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Illinois and Michigan Canal - RG 491 | Illinois State Archives

Name: Illinois and Michigan Canal - RG 491

Historical Note:

Under the terms of an act of Congress of March 30, 1822, the federal government granted land to the State of Illinois on which to construct a canal. In addition to the area specifically set aside for the canal, Congress gave the state ninety feet of land on either side of the waterway to be used to secure timber and other materials needed for construction of the canal (U.S. Stat. at Large, III, 659). On February 14, 1823, in response to the grant, the General Assembly appointed a commission to determine the most feasible route for the proposed canal (L. 1823, p. 151). The commission completed its work in 1824, recommending five possible routes with construction costs ranging from $639,542.78 to $716,110.71 (Report of the Canal the General Assembly....[Vandalia, 1825], p. 20).

Recognizing the value of a canal, but unable to finance its construction, the General Assembly on January 17, 1825 incorporated the Illinois and Michigan Canal Company, a private corporation with an initial capitalization of $1 million (L. 1825, p. 160). The incorporators, however, were unable to sell their stock and the company was abandoned and its charter revoked in 1826 (L. 1826, p. 63).

Following the failure of the Illinois and Michigan Canal Company, the General Assembly petitioned Congress for assistance in 1826, requesting a grant of public land, part of which would contain a canal and part of which would be sold by the state to finance construction of the proposed waterway (L. 1826, p. 97). On March 2, 1827, Congress responded by donating to Illinois part of the public domain to be used for the construction of a canal. In addition to the area set aside for the waterway, Congress gave to the state the alternate sections of land five miles on either side of the proposed route to be sold to finance construction (U.S. Stat. at Large, IV, 234).

With the donation as a basis for the project, on January 22, 1829, the General Assembly passed "An Act to Provide for the Construction of the Illinois and Michigan Canal." The law established a Board of Canal Commissioners, composed of three persons appointed by the Governor, and empowered the board to employ surveyors, engineers, draftsmen, and other individuals necessary for the completion of the canal. In addition the statute prescribed the manner to be used for conducting land sales and keeping records, set up procedures to be followed for legal actions taken against the Board of Canal Commissioners, and specified the dimensions of the canal (L. 1829, p. 14). On February 15, 1831, the General Assembly amended the 1829 act by providing for the laying out of town lots in Ottawa, the donation of up to ten acres of land to local governments for the erection of public buildings, and the modification of various provisions of the original act (L. 1831, p. 34).

Even with the land grant from the federal government, the state lacked the means to finance construction of the proposed canal. Therefore on March 1, 1833, the General Assembly abolished the Board of Canal Commissioners and abandoned the Illinois and Michigan Canal (L. 1833, p. 113). However, the abandonment was short lived and on February 10, 1835 the General Assembly established another Board of Canal Commissioners and empowered it to raise the funds necessary to complete construction of the proposed Illinois and Michigan Canal. The law authorized the Governor to negotiate a loan of up to $500,000 on the pledge of canal land and revenues and to issue Illinois and Michigan Canal Stock carrying a dividend of 5 percent per annum payable after 1860. The proceeds from the sale of stock, as well as those from lot and land sales, were to constitute a Canal Fund to be used solely for the construction of the canal and the payment of canal indebtedness (L. 1835, p. 222).

The pledge of canal properties and revenues was not sufficient security to attract many investors. Therefore, on January 9, 1836, the General Assembly reorganized the Board of Canal Commissioners and pledged the faith and credit of the state to the payment of the principal and interest to subscribers of the canal loan authorized in 1835 (L. 1836, p. 145). As soon as the board was reorganized the commissioners laid final plans for the construction of the canal. For purposes of convenience they divided the waterway into three divisions (i.e., Summit, Middle, Western) which were in turn subdivided into sections of varying length.

Construction proceeded rapidly and by the end of 1838 the Canal Fund virtually was depleted. To offset this situation on February 23, 1839 the General Assembly authorized the Governor to negotiate a loan, later referred to as the Thornton Loan, of up to $4 million at an annual interest rate of 6 percent (L. 1839, p. 168). Although agents for the Governor contracted for loans of $400,000 during the year, at the end of 1839 the Canal Fund again was depleted and the commissioners were forced to pay contractors with warrants bearing 6 percent interest payable at such times as funds were available. This expedient permitted construction to continue but even so the financial condition of the Canal Fund continued to worsen. In late 1840 and early 1841 several contractors ceased work on the canal while others continued to work but with reduced forces. Those contractors who continued to work were paid by two methods, state bonds and warrants promising payments at future dates (MINUTES OF MEETINGS OF THE CANAL COMMISSIONERS AND TRUSTEES, June 7, 1841, RS 491.001).

In 1843 the financial status of the canal reached its lowest point and construction ceased. Reacting to this situation the legislature authorized the Governor to negotiate a $1.6 million loan, the minimum amount deemed necessary for completion of the waterway. In order to ensure the successful subscription to the loan, the Governor was empowered to pledge the property and all revenues generated by the canal to bondholders in a deed of trust. By terms of the legislation authorizing the trust agreement, the canal, its revenues, and its property would revert to the state once the principal and interest were paid to bondholders. During the period that the canal would be under a trust agreement it was to governed by a Board of Trustees composed of three members, two of whom would be chosen by bondholders and one appointed by the Governor and not subject to approval by the General Assembly (L. 1843, p. 54). Thus, until the canal reverted to the state it would be administered for the benefit of its creditors.

