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Benjamin Kabak

MTA

Being Jay Walder

by Benjamin Kabak
written by Benjamin Kabak on August 5, 2010

Amidst a fiscal crisis, Jay Walder, center, hasn’t been able to implement many of his plans for the MTA. (Photo by Benjamin Kabak)

When Jay Walder took over as the MTA CEO and Chairman nine months ago, he thought he was inheriting an organization on the path to financial recovery. The state legislature had just passed a comprehensive funding package that was supposed to provide the authority with some fiscal stability over the next few years. But, as we know, once the economy bottomed out, the legislature stole earmarked funds and the payroll tax revenue came in well below the state’s tax accountants’ estimates, Walder had to set aside his ambitious plans to solve the MTA’s financial crisis.

So instead of presiding over growth, in the short term, Walder has presided over contraction. The authority dusted off its plans to trim service, started cracking down on waste and overstaffing at both the administrative and operation levels and readied a sweeping proposal to raise fares. It just might save the MTA, but at what cost?

Along the way, Walder made more than a few enemies. Union leaders, while working with him behind the scenes, have not publicly embraced the MTA head. After all, who could blame them? Walder has engaged in a public battle to cut down on jobs, and the union doesn’t want to and shouldn’t accept layoffs without a fight. Walder has also alienated a public already frustrated with the MTA by putting into place service cuts and fare hikes. And he still has five more years left on his not-quite-ironclad contract.

Late last week, Eliot Brown of The Observer profiled Walder’s first nine months. As Jay proclaimed his adherence to the agreed-upon 7.5 percent fare hike, Brown pondered a question that should concern transit advocates throughout the city: Will Walder “ever be able to unshackle himself from fiscal issues sufficiently to install more noticeable, meaningful changes-an undertaking that would take time and money-or will he continue to have to put out these fiscal fires, started long before his arrival, with viciously unpopular actions?”

Brown’s piece provides a nuanced look at the financial troubles plaguing the MTA. He tracks the travails of the five-year capital plan and highlights how the authority is dependent on the state for operations funding while the state would rather have nothing to do with it. Into this morass came Walder from McKinsey (and before that, Transport for London). “When I heard that he was possibly going to [take the job], I said, ‘There’s no way this guy is going to want to take a pay cut to take this,'” one MTA Board member said to The Observer.

What makes Walder stand out and what gives me hope that he could shine if given the money and support is the fact, as Brown notes, that “he is the first MTA chairman in two decades who was not a campaign contributor to the sitting governor. Instead, he is simply a pure transit technocrat, one whose well-regarded analytical approach-a “performance indicators” report on the agency’s Web site shows month-by-month changes to things like on-time performance-speaks of his time at McKinsey.”

But Walder must also recognize political reality. The governor who appointed him — David Paterson — will be in office for just a few more months before giving way, in all likelihood, to Andrew Cuomo. The current Attorney General has been relatively silent on issues of the MTA and hasn’t given his vote of confidence to Walder. As the MTA’s top spot is often a political plum, I don’t expect him to do so yet, but Walder has a Golden Parachute. Cuomo would be a fool to ignore both the CEO’s credentials and the money owed to him.

For better or worse, the MTA is where it is because previous leaders haven’t had the economic management expertise and the transit knowledge to deliver a better product. Walder may not be the most tactful when it comes to service cuts; he might not be the most invested into the politics; and he may not be the perfect leader. But he should be allowed to stick around for a while, to ride out the financial tide, and to see his pro-rider initiatives implemented. “I,” he said to Brown, “retain the view that our elected officials are going to recognize what the MTA has done in a very difficult climate. I think they will recognize what’s happened.”

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AsidesMetroCard

Fare media liability expected to stay at $52 million

by Benjamin Kabak
written by Benjamin Kabak on August 4, 2010

As with any transportation business, the MTA enjoys a small but significant revenue stream from unused pre-paid fares. For instance, if I were to buy a $25 pay-per-ride MetroCard and use only $20 of it before it gets lost to the sands of time, the MTA would enjoy a $5 profit from my card. Last year, when the MTA announced $53 million in fare media liability, I explored the whys of it. That budget item had jumped by 12.5 percent, and I speculated that New Yorkers simply don’t want to take the time to do the math involved with the MetroCard bonus system.

