Whether we like it or not — and who would actually like it? — the MTA is going to raise its fares by around 7.5 percent in 2013 and by the same amount again in 2015. These planned hikes were instituted as part of the authority’s attempts at combating inflation and the downward drag on average fares brought about by unlimited ride cards as well as a need to straighten out its finances. What we’re not getting, one MTA official told the City Council yesterday, is more service along with our fare hikes.
In fact, as Hilary Ring, the authority’s director of government affairs told James Vacca’s Transportation Committee, the hundreds of millions generated by the fare hikes will likely go toward the MTA’s ever-increasing health care and pension benefits. It will not, as Ted Mann of The Wall Street Journal reported, “be sufficient to allow for new improvements in the system or to restore some of the bus and subway routes eliminated during the budget crunch of 2010.” Said Ring, “Essentially the fare increase and the toll increase is almost dollar-for-dollar being eaten up by our increase in pension and retiree health care costs.”
As Capital New York’s Dan Rosenblum noted, the MTA expects to see $900 million in revenue from the fare hike while it will be on the hook for over $800 million in increased pension and health care costs. And those figures are in advance of whatever contract the TWU eventually signs covering 2012-2014. The amounts could be greater.
Of course, city politicians were none too pleased with these statements. “It’s hard for me to believe that we’re going to have that type of an increase and we’re going to have no restoration and no improvements in services,” Vacca said. “I refuse to accept that those of us who call ourselves strap-hangers have to accept paying more and getting less.”
The Journal had more on the fallout from Ring’s statements:
Jim Gannon, a spokesman for TWU, characterized the testimony as “a cheap shot,” saying the MTA was trying to blame its financial struggles solely on labor.
Gene Russianoff of the Straphangers Campaign noted that the MTA’s debt-service costs will also rise sharply along the same timeline. “MTA’s spin is to make their work force responsible for the fare increase….Who’s responsible for the pressure on fares and operations—the work force or the borrowing? I think the answer is you probably could make a good case for either,” he said. Debt-service costs for the MTA are projected to top $3.1 billion annually by 2018, said Mr. Russianoff, who said tolls on the East River bridges are an inevitable if controversial solution to the authority’s funding woes.
Mr. Vacca said he will urge the MTA to avoid the 2013 fare hikes if possible. He said he would stress that a rising economic tide—and a possible boom in ridership if gasoline prices continue to rise—could mean more revenue, in the form of fares and an uptick in the tax revenues dedicated to the MTA.
The city plans to contribute $786 million in operating costs to the MTA for 2013 as the authority plans for a budget in excess of $13 billion. It is, in other words, one giant mess.
So what exactly is going on here? On the one hand, Ring isn’t incorrect when he lights the MTA’s increasing pension and health care obligations. The authority is turning into a retirement fund for its legions of employees at the expense of its mission to provide transportation services. The agency can barely consider improving transportation access because of a never-ending increase in its employee obligations.
On the other hand, these obligations are hardly the only costs the MTA must absorb over the next few years. Debt service will continue to remain a steady presence on the MTA’s ledge, and while the revenue generating by increased ridership for the Second Ave. Subway, the 7 line extension and East Side Access will help pay down some of that debt, it too will act as a drain on the MTA’s budget.
Ultimately, then, we’re left in a familiar position: The MTA’s expenditures pie is growing in leaps and bounds, and none of that money is going toward improving service for those who have to shoulder the service cuts. Somehow, we the riders always come out behind.
58 comments
Why are the MTA’s borrowing costs going up? Interest rates are at historic lows. Also, blaming the rank and file for the entirely foreseeable cost of agreements that the MTA made in good faith (one assumes) is a bit rich. Well, maybe not entirely foreseeable on the healthcare costs but 100% on the pension.
I don’t think they mean interest rate wise, I think they mean the amount the authority owes in total. Eventually the MTA will cap out on the amount they can borrow, and that will be a serious problem for both the authority and its riders.
The reality is that the MTA is going to have to find a way to persuade both NYC and Albany to budget more actual monies (instead of asking them to bond their way through anything) or else the MTA will fall under its own weight, and the politicians in Albany will just blame the MTA for being wasteful.
