The Canadian Pacific Railway (1881 - 1885)The Conservatives, still led by John A. Macdonald, were re-elected in 1879 for economic reasons which we will discuss in the next lecture. In 1880 they came to an agreement with a Montreal-based group to build a transcontinental railway from Montreal to Vancouver by 1891 in exchange for the following subsidies. 25 million acres "suitable for settlement." The CPR "gained" every even section for 24 miles on both sides of the railroad track as the track was built for a total potential of 25 million acres or about 1/5 of prairie arable land. This procedure was similar to U.S. grants to railroads, except that the 24 miles were longer than U.S. distances. There was, however, one uniquely Canadian provision. If the CPR deemed that some of this land was "unsuitable for settlement", it would have had the option of exchanging this gained land for an equal amount of Dominion land elsewhere. We will see that the "suitability for settlement" clause probably hindered rather than stimulated settlement on the prairies. )2. A Monopoly The Dominion gave the CPR a monopoly on all railroads between the CPR tracks and the U.S. border. Freight rates could not be regulated until profits reached 10% of the capital spent on construction.4. $25 million in cash5. The Dominion's Western Rail Lines The federal government deeded all of its rail lines to the CPR once they were completed. Estimates suggest that the value of these rail lines was approximately $35 million,6. Tax ConcessionsThe CPR was exempt from taxes oni) Land sales for a 20 year periodii) Imported materials used in the original constructioniii) Railway capital and ownership in perpetuity (this was eventually repealed)7. The CPR was permitted to take any building materials from Crown land without payment. Were these subsidies necessary or excessive for the construction of the CPR? These subsidies were granted on the assumption that they were necessary to induce private investment in the CPR, but there has been considerable debate over their necessity subsequently. The CPR was built in four (1881 – 1885) not ten years and John Dales argued that subsidies were unnecessary because the CPR repaid a $35 million loan from the federal government by 1886 and made an average 3% profit on the capital between 1885 and 1885. 1895.