IRortbwestern Tllnlvcrelts Xlbrars
Bvaneton, Ulltnots
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publications of
The American Academy op Political: and Social Suence
No. 522
•
Chicago Traction:
A Stüdy in Political Evolution
BY
WILLA^b E: HOTCHKISS, PRß..
Northwestern Uttiveraity, Evanston, IHr
Reprinted from THE ANNALS oif the American. Academy
of Political and Social Science for November, 1906
PHILADELPHIA .
THE AMERICAN ACADEMY OF POLITICAL ANITÎOCttL SCIENCE
EngUnd; P. S. Kiiig>& San, 2 Gre«t Smith Street, We«tmln$ter, London, S. V,
Frnnec; l. ^rose, Rue SonNIot.-23, Paris^
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Spain: LIhml» Ntciohal ^ Ktciraiti*r> de E. Dohsi. ant«». Ed. Capdeville, Plaà de Sanis Ana, 9, Madrid ■
Price, 2S cents.
CHICAGO TRACTION: A STUDY IN POLITICAL
EVOLUTION
By willard E. Hotchkiss, Ph.D.,
Northwestern University, Evanston, 111.
The geographical element which has always been at the basis
of Chicago's traction problem is the division of the city into a
North, a South, and a West Side by the Chicago River and its
north and south branches. The area immediately back from the
lake in the angle between the river proper and its south branch,
occupying the extreme northern portion of the South Side, is the
down-town district, the commercial center from which the city's
growth has extended into the three geographical areas. The pri¬
mary problem of transportation has been from the start to carry
people back and forth between the three sides respectively and
down-town ; at this elemental stage the solution of the problem has
rested. The three sides have remained both in the matter of sur¬
face and of overhead transportation essentially distinct ; the need
for direct communication between the sides, which inevitably arose
with the city's growth, the demand for a cross-town service, in
short, the urgent necessity for a unified transportation system, has
never been met.
The earliest franchises were given to separate companies to
operate in one or the other of the three sides. The Chicago City
Railway was chartered in 1859 with both South and West Side
rights. The franchises of the North Chicago Company, chartered
in the same year, were located on the North Side, and in 1863 the
Chicago West Division Company, chartered in 1861, took over the
West Side rights of the Chicago City Railway Company.
This was the period of the introduction of the horse railway;
between i860 and 1865 some of the most important trunk lines were
constructed. With the rapid increase of population and the neces¬
sity for the extension of service, the companies began to plan for an
extension of their franchises. The first grants had been either
(385)
28
The Annals of the American Academy
unspecified or fixed at a period of twenty-five years. In 1863 the
companies succeeded in passing through the legislature a measure
extending their charters to ninety-nine years. This measure was
vetoed by Governor Yates, but was again taken up and passed by
the legislature of 1865 and repassed over the veto of Governor
Oglesby.^
The ninety-nine year act of 1865, the exact meaning of which
was determined only by a decision of the United States Supreme
Court rendered March 12, 1906, was apparently believed at the
time to extend the street privileges of the companies for the full
period of its duration.^ This belief resulted in something of a
political upheaval which was reflected in the Constitution of 1870
by a provision withdrawing from the General Assembly the right
to grant franchises in any city without the approval of the local
authorities of the city. Four years later the legislature passed the
"horse and dummy act," by which all franchises were limited to a
period of twenty years.
During the seventies the three companies above mentioned re¬
tained a monopoly in their respective fields. The movement toward
adoption of mechanical traction did not begin until early in the
eighties, and at first affected only one or two lines on the South Side
where competition had arisen with the steam roads. The success¬
ful operation of the cable, however, brought a demand for an
extension of the cable service. This meant large expenditures of
money which would not be undertaken with uncertain franchises.
The meaning of the ninety-nine year act had never been ascertained,
and its validity as a whole had been assailed. In addition to this,
there was a dispute between the companies and the city over a car
license of fifty dollars per year, levied by an ordinance of 1878,
but never collected. But for the act of 1865 many of the franchises
would soon expire ; the city was anxious for an improvement of
the service, and the companies desired to make their franchises se¬
cure. On July 30, 1883, a compromise was arranged which waived
the whole question of the merits of the case and provided for the
*At a hearing upon the Müller Law before Governor Yates, the youn.ti.T, in 1903 it was
asserted that the Governor's father had been offered $100,000 to let the Act ct 1863 become a
law. The authority offered was the elder Yates' signature.
'The attorneys for the companies made extensive investigations of the newspapers c
the time to establish before the court the intention of the legislature to extend the stree
privileges.
(386)
'A Study in Political Evolution
29
payment of the car license by the company and an extension of all
franchises for twenty years from date. Franchises granted after
1883 were for the most part made to expire with the earlier ones
in 1903 or soon after, although there are still a few that do not
expire until 1916.
