From a financial standpoint, Santa Fe ownership and control of the Colorado Midland was an unmitigated disaster. Whence came this disaster? First and foremost from the crushing fixed charges which ate up all net income until the Midland's ledgers showed nothing but red ink; secondly from the effects of a great local and national business depression.
Transcontinental bridge traffic in both directions between Colorado Springs and Grand Junction poured dollars into the Colorado Midland coffers. Even more so did traffic in ore, coal, livestock, lumber, mining machinery and merchandise for local consumption. Passenger revenues further swelled gross income. But neither dollars earned nor dollars saved stayed in the treasury very long when bond interest came due.
The Midland was unable to earn surpluses in times of prosperity and then the great financial and industrial panic of 1893 struck. On June 26, 1893, the mints of India, the world's most important silver market, closed to the coinage of silver. America's monetary was then based both on gold and silver. Now with silver bullion glutting the world markets and gold being hoarded, depression struck America. Since Colorado was largely a silver mining state at the time, the great panic's effects were especially cruel here.
With national business activities partially paralyzed, through freight traffic dropped off. Closing of mines at Leadville and Aspen slashed ore and bullion tonnage. Coal mines in the Glenwood Springs area curtailed output because of reduced demand from mining and smelting interests. Mine timber production at Norrie and Thomasville dropped to a trickle. With so many people without funds, passenger revenues declined. Only the Cripple Creek gold traffic, interchanged between the Colorado Midland and the Midland Terminal held up as gold mining was unaffected.
To make matters worse, the Midland's parent road, the Santa Fe was overextended, burdened with unprofitable subsidiaries, plagued by new fixed charges and weakened by foolish rate wars with other railroads. Weakened as it was the Santa Fe could not weather the Panic of 1893 and on December 23, 1893, receivers were appointed for the railroad. When the February 1, 1894 interest payment came due for the Midland, its treasury was empty and it defaulted. On February 2, 1894 the Santa Fe receivers were appointed receivers of the Colorado Midland Railroad Company.
The Midland bondholders thought it prudent to take steps to protect their investment and organized a committee who on May 1, 1894 got George W. Ristine appointed receiver of the Colorado Midland Railroad Company and the Santa Fe receivers discharged. Ristine was a professional railway administrator and under his energetic yet careful guidance, the Midland began a comeback. He was assisted by better economic times resulting in increases in bridge traffic and a return of the summer tourist business. The mines in Leadville and Aspen began to reopen to supply the base metals, lead zinc and copper as well as silver and with base metal prices rising, mining enterprises could again make a profit.
Traffic of all types increased and with the discovery of rich gold veins in the Leadville Mining District the Midland was in constant motion. Business proved so good that a shortage of motive power and rolling stock developed. In April 1896 this situation was temporarily relieved when the Midland Terminal took delivery of five Schenectady-built 2-8-0's and later 200 box cars. This allowed several Colorado Midland 4-6-0's to be returned from lease as well as many box cars.
Receiver Ristine applied for and received permission to purchase five Baldwin 2-8-0 freight engines, numbers 49 to 53, 180 Pullman-built box cars and 20 Hanrahan refrigerator cars. Because of reduced gross income resulting from the June 19, 1896 Leadville miners strike and the small surplus, Ristine felt that the Colorado Midland could not meet the coupons due on the Busk Tunnel and Aspen Short Line bonds. Already unpaid since 1894 was interest on both the First and Consolidated Mortgages so the U.S. Circuit Court of Denver on May 4, 1897 ordered foreclosure of the railroad under both mortgages.
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