Home MTA Economics Feds riding to the MTA’s rescue?

Feds riding to the MTA’s rescue?

by Benjamin Kabak

It’s no secret these days that the MTA is in financial trouble. While the word bankruptcy hasn’t been tossed around yet, with the agency facing a few billion dollars in debt, we’re probably not too far away from that point. But an unlikely source of funds — in the form of pork — may be riding to the rescue soon.

Yesterday, in The Observer, Eliot Brown summed up the financial straits in which the MTA currently finds itself. For the most part, Brown rehashes territory familiar to loyal SAS readers: The MTA doesn’t have a dedicated source of revenue outside of the volatile real estate taxes. Having spend years borrowing to fund both ambitious capital plans and operating budgets, the agency finds itself on the edge of a massive financial crisis.

But Brown touches upon a new source of potential revenue in the form of senior Democrat and chair of the House Transportation Committee Jerrold Nadler, one of the most influential New Yorkers in the House. Writes Brown:

At the center of the Congressional efforts is Mr. Nadler, the infrastructure devotee who is now the most senior Democrat from the Northeast on the House Transportation Committee, which is slated to reauthorize a 12-figure, six-year transportation bill in 2009 that would likely steer substantial money to the M.T.A.

“What helps is that not only am I very senior, but compared to five years ago or six years ago, we’re in the majority now, not the minority, and we have five Democrats from New York on the committee,” he said.

The M.T.A. is planning on more than $8 billion from the federal government, an amount Mr. Nadler said seemed reasonable. But much will depend on who wins the presidential election.

The presidential comment, by the way, is way anyone who cares about the New York City subways should take a good long look at the public transit policies of Barack Obama.

Anyway, the MTA is now relying on a substantial federal contribution which basically amounts to a big barrel of pork for the region from Nadler. They’re also hoping for a magically monetary solution from Richard Ravitch. Meanwhile, as MTA CEO Elliot Sander noted in Brown’s article, the agency can’t really trim the internal fat anymore. “The M.T.A. has already taken significant steps to tighten our belts,” Sander said to Brown.

This is, of course, a risky strategy for the MTA. While Nadler’s promise is refreshing and one our representatives in Albany should adopt, the federal transportation has a long way to go before funds reach New York City. The bills will have to clear the House and the Senate, and a president — Bush or whoever wins in November — will have to sign off on the bill. If John McCain captures the White House, it won’t be a result of any voters in New York.

The promised money from Nadler is a start, and it’s refreshing to hear from a New York politician who is willing to get money into the coffers of those agencies who need it. But I’m afraid that this might be too little, too late. We need Albany to take the MTA’s financial situation seriously. We need more money for our transit network before it gets much worse.

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18 comments

Kid Twist June 26, 2008 - 11:08 am

Let’s see:

The MTA risks its future on a shaky funding strategy, New York (state and city) continually fails to act responsibly and provide a solid financial foundation for its own vital transit network … and now we’re again going to ask people across the country to kick in their tax dollars to cover for our own local shortsightedness and ineptitude.

That’s refreshing? I almost hope Washington tells the MTA to drop dead; maybe that will finally force the agency, the state and the city to get their own house in order.

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ScottE June 26, 2008 - 11:25 am

Sounds like that guaranteed 300-some-odd million dollars that the MTA would have received from congestion pricing. Although denying that they prematurely included that money in their budget, the agency DID did heavily rely on it coming in, and when it didn’t – the threats of service cuts and fare hikes came back to the forefront. Until, of course, the windfall from the West Side Yards sale swung the pendulum back to the other side again.

Kid Twist has got a good point here. Handing out money does nothing to encourage fiscal responsibility. But then again, New Yorkers can’t afford to wait for these guys to learn how to spend money wisely.