The two decades between 1880 and 1900 constitute a period of
constant reorganization and readjustment both on the technical and
the financial side of street railway operations. Cable traction, first
introduced, as just described, by the Chicago City Railway Com¬
pany, began in the late eighties to be adopted by the other companies.
At the beginning of the nineties electric traction, in the form
of the overhead trolley, was introduced, and long before the end
of the decade was supplanting the awkward cable even where
the latter was already in operation. Before electric traction was
established experiments with the underground trolley, later so suc¬
cessfully operated in New York, were declared to have failed.® An
ordinance prohibiting the use of the trolley in a large part of the
down-town area has been set aside only piecemeal by issuing spe¬
cial permits for certain streets; this has been one of the influences
leading to the retention of the cable in a part of that area.*
Financial reorganization, or, more accurately speaking, ex¬
ploitation, has applied especially to the North and West Sides. On
the South Side the Chicago City Railway, dominated until very
recently at least, by local capital, has remained in control from
the start. On the North Side the property and rights of the
original company, the North Chicago City Railway Company, was
in May, 1886, leased for 999 years to the North Chicago Street
Railroad Company, a company incorporated and controlled by
Messrs. Yerkes, Widener and Elkins. During the eighties several
companies were chartered for operation on the West Side, among
which was the West Chicago Street Railroad Company, which by
1888, under the domination of Mr. Yerkes, was in practical con¬
trol of the other West Side companies.
The period of Yerkes' domination continued until the forma¬
tion of the Chicago Union Traction Company by a group of New
These experiments were inaugurated under the direction of an engineer called over from
Buda-Pest, and who had helped to install a successful system in that city. While the experi¬
ments were under way the engineer was called off. It is believed that failure was intended.
'Electrification of the last of the old cable lines was finally accomplished on October
twenty-first,
(387)
30 The Annals of the American Academy
York, Philadelphia and Chicago capitalists in 1899. This company
purchased Mr. Yerkes' holdings in the North Chicago Street Rail¬
road Company and in the West Chicago Street Railroad Com¬
pany, the controlling companies respectively on the North and West
Sides. The new company also obtained control through an operat¬
ing agreement, of the Chicago Consolidated Traction Company,
which possessed a large number of suburban lines. The Yerkes
stock of the North Chicago and the West Chicago Street Rail¬
road Companies, purchased by the Chicago Union Traction, did not
in itself give the new combination control of those companies.
Union Traction did, however, own a majority of the stock of the
three subsidiary companies, namely, the North Chicago City Railway
Company, the Chicago Passenger Railway Company, and the Chi¬
cago West Division Railway Company. The control of the whole
traction situation on the North and West Sides was obtained by a
lease from June i, 1899, of all privileges and properties of the
North Chicago and the West Chicago Street Railroad Companies,
including their stocks in other companies.
To return to the question of franchises, the situation in the nine¬
ties was essentially as it had been in the early eighties. Capital was
needed for electrification of lines ; this, it was claimed, could not be
secured upon franchises about to expire, or at least to be called in
question in 1903. At the same time the gas companies of Chicago
were seeking, among other privileges, legislative consent to a con¬
solidation which to all intents and purposes had been consummated
years before, but never legalized. The political situation seemed to
be peculiarly propitious for a united legislative effort on the part
of the two interests. The street railways, therefore, with Yerkes
as the dominant figure, instead of negotiating with the city council,
as had been done in the eighties, joined with the gas companies in
persuading the legislature.
The united legislative program was embodied in the Humphreys
bills. The act concerning street railways proposed to give them,
together with other privileges, a fifty-year extension of all franchises
granted by city ordinance. The measures were introduced with ap¬
parently good chances of success, but the absolute disregard of the
public was so flagrant in the traction measure that popular demon¬
stration interposed to defeat it. After the first defeat a new measure
was introduced which simply authorized the city council to do what
Í.388)
A Study in Political Evolution
31
the Humphreys bill had undertaken to do directly. The Allen bill,
as the new act was called, went through without mishap four days
after the gas consolidation act had become a law. The city council
promptly refused to exercise the authority granted by the Allen law,
and the 1898 election resulted in such a rebuke to those members
who had supported any of the public service corporation measures
that the new legislature repealed the Allen law by a practically
unanimous vote.
The net result of two years of notorious legislative effort on
the part of the companies was a wide-awake public sentiment ar¬
rayed in hostile opposition against them. Long continued intoler¬
able service, coupled with unmistakable and brazen corruption could
hardly fail in the end to arouse a long-suffering public. The meas¬
ures of 1897 were not first offenses ; they represented, rather, the
flood tide of a career of boodle legislation. Earlier efforts had
been more largely centralized on the city council. In 1895, the date
which marked the greatest degradation of Chicago's council, it was
well known that a large proportion of its membership had become
an organized gang of blackmailers whose negotiations with the
public service corporations were for the councilmen's own profit, and
who were always ready to "deliver the goods" for sufficient compen¬
sation. The relation of the companies with members of the state leg¬
islature which, to put the case mildly, had been regarded with sus¬
picion in connection with nearly every piece of street railway legis¬
lation, on the occasion of the Humphreys and Allen bills reached the
highest stage of noisome and indecent corruption.
