Archive for MTA Economics

A $3 base fare for subway and bus rides are among the fare hike options the MTA is currently debating.

On its own, a fare hike doesn’t portend a looming transit death spiral. In fact, regular and predictable fare hikes for, say, a subway ride designed to ensure that revenues remain fairly consistent with inflation and other costs over the long term can be a sign of a robust and well-managed transit system working to compete with other modes of transit. But when a fare hike is coupled by service cuts amidst a prolonged period with an overall decline in ridership and revenue, the transit death spiral canary starts chirping a bit louder in that coal mine. Last week, the canary showed up at the MTA Board’s budget meeting as the board books showed a continued decline in ridership, the budget forecast called for service cuts, and the MTA started debating the structure of next year’s fare hike. It certainly seems like New York City’s transit system sits on the edge of a death spiral.

The transit death spiral is a particularly prickly beast to pin down. A few months ago, Aaron Gordon wrote about it in his newsletter, and I’d like to reframe Aaron’s model slightly. The death spiral encapsulates a budget cycle in which a transit agency recognizes a revenue shortfall due to lower-than-project ridership, raises fares and cuts service to compensate, and thus further dampens ridership, leading to additional shortfalls. As the cycle repeats, the spiral becomes inescapable until a massive bailout or death. When the topic arose over the summer, Cap’n Transit wrote a rebuttal to Gordon’s piece, and in the intervening few months, the spiral seems to have worsened.

The current cycle will come to a head soon when the MTA Board reconvenes to approve a 2019 fare hike. On its own, the 2019 fare hike isn’t a surprise as the MTA instituted biennial fare hikes beginning in 2011, but with service reliability on the decline, riders seem particularly up in arms over next year’s planned hike. You can see the proposals in the chart atop this page, and I’m agnostic as to which one the MTA should choose. With the introduction of subsidized Metrocards for low-income New Yorkers on the horizon, eliminating the pay-per-ride discount and keeping the increase on unlimited passes at a minimum is probably my preferred outcome, but that choice is akin to just shuffling deck chairs. In a handful of months, we’ll be paying more.

You can view the fare and toll hike proposals in this pdf, but the details of the hike aren’t the big story. Rather, the big story is the MTA’s worsening financial picture. That story unfolds in this pdf, and it’s a dire one. In the span of two years, since the July 2017 financial plan, the MTA’s long-term outlook has worsened by over $800 million. According to MTA documents, the biggest drivers are declining ridership ($485 million), paratransit costs ($321 million), workers compensation payments ($125 million) and overtime ($100 million). The MTA has relied on a series of one-shot budget moves to stave off deficits, but these one-shots are drying up. As Robert Foran, MTA CFO said last week, absent healthcare and pension reform, the MTA is out of cost-savings measures, and no politicians have desired to leap into that fraught battle. (In fact, Gov. Cuomo did just the opposite when the MTA labor contracts were up recently.)

So the options are fare hikes and service cuts, the two best ways the MTA has of controlling revenues and expenses. With fare hikes scheduled for 2019, service cuts loom for 2020 – the first cuts since the crippling scalebacks in 2010. The MTA, of course, hasn’t said exactly what the service cuts will be, but it sounds as though the agency could change “service guidelines” to allow for more crowded trains and less frequent service. The total cuts to the subway will equal around $10 million – which is modest and projects to a few fewer trains per hour during certain times of the day on some, but not all, lines – and $31 million for buses which will devastate the bus network. Perhaps then the buses, with extremely steep ridership declines, are closer to that death spiral than the subways.

Service cuts by themselves won’t close the MTA’s budget gaps and will harm the long-term health of the transit network by driving down ridership.

Still, service cuts are a last-gasp approach. As Foran detailed at last week’s meeting, the MTA prefers to seek out a separate revenue streams to avoid service cuts while closing its budget deficit, and I think back again to the piece I wrote on the fight for congestion pricing revenue. The money may have to go to shoring up the MTA operations budget before it can go to the capital plan (or Andy Byford’s Fast Forward fund) as everyone is laying claim to a magical cure-all that won’t be.

If that doesn’t further complicate the picture, Aaron Gordon in his newsletter last week noted yet another issue the MTA budget projections: Their out-year projections do not account for planned or potential work that could further stifle ridership and revenues. I quote from last week’s edition:

The L shutdown, for example, begins next year. The MTA predicts the vast majority of trips will still take place within its ecosystem, but it’s easy to imagine ridership falling due to discretionary trips not being taken or a higher-than-projected rate of folks opting for rideshare or bicycling instead. Indeed, the MTA now predicts a 1.1 percent decrease in ridership in 2019, following a 2.8 percent decline this year. This is a major revision from the July plan, where they predicted ridership *increases* in 2019 and 2020 despite acknowledging the L shutdown. Their logic: the economy is good.

These explanations are more confusing than insightful. Pegging ridership trends to future employment projections may be accepted practice but it’s been demonstrably unreliable in recent years due to fundamental changes in how we work, shop, and travel…But there’s an even bigger red flag in their ridership projections. If the MTA does get funding to move ahead with the Byford Plan, entire trunk lines in Manhattan as well as major branches in Queens and Brooklyn will be shut down on nights/weekends for months if not years on end. In other words, the most extreme planned work shutdowns in the city’s history will occur in the next decade if Andy Byford gets his money. Ridership will almost certainly suffer.

That’s not an argument against doing the work, but merely a consideration therein, especially when projecting budgets. But, as of now, the MTA is predicting flat ridership for 2020-2022. Of course, the MTA cannot budget for a plan that has yet to be funded, but they don’t even flag this as a potential risk. This is emblematic of the agency’s tendency to get caught flat-footed by predictable ridership trends.

In other words, the plan to repair the system will, by necessity, lead to temporarily lower ridership, and the MTA isn’t accounting for it now. Their budgets for outyears aren’t conservative enough, and we’ll have to go through this process sooner than the MTA currently anticipates. You see where this is going? That’s also part of that death spiral.

Meanwhile, the MTA itself is struggling to figure out why service is declining. This came up first over the summer during the presentation of the July financial plan when the MTA failed to distinguish between the cause and the effect of the ridership decline. Ridership is declining because off-peak and weekend service isn’t reliable, and with easy and cheap alternatives such as for-hire vehicle apps, those who take discretionary subway trips are opting for more reliable means of travel. Last week, the MTA bigwigs tried to blame fare evasion as the leading cause of ridership declines without offering any evidence whatsoever, and it seems like the gatekeepers don’t know what ails the transit network. Between the lack of foresight in budget planing and the lack of understanding of the ridership decline, it’s hard to say if the current MTA Board and management can work its way out of this mess before the spiral leads to death or at least temporary paralysis cured only by a steep infusion of cash.

I am ultimately not particularly optimistic as we sit here a few days after Joe Lhota’s departure and a few months before fare hikes and the L train shutdown start to tax the system. It’s not clear what the future holds for Fast Forward, and it’s not clear where these downward trends lead. Enough people are watching that I hope we can escape the spiral before it gets worse, but like I said, that canary just won’t stop chirping.

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A new report by New York State Comptroller Thomas DiNapoli lays bare the MTA’s debt crisis.

