Section 40. Contract for equipment, maintenance and operation

a. Subject
  to the approval of the board of estimate and of the mayor, the board  of
  transportation  shall  have  full power and authority to provide for the
  maintenance, supervision, care and operation of any railroad and also of
  the subsurface structures  and  all  other  devices  and  appurtenances,
  constructed  or  to  be  constructed for and at the expense of such city
  pursuant to the provisions of this chapter.   With like  approval,  such
  board  of  transportation may enter into a contract with any person, who
  in the opinion of such board shall be  best  qualified  to  fulfill  and
  carry  out  such  contract,  for  the equipment, or any part thereof not
  provided for pursuant to  section  thirty-one  of  this  chapter,  of  a
  railroad,  at  his  own  cost  and  expense, and for the maintenance and
  operation of such road for a term of  years  to  be  specified  in  such
  contract  and  not to exceed twenty years. In lieu of such definite term
  of twenty years the contract may be for a  longer  period  to  be  fixed
  therein  and  in  such case it shall provide that the city upon giving a
  specified notice shall have the right to terminate the contract for  the
  equipment,  maintenance  and  operation  of  such  road as to all and if
  deemed advisable as to any specified portion thereof at any  time  after
  the  expiration of ten years from the date when operation of any part of
  such road or of such specified portion thereof shall actually begin, but
  such right of termination shall be upon condition as follows:
    1. If the title to the equipment of such railroad shall not be  vested
  in  the city then that the equipment of such railroad or portion thereof
  suitable to and used for purposes of such contract  shall  be  purchased
  and  taken  by  the  city  at  an  amount  which shall be ascertained as
  provided in the contract, but which shall not be greater than the actual
  cost thereof, plus fifteen per centum thereof. Such equipment shall upon
  such termination of such contract become and be the property of the city
  on paying to the contractor such amount, or in case  the  title  to  the
  equipment  of  such  railroad  shall be vested in the city then that the
  city shall pay to the contractor an amount for  his  investment  in  the
  equipment  of  such railroad, or portion thereof, which shall not exceed
  the actual cost to the contractor of the equipment of such  railroad  or
  portion  thereof,  plus  fifteen  per centum thereof, and shall decrease
  under the provisions of the contract as the term  thereof  continues  so
  that at the end of the full term of the contract no such amount shall be
  paid.  If  additional equipment shall be required and supplied after the
  railroad, or portion thereof, shall have been put in operation,  and  if
  the contract shall provide that title to such additional equipment shall
  vest  in  the  city when supplied, then the city shall pay an amount for
  the investment of the contractor  in  such  additional  equipment  which
  amount  shall  not  exceed  the  actual  cost  to the contractor of such
  additional equipment plus fifteen per centum thereof, and shall diminish
  so that at the end of the full term of the contract the  city  shall  be
  required  to  pay  for such investment in additional equipment only such
  amount as shall be provided in such contract, and
    2. Upon the further condition if such railroad  shall  be  constructed
  wholly or in part at the cost of the contractor that the city shall also
  pay  to  the contractor an amount for his investment in the construction
  of such road or portion thereof which shall not exceed the  actual  cost
  to the contractor of constructing such road or portion, plus fifteen per
  centum  thereof,  and shall decrease under provisions of the contract as
  the term thereof continues so that at the end of the full  term  of  the
  contract  no  such  amount  shall  be paid. If betterments, additions or
  improvements shall  be  required  by  the  board  of  transportation  or
  approved  by  such  board  prior  to  the  construction  thereof  and be
  constructed wholly or in part at the cost of the contractor,  then  that

  the  city  shall  pay  an amount for the investment of the contractor in
  such betterments, additions or improvements which shall not  exceed  the
  actual   cost  to  the  contractor  of  constructing  such  betterments,
  additions  or  improvements  plus  fifteen  per centum thereof and which
  amount shall diminish so that at  the  end  of  the  full  term  of  the
  contract  the  city  shall  be  required  to  pay for such investment in
  betterments, additions or improvements only  such  amount  as  shall  be
  provided in the contract.
