Jul
24

MTA unveils a fragile financial plan relying on biennial fare hikes

By · Published in 2013
The MTA budget documents released yesterday show how aggressive cost cutting and fare hikes could eliminate nearly all potential deficits through 2017. [pdf]

The MTA budget documents released yesterday show how aggressive cost cutting and fare hikes could eliminate nearly all potential deficits through 2017. [pdf]

The MTA unveiled a revised draf of its four-year financial plan on Wednesday, and while budgets are not particularly sexy, fare hikes are. This plan is chock full of fare hikes as the MTA’s fragile financial outlook relies on fare hikes every two years for the duration of the plan. Just how long, I have to wonder, will New York’s transit riders begrudgingly accept these fare hikes before it becomes a major political issue?

In plans released yesterday, the MTA still projects some deficits through 2017, but as February’s numbers showed alarming negative balance sheets, the July numbers are significant better. By 2017, the MTA expects to face a deficit of just $100 million — down from over $300 million — but these projections are based on a series of assumptions that may not come true. Riders are going to shoulder a significant amount of costs as fares continue to increase, and anything that rocks the MTA’s financial boat could be disastrous for the agency.

For the public, the fare hikes are the bad news, and they rightly dominate the media coverage. After fits and starts of raising the fares only when the budget looked dire, the MTA has instituted a policy of biennial fare hikes ideally tied to inflation. After a fare increase in 2011, the MTA jumped their prices by around 7.5 percent this year and plan to do the same in 2015 and 2017. Both hikes will be for around 7.5 percent as well, and without these fare increases, the MTA’s financial outlook is a negative one indeed.

If all goes according to plan, then, the MTA’s looming price increases will generate significant revenue for an agency looking at out-year projections that are very, very red. In 2015, the next fare bump will bring in over $400 million, and when the cost of a subway ride jumps up again in 2017, the total generated from the next two fare hikes will be a hair under $1 billion annually. Without the fare increases, the MTA’s deficit would be insurmountable. As such, the city’s riders — all 5.6 million of us daily — are the only thing keeping the subway system afloat.

Outside of these fare hikes, though, nearly all of the other assumptions are not sure things. The only sure thing is a concerted effort to cut internal costs. The MTA anticipates that, by 2017, it will have eliminated $1.3 billion in annual recurring costs, thus achieving internal cost-cutting projections first put forward in 2009. That’s a laudable goal for an agency that has long operated with much bloat, but more could be cut if operations were further streamlined.

Beyond these measures, though, the MTA is expecting a net-zero increase in labor costs over the next four years. While the MTA has realized such savings over the past few years, the TWU’s contract situation remains unresolved, and a net-zero reality saves just $300 million annually by 2017. Meanwhile, pension and healthcare costs are expected to jump by nearly 10 percent over the next four years and are among the biggest uncontrollable costs currently on the MTA’s books.

Beyond fares and labor savings, the MTA is relying on dollars largely outside of their control. Operating costs will increase as the 7 line extension and then Phase 1 of the Second Ave. Subway open, and the agency’s insurance rates took a huge hit after Sandy. Agency officials said yesterday that the MTA is getting half its previous coverage for twice the cost. Meanwhile, revenue from dedicated and federal contributions remain subject to the push and pull of the New York and U.S. economies.

Finally, the so-called “longer term vulnerabilities” come into play. The MTA will launch a new capital program in 2015, and it will likely be funded through bond issues and more debt. Pension, healthcare and paratransit costs are spiking upwards as New Yorkers live longer with less mobility, and weather mitigation and protection efforts will put a strain on the budget. It’s a never-ending scenario of investments.

So what does this all mean, you may ask. After all, budget forces and pure numbers are the ultimate in transit wonkery. The final picture, though, is a simple one: New York’s transit riders are going to be asked to shoulder an ever-increasing portion of the costs. Absent direct state investment, the best way for the MTA to raise money and increase its revenue is through fare hikes, and ridership, which recently reached an all-time high, has shown no signs of abating. People need the subways, and the MTA needs money. So we’ll get fare hikes in 2015 and 2017 and likely in 2019 and 2021 too. Until New Yorkers start agitating louder for an end to fare hikes, they are, for better or worse, the only route to budget stability.



