Archive for MTA Economics
As transit agencies across the country have struggled to find adequate amounts of money over the past few years, the promise of lucrative naming rights deals hovers at the edges of any discussion. On a practical level, our own MTA secured $200,000 a year for 20 years to append the Barclays Center moniker to the Atlantic Ave./Pacific St. stop, and in Philadelphia, AT&T paid out $5 million for a five-year deal to completely rename SEPTA’s Pattison Ave. stop. Beyond that, naming rights have remained a mirage.
Across the country — as a simple Google Search shows — transit agencies have been seduced by the allure of dollars for names. Boston has explored potential naming rights deals and so has Austin. Dallas is currently working to market its stations, and Chicago has tried various approaches with limited success. Apple paid to overhaul a CTA stop near one of its Windy City stores, but the CTA hasn’t shopped naming rights. Simply put, there isn’t a lot of money in these agreements.
That doesn’t, however, stop potential politicians from trying. Tom Allon, the CEO of Manhattan Media and potential GOP mayoral candidate (that is, if Joe Lhota doesn’t step in), penned a piece during Thanksgiving week calling upon the MTA to sell station naming rights. He wrote:
The MTA runs more than 400 subway stations and more than 5,000 bus stops. That’s very valuable — and visible — real estate that should be monetized. If we sold the naming rights to each bus stop for, say, an average of $5,000 per month and subway stations for an average of $10,000 per month (based on my own experience and estimates), that would generate $360 million per year in new revenue — the lion’s share of the current $400 million deficit that is precipitating the fare increase proposal.
Would you rather pay an extra $120 per year to commute or start referring to the Times Square subway station as “Pepsi Times Square”? Not a tough choice for me, especially since our transit system is already covered in ads.
Moreover, we routinely sell naming rights in the private sector to stadiums (Citi Field in Queens, Barclays Center in Brooklyn), hospital wings (NYU’s Langone Medical Center), university buildings (the Arthur L. Carter Journalism Institute, also at NYU) and other institutions. For that matter, now that the Barclays Center is open, the subway station beneath it has been renamed “Atlantic Avenue – Barclays Center.” Nobody seems outraged by the change so far. Sure, some will call this crass, charging that we are commercializing some of our public spaces. However, such criticisms would be misplaced.
In my mind, privatizing the names of stations is a small price to pay to keep fares down for working-class New Yorkers, who depend on mass transit each day to get to their jobs, at a time when median wages are not rising nearly as fast as the cost of living here.
Allon went on to suggest a series of (unfortunate) names: There’s Time Warner Marcy Ave., Nike Union Square, and Ray’s Pizza 68th and Broadway. No word if he meant Famous Original Ray’s or Ray’s Original Pizza.
If only it were that easy though. Unfortunately for Allon, it takes two interested parties to complete a naming rights deal. Someone has to want to sell those rights, and someone else has to want to buy them. The second someone else hasn’t been as forthcoming as the first. For starters, transit infrastructure does not have the best reputation in the world, and may companies are hesitant to append their names to something not safe. Imagine if this past Monday’s horrific incident had happened at M&M’s 49th St. station instead of just the 49th St. station.
Furthermore, will anyone really pay $10,000 per month? The MTA’s only current naming rights deal is for $16,666 per month, but it’s also at a station that saw a pre-Barclays Center average of 33,000 passengers per day. Marcy Ave., used in Allon’s example, has a daily ridership of around 11,000, and a large number of stations see well under 5,000 passengers per day. Allon’s revenue projections aren’t just optimistic; they’re flat-out impossible to attain.
It’s notable that Allon, ostensibly a serious candidate for mayor, is talking transit. That’s seemingly more than many of his Democratic counterparts have done so far. But his idea isn’t based in reality. It’s a populist trope with no money behind it. Naming rights aren’t some panacea for funding woes, and the more time politicians spend dallying on the idea, the less time they devote to truly transformative and revenue-generating policies instead.
As we well know, the MTA has a debt problem. By the end of the decade, the MTA’s annual debt service payments should top $2 billion, and debt — as opposed to transit expenses and true operating costs — is the largest growing portion of the MTA budget. Even as the authority has engaged in historic cost-cutting measures over the past few years, the debt problem just doesn’t go away.
