Home MTA Economics After $200M state error, a $343M MTA shortfall

After $200M state error, a $343M MTA shortfall

by Benjamin Kabak

The Metropolitan Transportation Authority will end 2009 where it begin: amidst a financial crisis that could lead to service cuts — but hopefully no fare hikes — in 2010.

In an e-mail to the MTA Board members this afternoon, MTA CFO Gary Dellaverson said that, in addition to the $143 million in state appropriations cuts, the MTA is now facing the reality of a shortfall in the payroll tax collections that will reach approximately $200 million. In total, the MTA’s 2009 revenue totals will miss expectations by $343 million, and although the agency can roll this cuts over into 2010, the MTA faces, in the words of Dellaverson, some “very difficult choices” as it prepares its balanced budget for next year.

“Receipts from the recently enacted mobility tax now appear to be under-running projections by about $200 million for this calendar year,” Dellaverson said. “This is a shocking development both because of the magnitude of the under-run (about 20%) and the late date of its discovery. As recently as last week, the State was continuing to advise us of their comfort with the forecast. We do not yet know what is causing these disappointing results. While compliance and timing may be a part of the answer, there is a substantial disconnect from the current performance of other similar tax sources.”

MTA officials were prepared for the original $143 million in state cuts, but this new shortfall caught them by surprise. “It’s the extra $200 million that’s really painful,” MTA spokesperson Jeremy Soffin said.

Although the MTA has long borne the brunt of a public skeptical of its ability to manage its own finances, officials at the agency and outside transit watchdogs stressed the state’s role in this new found gap. Jeremy Soffin called it, a “significant unraveling of the rescue package passed by the Legislature in the spring.”

Gene Russianoff of the Straphangers Campaign was more pointed in his ire toward Albany. “The Campaign,” he said in a statement, “calls on Governor Paterson to investigate whether New York State Department of Taxation and Finance has adequately administered and enforced the new payroll tax and on the MTA to redouble its efforts to find new administrative savings and financial actions that will maintain current fare and service levels in 2010. In 2010, both the governor’s office and the State Legislature are up for election. Hundreds of thousands of riders will not take kindly to broken promises on decent and affordable transit.”

While we await a state response to this Albany accounting error, the MTA is springing into action. The agency’s fiscal year ends at the end of the calendar year, and the Board is under a legal obligation to approve a balanced budget before the end of the month. Furthermore, the agency has committed to avoid a fare hike in 2010 but has plans to raise fares in 2011 and 2013. “It remains our intentions to stick with that understanding on the fare schedule,” Soffin said.

So the agency will look to roll this budget problem into 2010, and as Dellaverson turns his gaze internally, agency spokespeople could not say how the MTA would cover a gap. Service cuts remain on the table, and Jay Walder, the new CEO and Chairman, will continue his initiative to “overhaul with how the MTA does business.”

Furthermore, the MTA is now putting a $350 million bond issuance on hold until the agency board has a chance to review the budget.

All in all, this news caps a turbulent fiscal year for the MTA, and it is news we all could have done without. The agency has promised to “be as transparent as possible about where we were, what caused the situation and what we’re trying to do,” and Dellaverson will have an updated budget proposal when the Board’s Finance Committee meets next Monday.

Still as the authority looks for guaranteed revenue sources, as state calculations continue to fail, the East River Bridges remain free, and congestion pricing is but a glimmer in the eyes of transit advocates. As 2009 nears its end, this story is far from over.

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45 comments

Marc Shepherd December 7, 2009 - 7:40 pm

I would take exactly the opposite approach.

Instead of holding fares constant and cutting service, I would hold service constant and raise fares. As it is, most MTA riders are paying less in real terms than they did 10 years ago, due to MetroCard discounts and free bus-subway transfers.

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Nowooski December 7, 2009 - 8:06 pm

I’m with you. The average rider pays well under $2/ride. Raising fares so that the average ride was around $2.50 would bring in a windfall and be completely reasonable. The average New Yorker would still spend far less on transportation than most Americans.

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Christopher December 7, 2009 - 8:18 pm

Agreed. And cutting service has a negative feedback loop of making transit less usable, which discourages usage, which lowers revenue, and on. By lowering rider numbers as well, you put more cars on the road and negatively impact future planning and growth. It takes years to restore the rider numbers to justify returning service to prior levels as well.

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Alon Levy December 7, 2009 - 8:21 pm

Raising fares creates the same negative feedback loop.

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rhywun December 7, 2009 - 9:09 pm

But raising fares could easily be mitigated by some sort of rebate to needy people. Cutting service punishes everyone.

