Earlier this year, as the MTA went about securing its capital future, an infuriating state law concerning the issuance of debt rose to light. Even as New York State has required the MTA to issue debt, it is also takes a fee of about 8.4 cents per every dollar of debt issued. Thus, if the MTA issues $1 billion in debt, New York State, the body that required the MTA to issue the debt, takes in $84 million. As the state has collected over $100 million from the MTA over the years, I called it the great bond swindle.

When The Daily News brought the issue to light in February, it caught the attention of some New York politicians who were, rightfully so, outraged. Now, the MTA is, as the Staten Island Advance notes, getting a temporary reprieve. In an editorial calling for the permanent elimination of the debt fee, the Staten Island newspaper summarizes recent developments:

The authority would have had to fork over $50 million in BIC over the next two years alone to borrow the money it plans to raise through bond issues. Of course, this added financial burden has meant that the hard-pressed MTA, which is required to have a balanced budget, has been forced to resort to fare hikes, service cuts and even more borrowing to fund its operations.

As Ms. Malliotakis said, “This policy was completely counterproductive as it was bleeding the MTA dry and contributing to the agency’s chronic failure to maintain adequate bus service and keep tolls and fares at a reasonable level,”

Now that wrong has been righted, however – at least temporarily. At the urging of MTA officials, including Staten Island board member Allen Cappelli, and elected officials such as Ms. Malliotakis and Assemblyman Michael Cusick, who authored legislation to eliminate the fee, Gov. Andrew Cuomo finally relented and waived the bond issuance charge for new MTA bonds, but only on those issued in 2012 and 2013 to refinance old debt.

MTA Board members have quickly called for the authority to use the savings to restore services lost to the 2010 cuts. “The MTA needs to look at the additional money from this and increased passenger revenue and invest it in restoring much needed bus and subway restorations as well as some additions to service,” Cappelli said. Meanwhile, city workers removed two bus stops around the corner from my apartment that once served the late great B71, leaving me with the feeling that these lost routes ain’t never coming back.

Meanwhile, this absurd measure by the state has been rectified for now, and as the Advance says, it should be overturned permanently. Good riddance to bad polices.

When state officials in Albany announced a budget deal that saved the MTA’s dollars, not all transit advocates rushed to take the bucks with open hands. Although the money will allow the MTA to secure federal transit dollars while finishing Phase 1 of the Second Ave. Subway and the work at Fulton St., among other projects, the structure of the budgetary grant will also lead to more MTA debt, and as those debt figures climb, many are growing wary.

Transportation Alternatives has taken a lead role in warning about the MTA’s looming debt crisis. For the foreseeable future, the authority will devote a significant amount of resources toward debt payments, and as those payments come out of the agency’s operating budget, riders who shoulder a significant portion of that budget through fares, will be paying for debt. Ostensibly, that’s not a good thing for riders.

“This deal is an express train to more MTA debt, higher MetroCard fares and less subway and bus service,” TransAlt’s Executive Director Paul Steely White said last week. “When it comes to public transit, Albany only knows two plays: paying for it with more debt or robbing riders of hundreds of millions of dollars in dedicated transit funding. Both put the 7.5 million New Yorkers who rely on the bus and subway on the fast track to higher fares and more service cuts. Today’s plan doubles down on the State’s dangerous commitment to funding transit through debt. Governor Cuomo and the State Legislature must invest in transit through secure and sustainable sources of revenue.”

Advocates aren’t the only ones sounding the alarm though. As Streetsblog reported yesterday, Senator Gustavo Rivera from the 33rd District in the Bronx bemoaned the state’s actions as well. In calling for new sources of MTA funding, Rivera let it rip: “The great majority of people in my district rely on mass transit every single day. And when we look at what’s happened in the last couple of years, where the state has at different times raided the MTA and taken hundreds of millions of dollars that is supposedly dedicated transit funding, and instead uses it for all sorts of other things, what this has led to, as we know, is that the MTA has gone into a spiraling hole of debt.”

Now, I’m thrilled to see Rivera embrace transit. His predecessor Pedro Espada, Jr. clearly did not. But at the same time, the incessant focus on debt is obscuring some more serious issues. It’s true that the state has taken $260 million in dedicated transit funding away from the MTA over three years, but it’s also true that $86 million a year is barely 1 percent of the MTA’s overall operating budget. Since the MTA operates on razor thin margins, the impact of the reappropriation is magnified, and it should not be excused. It’s not however the only problem.

Meanwhile, for all the talk of alternative revenue streams — congestion pricing, bridge tolls, residential parking passes — the endgoal will not be a fully funded MTA capital plan. Rather, the end goal is to raise enough money to alleviate the pressures on the MTA’s operating budget while providing the agency with a steady revenue stream against which it can bond out more projects. This is the classic model of government spending. Ideally, the MTA would borrow money today to build a revenue-generating project tomorrow, and it would then pay off the bonds with increased fare revenue. That’s what’s happening along Second Ave.

The problem is that the MTA is spending exorbitant amounts of money on State of Good Repair work that has a negligible impact on ridership and costs far more to complete than it can realize through increase ridership and fare revenue. After decades of deferred maintenance, the authority is playing catch-up, and we the riding public are left saddled with the debt.

We shouldn’t excuse Albany for its failures, and we should applaud Gustavo Rivera for raising his voice. But we must recognize that Albany will not simply hand over $4-$5 billion a year for the MTA to invest in capital projects. One way or another, debt will remain in the picture. How the MTA picks what projects to fund through debt-producing bonds though will determine the future of our subway system.