    b.  The  contract shall provide a method of ascertaining the amount to
  be paid for such equipment and for such investment of the contractor  in
  the  construction  of such road upon termination by the city of any such
  contract and for the equipment of such railroad at the end of  the  full
  term of the contract. The contract may provide for determining from time
  to  time  in  default  of  agreement  by  arbitration  or by the court a
  valuation of such investment of the contractor in  the  construction  of
  such  road and of the equipment or any part or portion of either thereof
  for any purpose under such contract. The contract may provide  that  the
  title  to  the equipment as well as to such road, shall vest in the city
  from the beginning and that the amount to be paid by the  city  for  the
  investment  of  the  contractor  in such equipment shall decrease as the
  term of the contract continues, so that at the end of the full  term  of
  the  contract no amount shall be payable therefore except for additional
  equipment as aforesaid.
    c. The contract shall provide that upon the  expiration  of  a  period
  fixed  in  the  contract,  the  term  of such contract shall end without
  compensation to the contractor except as provided in the  contract,  for
  betterments,  additions or improvements to any such railroad required to
  be made  or  approved  by  the  board  of  transporation  prior  to  the
  construction  thereof  during the term of any such contract, and, if the
  title to the equipment be not vested in the city, for equipment suitable
  to and used for the purposes of such contract to  the  amount,  if  any,
  ascertained  as  provided  in  the contract, and that in such event such
  equipment shall become the property of the  city  upon  payment  to  the
  contractor of such amount or, if the title to the equipment be vested in
  the  city,  then  an  amount  for  the  investment  of the contractor in
  additional equipment for any such railroad to be ascertained as provided
  in the contract.  The  contract  may  also  provide  that  the  city  in
  exercising  the  right  so  to  terminate  any  contract  shall for such
  compensation as may be reasonable and which shall be determined pursuant
  to the contract permit the contractor whose contract is so terminated or
  the assignee or lessor of the contractor to use  the  tracks,  structure
  and  line  equipment  of  a  portion  of  such  road  when  necessary or
  convenient  to  reach  terminals,  yards  or  other  facilities  of  the
  contractor or such assignee or lessor then located thereon. The contract
  may  also  provide  for  assuring that in case a new contract under this
  section for equipment and for maintenance and operation of such railroad
  is  made  after  such  termination  pursuant  to  notice  or  after  the
  expiration  of  the  full  term  of  the  contract that the title to and
  possession of the equipment so taken and the right to the possession  of
  the  railroad  so  constructed  may  be  transferred directly to the new
  contractor upon his paying the amount so required.
    d. If such contract be made with a railroad corporation organized  for
  the  purpose  of  maintaining  and  operating  a railroad, including the
  equipment or any part thereof, constructed pursuant to the provisions of
  this chapter, and which has entered into a contract for the  maintenance
  and  operation of a railroad theretofore constructed in whole or in part
  at the expense of the city as provided in this chapter, and  is  engaged
  in  the  maintenance and operation thereof within such city, and if such

  contract  shall  make  provision  for  the  equipment,  maintenance  and
  operation  of  such  road  of  the city in connection with such railroad
  theretofore constructed as aforesaid at the expense of the city, and for
  a  single fare, such corporation and the city may in such contract or by
  modification of an existing contract provide that the original  term  of
  any  contract  for operation of such railroad theretofore constructed in
  whole or in part at the expense of the city, may be extended or  reduced
  and  any  right  to a renewal thereof may be abrogated or waived so that
  such term as extended or reduced shall become and be  co-terminous  with
  the  term  for  equipment, maintenance and operation of such road of the
  city to be fixed in and by any such contract; and that if the city shall
  elect to terminate the contract for equipment, maintenance and operation
  of such road as to any line or portion thereof, which with a  connecting
  line  or  portion  of  such  railroad  theretofore  constructed and then
  operated by such corporation shall make a continuous line, then the city
  may when so terminating such contract as to any  such  line  or  portion
  thereof,  take  over such connecting line or portion thereof theretofore
  constructed in whole or in part at the public expense and then  operated
  by  such  railroad  corporation  and  terminate  the  contract  of  such
  corporation as to the same, provided that in  lieu  of  such  connecting
  line  or  portion  thereof  so taken over such corporation shall for the
  then unexpired term of  the  contract  for  operation  of  the  railroad
  theretofore  constructed  have the right to maintain and operate without
  right of recapture by the city another line of road or  portion  thereof
  specified  in  such  contract  which  with  such  lines  of the railroad
  theretofore constructed shall make a continuous line. The contract shall
  in such case provide for adjustment between the city and the corporation
  of the difference in the value of the right  to  operate  the  lines  or
  portions  thereof  so  exchanged  by  agreement or arbitration or by the
  court and for payment of such difference between them. The city and  the
  corporation,  in such contract, may also provide that if the city, under
  any provision of law, shall terminate the contract for  the  maintenance
  and operation of such road of the city after the expiration of ten years
  from  the  date  when  operation of any part of such road shall actually
  begin, the city, at any time after thirty-five years from such date, may
  terminate such  contract  for  the  maintenance  and  operation  of  the
  railroad  theretofore  constructed  at the public expense, and take over
  any such railroad upon payment to such company of a  sum  not  exceeding
  the  then  present  worth  of  the unexpired portion of the term of such
  contract to be ascertained as  provided  in  such  contract,  which  may
  provide  that  in  default  of  agreement  such sum may be determined by
  arbitration or by the court.
