Home MTA Economics No fare hikes, service cuts in ‘fragile’ ’10 budget

No fare hikes, service cuts in ‘fragile’ ’10 budget

by Benjamin Kabak

Earlier this morning, the MTA released its $11 billion proposed budget for 2010, and although the agency plans to raise fares to match inflation in both 2011 and 2013, the document contains nary a mention of service cuts or fare hikes next year. During the MTA Board meeting, Jay Walder explained how the agency would engage in a significant overhaul to improve operations efficiency and why the agency is setting aside $85 million in reserve.

Despite the good news on fare hikes and service cuts, Walder cautioned that the authority is not yet on a sound financial footing. “From a narrow context, we see increased stability and are grateful that we can present a balanced budget without impacting our customers,” the new MTA Chair and CEO said. “But the MTA remains in a very fragile position with a number of risks on the horizon. This fiscal reality demands that we permanently overhaul the way the MTA does business. The bottom line is that there is no more money for us in Albany, and we will learn to do more with the funding we have.”

Walder will soon chair a working group designed to explore MTA efficiently. It will examine the ways the agency can “fundamentally change its business model to operate more cost effectively, improve performance and provide better value to taxpayers and customers,” according to an agency press release.

For those interested, the budget documents can be found here on the MTA’s website. The two piece go in depth into a budgeting process that requires the MTA to pass a balanced budget by the end of December. For now, the biggest piece of news is the $85 million reserve the MTA has in place to cover cost overruns.

The money for this reserve, according to MTA CFO Gary Dellaversoncame from three sources. Although real estate taxes were lower than anticipated, ridership figures, as I noted earlier today, have been higher than exepcted this year. Furthermore, summer belt-tightening measures have led to lower-than-expected spending.

To that end, the $85 million reserve will play an important role in avoiding a budget crunch next year on two fronts. First, the state and city are faced with significant fiscal problems and are threatening to cut contributions to the MTA further than they already have. Second, if the MTA loses its appeal of the TWU arbitration award, labor costs will eat up almost the entirety of this reserve.

I’ll have more on this proposed budget later tonight after I have some time to read through the materials. For now, though, Straphangers can breath a sigh of relief. For the first time since 2007, the MTA believes it will not have to raise fares.

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Nowooski November 19, 2009 - 1:42 am

I tend to think that fares are way too low. Where else in the country can you get all of your transportation for $89/month. According to the Department of Labor, the average american consumer unit (2.5 persons) spends $729/month on transportation. That is about $291 dollars per person.
In New York we pay less than a third of that.
I would happily pay more if it meant expanded services, more capital projects or cleaner facilities.
Hell, I would pay more for the service we have now and not think twice about it, since it is such a good deal.

Benjamin Kabak November 19, 2009 - 1:45 am

Sixteen months ago, I proposed doubling the fare. I couldn’t agree more. Objectively, the fares are way too low right now.

Alon Levy November 19, 2009 - 3:52 am

You would pay more? How nice. But in a city that’s 23% poor, not everyone can afford double the current fare.

Believe it or not, but relative to transit systems in other cities that are not London, the New York City subway is expensive.

AK November 19, 2009 - 10:16 am

Part of the reason other transit systems are less expensive is because those cities/nations do not believe that public transportation needs to be cash-flow neutral. Instead, those societies view transit as a social good (emnvironment, health, urban planning, etc), thereby subsidizing transit to keep fares low (and thus, maintain its position as a superior option for large numbers of people).

In New York (and the U.S. generally), we expect public transit to be self-sustaining without government aid (setting aside low-interest bonds). I can understand the public’s concern that if we were to subsidize transit fares, the money would be wasted/embezzled. Frankly, transit authorities do not have a great track record when it comes to efficient use of funds (take my hometown MBTA for example (Boston)).

And its not just London that is as expensive. For a 5-day pass in Paris, you pay 29 Euro –> $43. That said, your general point re: the cost of the NYC system is well taken.

However, the mere fact that some people can’t afford the fare doesn’t mean it shouldn’t be higher. What is more likely is that the minimum wage should be increased/programs put in place so that people (like the elderly) can get reduced fare Metrocards. That, though, is a conversation for another time.

Alon Levy November 20, 2009 - 12:29 am

The 5-day tourist pass in Paris is expensive. But the pay-per-ride, used by locals, costs €1.16 per ride, which is equivalent to about $1.62. This compares with $1.98 with a pay-per ride in New York. And the unlimited monthly costs €56.60 and covers both the Métro and the inner chunks of the RER, which is equivalent to $79, compared with $89 in New York.

But it’s not just subsidized European systems that are cheaper than the New York City Subway. Profitable systems in East Asia are often cheaper, too. For short trips, Tokyo Metro costs less than the NYC subway. For all but the longest trips, the base fare in Singapore is lower than the average fare in New York with an unlimited monthly, even after controlling for the lower incomes in Singapore.

rhywun November 20, 2009 - 12:40 am

So? Tax rebates or vouchers can take care of that. The median income in NYC is around $35,000. Public transit in the US is seen as something only poor people utilize: that is clearly not the case in NYC.


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