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Christopher December 8, 2009 - 10:28 am

What @rhywun said, but also I think you’ll find that people adjust a lot more easily to raised fares than the lost of routes. And lack of service is not easily restored later. People adjust to higher prices a lot more easily in general as long as the thing remains there.

Alon Levy December 8, 2009 - 5:44 pm

Raising fares punished everyone, too. The issue here isn’t equity so much as the fact that the more transit costs, the less people ride it.

rhywun December 8, 2009 - 11:00 pm

The current fare is peanuts to the average New Yorker (median household income: $32,000). The fact is, transit fares have historically been priced at poverty levels, because transit is seen as something that only poor people use. That clearly isn’t the case in NYC.

Cutting service is simply not acceptable, for the reasons stated above.

Alon Levy December 7, 2009 - 8:24 pm

Okay, but you should bear in mind that the poorest New Yorkers are those who live close to the subway and don’t benefit from free bus-subway transfers. I could live with a $120 unlimited monthly, but the MTA should use part of the revenue to provide more social service, for example discounts for low-income residents, which are common in some European cities.

Mind you, $120 per month would be much more than people pay in most European and East Asian cities, but let’s not ask New York City Transit to stop having so many overpaid managers, or go to OPTO, or implement any of the other commonsensical efficiency increases that have been routine in the rest of the world for decades.

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Marc Shepherd December 7, 2009 - 8:35 pm

If you honestly think there are $200 million worth of overpaid managers whom the MTA could fire, to get its way out of this problem, then there is probably nothing anyone could say to help you. It isn’t so.

You will find that most European and East Asian transit systems have a much higher level of public subsidy than the MTA receives.

Most of the MTA lines are not configured to run OPTO safely. On those that are, I entirely agree with you.

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Alon Levy December 8, 2009 - 3:16 pm

European systems are sometimes more subsidized than New York. East Asian ones run at a profit.

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Benjamin Kabak December 7, 2009 - 8:38 pm

Re: OPTO
You can blame Transit for the stubborn/protectionist policies of the TWU officials. (You can’t really blame them, per se, for sticking up for their members’ jobs, but that comes with a price.)

Re: Managers
Even if each MTA manager makes $150,000 a year, which is a bit too high, the Agency would have to eliminate 1333 managerial-level positions. I don’t think it’s an issue of just having overpaid managers. This is a state problem that impacts a bloated agency.

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Alon Levy December 8, 2009 - 3:18 pm

But the consultants don’t make $150k a year – they make $500 an hour. Walder just saved some money by flying in people from London for $200 an hour. And he could’ve probably flown in people from Japan and Korea for $50 an hour.

As for OPTO: as I recall, the first ATO experiment, on the 42nd Street Shuttle, was abandoned without union pressure.

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PB December 7, 2009 - 8:34 pm

Will anyone investigate Albany’s books? They often pass the blame on the MTA which could mean something.

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Ray December 7, 2009 - 9:09 pm

Is there a technology available to create a special $3.00 per ride fare zone inside the CBD – any ride originating and terminating within the zone Battery to 86th street would carry the higher cost?

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Andrew December 7, 2009 - 10:42 pm

How on earth does it make sense to charge more for a short trip than for a long one?

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Benjamin Kabak December 7, 2009 - 10:45 pm

Higher volume of ridership within the Manhattan CBD. But then everyone gets screwed over by it. Because of the socioeconomic structure and geography of New York City, variable rate fares based on distance simply don’t make sense.

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Ray December 8, 2009 - 4:57 am

Socioeconomically, the Manhattan CBD is the locus of greatest residential and commercial wealth, and one imagines the highest volume of linked passenger trips. Placing a premium on INTRA CBD travel during peak hours 7 days would raise a lot of revenue quickly while maintaining an economically just fare structure for workers in the rest of the city. Those less able to pay who reside outside of the CBD would not be obligated to pay the premium on their commute.

Concerns of course are many, the wholesale change in behavior required; identifying and removing unintended consequences. It seems the subway in the CBD would remain economically competitive relative to the most commonly used alternative(s): cabs/town cars. Perhaps one might leave the CBD bus network out of this scheme to encourage greater use?

Might this also be a strategy for re-introducing Congestion Pricing – seems to fit nicely?

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Aaron December 8, 2009 - 5:13 am

Do you really want to push bus service in the CBD, particularly for that purpose? Reminds me of the 91 Express Lanes in the OC, where the rich pay more for a faster commute. I’m pretty uncomfortable with the idea of pushing poorer customers onto slower and less efficient busses without a clear purpose being served by it. It’s something I’d have to sleep on to fully consider though.