    e. The contract between the city and such corporation may also provide
  that in consideration of the operation of any such railroad as  provided
  for  in  such  contract and any such railroad theretofore constructed in
  whole or in part at public expense in connection with each other  for  a
  single  fare, and of the payment by such company of moneys to be applied
  as authorized by this chapter to or toward the construction by the  city
  of  the  road  to  be  maintained  and  operated under such contract. In
  further consideration of any covenants or agreements by the  company  to
  modify  the  term  of any of its leases or to waive or modify any of the
  other provisions of any of its contracts,  the  gross  receipts  of  the
  operation  of any such railroad theretofore constructed and of such road
  of the city to be maintained and operated under  such  contract  may  be
  combined  during  the  term  of  such  contract, and that the city shall
  receive for the use  of  such  additional  road  at  intervals  named  a
  specified  part  or proportion of the income, earnings or profits of the
  railroads whose receipts are so combined. In such case the contract  may

  apportion  out of the amount so to be received by the city and specify a
  portion thereof which shall be deemed to be the rental for  the  use  of
  each  of  the  roads of the city maintained, equipped and operated under
  such  contract.  Any  such  contract  shall  provide for determining the
  amount of income, earnings or  profits  of  the  railroads  whose  gross
  earnings  are so combined, and for such considerations may authorize the
  retention by such railroad corporation for each year of the term of such
  contract, prior to the payment of any sums or of any part or portion  of
  the income, earnings or profits to the city as rental for the use of the
  roads specified or provided for in such contract, of:
    1.  A  specified  sum  of  money,  which sum may represent the average
  annual income from operation of such  railroad  theretofore  constructed
  and operated by such corporation for any two or more years;
    2. A sum not exceeding six per centum per annum for each year upon the
  investment  of  such  company, including brokerage charges not exceeding
  three per centum, in the construction and equipment of such road of  the
  city to be maintained and operated under such contract; and
    3.  A  sum  not exceeding the annual expense or cost to the contractor
  plus one per centum per annum  on  account  of  the  investment  of  the
  contractor in betterments or improvements upon or additions to such road
  and equipment.
  Such  contract  may  also  provide  that  such  annual payments shall be
  cumulative, and that any deficiency with respect thereto shall  be  paid
  off  and  discharged  annually  out  of  such  gross receipts before any
  payments by way of rental or compensation for  the  use  of  such  roads
  shall be made to the city.
   f.  Every  such  contract shall contain such terms and conditions as to
  the rates of fare to be charged and the  character  of  services  to  be
  furnished  and otherwise as the board of transportation shall deem to be
  best suited  to  the  public  interests,  and  subject  to  such  public
  supervision  and to such conditions, regulations and requirements as may
  be determined upon by such board, with like approval. In case  different
  parts  of a road shall be constructed at different times or at intervals
  of time, or if the contract shall provide for the use by the  contractor
  of an existing railroad as part of a continuous route as aforesaid, then
  and in any such case the board of transportation, in its discretion, may
  prescribe  periods for the operation of the different parts of such road
  so that at one period of time in the future the board may be enabled  to
  make  a  single  operating  contract  or  lease of the entire road. Such
  board, in its discretion, as one of the terms and conditions of any such
  contract, may provide that as a consideration for  the  making  of  such
  contract  the  contractor in addition to any sums to be paid as provided
  by this chapter by way of rental or otherwise for the use of  such  road
  shall  contribute  a part of the cost of construction of such road which
  shall be contributed and disbursed by such method, in such manner and at
  such  times  as  may  be  provided  for  in  any  such  contract.   Such
  contribution  shall  be  deemed to be an investment by the contractor in
  the construction of such  road  or  to  be  part  of  the  cost  to  the
  contractor of constructing such road within the meaning of subdivision a
  of  this section providing for termination of such contract by the city.
