Privatize Public Transit? | Politics | Chicago Reader

Privatize Public Transit? 

Chicago's tried it before. Here's how that went.

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In December 1898, some Chicagoans began wearing twine—twisted into the shape of a hangman's noose—in their buttonholes. It was their way of sending a message to the City Council about an upcoming vote. "I will not be surprised to see some hanging done in the streets of Chicago," said Mayor Carter H. Harrison II, sizing up the city's mood.

For years, citizens had been complaining about shoddy service on Chicago's privately owned streetcars. They'd fumed at corrupt businessmen who got rich by cramming passengers onto those streetcars. Now aldermen were talking about giving even more power to the street railways—Chicago's "traction companies," in the idiom of the day. If this vote went through, those companies would control the streetcars for another 50 years.

"The city seethed with excitement," Lloyd Wendt and Herman Kogan wrote in their 1943 book, Lords of the Levee. "Aldermen received letters threatening the kidnapping of their children and wives and the dynamiting of their homes."

This was an early round of a debate that Chicago has never settled for good: When does it make sense for City Hall to let a private company handle a public service, and when should the city do the job itself? Today the argument's focused on the parking meters Mayor Daley leased to a private company. But at the turn of the last century the issue was public transportation that private capital built, owned, and wanted to keep.

Between 1855 and 1861 city and state legislators passed laws allowing three companies to build and operate horse-drawn streetcars. The Chicago City Railway Company ran them on the south side and the North Chicago City Railway Company and the Chicago West Division Railway Company took the areas their names suggest. Each company got a 25-year monopoly on the business in the neighborhoods it was allotted.

"Chicago never built a street railway by itself, but it chartered almost anybody who came along," says David Young, the author of four books on local transportation history, including 1998's Chicago Transit: An Illustrated History. "If a bunch of guys came along and said, 'Hey, we want to build a street railway,' the city would grant them a franchise."

In his 1858 inaugural address, Mayor John Haines talked about the ways Chicago would benefit from street railways. "They are emphatically the poor men's railroads, and on this account, if no other, should be fostered and protected by the municipal authorities of all large cities," he said. But Haines never went so far as to suggest a public traction system—even though traction ordinances from the 1850s gave Chicago an option to buy the companies after their franchises expired. In newspaper articles and City Council documents of the 1850s, the idea barely comes up.

Why not? For one thing, Chicago lacked the home-rule powers to run its own lines. State laws spelled out exactly what the city was empowered to do, and running a traction system wasn't on the list—though of course, Chicago could have asked the state legislature to change the law. State laws also limited the city's debt, making it difficult to borrow money for big projects.

Young also says Chicago officials were probably sobered by the state's recent experience. The Internal Improvements Act of 1837 directed Illinois to spend $10 million building railways. Strongly supported by state legislators including Abraham Lincoln and Stephen A. Douglas, and by a public enthusiasm one observer called "almost insane," the construction project quickly went over budget and fell into disarray. Illinois didn't have the money, the materials, or the expertise the job demanded. "The result of the whole project was a mammoth debt for the state," Paul Simon, the future senator, wrote in a 1965 study of Lincoln as a legislator. "The state was dotted with bridges from nowhere to nowhere, with partially dug canals, with roads with no meaningful beginning or ending."

Chastened by the experience, Young says, Illinois started "chartering private railroad companies to build at their expense hither and yon across the state."

click to enlarge Trolleys on Randolph Street circa 1900
  • Trolleys on Randolph Street circa 1900
  • Time Life Pictures/Mansell/Getty Images

Chicago's first railroad line opened in 1848. The Galena and Chicago Union Railroad was financed by William Butler Ogden, the richest man in town. Ogden had been the city's first mayor, in 1837-'38, and biographer Jack Harpster (The Railroad Tycoon Who Built Chicago) tells us he stayed active in local politics after that while making a fortune in real estate and railroads. He was what historians call a "booster," someone who promotes his own interests as he promotes his city's. As former alderman Dick Simpson explains in Rogues, Rebels, and Rubber Stamps, Chicago's early city leaders were real-estate speculators motivated by personal profit as well as by civic pride.

Not surprisingly, the man who brought in the railroad was also involved in introducing streetcars: Ogden and four co-owners organized the North Chicago City Railway Company.

When the City Council heard the first local proposal for streetcars in 1854, the United States was in the midst of a railroad boom. Stephen Douglas, by then a U.S. senator, had led the way in 1850 as Congress gave 2.6 million acres of federal land to the state of Illinois, which signed it over to the Illinois Central Railroad Company. In return the railroad agreed to give the state 7 percent of its gross receipts.

