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Canadian Transport Sourcebook > All works> Annual Reports of the Waterloo Historical Society > Sketch of the History of the Village of Preston

Sketch of the History of the Village of Preston

(Otto Klotz, 1886)

...

The Preston Railway Debt

In 1852 an act was passed whereby the Galt and Guelph Raiway was incorporated.

The directors of that company made an agreement with the Canadian directors of the Great Western Railway Co., whereby the Great Western Railway Co., upon the building of the Galt and Guelph Railway by the directors thereof, was to assume that railway and all liabilities, work it and pay each stockholder of stock in the same six per cent. upon the stock subscribed and paid. This agreement was used as a great incentive to subscribe stock and accordingly not only individuals but also several municipalities were induced to subscribe stock. The municipalities were:—

Town of Guelph .....................$70,000.00
Township of Guelph ..................20,000.00
City of Hamilton .....................40,000.00
Village of Preston ....................40,000.00
$170,000.00
Bona fide Private Stock ...............17,000.42
Total Stock ....$187,000.42

There was also some bogus stock which was subsequently cancelled. The by-law passed by the municipal council of Preston was sanctioned by the ratepayers with an overwhelming majority, the few voices raised against its passage, though forcible in argument and true in every respect as future events demonstrated amply and fully, were drowned by the vociferous shouting of the multitude which had been seduced by the leaders of the movement. The bylaw was sanctioned on the 20th day of December, 1853, and came into force the next day. By it the Corporation of Preston was authorized to subscribe stock in the Galt and Guelph Railway Company for four hundred shares at twenty-five pounds, one hundred dollars a share, and to issue debentures for the same, to be redeemed in twenty years from date of bylaw. It was provided in the bylaw that a sinking fund be formed and that sufficient money be raised annually by taxation for such sinking fund and for the annual interest on the debentures. As the annual value of the amount of rateable property in Preston in 1852, was ascertained to be $13,862.60, the rate required to be raised for the payment of interest and the creation of a sinking fund was thirty-four cents on the dollar and the amount to be raised annually till 1873, by a population of 1540, was $4,400. Soon after the said stock was subscribed, with the assurance that it never needed to be paid, as the Great Western was to assume all the liabilities as soon as the G. G. Railway would be built, the Managing Director of the G. W. R. R., Mr. C. J. Brydges, went to England and took with him for confirmation the said agreement. It was said here that such confirmation was a mere matter for form and that there was no doubt of it being obtained. But the English Board of Directors of the G. W. R. R. took a different view; they condemned the act of the Canadian Directors and refused confirmation. When Mr. Brydges upon his return brought this sad news, the Directors of the G. G. R. R. contemplated to compel the G. W. R. R. and enforce the terms of said agreement, but unfortunately by some mere formality they were thrown out of court. The agreement had not the seal of the G. W. R. R. attached and since a corporation is recognized by its seal, this omission of attaching the seal gave the G. W. R. R. Co., in point of law, the right to disown the agreement.

This regulation on the part of the G. W. R. R. Co. was a sad blow to the Directors of the G. G. R. Co., who had their own road party completed and no funds to purchase rails with.

Thereupon on the 2nd of October, 1885, a lengthy agreement was made between the G. G. R. R. Co., and the G. W. R. R. Co., whereby the latter agreed to equip and work the road for a period of years, keep an account of receipts and expenditures, pay over balance of receipts, if any, to the Board of Directors of the G. G. R. R. Co., and bear themselves the loss in case of an adverse balance.

The G. W. R. R. Co., however, instead of keeping such account in the true spirit of justice and equity, kept no separate account of the G. G. R. R. Co. at all, but charged all receipts from the main line and the branch line in one account and all the expenditure upon the main line and the branch line in another account. Then in making out the half yearly statement for the G. G. R. R. Co. they charged the G. G. R. R. Co. its share per mile of the whole expenditure, including all the great losses of accidents on the main line, notwithstanding that the branch line only ran one train to at least six trains on the main line, while in making out that statement they only credited the G. G. R. R. for all freight shipped thereon for the actual miles on that branch without in any way accounting for the profit made by way of freight paid by shippers upon goods sent from the several stations on the branch line and also over the main line.