Matt December 8, 2009 - 12:58 pm

The only reason I’d even want to consider that is as a potential way to placate car-loving crybabies who claim some sort of absurd populist logic for opposing congestion pricing.

Think about the amount of resources being used by someone who drives into the Manhattan CBD (including by not limited to: road space, road maintenance costs, bridge maintenance costs, parking space, air quality, pedestrian delays, pedestrian fatality rates, and so on), compared to the amount being used by someone who takes the subway there. They are so divergent that it’s downright offensive to propose transit riders pay more than they do while drivers face no surcharge at all.

And besides – good luck getting the MTA to retrofit every turnstile for two-way swiping. And good luck educating your average subway rider about how they have to swipe both in AND out now.

Andrew December 8, 2009 - 10:00 pm

You’re assuming that everybody who lives within the so-called CBD is wealthy. That’s most certainly not the case.

You’re assuming that nobody who lives outside the so-called CBD is wealthy. That’s most certainly not the case.

And you’re assuming that every subway ride either begins or ends at home. That’s most certainly not the case.

(And I’ve never heard the CBD defined as starting as far north as 86th St.!)

If you want to charge the rich more than the poor, then do just that. Don’t make assumptions about where the rich go and where the poor go, because there are bound to be plenty of exceptions – rich people who you will be undercharging and, worse, poor people who you will be overcharging.

I would be absolutely in favor of raising the fare substantially while simultaneously providing some sort of transit allowance (think of food stamps) to those who truly can’t afford the fare. Come to think of it, if the transit allowance could also be used to pay tolls and other driving fees, that would put to rest the claim that bridge tolls and congestion pricing are regressive.

Andrew December 8, 2009 - 9:52 pm

I’m not sure what your point is. Someone traveling from Flushing to Canal St. is riding a greater distance in the Manhattan CBD than someone traveling from Union Square to Canal St. So why should the second person pay more than the first?

I don’t agree that distance-based fares don’t make sense due to socioeconomics – there are plenty of poor people who take short trips and plenty of wealthy people who take long trips, and currently those poor people are effectively subsidizing those wealthy people. The only way to avoid that is through means testing of some sort.

Distance-based fares don’t make sense right now because outer borough politicians would have a fit and because most stations would have to be seriously redesigned to provide enough turnstiles for exit swipes.

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Alon Levy December 8, 2009 - 6:50 pm

Meh. Congestion pricing is a sensible idea because every car on the road slows down the other cars. That, and only that, is the externality balanced by CP. For trains, riders do not slow down other riders; they only cramp their ride, which is not a valid social problem for the government to solve.

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Andrew December 8, 2009 - 10:11 pm

WHAT?!

A crowded train tends to spend more time in stations as people try to push off and on, thereby slowing down service for everyone on the train and everyone on the trains behind it. One of the justifications for SAS is that dwell times at Grand Central are so long that, not only do they slow down service, but they actually reduce the overall capacity of the line!

And when people are left behind on platforms because they cannot fit onto a train (whether that train is truly crush loaded or it has some air bubbles in the middle that are inaccessible from the platform isn’t entirely relevant, except that, in the long term, it might be feasible to train people to fill in air bubbles), that certainly slows them down – they now have to wait for the next train, which may not be any emptier.

Incidentally, your premise is false. Cars also slow down buses (carrying people who don’t own cars or are choosing not to use them) and trucks (carrying deliveries to people regardless of whether they drive). Cars pollute the air and make noise. Cars injure and kill pedestrians and bicyclists. Cars occupy a lot of public space in a very space-constrained area; with fewer cars, some of that public space could be reallocated in a more equitable fashion. Those are all externalities that congestion pricing could offset.

And who named you sole arbiter of which social problems the government should and should not solve?

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Alon Levy December 9, 2009 - 2:20 pm

The other externalities of driving are not balanced by congestion pricing. Cars pollute regardless of whether they’re in a congested CBD or in a less congested neighborhood. Other countries balance that with a gas tax on the order of $3-4 per gallon and with regulations mandating newer cars with catalytic converters. Congestion pricing is a CBD-specific technique for reducing congestion.

The Lexington line is crowded because the MTA is making little effort to run it at its true capacity. It uses 3-door cars where Tokyo runs 6-door, 20-meter cars, making boarding easier. It also uses individual cars instead of walk-through trains, which would increase capacity. The MTA isn’t making any attempt to either get Japanese-style pushers, or get people to push themselves as in China, which would allow trains to run 100% over official capacity instead of 13%. All of this costs peanuts; it would have cost zero extra money if the MTA had had the foresight to write multi-door, walk-through specs into the R142 order.

