Home MTA Economics DiNapoli highlights economy’s impact on MTA ridership, revenue

DiNapoli highlights economy’s impact on MTA ridership, revenue

by Benjamin Kabak

Thomas DiNapoli, the New York State Comptroller, issued a brief report on the state of the MTA ridership levels yesterday. The report is written in a way to draw headlines. “Ridership declines cost MTA $100 million,” screams his press release, but behind the figures is another story about the MTA’s precarious economic position.

First, the news, as DiNapoli’s office put it:

State Comptroller Thomas P. DiNapoli today released a report [PDF] showing 75 million fewer customers used the Metropolitan Transportation Authority’s (MTA) system through October 2009 than during the same period in 2008, costing the MTA more than $100 million in lost fare and toll revenue. DiNapoli attributes the sharp decline to the 110,000 jobs lost in New York City between October 2008 and October 2009.

“The MTA is vital to the strength of the regional economy – and the health of the economy has a huge impact on ridership,” DiNapoli said. “People don’t commute when they’re unemployed.”

In 2008, more than 2.6 billion riders used the MTA’s buses, subways, and commuter railroads and about 300 million vehicles crossed the MTA’s bridges and tunnels. Subway ridership, which had grown by 242 million trips between 2000 and the peak year of 2008, accounted for the biggest decline in 2009, with about 44 million fewer riders from January 2009 through October 2009 than during the same period in 2008.

As far as the facts go, nothing DiNapoli says is wrong. As the MTA’s own internal indicators show subway ridership is down in 2009 over the same period in 2008. DiNapoli is right to blame job loss figures and the overall state of the economy as well. Those out of work are taking fewer rides into Manhattan’s central business district, and fewer people are taking extraneous subway trips.

His conclusion though — that the decline in ridership has cost the MTA over $100 million — isn’t quite right. It is certainly headline-grabbing. Nearly all of the articles about the report lead with that news. But that’s now how the MTA’s budget calculations work.

The MTA each year calculates ridership revenue based on their expected ridership figures. When the authority issued its 2009 budget at the end of 2008, it allowed for the economic downtown and projected lower ridership figures and lower farebox revenues. Through November, subway ridership totals were just 3.9 million passengers lower than projected while Bridge & Tunnel and bus ridership totals were higher than expected. In the end, the MTA hasn’t really lost revenue, but as with any business, in a better economy, the authority would draw in more money. That seems to be the more obvious point DiNapoli is trying to make. Charging the MTA with a $100 million loss when it wasn’t expecting that $100 million in the first place is a bit misleading.

DiNapoli’s report brings up an interesting quandary about the MTA and the city’s subway system. It’s clear that the subways are a part of everyone’s daily life, and the ridership and revenue totals hew closely to the state of the economy. To me — and to many urban policy experts — the subways are a public good then. The city exists on a large geographical scale with a highly concentrated business district in Manhattan because people can get from the Rockaways and Coney Island to the Bronx for a MetroCard swipe. The public good aspect of the subways are also why the fares are so low. For the subways to serve their purpose, fares must remain affordable and, in a sense, artificially low.

Yet, when it comes to funding, politicians prefer to treat the transportation network as a luxury good. It takes political arm-twisting and threats of “Doomsday budgets” to gain even modest concessions and half-hearted funding plans. The MTA is a creature of the state. It was established by the state to serve the public in a vital role, and the people in power refuse to recognize it.

DiNapoli’s report underscores why the MTA shouldn’t have to rely heavily on farebox recovery for its primary source of funding. When will the politicians realize this as well?

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11 comments

Russell Warshay January 15, 2010 - 8:52 am

I’m surprised that DiNapoli doesn’t mention the real estate transaction tax.

According to a 2009 NY Observer article, “The M.T.A., between its four separate property-sale-related taxes it collects, reported $96.7 million between January and March, far less than the $220.2 million it was expecting and less than one-fourth of the $439 million the agency took in between January and March of 2007. The M.T.A. now estimates it will take in about $500 million in transfer taxes for 2009, around one-third of the $1.58 billion the agency took in during 2007.”

A billion dollar drop from real estate transaction taxes as compared to a hundred million dollar drop from reduced ridership. I think that the real estate transaction taxes should be addressed first.

Real estate transaction taxes are so volatile, that in my opinion, they should be replaced by a different funding mechanism. Perhaps this could be traded in for tolls on East River bridges. The MTA would get greater financial stability, and we would be spared the budgetary roller coaster ride.

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Marc Shepherd January 15, 2010 - 9:30 am

I entirely agree that bridge tolls would be a much better revenue source than the real estate transaction tax. The reality, though, is that the MTA does not just need more dependable funding sources; it needs more funding overall. Merely replacing the real-estate tax with bridge tolls would reduce, but it would not address the chronic shortfalls in the budget, particularly the capital budget.

The other problem, of course, is that the Senators who oppose bridge tolls still oppose them.

