This file portion of www.watertownhistory.org website
Railroad
Bonds
Between 1853 and 1855 the Watertown
government issued nearly a half million dollars in bonds to provide capital for
two railroads - the Chicago & Fond du Lac Company and the Milwaukee,
Watertown & Madison Road - to build lines through the city. The railroads
promised the city to secure this capital with a mortgage on the railroad
property when the lines were constructed, but this promise was never fulfilled.
The railroads defaulted on the interest
payments to the city and declared themselves bankrupt. Later, the Chicago &
Fond du Lac Company converted these bonds to its stock at less than face value.
The Milwaukee, Watertown &
The city was determined to protect
its property holders from the additional taxes needed to meet these payments.
The action of the speculators' buying the bonds at a fraction of the original
cost made the city even more reluctant to pay for them since the original
owners had already taken their losses. For many years the aldermen elected in
regular elections resigned immediately after they had declared the tax levy for
the year. Thus, the city could not be served with a court order to force
payment. After thirty-five years of court litigation the suits against the city
were dismissed by the Supreme Court of the United States and Watertown returned
to a normal government.
City Government 101
Written and contributed by Ben Feld
It is generally understood that in
governing a municipality the governing body should be familiar with and adhere
to the precepts outlined in the city charter and/or the state statutes. To do otherwise would be inviting trouble for
the individual members of that governing body, to the municipality, and most
certainly to the citizens thereof.
But what does one do if the
expectations of the citizenry are in conflict with the laws which are to be
obeyed? Disregarding the desires of the
constituency does not get one re-elected; but on the other hand, the consequences
of ignoring the rulings of the state legislature can have results even more
undesirable.
1868
That hypothetical situation became a
reality late in 1868 when the city was served with a writ of mandamus issued
by the United States District Court. Any
writ of mandamus issued by such a
high court is not to be taken lightly and was to be carried out even if it
meant putting the entire city, every building, every home, every plot of
ground, up for auction.
That sounds ominous; perhaps a word
of explanation as to how the city council of Watertown arrived at such a point
is warranted here.
Early in the 1850’s, with the influx
of immigration having swelled her population, Watertown became the second
largest city in the state and given her advantageous geographical situation,
chances were very good that Watertown would soon become the capitol of the
state. But, to compete with the other
cities desiring to become the state capitol, a railroad was needed.
1855
And in 1855 a railroad was put into service
joining Watertown with Milwaukee and, through an expanding system of
railroads, to Chicago and all points east.
Obviously, the progressive segment of the population concluded, if being
connected by rail to one city is beneficial, being connected to more cities
would be even more beneficial.
Almost before the last spike had
been pounded into the last tie of the Watertown-Milwaukee line, plans were being
made to extend the line to Madison, to Beaver Dam, to Fond du Lac, to all
points in between. And that brought out
the speculators, the entrepreneurs, the fly-by-night railroad builders, all
eager to reap the monetary benefits from building railroad lines. To do that required money, money which the
speculators rarely had. So to solve that
minor problem, the not-always-honest- builders appealed to the city of
Watertown to issue bonds and sell them to raise funds to make railroad building
possible.
And this the city did; they issued
the bonds, sold them, and in someway they eventually found them selves being
confronted with demands to pay the holders of those bonds huge sums of
money. An explanation of the machinations
involved is better left to those who understand monetary manipulations better
than this writer. Suffice it to say that
the bondholders felt they were entitled to much money from the city and the
city was most reluctant to pay.
Eventually the amount being asked
for exceeded the assessed valuation of the entire city; an alarming situation
for any municipality.
“But it is a legal debt”, the
bondholders maintained, “and must be paid”.
“Legal debt or not, we cannot pay
it”, the city countered.
“But you must”, the bondholders
insisted.
“So sue me, “responded the city
council.
And sue them they did -- or at least
tried to. In December a writ of mandamus was received from the
United States Circuit Court ordering the city council of Watertown to pay
Pitkin C. Wright and James H. Rees the sum of money they deemed was owed them.
(A writ of mandamus is an order
instructing the recipient to do something stipulated -- or else!)
That obnoxious writ put the city
council on the very horns of a dilemma.
To invalidate that edict, which promised to be the ruination of the
city, called for some creative governing.
To refuse to make payment to P. W. Wright and J. H. Rees would put the
council in danger of incarceration which would be intolerable for these upright,
law-abiding public officials.
Unthinkable !
On the other hand, making the
payment would put the city onto the path to bankruptcy but would please the
constituency and go a long way toward insuring re-election.
Brilliant !
They agonized over the solution for
a suitable length of time until someone, no one ever leaked the slightest hint
of who it was, came up with a truly awesome solution which didn’t really solve
the problem, but did give the city a fighting chance by delaying any action
long enough to take advantage of a technicality in recently enacted
legislation. Taking advantage of that
technicality, the city might be able to stall just long enough until requests
for payment of funds owed Wright and Rees would no longer be valid, the statute
of limitation having expired.
Thus was born the AW SHUCKS!! system
of governing or, as it was more aptly expressed in those days, the Ach du lieber! system of city
government, a simple but very effective system.
To affect it, one half the aldermen resigned
leaving the city without a viable government.
The remaining seven would meet regularly, and a resolution to
appropriate money to pay those cursed judgments would be passed unanimously;
whereupon the point of no quorum would be raised and it would be discovered
that the passing of the aforementioned resolution was invalid, there not having
been a quorum voting. So, although the
minutes of the meeting showed they had voted in favor of paying Wright and
Rees, it was impossible to actually make the payment.
“AW SHUCKS!” (or words to that
effect) the truncated city council would inform Wright, Rees, or whoever was
asking for payment. “We tried. We really
tried. But if there is not a quorum
present, it is not possible, legally, to make an appropriation of any
kind. We’ll try again at the next
meeting.”
Ach du lieber!
What will happen next?
1889
By dragging their feet and avoiding
service of another writ of mandamus,
the statute of limitations did kick in and finally, in 1889, the court declared
that, except for two small claims which the city agreed to pay, all past,
present and future claims were invalid.
