Home MTA Economics Debating what to do with that extra $40 million

Debating what to do with that extra $40 million

by Benjamin Kabak

Toward the end of March, with a general increase in state tax revenue and a slightly rosier financial picture emerging, the MTA revealed a surplus of $40 million that would make its way into the perennially strained budget. Since then, everyone and their mothers has tried to lay claim to these dollars, but the MTA is playing coy. The agency hasn’t determined how to spend or who gets it, and the race is on for the big bucks.

The money itself comes from Andrew Cuomo’s budget. Despite the obvious lessons of Superstorm Sandy, our car-lovin’ governor hasn’t quite seen the transit light yet. Rather, as the overall state economy picks up, there are more dollars to go around, and the MTA will get to benefit. That said, when Cuomo announced the new funding, he called upon the MTA to better serve as the “circulatory system” for the region’s economy. How best to accomplish that is the latest debate.

The loudest calls have been for more service. Over the weekend, the Riders Alliance (of which I’m a board member) held a rally with various MTA Board Members and local politicians urging the agency to reinvest in long lost services. Restoring lost buses, reducing off-peak subway headways and expanding the CityTicket were all on the agenda. “Any budget surplus should and must go toward restoring and improving the transit services on which our city relies — especially in the wake of yet another fare increase,” State Senator Daniel Squadron said.

Others echoed this call. “The MTA must realize that now more than ever the loss of service continues to impact our community and the MTA must do everything it can to restore and expand service for riders who all depend on it,” Assembly representative Nily Rozic, a rising star from Eastern Queens, said.

At various MTA Board and Committee meetings this week, Board members, especially those from Staten Island, argued to use the money to restore services lost in the 2010 cuts. Increasing bus service would be a big help to the city, and reducing subway headways is seemingly a no-brainer. The MTA though remained non-committal, and others have called for the money.

On the labor front, TWU President John Samuelsen has called upon the MTA to use the money to up his union members’ wages. At the Board meeting yesterday, Tom Prendergast, future Chairman and CEO, discussed using the dollars to steep avoid a 2015 fare hike. No one, meanwhile, has mentioned applying the money to the MTA’s crushing debt load and paying off some loans ahead of schedule. In a sane fiscal world, that’s likely the wisest solution and the one that would help the MTA and its riders most in the long run.

But we live in the here and now, and New Yorkers, still adjusting to the new MetroCard prices, want more bang for their bucks. Service should be increased, and the $40 million could go a long way. “I’ve asked the staff of all the agencies to look at service proposals in terms of either restoration of services or enhancement of new services,” Prendergast said yesterday. In July, the MTA must release its annual budget, and we’ll know then how we all will enjoy the fruits of an additional $40 million in spoils. My money is on increased service, and that’s OK.

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21 comments

asar April 25, 2013 - 6:58 am

I think they should use th money on sandy recovery.

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Benjamin Kabak April 25, 2013 - 7:53 am

No need. That’s all federally funded.

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Nathanael April 25, 2013 - 6:30 pm

Well, I think they should use it to address DEFERRED MAINTENANCE.

The system has a massive backlog of that. Spending the money now saves money later.

If nobody can think that far ahead (sigh) then expanding CityTicket is a worthy goal, as a small step towards rationalizing the fare system.

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BrooklynBus April 25, 2013 - 7:42 am

How did $358 million become $40 million?

http://www.governor.ny.gov/pre.....sportation

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Benjamin Kabak April 25, 2013 - 7:53 am

Most of that money was already accounted for in the MTA’s budget. That’s a great sleight-of-hand press release from the Governor basically announcing funding long ago promised.

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BrooklynBus April 25, 2013 - 8:46 am

Was this the money he promised to replace by limiting the payroll tax?

Has any or most of it been accounted for by wage increases?

Anyway, since they have a surplus, the 2015 fare increase should be off the table for the time being until the surplus turns to a deficit.

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Benjamin Kabak April 25, 2013 - 9:15 am

It’s unclear to me exactly what promised money this is. There’s a lot of money that flows from Albany to the MTA, and it’s hard to track it. Some of it may be payroll tax replacement, but some may just be normal tax receipt transfers. All but $40 million was baked into the original budget projections for this year.

As to the 2015 fare increase, I think limiting fare increases based on small dollar surpluses is one of the driving factors of this mess. The 2015 fare increase is supposed to generate around $400-$500 million in annual revenue. So this $40 million now is 10 percent of that. Basically, we’d avoid 1 percent of the fare increase (at the assumption that for each percentage point the fare goes up, the MTA realizes around $50 million in increased revenue). Worth it? Nah. That’s why I say invest in more service now.