Ummm, I haven’t seen the word “blame” in any MTA statement or press release. All they are doing is to factually state where the money will go. It isn’t anyone’s fault that health care and pension costs are going up; this has been known for a long time. It is merely a statement of fact.
The rates being lower cause an INCREASE in pension payments. Normally, you’d be able to set aside $50 and it’d grow to $100 to meet pension obligations in, say, 7 years. In a low rate environment, it would take, say, $80 to get to the same result. The current artificially low rates are killing pension funding all across municipalities and corporations. There are very few private sector companies that aren’t scaling back pension benefits in places where they can do so without legal restriction (such as for white collar workers).
Sure, they’re only factually stating things that happen to align with their current labor battles. The MTA could say, “We need to hike fares to cover service, pay capital debt, do maintenance, and pay benefits.” Instead, it chose to blast just the union.
And I have a nagging suspicion that it’s only going to make things worse. Workers who constantly fear layoffs will be demoralized and do a poor job. If you want to do a layoff, do it in a bang and then make a credible commitment not to do it again. This horn-locking in which small bits of labor cuts are done by agreement may make union leaders feel like they’ve protected their constituents, but it ends up dangling a sword over every worker’s neck for years on end.
The union asked for patently unreasonable things last time ’round, and they actually *got* them thanks to a patently unreasonable labor arbitrator.
No wonder the MTA is pointedly blaming the rate increase on that; the arbitrator literally told them the equivalent of “sure you can pay more pensions than seems affordable, you can just raise ticket prices or cut service”, if I remember correctly (someone care to research this?), so the MTA is doing what they were told.
I’m not on the TWU leaders’ side here. It’s only been hurting its members’ long-term interests. I suppose Alon agrees, actually, based on what he wrote….
Now imagine if they got 20/50 the way the NYC Teachers got 25/55. The latter is destroying the schools.
The debts are more the problem with the MTA. But Generation Greed doesn’t learn. The NYC Times has an article on congestion pricing, and immediately suggests bonding the revenues so they can all be spent in a few years, leaving the MTA no better off than before.
“The city plans to contribute $786 million in operating costs to the MTA for 2013 as the authority plans for a budget in excess of $13 billion.”
Let’s take most of that $786 million, combine it the payroll tax revenues that come from within NYC — 87 percent of the total – and how close does this come to matching the MTA subsidies for the bus system and paratransit? Assuming that the revenue from multi-mode rides goes to rail?
If NYC wants better bus service, let it take over the bus system. Cut off state aid to all the Downstate bus systems, and tell the suburban counties to fund their own bus systems — with or without the payroll tax as they choose.
“Somehow, we the riders always come out behind.”
The riders came out ahead from 1995 to 2002. Drastically falling net fares due to the introduction of Metrocard discounts, and improving service. The politicians and Straphangers acted as if these benefits were coming from Santa Claus. They were coming from the future, now the present.
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Pwn3d by the Me Generation!
Don’t worry, in the next few decades you’ll make plenty as gardeners and home health aides tidying up in millionaire’s rest homes; most jobs but that and municipal employees will be outsourced…
until they reach wage parity with the province around your employer’s main office in China.
Pay up, suckers!
“The authority is turning into a retirement fund for its legions of employees at the expense of its mission to provide transportation services.”
That pretty much sums it up.
When talking about these issues, no one bothers to calculate how much to blame the union and how much to blame past taxpayers/fairpayers.
How much of the pension hole is due to unfunded retroactive enhancements, and how much is due to the MTA not contributing enough, in some past years, to pay for the benefits that had been promised to begin with?
Of course to do that, you’d need an honest accounting of how big the pension hole actually is. And NO ONE seems to want that.
I would think that the vast majority of us are suckers – not a member of the TWU, or MTA management, not Albany lawmakers. We don’t draft up these ludicrous contracts, don’t grant retroactive pension spikes for political gain, don’t decide on if/how to fund any of it. Just asked to constantly pay more for less, while those mentioned above benefit.
The taxpayer/farepayer is then one party not represented in union-management negotiations. If coke signs a bad contract and forces a price rise, I can drink pepsi. Where do I go when MTA negotiators take the path of least resistance and offer up insane benefits packages to the guy who operates my subway train?