If it seems inevitable that congestion pricing will arrive in New York City, that’s because it is. Although no one in Albany appears to be in a hurry to push through pricing plan, every gubernatorial candidate, including the incumbent set to win by 20 points or so in two weeks, has, to one degree of enthusiasm or another, endorsed a fee on cars entering Manhattan. But with expectations high, can congestion pricing be the savior everyone is hoping it will? Can it fund Andy Byford’s Fast Forward plan or is the money already earmarked for something far less sexy? if I’m even asking, you can already guess the answer.

The most recent answer comes to us from a comptroller’s report on the MTA’s tenuous financial outlook. As Thomas DiNapoli explores in a new release [pdf], the MTA’s mounting debt is set to explode over the next few years, and with numerous competing demands on any new sources of revenue the state may authorize, along with a need to modernize the system, the MTA is in a position of promising the moon and stars while stretching dollars to cover investments it simply cannot afford. It’s a dire picture indeed.

The state comptroller summarized his findings in a press release on the report. In essence, even without addressing Andy Byford’s $40 billion Fast Forward plan, the MTA’s debt service payments are set to balloon to $3.3 billion by 2022 with the MTA’s total debt to reach $41.9 billion that year, and that’s before the agency starts bonding out Byford’s plan. Meanwhile, even though the MTA plans to raise fares next year and in 2021 and reduce certain expenditures, the operating budget gaps are projected to be $262 million in 2020, $424 million in 2021 and $634 million in 2022. To close those gaps, the MTA will need to implement massive cuts or fare increases or receive a new dedicated funding stream.

Even then, a balanced budget is no sure thing. As DiNapoli notes, the MTA’s current budget projections rely on “the assumption that the current economic expansion will continue uninterrupted.” As DiNapoli writes, that’s not sure thing: “As evidenced by the sharp drop during the Great Recession, the MTA’s revenues are sensitive to economic fluctuations. Changes in business cycles are inevitable, and the likelihood of an economic setback grows with each passing year.” Additionally, DiNapoli notes that, despite recent trends (including a very negative report on August ridership I’ll cover later this week), the MTA’s fiscal outlook relies upon a ridership increase in 2019. As the comptroller charitably notes, “While subway service has improved marginally in 2018, it remains far below riders’ expectations, and the improvement may not be enough to persuade riders to return in the face of higher fares.” Fare increases, as DiNapoli charts, have already outpaced inflation over the past decade, and if the MTA’s assumptions fail — if the economy falters and/or if ridership continues its precipitous decline — the MTA’s deficits, and corresponding fiscal pressures, will grow.

So how, you may ask, does this implicate the fight over congestion pricing? Well, the MTA has multiple competing fiscal demands right now. The agency is legally required to balance its operating budget and needs money over the next decade, as part of the next two five-year capital plans, to fund Byford’s Fast Forward program. Without it, service reliability will continue to decline, and eventually, the subway crisis will grind New York City to a halt. So essentially, the MTA needs two new revenue streams — one to fund its capital program and one to fund budget deficits (driven by the increased debt load from its capital spending). Congestion pricing can’t cure two ills in one fell swoop, but it’s being billed as a grand solution for the MTA’s woes.

On the one hand, New York City needs congestion pricing for numerous reasons. It needs to clear out congestion for economic, environmental and sustainability reasons, and it needs a new dedicated funding stream for transit. On the other, the MTA needs far more reform than congestion pricing. It needs a strong commitment from Albany to fund the capital budget through direct investments rather than new debt. It needs a strong commitment to reform capital spending so that projects aren’t orders of magnitude more expensive here than they are anywhere else in the world. And it needs an immediate response to the ridership and reliability crisis. These are not ills congestion pricing can solve immediately, and in certain ways, congestion pricing will put more pressure on the transit system to deliver reliable service immediately.

So as we talk about solutions to the MTA’s problems, and digest DiNapoli’s report in light of the MTA’s own budgetary picture, we have to be realistic. Congestion pricing is a piece of the puzzle, but that money will disappear into the agency’s budget as fast as it can. Perhaps congestion pricing can delay the inevitable, but can the MTA save itself from, well, itself? That’s the billion-dollar question upon which the fate of New York City rests, and as the Magic 8 Ball might say, “Reply hazy; try again.”

Categories : MTA Economics
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NYC Transit may put a pause on rolling out Select Bus Service routes for the next few years. (Photo by flickr user Stephen Rees)

With so many moving financial parts these day, it can be tough to keep track of where the MTA stands fiscally. Gov. Andrew Cuomo’s state of emergency declaration regarding the subways and his subsequent Subway Action Plan, largely ineffectual so far, has allowed the MTA to bypass traditional procurement channels while adding nearly $1 billion to its expense ledger. Meanwhile, relying on the promise of a strong economy and steady fare revenue, the MTA’s out-year financial projections remain as tenuous as ever, and it seems that some cuts may be on the table.

The story took a few weeks to develop after the MTA released its July Financial Plan last month largely because the cuts are buried throughout, but it broke last week in an article in The Wall Street Journal noting that cost reductions required, in part, to find money for the Subway Action Plan may lead to bus and subway service cuts. Most notably, the MTA may be pausing rollout of Select Bus Service routes for at least four years. Here’s how Paul Berger reported it:

The Metropolitan Transportation Authority plans to stop expanding a bus rapid-transit service, reduce bus fare-evasion patrols and cut dozens of positions for subway car cleaning as it seeks $562 million in cost reductions during the next few years.

According to emails reviewed by The Wall Street Journal, some MTA board members are concerned that the authority is taking such cost-savings measures even as it hires more than 1,000 workers under a plan launched last year to improve subway service, known as the Subway Action Plan.

MTA board member Carl Weisbrod, an appointee of Mayor Bill de Blasio, wrote in an Aug. 5 email to fellow board members and senior MTA officials: “It’s hard to escape the conclusion that we’ve giveth with one hand through the Subway Action Plan, and we’ve taketh away, to some extent, through these service cuts.”

In response, MTA Chairman Joe Lhota called the shifting funds a “redeployment of resources,” but a cut is a cut by any name. By holding back on Select Bus Service routes, other than those currently being planned and those needed on 14th Street for bus capacity during the L train shutdown, the MTA saves $28 million, a drop in the $500 million bucket the agency is trying to cobble together. It seems like a Pyrrhic victory as Select Bus Service routes are among the best in the city with touches of a modern bus system, including pre-boarding fare payment and dedicated lanes. So why cut them?

The answer is not quite as black-and-white as it seems, and the MTA may not be cutting off its nose to spite its face. In my view, it takes far too long for the MTA and New York City to roll out Select Bus Service routes. There are far too many hyper-local considerations given far too much weight while the needs of the riders are often backburned by trumped-up concerns over parking spots. We’ve seen this play out again and again and again. So a four-year pause may impact only a handful of routes.

But that’s a bad reason to accept the pause. The better reason is embedded in the MTA’s 500+ breakdown of the financial plan [pdf]. Led by Andy Byford, New York City Transit is currently amidst an analysis and reassessment of the entire citywide bus network. This includes every route, every stop and every 20th century element of the bus network including the boarding process. By 2021, Transit expects to amidst a major rollout of a new fare payment system, and the agency will have completed its review of the bus network. It doesn’t make sense to spend political capital and dollars on rolling out Select Bus Service routes now that may not fit in with the redesigned bus network, and that’s a good enough, but not great, reason to pause so long as the MTA commits to resuming introducing proper SBS (or even real BRT) routes to NYC once the bus turnaround plan is unveiled.