The public in 1898 was not inclined to exonerate its elected
servants, so-called, for the part they had taken in the degrada¬
tion of municipal and state politics. A large body of citizens, how¬
ever, attributed the custom of buying legislatures directly to the
determination of the public service corporations to secure and retain
valuable privileges without giving in return any adequate compensa¬
tion. However correct this analysis, the public was beginning to
understand something of the nature of a franchise and to appreciate
the public service element in the urban transportation industry. The
hostility to the companies had been led by the best informed citi¬
zenship of the city, and its underlying causes are indispensable to an
understanding of the developments in later years.
The failure of the Allen bill to result in any action on the
(389)
32 The Annals of the American Academy
part of the city council, as well as the responsibility for its later
repeal, is to be attributed in a large measure to the Municipal Voters'
League. This organization, the fruit of agitation carried on by
the Civic Federation and the Civil Service Reform Association,
represents the work of a comparatively small number of active pub¬
lic-spirited citizens. Its activities are confined chiefly to securing
and publishing accurate information concerning the character, the
record and the general fitness or unfitness of candidates for public
office. From the moment the Voters' League was established in
1896 the regeneration of the city council began. Within the next
two years the absolute domination of the council by the public service
interests was ended.
Thus far, however, the only results of popular agitation were
entirely negative ; franchises had been defeated and the companies,
with their allies in the government, had been rebuked ; but little or
no progress had been made toward developing a consistent traction
policy. The city was confronted by that greatest of all obstacles
to a well-considered and reasonable attitude toward the public
service corporations, namely, the absence of comprehensive and
reliable information. It was believed that past franchises had been
unfair, but until the whole financial history of the companies should
be revealed no one could indicate the conditions which a fair and
reasonable franchise should contain. The only source from which
information could be obtained was the companies themselves, and
it was not expected that they would voluntarily surrender what
they had always claimed, and what public service corporations
throughout the country had claimed, as legitimate business secrets.
The situation of the Chicago companies, however, in 1898 was
unusual. Although the Allen law was still on the statute books,
the refusal of the city council to extend franchises, as the provisions
of the law permitted, was apparently final. All companies were
anxious to reverse this action of the council, or at least to secure
positive action of some sort. In response to an invitation of the
Civic Federation in June, 1898, Mr. Yerkes addressed a public meet¬
ing and showed a strong desire to placate popular sentiment. The
events accompanying and succeeding the legislative session of 1897
had not entirely failed to make an impression. Mr. Yerkes was
reminded on this occasion that the public, without information, were
simply playing with loaded dice, and that public demands could
(390)
A Study in Political Evolution
33
be met only by opening the books of the companies to expert exam¬
ination. Whether convinced by the logic of this argument, or
because he saw the futility of further legislative effort along old
lines, Mr. Yerkes subsequently opened the books of the North and
West Side Companies to a committee of the Civic Federation, con¬
sisting of eminent citizens and public service specialists. The South
Side Company followed suit, and under the committee's direction
the books of the six chief companies were gone over by a profes¬
sional accountant.
Briefly summarized, this examination indicated that on July i,
1901,® the value of the several franchises as ascertained by sub¬
tracting the value of tangible assets from the market value of liabili¬
ties was about $75,000,000. The extension of franchises which the
companies had sought would, upon this basis, by enhancing the
price of marketable securities, have immeasurably increased the
franchise values. Comparing the face value of the liabilities with
the original cost of assets it was found that the excess of liabilities
was about $62,000,000, or, compared with the market value of
assets, the excess was about $72,000,000; in other words, the com¬
panies, by their various financial operations, had very nearly suc¬
ceeded in capitalizing their franchises. On the supposition that a
franchise is a valuable right for which full value should be given
in return, this excess capitalization represented water.
The average rate of profit of the several companies for the
year 1900 was found to be 14.6 per cent upon original cost, or 20
per cent on the market value of assets. Upon this basis, it was
pointed out that except for watered stock, the companies would
then have been in a position to pay the city 12 per cent of gross
income, lay aside 4 per cent for depreciation, aside from repairs
and maintenance, and still pay a 6 per cent dividend upon the original
cost. Using as the capital investment the market value of assets,
fares could have been lowered to four cents, a 6 per cent dividend
declared and 4 per cent set aside for depreciation, even had the low¬
ering of fares resulted in no increase of traffic.
