Spokane and Inland Empire Railroad

One of the earliest components of Spokane's early mass transit system was the Spokane and Montrose Street Railway, a narrow-gauge system with the distinction of being the first motorized street railway in Spokane. Originally built by Francis H. Cook (1851–1920), the line defaulted to creditors during the Panic of 1893, who later sold the line to a group of Spokane businessmen headed by Jay P. Graves (1859–1948) in 1902. Prior to this Graves and his partners had bought Cook's foreclosed land holdings in the Spokane area.

Graves and partners from Portland, Oregon, reorganized the Spokane and Montrose as the Spokane Traction Company on February 1, 1903, incorporated it as the Spokane and Inland Empire Railroad Company in 1906, and rebuilt it as a standard gauge line. The routes were extended through various areas of Spokane, including Corbin Park, Hillyard and Lincoln Heights. Initially, power for the line was purchased from the Washington Water Power Company. However, in 1909, Graves built a hydroelectric dam at Nine Mile Falls, Washington. This went on to power not only Spokane Traction and the Spokane and Inland Empire, but also sold surplus power locally.

During this same period, Idaho Lumberman Frederick A. Blackwell (1852–1922) organized the Coeur d’Alene and Spokane Railway. Operating in conjunction with the Graves' lines in 1903 it formed a route between Spokane and Lake Coeur d'Alene in northern Idaho. Together, Graves and Blackwell developed properties along this line. "To increase summer and holiday ridership," historian Laura Arksey notes, "Graves and Blackwell opened beaches and amusement parks on Coeur d’Alene, Hayden, and Liberty lakes." The electric railway platform in Coeur d'Alene was built onto the docks to connect with steamboats on Lake Coeur d'Alene.

Blackwell and Graves, together with James J. Hill of the Great Northern Railway, pushed the interurban lines to the south into the Palouse Country, eventually reaching Colfax, Washington, and Moscow, Idaho. This extension was operated under the name Spokane and Inland Empire. In 1908, Spokane Traction was sold to the Spokane and Inland Empire, but operated as a separate division. Hill purchased the Spokane and Inland Empire in 1909, retaining Graves as local president. Spokane and Inland Empire gradually reduced electric-powered passenger operations. In 1909, two Spokane and Inland Empire trains collided head on at Gibbs, Idaho (near Coeur d'Alene) killing 16 people and injuring over 100. This was the deadliest railroad accident in the state of Idaho.