website watertownhistory.org
ebook History of Watertown, Wisconsin
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
& Madison Road refused to do even this. The people who owned the remaining
bonds sold them to speculators for a fraction of their original cost, and the
speculators then brought suit against Watertown to force payment on these
bonds.
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.
History of Watertown,
Wisconsin