Gilded Age Cities Push Back from Dillon’s Law—Freezing Water
In the nineteenth century, the reader would do well to simply assume that most state governments were a basket of policy and moral perversions, largely dysfunctional, with inherent policy biases and distortions. The reader should also feel free to toss in remote, unaccountable, lazy and corrupt as well. Perhaps we exaggerate?[1] In any case, relations between states and their creatures were far from perfect, always complicated, and frequently Dillon’s law was invoked to accomplish all sorts of irritating, personalistic, partisan, not really very necessary and time-consuming “got to get the state’s permission” type of legislation—i.e. the states left to their own devices liked to micro manage (opportunity for honest graft). These matters were even worse in Western territories because previous to statehood they were “creatures” of the federal government–administered by territorial legislatures, the Congress—or both.
In this stifling and shameful atmosphere both the business community and much of the general community sought “home rule” by obtaining a new “municipal charter”[2] from the state legislature. Home rule is state legislation permitting an expanded set of powers and structures to a local government and brings those (and potentially other) powers under the control of the municipality’s citizens. The most typical provision in home rule legislation in this period was to permit the local government to adopt a preferred form of government, a new electoral system, and administrative powers such as budgeting, civil service, and taxing authority. Home rule legislation in this era was “package” legislation including the form of government allowed but also unicameral city councils, nonpartisan and at large electoral systems, a merit or civil service system, fiscal, budgetary, and revenue raising powers and some service delivery and housekeeping powers as well.
1875 Missouri became the first state to adopt home rule for cities (in their case, over 100,000); California followed in 1879 and other states such as Minnesota and Washington followed soon after that. The municipal home rule revolution had commenced. By the 1890’s most states were under serious and sustained pressure to adopt some form of home rule legislation which applied principally to our Big Cities. To develop home rule proposals and advocate for reform legislation, chambers, business groups and good government citizens formed local municipal leagues. City level municipal leagues spread across the nation and most cities of any size would have had formed some type of a municipal league or advocacy group by the late 1880’s. To facilitate state adoption and to achieve some level of standardization from city to city within and across states, a national organization quickly formed. The individual municipal leagues, with allied state and national municipal reformers, came together in 1894 Philadelphia[3] to form the National Municipal League (NML), today’s National Civic League.
If one wants to do great things, like revitalizing a city or building one, one needs great power. How does one forge a political-administrative structure, in a political system characterized by separation of powers, checks and balances, gift provisions, and Dillon’s Law, sufficient to these great purposes? In this environment, the simplest of tasks could challenge traditional relationships, such as those between the weak, but strengthening public sector and the private sector, or that could overcome the limits imposed by states on debt, finance, and taxes. The earlier structural solutions, Chapter 2’s joint stock, mixed enterprise corporations had not ended well—although they proved reasonably effective in putting into place the transportation infrastructure (and banks, insurance corporations, and start up manufacturing firms). The 1862 federal venture into transcontinental railroads, yet another form of “mixed enterprise”, toppled President Grant and dragged him through the 1872 “Credit Mobilier” scandal[4].
So over the next three decades, cities experimented in devising an administrative structure that could cope with the demands and odd tasks demanded of them by voters and simple logistical need. Solutions were often ad hoc, and non-theoretical, many failed or were overturned by courts, and experimentation continued well into the twentieth century. Activity, such as public regulation of private actors, was more political, than administrative, and will be considered when we discuss the Progressive Era in the next two chapters. Some experiment originated from demands launched by new groups in city politics, unions in particular.
By the late 1870’s union-backed candidates were winning elections to all levels of government, and captured the mayor’s office in cities like Scranton, Utica, Birmingham and Toledo. In a dramatic departure from the politics associated with businessman mayors, issues which pressed for government ownership of parts of the urban infrastructure (utilities and regional transportation systems) were not uncommon. In 1881, the Mechanics Assembly of San Francisco pressed for gas, water, and street-sweeping and in 1886, no less than Henry George himself was invited to run for New York City’s mayor on a platform of public ownership of that city’s mass transit.[5] Most of these more “radical” demands carried over into decades beyond this chapter’s focus, but In 1894, New York City voters approved in referendum the City’s ownership and operation of a subway (and in the same year Detroit voters approved a street railway, in 1902 Seattle voters approved a bond issue for a municipal owned power plant, and in the same year Chicago voters approved four to one for that city to own its mass transit system.[6]
Far more typical, however, is that municipalities desiring to freeze water followed a predetermined process. Before we begin, think of your life without a refrigerator. How do you keep stuff cold? Ice. Ice cut from frozen bodies of water and stored below ground in very cold caves or ice houses. Affordable ice was a public necessity and that is what encouraged municipalities of all stripes and persuasions to enter into and compete with private firms in the ice market. City governments do this all the time today—public Wi-Fi for example. In the 1870’s and 80’s this needed to survive the Dillon’s Law process. By this point an extra feature had been added. Literally Dillon’s Law required the state legislature to approve legislation enabling a lower unit of government to enter into an action. By the 1880’s a second step, judicial review, entered the picture and the state court, Supreme Court usually, could review the state legislature’s enabling legislation to make a determination if the legislature’s action was constitutional or not. In this manner, the state court system became a player in urban and economic development evolution. If the state court was literal, i.e. it followed a “strict construction” of the state constitution, change would be difficult indeed. The reader, no doubt, might dimly perceive that Mistoffelees and political culture have entered the premises.