Although it was recognized that there was no immediate possi¬
bility of squeezing out of the capitalization, water to the full amount
of the stock and part of the bonds of the companies, the definite
'The examination proper of the Civic Federation ended January i. 1898. A summary of
results prepared by Dr. Mile R. Maltbie brought the account up to July i, 1901-
(391)
34
The Annals of the American Academy
knowledge that the water, was there and how it came there was of
tremendous educational value. The evidence of a persistent failure
to write off depreciation, the payment of large stock dividends and
bonuses to stockholders, the payment of exorbitant prices for con¬
struction and conversion of lines to companies organized and owned
by the large stockholders in the traction companies—all these things
simply explained and harmonized with the legislative activities of
the traction interests.
With the spread of information the prospect of further fran¬
chise extension without compensation diminished. The investiga¬
tion, moreover, made it possible for the city to formulate a traction
policy. The question was no longer whether the city should con¬
tinue to be exploited, but by what method it could best protect its
interests and insure the establishment of a decent system of trans¬
portation. In all of this the companies had been thrown on the
defensive ; their franchises were about to expire ; with the shorten¬
ing of the franchise period the market value of securities was sure
to decrease. With the failure of legislative ventures the companies
rested their hope for extension beyond their twenty-year grants upon
the ninety-nine year act which they had hitherto been chary of
pressing.
Meanwhile the physical properties had deteriorated ; it was evi¬
dently expected that the need of rehabilitation would be a strong
argument in favor at least of another twenty-year grant. The events
of the late nineties, however, had crystalized a strong sentiment
against granting any new franchises whatever. Many who were not
in favor of municipal ownership as an abstract principle believed
that the city must at least be granted the legal right to own and
operate before it could be on a favorable footing to negotiate with
the companies. The street railway commission created by the par¬
tially regenerated city council in 1899 embodied this idea in a pro¬
visional act submitted to the state legislature. Again in 1901 the
same idea was incorporated in a bill presented by the committee on
local transportation which from that time conducted the legislative
efforts of the city council. The council committee's bill, which was
carefully drawn and ably supported was killed in the House com¬
mittee at Springfield.
Although between 1900 and 1903 there was a strong demand
for almost any sort of a settlement which would result in improved
(
'A Study in Political Evolution
35
service, and negotiations were from time to time conducted upon
that basis, the out-and-out municipal ownership sentiment was all
the time increasing. In the spring of 1902 the Referendum League
succeeded in having the general question of city ownership of street
railways submitted to a popular vote.® The result was nearly 143,-
000 for to 28,000 against. It has been claimed that a large part
of this vote of five to one for municipal ownership represented
simply a general feeling of hostility to the traction companies simi¬
lar to that which caused the legislative landslide of 1898 ; it at least
showed despair of a just settlement with the companies on the basis
of a new franchise.
Unfortunately for the cause of municipal ownership, the local
sentiment in Chicago did not extend to the state legislature. Al¬
though there was strong suspicion that the failure of the House
committee to report the local transportation committee's bill in 1901
was occasioned by "undue influence" on the part of the traction
interests, it was known that the brand "socialistic" had not been
without influence upon some of the country members. In 1903,
therefore, a somewhat simpler measure was advanced with emphasis
upon the necessity for enabling legislation as an indispensable con¬
dition precedent to any even-handed negotiations between the com¬
panies and the city. Several other bills were prepared, but support
finally centered on a measure mainly drafted by the secretary of
the Municipal Voters' League and introduced by Senator Müller.
The course of this measure, as had been expected, proved that trac¬
tion influence was still strong at the state capitol.
The political situation at Springfield in the beginning of 1903
seemed to lend little hope for any measure opposed by the street
railway companies of Chicago. The organization dominated by the
Governor, Mr. William C. Lorimer, party boss of Chicago, and Mr.
George W. Hinman, editor of the Inter-Ocean, which had been pur¬
chased by Mr. Yerkes, controlled the organization of the House by
a bare majority, and elected a weak and pliable speaker. It was
believed at the time that the speaker was definitely pledged to fol¬
low Mr. Hinman's orders in all matters concerning the street rail-
*0n May ii, 1901, an act was passed making it possible, upon petition of ten percent of
the voters, presented sixty days before an election, to submit for vote, in order to test the
sentiment of the community, any question of abstract policy. This permitted a vote upon
the question of municipal ownership in 1902 although the city did not at that time possess
the lecal right to own and operate street railways.
