IMAGE EVALUATION TEST TARGET (MT-3) 1.0 If *^ '^ I.I 1.25 32 .^ I c 1^ IIIIM 2.0 U IIIIII.6 ^ m ol f // 7 Photographic Sciences Corporation 33 WIST MAIN STRUT WiBSTIR, N.Y. M580 (716) B72-4503 ^; wss \^^' \\ o\ ^ ' signifie "A SUIVRE", le symbole V signifie "FIN". Maps, plates, charts, etc., may be filmed at different reduction ratios. Those too large to be entirely included in one exposure are filmed beginning in the upper left hand corner, left to right and top to bottom, as many frames as required. The following diagrams illustrate the method: Les cartes, pisnches, tableaux, etc.. peuvent Atre filmte A des taux de rMuction diffirents. Lorsque le document est trop grand pour Atra reproduit en un seul cliche, il est film* A pertir de I'angle supArieur gauche, de gauche A droite. et de haut en bas. en prenant le nombre d'images nicessaire. Les diagrammes suivants illustrent la mAthode. 1 2 3 32X 1 2 3 4 5 6 2h 0. 213 ^'/,/( aiUi M. /<.W NORTH SHORE RAILWAY REPORT OF THK CHIEF ENGINEER UPON TKK 4< /\l"i;i>LVi Ql EHEC RAILWAY All) ACT OF IS74. " vP^O . FEBRUARY 5, 1874. ■ \i Ufi ■UHTHEAL COLLECTION GAGNON ^ 'w / U- 52 7<^^ ^..30218 NORTH SHORE RAILWAY. LETTER PROM THE PRESIDENT. OFFICE OF THE NORTH SHORE RAILWAY COMPANY. Quebec, 2nd February, 1874. General S. Seymour, Engineer in Chief of the North Shore Railway Company. Sir, You will please find enclosed a copy of '• An Act to provide for the granting of aid to certain Railway Com- panies " passed at the late session of the Provincial Par- liament, and assented to by His Excellency the Lieute- nant-Governor, on the 28th of January last. Inasmuch as by the terms of this act the North Shore Railway iuompany is required to accept its provisions on or before the 1st May next, in case it should be deemed advisable to do so, I have to request that you will furnish me with your views as to the proper action to be taken by the Board of Directors in relation thereto. I have the honor to be, Sir, Your most obedient servant, W. RHODES, President. COPY OF THE ACT REFERRED TO IN THE PRESIDENT'S LETTER. U^JgSL-X. An Act to provide for the graiiding of Aid to certain Railway Companies. H ER MAJESTY, by and with the advice and consent of the Legislature of Quebec, enacts as follows : I. The lieutenant-governor in council may, subject to -the conditions and limitations contained in the colonization railway aid act of 1869, in relation to the conversion of subsidy therein mentioned, and further subject to the con- ditions, limitations and provisions of this act, grant pro- vincial aid in lieu of that specified in the said colonization railway aid act of 1869, to the extent of two thousand five hundred dollars for each and every continuous and un- broken mile of railway, with no additional allowance for bridges, to each of the following companies, namely : The Quebec and Lake St. John railway ; The Levis and Kennebec railway ; The South-Eastern railway, for such portion thereof as formerly belonged to the Richelieu, Drummond and Arthabaska Counties' railway. The Philipsburg, Farnham and Yamaska railway ; The Missisquoi and Black River Valley railway ; The Ouebec Frontier railway ; The Quebec and New Brunswick railway ; The St. Francis and Megantic International railway ; The Bay of Chaleurs railway ; The Sherbrooke, Eastern Tovvn'ships and Kennebec rail- way ; The Waterloo and Magog railway ; and The Montreal Northern Colonization railway (branch line.) The lieutenant-governor in council may also subject to the foregoing conditions grant unto the Montreal, Cham- ■bly and Sorel Railway Company, and unto the South ^fr^nr^M bhuiphiiii S RAILWAY AID ACT OF 1874. Eastern railway company, provincial aid to the extent of one thoiisant' dollars per mile, for such length of road as belonjyod to each, before the amiilgamationof'such railway companies respectively, with other companies, on com- pliance with the law in that behalf 9. All sums of money heretofore paid by the government of this province to any of the above mentioned railway companies, under the act referr«»d to in the foregoing section, or under any act amending the same, shall be deemed to have been paid to such company on account of, and shall be deducted from the increased aid or subsidy to which it would otherwise have been entitled under this act. •I. Notwtthstanding any provision contained in the Co- lonization railway aid act of 1869 the lieutenant-governor in council, if he thinks proper, may nevertheless, when it is established that any one of such companies is actively engaged in the construction of its works, grant to it for each twenty-five miles or more of road com pb' ted or one continuous half of the whole line a portion of such provin- cial aid, proportionate in amount to such length of road. 4. The Quebec and New Brunswick railway company shall not be entitled to any aid under this act unless it shall have, on or before the first day of January, one thou- sand eight hundred and seventy-five, signified in writing unto the secretary of the province, the abandonment by it of any claim to the grant of land specified in tbe eighth, ninth, tenth and eleventh sections of the act of this pro- vince, thirty-fourth Victoria, chapter twenty-one, and the acceptance by it of the subsidy or aid accorded by this act ; in the event of the company determining to ac( I'pt such aid or sul)sidy, and so signifying its intention, it shall be deemed to have forfeited, and shall forfeit all claim to the grant of lands mentioned in the said act. •"5. The St. Francis and Megantic International railway company shall not be entitled to any aid under this act, unless it shall have, on or before the first day of January, one thousand eight hundred and seA'enty-five, signified, in writing unto the secretary of the province, the abandpn- ment by it of any claim to the grant of land specified in BAIIAVAY AID ACT OF 1874. 