You’re supposed to go to the state legislature, but *it’s broken*.
The MTA negotiators really weren’t at fault, if you remember the last round of talks; the arbitrator was at fault, and the state rules which led to the arbitration were also at fault.
Arguably 100% of the problem is due to the state legislature. It created the rules which led to the rather bizarre bargaining procedures between the TWU and MTA; it created the pension laws and the pension funding laws; it chose to take the subway out of the control of the City; it chose to underfund the MTA severely; et cetera.
It’s *all* the legislature’s fault, ultimately. Could we fix it if we fixed the legislature? Perhaps. Fixing the legislature has been a very slow process. Step One is eliminating the Joe Bruno Gang (so-called Republicans) from power in the State Senate, and then we’ll work on step two…
Something to think about: When you buy gasoline, or household staples, (i.e. bread, milk, etc.), and the price goes up for those products, you are essentially paying more for the same thing (give or take a few bells and whistles that may be added in over time).
Transit is similar in that regard, with the same basic service provided continuously, supported by technological enhancements and upkeep on the system. As transportation is a staple of our society, there are subtle changes in the product over time, yet it must adjust to things that affect its cost structure.
As many of us know, unlimited metrocards have offered great value to the consumer, providing in essence, a lower fare per ride while fostering geater system usage. The downside to this strategy is foregoing future revenues that would have otherwise been collected under the old system. The long-term effects of this strategy are starting to become evident now, and the MTA must take action to fulfill its obligations, maintain some level of adequate service, and account for inflation.
And these challenges are emblematic of what many businesses are facing today. Just ask anyone whose health insurance premiums have gone up in the last few years while their coverage has declined.
“As many of us know, unlimited metrocards have offered great value to the consumer, providing in essence, a lower fare per ride while fostering geater system usage. The downside to this strategy is foregoing future revenues that would have otherwise been collected under the old system.”
The future revenues haven’t been forgone, because the fares — adjusting for the unlimited rides — have been rising faster than inflation.
It is the PAST fares that were foregone. Some share of this hell is on past riders. Whether that is more or less than the hell being visited on current and future riders is subject to debate.
But they perhaps would not have been collected. The unlimited MC made possible, and practical, trips that never would have been taken before. It’s likely part of the reason the ridership boom that took place in the 1990s was suddenly possible.
It especially encouraged a great deal of off-peak usage that might not have occurred.
Isn’t this the Republican approach as espoused by the Three Stooges (exclusive of Dr. Paul)? Make the little guy pay for everything? So as riders, we have to pay for the generous raises to TWU. We have to pay for all the bureaucratic bloat. We have to pay when Albany steals $ for transit. We have to pay for sweetheart real estate deals such as 2 Broadway and other MTA fire sales. We have to pay for longer waits for buses. We have to pay for a lack of a transit vision by being stuck on buses and trains and cars, all mired under their own weight.
The MTA’s basically in the same boat the automakers are in today — past management agreed to benefits with the idea that they would be long gone by the time the benefits came due, because even in the early 1970s you could see the problem coming when the retirees would have to be supported. It’s the same thing the feds are starting to face on Social Security and Medicare with the first wave of boomer retirees starting to tap into the system.
If you maintain the same pension benefits and the same retirement schedules, you’re going to get less bus service, because more buses=more drivers=more maintenance workers=more people on the MTA’s benefit and pension system. Back during the Lindsay years, when the new mayor bent over and dropped his drawers for Michael Quill, the idea was the cost could just be passed along to the big corporations and their high-income workers via corporate tax hikes and the institution of a city income tax, because New York City was so amazingly amazing no big corporation would ever consider moving out of town to cut its tax liability. Oohps.
As Larry mentioned about, if there was some way to cut the cost of the bus system out of the cost of funding the subway, the latter would be in far better shape because subway fare recovery is far more efficient than the bus system. But if you’re The New York Times or city politicians, you can’t wail about the fact the fare increases won’t add any service because all the money’s going into funding benefits, and then turn around a few weeks later and wail about the MTA’s plans to institute OTPO and CBTC on the L and 7 lines to save money through eventual workforce attrition.