43 Responses to “MTA unveils a fragile financial plan relying on biennial fare hikes”

  1. ARR says:

    This is an excellent report. Except for the fact that all of the fare increases will go to the Wall Street bankers that were bailed out by taxpayers in 2008.

    • Ben says:

      The rising costs are almost exclusively due to pension and healthcare costs. So, surprise, all of those fare increases are going to pay for some transit worker’s $100k-a-year pension.

  2. pea-jay says:

    The usual grumbling and posturing aside, how much outcry are we really going see and serious steps towards less rider-dependent financing schemes. Transit increases aren’t going push that many more into cars because, well the cost of car ownership isn’t exactly standing still either. At this point I don’t see a particularly helpful legislature to sign off on more innovative financing mechanisms and you can pretty much forget about DC being of any use.

    As long as the MTA makes slow progress in improving the system (and they have done so) and everything else creeps up in cost, I just don’t see anything changing what has become a pretty routine process.

    • Dan says:

      I’d tend to agree. And while a fare hike every two years is certainly going to have a non-zero impact on me (and most other riders), regular and predictable hikes are undoubtedly better than going years without any then hiking it 40%-50% or whatever because there’s a crisis.

      And the value delivered is still likely to be a relative bargain compared to any travel alternative that exists.

      • Larry Littlefield says:

        That’s right. The biennial fare hikes are a recent, more enlightened policy which hopefully brings to an end the era of 20, 33, or even 50 percent fare hikes we have had in the past.

        The more relevant issue is the fare relative to overall inflation, and New Yorkers wages. But unfortunately, transit is getting relatively more expensive for most New Yorkers because of past cuts paid for with debt and because transit workers are getting richer — in retirement benefits — relative to other New Yorkers.

        Those deals took place around 2000. But they didn’t pay for them around 2000. We are paying for them now. Taxes are for senior citizens and the debts they ran up in their working years, for Generation Greed. If those coming after cannot or will not pay for things on top of that, they will not have them.

    • Nathanael says:

      The NY State Legislature is not going to be helpful until its 70-year-long gridlock / “three men in a room” system is broken.

      That might actually happen, because the stranglehold of the (Joe Bruno mob) Republicans on the State Senate is getting very very weak. They’ve had to rely on turncoat Democrats *twice*, and they had to make the worst gerrymander in the United States, and they’re still barely hanging on by their fingernails. When they finally lose control for good — which will happen in the 2020 redistricting at the latest — I think it’s going to shake a lot of things loose and probably start a massive political realignment. (Although the realignment may already be starting for national reasons.)

      One question is whether it’s going to be possible to hold out that long.

  3. David Brown says:

    Fare Increases are essentially a “necessary evil.” System upgrades, better service, cleaning up from Sandy (as well as other possible storms),insurance premium increases, pension and other debt obligations, demands of interest groups, bureaucrats and politicians, and countless other things must be paid for. I can give one small example: My train stop is Essex St, and my Doctor is at Flushing Av, Brooklyn (“J” & “M”), and I go on Saturday’s to see her. I have no problem paying an extra quarter (in fact, I would be happy to pay it), knowing that for that fare increase, one thing that happened, was the MTA added “M” Service on weekends (particularly important if it is a very hot (or cold)day) and I have a shorter wait on the platform.

  4. alen says:

    is there a reason why the city can’t put a toll on the Koch bridge? the few times i drive into manhattan for work i take the midtown tunnel. its a lot faster since everyone takes the bridge because its free

    a toll might get more people to use the subway and more revenue

    • BoerumBum says:

      Interested parties might argue that there are nine free river crossings between the Bronx & Manhattan, two free river crossings between Brooklyn & Manhattan, and only one free river crossing between Queens & Manhattan (The 59th St. Bridge). Slating a different bridge for a fare might be more politically feasible that slating that one.

      • llqbtt says:

        There are 3 free river crossings between Manhattan and Brooklyn and 1 tolled crossing.

