The New York Subway, Its Construction and Equipment

by Interborough Rapid Transit Company

One of the most attractive—and, in fact, indispensable features of the scheme—was that the work of construction, instead of being subject to the conflicting control of various departments of the City Government, with their frequent changes in personnel, was under the exclusive supervision and control of the Rapid Transit Board, a conservative and continuous body composed of the two principal officers of the City Government, and five merchants of the very highest standing in the community.

Provided capitalists could be found to undertake such an extensive work under the exacting provisions, the scheme was an admirable one from the taxpayers' point of view. The road would cost the city practically nothing and the obligation of the contractor to equip and operate being combined with the agreement to construct furnished a safeguard against waste of the public funds and insured the prompt completion of the road. The interest of the contractor in the successful operation, after construction, furnished a strong incentive to see that as the construction progressed the details were consistent with successful operation and to suggest and consent to such modifications of the contract plans as might appear necessary from an operating point of view, from time to time. The rental being based upon the cost encouraged low bids, and the lien of the city upon the equipment secured the city against all risk, once the road was in operation.

Immediately after the vote of the electors upon the question of municipal ownership, the Rapid Transit Commissioners adopted routes and plans which they had been studying and perfecting since the failure to find bidders for the franchise under the original Act of 1891. The local authorities approved them, and again the property owners refused their consent, making an application to the Supreme Court necessary. The Court refused its approval upon the ground that the city, owing to a provision of the constitution of the State limiting the city's power to incur debt, would be unable to raise the necessary money. This decision appeared to nullify all the efforts of the public spirited citizens composing the Board of Rapid Transit Commissioners and to practically prohibit further attempts on their part. They persevered, however, and in January, 1897, adopted new general routes and plans. The consolidation of a large territory into the Greater New York, and increased land values, warranted the hope that the city's debt limit would no longer be an objection, especially as the new route changed the line so as to reduce the estimated cost. The demands for rapid transit had become more and more imperative as the years went by, and it was fair to assume that neither the courts nor the municipal authorities would be overzealous to find a narrow construction of the laws. Incidentally, the constitutionality of the rapid transit legislation, in its fundamental features, had been upheld in the Supreme Court in a decision which was affirmed by the highest court of the State a few weeks after the Board had adopted its new plans. The local authorities gave their consent to the new route; the property owners, as on the two previous occasions, refused their consent; the Supreme Court gave its approval in lieu thereof; and the Board was prepared to undertake the preliminaries for letting a contract. These successive steps and the preparation of the terms of the contract all took time; but, finally, on November 15, 1899, a form of contract was adopted and an invitation issued by the Board to contractors to bid for the construction and operation of the railroad. There were two bidders, one of whom was John B. McDonald, whose terms submitted under the invitation were accepted on January 15, 1900; and, for the first time, it seemed as if a beginning might be made in the actual construction of the rapid transit road. The letter of invitation to contractors required that every proposal should be accompanied by a certified check upon a National or State Bank, payable to the order of the Comptroller, for $150,000, and that within ten days after acceptance, or within such further period as might be prescribed by the Board, the contract should be duly executed and delivered. The amount to be paid by the city for the construction was $35,000,000 and an additional sum not to exceed $2,750,000 for terminals, station sites, and other purposes. The construction was to be completed in four years and a half, and the term of the lease from the city to the contractor was fixed at fifty years, with a renewal, at the option of the contractor, for twenty-five years at a rental to be agreed upon by the city, not less than the average rental for the then preceding ten years. The rental for the fifty-year term was fixed at an amount equal to the annual interest upon the bonds issued by the city for construction and 1 per cent. additional, such 1 per cent. during the first ten years to be contingent in part upon the earnings of the road. To secure the performance of the contract by Mr. McDonald the city required him to deposit $1,000,000 in cash as security for construction, to furnish a bond with surety for $5,000,000 as security for construction and equipment, and to furnish another bond of $1,000,000 as continuing security for the performance of the contract. The city in addition to this security had, under the provisions of the Rapid Transit Act, a first lien on the equipment, and it should be mentioned that at the expiration of the lease and renewals (if any) the equipment is to be turned over to the city, pending an agreement or arbitration upon the question of the price to be paid for it by the city. The contract (which covered about 200 printed pages) was minute in detail as to the work to be done, and sweeping powers of supervision were given the city through the Chief Engineer of the Board, who by the contract was made arbiter of all questions that might arise as to the interpretation of the plans and specifications. The city had been fortunate in securing for the preparation of plans the services of Mr. William Barclay Parsons, one of the foremost engineers of the country. For years as Chief Engineer of the Board he had studied and developed the various plans and it was he who was to superintend on behalf of the city the completion of the work.

