EXTRACTS FROM A LETTER
In regard to the Vermont and Massachusetts Railroad.
Boston, March 10th, 1863.
Dear Sir:
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In regard to Vermont and
Massachusetts Railroad stock, I have made the inquiries you
requested, and find its real value quite different from the
representations made to you.
There are some eight or nine thousand shares in the
hands of a clique of State Street operators, who have
, put up the price from fourteen dollars to its present rate,
by a combination among themselves usual in such cases,
ánd who intend, upon the strength of a favorable report
from the Troy and Greenfield Railroad and Hoosac Tunnel
Commissioners, and upon the expectation of friendly legisla¬
tion, to run it up to forty dollars, and then "unload" it
upon the public.
As to legislation in this matter, I need not say that it
is extremely doubtful, having in view the state of the
country, the enormous war expenses, the heavy taxes now
being laid upon the people, and the greatly increased cost of
living ; if the State will at present add to the burdens of the
people by expending four or five millions upon this project.
Aside from the anticipated action of the legislature, and
possible completion of the Hoosac Tunnel line, there is
nothing, as you will see by the figures below, to warrant the
^UREA'i'
library
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price of this eminently " fancy " stock being over twelve or
fifteen dollars.
Allowing the statement made in December to be true,
though it is more favorable than the Directors Report, it
appears that the
Bonds outstanding were, .... $990,525 00
Less bonds in sinking fund, $95,200 00
Bonds bought and on hand, 114,800 00
210,000 00
$780,525 00
To this must be added the scrip dividend "
voted by the Directors at the opening of the
road, for which the company is legally •
holden, though the claim is disputed by the
present board of directors, .... 80,000 00
Making the indebtedness .... $860,525 00
The amount of cash and notes receivable on hand, $76,-
405.49, is not included in the above, as some twenty-two or
twenty-three thousand was required January 1st, to pay the
six months' interest on the bonds, and by the report of the
Directors a considerable sum is required for bujlding thirty
miles of fence, for building an engine-house at Brattleboro',
and, it would appear, a large amount for materials for
repairs and fuel, (the value of these items on hand being
only $14,665.40.)
The following, taken from a statement signed by the
Treasurer, furnishes a basis for calculating the value of the
stock.
(This statement does not include the interest paid.)
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Earnings and Expenses for Ten Years.
YEARS.
Gross Earnings.
Operating
Net Earnings.
Expenses.
1853, ....
1854, ....
1855, ....
1856, ....
1857, ....
1858, ....
1859, ....
1860, ....
1861, ....
1862, ....
i$248,854 99
273,814 01
267,908 54
240,183 43
247,471 37
225,079 68
246,798 15
254,826 37
200,648 38
216,064 86
$161,365 56
148,091 96
183,202 12
134,843 60
151,944 53
120,042 49
140,481 01
136,089 96
104,909 81
100,823 92
$87,489 43
125,722 05
84,706 42
105,289 83
95,526 84
105,037 19
106,317 14
118,736 41
95,738 57
115,240 94
Totals, .
$2,421,599 78
$1,381,794 96
$1,039,804 82
Average, .
$242,159 97
yt
$138,179 49
$103,980 48
Included in these reported earnings is the sum of $39,000
per annum received from the Cheshire Railroad for tlie use
of ten miles of track between Ashburnham and Fitchburg.
This lease, which expires in a few months, was made at a
time when the Cheshire was doing a large and increasing
business, and when they had especial reasons for desiring a
direct connection with the Fitchburg road.
The rent paid, $3,900 per mile per annum, is a most
exorbitant price, being from 11 to 13 per cent, upon the
cost of the road, and probably three times as much as the
business done will warrant the Cheshire in paying.
For instance, the net earnings of the roads connecting
with the Cheshire and Vermont & Massachusetts, for the
last two years, without including interest on debts, were—
ROADS.
isei.
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1
186S.
Fitchburg and branches, per mile of road, .
Connecticut Kiver, " "
Fitchburg & Worcester, " "
Rutland & Burlington, "
Cheshire, " "
Vermont & Massachusetts,^ "
$2,323 92
2,459 11
547 35
1,542 04
736 87
$2,718 14
2,520 37
. 588 42
510 66
1,635 04
990 14
* Excluding the $39,000 receiyed from the Cheshire.
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It is not supposed that this lease can be renewed, if
renewed at all, for naore than fifteen or twenty thousand
dollars, and there must then be deducted from the estimated
earnings of the road, at least one-half of this rent, or $19,500
per annum, leaving for the probable yearly earnings, $84,480.
It has been gravely stated by the parties interested in this
speculation, that the road might begin at once to pay divi¬
dends, if the funded debt, which matures July 1, 1865,
could be extended for twenty years, and provided for by a
sinking fund.
Expected net earnings as above, . . $84,500 00
Interest on indebtedness,. . $52,000
Sinking fund, .... 22,500
74,500 00
$10,000 00
Which, on 28,801 shares, would make the very ridiculous
dividend of thirty-six cents.
