by Most, Doug
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A FEW WEEKS LATER, on a January evening in 1898, the USS battleship Maine steamed into Havana’s harbor with all of her guns fully loaded. She was not alone. German warships lay nearby, and on shore Spanish soldiers kept a nervous eye on her from the rocky hilltops. America and Spain had an increasingly tense relationship over Spain’s efforts to quash the Cubans’ push for independence. With each day the Maine sat off Cuba’s coast, the situation intensified, until shortly before ten o’clock in the evening on February 15, moments after a marine bugler had played taps on board. With no warning, the Maine exploded into the sky. A fireball lit up the night as she sank quickly into the harbor. Of the Americans on board, 266 were killed and 89 survived.
America was at war, and though not everyone understood precisely what was being fought over, New Yorkers got behind President McKinley. A military march down Fifth Avenue, with loud bands and gunfire salutes, was watched by hundreds of thousands of flag-waving New Yorkers. The newspapers of New York assisted the war effort by relaying messages on behalf of the military. And Teddy Roosevelt used the war to launch himself onto the national stage. He had served as New York police commissioner and had been named by McKinley as assistant secretary of the navy, but when war broke out, he resigned from the navy and took his mishmash band of Rough Riders to Havana to assist the army in the fighting. When the war ended, Roosevelt was elected governor of New York, and, after campaigning with McKinley in the 1900 election as his vice presidential nominee, he found himself as president when McKinley was assassinated. It was a stunning rise in less than five years for the nation’s twenty-sixth president.
Though the Spanish-American War was won in only a few months, it tested the strength of the fleet of warships America rebuilt under William Whitney. It also distracted the one man who had been waiting for more than a decade to build New York a subway, William Parsons. He volunteered to serve in the First United States Volunteer Engineers and climbed to the rank of captain. And after that, he traveled with his family to China. He’d been hired to survey the land and map out a route for a new railway. It was a rare opportunity, one of the first times American capitalists were willing to risk a fortune on a project that was entirely on foreign land. But those capitalists had the money to gamble with. One of them was J. P. Morgan. And the other was August Belmont.
Before leaving, Parsons penned a seven-page letter to the Rapid Transit Commission’s counsel, Edward M. Shepard. He explained that if the commission disbanded, he wanted to make sure his detailed studies were not handed over to city leaders, whom he did not trust. “Those plans are a part of myself,” Parsons wrote to Shepard, “and I should like to keep them.” If, on the chance the commission was able to get the approvals needed to move forward, Parsons assured Shepard he would “come home if so ordered.” But he insisted that Shepard not give that order “unless absolutely necessary.”
In the summer of 1899, while he was finishing his work in China, Parsons received an urgent cable. New York City’s infrastructure was under a massive upheaval, and there were contractors hungry to work and millionaires opening their deep pockets to back the projects that would bring them the most riches. There was only one job left to usher New York into the new century, and the cable Parsons received told him it was time to come home and build it.
* * *
AS THE CENTURY CAME to a close, William Whitney remained as determined as ever to leave behind a legacy. For a man who had lost his father to a premature heart attack and a child to a sudden illness and who had been widowed not once but twice, Whitney had proved time and again that he was resilient in life and able to compartmentalize his personal sorrow from his professional work. He controlled nearly every lighting, heating, and power line under the streets of Manhattan and Brooklyn, under a company called New York Gas and Electric Light. In building his Metropolitan Street Railway Company into an all-powerful monopoly, Whitney had never shown much interest in a subway. If anything, he viewed a subway as a threat to his “empire on wheels.”
But Whitney was also too smart to ignore reality. With a subway so close at hand, he knew that his company was one of the few that had the money and connections to pull it off. He offered to build the subway within three years in exchange for 5 percent of the annual gross receipts and permanent ownership of the lines. The man who had introduced the free transfer system proposed a more complicated system now. Five-cent fares for all local rides, ten-cent fares for express lines and free transfers from the express lines to his streetcars, and three-cent transfers from the local trains. His offer also came with the promise of thirty-mile-per-hour speeds on the express trains below Forty-second Street. Last, with a dash of arrogance, he demanded that his company pay no taxes on the subway until its costs had been recouped.
