Municipal ownership or close regulation of essential utilities and urban services was a central tenet of the Progressive Movement from the late 1800s through much of the twentieth century. Beginning with the aftermath of the Great Fire of 1889, Seattle became a national leader in establishing municipal ownership and management of water, electricity, transit, and harbor assets. Private companies, viewing local government as an unfair competitor, often resisted this aggressive public role. The modern legacy of the municipal ownership movement includes Seattle Public Utilities, City Light, the Port of Seattle, King County Metro Transit, and Sound Transit, as well as the manner in which the city and county play large roles in regulating new technologies such as cable television.
"Natural Monopolies"
The idea that government and public agencies should own or closely regulate essential utilities is as old as the industrial revolution. American social reformers of the nineteenth century were particularly alarmed by the economic power of railroads and they fought for decades to bring them under public regulation.
In the cities, key services such as water, gas, public transportation, electricity, and even telephone service were viewed as "natural monopolies," which is to say, as industries in which effective competition was nearly impossible. Believing that one company or cartel would ultimately dominate delivery of such vital services in any city, reformers argued that the public should take over the job or, minimally, license and control the private providers. This was the theory behind the municipal ownership movement of the late nineteenth and twentieth centuries.
The younger cities in the West faced a situation different from older metropolises of the East and Midwest. Western leaders were desperate for private capital to build essential urban infrastructure -- especially railroads -- and they knew that talk of public ownership would frighten away investors. Many cities pursued the alternative of granting lucrative franchises to private companies to build and operate utility and transportation systems. These were often laxly regulated and amounted to virtual gifts of public lands and rights-of-way. Corporate abuses of franchises and land grants fueled public anger, reflected in the Washington State Constitution's ban on such public generosity to private interests.
Water, Water Everywhere, But...
One month before the state constitutional convention met, Seattle had a disastrous experience with a private utility. The city's water was developed and owned by private investors, beginning with Henry Yesler (1810-1892). It flunked its severest test on June 6, 1889, when a small fire in a cabinet shop near 1st Avenue and Madison Street raced out of control and engulfed the entire business district. The water system could not provide firefighters with water and volunteers had to pump it from Elliott Bay in a losing battle with the flames.
It took exactly one month (on July 8, 1889) for voters to approve bonds to buy and operate the city's private water utilities. This was the beginning of the Seattle Water Department, now part of the Seattle Public Utilities Department. Under the leadership of progressive leaders and engineers such as George Cotterill (1865-1958) and Reginald H. Thomson (1856-1949), Seattle went on to acquire the Cedar River Watershed (during the 1890s) and built a modern water system that still supplies most of King County.
Railroads and Ports
Seattle and Tacoma were bitter rivals during the 1870s as they tried to woo the builders of the Northern Pacific Railroad (NP) into picking one or the other as its Puget Sound terminus. Tacoma won the nod in 1873, so Seattle tried building its own lines, first the Seattle & Walla Walla, and in 1887 the Seattle, Lake Shore & Eastern Railroad (SLSE), across the Cascades. Neither line got very far, but they made a profit by hauling timber and coal to Seattle's expanding port. Northern Pacific rails finally reached Tacoma in 1883, and a spur was built to Seattle the following year. Seattle lured Northern Pacific into providing good service by turning over SLSE's "Railroad Avenue" (now Alaska Way) and effective control of the central waterfront.
James J. Hill (1838-1916) established the city's second transcontinental rail connection in 1893 when he completed the Great Northern Railway. He had to stop at Smith Cove, north of the downtown harbor, and later tunneled under the downtown to Pioneer Square because the Northern Pacific would not let him use Railroad Avenue.
This obstacle was removed when Hill took control of the Northern Pacific, but Seattle's businesses and citizens soon came to resent the fact that their city's front door was controlled by distant investors who did not always care about local needs and interests. Local critics of private power included reformers such as Seattle mayor George Cotterill and City Engineer R. H. Thomson, and growing numbers of middle-class professionals united in groups such as the Municipal League and League of Women Voters.
National reformers succeeded in breaking up Hill's railroad trust in 1904 and the state of Washington began regulating rail services in 1906 through what is now the Transportation and Utilities Commission. On September 5, 1911, King County voters created the Port of Seattle and put the city's harbor under public ownership and management.