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Judge June 26, 2008 - 11:38 am

I respectfully disagree; the Feds should shunt a great deal of money over here (and not just because I live here!). Albany and the city should be more focused when it comes to overseeing and funding the MTA, but they can’t fully provide these days because both have so little finances to give, if any. This is true of the Fed as well, but the margins they can work with are whole order of magnitudes greater. AND as a national government, it certainly is within their interests to make sure that the center of the country’s largest metropolitan area keeps its ability to efficiently move people. This is not to exclude ancillary agencies like NJT or the PA as they need a helping hand as well.
People complain a great deal about Amtrak and its lack-of-accountability and mismanagement, but Congress is in a joint session to hammer out the details of a $10-15 billion appropriations bill for Amtrak geared largely towards the Northeast Corridor. It’s hardly perfect and the reasoning for the money may be more political grandstanding than anything, but the outcome is a more active involvement in the economic development of a region through infrastructure support (beside Interstates!). If the Feds want to more directly aid cities across the United States, it wouldn’t hurt to start with the metropolitan area that has around 10% of the nation’s GDP and relies most on its mass transit.
And after all, are we all not citizens of the same country? I would love for NYC to get a more fair relationship with Albany and DC, but I would be understanding if they wanted to save Chicago’s dilapidated ‘L’ or actually give WMATA an actual source of money. I want my country to do well more than anything else.

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Marc Shepherd June 26, 2008 - 11:58 am

The Feds can only be a part of the solution. At best, Washington will up its share of contributions to big-ticket system expansions, such as the SAS, the new Hudson River rail tunnel, and so forth. But as those projects are already well over budget, increased federal contributions may quickly be swallowed up by cost overruns. Also, Congress usually requires its own contributions to be matched by state and local government.

What Congress almost certainly won’t do is to fund the operating budget. So you won’t get Federal help for such things as service enhancements, station cleaning, train maintenance, and so forth. They are also unlikely to fund “minor” capital items like station rehabs and replacements of rolling stock.

What that means is that, however you slice it, Albany’s share must increase, either through direct grants or its acquiescence in other forms of revenue, be they tax increases or congestion pricing. Under any scenario, the fare will almost certainly go up.

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Christine June 26, 2008 - 12:36 pm

I read the post on Obama’s statements to the Mayor’s conference the other day. They were quite heartening, to say the least. Let’s just hope he has the guts to follow through on them if elected.

I agree that it absolutely makes sense for the Federal government to make substantial contributions to the life of the nation’s mass transportation systems. However, as with congestion pricing and the commuter tax, the large swaths of people who live in metropolitan areas (or who simply stop in for work and head back to the suburbs), there is and always will be some ill will or resentment (or whatever) when it comes to sending the big bucks to relatively thriving cities when the heartland is suffering.

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Christine June 26, 2008 - 12:37 pm

i meant to say “large swaths of people who DO NOT live in …”

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Todd June 26, 2008 - 12:52 pm

A quick note: Regardless if the money comes from the city, state, or federal level, it’s still taxpayer dollars. I think it makes a lot more sense billing the people who benefit from the system (city/state), but if the feds are willing to pay, I say let ’em.

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Mike June 27, 2008 - 10:57 am

Todd – if you apply that logic to transit, then apply it to highways as well. The problem is when it becomes a lopsided conversation — the ideal is for “equitable” funding of transit, but we don’t apply the same criteria to highway spending. I have a feeling that if NY State sent less gax tax $ to the fed government, then we’d have more for transit.

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Jason A June 26, 2008 - 3:43 pm

This would not be “pork.” It would be a long-overdue correction of the gross geographic imbalance of federal transportation funding.

I’m sick and tired of Washington fleecing the city to build sprawl-enabling freeways in the sunbelt. While Albany is just as awful, Washington shoulders a good deal of responsibility for the crummy state of the MTA’s finances.

Federalism is rotten for NYC. Hopefully these emboldened urban Democrats, and a Chicago-bred President, will lighten the capital load for the MTA…

With that said: hats off to Congressman Nadler. Go Jerry, go!

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Judge June 26, 2008 - 4:26 pm

The issue with the Federal Government stepping in is that the money still will not equal the magnitude of effort expended during the Federal Aid Highway Act of 1956. NYC will certainly be a recipient, but a proportionally poor one. Denver received billions a few years ago to develop several light rail and commuter train lines. Fine. But will those lines deliver the same results as new lines in NYC? Highly unlikely. The truth is that unless every city suddenly had NYC’s population density and history of transit use, rapid transit projects across the United States will simply not generate the same level of benefit as one in NYC… we make the most sense and have the most pressing need. Just like high-speed rail proposals in any area outside the BosWash area is of much lesser value than inside BosWash (although I feel for California).
Marc Shepherd: I agree the Feds can not and should not be the major supplier of funds. I still believe the country should rise above the politics and understand the necessity of helping out an already well developed and wealthy city (a society helping itself), but the city and the state should be providing most of the money. Keep things as “balanced” as possible.

