The Sacramento Valley Railroad is Sold
Viewing this as only a temporary set-back, the optimistic Lester Robinson and his Placerville supporters formed the San Francisco & Washoe Railroad to build eastward to Virginia City, and sought legislation to financially assist them. The federal government agreed to give them aid, on the same basis as the Central Pacific received it, provided they could complete the line into Nevada by 1866. The Nevada Constitutional Convention also offered a subsidy to the first railroad to cross the state line (a year later the offer was amended to include only the Central Pacific).
Robinson had argued to no avail before the Nevada Legislature that the Central Pacific did not intend to build a railroad to their state but only a wagon road, since their route was impassible for trains. He referred to his concept of the CP’s plans as the “Dutch Flat Swindle.” He also stated that Judah had been bribed to give him bad information, which Leland Stanford adamantly refuted. It all made no difference, since the young state of Nevada in reality had no money to give anyone.
By June 1865, the P&SVRR had only reached Shingle Springs and, although it now connected to the main road that carried nearly all of the freight and passenger traffic to and from the Comstock, it was obvious that the railroad would not reach Virginia City by the 1866 federal deadline. The line had progressed only four miles in 10 months while the toiling Chinese laborers of the Central Pacific were blasting out a mile a week over the “impassible” route towards Donner Summit. Even in light of this lack of progress, the owners of the Central Pacific still feared that the rails of the P&SVRR could still be extended over the Sierra and become a competing line, so they took steps to completely eliminate this problem.
In a questionable move, the SVRR’s president George F. Bragg finally convinced Lester Robinson and the bankers who held most of the railroad’s stock, that their problems were real and insurmountable. Though the rail line was bringing in substantial income, there was no way more financing could be obtained for construction or payment of their bonds. The railroad was on the verge of bankruptcy.
On Aug. 1, 1865, president Bragg purchased the entire stock interests of three other directors valued at nearly $400,000. Shortly thereafter, and in spite of the protests and claims of corruption from the press, he sold all of his stock to Leland Stanford and the other principal stockholders of the Central Pacific. The Central Pacific took over complete control of the SVRR on Aug. 16, 1865. In a final blow, Stanford ordered the suspension of all passenger traffic to and from Freeport.
Thus ended the independent existence of California’s first commercial railroad. The sizeable shops of the SVRR at Folsom were dismantled by the CP in 1865 and the equipment moved to their Sacramento shops. The CP also rebuilt the line to standard gauge that same year.
With the sale of the SVRR, the financial interest that El Dorado County and the city of Placerville held in the P&SVRR passed to the purchasers, and the $500,000 in bonds that had been sold in 1863 and 1864, became a financial burden for the county. With the rapid loss in freight traffic through El Dorado County since the completion of the Central Pacific to Reno, Nev., had made that city the gateway to the Comstock, and a general reduction in all mining, the county and city were in a life and death struggle just to exist, let alone pay off the bonds which would mature in 1876.
The 26.2-mile P&SVRR (Folsom Junction to Shingle Springs) had operated as its own company from August 1864 to July 21, 1871. But the mortgage on the property of the P&SVRR was foreclosed on May 21, 1869 and sold to William Alvord. On July 21, 1871, title was conveyed to Alvord who, on the same day conveyed the title to Huntington, Stanford, and Hopkins. They later formed the Sacramento & Placerville Railroad, incorporated April 19, 1877, and by deed of sale dated May 28, 1877, transferred the property of the P&SVRR into the new S&PRR corporation.