VIII. CANALS AND INTERNAL IMPROVEMENTS.

There are a number of provisions in the present constitution of Illinois which prevent the state's engaging either directly or indirectly in various projects of internal improvement. Some of these provisions were first introduced in 1848, because of the disastrous experience which the state had had with internal improvement projects previous to that date. Constitutional provisions introduced in 1848 were primarily directed against state activities in fields of internal improvements. To these provisions were added in 1870 provisions intended to prevent municipalities of the state from loaning their credit or becoming interested in railroads and other projects. Constitutional debt limits upon municipal corporations were also imposed for the same purpose, and a limitation upon the taxing power of counties.

Article IV, Section 18, of the constitution forbids the incurring of a debt by the state in excess of $250,000, without a vote of the people, and for the approval of the proposal to incur such a debt the measure must receive "a majority of the votes cast for members of the general assembly".

Article IV, Section 20, provides that "the state shall never pay, assume or become responsible for the debts or liabilities of or in any manner give, loan or extend its credit to, or in aid of, any public or other corporation, association or individual".

Section 12 of Article IX forbids the incurring of indebtedness in the aggregate exceeding five per cent of the value of the taxable property of any county, city, township, school district or other municipal corporation, and requires that at the time of incurring any indebtedness provision shall be made for the collection of a direct annual tax sufficient to pay the interest on such debt as it falls due and to discharge the principal within twenty years.

Article IX, Section 8 limits the aggregate taxes of counties to seventy-five cents on the one hundred dollars valuation, unless authorized by a vote of the people of the county.

The constitutional convention of 1869-70 submitted to the people a separate section which provided that "no county, city, town, township or other municipality shall ever become subscriber to the capital stock of any railroad or private corporation, or make donation to or loan its credit in aid of such corporation:" This separate section was adopted. by the people.

A separate section was also submitted to and adopted by the people of Illinois in 1870 providing that "the Illinois and Michigan canal, or other canal or waterway owned by the state shall never be sold or leased until the specific proposition for the sale cr lease thereof shall first have been submitted to a vote of the people of the state at a general election, and have been approved by a majority of all the votes. polled at such election. The General Assembly shall never loan the credit of the state or make appropriations from the treasury thereof, in aid of railroads or canals; Provided, that any surplus earnings of any canal, waterway or water power, may be appropriated or pledged

for its enlargement or extension." The project for a canal connecting the waters of Lake Michigan and those of the Illinois River took form almost as soon as Illinois was admitted as a state. In 1822 the United States government made the first grant of land to the state for canal purposes. In 1848 the Illinois and Michigan canal was opened to navigation. The total cost of the canal was approximately $6,500,000. From the time the canal was open until 1871 the title to the canal was vested in a board of trustees who managed the waterway for the benefit of its creditors. The canal had a prosperous career during this period, and in 1871 all the creditors were paid, the trust was dissolved and a balance of approximately $96,000, was paid over to the state.1

The provision against leasing or selling the canal was inserted in the constitution of 1870 primarily for the purpose of preventing railroads from securing the canal and reducing competition. The provision forbidding appropriation of money by the general assembly in aid of canals was inserted to prevent the canal from becoming a burden upon the state in case its expenses should exceed its revenues. The canal soon ceased to be prosperous and the general assembly fell into the practice of making appropriations from the state treasury to cover deficits. In 1904 the constitutionality of such appropriations came before the supreme court in the case of Burke v. Snively2 and the court said: "We are of the opinion that the true meaning of the constitutional provision with reference to the canal is that the legislature should have power to operate it to the extent, and to the extent only, that the income of the canal would defray the expenses of operation, maintenance and preservation, and that no moneys shall be appropriated from the treasury of the state in aid of the operation, maintenance or preservation thereof, and that if the earnings of the canal produced a surplus. appropriations of such surplus might be made to aid in the enlargement or extension of the canal should the legislature deem it wise to so appropriate such surplus". A review of the cases involving the separate section on canals will be found in the Annotated Constitution.

In 1908 the separate canal section was amended by inserting the word "maintenance" in the last clause of the original section after the word "enlargement", and by making express provision for the construction of a deep waterway or canal from the present water power plant of the sanitary district of Chicago at or near Lockport, to a point in the Illinois River at or near Utica, and bonds to an amount not to exceed $20,000,000, were authorized for this purpose. Legislation of 1915 authorized the construction of the canal, but no action was taken under this legislation, and the work of construction is being undertaken under legislation of 1919.

Under the terms of Article IV, Section 18, of the constitution the general assembly enacted legislation in 1917 for a $60,000,000 bond issue for a system of hard roads and the people approved the bond issue at the election of 1918. Legislation of 1919 also made further provisions regarding the use of money for the system of hard roads.

1 Putnam, J. W., Illinois and Michigan Canal, A Study in Economic History. Chicago Historical Society's collections, Volume 10. 1918. 2 208 Ill. 328.

The statements just made with respect to the deep waterway and the system of hard roads indicate that the people of Illinois are now embarking upon two large projects of internal improvements. There has been a similar development in other states, and a number of constitutional amendments have expressly authorized bond issues for road construction, or have loosened constitutional restrictions as to state debt limits so as to permit undertakings by the state which would previously not have been permitted. A review of some of the new developments with respect to state enterprises will be found in Bulletin No. 1, pages 44-45. .