8 sections two, threp, and four of the act of this province, thirty-lifth Victoria, <;hapter tvventy-thre**, and the accep- tance by it of the 8u})sidy, or aid accord<'d by thiH act ; in the ev«Mit of the company dt'tennininif to accept huch aid or subsidy, and sij^nifyinif its intention to that eifect, it shall be deemed to have forfeited, and shall forfeit all claim to the grant of lands mentioned in the said act. 6. The Bay of Chaleurs railway company shall not be entitled to any aid under this act, unless it shall have, on or before the lirstday of .Tiinuary, one thousand eiprht hun- dred and seventy-fiv<', sin^nilied in writinir unto the se- cretary of the province the abandonment by it of any claim to the g:rani of land specilied in scelions one and two of the act of this province, thirty-sixth Victoria, any shall not be entith-d to any grant under the first section of this act, but on the contrary, in so far as relates to any such railway comi)any, the grant nientiojied therein shall be entirely unoperative and of no efiect. 9. The lieutenant-governor in council may. subject lo the provisions of the next following sections grant, by way of loan, to the Montreal Northern Colonization railway company for l)uilding a railway fiom Montreal to Aylmer, provincial bonds or delx-utures to tli' extent of s 'veii hun- dred and iifty-one thousand three hundred and sixty-six dollars, which he is htMcbv authorized to issue in such forms, for such amouuts, and sul)j('ct to such provisions in respect tlu'reof, as shall be deemed to be in the i)ublic' interest. k M! 10, The said last mentioned company sliall be entitled to the said loan, upon the following conditions only : 1. The whole of the said railway shall have bei'ii com- pleted and put into operation bi'tween Montreal and Ayl- mer, and also the branch of the said road from Hiw Tlie- rese de lilainville to tlu^ village of St. Jerome, on or before the first day of May, one thousand eight hundred and seA'enty-six, to the entire satisfaction of the lieutenant- govornor in cotmcil ; 2. The said railway sh ^1 connect with the North Shore railway from Quebec to Montreal, at such point as has been determined by the lieutenant-governor in council ; 3. The lieutenant-governor in council shall have the ap- pointment of one third of the directors of the company, without counting the ex-officio director or directors repre- senting municipalities, and no city, town or municipality shall be represented in the comp» ly by a greater number of directors than the lieutenant-governor in council ; 4. The company shall, on or before the first day of August, one thousand eight hundred and seventy-four, signify in writing, unto the secretary of the province, the abandon- ment by it of any claim to the grant of lands specified in Hection five of the act of this province thirty-fourth Victo- RAILWAY AID ACT OF 1874. Till, chapter twonty-one, and s.'ctioii threo, of tho act also of this province, thirty-sixth Victoria, chapter forty-two, except the share of the said company in that portion of the said land grant described in the schedule of the said act, thirty-fourth Victoria, chapter twenty-one, as block A, and the acceptance by it, of the i^rant or loan accorded by this act. In the event of the company determining to accept such grant or loan, and signifying its intention to that efl'ect, it shall be decmend to have forf 'itcd and shall forfeit all claim to the grant of lands mentioned in the said acts, except as hereinabove mentioned ; 5. The company shall, on receiving the provincial bonds or debentures or any part thereol, ;iy hereinafter provided, give in exchange therefor delK'iUiircs of the company, bearing interest at the rate of six pjr cent per annum, to an equal and corresponding amo' i l ; G. Such amount of the ca})ital stock of ihe said company shall have been subscribed for, ovor ttul above the amount which iias already bcvMi, ov whicli may hereafter bo sub- scribed for by municipalities, Jis the lieutenant-governor in council shall deem just and reasonable, and at h^ast ten percent upon such additional stock, shall have bt eu bona fi'ie paid in to the company ; 7. The main line of the said company's railway .shall be a first class road, and shall have been accepted as such by the lieutemint-governor in council on the ri'port of the pro- vincial railwav board. II. The lieutenant-governor in council may, however, if he thinks proper, when it is established that the said company is actively engaged in the construction of the works, grant unto such company as soon as twcnty-iive miles of the railway shall have been completed, and for every twenty-live miles thi'reafter, a portion of such pro- vincial grant or loan proportionati' to such length of roarn(>r however may, if he thinks proper, when it is e.^-ta- blishe loan authorized by the. foregoing section, as for and in exchange for the provincial debt^ntures to be granted under this act, the road, lands, and real and personal estate of tht; said company shall be chargt'd and hypothecated in the order and manner follow- ing, that is to say : 1. In favor of all persons holding bonds or debentures issued by the company, under section seventeen of this act, RAILWAY AID ACT OF 1874. 