June 2008

For the past few years, the MTA has relied on various sources of real estate revenue to cover budget gaps. The authority had to turn to real estate taxes to keep pace with their operating budgets, and it has banked on land deals — such as the Hudson Yards sale — for vital economic contributions.

In the long run, this is, not to mince words, a terrible strategy. As we’ve seen this year, real estate taxes are very much at the whim of the economy, and when the housing market collapses, the MTA’s tax-based revenues follow suit. When those funds are supposed to be a key part of an annual budget, a public transportation agency will find itself strapped for cash.

In an ideal world — and one that New York State’s former three-term governor denied for the better part of a decade — the MTA’s operating budget would come from a separate dedicated revenue source. Whether that source be annual government contributions from the state for something — in this case, a transit system — that drives New York’s economy or, as it probably will be in the future, a congestion fee pricing structure, the MTA should not be dependent upon something as volatile as the real estate market.

By now, with the MTA’s repeated cries of poverty and financial problems, one would hope that New York politicians would start to understand that real estate does not a public transportation budget make. Alas, they do not. In a press conference on Sunday, City Council member Eric Gioia — from Queens — urged the MTA to sell its real estate holdings. He, of course, had an ulterior motive.

The Sun’s Benjamin Sarlin reports:

The Metropolitan Transportation Authority should sell the roof over its head before raising fares on New Yorkers twice in one year, Council Member Eric Gioia said yesterday.

Mr. Gioia, a likely candidate for public advocate in 2009, is calling on the MTA to sell off the 20-story building it owns at 44th Street and Madison Avenue to raise the money necessary to avert a fare increase.

“There’s no justification for the MTA to be on Madison Avenue,” Mr. Gioia, of Queens, said at a press conference in front of the building yesterday. “This is a glaring example of an asset being underutilized.”

He estimated that the property, which contains more than 230,000 square feet of prime office space, could fetch “at least” $200 million on the open market. Mr. Gioia suggested that after the sale, the MTA should move its offices to Queens.

Now, I could debate this point with Gioia. I could tell him that the $200-million infusion of cash, if the MTA could actually sell their Madison Ave. space in a weak seller’s market, would do wonders for the MTA’s budget gap this year. I could say that this transaction would do absolutely nothing to shore up the MTA’s finances for next year or further into the future, and I could argue that the rent the MTA would have to pay on whatever property they move to would probably exceed the money they draw in for the sale sooner rather than later.

But instead, I think I’ll just laugh at Gioia for giving it the old college try. This statement was nothing but an attempt to look good in the eyes of his Queens constituents. The MTA should sell their office space — and move to Queens? There must be a better way to fund the MTA than that, Eric. How about some real proposals instead?

Ever looking out for the public’s bottom line, New York State Comptroller Thomas DiNapoli has issued another report on the state of the MTA’s finances. This one reveals that the transportation authority has doled out over $1.2 billion for personal claims and property damage over the last 12 years.

The Times’ William Neuman broke the story on City Room on Thursday:

The report said that over all, the two commuter railroads and New York City Transit received a total of 86,875 claims of all types from 1996 to 2007. Since 1996, 85 cases have been settled for $1 million or more, at a total cost of $233 million, or a fifth of all claims paid.

Over the period covered by the study, claims have generally amounted to less than $100 million a year. Last year they reached $144 million because of the settlement of some unusually large claims. The authority’s annual operating budget is more than $10 billion.

The report — available here as a PDF — isn’t so much as critical of the MTA as it is just laying out the facts. Where the report is most critical is in the infamous LIRR armrest issue. The arm rest settlements have exceeded $285,000. That’s a lot of torn pants.

Most of the other claims and the big-ticket items in particular were focused around safety issues. People filed claims for falling into that LIRR platform gap, for getting struck by trains and for worker-related issues. For their part, the MTA in response focused on improving safety standards underground. Said Jeremy Soffin:

Protecting the safety and security of our employees and customers is the MTA’s top priority. The MTA has made great strides in improving safety over the past ten years, and we continue to pursue new initiatives. Since 1996, the employee injury rate has been reduced by 60% and in 2007 the MTA achieved its lowest employee injury rate ever. Customer injuries have also decreased. Since 1996 the number of customer injuries per million customers has decreased by 28% even while the MTA ridership is at record numbers. As a result, the MTA’s ultimate incurred cost for employee and customer accidents is less than what would have been expected, a savings of approximately $335 million from 1997-2007. In addition, two of the causes identified by the Comptroller of higher recent claims — gap incidents and torn clothing due to armrests on the commuter railroads — have both been addressed.

In the end, it’s hard to be overly critical of the MTA for this expenditure. Considering that billions of people ride the subways each year, the injury rate and the amount paid out per year are relatively slow. It would be better to see the MTA’s paying out zero dollars a year, but in our litigious society, that’s just a pipe dream.