36
The Annals of the American Academy
ways. While the Müller bill was being urged at Springfield, the
jnayoralty campaign was progressing in Chicago. The Voters'
League platform was indorsed by both parties, the Republican can¬
didate was active at the state capitol in behalf of the Müller bill,
and the press, with the exception of the above mentioned recognized
organ of the railways, was unanimous in its support. In response
to this tremendous influence the bill passed the Senate just after
the election, but was scheduled by the organization for defeat in
the House. A substitute measure calculated to protect the inter¬
ests of the companies was reported by the Lorimer-Hinman organi¬
zation committee on transportation. When the public cry for the
Müller bill began to threaten a coalition between the minority Re¬
publicans and Democrats, Mr. Lorimer, who with Mr. Hinman, had
taken personal charge of the situation after the Müller bill passed
the Senate, called in conference the Chicago sponsors for the bill.
On condition of active support on the floor of the House and the
withdrawal of opposition from the press, Mr. Lorimer offered as
an ultimatum to embody certain amendments in the substitute bill.
The extra-legislative Chicago delegation at Springfield, including
the Mayor, voted to accept the substance of the Müller bill or
nothing.
The final outcome was a union of all the forces opposed to the
Lorimer organization and the defeat of his substitute bill prac¬
tically two to one. This success, however, was achieved only after
the speaker had attempted to jam the organization measure through
by refusing a roll call demanded by two-thirds of the membership
of the House. Fear of personal violence was the only thing which
induced the speaker to recede. The effect on the majority of the
speaker's refusal to permit a roll call caused the somewhat precipi¬
tate retirement of that gentleman to his private room, from which
he returned to the chair only upon assenting to a formal capitula¬
tion.
The main provisions of the IMüller bill as finally approved are:
(1) Cities of the state are given power to own and operate
street railways, or to lease them as the city council may see fit
for a period not exceeding twenty years.
(2) No city may operate street railways (although it should
own them) except upon approval of a proposal to operate by a three-
fifths vote of the electors.
A Study in Political Evolution
37
(3) Provision is made for the reservation in any grant or
lease to a private company of the right on the part of the city to take
over and operate the lines or to grant them to another company.
(4) The old frontage law, which permitted an existing com¬
pany by owning land in a street traveled by its lines to prevent
the entry of new companies or lines, is set aside.
(5) Renewal ordinances or grants for more than five years
may not go into effect until after sixty days from the date of their
passage by the city council. During this period ten per cent of
the voters may demand a referendum, at which a majority vote
decides whether or not the ordinance shall become effective.
(6) For the purchase or construction of lines and equipment
regular city bonds may be issued, provided the issue be approved
by a two-thirds vote of the electors. This provision is subject, of
course, to the constitutional and statutory debt limit.
(7) In lieu of general city bonds, to meet the contingency
of the debt limit of a city having been reached, cities are authorized
to issue street railway certificates to an amount ten per cent in
advance of the cost of the street railway properties. Such certifi¬
cates are to be paid solely out of the street railway properties and
their income, and are never to become a lien upon the general credit
of the city.
(8) Any ordinance providing for the issue of street railway
certificates becomes effective only upon approval of the electors of
the city by a majority vote.
(9) The Müller act as a whole does not go into effect in any
city until adopted by a majority vote of the city electors.
The Müller bill was passed on May 18, 1903. The extended
franchises expired in July of the same year, and barring the ninety-
nine year act, the companies remained thereafter in many of the
streets only on sufferance. In the April election, 1904, the Müller
law was adopted by the electors of the city by a vote of over
153,000 against 30,000. The two following provisions were also
adopted as indicated:
For. Against.
Shall the city council upon the adoption of the
Müller law proceed without delay to acquire the
ownership of the street railways under the powers
conferred by the Müller law? 121,957 50,807
(395)
38 The Annals of the 'American Academy
For. 'Against.
Shall the city council instead of granting any
franchises proceed at once under the city's police
power and other existing laws to license the street
railway companies until municipal ownership can
be secured, and compel them to give satisfactory
service ? 120,863 48,200
Shortly after this election the Union Traction Company went
into the hands of a receiver. Whether or not this action was
voluntary is not definitely known. It is certain that the tangled
legal relations between the various companies, and the mass of
watered stocks and bonds bequeathed by Yerkes at the time he
unloaded and got away with his profits, left the properties badly
crippled. Whether voluntary or involuntary, one of the results
of bankruptcy, with the legal complications involved, was to put
the city at a disadvantage in any attempt to improve the service.
Negotiations continued, however, with the City Railway Company,
which led to the report of a tentative extension ordinance in Au¬
gust, 1904. The policy of the tentative ordinance looking toward
ultimate municipal ownership as over against immediate municipal
ownership, furnished the issue for the campaign of 1905. The elec¬
tion of Judge Dunne by a majority of about 20,000 over John M.
Harlan, who at that time was equally objectionable to the traction
interests, seemed to indicate that municipal ownership sentiment
was not declining. The same indication is seen in the majorities
upon the three questions submitted for referendum vote. These
questions were:
Yes. No.
