Control of Municipal Rates

There are extremists who advocate that state commissions should be given power to determine what rates should be charged by municipalities operating their own utilities and what principles should be followed in municipal rate-making. This is another radical infringement of the home rule principle and would virtually prevent a municipality from dealing with its utilities upon a public health or common good basis and require them to raise funds as prescribed by a state board. To illustrate: It has not been many years since private companies maintained sewerage systems in southern cities. From time to time these systems have been acquired by municipalities, and instead of charging according to the service rendered, the cost of maintenance has been included in the annual budget and raised by general taxation. If state regulation of all municipal utilities is to be carried as far as suggested, it will mean that municipalities may not defray such expenses by general taxation, by assessments upon property benefited or in some other way as they desire, but that revenues must be raised as a state commission shall dictate.

Many municipalities raise a considerable part of the cost of operating water works by general taxation, upon the ground that an adequate water supply is necessary to protect the health of the city. If the extreme of state regulation were to be adopted, a state board could rule that this is improper and that those using water must pay according to the number of faucets or bathtubs or gallons of water used. The people of the community might prefer another method, but their wishes would avail them nothing. Municipal home rule would become a myth, and towns, villages and cities would be ruled from the state capital and by persons not directly responsible to the people affected. Few things would be more destructive of civic patriotism and good government.

Service Matters

The term "service" has a very broad meaning. It covers a multitude of matters ranging from the number of cars operated upon a street railway to the efficiency of lamps supplied by electric companies and the pressure under which gas is distributed. These functions affect not only the commercial status of a community but also its health, convenience and safety. Until recently munici

pal regulation had a much wider scope than state supervision, but since the creation of state commissions with powers over service matters, there has been considerable discussion as to where the municipality should end and the state begin. As yet no clear line of demarcation has been evolved. Probably the most practicable plan would be for local authorities to continue to exercise the control now vested in them by statutes and city charters, and in case of conflict between different local regulations or between local and state regulations for the action of the state regulatory body to be controlling. In this field, state commissions should proceed slowly, and they should not interfere with local regulations unless such interference is quite necessary. Doubtless, experience will indicate what matters are local and what matters can best be dealt with by a state board. Until this has been done, state commissions should give local authorities every chance to work out their own salvation.

THE CASE FOR HOME RULE

BY CHARLES E. MERRIAM,

Professor of Political Science, University of Chicago.

The city of Chicago was the victim in 1913 of as daring a raid as a pirate crew ever made upon a rich and defenseless city. A bill was pending in the legislature which created a public utility commission, but in article six conferred upon cities the option of exercising identical powers, if they chose to undertake the task of regulation. This home rule article was suddenly stricken out by the house. Upon public protest it was restored by the senate. On the last day of the session the house refused to concur in the senate amendment, and to the consternation of Chicago the act became a law. It swept away most of the powers Chicago had slowly wrung from the state legislature through a long series of efforts, and snatched away the hope of adding others. This act was not demanded by the state of Illinois. No party and no candidate urged it. The Chicago press, and people, had uttered the most vigorous protest against the measure. Unasked by the people of the state and denounced by the people of the city, this bill was passed in the interest of public utility corporations, and was the crowning climax of the corporation legislation of our state.

Those interested in local public utility regulation firmly believe that cities should possess the right to control public service corporations, which are primarily, and largely, local. We hold that cities should be given the option of local or state regulation to exercise, as their situation, or judgment, may dictate. If cities prefer state regulation it should be their privilege to come under such regulation; but if they prefer to regulate their affairs themselves, then they should be accorded that privilege.

There is nothing to prevent cities of moderate size from securing the best types of expert advice, and assistance, whether engineering, accounting, investigating or otherwise. Chicago has had the benefit of the advice of men like Arnold, Cooley, and DuPont in the consideration of its traction problem; of Wallace and Fisher on railway terminals; of the Jackson brothers, and Bemis on gas and telephone,

and in the last ten years, has attacked the public utility problem, with the assistance of competent experts. The ability of the experts employed and the advantages gained have stood in striking contrast to the work done by the railway and warehouse commission of the state.

We have now organized a public service department for the supervision of service and the regulation of rates of public utility companies. This department consists of five bureaus: The bureau of transportation, the bureau of gas, the bureau of telephone, the bureau of electric light and power, and the bureau of engineering.

But for the surprising action of the legislature of 1913, this department would have now been in position to deal directly and effectively with the utility companies of Chicago. As things stand, its functions are limited to the general supervision of public utility service, and the enforcement of certain provisions in contract ordinances, notably those contained in the telephone and electric lighting company franchises.

Chicago received from its public utilities, in 1913, the sum of $3,688,477.03, derived as follows:

If adequate power were conferred upon the city by the legislature, it would be possible to have in Chicago a well equipped staff of experts, supervising service and rates, but responsible to the community which these companies serve, and not to a large and composite state population, most of whom they do not serve. The capitalization of the public utilities of Chicago excluding railroads is in round numbers $525,000,000. This amount is made up as follows:

The capitalization of down-state utilities, excluding railroads, is approximately $300,000,000:

Of the companies operating in the city, the People's Gas Light and Coke Company is owned by the Commonwealth Company and the elevated railroads are owned by the Commonwealth Edison Company. Interlocking directorates among the other corporations, as shown by recent reports of the public service department upon my city council order, are so close as to keep the ownership of this half billion dollar investment in a very few hands. The process of concentration is proceeding very rapidly and it is only a matter of a short time until we will be faced by a single company controlling all the public utilities of the city. This company will have larger revenues than the city government, a greater debt than the city, employ a larger number of men than the municipality, and transact a volume and variety of business rivalling that of the municipal corporation.

This mass of capital and net of interests can be effectively met only by one power, and that is the combined power of the subscribers of all these companies in the city. These consumers of gas, electricity and users of telephone and street railways, are familiar with the character of service rendered and the prices paid. If they are in a position to assert themselves through the city government they will exert pressure which the people of the whole state cannot