Over the next year, the Daily News reports today, the MTA again expects nearly $52 million to fill their coffers from unused MetroCards. The News notes that this amount is the same as 23 million rides at the base fare, but I have to wonder if it will truly be that high. If the MTA is charging $1 per new MetroCard, will straphangers be more inclined to zero their cards over their lifespans? Or will people simply refill with no regard to the discount or an uneven balance? Plenty of people will still buy cards and forget about them, but if the MTA is requiring us all to watch our MetroCards’ bottom lines, the fare media liability total could shrink a bit.

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View from Underground

How the elephant got its stripes

by Benjamin Kabak
written by Benjamin Kabak on August 4, 2010

For the uninitiated, the MTA’s subway route designation system is a jumble of nonsense. Trains that travel divergent paths share colors, and the number/letter bullet system makes no sense. Sure, the 1, 2 and 3 trains could share a route, but what does the B, D, F and M all have to do with anything?

To educate the online subway crowd, the MTA released the video atop this post a few weeks ago. Featuring some cheesy music and some trippy animation, the authority explains how Manhattan trunk routes lend the subway map its color and how the numbers and letters correspond to both historic designations and current rolling stock assignments. Certain trains can fit and take customers on certain tracks, and there is apparently some method to the madness that is the city’s subway map.

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Subway Cell Service

Underground cell service: a panacea or a prison?

by Benjamin Kabak
written by Benjamin Kabak on August 4, 2010

As news of the MTA’s revived attempt to outfit its underground subway stations with cell and wifi service gains steam, the authority has released the details of its revised deal with Transit Wireless. If all goes according to plan, the city’s 277 underground stops could be fully wired within six years, and while the MTA could realize a few hundred million in revenue and New Yorkers would be able to take advantage of 21st century technology while waiting for the subway, many are wondering if this new service will create a subterranean panacea or a cell-phone prison.

When the reports surfaced that the Transit Wireless deal was back on track, the initial stories were spares on the details, but Bloomberg’s Greg Bensinger and Amy Thomson dug them up. In essence, the terms of similar to the original deal in that Transit Wireless will pay the MTA $46 million to start the project and will foot the $200 million bill for installation as well. The funding will come in part from Transit Wireless’ new partner Broadcast Australia, that company that retrofitted Hong Kong’s metro for wireless service.

Although Broadcast Australia would not reveal the extent of its financial obligations, company officials seemed optimistic that their involvement would be beneficial all around. “We’ve been scanning for opportunities like this one,” Chris Jaeger, the managing director of international business, said. “The project fits very neatly with our business aspirations.”

The original plans called for the following stations to be wired first: 23rd Street and 14th Street on the Eighth Avenue line (A/C/E), 14th Street on the Seventh Avenue line (1/2/3), 14th Street on the Sixth Avenue line (F/M), and Eighth Avenue and Sixth Avenue on the L line. According to Bloomberg News, those stations will be wired first, and the project will start within the next two months. After that, says Transit Wireless, stations “could be completed at a rate of 10 to 15 per month.” That seems wildly optimistic for an MTA technology outfit, but if these companies have the expertise, it wouldn’t be an impossible goal to meet. The company says blueprinting and surveying work is through, and since only the stations — and not the tunnels — will be wired, the work will be unobtrusive.

The next step is the toughest. As was the case back in 2007, it’s no sure thing carriers would sign up. Now, as then, the cell companies will have to make sure that the Transit Wireless fees make sense. With such widespread adoption of cell phones and the prevalence of smart phones and data-ready devices, carriers ought to jump at a chance to bring their signals underground.

So then we arrive at the controversial question: Will cell service underground bring a fresh hell to the subways or will it just be an extension of business as usual? Those who never leave parts of Manhattan south of 125th St. are growing concerned that cell service will ruin that one quiet hour a day, but the truth is that subway cell service is far from unique or new. Although the 277 underground stations — with the exception of those close enough to the surface to pick up signals — aren’t currently wired, the 191 stations above ground have always been cell-phone ready. In the Bronx, Queens and Brooklyn, straphangers make their phone calls, check their email and idly surf the net while killing time before the train arrives. At the underground stations lucky enough to get spotty service, the same happens. The world, as far as I know, has not ended.

