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Privately-run subways?


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I was reading about the IND and other subway companies before 1940, and apparently the government built the subway systems and then leased them to IND and other private operators.


How did the economics of this work- did IND and the others actually pay the government to lease the subways from the government, which indicates that the private companies actually made a profit on subway operations?


If so, what was the difference then vs. now- were costs of running the subway lower, fares higher, ridership higher or service levels lower (or something else)?


Or was the system like the UK "private" passenger railroads, which lose money but are just paid by the government to actually run the trains?



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First of all the IND was not a private company. It was a city agency from the very beginning. It was operated by the NYC Board of Transportation, which is the forerunner of today's MTA.


The IRT (interborough Rapid Transit Company) and BMT(Brooklyn Manhattan Transit Corporation) were private companies. Essentially the subways were built by the city and leased to the private companies for operation. Certain sections, primarily elevated and open cut lines, were built and owned by the companies. The terms of the leases were rather complex.


The history of the BMT can be seen here: http://bmt-lines.com/history/


The story of the IND is told quite well here:



In brief the original IRT subway that opened in 1904 was leased by paying rent to the city. The subways built as a result of the "Dual Contracts" of 1913 had different arrangements. It was quite a bit more complicated but the brief summary is that the city got nothing until after the companies met all operating costs and a "preferential" equal to their average profits before entering into contract with the city. After the companies' preferentials were met then the profits were to be split 50/50 with the city.


The profits never reached the level where the city got any share, however the BMT was profitable at least until 1939. The IRT though declared bankruptcy in the early 1930's. Service levels and ridership were much higher than today but the fare was fixed at five cents. Unfortunately wages and other operating costs kept going up but the city would not let the companies raise the fare. Competition from the IND which the city opened in 1930 also put pressure on the companies.


This is the short answer - the details can fill entire books.

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