The wild card here though is city politics. Since buses uses city streets, NYC DOT is essentially in charge of permitted Select Bus Service routes, and SBS has become one of the few tools the city has to control its own transportation infrastructure. (Whether the mayor has used this tool efficiently or effectively or frequently enough is open for debate, though I’m sure you know my thoughts.) By pausing SBS rollout and by not informing the city or even working with them to cushion this announcement, the MTA has put itself at odds with the city agency that can by a major ally in pushing forward on the eventual bus turnaround plan. This strikes me as bad city-state politics and a move that could be quite costly down the road.

So ultimately, I think this was a case of bad presentation and mixed messages in a 500-page financial document. The MTA shouldn’t penny-pinch the only good approach to new bus routes over a matter of $28 million spread out over four years, but the agency shouldn’t be introducing new bus routes until it has a handle on how to improve bus service overall on a citywide basis. It’s OK, but not great, to halt Select Bus Service rollout so long as it comes back with a vengeance when the Bus Tunraround plan is unveiled. And if there’s no Bus Turnaround plan, well, that’s a different issue entirely.

Categories : Buses, MTA Economics
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A new RPA report, released as part of the group’s fourth Regional Plan, delves into NYC’s high construction costs.

It’s high times for close-ups on the MTA’s out-of-control capital spending, and hot on the heels of The Times’ deep dive into the MTA’s cost problems comes a long awaited Regional Plan Association report on the very same topic. The title is staid — Building Rail Transit Projects Better for Less — and doesn’t exactly roll of the tongue, but the conclusions are forceful. “The entire process of designing, bidding, and building megaprojects needs to be rethought and reformed top-down and bottom-up,” the RPA says, not mincing words.

In a certain sense, the RPA’s report takes a modest approach to cost reform goals. The RPA believes the MTA could save between 25-33% by implementing its recommendations. While those savings would bring costs more into line with the most expensive international transit projects, the MTA would still be a leader in the cost realm if, for instance, East Side Access came in at $7 billion instead of $10 or Phase 1 of the Second Ave. Subway checked in at $3 billion instead of $4.5. But the extra billions in essentially free money would be put to good use.

The full report is available as an 80-page PDF and, while not perfect, is worth the read. It delves into three case studies focusing on the Second Ave. Subway, the 7 line extension (the best of three overly expensive projects) and East Side Access before analyzing New York City in the context of its international peers. When stacked up against London (Crossrail and the Northern Line extension), Los Angeles, Paris and Madrid (along with a few other cities thrown in for good measure), our models fall apart. New York doesn’t adopt best practices when it comes to capital construction and thus cannot keep pace with technological innovations that would improve service reliability and modernize an old system as many international peer systems of a similar age have. It’s an ugly and familiar story all around.

A comprehensive set of recommendations

As with other recent pieces on the topic, the RPA is careful to spread the blame. Much to the frustration of those outside the transit realm, there is no silver bullet. “The extraordinarily high costs associated with building transit projects in New York are due to many factors, at every stage, from decisions made by political leaders at the inception of the projects to the final stages of lengthy planning, design, and construction processes. Long tolerated as an accepted natural consequence of New York’s size and dominance, these costs threaten to strangle the region’s future economic growth. Other global cities have outpaced New York in building modern infrastructure and attracting new business and residents as New York struggles to simply keep up with basic maintenance.”

To fix the problem, the RPA sets forth 22 recommendations. These include a streamlined environmental review process that could cut years off the planning process. Projects in New York can take up to seven years to get off the ground due to the environmental review requirements while similar work in Europe can begin in 18-24 months. The RPA also recommends accurate project budgets and timelines to avoid funding and procurement problems down the line; more of a reliance on off-the-shelf design and construction elements to avoid costs of customization and change orders; industry-standard project management and procurement practices; streamlined post-project review; the ever-popular work-rule reform; a ten-year capital funding pipeline to better align with construction timelines; and a reform of land-use and zoning practices so that the city and state coordinate on value capture. As a break from the familiar laundry list of reforms, the RPA also points to a shortage of skilled and qualified laborers for the work on the MTA’s slate and urges the creation of job-training centers as well.

Inside the Second Ave. Subway case study

While the RPA by and large seems to reinforce what many in the know have urged the MTA to do for years, the case studies, particularly with regards to the Second Ave. Subway, lay bare the the MTA’s problems. You can read Aaron Gordon’s analysis on the impact of cutting the third track at 72nd St., and take, for instance, the cost of phasing out the entire line:

SAS’s first phase offers many lessons for phase two, starting with how best to manage the overlap of a project with multiple phases. To date, the MTA has not completed engineering and design for phase two, which is only just getting started. This has made it impossible for the agency to coordinate the winding down of phase one with the ramping up of construction for phase two, which would have allowed the experienced crews working on phase one to move directly onto the next segment. Instead, the MTA ended major construction in January 2017 and left the neighborhood, with plans to return in roughly three years. The loss of experienced labor, current staging docks, and remote office spaces means the MTA will have to start the process all over again — adding to the time and costs of phase two as well as the disgruntlement of the neighborhood. And without institutionalizing the lessons learned from phase one, the MTA risks the loss of institutional knowledge that agency staff and project managers have developed on the job over the course of building SAS.

The report includes a one-page featurette on the decision to forego development at the six lots along 2nd Ave. that are home to ventilation plants and station entrances. The MTA lost out on approximately $100-$125 million had the city and state coordinated on rezoning and air rights transfers. As costs go, the Second Ave. Subway was subject to thousands of change orders, and the costs add up:

According to the GCA, the SAS had thousands of change orders, with 96th Street issuing 200 orders during the acceleration phase alone (a claim the MTA disputes). Change orders modified more than 30% of the contract plans. An extreme example occurred with the electrical contractor at 96th Street having over 70% of its bid scope of work modified by change orders, which were issued serially as items were discovered. “This required the general contractor to perform other work out of sequence,” noted GCA, “and in many instances, remove and replace (at its expense) work that had already been completed and installed.”

The stories and dollars just keep adding up. Take, for instance, the station costs:

The high costs of the 96th Street station can be partly explained by the inclusion of 65,000 square feet for the MTA workforce in underground facilities and office space, requiring expensive blasting. The station has hundreds of non-public-access employee spaces. This equates to three to four times as many employee spaces as any other station along the line. The MTA’s justification was that 96th is a terminus, which is only temporary because the line will actually terminate at 125th Street when phase two is completed. Instead of spending the extra millions of dollars to build these temporary facilities, the MTA should have explored the cost-effectiveness of providing employee spaces at the surface by renting commercial space.26 There are also redundant employee facilities at 86th Street and 72nd Street.

Of course, another reason SAS’s stations were extraordinarily expensive lies with the materials. The archway entrances, for example, are built of granite that is six to eight inches thick. As one MTA project manager noted, part of the problem is nothing is off the shelf, with all of the granite being custom-produced.27 Granite, by nature, is nonstandard; each piece is unique due to its geologic formation. Under Buy America procurement rules, the MTA was required to buy American materials. Yet the United States has only a few suppliers that could provide granite of this size, custom-cut to curve at around eight inches thick to support the weight of the archways. This was a deliberate material design decision that almost surely should not be repeated in the future if the MTA hopes to contain costs.