Now, the MTA has a Sandy problem as well. With the cost of repairs and some — but not all — hardening projects pegged at over $5 billion, the MTA has to find a way to fund these repairs. Eventually, federal money and insurance dollars will help cover the costs, but you know how these things work. It takes negotiations and time to get the checks cut and the dollars distributed.
Earlier this week, at the monthly board meeting, MTA officials spoke about the funding options for the repairs, and the MTA’s favorite four-letter word came up. To fund immediate repairs, the MTA will borrow money and take on more debt. If only my credit limit were as high as the MTA’s. While discussing the funding, MTA head Joe Lhota vowed to find ways to pay for it that don’t involve fare hikes. “The burden of Sandy will not be upon our riders,” he said.
Still, with the numbers the MTA is throwing around and their plans for funding, the riders will somehow, someway feel the pain. Before Sandy, the MTA’s financial picture was improving. Small surpluses for 2012 and 2013 were to lead to service enhancements — which the MTA says are still on the table — and further savings were on the table. The storm threw that plan fully out of whack as the MTA lost $268 million on fare revenue and increased operating costs and has to fund capital work worth $4.75 billion, the equivalent of a year in the capital budget.
In documents released this week, the MTA says it expects to receive federal reimbursement over a period of three years beginning in 2013. To fund the repairs sooner, the MTA will issue $2.9 billion of debt in 2013 and $1.9 billion in 2014. The MTA also anticipates that it could be left footing the bill for over $900 million in repairs without federal assistance. If the MTA has to bond out that difference, borrowing costs would add $62 million a year to the MTA’s already-substantial debt load.
That’s where Lhota’s statement comes into play. He feels the MTA could, if necessary, fund the difference through internal costs. The agency will not raise fares more than it is already planning to do to pay down this debt. But even if riders aren’t subsidizing the debt, they’re still paying for it. With more debt on the books, the MTA’s credit rating could suffer and borrowing costs may increase. With more debt on the books, the MTA will have less leeway in its tight budget for transit services. With more debt on the books, the riders are left in a very precarious position. Worse yet, we’re still not even contemplating ways to improve and eliminate flood-prone areas.
As is often the case, it’s all about the money for the MTA, and that dollar will just be stretched tighter and tighter as the transit network struggles to recover from the worst natural disaster in its 108-year history.
Since getting wind of the MTA’s $600 million request for funds to repair and restore the South Ferry/Whitehall St. station complex, I’ve had a tough time wrapping my head around the exceedingly high figure. The total — which may not include repairs to the Montague St. Tunnel or nearby Broad St. station — is over ten percent higher than the cost of constructing the new South Ferry station, and a time when budgets at any level are maxed out, it seems on the surface to be just another example of the MTA’s inability to rein in capital construction costs.
The South Ferry price tag isn’t the only shocking number from the MTA’s Sandy Impact List. Restoring the A train’s Broad Channel connection to the Rockaways will cost $650 million, and repairing the damage to the signal system will run up to $770 million, nearly as much as initial estimates for a full CBTC treatment of the Queens Boulevard line. While we can argue that emergency dollars from the feds represents an untapped revenue stream of which the MTA should take full advantage, something else might be at work here. The MTA may be overestimating it needs.
After facing a rumbling of shock over the cost estimates, officials at New York City Transit have repeatedly stressed that the figure is just a guess for now. They don’t know how much it will cost and hope to get the total well below $600 million. Ted Mann of The Wall Street Journal followed up this argument with a piece on South Ferry this evening. He writes:
The Metropolitan Transportation Authority is still in the earliest phases of assessing the damage to its facilities, including how much it will cost to rebuild South Ferry, which filled with flood water and debris carried in by the tidal surge of superstorm Sandy…The MTA will seek to repair damage to South Ferry for less than the $600 million asking price, Transit Division President Thomas Prendergast said on Tuesday.
The transportation agency is keeping its damage estimates high enough to account for potentially high costs of reconstruction–especially if the station suffered serious structural damage–or for expensive components like escalators and elevators that could need to be replaced. “You don’t want to pad” damage estimates in seeking federal aid, Prendergast said. “If you destroy your credibility by padding numbers, that’s bad too. But you start with a number that you think is going to capture all your costs and you work back from that. And if we find we end up delivering it less, we’re not going to bill anybody for more.”