Electricity and Streetcars
Recognizing the inadequacy of the horse and buggy for moving people around downtown, the Seattle City Council awarded the city's first streetcar franchise in 1879, but the line was never built. Frank Osgood won a second franchise and built Seattle's first horse-drawn streetcar line in 1884.
Seattle's first electrical generator was fired up in 1886, and Osgood replaced his "hay burners" with electric vehicles three years later. The success of Osgood's Seattle Electric Company, and that of private cable car lines, inspired numerous imitators, particularly developers who built streetcar and cable car lines to attract homeowners to early suburbs such as Leschi, Ballard, Madison Park, and the University District.
Before electrical lighting and appliances became widespread, "electric traction" was the most profitable way to turn kilowatts into dollars. The giant Maine-based utility cartel of Stone & Webster retained local banker Jacob Furth (1840-1914) to buy up Seattle's 22 private streetcar lines, including Seattle Electric, and it controlled public transportation in the city by 1900. Ironically, the seeds of street rail's destruction were planted that same year with the arrival of Seattle's first automobile.
Sparks Fly
After a heated debate, the Seattle City Council awarded Seattle Electric a 35-year franchise to operate all of the city's streetcar lines. Stone & Webster also acquired the area's first hydroelectric plant at Snoqualmie Falls and early interurban railroads. It folded Seattle Electric and other companies into a new holding company, Puget Sound Traction, Light & Power Company -- known as "Puget Power" -- the ancestor of today's Puget Sound Energy.
Reformers deeply resented this private monopoly over electricity and public transportation. They persuaded the Seattle City Council to build a municipal power plant on the Green River in 1902 (completed in 1904). Seattle City Light was created in 1910 to compete directly with Puget Power. Voters also approved creating a municipally-owned telephone system in 1912, but this was never developed.
City Light and Puget Power competed fiercely in both economic and political arenas. Ultimately City Light prevailed by outmaneuvering its private rival for control of the Skagit River (now site of Diablo and Ross Dams) and by helping to win approval (in 1930) of a statewide referendum endorsing public power ownership.
On Track and Off Track
Seattle voters first put their city in the transportation business in 1911 by approving purchase of the Rainier Avenue streetcar line between Seattle and Renton. After three years of fruitless haggling, the funds were used in 1914 to build a new line to Ballard.
World War I led to tighter regulation of many industries, including urban utilities and transportation companies. In 1916, federal regulators intervened to settle a bitter Seattle Electric streetcar workers strike. The lines were losing money under the city franchise's nickel limit on local fares, and commuters were growing impatient with the system's declining reliability.
In 1918, Seattle Mayor Ole Hanson (1874-1940) negotiated a deal to buy the streetcar system from Puget Power. Unfortunately, the $15 million price tag was triple the lines' true worth, and it precipitated a grand jury investigation of Hanson's deal. The jury concluded that the mayor was stupid but not criminal.
When the State Supreme Court blocked use of general taxes to finance streetcars in 1922, the city system was doomed to perpetual bankruptcy. Only a New Deal bailout in 1940 resolved the issue, but part of the price of federal aid was replacement of the city's aging streetcars with new buses and trackless trolleys. (In 1973, the Seattle Transit System and several private suburban bus lines were taken over by Metro, now part of King County government.)
Modern Times
Puget Power continued to operate an interurban railway until 1939, when it converted to buses. Federal antitrust regulators forced it to sell its North Coast bus line in 1947, and a narrow majority of Seattle voters authorized City Light to take over service to Puget Power's remaining customers within the city limits. Thus, it took nearly half a century to complete public ownership of the natural monopoly of electric service. (In a similar scenario, in 1951 state voters approved Washington state's purchase of the private Black Ball ferry lines.)
Municipal involvement with cable television dates back to passage of federal legislation in 1970s. Seattle has pursued its regulatory mission with mixed results. Efforts to promote minority entrepreneurism in the field were disappointing, and much of the downtown still does not enjoy cable service. On the other hand, the city-operated government access channel and Website have been well-received.
The City and County's cable regulatory powers sparked a lively debate over AT&T's purchase of the national TCI cable television system. Both governments approved the transaction in February 1999, but not before extracting concessions and guarantees intended to protect public access to cable and Internet services -- in the tradition of progressive reformers a century earlier.
