Feb
04

Brother, can you spare eight billion dimes?

By · Published in 2010

Those in charge of the MTA must be really glad Wedneday is over for it was yet another bad time in the long run of bad days for the MTA finances. As we learned late in the afternoon, revised budget projections from the state have opened up a wider gap in the MTA’s budget. Only later in the day did the extent of the cuts come into view.

Basically, the MTA has been fleeced by the state. Promised enough money to avoid either financial ruin or extreme service cuts and/or fare hikes in 2010, the MTA has not been given the millions promised to it. Rather, the State Division of Budget continues to adjust forecasted revenues from the Regional Mobility Tax downward. A statement from the agency yesterday summed up the bad news:

“The MTA anticipates that it may need to reduce the estimated receipts included in its 2010 budget by approximately $350 million (which includes $179 million of 2009 collections whose receipt was previously reforecast for 2010), with revenue loss of up to an additional $200 million a year thereafter. Combined with additional revenue loss previously projected in the Governor’s Executive Budget, the MTA could be faced with up to a $400 million new deficit for 2010.”

And so when we add the new deficit to the old $383 million deficit, we find the MTA looking at a 2010 fiscal hole of $783 million — or nearly eight billion dimes. Got a few to spare?

For its part, the MTA is “closely following” the state’s budget machinations and “remains prepared to take needed actions in order to maintain a balanced budget.” That’s agency-speak for “we’re screwed,” but the MTA, as I see it, has a few avenues it could pursue in order to gain more funding. Many of these approaches are politically unpalatable while others are generally unfeasible or simply not enough. Still, it’s worth an examination of the five proposals that should be on the table.

1. Adopt the Russianoff Plan
As much as I do not yet support moving stimulus funds from the capital budget to the operating budget, this move is clearly the most obvious one to close a budget gap of this magnitude. The only problem is that it falls woefully short of achieving that goal. Even if the MTA moves the $121 million allowed by law over from the stimulus ledger to the operating balance sheet and even if the MTA takes the $50 million PAYGO reserve and reinstates that into the operating budge, the agency would still be $612 million in the red. Plus, the strained capital budget — a necessary part of any future transit system that we will enjoy when the agency’s finances are stronger — would be further drained.

2. More service cuts
Right now, the MTA has a full slate of money-saving service cuts on the table. Although many of these cuts can be viewed as service reorganizations that better meet demand and costs, the MTA is still cutting train frequency and increasing load guidelines. These costs will save some money, but by themselves, the cuts can’t cover the deficit. If the MTA opts only to cut services, the cuts would be dramatic — think no overnight train service — and would cripple New York City. Still, if Albany doesn’t have or can’t find the money, this is truly a Doomsday option that remains on the table.

3. Raise fares
On Tuesday, I analyzed the debate between fare hikes and service cuts as budget-balancing approaches. In the end, 77 percent of those who voted in the poll supported fare hikes as a way to close the budget gap. For the MTA to cover this new gap, the agency would have to institute the already-planned service cuts and a fare hike that nets another $400 million revenue. To do so by fares would lead to a fare hike of around 10 percent across the board. Despite the MTA’s desires to avoid a hike, it seems almost inevitable.

4. Congestion Fee/East River Bridge Tolls
While one of these proposals could be passed without the other, I lump them into one item because they are, in effect, the same thing. Charging drivers who exact a cost on the city when they use unnecessarily free bridges would result in a guaranteed source of revenue for the MTA. Charging drivers who exact a cost on the city when they contribute to congestion and pollution would result in more funding for the MTA. The real problem here is that no New York politician seems willing to take the bull by the horns even though the majority of New Yorkers have, at times, voice support for either or both of these proposals. They too seem inevitable but not quite as soon as a fare hike does.

5. Market-Rate On-Street Parking
Last July, I ran some numbers and explored why New York should be charging its residents hundreds of dollars for the privilege of on-street parking. As real estate rates remain among the highest in the nation, the city gives away valuable space to cars for free. If the city instituted a residential parking permit program with tiered fees based upon proximity to transit and guaranteed those revenues to the MTA, the transit authority would be able to close a significant portion of its budget gap. Again, though, this proposal is politically unlikely.

So in the end, we’re left with the same options under consideration for the better part of the last two years. Even though more equitable funding solutions exist, when the dust settles, my money is on a combination of fare hikes and service cuts. The auto drivers — a small percentage of New York City’s commuters — will enjoy their free rides as the MTA limps toward financial ruin.



