When MTA head Joe Lhota announced yesterday a $29 million package of service improvements, he also voice his belief that the upcoming 2013 fare hikes will be pushed back by two months. Although the MTA needs the $450 million in annual revenue the fare hikes will bring, Lhota expressed his desire to avoid raising fares until absolutely necessary. “We owe it to the riders to wait to collect until we absolutely need to collect,” he said.
But should the MTA wait? After all, once the fares go up in March, no one will remember or care about the two-month delay. The fares will be higher, and while service improvements will be rolled out over the next 12-15 months, riders will grumble about the increased costs of a subway trip or bus ride. In the short term, it’s an olive branch offering to perennially unhappy riders. In the long term, it will cost the MTA $90 million.
And therein lies the economic rub. That $90 million seems to be a key figure. When The Daily News first reported on the service enhancements earlier this week, Pete Donohue noted that the authority could restore service thanks to a $90 million surplus, and yesterday, as reporters wondered about the remainder of the dollars, the MTA spoke at length about blossoming ridership. These service improvements are due to demand they said.
So it appears to me as though the MTA is using a fare revenue increase along with the promise of more riders to expand transit service while relying on that $90 million surplus to stave off the fare hikes for a few months. One way or another, the numbers add up. So while the MTA gets credit for delaying a fare hike, I’m left wondering if it’s sensible policy.
There’s no doubt, with health care costs and pension obligations high and debt service obligations steep, that the MTA needs the dollars. They also have to present a balanced budget at the end of the year. Why not use the excess money to pay down some costs and then just raise the fares as scheduled? Fare holidays or fare hike delays never really pay off in the long run as by September of next year, the riding public will have mostly forgotten the timing of the fare hikes anyway.
Maybe that’s too technocratic of me and the MTA needs some good will for a few months. Maybe the politicians will appreciate it. Maybe the public will too. It’s a customer-friendly gesture but maybe it’s just worth it to get the fare hike out of the way and the money rolling in.
15 comments
sorry i’ve lived in a cave for the past few months – is there a TWU contract or is that still being worked on?
No contract yet.
My guess is the TWU would use the $90 million to demand a wage increase. But wages would not go back down when real estate transfer taxes did, leading to even more service cuts. The delay in fare increase is politically astute, but economically stupid.
Unfortunately the MTA cannot pay down its New York City Transit pension hole, because that pension plan is run by the city. The city is hiding costs until Bloomberg leaves office, leading to much bigger increases in costs later.
It could use the money for the capital plan, to reduce debt, but arbitrators have ruled that the MTA can eliminate the capital plan and let the system collapse to pay for raises.
Bottom line — it’s a game of grab the money wheter it exists or not, the future be damned. Same as it’s always been. When the bill comes due, only the riders pay.
The fact that the banks fixed the interest rates to scam pension funds doesn’t help the issue. If the union finds that their pension fund was affected by LIBOR and sue successfully, that’s one issue that gets solved whence the banks pay out.
The bigger problem is that the executive class has fixed the market in executive pay, diverting corporate profits to themselves even as the dividend yield is half its historic level.
I understand there are political estimates of how underfunded pension plans are. The bottom line is stock prices go up and down, but benefits are paid in cash can only be paid from actual dividends and interest. Sell off the stock, and there are no assets to pay for the benefits of future retirees. And actual cash earnings are low and going down.
to me, a two month delay is similar to the “holiday discount” from a few years ago, which really did nothing except squander money
I wonder how a delayed fare increase would affect arbitration. On the one hand, the MTA could argue all the extra money is gone, so they can’t pay more. On the other hand, the TWU could argue the MTA had so much extra money, they delayed the fare increase, so they can pay more.
$90M? The hike is delayed by two months I am reading. That would be approx. $75M, no? Agree with your point though; no one will remember the olive branch when fares go up and they lose much needed dollars.
Yes. Sorry. $75 million. So that + the service increases basically equals the surplus.
I think that people who can barely afford to pay their train or bus fare will remember (& appreciate) that the fare increase was pushed back.
Just like the remember the massive cut in de facto fares in the late 1990s due to the addition of Metrocard discounts and the elimination of two fare zones?
Yup I hear it all the time from the Straphangers. Yes fares are rising and service has been cut, but it’s worth it because it is to pay back the debts run up when we had a great deal 15 years ago!
This gesture will be about as appreciated as free fares on Christmas.
Which is why there’s no point in delaying it.
Ask the Port Authority what they think about their toll hike.
The Feds are Watching.
Are they looking out for the riders or the feds?
[…] year. Such a move will cost the authority $67 million in 2013 and $69 million in 2015. I’ve questioned the wisdom of such a move, but MTA officials feel it is a positive customer service […]