Home Capital Program 2015-2019 Cuomo agrees to do…something…as MTA cuts capital budget gap

Cuomo agrees to do…something…as MTA cuts capital budget gap

by Benjamin Kabak

Shortly after I delved into the back-and-forth regarding potential solutions to the MTA’s capital funding woes, the latest episode in this soap opera unfolded as MTA CEO and Chair Tom Prendergast and Gov. Andrew Cuomo engaged in a very public dance regarding financing solutions. While Prendergast discussed the MTA’s commitment to cutting a few billion out of its spending plans, the Governor seemed to accept the idea that the state would have to cover around $8 billion if the MTA’s proposal falls into place. But as the dust settled, we were all no closer to understanding just how this gap will be closed.

The first move on Thursday afternoon came in the form of a letter from Prendergast in response to City and State comments issued earlier this week. He wrote to Mary Beth Labate and Anthony Shorris, agreeing to cut costs through the design-build process, but Prendergast noted that a significant funding gap of around $9.8 billion remained. It’s both admirable and telling that the MTA could trim the gap from $15 billion a few weeks ago to under $10 billion today, but that’s still a sizable gap.

To ensure full funding, Prendergast proposed a two-prong solution of sorts. First, he asked the city to contribute an additional $200 million per year over the next five years in addition to $1.5 billion for the non-Federal share of the next phase of the Second Ave. Subway. The state would then have to come up with only $8.3 billion over five years. “We believe this split is more than equitable to the City, particularly given that $22 billion of the $26.8 billion Capital Program is for projects in New York City,” Prendergast said.

A little more than an hour later, Gov. Cuomo took to the airwaves in a short interview with New York 1 to respond to Prendergast’s letter. He begrudgingly accepted Prendergast’s split of the funding burden: “The MTA divides the $9.8 billion by what they think is fair for the state and fair for the city and I could argue that it’s a little burdensome on the state. But I would accept the MTA’s numbers just to get it done and to go forward.”

He went on in this vein for a while:

Historically, the city was broke…Secondly, something like 90% of the MTA ridership is in the city and of the $26 billion in work, $22 billion of the $26 billion is in New York City. So New York City is a lion share of the riders. They’re a lion share of the assets and I understand they haven’t paid much historically, but the city’s financial condition is much different than it was and I think the MTA is asking for $200 million per year for five years. The city ends up paying a fraction of what the state would be spending, so I think it is fair and it allows us to resolve the matter and move forward. It’s a much larger number for the state, the state ends up paying $8 billion and the city would be a total of about $3 billion at the end of the day so it is, I think, more than fair to the city.

This was his way of slamming New York City — something Cuomo has done repeatedly in recent days as the relationship between he and the mayor has devolved into something you might find in a high school cafeteria. But Cuomo isn’t exactly correct. As the Citizens Budget Commission recently highlighted, the overwhelming majority of all MTA funding comes from the city. Perhaps Cuomo doth protest too much, but that’s politics.

Unfortunately, for here, the NY1 interview veered off the proverbial tracks. The host asked about Uber and then returned to the MTA. Cuomo indicated that he wasn’t keen on seeing the agency raise fares to fund the capital plan and has accepted that the state will fill a $8 billion gap. But the key question remains unanswered. Despite Thursday’s politicking, we still don’t know how the state will find $8 billion or if the city will do its part here. These are major questions that leave $10 billion in the five-year plan still unaccounted for.

So have we gotten anywhere? On the one hand, the Governor has committed to solving the MTA funding gap, and as we know, what Cuomo wants, he seems to get. But the mechanisms of the revenue streams will have to be hashed out amidst the halls of Albany and City Hall. We’re inching towards a resolution, but this saga is far from over. Cuomo is no savior yet.

