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Loan of 1902,” for the purpose of erecting new State buildings and the completion of others, viz:

State House Annex. . . . . . . . . . . .................... $250,000 Heating Plant, furnishing, etc., Annapolis. . . . . . . . . . 140,000 Completion of Fifth Regiment Armory. . . . . . . . . . . . . 120,000 House of Correction Annex....................... 90,000

But $400,000 of this loan was issued during the fiscal year 1902, bearing date of July 1, 1902, as it was deemed wise to issue only such an amount as the necessities of the work demanded, therefore it became necessary on July 1, 1903, for the remainder of said loan, viz: $200,000 to be issued. Bonds to this extent were sold as of that date and, while taken by the State for its sinking funds, nevertheless the moneys arising from such sale came into the Treasury as an extraordinary receipt.

Second. During the fiscal year to wit December 11, 1902, there was paid into the Treasury including penalty and interest, the sum of $225,017.92, being in full of all taxes upon the gross receipts of the Northern Central Railway Company from the year 1896 to 1902 inclusive. By reason of such arrearage of taxes, said amount came into the Treasury also as an extraordinary payment. The above sum was covered into the Treasury as the result of a decision of the Supreme Court of the United States in favor of the State of Maryland, in the case of the Northern Central Railway Company, the effect of which is so far-reaching and important to the State that I desire to quote from my former report to His Excellency, John Walter Smith, in order that your Honorable body may be fully advised as to its scope and meaning:

The important question presented in this case was, whether the provision in Chapter 16 of the Acts of 1880, whereby the said Northern Central Railway Company was liable for all annual tax of one-half of one per centum upon its gross receipts within the State of Maryland, was subject to repeal by any subsequent Legislature, and if so, whether or not in fact the said act was not repealed by Chapter 559 of the Acts of 1890, which imposed an annual tax of one per centum on the gross receipts of all railroads within the State of Maryland operated by steam.

It was contended by the Railway Company that the said Act of 1880 being “An act to adjust and settle finally by agreement all pending controversies between the State of Maryland and the Northern Central Railway Company,” was a valid-contract, and as such under the Constitution of the United States, which prohibits a State from making any law impairing the obligation of a contract, could not be put an end to or impaired by an act of the Legislature of Maryland without the consent of the Company. It was contended by the State that the Act of 1880, Chapter 16, did not constitute a contract between the said railway.company and the State which was beyond the power of any subsequent Legislature to repeal or impair, because the provision in the Constitution of 1850, antedating the charter of the company (ch. 250 of 1854) provides, that all charters granted by the State may be altered or repealed, a most wise provision and one incor. porated in every constitution since that time, therefore the said Railway Company in accepting the consolidation of certain railroads under ch. 250 of the Act of 1854 was presumed to know that the immunity from taxation was liable to repeal by future Legislatures. It was further contended by the State that the Act of 1890, imposing a tax of one per centum on the gross receipts of all railroad companies, whose roads are worked by steam, incorporated by and doing business within the State, repealing all acts in conflict therewith, repealed by necessary implication Chapter 16 of the Act of 1880. The contention of the State was thoroughly established by the decision of the Court of Appeals of Maryland and afterwards sustained by a decision of the Supreme Court of the United States. Justice White in delivering the opinion of the latter court, said that “where a legislature is inhibited by the constitution from making an irrepealable charter it cannot create a new contract and bring into being a new corporation, and yet by the charter of such corporation give rise to the irrepealable contract which the constitution absolutely prohibits.” By reason of the great importance and value to the State of this decision a brief history of the case may be given.

In 1827 a charter was granted to the Baltimore and Susque. hanna Railroad Company by chapter 72 of the Act of 1827, one of the chief provisions being, immunity from taxation. In 1854, by chaptér 250 of the act of the same year, the stockholders of the Baltimore and Susquehanna Railroad Company were authorized to consolidate with the York and Maryland Line Railroad Company, the York and Cumberland Railroad Company and the Susquehanna Company, forming one corporation by the name of the Northern Central Railway Company, in which consolidation was transferred among other things to the new company, the property, rights, privileges and immunities belonging to the several old companies. This exemption from taxation under the Act of 1854 was enjoyed by the said com. pany until the year 1866, when the General Assembly passed a general assessment law, chapter 157, providing of course for the assessment of all property, in which, however, was a pro. vision repealing in general terms all laws exempting property from taxation. A more specific act, however, was passed it. 1870, ch. 362, repealing “every provision contained in the charter or supplements thereto, of every railroad company incorporated by the laws of this State or contained in any law heretofore passed by the Legislature of the State whereby the stock or property, real or personal, of any railroad company ...” “ * is exempted from taxation.” Two years later, the Legislature, by chapter 234 of the Act of 1872, imposed its first gross receipt tax upon steam railroads, viz: one-half of one per centum annually. g

