Home MTA Economics Tax revenues for MTA $87M short as bad month continues

Tax revenues for MTA $87M short as bad month continues

by Benjamin Kabak

December is always a harsh mistress for the MTA. As the authority gears up to cope with inclimate weather and all of the challenges feet of snow can bring, up in Albany, the New York state legislature tries to pretend it isn’t totally inept as it rushes to wrap up end-of-year work. Included in that work are appropriations measures that usually mean a raid on MTA funds and of course, new tax measures.

This year has been a particularly tough one for the MTA. The authority is losing $320 million annually in a cut to the payroll mobility tax with only a vague promise from Gov. Andrew Cuomo that he will somehow find a steady or not-so-steady source of replacement funds. The state reappropriated another $100 million that was supposed to fill the MTA coffers while the governor stripped the transit lockbox legislation of any teeth. Now, we find out that the New York State beancounters once again over-estimated the MTA’s tax haul.

As Pete Donohue reported, the New York’s Mass Transportation Operating Assistance account, a key MTA funding mechanism, will be $87 million short of initial estimates as tax revenue was less than expected. For an MTA that was, a few weeks ago, looking forward to a semblance of financial stability in 2012, the news comes at the end of a few long weeks.

To make matters worse, as Donohue relates, this drop comes after two MTA Board members had lobbied hard to set some money aside next year to restore buses lost to the 2010 service cuts. Now, those plans are off the table. Donohue reports:

The Metropolitan Transportation Authority’s financial outlook has worsened since just last month, when two board members proposed setting aside money to bring back some of the axed service – which included 36 bus routes — sources said. The state Division of Budget has told the MTA to expect an $87 million drop in projected subsidies from the Metropolitan Mass Transportation Operating Assistance account next year because certain tax revenues are coming in lower than anticipated.

MTA subsidies from the account also are likely to be lower than previously projected for the following three years – 2013, 2014 and 2015 – by $58 million, $45 million and $47 million, the state has told the MTA. “We’ve been saying all along how fragile the budget is, and you can see we’re nowhere near out of the woods,” one source at MTA headquarters said. “Now is not the appropriate time to be talking about restoring service,” the source said.

The MTA budget going before the board next week for a vote will include tapping some of the MTA’s small reserve and finding other savings to make up for the shortfall. Additional service cuts won’t be in the mix, sources said.

That last bit of news, at least, is a welcome development, but it’s a small consolation for a cash-starved MTA that is also facing some tough labor negotiations. (Their current contract with the TWU ends on January 15, but no one is expecting a repeat of the 2005 transit strike.)

Meanwhile, to drive home the point, the Straphangers Campaign released their annual top ten lists of subway stories yesterday. They focus on both the ten best and ten worst stories of the year, and while the ten good items concern technology upgrades and better bus service, the ten worst are all about the dollars. The MTA has lost upwards of $400 million over the past few weeks as it eyes debt funding for the remainder of its current capital plan. At some point, the system and the authority will reach its fiscal breaking point.

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19 comments

Alex C December 13, 2011 - 11:28 pm

It bears repeating what other frequent readers of this blog have said: it might be time for the subways to go back to the City. Albany won’t be satisfied until the system literally goes into the condition it was in late 70s through late 80s. As long as the subway isn’t completely dead, the clowns in Albany consider it as just fine and overfunded.

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Bolwerk December 14, 2011 - 9:09 am

I’m great with it going back to the city, but going back without some some mechanism that assures the city can keep it well-financed could be worse than just leaving it where it is. Albany just as cheerfully takes the city’s money as it takes the MTA’s – hell, the MTA is an example of Albany taking and mismanaging the city’s money.

A worst-case scenario could be: it goes back to the city, but Albany keeps all the work rule and pension mandates and withdraws funding.

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Larry Littlefield December 14, 2011 - 9:15 am

“A worst-case scenario could be: it goes back to the city, but Albany keeps all the work rule and pension mandates and withdraws funding…”

From the city but keeps it for transit systems elsewhere in the state.

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Marc Shepherd December 14, 2011 - 11:00 am

Just remember: although Albany gives the MTA less than it should, it doesn’t give zero. If the subways went back to the city and lost all state funding, they’d be worse off than before, not better.

On top of that, the city has fewer levers for raising revenue than the state, and the city goverment has basically the same problem the state does: people want more transit, but they don’t want to pay for it. The city’s only realistic options (higher fares, higher tolls, higher taxes, or higher debt) would be met with all of the usual political objections.