9 which bonds and debentures shall be hereafter known and styled "North Shore railway company, first preference bonds. " 2. In favor of the corporation of the city of Qu««bec and all other subscribing municipalities to the amount of the capital sum of their subscribed stock; and a dividend thereon not exceeding seven per cent per annum. 3. In favor of the government of this province, for the amount of the provincial bonds exchanged for th(» bonds and debentures of the company under the provisions of this act. 19. In the event of the company d»*termining to accejit the loan hereinabove specified, upon the terms and condi- tions set forth in this act, and signifying their acceptance thereof, in the manner and form herein provided, from and after the twentieth day of May, one thousand eight hundred and seventy-four inclusively, the board of directors of the company shall be composed of twelve members in addition to the representatives of the munieipalities entitled to form part thereof Of these twelve members, six shall be named by the lieutenant-governor in council, and six only shall, in future, be elected by the shareholders and bond-holders, in the manner hereinafter provided ; but until the twen- tieth day of May, one thousand eight hundred and seventy- four, the said board shall consist of the present directors, and until the next election of directors the board shall not have power to fill vacancies among the directors elected. 20. In the election of directors of the said company on the twentieth day of May next, and at all elections there- after, each shareholder shall be entitled to one vote for each one hundred dollars of stock held by him, upon which at least ten per cent shall have been paid up, and upon which all other and subsequent calls shaJ also have been paid up, and each person holding bonds or debentures of the said company issued under .section seventeen of this act, shall be entitled to one vote for each one hundred dollars of bonds or debentures so held by him, and such shareholders and bond- holders shall be entitled to vote either in person or by proxy. -^MMa 10 RAILWAY AID ACT OP 1874. 31. Notwithstanding anything to the contrary contained in this act, it shall be lawful for the lieutenant-governor in council, on satisfactory proof that the Montreal Northern Colonization railway company, or the North Shore railway company, have made complete financial arrangements or entered into contracts in good faith, for the construction of their respective lines of road, and that the work thereon is in active progress, to advance, from time to time, unto either or both of such railway companies, out of the grant or loan, to which ihey would be entitled under this act, a sum bearing such proportion to th(! total amount of the grant authorized herein, as the progress of the work, and the security taken by the companies, for the completion thereof, may then.seen to the lieutenant-governor in coun- cil to justify. But nothing in this section shall in any way affect the proviso contaim^d in the sixteenth section of this act. .1 ! 9s5. In the event of any of the said railway companies neglecting to exercise tho option conferred upon it or ne- glec'ing to signify its acceptance in the manner and within the delay prescribed in this act, then and in such case, the l)rovisions of this act shall in no respect apply to such rail- way company, and in so far as concerns such railway com- pany this act shall be deemed not to have been passed. S5{. All provincial bonds or d(d)entures issued under the authority of this act shall be made payable in thirty vears from the date thereof, and shall bear interest at the rate of five per cent per annum, and in the case of the issue thereof, it shall be the duly oi the treasurer of the pro- vince, to cause to be invested yearly, one per cent on the amount of such bonds or debentures, as a sinking fund, for the redemption of the principal thereof at maturity. ii4. The treasurer of the province on being authorized by the lieutenant-governor in council, may negociate and sell the said debentures mentioned, and pay the proceeds thereof to the respective railway companies under this act. 95, The expression " The Quebec railway aid act of 1874 " shall be a sufficient citation of this act; and it shall come into force on the day of its sanction. jT cointained governor in l1 Northern ore railway gements or struction of z thereon is time, unto if the ijrant this act, a amount of the work, 2omph>tion )r in coun- n any way ion of this i' TH 8H0RE liAlLWAY. RFPORT OF THF: (JHiEF ENGINEER, UPON THE (ilEBEt RAILWAY All) ACT OF 1874. companies Dn it or ne- and within h case, the ) such rail- Iway com- passed. Lied under e in thirty r<'st at the of the issue )f the pro- ent on the ling- fund, iituritv. • luthoriised ociate and ! proceeds iiider this aid act of nd it shall office of the engineer in chief, Quebec, Feb. 5th, 1874. Mr. President : I have the honor to acknowledge the receipt of your letter of the 2nd instant, enclosing a copy of " The Quebec Railway Aid Act of 1874" ; and re- questing- me to furnish you with my views as to the proper action to be taken by the Board of Directors in relation thereto. In performing the duty which you have seen fit to im- pose upon me, I beg leave to state, that I enter upon it with a deep sense of the importance of the questions in- volved