Enter “the saga of municipal ice sector involvement”. In most cases when municipalities entered into the ice industry, no court action followed. In general, however, it did as happened when the socialist mayor of Schenectady started that city’s ice business (1911) fulfilling his election pledge to “save the babies of the working class”. The city attorney reasoned that existing legislation empowered the city to store and transport water (water lines, etc) and ice was, after all, only frozen water. So hiring workers striking from General Electric, he started cutting ice and storing it. In the summer he gave it free to needy families—that was before a state court, on July 4th, decided it was not legal. So that night the city set up a non-profit and continued its ice business. Private ice companies struck back and harassed their new competitor. They got needed financing by selling “ice at cost” buttons and finished the summer. Next winter the river did not freeze and the whole endeavor melted away. Courts throughout the nation, when asked, blocked municipalities from the ice business.
In 1915, Harvard University’s Municipal Research Bureau (the Policy World if you cared to note) reported that it found many municipalities had entered the ice business and that it resulted in lower cost ice to the consumer. By 1919 Cleveland owned and managed a cold storage plant, and many municipalities in the Privatist, but hot and humid South did so as well. In 1919, however, one state supreme court, Missouri, in Kansas City v. Orear overturned an approved municipal bond referendum to build and construct a municipal ice plant. It was not, the courts held, a legitimate public purpose “and not even the sovereign Legislature, much less a municipal corporation, can, by fiat, make that public which is in fact private”. The year after, the state of Missouri approved a constitutional referendum/amendment permitting municipalities to engage in the ice business. Ten years later (1929) the owners of the Denton Texas Home Ice Company thought they could stop Denton Texas from starting its own municipal ice business; that state court, however, said the city could do it—and the Texas Supreme Court upheld the lower court decision allowing the municipality to proceed with its ice business.[7] Get the point?
Dillon’s Law and state judicial review became the de facto process by which nearly every major economic development innovation or change went through—and goes through to the present day. The bias, at least initially, was that court’s followed a strict construction and enforced older interpretations and precedent (including gift clauses) of the state constitutions—continuing the traditions and values of the first settlers and preserving values of the founding fathers. Then, on a state by state basis, subject to subsequent legal activity, the court would continue to review and decide whether or not the action was constitutional and would make determinations which shaped the content and the process by which these economic development innovations would be permitted. In many cases, over time, the court could even reverse early decisions, but often doing so preserving as much of the traditional judicial precedent as possible. So tax exempt bond issuance, tax increment financing, eminent domain associated with urban renewal, eminent domain, municipal ability to lend to private firms and own property to benefit private firms (industrial parks), economic development zones, annexation etc. went through this maze and obstacle course. In this manner, the fifty state SSS, described in our opening chapter, came into being.
That is why in economic development “a rose is not a rose”. What is a rose in one state, is a peach in another, and outright forbidden in a third.
[1] Jon C. Teaford should be consulted for a more balanced perspective. For a more cynical treatment download or stream “Blazing Saddles” or the “Best Little Whorehouse in Texas”. They are funny and closer to the truth than you might realize.
[2] Most cities already had acquired municipal charters from the state legislatures and hence home rule necessitated a revamp or a replacement of the original charter.
[3] In attendance were Theodore Roosevelt, Louis Brandeis, Frederick Law Olmsted and Mary Mumford.
[4] Chapter 4 will present some very interesting and terribly important economic development consequences which follow from the reaction to that scandal. The innovation prompted by that scandal will serve as the foundation for city-building in the American West, and the attraction strategy for our profession.
[5] Gail Radford, The Rise of the Public Authority: State-building and Economic Development in Twentieth Century America (Chicago, University of Chicago Press, 2013), p. 74. I follow much of Dr. Radford’s Chapter 3 in this discussion.
[6] Gail Radford, The Rise of the Public Authority, op. cit., p. 74. The activities associated with social reform mayors during the Progressive Era will be further detailed in the next chapter.
[7] This entire case study was taken from Gail Radford, chapter 3, in her The Rise of Public Authority, op. cit., pp. 78-82. We are indebted to her for this excellent research. I confess, however, that she did not intend it to demonstrate the development of a state SSS—her purpose, as in part was ours, was to demonstrate how public authorities engaged in some form of economic development found it difficult to navigate though Dillon’s Law and state judicial review.
Ron W. Coan 