Beyond the IRT
The success of the Interborough Rapid Transit System, more commonly referred to as the IRT, created an immediate demand for its expansion. While Manhattan's newest transit system was a gold mine for August Belmont and his IRT, it fell far short of meeting the needs of all commuters.
In 1905, just a year after the opening of the IRT, the Board of Rapid Transit Commissioners announced plans for an additional nineteen subway lines. New tracks would run one hundred and sixty-five miles through Manhattan, Brooklyn, the Bronx, and Queens; the board called for open bids for construction and operation.
August Belmont saw in these plans a dual threat to the IRT's profitable monopoly. If another company built and operated the new lines, the IRT would not realize a profit from expansion. He also understood the law of supply and demand. The IRT made the most money when its trains ran at absolute, bone-crunching capacity. New subway lines would result in less crowded trains and a lower profit margin. With all this in mind, Belmont moved quickly to protect the IRT.
Private Ownership, Public Concerns
When the Metropolitan Street Railway stated its interest in bidding on the new lines, Belmont made it clear that since the IRT had been the city's first subway, it should be given sole right to construct any additional lines. The Transit Commission responded by offering Belmont a chunk of the expansion pie--but not all of it. Pressed into a corner, Belmont responded with the pluck of a Gilded Age capitalist and bought the company.
The Brooklyn Rapid Transit Company (BRT) operated a profitable network of streetcars and elevated railroads in Brooklyn--a network that it now proposed be extended into Manhattan as part of subway expansion. Belmont lacked the resources to buy the BRT, so he negotiated for the strongest position possible--the BRT and the IRT would share in construction and operation of a greatly expanded system. The era of the Dual Contracts was born.
The Dual Contracts doubled the size of the current system, pushing Manhattan's population northward and fostering residential growth in Brooklyn, the Bronx, and Queens. The new lines connected the beaches of Coney Island with the theaters of Times Square, and the citizens of Queens with the shopkeepers of Manhattan. But the terms of the contracts, particularly the fares and how they would be divided, would later cripple the system and threaten its continued growth.
At the time the Dual Contracts were negotiated, the IRT and the BRT consistently made money. Naturally, they desired to continue, and they succeeded in negotiating a payment system that included a guaranteed yearly profit, to be taken before any lease payments were made to the City of New York. In addition, the subway operators sought and received a guaranteed five cent fare for the length of their forty-nine-year lease on the system.
Well before they completed the Dual Contracts lines, the IRT and the BRT felt severe growing pains. The nickel fare, which seemed like a sure bet to the subway magnates in 1911, lost its luster in the inflation-ridden days of World War I. By the time they claimed their guaranteed profits, the companies had little money left for maintenance and equipment upgrades.