Earlier today, the MTA Finance Committee held a special meeting to update the MTA Board on worsening financial projections. According to reports from the meeting, the MTA could be facing a crippling $1.2 billion deficit if the agency cannot find economic relief from the city, the state, a fare hike or measures suggested by the Ravitch committe.
Sewell Chan and William Neuman filed a report on City Room:
The Metropolitan Transportation Authority faces a $1.2 billion budget deficit in 2009 — $300 million more than it had projected in July — that will very likely require new fare and toll increases or service reductions unless it gets new state and city aid or finds new sources of revenue, officials warned on Monday morning.
At a meeting of the finance committee of the authority’s board, the authority’s chief executive, Elliot G. Sander, said the authority faces a dire fiscal situation that could influence riders across the subway, bus and commuter-rail networks. The deficit was caused, he said, by the collapse of revenues from real estate and corporate taxes, which until just a few years ago had given the authority a string of healthy surpluses…
The magnitude of the fiscal challenges confronting the authority was evident in a PowerPoint presentation presented at the meeting and posted to the authority’s Web site. Real estate transaction taxes, which represent an important share of M.T.A. revenue, provided the authority with more than $1.4 billion in 2006 and nearly $1.6 billion in 2007. This year, the authority is on track to collect only $995 million in such taxes — about $50 million less than had been projected in July. And the situation is expected to get even worse. The authority now expects to collect $895 million in real estate taxes next year, and $877 million in 2010.
The PowerPoint presentation is available here, and in the next day or two, an archived video of the committee meeting will be posted on the MTA’s website.
“They will be very, very significant,” Sander said during the hearing. “Whatever that mix that we come up with, in terms of fare and toll increases and service reductions, there’s no question that they would have an impact, significantly, on our customer and on the functioning of that region.”
Right now, the financing mechanism for the MTA is clearly broken, and it’s up to the government to fix it. While the feds are working on a $700 billion bailout plan for the rest of the U.S. economic, it wouldn’t be out of the realm of the ordinary to suggest that less than 0.2 percent of that money be siphoned to ensure a healthy MTA. The New York Metropolitan Area’s transit infrastructure is probably at least that valuable to the national economy on the whole.
Meanwhile, the Ravitch Commission’s recommendations — discussed at length this morning — loom larger now. Somehow, someone will have to pay to fix the MTA. It will come out of taxpayers’ pockets either at the expense of everyone or at the expense of drivers who opt to enjoy the luxury of driving. In all likelihood, the end result will be some combination of both.
But no matter the solution, the government cannot allow the fortunes of the MTA to raise and fall on something as unstable as real estate tax revenues. It’s hard to underestimate the city’s need for a healthy public transit network. I’d hate to see New York learn the hard way a lesson we all should have picked up from the 1970s.
24 comments
Two statistics leap out. The largest contributor to the deficit is debt service, because the 2000–2004 capital program was “essentially put on a credit card” during the Pataki administration. It will be a $2 billion a year hole by 2012. Politicians love debt, because it gives them the chance to spend money without raising taxes, leaving repayment as a problem for someone else to solve.
The other problem is that too much of the MTA’s funding comes from real estate taxes—a roller-coaster funding source that is down, and likely to stay that way for some time to come.
Yikes.
To what extent do you think will this deficit eat into the capital improvements – at what point will they scale those back, SAS in particular, but others too?
A number of the big-ticket capital improvements have dedicated funding sources. You’re not likely to see those projects cancelled outright, though they could be scaled back. That has already happened to some extent, e.g., the Fulton Street Transit Center.
There will likely be bigger cutbacks for capital projects that don’t have external funding, such as station rehabs, and the less sexy projects like tunnel lighting, track replacement, and so forth.
But don’t some of them – again thinking SAS – only have dedicated funding for certain parts, and not all components/contracts? I fear these capital improvements are about to go by the wayside . . .
I definitely agree with you when you said:
“The New York Metropolitan Area’s transit infrastructure is probably at least that valuable to the national economy on the hole.”