It was the first time the federal government had given away land to help a private company build a railroad, but it wouldn't be the last. In the 1850s and 1860s the U.S. turned over at least 130 million acres to the railroads in exchange for discounts on transporting troops and freight. Looking back on this deal in 1997, historian John Stover wrote in American Railroads that the benefit to each side was "roughly equal," the land and the discounts (which remained in effect through World War II) each being worth about half a billion dollars.

But it did not look so reasonable early on, when a series of scandals turned public sentiment against the railroads. "Many, perhaps most, of the post-Civil War railroad lines suffered from the evils of inflated construction costs, fraudulent stock manipulations, and incompetent management," Stover wrote.

In the 1920s, historian Vernon Louis Parrington had described Douglas's push for railroad land grants as the opening of America's Gilded Age. "In the tumultuous decades that followed," he wrote, "there was to be no bargaining with corporations for the use of what the public gave; they took what they wanted and no impertinent questions were asked."

Chicago epitomized this acquiescent relationship between politics and business. Donald Miller observed in City of the Century: "The city of Chicago may not have given a single cent of its tax revenue to the railroads, but it handed over to them something far more precious—its very land, air, and water. Railroads . . . had an unlicensed right of way to go anywhere and build anywhere in the city."

It was in this atmosphere that Chicago began considering streetcar plans in the 1850s. Chicago's street railways received no government land, but they got the exclusive right to run streetcars on certain public streets practically free of charge. As with the 2008 parking-meter deal, critics focused on the length of the deal and what benefit the city got out of it—or didn't.

Unlike the Illinois Central, the streetcar companies weren't required to give the government any of their revenue. This outraged some Chicagoans. In 1859 a citizen identified only as "F" wrote the Tribune condemning aldermen for having "foolishly bartered away" a valuable franchise without getting a red cent in return.

Like the firms seeking today's privatization deals, the 19th-century traction companies wanted contracts or franchises long enough to make their investments worthwhile. But how long was that? Chicago gave them 25-year franchises, and after a judge ruled that the city had lacked the authority to do so, the Illinois General Assembly stepped in and gave them similar terms.

In 1865 the street railroads successfully lobbied in Springfield to extend their franchises to 99 years. They complained that their expenses were going up and it was hard to make a profit, thanks to the city's five-cent limit on fares.

The Tribune didn't buy it. "They are the most gigantic beggars that ever went on the town, for nothing less than an income of millions will give them relief," the newspaper wrote. It suggested that Chicago could cover all its expenses for public schools and city government simply by deducting the money from the "enormous profits" of these "bloated monopolies."

Governor Richard Oglesby vetoed a bill giving the companies the leases they wanted, but the General Assembly overrode his veto. It was a representative from Peoria, Alexander McCoy, who made one of the most impassioned speeches against Chicago's streetcar monopolies. "The streets of a great city are being voted away to a mammoth corporation," he said. "It prevents all competition. It gives the control of all the streets of a great city, so far as railways are concerned, into the hands of a great monopoly for almost a century to come."

Confusing matters, in 1870 Illinois approved a new state constitution that gave cities the power to grant streetcar franchises while preventing the General Assembly from doing so without permission from local officials. In 1875 Chicago got a new city charter, including a 20-year limit on streetcar franchises.

These actions left Chicago's traction system in a state of uncertainty. Did the railways now have franchises for 99 years or 20? Or was it back to 25? The argument went on and on. In 1878 the City Council imposed an annual license fee of $50 per streetcar that the companies refused to pay and challenged in court. In 1883 the city said the 25-year franchises signed in 1859 were expiring, while the companies insisted they were good till 1958.

The two sides grudgingly worked out a compromise: Though they continued to insist the 99-year franchises were valid, the companies agreed to start paying the $50 fee and drop their suit, and in return the city gave them new 20-year franchises, good until 1903.

Meanwhile technology was on the move. Cable cars began replacing horse-drawn streetcars here in 1882. New companies began building elevated tracks in 1892. And starting in 1893, cable cars were converted to electric trolleys. Despite these advances, Chicagoans continued to call service lousy. With different companies running streetcars in different parts of the cities, connections were often difficult and never free. When passengers got off one streetcar and onto another, they had to pay another fare.

The streetcars were cold and drafty in the winter, and rides were often herky-jerky. An 1886 Chicago Daily News article described cable cars moving forward in jolting spurts and half-stops. "To people of strong constitutions this may not be so hard to stand," the newspaper remarked, "but to the man with the average Chicago liver such progression can only be likened to that made by the trip of a toboggan over a rock mountain slide."