There is the possibility — though no guarantee — that some damage estimates will fall as evaluation continues and repair work begins in earnest, Prendergast said. “When you’re dealing with third parties who may reimburse you, you never want to start low and then work high,” he said.
In a sense, the MTA is following a practice it rarely pursues: By overestimating the costs now, the agency may look better in the public eye when repairs come in below target. They also may not know the full extent of the damage, and it is possible as well that the repairs will cost that much. After all, the entire South Ferry station was flooded, and salt water mitigation and subsequent repairs and hardening efforts will be substantial.
Still, these estimates bring to light a problem that has bedeviled the MTA for decades: Construction costs in New York City cannot remain this high if the MTA wants to continue to expand its network to meet growing demand. We can’t pay $600 million to repair a single subway stop just like we can’t pay $4.5 billion to build barely two miles of new subway. The MTA has needed to engage in a serious discussion of its capital construction spending scale for years. Maybe Sandy can push that dialogue in the right direction. After all, New Yorkers are beginning to suffer from subway repair-induced sticker shock.
Earlier this morning, I posted on the steep costs of repairs in the aftermath of Sandy, and this afternoon, the Governor’s list of fiscal requests for the MTA hit the net. Via Transportation Nation comes the above list with the detail breakdown. You can also download it from here in PDF form, and the line items are shocking.
We already heard of the $600 million request for the South Ferry/Whitehall St. station, and now we know restoring A train service to the Rockaways will cost even more. The MTA Impact List requests $650 million for the restoration of the Broad Channel service, a figure that will embolden those wondering if restoring the line is the best use of resources. Overall, tracks and signals suffered $300 and $700 million worth of damages respectively, and the Hugh L. Carey (nee Brooklyn-Battery) and Queens-Midtown Tunnels suffered a combined damage total of nearly $800 million.
Further down the line, while the MTA’s major capital projects — the 7 line extension, Fulton St., the Second Ave. Subway and East Side Access — escaped major flood damage (in some cases by 25 feet or so), construction delays have mounted as well. East Side Access suffered $20 million worth of delays while the other three projects totaled around $5.6 million.
All in all, it adds up to $5.022 billion in repairs, and with these figures, it’s safe to assume that it will be awhile before 1 trains return to South Ferry and the A crosses into the Rockaways.
It’s been four weeks since Hurricane Sandy swept through New York City, and the storm and its aftermath has been our main focus since then. Fare hike hearings have become an afterthought for the MTA as storm clean-up and repairs have become the authority’s top priorities. Monday marked the first MTA Board committee meetings since the storm, and now the costs of the cleanup are coming into focus.
As the Board met — and more on that shortly — Gov. Andrew Cuomo discussed the state’s needs with its Congressional delegation. The price tags are steep. Overall, Cuomo believes New York needs $32 billion to recover from the damage inflicted by Sandy, and the MTA’s needs are considerable. Cuomo in a summary (pdf) noted that the MTA needs over $5 billion for repair work. As a comparison, one year of the MTA’s capital plan is also around $5 billion. The damage, clearly, was extensive.
“The devastation caused by Hurricane Sandy is of unprecedented proportions, ranking among the worst natural disasters in our nation’s history in terms of loss of life, property damage, and economic impact,” Governor Cuomo said in a statement. “Today’s meeting with our state’s Congressional delegation builds upon the close cooperation between local, state, and federal partners that has existed throughout Hurricane Sandy and in the storm’s aftermath. Working together, we will rebuild stronger and better than ever before, so New York State is better prepared and has the infrastructure in place to handle future major weather incidents.”
The specifics of the destruction are tough to come by, but some early estimates are leaking out. Thomas Kaplan of The Times tweeted:
This is mind-boggling: the MTA says repairing the South Ferry-Whitehall Street subway station will cost $600 million.
— Thomas Kaplan (@thomaskaplan) November 26, 2012
That’s a mind-boggling figure consider that the new South Ferry-Whitehall Street station opened three years ago and cost $530 million then. Kaplan later said the Governor’s Office confirmed that this line item was simply for the station and not, say, for the damage caused to the Montague St. Tunnel as well. In a statement to me, on Monday afternoon, though, the MTA said they “cannot confirm at this time” that the $600 million figure is a correct or final one. Still, repairs will not be cheap.