Just before I echoed similar sentiments when I wrote:
“If they can bail out automakers, banks, & an insurance giant, why not the most important transit agency in the entire country bar none. I would bet my life that our region’s transit infrastructure brings more to the economy than any other in the entire country & possibly world. This is reason enough for the federal government to step in & help out in a big way.”
P.S. You forgot the W before hole.
The MTA has had a minimum surplus of 600 million a year for the last 7 years. In 2005 alone they had over a billion dollar surplus in a contract year in which they decided that there employees deserved none of it and received none of it.
Where is all of that money???
Did you even read the article? There are two simple explanations: debt service and shrinking real estate tax revenues.
Those 2 reasons explain what the MTA did with the billions of surplus dollars they have accumulated over the last 7-10 years? No it does not answer that question. My guess is most of this money was stolen by these thieves who answer to nobody!
What the article explains is why the MTA doesn’t have a surplus as usual this year. Not where the past years riches have gone because they certainly haven’t gone to there employees.
Where the surplus goes:
1. Debt payments.
2. Stupid holiday MetroCard promotions
3. Reinvested into the system.
They didn’t dole out the surplus to each other. They put it back into the system, and when they ran out of surplus but still had to fund mandated capital improvement plans and operations budgets, they ran into $1.2B in debt. Also, the bad economy isn’t helping.
> they certainly haven’t gone to there employees
I’d like to know what the employees are getting before I could comment on that. When I lived in SF it was a bombshell when some of the union’s outrageous benefits became known (fat pensions unheard of in the “real world”, dozens of no-questions-asked sick days, etc.). Doubtless there’s tons of middle-management positions that can go, too. But these agencies will always threaten fare increases and service cuts before looking for ways to cut costs.
You can’t compare public employee’s to private employees or the “real world” as you called it. You can only compare them to each other. The TA gives 12 sick days a year compared to unlimited for NYPD, FDNY, NYDS, Corrections, and Teachers.
The TA employees can retire at 55 years old with at least 25 years of service. It’s 20 years and out for NYPD, FDNY, and NYDS no age restriction.
Most importantly the employee’s of the TA get zero respect for the massive productivity that they have produced over the last 10 years. More trains, buses, and passengers with much less hourly employees.
First, much of the city regards NYPD as a bunch of idiots who shoot unarmed people for no good reason. So respect is relative.
And second, you could make a good argument that all public sector employees should be treated like private sector ones, i.e. getting more pay and fewer benefits. Retirement at 55 makes sense only in countries where life expectancy is 65.
Um… why not? Work is work. And since I pay their salaries, I don’t think it’s fair that the unions have stongarmed their way into vastly greater benefits that us mere mortals.
PS. Public sector pay is higher, not lower, than similar jobs in the private sector.
Rhywun, the data comes from the Cato Institute, which makes it automatically suspect. You wouldn’t trust a Cato study about rail transit; why trust a Cato study about government salaries?
In this case, the data given seems to be for Orange County, which has enough money to pay high public sector salaries. So do the New York City suburbs, where cops earn $100,000 a year. However, New York City itself doesn’t have that kind of money.
Rhywun public employees sacrifice the most important thing in life which is family time for there jobs. You work 24/7 352 all holidays and weekends included.
Most of these jobs don’t come with set hours or reporting locations either. These among other things are some of the reasons that these jobs were given certain hard earned benefits long ago to attract people to do these jobs.
Believe it or not but it’s tough to be working on every single holiday when you have small children at home!!
During this time of defecit for the MTA nobody is making a big deal about the line general manager program which adds alot more unnecessary management making big money.
The program has started in the IRT with a General Manager of the East and one for the West. Under these managers each individual line has a general manager and assistant general manger.
This is 16 more highly paid managers on top of all of the superintendents that are already there. This is an outrage that the news should be on top of! It’s just another 2 layers of upper managment that is useless. Find out the salaries of these positions they have to all be 200 grand a year and up.
Actually the line general managers allows the MTA to get rid of the old subway management structure, and therefore cut out an entire layer of opaque middle management.
Not one perosn has or will be let go because of this program. What layer of middle management are you talking about? The old system has worked for 100 years there wasn’t a need to change this. There are many things that need changing but this wasn’t one of them.
It’s all upper management now.
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