The New York Subway, Its Construction and Equipment

by Interborough Rapid Transit Company

"It was evident to me that underground rapid transit could not be secured by the investment of private capital, but in some way or other its construction was dependent upon the use of the credit of the City of New York. It was also apparent to me that if such credit were used, the property must belong to the city. Inasmuch as it would not be safe for the city to undertake the construction itself, the intervention of a contracting company appeared indispensable. To secure the city against loss, this company must necessarily be required to give a sufficient bond for the completion of the work and be willing to enter into a contract for its continued operation under a rental which would pay the interest upon the bonds issued by the city for the construction, and provide a sinking fund sufficient for the payment of the bonds at or before maturity. It also seemed to be indispensable that the leasing company should invest in the rolling stock and in the real estate required for its power houses and other buildings an amount of money sufficiently large to indemnify the city against loss in case the lessees should fail in their undertaking to build and operate the railroad."

Mr. Hewitt became Mayor of the city in 1887, and his views were presented in the form of a Bill to the Legislature in the following year. The measure found practically no support. Six years later, after the Rapid Transit Commissioners had failed under the Act of 1891, as originally drawn, to obtain bidders for the franchise, the New York Chamber of Commerce undertook to solve the problem by reverting to Mr. Hewitt's idea of municipal ownership. Whether or not municipal ownership would meet the approval of the citizens of New York could not be determined; therefore, as a preliminary step, it was decided to submit the question to a popular vote. An amendment to the Act of 1891 was drawn (Chapter 752 of the Laws of 1894) which provided that the qualified electors of the city were to decide at an annual election, by ballot, whether the rapid transit railway or railways should be constructed by the city and at the public's expense, and be operated under lease from the city, or should be constructed by a private corporation under a franchise to be sold in the manner attempted unsuccessfully, under the Act of 1891, as originally passed. At the fall election of 1894, the electors of the city, by a very large vote, declared against the sale of a franchise to a private corporation and in favor of ownership by the city. Several other amendments, the necessity for which developed as plans for the railway were worked out, were made up to and including the session of the Legislature of 1900, but the general scheme for rapid transit may be said to have become fixed when the electors declared in favor of municipal ownership. The main provisions of the legislation which stood upon the statute books as the Rapid Transit Act, when the contract was finally executed, February 21, 1900, may be briefly summarized as follows:

(a) The Act was general in terms, applying to all cities in the State having a population of over one million; it was special in effect because New York was the only city having such a population. It did not limit the Rapid Transit Commissioners to the building of a single road, but authorized the laying out of successive roads or extensions.

(b) A Board was created consisting of the Mayor, Comptroller, or other chief financial officer of the city; the president of the Chamber of Commerce of the State of New York, by virtue of his office, and five members named in the Act: William Steinway, Seth Low, John Claflin, Alexander E. Orr, and John H. Starin, men distinguished for their business experience, high integrity, and civic pride. Vacancies in the Board were to be filled by the Board itself, a guaranty of a continued uniform policy.

(c) The Board was to prepare general routes and plans and submit the question of municipal ownership to the electors of the city.

(d) The city was authorized, in the event that the electors decided for city ownership, to issue bonds not to exceed $50,000,000 for the construction of the road or roads and $5,000,000 additional, if necessary, for acquiring property rights for the route. The interest on the bonds was not to exceed 3-1/2 per cent.

(e) The Commissioners were given the broad power to enter into a contract (in the case of more than one road, successive contracts) on behalf of the city for the construction of the road with the person, firm, or corporation which in the opinion of the Board should be best qualified to carry out the contract, and to determine the amount of the bond to be given by the contractor to secure its performance. The essential features of the contract were, however, prescribed by the Act. The contractor in and by the contract for building the road was to agree to fully equip it at his own expense, and the equipment was to include all power houses. He was also to operate the road, as lessee of the city, for a term not to exceed fifty years, upon terms to be included in the contract for construction, which might include provision for renewals of the lease upon such terms as the Board should from time to time determine. The rental was to be at least equal to the amount of interest on the bonds which the city might issue for construction and one per cent. additional. The one per cent. additional might, in the discretion of the Board, be made contingent in part for the first ten years of the lease upon the earnings of the road. The rental was to be applied by the city to the interest on the bonds and the balance was to be paid into the city's general sinking fund for payment of the city's debt or into a sinking fund for the redemption at maturity of the bonds issued for the construction of the rapid transit road, or roads. In addition to the security which might be required by the Board of the contractor for construction and operation, the Act provided that the city should have a first lien upon the equipment of the road to be furnished by the contractor, and at the termination of the lease the city had the privilege of purchasing such equipment from the contractor.

(f) The city was to furnish the right of way to the contractor free from all claims of abutting property owners. The road was to be the absolute property of the city and to be deemed a part of the public streets and highways. The equipment of the road was to be exempt from taxation.

(g) The Board was authorized to include in the contract for construction provisions in detail for the supervision of the city, through the Board, over the operation of the road under the lease.