Also in Cuomo’s budget was a request for nearly $9 billion in prevention and mitigation investment projects. That’s a comforting request, but it’s probably not enough. During those Monday committee meetings, New York City Transit President Thomas Prendergast spoke at length about Transit’s needs and desires. In a PDF, he put forward his agency’s non-exhaustive wishlist for investment improvements. These run the gamut from stair and vent closures to elevator hardening to bladders or floodgates and “pre-engineering and site mobilization for temporary mitigation structures.” At the very least, Transit needs more than three pump trains, power redundancy systems and significant protection for its low-lying depots and vulnerable signal and communications equipment. None of this will be cheap.
Meanwhile, in addition to mitigation costs, the long-term outlook is bleak, and the MTA will have to accelerate its component replacement program. As Prendergast’s presentation noted, “general failure rates are expected to accelerate in system elements that experienced flooding.” These elements include electrical equipment, cable sheathings and even track beds that were inundated with garbage from the storm run-off. It was a mess.
So right now, it’s unclear how much money will flow our way and when. The MTA said on Monday that the R train will soon run to Whitehall and back through the Montague St. Tunnel to Brooklyn. J and Z trains will again reach Broad St. within the next week or two as well. But the outlook for that South Ferry-Whitehall St. station is hazy. The 1 trains will be turning through the old South Ferry loop for the foreseeable future, and the Whitehall St. station won’t take passengers until significant station repairs are completed. The Broad Channel washout too will take months to repair.
With these clean-up efforts under way and the monetary requests in place, we simply play the political waiting game. Despite astronomical cost projections, the MTA has a sense of what it needs to do to protect its infrastructure. Will Congress respond before the next storm hits? That’s a question perhaps better left unanswered as we hope for the best.
Two weeks ago, Hurricane Sandy swept through New York, leaving death and destruction in its path. With the cleanup and recovery efforts well under way, the monetary costs of the storm are slowly coming into view. The initial price tag, at least, tells only part of the story though as the effects from salt water exposure will be felt for years.
As the cleanup began in earnest a little more than a week ago and the subway system slowly came back online, The Wall Street Journal ran a short piece on potential costs of recovery. One recent study pegged the cost of cleanup at close to $60 billion citywide, and MTA executives warned that transit repairs would be substantial.
“Think of it as a 90- to 100-year-old patient that got into an accident and is in the hospital,” MTA Chairman Joseph Lhota said to The Journal. “Things always happen when you get in the hospital that you don’t expect. The amount of saltwater that is in the system, as we clean it out, we’re finding other things.”
Today, The Times reported that Gov. Andrew Cuomo will ask Washington, D.C., for at least $30 billion, and a good portion of that will be for transit repairs. The article notes that Cuomo will ask for $3.5 billion “to repair the region’s bridges, tunnels and subway and commuter rail lines.” Already, the Governor has pledged to refund the MTA fares lost to the days when transit was offline and then subsequently free, and with the precarious state of the MTA’s budget, these are dollars the authority can ill afford to lose.
Yet, there’s more to it then just this starting point. In The Times’ article, reporter Raymond Hernandez mentions how the $30 billion total would be allocated. Cuomo hopes to spend some money not just repairing infrastructure but upgrading it. Power delivery systems would be modernized, and the fuel supply lines would be upgraded to prevent the shortages currently impacting the region. Missing though is any talk of upgrading the subway infrastructure, and boy, does it need upgrading.
The immediate problem concerns one of avoidance. How do we prevent this storm surge from flooding out the subways the next time we get a big storm? (And, yes, there will be a next time.) Over the past few weeks, some have suggested giant inflatable plugs that can dam tunnels, but those still lead to flooding in front of the plug. Others have talked of storm doors, surge barriers and better drainage systems. Whatever the answer, something must be done with an eye toward prevention.
The long-time problem focuses around that exposure to salt water Lhota mentioned. Even with the system up and running, salt water will impact the useful lifetime of this equipment. Switches and signals will degrade faster than they otherwise would have, and the MTA will have to spend money it did not anticipating needing on necessary infrastructure repairs. Who will fund these projects as well?