Shall the city council pass the ordinance reported
hy the local transportation committee on August
24, 1904, granting a franchise to the Chicago City
Railway Company? 64,391 150,785
Shall the city council pass any ordinance grant¬
ing a franchise to the Chicago City Railway Com¬
pany? 60,020 151,974
Shall the city council pass any ordinance grant¬
ing a franchise to any street railroad company?.... 59,0x3 152,135
(396)
A Study ill Political Evolution
39
The only point settled by the election of 1905 was that a
majority of the votes had been cast unmistakably for municipal
ownership. There was no indication of the method by which muni¬
cipalization was to be achieved. The exact situation concerning the
various street privileges as affected by the ninety-nine year act
was not definitely known ; the constitutionality of the certificate
feature of the Müller law was sure to be attacked as soon as
steps were taken toward financing municipal lines upon that plan.
As soon as Mr. Dunne assumed office it was clear that there
was to be little co-operation between the mayor and the city coun¬
cil. The net result of the activities of the city government dur¬
ing the first year of Mayor Dunne's administration was the passage
by the council on January 18, 1906, of an ordinance providing for
the issue of $75,000,000 in street railway certificates to acquire and
equip street railway properties. This ordinance, with two other
proposals as here indicated, was voted on at the last election.
For. Against.
Seventy-five million dollar Müller certificate Or¬
dinance 110,225 106,859
Shall the city of Chicago proceed to operate
street railways? 121,916 110,323
Shall the council proceed to secure municipal
ownership under the Müller law instead of passing
pending franchise ordinances or any other ordinances
granting franchises to private companies? m.QSS 108,087
This vote, although on its face less favorable to municipal
ownership than previous votes had been, adds no new obstacle to
municipalization. The slight significance of the vote is seen in
the relatively large majority for municipal operation; it is incon¬
ceivable that any intelligent voter, upon a clear issue, could at the
same time favor municipal operation and oppose municipal owner¬
ship. The operation proposal, however, requiring as it did under
the Müller law a three-fifths majority, was the only one of the three
proposals defeated. This again can have at best no more than aca¬
demic significance, as there exists no immediate possibility of
municipal operation.
The legal situation has become considerably simplified within
(397)
40
The Annals of the American Academy
the past few months. On March i6, 1906, the United States
Supreme Court decided that the ninety-nine year act, while extend¬
ing the corporate existence of the three companies to which it
applied, did not extend their street privileges. Since the last elec¬
tion steps have been taken to secure a judicial decision upon the
constitutionality of the certificate features of the Müller law. The
lower court has already upheld the law in every detail, and the case
is now pending before the Supreme Court of the State. An adverse
decision would practically prevent the financing of any plan of
immediate municipalization, as the present municipal debt does
not permit the issue of any obligations upon the general credit of
the city.
Whether or not municipalization proves practicable, the ninety-
nine year act decision has placed the city in a very favorable posi¬
tion for dealing with the present companies. The only rights which
the companies now possess are: first, the right to operate certain
lines until the city shall acquire the same by purchasing the tangi¬
ble property at an appraised value ; and, second, the right to oper¬
ate certain lines, chiefly in the outlying portions of the city, under
definite term grants, most of which soon expire. As to the remain¬
der of the system, the city has the legal right to order operation to
cease at any time subject to no obligation whatever to purchase
the tangible property. Whether the company in case the city
exercises this right may remove the physical property from the
streets has not been decided.
The improved situation puts entirely out of consideration any
settlement along the line of negotiations carried on last year be¬
tween the companies and the city council. It seems probable that,
barring unforeseen obstacles, there will henceforth be a greater
degree of co-operation than has hitherto been the case between
the council and the mayor. The administration program embodied
in a letter of April 27, 1906, from the mayor to Alderfnan Charles
Werno, chairman of the committee on local transportation, has
been for some time under consideration by the companies. The
plan is supposed to have been formulated by Mr. Walter Fisher,
special transportation counsel to the mayor, and probably one of
the best informed men in Chicago upon the whole transportation
situation. The plan provides:
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'A Study in Political Evolution
41
(1) Sale to the city of all tangible property and unexpired rights at a
price to be fixed now.
(2) Continued operation by the companies under a revocable license.
(3) Reconstruction of the entire system upon plans adopted by the city
with the concurrence of the companies.
(4) Improved service to provide for:
(a) Unification of all routes.
(b) Through routes.
(c) Universal transfers.
(5) Adequate assurance to the companies of the ultimate payment for
present value of properties as now fixed, and for additional investments,
whenever the city takes over the lines.
(6) Fair return upon present and future investment, with some share
of net profits.
(7) Remaining profits to go to the city as a sinking fund for purchase
of the properties.
