New York City Private Works

Saturday, Jun 11, 2011

Private companies originally managed rapid transit routes and surface lines. Abraham Brower established New York City's first public transportation route in 1827, a 12-seat stagecoach called "Accommodation."

The next year, John Mason organized the New York and Harlem Railroad, a street railway that used horse-drawn cars with metal wheels and ran on metal track. By 1855, 593 omnibuses traveled on 27 Manhattan routes and horse-drawn cars ran on street railways on Third, Fourth, Sixth, and Eighth Avenues.

The city's first regular elevated railway service began on February 14, 1870. The El ran along Greenwich Street and Ninth Avenue in Manhattan. Elevated train service expanded and dominated rapid transit for the next few decades.

New York City's first official subway system opened in Manhattan on October 27, 1904. The Interborough Rapid Transit Company (IRT) operated the 9.1-mile long subway line that consisted of 28 stations from City Hall to 145th Street and Broadway.

IRT service expanded to the Bronx in 1905, to Brooklyn in 1908, and to Queens in 1915. The Brooklyn Rapid Transit Company (BRT) began subway service between Brooklyn and Manhattan in 1915. The Brooklyn-Manhattan Transit Corporation (BMT) took over the BRT a few years later.

Private companies also operated the city's earliest motor buses. The Fifth Avenue Coach Company began passenger service between Washington Square and 90th Street with gasoline-powered buses and open-top double-deckers on July 13, 1907.

New York City Transit - History and Chronology, Metropolitan Transportation Authority, http://www.mta.info/nyct/facts/ffhist.htm.

On Oct. 27, 1904, the Interborough Rapid Transit (IRT), the first subway line in the city, began operating from lower Manhattan. It was an immediate success. A journalist wrote the new lines were "architecturally superlative executions." A transit trade journal called the subway stations "dignified and artistic efforts of the highest order." One historian called these private lines "a great public work."

Today, with more than a half century of public ownership and operation of the subways, imagine anyone making those kind of comments about the New York subways!

Sell The Subways, Gregory Bresiger, 1998, http://mises.org/freemarket_detail.aspx?control=69.

Originally [the New York City subway] was built by entrepreneurs under a franchise granted by the "city fathers." As a condition of the grant, the fare was fixed at five cents. For a while all went well; the company rendered adequate service and paid its bills, including interest on its bonded indebtedness. As the city pulled into its orbit more and more surrounding communities, the company extended its mileage, as required, and in due time the nickel fare did not meet operational costs. The company asked for permission to increase its fare. The people-loving politicians refused the request and the "nickel fare" became a potent campaign issue.

A Matter of Degree: The New York Subway, Frank Chodorov, 1959, http://mises.org/daily/3948.

One of the promises of public ownership and management back in 1940 was that the nickel fare would be protected from “greedy” private operators.

Once the “greedy” private operators were gone, there was no bar to fare, tax, and toll raises... The fare has been hiked many times and is today $2... These rate hikes usually have exceeded the rate of inflation.

That’s because over the years it has been “easy to hide the cost of dipping into taxpayer levies,” wrote a biographer of Fiorello LaGuardia. He was the mayor who accomplished the 1940 plan to replace the private sector, a plan that most historians recognize led to a spiral of problems and high fares.

For example, in 2004 the MTA said that it expected to take in some $3.5 billion. It projected another billion or so from the profits of the bridges and tunnels, whose tolls have been raised many times. That’s although drivers were told in the 1950s that the bridges were generating so much money that the tolls would eventually be dropped. In spite of this extra bridge and tunnel money, $4.5 billion is less than half of projected MTA expenses of $9.4 billon!

In 2006, there is estimated to be about a $1.2 billion deficit, and in 2007 the MTA expects red ink of $1.3 billion. By the way, MTA’s debt service is forecast to go from 19 percent of operating revenues to 27 percent over the next two years.

Even supporters agree that Amtrak and the subways are in terrible shape; that there is a huge backlog of repair projects as well as vital improvements that are required if these systems are not to deteriorate further. However, supporters say that these systems are “starved” and should receive bigger subsidies.

The IRT made money through much of its existence, even though it operated under great handicaps — handicaps that led it to sell out because it would never be allowed to raise its fare. The Pennsylvania Railroad — before it was regulated and taxed to death — made regular dividend payments for more than a century.

Yet subway leadership, under the government-enterprise model, has not only raised the fares many times, but mulcted drivers and taxpayers — many of whom are disgruntled ex-subway riders — to pay for the city’s and region’s problematic public-transit system. All this has happened while the quantity and quality of service have declined. The system has, as we have seen, raised bond issues for specific purposes. Then the system’s leaders spent the money on other things. The system has received hundreds of millions of dollars in federal and state aid — maybe billions: there have been some scandals in the MTA over how it adds up the numbers — and still runs in the red almost every year. Indeed, despite all this additional revenue, the system, to quote the Orwellian language of the MTA reports, still has “gaps” and “structural imbalances.”

So we come to possibly the most insidious of all problems of government enterprise — its lack of accountability. Whom do we go to if we’re not happy with a government enterprise? Write a letter to the governor or another elected official?

“If anything has been demonstrated by modern experience in these matters,” F.A. Hayek wrote in 1960 of state agencies and commissions, “it is that, once wide coercive powers are given to government agencies for particular purposes, such powers cannot be effectively controlled by democratic assemblies.”

The Disastrous World of the New York Subway, Gregory Bresiger, June 26, 2006, http://www.fff.org/freedom/fd0602e.asp.

Last year the New York City Subway system carried 1.41 billion passengers. In 1947, the historic high point of ridership, the system carried 2.02 billion. That means the latest numbers constitute an incredible falloff of some 30% in a city whose population has stayed about the same over the past 60 years.

The Charlatan Lindsay ran for mayor in 1965 on a platform of protecting the 15 cent fare. Once in office, he raised the fare. Actually, he raised it several times in his eight years in office.

By the way, the tracks are so bad that there are hundreds of places in the system where trains must go slow.

But you know that if this were a private system pulling these scams, the politicos would be falling all over one another to indict the "greedy" owners of capital. Yet isn't a 33% increase "greedy?" And since the government bought out the last vestiges of private management in 1940, the fare has risen 3,900% or $1.95.

Government ownership would result in economies of scale. It would mean labor peace because subway workers would be barred from striking, according to LaGuardia. It would mean that the nickel fare would be protected from those rapacious private subway owners. All these fabulous promises were made by our pols, men and women we elected and re-elected.

In the beginning, at the start of the 20th century, the nickel fare was just fine. This was the golden era of the subways, which were primarily built with private funds. A friend of public ownership, Brian J. Cudahy, in his book "Under the Sidewalks of New York, would reluctantly concede that without private money the subways "would not have been possible."

This was the era—roughly from the turn of the century to 1940—when people actually came from around the world to ride the subways. Even an enemy of private ownership, Robert Caro, would write in "Power Broker," of this era, "so superbly had it (the subways) been designed that it took decades to break down."

Subway Tax in the Rancid Apple, Gregory Bresiger, February 27, 2003, http://mises.org/daily/1172/Subway-Tax-in-the-Rancid-Apple.