypsilanti. A few others did little spots of grading. Most made no progress. Each one experienced difficulty in raising capital. There simply were not investment funds in the territory adequate to undertake projects of this size.
In 1830, the population of Michigan was 32,538. By 1834, it was almost tripled at 87,278. The number doubled again by the 1837 census to 174,619. Many of the newcomers were affluent. Their money went first to buying land and building a homestead. The remainder, for many, went into land speculation; government land was offered at $1.25 an acre and bought for resale at a profit. The best that many railroad companies could do was to raise enough to pay for a survey of the line and with that go out and beat the drum to raise start-up capital. It took the Detroit & St. Joseph, which had some of the strongest and most prestigious backing, nearly four years to get together enough money to begin grading a line on land that was most often donated.
The territorial legislature was able to extend one bit of assistance to a few of the fledgling companies. In March 1835, it amended the charters of the Detroit & Pontiac and the Erie & Kalamazoo to permit them to establish banks at Pontiac and Adrian, respectively. It was hoped that this activity would provide financing for railroad construction and at the same time provide needed banking services. In August 1835 the charter of the Detroit & St. Joseph was amended to allow it to begin a bank in Ypsilanti. The charters granted at the same time to the Macomb & Saginaw and the River Raisin & Grand River included permission to establish banks. For the Macomb & Saginaw, it never provided any help. The River Raisin & Grand River banking operation took on a completely undesireable character and did nothing to further the railroad.
Some grading began in 1835 on the Detroit & St. Joseph and the Erie & Kalamazoo. Of these, the E&K was the first to complete a part of its line. It began operations between Toledo and Adrian on November 2, 1836. The first train was several stagecoach-like carriages pulled by horses. It was not until June 1837 that the E&K received its first steam locomotive. The Erie & Kalamazoo proudly claimed itself as the first railroad operating west of the Allegheny Mountains, the first in the states of Michigan and Ohio, and the first to operate a steam locomotive west of the Alleghenies.
The Detroit & Pontiac had a harder time of it than did the E&K. It began grading in 1836, and took until July 31,1838, to build its line between Gratiot Avenue and Royal Oak. A year later it was opened to Birmingham. Four more years were needed to complete the road from Birmingham to Pontiac. It took the operations of its bank in Pontiac and a state loan of $100,000 to get this done. If construction was slow, so too was the service, if the accounts of some are to be believed
In October 1835, the voters of Michigan ratified a constitution forming a state and on November 3, Stevens T. Mason was sworn in as Michigan's first state governor. Up to this time Michiganians had been frequent and persistent petitioners of the federal government for assistance—of any sort—for transportation projects. Before 1830 they had started asking for help in surveying and building a canal across the state. This was supplemented by requests for new roads. After 1830, requests began for help to build, or at least survey, a railroad across the state. Much of the impetus came from New York state's Erie Canal. This was a familiar route of travel and was used by many who came to Michigan. Washington had given small amounts of money or grants of land to support a few transportation projects in the Northwest Territory, mostly for roads and canals. In 1832, President Jackson vetoed the Maysville Road Bill but continued to support appropriations for the National Road. Michiganians continued their petitioning, citing national importance rather than local "internal" improvement in their reasoning.
