Archive for MTA Economics
In response to the Riders Alliance’s call to improve transit access to LaGuardia Airport by rebranding the Q70 and eliminating its fare, the MTA came down hard against the idea. Despite the Riders Alliance’s contention that a fare-free service would likely generate more ridership, and thus more revenue, for the MTA, the agency opted to highlight the potential affect on its bottom line such a free service would have. Cost estimates ranged from a few hundred thousand to tens of millions, and while officials stopped short of uncategorically dismissing the idea, they might as well have.
“One-fourth of riders do not come from the subway and don’t use the free transfer, and thus we would lose money on one out of every four customers under their plan,” Transit spokesman Kevin Ortiz said to me in a statement. “If ridership would continue to grow on the route to the level they claim, we would have to add service, and that costs money. And where would we find the buses?”
Where would the MTA find the buses? Well, that must be the costs MTA spokesman Adam Lisberg had in mind when he later said on Twitter that the agency is “generally opposed” to ideas that “would cost the MTA tens of millions” of dollars. It’s hard to believe increasing service from every 12 minutes to every 10 for a few hours a day would have that much of an effect on the MTA’s budget, but that was the party line earlier this week.
Meanwhile, it wasn’t the only time the MTA, or its surrogates, relied on an argument over token amounts of money to reject a rider-friendly initiative. Earlier this week, Governor Andrew Cuomo vetoed a measure that would have upped MetroCard transfers on certain routes from one per two hours to two. The measure had bipartisan support, but Cuomo claimed it foisted an unfunded $40 million expense onto the MTA’s shoulders. “The bill,” he said in a veto message, “does not provide any funding to account for this expense. Such funding decisions should be addressed in the context of the state budget negotiations.” The MTA urged those riders who need the extra transfers to buy unlimited ride cards instead.
For the MTA, this recent attention to dollars lost around the edges of its $13 billion annual budget — a half a million here, $40 million there — is hardly a new development. The MTA’s operating budget has, for years, run on razor-thin margins, thanks in part to capital debt payments, and the agency has recently focused on penny-pinching when it comes to operations, often at the expense of rider-friendly initiatives. Costs matter.
Meanwhile, just a few weeks ago, the MTA secured $28 billion for its capital projects, and boy do costs not even come into consideration here. The MTA is currently building, along the East Side, the world’s most expensive subway and, underneath Grand Central, the world’s most expensive commuter rail terminal. The 7 line extension was the world’s second most expensive subway, and the Fulton St. Transit Center’s $1.4 billion price tag looks low only because the WTC PATH Hub across the street costs nearly three times as much. Meanwhile, future phases of the Second Ave. Subway are likely to cost even more, and no one at the MTA is decrying these dollar figures which are orders of magnitude higher than a free shuttle bus to the airport.
It’s hard to say that the MTA cares about construction costs. Outwardly, there’s been very little effort to get them under control, and project costs inch higher and higher with each passing year. Securing the dollars is a fight, and the money goes further everywhere else in the world. Government regulations, interest group politics, local NIMBYism, bad labor practices and plain old corruption seem to all play into the MTA’s costs, but no agency officials have claimed to lose money on capital expansion projects.
Ultimately, then, it seems that the MTA cares about money only around the margins. Usually, they don’t; sometimes, they do. And those times seem to implicate benefits for riders. This strikes me as a rather uneven response from an agency with so many customers that should be trying to attract more. If anything, it’s hypocritical and exhausting.
The topic of MTA debt is not a particularly sexy one. I’d rather write about how the subways are unsustainably crowded and how the MTA has no real plan for immediate relief. I’d rather write about light rail efforts through Queens, the latest goings-on in London with regards to overnight Tube service or some thoughts on closed entrances. But MTA debt is too important to ignore. Even if you’re tempted to close the tab or allow your mind to wander, stick with me for a few hundred words today.