Social Security will have no problems before 2044. Look it up.
(The government’s general fund, on the other hand, is bankrupt, largely due to military spending and cutting taxes on the rich. It’s been borrowing from Social Security. Of course, it could easily fix its problems by restoring Eisenhower-era tax rates and giving us our “peace dividend” like the first Bush promised.)
Medicare, unlike Social Security, has a serious problem because health care costs in the US are a disaster. The solution is single-payer, which forces costs way down, but Republicans won’t consider it and all too many Democrats won’t consider it either.
Got to pay for the one percent, too.
“Isn’t this the Republican approach as espoused by the Three Stooges (exclusive of Dr. Paul)? Make the little guy pay for everything?”
yyyyup
“Got to pay for the one percent, too.”
yyyyup
What do the “one percent” have to do with MTA employee benefit payments? There’s undoubtedly some subtle logic I’m missing here. You have huge benefit liabilities promised by a government bureaucracy to government workers. You blame . . . who, a dentist making $300k a year? I don’t get it.
Both the executive class and public retirees negotiate with their own kind, and pass the hidden cost on to everyone else.
The top executives and board members like to pretend their pay is set in a competitive marketplace, rather than acting as a de facto monopoly union grabbing more, more more. Those unionized retirees with retroactively enhanced pensions like to pretend they are the 99 percent, not financial predators at their expense.
I don’t pay top executives. I don’t pay Kobe Bryant or Alex Rodriguez. I don’t care what they make. Government employees are paid by me, and their compensation has to matter to me whether I want it to or not. Whether I care what Peyton Manning signs for is merely a matter of prurient interest or envy.
Sure you do. Let me give you one example.
The average dividend yield on stocks is historically 4.3%. It is now around 2.0%, and has been at that level or lower for some time. So investors are getting less income.
The executive class claims that instead of dividends they are buying back stocks, creating capital gains for investors. But as much as they buy back stock from existing investors, they issue stocks to themselves. So in the long run (bubbles aside) there are no capital gains.
Now the public employee pension funds assume they will earn 8.0% per year on investments. Even though the dividend yield is 2.0%, and the interest rate is kept at zero as part of the financial bailout. So who makes up the difference?
You do.
“The city plans to contribute $786 million in operating costs to the MTA for 2013.”
Wonder what the city spends on streets and bridges each year. minus any state or federal funds flowing thru, but plus some of NYPD acting as highway patrol plus snowplowing etc?
I have a hunch that the more than 50% of NYC households who do not even own cars are not seeing as much spent on buses and subways as is spent on streets and bridges for the benefit of the richer but fewer.
Well, I could be wrong about this, but I’d be really interested to see the figures compared.
Would be an interesting comparison for sure. But then you also have to think about the benefits the non-driver gets from a road system allows for delivery of goods, services, etc..
Isn’t the free-rider / user vs. all payment question grand? It makes us all think about what we want to do and the way we as a society prioritize and value things.
Russianoff said that tolling the East River Bridges is the solution to the Authority’s funding woes. Those were virtually the exact words of the politicians prior to the creating of the MTA. But that time the line was create an MTA that will have the power to divert bridge and tunnel tolls to the subways and our transit financial problems will be solved. Fool us once but not twice. If the free bridges were to be tolled, the MTA would still come back every two years for a fare increase and we have no assurances that Albany will not reduce further it’s mass transit assistance if new revenues from elsewhere became available.
+1
I think most people would agree that IF the East River Bridges were tolled, the hope is that it would be an additional funding source, rather than instead of the current funding source.
However, I find the argument of, “well, they are going to raise the fares anyhow, therefore we shouldn’t toll, to be shortsighted”. The bottom line is that there needs to be more income to the MTA, and tolling the East River crossings would be a good way to do so. Because there were mistakes made in the past doesn’t mean we should ignore logic now. THe law just needs to be written in a way that allows this to be an additional source (I’m aware that could be an issue, but fighting for it, would be a start)
You would also have to rewrite how the MTA is allowed to spend that revenue. Currently the subways and buses don’t receive their fair share of TBTA revenues. The formula shoud be based on ridership so that the subways not the rails receive the bulk of the revenues.
