Sep
12

CBC: Absent the payroll tax, a steep fare hike

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Later this morning, at a breakfast hosted by Crain’s New York and in front of a crowd of influential New Yorkers, MTA Chairman and CEO Joseph Lhota will take the microphone to defend and promote the MTA. He is likely to talk about the power of transit and its role in shaping New York, and inevitably, as his talk with mirror recent headlines, he will have to defend the payroll mobility tax. Under assault by a state judge with an agenda, the payroll mobility tax was no one’s good idea other than David Paterson, but the MTA can ill afford to lose over $1.5 billion in annual revenue.

The payroll tax has always been an odd creature. The state approved it despite congestion pricing or bridge tolling schemes that may city-based transit advocates thought were more progressive. It is a seemingly small tax — just 34 cents for every $100 in payroll — that has generated opposition from the end of Long Island to the norther reaches of Metro-North. Politicians want to see its demise, but no one has yet offered up how the MTA can replace a gaping hole of approximately 17 percent of its annual operating budget. We are at an impasse.

Earlier this week, Charles Brecher and Rahul Jain from the Citizens Budget Commission ran the numbers and determined what would happen if the MTA had to face a future without a payroll tax, in part or in whole. As many have suggested in the comments to my post, it’s not unreasonable to assume that the MTA would look to jack up fares for the suburban riders whose neighbors are so opposed to the tax. The outcome, the two write, would be quite extreme. They note that of the $1.4 billion in revenue generated by the payroll tax, 70 percent came from city-based employers. So how do we replace the remaining $428 million if the suburban portion of the payroll tax were to be eliminated? Take a read:

Since the forgone money came from the suburbs, the MTA could reasonably look to those counties to make up the gap by either paying more in another way or taking cuts in services — to the Long Island Rail Road (LIRR) and Metro-North Railroad (MNR).

Both railroads are heavily subsidized by regional and statewide taxes in addition to the PMT. In 2012 the LIRR will cost more than $1.6 billion to operate and MNR will have expenses surpassing $1.3 billion. Passenger fares are expected to cover only about 36 percent of the LIRR budget and less than 46 percent of the MNR budget. Relatively small amounts come from Connecticut for MNR and from advertising and other “earned” revenue sources. The bulk of both railroads’ costs are covered by taxes like the PMT appropriated through the State budget.

What if the LIRR and MNR had to deal with the $459 million in lost PMT revenue? This would mean expenditure cuts of about 16 percent for the LIRR and 15 percent for the MNR. In rough terms, that is the equivalent of ending service one day per week. If offset by higher fares, the lost sums would require a 46 percent increase on the LIRR and a 32 percent increase on the MNR. The price of a ticket to Ronkonkoma, the largest station by ridership on Long Island, would increase from $334 a month to $488; a 32 percent change in the price of a monthly ticket from White Plains to Grand Central Terminal on MNR would increase the price from $229 to $302. These changes do not include already planned fare hikes of 7.5 percent for all MTA riders for 2013, bringing the monthly fare to more than $513 for Ronkonkoma and $319 for White Plains. Neither the service cuts nor the fare hikes would make riders happy.

A few days ago, Greg David at Crain’s wrote about how the payroll tax has “undermined support” for transit amongst certain suburban leaders. He advocated for a combination of a restored commuter tax and a tolling proposal. In essence, the dollars should be the same as the payroll tax, and those paying are the same as well. It’s basically just reallocated the money to similar constituents and calling it something else. Maybe that would work or maybe not.

Perhaps the solution is to stiff suburban riders — at least temporarily. Suburban representatives would cry bloody murder over such a fare hike, but they can’t have their cake and eat it too. Transit service provides a benefit to those towns and residents who don’t live in the city but want easy access, and nothing is free. As Brecher and Jain wrote, “People should be careful about what they wish for; the theory of an unconstitutional PMT could be far less pleasant in reality. There is no such thing as a free lunch or a free train ride; the LIRR and the MNR must be paid for in one way or another, and the PMT may be less painful than many other options.”

