Home Public Transit Policy Federal money for construction but not operations

Federal money for construction but not operations

by Benjamin Kabak

The feds are funding Second Ave. Subway construction efforts, but money for operations remain out of reach. (Photo by Benjamin Kabak)

As part of the continued federal support for the MTA’s megaprojects, Rep. Carolyn Maloney announced this week that the transportation appropriations bill for 2011 will contain $400 million for the Second Ave. Subway and the East Side Access project. Maloney has been touting her role in delivering this money for the better part of 2010, and the grants are a welcome addition to the MTA’s capital coffers. The ease with which this money was delivered, however, lays bare the inherent contradictions in the way Washington funds construction but not operations for the nation’s transit authorities.

In announcing the grants, Maloney spoke of the economic impact of the construction efforts. “I’m proud to have helped to make sure that this year’s House transportation bill includes a $400 million boost for these two ‘megaprojects,’ which are creating thousands of jobs right here in New York,” she said. “On their first day in operation, the Second Avenue Subway and East Side Access will move more people than the entire transit systems of most other major American cities. I thank Chairmen John Olver and David Obey and their colleagues on the House Appropriations Committee for their ongoing commitment to funding the Second Avenue Subway and East Side Access, which are vitally important boosts for our region’s economy.”

With this grant, the Second Ave. Subway will receive $197 million and the East Side Access $215 million. Maloney, who slammed the progress along Second Ave. in a report last fall, focused this time on the way the subway work creates jobs. For every dollar spent, she said, city GDP increases by $1.59, and the Second Ave. Subway will generate $4.347 billion in economic activity during construction. Afterward, East Side residents will enjoy quicker and more comfortable commutes as many residents are closer to a subway line, and overcrowding will be lessened along the East Side IRT.

This is all well and good for New Yorkers. We need to make sure the MTA construction projects are fully funded, but what of the other transit budget? What of operations and the need to maintain consistent and frequent service? What of helping out cash-strapped agencies avoid budget cuts?

Over the past few years, between Recovery stimulus grants, 9/11 grants and general transportation appropriations grants, Washington has sent billions of dollars to the MTA, and every single cent has gone to the capital budget. None of these billions can be used to close an $800 million operating budget. “The law is quite clear,” MTA spokesman Kevin Ortiz said. “The federal money cannot be used to cover operating expenses.”

As Maloney appeals to the economic impact of construction, the deafening inaction from Washington on the transit rescue package speaks volumes about the stilted funding priorities. A federal rescue plan for transit operations would generate billions in economic activity as well. It would keep hundreds, if not thousands, of workers in their jobs and would ensure fast transit service into and out of the city’s business areas. It would keep cars off the roads and ensure productivity remains high.

Of course, as we saw yesterday with the political support for Select Bus Service, politicians prefer to point to a concrete accomplishment. Representatives can say that they helped usher in Select Bus Service. Look how much better the commutes are. They can’t say that their millions staved off service cuts that would have been a huge headache because constituents have a tough time conceptualizing that as a true political accomplishment. That money, however, is just as important.

So we can celebrate the $197 million for the Second Ave. Subway, but at the same time, we should be wary of it. If the MTA could earn that much from Washington for operations, it wouldn’t have to cut service twice over. After all, last month’s cuts save the agency just $93 million while impacting the rides of hundreds of thousands daily. But that’s the way Washington works. Until it changes, we’re left with expansion plans that go forward while service declines.

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Larry Littlefield July 9, 2010 - 9:44 am

So the federal government is, in this case, priortizing the future in an era when every other institution, every other decision, sells it out. I care about the future, and I’m sick of it.

We are either going to get these promised improvements, or we are not because of another triumph of “I want for me now” thinking. All that federal money is borrowed. My children will be paying for it. Should they get something for it, or should they not?

Or would you like to argue that we should stop investing in the future entirely, because given all the other decisions and deals, it’s doomed anyway?

curcuas July 9, 2010 - 10:08 am

I think there’s actually a very good case for funding only capital operations. Most, if not all, state and municipal budget crises of late have been caused by cronyism, corruption, waste, and massive overspending on pension plans. When the financial crisis strained budgets, it laid bare these basic failings. The fact is that these expenses, especially those on pensions, were completely unsustainable in the first place – the Federal Gov’t shouldn’t be in the business of bailing out corrupt and failing municipal and state governments.

So how does this affect the subways? As you have detailed, the MTA has been constantly screwed by Albany. Only by forcing Albany to reform, will the MTA have a sustainable future. At the same time, the Federal Gov’t obviously wishes to stimulate the economy. One way to do this is to spend money on significantly less wasteful capital expenditures that have the added effect of generating far more jobs than operations expenditures and investing in the future. Ultimately, I find it a surprisingly sensible decision by congress.

Scott E July 9, 2010 - 10:24 am

So the Federal Government only gives money to capital programs (and it is debated that a small percentage of that can go to operational expenses). It’s understandable that the feds can earmark money for projects, but can’t commit to funding operations for an indefinite period of time.