The examples go on and on and on, and by the end of the case studies, one may think that the Second Ave. Subway was designed with no regard to cost at all. The construction of Phase 1 was, from start to finish, a textbook example of how not to build a subway line at a reasonable cost and within a reasonable timeline, and the MTA has shown no indication that things will be different for Phase 2.

Criticism of the RPA’s report

For the strength of its examples, though, the RPA report has not been immune from criticism, and Alon Levy, the resident expert on transit construction costs, has weighed in with a thoughtful critique of the report that is also worth the read. Levy highlights mistakes in the details of the RPA’s cost comparisons that are hard to ignore and rightly charges the organization with an Anglo bias in that it “overvalue[s] other English-speaking countries, even when their construction costs are the highest in the world outside the US.”

Levy doesn’t hold back in his conclusion, urging the creators of reports such as these to delve deeper and draw out the necessary comparisons. He writes:

One of the things I learned working with TransitMatters is that some outside stakeholders, I haven’t been told who, react poorly to non-American comparison cases, especially non-English-speaking ones. Ignorant of the world beyond their borders, they make up excuses for why knowledge that they don’t have is less valuable. Even within the group I once had to push back against the cycle of failure when someone suggested a nifty-looking but bad idea borrowed from a low-transit-use American city. The group’s internal structure is such that it’s easy for bad ideas to get rejected, but this isn’t true of outside stakeholders, and from my conversation with Tom Wright about Gateway I believe the RPA feels much more beholden to the same stakeholders.

The cycle of failure that the RPA participates in is not the RPA’s fault, or at least not entirely. The entire United States in general and New York in particular is resistant to outside ideas. The political system in New York as well as the big nonprofits forms an ecosystem of Americans who only talk to other Americans, or to the occasional Canadian or Brit, and let bad ideas germinate while never even hearing of what best industry practices are. In this respect the RPA isn’t any worse than the average monolingual American exceptionalist, but neither is it any better.

The RPA of course knows its audience and knows how far recommendations can go within the MTA. Scott Rechler, the chair of the RPA, is a bright voice on the MTA Board, and he knows that institutional resistance to reform runs deeper. So perhaps in that sense, the report is written for its audience and goes as far as this audience is willing to go. That may be part of the problem. It is another salvo in the MTA’s war on costs, one I would read with Levy’s grain of salt but not dismiss out of hand. The question is: Who’s listening and when and how will change arrive? The city cannot afford to spend more while getting less and less each year.

Categories : MTA Economics
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Can the city save its subway system before it’s too late? The Times Magazine Section asked just that question this weekend.

Needless to say, taking the subway these days is a bit of a crapshoot. Last week, before it even started snowing, the MTA couldn’t sustain semi-reliable service during Wednesday night’s rush hour commute as crews were working to move trains out of the way of an incoming snow storm while dealing with the fallout from a mid-morning assault at Jay St. and a signal problem along 4th Ave. in Brooklyn. It resulted in multi-hour commutes for thousands of people who just wanted to get home before a winter storm descended on the city, but it even seemed very familiar to anyone watching the subway system’s slow-and-then-fast descent into unreliability and madness. Things are a mess. When will they get better?

Riders aren’t the only people wondering about the fate of the subway. Following The Times’ exposé before the New Year on the MTA’s out-of-control cost problem, the Grey Lady took another deep dive underground this weekend. In a magazine piece that’s been months in the work, Jonathan Mahler made the case of the subways, as his headline suggests. The idea that New York City must absolutely invest in its subways seems like one you and I may take for granted, but Mahler’s piece is somber reminder of the path we may face if our politicians do not find a way to fix the subways.

Coming just a few days after Brian Rosenthal’s magnum opus on costs, Mahler’s piece overlooks the reality that the MTA probably shouldn’t be trusted with massive amounts of dollars before reforms are implemented, but that is besides the point. In fact, the editorial board of the paper cleared up that conflict today, and more on that later. Mahler’s piece takes a deep dive into the importance of the subway to very fabric of New York City and concludes that we simply cannot afford to whiff on the opportunity to fix the subways. Doing so could lead to an inexorably decline in the success of this city. Mahler too pinpoints the class issues inherent in the discussion, a notable aspect of any discussion of public transit. “Can the gap between rich and poor be closed,” he asks, “or is it destined to continue to widen? Can we put the future needs of a city and a nation above the narrow, present-day interests of a few? Can we use a portion of the monumental sums of wealth that we are generating to invest in an inclusive and competitive future?”

The essence of his piece is laid bare in a comparison with international views on subway systems:

Most countries treat subway systems as national assets. They understand that their cities are their great wealth creators and equality enablers and that cities don’t work without subways. The public-private corporation that runs Hong Kong’s subway expects 99.9 percent of its trains to run on time, and they do. (If you are traveling to the airport, you can also check your luggage at a central downtown train station and not see it again until you’ve landed at your destination. Imagine!) China has been feverishly building new metro systems in cities across the country, a recognition that subways are the only way to keep pace with the nation’s rapid urbanization and the needs of its citizens. And it’s not just new cities that are seeing major investments in their subways. Two decades ago, the decline of London’s Underground became a national crisis; now it’s moving toward running driverless trains. For that matter, Los Angeles — Los Angeles — recently embarked on a 40-year, $120 billion project to build out its mass-transit system.

New York City’s subway, meanwhile, is falling apart. If you are a regular rider, you know this firsthand. But even if you aren’t, it has probably become difficult to ignore all the stories about the system’s failure: the F train that was trapped between stations for close to an hour without power or air conditioning, the Q train that derailed in Brooklyn, the track fire on the A line in Harlem that sent nine passengers to the hospital. The cumulative impression of all these miserable underground experiences — and all these stories about miserable underground experiences — is that the situation is hopeless, that the subway cannot be fixed. The subway has been wrecked, and in this era of short-term thinking and government mistrust, public-works projects with benefits larger than any single mind can realize are no longer possible. But it is possible to fix the subway. And we must. Our failure to do so would be a collective and historic act of self-destruction.

Mahler’s piece, magazine-length at that, deserves a close parsing, and he traces the political machinations over responsibility for the decline of the subway. It features stunning photos by Damon Winters of a system falling apart, and it concludes that no amount of money is too little to spend on the subway:

Just this partial list — I haven’t included the platform doors, for instance — brings the total to about $111 billion. It’s a big number. But not when you put it in context. New York City and its environs generated $1.7 trillion in gross metropolitan product in 2016. That’s roughly 9 percent of the nation’s overall G.D.P. How much of that activity is dependent on the subway? About a year before Hurricane Sandy, a state-funded group of scientists and engineers produced a comprehensive (and as it happens, prescient) report on the damage that a hundred-year storm surge could cause to the system. One of the study’s authors, Klaus Jacob, a geophysicist at Columbia University, told me that losing the subway for a month would cost the city about $60 billion in lost economic output.

