Monday, April 7, 2014

Dever Traction Plan -- April 7, 1925

Streetcar in front of the Leiter Store on State Street, 1927
Chicago Daily News Archive
On October 1, 1947 the City of Chicago got into the public transportation business, assuming ownership of the assets of the Chicago Rapid Transit Company and the Chicago Surface Lines streetcar system.  It took another five years to negotiate the rights to the Chicago Motor Coach Company.  Today, of course, the system is known as the Chicago Transit Authority.  But what I didn’t know was that the same thing could have been done nearly two decades earlier by a simple vote.

Wiiliam Dever
Mayor William E. Dever, who served as Chicago’s mayor from 1923 to 1927, proposed a plan that could have accomplished virtually the same thing in 1925.  Described as a “municipal ownership project,” the proposal was the bedrock of Mayor Dever's campaign.  It provided for “the purchase of existing surface lines as well as for the purchase of the elevated lines, and also provided a vast scheme of street railway and elevated railroad extensions and subway construction, all to be financed through the issuance of the so-called ‘Schwartz certificates.’”  [Public Ownership League of American, 1926.  p. 84.]

These certificates would have been issued under the restriction of the municipal ownership law of 1913, outlined in a United States Supreme Court decision, Springfield Gas & Electric Co. v. City of Springfield.  The court stated,

The private corporation whatever its public duties is organized for private ends and may be presumed to intend to make whatever profit the business will allow. The municipal corporation is allowed to go into the business only on the theory that thereby the public welfare will be subserved. So far as gain is an object it is a gain to a public body and must be used for public ends. Those who manage the work cannot lawfully make private profit their aim, as the plaintiff's directors not only may but must . . . The municipalities can exercise their power to make all needful rules and regulations only by ordinances and resolutions as in other public action. [

In order to protect “the public welfare” the Dever plan placed operation of the public transportation system under a “Board of Control” in which banks holding the certificates that financed the operations would have equal representation with the city.  It got the plan paid for, but it also gave the financiers equal control in the system’s operation.  This meant, for example, that for a period of 40 years (at which time the certificates would expire) the banks would hold the power to go to court in order to fix fares at whatever rate was necessary to keep the whole thing from defaulting.  The lenders would receive equal voice in managing the system and in determining public transportation policy.

Two former mayors, Carter Harrison and William Thompson, opposed the plan while the utility czar Samuel Insull encouraged citizens to vote for it.  On this date in 1925 the ordinance was defeated by a three-to-one margin.

The next day The Tribune editorialized, “[The traction ordinance] offered Chicago, as we believe, a sound method of unifying and developing the existing transportation lines and of building subways at once.  The city is not likely to obtain a better bargain than was contained in the Dever ordinance.  Yesterday’s defeat may mean that a generation must pass before the city’s needs are met.  If that is true, the news on the front page this morning is bad news, indeed.”  [Chicago Tribune, April 8, 1925]

A fairly accurate assessment of the situation as it turned out.  Chicago’s first subway, along State Street, was completed on time in 1943.  The next link in the system, the Milwaukee-Dearborn line, would not be completed until 1951.

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