Categories : MTA Economics

35 Responses to “Brother, can you spare eight billion dimes?”

  1. AF says:

    Ben,

    Essentially the only option you present that takes money from within the current budget is the one you reject. Yet, before last year none of that money was available for the capital plan so taking it is not going to be the cause of some huge hole in the capital budget.

    The reality is that each of your suggestions raises taxes, and considering the environment, these regressive taxes are and should be off the table right now. The MTA is not the only state agency that is facing budget cuts, but that is the reality. Why should the MTA get a tax increase when other services are being cut?

    Note that while transit is important, so is education, healthcare and god forbid it gets mentioned here, roads.

    Tolling the city bridges will not likely bring in very much money in the short run. It actually will cost money to build the infrastructure and most of the money will need to go to dealing with those bridges. It will be several years before it starts kicking off money to fund other things, and it is still not especially clear that the MTA should be given that money.

    Similarly, changing the nature of parking in the city would require a pretty large adjustment process, as many people own cars who park them on the street and “market rate” parking charges would be unaffordable, so you would need a several year adjustment period, and again the money would not go to the MTA anyway.

    • E. Aron says:

      I don’t see how using stimulus money, service cuts, raising fares, tolling free bridges, or demanding pay for free parking raises taxes in any way. In fact, the tax raise instituted by the state simply didn’t work. These are non-tax solutions to the imperative problem of decaying transit. The MTA is in dire straits – its bond-rating was just reduced. It needs long term financial solutions, which can and should be provided by tolling bridges, which are expensive to build and maintain. Additionally, having people that irrevocably pollute the earth everywhere they go and empower oil producing nations (with which we tend not to get along, to say the least) pay a bit more sounds like good policy.

      Transit is the most fundamental service – how are all those educators and students that you mentioned, who obviously also need funding, supposed to get to school? Cars aren’t the solution for everyone.

      As for roads, it is abundantly clear that people love them. They’re federally funded and pretty much never lacking political or financial support.

      • Duke87 says:

        Using stimulus funds and cutting services does not increase taxes. But bridge tolls, parking fees, and, yes, transit fares are all effectively “taxes” because the money collected is public money.

        The sanest thing to do to cut costs would be to cut wages. But the workers are unionized, so the MTA can’t do that.
        And breaking the union is about as politically feasible as bridge tolls and congestion pricing, unfortunately. :\

    • Marc Shepherd says:

      The option that Ben sensibly rejects has two flaws: First, it doesn’t produce enough money to solve the problem. Second, it is a short-term fix that, to the extent it helps at all, merely postpones the tough decisions for a short time.

      Congestion pricing is the best option, for as some of us recall, the Federal Government was actually going to pay for the implementation. Those funds are still available. When our legislature shot that down, it turned its back on several hundred million dollars worth of Federal money. Bridge tolls may cost a little bit to implement initially, but once in place would be a reliable source of revenue for years to come.

      I do agree with AF that changing the way we charge for on-street parking is much tougher to implement, so I would not be a fan of that option.

    • Vin says:

      Putting tolls on the bridges would not cost very much money. All you’d need to do is install cameras. The camera can automatically charge a driver’s E-ZPass, and if there is no E-ZPass, it can take a picture of the car’s license plate and send the driver a bill (with a hefty fine for late payment to ensure collection). That would not cost much money.

      As for market-rate on street parking, frankly, while I support congestion pricing, charging thousands of dollar for space on the street sounds too radical. I also think that basing the parking rate on the square footage rate for a building is kind of absurd – room on a street is not the same as room in an apartment. Still, implementing a zone-based residential parking program in the denser parts of the city could generate substantial revenue even if the fees are not particularly high.

      • Room on the street is actually more valuable to the city than room inside of an apartment.

        But anyway, in the end, my proposal was to start really small. Even if we charge just $200 a year for an on-street residential parking permit, that should generate nearly $200 million in revenue for the MTA. That doesn’t seem unreasonable to me.

  2. Anon says:

    maybe they are buying countdown clocks to count down to when they run out of cash?

    • Again, that’s a capital budget expenditure that was earmarked for the project years ago. Even if they stop buying the clocks, they can’t take that money — money already spent — and move it to the operating deficit. That’s not how MTA financing works.

      • Anon says:

        Yes and no. Depending on the source of funding.

        Let’s say for argument’s sake the cost of countdown clocks is 1 Billion Dollars. But 900 Million of that funding is from the Feds and 100 Million is from MTA.
        The MTA could forfeit the FTA Commitment and return the unused portion of the funds. They would also probably have some sort of lawsuit on their hands from the contractor for abandoning the contract. So the MTA Would have to forfeit 900 Million Dollars to save (for the lack of a better word— maybe I should say reallocate) 100 Million.
        Yes it is absurd. But everyone says this is doomsday is it not?