Accidents were an everyday occurrence. "The railroads which cross the city at the level in every direction . . . constantly mow down unoffending citizens at the crossings, and those legless, armless men and women whom you meet on the streets are merely the mangled remnant of the massacre that is constantly going on year in and year out," English reformer William Stead wrote in 1894's If Christ Came to Chicago. He reported that the number of people killed in Chicago by streetcars and trains had risen from 257 in 1889 to 431 in 1893.

More than anything else, though, Chicagoans complained about crowding. It was like "a scene in Dante's hell," wrote Stead. A north-side passenger commented in 1895: "Men and women were packed together like herrings in a barrel so that they breathed in each other's ears, trod on each other's toes, fell helplessly on top of each other as they rounded the curves, and had to climb over each other to get out."

What could be done? The Daily News wrote in 1886 that Chicago was "at the mercy of three monstrous corporations—grasping, selfish, and powerful—which threaten never to relax the hold they have upon her throat." The annual $50-per-streetcar fees were a trivial expense; a state government report noted that the city was earning more money from dog licenses.

Those fees, however, weren't the only ones Chicago exacted. The companies also had to satisfy a corrupt group of aldermen known as the Gray Wolves. "Political corruption had become so pervasive at the end of the nineteenth century that the Gray Wolves were attempting to shake down virtually every utility dependent upon the city for a franchise, not just the transit systems," wrote David Young in Chicago Transit. (In his 1935 memoir, Stormy Years, Carter Harrison II—Chicago's mayor from 1897 to 1905 and 1911 to 1915—would describe the City Council of his day as a "low-browed, dull-witted, base-minded gang of plug-uglies with no outstanding characteristics beyond an unquenchable lust for money.")

But the chief villain of the streetcar controversies, as far as Chicago's newspapers and reformers were concerned, was Charles Tyson Yerkes, a financier who'd served prison time for larceny in Philadelphia. In 1886 Yerkes began buying up Chicago's transit lines in a series of complicated deals—"a gigantic scheme of financial legerdemain," according to lawyer Clarence Darrow, one of the harshest critics of the streetcar companies. By 1897 Yerkes controlled two of the three major streetcar lines (the exception was the south side's Chicago City Railway, whose major shareholders included Marshall Field). Yerkes also owned eight smaller electric suburban railways and four elevated lines, which he combined into the Union Elevated Company.

click to enlarge Charles Tyson Yerkes circa 1900
  • Charles Tyson Yerkes circa 1900
  • Topical Press Agency/Getty Images

"I am in Chicago to make money," Yerkes told an associate, "and if it were not for what I expect to make out of it I would take the first train to New York and never set eyes on the beastly place again."

The Chicago Journal once observed: "He hates Chicago, and Chicago is honored by his hatred."

In the 1890s Chicago reformers waged a campaign for municipal ownership of the streetcars and other utilities. Meanwhile, Yerkes lobbied in Springfield for laws that would tighten his grip on Chicago's transit system.

In 1895 the General Assembly passed a bill allowing cities to extend streetcar franchises to 99 years. Governor John Peter Altgeld vetoed it. "I love Chicago," Altgeld said, "and am not willing to help forge a chain which would bind her people hand and foot for all time to the wheels of monopoly and leave them no chance of escape." In 1897 Yerkes tried again. He supported a bill allowing the General Assembly itself to extend the franchises to 50 years. The senate approved the measure, but opponents protested that the 1870 Illinois constitution clearly denied the legislature the power to do such a thing, and the bill died in the house. Back for a third try later that year, Yerkes persuaded the General Assembly to pass and a new governor to sign a bill giving Chicago the power to grant 50-year franchises.

John Franch, author of the 2006 biography Robber Baron: The Life of Charles Tyson Yerkes, describes him as someone who'd stop at nothing to get what he wanted. Citing an 1898 article in the Chicago Times-Herald and an unpublished memoir by one of Yerkes's lawyers, Franch wrote that Yerkes offered Altgeld a stock deal worth $1 million to $2 million in exchange for his signature on the first bill. "A fortune is in your hands," the tycoon allegedly told the governor. And in an unpublished memoir by Edward Price Bell of the Chicago Record, Franch found an account of Yerkes's companies using "moral terrorism" against married legislators, hiring "professional vamps, both beautiful and clever," to seduce them and then threatening them with exposure if they voted against his interests. Bell also told of Yerkes's companies bribing jurors in personal-injury lawsuits filed by people injured by streetcars. Several men would be convicted of bribing the jurors, but Yerkes himself was not charged.