        • BoerumBum says:

          Nice catch… forgot Williamsburg. Still, that compounds the point that the other outer boroughs (that have bridges to Manhattan) have more free bridges than Queens.

          • Bolwerk says:

            Why should anyone be entitled to a free bridge? It’s the most fuckity idea ever. Even transit users don’t get a free bridge crossing. They pay a fare.

            “Free” bridge advocates are everything carheads pretend not to be: entitled ingrates living off the labor of others.

            • Ben says:

              Agreed. Too bad the political will isn’t there. I would understand the difficulty of building toll gates on those bridges, but gate-less tolls have proven gates unnecessary.

          • Bolwerk says:

            For that matter, it doesn’t matter how many bridges a borough has. They’re all useful to all of us (socialism?!). The Williamsburg Bridge is closer to Long Island City than it is to Coney Island.

            The arbitrary political borders in this city just shouldn’t matter as transportation policy is concerned.

      • alen says:

        who controls the bridges? the MTA?

        why can’t they toll them all or most of them?

      • Nathanael says:

        Why not toll all the bridges? For cars, I mean. Let pedestrians and bikes cross for free.

  5. BBnet3000 says:

    Guess we should think twice before investing “found” money into service instead of debt.

  6. Phillip Roncoroni says:

    The budget is unrealistic simply because of the fallacy that there won’t be any employee raises. You can’t give these workers a zero percent increase through 2017 while the cost of living goes up.

    • That’s not completely accurate. It’s not a zero percent wage increase; it’s a net-zero increase in labor costs for the MTA. Worker salaries can go up, but the number of full-time employees will go down.

      • Bolwerk says:

        Reducing staffing probably makes more sense anyway. The labor problems at NYCTA have always been less about compensation and more about overstaffing and onerous work rules. The pay may be a little high sometimes, but it’s not the cashfest authoritarian anti-union ideologues imagine.

        Still, while they remain in debt crisis mode, there is no reason wages should ever go up higher than inflation. Let’s be honest: NYCTA workers have a dignified wage, and aren’t automatically entitled to more either. Arguably the maximum wage increases for the foreseeable future should be tied to the rate at which the wider working class’s wages increase. That at least to some extent limits the cost increases for the riders, especially the most vulnerable ones.

        • Phillip Roncoroni says:

          Still, while they remain in debt crisis mode, there is no reason wages should ever go up higher than inflation. Let’s be honest: NYCTA workers have a dignified wage, and aren’t automatically entitled to more either.

          The problem is that the cost of living in New York is rising greater than inflation.

          http://www.metro.us/newyork/ne.....-stagnate/

          I understand that the salaries are funded by a combination of taxes and fare revenue, but the unions are one of the only remaining forces that still have the power to stop this race to the bottom in terms worker compensation. Every single NYC civil servant is working under an expired contract. I work at CUNY and our contract expired October 20, 2010. You can’t keep socking the riders with fare hikes, but at the same time you can’t ask Transit employees to take raises that are essentially pay cuts when you adjust for the cost of living increases here.

          • Bolwerk says:

            Cost of living in New York is rising, while union workers mostly already make well north of a living wage. It’s the non-union working class that doesn’t make a living wage, and suffers when the TWU gets a wage increase that in turn increases the fare. That’s just shitty and inexcusable. It’s one thing to be immune to cuts in downturns, but it’s another thing to automatically be guaranteed better when everybody else gets worse.

            Unions don’t have the power to stop it, and the public sector unions have even encouraged the race to the bottom as long as they got theirs. They demand wage increases for themselves, not increases in the minimum wage for everybody. They get healthcare for themselves, but don’t do anything to meaningfully demand universal healthcare for everybody. They have no solidarity with the wider working class, or the increasingly lumpen middle class for that matter. I can respect egalitarians like the IWW, but screw the ones that made deals with the devil.

          • Nathanael says:

            Phillip, the TWU has better contracts than CUNY. Think about it.

            They really have been a “we got ours, eff y’all” union local, rather than a “solidarity forever” union local. And don’t get me started on the LIRR unions, which are *worse*.