The make-up of the New York Metropolitan Commuter Transportation District has long been a point of contention for those counties on the outskirts of the region. Rockland County, in particular, has long objected to the MTA. They say they pony up more money in subsidies in taxes than they receive back in services, and now, the county, armed with a study that shows as much, is ready to push forward for a break from the MTA.

The recent trouble started, of course, with the payroll mobility tax. It served as the final straw for many of the outerlying counties who have seen their fares increase, their service decreases and their bill spike. Some think they may be able to provide similar levels of service for less while others are interested in assessing the fairness of the MTA’s current set-up. In a study released yesterday by Rockland County and presented to the area’s Economic Development Committe []pdf], the county highlights that inequity.

According to the study, conducted by Cambridge Systematics, Rockland County forks over $110 million to the MTA through various taxes, tolls and fares while the MTA provides just $68 million in transit services for the area’s residents. This divide has Rockland County officials calling for an MTA withdrawal. “The report provides the solid foundation and updated data we need to now explore the realities of withdrawal,” County Executive C. Scott Vanderhoef said. “Realities which include two major unknowns – legislative approval at the State level, and the value of MTA’s Commuter Rail Revenue Bonds (CRRB), which given legislative history may have to be undertaken by the County.”

The study goes through a rather technical examination of services provided vs. the amounts charged and subsidies levied. The meat of though focuses on the practicalities of an outer-county withdrawal. It’s not as easy as simply asking out. First, the state legislature must approve such a withdrawal, and it’s tough to envision a Sheldon Silver-controlled body approving a GOP-lead effort to remove monies from the MTA’s pot. Second, it’s unclear what happens to the various fiscal contributions in the event of a withdrawal. While some tax money is earmarked for the MTA, others go into a central pot and are redistributed to the authority. Would Rockland County be guaranteed that money for transit operations? Would the MTA still get some of those dollars? Would the payroll tax disappear or be reapportioned?

Next, Rockland County is worried too about bond obligations. The MTA has a series of bond obligations for overall capital work, and for Rockland-specific work. If the county must assume those obligations, withdrawal saves less money than it otherwise would. No matter, though, withdrawal would likely save the county some money. The study’s conservative estimate features savings of around $23 million.

But what if withdrawal is not approved in Albany? The county could seek to reduce payments to the MTA; receive a greater share of operating funds for transit service; ask the MTA to increase service to the area to better align with fiscal contributions; or request a greater return of dollars through funds similar to the DORF payments. The state, as I mentioned, has not authorized withdrawal, and a deficit-reducing measure may be more palatable in Albany.

As much we in the city would love to take in that extra $50 million, it’s tough to argue with Rockland County’s analysis. Sure, having transit service increases property values in areas that are rather far from the Manhattan Central Business District, but these areas do not get what they pay for. As they make noises about the payroll tax, perhaps the best solution is to provide more services. After all, better transit access should be a goal for the region, and then they wouldn’t be as quick to take their money and run. No matter the looming outcome, I doubt this is the last we hear of such discontent.

When the MTA announced last week that it was hoping to refinance its debt, the Bloomberg News reporters who covered the story let slip an oft-overlooked fact. Because of an obscure provision at the end of the New York State Public Authorities Law, the MTA must pay to the state $8.40 for every $1000 it borrows through the sale of government-backed bonds. In other words, if the MTA borrows $1 billion, it owes the state $8.4 million.

When we actually stop to think about that, it seems a bit contradictory. Public Authorities exist, to some degree, to allow states to escape constitutionally-bounded debt limits. States are often banned by their founding documents from taking out too much debt, but public authorities, quasi-state entities, can avoid those debt limits. Thus, the MTA can become one of the nation’s largest debtors while the New York State books are technically clear of these debt obligations.

On the other hand, the state is charging the MTA for its own ineptitude. Why is the MTA looking to issue another few billion dollars in debt? Because the state hasn’t come up with a better funding scheme and is happy to put paying for today’s upgrades on the shoulders of tomorrow. In a way, then, the MTA is paying double: It has to pay this so-called “cost recover” fee now while paying down debt later.

In The Daily News today, Pete Donohue reveals a shocking figure: The MTA has paid $105 million to the state in debt issuance fees since 2006. That’s enough to fund the 2010 service cuts and restore bus service for millions of New Yorkers. “These unnecessary fees add to our total debt and strain our ability to provide bus and subway service,” Allen Cappelli, an MTA board member, said. “Our riders deserve relief so that this money could be used to provide restorations and improved service.”

Donohue has more:

In the last fiscal year, the MTA paid the state nearly $20 million in bond issuance fees, according to data provided by the state controller’s office. In the fiscal year ending in April 2009, the MTA paid the state more than $30 million. Since 2006, the MTA has paid $105 million in fees. But the agency borrowed extra money to cover the cost of those fees. That debt adds up to $6.5 million in interest payments annually, authorities said.

The MTA this year plans to sell an unusually large amount of bonds to raise new money and refinance existing debt. It potentially could wind up paying the state another $75.4 million in fees. MTA Chairman Joseph Lhota has asked the state budget director to grant a waiver lowering that amount by tens of millions of dollars.

State controller Thomas DiNapoli said the bond issuance fee also is “an issue for other public authorities that issue debt. As the State moves toward greater fiscal discipline, this is a practice that should be reviewed.”

That’s a rich one: Not only must the MTA pay these unnecessary fees, it also has had to borrow additionally money to pay the state to borrow more money. If you think about it for too long, it becomes a blackhole of terrible and irresponsible fiscal policies.

This is a broken system. The state won’t adequately fund transit maintenance and improvements, and in fact, the state is levying a penalty on the MTA for trying to do so. The authority can ill afford to see Albany remove another $20 million from its budget, but without reform of this law, straphangers will continue to pay for political mismanagement by and from those we continuously send to Albany.