During the 1860s New Yorkers had been cheated of $100 million by the crooked politicians of Tammany. There was consequently considerable fear that a subway construction project might become a new hog's trough for municipal corruption. That inclined the citizenry to entrust the undertaking to private enterprise.

No entrepreneur was prepared however, to hazzard the venture. Jacob H Schiff the banker, in testimony before the Board of Estimates, explained that the subway could not be financed on the capital market. Its real costs were too difficult to ascertain. No financier would touch the project.

The city fathers therefore settled on a public ownership, private management division of labor. The municipality would pay private enterprise to create the subway. It would be operated for profit by a leaseholder, while the city retained overall ownership. In January 1900 contractors were invited to submit bids.

John McDonald, a capable construction contractor, with experience in large projects, put in a bid for $35 million, plus $2.7 million for stations, and $1.5 million to buy additional land. He proposed to build the subway for those sums. His reward would be a license to operate the subway at a nickel a ride.

McDonald's was the low bid and he won the contract. However, it required a $7 million bond deposit. McDonald could not come up with the money. Rather than forfeit the deal he agreed to let August Belmont take over the contract. McDonald would work as a Belmont employee.

On 21 Feb 1900 a contract was signed that gave August Belmont the responsibility of building and operating the subway. He obligated himself to buy the cars, and the signal equipment out of his own pocket. He agreed to spend $500,000 to decorate the stations. John McDonald's original contract had stipulated that there would be no advertising displayed in the subway. Belmont however, got out of that provision, and his stations would display plenty of ads.

Belmont immediately created the Rapid Transit Subway Construction Co. It would build the subway. Two years later he created the Interborough Rapid Transit Company (IRT), with himself as president. It would operate the completed subway. Until his death in 1924 Belmont remained the boss of the IRT.

August Belmont was the son of August Schoenberg, a poor German Jew who, at 21 years was sent by the Rothschilds to represent them in the New World. Within weeks of reaching New York, Schoenberg made a fortune in the panic of 1837. Subsequently he changed his name and religion, married the daughter of Commodore Matthew Perry, and sent his son August Jr. to Exeter and Harvard.

That son, would operate the IRT from 1904 until his death in 1924.

From 1904 to 1918 the IRT was very profitable. As of Jan 1905 it had an 8% profit. In some of the coming years those earnings reached 20%, and the 2% dividend of 1904 rose to 9% in 1907 and 15% in 1915.

In 1905 Belmont rid himself of a competitor for future subway contracts by buying the Metropolitan Street Railway for 220 million. He had, since 1902, already owned  the Manhattan Railway with its four elevated lines.

A plumb that accrued to Belmont was a special director's car. It was bought for $11,429 from the Wason Mfg. Co of Brightwood Mass and dubbed, the Mineola. The sumptuous carriage was kept on a spur under the Belmont Hotel at 42nd and Park. August Jr. used the Mineola as his personal intra city train.

After the Great War however, the finances of the business soured. The IRT's net income, plunged  50% to about $4.5 million. In the 1920s the 5 cent fare never had more than a 2.68 cent value in real dollars.

The competing company, the BRT, had even more serious operating deficits and was on brink of bankruptcy by Armistice day.

To make ends meet the turnstile was introduced in the early 1920s. It accepted a nickel coin and permitted the elimination of hundreds of ticket choppers, men who had torn the passenger's tickets in half at the gate.

Another economy was the introduction of automatic doors. They reduced from five to one the number of conductors needed to open and close a ten car train. That allowed the IRT to reduce the number of its conductors, called guards, from 4,000 to 1,519. The BRT, whch had come out of Chapter 11 as the BMT, also reduced its guard employees by two thirds.

The IRT's cost cutting measure included reducing the wages of employees by 10% in 1921. That saved an annual $2.6 million. Employees per million car miles were reduced from 85 in 1918 to 45 in 1928. (C.Hood)

The IRT declared no dividend in the 1920s and had a deficit in 1923 and again in 1925. But it recovered and regained profitability in the second half of the 1920s.

Then came the depression. The  BMT lost 12% in ridership from 1928 to 1937, and net annual income fell from $6.6 mill to $4.6l. IRT ridership fell 19%.

Between 1930 and 1939 the IRT had to pay the Manhattan Railroad Company bondholders fixed 5% rental on a valuation of $60 million. That cost it $27.8 million of its $30 mill in profits during those years. To escape that lease the IRT opted for receivership in 1932.

In 1940 the IRT acquired the Dyre Avenue Bronx line from the NY New Haven & New Heartford RR. It gained that valuable four and a quarter mile stretch of four track right-of-way for less than $1.8 million.

The Dual System, the IRT/BMT collaboration, contained a profit sharing provision for the city. It however, earned NYC very little. In all the city received only $2.2 million from a total $306.9 million IRT income between 1919 and 1940. It collected not a penny from the BRT's $207.3 in revenue. Instead the city  shared in an accumulated deficit of $278.7 with the IRT and $182.7 with the BRT. The city was required to pay $10 mill annually in fixed subway costs out of the general tax budget.

The problem was the low fare. The mayor resisted all requests for fare increases. Mayor Haylan's reelection campaign featured a "5 cent Fare Club" and was based on a pledge to retain the 5 cent fare.

