As inveterate transit watchers know, the MTA’s current financial crisis is years in the making. The perfect storm of decreasing state and city subsidies combined with ever-increasing labor costs and spiking debt payments has led us to today’s tenuous position. That said, a few key politicians have been instrumental in overseeing the decline and fall of state support for New York City’s transit system, and they deserve special recognition of their own.
Over at WNYC’s Empire blog, friend-of-SAS Colby Hamilton published an insightful and thorough post on the origins of the MTA’s fiscal crisis. Hamilton highlights an oft-ignored part of the MTA’s history. As he writes, “Out of this pool of transit tragedy one person bears a disproportionate responsibility for the current mess the nation’s largest public transit system is in. That person is former Governor George Pataki.”
Now, Pataki wasn’t the first person to remove MTA subsidies. In fact, under the first Cuomo Administration, the MTA lost nearly $1 billion in annual state subsidies, but those were replaced with money from the failed Westway project as well as revenue-backed bonds. The funding remained the same while the sources diversified. Under Pataki, it all fell apart. “Cuomo understood the importance of the MTA and the transportation system,” Peter Derrick, a former MTA official who accused Pataki of politicizing the agency, said. “The MTA basically set the transit budget and the governor didn’t stick his finger in the pot. Pataki came in and totally brought his own people in who were not transit people.”
With the Peter Kalikow’s of the world running the show, the MTA slipped precipitously into an embrace of debt. Hamilton explains:
The crux of Pataki’s culpability was the desire to float large capital programs without finding new streams of revenue. “Pataki said, ‘Oh no, I don’t have to do that. I’m going to be the governor that doesn’t have to raise taxes or raise fares,” said Derrick.
“It’s very tempting to put stuff on the credit card,” said William Henderson, executive director of the Permanent Citizen’s Advisory Committee to the MTA. “That’s essentially what we did. The result is the kind of debt and debt service we have now.”
Peter Kalikow was Governor Pataki’s MTA chief for most of his administration. He says that, in fact, Pataki was willing to allow fare increases, but the reality is that paying for capital needs through debt is actually a good thing. “A lot of guys yell that there’s so much debt. That’s nonsense. What you have to do is keep the fares at the level that you can pay the debt service,” Kalikow said. “If the state doesn’t give you the money, you’re going to have to do bonds. I don’t think that’s a terrible thing to do.”
Debt, as Kalikow says, isn’t always a bad thing. In fact, certain projects such as the Second Ave. Subway should be funded through debt because those projects will generate enough revenue to cover bond payments. But many other projects, including system modernization, will not expand the revenue base enough to generate money for the debt payments. Today, we’re stuck with debt for everything whether appropriate or not.
Now Hamilton’s piece contains most of the story, but as a few commenters pointed out, it’s not everything. Labor costs have risen have more than labor productivity has, and the artificial depression of the fare in nominal dollars since the advent of the unlimited ride MetroCard in 1996 has hurt the MTA’s bottom line as well.
Of course, the ultimate question concerns the future: Where do we go from here? As Hamilton notes, the next MTA head will have to take a long, hard look at the way the MTA is funded, and Albany must be willing to do so as well. I’m not too optimistic.
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Actual people suffering while rich people in suits argue in a vacuum about things that absolutely need to be done and use those actual people and the resources they need as pieces in some mad chess game. That’s our government for you.
“In fact, certain projects such as the Second Ave. Subway should be funded through debt because those projects will generate enough revenue to cover bond payments.”
That proposition seems highly dubious, especially as the costs have risen considerably since the project was approved, but the benefits have not. The SAS service area is already as built up as it ever will be, and most people in that area would use transit whether the SAS were built or not. I cannot imagine that the incremental ridership would be enough to service that much debt.
The crisis is a political one, not a financial one. Any financial manager would love to take over a business which can, without difficulty:
(A) greatly increase revenues without adding any new costs and
(B) greatly reduce capital spending without reducing expected future profitability.
That’s the MTA in a nutshell. Given the inelastic nature of demand in this largely uncompetitive market, you can easily raise lots of revenue by greatly increasing fares. Also, you can stop spending on your major capital project (e.g. SAS) at least until some time in the future where their incremental revenues are expected to exceed their incremental costs. You’ve just done a ton to boost your bottom line in a few days on the job.
This is only a problem for the politicians, who will suffer due to the unpopularity of this outcome.
State government seems to have mastered the art of rob the MTA, blame the MTA.
That’s the whole reason the MTA was created – so that money from profitable transit activities (the TBTA) could be sapped away to subsidize other operations in financial difficulty. But local government was entirely complicit in this, so it’s hard to blame the state government for it. The solution is to create transit entities that are financially self-sufficient, i.e. fares and other revenues > costs, and then ringfence them from government interference, whether through debt indentures or otherwise.
It’s not dubious, but it’s also not something that should be done as much as it was. At the low interest rates we’ve been seeing so far in the 21st century, it maybe does make sense to finance some capital projects with debt. What agency can afford to pay the debt is another matter – the MTA never could, and bondholders must know that when they buy bonds.
Littlefirld’s assertion that the strike was about 20/50 is false. It’s interesting how these memes start and never end.
So you say. But here is what I remember.
You had two factions in the TWU, including the New Directions movement, that were in competion. Among the points of contention — a promise to restore the 20/50 pension plan.
After taking over, New Directions got the state legislature to pass 20/50 not once but twice. Without a single no vote. Pataki vetoed.
In the run up to the strike, New Directions demanded 20/50 as part of the negotiations with Kalikow, Pataki’s man.
Those are facts. My assumption — after having promised 20/50, the TWU leadership either had to get it or prove it couldn’t be had, with the latter requiring a strike.
One must never assume. I never heard 20/50 mentioned in the lead up to the strike. On the picket line or afterwards when New Directions was selling the settlement-remember the membership voted down the settlement by 7 votes and they had to have a re-vote.
The official line was “We must protect the un born” and “It’s about respect”.
20/50 was always discussed as being in the realm of state politics, not something negotiated at contract talks. There was hope that with Spitzer 20/50 would come to pass.
FWIW, the 20/50 was mentioned in the news coverage surrounding the strike as well. It’s at least what Toussaint asked for even if he knew there was no realistic chance of getting it.
So the assertion that the strike was about 20/50 is incorrect. Sort of like saying it was because the MTA asked for OPTO and the union walked out.
[…] The questions that the film raises, both about the aesthetic value of graffiti and about the role of advertising in public space, are even more relevant now than they were in the late 1970s. After spending millions of dollars scrubbing subway cars clean of graffiti, the MTA has piloted an advertising program that allow companies that cover the outside and inside of subway cars with ads. This program is one of several attempts by the agency to find alternate revenue streams in response to State subsidy cuts and a growing budgetary crisis. […]