June 10, 1903

CANADIAN NORTHERN RAILWAY-GUARANTEE OF SECURITIES.


House went in committee on the following proposed resolutions : 1. Resolved, that the government may aid the extension of the line of the Canadian Northern Railway Company from Grandview, the point where what is known as the Gilbert Plains branch of the said railway ends, to a point at or near Edmonton, a distance of about 620 miles, and also of the Prince Albert branch of the said railway from a point 100 miles east of Prince Albert to Prince Albert, a distance of about 100 miles, by guaranteeing the principal and interest of the first mortgage bonds, debentures or other securities of the company to the extent of $13,000 per mile of the line, interest on the said bonds to be at the rate of three per cent per annum payable half-yearly, and the principal to be payable in 50 years. 2. Resolved, that the said bonds, debentures or other securities shall be secured by mortgage forming a first charge upon the lines of railway so aided, and all property and franchises in connection therewith, and all revenues derived therefrom by the company ; provided that with respect to that portion of the said line from the end of the Gilbert Plains branch to the westerly boundary of Manitoba, a distance not exceeding sixty-five miles, tile said mortgage shall be a first charge to the extent of only $10,000 per mile, but shall also rank on the said portion next after the charges heretofore created ; provided also that the said mortgage shall be a charge next after a first charge of $13,000 per mile (to be created by the company) on that part of said Prince Albert branch. 3. Resolved, that the said mortgage shall also form a charge next after the charges existing thereon upon all the lines and branch lines of


CON

Rufus Henry Pope

Conservative (1867-1942)

Mr. POPE.

railway of the company now In operation, and all property and franchises connected therewith, and all revenues derived therefrom by the company.

1. Resolved, that the kind of securities to he guaranteed as aforesaid, and the forms thereof, and the form and terms of the mortgage securing them, and the form and manner of guarantee, sfiall be such as the Governor in Council approves of.

5. Resolved, that upon the said guarantee being signed on behalf of the government, the government shall become liable for the payment of the principal and interest of the securities guaranteed, and the said payment shall be a charge upon the Consolidated Revenue Fund.

6. Resolved, that the rates and tolls to be charged for the transfer and carriage of freight and passengers upon the lines of railway 30 aided and upon the lines owned by the Canadian Northern Railway shall be under the control of the Governor In Council or of such authority, commission or tribunal as is designated or constituted under any Act of the parliament of Canada for the regulation or control of the business of railways.

7. Resolved, that the Governor in Council or any authority created by parliament for the purpose may also grant running powers over any portion of the lines hereby aided to any other line of railway upon terms considered equitable.

8. Resolved, that it shall he unlawful for the Canadian Northern Railway to lease or sell any of its lines or any portion thereof to the Canadian Pacific Railway Company or to amalgamate with the said company or enter into any agreement with the said company whereby rates upon freight or passengers shall be pooled ; hut this provision shall not extend to traffic or running arrangements made with the assent of the Governor in Council.

9. Resolved, that any money paid by the government of Canada under the guarantee herein provided for shall be held to be paid In discharge of the liability of the government, hut not in discharge of the liability of the mortgage securing them ; and the money so paid shall be held to be still secured by the said securities and mortgage, and the government shall be subrogated in all the rights of the holders of the securities, the interest upon or the principal of which has been paid by the government, and the government shall in respect of all the moneys so paid be in all respects in the position of security holders in respect of whose securities default has been made in payment to the extent of the moneys paid by the government.-(The Minister of Railways).

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The MINISTER OF RAILWAYS AND CANALS (Hon. A. G. Blair).

These resolutions, it will be observed, contain the proposals of the government in the way of granting aid towards the construction of certain portions of the line of the Canadian Northern Railway. I apprehend that there is no railway which could be projected in Canada to-day which would have stronger claims upon the favourable consideration of the government and of parliament for assistance to any necessary extent than the line of railway which is mentioned in these resolutions. The main portion of the line of this road, that is to say, that portion extending from Grandview, in the province of Manitoba, to Edmonton, has not only been

JUNE tO, 1903

located, but its location lias been approved as required by law. Therefore, we know whereof we speak when we say that the country through which this railway passes is one of exceptional fertility, and one which will, without any reasonable doubt, afford, in a very short time, not only a substantial amount of traffic, but a paying traffic, to the railway. It will be noted that the mileage for which aid is to be authorized in these resolutions aggregates about 720 miles.