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Alon Levy June 27, 2008 - 4:57 pm

Actually, high-speed rail is more useful in California than in the Northeast. The reason the Acela isn’t really high-speed is that the Northeast sprawls with suburban development, so that Amtrak couldn’t straighten the tracks to make them fit for high-speed operations. In California, most of the proposed alignment is in rural areas, where it’ll be easy to run the trains at Shinkansen speeds.

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Judge June 27, 2008 - 5:34 pm

I don’t think we’re quite arguing the same aspect of high-speed rail. California would have an easier time building up its network versus BosWash for the reasons you mentioned. The value of putting in BosWash is that it can serve a much greater population than California; California has around 36 million to BosWash’s 55 million. BosWash also has several cities that have high rates of mass transit use along the route – Boston, New York City, Philadelphia, and Washington DC – so the stops along the way act more as intermodal-styled destinations than California can currently provide in its cities. I would think it clear that if the systems could be built the same level service as each other, the yields would be much better in the northeast than in the west.
The one counter I would concede to is that California may have a greater need for the first system because they’re just so lacking in alternatives to I-5 / I-80 (SF to LA and Sacramento to SF, respectively) and the airports of the major metropolitan areas. We may have the half-***** Acela, but at least we already do efficiently move millions a year between Boston to Washington on rail.

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Boris June 26, 2008 - 10:02 pm

I’m with Jason A on this one. If you want to call it pork barreling, fine- it’s our turn and we need to get what’s due to us. Otherwise, it’s just a debt the federal government will finally repay us.

As for whether the feds should be a regular supplier of funds, it’s very simple- transportation funds should be dispersed proportionally by population. Imagine if the subway had the same per capita funding as highways in the Midwest, for example. We’d have the best subway in the world.

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Alon Levy June 27, 2008 - 3:38 am

What’s the per capita funding of highways in the Midwest?

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Boris June 28, 2008 - 12:06 am

I don’t have any numbers, but I think it’s safe to assume that they have many more miles of roads (and in better condition) for fewer people than we do.

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Ed June 27, 2008 - 5:18 am

Since the MTA operates in Connecticut, technically it operates across state lines and federal funding is appropriate. The same goes for anything that crosses the Hudson. More practically, the tendency has been for the state and city to fund pork in the rest of the country rather than the other way around, and while it would be good to somehow stop the pork in the rest of the country and forgo the federal funding, that deal is not on the table, so we better take what we can get. The MTA also moves a ridiculous amount of people compared with other mass transit systems that do get federal funding.

As long as the MTA is a state agency, it should be funded by the state. The state government, after all, can tax New York City taxes. I’m not sure that City levied taxes should even be involved if the City government has no control over the direction of the MTA. I could see turning over the subways to the City and having them funded by City levied taxes and operated by the City government, but again that is what is not on the table.

However, I would like to see the city and state governments get out of the habit of soliciting federal funds. The state government in particular has a large enough tax base, even taking into account the portion of the state GDP that is siphoned into federal spending outside the Northeast, to fund its own capital projects, provided the money was managed properly.

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Streetsblog » Today’s Headlines June 27, 2008 - 9:01 am

[…] Would Deliver $237M to NYC (Gristmill, AP)No Single Solution to MTA Budget Crisis (Observer via 2nd Ave Sagas)NYT Has Faith in Richard Ravitch……But Who Will Fight for Transit Funding in Albany? […]

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Second Ave. Sagas | A New York City Subway Blog » Blog Archive » House delivers $237 million for MTA operating budget June 27, 2008 - 11:45 am

[…] up on yesterday’s item about Rep. Jerry Nadler’s (D-N.Y) promises to deliver federal funds for the MTA, the House voted to approve a bill authorizing $1.7 billion for public transit systems. Ostensibly, […]

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