Jul
12

The MTA’s days of wine and roses

By · Published in 2010

When details of the 2011 fare hike got out on Friday, to many New Yorkers, threats of increased unlimited ride fares and a MetroCard surcharge came as no great surprise. The MTA had, after all, raised fares in both 2008 and 2009, and the authority has spent nearly all of 2010 pleading poverty. That the fares aren’t going up in 2010 is only a matter of semantics; due to the payroll tax funding package, the MTA can and will raise fares on January 1, 2011.

Yet, life wasn’t always all about fare hikes for New York City subway riders. Although the MTA raised the fares regularly throughout the 1990s and early 2000s, straphangers could take solace in the fact that these hikes were often little more than cost-of-living adjustments. The MTA then didn’t have to live fare hike-to-fare hike as it does today, and once upon a not-so-long-ago time, the authority had enough money in its coffers to grant its riders a holiday reprieve from the full fare.

Our story starts on October 18, 2005. On that day, the MTA announced plans to offer a fare discount between Thanksgiving and New Year’s Day. Since the MTA had a balance sheet that was, at the time, projected a surplus that could have reached $900 million, the authority wanted to give something back to its riders. “It’s unprecedented,” Gene Russianoff said at the time. “I’ve never seen any holiday-related discounts for riders. I think it will encourage people to use transit during the holiday season at a time when gas prices are going through the roof. It’s a smart way to reward customers.”

The discounts included relief for everyone. The base fare was to be $1 while bonus days were to be added to unlimited ride MetroCards and commuter rail passes. The MTA estimated that the giveaway would cost $50 million overall with an expected increase in ridership covering from the lost fare revenue. The rest of the budget surplus was to go pension relief, security projects and service improvements, and because the MTA had to have a $0 balance at the end of the year, the money had to be spent.

The next day, the headlines were decidedly less friendly. New York’s liberal and conservative political groups called the fare giveaway an irresponsible marketing gimmick. Because the MTA had been anticipated budget deficits in both 2007 and 2008 — deficits that came to pass — for some time, fiscal experts, such as James A. Parrott of the liberal Fiscal Policy Institute, wanted the authority to plan for long-term budget stability and a source of revenue flow for capital projects. Others, such as the Manhattan Institute’s Ed McMahon, wanted the dollars to cover the MTA’s pension obligations. Then-Governor George Pataki called for the MTA to use the money to cover construction costs at South Ferry or the Fulton St. transit center.

Most commentators figured the good will earned by the temporary fare relief would be short lived. “Whom does this actually benefit?” Preston Niblack, from the city’s Independent Budget Office, said. “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.”

When the MTA Board held its October meeting, the fare holiday garnered approval amidst a contentious debate. A vocal minority of board members paid heed to the looming financial crisis, and they urged the MTA to, in the words of Andrew Saul, “bank the money” to lessen the pain of future deficits. “I’m not sure in the long term that this is really in the interest of the riders,” Saul said. “This agency is facing tremendous financial stress going forward.”

In November, as the MTA’s surplus ballooned to $1 billion, the discount December was a foregone conclusion. Even as the MTA tried to pare down its future debt, the authority went forward with a plan that many figured was nothing less than bribery and nothing more than a public relations move gone bad. If New Yorkers saw the discount fares and assumed the MTA could afford such a program, these New Yorkers would forever be skeptical of the MTA’s claims of poverty and deficits.

In the end, the program was neither a success nor a failure. The MTA lost approximately $46 million in lost revenue, but few people had changed their fare-buying or ticket-purchasing behavior. As 77 percent of customers said the program saved them money, the MTA even budgeted $50 million for another fare holiday in 2006, but it was not to be as the MTA canceled the 2006 discount in order to postpone an impending fare hike.