  Any such contract may provide for the construction during  the  term  of
  such  contract  of  any  branches  or  extensions  of  such road and the
  construction of additional lines and for  the  equipment  and  operation
  thereof  by  the  contractor  in  connection with such road and may make
  separate provision for apportioning the receipts of  such  road  and  of
  such branches, extensions or additional lines and as to the compensation
  to  be  paid to the city for the use of any such branches, extensions or
  additional lines. The city may enter into a contract for the  equipment,

  maintenance  and  operation  of  any  such  road before any contract for
  construction of such road or any portion thereof shall have  been  made,
  and in such case the contract may provide that the city may construct or
  complete such road or additions thereto or betterments thereof from time
  to time at the expense of the city, or partly at the expense of the city
  and  partly  at  the  cost  or through contribution of the contractor as
  aforesaid in such proportion as may be agreed upon between the city  and
  the  contractor.  Such  contract  for  the  equipment,  maintenance  and
  operation of such road or any portion thereof may be  made  and  entered
  into  as  provided  in  this chapter before the consents shall have been
  obtained for any such road or for any portion  thereof  as  provided  in
  section  twenty-one  of  this chapter, and before the detailed plans and
  specifications  shall  have  been  prepared  as  provided   in   section
  twenty-two  of  this  chapter. In such case such contract for equipment,
  maintenance and operation of such road or any portion thereof  shall  be
  upon  condition that such contract shall not become operative or go into
  effect as to such road or such portion thereof unless and until the city
  shall acquire the right to construct such road  or  portion  thereof  by
  obtaining  such  consents.   The board of transportation in any contract
  may reserve the right, upon  conditions  and  for  compensation  to  the
  contractor, as provided in the contract, to permit other persons and the
  municipality  itself  to use the tracks, structure and line equipment of
  the railroad, or any portions thereof.
    g. Every such contract  shall  further  provide  that  the  person  so
  contracting  to  equip,  maintain  and  operate such road annually or at
  specified intervals, shall pay into the  treasury  of  such  city,  such
  rental  for  the  use  of such road, as shall be prescribed therein. The
  rental may be either a specified sum of money or  a  specified  part  or
  proportion of income, earnings or profits of such road, or both a sum of
  money  and  a part or proportion of income, earnings or profits, as such
  board shall deem best suited to the public interest  and  the  board  of
  estimate  and  the  mayor shall approve. Every such contract may further
  provide that the amount and character of such rental may  be  readjusted
  at  the expiration of a prescribed period of not more than twenty years,
  and be readjusted from time to time in the future at intervals  each  of
  not more than twenty years, and may prescribe a method of determining by
  arbitration  or by the court the amount to be paid upon any readjustment
  thereof. If such contract be made  with  a  person  owning  or  actually
  operating or agreeing to operate a railroad wholly or in part within the
  limits  of  the  city  and  shall  make  provision  for  the  equipment,
  maintenance and operation of such road of the city  in  connection  with
  such  railroad  and for a single fare, the contract may provide that the
  gross receipts from the operation of such railroad within the limits  of
  the city and from the operation of such road of the city may be combined
  during the term of such contract and that the city shall receive for the
  use  of  such  road at intervals named a specified part or proportion of
  the income, earnings or profits of the railroads whose receipts  are  so
  combined and the contract, in such case, may apportion out of the amount
  so  to be received by the city and specify a portion thereof which shall
  be deemed to be the rental for the use of each of the roads of the  city
  maintained,  equipped and operated under such contract. In any such case
  the contract shall provide for determining the  amount  of  the  income,
  earnings  or  profits  of  the  railroads  whose  gross  earnings are so
  combined, and may authorize the retention, prior to the payment  of  any
  sums  to the city for or on account of the investment of the city in the
  construction of such road or for the use of the same, of:

    1. A specified sum of money, which may represent  the  average  annual
  income  from operation of such railroad theretofore constructed during a
  period specified in such contract;
    2. A sum not exceeding six per centum per annum for each year upon the
  investment  of the contractor, including brokerage charges not exceeding
  three per centum, in the construction and equipment of such road of  the
  city  to  be  maintained  and  operated  under such contract, and in the
  construction and equipment of extensions of any railroads and tracks not
  owned by the city thereafter constructed and to be operated  under  such
  contract; and
    3.  A  sum not exceeding the annual expense or cost to the contractor,
  plus one per centum per annum, on  account  of  the  investment  of  the
  contractor  in  betterments  or  improvements upon, or additions to such
  road of the city, and upon or to any railroads not owned by the city and
  operated under such contract, and upon or to the equipment thereof.
