protest and with such unanimous public disapproval that the project died before it was born. Indeed, it was not until the new assessments for the year 1899 had been confirmed and a constitutional amendment adopted, excluding some $30,000,000 of debt from the constitutional limitation, that the contract for the construction of the present subway from municipal funds was finally signed. Five years had thus been practically lost, thanks to the efforts of those who wanted no more rapid transit except upon their own terms, and thanks to a bugaboo born of a wrong construction of the constitution. The last two years have seen a duplication of the situation from 1894-1900. The Public Service Commission has proposed the construction of rapid transit lines from public funds, and has had six contracts before the Board of Estimates and Apportionment for nearly a year and six months. The work could have been begun and would be one-half finished to-day if prompt action had been taken. At least two other lines could also have been put under way. But the debt limit cry has again been raised, an obstructive suit was brought, and only within the last few weeks has the Court of Appeals decided that the city had a considerable margin when it was said to have had nothing. No Money for Thus, as a result of 50 years of agitation for rapid transit and of a particularly strenuous fight during the last few years, only one subway has been built and put in operation, and only part of one other had been put under contract up to a few days ago, when the Board of Estimate approved six contracts for a portion of another line. The great increase in the borrowing capacity of the city, due to rising values of real estate, a higher valuation of property and the amendment of the constitution, has been squandered and spent upon various "public improvements", with a niggardly allowance for subways. Between January 1, 1904, and November 1, 1908, over $298,000,000 in corporate stock were issued. by the City of New York. Of that amount only $19,000,000, or less than 7 per cent., were devoted to rapid transit. But a considerable portion of the stock issued was for expenditures authorized prior to January 1, 1904. Since that date down to November 1, 1908, the city issued corporate stock for expenditures authorized since January 1, 1904, amounting to $147,000,000, and of this amount less than $3,400,000 went for rapid transit, or less than 3 per cent. Who that is familiar with traffic conditions in New York City is bold enough to uphold such a distribution of municipal expenditures as wise, proper or just? But whatever may have been the ethics or the wisdom of such large expenditures for everything but rapid transit, the fact remains that the city was again forced into the position where the debtlimit cry was effectually raised and where further construction was blocked for a time. The embargo was raised only a few days ago, just before election. The basic law relating to rapid transit was for many years an act passed in 1891, which created a board of rapid transit railroad commissioners. The act was general in Previous form but was intended to apply only to New York City. Five persons were named therein, who with the mayor, the comptroller and the president of the Chamber of Commerce were to administer the law. This board was to fill vacancies in its own membership and until 1906 was one of the few instances in the whole United States of a cooptated body. The growing dissatisfaction with this plan came to a focus in 1906 when the mayor was given power to fill vacancies, but a year later the entire commission was abolished and its powers transferred to the public service commission for the first district appointed by Governor Hughes. The Act of 1891 was amended nearly every year after its adoption. Originally, it conferred very broad powers upon the rapid transit board, but during the first half of the present decade, these powers were greatly reduced, hedged about and restricted. Many believed that too little discretion remained, but the public generally seemed reluctant to remove the barriers. Successive amendments had made portions of the law obsolete. In other parts, it was so confused, involved and verbose that the average citizen could hardly understand it. In the attempt to escape from the long-term franchise or contract, a very short period with rigorous limitations had been adopted. Yet in many ways, the interests of the city were not amply protected, and the law cannot be said to have represented a clear, harmonious, progressive policy. As soon as the Public Service Commission was organized, we began at once to redraft the law. A bill was presented to the legislature a bill that was somewhat crude and imperfect in certain respects. The legislature passed it, but not until several changes had been made that were very objectionable. Governor Hughes wisely vetoed the bill, and the matter went over until this year. Between the two sessions, the preparation of a new law went on, and the details of the proposed amendments revised and perfected, and several new features introduced. The bill was presented to the last legislature, met with practically no opposition and was signed by the governor, no amendments opposed by the commission this time having been made. The law needs still further amendments, and details must be perfected; but as it now stands, it represents a practically harmonious policy which is probably more modern and progressive than any heretofore formulated in law. It is believed to combine adequate protection of public interests and yet to allow reasonably free range to private initiative. The Indeterminate Grant Probably the most important change in the law was the