in the discussion ; and also of the responsibility which must attach to the Directors, in arriving at a proper decision in relation thereto. REPORT OF THE CHIEF ENGINEER GENERAL PROVISIONS OF THE ACT. It appears, from an examination of the Act above referred to, that certain Railway Companies therein named, are, upon certain conditions, to receive from the Provincial Government a grant, in the shape of Provincial debentures or their proceeds, at the rate of $2,500 per mile of completed Railway ; and that certain other Railway Companies are to receive a grant of $1,000 per mile. It further appears, that provision is made, upon certain conditions therein named, for a loan of Provincial deben- tures or their proceeds, as follows : to the Montreal Northern Colonization Railway Company, the sum of $751,360; and to the North Shore Railway Comjiany, the sam of !$ 1,248,634. Without referring at present, to any of the provisions of this law, other than those directly affecting the North Shore Railway Company, except to call attention to the important fact, that to one class of roads the Grovernment proposes to make a direct grant, and to another class, in which this Company is included, a redeemable loan, I will proceed to demonstrate, as well as I may be able, the probable effect that the acceptance of these provisions, in lieu of the laws now in force, will have upon the pre- sent and future interests of the North Shore Railway Com- pany. In order to a full understanding of the case, I will first call your attention to the present position of this Company under existing laws, in reference to points that will be affected by the new Act ; and then, endeavor to show what its position would be, with reference to the same points, under " The Quebec Railway Aid Act of 1874. " UPON THE RAILWAY AID ACT OF 1874. CONDITION OF THE COMPANY UNDER EXISTING LAWS. 1. Your Company has a land grant of 2,000,000 acres of Taluable timber lands, subject only to the condition that your Railway shall be fully completed and equipped on or before the 1st May, 1877. 2. You have a subscription of $1,000,000 from the City of Quebec, payable in City debentures, drawing interest at 7 per cent, subject only to the condition that the Railway Company shall pay the interest on these debentures to the date of the opening of the road between Montreal and Quebec, and the running of the first through train between these two Cities. You have a)jo a subscription of $125,000 from other municipalities, 3. You have the right to issue $6,000, 000 of mortgage bonds, based alike upon your Railway and land grant ; and the bond holders have no vote in the election of Directors. 4. Your shareholders have a right to one vote upon each share of stock representing $25 ; and also to elect eight Directors to represent them in the Board. 5. The Government has a right to only four Directors. 6. You have a contract for the construction and equip- ment of the road for the sum of $7,000,000, payable $1,000,000 in Quebec City debentures, and $6,000,000 in the mortgage bonds of the Company ; which contract pro- vides also, that the Contractors shall pay the interest upon these securities, as well as the expenses of the Railway Company, imtil the road is completed and ready for business. The supplemental contract provides for an additional compensation of $3,000,000 of Capital Stock, to be placed with the bonds, upon certain conditions as to the time of completing portions of the road. 4 REPORT OF THE CHIEF ENCHNfiER 7. The Contractors have already expended about #200,000 under the present contract. The road and lands have been mortgaged for the sum of $6,000,000. The mortgage bonds have been duly executed by the Officers of the Company and the Trustee ; and they are now in London, England, 8ul)ject to the order of the President of the Compjiny. CONDITION Ol'' THIi COMPANY UNUKU THE NEW ACT. Ist. Your land grant will be reduced to 1,140,875 acres, making a deficiency of 859,125 acres, in consideration of which the Government is to loan the Company its deben- tures, or their proceeds, for the sum of 81,248,634, at 5 per cent interest, payable in 30 years ; and take from the Company, in exchange, a third class of bonds, secured by mortgage upon the road and lands, at 6 per cent interest, payable in 30 years. 2nd. You are to create a second mortgage upon the road and lands, in favor of the City of Quebec and other municipalities which have subscribed to the stock of the road, for the purpose of securing the payment of a yearly dividend not exceeding 7 per cent per annum, upon $1,125,000. 3rd. You can issue such an amount only of first prefe- rence or mortgage bonds, for the purpose of securing the (.cmpletion of the road " as may hereafter be fixed and determined by the Lieutenant-Grovernor in Council. " 4th. Your shareholders can have the right to one vote only " for each one hundred dollars of Stock " ; and the first mortgage bond holders will have a right " to one vote for each one hundred dollars of bonds ; " and the Stock and Bond holders can only vote for six Directors to repre- sent their interests in the Board. ■UPON THE RAILWAY AID ACT OF 1874. 