§ 40 — Contract for equipment, maintenance and operation

§ 40. Contract for equipment, maintenance and operation. a. Subject\nto the approval of the board of estimate and of the mayor, the board of\ntransportation shall have full power and authority to provide for the\nmaintenance, supervision, care and operation of any railroad and also of\nthe subsurface structures and all other devices and appurtenances,\nconstructed or to be constructed for and at the expense of such city\npursuant to the provisions of this chapter. With like approval, such\nboard of transportation may enter into a contract with any person, who\nin the opinion of such board shall be best qualified to fulfill and\ncarry out such contract, for the equipment, or any part thereof not\nprovided for pursuant to section thirty-one of this chapter, of a\nrailroad, at his own cost and expense, and for the maintenance and\noperation of such road for a term of years to be specified in such\ncontract and not to exceed twenty years. In lieu of such definite term\nof twenty years the contract may be for a longer period to be fixed\ntherein and in such case it shall provide that the city upon giving a\nspecified notice shall have the right to terminate the contract for the\nequipment, maintenance and operation of such road as to all and if\ndeemed advisable as to any specified portion thereof at any time after\nthe expiration of ten years from the date when operation of any part of\nsuch road or of such specified portion thereof shall actually begin, but\nsuch right of termination shall be upon condition as follows:\n 1. If the title to the equipment of such railroad shall not be vested\nin the city then that the equipment of such railroad or portion thereof\nsuitable to and used for purposes of such contract shall be purchased\nand taken by the city at an amount which shall be ascertained as\nprovided in the contract, but which shall not be greater than the actual\ncost thereof, plus fifteen per centum thereof. Such equipment shall upon\nsuch termination of such contract become and be the property of the city\non paying to the contractor such amount, or in case the title to the\nequipment of such railroad shall be vested in the city then that the\ncity shall pay to the contractor an amount for his investment in the\nequipment of such railroad, or portion thereof, which shall not exceed\nthe actual cost to the contractor of the equipment of such railroad or\nportion thereof, plus fifteen per centum thereof, and shall decrease\nunder the provisions of the contract as the term thereof continues so\nthat at the end of the full term of the contract no such amount shall be\npaid. If additional equipment shall be required and supplied after the\nrailroad, or portion thereof, shall have been put in operation, and if\nthe contract shall provide that title to such additional equipment shall\nvest in the city when supplied, then the city shall pay an amount for\nthe investment of the contractor in such additional equipment which\namount shall not exceed the actual cost to the contractor of such\nadditional equipment plus fifteen per centum thereof, and shall diminish\nso that at the end of the full term of the contract the city shall be\nrequired to pay for such investment in additional equipment only such\namount as shall be provided in such contract, and\n 2. Upon the further condition if such railroad shall be constructed\nwholly or in part at the cost of the contractor that the city shall also\npay to the contractor an amount for his investment in the construction\nof such road or portion thereof which shall not exceed the actual cost\nto the contractor of constructing such road or portion, plus fifteen per\ncentum thereof, and shall decrease under provisions of the contract as\nthe term thereof continues so that at the end of the full term of the\ncontract no such amount shall be paid. If betterments, additions or\nimprovements shall be required by the board of transportation or\napproved by such board prior to the construction thereof and be\nconstructed wholly or in part at the cost of the contractor, then that\nthe city shall pay an amount for the investment of the contractor in\nsuch betterments, additions or improvements which shall not exceed the\nactual cost to the contractor of constructing such betterments,\nadditions or improvements plus fifteen per centum thereof and which\namount shall diminish so that at the end of the full term of the\ncontract the city shall be required to pay for such investment in\nbetterments, additions or improvements only such amount as shall be\nprovided in the contract.\n b. The contract shall provide a method of ascertaining the amount to\nbe paid for such equipment and for such investment of the contractor in\nthe construction of such road upon termination by the city of any such\ncontract and for the equipment of such railroad at the end of the full\nterm of the contract. The contract may provide for determining from time\nto time in default of agreement by arbitration or by the court a\nvaluation of such investment of the contractor in the construction of\nsuch road and of the equipment or any part or portion of either thereof\nfor any purpose under such contract. The contract may provide that the\ntitle to the equipment as well as to such road, shall vest in the city\nfrom the beginning and that the amount to be paid by the city for the\ninvestment of the contractor in such equipment shall decrease as the\nterm of the contract continues, so that at the end of the full term of\nthe contract no amount shall be payable therefore except for additional\nequipment as aforesaid.