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David M July 24, 2015 - 6:47 am

Maybe I’m being too optimistic, but I think there may actually be some light at the end of the tunnel, and we may be better off after this whole funding debacle is over. Cuomo has stated that the MTA capital plan is bloated. While it is not bloated in the sense of its inclusion of necessary projects, as Ben and Alon Levy have extensively covered, the prices it sets for these projects are extremely bloated. There is no good reason why we should pay 2-3x what the rest of the first world pays for similar projects. Even if we simply wanted to throw money at these projects, if costs were cut, we could build a lot more of these projects. I think when he mentions using the design-build process, that could potentially lead to significant cost savings on capital projects. The design-build process encourages more efficient and less expensive projects.

I may be speaking too soon, and I understand if you’re all skeptical, but Cuomo may have been just what we needed this whole time and we didn’t even know it. For decades, the only solution to expensive projects were to either scale them back (loss of 10th Ave station, 3rd track at 72nd street) or cut them completely. My hope is that this whole budget battle leads to a permanent culture change at the MTA, where the astronomical costs of our projects are not simply justified with the pathetic excuse of “it’s NYC, things are just more expensive here.”

R.V. July 24, 2015 - 8:42 am

What system is the MTA using now and how is design build different? I am just curious.

David M July 24, 2015 - 9:15 am

Currently, the MTA designs and engineers a project (i.e. the Second Avenue Subway phase 1), and seeks out (a) contractor(s) to build it. A cost is agreed upon between both parties. However, if something goes wrong, and a design has to be changed, that leads to a cost increase because they had a change order.

With design-build, the contractor both engineers and builds the project. This means that the contractor is completely responsible for how the project’s built. If they realize something needs to be changed and it will cost extra, they have to pay for it themselves. It removes the incentives for contractors to low-ball the price and plan for future cost increases.

Larry Littlefield July 24, 2015 - 9:20 am

Just for clarification, contractors aren’t low-balling any prices for the MTA. They are inflating them, to cover the hole in private sector pension plans, and because they can.

The MTA keeps raising its estimates, which are made public. And the contractors use them as a floor.

R.V. July 24, 2015 - 10:20 am

Thanks appreciatethe explanation. Definitely sounds like an improvement.

David M July 24, 2015 - 10:59 am

Oh yeah, I know they’re over inflated. What I meant by “low-balling” is that they’ll (likely intentionally) underestimate the engineering challenges when making their bid. Then when these challenges come up, they raise prices due to a ‘necessary’ change order.

LLQBTT July 24, 2015 - 7:11 am

The last time that I checked, NYC is IN NYS, so it’s not as if there’s really a jurisdictional issue as recent discussions seems to suggest. Therefore, the 90% of the MTA ridership that is in NYC is 100% in NYS. Or is Gov. Cuomo suggesting that the remaining 10% (sans a few % for CT) is somehow more of his constituents?

SEAN July 24, 2015 - 10:20 am

Sounds like a backwards home rule where the city is viewed separate from the rest of the state.

Alex July 24, 2015 - 12:22 pm

And to take that a step further, the bulk of NY State’s tax base comes from NYC. Cuomo is talking out his ass as usual when he says, “I know they haven’t paid much historically.” I’m glad that there’s progress here, but of course it couldn’t happen without Andy being his usual backhanded, blowhard self. I just pray his poll numbers continue to drop so we can get someone new in next election.

AG July 24, 2015 - 2:25 pm

Get someone new like who? Why do you all have faith in any politician??? That said – neither the city – not the state kept up funding the way it should have because indeed the city was broke. That’s a fact – not the governor’s opinion. Funding is well below what it would be if it was even inflation adjusted.

Bolwerk July 24, 2015 - 4:11 pm

Wait, who needs faith? Cuomo is exactly like what would be expected if the Bilderberg-Trilateral Commission-Bohemian Grove-Skull ‘n Bones-Koch Enterprises crowd bought both horses in 2010. Furthermore, it’s as if they did so knowing that everyone in NYS would have enough sense to flock to the low-key closet petrolsexual over the rabid-frothing-at-the-mouth guy. Master stroke! (Yes, I’m joking, but the outcome is not a joke.)

