The Gulf, Mobile and Ohio
By James H. Lemly

 

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CHAPTER XX

Lines Acquired Prior to 1930

 

 

THE BIRMINGHAM AND NORTHWESTERN RAILWAY COMPANY-1910-29

Steel Bridge, Glasgow, Mo., 1879 For many years prior to 1910, Jackson, Tennessee, had seen the advantages of railroad transportation.  This town was fortunate enough to be the point at which three important rail lines crossed, and railroad wages provided much of the financial support of the community.  Because all of these roads were prosperous at the time, it was comparatively easy to organize another rail company which proposed to bring more income to the coffers of Madison County’s “metropolis.” A railroad was planned which, it was hoped, would someday extend from Birmingham, Alabama, to Kansas City, Missouri.  The line was designed to cross Tennessee on a diagonal line from Corinth, Mississippi, to a point on the Mississippi River northwest of Dyersburg.  The road would thus serve Jackson, instead of Memphis as the line which is now known as the Frisco did.

Because promotional strength for the line came from Jackson’s citizens, its construction started there also.  The first link was to join Jackson with Dyersburg, Tennessee, some 49 miles away.  The city of Jackson was to put up $75,000 to aid construction.  Dyersburg contributed $50,000, and the town of Bells advanced $16,000.  In addition to these sums provided by the municipalities, interested individuals signed notes in favor of the project which provided $50,000.

With this backing, the company, known as the Birmingham and Northwestern Railway Company, was able to begin construction on July l, 1911.  The corporation had been started on August 16, 1910, with the granting of a charter by the State of Tennessee, but it had taken almost a year to lay the groundwork so that actual construction could begin.

Work progressed smoothly and by April 20, 1912, 38 miles of the line were ready for operations.  The first sector extended from Jackson to the station of Tigrett.  The rest of the work was pushed rapidly to a conclusion, and on June 16 the remaining 11-mile sector was put in service, connecting Dyersburg with Jackson.

The work was done by the Jackson Construction Company, which had been organized for the specific purpose of building the road.  Many of the men who later were officers and directors of Birmingham and Northwestern Railway Company were also officers in the construction company.

Construction was completed by means of the sums advanced by the sponsors and by the use of funds borrowed from local banks.  Permanent financing was then undertaken by issuing $800,000 in 5 per cent bonds and $300,000 in common stock.   $191,000 in stock was issued to the cities and individuals who had acted as sponsors, $103,000 went to the construction company as part payment for its work, $4,200 was paid to R.  M.  Hall, president of the Jackson Construction Company, for surveys and profile maps of the road, and $1,800 was sold for cash.

When the line began operations in 1912 it had as its president I. B. Tigrett, a prominent young banker of Jackson.  This was the first time the 32-year-old Tigrett had ever been associated with railroad affairs.  The major reason for his entry into railroading at this time was the fact that his bank held most of the bonds of the Birmingham and Northwestern Railway Company, and the bank wanted an experienced financier in charge of the funds of the line to see that interest payments were prompt and continuous.

Since the new president of the road was not experienced in railroad operations, he served in a part-time capacity only and still held his position in the bank.  The actual operation of the line was controlled by its full-time employees.

The road immediately became an important local thoroughfare, moving much of the produce of the region to market in Jackson and Dyersburg.  Passenger service was offered also, and this business prospered at the time, although the trips of each traveler were generally very short.  Movement primarily was from the rural sections to and from one of the two terminals.  Thus the road performed the function which these two towns desired when they agreed to help sponsor the line.  Such things are impossible to measure exactly, but it is probable that in the long run the merchants of Dyersburg and Jackson profited many times more than the $125,000 which these cities advanced in the building of the road.

The line was never a major money maker, however, and never in its life did the Birmingham and Northwestern Railway Company pay dividends on its $300,000 common stock.  Partly for this reason and partly for others, the line was not extended beyond the original 49 miles which was completed in 1912.  The problem of crossing the Mississippi River served as an effective block on the northwest end of the line, and Jackson was already tied to Birmingham by the line of the Illinois Central which had been built only a few years before 1912.

