For the MTA, a financial picture still cloudy

By · Published in 2012

According to New York State Comptroller Thomas DiNapoli, the MTA’s finances are, temporarily, in good shape. Or perhaps they’re not. In a report released on Tuesday evening but not yet available on the Comptroller’s website, DiNapoli noted that the MTA has aggressively cut costs while reining in spending over the past few years. He warned of an increase in debt service payments and noted how looming fare hikes will outpace inflation. In other words, there’s nothing new here.

I haven’t yet seen the Comptroller’s report because I’m not on his press distribution list and, in a move that screams “lack of transparency,” his website hasn’t been updated as of nearly midnight on Wednesday morning, but I don’t need to see it to understand. Press reports make it abundantly clear that DiNapoli has, once again, examined a series of documents made publicly available by the MTA and is essentially paraphrasing them. Instead, let us look at the words of Carol Kellerman, the president of the Citizens Budget Commission.

In a piece late last week in Crain’s, Kellerman questioned the MTA’s approach to its looming budget crisis. Highlighting the MTA’s decision to push back the fare hikes by a whopping 60 days, Kellerman wondered if the authority was sacrificing short-term good will for long-term fiscal health. Here is Kellerman’s take:

Although some might get mixed signals from these developments, nobody should doubt that the MTA is in serious financial trouble. Everyone—commuters, MTA employees, city and suburban residents, and elected officials—must face reality and contribute in some way to a long-term solution to the MTA’s fiscal problems. And periodic, predictable fare increases along with continued belt-tightening, including a trimmed service schedule, are unavoidable elements of a sensible solution.

The “surplus” announced for 2012 is based on an accounting approach that focuses only on immediate cash needs. By this calculation, the MTA has a surplus this year because its projected cash receipts are modestly ahead of projections made at the start of the year. But current-year obligations to be paid after Dec. 31 and the need to keep up with capital repair and replacement needs, known as depreciation, are left out.

Using the more appropriate accounting principles followed in the MTA’s audited financial statements, the agency has an estimated deficit of $2.7 billion in the current year and faces even larger deficits in the next four years. Indeed, it has had a surplus only once in the past 20 years (in 1996, after a large fare increase). Deficits exceeded $2.5 billion annually from 2008 to 2011, sums that are equal to at least 16% of annual expenses, and they continue to be large despite enactment in 2009 of the now-threatened payroll tax.

The MTA needs the revenue from the planned 2013 and 2015 fare hikes; delaying them, as announced, from January to March will worsen the 2013 deficit by $67 million and the 2015 deficit by $69 million, for a combined loss of $136 million. While we all may welcome service restorations, the $29.5 million going for this purpose should be better justified. The 2010 service cuts were selected based on analysis of ridership patterns and services that were little used. Overall bus ridership has not been growing enough to warrant major service restorations; instead, adjustments can be made to deploy buses in accord with shifting usage patterns.

We know this story inside and out. The MTA has taken on so much debt over the past decade and has committed so much of its finite pie to pension obligations that the payments will soon come due. Without labor reform, increased state commitments and higher fares, the agency will suffocate under the weight of debt service payments. Kellerman’s answer isn’t sufficient enough.

I don’t believe the MTA should look to cut services until every other avenue of potential revenue has been exhausted. Even though the MTA often resembles a pension organization, its ostensible mission is to supply transit service. That means meeting demand while increasing options. The MTA should run services to replace other modes of transit, and often that means running routes that aren’t profitable. Cutting services simply leads to disgruntled commuters, more congestion and a less productive city. Maintain service, but bleed dollars out of every other potential revenue stream.

Ultimately, though, Kellerman’s conclusion serves as the unifying theme. She writes “It’s only natural to complain about taxes, fare hikes and service cuts, but the alternatives can be far worse. The economically devastating consequences of a deteriorating transit system loom if all New Yorkers do not acknowledge our collective responsibility for the system on which our jobs and family incomes depend.” That cannot be said often enough.