        How about 2nd Avenue Subway. Let us again use an arbitrary # for argument’s sake (Doomsday’s sake?). Let’s say Second Avenue Subway Costs 10 Billion Dollars. If MTA abandons 2nd avenue they would probably save about 1 Billion Dollars… but they would have to forfeit 9 Billion back to the Feds. But they would be able to reallocate (yeah I like this word better) another 1 Billion dollars (granted that 1 Billion Dollars is over time).

        Yes I realize most folks don’t realize that the MTA can’t simply reallocate capital funds because they are grants from the feds earmarked for specific purposes.

        But is this doomsday or isn’t it? Or is this just a catchphrase the media likes to use?

  3. Scott E says:

    I’m not sure here if I should be angry at the MTA or at Albany. It seems that, time and time again, Albany makes cuts, and the MTA sighs, accepts it, and tries to make adjustments.

    Are Albany’s cuts fair? I don’t know how they choose their budget-cuts (but unlike the MTA, they’re not required to balance it). Promising $1.2 Billion in payroll taxes, and then delivering nearly a tenth of that, though, reeks of bad-faith (and I’ll bet the tax imposed on schools hasn’t been refunded yet).

    Meanwhile, the MTA is a huge agency where money isn’t spent efficiently. Yes, they’re underfunded and hugely in debt. They’re always battling politicians, unions, weather, dishonest contractors, etc – all of which make it extremely difficult to estimate costs (the media doesn’t help). And they have no actual power to do anything, they can just extend their hand and ask “please”. But just like their size presents opportunities to be more efficient, the organizational layers also create inefficiencies.

    I opened up the paper on January 22nd and read an Op-Ed piece from William Schoolman, President of a private bus line. He says “We run luxury charter and line-run buses to similar destinations served by the Long Island Rail Road and Metro-North, and we’re able to do it at comparable prices offered by the MTA. We’re also able to remain profitable, even though our competitor has the advantage of being funded by taxpayer dollars.” He doesn’t like paying payroll taxes to fund his competition. Rightly so.

    Mr. Schoolman runs a lean for-profit business, and looks for any cost-savings that he can. He is concerned by the “drop-in-the-bucket” expenses, unlike a large agency which ignores them as the metaphorical bucket quickly overflows.

    The MTA, of course, can’t run on the same model — it needs to serve the poor, unprofitable neighborhoods, and has to build much of its own infrastructure (tunnels, tracks, etc) while the bus company just needs a few vehicles and an arrangement to use some existing parking lots.

    But it can run leaner, with more accountability to each division. I’d consider the following MTA break-up: Spin-off the buses and commuter railroads. Let the redundant bridges and tunnels division join those already owned and operated by the city DOT (congestion pricing can handle the subsidy issue). Separate the IRT, BMT, and IND. A separate fare-collection agency, along the lines of E-ZPass, could support all of the above, as well as NJ Transit and PATH.

    Head each agency with a well-paid, profit-driven executive from the private sector. He’ll probably replace pensions with 401(k)s and incentive-driven bonuses. Once this is done, there should be less red-tape, and the waste and inefficiencies should become glaringly obvious.

    It’s a dramatic step, but the current model simply doesn’t work. It can’t sustain itself, and the state can’t sustain it either.

    • Joe says:

      Correct me if I’m wrong on your concept of separating all of the entities of the MTA, but don’t the divisions (IRT & BMT/IND) already operate as separate entities internally? And also, the individual lines each have a manager that is responsible for stations, track conditions, equipment and customer concerns. I think its still a pilot program, but if I recall it’s viewed as a cheaper and more effective management system than what existed previously. I don’t think it makes sense though to create entirely separate entities that manage each division of the former MTA.

      I do like the idea of an independent fare collecting agency, that can be shared among all entities sharing the metropolitan area.

      • I think that creates more organizational inefficiencies. The idea at MTA is have fewer people doing the same thing and not more. The three former entities have been moving toward a model of better and better integration. Reversing that imposes more costs on the organization.

    • petey says:

      “It seems that, time and time again, Albany makes cuts, and the MTA sighs, accepts it, and tries to make adjustments.”
      yes, i’ve wondered, where is the MTA pulpit? why do i seem not to hear top MTA people firing back? (or have i missed it?)

    • Russell Warshay says:

      “Separate the IRT, BMT, and IND.”

      Why and how would this be done? Lets not forget that the BMT and IND have largely been integrated since the Chrystie Cut was opened.

