Archive for August, 2010
Aug
03
What future the MTA’s key payroll tax?
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During rough economic times, politicians angling for reelection like nothing more than a tax to serve as a good whipping boy. Since the MTA has long held that unwanted position at the bottom of the New York political totem pole, the unpopular, but necessary, payroll tax is beginning to attract everyone’s ire. While neither Andrew Cuomo nor Rick Lazio have voiced any support for the payroll tax, GOP lawmakers are starting to make noise about a repeal.
In Newsday today, transit writer Alberto Castillo explores how state Republicans are calling for an end to the tax (link is subscription only). Well, perhaps saying they want an end to the tax is premature. Rather, they’re beating the MTA/forensic audit drum. Unless the authority agrees to a forensic audit — something to which it has been quite willing to submit — these representatives wish to deny the MTA its next payroll mobility tax check. “We want every paper clip, every pencil. We want to know every expense of the MTA and its subsidiaries,” Dean Murray, from Patchogue, said. “Before you turn to the taxpayers to bail you out, you should look where you could save money.”
Castillo has more priceless quotes from state representatives who do not view it as their duty to mind the MTA, a state authority. One representative from Glen Head claimed that, in the words of Castillo, “the MTA wouldn’t need that money if it kept its house in order.” Michael Montesano said, “It’s just easier for them to go to the taxpayer and to the State Legislature and just ask for more money. And if you don’t give it to them, there’s the threat of more service cuts.”
Of course, there’s the threat of more service cuts or fare hikes. If the state, the body that granted the MTA a corporate charter and mass transit oversight, doesn’t deign to fund transit, then the MTA can balance its books through only fare hikes or service cuts. This isn’t complicated policy; it’s simple economics.
For its part, the MTA says it “welcomes” an audit and, in fact, is the subject of numerous audits conducted at both the state and city level. “At the same time, this current administration has undertaken the most aggressive cost-cutting initiative in the history of the MTA, leading to more than $700 million in recurring annual cost savings,” MTA spokesman Kevin Ortiz said to Newsday.
A forensic audit is all well and good, but what will be the point? Thomas DiNapoli will discover that, shockingly enough, the MTA wastes money. He’ll discover that the authority has redundant staffing levels, that its corporate structure was built through combining six different entities into one with little to no consolidation. He’ll find wasteful policies and poor capital oversight on the part of the state, and a state-mandated bidding process that doesn’t leave the MTA with the best possible contractors.
Of course, lawmakers won’t be satisfied with a forensic audit. If given the chance, they’ll move to repeal the payroll tax entirely. That’s why Nassau County and the Town of Chester, among other municipalities, are joining a suit to halt the payroll tax. If successful — which they probably won’t be — what would happen?
As I’ve mentioned over the past few days, the MTA is relying on the payroll tax for up to $1.5 billion a year over the next four years. In 2011, the payroll tax is expected to be over 27 percent of total government subsidies for the MTA’s operating budget. Were the state to repeal it without an adequate replacement source of revenue, the consequences would be disastrous. The MTA would either have to raise fares by 30 percent, slash service to levels never seen before in New York or begin to contemplate defaulting on its payments.
So politicians can beat their anti-tax drums. Republicans can speak out against it; Andrew Cuomo doesn’t have to embrace it. But without this necessary evil, the MTA won’t be a fiscally viable agency. Give me congestion pricing. Give me East River Bridge Tolls. Just don’t take away the payroll tax.
Aug
02
Mixed results for ATO on the L
Posted by: | CommentsThe Post this weekend ran an article on the use of automated train operations on the L line, and Janet Roth’s story focuses on “aggravating delays for riders and multimillion-dollar repairs for the MTA.” Basically, according to transit workers, ATO has created more problems than it has solved along the L line. It doesn’t always work reliably well, and it has led to some monumental delays. Transit watchdogs too have confirmed that. “It’s trying to fit new technology into an old system,” William Henderson, head of the Permanent Citizens Advisory Committee to the MTA, said. “There is some skepticism about why we are doing this.”
And what do the numbers say? It cost over $340 million to implement, and the L line has suffered from a high number of delays. Not all of those, however, are related to ATO. There have been, however, 100 glitches a year on the L, and the authority had to hire special contractors to fix the problems. Still, the automated control system, says a Transit spokesman, works on more than 20 trains a day, but it has suffered a “higher than expected failure rate.”
As with every MTA technological project, this one hasn’t been the success the authority had hoped. As the authority looks to bring ATO-based train control to the 7 line, it will use a different contractor and a different set of rolling stock. MTA officials are hopeful that they can learn from the mistakes of the L and bring a better service to the IRT Flushing route.