6 5th. The Government will have a right to six Directors. (5th. The present contract will require to be so modified as to meet the conditions of the new law, with reference to payments, &c. It is also proper to state, in this (•onn<'Ction, that this new Act does not take efl'eot, so far as your Company is concerned, unless assented to by the Company on or before the 1st of May next. Also the fact, that it provides that *' the Treasurer of the Province, on being- authorized by the Lieutenant-Governor in Council, may negotiate and soil the said debentures mentioned, and pay the proceeds thereof to the resj)ective Railway Companies. " POINTS FIRST TO BK DETKIlMINED. Having stated as concisely as possible the loading points of contrast between the position of th«' Company under the laws now in force, and the one under consideration, I will proceed to call your attention to some points which it seems to me the Company must m-cessarily determine, before it can decide intelligently upon the question of either accepting or rejecting this Act. It will be admitted that if the Act is accepted, the work cannot go on under the present contract, without a very material modification in its terms ; and it may safely be assumed also, that, in negotiating these terms, the Con- tractors will insist upon substantially the same values to the securities to be taken by them, in payment for work under the modified contract, that can fairly be attached to the securities agreed to be taken by them for the same amount of work under the present contract. By referring to my report to the Company, under date of May 28, 1873, soon after my return from Europe, I find / 6 REPORT OF THE CHIEF ENGINEER that the following estimate of values was at that iiiue placed upon the securities to be taken by the Contractors under the t'xisting contract : $6,000,000 Mortgage Bonds net 80 per cent.. $4, 800,000 $1,000,000 Quebec debentures " 90 per cent.. 900,000 Total $5,700,000 Inasmuch however, as the Contractors failed to close the negotiation upon that basis, even after having 5^3,000,000 of stock given them by the Company to place with the bonds, I do not think the present value of these bonds should be placed higher than 75 per cent net, and I ]>elieve that the City debentures may be estimated to net 95 per cent. Upon this basis, the following w^ould be the present aggregate n«^t cash values of the securities embraced in the present contract. $6,000,000 Mortgage Bonds U(.'t 75 per cent.. $4,500,000 $1,000,000 Quebec debentures " 95 per cent.. 950,000 Total $5,450,000 Assuming, for our present purpose, that this estimate of values is substantially correct, we will endeavor to fix the same relative values upon the securities provided for by the new Act, as follows : Say $1,250,000, Government debentures, net 95 per cent $1,187,500 $1,000,000, Quebec debentures, net 95 percent , 960,000 4,400,000, Mortgage Bonds, net 75 per cent 3,300,000 Being very near the same total $6,437,500 ' UPON THE RAILWAY AID ACT OF 1874. t It is to be presumod, however, that in any modification of the present contract, the Company would endeavor to provide the means necessary for the extension of the track down to navigable water, in the Cities of Quebec, Three Rivers, Berthier and Montreal ; and also for the payment of existing claims against the Company, all of which would necessarily increase the amount of tii»' first mortgage bonds to a considerable extent. The first point therefore to b«« determined upon by the Company, before accepting the new Act, would seem to be, as to whether the present contract can be modified, upon satisfactory terms ; and if this can be done, the second point would be to ascertain whether the Lieute- nant Governor in Council would approve of the issue of the necessary amount of first mortgage ]>onds, to enable the Company to carry out the modified contract, NliXr POINTS TO BE CON^llJliHED. Assuming that the points above referred to can be ar- ranged to the satisfaction of all parties, the next points for the Company to consider will naturally be, the effect of the provisions of the new Act upon the future management of the road, and the financial interests of the Company. The Board of Directors as now constituted, consists of eighteen members, four of whom are appointed by the Government, four by the Quebec City Council, one each by the municipalities of Three Kivers and St. Sauveur, and eight are elected annually by the St<»ck holders of the Company ; and it is also provided in the supplemental contract, that four out of the eight Directors thus elected by the Shareholders, may be nominated by the Stockholders in Europe or elsewh .re, who h. 'd the first mortgage bon Is of the Company. 8 REPORT OF THE CHIEF ENGINEER From th«' abovo, it will be seon that uiubr thr present laws, the Stock and Bondholders are represented by eight eighteenths, or nearly one half of the Board ; whereas, under the new Aet, it is provided that the Stock and Bond- holders shall be represented by only one third of th« Board. I happen to know that one of the greatest objections made during the past year, by foreign Capitalists, to the advancement of money u]»on the bonds of the Company, was the um-qual representation, in the Board of Directors, of the capital required to construct the road; audit was for this reason alone, that the sujiplemental contract was made to correct the discrepancy, so far as it could be done, with the consent of the Government, and under existing laws. The new Act will certainly have the efl'ect to remove this objection to a very great, and perhaps adequate extent, so far as the first preference bondholders an; concerned ; but it is difficult to see what real protection is afforded to the present individual Stockholders of the Company. It is proper to state in this connection, that