We’re in unchartered territories here in many ways. In the post-election climate in D.C., multi-billion-dollar allocation requests may be tough to see pass through the House, but the region needs money and support. The services provided by the MTA, as we saw, are too critical for the region and its economy to be swept under the rug. A discussion focusing on storm preparedness if one we need to have sooner rather than later, and the money must follow.
According to New York State Comptroller Thomas DiNapoli, the MTA’s finances are, temporarily, in good shape. Or perhaps they’re not. In a report released on Tuesday evening but not yet available on the Comptroller’s website, DiNapoli noted that the MTA has aggressively cut costs while reining in spending over the past few years. He warned of an increase in debt service payments and noted how looming fare hikes will outpace inflation. In other words, there’s nothing new here.
I haven’t yet seen the Comptroller’s report because I’m not on his press distribution list and, in a move that screams “lack of transparency,” his website hasn’t been updated as of nearly midnight on Wednesday morning, but I don’t need to see it to understand. Press reports make it abundantly clear that DiNapoli has, once again, examined a series of documents made publicly available by the MTA and is essentially paraphrasing them. Instead, let us look at the words of Carol Kellerman, the president of the Citizens Budget Commission.
In a piece late last week in Crain’s, Kellerman questioned the MTA’s approach to its looming budget crisis. Highlighting the MTA’s decision to push back the fare hikes by a whopping 60 days, Kellerman wondered if the authority was sacrificing short-term good will for long-term fiscal health. Here is Kellerman’s take:
Although some might get mixed signals from these developments, nobody should doubt that the MTA is in serious financial trouble. Everyone—commuters, MTA employees, city and suburban residents, and elected officials—must face reality and contribute in some way to a long-term solution to the MTA’s fiscal problems. And periodic, predictable fare increases along with continued belt-tightening, including a trimmed service schedule, are unavoidable elements of a sensible solution.
The “surplus” announced for 2012 is based on an accounting approach that focuses only on immediate cash needs. By this calculation, the MTA has a surplus this year because its projected cash receipts are modestly ahead of projections made at the start of the year. But current-year obligations to be paid after Dec. 31 and the need to keep up with capital repair and replacement needs, known as depreciation, are left out.
Using the more appropriate accounting principles followed in the MTA’s audited financial statements, the agency has an estimated deficit of $2.7 billion in the current year and faces even larger deficits in the next four years. Indeed, it has had a surplus only once in the past 20 years (in 1996, after a large fare increase). Deficits exceeded $2.5 billion annually from 2008 to 2011, sums that are equal to at least 16% of annual expenses, and they continue to be large despite enactment in 2009 of the now-threatened payroll tax.
The MTA needs the revenue from the planned 2013 and 2015 fare hikes; delaying them, as announced, from January to March will worsen the 2013 deficit by $67 million and the 2015 deficit by $69 million, for a combined loss of $136 million. While we all may welcome service restorations, the $29.5 million going for this purpose should be better justified. The 2010 service cuts were selected based on analysis of ridership patterns and services that were little used. Overall bus ridership has not been growing enough to warrant major service restorations; instead, adjustments can be made to deploy buses in accord with shifting usage patterns.
We know this story inside and out. The MTA has taken on so much debt over the past decade and has committed so much of its finite pie to pension obligations that the payments will soon come due. Without labor reform, increased state commitments and higher fares, the agency will suffocate under the weight of debt service payments. Kellerman’s answer isn’t sufficient enough.
I don’t believe the MTA should look to cut services until every other avenue of potential revenue has been exhausted. Even though the MTA often resembles a pension organization, its ostensible mission is to supply transit service. That means meeting demand while increasing options. The MTA should run services to replace other modes of transit, and often that means running routes that aren’t profitable. Cutting services simply leads to disgruntled commuters, more congestion and a less productive city. Maintain service, but bleed dollars out of every other potential revenue stream.
Ultimately, though, Kellerman’s conclusion serves as the unifying theme. She writes “It’s only natural to complain about taxes, fare hikes and service cuts, but the alternatives can be far worse. The economically devastating consequences of a deteriorating transit system loom if all New Yorkers do not acknowledge our collective responsibility for the system on which our jobs and family incomes depend.” That cannot be said often enough.