The reality of this apocalyptic scenario hasn’t sunk in. Absent sufficient resources, the subway has been left with diminished ambitions and empty spectacles…

New York won’t die, but it will become a different place. It will happen slowly, almost imperceptibly, for years, obscured by the prosperity of the segment of the population that can consistently avoid mass transit. But gradually, an unpleasant and unreliable subway will have a cascading effect on New Yorkers’ relationship with their city. Increasingly, we will retreat; the infinite possibilities of New York will shrink as the distances between neighborhoods seem to grow. In time, businesses will choose to move elsewhere, to cities where public transit is better and housing is cheaper. This will depress real estate values, which will make housing more affordable in the short term. But it will also slow growth and development, which will curtail job prospects and deplete New York’s tax base, limiting its ability to provide for citizens who rely on its public institutions for opportunity. The gap between rich and poor will widen. As the city’s density dissipates, so too will its economic energy. Innovation will happen elsewhere. New York City will be just some city.

I generally agree with Mahler though believe cost reform must be a key part of any effort to fix the subways. After all, $100 billion spent efficiently will go a lot further if 30-40 percent of those dollars aren’t assumed to be the cost of corruption right off the bat. In a real city not beholden to corruption in fact, $100 billion could lead to a completely updated and modernized subway system, but we ad the people we elect to represent us seem stuck in this rut of ignoring the 800 pound gorilla in the room.

Mahler’s piece wasn’t the only one to make the case for the subways this weekend. Today, the edit”orial page of The Times includes a call for our leaders to do something. “Billions of dollars that could have gone to maintaining and improving the subways,” the piece notes, “have been wasted on exorbitant costs. Projects have also been delayed by mismanagement.” In fact, The Times notes that based on Alon Levy’s calculations, the first phase of the Second Ave. Subway could have cost a quarter of its $4.5 billion price tag were it built literally anywhere else in the world. Without cost reform, the editorial states, “no amount of revenue, whether it comes from higher fares, from a tax on millionaires as Mayor Bill de Blasio has proposed, or from congestion pricing as Mr. Cuomo has suggested, will be enough to fix the subways. Too many of those added dollars would be frittered away.”

And that’s the key. We can spend $100 billion; we can, as David Leonhardt eloquently argues, implement congestion pricing in a way that makes sense and improves New York city for everyone; we can vow to fix the subways. But until cost reform are part and parcel of any reform effort, no amount of money will fix the subway because it will all just be siphoned away into the great unknown of the New York City subway system’s blackhole of institutional corruption.

Categories : MTA Economics
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The world’s most expensive subway construction project opened a year ago. Can the MTA take the steps needed for cost reform? (Photo by Benjamin Kabak)

Why do New York rail construction projects cost so much? In essence, with a $5-$6 billion tag attached to Phase 2 of the Second Ave. Subway on the horizon (let alone the recent politicking over the fate of the Gateway Tunnel), this is the big question plaguing New York. With limited dollars not going nearly as far as they do the world over, the MTA’s cost problems are a significant barrier to New York City transit expansion.

For years, those watching the MTA have rung the alarm on the agency’s high construction costs. I’ve written about cost concerns and the ever-increasing budgets for big-ticket MTA capital projects for years, and I’m not alone. Alon Levy has, since this post in 2011, charted the absurd costs of U.S. rail construction in detailed comparisons with international peers, and Stephen Smith, via the @MarketUrbanism twitter feed, has beaten the cost drum. When challenged, MTA officials have acknowledged that construction costs, but no one has tackled the twin issues of cost transparency and cost control. No one, that is, until last week, when The Times ran a massive front-page story charting all the reasons why NYC transit construction are so high.

As the finale in the series that started with an in-depth look at our unfolding transit crisis, Brian Rosenthal, with help from Doris Burke and Alain Delaquérière, has done what the MTA or the New York State Comptroller should have done years ago: They scrutinized MTA spending and took a deep dive into the agency’s contracting practices, staffing policies and lack of productivity in a way that lays bare just how bad the MTA is at managing big-ticket construction projects or getting a good return on its dollar. The article is, essentially, the story of how institutionalized corruption has become the norm in New York City. I highly urge you to read the entire piece and peruse through my instant reaction Twitter thread from Friday. I’ll excerpt a bit here.

First, the lede in which no one knows what 200 people are doing as part of the East Side Access project, a $12.5 billion project that costs, as The Times notes, seven times more than similar work elsewhere:

An accountant discovered the discrepancy while reviewing the budget for new train platforms under Grand Central Terminal in Manhattan.

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there.

“Nobody knew what those people were doing, if they were doing anything,” said Michael Horodniceanu, who was then the head of construction at the Metropolitan Transportation Authority, which runs transit in New York. The workers were laid off, Mr. Horodniceanu said, but no one figured out how long they had been employed. “All we knew is they were each being paid about $1,000 every day.”

At the outset, the article blames everyone and dives in from there. I haven’t seen a more succinct summary of the MTA’s problems than this excerpt:

Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more laborers than elsewhere in the world, documents show.
Construction companies, which have given millions of dollars in campaign donations in recent years, have increased their projected costs by up to 50 percent when bidding for work from the M.T.A., contractors say. Consulting firms, which have hired away scores of M.T.A. employees, have persuaded the authority to spend an unusual amount on design and management, statistics indicate.

Public officials, mired in bureaucracy, have not acted to curb the costs. The M.T.A. has not adopted best practices nor worked to increase competition in contracting, and it almost never punishes vendors for spending too much or taking too long, according to inspector general reports.

At the heart of the issue is the obscure way that construction costs are set in New York. Worker wages and labor conditions are determined through negotiations between the unions and the companies, none of whom have any incentive to control costs. The transit authority has made no attempt to intervene to contain the spending.

Meanwhile, when faced with the conclusions of The Times’ reporting, the MTA pointed to its favorite bogeyman — New York exceptionalism. Projects cost a lot in New York because things are expensive. MTA Chairman Joe Lhota pointed at ” aging utilities, expensive land, high density, strict regulations and large ridership requiring big stations.” In the reporters’ fact-based world, none of this would fly:

But the contractors said the other issues cited by the M.T.A. were challenges that all transit systems face. Density is the norm in cities where subway projects occur. Regulations are similar everywhere. All projects use the same equipment at the same prices. Land and other types of construction do not cost dramatically more in New York. Insurance costs more but is only a fraction of the budget. The M.T.A.’s stations have not been bigger (nor deeper) than is typical. “Those sound like cop-outs,” said Rob Muley, an executive at the John Holland engineering firm who has worked in Hong Kong and Singapore and visited the East Side Access project, after hearing Mr. Lhota’s reasons.

In Paris, which has famously powerful unions, the review found the lower costs were the result of efficient staffing, fierce vendor competition and scant use of consultants. In some ways, M.T.A. projects have been easier than work elsewhere. East Side Access uses an existing tunnel for nearly half its route. The hard rock under the city also is easy to blast through, and workers do not encounter ancient sites that need to be protected. “They’re claiming the age of the city is to blame?” asked Andy Mitchell, the former head of Crossrail, a project to build 13 miles of subway under the center of London, a city built 2,000 years ago. “Really?”