The records of this office show that under this statute, the tax .

of one-half of one per centum on the gross receipts of said coru. pany was levied from April 1 to December 31, 1872, amounting to $3,082.37%, and for each year thereafter up to and including the year 1879, the total tax for the eight years aggregating $29,762.54. This tax the said Railway Company refused to pay, and upon suit being brought by the State, a judgment was recovered in favor of the company, from which judgment an appeal was taken by the State to the Court of Appeals, with the result of a reversal of the judgment of the lower court by said Appellate Court, thus holding the company liable for said tax.

Shortly afterwards the Legislature of 1880 convened, and passed the Act of that year, chapter 16, hereinbefore mentioned, in pursuance of which the said company paid to the State on April 13, the sum of $29,762.54, being the tax in full from 1872 to 1879, both years inclusive.

The said railway company continued to pay regularly the tax of one-half of one per centum as levied until the year 1890, when the Legislature of that year, by chapter 559, increased the annual rate of tax upon the gross receipts of steam railroad companies to one per centum. This increased tax the company paid under protest until the year 1896, when it refused to do so any longer. Hon. Robert P. Graham, comptroller at that time, thereupon placed for suit, in the hands of Hon. George R. Gaither, attorney, the tax for that year, amounting to $13,142.35.

The case was tried in the Superior Court of Baltimore city, a verdict being rendered in favor of the company. From this judgment the State took a successful appeal to the Court of Appeals, where the case was decided and remanded January 10, 1900. At the retrial of the case, the State won, the company taking an appeal with the result of an affirmation of the judgment of the lower court by the Court of Appeals on December 7, 1900. From this judgment the company took an appeal to the Supreme Court of the United States, with the result as hereinbefore mentioned.

Throughout the entire course of this case the State has been ably represented by the Hon. George R. Gaither, formerly attorney-general of Maryland.

It is but proper to add, that by virtue of the above decision, the said company becomes liable to and has paid the increase tax under the provisions of chapter 120 of the Act of 1896, which recites: “Eight-tenths of one per cent. on the first one thousand dollars per mile of gross earnings, or on the total earnings if they are less than one thousand dollars per mile, and one and one-half per cent. on all gross earnings above one thousand dollars per mile and up to two thousand dollars per mile, and when the earnings exceed two thousand dollars per mile two per cent. on all earnings above that sum,” under which law the tax due by the said Northern Central Railway Company amounted to $30,763.37 for the year 1902, not includ. ing penalty or interest. * -3 Third. Statement “A” also shows a payment from tax on Baltimore city stock of $46,539.65. Of this sum, $24,025.24 belonged to the fiscal year 1902, but was received into the Treasury October 1, 1902, thus making two payments fall within the fiscal year just closed. The revenue from this source in 1901 was $49,549.22, and as the amount was so much less than that of the previous year I did not feel justified in accepting the amount as full settlement for that year. By direction of the Attorney-General, I received same as so much on account, which I again did in 1903, suit for the balance being instituted and is now pending.


In Statement “B” is shown in detail the character of dis. bursements and the Acts of Assembly authorizing the same, aggregating $3,676,334.33, or in excess of that of the year previous by $259,957.62, occasioned mainly by larger disbursements on account of the “State Loan of 1902” and by increased appropriations made by the Legislature of 1902.

The balance in the Treasury proper at the close of the fiscai year was $1,147,410.42. I wish in this connection to call your attention to the fact that against this balance there must be charged certain definite sums, specifically dedicated, and which must remain inviolate; such as the proceeds of sales of bond issues, schools and sinking fund taxes. After providing for the integrity of the sinking funds, there yet remained to be charged against this balance of $1,147,410.42, the following amounts :

State Loan of 1902. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $267,174.32 State Building and Improvement Loan . . . . . . . . . . . 40,027.45 Public School Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346,434.68

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $653,636.45

leaving a normal balance in the Treasury October 1, of $493,773.97, with which to meet the heavy October disbursements under the Acts of the last Legislature.

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