the parties with whom negotiations were being made in Europe, au- thorized me to promise in their behalf, that in case the bonus of stock was granted them, they would take a transfer of any individual stock that might be offered, and repay the money which had been advanced upon it. But under the new Act, any holdei of a one hundred thousand dollar first mortgage bond, could out-vote all of the pre- sent Stockholders, and effectually prevent their represen- tation in the Board of Directors. FINANCIAL EFFE(.T UI'ON THE COMPANY. With reference to the effect of the new Act upon the^ UPON THE UAILWAY AID ACT OF 1874. ft fmuiicial interests of the Coiapuuy, it vvili ho ohserved, that under the present hwvs, the hohded deht is limited to $6,000,000 ; the interest upon which at 7 per cent, will amount to $420,000 per annum. It has been shown that under the new Act, and a mo- dified contract, the bonded d< bt, without providinjj for any additional expenditure, will be as follows : $4,400,000, 1st mortgage, 7 per cent. interest..$308,000 $1,125,000, 2nd " 7 " " " 78,750 $1,250,000, 3rd " " *' " 75,000 making an aggregate bonded debt of $0,775,000, upon V ' ieh the interest will amount to $4(51,750 per annum ; being an excess of $775,000 in bonded debt ; and of $41,750 in annual interest. Ffom all which it would appear that an additional financial burthen, is imposed annually upon the coin]>any, by the operation oi the new Act, which is not conteniph ted by the existing laws ; which burthen, if computed for a torm of thirty years, or until the maturity of the ditterent classes of bonds, will amount to very considerable sum. F''INANr[AI. EFFECT IPON THE Gf)VERXME\T AND MUNICIPALITIES. While engaged upon this branch of the subject, I have ventured to take a somewhat hasty view of the effect which the adoption of the new Act, by this Company, would have upon the financial interests of the Government and Muni- cipalities, and the following is the result. The Grovernment loans the Company its bonds for say, $1," 50,000, at 5 per cent, annual interest, and takes in ex- change the Company's bonds for the same amount drawing 6 per cent, annual interest, both classes of bonds having 10 REPORT OF THE CHIEF ENGINEER thirty years to run. The excess of interest is therefore 1 per cent, or $12,500 per annum, in favor of the Grovernment. If this amount should be re-invested annually at 6 per cent, compound interest, for a term of thirty years, it would reach the sum of $998,228, or in round numbers, $1,000,000 ; being only $250,000 less than the Government loan. Upon the payment, or restoration and cancelment by each party of its bonds, the Government would therefore have a surplus of $1,000,000 cash, and 859,125 acres of timber lands, which it will not have if the existing laws remain in force. As to the eirect which the adoption of the Act would have upon the financial interests of the City of Quebec, and the other municipalities which hold stock in the Com- pany, it is quite evident Irom the terms of Ihe Act, that they would secure the interest of 7 per cent, or $78,750 annually, upon their investment of $1,125,000, which at the end of thirty years, would amount to $2,362,500 ; and which, at the time the subscriptions were made, and until the recent passage of this Act, they expected never to receive. It is therefore (piite apparent, that, while the new Act may, as its title imports, afford this company, some present aid, by placing at its disposal a large amount of money to be used during the earlier stages of the work ; yet its Jiital. effect will be, to increase its financial burthen ; and to place both the Government and municipalities in a much better financial condition than they would be, under the operation of existing laws. UPON THE RAILWAY AID ACT OF 1874. 11 ONE CONTINGENCY THAT WILL .1 US 11 FY ITS ADOPTION. Having entered into the investigation of this subject ^th the most earnest desire to find some cluuse or feature in the new Act, that would be calcuhited to infuse new life and energy into both the Company and the Contrac- tors ; and thus result in the speedy resumption of the work, and the early completion of the road ; and having patiently pursued the investigation thus far with only the foregoing results, it remains to be considered whether there is any contingency under which it would be at all expedient or justifiable for the Company to accept '* The Quebec Railway Aid Act of 1874. " The North Shore Railway is admitted to be the great pre- sent want of the people of the City of Quebec, and of the Country lying along the North Shore of the St. Lawrence between Quebec and Montreal ; and they should have it at once, and at whatever present or future disadvantages its immediate construction may entail upon the compara- tively limited number of present stockholders, who have kept the organization alive during the past ten or twenty years, and brought it up to its present condition. If therefore, it can be satisfaotorily demonstrated that the Load cannot be built within a reasonable time, under exi.sting laws ; and that it can be built at once under this raw Act, I am decidedly of the opinion, that the Com- pany should accept the new Act, at once. KEASON^ rol! PAST FAII.LliRS In considering this most important, if not vital I)ran('h of the subject, I am quite sensible that my conclusions must be based almost entirely upon assumptions or specu- *^/ 12 HEPORT OF THE CHIEF ENGINEER lations, rather than upon mathematical demonstrations, such as I have endeavoured to adopt as the basis of my pre- vious conclusions. By the terms of the existinj^ contract, the labor and re- sponsibility of the negotiation of the bonds of the Railway Company, are assumed by the Contractors for constructing- the road ; and it is very well known, that up to the present time, they have failed ei\tirely in negotiating- a sale of these Si>curities; inconsequence of which, at least one entire working season has been lost in the construction of the road. The reasons given by the Contractors for this foil are have been : 1st. That the land grant of the Company was imperfect in its location and boundaries. 