Once the General Assembly passed Yerkes's bill, giving Chicago the power to grant 50-year franchises, the debate moved to City Hall. A special committee of aldermen investigating streetcar finances concluded that on the basis of rising stock prices and dividends issued, between 1890 and 1898 shareholders of the three companies had made profits ranging from 190 and 244 percent, "figures . . . so stupendous that they may very likely create surprise." The committee posed a question: If the shareholders' annual profits had been limited to 6 percent for those years, how much extra money would have been freed up? The answer was calculated at a staggering $56 million to $62 million; the city estimated it would cost only $24 million to build the entire 487-mile streetcar system from scratch.

Yerkes dismissed the report as "clap-trap." But John Franch says, "Yerkes was primarily interested in selling securities and making money through his securities. He pumped up his profits through various unscrupulous means." The committee of aldermen named some of them: one was raising more money in stocks and bonds than Yerkes's companies were worth, so he and shareholders could pocket the difference; another was inflating the costs of installing cable car lines and paying the money to a construction company he owned.

Muckraking journalist Henry Demarest Lloyd was one of the most outspoken advocates of a municipal takeover. He urged Chicago to "reject any ordinance with a corporation snake in its belly," arguing that the transit system would always be a "hotch potch" as long as private companies were running it. Working-class unions joined middle-class reformers in campaigning for public ownership of the traction lines. "Reform politics now involved a broad section of the city's population," wrote Georg Leidenberger, author of the 2006 book Chicago's Progressive Alliance: Labor and the Bid for Public Streetcars. It was "definitely a new moment in the political culture."

By this point in its history, Chicago had plenty of other experience with private companies handling public services. In the 1830s and 1840s, the Illinois General Assembly had put Chicago's water supply in private hands, but cholera outbreaks and frequent problems with frozen pipes caused the city to take over in 1861. (Providing clean water continued to be a challenge for decades.)

Chicago also relied on private scavengers to collect much of its garbage. "The streets and alleys are places of deposit for all that is foul and abominable," the Tribune complained in 1865, but another 41 years would go by before the city began collecting garbage itself.

The state gave private companies monopolies on supplying natural gas to Chicago, and in the winter of 1866-'67 citizens held rallies to protest high gas rates and urge the city to take over the service. The city didn't, and the gas trust remained the subject of public ire—and aldermanic shakedowns. In 1895 the City Council awarded a franchise to a new outfit called Ogden Gas Company—a dummy corporation set up by the Gray Wolves simply to extort People's Gas into buying them out.

Chicagoans also received electricity from private companies, many of which were bought up in the 1890s by Chicago Edison, the forerunner of ComEd. In 1887 the city built its own plant to supply power for streetlights, a switch, Mayor Harrison would write, that cut the operating cost of the streetlights by 71 percent. City officials wanted Chicago to provide the public with electricity as well, but that would've required the approval of the General Assembly, and the necessary bill died in the house.

Charles Yerkes disputed the idea that Chicago was really providing water and electricity cheaper than private industry could. "The operation of the electric plant is today a disgrace to this community," he said. "There is not another large city in the country, and I doubt if there is one in the world, where it costs so much for public lighting as in Chicago."

And he attacked the idea of a government-run transit system as socialistic: "It would soon build up a government based upon the tyranny, strength, avarice and despotism of the head of that government, and the people themselves would have little or no voice in it," he said.

Yerkes wasn't the only one questioning whether the city government was capable of running streetcars or utilities. "The reason why none of these things should be done by the city, is that they can be as well if not better done by individuals or by corporations," the Chicago Journal editorialized. The city couldn't even keep its streets in good condition, the Journal observed.

"There was a widespread belief that city government was so corrupt that it would have been impossible for a city government to run something as huge as a streetcar system," John Franch says. "There were fears of the patronage possibilities—various well-connected politicians would hire their cronies."

The debate peaked in December 1898, as the City Council prepared to vote on the 50-year franchises. The ordinance called for the companies to give the city a small cut of their gross receipts, on a sliding scale from .5 to 3 percent. The Tribune scoffed, saying Yerkes could afford to pay 20 percent.

Mayor Harrison vowed to defeat the ordinance. Newspapers reported that opponents of the bill were threatening to lynch aldermen who voted for it. The Chicago Chronicle published the following advertisement: "WANTED: 10,000 strong-limbed and fearless men. Apply at the council chamber, with ropes, the night the aldermen attempt to pass the fifty-year franchise robbery. Come prepared to do business."

The controversy was front-page news even in New York, where the World reported Chicago businessmen seen wearing the "little slip-knots of twine" in their buttonholes.

"The 'lynching' talk is the worst kind of rot," said Yerkes in the World.

From the pulpit of Chicago's First Baptist Church, the Reverend P.S. Henson accused the streetcar companies of using "nets made of gold" to capture the city's aldermen. "If you wish to see the most disgraceful dog-pound on the face of the earth," he thundered, "you have only to visit our City Council chamber on a Monday night and listen to the yelping of the curs that have been caught and see them jump at the crack of the whip of the masters who have caught them."