Today, the fare discount lives on in memory only. Instead of a holiday reprieve this year, we’ll be preparing for another fare hike as the MTA looks to close a budget deficit nearly as large as the surplus from five years ago. The $46 million the MTA gave up to provide that discount fare wouldn’t have made a huge discount today, but it served as a portent of bad times to come. From now until the real estate market recovers, we’ll be suffering through fare hikes and not holidays.



Categories : Subway History

12 Responses to “The MTA’s days of wine and roses”

  1. Jowy Romano says:

    I remember this holiday promotion. I was really confused about how the MTA could have so much surplus while projecting deficits the next year and even more confuse about how they could possibly give away half price rides. I was actually kind of mad about it because it left an odd, unusable number of dollars on my MetroCard.

    • Marc Shepherd says:

      It was all about accounting. They had a surplus that year, but all responsible projections showed deficits in later years. If you were running a household, you wouldn’t go out and blow your savings, when you knew that big bills were coming in the next year or two. That’s what the MTA did.

      By the way, when you have an odd number of dollars on your MetroCard, they are not “unusable.” You just go to the machine and add enough cash to pay a full fare. For instance, if you have $1 remaining, go to a machine and add $1.25.

      But the comment shows that, even as a PR gimmick, the holiday promotion was not very effective. How many people even remember that it happened? And of those who remember, how many actually took away a positive impression?

      • Jowy Romano says:

        Yes… But when you filled your MetroCard there would always be a bonus percentage added, which kept it in unusable increments. More of an OCD thing than anything else.

  2. Scott E says:

    This still angers me. Even if all the operating expenses were fully budgeted and funded, this could have been used to pay down some debt that was run up in the 1980s. Instead, we’re stuck paying interest on compounded interest; money that is completely wasted. It’s basic Suze Orman economics — when you’re this deep in debt and suddenly come across “found” money, can you afford to indulge? DENIED!

  3. Nesta says:

    That holiday promotion was done for 1 reason only because it was a contract year and the TA had a huge surplus to unload so that they could cry poverty at the negotiating table like every single other contract year!

    • John says:

      Yeah, they “cry” it because it’s actually true.

      • Nesta says:

        Wasn’t true that year or a few years before that when the TA “found” a big surplus 1 month after the union agreed to a terrible contract because of the poor financial picture the agency was painting.

        • Sharon says:

          Surplus as compared to projected revenue and expenses. In fact the mta had billion in debt that should have been paid down. The reason for the surplus was easy money from low interest rates and standards and people getting second AOL lines for the internet thus more mta phone taxes. No funny games to dupe the union this time. No one could have predicted the inflow. The Crappy contract still had a huge raise, the cost of health care and pension went up. The papers focus on salaries only.

          • Nesta says:

            That huge raise you’re talking about was a ZERO in the first year of the contract. Something that none of the other big unions ever agree to.

    • bob says:

      There’s a 2nd reason: Mayoral election in November 2005. It was fiscally irresponsible given the agencies needs. But if Patiki really thought it was a bad idea, why didn’t his appointees (a majority of the board) vote against it? Sounds like he was playing both sides.

  4. John says:

    I attended a meeting on the city budget last month and learned that the city can’t have a “surplus”. If it has any additional money left over, it must pay off a part of the next year’s expenses. If nothing else, since it does issue bonds, it could’ve paid some of them off instead of letting them accrue interest. That could be part of the reason why it is in debt today.
    As far as the half-fare discounts go, I don’t think it was a bad idea. It could’ve well contributed to some increased ridership today. If they lost $46 million, that means that over the next 4 years, it would have to get a total of about 23 million additional riders to make up that lost revenue. Spread that out over 4 years and that is an extra 6 million riders per year that it would need to generate. I believe that it is possible that it could’ve gotten those 6 million additional riders through that discount program.

Trackbacks/Pingbacks

  1. […] out discount fares to regular straphangers and tourists alike. The holiday fare program, deemed neither a success nor a failure, is a relic of a financially secure past, but the end of December in 2005 saw the city’s […]

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