The Birmingham and Northwestern Railway Company had 4 locomotives, 5 passenger cars, and 92 freight cars which produced $120,000 in revenue for the year ending June 30, 1916.  Operations for the year showed a deficit of $17,000 which indicates the problems the road faced at that time.  It apparently was successful during the next year, however, for the report ending December 31, 1917, showed a net profit of $53,000.  This later turned out to be the high water mark of the line’s earnings for with the advent of federal control, profits decreased and then vanished.  After the war years, the Birmingham and Northwestern found conditions much changed and its problems increased year after year until the little line was taken over by the Gulf, Mobile and Northern.

When Mr. Tigrett became President of the GM&N in 1920, he ceased to direct the affairs of the Birmingham and Northwestern Railroad Company, although he retained his affection for the line and its home town of Jackson.  In fact he never moved away from Jackson and thus kept in close touch with the affairs of the Birmingham and Northwestern.  Also, he saw that the Birmingham and Northwestern could work profitably with the GM&N in many instances, so he brought the two roads as closely together as he could.  The GM&N used the station facilities of the Birmingham and Northwestern in Jackson, rather than construct its own, and the two roads developed joint tariffs which proved mutually beneficial.

Because of the mutuality of interests of the two lines, the GM&N tried to purchase the securities of the Birmingham and Northwestern Railway Company in 1922, but the Interstate Commerce Commission refused to agree to the proposal.  In March, 1924, the GM&N, with ICC approval, purchased the bonds of the Birmingham and Northwestern and acquired an option on 2,000 of the 3,000 shares of stock.  Finally in March, 1927, the Commission agreed to acquisition of all Birmingham and Northwestern Railway Company securities by the GM&N.  After this transaction was completed, the GM&N operated the Birmingham and Northwestern under a lease which paid the Birmingham and Northwestern Railway Company $40,000 a year.  This did not quite pay the interest on the then outstanding Birmingham and Northwestern bonds, but since the GM&N had purchased all of these securities, it mattered little if interest payments were less than adequate.

For practical purposes, the Birmingham and Northwestern Railway Company ceased to function in 1927, but its legal existence was continued until 1929.  In July, 1929, the Interstate Commerce Commission authorized the GM&N to acquire the property of the Birmingham and Northwestern which was accomplished in September of the same year.  With this action the corporate activities of the Birmingham and Northwestern Railway Company came to a close, its lines formally becoming part of the larger GM&N.

 

THE MERIDIAN AND MEMPHIS RAIILWAY COMPANY - 1911-29

North of the Alabama and Vicksburg Railway and situated between the main line of the Mobile and Ohio Railroad and the New Orleans, Mobile and Chicago Railroad .  .  .a large tract of standing timber considerably removed from rail communication remained untouched by the woodsman’s axe and in 1911 Mr. Sam Neville, an enterprising citizen of Meridian, Mississippi resolved to construct a railroad through this timber and on August 29, 1911, incorporated the Meridian and Memphis Railway.   This early statement about the Meridian and Memphis clearly sets forth the purpose of construction of this road.  It was to be a pathway to bring the lumber of its region to more profitable markets.

Neville, like most of the railroad promoters of the day, did not intend for his road to stop at Union, Mississippi.  His stated terminal was a point at or near Winona, Mississippi, on the IC.  If this had been done, his road would have run northwestward about 100 miles from Meridian, but the first construction project was the only one started.  The road never went beyond Union, Mississippi, some 32 miles from Meridian and about 18 miles north of Newton, Mississippi, which is on the old Alabama and Vicksburg Railroad.  Construction began on February 1, 1912, and by June 30, 1913, the first 30 miles of line was ready for service.  It was not until December, 1913, that the line was opened into Union and trains were able to operate over the entire distances.

The Equitable Loan and Mortgage Company of Mobile, Alabama, acted as banker for Mr. Neville in this project.  This firm advanced $478,714.41 to Neville during construction.  The city of Meridian donated lands worth approximately $50,000 to the undertaking and several interested lumber companies helped in various ways.  When the line was completed, the road issued $675,000 face value of 5 per cent bonds to the Equitable Loan and Mortgage Company in payment of its loan account.  These bonds were given a discounted value of $401,127.75, about $174,000 less than face value.  The road also issued $500,000 capital stock to Neville for his work in developing the line.