So what makes MTA projects cost so much? One answer is overstaffing. As I have detailed before, the MTA staffs upwards of 25 people on TBM projects while most other nations use around 10 for similar work. But that’s just the tip of the iceberg:

The documents reveal a dizzying maze of jobs, many of which do not exist on projects elsewhere. There are “nippers” to watch material being moved around and “hog house tenders” to supervise the break room. Each crane must have an “oiler,” a relic of a time when they needed frequent lubrication. Standby electricians and plumbers are to be on hand at all times, as is at least one “master mechanic.” Generators and elevators must have their own operators, even though they are automatic. An extra person is required to be present for all concrete pumping, steam fitting, sheet metal work and other tasks.

In New York, “underground construction employs approximately four times the number of personnel as in similar jobs in Asia, Australia, or Europe,” according to an internal report by Arup, a consulting firm that worked on the Second Avenue subway and many similar projects around the world. That ratio does not include people who get lost in the sea of workers and get paid even though they have no apparent responsibility, as happened on East Side Access.

And then of course there is good old fashioned featherbedding. As Rosenthal details, the Sandhogs’ union gets a free perk just because the MTA uses TBMs, a technology that has been employed to dig subways for the better part of 50 or 60 years. As he writes, “One part of Local 147’s deal entitles the union to $450,000 for each tunnel-boring machine used. That is to make up for job losses from ‘technological advancement,’ even though the equipment has been standard for decades.”

Besides the obvious institutionalized corruption and back-patting, Rosenthal details how the MTA’s own practices lead to significantly higher costs. This is a key part:

Mr. Lhota, the M.T.A. chairman, agreed that leaving negotiations to unions and vendors may be problematic. “You’re right; in many ways, there’s this level of connection between the two,” he said. But the chairman said he did not know what could be done about it. Hiring nonunion labor is legal but not politically realistic for the M.T.A. The transit authority could get unions to agree to project-specific labor deals, but it has not.

The profit percentage taken by vendors also is itself a factor in the M.T.A.’s high costs. In other parts of the world, companies bidding on transit projects typically add 10 percent to their estimated costs to account for profit, overhead and change orders, contractors in five continents said. Final profit is usually less than 5 percent of the total project cost, which is sufficient given the size of the projects, the contractors said.

Things are much different in New York. In a series of interviews, dozens of M.T.A. contractors described how vendors routinely increase their estimated costs when bidding for work. First, the contractors said, the vendors add between 15 and 25 percent as an “M.T.A. Factor” because of how hard it can be to work within the bureaucracy of the transit authority. Then they add 10 percent as a contingency for possible changes. And then they add another 10-12 percent on top of all that for profit and overhead.

The MTA takes a laissez-faire relationship to its contractors’ agreements with labor unions and then sits back as the contractors build in extra costs (and profit margins) to their agreements. No wonder the contractors want the MTA capital plan to be as expensive as possible as high amounts of available dollars lead them to realize more profits. And the examples are endless. Rosenthal notes that other countries’ bidding processes lead to as many as eight bids on complex construction work whereas the MTA sees two that often come in far higher than estimated. MTA Board members meanwile, are keen to wash thier hands of graft:

More than a dozen M.T.A. workers were fined for accepting gifts from contractors during that time, records show. One was Anil Parikh, the director of the Second Avenue subway project. He got a $2,500 ticket to a gala, a round of golf and dinner from a contractor in 2002. Years later, shortly after the line opened, he went to work for the contractor’s parent company, AECOM. Mr. Parikh and AECOM declined to comment.

A Times analysis of the 25 M.T.A. agency presidents who have left over the past two decades found that at least 18 of them became consultants or went to work for authority contractors, including many who have worked on expansion projects. “Is it rigged? Yes,” said Charles G. Moerdler, who has served on the M.T.A. board since 2010. “I don’t think it’s corrupt. But I think people like doing business with people they know, and so a few companies get all the work, and they can charge whatever they want.”

Firms that donate to politicians and operate a revolving door between their offices and the public sector are the only ones to bid on complex projects and they do so at inflated costs. It’s graft, and whether it’s legal is a big open question mark in my mind. But don’t sleep on MTA ineptitude either; the agency after all hired three “operational readiness” consultants for East Side Access ten years before construction work is set to wrap on the project. The waste and the rot run deep.

As you read The Times piece, you may be wondering what happens next. After all, MTA officials have been on the record acknowledging these problems for years, but they never act. Horodniceanu talked about overstaffing on TBM projects years ago, and he never acted. A faction on the MTA Board recently started raising concerns over contracting dollars, but the full board still voted to approve all projects. And the $6 billion Second Ave. Subway phase looms large.

As I see it, two people could fix this mess. One is Andrew Cuomo. He could exert the leverage he has over the MTA and the labor unions to get both sides to come to the table on a solution. Unfortunately, he has shown no willingness to challenge union costs, and he has used the MTA for political show only. The other person is New York State AG Eric Schneiderman who could use his office’s legal powers to investigate these contracts and, if legally feasible, start prosecuting all of these players for fraud. That would be a big shock to the New York state construction graft industry but is a reach legally with standards for proving this type of corruption very high these days.

Are we stuck then? Is the only outcome a well-deserved Pulitzer nomination for Rosenthal and The Times and vindication for Stephen Smith, Alon Levy, and the thousands of transit nerds who have listened to them over the years? I hope something more comes out of this series of articles. The future of reasonably priced transit projects in NYC depends on it. But even with everything out in the open, corruption has a way of persevering absent a major shock to the system that enabled it in the first place.

I’ve been thinking about some ways to keep this site moving in light of the time I have to spend on it these days. As you all know, new posts have been infrequent and without warning. The site isn’t dead, but I’m going to try a new format around these pages. My goal is a weekly post on Sunday nights/Monday morning with some key links at the end. I may try to do one or two posts during the week that are links to articles worth reading. You can also keep up on with my on Twitter as well. There’s a lot going on in transit these days — both noise and otherwise — and I don’t want to stay silent.

To that end, let’s dive into the news of last month: Shortly before the first end of the New York legislative session — in fact, with only a few hours to spare, Gov. Andrew Cuomo finally nominated a permanent MTA Chair. The move was a surprise as supposedly a committee was to be engaged in a big search for a replacement, but when the dust settled, Cuomo appointed Joe Lhota, the former MTA head, to resume his spot. Lhota agreed and was confirmed with hardly any hearing, a part of Albany’s continued failure to exercise its MTA oversight obligations. He’ll be the Chair but will keep his job at NYU Langone while delegating executive director duties to someone else. For now, that “someone else” is still Ronnie Hakim.

At the time, in June, Lhota’s appointment seemed to me to be a bit of a “Hail Mary” move by a beleaguered governor. Lately, the subway’s performance decline has been notable, and a growing drumbeat has emerged out of New York City ensuring that Cuomo is named as the source of the problem, as he in charge of the MTA, and calling for him to do something. Right now, Cuomo needs someone to project competency, and Lhota projects competency. After all, he was in charge of the MTA during the aftermath of Superstorm Sandy and was credited with getting so much of the system up and running again relatively quickly after such a catastrophic storm. So Lhota, a member of the search committee, winds up with the job.