The latest round of news about MTA debt comes from — you’ll never believe this — Gov. Andrew Cuomo. A few weeks ago, when Gov. Cuomo and Mayor Bill de Blasio magnanimously did their jobs and came to an agreement on MTA capital funding, the two politicians hailed the deal as something groundbreaking. The MTA, the argument went, had unprecedented support from the state and unprecedented support from the city. Everyone wins!
If that sounds too good to be true, well, you’ve been paying attention. Despite announcing around $9 billion in state support for the MTA, Cuomo has not once said how he plans to generate this money. Had he wanted to see through a Move New York-style traffic pricing plan, he could have, but that would have gone against the ethos of Mr. Muscle Car Governor Cuomo. Instead, he’s like to turn to the tried-and-truth method of totally screwing over New York City subway riders: debt.
Bill Hammond, now writing for Politico after his unceremonious ouster from the struggling Daily News, had the story:
At best – and assuming it holds up – the deal settles only the latest turf squabble between feuding politicians: With a $10 billion hole to fill in the MTA’s $26 billion five-year capital plan, Governor Andrew Cuomo committed that the state will contribute $8.3 billion while Mayor Bill de Blasio agreed to chip in $2.5 billion from city coffers. But this divvying-up exercise was a crisis only to the extent that governor made it one, as a tactic to offload a fraction of the headache onto his declared friend, fellow Democrat and favorite punching bag at City Hall.
The real political heavy lifting to be done involves not who collects that $10 billion tab, but who gets stuck with paying it – and how and when. And whether the MTA will walk away with a short-term cash infusion, or with the sustained base of funding necessary to build and maintain a halfway up-to-date mass transit system…The overdue debate on covering the $10 billion gap should begin to get serious in January, when Cuomo is promising to spell out, as part of his annual budget proposal, exactly how he intends to raise the $8.3 billion. De Blasio, too, will have to account for his share in budget documents due in the next three months.
This should be interesting. The Daily News has reported that Cuomo will likely borrow some or all of his amount – which is legitimate, given that it will be used for long-term investments in infrastructure – and that he is ruling out tax hikes. But $8.3 billion would add 15 percent to the state’s already prodigious debt load of $55 billion. Even if spread over a 30-year term, the annual payments on those new bonds would be roughly half a billion dollars – corresponding to nearly a 10 percent increase over current debt service.
The Daily News report Hammond mentioned is right here, and it’s a tells a tale of more debt. The MTA may have to borrow to cover the state’s contributions, and it’s not clear if the MTA or the state would fund the debt. The MTA simply cannot afford more debt. The agency is already carrying $35 billion in debt — debt that’s funded through fare revenue. More would simply push the cost of the capital plan onto the shoulders of riders, no matter what Cuomo says.
So Cuomo’s solution has been anything but a solution. Without identifying a revenue stream, debt simply becomes something we must fund in the future, and that’s no way to solve transit funding problems. Will New York wake up the problems of debt? It’s not looking good for the near future or the far future, and that’s not a positive development for anyone.
Since my office is now across the street from Grand Central, I’ve had a front-row view of the work at 1 Vanderbilt. In a way, it’s a peek into the potential future of MTA financing. As the old building goes down and a new skyscraper takes its place, we should ask if this model of value-capture is sufficient and sustainable. The new developers of the new building will guarantee at least $210 million in upgrades for the Grand Central subway stop, but is this truly a model that the city can replicate on a grand scale while addressing the needs of growing demand for transit?
The idea behind the funding for the transit improvements at 1 Vanderbilt is simple: In exchange for permission to construct the 68-story tower, SL Green will contribute a few hundred million to fancy up the Grand Central subway station. The dank Lexington Ave. line will see improved street level access, more platform space and a larger mezzanine. Ideally, these changes will help the station better handle both current passenger loads and anticipated increases in ridership brought about by the new building, the East Side rezoning and the eventual opening of the East Side Access project.
