The MTA has a very difficult relationship with New York State and its elected representatives. On the one hand, the MTA is an authority established to operate outside of the realm of politics in order to better run the city’s transit network. On the other, the MTA is heavily dependent upon the state for both operating and capital aid, and the state has political control and oversight of the public authority. When the two sides clash — as they often have lately — MTA officials must tiptoe around sensitive issues while asserting their needs for better political and economic support.
Yesterday, this conflict started to come to a head as the MTA revealed that state payroll and real estate tax estimates are again looking to be off by approximately $72 million. Michael Grynbaum has the details:
On Monday, the authority said that those revenues were coming in even worse: $41.5 million below even the most pessimistic projection.
Transit officials said that the numbers were fluctuating from day to day, and so they did not want to make hard-and-fast revisions to their budget numbers yet.
Unfortunately, they seemed at a loss to explain the trends. “We don’t know,” said Robert Foran, the authority’s newly appointed chief financial officer, when asked why the numbers were so low. “It’s a brand-new tax,” he added. “We’re looking into it.”
This isn’t the first time this year that state accounting officials have delivered bad financial news to the MTA. In January, state tax revenues were believed to be $104 million less than expected. This time, the MTA is starting to question the state’s ability to calculate tax projections, and authority officials say they are going to take matters into their own hands.
Robert Foran, the MTA’s new CFO, said his office would begin to conduct its own tax projections. “There’s been some talk that we shouldn’t just take numbers from the state and blindly accept them,” he said today. “We should vet them. But would we rely solely on our own projections? I don’t know either.”
For the MTA today, this promise of a check on the state power is bittersweet. The MTA should be conducting its own projections going forward, but the MTA should also be able to rely on the state to provide an accurate accounting of potential revenues. The state, according to Andrew Grossman of The Wall Street Journal, claimed that “the economic downturn has made estimating tax receipts harder.” That’s some excuse.
If these numbers wind up being accurate, the MTA will be out $41.5 million in payroll tax revenues and $30.5 million in real estate tax revenues. The authority’s budget gap will just to $450 million, and the looming threat of a big fare increase will remain despite the MTA’s promise to avoid a fare hike at any cost.
In other MTA financial news, State Comptroller Thomas DiNapoli — who yesterday announced an impending election year forensic audit of the MTA — issued a report last week straight from the desk of Captain Obvious. If the MTA does not find a way to close what was on Friday a $378 million budget gap, the agency may have to raise fares beyond the allotted 7.5 percent next year. No kidding.
DiNapoli found that MTA spending far outpaced both revenue and inflation and that debt service payments are largely to blame for the increased spending. He urged the MTA to be mindful of the need to keep public transit relatively cheap and reliable in New York City. “The MTA has to squeeze out every penny of wasteful spending,” DiNapoli said. “Mass transit has to be affordable for working New Yorkers. The MTA should focus on eliminating waste rather than cutting services and raising fares. My office has found administrative redundancies and outside contracts where savings can be achieved. Chairman Walder has made some progress, but so much more needs to be done.”
And so the MTA is left, once again, in the untenable position of having to bite the hand that feeds it. The fiscal morass is growing deeper each day, and the state, already dysfunctional, is making matters worse. Who will bend? What will break?