Aug
02
DOT: Former bus stops will become parking spots
Posted by: | CommentsAs the MTA prepared to shutter bus routes across the city, I joined with livable streets advocates in calling for the city’s Department of Transportation to turn former bus stops in bike parking spaces, among other non-auto-centric uses. When the NYPD, however, told its enforcement agents to avoid ticketing cars parked in the old bus zones, I was not optimistic that the battle would be won. Today, the New York Post reports that, by and large, DOT will convert the bus stops into parking spaces, thus handing over premium curbside space once reserved for transit to drivers.
According to Rich Calder and Tom Namako’s reporting, 365 of the 600 bus stops no longer in service are being used by drivers searching for more parking space. Although DOT has yet to decide which areas will be permanent parking spots and which will be deemed school or loading zones, no bike parking or pedestrian spaces will be considered. Hopefully, some of the abandoned shelters can be converted to that purpose instead. DOT says the removal of the bus signs and the installation of signs proclaiming the new use will be completed “over the next few weeks.”
Aug
02
What future the capital program?
Posted by: | Comments The MTA unviled its four-year budget plan last week, and inside of this document are a series of somewhat rosier projections than we’d expect. Despite a crushing deficit this year, if CEO and Chairman Jay Walder can realize all of his cost savings plans, the authority will run net cash balances in the black for 2010, 2011 and 2013 with significant but not too costly deficits in 2012 and 2014. To make these projections, the MTA had to rely on economic assumptions from the city and state, but in the past, these numbers haven’t been too far from reality.
In the consolidated statement which features a line-by-line breakdown of MTA costs, one item jumps out at me. That is the authority’s dept service payments. Last year, the MTA made $1.4 billion in debt service payments and is on pace this year to see that number reach $1.8 billion before jumping up over $2 billion in subsequent years. By 2014, debt service will reach $2.555 billion, and it will consist of approximately 13 percent of the MTA’s annual expenses.
Meanwhile, as debt service remains a significant annual cost on the operations ledger, the MTA is moving ahead with another five-year capital plan that will see the authority issues more revenue and construction bonds. Thus, these debt totals will not lessen or disappear from the ledger any time soon, and MTA Board members are growing leery of the capital spending. Every time we spend money on this capital plan, we’re increasing the debt, increasing the debt service, and this is like a time bomb here,” Andrew Saul, the authority’s vice chairman, said last week.
Saul wasn’t the only board member to question the wisdom of maintaining debt-producing programs as the MTA struggles to close a budget gap. “We’re paying interest during the construction periods of projects in part from the fare box, so we are paying for capital with the fare box,” board member Doreen Frasca said. “That means that less money is dropping down to pay maintenance expenses. We’ve cut 20 percent out of many of the agency budgets. We certainly haven’t cut the capital budget by 20 percent.”
For its part, the MTA defended its capital budget and noted that it had reduced its five-year plan by approximately $2 billion. “A series of five-year capital programs have revitalized our transit system,” the authority said in a statement. “While the more than $64 billion spent in that time has helped turn around our regional economy, maintaining and improving the 100-year-old transportation system is an ongoing need and we cannot afford to disinvest. The current $26.3 billion program reflects a nearly $2 billion reduction as the result of a comprehensive review of projects.”
All of this begs an important question: What should the MTA do about its capital spending and the need to take on debt? Once upon a time, the state contributed more money annually to the MTA’s capital plan, and the authority didn’t have to take on the debt. But as New York’s finances went south, successive governors have pulled more funding and have urged the MTA to bond their projects instead. Some of those — such as new subway lines — can be bonded because the revenue from the increase in ridership will cover the debt service payments in the future. But other programs — such as State of Good Repair initiatives and other routine maintenance, upgrade and rolling stock proposals — are funded without that guarantee of future returns. People stop using the subways as the system breaks down but spending billions to maintain it doesn’t lead to an incremental jump in ridership.
What the MTA can’t do is halt its capital program. It would be far too costly to cut back on maintenance and capital repairs while moving forward only on ambitious (and often delayed) expansion efforts only because the economics of bond issuances work out that way. The authority must make sure the system doesn’t slide into a state of unreliability because that would exert a huge cost on the city’s economy.
So for now, the debt system stays as it is. Unless the government can find more money for capital investment, the authority will have to take on more debt, and we’ll be paying tomorrow for upgrades today. It’s not an ideal situation by any means, but when it comes to funding transit, what is these days?