Underground, in cramped quarters where sound carries, the situation may be a little different. Straphangers may grow wary of hearing each other’s conversations echo throughout the station, and the rush to get in a 20-second phone call as the train pulls into a cell-equipped station may start to drive everyone nuts. But it’s a part of moving society forward. Enough people are mindful of their conversations. Enough people will make use of their smart phones to be productive. The underground world will not end.

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Second Avenue Subway

Second Ave. Subway merch: A tee for the T

by Benjamin Kabak
written by Benjamin Kabak on August 3, 2010

When Phase 1 of the Second Ave. Subway opens in 2012 2016 2018, the turquoise T won’t be a part of the subway system quite yet. The first part will simply extend the Q line north from 57th St. and Broadway underneath Central Park to the F stop at 63rd St. and then up to 96th St. and Second Ave. In fact, Phase 2, an extension from 96th to 125th Sts. won’t see the birth of the T either. Instead, the new train bullet will make its debut when — or is that if? — the MTA completes the full four phases of Second Ave. Subway, and the train reaches its way down to Hanover Square.

That won’t, however, stop the MTA from cashing in on the new train. Earlier this morning, the Transit Museum posted via Twitter an image of its latest and greatest addition to the subway bullet t-shirt line. That newcomer is none other than the turquoise T with the words “2nd Av Local” underneath. Phases 2-4 may not be up for funding yet, but no one ever said New Yorkers weren’t ambitious. “Wear it,” the museum said, “before you ride it.”

The image of the t-shirt atop the post comes via the Transit Museum. The shirts are available for sale right here.

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AsidesFare Hikes

With the fare hike, anticipating a small ridership drop

by Benjamin Kabak
written by Benjamin Kabak on August 3, 2010

In the months prior to the June service cuts, the MTA saw its ridership increase for the first time since the recession hit. Now, however, forces are gathering against the authority, and with the cuts in place and fare hikes coming our way in January, the authority believes it will see a slight decline in ridership come 2011.

As Pete Donohue reports in the Daily News, the MTA expects 16 million fewer trips in 2011 than in 2010, a decline in subway ridership of approximately 0.7 percent. The authority believes a rebounding New York economy will dampen the impact of the fare hike as the projected 66,000 new jobs will lead to more transit use. “Because we are cautiously optimistic about the recovery of New York’s economy, we expect the fare increase to cause a very small decrease in ridership,” Jeremy Soffin, MTA spokesman, said to Donohue.

Still, despite the improving economy, if the MTA opts to limit the currently unlimited MetroCards, the ridership drop could be larger than expected. Those riders on a budget who currently enjoy unlimited transportation won’t swipe as often as they do now and may take fewer trips for pleasure. The hikes though will see the authority’s revenue take increase significantly. “Poor people and people of modest means count their trips more often after a fare hike, and they’ll cut out some nonwork trips,” Straphangers guru Gene Russianoff said.

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MTA EconomicsMTA Politics

What future the MTA’s key payroll tax?

by Benjamin Kabak
written by Benjamin Kabak on August 3, 2010

During rough economic times, politicians angling for reelection like nothing more than a tax to serve as a good whipping boy. Since the MTA has long held that unwanted position at the bottom of the New York political totem pole, the unpopular, but necessary, payroll tax is beginning to attract everyone’s ire. While neither Andrew Cuomo nor Rick Lazio have voiced any support for the payroll tax, GOP lawmakers are starting to make noise about a repeal.

In Newsday today, transit writer Alberto Castillo explores how state Republicans are calling for an end to the tax (link is subscription only). Well, perhaps saying they want an end to the tax is premature. Rather, they’re beating the MTA/forensic audit drum. Unless the authority agrees to a forensic audit — something to which it has been quite willing to submit — these representatives wish to deny the MTA its next payroll mobility tax check. “We want every paper clip, every pencil. We want to know every expense of the MTA and its subsidiaries,” Dean Murray, from Patchogue, said. “Before you turn to the taxpayers to bail you out, you should look where you could save money.”