In the aftermath of Lhota’s appointment, Gov. Cuomo has declared a state of emergency for the MTA. It’s not quite clear if that has legal force, but it allowed Cuomo to garner headlines for promising an additional $1 billion in MTA funding. (It’s not quite clear where that $1 billion will go or if Cuomo understands how laughably small that amount is considering the cost of overhauling the signal system.) Lhota too in some of his first public comments, promised to overhaul the MTA too.

“Millions of New Yorkers depend on the MTA every day, and we must rebuild confidence in the authority with a complete overhaul of the system, he said during the Genius contest a few weeks ago, “identifying the root causes of our problems and taking immediate and decisive action to fix them. It is our responsibility to transport people as safely, quickly and efficiently as possible, and the current state of the subway system is unacceptable. In tandem with the Genius competition proposals, we will deploy a multi-faceted plan to restore confidence to the MTA and prove that we can deliver for our customers.”

Ultimately, though, the words are meaningless without actions, and actions haven’t come yet. To truly overhaul the MTA, as many have been saying for a while, requires a commitment to change at all levels. The MTA has to be able to deliver projects at a reasonable cost and in a reasonable timeframe. We need MTA projects to be competitive with European spending levels and not ten or even 100 times more expensive, and we need delivery timetables to be rapidly accelerated. The signal system project, for instance, is supposedly going to take decades, but the MTA should have a plan to shut down lines, one a time, and blitz the signal system. Could work be completed in 10 years instead of 40 with adequate attention, investment and mitigation? We the public do not know because the MTA itself, by all accounts, doesn’t know.

In Saturday’s New York Times, Joe Lhota responded to be an editorial calling for more MTA investment with a letter to the editor pushing the fiscal issue onto the shoulders of the legislature. He wants some attention on operations as well as capital. “The day-to-day operations of the subway desperately need an infusion of additional financial support from every level of government, including the city. Today, our customers pay a larger portion of the system’s operations from their daily fare than the customers of almost every other mass transit network in the country do,” Lhota wrote. “The burden of operations should not fall primarily on subway and bus riders; it’s time for all elected officials to use their budgets to support the transit system, which drives the region’s economy and makes New York possible.”

The MTA needs money, but funneling more money into a black hole won’t solve the problem. It needs to rethink who it is paying to do what, how much is being paid and how much productivity the money is generating. These aren’t easy questions, and they’ll face resistance from an entrenched bureaucracy and various special interests who don’t want the MTA’s monetary flood to slow to a trickle. These reforms — deep, structural reforms — are what Lhota must deliver to be successful. Otherwise, the state of emergency will deepen.

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Transit analysts and advocates have engaged recently in an interesting, if wonky, battle over the state of the MTA’s finances. Taken as a whole, these arguments lead to the conclusion the MTA is both over- and under-funded. It doesn’t have enough money but can’t spend the copious billions it does have efficiently or quickly enough to warrant giving it more. It is stuck between a proverbial rock and a hard place.

On the one hand, the MTA has access to around $30 billion in capital funding (though the dollars will materialize through debt service and other questionable financial practices), and on the other hand, $30 billion at the MTA’s current spending levels and efficiencies isn’t enough for the agency to do everything that needs doing. Two recent articles underscore these tensions, but the fix remains elusive.

The first comes from The Post. Former MTA Chairman Peter Kalikow had some unkind words for his one-time ally Gov. Andrew Cuomo over MTA financing:

“It’s not right. Cuomo is wrong. He’s nickled an dimed the MTA on the capital program,” Kalikow told The Post, in rare criticism of the governor from a former MTA chair. He said while Albany has promised $8.3 billion toward in the $27 billion five-year capital plan, the state has handed over less than two billion dollars of the promised funds so far. “They have not funded it properly,” Kalikow said. “If you get Prendergast the money needed, he could do the job.”

It’s not quite clear how much Kalikow wants, but there is a sentiment that the MTA needs more than $30 billion to keep things running smoothly. One problem with that argument is that the MTA’s spending practices are woefully inefficient, and cost control is something I’ve covered extensively in the past. The other is that it isn’t clear if the MTA can spend more than what it has. After a while, there are only so many qualified contractors in New York City who can do the work the MTA funds. But the former point is more important than the latter. Should the MTA get more money before it improves its spending practices?

The second article is even wonkier. Here’s The Wall Street Journal on how recent accounting changes have exposed the MTA’s long-term pension obligations:

New accounting rules are shining a light on more than $7 billion in pension liabilities facing the Metropolitan Transportation Authority. While the disclosures won’t force the MTA to raise tolls or cut service, they quantify the authority’s tab for commitments to pay retirees, and some critics detect a mounting potential burden on riders and taxpayers. “I would hope there would be some sticker shock” with the pension-cost reporting, said Charles Brecher, director of research at the Citizens Budget Commission, a civic group based in Manhattan. “You want to inform people about the cost of these promises.”

The MTA pays steeper costs for employee pensions and other retirement benefits than its peers in London and Paris, Moody’s Investors Service analysts said in March report. For each ride, the MTA paid $3.06 in overall personnel costs in 2014, compared with $1.05 for Paris and 75 cents for London, according to the report. Nearly $1 of every MTA ride goes to health care, pension and retirement costs…

the MTA’s labor-related costs could reduce its budget flexibility and compete with capital improvements, the Moody’s report noted. An MTA spokeswoman said the market understands the authority’s cost structure “and still rates our bonds highly.” A downgrade in the MTA’s bond ratings could increase its borrowing costs…The relatively high cost of the MTA’s pension liabilities could increase pressure to raise fares and tolls or cut service. “If you have some downturn in your revenues, those are expenses you can’t cut so all the cuts have to come out what’s left of your budget,” said Marcia Van Wagner, a Moody’s analyst.

The MTA’s pension costs have been a long-standing issue that few people like to take up because of the explosive nature of issue. In the article, TWU President John Samuelsen defends the MTA’s pensions for its drivers as part of a “dignified retirement.” He doesn’t address how workers pad their pensions through overtime in their final years or how employers across the nation outside of the public sector have essentially eliminated pensions entirely. Rather, he offers us this defense of the job: “They,” he said of financial analysts, “would pee themselves if they had to drive a bus up Utica Avenue for an eight-hour shift.” It’s part of a straw-man argument that cuts both ways.

The MTA’s pension obligations are a part of a broader conversation about how the MTA spends its money. The pension dollars will eventually come out of fare revenue, and the fares will go up to support pensions. Meanwhile, the capital dollars — which should fund more than they do — are bandied about by politicians as part of a game. The MTA can’t spend the money it has wisely and can’t access the dollars it needs properly. Talk about being stuck between a rock and a hard place.

Categories : MTA Economics
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Whenever the MTA raises fares — a biennial occurrence for the foreseeable future these days — the price increases if often called a regressive tax. While the fare hikes are generally applied across the board, these increases have a larger negative impact on those from lower economic classes as it takes out a larger percentage of their incomes. If public transit is supposed to equalize the way we New Yorkers get around the city and access job centers, schools and everything else the city has to offer, constant fare hikes should, at a certain level, be a policy concern.

Lately, as the MTA has been forced to balance its budget on the backs of its riders (rather than, say, through some sort of congestion pricing or tolling plan), anti-poverty advocates have focused on transit fares as a point of concern. A few weeks ago, the Community Service Society of New York in conjunction with the Riders Alliance released a report [pdf] with some sobering numbers. Approximately 1 in 4 New Yorkers simply cannot afford to pay transit fares and thus are very limited in their potential job searches. Meanwhile, low-income New Yorkers who are more heavily reliant on transit than their richer neighbors spend a disproportionately higher percentage of their incomes on transit.

