[AUTOGRAPH LETTER, SIGNED, FROM PRESIDENT THOMAS JEFFERSON TO MARYLAND GOVERNOR JOHN MERCER, CONCERNING THE FINANCING OF THE NATION'S NEW CAPITAL].

Jefferson, Thomas:

Published by Washington, D.C. July 7, 1802.

About this Item

An autograph letter, signed, from Thomas Jefferson in Washington, D.C., on July 7, 1802, during his first term as President, to Maryland governor John F. Mercer, concerning the financing of the nation's new capital. With its passage more than a decade earlier, the Residence Act of 1790 had called for the construction of a new national capital to be situated on the Potomac River, giving a deadline - December of 1800 - by which the city would need to be ready to accommodate the transfer of the nation's seat of government from its temporary location in Philadelphia. The act, however, had made no provision for financing the project. Instead, the Washington administration had developed a funding strategy, spearheaded by then-Secretary of State Thomas Jefferson, that would rely on a combination of grants from the neighboring states of Maryland and Virginia, both of which stood to benefit from the new federal city on their doorsteps, and proceeds from the sale of lots carved out of the land that had been transferred to the federal government for the purpose of developing the new capital. Three commissioners were appointed to supervise the sale of these lands as well as the construction of the new federal city. Progress, however, on the construction of the capital city was slow, and it soon became apparent that initial projections had both underestimated the cost of building the new federal city and overestimated the amount of money that could be realized from the sale of land. Making matters worse, the speculators who had bought many of the lots sold by the commissioners during these early years had since gone into default, raising serious questions about the title to those lots and whether or not they could be resold. By the end of 1795, the commissioners had run out of money and had to turn to Congress for assistance. On May 6, 1796, Congress passed the Guarantee Bill, authorizing the commissioners to borrow up to $300,000 to finance the continued construction of the city. The loans would be guaranteed by the federal government, using the unsold lots as collateral. Obtaining the loans, however, proved difficult. The commissioners received two small loans from the Bank of Columbia in 1796, one for $40,000 and another for $42,000, but when they applied for a $100,000 loan from the Bank of the United States in Philadelphia, they were turned down. More receptive was the Maryland state legislature, which granted the commissioners two loans that year, one for $200,000 and another for $100,000. This was supplemented in 1798 with $100,000 from Congress and in 1799 with yet another $50,000 loan at six percent interest from the state of Maryland. This last loan from Maryland was issued on condition that it be repaid by November 1, 1802. What's more, if the quarterly interest payments were not paid on time, the state could sue to recover the principal in its entirety. By late 1801, with various deadlines for repayment of the loans and interest approaching and no funds with which to repay them, the commissioners, in consultation with Congress and the president, began to consider their options. According to the terms of the Guarantee Bill, the loans were to be repaid using money raised from the sale of the remaining lots in the city, and if those funds proved insufficient, the balance was to be paid by the United States government. As it stood, however, if the remaining lots were to be sold immediately, the sale would result in a massive loss, especially when compared to the prices those properties would likely command once the new federal city was nearer completion. To avoid this scenario, an alternative was proposed: rather than sell the lands now, the government would continue to hold on to them, allowing them to appreciate in value, and in the meantime the loans and associated interest would be paid from monies advanced by the U.S. Treasury. This was the plan agreed to by Congress in a bill passed on May 1, 1802. The present letter from Pre.

Seller Inventory # 65909

Bibliographic Details

• Title: [AUTOGRAPH LETTER, SIGNED, FROM PRESIDENT THOMAS JEFFERSON TO MARYLAND GOVERNOR JOHN MERCER, CONCERNING THE FINANCING OF THE NATION'S NEW CAPITAL].
• Publisher: Washington, D.C. July 7, 1802.
• Signed: Signed by Author(s)