Castillo has more priceless quotes from state representatives who do not view it as their duty to mind the MTA, a state authority. One representative from Glen Head claimed that, in the words of Castillo, “the MTA wouldn’t need that money if it kept its house in order.” Michael Montesano said, “It’s just easier for them to go to the taxpayer and to the State Legislature and just ask for more money. And if you don’t give it to them, there’s the threat of more service cuts.”

Of course, there’s the threat of more service cuts or fare hikes. If the state, the body that granted the MTA a corporate charter and mass transit oversight, doesn’t deign to fund transit, then the MTA can balance its books through only fare hikes or service cuts. This isn’t complicated policy; it’s simple economics.

For its part, the MTA says it “welcomes” an audit and, in fact, is the subject of numerous audits conducted at both the state and city level. “At the same time, this current administration has undertaken the most aggressive cost-cutting initiative in the history of the MTA, leading to more than $700 million in recurring annual cost savings,” MTA spokesman Kevin Ortiz said to Newsday.

A forensic audit is all well and good, but what will be the point? Thomas DiNapoli will discover that, shockingly enough, the MTA wastes money. He’ll discover that the authority has redundant staffing levels, that its corporate structure was built through combining six different entities into one with little to no consolidation. He’ll find wasteful policies and poor capital oversight on the part of the state, and a state-mandated bidding process that doesn’t leave the MTA with the best possible contractors.

Of course, lawmakers won’t be satisfied with a forensic audit. If given the chance, they’ll move to repeal the payroll tax entirely. That’s why Nassau County and the Town of Chester, among other municipalities, are joining a suit to halt the payroll tax. If successful — which they probably won’t be — what would happen?

As I’ve mentioned over the past few days, the MTA is relying on the payroll tax for up to $1.5 billion a year over the next four years. In 2011, the payroll tax is expected to be over 27 percent of total government subsidies for the MTA’s operating budget. Were the state to repeal it without an adequate replacement source of revenue, the consequences would be disastrous. The MTA would either have to raise fares by 30 percent, slash service to levels never seen before in New York or begin to contemplate defaulting on its payments.

So politicians can beat their anti-tax drums. Republicans can speak out against it; Andrew Cuomo doesn’t have to embrace it. But without this necessary evil, the MTA won’t be a fiscally viable agency. Give me congestion pricing. Give me East River Bridge Tolls. Just don’t take away the payroll tax.

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AsidesMTA Technology

Mixed results for ATO on the L

by Benjamin Kabak
written by Benjamin Kabak on August 2, 2010

The Post this weekend ran an article on the use of automated train operations on the L line, and Janet Roth’s story focuses on “aggravating delays for riders and multimillion-dollar repairs for the MTA.” Basically, according to transit workers, ATO has created more problems than it has solved along the L line. It doesn’t always work reliably well, and it has led to some monumental delays. Transit watchdogs too have confirmed that. “It’s trying to fit new technology into an old system,” William Henderson, head of the Permanent Citizens Advisory Committee to the MTA, said. “There is some skepticism about why we are doing this.”

And what do the numbers say? It cost over $340 million to implement, and the L line has suffered from a high number of delays. Not all of those, however, are related to ATO. There have been, however, 100 glitches a year on the L, and the authority had to hire special contractors to fix the problems. Still, the automated control system, says a Transit spokesman, works on more than 20 trains a day, but it has suffered a “higher than expected failure rate.”

As with every MTA technological project, this one hasn’t been the success the authority had hoped. As the authority looks to bring ATO-based train control to the 7 line, it will use a different contractor and a different set of rolling stock. MTA officials are hopeful that they can learn from the mistakes of the L and bring a better service to the IRT Flushing route.

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AsidesBuses

DOT: Former bus stops will become parking spots

by Benjamin Kabak
written by Benjamin Kabak on August 2, 2010

As the MTA prepared to shutter bus routes across the city, I joined with livable streets advocates in calling for the city’s Department of Transportation to turn former bus stops in bike parking spaces, among other non-auto-centric uses. When the NYPD, however, told its enforcement agents to avoid ticketing cars parked in the old bus zones, I was not optimistic that the battle would be won. Today, the New York Post reports that, by and large, DOT will convert the bus stops into parking spaces, thus handing over premium curbside space once reserved for transit to drivers.