The World also reported that the ordinance's promoters were offering aldermen a total of $1.2 million in bribes.

Three thousand people attended a rally at Central Music Hall. Shouts of "Hang them! Hang them!" rang out during speeches denouncing "gang aldermen" and "boodlers" on the City Council.

In a speech to the Mayfair Improvement Club, one of Yerkes's business associates, DeLancey Louderback, defended the ordinance. "We ask for 50-year franchises because 50 years are needed to give us any prospect of a fair profit," he said. And Yerkes told the World, "There is nothing I have done that I am sorry for. My bitterest enemies would not have the transportation system of Chicago put back where I found it. My only crime is that I have made money—not so much as they say, but enough to install envy in thousands who pull me down."

All of Chicago's newspapers opposed Yerkes except for the Inter Ocean—which Yerkes had purchased in 1897. The Inter Ocean accused the "slanderous newspaper press" of siding with corrupt politicians and warned that a City Council vote against the railways would hand Chicago "over to the rule of criminals, anarchists, firebrands, and assassins."

When the City Council met to debate the ordinance, an estimated 700 people filled the public galleries and another 3,000 the corridors of City Hall. When Alderman William Mangler defended the streetcar owners as philanthropists, someone in the galleries called out, "How much do you get for that speech?" Mangler shook his fist and shouted back, "If it were not for the streetcar companies we would not have a city."

"Sit down!" someone yelled. "You're bought. We see where you are."

Other aldermen spoke against the ordinance, prompting enthusiastic cheers. "Knock them out!" spectators yelled. "Hurrah! Whoop it up! Smash 'em!"

A week later the aldermen voted 32-31 to send the ordinance to the Committee on City Hall, despite objections that it had nothing to do with City Hall. The committee was packed with Harrison allies, so the move effectively killed the measure. The applause from the galleries lasted three minutes.

Two of Chicago's most notoriously corrupt aldermen, John "Bathhouse" Coughlin and Michael "Hinky Dink" Kenna, both of the First Ward, were among those who voted against the 50-year franchises. Asked to explain, Coughlin told a reporter, "I have recently joined the church."

Years later, Harrison's memoirs offered another explanation for how Bathhouse and Hinky Dink voted. Coughlin had said he was taking the advice of U.S. Senator William Mason: "Keep clear of the big stuff, John—it's dangerous. You and Mike stick to th' small stuff; there's little risk and in the long run it pays a damned sight more!"

The following March the General Assembly repealed the 1897 law under which the City Council had considered offering the 50-year franchises.

Defeated, Yerkes left Chicago in 1899, selling off his streetcars and elevated railways. The new owners soon discovered they were saddled with millions of dollars in debt. An accountant hired to study the books reported that Yerkes had been siphoning money into his suburban railways, which, thanks to contracts Yerkes had signed with himself, were entitled to run their streetcars on city tracks. Yerkes (who would soon play a key role in the construction of the London Underground) had doomed his successors to eventual bankruptcy, yet he had given Chicago its famous Loop and a sprawling, if fragmented, system of streetcars and trains.

In 1900 Edward Price Bell interviewed Yerkes in London and asked him about bribing juries. "What sort of juries?" Yerkes exclaimed. "Where did you find most of the men who inveighed against 'jury-hangers'? You found them in the lairs of Chicago, the barrel-houses and the opium dens, and worse. Some, I will concede, were honest men. But some were the tools of ambulance-chasing shysters and had been trained in schools for the subornation of perjury. I could cite many cases of organized attempts to bilk my companies on absolutely fictitious testimony. We had to fight some suits, formidably prepared, against lines which had not been built at the time when the injuries were alleged to have been inflicted! As for Springfield, the boodlers held the gap there. One could not pass, be one's bill good or bad, without uttering clearly the essential watchword. And you know what that word was."

Says David Young of Yerkes, "This guy played by the rules that were in place at the time."

Yerkes's departure did not end the streetcar wars. Mayor Harrison kept saying that he favored municipal ownership—at least in principle. But in an 1899 interview with the Brooklyn Daily Eagle, he admitted that government ownership of Chicago's streetcars was "a long way off" and said, "I do not believe that the city should own and operate its street railways until a civil service system is well established."

Chicago already had a civil-service commission, which in theory shielded some city jobs from political influence. So the mayor's opponents accused him of prolonging the streetcar controversy so he could continue to use it as a "political football," rallying voters to his side by condemning robber barons. Former governor Altgeld charged him with being secretly in league with the traction companies. "Everywhere the corporations get precisely what they want, while the administration is posing and making a pretense of protecting the people," Altgeld said.