Then a small windfall appeared. As a state, Michigan would be entitled to share in the distribution of the national surplus—payments of which were to begin in 1837. Although there were many motivations behind the impetus for statehood, the prospect of money coupled with the additional pressure that could be exerted by elected congressional representatives, gave support to the movement. While the push for statehood was growing, another idea took hold of the popular imagination. "Internal improvements"—an early day name for a transportation infrastructure—came to the forefront in Ohio, Indiana, and Illinois. Seaboard states had been funding canal projects since about 1825. Ohio had been building a canal system over the preceding ten years. With the anticipated federal surplus, internal improvements programs took on renewed vigor. Indiana had passed a $10,000,000 program in January 1836. A similar program had become law in Illinois in January 1837. Both Indiana and Illinois had approved substantial bond issues to finance their projects. Governor Mason touted such a program for Michigan. In his 1836 message to the Legislature, he supported the entire concept and encouraged the lawmakers to follow the guidance of the 1835 state constitution, which directed that "Internal Improvements shall be encouraged by the government of the state." He encouraged the Legislature to decide which works were to be done and to arrange funding for them. Also, he proposed that a loan be negotiated so the state could invest in desirable works to assist their completion. By January 1837, several years of debate on the subject of internal improvements had been held. In his 1837 message to the Legislature, Governor Mason urged measures to authorize a $5,000,000 loan and legislation for the state itself to undertake a program of internal improvements. In March the legislature finished its work: authorization for a $5,000,000 loan, and a laundry list of internal improvement projects. Governor Mason named Justus Burdick of Kalamazoo, David C. McKinstry of Detroit, Hart L. Stewart of Mottville, John M. Barbour of Bertrand, Gardner D. Williams of Saginaw, Levi S. Humphrey of Monroe, and James B. Hunt of Pontiac (who replaced Daniel LeRoy of Pontiac, who was defeated in the confirmation voting) as commissioners in charge of the work.
Engraving of Michigan's first operating railroad, the Erie and Kalamazoo, circa 1838.
The results had something for everyone. Three railroads were authorized: a Southern line from near Monroe to New Buffalo, a Central line from Detroit to the mouth of the St. Joseph River, and a Northern line from either Palmer (now St. Clair) or the mouth of the Black River (Port Huron) to either the Grand River in Kent County or Lake Michigan in Ottawa County. A canal or canal-railroad combination from Mt. Clemens on the Clinton River to the mouth of the Kalamazoo River, and a canal connecting the Saginaw River with either the Maple or the Grand River were stipulated. Improvements to navigation on the St. Joseph, Kalamazoo, and Grand Rivers were included. The board was authorized to purchase the work done by the Detroit & St. Joseph Railroad and the charter of the Havre Branch Railroad—which was authorized to build from Havre on Lake Erie at the Ohio border to a connection with any other railroad. Preliminary funding for surveys was provided. Two additional acts authorized the purchase of the Detroit & Pontiac Railroad and a survey for a canal around the falls at Sault Ste. Marie.
With the federal surplus distribution as start-up money for the public works, Governor Mason sailed for New York, and into trouble. His efforts to negotiate the sale of the state's bonds went badly. The Panic of 1837 was beginning to move over eastern banking; it was not possible to sell the bonds in the United States. After several trips to New York, and several changes in the enabling legislation, Mason was able to sell a fraction of the bonds in Detroit and in New York. But it was not until June 1838 that the Morris Canal & Banking Company agreed to handle the entire issue. The bank began paying the promised installments and kept up through the January 1, 1840 installment, and then it stopped paying. The state received a little over $2,000,000 in cash for its $5,000,000 issue. Although funds were slow in arriving, the commissioners pressed ahead with work on the different projects. On April 22, 1837, the franchise and property of the Detroit & St. Joseph was purchased for $139,802. The next, and much more difficult, step was to decide the specific routes for the three railroad lines. Work was pushed to Ann Arbor on the route which the D&SJ had chosen. A survey of the Southern route was made, hearings were held at Jonesville, more surveys were made to satisfy the complainers, and more hearings were held. Construction began at Monroe, but progress was slow and the continuing dissatisfaction over the route made the commissioners cautious. Of the several routes possible for the Northern line, the board finally chose Port Huron over St. Clair as the eastern terminus.