Categories : MTA Economics

26 Responses to “For the MTA, a financial picture still cloudy”

  1. It’s only natural to complain about taxes, fare hikes and service cuts, but the alternatives can be far worse.

    She seems unaware of the best alternative: reform the damn MTA! Between OPTO on subways, OPTO on regional rail, and serious capital construction cost reform, there must be 50% of the budget that can be cut before we need to see service cutbacks. If it involves a strike (that’s what it took David Gunn to reform SEPTA in the ’83), so be it.

    And if we’re talking about raising taxes, it should be to maintain current spending levels and massively increase service offerings as a way to get support from unions and the voting public. That is, running twice the number of trains with half the number of cars (although honestly you could probably run full trains off-peak when you’ve got the rolling stock available…the marginal cost of running a longer train off-peak is very low, and might be made up with extra fare revenue) whenever there is extra infrastructure capacity.

    Waste and inefficiency that siphons off money to contractors and unions is the elephant in the room, and any politician, MTA bureaucrat, or transit advocate who tells you that there isn’t much more fat to cut isn’t worth the time of day.

    • Bolwerk says:

      We aren’t even spending too much money. It’s how we’re spending it that’s stupid. If I were a reformist pol, I would just present the changes as better allocation of resources. Frankly, for what we’re spending, we could actually get our money’s worth.

      The savings you’re talking about could create a permanent bureaucracy dedicated to the construction of subway lines. And, you could probably draw any line almost anywhere between the west side of Manhattan and the middle of any of the outer boroughs and have a route that would get pretty good ridership, afterall. There is a lot of unmet need.

      • Someone says:

        There is capacity to run more trains during rush hours using the rolling stock we already have. I wonder why they haven’t done that already. That way you can fit more passengers into trains and there will be higher ridership.

        • Nathanael says:

          This would require paying more featherbedded union members. Bluntly, with OPTO, you COULD run more trains during rush hours using the current rolling stock.

          • Bolwerk says:

            Maybe in some cases maybe service could be sped up. In some cases, this would only need a small speed increase to get the ineffective addition of 2-3 trains per hour.

    • Nathanael says:

      Notice that if you massively increase service levels, you could go to OPTO *and still employ every single current union member* (yeah, conductors become motormen). I would advocate this proposal.

  2. Larry Littlefield says:

    “Without labor reform, increased state commitments and higher fares, the agency will suffocate under the weight of debt service payments.”

    Or perhaps the transit system and the broader city will be wrecked even with these. If not, they’ll keep going until they get to that point. What is the Straphangers yelling? “Save the fare!”

    The issue is Generation Greed. Until people start saying so, nothing changes. DiNapoli complains about fare increases. The fare when he was elected to the assembly was $1.00, which was $2.10 in today’s money, with the Metrocard free transfers, unlimited rides, etc. His generation handed out those goodies, and others, by borrowing money. Now he is very concerned about the consequences, for others?

    Someone needs to respond to every one of these press releases by saying “you screwed the future and everyone living it. You!”

  3. Mike says:

    “reining in spending” and “reigning in spending” mean two very different things

  4. Bushwicked says:

    So if the yearly deficit is 16% of expenses, raise subway fares 36 cents or 50 cents to make it a simple $2.75.
    That’s still cheaper than many other transit tickets around the US and world.
    New Yorkers can afford 1 dollar extra a day. Buy fewer lotto tickets or downsize your coconut mocha bacon crappuccino.
    It’s time to get realistic with financial facts…

    • Nathanael says:

      Watch out. In Boston, the state government deliberately loaded the MBTA with debt from projects which had nothing to do with the MBTA.

      If the MTA in NY balances its budget by raising fares, the state legislature and city council will probably just spend even less money on the MTA.

      If the MTA actually goes into full profit mode (which is conceivable), the state legislature — or the city council — will probably start skimming the profits off rather than allowing it to be reinvested.