    Such contract may also provide that such payments shall be cumulative,
  and that any deficiency with respect  thereto  shall  be  paid  off  and
  discharged  annually  out  of such gross receipts before any payments by
  way of rental or compensation for the use of such roads shall be made to
  the city. The contract may  provide  for  a  readjustment  at  specified
  intervals  of the part or proportion of such income, earnings or profits
  of the railroads, which the city shall receive, or of the portion of the
  amount received by the city which shall be deemed to be  the  rental  of
  each  such  road  owned  by  the  city,  and  may  prescribe a method of
  determining by arbitration or by the court the  amount  which  the  city
  shall  receive  as  its  part  or proportion of such income, earnings or
  profits or as such rental upon any such readjustment thereof.
    h. Such rental and the term for the operation of the railroad included
  in any such contract shall begin,  as  to  such  road,  or  any  section
  thereof,  at such time as may be provided in the contract. The aforesaid
  rental shall be paid at such times during each year or at such intervals
  as the board of transportation shall require. If a  contract  to  equip,
  maintain and operate such road be made with the person having or to have
  the  contract to construct the same and such contract shall provide that
  such road shall be constructed wholly or in part at  the  cost  of  such
  person  such  road,  however, to be the property of the city in the same
  manner and to the same extent  as  if  constructed  wholly  with  public
  money,  then  the  contract may provide as an alternative in lieu of the
  rental above provided for that any and all income and  increase  derived
  by  the contractor or on his behalf in any manner from the enterprise of
  constructing, equipping, maintaining  and  operating  such  road,  after
  deducting   operating   expenses,   taxes,   payments   to  reserve  and
  amortization funds as provided for in the contract,  and  not  exceeding
  six per centum interest per annum payable quarterly upon the actual cost
  to  the  contractor of construction and equipment of such road, shall be
  divided share and share alike between the contractor and the  city.  The
  rental and any sums payable under such contract, except any sum of money
  that  may  be  contributed  toward  the  construction of any road by the
  contractor having the contract for the equipment and operation  of  such
  road,  shall  be  applied  first  to  the  payment  of the interest upon
  obligations issued by such city for the construction  and  equipment  of
  such  road, as the same shall accrue and fall due. The remainder of such
  rental and moneys not required for the payment of such interest shall be
  kept separate and apart from any and all other moneys of such  city  and
  shall  be  securely invested and, with the annual accretions of interest
  thereon, shall constitute a sinking fund for the payment and  redemption
  at  maturity  of  the  aforesaid  obligations.  Such  rental, moneys and
  accumulations of such fund over and above so much as may be required for

  payment of interest and principal of such  obligations,  shall  be  paid
  into  the  rapid  transit  fund  provided in section thirty-four of this
  chapter.
    i. Any such contract also may provide for a renewal or renewals not to
  exceed  twenty years in the aggregate of the lease of such road upon the
  expiration of an original term of not more than twenty years  upon  such
  terms  and  conditions,  to be approved by the board of estimate and the
  mayor, as to the board of transportation may seem just and proper.  Such
  contract also may contain provisions for the valuation of the whole or a
  part of the property of  such  contractor  employed  in  and  about  the
  equipment,  maintenance and operation of such road, and for the purchase
  thereof by the city, at such valuation, or a percentage thereof,  should
  such  lease not be so renewed at any time, or should it be terminated or
  expire as aforesaid. Such contract also shall state the  date  on  which
  the operation of the road, or any section thereof, shall commence.
