Home Capital Program 2010-2014 On the need to fund the MTA’s Capital Program

On the need to fund the MTA’s Capital Program

by Benjamin Kabak

Over the past few months, as the spring legislative schedule has inched closer toward summer recess, I’ve beaten the drum about the MTA’s current capital funding. The five-year plan is short $10 billion, and it’s only funded through the end of 2011. As Albany has struggled with the state budget, it must also turn its attention to the capital program, and it’s no stretch to say that the city’s economy depends upon it.

Without a properly-funded capital plan, the MTA’s physical infrastructure will further erode. Without a properly-funded capital plan, tracks will break down, trains will be delayed and business will suffer. Without state support, the riders will have to pay more and more so that the MTA can simply maintain the current levels of service.

Today, in the latest edition of Crain’s New York Business, the trade mag talks about the need to fund the capital plan. While the city’s commuters and straphangers are relying on MTA investments, so too is the construction industry. I’ll excerpt the editorial as it touches upon these various issues:

State lawmakers, who congratulated themselves two months ago for closing a $10 billion budget gap, have made no progress in filling another hole that is just as big. The Metropolitan Transportation Authority has no capital funding in place for the next three years and needs the state to identify revenues this year to issue bonds. That will be controversial, so Albany needs to get moving.

Gov. Andrew Cuomo and legislators must undertake the mission knowing that the capital plan cannot be shrunk significantly. MTA contractors could reduce construction costs by a few hundred million dollars by negotiating new work rules with their unions; the MTA could pare the price tag a bit more by delaying nonessential improvements. But if there’s one thing we’ve all learned about the transit system over the years, it’s that postponing vital work backfires…

Maintaining a state of good repair, improving service and finishing large projects—East Side Access, the Fulton Transit Center and phase one of the Second Avenue subway—are crucial in order for the regional economy to grow. It won’t happen without money.

Funding for the MTA is not an expense but an investment with proven returns. Unfortunately, some lawmakers prefer to portray the agency as a cesspool of waste and to use it as a scapegoat to distract voters. It’s time they acknowledge the MTA’s role in reviving the city and its suburbs, and the efficiencies Chief Executive Jay Walder has found in the past two years. He shaved $525 million from the operating budget, including $93 million in service cuts to underutilized bus and subway lines. He lopped $2 billion off the capital plan without killing important projects.

It’s Albany’s turn now. Legislators must identify at least $750 million in annual revenues to finance 30-year bonds. Fares have been increased for three straight years and are scheduled to rise 7.5% in 2013, so riders ought to be spared until then. Businesses funded most of the 2010-11 capital plan with a payroll tax that generates $1.5 billion annually.

How does Crain’s propose finding the funding then? Through road usage fees: “One option is to raise more revenue from drivers. A variable fee on vehicle trips that congest Manhattan’s central business district is logical, since they impose large costs on the economy. Also, the payroll tax mechanism should be improved to lessen its political toxicity and increase compliance.”

As Crain’s notes, transit ridership has surged by 50 percent over the past 15 years as capital investment in the system has grown as well. The state and its subways are heading toward a turning point, and while Albany may have to make some tough choices, it cannot leave 5 million daily subway riders out in the cold. The city’s economy simply cannot take the hit.

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Alex C May 23, 2011 - 1:30 am

Funding for public works? Madness! We need more tax breaks! /kidding
But seriously, Albany and the MTA need to figure this out. This city already had a 15-year spell of a nearly unfunded subway in the 70s and 80s. That alone should scare people into realizing how important funding for the MTA is. That should be an ad campaign: fund it, or it doesn’t run. Unfortunately I don’t see this happening. Even here in NYC, there are too many stupids who yell the loudest who eventually ruin it for the rest of us, and nobody upstate gives a damn about NYC.

Hank May 23, 2011 - 8:06 am

Alex, upstate does care about NYC. The City provides all the tax revenues that fund their highway construction and sweetheart deals for cronies of Republican state senators.

Though in all seriousness, completely agree. Maybe this could be the impetus that finally gets the congestion charge in place.