Later this morning, at a breakfast hosted by Crain’s New York and in front of a crowd of influential New Yorkers, MTA Chairman and CEO Joseph Lhota will take the microphone to defend and promote the MTA. He is likely to talk about the power of transit and its role in shaping New York, and inevitably, as his talk with mirror recent headlines, he will have to defend the payroll mobility tax. Under assault by a state judge with an agenda, the payroll mobility tax was no one’s good idea other than David Paterson, but the MTA can ill afford to lose over $1.5 billion in annual revenue.
The payroll tax has always been an odd creature. The state approved it despite congestion pricing or bridge tolling schemes that may city-based transit advocates thought were more progressive. It is a seemingly small tax — just 34 cents for every $100 in payroll — that has generated opposition from the end of Long Island to the norther reaches of Metro-North. Politicians want to see its demise, but no one has yet offered up how the MTA can replace a gaping hole of approximately 17 percent of its annual operating budget. We are at an impasse.
Earlier this week, Charles Brecher and Rahul Jain from the Citizens Budget Commission ran the numbers and determined what would happen if the MTA had to face a future without a payroll tax, in part or in whole. As many have suggested in the comments to my post, it’s not unreasonable to assume that the MTA would look to jack up fares for the suburban riders whose neighbors are so opposed to the tax. The outcome, the two write, would be quite extreme. They note that of the $1.4 billion in revenue generated by the payroll tax, 70 percent came from city-based employers. So how do we replace the remaining $428 million if the suburban portion of the payroll tax were to be eliminated? Take a read:
Since the forgone money came from the suburbs, the MTA could reasonably look to those counties to make up the gap by either paying more in another way or taking cuts in services — to the Long Island Rail Road (LIRR) and Metro-North Railroad (MNR).
Both railroads are heavily subsidized by regional and statewide taxes in addition to the PMT. In 2012 the LIRR will cost more than $1.6 billion to operate and MNR will have expenses surpassing $1.3 billion. Passenger fares are expected to cover only about 36 percent of the LIRR budget and less than 46 percent of the MNR budget. Relatively small amounts come from Connecticut for MNR and from advertising and other “earned” revenue sources. The bulk of both railroads’ costs are covered by taxes like the PMT appropriated through the State budget.
What if the LIRR and MNR had to deal with the $459 million in lost PMT revenue? This would mean expenditure cuts of about 16 percent for the LIRR and 15 percent for the MNR. In rough terms, that is the equivalent of ending service one day per week. If offset by higher fares, the lost sums would require a 46 percent increase on the LIRR and a 32 percent increase on the MNR. The price of a ticket to Ronkonkoma, the largest station by ridership on Long Island, would increase from $334 a month to $488; a 32 percent change in the price of a monthly ticket from White Plains to Grand Central Terminal on MNR would increase the price from $229 to $302. These changes do not include already planned fare hikes of 7.5 percent for all MTA riders for 2013, bringing the monthly fare to more than $513 for Ronkonkoma and $319 for White Plains. Neither the service cuts nor the fare hikes would make riders happy.
A few days ago, Greg David at Crain’s wrote about how the payroll tax has “undermined support” for transit amongst certain suburban leaders. He advocated for a combination of a restored commuter tax and a tolling proposal. In essence, the dollars should be the same as the payroll tax, and those paying are the same as well. It’s basically just reallocated the money to similar constituents and calling it something else. Maybe that would work or maybe not.
Perhaps the solution is to stiff suburban riders — at least temporarily. Suburban representatives would cry bloody murder over such a fare hike, but they can’t have their cake and eat it too. Transit service provides a benefit to those towns and residents who don’t live in the city but want easy access, and nothing is free. As Brecher and Jain wrote, “People should be careful about what they wish for; the theory of an unconstitutional PMT could be far less pleasant in reality. There is no such thing as a free lunch or a free train ride; the LIRR and the MNR must be paid for in one way or another, and the PMT may be less painful than many other options.”
Until Albany finds a better, more equitable solution, the payroll mobility tax should stand, and even though neither he nor his predecessor Jay Walder proposed the idea, Lhota will fight for it until the end. The MTA budget has little other choice right now.
S&P’s and Moody’s warned Monday that fallout from the ruling that overturned the Payroll Mobility Tax could have a negative impact on the MTA’s bond ratings if the decision is upheld by a higher court. Moody’s issued a so-called credit-negative yesterday while S&P’s statement warned of a “weakened” financial position for the authority “absent added support from the state, fare increases, or service cuts to offset the loss of revenue.”