Allowing, however, the most favorable condition of things
that can possibly occur. Suppose the Hoosac Tunnel com¬
pleted, and opened for travel in ten years. (The Commis¬
sioners estimate it, provided no unforeseen obstacles are met
with, and the character of the rock remains the same in
the interior of the mountain as at the outside, &c., between
eight and eleven years from the time of commencing work.)
The business over the fifty-six miles of the Vermont &
Massachusetts, to be derived from this line when finished, is
variously estimated from $7,000 to $9,000 per mile of road.
But before this business can be done at all there must be
an addition to the equipment of the Vermont & Massa¬
chusetts road, (which now consists of 10 locomotives, all of
small class; 8 passenger cars; 5 baggage cars, and 179
freight cars,) of at least
20 locomotives, at $9,000,* . . . $180,000 00
* The present price is from $11,000 to $12,500, and other items of
equipment in the same proportion.
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20 passenger cars, at 13,000, . . . $60,000 00
10 baggage and mail cars, at $1,250, . 12,500 00
500 merchandise cars at (average) $650, . 825,000 00
Matérials for repairs and Fuel, . . . 80,000 00
The company owns no land or buildings at
Greenfield, but on the opening of the tun¬
nel line, will require land, depots; engine-
house, sheds, side track, &c., to cost, say 60,000 00
New repair shops and machinery, side tracks,
&c., at Fitchburg, .... . 30,000 00
Sidings at way-stations to accommodate
increased business, (allow trains to meet
and pass,) ...... 50,000 00
For reducing the Y at Ashburnham, where
all trains are now delayed for locomotives
to turn, 25,000 00
Telegraph, ...... 20,000 00
Incidentals, . . . . . . 20,000 00
In all, ..... $862,500 00
The only way to provide for this large expenditure—and
I am told it is under-estimated—will be by a new loan, or by
the issue of new stock at a depreciated value. Suppose it
to be a twenty-year loan, requiring a sinking fund of $22,500
per annum, the whole debt will then be about $1,725,000.
Estimated earnings, (taken at the most favorable rate)—•
Fifty-six miles, at $9,000 per mile, . . $514,000 00
Twenty-one miles, at $2,500 per mile, . . 52,500 00
$5665500 00
Expenses, at the average of four best man¬
aged Boston roads for the last three years,
fifty-four per cent., 306,000 00
$260,500 00
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From this take the interest, . 1103,500 00
And the contributions to sink¬
ing funds, . . . . 45,000 00
1148,500 00
Leaving applicable to dividends, . . . $112,000 00
That is to say, you can buy this stock for $36 or $37, lay
it away ten or eleven years, with all the contingencies, and
then, provided the Hoosac Tunnel is completed^ receive four
dollars per share per annum.*
A more absurd and unreasonable price was never man¬
ufactured " for any stock ever sold in the Brokers' Board,
and it is evident that the holders of this stock would find
some difficulty in " unloading " if its actual worth was
known.
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P. S. ■ Since the foregoing was written, it appears that
the Troy & Boston, Vermont & Massachusetts and Fitch-
burg roads have executed a contract by which they agree,
in consideration of the State's finishing the Hoosac Tunnel
and Troy & Greenfield Railroad, to pay the State twenty
per cent. of the gross earnings they may receive from pas¬
senger and freight business which passes over the whole or
any part of the Troy & Greenfield road.
The only condition being that when the net earnings of
the Troy & Greenfield road amount to six per cent, upon
its cost, the roads before named are to be released from
such payments.
By the Commissioners, the sum to be received by the
State under this contract, when the whole earnings amount
to four and a half per cent, upon the cost, is estimated
at $124,336, of which the contribution of the Vermont
& Massachusetts would be $45,225.
* See page 7.
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It is probably supposed that this payment will cease in
a few years after the completion and opening of the Tunnel,
but this expectation is not well founded ; for the estimated
cost of the Road and Tunnel (Commissioners' Report, page
95,) is 15,719,330 ; -six per cent, úpon which would
occupy the sum of $343,159.80, and this would require a
net earnings, upon the forty-four miles of the Troy and
Greenfield road, of $7,799 per mile.
Inasmuch as the Western road, with its immense local
traffic, its share of the New York business, and all its
advantages, only earned, excluding interest paid and
received, during the last and most prosperous year of its
experience, $5,846 per mile, it must be concluded that this
payment will entail a perpetual annual tax upon the
Vermont & Massachusetts road of from $45,000 to
$60,000.
Taking it at the lowest sum, and deducting this from the
estimated net earnings, the balance applicable to dividends
will be about $67,000 per annum, or $2.25 per share,
when the Tunnel and Troy and Greenfield road are
completed and fully in operation.
When it is considered that all the estimates and calculations
made herein are upon the most favorable expectations, and
nothing is allowed for extraordinary expenses, renewals or
accidents, to all of which the Vermont & Massachusetts road
is particularly exposed, from its single track, sharp curves,
high grades, number of road crossings at grade, and extraor¬
dinary number of wooden truss bridges, (in all over a mile
and a quarter in length) many of which have already been
standing fifteen years, probably no one will undertake to say
that the stock of this road is, or can be, under any circum¬
stances, worth half the price it is nominally selling for.
3 5556 042 158758
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