Sep
26

DiNapoli issues bleak financial outlook for the MTA

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Thomas DiNapoli, New York State comptroller, has delved into the MTA’s books, and he doesn’t like what he has found there.

Three months ago, amidst talks of regular fare hikes and budgetary concerns at the MTA, DiNapoli announced he would conduct an audit of the MTA’s books. This week, he released his report on the MTA’s financial outlook, and the picture is not pretty. While the authority’s internal budget gap-trimming measures have been relatively successful, DiNapoli still sees budget gaps climbing to $1.8 billion by 2012. The financial future of the nation’s largest public transit authority has never been more in doubt.

In the report — available here as a PDF — DiNapoli urges the MTA to wean itself off government funding and warns that the recent economic problems coming out of Wall St. may spell financial doom for the agency. In fact, DiNapoli goes one step further and warns the MTA not to expect any additional government funding. Additionally, with the MTA so dependent on taxes and fare revenue, any widescale loss of jobs — such as the collapse of Lehman Bros. or the banking crisis in general — could significantly impact the future finances of the transportation authority.

“The turmoil on Wall Street has created serious fiscal challenges for the City and the State, which will likely limit their ability to provide additional assistance to the MTA,” DiNapoli said, in a statement. “To its credit, the MTA has directed its agencies to develop contingency plans, but the focus must be on administrative costs, not service cuts. Like everyone, the MTA has to learn to do more with less.”

DiNapoli’s office summed up the vital parts of the report in a press release:

In July, the MTA projected operating budget gaps, on a cash basis, of $1.1 billion in 2009, $1.9 billion in 2010, $2.1 billion in 2011, and $2.3 billion in 2012. These gaps represent 11 percent of revenue in 2009 and more than 22 percent of revenue by 2012. The DiNapoli report found that while the MTA’s budget gap estimates were reasonable when they were presented in July, the State has lowered its forecast of dedicated transit taxes by $381 million over the financial plan period.

To balance the 2009 budget and narrow the budget gaps for subsequent years, the MTA has proposed a $6.4 billion gap-closing program. The report found that the gap-closing program is risky because it relies so heavily on actions that are either outside the MTA’s direct control or are still unspecified. Nearly half of the resources are expected to come from additional State and City aid. Less than one quarter would come from internal actions, and 37 percent of those savings remain unspecified.

After assessing the gap-closing program and other risks, the report concluded that the MTA still faces budget gaps of $522 million in 2009, $1.4 billion in 2010, $1.6 billion in 2011, and $1.8 billion in 2012. DiNapoli noted that even if all of the MTA’s gap-closing measures were successful, it would leave a gap of $250 million in 2010 – or the equivalent of a five percent fare hike.

Basically, the MTA, which already relies more on farebox revenue than any other transit system in the nation, will have to keep pushing riders to pay more or else they’ll have to cut service to meet financial expectations. No organization — outside of the federal government — can operate by racking up $4.8 billion in debt over three years, and I have to wonder if the MTA is going to collapse under the weight of its borrowing before the next few years are out.

Meanwhile, as the MTA has increased fares at a rate outpacing inflation by 52 percent, the capital budget is still facing a seemingly insurmountable $15 billion gap. The MTA is also facing the prospects of unfunded pension liabilities reaching nearly $2 billion.

In the end, DiNapoli’s report is long on the doom and gloom and short on answers. He warns the agency not to expect state and city money, and he urges the agency to consider cutting services. From a practical, governmental perspective, DiNapoli’s suggestions are sound, but from a customer service viewpoint, the MTA — enjoying sixty-year ridership highs — can’t really cut service. How this plays out is anyone’s guess.



Categories : MTA Economics

5 Responses to “DiNapoli issues bleak financial outlook for the MTA”

  1. It took me a while to figure out that DiNapoli isn’t saying that the state and city shouldn’t contribute to the MTA. He’s saying that the MTA shouldn’t count on any contributions from the city or state. Based on this, they should raise fares, cut service or some combination.

    That makes sense, but I still think that the city and state should contribute. We should make it clear that it’s the city and state budget cuts that have put the MTA in this position.

    The real value of DiNapoli’s report is that it discredits the often repeated claim that the MTA has hidden billions, or that it just needs to trim the fat somewhere, and that “they shouldn’t get a dime more from us.” DiNapoli is saying that there are no hidden billions, and not much fat left to trim.

    The LIRR disability swindle is a liability, but it doesn’t mean that we shouldn’t bring taxpayer contributions to the MTA back up to the levels they used to be at.

    • The thing about the LIRR swindle is that it doesn’t really impact the MTA’s bottom line. It comes out of a federal retirement benefits organization. The Railroad Retirement Board is in charge of that money and doling out payments. It just looks bad.