\n c. The contract shall provide that upon the expiration of a period\nfixed in the contract, the term of such contract shall end without\ncompensation to the contractor except as provided in the contract, for\nbetterments, additions or improvements to any such railroad required to\nbe made or approved by the board of transporation prior to the\nconstruction thereof during the term of any such contract, and, if the\ntitle to the equipment be not vested in the city, for equipment suitable\nto and used for the purposes of such contract to the amount, if any,\nascertained as provided in the contract, and that in such event such\nequipment shall become the property of the city upon payment to the\ncontractor of such amount or, if the title to the equipment be vested in\nthe city, then an amount for the investment of the contractor in\nadditional equipment for any such railroad to be ascertained as provided\nin the contract. The contract may also provide that the city in\nexercising the right so to terminate any contract shall for such\ncompensation as may be reasonable and which shall be determined pursuant\nto the contract permit the contractor whose contract is so terminated or\nthe assignee or lessor of the contractor to use the tracks, structure\nand line equipment of a portion of such road when necessary or\nconvenient to reach terminals, yards or other facilities of the\ncontractor or such assignee or lessor then located thereon. The contract\nmay also provide for assuring that in case a new contract under this\nsection for equipment and for maintenance and operation of such railroad\nis made after such termination pursuant to notice or after the\nexpiration of the full term of the contract that the title to and\npossession of the equipment so taken and the right to the possession of\nthe railroad so constructed may be transferred directly to the new\ncontractor upon his paying the amount so required.\n d. If such contract be made with a railroad corporation organized for\nthe purpose of maintaining and operating a railroad, including the\nequipment or any part thereof, constructed pursuant to the provisions of\nthis chapter, and which has entered into a contract for the maintenance\nand operation of a railroad theretofore constructed in whole or in part\nat the expense of the city as provided in this chapter, and is engaged\nin the maintenance and operation thereof within such city, and if such\ncontract shall make provision for the equipment, maintenance and\noperation of such road of the city in connection with such railroad\ntheretofore constructed as aforesaid at the expense of the city, and for\na single fare, such corporation and the city may in such contract or by\nmodification of an existing contract provide that the original term of\nany contract for operation of such railroad theretofore constructed in\nwhole or in part at the expense of the city, may be extended or reduced\nand any right to a renewal thereof may be abrogated or waived so that\nsuch term as extended or reduced shall become and be co-terminous with\nthe term for equipment, maintenance and operation of such road of the\ncity to be fixed in and by any such contract; and that if the city shall\nelect to terminate the contract for equipment, maintenance and operation\nof such road as to any line or portion thereof, which with a connecting\nline or portion of such railroad theretofore constructed and then\noperated by such corporation shall make a continuous line, then the city\nmay when so terminating such contract as to any such line or portion\nthereof, take over such connecting line or portion thereof theretofore\nconstructed in whole or in part at the public expense and then operated\nby such railroad corporation and terminate the contract of such\ncorporation as to the same, provided that in lieu of such connecting\nline or portion thereof so taken over such corporation shall for the\nthen unexpired term of the contract for operation of the railroad\ntheretofore constructed have the right to maintain and operate without\nright of recapture by the city another line of road or portion thereof\nspecified in such contract which with such lines of the railroad\ntheretofore constructed shall make a continuous line. The contract shall\nin such case provide for adjustment between the city and the corporation\nof the difference in the value of the right to operate the lines or\nportions thereof so exchanged by agreement or arbitration or by the\ncourt and for payment of such difference between them. The city and the\ncorporation, in such contract, may also provide that if the city, under\nany provision of law, shall terminate the contract for the maintenance\nand operation of such road of the city after the expiration of ten years\nfrom the date when operation of any part of such road shall actually\nbegin, the city, at any time after thirty-five years from such date, may\nterminate such contract for the maintenance and operation of the\nrailroad theretofore constructed at the public expense, and take over\nany such railroad upon payment to such company of a sum not exceeding\nthe then present worth of the unexpired portion of the term of such\ncontract to be ascertained as provided in such contract, which may\nprovide that in default of agreement such sum may be determined by\narbitration or by the court.