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Russell Warshay January 15, 2010 - 9:46 am

…the MTA … needs more funding overall…

As long as the real estate transaction tax exists, these massive fluctuations will continue. Along with is comes public mistrust of the MTA, and of government in general. Most people don’t understand how the MTA can have a huge surplus one year, and then a deficit the next. Corruption and incompetence is falsely assumed, and then we get demagogues like John Liu holding press conferences.

If these misconceptions are mitigated, then I believe that it will be much easier to gain public support for additional funding.

The other problem, of course, is that the Senators who oppose bridge tolls still oppose them.

You’re probably right, but perhaps not 100% right. Removing the real estate transaction taxes will benefit the Hudson Valley, so some of those senators might be happy to make the swap.

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Avi Frisch January 15, 2010 - 11:02 am

There is no particular reason why bridge tolls on city owned bridges should be dedicated to the MTA, the city itself has budget issues that could be addressed by tolling its bridges. Why does everyone assume that if there is ever an agreement to toll bridges that the MTA will get, or even deserves to get, the money.

Real estate transaction taxes do fluctuate, but not as much as you assume. They went up temporarily because of a huge bubble in Manhattan real estate and now that the bubble has popped they have gone way down. If and when the economy improves, the real estate taxes should settle into a more stable revenue flow.

In the end, though, Marc is right. The subways and busses need more money, not just a more stable flow of money. It is not like tolls and ridership do not decline in a poor economy, nothing is entirely stable. I would refuse to give the current MTA any more funding, however, since I believe that all NY state authorities need to be abolished and replaced by true democratic governance.

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Benjamin Kabak January 15, 2010 - 11:25 am

Why does everyone assume that if there is ever an agreement to toll bridges that the MTA will get, or even deserves to get, the money.

We assume as much because the state and city representatives who talk about tolling bridges say the money will go toward filling the MTA’s coffers. It’s not just our pipedream; it was part of the funding plans.

I would refuse to give the current MTA any more funding, however, since I believe that all NY state authorities need to be abolished and replaced by true democratic governance.

I believe you — or others — have mentioned this in the past, but I don’t really buy this argument. Running a transit network isn’t a democratic operation. It’s a niche operation that requires people with highly specialized skills and knowledge. Whether those skills are operational or managerial, political cronies and elected officials, as we’ve seen, just aren’t knowledgeable enough or qualified to run a transit system, and handing it over to We The People would be a disaster. Public authorities can serve a useful function with enough oversight. I think the key here is to increase the level and efficacy of oversight and not to hand over transit operations to those who don’t want it, can’t do it and shouldn’t be tasked with it.

Russell Warshay January 15, 2010 - 12:16 pm

Real estate transaction taxes do fluctuate, but not as much as you assume.

I’m not assuming, the data is a matter of public record.

They went up temporarily because of a huge bubble in Manhattan real estate and now that the bubble has popped they have gone way down.

That would be an acceptable defense of real estate transaction taxes if real estate bubbles were rare. The MTA began to receive this form of revenue in 1979. Three full business cycles and two real estate bubbles have occurred since that time. This is the second dramatic drop in real estate transaction tax revenue. The first was the four year span of 1988-1991, when revenue dropped every single year until it was about a third of what it was in 1987.

Real estate transaction taxes simply are not reliable sources of consistent funding. They need to be replaced.

JebO January 15, 2010 - 12:39 pm

There is no particular reason why bridge tolls on city owned bridges should be dedicated to the MTA, the city itself has budget issues that could be addressed by tolling its bridges.

If I recall correctly, under bridge toll plan plan presented by the Ravitch Commission, MTA Bridges and Tunnels, perhaps better known as the Triborough Bridge and Tunnel Authority, would take the costly burden of ownership of the bridges off the hands of the City of New York, saving City taxpayers hundreds of millions of dollars in annual maintenance costs. The bridge toll plan would help the city’s budget issues as well as the MTA’s.

Avi Frisch January 15, 2010 - 2:44 pm

For all you talk about the Ravitch Commission’s proposals, they never had much chance of passing that tax.

Ben, just because you think that highly specialized things cannot be run by the state DOT or others, the subways’ worst time came under the Transit Authority and then the MTA. Also, there are authorities that have historically been better run and more effective than the MTA, just probably not in New York State.

Benjamin Kabak January 15, 2010 - 2:50 pm

The subway’s worst time came under the MTA through less fault of the MTA than you would think though. The subway’s worst time came because the city and state stopped investing in the subways. As it is today, it was then always about the money. I don’t see what that has to do with my firm belief that state DOT workers couldn’t and shouldn’t be tasked with running an urban subway and metropolitan area transit system. It also doesn’t address the fundamental problems with transit funding in New York State.

Andrew January 17, 2010 - 11:21 am

The subway’s worst time came because of the NYCTA’s deferred maintenance policy, beginning in the 50’s or early 60’s – before there was an MTA. It took a few decades for the full effects to be realized. Decisions made in the 70’s didn’t help matters, but the problem was already in place.

Streetsblog New York City » Today’s Headlines January 15, 2010 - 9:01 am

[…] Highlights Perils of MTA Farebox Dependence; Are Recalcitrant Pols Listening? (SAS, […]

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