Refusing to toll the free bridges is simply another thing screws drivers. Well, it screws responsible, taxpaying drivers. It apparently pleases the whiny, entitled class of drivers who don’t care about their own time and money (or anyone else’s) as long as they can vroom vroom in idle traffic.
Russianoff is full of shit though. He doesn’t dare take on the pension obligations and other featherbedding the TWU enjoys. It’s just not anti-worker or even anti-union to say they are getting a deal far out of proportion with what they need or deserve for the amount of work they do.
If they ever would have considered lowering the existing tolls in exchange for tolling the free bridges, it might have passed, but the politicians would only consider increasing the free bridges to an insane $6.50 which rises by at least 50 cents every two years. And the higher those tolls get, the less chance there will be that the free bridges will ever be tolled.
If that’s so, it was probably a deliberate tactic to derail the toll and fuck the city.
And yet the TWU is actually relatively well-behaved — not that much featherbedding, work most of the time — compared to the featherbedded LIRR unions.
If they tolled the East River bridges, MTYA employees could retire at 30. Heck, if they toll the side streets, the MTA employees could retire before even starting work! Once staircases and hallways are tolled, the entire population can retire at birth!
Got to love that ad. Albany politicians want to give worker’s pensions to Wall Street. Who do you think invests the pension money right now? Under pay to play no doubt — just ask Alan Hevesi.
I’ll bet the unions are negotiating to get even worse pensions with more contributions for future employees, to pay for the exiting pension hole created by past enhancements for those cashing in and moving out, and perhaps even another retirement incentive for Generation Greed.
“I’ll bet the unions are negotiating to get even worse pensions with more contributions for future employees,”
Last I checked, you’re correct. Last I checked, the TWU was still selling out its newer members to pay for its older ones. This might have changed, though.
I have used the term and I will use it again MTA stands for money taken away, and used for projects that are inefficient such as the Fulton St Transit Center and East Side Access (They had a far cheaper alternative to building this project called the Hunterspoint Avenue LIRR Station, which coupled with the 7 train, offers about a 5-10 minute trip straight to Grand Central. All they had to do is upgrade the stations). However, so much money was sunk into those projects, they have to be completed, otherwise billions will have be thrown into the garbage. That said, the issue starts and ends with cowardly politicians who are afraid to stand up to various unions and pressure groups who seem to get whatever they want, from big pensions and featherbedding, to stopping needed improvements such as additional tracks on the LIRR Main Line (A trip I make everyday from Bethpage), to preventing a one stop trip to LaGuardia Airport, to the refusal to put tolls on bridges. Until our so-called leaders think about the majority instead of a narrow few, we will keep paying through the nose with higher fares and taxes for gold plated pensions for TWU workers, coupled with bad service and poor planning… Assuming things don’t finally collapse like we see in Greece.
An upgraded Hunterspoint Av station would not give a one-seat ride to Grand Central, the goal of ESA, and the already overstuffed 7 train likely could not accommodate that amount of traffic.
Hunterspoint Ave station is under utilized as is Woodside for that matter. The BILLIONS they sank into East Side Access PLUS the time and money involved fixing the Steinway Tunnel could have been better utilized in other areas. Is Hunterspoint perfect? No it is not. But it would have been a far cheaper alternative.
question: How do the fares in New York compare with other systems internationally?
having been to London many times… i can say that compared to the underground, we have a very reasonable system, particularly if you are traveling across zones.
obviously, it should stay that way…but it does make one stop and think a bit.
also… how does the cost of operating the subway system compare to the cost of operating roads on a per capita or per miles traveled basis?
Rather low, really. But few cities have the benefits of scale we do. And, compare Germany, which has similar fares on its urban transit. Operating expenses tend to be covered far better from fares.
Probably the simple answer is, it doesn’t. Not meaningfully anyway.
Roads present completely different challenges. To name some of them, they take helluva more space and the opportunity cost of the land they sit on is high. One of the problems with Moses’ car-centric projects was always land taken off tax rolls to go to public support of roads, a backdoor subsidy for drivers. They carry fewer people and obviously have much more negative environmental externalities. Policing and court costs. Radically different administrative needs. Different means of taxpayer support. Different kinds of user contributions. In the case of NYC, there is the matter of the problem that many drivers likely don’t pay any of their share of the expenses the city incurs.