Until Albany finds a better, more equitable solution, the payroll mobility tax should stand, and even though neither he nor his predecessor Jay Walder proposed the idea, Lhota will fight for it until the end. The MTA budget has little other choice right now.



Categories : MTA Economics

31 Responses to “CBC: Absent the payroll tax, a steep fare hike”

  1. Spendmore Wastemore says:

    “Perhaps the solution is to stiff suburban riders”

    Nothing in the proposal stiffs suburban riders. They have, through their representatives, decided not to pay for transit. Thus the service should either be shut down (foolish), or the price raised to cover costs. For the LIRR and its notorious grift, there should be no MTA subsidy except from funds paid by Long Island constituents.

    • SEAN says:

      Could you imagine what NYC would be like without the railroads that fead it? First of all the average suburban home would lose nearly 20% of it’s value & commercial buildings would lose 50% as the Texas Transportation Institute calculated in 2006. That would be perhaps good for new homebuyers, but would have a cascading effect on government as property & other tax sources would dry up over night.

      Second If you think the city is overloaded with cars now, without transit it would be next to impossible to get around as the suburbanites all drive to & from the city at once & try to find a place to park.

      Third This could cause companies to reavaluate if they should stay in the NYC area at all. Yeah yeah I know companies move out all the time, but the effect would be quite different even though it may appear to be the same.

      Forth If jobs move out, then the people who hold those jobs go with them along with their ecconomic impact.

      So you can see just a few issues that come up & I described them as briefly as possible.

      • Tower18 says:

        Precisely, which is why they should do it. Cut out Wednesdays or something. Since that can’t happen, reduce rush-period service by 15%, eliminate express trains. There will be a few days, maybe a week or so of pain…and then everyone will realize how useful the railroads are. Or, it will go on for a long time and housing prices in Long Island will fall, people will re-evaluate NJ over LI, and maybe THEN the politicians will wake up.

        I don’t know if Westchester will have the same immediate problems, the traffic situation up north isn’t quite as bad. But trying to drive to the city from LI will be a nightmare on Day 1…and I say “good.”

        • Nathanael says:

          Or if you want to be more aggressive, cut entire services; whichever ones cost the most and go through the areas providing the least political support.

        • Alon Levy says:

          “Cut express trains” is an underrated solution already for the Main Line. The line’s peak traffic is about 22 tph. This is enough to fit on one unidirectional track if all trains go at the same speed, and this would allow crucial reverse-peak service for people who live in the city and work in Mineola and Hicksville. It is bad practice of the LIRR to eliminate reverse-peak service so that it can run express trains all day.

      • Nathanael says:

        “Second If you think the city is overloaded with cars now, without transit it would be next to impossible to get around as the suburbanites all drive to & from the city at once & try to find a place to park.”

        All the road entrances to Manhattan from Long Island are controlled either by the City or by MTA Bridges and Tunnels. Raise the tolls.

        All the road entrances from the Bronx are also controlled by either the City or MTA Bridges and Tunnels, with the worrisome exception of the I-95 bridge over the Harlem River. Toll ‘em all. Toll the exits to I-95 to avoid the problem of tolling a road not controlled by the City.

        This would help with a lot of the funding problems, anyway.

  2. Eric F says:

    Can anyone explain why the cost coverage on the LIRR is so low relative to the other services? The trains seem packed, the quality of the service seems no higher than Metro North. That’s an appallingly low farbox recovery figure.

    The analysis leaves out other possibilities to make up the revenue loss, namely, reduced expenses. When an airline can’t cover its costs, one thing it can do is turn to its unions for concessions. That would not seem an unreasonable tack to take here.