            • Phillip Roncoroni says:

              The LIRR is an abject disaster, which should be disbanded given the systemic culture of corruption there. There’s no reason it should cost $8.25 to go from Bayside to Penn, that behind subsidized by about half because the “true cost” is double that.

              As to the TWU vs. PSC (CUNY’s union), I’m sure each has their pros and cons. I know a lot of the membership of my union doesn’t like the face that our union president seems to spend resources on social issues not directly related to own membership, but I think she seems to see the larger labor picture out there.

          • Ben says:

            The TWU isn’t fighting for people who are suffering. They’re just fighting for their own personal interests. We’re not talking about people making $10/hr working for McDonalds here.

            Yes, we can ask you to take “what are essentially pay cuts”. Everyone else is experiencing them, too, and you’re not exactly underpaid.

    • alen says:

      the union is always lobbying for low co-pays on medical. what happens is that they get the low co-pays but the total amount that the MTA pays doesn’t go up very much. they just start cutting the more expensive doctors out of the system so you get left with the worst doctors

      • Phillip Roncoroni says:

        Healthcare in this country is an entirely different debate. There’s no reason we shouldn’t have single payer like every other civilized country. I also don’t understand why the business community and legislatures themselves aren’t clamoring for it. If I’m a CEO and I’m spending $20,000 per employee for family health insurance premiums, I would be lobbying whoever I could to get those costs off my books, because it puts me at a significant disadvantage against other countries whose governments pay for health care.

        • Bolwerk says:

          I’m fine with single-payer healthcare, but the model used triple partnership model (can’t remember what it’s called, but state-employer-employer basically work together to pay for and administer care) in Germany is pretty good too. It does have the advantage of keeping the healthcare sector somewhat private and competitive.

          • Nathanael says:

            The German system costs a lot more than single-payer… but more importantly, it requires that the government regulate corporations very very intensively. That would be excellent, but it’s going to be very, very hard to do that in the US.

            Of course, the cheapest system is a fully nationalized National Health Service such as Clement Atlee set up in the UK after WWII. It also gives the best health outcomes. Sometimes central planning works.

            • Bolwerk says:

              It’s modestly more expensive than some of the better single-payer systems, but access might also be better than most.

              Anyway, I probably prefer single-payer, but at least something sane would be fine. The key is a well-run system, and that doesn’t have to be single-payer. Single-payer can be run badly.

            • Alon Levy says:

              It costs more, but not a lot more. And nowadays France has higher cost growth than Germany – it might have even overtaken Germany in costs, I’m not sure.

          • Ant6n says:

            Germany’s system is regressing slowly towards whatever the US has, a neo-liberal wet dream. But for users it sux; it’s still decent in terms of costs for proper employees, but everybody else has to pay private insurance. And doctors can charge private patients more – so there’s a 2-class system of employees with proper public health care who get shitty service, and privately insured people who get great health care service, but may not be able to afford it. And because of the way the system is set up; it dis-incentives companies to get proper employees, leaving more and more people in precarious work situations.

            I’m happy to be out of that system, finally being in the Canadian system – it doesn’t have a great reputation, but at least it doesn’t cost me an arm and a leg, and I know everybody basically gets the same service.

  7. JJJJ says:

    We should tie fare hikes to the increase in the US median income.

  8. Rob says:

    I suppose NY will be the last holdout to OPTO?

    And healthcare? I thought hussein & co. cured that.

    • Nathanael says:

      The single payer advocates are saying “I told you so” to the Obamacare/Romneycare supporters at the moment.

  9. Theorem Ox says:

    What I suspect will happen down the line:

    The majority of the transit riding public will pretend to begrudgingly accept the fare hikes and accordingly, pretend to pay the fares and even the fines for non-payment.

    It’ll become one hell of a feedback loop!

  10. Andrew says:

    If these fare hikes are tied to inflation, they are not actually fare hikes. If $2.50 today is worth $3.00 tomorrow, then a $2.50 fare today is equivalent to a $3.00 fare tomorrow.

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