\n e. The contract between the city and such corporation may also provide\nthat in consideration of the operation of any such railroad as provided\nfor in such contract and any such railroad theretofore constructed in\nwhole or in part at public expense in connection with each other for a\nsingle fare, and of the payment by such company of moneys to be applied\nas authorized by this chapter to or toward the construction by the city\nof the road to be maintained and operated under such contract. In\nfurther consideration of any covenants or agreements by the company to\nmodify the term of any of its leases or to waive or modify any of the\nother provisions of any of its contracts, the gross receipts of the\noperation of any such railroad theretofore constructed and of such road\nof the city to be maintained and operated under such contract may be\ncombined during the term of such contract, and that the city shall\nreceive for the use of such additional road at intervals named a\nspecified part or proportion of the income, earnings or profits of the\nrailroads whose receipts are so combined. In such case the contract may\napportion out of the amount so to be received by the city and specify a\nportion thereof which shall be deemed to be the rental for the use of\neach of the roads of the city maintained, equipped and operated under\nsuch contract. Any such contract shall provide for determining the\namount of income, earnings or profits of the railroads whose gross\nearnings are so combined, and for such considerations may authorize the\nretention by such railroad corporation for each year of the term of such\ncontract, prior to the payment of any sums or of any part or portion of\nthe income, earnings or profits to the city as rental for the use of the\nroads specified or provided for in such contract, of:\n 1. A specified sum of money, which sum may represent the average\nannual income from operation of such railroad theretofore constructed\nand operated by such corporation for any two or more years;\n 2. A sum not exceeding six per centum per annum for each year upon the\ninvestment of such company, including brokerage charges not exceeding\nthree per centum, in the construction and equipment of such road of the\ncity to be maintained and operated under such contract; and\n 3. A sum not exceeding the annual expense or cost to the contractor\nplus one per centum per annum on account of the investment of the\ncontractor in betterments or improvements upon or additions to such road\nand equipment.\nSuch contract may also provide that such annual payments shall be\ncumulative, and that any deficiency with respect thereto shall be paid\noff and discharged annually out of such gross receipts before any\npayments by way of rental or compensation for the use of such roads\nshall be made to the city.\n f. Every such contract shall contain such terms and conditions as to\nthe rates of fare to be charged and the character of services to be\nfurnished and otherwise as the board of transportation shall deem to be\nbest suited to the public interests, and subject to such public\nsupervision and to such conditions, regulations and requirements as may\nbe determined upon by such board, with like approval. In case different\nparts of a road shall be constructed at different times or at intervals\nof time, or if the contract shall provide for the use by the contractor\nof an existing railroad as part of a continuous route as aforesaid, then\nand in any such case the board of transportation, in its discretion, may\nprescribe periods for the operation of the different parts of such road\nso that at one period of time in the future the board may be enabled to\nmake a single operating contract or lease of the entire road. Such\nboard, in its discretion, as one of the terms and conditions of any such\ncontract, may provide that as a consideration for the making of such\ncontract the contractor in addition to any sums to be paid as provided\nby this chapter by way of rental or otherwise for the use of such road\nshall contribute a part of the cost of construction of such road which\nshall be contributed and disbursed by such method, in such manner and at\nsuch times as may be provided for in any such contract. Such\ncontribution shall be deemed to be an investment by the contractor in\nthe construction of such road or to be part of the cost to the\ncontractor of constructing such road within the meaning of subdivision a\nof this section providing for termination of such contract by the city.\nAny such contract may provide for the construction during the term of\nsuch contract of any branches or extensions of such road and the\nconstruction of additional lines and for the equipment and operation\nthereof by the contractor in connection with such road and may make\nseparate provision for apportioning the receipts of such road and of\nsuch branches, extensions or additional lines and as to the compensation\nto be paid to the city for the use of any such branches, extensions or\nadditional lines. The city may enter into a contract for the equipment,\nmaintenance and operation of any such road before any contract for\nconstruction of such road or any portion thereof shall have been made,\nand in such case the contract may provide that the city may construct or\ncomplete such road or additions thereto or betterments thereof from time\nto time at the expense of the city, or partly at the expense of the city\nand partly at the cost or through contribution of the contractor as\naforesaid in such proportion as may be agreed upon between the city and\nthe contractor. Such contract for the equipment, maintenance and\noperation of such road or any portion thereof may be made and entered\ninto as provided in this chapter before the consents shall have been\nobtained for any such road or for any portion thereof as provided in\nsection twenty-one of this chapter, and before the detailed plans and\nspecifications shall have been prepared as provided in section\ntwenty-two of this chapter. In such case such contract for equipment,\nmaintenance and operation of such road or any portion thereof shall be\nupon condition that such contract shall not become operative or go into\neffect as to such road or such portion thereof unless and until the city\nshall acquire the right to construct such road or portion thereof by\nobtaining such consents. The board of transportation in any contract\nmay reserve the right, upon conditions and for compensation to the\ncontractor, as provided in the contract, to permit other persons and the\nmunicipality itself to use the tracks, structure and line equipment of\nthe railroad, or any portions thereof.