During the thirty-two years of rapid transit discussion between 1868, when the New York City Central Underground Company was incorporated, up to 1900, when the invitations for bids were issued by the city, every scheme for rapid transit had failed because responsible capitalists could not be found willing to undertake the task of building a road. Each year had increased the difficulties attending such an enterprise and the scheme finally evolved had put all of the risk upon the capitalists who might attempt to finance the work, and left none upon the city. Without detracting from the credit due the public-spirited citizens who had evolved the plan of municipal ownership, it may be safely asserted that the success of the undertaking depended almost entirely upon the financial backing of the contractor. When the bid was accepted by the city no arrangements had been made for the capital necessary to carry out the contract. After its acceptance, Mr. McDonald not only found little encouragement in his efforts to secure the capital, but discovered that the surety companies were unwilling to furnish the security required of him, except on terms impossible for him to fulfill.

The crucial point in the whole problem of rapid transit with which the citizens of New York had struggled for so many years had been reached, and failure seemed inevitable. The requirements of the Rapid Transit Act were rigid and forbade any solution of the problem which committed the city to share in the risks of the undertaking. Engineers might make routes and plans, lawyers might draw legislative acts, the city might prepare contracts, the question was and always had been, Can anybody build the road who will agree to do it and hold the city safe from loss?

It was obvious when the surety companies declined the issue that the whole rapid transit problem was thrown open, or rather that it always had been open. The final analysis had not been made. After all, the attitude of the surety companies was only a reflection of the general feeling of practical business and railroad men towards the whole venture. To the companies the proposition had come as a concrete business proffer and they had rejected it.

At this critical point, Mr. McDonald sought the assistance of Mr. August Belmont. It was left to Mr. Belmont to make the final analysis, and avert the failure which impended. There was no time for indecision or delay. Whatever was to be done must be done immediately. The necessary capital must be procured, the required security must be given, and an organization for building and operating the road must be anticipated. Mr. Belmont looking through and beyond the intricacies of the Rapid Transit Act, and the complications of the contract, saw that he who undertook to surmount the difficulties presented by the attitude of the surety companies must solve the whole problem. It was not the ordinary question of financing a railroad contract. He saw that the responsibility for the entire rapid transit undertaking must be centered, and that a compact and effective organization must be planned which could deal with every phase of the situation.

Mr. Belmont without delay took the matter up directly with the Board of Rapid Transit Railroad Commissioners, and presented a plan for the incorporation of a company to procure the security required for the performance of the contract, to furnish the capital necessary to carry on the work, and to assume supervision over the whole undertaking. Application was to be made to the Supreme Court to modify the requirements with respect to the sureties by striking out a provision requiring the justification of the sureties in double the amount of liabilities assumed by each and reducing the minimum amount permitted to be taken by each surety from $500,000 to $250,000. The new corporation was to execute as surety a bond for $4,000,000, the additional amount of $1,000,000 to be furnished by other sureties. A beneficial interest in the bonds required from the sub-contractors was to be assigned to the city and, finally, the additional amount of $1,000,000, in cash or securities, was to be deposited with the city as further security for the performance of the contract. The plan was approved by the Board of Rapid Transit Railroad Commissioners, and pursuant to the plan, the Rapid Transit Subway Construction Company was organized. The Supreme Court granted the application to modify the requirements as to the justification of sureties and the contract was executed February 21, 1900.

As president and active executive head of the Rapid Transit Subway Construction Company, Mr. Belmont perfected its organization, collected the staff of engineers under whose direction the work of building the road was to be done, supervised the letting of sub-contracts, and completed the financial arrangements for carrying on the work.

The equipment of the road included, under the terms of the contract, the rolling stock, all machinery and mechanisms for generating electricity for motive power, lighting, and signaling, and also the power house, sub-stations, and the real estate upon which they were to be erected. The magnitude of the task of providing the equipment was not generally appreciated until Mr. Belmont took the rapid transit problem in hand. He foresaw from the beginning the importance of that branch of the work, and early in 1900, immediately after the signing of the contract, turned his attention to selecting the best engineers and operating experts, and planned the organization of an operating company. As early as May, 1900, he secured the services of Mr. E. P. Bryan, who came to New York from St. Louis, resigning as vice-president and general manager of the Terminal Railroad Association, and began a study of the construction work and plans for equipment, to the end that the problems of operation might be anticipated as the building and equipment of the road progressed. Upon the incorporation of the operating company, Mr. Bryan became vice-president.