When the MTA had a surplusBy
As the first week of 2009 dawns, we’ll soon be hearing a lot about more about the MTA’s finances. The authority has public hearings on the Doomsday budget set for this month, and at some point, the state legislature will begin to deal with a Ravitch-inspired bailout plan.
But in the meantime, let’s hop into the Wayback Machine. We’ll visit a time when the MTA had money and decided to spend all on us! Those were the days, eh?
The time is 2005, and the MTA has determined that they will enjoy a $928-million budget surplus for that fiscal year. That number would in fact eventually reach $1.04 billion. As The Times explained at the time, the surplus “stemmed from the unusually high real estate taxes and low interest rates.” We now know all too well what happens when unusually high real estate taxes turn into unusually low real estate taxes, but we’ll get to that later.
In an effort to give something back to the riders, the MTA in October announces a plan for discount holiday fares. Immediately, this move is decried as “a marketing gimmick” by city experts. This move will cost the MTA $100 million of their surplus with the rest going to reducing some unfunded pension liability, enhancing subway security and expanding service.
Experts were skeptical. “Why is the M.T.A. engaging in feel-good, short-term gimmicks rather than convincing riders and business leaders that it has sensible, long-term plans for a balanced operating budget and a fully funded capital budget?” James A. Parrott, chief economist at the Fiscal Policy Institute, said to Sewell Chan.
Some city officials wondered about the rational behind the move. “Whom does this actually benefit?” Preston Niblack of the city’s Independent Budget Office said to The Times. “It does not really solve any structural issues. It’s great from a public relations point of view, but it does not address long-term needs.” It never does.
In the end, the MTA Board approved the plan but not without dissent. Some board members feared the discount offerings would lead the public to believe the MTA had full coffers at a time when internal documents were predicting a $900-million deficit for as soon as 2009. (They clearly underestimated.)
In the end, the program earned mixed reviews, and transit advocates maintained that the money should have been reinvested in the system and used to shore up the MTA’s shaky future financial picture. Even in 2006, hindsight was 20/20.
Now, three years removed from the days of discount fares, the MTA has gone from a surplus to a deficit of a size larger than the one predicted in 2005. If the agency knew that their finances were going to head south, why didn’t they urge a Ravitch Commission-type investigation sooner? For years, we’ve know that real estate tax revenue is no way to fund a transit system, and now we’re paying the press.
At some point, the MTA’s finances will improve, and the agency may once again be saddled with the “problem” of a surplus. But for now, we can just look back on 2005 as a moment in time when transit funding seemed secure, and the riders got a discount, misguided as it may have been.