By the turn of the 20th century, municipal ownership of public services was a hotly debated issue across and beyond America. George Bernard Shaw championed the idea in London. Edwin Burritt Smith, who served Chicago in 1903 as special counsel on transit issues, argued in the Atlantic Monthly in 1904 that the use of private companies to do public business "is the direct cause of municipal misrule." In a 1902 essay in the Saturday Evening Post, Mayor Harrison said a switch to municipal ownership would relieve corruptible aldermen of a temptation they could not resist.

But before Chicago could take over the traction companies, it needed authority it didn't have. In 1903 Democrats and Republicans in Springfield introduced competing bills amending state law accordingly. Mayor Harrison and other municipal-ownership advocates favored the Democratic version, claiming the Republican bill included too many restrictions on how cities could finance transit systems.

The Tribune called April 23, 1903, "the most exciting day the Illinois legislature has ever known." Without taking a roll call, the Republican speaker of the house, John Henry Miller, banged his gavel and declared that the Republican bill had passed. From the chamber came cries of "You are a liar! . . . Mr. Speaker! . . . Roll call! Roll call!" Legislators pounded their desks with books. Some smashed chairs. An inkstand was hurled. A legislator rushed Miller and was flung to the floor by a guard. Pale and trembling, the speaker exited the chamber.

Had the house adjourned? The 97 representatives Miller left behind declared they were still in session. They elected a temporary speaker, passed a resolution denouncing Miller's "revolutionary and unconstitutional conduct," and revised the transit bill that Miller had just declared victorious, replacing its provisions with language straight from the Democrats' bill.

A few hours later Miller returned to the house and explained that he'd acted to thwart a bribery scheme. Certain "parties" had "intimated to me" that Miller "could make money" by seeing to it the Democrats' bill passed. "For this reason I denied the roll call, and have stood firm on this proposition to the limit."

Shouts rang out: "Names! Names!"

A special house committee investigated Miller's allegation, and Miller told its members he didn't know the names. His critics—who included Mayor Harrison—accused him of doing the bidding of Chicago Republican boss Billy Lorimer, widely viewed as an ally of the streetcar companies.

The legislature approved the Democrats' bill, and the Republican governor, Richard Yates, signed it on May 18. It had been passed by "riot in the house," with "intimidation of every possible kind," said Yates, yet "the real question is, shall the city councils of cities and the people thereof be permitted to do a right thing, and not, has the right been brought about in the wrong way."

Now Chicago had the law it needed to take over the streetcars, which the city said it could do once the main franchises expired that July. Even so, the city began negotiating with the south side's Chicago City Railway for a franchise extension under new terms. Meanwhile, Yerkes's old companies on the north and west side were forbidden to negotiate. They'd merged into the Union Traction Company and gone into receivership, and the federal judge overseeing the receivership held that Union Traction did have a 99-year lease, a "valuable asset" he would not allow it to negotiate away.

The all-important question of the length of the franchises would have to work its way through the courts, and as that process began, Chicago City Railway and Union Traction went on operating. Talks with Chicago City Railway deadlocked over the question of what the company would pay the city under a new franchise, and in the fall of 1903 the company was hit by a strike.

The Amalgamated Association of Street Railway Employees hit the bricks to protest working conditions, with some of the workers holding they'd be better off under public ownership. A local Swedish paper, Svenska Nyheter, commented: "If the streetcars belonged to the people, we would have no streetcar strike these days, and the policemen of the city would find time to protect the citizens and their homes from those parasites who resemble the corporations."

On November 22, 1903, the striking streetcar men and allies from other unions paraded down State Street, forming a column six blocks long. Led by brass bands, they marched into Tattersall's auditorium on 16th Street, and 15,000 union members listened as the Chicago Federation of Labor's R.G. Wall, an ironworker, called the Chicago City Railway a "menace to the welfare of the city." The city must take over the rails, he said, and people in the crowd shouted, "Hang the aldermen!"

But then Wall said, "I blame you! . . . You vote like a lot of sheep. If Harrison comes out for municipal ownership, there's no doubt that unless we get busy and organize, we'll put him back again."

The air filled with catcalls. Wall persisted.

"Why, he's the best friend you ever had," he sneered. "He has taught you that in the past you have lacked cooperation and lacked intelligence."

The final speaker was Clarence Darrow. He goaded the union members to take on City Hall. "You allow yourselves to be used by politicians," he said. A loud cheer went up from the crowd and a burly man shouted, "That's the stuff! Give it to us! We deserve it!"