Billy G May 23, 2011 - 3:17 am

Riders actually have to pay for what they use?! UTTER DISASTER!

Keep raising the rates until the trains come CLOSE to paying for themselves. NYCT charges much less than its equivalents around the world.

Justin May 23, 2011 - 5:33 am

You don’t need to say that twice, its basically what the MTA and NYS intend to do anyway. Rates will continue to go up until they pretty much pay for the MTA, operationally. On a capital basis, the MTA will have to continue to a get grants from the feds, state, and city.

Perhaps NYC should do like other cities and disperse residents of the housing projects (particularly the Manhattan ones and the East River ones in Queens and Brooklyn) and then privatize them. The proceeds (as well as reduced welfare spending) could be used to subside repairs and new construction for the MTA.

R. Graham May 23, 2011 - 7:53 am

So more gentrification is the answer? This entire city is crowded. You don’t just up and move thousands of families somewhere else. And moving them solves what exactly? What does privatizing the projects do other than moving in more people who drive and increasing the percentage of those who will use their car in Manhattan Monday through Friday?

R. Graham May 23, 2011 - 8:03 am

The key to public transportation is and has always been the fact that it’s low cost and affordable for ALL. This is the only city where more than 50% of the fare box revenues pay for the system’s operating costs. If you keep raising the fares until they pay for 100% of the operating costs then you will see fares that don’t even come close to resembling affordable payment for all. If the lower income workers can’t afford to go to work the job disappears and more is asked of those who get paid more. That fare box and this economy go hand and hand. This has been an ongoing battle for generations. What really needs to be done, is Albany and NYC need to go back into the business of funding transit. There was a day when the needs of transit used to be apart of the city and state budget. Those days ended when both the current and previous Mayor stating being evasive with this obligation. Same thing with Pataki who cared very little for NYC. And I truly believe the fare box should not be paying for capital construction. That’s just ridiculous.

Chris May 23, 2011 - 8:51 am

So you provide more assistance for lower income workers by reducing the city’s tax burden at the lower end of the income scale. I don’t really think affordability should be a big part of transit’s mandate. Transit should charge what it costs, or at least what would maximize revenues under current conditions.

R. Graham May 23, 2011 - 10:07 am

Due you know how much a single fare would cost if you actually had the fare pay for operations and capital? You’re talking about the lower income workers getting assistance. You would need to figure out how to assist the middle income workers as well. You would have effectively priced lower and middle out of NY. Once subway fares start looking like LIRR fares you will have effectively slaughtered NYC. When you can’t afford to live here do you continue to stay here if you have the ability to leave? No you leave. And if you can’t afford to travel to work in a day and age where jobs are paying less and providing less travel subsidies more than ever before, you lose your job and you lose your home. Then you either move in with a relative or you try to work the shelter system. If you live in the city what makes you think most people in this town can afford $6+ for a one way fare or $12+ a day? That’s dramatic.

Chris May 23, 2011 - 12:02 pm

Presumably the price would be the same as it is now; we would just pay out of hand rather than the money vanishing silently from our paychecks. As to $12/day, that’s $4400 or so assuming one commutes every single day. For two commuters it’s about $9000 – or, roughly, what a typical American household on average spends annually on transportation. So I feel comfortable saying the average household in NYC can afford this, because the average household in the US already does afford that. Would poorer than average households suffer? Of course. But the best, most efficient way to remedy that suffering is through direct transfer of cash. And if the money removed from transit subsidies is handed dollar-for-dollar to the bottom half of the population they’ll be better off for it.

The silent advantage, of course, would be that the MTA would be self-funding and could be depoliticized. Meaning that the capital budget needn’t be held hostage by the latest batch in Albany. So for their money – the same money they are paying now, one way or the other – commuters could have a better transit system, which didn’t go without maintenance every other decade.