I quite literally can’t see how someone with a snowball’s chance in hell of winning the governor’s mansion in the near term could plausibly be worse than Cuomo. Even Bloomberg would be way better on nearly every issue.

Nathanael July 27, 2015 - 2:49 pm

The whore and the “Rent is 2 Damn High” guy were both better candidates than Cuomo and would both have been better than Cuomo.

Sure, horse-porn Palladino would have been worse, but the Republicans simply aren’t offering serious candidates any more. We have to have a real Democratic primary, but pretty much any third party candidate would be better than Cuomo too.

adirondacker12800 July 27, 2015 - 3:33 pm

He co-opted the third parties.

Bolwerk July 24, 2015 - 4:15 pm

You pretty much would need someone like Rudy Giuliani to do worse. And maybe not even the subtle, charming Giuliani of the 1990s, but the “blacks should be more like Bill Cosby” Rudy Giuliani of today.

Or Donald Trump. Or Carl Paladino.

Basically, doing worse takes people who probably bat their own poop around on the kitchen floor.

Nathanael July 27, 2015 - 2:51 pm

I actually am not even sure that Trump would be worse.

Larry Littlefield July 24, 2015 - 7:39 am

Are these recurring revenues we’re talking about? If not, it we are just bonding debt, we’re back in the same situation — after already paying more in taxes, tolls or something — in less than five years.

And some of that extra MTA $1 billion is not real. Just project a real estate (transfer and mortgage recording taxes) and stock market (lower pension costs) bubble into the future.

“He asked the city to contribute an additional $200 million per year over the next five years in addition to $1.5 billion for the non-Federal share of the next phase of the Second Ave. Subway.”

Fine. What are the other counties putting up?

SEAN July 24, 2015 - 10:17 am

Counties within the MTA service area or all counties in NYS plus Fairfield & New Haven in CT.

Bolwerk July 24, 2015 - 10:21 am

What is this shit about us not paying much historically? We pay a lot to the state, and state support to the MTA is another phrase for paying us with our own coin.

It’s galling how not one NYC senator or assemblyperson seems willing to call this out.

Alex July 24, 2015 - 12:27 pm

Sometime last year I saw charts detailing what NYC pays to NY State in taxes vs. what it gets back. As you can imagine, we’re carrying the rest of the state. Just wish I could remember where I saw the exact figures. Regardless, that statement is maddening.

AG July 24, 2015 - 2:33 pm

In the history of things – that is fairly recent. When manufacturing was king of “the Empire State” things were different. As that dissolved and Wall St. (Who everyone loves to hate) became the super profitable cash cow – the dynamic changed.

adirondacker12800 July 24, 2015 - 3:34 pm

when people in New York City were making things instead of manipulating symbols there were far less people in the suburbs and upstate.

Bolwerk July 24, 2015 - 4:17 pm

I can’t say I even understand what AG is talking about, but Upstate’s population probably peaked sometime between the 1950s and 1970s.

AG July 24, 2015 - 6:21 pm

Meaning – Not sure what that means – but Buffalo – Syracuse – Rochester etc. were booming cities… Meaning NYC didn’t have as much of a burden to carry the state like it does now..

AG July 24, 2015 - 6:23 pm

Well upstate cities started to fall apart the same time NYC did… Not only did they not have Wall St. – but they don’t have the creative industries that NYC had to recover. That’s why NYC now has to carry the rest of the state. As to the suburbs… Well all that took was the mass production of cars.

Nathanael July 27, 2015 - 2:55 pm

Allowing the major upstate cities to collapse was criminal, but it was a crime committed at the federal level, so the state government couldn’t do much about it…

…of course back then Rochester had a subway… which rather changed the dynamics of transport politics.

adirondacker12800 July 27, 2015 - 3:49 pm

Metro Rochester and Metro Albany didn’t collapse. Rochester had Kodak and still has Xerox. Albany has the state government. Last time lovely Tompkins County had a population decline between Censuses was 1900-1910. It’s a myth that Upstate is imploding. It’s just not growing very fast.