It was a detailed plan, and the numbers would actually prove over the ensuing decades to have been a favorable deal for New York City. But New Yorkers hated it. There was little desire to be at the mercy of the Metropolitan Street Railway Company for the foreseeable future, and the plan was roundly rejected. There was much greater comfort in a plan where the city paid for the entire construction cost and awarded the contract to the lowest bidder, who would be obligated to pay for the equipment, operate the system, and lease it all from the city for fifty years.
Whitney was disappointed and said that he was insulted at having his integrity questioned. In a statement released by his company on April 17, 1899, he said the Metropolitan was withdrawing its interest in the subway for good. “Mr. Whitney and his friends resent the imputation that they are trying to grab something,” the statement said. “Inasmuch as they have been inspired largely by public spirit in taking up this gigantic project, they feel that the present drift of public sentiment places them in a false position. Therefore they determined to drop the whole thing at once.”
The man who had ruled the street railways of New York through the 1890s seemed ready to accept that if a subway was going to be built, it would be without his involvement.
* * *
THE FIRST SNOWFALL OF THE season was accompanied by a cold snap down to sixteen degrees that froze the ponds in Central Park with two inches of ice, thick enough to walk on but not for skating. The streets were blanketed in white as the city rose for the first day of 1900, covering the signs of revelry from the night before that included battered tin horns, mountains of peanut shells, and random pieces of clothing that were curiously shed through the night and strewn everywhere.
Two weeks later, a day that Parsons had been anticipating for more than ten years and that some New Yorkers had been looking forward to for as many as fifty years arrived. The city, after weeks and months of speculation, was going to learn who would build New York a subway. Parsons anticipated half a dozen contractors to bid for the job, but as the hour grew near he lowered his expectations. Bidders had to submit a check of $150,000, which undoubtedly would keep many away. “Money is not so cheap now that people are willing to sacrifice the interest on such an amount as that even for a day,” he said.
On Monday around eleven o’clock, January 15, 1900, the large meeting room of the Rapid Transit Commission began to fill up. Citizens from all over the city came to watch the opening of the envelopes, and by noon all the players were in place and the room was overflowing. Mayor Robert Van Wyck took a seat, and so did Parsons.
At noon, the commissioners announced that they had received two bids, which must have been a relief considering the embarrassment the commission faced the first time when not a single reliable bidder emerged. The commissioners sounded confident they would find a contractor from the two formal bids. “These bids,” Alexander Orr said, “show that we were right. They are satisfactory. It is splendid vindication for Mr. Parsons.”
The first bid opened had a $150,000 check from National Park Bank, as required, and a promise to submit $1 million in cash and securities. It laid out the subway project in four separate sections, with individual costs for each one. The total bid from t
he contractor named Andrew Onderdonk was for $39,300,000, but it included one curiosity that gave pause to the commissioners. He offered to share a percentage of his yearly profits above $5 million with the city. He was bidding above the $35 million figure Parsons had projected with the promise of a return on the city’s investment. It was risky, considering that nobody knew if the subway would make money or how long it would take to become profitable.
Onderdonk’s qualifications were never questioned when his name was announced. He was already working with the state on a dredging project in New York Harbor. Fifty years old, and a trim man with a bushy dark mustache, his first big project was to build up the harbor in San Francisco Bay. But he also came with experience in railroads, retaining walls, and, most important, tunneling, having built a four-mile water-supply tunnel under Lake Michigan in Chicago.
