יז*

notions that were then generally entertained upon this subject. The plan of improvement, in its inception, was certainly uncalled for on any ground of public convenience or utility; it was clearly beyond the means of the state to accomplish, and it involved the government in business entirely foreign to its legitimate duties. No state certainly ever stood in less need of artificial works for purposes of communication than Michigan. Washed on three sides by navigable waters, its territory intersected by streams upon which could be freighted the produce of the country, it enjoyed from the hand of nature, advantages which rendered such works far less necessary than in most other states. But nevertheless the people saw, or fancied they saw, great public benefits to result from the proposed improvements, and the legislature, in compliance with public sentiment, entered with zeal and little forecast, upon a system of the most extensive character.The first step taken was the passage of a law authorizing a loan of five millions of dollars, although the state at that time was compelled to resort to the same process for obtaining means to meet the current expenses of its government. Having obtained the money, as was supposed, a plan of internal improvements was adopted, embracing a canal and three independent lines of rail-roads across the peninsula. Appropriations were from time to time then made for the construction of these works and several minor improvements, until the entire means of the state were absorbed. Upwards of six hundred thousand dollars were expended on works that are now regarded as utterly worthless. The monies constituting the balance of the internal im-provement debt, together with about one hundred and seventy-five thousand dollars, received from the United States, the profits, so call ed, of the roads, and some one hundred and fifty thousand acres of dand were expended on the Central and Southern roads. And these latter works, as a source of revenue, are likely to be as unproductive as the former. Yet at the time they were projected, calculations were made, showing that many of them would be highly productive as investments. It was estimated, in 1837, that the Central road, when completed, would yield a net revenue of at least thirty per cent. Time has shown the fallacy of the prediction; and instead of realizing any of these fancied profits, we find ourselves saddled with a debt of nearly five millions, without revenue from any of these in vestments, with which to meet the interest.

31

.1590

OT

B

But the experience of Michigan, in this respect, is that of almost every state, which embarked in the same schemes of speculation.The State of Pennsylvania, in prosecuting her works of internal improvement, incurred a debt of about forty millions. Nearly one half of this amount is a dead loss, and to pay the interest, the state is compelled to resort to taxation. The State of Ohio, after having expended some fifteen millions in railroads and canals, is compelled likewise, to resort to taxation, to pay the interests on its loans. Illinois, in the prosecution of similar schemes, expended over ten millions; and the State of Indiana, in its canal and railroad investments, expended eleven millions. The public works, in the two last named states, yield no revenue whatever. The list might easily be enlarged, but enough examples have been cited to prove that Michigan is not an exception to a genearal rule, that states can never construct canals and railroads under ordinary circumstances, with any reasonable expectation of profit.

Another error committed by the state, consisted in its attempt to prosecute the construction of the Central and Southern roads, after its borrowed means had been exhausted, by the failure of the United States Bank. This policy was adopted, under the impression that those works, if continued to certain points, would yield a sufficient revenue to pay the interest on the entire debt and save the necessity of taxation. The object to be attained, was deemed important enough to justify a resort to almost any expedient in order to raise the necessary means. In the first place a currency was created by the is sue of treasury notes in vlolation of the constitution of the United States. Then drafts were drawn upon an empty treasury. And after these expedients had failed, the next resort was had to drafts payable only in the wild lands of the state. In this way all obstacles were finally overcome, and the Central and Southern roads extended to points that would yield the largest amount of revenue, short of their entire construction. But the result of the experiment has been such as to disappoint the expectations of the public in every particular.The project of extending the roads, althogh proposed and adopted, as a revenue measure, has failed to secure any large amount of increased profits. It has not alleviated a single burden. On the contrary, it has had the effect to involve the state still deeper in embarrassment, and

widen the disproportion that before existed, between its liabilities and resources. This will be seen by instituting a comparison between the cost and value of the roads, and the debt of the state four years ago, and at the present time. It will be found on such comparison, that the difference is far greater now, than it was then. In other words, if the state had applied the roads in payment of its indebtedness at their cost on the first day of Janucry, 1842, it would have left a smaller balance than now. And we have no reason to suppose, but that the disproportion between the internal improvement debt, and its resources, will increase so long as the present system is continued-If this view is correct, sound policy would seem to require that the state should disencumber itself without delay, of this prolific source of embarrassment. But the committee feel that they can at most, present only a meagre outline of the evils which the past financial policy has entailed upon the state. It has involved us in a debt of about five millions. It has in its progress, by its cannexion with banks, been the cause of individual losses, of hundreds of thousands of dollars. Although no tax has yet been directly levied, to pay the interest or principal of the internal improvement debt, yet the prospect of taxation, has tended to divert emigration from the state. The loss of credit and reputation, which the state has sustained, has been visited upon the enterprise and business of its citizens. It has tended to encourage (and forster throughout the whole state a spirit of private speculation. It has created local jealousies that have arrayed different portions of the state against each other. It has been the cause of half of the legislation of the state for a period of nine years, engrossing the chief attention of successive legislatures, to the great detriment of all other important interests. And it has finally thrown upon the state, the charge and management of works to which it is clearly incompetent, and which experience has shown, can only be conducted by private citizens, if profit is sought to be secured, or public convenience subserved. Independent then, of mere financial considerations, the committee would regard the sale or other disposition of the roads, as demanded by every principle of sound policy. But as a financial measure, for the relief the state, the question presents claims too strong to be resisted.