According to Rich Calder and Tom Namako’s reporting, 365 of the 600 bus stops no longer in service are being used by drivers searching for more parking space. Although DOT has yet to decide which areas will be permanent parking spots and which will be deemed school or loading zones, no bike parking or pedestrian spaces will be considered. Hopefully, some of the abandoned shelters can be converted to that purpose instead. DOT says the removal of the bus signs and the installation of signs proclaiming the new use will be completed “over the next few weeks.”

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MTA Economics

What future the capital program?

by Benjamin Kabak
written by Benjamin Kabak on August 2, 2010

The MTA unviled its four-year budget plan last week, and inside of this document are a series of somewhat rosier projections than we’d expect. Despite a crushing deficit this year, if CEO and Chairman Jay Walder can realize all of his cost savings plans, the authority will run net cash balances in the black for 2010, 2011 and 2013 with significant but not too costly deficits in 2012 and 2014. To make these projections, the MTA had to rely on economic assumptions from the city and state, but in the past, these numbers haven’t been too far from reality.

In the consolidated statement which features a line-by-line breakdown of MTA costs, one item jumps out at me. That is the authority’s dept service payments. Last year, the MTA made $1.4 billion in debt service payments and is on pace this year to see that number reach $1.8 billion before jumping up over $2 billion in subsequent years. By 2014, debt service will reach $2.555 billion, and it will consist of approximately 13 percent of the MTA’s annual expenses.

Meanwhile, as debt service remains a significant annual cost on the operations ledger, the MTA is moving ahead with another five-year capital plan that will see the authority issues more revenue and construction bonds. Thus, these debt totals will not lessen or disappear from the ledger any time soon, and MTA Board members are growing leery of the capital spending. Every time we spend money on this capital plan, we’re increasing the debt, increasing the debt service, and this is like a time bomb here,” Andrew Saul, the authority’s vice chairman, said last week.

Saul wasn’t the only board member to question the wisdom of maintaining debt-producing programs as the MTA struggles to close a budget gap. “We’re paying interest during the construction periods of projects in part from the fare box, so we are paying for capital with the fare box,” board member Doreen Frasca said. “That means that less money is dropping down to pay maintenance expenses. We’ve cut 20 percent out of many of the agency budgets. We certainly haven’t cut the capital budget by 20 percent.”

For its part, the MTA defended its capital budget and noted that it had reduced its five-year plan by approximately $2 billion. “A series of five-year capital programs have revitalized our transit system,” the authority said in a statement. “While the more than $64 billion spent in that time has helped turn around our regional economy, maintaining and improving the 100-year-old transportation system is an ongoing need and we cannot afford to disinvest. The current $26.3 billion program reflects a nearly $2 billion reduction as the result of a comprehensive review of projects.”

All of this begs an important question: What should the MTA do about its capital spending and the need to take on debt? Once upon a time, the state contributed more money annually to the MTA’s capital plan, and the authority didn’t have to take on the debt. But as New York’s finances went south, successive governors have pulled more funding and have urged the MTA to bond their projects instead. Some of those — such as new subway lines — can be bonded because the revenue from the increase in ridership will cover the debt service payments in the future. But other programs — such as State of Good Repair initiatives and other routine maintenance, upgrade and rolling stock proposals — are funded without that guarantee of future returns. People stop using the subways as the system breaks down but spending billions to maintain it doesn’t lead to an incremental jump in ridership.

What the MTA can’t do is halt its capital program. It would be far too costly to cut back on maintenance and capital repairs while moving forward only on ambitious (and often delayed) expansion efforts only because the economics of bond issuances work out that way. The authority must make sure the system doesn’t slide into a state of unreliability because that would exert a huge cost on the city’s economy.

So for now, the debt system stays as it is. Unless the government can find more money for capital investment, the authority will have to take on more debt, and we’ll be paying tomorrow for upgrades today. It’s not an ideal situation by any means, but when it comes to funding transit, what is these days?

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