Home MTA Economics Interviewing Jay Walder: On the MTA’s fiscal state

Interviewing Jay Walder: On the MTA’s fiscal state

by Benjamin Kabak

Jay Walder is the center of attention during an April ribbon-cutting ceremony. (Benjamin Kabak/Second Ave. Sagas)

When Jay Walder moved his family and career back to New York from London 14 months ago, he did so with the expectation that he would head a fully-funded MTA. Gov. David Paterson had tabbed Walder to head the MTA as its new CEO and chairman because of his background in technological innovation. Walder was to use his expertise to modernize an authority struggling to incorporate 21st century technology into an early 20th century system.

Instead, Walder had to face head-on the MTA’s greatest economic crisis in a generation. Thanks to lower-than-projected tax revenues and the outright theft of dedicated funds by the state legislature, the authority found itself $800 million in the red. To balance the budget, Walder oversaw an intense effort to trim the MTA’s operating costs that included $500 million in administrative savings and steep service cuts with a fare hike to come at the end of December. Needless to say, it is not, as I noted in August, how he anticipated spending his first year back in New York.

Before the Thanksgiving holiday, Walder sat down with me for a 30-minute interview on all things MTA — or at least all things MTA we could cram into a half an hour. I’m going to run the Q-and-A in pieces this week. I’ve edited Walder’s answers only for grammar and, at times, removed some words for clarity and brevity. The words are his. I conducted the interview shortly after the MTA unveiled its latest 2011 budget projections and started off with questioning focusing on the authority’s economic outlook.

Second Ave. Sagas: What do you see as the best hope for avoiding future service cuts?

Jay Walder: Answer: I think our plan avoids future service cuts. When we looked at this, we felt that the best way to stabilize the finances of the transit system were as follows. We needed to continue to reduce our costs. We’ve saved over $500 million a year this year from cost actions, a portion of which — less than $100 million — is from service cuts but — and I’m not minimizing that — the other $400 million plus was not that. So we need to continue to reduce costs. We need to find ways to really improve productivity. In what you’ve seen us do right now, you haven’t seen that [increased productivity] within the broader work structure.

Second Ave. Sagas: Does that include the various initiatives announced in May, including consolidating the Bridges & Tunnels shops and ensuring that LIRR maintenance crews can service Metro-North trains and vice versa?

Walder: It includes any number of institutional arrangements, work rules, other things like that. While respecting the fact that our employees should be well trained and well compensated, we have rules in many different ways that stand in the way of getting the most productivity and efficiency and being the most cost effective. What we really want to be able to do is prove to everybody that we are actually making every dollar count, that we are an efficient and effective provider of public transit services. And I think if we can do that, than that gives you a very very critical plank in protecting the services that people want. That’s the first part.

The second part is I think we need to accept that periodic fare and toll increases are necessary in supporting the public transit system. I don’t think we should shy away from that. I don’t think there’s anything wrong with that. I think we should build them into a business plan but I think we should recognize that they need to be predictable and they need to be at amounts that we think are fair and reasonable which broadly approximates inflation and things of that nature.

The third part is that there is no public transit system anywhere in the world — perhaps with one exception — that operates without public support beyond the riders of the system, and there are lots of reasons why that makes sense. The transit system allows a degree of economic development that would not take place otherwise. You do not capture back into the transit system the value of that economic development. It gets captured into state taxes, local taxes. It gets into the tax base. It provides for environmental benefits that come from it, and it provides in terms of our socially conscious elements. It provides for mobility and opportunity with limiting prices as an impediment to doing that. We have to recognize that’s the third leg of the stool.

The first leg of the stool is to show that you’re an efficient and effective provider of public transit and that you’re meeting people’s needs in doing that. The second leg of the stool is accept the fact fares are part of the picture and what you’re doing, and the third leg of the stool is the fact that we will rely on public support to do this. If we want to be operating in a way in which we’re protecting the services, we have to ensure all three of these things. Many of these things are interrelated. Your best ability to be able to protect subsidies that come to the transit system is actually showing people that we’re using the money well.

MTA CEO and Chair Jay Walder is hopeful that transit defenders can pressure the state into delivering money that should be dedicated for transit to the MTA. (Graphic via Streetsblog)

Second Ave. Sagas: You announced recently that the authority is still waiting for a payment from the state, and Gov.-elect Andrew Cuomo recently spoke of the fungible-ness of transit funding. Are there concerns that the state is going to repeat last year and take money away that’s supposed to go to transit to fill their general budget gap? Where does that leave the MTA?