R. Graham May 23, 2011 - 4:57 pm

Other than TransitChek and other pre-tax transit based deductions that remove money from your check pre-taxes for the purpose of you paying for transit. What exactly are you referring to when you say “money vanishing silently from our paychecks?” I don’t know about you but I used to do a pre-tax transit deduction but stopped because the company my employer uses is worthless. Other than that there no money coming out of my paycheck for transit. I pay for my transit out of my bank account. I don’t see what difference a removing a pre-tax system would make in terms of what you’re proposing, which makes me assume that you are talking about the payroll tax. Last time I checked that was at the employer level. Now that has very little effect on how regular individuals like us pay our fares and without the employer based payroll tax our fares would skyrocket without government help. I can barely afford $104 a month. I can’t imagine having to pay much more without a raise. I have kids and most families with kids have more obligations other than transit.

pete May 24, 2011 - 3:22 pm

So NY State owns a color photo copier that prints money? All subsides from from taxes, or are taxes by taxes not collected (tax break, deductions, etc). People do pay for the $6 ride, through their taxes and MTA bridge tolls, whether they know it or not.

Al D May 23, 2011 - 10:18 am

Then the city as we know it will cease to exist. Your result will be to drive the lowest wage earners out of the city, thereby shuttering many, many business that rely on low wage earners to remain in business. Once that’s done, the people who use these bsuiness will move because the businesses will no longer be there. The local economy would crash and anybody remaining woud have to go on the bread lines.

Chris G May 23, 2011 - 2:35 pm

So Chris, tell us this. If you want transit to cost the actual costs, will you pay the actual cost for roads?

Chris May 23, 2011 - 3:33 pm

I don’t own a car. I don’t think general tax revenue should go to support roads/driving; indeed highways should be producing net revenue for the state that it can use to provide environmental remediation. How exactly to extract the needed funding from their users is a bit more complicated than for transit (you can’t have collection at every entrance point, less homogeneous user base, etc.), but ultimately users should pay the costs.

R. Graham May 23, 2011 - 3:41 pm

So what you’re telling us is that even for roads, everything should be paid for by the users? If that’s your idea of the ideal NY, then tell us why what you’re proposing won’t turn NY into a city for the rich only? Then you tell me this. If your salary doesn’t allow you to afford a $6+ one way fare and your job refuses to help provide subsidies, will you still be able to live and work in this city?

Chris May 24, 2011 - 4:02 pm

If you take transit subsidies that are currently going to rich and poor indiscriminately, and instead use them for transfer payments, I suspect that most everyone in the lower part of the income spectrum will find the city equally affordable if not more. If you can afford a $2 fare which is subsidized by $6/user, you can afford an $8 fare when the government gives you $6 in extra income based tax credits. Meanwhile the government saves the $6 it would have spent to subsidize the rides of Wall Street analysts, and can use that money to provide extra services for people who actually need them.

To your second point, some jobs will pay more to attract workers to this expensive city and some will not. If you have a job that will pay the same anywhere you do it, and you want to live in a relatively expensive city, you’ll have to endure a relatively lower standard of living. That’s how the economy works, and some jobs (e.g. farming) have already been priced out completely as the city grew. I expect that many other low-wage jobs will continue to flee, whether just out of New York or out of the country entirely, to be replaced by other jobs that can only be done in New York (tourism) or benefit from the high concentration in the city (financial services). But I don’t think replacing transit subsidies with cash payments will impact that significantly.

R. Graham May 25, 2011 - 1:23 pm

The low paying jobs that would flee that you’re referring to can’t be replaced. They’re low paying jobs for a reason. It’s because they replaced the higher paying jobs of yesteryear and that’s also how the economy works. I’m going to try to be brief because I can chat on for page lengths but investment in transportation is an investment in the economy. Those subsidies exist so jobs can exist and the minute you put the burden on the backs of the people is the minute you lose jobs and put more people in the poor house and on the streets. It’s as simple as that. What every the cash trade off is will not stop that fact.

Al D May 23, 2011 - 10:15 am

Well said!

Alon Levy May 23, 2011 - 1:53 pm

Keep raising the rates until the trains come CLOSE to paying for themselves. NYCT charges much less than its equivalents around the world.