But what of the money that comes to us from Albany or internally from fare and advertising revenue? How is its destination (capital or operating) determined? One would think that could be reallocated to avoid a surplus in one and a deficit in another, effectively putting the federal grant in a collective pool.

Kid Twist July 9, 2010 - 11:07 am

You know, that money comes from somewhere. It doesn’t just magically arrive in the MTA’s bank account to “generate billions in economic activity.”

Washington doesn’t create money. It takes it from someone and gives it to someone else. So every federal dollar that gets spent in New York is simply a dollar that doesn’t get spent somewhere else, where it could also generate economic benefits. (In fact, given the costs associated with running the government, quite a bit of money is lost in the course of the transfer. Every dollar that arrives in New York is probably $1.50 taken from someone else.)

If the MTA got federal operating money, it would just become a crutch. This blog has done a fantastic job of highlighting Albany’s repeated failure to establish a permanent funding mechanism for the MTA. If the feds start footing part of the bill, the Legislature will never act responsibly. In fact, it wouldn’t surprise me if the state used the federal funding as an excuse to cut the state’s contribution.

Adirondacker12800 July 9, 2010 - 1:32 pm

Every dollar that arrives in New York is probably $1.50 taken from someone else

New Yorkers pay Federal Taxes too. Much more in Federal Taxes than they get back. Money flows from rich places like New York in great big rivers to DC and Albany never to be seen again.

Kid Twist July 9, 2010 - 1:41 pm

Which is another reason not to involve Washington. It’ll cost us more in taxes and we’ll never get full value back. Better to spend our own money on our own stuff.

Adirondacker12800 July 9, 2010 - 1:46 pm

Seceding from the Union isn’t an option. That’s the only way to get the sticky fingers of red states out of blue state pockets.

Kid Twist July 9, 2010 - 3:23 pm

Who said anything about secession?

Adirondacker12800 July 9, 2010 - 6:52 pm

That’s the only way you are gonna get place like Alabama to stop bleeding places like New York dry.

Marc Shepherd July 9, 2010 - 11:35 am

I agree that other commenters that the Feds should not help fund the operating budget.

Capital projects are things you build once and use for decades. The operating budget goes on forever, for as long as the system exists. It’s hard enough to make the case that tax dollars from Wyoming should pay for a new subway line in New York, but at least something is being created.

Running what already exists is a local responsibility. The fact that our irresponsible legislators in Albany haven’t figured out how to do it, is no excuse for shunting the burden onto Washington.

Adirondacker12800 July 9, 2010 - 1:42 pm

It’s hard enough to make the case that tax dollars from Wyoming should pay for a new subway line in New York, but at least something is being created.

And it’s equally hard to make the case that New Yorkers should pay for highways across Wyoming. New Yorkers pay Federal taxes too. If the Federal government shouldn’t pay for transportation projects in New York then the Federal government shouldn’t be paying for transportation projects in places like Alabama, which per capita suck up a lot more Federal subsides than New Yorkers do.

,,,why should drivers on the New York State Thruway who are burning fuel taxed by the Federal government without getting anything in return pay for I-80 across Wyoming?

…I’m sure someone is going to argue that I-80 provides services to New Yorkers. New Yorkers provides services to people in Wyoming. Life in Wyoming wouldn’t be as pleasant as it is without places like New York, Chicago or Denver. Especially since those places are where all the tax money to subsidize places like Wyoming come from.

Kid Twist July 9, 2010 - 3:28 pm

There’s a precedent for Washington spending money on infrastructure. The very first bill enacted by Congress was a roads bill, because the Federal government has jursidiction over interstate commerce. It’s hard to see how paying the salary of a conductor on the IRT is Washington’s responsibility.

Alon Levy July 9, 2010 - 7:59 pm

Paying the salary of the conductor means the government doesn’t have to spend as much money on roads. It makes other, more established forms of government spending more efficient.

Andrew July 11, 2010 - 10:44 pm

Without getting into the debate over whether the federal government should fund operating costs, there’s nothing wrong with using federal funds for capital projects that reduce operating costs.

One example is fare payment. Federal funds can be used to implement a new fare payment system that’s cheaper to operate than MetroCard and speeds up bus service to boot.

How about using federal funds to implement a robust OPTO system, with video images of the platform transmitted to a monitor in the train operator’s cab, allowing for the phaseout of conductors? Or maybe using federal funds to implement a comprehensive station security and information system with full remote control of gates and turnstiles, eliminating all reasonable objections to the complete phaseout of station agents?

Chris July 14, 2010 - 2:54 pm

I agree the federal government has no business funding operating costs; subsidizing capital costs is enough. First, the subway should be able to raise enough revenue to at least cover its operating costs, or fares should rise. There’s no point to collecting taxes with one hand and then funneling that money back to the same people in the form of subsidizing transportation.

Second, federal money for capital goes into projects that at least have a stated estimated cost (ideally, the feds would push the MTA to come in at or below that estimate or face the loss of funding). But if the feds commit to fund operating costs, all the unions and vendors will know this and will simply raise prices to eat up that money. If the MTA can’t cry poor, it loses negotiating power.


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