As part of the franchise agreement which owners had to sign, City Hall had direct control over the fare structure. For a period of time, owners actually made a profit with a five-cent fare. After two decades passed, the costs of salaries, maintenance, power, supplies, and equipment would pressure owners to ask City Hall for permission to raise the fares.
This additional revenue was needed to keep up with maintaining a good state of repair, increase the frequency of service, purchase new subway cars, pay employee salary increases, and support planned system expansion. Politicians more interested in the next reelection (and subscribing to the old Roman philosophy of free bread and circuses) refused this request each year for well over a decade.
As a result, in order to survive owners of both systems began looking elsewhere to reduce costs and stay in business. They started curtailing basic maintenance, delayed purchases of new subway cars, postponed salary increases for employees, canceled any plans for system expansion and cut corners to survive. (Does any of this sound familiar?)
In the 1930s, New York City began building and financing construction of the new IND (Independent Subway - today's A,C,E,F, G and V lines). This new municipal system directly subsidized by taxpayers dollars would provide direct competition to both the IRT and BMT. Municipal government forced them into economic ruin by denying them fare increases that would have provided access to additional badly needed revenues. Big Brother, just like the Godfather, eventually made them an offer they couldn't refuse. The owners folded and sold out to City Hall.
In 1953, the old NYC Board of Transportation passed on control of the municipal subway system, including all its assets, under a master lease and operating agreement to the newly created New York City Transit Authority. Under late Governor Nelson Rockefeller in the 60's, the Metropolitan Transportation Authority was created. The governor appointed four board members. Likewise, the mayor four more and the rest by suburban county executives. No one elected official controlled a majority of the votes.
As a result, elected officials have historically taken credit when the MTA or any operating subsidiary such as New York City Transit would do a good job. When operational problems occurred or fare increases were needed, everyone could put up their hands. Don't blame me, I'm only a minority within the board. Decade after decade, mayors, comptrollers, public advocates, borough presidents, and City Council members would all sing the same sad song: if only we had majority control of the Board. things would be different.
All have long forgotten that buried within the 1953 master agreement between the City of New York and New York City Transit is an escape clause. The city has the legal right at any time to take back control of its assets, which includes the subway and most of the bus system as well. Actions speak louder than words. If municipal elected officials feel they could do a better job running the nation's largest subway and bus system, why not step up to the plate now and regain control of your destiny?
You have to admire the brave private sector entrepreneurs who operate the remaining handful of bus, commuter van, ferry, and pedicabs and somehow survive in today's anti-free market transportation provider environment.