How did railroad companies get land and money to build the railroads?

Between 1850 and 1872 extensive cessions of public lands were made to states and to railroad companies to promote railroad construction. [18] Usually the companies received from the federal government, in twenty- or fifty-mile strips, alternate sections of public land for each mile of track that was built.



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To encourage railroad construction across the Great Plains, the federal government gave land grants to many railroad companies. The railroads then sold the land to settlers, real estate companies, and other businesses to raise money to build the railroad.

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The rail line was built by three private companies over public lands provided by extensive US land grants. Building was financed by both state and US government subsidy bonds as well as by company-issued mortgage bonds.

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In the United States, federal, state, and local governments as well as individuals gave railroad companies gifts of land to build their lines through the Plains. Railroads received an estimated 185 million acres of land from these sources.

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The federal government issued bonds, at 6 percent interest, and agreed to pay the two railroads $16,000 for each mile of track laid on level ground, $32,000 for track laid in foothills, and $48,000 per mile for track laid in mountainous areas.

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In 1870 it took approximately seven days and cost as little as $65 for a ticket on the transcontinental line from New York to San Francisco; $136 for first class in a Pullman sleeping car; $110 for second class; and $65 for a space on a third- or “emigrant”-class bench.

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The largest rail company in the world is Deutsche Bahn, with a revenue of $47.72 billion. As of 2021, the global rail industry has a market size of $295.80 billion.

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One of the most frequently asked questions we receive when conducting training on railroading basics is: “Who owns the railroad tracks?” In the United States and Canada, that answer is overwhelmingly the railroads themselves.

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To encourage development of rail lines westward, the government offered railroad companies massive land grants and bonds. Railroads received millions of acres of public lands and sold that land to generate money for the construction of the railroads.

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In 1862 Congress passed the Pacific Railroad Acts which designated the 32nd parallel as the initial transcontinental route and gave huge grants of lands for rights-of-way. The legislation authorized two railroad companies, the Union Pacific and the Central Pacific, to construct the lines.

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At first, the farmers wanted the government to control prices on the railroads. Later, the farmers began to demand that the government own the railroads. The farmers decided they had to have an organization. They formed several organizations.

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