The MTA unveiled a revised draf of its four-year financial plan on Wednesday, and while budgets are not particularly sexy, fare hikes are. This plan is chock full of fare hikes as the MTA’s fragile financial outlook relies on fare hikes every two years for the duration of the plan. Just how long, I have to wonder, will New York’s transit riders begrudgingly accept these fare hikes before it becomes a major political issue?
In plans released yesterday, the MTA still projects some deficits through 2017, but as February’s numbers showed alarming negative balance sheets, the July numbers are significant better. By 2017, the MTA expects to face a deficit of just $100 million — down from over $300 million — but these projections are based on a series of assumptions that may not come true. Riders are going to shoulder a significant amount of costs as fares continue to increase, and anything that rocks the MTA’s financial boat could be disastrous for the agency.
For the public, the fare hikes are the bad news, and they rightly dominate the media coverage. After fits and starts of raising the fares only when the budget looked dire, the MTA has instituted a policy of biennial fare hikes ideally tied to inflation. After a fare increase in 2011, the MTA jumped their prices by around 7.5 percent this year and plan to do the same in 2015 and 2017. Both hikes will be for around 7.5 percent as well, and without these fare increases, the MTA’s financial outlook is a negative one indeed.
If all goes according to plan, then, the MTA’s looming price increases will generate significant revenue for an agency looking at out-year projections that are very, very red. In 2015, the next fare bump will bring in over $400 million, and when the cost of a subway ride jumps up again in 2017, the total generated from the next two fare hikes will be a hair under $1 billion annually. Without the fare increases, the MTA’s deficit would be insurmountable. As such, the city’s riders — all 5.6 million of us daily — are the only thing keeping the subway system afloat.
Outside of these fare hikes, though, nearly all of the other assumptions are not sure things. The only sure thing is a concerted effort to cut internal costs. The MTA anticipates that, by 2017, it will have eliminated $1.3 billion in annual recurring costs, thus achieving internal cost-cutting projections first put forward in 2009. That’s a laudable goal for an agency that has long operated with much bloat, but more could be cut if operations were further streamlined.
Beyond these measures, though, the MTA is expecting a net-zero increase in labor costs over the next four years. While the MTA has realized such savings over the past few years, the TWU’s contract situation remains unresolved, and a net-zero reality saves just $300 million annually by 2017. Meanwhile, pension and healthcare costs are expected to jump by nearly 10 percent over the next four years and are among the biggest uncontrollable costs currently on the MTA’s books.
Beyond fares and labor savings, the MTA is relying on dollars largely outside of their control. Operating costs will increase as the 7 line extension and then Phase 1 of the Second Ave. Subway open, and the agency’s insurance rates took a huge hit after Sandy. Agency officials said yesterday that the MTA is getting half its previous coverage for twice the cost. Meanwhile, revenue from dedicated and federal contributions remain subject to the push and pull of the New York and U.S. economies.
Finally, the so-called “longer term vulnerabilities” come into play. The MTA will launch a new capital program in 2015, and it will likely be funded through bond issues and more debt. Pension, healthcare and paratransit costs are spiking upwards as New Yorkers live longer with less mobility, and weather mitigation and protection efforts will put a strain on the budget. It’s a never-ending scenario of investments.
So what does this all mean, you may ask. After all, budget forces and pure numbers are the ultimate in transit wonkery. The final picture, though, is a simple one: New York’s transit riders are going to be asked to shoulder an ever-increasing portion of the costs. Absent direct state investment, the best way for the MTA to raise money and increase its revenue is through fare hikes, and ridership, which recently reached an all-time high, has shown no signs of abating. People need the subways, and the MTA needs money. So we’ll get fare hikes in 2015 and 2017 and likely in 2019 and 2021 too. Until New Yorkers start agitating louder for an end to fare hikes, they are, for better or worse, the only route to budget stability.