Thirty years ago, when the ten-year-old MTA was facing a subway crisis, New York turned to Richard Ravitch to step in and save a decaying and unsafe system. Now, the 40-year-old MTA, suffering from the same economy slump affecting Americans the country over, has once again turned to Richard Ravitch to revive and revitalize the MTA’s finances. Ironically, Ravitch and his panel are tasked with solving a problem created by Ravitch thirty years ago: crushing debt brought about by investment in the subway system.
This is quite the conundrum. Why would the MTA turn to Ravitch to fix a problem that stems, by and large, from policies he instituted and paths he chose in the 1980s? Better yet, how exactly did Ravitch create those problems? A very well done Ray Rivera article in The Times this weekend delved into the issue of MTA debt, and in Rivera’s work, we see the origins of the MTA’s current financial difficulties.
When Richard Ravitch was named chairman of the Metropolitan Transportation Authority in 1979, he inherited a subway system in decay. Trains derailed or collided on average every 15 days. Stations were filthy and crime was rampant. Ridership sank to lows not seen since World War I.
To revive the system, Mr. Ravitch, a former construction executive, persuaded lawmakers to allow the authority to do what countless cities and states had long done to build and maintain their infrastructure: Issue bonds.
“The system was falling apart, and the only way I could get the money to rebuild it was to borrow it,” Mr. Ravitch said in a recent interview.
Nearly 30 years later, the system is by all accounts better. But the authority’s debt has ballooned, and like stressed homeowners across the country, the system is groaning under the pressure to repay it. Indeed, debt payments are the system’s largest single cost after payroll, and by 2012 they will account for one of every five dollars the authority spends.
Rivera goes on to talk about the recent restructuring of the MTA’s finances. The agency is on the hook for debt payments until, at the earliest, 2032, and those payments amount to at least $1 billion annually. If the agency wants to expand its system, as it is doing now, if the MTA wants to keep stations in a good state of good repair, renovate those that need improvements and keep equipment modern, those debt tolls could increase.
And it all started with Ravitch:
Money for capital improvements hovered around $50 million — not the billions Mr. Ravitch and his analysts knew it would take. So he went to Albany.
“The Legislature squawked,” recalled Mr. Ravitch, 75. “They said that will result in a fare increase, and I said ‘That’s absolutely correct.’ But I said it will also result in an improvement in the system and attract more riders and avoid the dysfunctionality in the system, and they were persuaded.”
The law passed in 1981, and the next year the authority issued its first bonds, totaling $350 million. The authority issued hundreds of millions of dollars in new debt over the next 20 years, nearly all of it going toward new stainless steel cars and buses, and track repairs, signal replacements and other system improvements. By 2000, the agency’s outstanding debt had reached $12 billion.
Over this time period, as the MTA fell further and further into debt, city and state politicians were content to let the transit authority crumble. Until 1991, New York City and State funded a combined 26 percent of the capital plans. From 1992 onward, that contribution fell to a meager nine percent, and the MTA had to rely on the money they could raise from bond sales. Right now, if all of the MTA’s bonds were recalled, the transit agency would, in all likelihood, default.
This time around, Ravitch is going to have to rely on something other than yet another bond issue to fund the MTA. The transportation agency cannot continue to borrow against itself to fund capital improvements, system expansions and maintenance programs. Ravitch will have to demand more money from a government strapped for cash, and identify some other sources of dedicated revenue stream. As we know, Ravitch got us into this mess by suggesting bond issues in the first place. Can he get us out of it?