Mayor Carter Harrison didn't run for reelection in 1905. He'd consistently supported the idea of municipal ownership, at least in principle, but he ridiculed those who talked about it as the key to a sort of utopia. In his memoir Stormy Years, Harrison wrote that those "irresponsible . . . yawpers were promising an economic millennium, no taxes, vast revenues pouring into the public treasury, high wages for the traction employees, new jobs for political loafers and the always present army of unemployed; the voters were just about crazed with the alluring prospect unfolded to their hungry gaze."

The new mayor, former judge Edward Dunne, promised immediate municipal ownership. "Private ownership of the streetcar system has become a stench in the nostrils of the people," he said. But once in office, Dunne found it difficult to keep his promise. "Because he was not a party boss," Dick Simpson wrote in Rogues, Rebels, and Rubber Stamps, "Dunne could not overcome the entrenched power of established ward bosses and city power brokers who felt threatened by his reforms."

Dunne sought advice from James Dalrymple, the manager of Glasgow's municipally owned streetcar system. Visiting Chicago, Dalrymple said Americans seemed to fear government-run transit systems because they worried that a "strong political machine" would control the trains. Dalrymple suggested that Chicago and other U.S. cities avoid patronage problems by enacting strong civil-service laws.

But by the time Dalrymple returned to Scotland a few weeks later, he'd changed his mind. Now that he'd seen Chicago's "spoils system" in action, he said municipal ownership wasn't wise in a city that let the political parties hire and fire so many public employees after each election. As for the city's civil-service laws, they didn't work either, because of all the "red tape" it took to fire anybody protected by them.

Dunne got some good news in March 1906. The U.S. Supreme Court finally answered the nagging question about the length of Chicago's streetcar franchises. The Court threw out the 99-year franchises that Illinois legislators had approved back in 1865 and said the companies had franchises lasting for only 20 years, many of them already expired. And six months later, a Cook County circuit judge approved Chicago's plan to finance a takeover by issuing $75 million in certificates.

But Dunne and other city officials weren't sure the state supreme court would go along with it. Dunne wanted the City Council to sit tight until the court was heard from and the public made its wishes known in a referendum. But the council decided to act. In early 1907 it approved a deal that would let the traction companies keep their franchises for another 20 years if they turned over 55 percent of their profits to the city. Dunne, who'd come into office vowing to buy the companies, vetoed the agreement. He said it had so many flaws it "would practically prevent the consummation of the people's desire for municipal ownership." (Georg Leidenberger says the mayor's veto was a "last-minute desperate move" to win back his political base, the unions, as he ran for reelection.) Aldermen overrode the veto. Journalist Ida Tarbell reported that as the referendum approached, Chicago was consumed with debate. "The newspapers, the clubs, the barrooms, the streets rang from morning until night with arguments," she wrote. Even "ordinary shopgirls" were discussing the "55 percent provision."

There'd been previous referendums, and the public had always voted overwhelmingly in favor of municipal ownership. But David Young observes that $75 million struck a lot of people as an awfully high price to pay, and that Yerkes, whose name stirred foes of the traction interests to righteous wrath, had left town. The public approved the City Council's agreement, and added insult to injury by rejecting Dunne for reelection in favor of Republican Fred Busse. Dunne had included academics and women among his advisers, and when he left office the Tribune said good riddance to "pipe dream government . . . and the whole crew of female politicians and other long-haired freaks."

The supreme court soon ruled that the plan to issue $75 million in certificates would raise Chicago's debt levels beyond the limits allowed under the state constitution. It overturned the plan for financing municipal ownership.

After decades of fruitless debate, the idea of municipal ownership must have come to seem like a remote fantasy to many Chicagoans. In his 1916 poem "The Loop," Edgar Lee Masters describes a low-class thief cursing the powerful men who still ran Chicago's public services.

He is a thief, and he knows he is a thief,

He is a thief found out, and, as he knows,

The whole loop is a kingdom held in fief

By men who work with laws instead of  blows

From sling shots, so he curses under his  breath

The money and the invisible hand that  owns

From year to year, in spite of change and   death,

The wires for the lights and telephones,

The railways on the streets, and overhead

The railways, and beneath the winding   tunnel

Which crooks stole from the city for a runnel

To drain her nickels; and the pipes of lead

Which carry gas, wrapped around us like a   snake,

And round the courts, whose grip no court   can break.

Georg Leidenberger believes the long, failed campaign for public streetcars wasn't a waste of time. "These debates in the early 20th century changed the scale of what were considered public services and what weren't," he says. "By the 20s and 30s there was a more general acceptance that services had to be, if not owned and operated by government, then strictly regulated."

More regulation came with the formation of the Illinois Public Utilities Commission in 1913. Chicago electricity mogul Samuel Insull, who ran Commonwealth Edison and owned elevated railways, lobbied for the state to set up this agency. According to David Young's Chicago Transit, Insull and other utility owners decided they would rather deal with a state agency than Chicago's aldermen.