introduction of the indeterminate principle for franchises and operating leases. Under the old law, the duration of the lease was a most prolific source of discussion. Originally, the Rapid Transit Board was authorized to lease a municipally-owned road for any term of years without limitation. The first contract made thereunder was for 50 years with the privilege to the lessee of a 25-year renewal. The second contract, made three years later, was for 35 years with a 25-year renewal. The subway built under these contracts was such a success financially from the very start that immediately a movement for the limitation of the powers of the board was started. After a few years of agitation, there was passed in 1906 an amendment which restricted the duration of the original lease to twenty years and renewals to twenty years more in case the road was constructed at city expense. If the city paid for equipment as well, the original term could not exceed ten years and renewals ten years. Even before this amendment was passed, many insisted it was so restrictive that private companies would not accept the terms. Others were equally positive that it was not only reasonable but necessary to protect the welfare of the city. As yet it has not been tried, but the short-term franchise or lease has so many objectionable features from the standpoint of the public and the company that the commission undertook to work out a plan which would not only give better control and protection to the city, but also be fairer to the operator, provided he gave good service at reasonable rates and respected the city's interests. The plan finally perfected was based upon the indeterminate idea. Under all future franchises or operating contracts under this plan, the city will have the right to terminate the grant or contract at any time after ten years and to take over whatever the company may have provided in the way of road or equipment upon paying an amount to be provided for in the contract, which shall not exceed the investment made by the company plus 15 per cent., and which amount shall decrease from year to year as the grant continues, until finally all the property in the street shall revert to the city free and clear without payment upon some date fixed in the grant. The date at which such reversion shall take place is to be fixed at the earliest time within which the investment made by the company in the road can be amortized out of earnings. In no case is any payment to be made to the company for the franchise or for the termination of the lease or the contract. If any rapid transit line is thus taken over, the city may operate the line itself or lease it to another company or transfer it directly from the old company to the new company. In other words, the hands of the city shall be untied and left free to minister to the needs of the community as conditions from time to time demand. The important points to be noted are the short minimum period (not more than 10 years), the limitation of the amount to be paid (cost plus 15 per cent.), the diminution of the amount as time runs on, the fact that equipment will be paid for according to its then value, and the fact that the more profitable roads will revert to the city in a shorter time than the less profitable ones. The principal reason for differentiating equipment from roadway is that the former would doubtless be allowed to de teriorate as the date approaches at which the city is to receive it free. But if the payment is to be based upon its then value, it is likely that the equipment will be maintained in good condition. In the case of street surface railroads, this argument would apply with much force to roadway as well. This plan will, we believe, judging from the experience of other countries and states, adequately protect whatever investment may be made by private companies and will furnish sufficient inducement to attract such private capital as may be needed. If a company knows in advance that the capital it invests will be repaid to it, less such amount as may have been accumulated in the amortization fund, in case the city decides to terminate the grant, and that if the city does not terminate the grant, itthe company-will be allowed to continue operation, it will at once perceive that the only risks it runs are those of mismanagement and misjudgment. These are the ordinary risks which. every business man encounters, and in the case of urban transportation, they are at a minimum. Indeed, experience has shown that public utilities will often stand mismanagement which would immediately bankrupt a company doing a competitive business. This principle, for which the Public Service Commission stands, means that the city shall always and continuously be in a position to control transit development. Nothing is more vital to a city than adequate transportation, and it is no more important that a city should control its streets than that it should control the special arteries of traffic, its rapid transit lines. Under an irrevocable franchise or operating contract which gives a company the exclusive right to operate a line for 30, 40, 50 or 100 years, the city loses complete control, and there is no way by which it can be regained before the expiration of the term except at enormous expense and under such difficulties as make it impracticable.1 The second important principle of the new law is the sharing 1 It is impossible here to discuss as fully as is desirable the relative advantages of the indeterminate grant as compared with perpetual and short-term franchises. Those who are interested may find of some value a report upon this subject to the Public Service Commission, New York City, made by me in December of last year. |