The companies have already agreed to the principle of this
plan, and on September 27 the prices demanded for the various prop¬
erties were submitted to the council committee on local trans¬
portation. The Union Traction Company has set a price of $29,-
294,472 upon its tangible property and $13,825,040 upon its unex¬
pired rights; a total of $43,119,512. The City Railway Company
asks $20,103,936 for its tangible property and $10,322,228 for its
intangible rights ; a total of $30,426,164. This makes a grand total
of $30,426,676 demanded for present values. These valuations are
considered much too large, and the city now has a committee of
engineering experts, consisting of Mr. B. J. Arnold, Mr. L. E.
Cooley and Mr. A. B. du Pont, examining the properties.
For the contingency of the failure of present negotiations, the
mayor has again urged his so-called "contract plan," which was last
year several times rejected by the city council. This plan contem¬
plates the organization of a constructing company in the city's inter¬
est to proceed with construction or rehabilitation wherever the
rights of the old companies have entirely expired. The company
would be allowed a fair construction profit and interest on its in¬
vestment until such time as the city should take over the lines,
for a price agreed upon in advance. In case such an arrangement
should not furnish sufficient inducement to capital, it is suggested
that the investment could run for a definite term as a lien upon
the property, the city having the right to take over, own, and
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The Annals of the American Academy
operate the lines subject to such lien. The other conditions would be
essentially the same as those upon the basis of which negotiations
are now proceeding with the present companies.
In any plan for rehabilitation the first problem which the enter¬
prise has now to solve is that of finance. In case the present com¬
panies continue to operate, the magnitude of the problem will de¬
pend largely upon the valuation finally fixed upon for existing prop¬
erties and rights. The present demands of nearly $50,000,000 for
tangible properties are about $4,000,000 in excess of the highest
estimated valuation fixed in Dr. Maltbie's summary of the Civic Fed¬
eration report in 1901. This latter valuation of less than forty-six
millions included inter-company obligations and non-productive as
well as productive assets. Excluding obligations between the com¬
panies the valuation was less than thirty-five millions, and even that
included a considerable amount of property fit only for the scrap
heap. Although several lines have been added since that time, the
older properties have greatly depreciated. It will probably not be
seriously advanced that the properties as a whole have materially
appreciated during the past five year period.
Evaluation of franchises is at best a rough estimate, but the
demand of over twenty-four millions as compared with an esti¬
mated valuation of seventy-five million in 1901 would certainly
seem not to make excessive allowance for the expiration of the
1883 extensions, the overthrow of the ninety-nine year act, and the
passage and adoption of the Müller law. Whatever the present
value, it is rapidly approaching the vanishing point. It seems proba¬
ble that unless the companies accept a lower figure both for the
tangible and the intangible properties no settlement with them will
be reached.
As this paper goes to press events are happening which con¬
siderably clarify the negotiations. The legal tangles of the Union
Traction interests seem to have been practically straightened out.
All of the several interests involved in the various companies were,
on October i8th, surrendered to the jurisdiction of Judge Gross-
cup's court, which it is said will adjust matters through the newly
formed Chicago Railways Company. This company seems to be
now in a position to negotiate with the city for the solution of the
whole traction problem.
At a recent meeting in New York, at which Mr. John M.
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A Study in Political Evolution
43
Harlan, the defeated candidate for mayor, represented the court,
satisfactory arrangements are said to have been made to secure
the capital for rehabilitation. The attorneys for the companies give
assurance that the plans outlined follow the principles of Mayor
Dunne's letter to Chairman Werno. The principles of a revocable
license upon six months' notice, of unified operation, with universal
transfers, are accepted and embodied in an ordinance to be submitted
at an early date to the city council. It is not possible at this writing
to say what provision for the future building of subways is con¬
templated in the new arrangement. Negotiations seem at least to be
pending on a satisfactory basis. The chief obstacles are likely to
be the evaluation of present properties and the division of profits."
Whether or not the developments of the last few months are
in the direction of municipal ownership and operation no one can
say. It is not improbable that with an improved service under the
system of private operation with a revocable license the urgent
demand for municipal operation would largely subside. In the pres¬
ent temper of public sentiment in Chicago, the continuance of decent
relations between the operating company and the public powers
will largely influence the trend of public opinion. It is safe to say
that a policy of flagrant disregard for public interests cannot in the
future be supported by the wholesale purchase of legislators and
political organizations.
Many of the warmest advocates of municipal operation feel, in
spite of the progress of the past few months, that the present mayor,
with his almost fanatical devotion to municipal ownership as a
developments since the above paragraphs were written indicate that the legal obstacles
in the way of endowing a new company with authority to negotiate for the solution of the
whole traction situation have not been entirely removed. The Chicago City Railway, how¬
ever, presented to the council committee on local transportation, on October twenty-fifth, an
ordinance embodying the main features of the administration program. The plan contem¬
plates the acceptance of a parallel and identical ordinance by the Union Traction Company.