The action of the General Assembly paved the way for completion of the canal and on June 19, 1845, the trustees met, formally organized themselves, and began preparations for the resumption of construction (MINUTES OF MEETINGS OF THE CANAL COMMISSIONERS AND TRUSTEES, June 19, 1845, RS 491.001). In the interest of equity those contractors who had been working on various sections prior to the suspension of construction in 1843 were authorized to submit preemption petitions requesting reassignment to their former construction areas. Between July 22 and August 18, 1845 those sections not preempted by former contractors were let to the lowest responsible bidders (MINUTES OF MEETINGS OF THE CANAL COMMISSIONERS AND TRUSTEES, July 9, 25, 1845, RS 491.001).

Following the awarding of construction contracts, work proceeded rapidly and the canal was opened for navigation in April 1848. Although it took much longer than expected to pay off bondholders and required several payments to creditors to be delayed, the entire canal debt was liquidated and the waterway returned to the state on May 1, 1871 (MINUTES OF MEETINGS OF THE CANAL COMMISSIONERS AND TRUSTEES, May 15, 1871, RS 491.001).

In anticipation of the return of the canal to the state, in 1867 the General Assembly established a new seven-member Board of Canal Commissioners empowered to make all preparations for taking control of the waterway, including the drawing up of plans for improvement and enlargement (L. 1867, p. 81). In 1869 the legislature reduced the number of commissioners to three (L. 1869, p. 60) and in April 1871 formally dissolved the trust agreement between the state and the canal creditors (L. 1872, p. 215). Thus, in May 1871 when the state resumed complete control of the Illinois and Michigan Canal the waterway was again administered by a Board of Canal Commissioners appointed by the Governor.

This form of management continued until 1917 when the General Assembly transferred control of the Illinois and Michigan Canal to the Department of Public Works and Buildings (L. 1917, p. 24). The Department of Public Works and Buildings managed the canal until 1925 when the legislature transferred control of it to the Department of Purchases and Construction (L. 1925, p. 180).

The waterway continued to operate as an artery of commerce until 1935 when it became the Illinois and Michigan Canal State Parkway and was closed to all but recreational pursuits (Illinois Blue Book, 1935-1936, p. 415). In 1933 control over the canal was again transferred to the Department of Public Works and Buildings and when the canal itself was closed to commerce in 1935, the department continued to sell and lease land and property and to lease waterpower sites (L. 1933, p. 180). In 1955 the Illinois and Michigan Canal and adjacent areas became a state park and in 1971 control over the waterway and its property passed to the Department of Transportation which assumed responsibility for all administrative activities connected with the canal (L. 1955, p. 1305; P.A. 77-155, p. 295).

As noted previously, until the twentieth century (with the exception of the period between the abolition of the Board of Canal Commissioners in 1833 and the creation of a new board in 1835 and the period between 1843 and 1845 when construction was suspended) direct management of the Illinois and Michigan Canal and its assets was in the hands of a commission or a board. By statute during the suspension period all officers and employees were discharged except for one acting commissioner, a secretary, and an engineer. These three remaining staff members were charged with the responsibilities of protecting canal land and property against trespass and damage and settling outstanding accounts with contractors (L. 1843, p. 62).

In addition to these officers the General Assembly, commissioners, trustees, and other state officials frequently appointed agents to handle specialized services and activities, the most important of which was the sale of canal bonds during the period of construction. Such sales always were conducted by the Governor or his special agents. Land sales, like stock subscriptions, involved personnel outside of the boards of commissioners and trustees. Although the commissioners and trustees administered all sales of canal lots and land, they could not permit any parcel to be sold for less than the minimum price established by statute or by an independent board of appraisers appointed by the judge of the circuit court within whose jurisdiction the lot or tract lay (L. 1847, p. 23). It was common practice for the General Assembly to appoint special commissions to investigate damage claims against the state having their origin in the construction or management of the canal (L. 1837, p. 44).

With the exception of ninety-foot strips on either side of the canal, the state sold as much canal land as possible to offset construction and indebtedness costs. Initial policy established by the General Assembly in 1829 required all canal land sales to be conducted for cash only at the minimum rate of $1.25 per acre (L. 1829, p. 14). However, in 1836 the legislature abandoned its original plan and provided for the sale of lots and land on a four-payment installment basis. No land could be sold for less than the minimum price established by boards of appraisal and purchasers were required to pay one-fourth of the purchase price at the time of sale and to pay the balance in three equal installments plus interest accruing at an annual rate of 6 percent (L. 1836, p. 145). In February 1839 the General Assembly amended the 1836 act and permitted canal lots and land to be sold for only a 10 percent down payment. Those who purchased lots and land under this system had to pay the remaining 90 percent within twenty years as well as an annual interest rate of 6 percent of the purchase price (L. 1839, p. 177). The final change in sales procedures occurred in 1869 when the General Assembly mandated that all future sales of canal lots and land be made on the basis of full cash payment at the time of sale (L. 1869, p. 62).

Although various statutes provided for the forfeiture of lots and land if purchasers failed to meet principal and interest payments, they also made certificates of purchase negotiable and transferable either by endorsement or by separate legal agreement. Moreover in 1841 the General Assembly, reacting to the panic of 1837, acted to bring relief to those who had purchased land and lots in Ottawa and Chicago during 1836. In 1841 those persons were allowed to select as much of their original purchase as previous payments covered less one-third of the original purchase price (L. 1841, p. 49). Thus, those who purchased lots and land in these two towns acquired some land and were absolved of their debt to the state.

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