    • Here would be my questions for Schoolman:

      1. Are your workers unionized? What salaries do you pay them? What are your pension obligations? Clearly, based on this section of his website, he’s paying his workers far less than the MTA. Is that a sign of a better business model or his ability to bypass the unions?

      2. Is Schoolman tasked with covering the costs for maintaining and improving the infrastructure his private buses use? The answer, I know, is only through direct taxes and the costs of acquiring equipment. He doesn’t have to maintain a vast subway and commuter rail system. He simply has to keep his buses in good shape and purchase new ones now and then. That’s how he can be profitable.

      That lawsuit also will probably go nowhere, but I’ll have to read a little closer.

      • Boris says:

        Just to add the obvious, the bus company receives a large subsidy in the form of free access to roads and bridges maintained by the government.

      • Marc Shepherd says:

        Schoolman also has the luxury of running only those routes that are profitable, at only those times that he chooses to operate them. The vast majority of the MTA’s routes cannot be operated at a profit. Remember, most of the MTA network was built and formerly operated by private companies that went bankrupt, the victims of legislative policy that favored roads and airports.

        To compare the MTA to a private company that cherry-picks the routes it wishes to operate is complete nonsense. Obviously the legislature could choose to run the MTA that way, but in that case a subway ride to Far Rockaway would cost about $10, and quite a few routes that people now depend on would probably be abandoned entirely.

      • Scott E says:

        I don’t know about the lawsuit (Schoolman says the tax violates some law that I don’t know about), but I can see the frustration in having to finance a competitor. Of course, you can’t categorically exclude other bus companies (like schools) from the tax. He probably doesn’t use union drivers, and probably doesn’t offer a pension. Why does the MTA have to offer a pension to its non-union employees? It’s a practice that encourages job-preservation over not job-success.

        And I did mention the difference in infrastructure. My point was that when you operate a small company, the person in charge looks at everything and doesn’t dismiss the “insignificant” costs. I did allow for public funding via congestion pricing.

        Regarding Joe and Russell’s comments, splitting them would require some interoperability, just as Long Island Railroad uses Amtrak lines to get to Penn Station, Amtrak uses Metro-North lines in Westchester (and other areas, I believe), etc. If it’s in both parties interests to do it, they work out a deal. But more than anything else, splitting them would provide some accountability — I started out writing that comment (which turned into an essay) wondering which division was the most efficient, and which the most wasteful. Line managers are a start, but they are only empowered to do so much. They’re generally labor supervisors promoted into the role, not executives who focus more on big-picture strategies. An executive with full autonomy over 1/3 of the system can get things done.

        • Alon Levy says:

          Don’t forget that buses are unusually subsidized because of the road wear issue. A 20-ton bus causes 10,000 times the road wear of a 2-ton car, but does not pay 10,000 times the gas tax. And that’s besides the fact the gas tax only covers about two thirds of road maintenance costs…

          But sure, the luxury bus is profitable.

          Breaking up the MTA into IRT, IND, and BMT is a nostalgic solution looking for a problem. It’s not going to solve the actual problems facing the MTA; if it did, you’d expect the fractionalized Bay Area transit systems to be huge money makers and the single-agency Hong Kong MTR to be a subsidy hog.

  4. SEAN says:

    Former gov. Patocki was worned that constant borrowing for the MTA was going to leed to disaster. Here we are 15-years later at said disaster.

    How about for subway cuts pull as menny R32 -R68A cars off & replace them with as menny R142, 143 & 160 cars as possible. After all R160S are still being manufactured & delivered as we speak.

  5. Eric F. says:

    The idea of taxing cars to further subsidize transit is a great idea. How about these ideas:

    Using MTA toll revenue to subsidize transit
    Earmarking part of the sales tax for transit
    Tax on utility bills for transit
    General fund tax revenue for transit
    Gas tax revenue for transit
    Real estate transfer tax for transit

    Have the above been considered?

    • Joe says:

      Isn’t part of the real estate transfer tax already used to fund transit? I could have sworn that the MTA did quite well during our real estate boon years because of revenue from a tax associated with real estate. And I think that’s also the problem, because our recession has slowed the once hectic pace of the real estate market, and cooled down some prices, the MTA was getting less revenue.

    • I’m pretty certain that your list features many of the fees and taxes already in place. Tolls, in particular, have been subsidizing transit since the TA and Triborough Bridge Authority merged in the last days of Robert Moses. Look also at how variable most of those measures are.

      But what makes charging bridge tools or congestion price appealing is the argument about externalities. Right now, cars exact a cost on the city. They create traffic, noise and pollution, and drivers don’t pay those costs. By implementing tolls and congestion pricing, the city is basically capturing the costs of car use while discouraging unnecessary auto use and supporting transit. It’s the most equitable way to do that.