Walder: The general budget gap for the state is clear. The state is obviously dealing with a very, very difficult financial situation, and I think that’s clear right now. Clearly all we can do is to project that the taxes that have been raised on the basis that they will be supporting our transit system…the only basis we can work on is the view that those monies will be available to and will come to the transit system. That doesn’t mean that we predict that the economy will get better or other things of that nature. It’s only saying that whatever comes into those funds is available for the transit system. It’s the only reasonable basis for which we can work, and I think you’re seeing some public view put forth by a number of people that says the taxes were raised on this basis. In fact, they were very explicitly stated as “We’re raising this tax to be able to support our transit system because we want to have a transit system that prospers, that allows the region to prosper, that provides opportunity and does other things like that.”

Are there risks that are there? You’d be hard pressed to say there aren’t risks. I think the fact is that there clearly are risks that are there, but the best argument you can make is that the taxes were raised for this purpose. We’re using the money well, and it’s meeting a public objective that we need to meet.

The next parts of the interview will focus on Walder’s tenuous relationships with the MTA’s various labor unions, the future of the Second Ave. Subway and the authority’s next-generation fare payment technology. Check back this week for more.

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Marc Shepherd November 29, 2010 - 8:07 am

Where is the exceptional public transit system he referred to, that funds itself entirely from the farebox?

J B November 29, 2010 - 8:12 am

Aren’t Taipei, Hong Kong, Tokyo, Delhi and Singapore all able to do so, at least so far as operating expenses go? Or is he referring to capital expenses as well?

Marc Shepherd November 29, 2010 - 8:45 am

I am sure he is including capital expenses, as he should.

Alon Levy November 29, 2010 - 9:18 am

Those systems are profitable after depreciation, which takes care of capital expense. Many more systems are close to but not quite profitable, for examples Munich and Sapporo.

In contrast, New York City Transit barely recovers half of its operating expenses out of fares, not counting depreciation. This is considerably worse than even medium-size German-speaking cities, which recover 70%+ of their operating expenses through fares. Zurich recovers 68%, I believe after depreciation.

Sharon November 29, 2010 - 9:16 pm

A large part of the problem is we are paying many mta employee’s union and Non Union far higher wages then workers in the private sector and other city agencies. This is due to the tax and toll gravy train.

One example is a train cleaner is making $23 cash plus $10 plus benefits while a porter at the Flatbush Gardens housing complex is making $18 an hour. That amounts to 27% more in cash terms and far more if you include the benefits packages.

Walder is 100% correct that work rules need to be changed to increase productivity but all process needs to be changed. give workers the correct tools to carry there work out in a more efficient manner.

We can no longer look the other way when the union demands to have express buses return to SI so that workers can have a 3 hour break at the depot paid at half salary. why can’t these drivers clean their buses or some other task?
Multiply the extra cost over a decade and you have a large chunk of the debt and it’s associated interest off your books.

The fact that people overlook is that the mta already gets huge tax and toll subsidies. It is just a matter of using them wisely which it has not. The mta should follow Oboma’s lead and freeze salaries unless there are associated work rules changes. 50% of the savings can go to raises

Alon Levy November 30, 2010 - 12:12 am

I know the wages at about 2.5 of those profitable transit agencies. At one, they’re barely lower than at NYCT. At another, they’re about 20-25% lower. At a third, they’re much lower, by about half or more.

The main difference is not in the wages. It’s in the staffing level. The barely-lower-than-NYCT-wage agency (Toei, the city-run part of the Tokyo subway) carries half as many passengers as NYCT with one seventh the payroll. To get to Toei’s labor efficiency per rider, NYCT would need to lay off ten times as many people as would be axed with OPTO. This you can forget about; the Japanese agencies got to where they are by slowly shedding workers through attrition over decades.

Benjamin Kabak November 29, 2010 - 8:19 am

I think he was referring to Singapore, but I didn’t have time to follow up on that point. As far as I know, none outside of Asia exist without public subsidies to varying degrees.

Alon Levy November 29, 2010 - 9:21 am

Since Asia has the only first-world transit-oriented cities with comparable population to New York, it’s a perfectly appropriate comparison. I for one would prefer New York to play in the same league as Tokyo, Seoul, and Osaka, and not in the same “We need more money!” league as Chicago and Washington.