Transit advocates seem to like the idea. On Friday, Gene Russianoff of the Straphangers and John Raskin of the Riders Alliance published an Op-Ed in the Daily News calling upon the city to pursue this type of funding on a wider scale. They write:
Over time, especially with systematic disinvestment from the federal government, we’ll need more funds to fill the gap. One promising source is sitting right there in underdeveloped land near the subway. Think of it as a kind of “value capture”: Landowners seek permission for large-scale bonuses to how big they can build. In return, they must offer transit improvements. In the past, many of the changes have been modest, as anyone stuck at the bottom of a non-working private escalator in the subways can tell you. We must be more demanding…
If we extend it to far more projects, the One Vanderbilt model could eventually bring in hundreds of millions of dollars as the city considers a new generation of super skyscrapers. (It’s true that real estate does pay citywide taxes that fund transit. But these are like the broad-based transit taxes on drivers, corporations and consumers — not tied to specific improvements.)
Many communities around New York City owe their existence to our number one capital asset — our subways. How fitting that desperately-needed subway aid should come from our number one home town industry, real estate.
In theory, it’s hard to oppose this deal. Mega-towers will likely tax the subways around them, and the MTA shouldn’t be left holding the bag as developers walk away with millions of dollars from these new towers. But in practice, I’m not yet convinced it’s a sustainable model for MTA funding.
The problem concerns, as Raskin and Russianoff put it, “underdeveloped land near the subway.” Is there enough underdeveloped land to generate enough revenue for the MTA to build multi-billion-dollar subway extensions? The land, for instance, around the Triboro RX line isn’t zoned for developments big enough to help offset anything more than a token amount of the costs, and asking developers in corridors with lower value than Midtown Manhattan may not be a fruitful exercise. This may work in Manhattan — and could help parts of additional phases of the Second Ave. Subway — but beyond that, I’m skeptical.
The MTA’s problems regard cost and sustainability. Can the MTA get a handle on its absurd capital costs? And is there a geographically neutral way to fund transit that doesn’t simply lead to more money for Manhattan and less for growing Outer Borough areas equally as overburdened? The 1 Vanderbilt model is a component to a capital funding plan, but it’s unlikely to be a panacea without significant other pieces.
In addition to a lack of political support from Albany, the highest barrier to MTA expansion efforts concerns costs. The one-stop 7 line extension clocked in at $2.3 billion, and the only subway expansion effort in the world that’s more costly is the first phase of the Second Ave. Subway. The MTA is spending nearly as much to rebuild the South Ferry station as it did to construct it, and the East Side Access price tag is comically high and ever increasing.
In a vacuum, the probably isn’t just the costs alone. We know everything costs so much, but we do not know why. Over the years, observers and experts have blamed everything from stringent federal regulations regarding emergency access, a costly and litigious environmental review process, corruption in the construction industry and the uncertainties of digging up old New York City streets. To me, this reeks again of New York City exceptionalism as these are issues facing most developed nations. Somehow, some way, other countries aren’t spending $2.7 billion per new subway mile.
In the latest issue of Capital New York’s monthly magazine, Dana Rubinstein went in depth on the cost issue. For long-time readers of my site (or infrequent and new readers), Rubinstein’s piece is a succinct look at an issue that New York City must solve if it is to meet the demands of its population. Without a handle on costs, the money to expand nets fewer and fewer improvements.
Rubinstein frames her piece around the idea that transit agencies have a rich history of low-balling costs to get money to start a project only to return, cap in hand, for more to finish. Robert Moses deployed this strategy to great effect throughout the city, and the MTA and Port Authority have essentially done the same with their recent construction binges. Think, after all, on how Phase 1 of the Second Ave. Subway should have cost $3.5 billion or how the Port Authority WTC station was originally budgeted at under $2 billion. Once shovels are in the ground, it’s hard to stop, especially if federal grants are involved, and local politicians are forced to fork over the dollars.
What I found even more intriguing though was this excerpt that shows how few people are engaged in this issue:
How New York City’s megaprojects compare in cost to those in similarly developed countries around the world is a question that is, somehow, very rarely studied. Stringer’s spokesman said the comptroller relied for his numbers, in part, on a mathematician named Alon Levy, who’s now completing his post-doc at the Royal Institute of Technology, and who notes, in his blog Pedestrian Observations, that, mass transit is a “side interest” for him and “entirely unrelated to my work.”