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Andrew December 13, 2009 - 6:59 pm

I’m afraid you’ve lost me on the congestion pricing question. Cars pollute wherever they operate, but the pollution has a greater direct impact when it’s in close proximity to a lot of people. And congestion pricing fees don’t only push drivers from the CBD to other areas – they also push drivers onto other modes.

And how about the other externalities I mentioned? Slower service for transit riders, longer delivery times, noise, safety, public space?

I’d love to see walk-through trains – but I’m afraid this isn’t as simple as calling Kawasaki and asking for it. The cars first need to be designed – and they need to be designed in a way that will work with the NYCT system.

Pushers won’t help at Grand Central – they are a solution to the wrong problem. The problem at Grand Central is not that crowded trains pull in and more people want to get on – that’s a relatively minor problem, and it happens all over the system. The problem at Grand Central is that crowded trains pull in and a lot of people want to get off as well as on. So the people getting off have to squeeze through the thick crowds while the people outside are starting to impatiently push their way on. The more crowded the train when it arrives at Grand Central, the harder it is for people trapped in the middle to get out. If loads at the north end of the line are reduced just a bit (say, by diverting some riders to a new subway line a few blocks to the east), then the people getting off at Grand Central encounter less resistance, and dwell times are reduced, and service can be increased.

Abba December 7, 2009 - 11:34 pm

Is it possible that Albany can bailout the mta again?

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Benjamin Kabak December 7, 2009 - 11:35 pm

Or fix the math behind their own bailout. This is on Albany’s shoulders. They’re going to have to fix it.

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Scott E December 8, 2009 - 7:09 am

Ideally, yes – Albany needs to fix it. But it sounds like they’ll just say to the MTA “Sorry – we screwed up…. you’re getting $200 million less this year. Make it work”

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E. Aron December 8, 2009 - 12:37 am

Those guys up in Albany are busy wiping their elbows, if you catch my drift… Don’t count on them to do anything properly.

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Real Deal December 8, 2009 - 9:41 am

I will go EVEN better.I say get rid of the “Unlimited Ride” cards.Sure I know a lot of you are gonna hate this,BUT sitting and observing behind the glass for years it would eliminate the abusers who buy the card and shuttle it to a waiting family member.The Asian community is very well known for doing this and also gets rid of the swipers in the bad neighborhoods and unmanned station areas.With everyone paying the $2.25 sure their will be resentment but the MTA will most assuredly get rid of the deficit sooner rather than later and get the necessary improvements doneand most likely not raise fares for a while.

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John December 8, 2009 - 9:48 am

Don’t you have to wait like 10 minutes to re-swipe an unlimited metrocard?

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AK December 8, 2009 - 9:52 am

You have to wait 18 minutes before swiping at the same station.

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John December 8, 2009 - 12:35 pm

So either this guy has old information or the people he’s seen are passing back pay-per-ride cards, which is perfectly legal. I don’t think it’s possible to abuse the unlimited cards without wasting a lot of your own time.

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Real Deal December 8, 2009 - 1:42 pm

I have had an asian person tell me their 30 day didn’t work…came to me and checked the card.It expired the previous day.HOWEVER I did notice how many times the card was used…No Lie 634 times,Which would equal out to pennies per ride.Now if thats not abusing the system than I give up.It is legal now,but take it away and everybody pays their fair share and those swipers…OH WELL back to panhandling.

John December 8, 2009 - 5:57 pm

21 rides a day isn’t THAT crazy. Yes to get to that number multiple people are probably using it, but not at the same time (unless they have nothing better to do with their time than wait 20 minutes to save a buck or two). If people are abusing it, I think there are ways to close those loopholes rather than punishing those who are using it as intended.

Marc Shepherd December 8, 2009 - 9:53 am

I think it’s 18 minutes (3 tenths of an hour,) to be exact.

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rhywun December 8, 2009 - 11:13 pm

Correct me if I’m wrong, but the MTA couldn’t balance their budget in the bad old days before unlimited rides, either. You’re going to hate this, but the real solution is to extract concessions from the union to bring benefits more in line with the private sector that the vast majority of riders are used to. No more unexcused absences, no more guaranteed pensions, no more getting paid for doing nothing. And NO I don’t blame the workers for this situation, I blame the MTA management for failing to negotiate properly.

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Abba December 8, 2009 - 10:14 am

Benjamin,any idea what kind of service cuts the mta is thinking about?

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Benjamin Kabak December 8, 2009 - 12:44 pm

None. The MTA couldn’t comment. It’s not that they didn’t comment; it’s that they don’t yet have the information and are working right now on putting it together. We’ll know by Monday at the latest when the Board’s finance committee is set to meet.

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