And what meaning do you derive from comparing a mile of subway track to a mile of open road? Or suburban tract housing? Everything from velocity to labor costs are radically different.
Compared to other American cities, the fares in New York are expensive. Compared to Europe, they’re cheap. But this reflects variation in the local cost of living, it doesn’t mean that anyone’s fares are too low or too high.
One thing which has struck me, though, is how we handle unlimited rides. MTA has kept bumping up the break even point for one reason or another every time they hike the fares… $2.10 versus $104, you need 50 rides to break even.
Compare this to Montreal, where in pay as you go a single ride works out to $2.40 but a monthly unlimited card is only $75.50 – so the break even point is 32 rides.
The issue in New York seems to be a complaint that unlimited riders “don’t pay their fair share”… or that it’s supposedly putting more of the burden of the fare hike on people who can more afford it based on some myth that poor people don’t use unlimited cards. What’s lost is that the more you raise the break even point of the unlimited card, the more you defeat the purpose of its existence.
So far as I can tell, NYC is only cheap compared to cities with similar large-scale transit. And, speaking really generally here, that’s probably only if you adjust for purchasing power parity.
I don’t know what to say about unlimiteds. Sure, they should offer a discount for average use, but what that discount is probably depends at least in part on daily commuter habits and actual use. The main benefit of unlimiteds seems to be encouraging the use of extra capacity during off-peak times, which is good public policy – it should be used and will go to waste if it’s not. As off-peak use has increased, it makes sense for unlimited prices to move closer to the prices of using fares.
One of the problems with NYC Subway fares is that it has flat-rate fares. Pretty much every other city this large has zoned fares or distance-based fares of some sort.
New York fares are higher than most but by no means all European fares – the single-ride fare is lower, but European cities tend toward larger unlimited monthly discounts, so the monthly fare is lower. (For example, it’s €30 in Milan, and €74 in Berlin.) Measured by average fare paid per ride, they’re roughly a wash with Tokyo fares.
Operating costs I don’t know – all I can tell you is that per rider, NYCT is 20% more expensive than the Paris system. Tokyo, which has a more efficient system and much busier lines, costs a fraction to run – with the same average fare as New York, its subways make a profit.
“All I can tell you is that per rider, NYCT is 20% more expensive than the Paris system.”
How much of that is the fact that in France all the workers get the same taxpayer funded health and retirement benefits, rather than public employees being a privileged class?
To make that comparison, you have to adjust for currencies and the cost of living. What makes the value of what MTA workers worth relatively more is that other workers get relatively less, reducing their cost of living.
Per-rider cost may not be very instructive here when comparing with Paris. NYC could have significantly higher usage that conceals major inefficiencies in this comparison. I don’t know about Paris, but staffing levels are significantly lower on European systems.
No, actually, usage is fairly comparable in absolute terms, though per capita Paris is much higher. I no longer remember whether I was comparing STIF vs. MTA+NJT (Paris has a bit more absolute usage than New York) or just RATP vs. NYCT (Paris has a bit less).
No, on the contrary, French public sector unions are the most militant. The railroad workers go on strike on a regular basis. It’s gotten to the point that there are frequent partial strikes, i.e. only 1/3 or 2/3 of the trains are running. Often the only demand the workers get is to be paid for the strike days. SNCF actually uses it as an argument in international consultancy – it claims experience with strong, hostile unions.
Also, retirement benefits in France are funded out of a 50% payroll tax paid by the employer. Put another way, for every 1.50 Euros your employer needs to spend on you, 50 cents go to your retirement.
But health care.
Health care benefits costs are obscenely large in the US and are completely distorting the entire economy.
This is not true in France.
“How much of that is the fact that in France all the workers get the same taxpayer funded health and retirement benefits, rather than public employees being a privileged class?”
An enormous amount. Health care benefits now cost more than salaries in many jobs; I don’t know about the MTA. But this situation is ridiculous and untenable. The government should handle health care payments through a single-payer system, and your job should just pay actual money.
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