The experts at the Regional Plan Association, who are looking into the problem of megaproject cost overruns as part of their latest survey of regional infrastructure, directed Capital to a blog post by Levy, too. The post, from 2011, reported that the Toei Oedo Line in Japan cost $560 million per mile. The Berlin U55 cost $400 million per mile. The Paris Metro Line 14 cost $368 million per mile. New York’s construction costs blew all of that away, the study found. The Second Avenue Subway is coming in at $2.7 billion per mile. The 7 train extension to the far West Side? $2.1 billion per mile.
David Schleicher, an associate professor at George Mason University School of Law, has analyzed Levy’s numbers and says that his analysis basically confirms Levy’s. Barone, of Regional Plan Association, said, “The question is always why, why, why is it so expensive?” said Barone. The answer always seems to come back to a limited universe of issues, in varying combination: labor costs, work rules, managerial incompetence, the spaghetti of infrastructure tangled beneath Manhattan’s streets, a political firmament without incentive to tackle hard issues.
I’ve never met anyone who’s had reason to doubt Alon’s numbers (and you can read the post in question right here on his site). What’s surprising is how few comparative studies have been done to highlight these cost disparities. For its part, the MTA talks about a design-build process that’s supposed to mitigate costs, but working hand-in-hand with the parties responsible for the high costs (that is, the contractors) won’t lead to meaningful reform.
Meanwhile, it’s Chris Ward, a former head of the Port Authority, who has seized on this issue. “It is time to recognize that the delivery model for big projects is broken and fiddling on the margins will not build the kind of projects the region needs,” he said to Rubinstein. Without a better handle on costs, the MTA’s request for $15 billion in capital funding is a tough one to stomach, and future megaprojects are doomed to an expensive limbo at a time when the city and its current and future residents need them the most.
I love my Unlimited MetroCard. I’ve been using one for years, and it makes using the subway essentially free. I pay once per month — in my case, on a pre-tax basis — and get a card that simply tells me to “Go.” I can swipe in at Grand Army Plaza and take a 2 or 3 to Franklin Ave. without thinking about the cost or a subsequent card purchase. I can hop on a bus without a thought, and in fact, the more I ride, the better a deal I get from my unlimited card.
In a very real sense, as I wrote half a decade ago, the Unlimited MetroCards ushered in a revolution in New York City transit history. As then-Gov. George Pataki noted in the late 1990s, ”The goal” with these MetroCards “was very simply to empower the rider. Empower the person who takes the subway and the person who takes the bus by giving them the broadest possible range of options as to how they want to choose to use the mass transit system.”
And it worked. The average cost per ride a subway rider must pay declined precipitously, and only recently, through aggressive fare hikes, has the MTA clawed back revenue it lost to these unlimited cards. Still, the MTA drew in more in inflation-adjusted dollars in 1996 before unlimited ride cards were introduced than it does today. Furthermore, ridership has spiked — to over 6 million per day at times during peak ridership seasons last fall — and the MTA’s fare discounts push ridership.
But has the unlimited ride card outlived its useful life? That’s the question New York City’s Citizens Budget Commission posed recently. The independent group argues that, with ridership up and demand greater than subway supply, the MTA could incrementally rollback the incentives from the unlimited ride cards. After all, in the 1990s, the agency had to incentivize riders to return to a restored system, but today, the system sells itself. By capping unlimited ride cards at levels beyond the reach of all but the power users, the MTA could, they argue, draw in an additional $93 million a year.
Here’s their take:
The need for increased fare revenue need not be met exclusively through current practices of raising base fares and adjusting discounted prices. The MTA can generate revenue by capping the number of rides permitted on the 7-day and 30-day passes. Unlike recent fare increases hitting nearly every straphanger, the caps would provide needed revenue while affecting fewer riders, many who now enjoy very deep discounts, and would still retain heavily discounted fares.
