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Miller v. Chicago Transit Authority





Appeal by defendant from the Circuit Court of Cook county; the Hon. ELMER J. SCHNACKENBERG, Judge, presiding. Heard in the third division of this court for the first district at the October term, 1949. Order reversed. Opinion filed January 19, 1950. Released for publication February 21, 1950.


This is an interlocutory appeal from an order entered October 18, 1949, restraining defendant Chicago Transit Authority from enforcing and continuing in effect a certain ordinance to increase fares on transportation facilities of defendant.

Plaintiffs filed a verified complaint alleging in substance that they are residents of the Chicago Metropolitan Area and users of the facilities furnished by defendant a municipal corporation; that defendant passed a certain ordinance #49-5 effective October 13, 1949, providing for the increase in fares for transportation services in accordance with the recommendation of its general manager; and that the proposed ordinance is illegal and void for the following reasons:

a. The proposed charges are excessive, unduly high and extortionate;

b. The proposed charges are not based on efficient and economical management but rather upon extravagant, excessive and unnecessary costs;

c. The proposed rates are contrary to the evidence received by the Authority in the aforesaid hearing;

d. The proposed rates constitute an abuse of discretion by the Authority;

e. The proposed fares will not produce sufficient revenues to meet the standards of the Act or enable the Authority to carry out the purposes of the Act in providing adequate, efficient and economical transportation service in that the higher fares will result in a substantial decline in traffic on the properties operated by the Authority;

f. The order is illegal in that it is contrary to Section 31 which provides that ordinances providing for penalties shall not become effective for ten days until after publication;

g. The order is invalid because it was not published prior to its effective date;

h. The order is illegal in that it would deny the complainants an adequate opportunity to seek a stay of said ordinance and thus deprive complainants of their constitutional right to an adequate judicial review of said ordinance;

i. The ordinance is invalid in that participating in the deliberations in connection with the ordinance was Irvin L. Porter, a member, in fact sponsored said ordinance and who was not a proper, competent or disinterested person since he was also a member of the Board of Directors and Vice President of the First National Bank which acts as trustee under a certain deed of trust executed by said Authority.

This suit was filed on October 13, 1949. October 17, defendant filed an affidavit in opposition to the plaintiffs' motion for injunction, averring that defendant Chicago Transit Authority heretofore issued its revenue bonds in the aggregate amount of $105,000,000, pursuant to and secured by a certain trust agreement dated July 1, 1947, made and entered into by and between the Chicago Transit Authority and the First National Bank of Chicago as trustee, which provided, among other things, that the rates and charges for services supplied by the transportation system of defendant, "shall be lawfully determined and fixed from time to time by the Board so as to supply efficient and adequate local transportation, equipment and service at a cost consistent with the requirements of the law and the provisions of the trust agreement. The Board shall fix rates and charges for transportation such that the income and revenue derived from the transportation system shall at all times be sufficient in the aggregate to provide for the payment of all the expenses and charges payable from such income and revenue, including, without limiting the generality of the foregoing, all operating costs and expenses of the transportation system, including the costs and expenses of establishing a damage reserve fund and a pension and retirement system, the prompt payment of the principal of and the interest on all revenue bonds and other obligations of the Authority, as well as all sinking fund and reserve fund payments required to be made with respect thereto, the payments required to be made to the municipal compensation account, and all other charges upon the revenue and income as is provided in this trust agreement or in any agreement entered into by the Authority with respect to other obligations incurred or assumed by it, the creation and maintenance of an adequate depreciation reserve for the replacement of obsolete and worn out property, and for the payment of all other costs, expenses and charges of every kind necessary or appropriate in the maintenance and operation by the Authority of an efficient transportation system and for the payment of which funds are not otherwise provided."

The affidavit further averred that on the basis of present traffic and present operating costs, the revenues of defendant from rates, fares and charges now in effect are and for some time past have been insufficient to meet the requirements of the statute and of the aforesaid trust agreement. For the first eight months of 1949, the revenues (without making provisions for the prospective retroactive wage adjustments as to be agreed upon) were insufficient by the amount of $1,606,950 to meet the depreciation requirements and were insufficient to make any provision whatever for operating expense reserve charges of $600,000 and to provide funds for municipal compensation of $769,815. The deficit in ...

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