Regular service on the Central road began on February 3, 1838, between Detroit and Ypsilanti. By the end of November 1838, the board had spent nearly $1,000,000 on all of its works. The $5,000,000 loan did not generate funds quickly enough to provide payments to contractors. The excitement that launched the internal improvements program soon changed to disgust. Allegations of fraud and mismanagement were heard. Citizens were unhappy if the railroad bypassed their community. To top it all the economic problems of the Panic of 1837 now extended to Michigan. Hard money became scarce, government land sales dropped, and Michigan's system of "free banking"—the "wild cat" banks—proved disastrous. The internal improvements programs in Indiana and Illinois were in no better shape, and possibly in worse. But the state kept working at it. The Central line was finished to Ann Arbor on October 17, 1839, and to Jackson on December 29, 1841. The Southern route was completed as far as Adrian on November 23, 1840.
In 1840, the installments on the internal improvement bonds stopped. The state resorted to notes payable from future installments to keep the work going. Script was issued as a temporary measure. Finally, the state issued warrants based on the sale of a five hundred thousand acre land grant received in 1841. Construction took all the money that could be raised. The state was no longer able to pay the interest as it came due. With no other means of raising money, the state finally admitted it could go no farther and stopped contracting for new work. In 1843, the Legislature stipulated that the Central line was to be built only to Kalamazoo and the Southern was to end at Hillsdale.
The Southern line was completed to Hillsdale on September 25, 1843. In June 1844, the state purchased the Palmyra & Jacksonburgh and made it into the Tecumseh branch of the Southern. The Central was finished to Marshall on August 12, 1844, to Battle Creek on November 25, 1845, and to Kalamazoo on February 1, 1846. A grade between Port Huron and Lapeer was all that was ever done on the Northern line. In 1841, the Legislature ordered that project converted into a wagon road. By the end of 1845 the state had expended just over $4,000,000 for all of its internal improvements works. This amount did not include the five hundred thousand acre land grant from the federal government. Governor Alpheus Felch reported the cost of the Central as $2,238,289 and the Southern as $1,125,591. These amounts are subject to dispute, given the quality of the recordkeeping and the varying accounting methods employed by the board itself, but they are a fair indication that substantial sums were spent on the two railroads actually built.
After some years of mumbling about it, the Legislature of 1844 began openly discussing the possible sale of the Central and Southern railroads. The whole affair had become an embarassment to the state as well as a financial debt that the state could not repay. In his message to the legislature on January 6, 1846, Governor Felch discussed the matter at great length. He admitted that a completed Central could become a very profitable road. But the upshot of it was that the state did not have the money to extend the road, keep it in repair, and at the same time pay the interest on the outstanding debt. The roads would have to be sold. The state simply abandoned the canal projects. In 1847, the Legislature authorized the transfer of the Northern route to the Port Huron & Lake Michigan Railroad as part of that road's charter.
The Central road was the best of the projects. John W. Brooks, superintendent of the Rochester & Syracuse Railroad, came to Michigan to inspect the road. His response was enthusiastic. Brooks enlisted the help of Detroit attorney James F. Joy, and together they began lining up capital to buy the road. The final group was headed by John Murray Forbes of Boston, Erastus Corning of Albany, Joy, Brooks, and a number of other New England financiers. The Legislature issued a charter for the Michigan Central Railroad on March 28, 1846. The founders were given six months to agree to buy the Central for $2,000,000, subject to a down payment of $500,000, with the remainder due one year later. They were given two years to rebuild the first fifty miles west of Detroit. And they had to complete the line to Lake Michigan within three years. Payments could be made in state bonds, which were widely available at depreciated prices. Just under the wire the incorporaters raised the down payment and bought the line on September 24, 1846.
Excerpted from Michigan Railroads and Railroad Companies by Graydon Meints. Copyright © 1992 Graydon Meints. Excerpted by permission of Michigan State University Press.
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Table of Contents
INTRODUCTION TO MICHIGAN RAILROADS,
LIST OF COMPANIES,
CORPORATE FAMILY TREES,
CHRONOLOGY OF CORPORATE ACTIONS,
CORPORATE ACTIONS BY YEAR,
COUNTY LISTINGS OF COMPANIES,