2

The disordered condition of the finances has already been fully pre

sented as well as the total inability of the state to meet the payment of interest from all the sources of revenue, provided by existing laws. It has been shown that the public lands cannot at present be applied to diminish the amount of the indebtedness-that no reliance whatever can be placed upon the public works as a source of revenue, and that the state is not in a condition to bear the requisite amount of taxation. The only alternatives then left are to repudiate, or disregard the just obligations of the state, or make the public works available in payment of the indebtedness by a sale. And between such alternatives the committee are confident that the people of Michigan would not hesitate long in making a choice, nor would the result be doubtful. Whatever might be the advantages to accrue from a continued possession of the public works in other respects, yet they would have little weight in deciding a question involving as this does, the character of the state for honor and integrity. Among men of honorable minds, there certainly would be but one voice, and that in favor of a sale..

That the Central and Southern roads present sufficient inducements to capitalists to make a purchase desirable, seems to be generally conceded; but the sum of money they will bring cannot of course be ascertained, until terms of sale are proposed and an offer made. It cannot be presumed that the roads would command in market anything near their original cost, if payment should be required to be made in cash, but such a restriction or requirement would be unnecessary. The interests of the state would be as much promoted by accepting the outstanding liabilities of the state due, or to become due, in payment, as to require cash. Again, the amount of money which a company would be willing to pay would be increased or diminished, by the extent of the privileges and corporate powers which the legislature might see fit to grant. Unusual restrictions or reservations, would either prevent a sale altogether, or lessen very materially, the price which the purchaser might otherwise be willing to give. The policy of the legislature in this respect should be, in the opinion of your committee, to grant a charter delegating liberal powers and privileges, but so defined and guarded as to keep the companies in proper check, and prevent abuse. On such terms a sale could prob. ably be effected, while it might be impracticable to sell, should great

1.

er restrictions be imposed. Capitalists will not invest their money where the rights to be acquired are ill defined, or where they can bet interfered with or taken away at the option of a legislature. They' require the same degree of certainty and protection of their corporate rights, as are extended to, and enjoyed by individuals. With a charter containing the requisite guarantees in this respect, and with the privilege of paying the purchase money in the liabilities of the state, the roads would probably bring their original cost, or a sum approximating very nearly to it. So far at least as the Central road is con cerned, there is little doubt but that it could be thus sold.

The cost of the central railroad, as appears by the Auditor Genieral's report, is two millions one hundred and thirteen thousand, eight" hundred and twenty-two dollars and forty-five cents, but of this amount, one hundred and eighty-three thousand seven hundred and four dollars and sixty-three cents is included for interest, &c., during construction. This sum, however, might with great propriety be deducted as an equivalent for the wear and depreciation of the roads, if for no other reason. This deduction being made, it would leave the cost of the road at the sum of one million nine hundred and thirty thousand one hundred and seventeen dollars and eighty-two cents. If we add to ̈ this the e value of the machinery and cars on hand, we should make the cost of the road and its appurtenances, about two millions of dollars, which probably is not far from the true amount. A sale, therefore, would take up and extir and extinguish two millions of the present indebtedness,” saving an annual interest of one hundred and twenty thousand dol lars, equal to a tax of four mills upon the present valuation of the property of the state.

20

1

The Southern Railroad is estimated by the Auditor General to have" cost exclusive of the ten per cent. for interest during construction, nine hundred and sixty-one thousand nine hundred and seventy-three dollars and eighty-seven cents. The value of the machinery of the road is estimated to be worth, or to have cost fifty-five thousand dol lars, making the cost of that road one million and sixteen thousand nine hundred and seventy-three dollars and eighty-seven cents. Whether this road will find ready purchasers or not, remains to be seen, but as in the case of the central road, it seems to be admitted that it can be sold upon terms highly advantageous to the state.” Tos