Tom December 10, 2010 - 12:52 am

A few things. Yes it’s true that the unions are demanding, but it goes far beyond that. For beginners, public transit in America is severely underfunded, especially for our larger systems that carry many people day in and day out. In fact, our country spends less than one percent of it’s GDP on public transportation. This needs to change. Secondly, I’m sure European systems are unionized and demand a lot as well. However, because they do not lose as much in taxes and receive more federal funding they are able to maintain exceptional systems. Whether or not you agree with the way European governments work, it’s hard to deny that public transportation in Europe is actually an example of government working for the people. Third, we need to put more pressure on the private sector to invest more in our transit systems. While they put in money to improving stations when they have new buildings constructed above them, they can and need to do more to ease the burden on the taxpayer. Lastly, there are many abandoned right of ways which could provide critical relief to areas experiencing overcrowding and/or lack public transit options and we need to take advantage of that. There is no magic wand and while Jay Walder is not perfect, I do applaud him for increasing the transparency of the MTA’s finances and taking many necessary steps to increase its efficiency, but he can only do so much with the tools provided to him.

Tom December 10, 2010 - 12:57 am

Also, while I’m not suggesting we need to invest 7-8% percent of our GDP to invest in public transit like they do in Europe, I don’t think its unreasonable to increase the amount to 3-4%. This would be easily possible if we decreased some of the waste we spend on the military. I’m not trying to suggest we don’t need a strong and equipped army, but do we really need to still spend money on having troops stationed in countries like Germany and Japan today?

Streetsblog New York City » Today’s Headlines November 29, 2010 - 8:59 am

[…] Jay Walder Discusses the MTA Budget With Ben Kabak […]

transitbuf November 30, 2010 - 4:45 pm

Give Jay Walder a chance The Transit Authority needs serious change. I have first knowledge of this because I was employeed there 26 years and was recently railroaded out of my job for speaking out on corruption. I can only speak for the section I worked for its Dept of Buses facilities its a dept that taked care of the bus garages and all infrastructure of the bus facilities which includes plumbers, painters , electricians ironworkers and tin smiths. Here is an example of waste it took 8 months to do over a dispatchers office at Jamaica Dept (merrick blvd and liberty ave) which only entailed new Kentile floor new suspended ceiling and sheetrock 8 months 12 men (most making $29 an hour) why because the forman don’t know how to set up a job and most of the time the men were waitig on material sound absurd well in the same location it took Two years to build a bathroom in the bus garage by lift area if the public saw the countertop and fixtures used they would be infurated what should be investigate is the amount of material bought and disappeared they should investigate the price of this project its crazy. This same location oil is has been seeping into the basement boileroom through the walls a combo of water jamaica water(high water table) and oil from abandon oil tanks on site their solution from 1990 was to make a french drain and send it to a pit and pump out the water they were caught by DEP that they were dumping oil and water into the sewer system they were suppose to be fined each day the system was dumping into the sewer system but all they did was hook the water up to there oil seperator system. Now instead of cleaning up this superfund site they are filling in the basement and caping it and putting the boileroon on the main floor in the storeroom if this was private property it would be condemn and labeled a superfund site.
Jay Walder needs time to dismantle the TA blue wall Of silence I was an employee who grew up in working for the Transit right out of high school. Recently I been speaking out on the corruption that goes on and instead they turned the tables and distroyed my career there but most of all my reputation. I would jump at the oppurtunity to meet with Mr Walder and just to let him know how deep the problem runs.
In the last two years LI bus was suppose to merge with Mta bus well our supperiors took that as a piggy bank and promoted their friends guys making $53000 promoted them to superintendents a $90000 a year job when the MTA supposedly has a hiring freeze. So their friends received a %40 pay raise and these guys barely have a high school diploma. Now that the Merger is off they use them as forman while making $90000 isnt that great during a great recession!!!!! Do you wonder why your fares are increasing every year.. Stay tuned More to come I have 26 years of stories to tell i am willing to meet any one in Walder office to give him my in the trench assessment !!!

BrooklynBus December 1, 2010 - 12:22 am

I have 25 years of stories. Too bad you didn’t come to the 9-11 ceremony in Battery Park on 9-13. Walder was just standing there and anyone could have gone up and just spoke to him.