For the year which ended June 30, 1914, the Meridian and Memphis Railroad Company had 2 locomotives in service, 2 passenger cars, and 101 freight cars.   Gross revenues for the year were listed at $13,150.93 with a net deficit of about $15,000.  During the year the road carried 15,741 passengers and hauled 45,278 tons a total of 1,057,479 ton miles.

The year ending June 30, 1915, was much better, with a total of 70,780 tons hauled.  The deficit for that year was down to a little less than $2,000, primarily because hauling of forest products had risen from approximately 14,000 tons in 1914 to 44,000 tons in 1915.

Improvement continued in 1916, and the road showed a net income of $8,000.  This was possible because the road moved a total of 101,343 tons of freight, of which 69,537 tons were forest products.

On July 1, 1916, the Meridian and Memphis Collateral Trust was created, in which 4,000 participating shares were issued.  The Trust held all of the $500,000 capital stock and the $675,000 first mortgage bonds of the Meridian and Memphis Railway Company.  These securities constituted the entire capital obligation of the Meridian and Memphis except for a first lien, 6 per cent gold note of $260,000 which was due July 1, 1919.

The GM&N bought the 4,000 shares of the Meridian and Memphis Collateral Trust in January 1918, subject to the payment of the $260,000 in 6 per cent gold notes, which were paid off on July 1, 1919.  The GM&N assumed complete control of Meridian and Memphis operations and, for all practical purposes the line was a part of the GM&N.  Not until 1929 was the GM&N given ICC permission to acquire the property of the Meridian and Memphis and thus liquidate the company. 

 

THE JACKSON AND EASTERN RAILWAY COMPANY - 1916-29

 When Sam Neville decided that there was little likelihood that his Meridian and Memphis Railway would be built from Union to Winona, Mississippi, he turned his mind to other fields.  Union, Mississippi, was the western terminal of the Meridian and Memphis, and west of Union the timber was still just as fine as it had ever been, for there was no way to get the logs out.  Neville decided to start another line which should run west from Union, but this time the plan was to run the road west and slightly south to Jackson, Mississippi, instead of northwest to Winona.

On January 24, 1916, the Jackson and Eastern Railway was chartered under the general corporation laws of Mississippi Construction started almost immediately, and by November, 1916, the road began operations over some of its track.  By the end of 1916 the line was in service from Union to Sebastapol, a distance of about 13-1/2 miles.  In this instance, there were no prosperous towns ready to pay, large bonuses for construction, but the inhabitants of the region were happy to see the railroad.  The people of the village of Sebastapol contributed $1,000 to the project, and the lumber companies in the area also proved helpful.  The Buckwalter Lumber Company agreed to use the line for its logging trains and contracted to pay rental of “$1.00 per day per mile for tracks used by the .  .  .  Company.  When flat or gondola cars are provided by the carrier for use by the Buckwalter Lumber Company, the stipulated rental is $1.50 per car from any point to any other point on the line of road of the carrier.”

According to the ICC valuation study which was made as of June 30, 1917, the Jackson and Eastern Railway Company traversed creek bottom and timber flat lands, with a few sand clay, regions.  The road was 14 miles long, had 1 locomotive and 72 freight cars and was valued by the Interstate Commerce Commission at $140,000 for rate-making purposes.

The valuation study further stated that Neville had been issued $99,700 in stock for his expenses in building the road and that the road had issued an outstanding $50,382 in short-term notes.

For the year 1918, the Jackson and Eastern Railway Company hauled 59,334 tons of freight, and of these about 55,000 tons were timber or lumber.   During this year the road showed a net income of $7,345.  It employed thirty-eight people and paid out $30,364 in wages for the year.

For the next three years, 1919, 1920, and 1921, the road showed a great drop in tonnage and as a result showed a net deficit from its operations.  Partly as a result of this decline in business, the road decided to go ahead with its original plan to build on to Jackson, Mississippi.  On July 12, 1921 the Interstate Commerce Commission authorized the extension of the line to Jackson, which at this time was some 61 miles from the end of the road.  The Commission recognized that the line might not be a paying proposition permanently, but it gave its permission because there were tremendous stands of timber in the region and local interests were willing to pay for the road to get the timber out.  The Commission also recognized that if the line was completed it would open a new outlet to the north for rail business south of Jackson, Mississippi.  The decision noted that the growing capital city of Mississippi had no railroads leaving it to the north except the IC and its subsidiaries.