The study traces how certain transit benefits programs aren’t set up properly. While the MTA’s fare structure is set up to reward frequent travelers, only 18 percent of low-income riders are buying 30-day Metrocards, mostly because they cannot afford the initial outlay of $116.50. So they end up paying more over the course of the month — either through weekly purchases of the 7-day card (which adds up to a pro-rated $132.86 over 30 days) or through pay-per-ride cards. Additionally, tax breaks for transit usage often do not reach low-income riders. Here’s how the report puts it:

While the tax deduction for monthly MetroCard passes can save higher-income New York City families over $600 per year, the deduction is worth less to lower-income families who face lower tax rates. In fact, some families with lower earnings who are eligible for the Earned Income Tax Credit (EITC) would actually be worse off if they were to enroll in commuter benefits.

The pre-tax commuter parking benefit also yields higher tax savings to relatively more affluent suburban commuters who claim both the transit and parking allowance (e.g., those who drive to a commuter rail station). Most of the neediest commuters, however, do not own cars and benefit from the parking deduction; they are also more likely to live in New York City and rely on the MTA, allowing them to claim less than half of the $255 transit allowance for monthly MetroCard expenses. The pre-tax commuter benefits program offers considerable savings to many middle- and upper-income commuters. The cost to the state of New York of a tax subsidy such as this is the forgone state and city income tax revenues. Between the commuter benefit tax subsidy, half-price MetroCards for the disabled and elderly, and discounted monthly passes that are not affordable to low-income families, substantial public resources are being used to subsidize transit fares without reaching the majority of low-income families.

An estimated 800,000 riders would be eligible for a half-price fare for poor New Yorkers, saving those who opt to participate up to $700 per year.

The solution, the group argues, is a half-fare discount plan, such as those currently available for seniors or students, targeted at poor New Yorkers. The CSS argues that those eligible number around 800,000, and they would save approximately $700 a year in transit costs. The CSS estimates similar eligibility and participation rates as food stamps and believes the program would cost approximately $194 million in lost farebox revenue. It is worth noting as well that other cities, including Seattle, San Francisco and London, have already embraced some form of discount fares for low-income riders.

“Economic mobility and transit affordability go hand in hand. To get to work, pick up your kids from school, go to the doctor, to do almost everything you need to do in New York City to survive requires riding the subway or bus, “ David R. Jones, President and CEO of the Community Service Society, said in a statement. “Yet one-quarter of the city’s working poor often cannot afford bus and subway fare. The MTA should be available to everyone in our city, not just those with credit cards in their pocket who can afford a monthly pass, but to those with a few bucks in their pockets who are struggling to take care of their families and get ahead.”

The supporters of the plan haven’t pitched this is an idea the MTA should drive; it is, after all, something that will have to be made available to transit riders with a corresponding increase in MTA funding to offset the potential lost revenue. But so far, over two-thirds of New Yorkers surveyed have expressed some level of support for low-income fare subsidies. How the city and state could pay for this program is up for debate. The CSS argues for a share of some fare tolling/congestion pricing revenue, but everyone will have their hands in the pot. A surcharge on taxis, including Uber and Lyft rides, is mentioned in the report as are gas tax hikes, a so-called “millionaires” tax or direct budgetary contributions. It certainly warrants a robust public discussion. In our current climate, with lackluster support from transit from both Albany and City Hall, can this become an argument over economic fairness and livability in New York City in 2016? It should be.

Categories : MTA Economics
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As the clock on March expired and the calendar flipped to April, New York State legislators passed a $155 billion budget. The state has a lot of money to play with, and as interest rates remain low, it’s very easy to borrow. It would be, in other words, a great time to fund mass transit through direct contributions, and even $3 billion in annual direct contributions would lead to a guaranteed $15 billion for the MTA’s five-year capital plan. This money would lessen the MTA’s need to borrow and then fund borrowing through fare revenue. Less than 2% of the state budget should go toward MTA capital improvements. But that’s not what happened.

As I explored shortly after the budget passed, the MTA didn’t get much out of it except for some funding earmarked toward future phases of the Second Ave. Subway and, apparently, a vague promise to approve the capital plan following a second round of amendments. Meanwhile, Cuomo has promised to fund a sliver of the MTA’s current five-year, $28 billion capital plan only when the agency has exhausted all other revenue streams. To that end, no one expects the MTA to realize any of this money until the mid-2020s, and Cuomo has insidiously allowed the MTA to raise its debt ceiling. Thus the agency can borrow even more before the state’s obligations to pony up a few billion dollars come due.

Over at NY1, Zack Fink broke the story:

After staying up all night, the New York State Senate finally voted on the last budget bills before 9 a.m. Friday. One of those bills raised the debt ceiling for the Metropolitan Transportation Authority (MTA), allowing the agency to borrow up to $55 billion. “What kind of message does that send, that we’re allowing one state authority to issue more debt than the entire state of New York is allowed to?” said State Assembly Member Nicole Malliotakis of Staten Island and Brooklyn. “It’s going to lead in the future to higher tolls, fares, and service cuts.”

…Observers said the new MTA debt ceiling explains how Cuomo will fund the agency’s ambitious capital program construction, which includes East Side Manhattan access to the Long Island Rail Road and the Second Avenue Subway. “Cuomo said he’s going to give $8.3 billion to MTA; he only showed up with $1 billion,” said Nicole Gelinas of the Manhattan Institute. “And so where is he going to get the rest of this money? Obviously there’s your answer.”

Critics say commuters will ultimately get hit with the bill. “Somebody has to pay for this. The MTA already has budget gaps over the next several years, so people’s fares and tolls will go up to pay for all this debt,” Gelinas said. “It’s just that the governor probably expects that this will happen after he leaves office.”

It is my understanding that the MTA’s debt will come in the form of so-called moral obligation bonds and not general obligations bonds. Thus, if the MTA defaults on its bond obligations in order to force bondholders to the table, the state will not step in to cover any outstanding debt service payments. In other words, by hook or by crook, we the subway and bus riders of New York City (along with the Metro-North and LIRR riders and those paying bridge and tunnel tolls) are stuck with mounting debt and mounting debt service obligations that would put more pressure on fares and the MTA’s ability to provide and expand service. That’s Gov. Cuomo’s New York.

Meanwhile, the Governor has promised upstate drivers parity and breaks on New York State Thruway tolls. It seems unlikely that they will be saddled with debt this high that could be easily avoided for a small percentage of the overall budget. Cuomo too has proposed a series of transit projects that aren’t in line with what the city needs. He’s singularly focused on improving the way people enter and exit New York City rather than on improving how they get around New York City once they’re here, and even some ideas — such as the Willets Point Laguardia AirTrain — are worse than doing nothing.

It’s easy to saddle future generations of New Yorkers who will never have the opportunity to vote for Cuomo or the current batch of legislators will the debt that arises out of transit ideas built today, whether they’re good or bad ideas, and that is exactly what our politicians have done. It’s a devious way to make decisions that affect us all for decades to come.

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