A Moody’s analyst warned against reading too much into the statement, for now. “It doesn’t mean there is a ratings change,” David Jacobson said to Transportation Nation. “What we are saying is that the court case, could — key word ‘could’ — have a negative impact, but it is not enough to warrant a change in the rating or the outlook.” However, if these agencies decide to lower the MTA’s rating, the costs of borrowing will increase, and that is a spike the MTA can ill afford right now.
Meanwhile, as the MTA continues its offensive against the controversial ruling, Joe Lhota sat down last week with Transportation Nation reporter Alex Goldmark to review the authority’s finances. According to the Chairman, the MTA more heavily subsidizes commuter rail trips over the subway. The MTA spends $7 to each LIRR ride, $4 per Metro-North rider and $1 per subway rider. Of course, with far more subway riders than anything else, the $1 quickly adds up, but it’s more expensive to provide that commuter rail service on a per-rider basis than it is to keep the subways going. Just some food for thought.
As hyperbolic as it sounds, it’s no stretch to say that the MTA’s world was rocked by Judge R. Bruce Cozzens, Jr.’s shocking ruling Wednesday overturning the payroll tax and a slew of other fees and taxes that support the MTA. After four other cases were tossed out, a Nassau County judge elected to his position on the same party line as key payroll tax opponents fulfilled the wishes of suburban politicians and torpedoed up to $1.8 billion in annual MTA money — or over 16 percent of the agency’s budget. The ruling left transit advocates fretting, and many wondering what comes next.
So what does come next? First up, the MTA isn’t going to see its revenues decrease in the short term. According to agency officials and Gov. Cuomo, the state will continue to collect the tax while suffering through the appeals process. “There won’t be any disruption in the MTA funding,” the governor said yesterday. “We believe the ruling is wrong and we believe the ruling is going to be reversed.”
Meanwhile, as State Senators such as Jack Martins, a Nassau County Republican who won election on an anti-MTA platform, gloated like a child over the court ruling and Westchester politicians from both parties celebrated, the MTA issued dire budgetary warnings. “The payroll mobility tax drives the entire economy of New York,” MTA head Joe Lhota said. “Without the MTA, New York would choke on traffic.”
And how do you solve a potential a $1.8 billion gap? Through cuts and fare hikes of course. As Lhota said during a press conference, “Without the payroll mobility tax, the MTA would be forced to balance its budget with a combination of devastating service cuts and ever-increasing fare hikes.” As a comparison, the MTA’s draconian budget in 2010 resulted in only around $90 million in savings from service cuts, and a fare hike generates around $50 million in added revenue per one percent increase. To cover this potential funding gap, the MTA would need a fare hike of nearly 30 percent. That’s far far worse than the payroll tax.
Downstate, Mayor Michael Bloomberg, who had already washed his hands of the MTA-related mess in Albany, did not have kind words toward those who had earlier torpedoed his congestion pricing plan. Again on Friday morning, he took to the airwaves to call for a renewed effort.
“Is there a plan in place? Let me see if I can work out a plan for you,” he said Thursday. “Why don’t we toll people, I got it! Let’s toll people coming into the city, OK? Because then it wouldn’t be anything outside the city, there’s no jurisdictional issues, and we could use the money to improve mass transit! And that would get fewer people on their cars and more people on the subways. The subways would be bettter, more reliable, more pleasurable, and it would be paid for by people coming in and out. That’s a good idea isn’t it? I think so. But wait, now my recollection … I betcha the legislature thinks they have a better plan. So my suggestion is you address your question to those people who think they have a better plan.”
It’s still stunning to think that a supposedly impartial state judge thought the MTA budget not a “substantial state state concern” and somehow twisted home rule jurisprudence to create this ruling. Still, that’s where we are. The MTA and New York State will “vigorously” pursue an appeal, and the money will still flow. But politicians have won a talking point without actually finding an adequate solution.
It’s unlikely an appeals court will uphold this ruling, but if they do, as Joe Lhota said yesterday, “it would be a catastrophe for the entire region, and for the entire state’s economy that depends on it.” The payroll mobility tax is far from an ideal solution for MTA funding, but until politicians are willing to take a serious look at transit support in the region, it’s what we have. No one can afford to lose it.