      The state legislature — or at least the city council — has to be fixed before a permanent fix is possible.

      • Alex C says:

        Our DINO Governor will be confiscating those budget savings or profits for “emergency funding” and have them pay for tax cuts for Hamptonites and the like. You can bet your life savings on that.

        • Alon Levy says:

          The sad thing is that he’s no more a DINO than any mainline Democrat.

          • Bolwerk says:

            The only really cogent definition of Democrat is “not a Republikan.” This has been true historically, too. It’s not because of shared values that Upper West Side Marxists and Southern segregationists could both vote for FDR, Truman, Kennedy, and ultimately even LBJ or Carter.

          • Nathanael says:

            Actually, most Democrats will reliably oppose the poisoning of water supplies — not Cuomo. So in that sense I consider him worse.

      • Larry Littlefield says:

        My view is that the City Council was fixed. By term limits. I don’t agree with a lot of the people on it, but it isn’t bad, and is more representative and cares more about the future.

        It is the state legislature that needs to be fixed. Here is what I did about it. I ran a Don Quixote campaign against the local incumbent, thus ending my public sector career and costing my family nine months wages plus money put in, in 2004 when I couldn’t stand it anymore.


        So what has anyone else done?

        • Bolwerk says:

          I don’t even see how term limits made the Council less bad. In a way, it made it worse by making it harder for new pols to gain seniority. By the time they’re experienced, they have to leave, if they can’t find another office to run for.

          The powerful at the top of the heap get shuffled from one position to another. Soccer mom Christine Quinn is likely to be our next mayor, to the detriment of civil liberties and environmental policy/safe streets/transit alike. (Bloomberg is fascisty on the former, but at least meh to good on the latter.)

          Anyway, Republikans turn my stomach as much as that of anyone with triple digit IQ and a conscience. But I see absolutely no way to have actual reform without finding a way to be more than a one-party city.

          • Nathanael says:

            There are only two ways to become more than a one-party city

            (1) The long term solution: party-proportional representation. Look it up. It’s the only way to evade Duverger’s Law, which drives single-member districts (and indeed block voting districts) towards a two-party system. If you want more than two parties to exist, this is the only way.

            (2) The short term solution (which may take decades): eliminate Republicans from being a viable party at all. Democrats keep getting elected because the alternative is *Republicans*! If the alternative were *Green Party* (or whatever) then you could have a viable, vibrant two-party system.

            Look at the state legislature. The first signs of reform within the Democratic members came when the Republicans *lost* control of the State Senate. Only by eliminating the really-not-acceptable party does it become possible to reform the other party.

            • Bolwerk says:

              Getting rid of the Republikans-in-fact as an institution doesn’t really get rid of the conditions that guarantee Republikans-in-principle: the corporate money, the poor education system, the poison social mores, even the demographics – or, the biggest problem, that the best way to win is to make the other guy look worse than you. My guess: if the Greens become the second party in the two party system, the Democrats would become the Republikans (which would be a full circle manuever, in a sense).

              Anyway, instant-runoff voting and Condorcet voting are both fairly viable alternatives to the current two-party system that could in theory preserve districts. I prefer proportional representation myself, but those aren’t even radical changes from what we have now.

  5. Boris says:

    What the MTA needs is mass computerization, so that those people retiring in droves don’t have to get replaced to do manual jobs nobody wants to do any more. The army of dispatchers and their assistants tracking subway trains on paper (yes, Division B has no computer system doing this at all) needs to go. Management staff can be cut too, with proper IT investment.

    Beyond that, I agree, the state legislature and the counterproductive laws they make remain the biggest problem.

    • Larry Littlefield says:

      ATS is costing so much money I wonder if in the end the people with paper will have been cheaper.

      • Someone says:

        Yes but the A division is fully upgraded with computerization (not ATO). The B Division was upgraded in six places but is otherwise low-tech.

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