Because of the speculative nature of the proposed extension of the Jackson and Eastern Railway Company, Sam Neville promised to build the road and then to take 6 per cent bonds in payment for the construction, which was expected to cost about $15,000 per mile.

Construction westward was started in 1922 but no new mileage was put into operation during the year.  Freight tonnage increased, and for the first time in several years the road reported a net profit which amounted to $5,672.

The road was opened in 1923 as far west as Walnut Grove, Mississippi, which was about 24 miles from Union.  Construction was not being rushed, but there was not much reason to be hasty, when the primary purpose of the line was to haul timber which could not be cut until the road reached the area.  Construction may also have been slowed down by the pressure of operations.  Profits were so good in 1923 that an 8 per cent dividend was declared on the $100,000 common stock which was held by President Neville.  This was the first dividend the road had been able to pay in its history.

By the end of 1924 the road had begun to carry passengers as well as freight.  Records of the line showed that 10,004 passengers were carried for an average distance of 15 miles at a charge of 4.14 cents per passenger mile.  It is not at all likely that those passengers thought they were getting fancy service over this line with its mixed trains, but certainly they were paying fancy prices for the trips.  The freight service of the road was just as expensive as the passenger service.  During 1924 the line hauled over 99,000 tons of freight (82,000 tons of timber) for a total of 1,949,195 ton miles at all average charge of 7.64 cents per ton-mile.  A great demand undoubtedly existed for Mississippi timber.  Rates from the forests to the sawmills were high, but the traffic still moved.  The average haul was fortunately only 20 miles.  The rest of the journey to market was over the competitive lines of other railroads.

Although the charges seem very high, they were not excessive in comparison with charges for similar services by other timber railroads.  It had always been true that whenever the volume of rail service is light the proportional charges must be high to sustain the service.  In spite of these high charges in 1924, the road showed a net profit of only $1,700, and no dividends were paid on the stock.

The year 1925 proved to be another good one for Jackson and Eastern Railway Company.  The road had been extended to Lena, Mississippi, which was a little over 33 miles from Union.  Tonnage increased from 99,000 to 114,000 tons, and as a result of that and other factors a net profit of $15,142 was reported.  Again a dividend of 8 per cent was paid on the $100,000 of common stock.

In July, 1926, the GM&N bought, subject to ICC approval, the entire capital stock of the Jackson and Eastern Railway Company.  This was part of the GM&N program to gain entry into Jackson, Mississippi, and to offer service to New Orleans in conjunction with the New Orleans Great Northern.  At the time of this transaction, the Jackson and Eastern Railway Company had $198,000 in 6 per cent bonds outstanding, in addition to the $100,000 of capital stock.  Also, the Commission on March 20, 1926, had authorized the Jackson and Eastern Railway Company to issue $300,000 in 5 year 6 per cent bonds for expansion purposes.  Apparently, Mr. Neville had decided that he should continue his operations all the way into Jackson since he had been showing good profits for the past 3-year average.

The Commission granted permission for the GM&N to hold the stock of the Jackson and Eastern, with the result that by the end of 1926 the GM&N was in complete control of the road and the task of extending and rebuilding the line was well under way.  On July l, 1926, the GM&N formally leased the Jackson and Eastern Railway Company.  Payments were to equal the interest due on Jackson and Eastern’s bonds and short-term loans.  At that time, the Jackson and Eastern had $230,000 in bonds outstanding, and the GM&N owned all of these.  The GM&N was, in effect, paying dividends to itself from this transaction.  At the same time, it was paying interest to itself because the construction funds to build the new line were also being advanced by the GM&N.

When the extended line was placed in service in July, 1927, the Jackson and Eastern Railway Company was little more than a name.   It was GM&N equipment, crews, and trains which operated over the road, but technically the Jackson and Eastern Railway Company was still in existence.  In July, 1929, the GM&N was given permission by the Interstate Commerce Commission to acquire the property of the Jackson and Eastern Railway Company at the same time it acquired the property of the Birmingham and Northwestern Railway Company and the Meridian and Memphis Railway Company.  When this transaction was completed in September, 1929, the Jackson and Eastern Railway Company officially became a part of the GM&N and lost its corporate existence in the drive to simplify control and to reduce operating expenses.

 

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