Editing Central Pacific Railroad (section)

===Financing===
[[File:Central Pacific Railroad First Mortgage Bonds Advertisement 1867.jpg|thumb|150px|Advertisement for CPRR First Mortgage Bonds (1867)]]
{{multiple image
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|image1 = Trestle CPRR.jpg
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|image2 = The Last Spike 1869.jpg 
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|footer = (Left): The Central Pacific built trestles initially in order to expedite construction of the railroad.  Later, many of the trestles were filled in with dirt, such as this one near [[Secret Town, California|Secret Town]], [[Placer County, California]]. Photo: [[Carleton Watkins]](1876); (right): ''The Last Spike'', painting by [[Thomas Hill (American painter)|Thomas Hill]] (1881).  Some of the Central Pacific officials depicted in the painting were not actually at the Gold Spike ceremony in Utah.<ref name="auto8"/>
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Construction of the road was financed primarily by 30-year, 6% [[United States Treasury security|U.S. government bonds]] authorized by Sec. 5 of the [[Pacific Railway Acts|Pacific Railroad Act of 1862]]. They were issued at the rate of $16,000 ($265,000 in 2017 dollars) per mile of tracked grade completed east of the designated base of the [[Sierra Nevada]] range near Roseville, CA where California state geologist Josiah Whitney had determined were the geologic start of the Sierras' foothills.<ref>{{cite web|author=CPRR.org |url=http://www.cprr.org/Museum/Pacific_Railroad_Acts.html#1862-05 |title=Pacific Railroad Act of 1862 §5 |publisher=Cprr.org |date=September 24, 2009 |access-date=17 January 2014}}</ref> Sec. 11 of the Act also provided that the issuance of bonds "shall be treble the number per mile" (to $48,000) for tracked grade completed over and within the two mountain ranges (but limited to a total of {{convert|300|mi|km}} at this rate), and "doubled" (to $32,000) per mile of completed grade laid between the two mountain ranges.<ref>{{cite web|author=CPRR.org |url=http://www.cprr.org/Museum/Pacific_Railroad_Acts.html#1862-11 |title=Pacific Railroad Act of 1862 §11 |publisher=Cprr.org |date=September 24, 2009 |access-date=17 January 2014}}</ref> The U.S. Government Bonds, which constituted a lien upon the railroads and all their fixtures, were repaid in full (and with interest) by the company as and when they became due.

Sec. 10 of the 1864 amending Pacific Railroad Act (13 Statutes at Large, 356) additionally authorized the company to issue its own "First Mortgage Bonds"<ref>{{cite web|author=CPRR.org |url=http://cprr.org/Museum/Bond_Adv_CPRR_1867.html |title=First Mortgage Bonds of the Central Pacific Railroad, Business Prospects and Operations of the Company, 1867 |publisher=Cprr.org |access-date=17 January 2014}}</ref> in total amounts up to (but not exceeding) that of the bonds issued by the United States. Such company-issued securities had priority over the original Government Bonds.<ref>{{cite web|author=CPRR.org |url=http://www.cprr.org/Museum/Pacific_Railroad_Acts.html#1864-10 |title=Pacific Railroad Act of 1864 §10 |publisher=Cprr.org |date=September 24, 2009 |access-date=17 January 2014}}</ref> (Local and state governments also aided the financing, although the City and County of San Francisco did not do so willingly. This materially slowed early construction efforts.) Sec. 3 of the 1862 Act granted the railroads {{convert|10|sqmi|km2|0}} of public land for every mile laid, except where railroads ran through cities and crossed rivers. This grant was apportioned in 5 sections on alternating sides of the railroad, with each section measuring {{convert|0.2|mi|m}} by {{convert|10|mi|km}}.<ref>{{cite web|author=CPRR.org |url=http://www.cprr.org/Museum/Pacific_Railroad_Acts.html#1862-03 |title=Pacific Railroad Act of 1862 §3 |publisher=Cprr.org |date=September 24, 2009 |access-date=17 January 2014}}</ref> These grants were later doubled to {{convert|20|sqmi|km2|0}} per mile of grade by the 1864 Act.

Although the Pacific Railroad eventually benefited the Bay Area, the City and County of San Francisco obstructed financing it during the early years of 1863–1865. When Stanford was Governor of California, the Legislature passed on April 22, 1863, "An Act to Authorize the Board of Supervisors of the City and County of San Francisco to take and subscribe One Million Dollars to the Capital Stock of the Western Pacific Rail Road Company and the Central Pacific Rail Road Company of California and to provide for the payment of the same and other matters relating thereto" (which was later amended by Section Five of the "Compromise Act" of April 4, 1864). On May 19, 1863, the electors of the City and County of San Francisco passed this bond by a vote of 6,329 to 3,116, in a highly controversial Special Election.

The City and County's financing of the investment through the issuance and delivery of Bonds was delayed for two years, when Mayor [[Henry P. Coon]], and the County Clerk, Wilhelm Loewy, each refused to countersign the Bonds. It took legal actions to force them to do so: in 1864 the Supreme Court of the State of California ordered them under Writs of [[Mandamus]] (''The People of the State of California ''ex rel'' the Central Pacific Railroad Company vs. Henry P. Coon, Mayor; Henry M. Hale, Auditor; and Joseph S. Paxson, Treasurer, of the City and County of San Francisco.'' 25 Cal. 635) and in 1865, a legal judgment against Loewy (''The People ''ex rel'' The Central Pacific Railroad Company of California vs. The Board of Supervisors of the City and County of San Francisco, and Wilhelm Lowey, Clerk'' 27 Cal. 655) directing that the Bonds be countersigned and delivered.

In 1863 the State legislature's forcing of City and County action became known as the "Dutch Flat Swindle". Critics claimed the CPRR's Big Four intended to build a railroad only as far as [[Dutch Flat, California]], to connect to the Dutch Flat-Donner Pass Wagon Road to monopolize the lucrative mining traffic, and not push the track east of Dutch Flat into the more challenging and expensive High Sierra effort.  CPRR's chief engineer, Theodore Judah, also argued against such a road and hence against the Big Four, fearing that its construction would siphon money from CPRR's paramount trans-Sierra railroad effort. Despite Judah's strong objection, the Big Four incorporated in August 1863 the Dutch Flat-Donner Lake Wagon Road Company. Frustrated, Judah headed off for New York via Panama to raise funds to buy out the Big Four from CPRR and build his trans-Sierra railroad.  Unfortunately, Judah contracted yellow fever in Panama and died in New York in November 1863.<ref name="SierraSun2004">{{cite web |last1=McLaughlin |first1=Mark |title=The Big Four and the 'Dutch Flat swindle' |url=https://www.sierrasun.com/news/the-big-four-and-the-dutch-flat-swindle/ |website=Sierra Sun: Serving Truckee, Tahoe City, Kings Beach and Incline Village |access-date=April 28, 2019 |date=July 28, 2004}}</ref>