    And why can’t the fares rise to the levels mentioned? Ok, so now you are paying 488 a month to commute in from Suffolk. That’s about 6 grand per year. Part of that cost is covered by the taxpayer when you get your transit card via a payroll deduction. At any rate, it doesn’t seem unreasonable to shoulder the true burden, imposed in a transparent way, rather than pay through a dozen little taxes imposed on unrelated activities. There is no greater security for people taking in excessive money from the LIRR than having the LIRR financed in opaque and indirect ways. The post office should be so lucky as to be able to charge 10 cents for a stamp and have 60% of its financing come from little taxes on toys and real estate and movie tickets. It could go in perpetuity bleeding money and no one would look at it cross-wise.

    Maybe if the cost rose to 10 grand, people would take a hard look at what the MTA is doing with that money. Why are costs for transit services on a unique cost-rising ratchet when the same is not true for other transportation modes. In an era of high unemployment and 0% private sector wage gains, can’t someone stop the madness of coddling the railroad employees?

    • From overstaffed commuter trains (they should have one driver and that’s it – fixed level boarding, proof-of-payment, and no conductors at all!) to maintenance shops that are run by craft unions bickering over every single job and work rule, it’s no wonder the LIRR is bleeding money. Now if only someone would confront the MTA about it. A lot of people seem to think that shutting down the LIRR and MNRR would make the suburbs think twice about stiffing the MTA, but I’d like to think it would make them think twice about how much money the MTA wastes on commuter rail service!

      • Bolwerk says:

        I don’t think the MTA is getting around the staffing issue. You need a minimum staff of two on trains, per FRA rules, I think almost exclusively due to the need for brake tests. Perhaps this could be partly circumvented by having a certified engineers waiting at terminals to do them.

        As for confrontation, who is to do it? The pols surely know the true mission of the MTA is making sure that featherbedding goes on. The media doesn’t care, as long as the suburban proceed pimps get their cut without annoying the rabble (e.g., no payroll taxes).

        • Doesn’t Caltrain and/or Metrolink run trains on FRA-regulated track without conductors?

          In any case, even bringing the LIRR/MNRR down to one driver and one conductor would be a huge victory.

          • Bolwerk says:

            Not that I know of, but I’m not sure you need a conductor – not one that does anything anyway, except the brake tests. He’d presumably have some other certifications too, but I don’t know the details. And then, the FRA seems to have authority to waive anything. River Line got a waiver because of a complex “temporal separation” agreement.* I’m sure PATH theoretically could do it. It’s basically a railroad that got a waiver for virtually everything that separates railroads from rapid transit.

            But, yeah, I agree with you. Be as sane as possible.

            * I do believe RiverLine’s vehicles are used in mainline service in Switzerland.

          • Michael says:

            Even though Caltrain is Proof of Payment, they still normally have 2 conductors on every train checking tickets and opening doors.

            Not sure about Metrolink…

        • Nathanael says:

          Two would be fine, even. The staffing on the LIRR is WAAAAY more than that. The LIRR unions are running on contracts with work rules which basically date from the 19th century.

          You’d save a lot of money by firing everyone and hiring fresh *on generous terms*, it’s that bad.

          • Nathanael says:

            Do note that LIRR service exists because from 1949 (when it went bankrupt) onward, powerful rich people with political clout decided that service *should* continue to exist — and raised taxes to match.

            If they have changed their mind — cut the service. If it comes back later, maybe it’ll come back without the featherbedding.

            The LIRR unions are absolutely the worst I have read about in the US in my lifetime.

      • Nathanael says:

        Metro-North is relatively professional. LIRR… is proud of being archaic. Institutional culture.

    • Bolwerk says:

      Can anyone explain why the cost coverage on the LIRR is so low relative to the other services? The trains seem packed, the quality of the service seems no higher than Metro North. That’s an appallingly low farbox recovery figure.

      If you relied on your usual truthiness on this one, you’d probably be approximately right. The union is corrupt, the perks are absurd, they’re overstaffed, the work rules are ridiculous (example: $1000 bonus for operating both a diesel and electric train in one day? – so someone on misc.transit.rail.americas mentioned anyway).

      Why are costs for transit services on a unique cost-rising ratchet when the same is not true for other transportation modes.