In 1925 the Board of Estimate announced that a third subway line, the IND would be built for $674 million, to be financed via 50 year bonds. The actual total would turn out to be $766.8 million. That amounted to $9 mill per route mile. The IRT and BRT had cost around $4 million per mile. The IND's construction was therefore 125% more expensive. It also had huge operating losses. Every IND trip cost 14 cents while collecting only 5 cents.

The Sixth Avenue line, 2 and 1/4 miles long,(or rather short) was completed in December 1940. It cost $46.8 million to build. Its equipment cost $6.6 million and its trains added another $6.25 million for a total of $59.5 million. or almost $27 million per mile. It was the most expensive underground construction project in the world, up to that time.

The Archer Avenue Line with its two miles of tracks and three stations was begun in 1972 and opened in 1988. It links the Queens Boulevard IND Line with the elevated Jamaica Avenue BMT Line. It cost $456 million.

The 63rd Street Extension, running for 3.2 miles and linking Roosevelt Island with Manhattan, was begun in the 1970s, cost $868 million and was to have gone into service in 1989, but remained closed for another decade.

By 1932 NYC's debt was almost equal to the debt of the 48th states combined. Fiorello LaGuardia, who was elected mayor in November 1933, believed that the subway could overcome its fiscal problems if the city took over all the lines, eliminated duplications and benefited from economies of scale.

In 1934 LaGuardia won a $23 million dollar grant and loan from the Federal Public Works Administration, towards the cost of the IND. This was the first federal help to NYC mass transit.

GRAFFITI

In 1971 the TA spent $800,000 removing graffiti. In 1972 it spent $1.3 million.

Andy Warhole said: "I'd leave graffiti on the subway, Love graffiti." Norman Mailer in the May issue of Esquire called graffiti "the great art of the 70s." By 1975 the TA was spending $5 million to remove those masterpieces.


Fares Through the Years.

1904-1948: 05 cents
1948-1953: 10 cents
1953-1966: 15 cents
1966-1970: 20 cents
 
1970-1972: 30 cents
1972-1975: 35 cents
1975-1980: 50 cents

1979-1980: 50 cents
1979: special commemorative token for 75th anniversary.

1980-1981: 60 cents
1981-1983: 75 cents
1983-1984: 90 cents
1984-1986: $1.00

1986-1990: $1.00
1990-1992: $1.15
1992-1995: $1.25
 
1995-2003: $1.50... An increase to $2 was held up by court order.
April 2003. Tokens were replaced by a Metrocard system.

The $1.50 fare covered 71% of the cost of a New Yorker's ride. The rest was subsidized by the city and state. (In May 2003 the fare was scheduled to rise to $2.00 but the increase was held up by court order.) In Boston the fare pays for only36% of the ride. In Washington, Chicago, San Francisco and Philadelphia the subsidy is more than 50%.

INFLATION

Consumer prices advanced 56% between 1917 and 1920

Between 1916 and 1919 the price of break-shoes advanced 150%. A ton of steel tripled from $30 to $90.  a ton of coal from $3.23 to $6.07

The IRT paid $6 million more in wages in 1919 than in 1916.

However, the 1904 nickel was worth only 2.6 cents by 1919 and descended to 2.25 cents in 1920. That, while the cost of everything else had risen 92%.

The fare increase for the first time in 1948, to 10 cents. That gave the system a surplus that year but thereafter rising labor costs and falling ridership produced  operating deficits of 1.2 million in 1950, $3.1 million in 1951, and $24.8 million in 1952.


MISCELLANEOUS

Car registration more than doubled between 1920 to 1925, from 9 to 20 million.

The Model T had cost $850 in 1908. It cost $393 in 1923.

Construction funds were lost to highways as of 1920, and mass transit lost passengers to cars.

Passenger traffic hit a low point in 1933 with only 1.7 billion rides.

However, ridership picked up with WWII. It increased to 1.9 billion in 1943 and peaked in 1947 with over 2 billion riders. But then, with the resumption of auto production, people began to stay away again. It was a nation-wide trend.

In the whole of the US mass transit use declined from 23.4 billion riders in 1945 to 9.4 billion in 1960. In the same years, car registrations rose from 25.8 million to 61.7 million. In NY, subway and elevated ridership fell from 2 bill to 1.3 bill

In 1970s the TA spent $400,000 to fix 119 obstructions in IND and BMT tunnels to accommodate an increase in train length from a standard 60 feet to 75 feet.

In September 1964, in the largest carriage order to that date was placed, 600 stainless steel Brightliner R-32's, costing $68,820.00 each.

Twenty years later the St. Louis Car Company R 44 cars cost $211,850 each.

Upon unification in 1940, NYC transit had 35,000 transit employees with a $60 million annual payroll.

The 8th Ave. El was torn down before WWII and the scrap metal was sold to Japan. It was replaced by the Westside Highway.

In 1942 the 2nd Ave. El was torn down and in 1951 a $500 million municipal transit bond was authorized to raise money for a 2nd Avenue subway. That line was never built. The money was used to improve the existing lines.

Belmont's very able general manager, Frank Hedley. was earning $75,000 a year in the late 1920s.

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