Take any declines in exurban counties between 2000 and 2010 with a grain of salt. Grandpa and Grandma retire to their cabin in the woods in 1996. They both show up in the 2000 Census. Grandpa dies in 2003 and Grandma in 2007. In a normal economy the kids sell the house off in 2008 and there’s a new retired couple in the house for the 2010 Census. The kid weren’t able to sell off the house by the time the census rolled around so the house is still unoccupied. Or they were able to sell it off but the people who were gonna retire in 2009 weren’t able to…

AG July 27, 2015 - 5:53 pm

Well Rochester did indeed decline overall. It didn’t go down as much as other upstate cities – but it did shrink in terms of population and economy. It has re-tooled with new economy jobs – just like Pittsburgh. But it did shrink and crime has gone up – just like Pittsburgh (though in the 2010’s Rochester’s murder rate did start to go down somewhat after being very high in the 2000’s when it was the highest in NY state). In actuality though – for a metro region – Rochester’s economy is now smaller than Buffalo.

Albany – that is true. It’s the state seat of government. In recent times it has gain a lot of R&D jobs.

adirondacker12800 July 27, 2015 - 6:55 pm

Every city, no matter what anyone did, short of a catastrophic depression, would have shrunk. Family size went down and lots of housing that used to have large families in it now has a much smaller family or just one person in it. People moved from the small house in Rochester to the four bedroom split out in Greece. Monroe County’s population dipped briefly and very little between 1970 and 1980. It had recovered by 1990. The surrounding counties grew.

AG July 28, 2015 - 12:20 am

You mean Rust Belt cities (lost population). In any event – the economy weakened and hasn’t recovered to it’s relative heyday over the past 40-50 years.

AG July 27, 2015 - 5:37 pm

I wouldn’t take the state off the hook.. In the same way the city allowed the South Bronx to be destroyed during that time. It was a time of turmoil all around.

Alon Levy July 25, 2015 - 4:21 pm

That’s not really true. What you say about the suburbs is, but not what you say about Upstate. The counties that currently form the metro area within the state, from Ulster, Dutchess, and Orange south, are 68% of the state’s population today, vs. 67% in 1950. Of course there’s been a relative shift from the city to the suburbs, but there hasn’t been any relative shift out of the metro area. If anything, since Poughkeepsie was an independent metro area then and isn’t today, metro New York’s share of the state population has increased (from 64% in 1950, counting only the city, Long Island, and Westchester).

Larry Littlefield July 24, 2015 - 12:45 pm

The history is this Both NYC and NY State contributed much more to the MTA Capital Plan in the 1980s. Both cut off funds in the early 1990s, and the MTA was told to borrow instead.

Then new MTA revenue sources were added, but these were only sufficient to pay the interest on past debts, meaning the MTA had to borrow more, and more, and more.

And some of the MTA’ “dedicated” taxes were diverted to other thing, along with revenues in the Transportation Trust Fund.

This “city vs. state” thing is nonsense. Neither has an money of it own. Generation Greed did not pay. Youngers genreations will pay twice as a result.

Pedro Valdez Rivera Jr. July 24, 2015 - 1:15 pm

I feel you Larry. I am 23 years old, and some of my siblings are in their twenties, working, in order to make a living. ?

Subutay Musluoglu July 24, 2015 - 2:52 pm

Ben – Do you happen to have a link to a pdf of Prendergast’s letter? Thanks.

Brooklynite July 24, 2015 - 9:40 pm

The MTA has magically been able to cut the capital program from $32 billion to $28 billion. Here’s a thought to ponder: if capital construction costs were in line with norms elsewhere, the thing would cost around $20 billion, if not less. The political games we’re witnessing aren’t helping anybody.


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