False. Paris, Milan, Berlin, Madrid, Rome, Vienna, and other European cities I forget right now have lower fares. STIF’s website has a PDF I can’t find right with a cross-city comparison throughout Europe, and if you put New York on the list then it’d be the 3rd or 4th most expensive on a list of about 15.

And Tokyo fares are about even with New York fares – go to Tokyo Metro’s website and find fare revenue and ridership numbers.

Phil May 24, 2011 - 2:52 am

Except for Hong Kong’s MTR, there are no rapid transit operators in the world that make a profit (and yes, this is true of Tokyo), and that profit comes from revenue from transit-oriented development and the exploitation of low labour costs. The most an unlimited monthly MetroCard should be is $150 considering the state of the subway as it is.

Alon Levy May 24, 2011 - 5:11 am

No, it is not true of Tokyo. Or JR East. Or Helsinki. Or Singapore. Or apparently Taipei.

And Wikipedia claims that the Hong Kong MTR’s railway lines are profitable by themselves. And at this point I think Wikipedia is more trustworthy on this matter than you are.

paddle May 24, 2011 - 9:56 am

That’s not true at all. The only mass transit system that charges as much per fare as the MTA is Chicago. And their monthly and weekly cards are cheaper there.

Alon Levy May 24, 2011 - 11:35 am

That’s not really true either – while New York City transit fares are on the high side, they’re not the highest. The highest fares are in London, where a ticket just for the central zone is more expensive than in zoneless New York. In addition, Stockholm, Toronto, and (I think) Munich have higher fares than NYCT.

Bolwerk May 24, 2011 - 12:02 pm

Blah. They do come pretty close to paying for themselves directly, and they certainly pay for themselves with the indirect benefits they confer on the economy.

Without the same mandate of self-sustainability for highways, this idea about higher fares and every idea about users paying “upfront” costs – or mitigating the costs by subsidizing riders directly instead of subsidizing the trains themselves – is moronic and would be disastrous. Here is what you people are demanding:

· in the case of direct user subsidies, creation of a paid government bureaucracy that decides who gets the benefit and who doesn’t
· more difficulty for the poor and transit-dependent middle class to travel (out of spite?), particularly if they don’t get the benefit that new bureaucracy can grant them
· drive people out of trains and onto an already congested street network, pretty well screwing drivers too. Because of the stupidity and irrationality of people, probably correlating to the size of the car they drive, many will even make the mistaken assumption that a car is cheaper when it’s not.
· the above entails you clog highways with all the attendant additional pollution, parking shortages, accidents, and economic waste we already have plus more.
What we need to do is make sure the fucking trains and buses run properly and efficiently, and carry people to where they need to go, first. Paying for it is secondary – we have to do it, because it’s the cheapest option no matter how expensive it feasibly gets. If you want to help that, you need to demand accountability from the MTA and politicians.

Son of Spam May 23, 2011 - 9:19 am

I’m glad to see some mainstream press (no offense, Ben) finally paying attention to the transit funding situation, and making sense about it.

A copy should be sent to all the state senators too lazy to become aware of the situation, aside from calling for forensic audits.

Larry Littlefield May 23, 2011 - 4:29 pm

“I’m glad to see some mainstream press (no offense, Ben) finally paying attention to the transit funding situation, and making sense about it.”

No sense at all.

The MTA already has enormous dedicated revenues, more than enough to pay for its capital needs. The problem? The money is all going to past debts.

So what does Crain’s propose? A huge battle over a new funding source. People will be paying for that funding source for 30 years. And what would it get us?

Three more years of the capital plan. That’s it. While Democrats and unions screw the future and those who will live in it with pensions, the rich and corporations do it with public debts.

And this business oriented publication does not want to admit that future is wrecked because of debts and more than the unions want to admit that public services are being gutted because of the pensions. So they propose to repeat the same disaster.

Larry Littlefield May 23, 2011 - 4:30 pm

If Crain’s plan was adoped, what would happen in three years? They don’t say. They don’t want to think about it.


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