    • Russell Warshay says:

      The real estate transfer tax has been a feast or famine source of revenue for the MTA. it produced $1.5 billion in 2007, and a third of that in 2009. If anything, it should be replaced with a more stable form of revenue, not expanded.

      • Russell Warshay says:

        I just had a thought about the real estate transaction tax. If it remains on the books, when the economy picks up, it might be a good thing if those additional revenues are used exclusively to retire debt. I’m not sure how feasible this is, but that debt service is only going to get worst.

  6. Russell Warshay says:

    The money is needed now, and there seems little political will to do anything. Sounds like a fare hike is in order.

    • nathan_h says:

      I think so. The MTA did everything it could to get the revenue through better means. The pending crisis was plain when the legislature dumped bridge tolls and even congestion pricing. It’s all on the record. The government failed to act and transit riding voters have not yet held their politicians to account, so the authority must choose among its remaining options.

      As proponents of robbing the future (one last time, for the road?) assert, it would be difficult to set up new toll revenue streams in time to cover the shortfall. That is effectively an argument for severe fare hikes or service cuts, since the tiny amount left to rob from New York’s children is not enough to cover immediate needs. So, whatever. Even if those thieves succeeded in lessening the blow to themselves a fraction, the fact is there will be a blow and it will disrupt our abysmal politics.

      • Russell Warshay says:

        Its hard to hold politicians accountable when so many reflexively point a finger at the MTA, and do so in countless press conferences. Its like a political campaign where only one side is allowed to run negative and/or misleading ads.

        I’m not saying that the MTA is without fault, just that the blame should be shared. They are in a symbiotic, not adversarial, relationship, with elected officials. The public perception, of course, is different. In modern times, elected officials have mastered the art of running against their institutions. This is why, for example, legislative bodies are almost always unpopular, but everyone loves their legislators. So they keep getting reelected. Our elected officials are doing the same thing with the MTA. They need the MTA as a scapegoat so that they can express populist outrage and appear to represent their constituents. Otherwise, our populist elected officials would actually have to do their jobs.

  7. Eric F. says:

    So they are trying that last one. How about the other things on my list, maybe they could try those things. In addition, they could layer on a new payroll tax. That might also help.

  8. James D says:

    There is another alternative: get the legislature to amend the Taylor Law to enable the MTA to offer every worker the choice of a 10% pay cut or redundancy without consulting TWU Local 100.

    Of course that would be political suicide. The only sensible alternative is a big fare hike. Especially one that was big enough to save people from some of the worse service cuts (e.g. the eastern half of the B4), although some of the service cuts (e.g. the restructuring of the X1-X9) should be done anyway in the name of efficiency.

  9. Eric F. says:

    Trick question! All of my list is currently being used to funnel cash into the MTS (‘s employees’ pensions).

    “Right now, cars exact a cost on the city.”

    So do tranist users! I haven’t gotten a seat on the 4 train since 1977. Fewer transit riders would lead to a nicer riding experience.

    What is”unnecessary auto use”? You have a car, right? So, I guess you’d define necessary as any trip you take, and unneccesary as any trip taken by someone else?

    • Can you please use the reply button to reply to comments? It’s there to keep the threads organized.

      Anyway, my family does own a car, but we rarely use it in the city. I’ve written at length about unnecessary car trips in response to your comments before. Basically, those are trips taken by people who have other options. Someone driving in from Brooklyn to Manhattan because he or she doesn’t like to take the subway is taking an unnecessary car trip. These happen all the time. Unnecessary car trips aren’t just those taken by someone else.

      Furthermore, your discussion on externalities understates the impact of driving. Do you really think the costs someone driving exerts on the city is even comparable to the fact that you haven’t had a seat on the 4 train at rush hour in a while? It’s not even close. The simple truth is that driving exerts far more of a cost on the city and its residents than transit and that the money drivers pay don’t come close to covering those true costs. Cars have a purpose in urban life, but that shouldn’t be a purpose that comes at the expense of the rest of us.

    • Alon Levy says:

      So do tranist users! I haven’t gotten a seat on the 4 train since 1977. Fewer transit riders would lead to a nicer riding experience.

      A nicer experience isn’t a social good. The reason for congestion pricing isn’t that fewer drivers doesn’t lead to a nicer driving experience; it’s that it leads to much higher driving speeds.

  10. pb says:

    For once I would love to see a huge ad campaign pinning the sole blame on Albany! I don’t know who would do it but it should be done.

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