      It isn’t? Well, at least it was. Many airlines went bankrupt in the past two decades over pension obligations, and the feds took those over. They got a clean slate, though I’d be surprised to hear they’re getting cheaper to operate with fuel prices going where they’re going.

      I don’t know much costs are increasing here either, and I don’t care enough to look, but you have to be delusional to pretend that highways aren’t absurdly expensive to build and operate – oddly enough, there are no armchair hawks around to question that either.

      • Eric F says:

        When I asked why farebox recovery is so low, I didn’t mean to trigger a particular answer. I genuinely don’t unerstand why it’s so low. LIRR fares seem expensive, and the trains are well-used. I genuinely don’t get why fares don’t cover a much higher share of the operating costs.

        I also have an intuitive understanding that there’s some really cushy labor practices, but I would also intuit that this is not the sole source of the low recovery.

        Airfares are not exhibiting cost rises like this. And I don’t care if airlines lose money, because it’s not my money they are losing. If an airline loses money, all it means is that surpluses from air tarvel are captured by airplane manufacturers, airline employees and airline passengers and not airline owners. It is not a big deal to me that airline shareholders are in effect subsidizing everyone else that interacts with an airline.

        I doubt highway maintenance costs are on a ratchet up, adavences in pavement technologies have made repairs much more durable than in decades past. At any rate, we aren’t talking about highways vs. LIRR, we are talking about LIRR vs the rest of the MTA umbrella. Screaming I hate cars seems even more grossly inapplicable in the context of this discussion.

        • Bolwerk says:

          It really is featherbedding and the like that makes LIRR farebox recovery so low. NYCTA and MNRR are kinda bad, but LIRR is, as others are saying, downright insane.

          And I don’t care if airlines lose money, because it’s not my money they are losing.

          That’s true until they’re bailed out by the state, which has happened repeatedly.

          I doubt highway maintenance costs are on a ratchet up, adavences in pavement technologies have made repairs much more durable than in decades past.

          In the case of public projects, it tends to be labor costs that drive costs up.

          With private ones, maybe things are difference. Airlines, for instance, took a hit because fuel costs skyrocketed so much, but other modes are probably a little less sensitive.

          At any rate, we aren’t talking about highways vs. LIRR, we are talking about LIRR vs the rest of the MTA umbrella.

          You’re the one who brought up the comparison to other modes. I don’t think any mode is “innocent” here. If I had to guess, rail transit (not commuter rail, which is considered another mode even if it shouldn’t be) is probably one of the more efficient ones.

          Screaming I hate cars seems even more grossly inapplicable in the context of this discussion.

          Who did this? Surely not me.

    • Nathanael says:

      The LIRR has *mindbogglingly* featherbedded workers. They only recently got rid of the “fireman” position (you know, the guy who shovels the coal into the steam engine?)

  3. LLQBTT says:

    Bridge tolling is a LOSER. Yes, suburbanites use toll crossings, but many, many outer borough residents do too. So basically the burden of funding the LIRR & MNR would fall to outer borouh residents because suburbanites want a free ride. How fair…

    So instead, put tolls at the NYC border. They were there a long time ago on the Southern State Parkway. Toll all the little bridges that connect LI’s barrier beaches with the main island.

    And thirdly, here’s a lovely suggestion: How about LIRR & MNR looking into some cost savings opportunities?! There’s all this non-sense talk about 1 man subway crews, but how many people staff each RR train?!

    • SEAN says:

      Remember that tolling as you describe would require tolls on such streets as Boston Road & White Plains Road in The Bronx as they are direct routes to & from Westchester. Do you want tolls on EVERY SINGLE road that enters the city regardless of the size?

      • Bolwerk says:

        We shouldn’t have traditional tolls at all anymore. Camera enforcement and smart readers are a pretty proven technology. People should only know they’re being billed because a road sign tells them so.