One portion of the line has not yet been finally located, or at all events, the location has not been approved of. That is the portion east of Prince Albert not exceeding 100 miles. The main line, as I may describe it, because it will be the main line of the Canadian Northern which extends from Grandview to Edmonton, passing through Battle-ford, will not exceed 620 miles. As to the quality of land in this district, we are informed by the officers of the Interior Department. that the raiway is tributary to a fertile soil aud a country SO per cent of which is capable of yielding the best quality of wheat the North-west Territories can produce.

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CON

Robert Laird Borden (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. BORDEN (Halifax).

You are speaking of the 100 miles ?

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The MINISTER OF RAILWAYS AND CANALS.

I am speaking of the 620 miles from Grandview to Edmonton. The same may be said in refrence to the other section as well, as I am advised. Perhaps, not quite the same percentage, but very nearly so, and the section of the country through which the 100 mile branch of the railway passes east of Prince Albert, is pretty well filled up by settlers. People have been settled there for very many years, they have flocked in within the last few years in increasing numbers and they have been expecting that a railway would be constructed through the district for many years past, until, as I am advised, they have become almost hopeless in. regard to it and the disposition is believed to exist in many of them to throw up their hands and abandon the country altogether if railway construction does not take place at an early day. Taking into account the class of country through which the 620 mile section from Grandview to Edmonton, runs, it will be fair to assume that no reasonable amount of obligation, no reasonable amount in the way of bonded indebtedness which may lx? placed upon that undertaking in order to ensure its construction will not in the course of time be fully paid, not only the interest paid, but tlie principal amount returned. There is, I think, no doubt in the mind of any person who has made himself acquainted with the result of the operation of the lines of the Canadian Northern Railway in portions of the province of Manitoba and the west, that the business which-will be created upon that line of railway will not only suffice to pay the working expenses almost at

the outset, but will suffice to pay at a very early day the interest charges upon its bonded indebtedness as well. No one, I think, will question but that in view of the magnificent country through which that railway passes, and in view of the rapidity with which people from other lands as well as from some portions of our own country are flocking into the North-west Territories and settling in the district, that the obligation rests upon the government to see to it that no time is lost in ensuring the early construction of a railway through that territory. I think there is no more imperative obligation resting upon the parliament of this country than to bring railway conveniences and railway accommodation at the earliest possible moment to the settlers who have gone in there with the expectation of making their homes there and in the further expectation of finding these facilities afforded them. If that be a fact, and I think it will not be disputed by this committee, the question which rested upon the government was this : Was it reasonable to suppose that the company which has been chartered to construct this line would be able to as speedily as the necessities of the country required lay out and construct and put that line into operation of its own means and relying upon its own financial strength and relying in addition to that only upon the character of the credit which would attach to the undertaking among financiers abroad ? I think it would be a disappointment to the country, I think it would be expecting too much of the company, and that we would be likely to retard aud injuriously affect the interests of the people who have settled in that territory if we were to wait until conditions exist which would enable the company to carry that work through itself without assistance. Time would be lost and it appears to me and to the government time is the very essence of the whole question in connection with the construction of this railway. Well, having decided in our minds that the obligation rests upon the government to give all the assistance to this company that was possible1. and that we could not afford to wait until the company of its own means and with the resources which it had in its own hands should be able to build the railway, and having come to the conclusion that the duty rests upon the government to assist this company in carrying out its undertaking. the question then arose as to what form assistance would take. It is well known to this committee that for years past there has been a genera] and uniform policy on the part of both the present and preceding governments to make grants by way of bonus to such companies as the government felt were entitled to be assisted, giving out of the public exchequer for ever very substantial sums of money for the purpose of enabling these enterprises to be carried through. But, it appeared to us

that iu a work of this magnitude, in an undertaking which would involve such a very large amount of money if we were to pursue the policy which lias hitherto obtained and having regard to the fact that we could make the necessary advances, or afford the necessary assistance without any question or doubt in such a manner as would not involve in the carrying cut of the scheme one dollar of charge ultimately upon the treasury of the country, we felt that it was a venture, that the proper policy to pursue was to give assistance seasonably necessary to carry the enterprise through without any loss to the Exchequer of the country. We have come to the conclusion, upon negotiation with the gentlemen who are promoting the carrying out of the Canadian Northern schemes that this sum of$13,000 per mile, which Is named inthe resolutions, would be ample for the purpose, not an excessive sum byany means, but that it would be