    j. In case the title to the equipment of such road shall not be vested
  in  the  city,  the  city  also shall have a first lien upon the rolling
  stock and other property of such contractor, constituting the  equipment
  of  such  road  and  used  or  intended  for  use in the maintenance and
  operation thereof, as further security for the faithful  performance  by
  such  contractor  of  the  covenants,  conditions and agreements of such
  contract, on his part to be fulfilled and  performed.  In  case  of  the
  breach  of any such covenant, condition and agreement such lien shall be
  subject to foreclosure by action, at the suit of such city, in the  same
  manner,  as  far  as  may  be, as is then provided by law in the case of
  foreclosure by  action  of  mortgages  on  real  estate.  The  board  of
  transportation,  however,  from time to time, may relieve from such lien
  any of the property to which it may attach,  upon  receiving  additional
  security, which may be deemed by such board to be the equivalent of that
  which it is proposed to release and otherwise upon such terms as to such
  board shall seem just.
    k.  The  contract shall further provide that in case of the failure or
  neglect on the part  of  such  contractor,  after  such  notice  as  the
  contract  may  prescribe,  faithfully  to  observe, keep and fulfill the
  conditions, obligations and requirements of such contract, the city,  by
  the  board  of transportation, may either terminate the contract or take
  possession of such road and the equipment thereof, and as the  agent  of
  such  contractor, either maintain and operate such road, or enter into a
  contract with some other  person,  for  the  maintenance  and  operation
  thereof.   Such  contract  shall  contain  such  terms,  conditions  and
  provisions in relation thereto as such board  shall  deem  necessary  or
  desirable  for  adequately  safeguarding  and  protecting the rights and
  interests of the city. Such  contract  shall  also  contain  appropriate
  terms,  conditions  and provisions for accomplishing such termination or
  taking possession.
    l. Any existing railroad corporation owning or  actually  operating  a
  railroad wholly or in part within the limits of the city and approved by
  the board of transportation, shall be competent and is hereby authorized
  to  enter into any contract for the equipment, maintenance and operation
  of any railroad pursuant to the provisions of this  chapter,  or,  after
  such  a  contract shall have been made, shall be competent and is hereby
  authorized, with the approval  of  such  board,  to  contract  with  the
  original contractor or his assignee or assignees for the maintenance and
  operation  (including the equipment or any part thereof) of any railroad
  constructed or in process of construction or to be constructed  pursuant
  to  the  provisions  of  this  chapter,  and  shall  have all the powers
  necessary to the due performance of such contract. A corporation may  be
  organized  under  the  railroad  law,  for  the purpose of constructing,

  equipping,  maintaining  and  operating  a  railroad  pursuant  to   the
  provisions  of  this  chapter  or  for  the  purpose  of maintaining and
  operating a railroad, including  the  equipment  or  any  part  thereof,
  already  constructed,  in  process  of construction or to be constructed
  pursuant  to  the  provisions  of  this  chapter.  Any  corporation   so
  organized,  upon the approval in writing of the board of transportation,
  in addition to the powers conferred by the general act under which  such
  corporation  is  organized, shall be empowered, and is hereby authorized
  to enter into any contract permitted by  law  for  the  maintenance  and
  operation  when constructed, including the equipment or any part thereof
  if desired, as the case may be, of any such  railroad  owned  or  to  be
  owned  by  the  city, constructed or to be constructed at the expense of
  the city or of such corporation or both as provided by this chapter. The
  certificate of such approval  shall  be  filed  in  the  office  of  the
  secretary  of  state,  and a copy thereof certified to be a true copy by
  the secretary of state or his deputy, shall  be  evidence  of  the  fact
  therein  stated.    A  corporation so organized shall not be required to
  procure the consent of the public service commission as provided for  in
  section nine of the railroad law.
    m.  Where in this section or in section thirty-one of this chapter the
  consents  referred  to  in  section  twenty-one  of  this  chapter   are
  mentioned,  they  shall be construed to include any consent given by the
  commissioners appointed by the appellate division of the supreme  court,
  and  confirmed  by  such  appellate  division  in lieu of the consent of
  property owners as provided in this section.