\n g. Every such contract shall further provide that the person so\ncontracting to equip, maintain and operate such road annually or at\nspecified intervals, shall pay into the treasury of such city, such\nrental for the use of such road, as shall be prescribed therein. The\nrental may be either a specified sum of money or a specified part or\nproportion of income, earnings or profits of such road, or both a sum of\nmoney and a part or proportion of income, earnings or profits, as such\nboard shall deem best suited to the public interest and the board of\nestimate and the mayor shall approve. Every such contract may further\nprovide that the amount and character of such rental may be readjusted\nat the expiration of a prescribed period of not more than twenty years,\nand be readjusted from time to time in the future at intervals each of\nnot more than twenty years, and may prescribe a method of determining by\narbitration or by the court the amount to be paid upon any readjustment\nthereof. If such contract be made with a person owning or actually\noperating or agreeing to operate a railroad wholly or in part within the\nlimits of the city and shall make provision for the equipment,\nmaintenance and operation of such road of the city in connection with\nsuch railroad and for a single fare, the contract may provide that the\ngross receipts from the operation of such railroad within the limits of\nthe city and from the operation of such road of the city may be combined\nduring the term of such contract and that the city shall receive for the\nuse of such road at intervals named a specified part or proportion of\nthe income, earnings or profits of the railroads whose receipts are so\ncombined and the contract, in such case, may apportion out of the amount\nso to be received by the city and specify a portion thereof which shall\nbe deemed to be the rental for the use of each of the roads of the city\nmaintained, equipped and operated under such contract. In any such case\nthe contract shall provide for determining the amount of the income,\nearnings or profits of the railroads whose gross earnings are so\ncombined, and may authorize the retention, prior to the payment of any\nsums to the city for or on account of the investment of the city in the\nconstruction of such road or for the use of the same, of:\n 1. A specified sum of money, which may represent the average annual\nincome from operation of such railroad theretofore constructed during a\nperiod specified in such contract;\n 2. A sum not exceeding six per centum per annum for each year upon the\ninvestment of the contractor, including brokerage charges not exceeding\nthree per centum, in the construction and equipment of such road of the\ncity to be maintained and operated under such contract, and in the\nconstruction and equipment of extensions of any railroads and tracks not\nowned by the city thereafter constructed and to be operated under such\ncontract; and\n 3. A sum not exceeding the annual expense or cost to the contractor,\nplus one per centum per annum, on account of the investment of the\ncontractor in betterments or improvements upon, or additions to such\nroad of the city, and upon or to any railroads not owned by the city and\noperated under such contract, and upon or to the equipment thereof.\n Such contract may also provide that such payments shall be cumulative,\nand that any deficiency with respect thereto shall be paid off and\ndischarged annually out of such gross receipts before any payments by\nway of rental or compensation for the use of such roads shall be made to\nthe city. The contract may provide for a readjustment at specified\nintervals of the part or proportion of such income, earnings or profits\nof the railroads, which the city shall receive, or of the portion of the\namount received by the city which shall be deemed to be the rental of\neach such road owned by the city, and may prescribe a method of\ndetermining by arbitration or by the court the amount which the city\nshall receive as its part or proportion of such income, earnings or\nprofits or as such rental upon any such readjustment thereof.\n h. Such rental and the term for the operation of the railroad included\nin any such contract shall begin, as to such road, or any section\nthereof, at such time as may be provided in the contract. The aforesaid\nrental shall be paid at such times during each year or at such intervals\nas the board of transportation shall require. If a contract to equip,\nmaintain and operate such road be made with the person having or to have\nthe contract to construct the same and such contract shall provide that\nsuch road shall be constructed wholly or in part at the cost of such\nperson such road, however, to be the property of the city in the same\nmanner and to the same extent as if constructed wholly with public\nmoney, then the contract may provide as an alternative in lieu of the\nrental above provided for that any and all income and increase derived\nby the contractor or on his behalf in any manner from the enterprise of\nconstructing, equipping, maintaining and operating such road, after\ndeducting operating expenses, taxes, payments to reserve and\namortization funds as provided for in the contract, and not exceeding\nsix per centum interest per annum payable quarterly upon the actual cost\nto the contractor of construction and equipment of such road, shall be\ndivided share and share alike between the contractor and the city. The\nrental and any sums payable under such contract, except any sum of money\nthat may be contributed toward the construction of any road by the\ncontractor having the contract for the equipment and operation of such\nroad, shall be applied first to the payment of the interest upon\nobligations issued by such city for the construction and equipment of\nsuch road, as the same shall accrue and fall due. The remainder of such\nrental and moneys not required for the payment of such interest shall be\nkept separate and apart from any and all other moneys of such city and\nshall be securely invested and, with the annual accretions of interest\nthereon, shall constitute a sinking fund for the payment and redemption\nat maturity of the aforesaid obligations. Such rental, moneys and\naccumulations of such fund over and above so much as may be required for\npayment of interest and principal of such obligations, shall be paid\ninto the rapid transit fund provided in section thirty-four of this\nchapter.