reasonably ample for the purpose. And we come to the further conclusion, that it would be a wise course for us to take and less burdensome upon the country; a course which would ensure the return of every dollar that might be directly or indirectly secured by the government assistance; relieve the government ultimately of all obligation in respect to it; if we were to incumber it to the amount of $13,000 per mile. It will be of course for the committee to say whether or not our conclusions in this regard have been wisely arrived at, or whether any more favourabe plan could have been devised by which the aim which I think we all desire to attain should be attained, and attained within the shortest possible period. We propose therefore to ask parliament by these resolutions to authorize us to endorse as it were, the obligations of this company to the extent of $13,000 per mile. We guarantee the interest upon these bonds at the rate of 3 per centum per annum. The company are able to make their loan upon these securities at a low rate of interest. They avail themselves of the credit of the government; they profit by the fact that with our endorsation-particularly as the credit of Canada stands to-day in the great financial centres-they will be able at a very much less annual charge than could possibly be achieved in any other way to secure the money which is required from government to complete the undertaking at the smallest possible cost and to afford every possible reasonable guarantee that the results would be the best which it would be possible to obtain. In my remarks I propose to pass over the minor details of the resolution

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John William Bell

Mr. BELL.

Is it expected that the company will be able to sell their three per cent bonds at par, with the government endorsation ?

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The MINISTER OP RAILWAYS AND CANALS.

They are very hopeful about it.

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LIB

Andrew George Blair (Minister of Railways and Canals)

Liberal

Hon. Mr. BLAIR.

The committee will observe that the resolutions provide for a first charge of the $13,000 per mile bond issue upon all the lines which we are here aiding, with a single exception. I will state what that exception is. There are about sixty-three miles between Grandview in Manitoba and the western boundary of that province which are not subject to a first lien to the extent of the $13,000 per mile. With the exception of that sixty-three miles about, the balance of all the mileage bears from the outset a mortgage to secure these bonds, a first charge upon the railway for the $13,000 per mile. As to the sixty-tliree miles the committee will observe that the mortgages will only get a mortgage endorsed by the government as a second charge upon these sixty-three miles, because in the arrangements which were made by the Canadian Northern Railway with the government of Manitoba there was a clause under which they were entitled to encumber all their railways within the limits of the province of Manitoba to the extent of a first charge of $10,000 per mile. And there were some miles of their railway in that province, among others this sixty-three miles, upon which that charge had not been executed.

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CON

Edward Frederick Clarke

Conservative (1867-1942)

Mr. CLARKE.

Did they not get the aid of the province of Manitoba to build that sixty-three miles ?

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The MINISTER OP RAILWAYS AND CANALS.

I do not know that they did; I think not. They gave the province of Manitoba a general mortgage, the particulars of which I will briefly state to the committee, so that they will see just what the character of our securities are. The first lien for the $13,000 per mile, with the exception of the whole of the line built under these arrangements, in the province of Manitoba and in the province of Ontario, and throughout the whole system of the Canadian Northern Railway we take and obtain a mortgage of a second charge on top of the existing mortgage which has been given to the Manitoba government, or if not given to them, given under the arrangement they have made.

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CON

Haughton Lennox

Conservative (1867-1942)

Mr. LENNOX.

Are we right in understanding that on the whole of the Canadian Northern system including Ontario we will have a second mortgage ?

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The MINISTER OP RAILWAYS AND CANALS.

Yes. We have a blanket mortgage over their whole enterprise from Port Arthur through to the west.

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CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

Then I misread the second clause. I understand you that on sixty-tliree miles we have a second mortgage for $10,000 a mile, but as I read this you have a first mortgage of $10,000 per mile.

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The MINISTER OF RAILWAYS AND CANALS.

A first mortgage.

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CON

Samuel Barker

Conservative (1867-1942)

Mr. BARKER.

lrou said a second mortgage.

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The MINISTER OF RAILWAYS AND CANALS.

I failed to make myself clear to the hon. gentleman. We get a $13,000 per mile mortgage upon all except the mileage between Grandview and the Manitoba western boundary. On that we only get a $10,000 mortgage. The clause that I refer to in the contract with the Manitoba government reserved to the company the right to encumber any of their lines in that province which they had not previously encumbered, to the extent of $10,000 per mile before the mortgage to the Manitoba government could take effect and become a charge.

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John William Bell

Mr. BELL.

In that case, how can this government secure a first mortgage to the extent of $10,000 a mile upon that section ?

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The MINISTER OF RAILWAYS AND CANALS.

Because this company have never issued the mortgage.

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John William Bell

Mr. BELL.

They have not used it.

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June 10, 1903