  2. Testimony of George N. Spitz before New York State Commission on MTA Financing, September 22, 2008, Mineola, New York
    TERMINATE MANHATTAN SUBWAY MEGA PROJECTS
    ALTERNATE PLANS OFFER $6.7 BILLION IN SAVINGS

    Chairman Ravitch, Honorable Commissioners
    It appears obvious from previous testimony and examination of documentation submitted by the MTA for its capital spending program including new projects and system upgrades that a resolution of your mandate is unlikely without substantial city and state aid increases involving tax hikes, including congestion pricing, and/or higher fare and toll bridge rates. These could have a detrimental effect on New York’s economy at a critical time because consumers would consequently have less money to spend in stores and restaurants.
    CONSIDER ALTERNATE METHODS FOR MANHATTAN MEGAPROJECTS
    Yet New York’s transit expansion needs are desirable and to cancel them absent availability of less costly alternatives would not be good for New York City. That being said, all three Manhattan megaprojects are unfairly absorbing virtually all capital monies from the city state and federal government despite serious needs in the outer boroughs and, consequently should be re-examined. There are feasible substitutes for all three Manhattan megaprojects offering considerable savings, thus, freeing up money not only to avoid harmful tax and fare increases but also to make available monies for equally needed transportation projects, such as light rail in Staten Island and Eastern Queens.
    MANHATTAN MEGAPROJECTS REQUIRE HIGHER TAXES AND FARES
    The Second Avenue Subway, the Extension of the #7 Line on 42nd St. and East Side Access are the three Manhattan megaprojects that although substantially underfunded as far as completion is concerned are, as noted, absorbing, virtually all capital expansion monies. The higher taxes and subway, bus and toll bridge fares for the megaprojects will be paid for by all New York City and Suburban residents.
    ALTERNATE PLANS OFFER $6.7 BILLION IN SAVINGS
    But, there are alternate plans devised by skilled engineers offering savings totaling in the vicinity of $6.7 billion that are available. The approximate breakdown of these savings are: (1) $1.2 billion in construction cost and a completion date three years earlier by halting construction of MTA Deep Cavern Station by linking Long Island Railroad East River tunnels with five existing platform tracks at Grand Central Terminal. (www.irum.org); (2) $1.5 billion by substituting for the $2.1 billion 1 mile one station, #7 line extension on 42nd St. with a a 2.5-mile surface light rail line running river-to-river in a landscaped 42nd Street, with 16 pairs of stops, conservatively costing $600 million. {www.vision42.org/about/studies.php#cost; (3) $4 billion by replacing the $4.65 billion, 1.7 mile Second Avenue Subway with light rail (LRT) on 1st, 2nd and 3rd avenues at a cost of $500 million. Denver LRT costs were $27.6 million per mile (Rocky Mountain News, 11/17/06) but construction in New York City is generally, often substantially, higher
    COMMISSION SHOULD RECOMMEND MTA HALT EXCAVATION IMMEDIATELY
    Since George Haikalis, a professional engineer with high standing in transportation groups around America and also the President of the Institute for Rational Urban Mobility (IRUM) has also been invited to testify before this Honorable Commission and is more knowledgeable about these projects that I am, I will focus on the financial and deleterious political aspects of the Second Avenue Subway. I’m also recommending that the Honorable Commission persuade the MTA to cease construction in the 91st to 96th St. areas where eight stores and restaurants have ceased operation with many more anticipated in the future and certainly not start excavation in the 69th to 72nd St. area threatened for the end of the month (The INFORMER, , September 15, 2006, page 1 attached) until the Honorable Commission is convinced that the subway project is desirable and should continue regardless of current apparent financial problems. There is an excellent comprehensive study of the advantages of light rail (LRT) for the Second Avenue Subway on the IRUM web site (www.irum.org)
    MTA MAY VIOLATE FEDERAL TRANSPORTATION AND ENVIRONMENTAL ACTS
    Honorable Commissioners the MTA appears to have casually discarded light rail (LRT) in what may be violations of the federal government’s National Environmental Policy Act (NEPA) and the Transportation Efficiency Act for the 21st Century (TEA-21), formerly known as the Intermodal Service Transportation Efficiency Act (ISTEA). The Second Avenue Subway SDEIS (Supplemental Draft Environmental Impact Statement) lists in Table B-1 (page B-7) an alleged “Long List of Alternatives”. Alternative 5A is described as “Light Rail Service on Dedicated Avenue and 5B is labeled Light Rail Service on Paired Avenues. In, Table B-3, Item 6 (page B-12) the aforementioned two LRT alternatives are dismissed “because of substantial potential traffic impacts.”
    MTA IGNORES LRT BUT PROMOTES BRT
    This rationale for LRT dismissal is preposterous because obviously to be worthwhile, light rail (LRT) requires dedicated lanes which cannot be shared with auto traffic. Yet, the website of DMJM HARRIS reveals it received from MTA a $2.8 million contract “to see which corridors present the best opportunities for a BRT [Bus Rapid Transit] demonstration” (appended). Similar to light rail, BRT needs dedicated lanes to make an investment feasible. The difference is that enforcement of dedicated lanes is much cheaper and easier for light rail because LRT lanes can be real or artificial grass requiring minimal enforcement because autos and buses including BRT cannot run on other than a paved surface. Moreover, New York City’s PlaNYC also completely ignores light rail (LRT), which is excellent for seniors and the disabled because of its street level boarding capacity, while promoting bus rapid transit (BRT).

    George N. Spitz, http://www.georgespitz.com, gnspitz1@msn.com. 212 348 2225 or 646 210 6170

  3. Great content. I happen to be from Mineola, NY and I must say it’s great to see a person on the net from my neighborhood. I feel that even though we’re in two entirely unique careers, we’ve got related perspectives due to the fact we work in the same city. Let’s keep in touch! Mineola dentist

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