The New York Subway | Page 7

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