Transit Trouble

Unhappy the stranger in any of New York City's three subways. Equally lost are most natives in the maze of the city's 35-year-old transit troubles. Most New Yorkers long since decided what they wanted--unification of the three lines and a guaranteed 5-c- fare. But for 18 years the Unification Express has been rattling past stations, stalling in dark tunnels. Suddenly last week, to the general public's surprise, it slowed for a stop. Tentative acceptance of the city's offer to buy the Brooklyn-Manhattan Transit Corp. for $175,000,000 brought unification closer than it had ever

been.

A franchise for a Manhattan subway was first offered at public auction in 1892. Although potentially it was probably the most lucrative franchise ever offered, it drew a lone bid of $1,000, which was promptly rejected. The city thereupon decided to build the subway itself and August Belmont, then a financial outsider, came forward to act as contractor. When the line was finished in 1904, his Interborough Rapid Transit Co. secured a lease to operate it.

By further acquiring trolley lines and elevateds, I. R. T. soon had a monopoly on Manhattan transit. Meanwhile Brooklyn Rapid Transit Co. attained a similar monopoly across the river in Brooklyn, though it had no subway then. This cozy set-up has foliated through the years until today New York's rapid transit lines are a complex tangle with only three clear-cut divisions:

1) The I. R. T., which once (1912) made 90,523,766, went into receivership in 1932. Last fiscal year its deficit totaled $23,682,369 I R. T.'s condition can be laid partly to continuance of the 5-c- fare, which, since the World War boosted costs, has been insufficient to pay expenses. But mostly it is due to high dividends paid in the early days and to the staggering fixed costs of its fabulous 999-year lease of Manhattan s four outmoded elevateds.

2) The B.R.T., which went into receivership in 1918. It emerged as Brooklyn-Manhattan Transit Corp., which now operates a subway connecting Brooklyn and Manhattan and another between Manhattan and Queens, as well as numerous elevateds, bus routes and trolleys in Brooklyn and Queens. B.M.T. makes money ($4,508,462 in fiscal 1938, $578,168 in 1938). ,

3) The 5-c--fare Independent Subway System, opened by the city in 1932 and operated at a net loss ever since ($17,962,000 in year ending June 30, 1938).

These three main systems and their various subsidiaries give the city an efficient transit service, but probably one of the most uneconomic in the U. S. so far as the city itself is concerned.

Anxious to extend the original subways, the city found soon after the turn of the century that it could do so only on the I. R. T.'s and B. R. T.'s terms, since no bankers would fight their monopoly. After five years of dickering I. R. T.'s then President Theodore P. Shonts put on a great show of letting the city get the better side of the bargain. A man of wit, he remarked: "I was fairly well dressed when I went into that room, but they've taken away everything but my shirt." To enable Mr. Shonts to dress again I. R. T. promptly recompensed him with a $150,000 bonus and doubled his salary.

The contracts called for the city and the two companies to finance construction of the new subways jointly, then for the companies to operate them. The contracts, which run until 1967 and 1969, provide that the companies may take enough out of earnings to pay interest on the money they furnished and to make fat payments to a sinking fund. After certain other deductions, the city gets part of what is left. Most of the years there has been nothing left. The companies, which put up $334,000,000, have received some $500,000,000 in preferential allowances under the contracts. The city put up $400,006,000, has got back to date only $19,000,000, and its cumulative deficit now stands at $400,000,000.

There are two ways out of this situation--to raise the fare from 5-c- or to abrogate the dual contracts. Raising the fare is politically impossible and the only way the contracts can be abrogated is for the city to take over the two private systems, merge them with its own Independent line. Sporadically, until it seemed an empty catchword, transit unification has come up in New York City politics.

In 1921, crusty Republican Governor Nathan Miller put a major hurdle in the way by creating a State Transit Commission with sole unification powers. It bickered with the city and nothing resulted.

After the 1925 Legislature provided that the city must approve any unification plan devised by the Transit Commission, the Commission's Special Counsel Samuel Untermyer in 1930 offered to pay $489,000.000 for both companies. This was the highest price ever suggested, but B. M. T.'s square-jawed Chairman Gerhard Melvin Dahl held out for more.

When peppery little Mayor Fiorello LaGuardia took office in 1934, he designated Samuel Seabury and A. A. Berle Jr. to try again. Their $436,000,000 proposal was rejected after public hearings by the Transit Commission as too high. This brought bitter words between the commission and Mayor LaGuardia. but last year they got together for a final try.

In all previous merger proposals, subway bondholders would have exchanged their securities for bonds issued by a Board of Transit Control and not guaranteed by the city itself. Last year, at the November election, voters passed an amendment to the constitution allowing the city to exceed its legal debt limit by $315,000,000 to effect transit unity. And by last week, when the city offered $175,000,000 for B. M. T. alone, Chairman Dahl was glad to take it, for depression and competition from the Independent have continuously weakened his position. That leaves the city $140,000,000 in City bonds to dangle before I. R. T., which is likely to bite.

To the subway sardine the most significant feature of the deal was the promise that the city would try keeping the 5-c- fare, on which it thinks it can break even with unification.

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