2nd. That too little was known as to the real A'^alue of these lands ; and also of the resources of the country through which the Railway passes ; and also of the prob- able earnings of the road. 3rd. The active and unrelenting opposition of the Grand Trunk Railway Company, to the construction of this road ; and, 4th The recent and almot-t unparallelled panic and break down in the money markets, both of this country and Europe. "While I am quite ready to admit that each of the above causes has had its effect, to a greater or less degree, in re- tarding the negotiation of these securities, I cannot admit that either, or all of them combined, could or would have prevented a successful negotiation, provided the Contract- ors had carried out the pledges which they made before UPON THE HAILWAY AID ACT OF 1874. 18 signinj^ the contract, in relation to the amount of their own private means which they would invest in the work, be- fore offering the securities of the Company upon the mar- ket. And I desire, as an act of justice to myself, to state here, that but for my firm belief in the sincerity of those pledges, and my knowledge of the financial ability of the Contractors to carry them out, it is quite certain that I never would have recommended them to the Company as parties who were in every way suitable for undertaking and carrying on the work to successful completion. It was well understood, as I have abundant evidence to prove, that the Contractors would expend at least one million dollars of their own mone;, in the work, before offering these securities for sale ; and I have never enter- tained a doubt that, if they had done so in good faith, the entire work would now have been more than half com- pleted, and the bonds would have been placed, at a rate that would have secured to the Contractors a handsome profit upon their contract. THESE CAUSES NO LONGER EXIST. But, admitting for the moment, that the reasons assi- gned by the Contractors for their failure, may at the time have had some force, it is quite evident that they no longer exist to any considerable extent. The Government has furnished the Company with maps and descriptions of unoccupied lands, from which the de- ficiency in the original grant may be selected by the Com- pany at any time. During the past year, information of the most reliable nature has been obtained respecting the value of the land grant ; and also as to the probable business and earni^igs 14 REPORT OF THE CHIEF ENGINEER of the road, which information more than confirms any estimate which has heretofore been placed upon the future resources of the Company, and the consequent value of its securities. The Grand Trunk Railway Company, having effected the large loan which it had placed upon the market, at the time when the securities of this Company were being offered in London, cannot now claim the same justification that it then did, for placing every conceivable obstacle in the way of the successful negotiation of our bonds. The equilibrium of the money market has been fully restored ; and the present is universally admitted to be a most favorable time for the negotiation of first class securities, as well as for the purchase of iron and other materials, and the employment of labor required for the prosecution of works of this character. SUCCESS NO MORE CERTAIN UNDER NEW ACT. In view of the foregoing facts, I can see no good reason to doubt, that if the proper means are used, the enterprise can be successfully carried out under the existing laws, and the. present contract ; and even if it can be demonstrated that failure would be quite certain under the existing laws and contract, I am unable to discover any good reason for believing that success would be certain under the new law. The same amount of expenditure would be required, on the part of the Contractors, in order to give currency to the mortgage bonds of the Company ; and the land security of the bonds contemplated by the new Act, is certainly much less, in proportion to the amount of bonds issued, than it is un^er existing laws ; so that there can be UrON THE RAILWAY AID ACT OF 18'74. 