If you think they are clowns in Albany, do you think the NYC government is any better? City comptroller John Liu is the greatest clown of them all. It is worth recalling that when the city ran the transit in the past, they did not cover themselves in glory. I see no reason to think they would be better at it the second time around.

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Bolwerk December 14, 2011 - 2:00 pm

Behl. So they didn’t run it well in the 1950s, when NYS was regarded as a model of good government.

I think NYC is better. I wouldn’t say NYC is a model of good government these days, but they’ve arguably been more fiscally responsible than the state since at least the Koch era. A sensible deal to let the city run the subway, provided it has the financial levers to do so, would be favorable for everyone.

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Frank B. December 14, 2011 - 2:57 pm

“The city’s only realistic options (higher fares, higher tolls, higher taxes, or higher debt) would be met with all of the usual political objections.”

As I recall, the city council approved congestion pricing without great difficulty. It was that louse Sheldon Silver, dictator in chief of Albany, who refused to even bring it up for a vote.

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JAzumah December 15, 2011 - 1:14 am

I don’t think you want to give the subways back to a city that contributes just 4% of the current budget and is trying to offload that obligation plus its MTA Bus subsidy via bridge tolls. No thanks.

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Scott E December 14, 2011 - 8:15 am

Is Mr. Lhota regretting his decision to take the new job yet?

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Chris December 14, 2011 - 9:08 am

Lumping this together with the payroll tax cut is deceptive – this is not a cut, just lower than expected collections. The MTA knows going in that it’s funding will be dependent on such things as motor vehicle registration fee collections and gas taxes. Yes, funding your mass transit system based on demand for a substitute good is pretty stupid, but they wanted to find some money to put into the MTA and the nearest pile of money they could snatch was in driver’s pockets.

I’ve said this before, but there’s a simple solution – fund the system from fares, advertising, and other internally generated sources, and you avoid all these problems. It’s up to the public to either bear higher fares or accept that service levels will be based on political caprice and the collections of arbitrary taxes whose revenues happen to be assigned to the MTA.

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Bolwerk December 14, 2011 - 9:21 am

Then fund drivers’ transportation needs with tolls, congestion fees, and/or $8/gallon gas. Drivers certainly aren’t an injured party when they aren’t coming anywhere near covering their own costs either – and any transfer from transit users to drivers is, in fact, coming from general income appropriations rather than easily-targeted earmarked taxes/fees.

Funding the system from “fares, advertising, and other internally generated sources” (whatever those are) just doesn’t solve anything, like the debt Albany already inflicted on the system because it, by itself, doesn’t address any of the systematic problems with the MTA.

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Chris December 14, 2011 - 10:27 am

We can only dream that drivers would be expected to cover their own cost as well, and government would get out of subsidizing transportation entirely. It would be nice if players in this industry could make their money by appealing to consumers rather than fighting amongst each other for a bigger slice of the government pie (while teaming up to ensure, above all, that the government pie is as big as possible).

To your last point, if the MTA were cash flow positive, many more options would be open to it in addressing its debt and structural problems. When you’re not beholden to union-supported politicians for desperately needed fixes of cash, you can fight your unions. When you know you won’t need to borrow again for a long time, you can be aggressive about restructuring your debt and have plenty of runway to return to financial health.

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Bolwerk December 14, 2011 - 10:53 am

I don’t really have any ideological hangup about who pays for what or profitability. I just think it should be clear, public, honest, and preferably rational. But instead of looking at this from an accounting perspective, look at it from a economic perspective: the direct, attributable market costs of the operation probably are recovered by fares, at least with trains. It’s plus-mandates and overhead – some of it arguably helpful/a bonus/beneficial, some not – that I suspect drives most of the debt. Larry mentions pension obligations, but even labor inefficiency, top-heavy management, and poor work rules that drive costs and debt up. From that perspective, drivers aren’t paying for transit at all; they’re only paying for unnecessary transit overhead that doesn’t even benefit transit users directly.* That’s what we’re taking out debt to support, not transit.

That said, the government will never be out of funding transportation until the state is smashed. The government itself has far too much of a stake in transportation. Governments probably can’t even function without controlling transportation networks, and likely exist for that very reason.

* But arguably benefits drivers somewhat at least by keeping traffic congestion away, but I digress.

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Larry Littlefield December 14, 2011 - 9:14 am

What no one is noticing. The Center for Retirement Research at Boston College has once again found that the New York City Employees Retirement System, which includes New York City Transit, is one of the most underfunded pension systems in the U.S. Confirming their earlier analysis. And that of independent pension actuary John Bury.