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BrooklynBus April 25, 2013 - 10:54 am

“That’s why I say invest in more service now.”

I fully agree. That’s why I think running new services at every 30 minutes is dumb. It should be every 15 to 20 minutes as in the past. It is penny wise and pound foolish because every 30 minutes is a huge deterrent to attracting new riders when other options are available. You will not accurately be able to determine demand, unless the MTA is setting these routes up to fail to prove the existing route structure works just fine. They will never be able to attract more than a half dozen riders per bus with this headway, and they claimed that 6 to 12 riders per bus was not enough to continue running the B4 in Sheepshead Bay.

If we made the 1978 Southwest Brooklyn changes at 30 minute headways, they never would have been successful. Instead we increased 15 minute service on Brighton Beach Avenue to every 10 minutes. Today with the extra school service headways are as frequent as every 3 minutes. You don’t build patronage by being cheap with the service.

I bet the MTA isn’t even considering ridership in their budget projections with these new routes. They should realize that a 15 minute route will attract twice as many passengers as a 30 minute route. Where is that analysis that showed they they couldn’t afford to provide more frequent service, because I would like to see it.

Flatbush Depot April 25, 2013 - 6:19 pm

Amen.

Larry Littlefield April 25, 2013 - 7:55 am

Is this our state taxes, or MTA taxes only collected downstate?

And what about the next capital plan? If they are cutting ongoing normal replacement below the level needed to prevent system deterioration, will they say so or lie about it?

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Nathanael April 25, 2013 - 6:31 pm

“If they are cutting ongoing normal replacement below the level needed to prevent system deterioration, will they say so or lie about it?”

Neither. They just won’t mention it. Only if bloggers look it up and make a stink about it will it be noticed.

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Chris C April 25, 2013 - 9:21 am

Is this a one time $40m or a projected recurring amount?

It is no good adding extra service if it is a one-off because as soon as it is spent then the service will have to be cut back to bring the budget back into balance.

If it is one off then probably better using it to either to reduce debt or do some quick (and cheap) station improvement works.

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Mayor Weener April 25, 2013 - 9:42 am

$40 million? Have a janitor clean up the 125th Street A-B-C-D Station. That should take only a few years and ultimately cost $75 million.

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llqbtt April 25, 2013 - 10:38 am

A drop in the bucket I know, but start paying down the debt. This isn’t a sweepstakes win or anything. It’s returning state $ to the MTA that were taken away starting under Pataki which then forced the MTA into a high amount of debt in order to keep the system in a state of good repair.

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Nick Ober April 25, 2013 - 10:42 am

My head says use the money for debt service but my heart says spend it on hiring more station cleaners. $40 million should be able to scrub down/power wash a lot of stations if we lived in a rational world.

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Jonathan F April 25, 2013 - 10:58 am

This money should be used either for paying down a bit of the debt, or for some sort of maintenance project. From a PR stand point something that is obvious to users of the system, like cosmetic improvements to the station. The other thing would be to speed up the normal replacement of unsexy things like switches.

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Chuck April 25, 2013 - 1:00 pm

Is it possible that debt repayment isn’t being considered because it’s either not possible or just not good financial practice?

I’m certainly not a financial expert, so I’m not sure how the MTA’s borrowing works (someone with more knowledge may be able to chime in here) but I would assume that the bond payment schedule would be rigid enough as to guarantee profits for those entities investing in the bonds. The “credit card” term gets bandied about when we talk about the capital program, but common sense says that you just can’t pay the whole thing off and not expect to owe the interest…investors need to get paid no matter what, right? In this situation, it would seem there’s no monetary savings in pre-paying the principal….you’re just giving them their money sooner.

Now, if we’re talking about using the X amount of surplus so that we don’t have to borrow X amount in future Capital Programs…that’s a different story.

Like i said, I don’t know a thing about how capital plan borrowing works…Ben, maybe a topic for a future blog post?

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Alex C April 25, 2013 - 1:15 pm

Paying down the debt would be nice, but service increases would ultimately be best for riders for today. Bus services (the B37 in particular) could use a boost.

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Ken April 25, 2013 - 2:04 pm

Since this is a one time event, I would use this money to reduce amount borrowed going forward. Do not recommend delaying fare increase. A consistent set of increases helps with planning for MTA and commuters.

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Alon Levy April 26, 2013 - 1:14 am

Bank it to reduce the next shock by $40 million times discount rate.

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Bolwerk April 26, 2013 - 2:28 pm

I think I agree with Nathanael. I suspect the long-term cost increases of deferred maintenance probably exceed any reasonably low-risk discount rate, and the cost of deferred maintenance is probably already in the billions.

Could be better to just spend it now.

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