Based on data provided by the MTA for October 2013, riders used 7-day passes for 45 million rides per month and 30-day passes for 66 million rides per month. These rides can be attributed to an estimated 2.8 million 7-day passes and 1.1 million 30-day passes. At a price of $30 the break-even number of rides for a 7-day pass was 13; for a 30-day pass at $112 the number was 48 rides. (Both calculations use the $2.38 fare available with a volume discount.) Rides above these numbers are effectively “free” for the pass holder.
Each “free” ride represented $2.38 in foregone revenue assuming the unlimited passes were eliminated and passengers purchased volume discount rides instead. The monthly number of “free” rides on the unlimited passes is estimated at 28.4 million. This equals about $67 million in foregone revenue monthly, or $807 million annually. Since a significant share of unlimited pass purchasers does not actually use the cards enough to reach the break-even point, these “unused” rides are extra revenue for the MTA. If this extra revenue was also foregone, the net gain from eliminating the unlimited passes would be $619 million annually. But eliminating unlimited passes would be a radical change, causing hardship for many straphangers and undermining the sense of convenient mobility the passes are intended to promote. A fairer strategy is to cap the number of rides on these passes at a number above the break-even point.
The CBC acknowledges that the MTA hasn’t made enough information available to assess the proper cut-off for unlimited ride cards, but they assume a hair over three swipes per day, an exceedingly high volume of rides. Limiting pay-per-rides to 22 swipes per 7 days or 92 per 30 days could lead to eliminating nearly 4 million rides that are free — that is, they are taken after the breakeven point on MetroCards. The unlimited ride cards would still be a great deal, but the MTA would capitalize on very high volume users (and those who try to defraud the system by selling swipes) to the tune of $7.8 million a month.
Part of me hates this idea. The psychological benefits of a true unlimited ride card encourage transit use at a time when New York City’s transit advocates should do all they can to keep residents out of private automobiles. It cuts against the grain of environmental advocacy, congestion pricing proponents and Vision Zero efforts to add any new psychological barrier, albeit a small one, to transit use.
But on the other hand, it’s hard to deny that revenue is revenue. The CBC estimates that only 60,000 30-day card users and around 415,000 7-day card users would exceed their lofty cap, and those figures are only 15 percent of all 7-day card users and 5 percent of 30-day users, relatively small percentages overall. It’s an idea that warrants some debate and discussion. As the CBC says, “Unlike general fare increases affecting nearly every straphanger, the caps would provide financial benefits while affecting only the relatively few riders who use their 7-day and 30-day passes most heavily and would still benefit from discounted fares.”
When I read New York State Comptroller Thomas DiNapoli’s release about his latest report on the MTA, I rolled my eyes a bit. DiNapoli, picking up on the MTA’s $15 billion capital funding gap, noted that while the MTA’s finances are better, the riders could wind up shouldering a huge portion of the next five-year plan, and the Comptroller said, riders shouldn’t be expected to pay for everything.
We could debate for hours whether or not that last statement is true, but DiNapoli’s point isn’t a new one. “The MTA is in better financial condition thanks to its own efforts and a stronger economy,” DiNapoli said yet again. “Over the coming months, the MTA will have to work closely with its funding partners to close the $15 billion gap in its capital program. Additional borrowing could increase pressure on fares and tolls, and while the MTA should look for opportunities for savings, deep cuts could affect the future reliability of the transit system and jeopardize expansion projects.”
Overall, DiNapoli’s report regurgitates MTA talking points. He notes that subway ridership has hit highs not seen since the late 1940s and that the MTA’s debt burden will continue to increase for the foreseeable future. He highlighted the new labor deals, unfunded pension obligations and steep fare hikes. It’s basically a summary of the last six months’ worth of news. (You can read it here as a PDF if you need a primer.)
Despite the mundane nature of DiNapoli’s report, one part is worth a deeper dive. His report “cautions that every $1 billion borrowed would increase debt service by an amount comparable to a 1 percent increase in fares and tolls.” Thus, if the MTA needs to borrow that $15 billion to cover its capital funding costs, it could do so simply by raising fares by an additional 15 percent. That’s a big fare hike. The MTA’s current plan for 2015 — once it gets released some time after Gov. Cuomo’s upcoming Election Day — calls for only a 4 percent hike, down from an originally planned 8 percent.