The existing constitutional provisions in Illinois are clearly not so rigid as to prevent the undertaking of projects of internal improvements, if the people definitely desire that certain projects should be undertaken. However, attention should be called to the fact that the $60,000,000 bond issue for good roads was authorized under Article IV, Section 18 of the constitution, which requires a popular vote of a majority of those voting for members of the general assembly; whereas the $20,000,000 bond issue for the deep waterway required a constitutional amendment with a majority of all of those voting in a general election. If it is desired that projects of internal improvement be undertaken in the future, subject only to popular approval, it may be desirable that the methods of popular approval be made uniform with respect to the matter. The problem will also present itself of the relationship of the Illinois and Michigan canal to other projects of internal improvement, and in this connection the question may be raised as to whether the present constitutional provisions as to the Illinois and Michigan canal may not be unduly restrictive as to the operation of that canal in connection with the larger deep waterway.

There is probably no desire now that municipal corporations be authorized to loan their credit to railroads or other private corporations. However there is some demand for constitutional provisions which will make it possible for municipalities to own their local public utilities, and an effort will be made to obtain an alteration of the municipal debt limit so as to permit the accomplishment of such a purpose. The problem of municipal ownership of public utilities will be found discussed in Bulletin No. 4 where there is a chapter upon debt limitations, and in Bulletin No. 6 which is devoted to municipal home rule. A full review of the judicial decisions bearing upon the application of the municipal debt limit will be found in the Annotated Constitution.

IX. ILLINOIS CENTRAL RAILROAD.

Historical account of the Illinois Central provision. The Illinois Central railroad was chartered in 1851. Whenever the charter lines of the road crossed land owned by the state, the charter granted a right-of-way not exceeding 200 feet in width across these lands. In addition, the railroad was granted 2,595,000 acres of land received by the state from the federal government for railroad purposes. In return for these grants the railroad was required to pay 5% of its annual gross income to the state, and an annual tax was to be assessed by the auditor of public accounts upon all the corporate assets as determined by a statement of those assets filed annually by the company with the auditor. If the sum of the two taxes should not equal 7% of the annual income of the company, the company was required to pay 7% of its yearly income to the state in lieu of all other taxes both state and local.1

The proposed constitution of 1862 contained a provision that "the general assembly of this state shall have no power to release, suspend, modify, alter, remit or in any way or manner impair the obligations of the Illinois Central Railroad Company to pay into the state treasury all sums of money secured to the state by the charter of said company, approved Feb. 10, 1851; nor to release, suspend, modify, alter, remit or in any manner impair any right of taxation of lien secured to the state by said charter".

The position of the Illinois Central Railroad was discussed fully in the constitutional convention of 1870.2 Representatives of the counties through which the railroad operated wished to have the amount received by the state under the charter distributed among the counties in which the right-of-way lay, in view of the fact that those counties were compelled to forego the collection of taxes from the railroad. However, the opponents of this proposal finally prevailed and the section submitted to the people made the sums received from the company applicable solely to state purposes. The section of the constitution with respect to the Illinois Central Railroad was submitted to the people separately and was adopted by a vote of 147,032 to 21,310. The only counties in which a majority of the voters were opposed to the adoption of the section were Champaign, Fayette, Iroquois, Kankakee and Marion.

The section of the constitution relating to the Illinois Central Railroad Company has been the subject of a good deal of litigation in

1 Charter of Illinois Central Railroad Company, Private Laws 1851, pp. 61-74. Brownson, H. G., History of the Illinois Central Railroad to 1870. University of Illinois studies in the social sciences, Vol. 4, Nos. 3 and 4 (1915). See also W. K. Ackerman, Historical Sketch of the Illinois Central Railroad, Chicago 1890.

* Proceedings and Debates, Constitutional Convention of 1870, pp. 1199-1202, and 1243-1256.

recent years. This litigation has related primarily to accounting methods in determining the 7% payment to be made from the gross receipts of the railroad. It should, of course, be borne in mind that the 7% gross receipts tax relates merely to the original charter lines of the railroad. The charter lines constitute a total mileage of 705.50, and comprise the line from Chicago to Cairo (364.73) and from Dunleth to Branch Junction (340.77).

Two important cases have passed upon questions involving the duty of the company to pay 7% upon the gross receipts from its charter lines. These cases are State v. Illinois Central Railroad Company (246 Ill. 188. 1910), and People v. Illinois Central Railroad Company (273 Ill. 220. 1916). A review of the cases bearing upon the Illinois Central section will be found in the Annotated Constitution. For a full review of the issues involved in the case decided in 246 Ill. see a pamphlet prepared by Attorney General W. H. Stead on the Illinois Central case.

Problems of collection. The cases just referred to outline in detail some of the problems involved in the segregation of the receipts of the charter lines from the receipts of the Illinois Central Railroad system as a whole, and present in detail a number of the problems which have arisen for decision. A large number of the points at issue as between the railroad and the state have been settled by these two decisions. Since 1907 there has been a good deal of expenditure on the part of the state in connection with the collection of the Illinois Central gross receipts payments, and it has been thought worth while to give a brief statement here of appropriations since 1907. Some appropriations have been made directly to the governor, but the appropriations have in the main been made to the attorney general. In the table, original appropriations alone have been counted and reappropriated items have merely been noted but not included in the totals. Appropriations for Illinois Central Litigation.