The new commission (and the agency that replaced it in 1921, the Illinois Commerce Commission) decided what the fares should be on Chicago's el trains and streetcars. Because the city had capped most fares, more than half a century after the streetcars began running in 1858, the price for a ride was still a nickel. "Economic regulation was strangling Chicago's street railway system," Young wrote.

Proposals to raise the fares incited political battles and court cases that stretched on for years. Streetcar fares spiked to eight cents for a time, but in 1926 a judge ordered a seven-cent fare. By that time the urban railways were in dire financial condition. As Young tells the story, fare increases were unpopular but without higher fares or some sort of subsidy the transit companies couldn't break even. The dream of municipal ownership finally became a reality in 1947, when the Chicago Transit Authority was formed to take over the bankrupt transit lines. Finding enough money to run the CTA has been a problem ever since. "A transit system that was unable to survive on fares as a private enterprise was somehow expected to do so as a public entity in a declining market," Young wrote. The all-time high for public-transit use in Chicago was the late 1920s, he says, when the city's streetcars, buses, and trains annually handled more than 1.1 billion rides. In 2009 the CTA handled 521 million rides, not quite half as many.

Clearly municipal ownership did not turn out to be the panacea that reformers had hoped for. If few people now question whether one of the services city government provides should be economical public transportation, some occasionally wonder whether the city must provide it directly or should simply make sure it exists. For instance, in 1998 the Regional Transportation Authority floated the idea of privatizing Chicago's els to raise $500 million to pay for capital improvements. And three years ago the Chicago Tribune criticized the CTA for being "unwilling to lock horns with unions to reduce overtime, scale back overgenerous benefits and privatize some operations."

In 1969 Austrian-American economist Peter Drucker urged governments to "reprivatize" services. "Government is a poor manager," Drucker wrote. "It has no choice but to be 'bureaucratic.'" In the 1980s privatization became a catchword.

Mayor Richard M. Daley began his campaign of privatization in 2004, when the city turned the Chicago Skyway over to a private company for 99 years in exchange for $1.8 billion. In 2006, the city leased four municipal parking garages for 75 years. In 2008 Midway Airport went up for lease, but the deal fell through.

And in December 2008, the city leased its system of 36,000 parking meters for 75 years to Chicago Parking Meters, a company controlled by the investment firm Morgan Stanley. The LAZ Parking company began running the system for Chicago Parking Meters, and the city received a payment of $1.157 billion. The Reader's Ben Joravsky and Mick Dumke reported that various numbers crunchers said Chicago had left a billion dollars or more on the table with this deal, and in time David Hoffman, the city's inspector general, would agree. On June 2, 2009, he issued a report that said the city could have collected an extra $1 billion from parking meters over those 75 years if it hadn't signed this "dubious" deal.

"It is a momentous decision for a government to give a private company control over a major public asset for three generations," Hoffman said, sounding very much like those reformers who pushed for municipal ownership more than a century earlier.

Mayoral chief of staff Paul Volpe responded, "This transaction provided great benefit to Chicago taxpayers and residents, allowing us to continue providing vital services and avoid steep tax increases during this difficult economy."

In an October 2009 meeting with the Chicago Tribune's editorial board, Daley stood by the idea of leasing public assets. He said he was talking with consultants about more possible privatization deals. "Nothing is off the table," Daley said.

Those comments prompted the Tribune to publish a story looking at the possibility that Chicago might turn over its water system to a private company and pointing out the pitfalls encountered by other cities, including Atlanta, that had taken this step. A Daley spokeswoman downplayed the idea that Chicago's waterworks might be privatized.

The Tribune article prompted MarySue Barrett, president of the Metropolitan Planning Council (a nonprofit whose focus is rational regional growth), to write the editor. "The most important question to ask about privatizing public assets is, 'Why?'" Barrett wrote. "Yes, public-private partnerships have potential to reduce traffic congestion or promote water conservation more efficiently than the public sector can alone. However, to protect public interests, a privatization agreement must ensure strong public oversight, reasonable profits and infrastructure reinvestment. Without these benefits, privatization makes little sense and just increases costs for consumers."

Yerkes's biographer, John Franch, says the story of Chicago's traction wars shows that government need to be cautious whenever it decides to put a public service into private hands. "It has to be very tight regulation," he says. "It's just outrageous that all these advances that reformers in the early 20th century made are all being thrown out the window now. We're moving in a reverse direction. It's a shame. There's a historical amnesia in this country where we absolutely forget the past. We forget why these reformers were so up in arms."   

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