So while it’s easy to dismiss DiNapoli’s report for being nothing more than a news aggregator, the point he makes about the fares is a political chit for the MTA. If no one steps up with a different funding scheme and the MTA is serious about this $30 billion plan, the riders will be footing the bill for a substantial portion of it. Maybe that’s OK; maybe the people who use the system should pay for more of it. But now we know it’s a choice that Albany will make willingly. Is it the right one? I don’t think so.
The Commercial Transformation of Columbus Circle
The MTA’s rehabilitation of the Columbus Circle subway stop was an odd project. Like many before and after it, it took far longer than the MTA budgeted and ended not with a ribbon-cutting or even an announcement but with a whimper. One day, it was under construction, and the next day it wasn’t. It’s still not quite finished either as the corridor underneath 8th Ave. remains simply that.
As part of the original plans, this corridor was to become a commercial space with high-end tenants. It was, then-MTA head Jay Walder told me, to be the first of a new breed of MTA real estate. Instead of dingy newsstands and off-beat shops, Columbus Circle was to pave the way for a re-envisioning of subway real estate. It could be popular and a destination in and of itself.
Now, years after the renovation wrapped, that dream is inching closer to reality, Matt Chaban wrote in The Times this week. Chaban profiled Susan Fine, the current head of Oases Real Estate and the former MTA exec who was in charge of the rebirth of Grand Central, as she works to draw in tenants at Columbus Circle. Beginning 2015, 30 storefronts will line in the corridor as a set of shops called TurnStyle. These stores will include grab-and-go options such as Magnolia bakery, some electronics and high-end shopping spots, and larger upscale fast food types.
If Fine is successful — and that’s not a given as she has to convince New Yorkers to dine in a subway station — the MTA could bring this public-private commercial partnership to other subway stations with high foot traffic and open spaces. Taking up residence in the 7th busiest subway certainly won’t hurt the cause. “The trick was really figuring out strategies to slow people down,” Jessica Walsh, one of Fine’s partners, said. “If we can make it an interesting space with its own identity, we’re pretty confident we’ll not only catch commuters, but tourists and even people on their lunch break. Deep down, we all love the subway.”
CM Rose lead Staten Island calls for transit investments
As the MTA’s next five-year capital plan has come into view, complaints from Staten Island have increased. I wrote about the isolated borough’s complaints last week and pinpointed politicians as the leading cause of their problems. To be fair to Staten Island, though, not all of their politicians are as opposed to transit improvements as others, and this week Council Member Debi Rose flashed her credentials.
In a piece for the Staten Island Advance, Rose made the case for more transit investments for Staten Island. Not satisfied with the new ferries or the promise of new rail cars for the Staten Island Railway, Rose argued for some use for the North Shore and West Shore rights of way. She isn’t wrong, but her piece highlights the political problems here as well. Rose admits that the city doesn’t invest enough in transit, and although she rails against fare hikes and toll increases, she doesn’t propose a solution or a funding scheme.
As I’ve said before, the answer here is simple: Put your money where your mouth is, and the MTA will listen. If Rose wants BRT for the North Shore ROW, all she has to do is find a way to pay for it. But would she risk alienating Staten Island drivers, a strong constituency who will not be the first to support a congestion pricing plan? I doubt it. Without leadership that leads to dollars, nothing will happen.
The Man-Spread Blight
Finally, a more whimsical piece from amNew York that delves into one of the most egregious breaches of subway etiquette: the man-spread. We’ve all been there when some guy next to us is sitting with his legs spread far wider than any normal human would ever need. Perhaps it’s overcompensation; perhaps its ego or obliviousness; perhaps it’s a combination of all three. Whatever the cause, it drives me nuts.
In an amNY piece, Sheila Anne Feeney tried to get to the bottom of this phenomenon, and her article will in turns amuse and infuriate you. The perps and defenders act so righteous — “Men need space,” one person said — while those trying to find seats get glares or worse.