Against this inequitable mode of charging and crediting, objection was raised and the matter was submitted to the Court of Chancery, which Court ordered the G. W. R. R. Co. to render an account in accordance with the principles of justice and equity and as contended for on the part of the G. G. R. R. Co. Unfortunately however the only parties who at the meetings of the Board of Directors of the G. G. R. R. Co. strongly urged the final prosecution of that order of Court were the representatives of Preston, while the other parties composing the Board were either under direct obligation to the G. W. R. R. Co., for favors received, or were more or less indifferent upon the subject. The consequence was that further proceedings were stayed, and a compromise made between the G. W. R. R. Co. and the G. G. R. R. Co. whereby the latter gave up to the former the whole railway and all its privileges and the former assumed the working and managing of the road; thus Preston lost its claim. Preston had not, nor had any other of the municipalities, raised a sinking fund to redeem the debentures as they matured. Of the debentures issued several had been redeemed but the unredeemed portion was still so large that there appeared no alternative other than the issue of new debentures to redeem the railway debentures. The debentures redemmed were paid partly with Clergy Reserve Fund money, partly only by direct taxation money, viz:—

Clergy Reserve Fund Money, 40 shares, $4,000 paid thereof ................$3,336.40
Tax Money bought by Council, 16 shares $1,600 ...........................1,322.69
Tax Money bought by Erb & Klotz, 72 shares, $7,200 paid therefor ........5,523.62
128 shares, $12,800 paid therefor ......$10,182.71

Leaving unpaid 272 shares at $100, $27,200 besides interest. The shares or debentures bought by Abram A. Erb and Otto Klotz were those held by the G. W. R. R. Co. and which the Court of Chancery had ordered to be sold. They were advertised for sale by public auction, and Messrs. Erb & Klotz were deputed by the Preston council to attend the auction with a view to purchase those debentures; they succeeded in their mission by managing to procure those debentures amounting to $7,200 principal with interest due, $216, a total of $7,216, for a cash payment of $5,408, making a clear profit of $2,008. Mr. Klotz had previously arranged for the loan of $5,408 and the difference between the two sums shown, viz, $5,523.62 and $5,408 is for interest on that loan. While that heavy debt of $27,200 with half yearly interest was hanging like a dark cloud over Preston, threatening almost certain ruin, a real Godsend came by way of a statute of Ontario. By this statute it was enacted that the municipalities which had issued debentures in furtherance of railways in this province, and had not already borrowed money from the Municipal Loan Fund, should be entitled to receive aid from that fund for the purpose of paying off such indebtedness, or certain portions thereof, according to a certain scale laid down in the statute. Accordingly every effort was made by the Preston council through certain parties specially appointed for that purpose to advance and make known to the Government of Ontario, the claim of the municipality of Preston upon the Municipal Loan Fund by virtue of that statute. The result of several interviews with the Prime Minister of Ontario proved successful and the Municipality of Preston obtained in 1873 from the Provincial Treasurer the sum of $22,254 for the redemption of railway debentures to that amount, and the debentures were redeemed accordingly and sent to the Provincial Treasurer for cancellation. This left the sum of $4,946 of debentures still unredeemed and these were paid off from money raised by direct taxation; so that by the time the debentures matured all were redeemed and Preston stood once more free of debt; after struggling for twenty years in endeavoring to keep its head above water and avoid drowning with that millstone of $40,000 debt and interest weighing upon its body.

The actual cash paid by the Municipality of Preston for this railway debt, besides incidental expenses for lawyer's fees, bond costs, etc, was as follows:—

Cash paid for debentures redeemed as above$10,182.71
Interset paid on coupons during 20 years ....37,444.62
Last debentures redeemed in 1873 .........4,946.00
$52,573.33

Really an appalling sum if it is taken into consideration that all Preston got for it was that a station was built in Preston, while if Preston had not taken stock the railway would have passed Preston about one mile to the south, where a station might have been built for a mere trifle.

The Grand River Bridge

The inhabitants of Preston and especially the business men conceived the idea that a bridge across the Grand River at what was then called Bechtel's farm, now Oberholtz's farm, would be of great advantage to Preston, in as much as it was in a straight line from Strassburg to the junction of the Berlin road with that leading to the Bechtel farm. Accordingly a subscription was raised and with the money thus obtained a bridge was built across the Grand River; and the hill on the opposite side of that river partly lowered. This bridge proved of great benefit to Preston, as farmers of the west coming through Strassburg could reach Preston almost as quickly as Doon, and sooner than they could reach Blair or Galt.

Unfortunately freshets carried off the bridge and thereby one important road leading into Preston was blocked again by the unbridged view. The Municipal Council of Waterloo Township had for several years performed statute labor upon the approaches and even repaired the bridge itself. By this act that council had virtually in law assumed the bridge, and were accordingly bound to keep it in repair as also to rebuild it after being carried away. The Reeve was notified accordingly but the Township Council appeared unwilling to rebuild and notwithstanding that there could be no doubt about the responsibility of that council for such rebuilding neither the people of Preston nor its council in particular could be induced to take legal procedure against the Township Council. The matter remained unprosecuted, the bridge was never rebuilt, the road about two miles nearer to Strassburg than going there by way of Blair became virtually a blocked road and Preston lost one of the chief tributaries to its grist-mills and other business places.

[Public Domain] Copyright/Licence: The author or authors of this work died in 1964 or earlier, and this work was first published no later than 1964. Therefore, this work is in the public domain in Canada per sections 6 and 7 of the Copyright Act. See disclaimers.