When asked about Onderdonk’s profit-sharing offer, Parsons said he had little doubt that $5 million in revenue would be achieved when the subway opened. He said that the eight tracks of elevated trains in New York produced $10 million in revenue a year and that it seemed reasonable to expect four tracks of subway to produce at least half that. “Mr. Onderdonk’s offer will therefore have to be carefully considered,” Parsons said.
Onderdonk’s only competitor was a jovial character who came with even greater experience and whose bid of $35 million was $4 million less. Also like Onderdonk, John McDonald came with a complication. And it made the commissioners very nervous about hiring him.
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JOHN BART MCDONALD WAS fifty-six years old and short in stature with a bald, flat head; broad shoulders; a puffed-out chest; a softly curved mustache; and warm hazel eyes that contradicted his otherwise gruff appearance. When he shook hands with his strong grip, he identified himself as a man who had spent a lifetime in hard labor, which he had. He was born in County Cork, Ireland, on November 7, 1844, a year before the Irish potato famine leveled the country in starvation and disease. Like many parents, Bartholomew and Mary McDonald fled from the famine with their children. John was three when they came to New York and settled in the Bronx. His father, an independent contractor, taught his boy from a young age the value of combining politics and hard work, making a fortune in labor while also serving as a city alderman. His son tried college but wasn’t interested, and he dropped out to partner with his father in work. He quickly showed himself to be skilled as both a laborer and a manager.
One of his first assignments, which he landed through his father, was a low-level timekeeping job at the Croton Dam. His first railroad job was rebuilding Cornelius Vanderbilt’s New York Central Railroad’s Fourth Avenue tracks up around Ninety-sixth Street. It was a job that gained him notoriety and led him on a busy path around North America, from New Jersey to Canada to Western Massachusetts to Buffalo to Philadelphia to Wisconsin to Illinois to West Virginia. He settled for a while in Baltimore to work on a long and complicated tunnel for the Baltimore & Ohio Railroad, and by the time he returned to New York with his wife, son, and daughter, he was no longer a run-of-the-mill contractor. He was enormously wealthy and successful, regularly golfing and yachting with friends, a man who enjoyed big meals, smooth drinks, and good cigars. He was known as a good boss who didn’t blow budgets or miss deadlines. He also enjoyed good company, which is no doubt how he rose in power among Democrats and in the powerful world of Tammany Hall politics. As a native Irishman, McDonald bonded easily with the Irish-American politicians of New York, like the Tammany Hall leader Richard Croker, who got Van Wyck elected mayor and who preferred a city where business was done with a wink and a handshake rather than a lengthy bidding process for every little job.
But that night, when he was found by reporters imbibing at the Hoffman House, one of New York’s oldest hotels, McDonald was nothing short of arrogant in believing that he, not Onderdonk, was the man for the job. “I expect to get the contract,” he said. “I have made arrangements for the necessary bonds and I can have the work started inside of thirty days from now if the commission promptly awards the contract.” McDonald overlooked one detail in his assumption. His bid was certainly the lowest. And he was unquestionably qualified to build the subway. But while he was a wealthy man, he was not nearly rich enough to afford the $7 million the commission required of the winning contractor. Unless he could raise the money, he would never be allowed to put a shovel in the ground. And considering that Onderdonk was in no better financial position than McDonald, once again New York’s subway was in peril.
Not surprisingly, given such an enormous issue, rumors started to fly the moment the bids were unveiled. There was talk that Onderdonk had approached McDonald in the days before submitting their bids and asked him to team up and submit one bid together and that McDonald replied that he preferred to go it alone. There was also gossip that after the subway was built it would be turned over to the powerful Metropolitan Street Railway Company, so that it could have total control over the streets and the subways and provide more seamless rides for passengers transferring between the two systems. But the day after the commission opened the bids, Orr, the commission’s president, received a letter quashing that suggestion, from none other than the man behind the Metropolitan, William C. Whitney.