\n i. Any such contract also may provide for a renewal or renewals not to\nexceed twenty years in the aggregate of the lease of such road upon the\nexpiration of an original term of not more than twenty years upon such\nterms and conditions, to be approved by the board of estimate and the\nmayor, as to the board of transportation may seem just and proper. Such\ncontract also may contain provisions for the valuation of the whole or a\npart of the property of such contractor employed in and about the\nequipment, maintenance and operation of such road, and for the purchase\nthereof by the city, at such valuation, or a percentage thereof, should\nsuch lease not be so renewed at any time, or should it be terminated or\nexpire as aforesaid. Such contract also shall state the date on which\nthe operation of the road, or any section thereof, shall commence.\n j. In case the title to the equipment of such road shall not be vested\nin the city, the city also shall have a first lien upon the rolling\nstock and other property of such contractor, constituting the equipment\nof such road and used or intended for use in the maintenance and\noperation thereof, as further security for the faithful performance by\nsuch contractor of the covenants, conditions and agreements of such\ncontract, on his part to be fulfilled and performed. In case of the\nbreach of any such covenant, condition and agreement such lien shall be\nsubject to foreclosure by action, at the suit of such city, in the same\nmanner, as far as may be, as is then provided by law in the case of\nforeclosure by action of mortgages on real estate. The board of\ntransportation, however, from time to time, may relieve from such lien\nany of the property to which it may attach, upon receiving additional\nsecurity, which may be deemed by such board to be the equivalent of that\nwhich it is proposed to release and otherwise upon such terms as to such\nboard shall seem just.\n k. The contract shall further provide that in case of the failure or\nneglect on the part of such contractor, after such notice as the\ncontract may prescribe, faithfully to observe, keep and fulfill the\nconditions, obligations and requirements of such contract, the city, by\nthe board of transportation, may either terminate the contract or take\npossession of such road and the equipment thereof, and as the agent of\nsuch contractor, either maintain and operate such road, or enter into a\ncontract with some other person, for the maintenance and operation\nthereof. Such contract shall contain such terms, conditions and\nprovisions in relation thereto as such board shall deem necessary or\ndesirable for adequately safeguarding and protecting the rights and\ninterests of the city. Such contract shall also contain appropriate\nterms, conditions and provisions for accomplishing such termination or\ntaking possession.\n l. Any existing railroad corporation owning or actually operating a\nrailroad wholly or in part within the limits of the city and approved by\nthe board of transportation, shall be competent and is hereby authorized\nto enter into any contract for the equipment, maintenance and operation\nof any railroad pursuant to the provisions of this chapter, or, after\nsuch a contract shall have been made, shall be competent and is hereby\nauthorized, with the approval of such board, to contract with the\noriginal contractor or his assignee or assignees for the maintenance and\noperation (including the equipment or any part thereof) of any railroad\nconstructed or in process of construction or to be constructed pursuant\nto the provisions of this chapter, and shall have all the powers\nnecessary to the due performance of such contract. A corporation may be\norganized under the railroad law, for the purpose of constructing,\nequipping, maintaining and operating a railroad pursuant to the\nprovisions of this chapter or for the purpose of maintaining and\noperating a railroad, including the equipment or any part thereof,\nalready constructed, in process of construction or to be constructed\npursuant to the provisions of this chapter. Any corporation so\norganized, upon the approval in writing of the board of transportation,\nin addition to the powers conferred by the general act under which such\ncorporation is organized, shall be empowered, and is hereby authorized\nto enter into any contract permitted by law for the maintenance and\noperation when constructed, including the equipment or any part thereof\nif desired, as the case may be, of any such railroad owned or to be\nowned by the city, constructed or to be constructed at the expense of\nthe city or of such corporation or both as provided by this chapter. The\ncertificate of such approval shall be filed in the office of the\nsecretary of state, and a copy thereof certified to be a true copy by\nthe secretary of state or his deputy, shall be evidence of the fact\ntherein stated. A corporation so organized shall not be required to\nprocure the consent of the public service commission as provided for in\nsection nine of the railroad law.\n m. Where in this section or in section thirty-one of this chapter the\nconsents referred to in section twenty-one of this chapter are\nmentioned, they shall be construed to include any consent given by the\ncommissioners appointed by the appellate division of the supreme court,\nand confirmed by such appellate division in lieu of the consent of\nproperty owners as provided in this section.\n