        • SEAN says:

          That wasn’t my point. Regardless how you toll, there are smaller residential streets in Yonkers, Mount Vernnon & other communities that cross the city line. Do you want to toll every one of these streets along with the main roads?

          • Bolwerk says:

            I don’t really have a problem with that. With electronic tolling, it’s rather trivial. What you’re describing is akin to a congestion charge.

            But a more sensible regime of bridge tolls (toll the East River bridges a lot, reduce outer borough bridge tools) are probably more politically feasible.

    • Bolwerk says:

      Bridge tolling is a great idea, but it shouldn’t go to the suburban railroads – well, personally, I’d find it acceptable if a fraction of the suburban drivers’ proceeds went to their railroads. But the win for bridge tolling isn’t necessarily the money, or what you do with it,* but just keeping the roads less crowded. It’s a smart component of a holistic approach to better streets.

      * I’m for street maintenance, personally, because our streets are in sorry fckuin’ shape. Whatever is left should fund the MTA’s capital program, but not subway operations.

      There’s all this non-sense talk about 1 man subway crews, but how many people staff each RR train?!

      Great idea, but illegal (see my comment above).

    • Gramercy Mike says:

      I wish there was a better way to toll people entering any part of NYC, but that’s impossible. Just look at the border of Queens/Nassau by Jamaica/Jerchico Turnpike (PS- Turnpike means it was a toll road) The north side of the street is Queens, South is Nassau. Make a U-Turn you get tolled? Ok so that’s not going to work. So put tolls on the bridges in to Manhattan. City residents get a reduced or eliminated toll via EZ-Pass. Also, issue parking passes for the neighborhood in which you live. That’ll also bring in more car registration fees from people who leave their cars registered out of state but live here.

      AND bring back the commuter tax.

  4. TP says:

    The thing about the payroll tax is that it’s the suburban employers who so pissed about paying it. The suburban employees who commute to jobs in the city by LIRR and Metro-North get their paycheck from employers who are more supportive. It’s the employers in the suburbs, who have a much lower share of transit riding employees, who are up in arms about it. And they have a point! LIRR and MNR are basically designed to get people from their homes in the ‘burbs to jobs in the city. Sure, MNR has made strides to improve the commute to newly rezoned business hubs in Westchester and Connecticut, and reverse commuters are now a rapidly increasing segment, but they haven’t changed their overall mission. LIRR is even worse–most of their stations are surrounded by parking lots and there’s never been much of an effort to connect the stations to surrounding businesses.

    This whole “let’s just cut them off” mentality is dumb and counterproductive. We live in a region. I’m sure the regular LIRR and MNR commuters support the payroll tax. If you cut their services or made them insanely expensive they’d be forced to find employment in the suburbs instead where they can easily drive and avoid using any MTA services. The share of jobs in the region that are in Manhattan has been on the wane for a long time and it’d only increase that.

    • Andrew says:

      I agree.

      However, suburban elected officials, whose job it is to balance the needs of their constituents, have also been loudly calling for an end to the payroll tax. If commuters to Manhattan disagree, they should make sure their elected officials know.

      And if the MTA has to cut service or raise fares due to the loss of the payroll tax, subway and bus riders shouldn’t take the hit.

      • Nathanael says:

        “suburban elected officials, whose job it is to balance the needs of their constituents, have also been loudly calling for an end to the payroll tax.”

        Bingo.

        If they were instead calling for reverse-peak service on the LIRR… why then, that would be different, wouldn’t it?

    • SEAN says:

      I’m sure the regular LIRR and MNR commuters support the payroll tax. If you cut their services or made them insanely expensive they’d be forced to find employment in the suburbs instead where they can easily drive and avoid using any MTA services. The share of jobs in the region that are in Manhattan has been on the wane for a long time and it’d only increase that. Isn’t that the goal of suburban polititions? Do what ever it takes to bring jobs in & make sure they drive. Well at least White Plains & Stamford are bucking that trend As the office campuses on Westchester Avenue continue to blead tennents for buildings near transit.

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