In case the latter company fails to accept the ordinance, the Chicago City Railway Company
agrees to take both ordinances, and to establish one system for the whole city. In either
case, unified operation is contemplated.
The ordinance provides for a subway system to be built by the companies in partnership
with the city, the companies' investment therefore to be limited to five million dollars during
the first five years. There is in the ordinance as drafted one essential restriction on the city
which reqmres that in case the lines and equipment are purchased by the city within the first
twenty years, the sale must be for cash, and the purchase must be made for the city's own
use and operation. It is not unlikely that considerable changes will be made in the ordi¬
nance before it is finally passed. If the question of compensation for existing properties, and
the question of the division of profits can be agreed on, other details are likely to be ar¬
ranged,
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The Annals of the American Academy
principle, is himself a serious obstacle to its practical and perma¬
nent realization. The mere cry of "spoils" and "inefficient officers"
should not, considering the baneful influence of party politics under
private management of public utilities, determine the question
of municipal, as over against private operation; nevertheless, the
fundamental prerequisite to complete success in new and compli¬
cated fields of municipal enterprise is integrity and ability in the
civil service. Barring the appointment of Mr. Walter Fisher and
several excellent appointments on the board of education, the mayor
has done little to reassure the public that under the present admin¬
istration such a civil service as is needed is to be expected. The
temporary suppression of the Dalrymple report, which merely em¬
phasized the dangers to municipal ownership inherent in Amer¬
ican political conditions, was at least an unhappy incident. Later
actions of the mayor indicate a failure to appreciate those dan¬
gers; in his appointments to the most important positions, as well
as in his attitude to the general problems of city government, he
has seemed unable to free himself from the traditions of the organi¬
zation politician.
To the person without theories concerning public or private
ownership it seems to matter little whether the present agitation
leads to municipal ownership and operation or not. The sig^nificant
fact for those who are compelled to endure the transportation facili¬
ties now available is that some measure of substantial improvement
is among the possibilities of the near future. By whatever method
improvement comes, there seems to be little danger that the element
of public service will be ignored.
On the other hand, there are few who believe that a really
adequate service can be established by the rehabilitation and the
unification of existing lines. The mere question of surface space
in the down-town area presents a serious if not unsurmountable
obstacle—an obstacle which even the unification of all surface and
elevated lines would not remove. Such unification is not contem¬
plated by any present plan. A number of excellent citizens who
have interested themselves in the transportation problem from the
start believe that the subway loop furnishes the only possibility of
solution ; they even go so far as to refuse co-operation in any other
plan. In this connection, the lowering of existing tunnels under the
river which has now been directed by federal statute, was repeatedly
.(403),
A Study in Political Evolution
45
deferred in the hope that the new tunnels might be made a part of
a comprehensive subway system. All of these physical elements in
the problem will doubtless postpone the establishment of a really
complete system of rapid transit long after the present financial
problems have been settled.
Questions of engineering and finance which the city gov¬
ernment and future city governments will have to face are of tre¬
mendous importance to citizens of Chicago; beyond that they will
be of scientific interest merely to engineers and to students of
municipal institutions. To the importance of the social and political
element in the history of Chicago traction during the past decade,
no such limitations can be imposed. Though companies under one
management continue, as far as fares are concerned, to be operated
as separate lines, though the entire service is disconnected, inade¬
quate and in every way indescribably bad, even though the present
schemes for improvement should fail, it would still remain true
that the situation has been unmistakably and immeasurably improved
by the general public uprising.
Far more important than the positive hardships, even than the
moral dangers, which the present miserable facilities entail ; over-
weighing any academic contest between the policies of public and
private ownership ; not to be compared with the derived question of
individualism or socialism—terms which for practical purposes are
mere catch words denoting different degrees of the same thing—-
more fundamental than all these are the questions of citizenship.
The expediency of adopting private or public ownership will
depend very largely in every concrete case upon the probable in¬
fluence of the one system or the other toward developing or dis¬
couraging, in the whole body politic, the highest type of citizenship.
With active, able, unselfish, public-spirited citizens, utilities once
recovered can be successfully operated under almost any system ; in
the absence of such citizens no system will adequately subserve the
public interest.
Though Chicago has hardly more than started in the direction
of wise and efficient government, the rebukes which decent citi¬
zens have repeatedly and persistently administered to a body of men
and interests organized for plunder, have laid a foundation which
will remain. The few men who have been instrumental in rescuing
and regenerating the city council, who through various organiza-
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46
The Annals of the Ameritan Academy
tions have called the whole body of citizens to protect the interesta
of the public—these men have demonstrated in a way that cannot be
misunderstood that democracy* and citizenship are still vital forces
in American public life. This is the incident in the relation of the
public to the street railways of Chicago which will be of abiding
importance.
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