16 no valid reason for expecting that the first mortgage bonds to be issued under the new Act, would meet with a more ready sale, or bring a higher price in market, than the present issue under existing laws. The only motive or excuse that would seem to justify the Company in entering into a contract of this nature at all, for the constr«ction and equipment of the road, is the fact, that it has no available means of its own with which to commence the work ; and honce the necessary consideration that the Contractors should invest in advance, a sufficient amount of their own means, to secure the successful carry- ing out of the contract. If this be not done, it is difficult to see what advantage the Company is to derive from the contract ; and why it may not as well become at once its own Agent for negotiating its securities and carrying on the work ; and thus save for its own use and benefit, the large amount of profits that it is claimed will be made Tinder the present contract. food ider ids be RECOMMENDATION TO THE BOARD. Inasmuch therefore, as the Company has until the 1st of May next, in which to make known to the Government its final decision as to the acceptance or rejection of this new Act, I would respectfully recommend that no decision be made by the Board of Directors upon the subject, until every reasonable eftbrt has been made, both by the Com- pany and Contractors, to provide for the construction of the road under existing laws, and under the present contract, after giving a reasonable extension of lime for carrying out its provisions. . If these effiarts should entirely fail, between this time Aud the first of May next ; and if in the mean time it He REPORT OF THE CHIEF ENGINEER u should be ascertained that the construction of the Railway may bo secured upon reasonable terms, under this new Act, it will be time for the Company then to consider whether it w^ill embrace such opportunity, and accept the Act ; or whether it will still further await the course of events, in the hope of ultimately being able to avail itself of the laws now in force, which do nof expire until the 1st of May 1877. T.{\NSFER OF TIIIJ CONTRACT. It may be expected that, before closing this report, some allusion will be made to the transfer, which it is understood has recently been made of the existing contract, to the Hon. Thomas McGreevy, of this City ; which contract was executed in good faith, by the Railway Com- pany, on the 5th April, 1872, with Messrs. Perry H. Smith, Samuel L. Keith and George L. Dunlap, all of Chicago, Illinois, and doing business here in the name of the Chicago Contracting Company. Inasmuch as neither the Railway Company, nor any of its officers, have as yet been favored with a notice of this transfer, or an intimation as to its conditions, ,1 can only assume that when the matter is brought properly before the Board of Directors, it will receive such careful con- sideration and action, as will be calculated to promote the best interests of the Railway Company. Having been chiefly instrumental in bringing about the negotiation of a contract with these parties ; and therefore being very justly held responsible to a certain extent, b©th by the Railway Company and the public, for its being carried out in good faith on their part, I may be per- mitted to say, that it is a source of great satisfaction to me UPON THE RAILWAY AID ACT OF 1874. 17 Railway his new lonsider ;ept the ►urse of lii itself ntil the report, ch 7.t i& ontract, which ly Com- . Smith, ;!hicago, jhicago any of of this n only before il con- jte the >ut the refore xtent, or its e per- to me personally to know that, oxcopt the general loss of more than a year's time in the completion of the road, the Kail- way Company has sustained no peciitiiary loss by the de- linquency of these contractors ; and that the result of the Contract thus far has been, an expenditure on their part of about $200,000 a portion of which has gone to reimburse the Company for the most of its former expenditures, and to pay its current expenses ; and the most of the balance has been legitimately expended in paying for right of way," grading and engineering, all of which may be made available in the further prosecution of the work. I may also state further, and with equal frankness, that in my opinion it will be quite fortunate for the Railway Company, if it shall be found that the contract has fallen into the hands of Mr. McGreevy, whose name, reputalion and acknowledged financial ability, will undoubtedly prove to be a source of great additional strength to the enterprise. The fact that Mr. McGreevy has already assumed the contract, would seem to indicate that he feels entire confi- dence in his ability to carry out either the present contract, or such a modification thereof as the company may consis- tently sanction ; and therefore, while in the one case you have had American Contractors, whose sympathies, and interests were very naturally quite foreign to those of your own Government and people ; and whose principal object, as they have already demonstrated, was to make as much money out of the contract as possible, and take it with them out of the Province ; in the other case, you will have an entirely responsible Canadian Contractor, whose sym- pathies and interests will necessarily be in full accord with 18 REPORT OF THE CHIEF ENGINEER. m your own Grovernnieiit luid j)i'opl«( ; and whos<» profits, if he should bo so fortunate as to realize any from the contract, will but add so much to the wealth of the City and Pro- vince of Quebec. It has for a long time been quite apparent, that, not only the Railway Company, but also the Government and people of Canada, were becoming more and more dissa- tisfied with the great want of energy and financial strength manifested by these American Contractors, in the prosecu- tion of the work ; and I would therefore expect that a change of this kind, at the i^resent time, would be regarded with great favor, by all parties interested in a speedy re- sumption of work, and an early completion of the road. All of which, is most Respectfully submitted, SILAS SEYMOUR. To Colonel Wm. RHODES, President of the North Shore Railway Company. e