This post is about the new GASB rules. The general CRR point of view is that the public employee pension crisis is not as bad as the critics make it sound, except in a few cases. Like ours.

See the table in the back of this report.

http://crr.bc.edu/images/stori.....23_508.pdf

Note that these estimates do not even include at 20/50 pension for the TWU which the state legislature has passed at least twice without a single “no” vote and which the TWU went on strike for.

It hasn’t happened, but in addition to gutting the system to pay for the existing pension hole and the debt, don’t you think the MTA had better start putting money aside for 20/50? After all, it’s certain to pass, along with a long of things like it, just before the senior citizens up the legislature and their backers finally decide to decamp en masse to Florida.

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nycpat December 14, 2011 - 10:23 am

If the legislature passed 20/50 twice, why would the strike be about 20/50? I would think the media would in that case have pointed out that the strike was a direct confrontation with Pataki over that issue.
Of course it wasn’t. It’s a falsehood you keep repeating.

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Larry Littlefield December 14, 2011 - 10:32 am

The state legislature passed 20/50 twice (that I know of), and Pataki vetoed it both times (while signing similar legislation).

The strike followed.

This isn’t a source many union people like — the Empire Center and the Post, but this is the sequence of events as I remember it also.

http://www.manhattan-institute.....albany.htm

“In 2003, fresh from another negotiation with the MTA, die union persuaded state legislators to introduce a bill allowing transit workers to retire with half pay pensions at age 50, after just 20 years on the job…just before adjourning in 2003, the Legislature approved the bill. The vote tallies were as good as it gets 148 0 in the Democrat dominated Assembly, and 62 0 in the Republican controlled Senate.”

“Pataki killed the measure with a “pocket veto” in early 2004. Even then, however, he didn’t object in principle to 20/50 pensions. Instead, in a tepid veto message, the governor cited technical problems with the bill, expressed qualms over its cost and said he was “constrained to disapprove the NIP based on the objection of the MTA and Mayor Bloomberg, “who contend that this type of enhanced benefit should be the subject of mutual agreement through collective bargaining.”

“In the 2005 session alone, both houses of the Legislature passed at least 46 bills increasing pensions for entire groups of employees’ at a total estimated cost of more than $100 million in onetime or recurring expenses to taxpayers. Among them was yet another bill boosting pensions for TWU members this one granting the ability to retire at age 50 to transit cashiers adopted by a combined vote of 198 1. Pataki vetoed it on grounds similar to those he cited in rejecting the broader sweetener a year earlier.”

“This, then, was the context in which the TWU approached its 2005 contract negotiations.”

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nycpat December 14, 2011 - 11:22 am

It is part of the overall context but it is not the cassus belli. Your repetition of this is slanderous.
I went on strike. I didn’t want to. I never heard 20/50 as a reason-before,during,after.

I thought the Taylor law specifically prohibits pension negotiations during contract talks.

The Empire Center does some good things. Sometimes it excuses sloppy scholarship because it’s ideologically convenient.

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Larry Littlefield December 14, 2011 - 11:54 am

“I thought the Taylor law specifically prohibits pension negotiations during contract talks.”

It does. But that didn’t stop Pataki from saying the stupid thing he did, evidently. And it didn’t stop Bloomberg to agreeing to 25/55 for teachers in 2007 in exchange for the UFT agreeing to a “merit pay” schoolwide bonus plan, now defunct.

The law does not apply in Albany.

Eric F. December 14, 2011 - 11:32 am

I’m with you on the point that you need adequate funding, but there is a larger context here. The MTA’s annual operating budget is over $7 billion. Roughly $90 million is not pocket change, but it’s only about 1 percent and change of the MTA’s budget. If your local business suffered a 1% revenue decline it would not seize to a halt.

I was curious about what was running under expectations. Is this real estate transfer tax money? Sales taxes? There are so many tax sluices for MTA revenue sources, it’s hard to know what they are talking about unless specifics are given. Presumably, if whatever is short is a good proxy for the rest of the revenue picture, it’s going to be a lousy tax revenue year all around.

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Larry Littlefield December 14, 2011 - 11:57 am

New York to limp along for years, says top economist.

“Let me be clear: Finance won’t deliver the jobs or taxes that it used to do. Period. Ever.”

Read more: http://mycrains.crainsnewyork......z1gWrZYa7p

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