When the MTA started moving off of its net-zero labor demands a few months ago, we knew how this story would end. The MTA’s economic picture would improve as the region’s economy grew stronger, and the unions would demand a greater share of the pie. They would get their slice while the riders would get the scraps. Now that the MTA has sealed the deal with the TWU and LIRR unions, the financial picture for the next few years has taken shape, and lo and behold, riders are getting the bare minimum in service increases and biennial 4 percent fare hikes while the labor deals will cost $1.5 billion over the next four years.
As presented by the MTA on Monday during its monthly Board meetings and as later broadcast in a press release, the MTA anticipates that the new labor deals will result in annual increases in expenditures of $260 million. They swear, though, that the money won’t come from higher-than-anticipated fare hikes. Rather, the MTA will “reallocate” resources to pay for these labor costs as well as some service enhancements while maintaining pay-as-you-go funding for $5.4 billion worth of capital expenses for the next five-year plan. Without meaningful work rule reform, this is indeed a pyrrhic victory.
In fact, it may not even be a victory. The MTA will still take $80 million away from those PAYGO funds each year and simply have less to spend on capital projects. That’s one of the reasons the MTA faces a significant capital funding gap. Here’s the agency explaining other sources of money:
The plan makes several long-term trade-offs to ensure revenues meet ongoing obligations. Over the four-year period, supplemental contributions to an LIRR pension plan totaling $110 million will be eliminated, though all actuarially-required contributions will continue. Also, $254 million will be withdrawn, and additional contributions totaling $533 million will be suspended for four years, from a discretionary fund for future retiree health benefits which has no mandatory funding level. The plan also reduces pay-as-you funding for the MTA Capital Program by $80 million per year, which is equivalent to a $1.5 billion reduction in Capital Program funding capacity.
And how about the rest of us? Tell the people what they’ve won. For $15.5 million, we’re going to get….weekend J train service to Broad St. some time in mid-2015, extensions of service to Gateway Center II along the B13 and B83 bus routes, and added service along the Bx5. Staten Island residents will enjoy more frequent SIR and bus service to lineup with the increased overnight ferry service, and we’ll get two more Select Bus Service routes next year. Transit is also planning to better respond to signal problems in order to cut down unplanned service issues during the day.
Now, I don’t want to look a gift horse in the mouth, but it’s easy to see who gets the better end of that deal. This is the fiscal reality we live in though. The unions outlasted the MTA’s economic downturn, and the rest of us get saddled with a disproportionate amount of the costs without enjoying a similar share of the benefits. Less money for capital expenses; service improvements that raise just barely above the “token” level and more delays for future expansion and technology infrastructure projects — it’s all just part of the same old song and dance.
OK, OK. Maybe there’s no Jeffrey Lebowski to ask for money, but New York State Comptroller Thomas DiNapoli can’t seem to find around $12 billion for the MTA’s next capital plan. This is hardly a breaking piece of news for anyone who’s watched the recent politicking behind the MTA’s looming need to present a new five-year spending plan, but DiNapoli’s report drives home the fact that the MTA has to spend a lot of money it doesn’t have to keep our trains and buses running smoothly.
“Millions of New Yorkers rely on the MTA transit system and while it is in far better condition than it was 30 years ago, much more needs to be done,” DiNapoli said in a statement. “The MTA has to find a way to finance improvements without putting the financial burden on riders. This can be achieved only by working closely with the federal government, New York state and New York City to develop a long-term financing program and by using resources effectively and efficiently. Otherwise, needed repairs will be pushed even further into the future, and fares and tolls could rise even faster.”
DiNapoli’s main point isn’t necessarily that $12 billion is missing, but rather that $12 billion in funding will not materialize without sending the agency further into debt. In his short report, the New York State Comptroller analyzes the spending needs for the MTA and concludes, as we know, that the next capital plan isn’t a sexy one. Unless the MTA is aggressive in requesting funding for future phases of the Second Ave. Subway or work beyond the never-ending East Side Access plan, the capital program will fund much-needed signal and infrastructure upgrades and rolling stock purchases.