“My Dear Mr. Orr,” Whitney wrote on January 16. “I cannot begin this day without offering to you and your associates my sincere congratulations upon the success of your long labor … The Metropolitan Company, I promise you, will do all in its power to aid the work.” In the letter, Whitney also assured Orr that the Metropolitan company “has no connection with nor responsibility for either bid. The credit of undertaking this great work belongs to others, but we will aid them in all ways possible.”
With that reassurance, the Rapid Transit Commission needed less than twenty-four hours to award the contract to McDonald. And Orr quickly put to rest another rumor, one that suggested if the Tammany-connected contractor did not win the job the subway would never get built. “Absurd!” Orr said. “Politics has had no consideration in this matter. The board in its wisdom decided that Mr. McDonald’s bid was the better. That’s all there is to it.”
It was the better bid. But when he received word that he had won the subway job, McDonald was uncharacteristically silent. What only he knew at that moment was that the banks he had lined up to back his bid had, without any warning, dropped him. They had been told by the men from the Metropolitan Street Railway group, mainly Whitney and Ryan, that the subway was a dangerous investment unless the city awarded the contract in perpetuity rather than for a fifty-year term. The banks listened, and were convinced that a subway was a financial loser, and they backed away.
McDonald had made a bid for a $35 million job, and now suddenly he had no way of putting up any significant money toward it. Perhaps that’s why, after receiving such joyous news, McDonald released no comment. He had ten days, under the commission’s rules, to find $7 million to put down. While reporters scurried about town to find the burly Irishman, he enjoyed a quiet dinner and drinks at the Hotel Savoy before returning home to his apartment in the Dakota flats on the Upper West Side. He had no time to waste. He began lining up meetings with some of the wealthiest financiers in the city.
* * *
AUGUST BELMONT JR. WAS the spoiled son of one of the richest bankers in America. The young Belmont attended the Rectory School in Hamden, Connecticut; Phillips Exeter Academy; and Harvard College. When he was caught one time dousing people with water who were walking beneath his dormitory window and another time howling at the moon at five o’clock in the morning, he was merely scolded politely. But rather than punish him, his father essentially bribed him to behave better, buying him a sloop called the Ariel for about $1,000. Private tutors helped August Jr., but he bored easily and graduated Harvard only with the help of a last-minute cram session for his final exams. For his graduation and birthday, his father gave him two hundred shares of the Bank of the State of New York, a present worth $25,000. When August Belmont Sr. died on November
24, 1890, with an estate estimated as high as $50 million, there was no doubting who would take over his affairs. And his son’s interests soon expanded beyond his father’s.
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A SECRETARY ARRANGED THE historic meeting. By the time John B. McDonald sat down with Belmont in January of 1900 to strike a deal, it was as if they were meant to do business together. Both men were short-tempered and cocky. And Belmont’s princely life no doubt forged a bond between himself and McDonald. They both enjoyed drinking, sailing, fishing, golfing, and horses.
In a series of meetings the two men held, it became clear that McDonald needed more than a loan. He needed Belmont to put up the $150,000 certified check and to bankroll the entire project. The two men struck the historic agreement that would make New York’s subway a reality, although Belmont, not a humble bone in his body, would not exactly view the agreement as an exercise in compromise. Like any shrewd businessman, Belmont told McDonald he was not going to simply hand over his money. He wanted power in return for his investment. The plan called for the city government to hand over to the contractor $37.5 million to pay for the construction costs and the land necessary for the station terminals. So Belmont agreed to organize a syndicate, which he later called the Rapid Transit Subway Construction Company, to raise the money and to pay for the subway construction, which McDonald would lead. And, because the Rapid Transit Commission also required the contractor to run the subway after it opened, Belmont set up what he called the Interborough Rapid Transit Company, or IRT. Last, McDonald agreed to spend his own money to build and purchase the subway cars, signals, and other miscellaneous equipment, which the city would buy back at the end of the lease. It was a straightforward agreement that made perfect sense. The builder would build. The banker would bankroll.