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Larry Littlefield November 29, 2010 - 9:22 am

Hopefully he mentioned some cost savings (as opposed to deferred maintenance) in capital spending. On ARC cost increases were simply assumed. I understand that circumstances change. But where are the mid-project cost DECREASES as a result of the recession?

tacony palmyra November 29, 2010 - 9:32 am

I like that he’s accepting that fare increases are a part of life. The periodic fight over maintaining fares has in some sense defined the New York City subway’s history, but it’s time for that era to end. Why not just create a new guideline that the fare is adjusted every January 1st based on inflation/CPI-U or whatever measure would be appropriate? Take the political drama out of it and make it routine. Only downside would be having base fare of odd numbers like $2.31 — but this will become less important as more and more people use plastic in the future and the people using all those coins on the bus become less and less by the day.

ant6n November 29, 2010 - 1:21 pm

Could always be rounded to the next dime and/or quarter

Alon Levy November 29, 2010 - 2:04 pm

Most people should be using unlimited monthly passes anyway, so they can just hike the unlimited fare by $2 each year.

petey November 29, 2010 - 11:35 am

hey ben, you scored the MTA chair. congrats!

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Brandon November 29, 2010 - 4:09 pm

How much closer would the system be to profitability if the subways were automated? That would be a priority for me.

Sharon November 29, 2010 - 9:29 pm

The only way the system would be profitable(including capitol expenses) would be if the IRT/BMT would have had continuous ownership with out political interference in terms of fares. Much of the system would have been automated many decades ago. Automation alone today will not make the system profitable. It will reduce the burden on tax payers and allow nyc to attract more business further off setting costs.

Complete automation would take 30+ years min and a few billion $$. What can be rolled out within 6 months to a year is removing conductors from trains. This could be done in a cost effective safe way. This would include a screen for the train operator to monitor door operations and platform camera’s. I would also like to include 100% cctv inside the cars for extra security. I would also operate shorter train more with shorter waits overnights on most lines to encourage more ridership thus revenue. If you live in Brooklyn and have to go to the UWS a trip at 12 am takes twice as long. had to drive in for a wedding on Sat due to the reception being in the 70’s in the broadway area.

Train interiors as well as stations area’s could be monitored by station agents and mta central control. Not just looked at but actively monitored which means condition reports on stations and trains. Actively monitoring will allow the mta to reduce vandalism which save cash as well.

Bolwerk November 30, 2010 - 2:26 pm

All things being equal, privatization is an awful way to encourage profitability. All it does is guarantee that financing will be more expensive – so you will be less likely to see capital expenses covered.

Alon Levy November 30, 2010 - 12:19 am

Assuming automation is cost-free, the labor cost saved would be about $450 million a year. This compares with $5 billion in losses incurred by NYCT every year.

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Matt November 30, 2010 - 4:01 pm

Why not just extend the 7 train south along 11th avenue to 14th street, then cut diagonally across the Hudson river to terminate/connect at Hoboken Terminal. That would connect NJ Transit, including the North Jersey/Rockland lines, Hudson Light Rail, PATH, and NY Subway at a single location, and would likely cost at least half what the much longer Secaucus route will cost. Not to mention, then you could always extend the L line to terminate at a 11th Avenue 7/L stop. Yes I know they are different systems, but they can still share a stop the way the 7 and N connect at Queens Plaza. Either way, if the bottom line is money, I think tunnelling under the Hudson AND under a long stretch of Jersey will cost more than a shorter connection to Hoboken Terminal, which also would happen to incoroprate more existing train lines. Thoughts?

Bolwerk December 1, 2010 - 12:18 pm

Why not? There is no _plan_ to cross the river right now. It’s simply a seven-word political proposal: “Let’s bring the 7 Train to Secaucus.”

Good an idea as it is, the obvious problem is cost. It’s probably easier to build no stations additional and a straight shot line from Manhattan to Secaucus, skipping the Palisades, Hoboken, Weehawken, what have you. If there are stations, they’re gonna be deep and likely more densely populated places like Hoboken will want to be avoided, unless there’s an obvious place to land the tunnel and then use an existing ROW.

Of course, I suspect Hoboken is kind of a pipe dream, but also one that may not be so necessary. It would be kind of tragic to skip HBLR, perhaps, since that has a lot of potential to be a feeder service to the Subway this way.

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J B December 1, 2010 - 3:29 am

The fact that he falsely claims that there is only one metro system in the world seems significant to me- he’s either ignorant, or he’s deliberately trying to make people keep believing that it’s normal and unavoidable for transit agencies to operate at huge losses. If it can be shown that mass transit can in fact be profitable, you would remove one of the major objections to mass transit in the US.

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