That’s not to say that these aren’t 100 percent necessary for the future healthy of New York City; they are. But when it comes to headlines, few New Yorkers are going to read about signal modernization and long delays caused by the work with any joy. This is stuff we never see even if our daily rides depend on it. Still, says DiNapoli, despite 30 years of investment, the system is not in a state of good repair and may never get there without considerably more investment.
As DiNapoli notes, this funding gap was a problem with the last five-year plan, and the MTA “solved” this problem by cutting expenditures and bonding out its obligations, thus adding more debt to the ledger. Debt service in 2018, notes the Comptroller, will be three times what it was in 2005. How long can this go on?
Ultimately, then, the issue isn’t that $12 billion is missing from the MTA’s capital budget. Rather, the issue is that the MTA will have to continue to go into debt to cover the funding gap. Can they add another round of debt to their finances without beginning to impact service? As debt counts against the operations budget, already riders pay for this debt as fares go up to cover operating obligations. DiNapoli doesn’t offer a stark picture for the future, but the meaning is there. Someone will pay for that $12 billion. Either the MTA doesn’t perform work or somehow it gets paid. Either way, without direct contributions from outside sources, riders alone will foot that bill.
For the past few years, through the tenures of three different MTA heads, “net zero” had become a mantra. Without a net-zero labor increase, the MTA’s budget would be deeply in the red with the costs expected to fall on the riders in the form of service cuts, fare hikes or both. As late as February, the MTA warned of steep fare hikes if they couldn’t toe the net-zero line. The Citizens Budget Commission has long since endorsed the approach, and the MTA and TWU were at war.
Then, suddenly, it was election season, and the MTA and TWU were, with the help of Gov. Andrew Cuomo, shaking hands and best buds. Without exacting much in the way of labor reform — and certainly without anything close to net-zero — the MTA gave the TWU a new contract with only a few concessions. The raises — 8 percent over five years — are deserved, and there are some givebacks. But ultimately, the MTA’s labor costs are going to increase by $411 million through 2016. That ain’t net-zero.
In a document released yesterday to bond investors [pdf], the MTA offered the public its first glimpse at the ramifications of the deal. The Memorandum of Understanding won’t be released until after the TWU votes on it, and such a vote isn’t likely until after next week’s MTA Board meeting. So what we know is that the MTA is on the hook for a lot of money. The deal includes retroactive payments of $126 million and a current bump in labor expenses of around $55 million. In 2015 and 2016, the MTA expects to spend $116 million and $114 million respectively, though some experts — notably Nicole Gelinas — believes these estimates to be low.
To cover some of the costs, the new deal includes an increase in the amount of employee contributions to health and other benefits as well as a new “wage progression schedule.” Still, someone has to come up with $411 million, and MTA Chairman and CEO Tom Prendergast insists it won’t fail to the fare paying public this time around. So how is the MTA going to pay? Read it (and weep):
MTA anticipates that the onetime payment for retroactive wages in 2014 will be funded from monies derived from released 2013 general reserves budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions that would have reduced the unfunded liability and future expenses. Increases in current year and annual ongoing costs are anticipated to be paid from funds budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions, and a portion of monies earmarked for voluntary deposit into the OPEB trust for future retiree healthcare costs.
It gets better. If other unions that do not have contracts in place sign similar deals, the MTA would have to find another $300 million. This money, the agency says, will come from voluntary deposits into the OPEB trust and a reduction of PAYGO capital funds of approximately $70 million. To say this doesn’t fall on the riders is sleight of hand accounting. In fact, this entire budget is sleight hand accounting.
But now we know: The MTA is robbing future riders to pay for the present. It doesn’t bother Cuomo because he’ll be gone from Albany before the bill comes due, but for the rest of us, this isn’t a good deal. We may not pay now because the MTA will keep those looming fare hikes low, but give it a few years. We the riders will be paying then or else the system will suffer.