Fare Hikes

At the end of last week on a Friday during the summer, a few anonymous MTA officials dropped a story on Pete Donohue. The MTA, they said, is not-so-quietly considering a fare hike for 2009 to meet operating budget deficits that will exceed tens of millions of dollars.

On Wednesday, with MTA CEO and Executive Director Lee Sander testifying in front of the New York State Assembly’s Committee on Corporations, Authorities and Commissions, agency officials dropped any pretense of anonymity and flat-out toward the gathered assembly members that a 2009 fare hike will be necessary if the agency doesn’t see more money flowing its way.

Times reporters William Neuman and Jeremy Peters tell the sad but expected tale:

The executive director, Elliot G. Sander, said that the transportation authority faced an operating deficit of as much as $500 million to $700 million next year and that it would “have no option” but to raise fares in 2009 if it did not receive considerable outside financial assistance.

“Our hope is for additional support from Albany and other partners,” Mr. Sander said, speaking in Albany at a hearing of the State Assembly’s Committee on Corporations, Authorities and Commissions. “If we do not have funding from our outside partners, then the only recourse the M.T.A. has is to raise fares, engage in service cutbacks and cutting staff.”

The authority previously proposed raising fares in 2010, as part of what it said would be a series of regular, moderate increases every two years. But an increase next year would disrupt that initiative before it even started.

Now, MTA haters will be quick to unleash familiar refrains: The MTA has no budget accountability; the MTA has no idea how to balance its books. And while I’m not usually one to leap to the MTA’s rescue, it’s clear from Sander’s testimony that this was a largely unexpected fiscal problem (and one that could have been averted through congestion pricing).

As I’ve noted before, the MTA’s expected revenue from the real estate tax is nearly $100 million below expected levels, and as Sander said today, their fuel expenditures are already 17 percent over budget. Oil prices are heading in only one direction these days, and it isn’t down.

So the MTA has a valid excuse. Now though the ball is firmly in the Assembly’s court. During the congestion pricing debate, numerous elected representatives — and, most vocally, Richard Brodsky — told the MTA that, to get more money from the state, all Lee Sander had to do was ask. As Jay Gallagher at The Journal-News’ Politics on the Hudson blog reported yesterday, that’s exactly what Sander did. “I am asking the Legislature and the governor for more financial support,’’ he said to Brodsky’s committee.

So what say you, Mr. Brodsky? The MTA has laid out its case, and the city’s vital transportation authority has found itself up the proverbial creek with nary a paddle in sight. Will Brodsky keep his word or will he just renege on yet another transit-related promise in the area?

Fare hike 2009, here we come.

Much like every other straphanger in the New York area, the Daily News editorial board isn’t too thrilled with the news that another fare hike may head our way next year. The board issues a stridently worded editorial blasting MTA Chair Dale Hemmerdinger and CEO Lee Sander for breaking their fare hike and fiscal promises.

Take a look:

Back in March, the MTA socked riders with another fare hike for subways, buses and commuter rail. The salve was a pledge that there would not be another increase for at least two years.

Chairman Dale Hemmerdinger and CEO Lee Sander promised to get the agency’s fiscal affairs in order. They promised they were starting an orderly program of fare increases: Riders would pony up every other year, with hikes in line with inflation. They promised they would get whatever additional money they needed – and it would be a lot – from state and city governments.

“Trust us,” harrumphed Hemmerdinger and Sander.

And they took the public for a ride. Barely three months after giving their word – and pushing through a hike with the blessings of then-Gov. Eliot Spitzer and Mayor Bloomberg – the MTA is floating the prospect of another increase as early as next year.

All of a sudden, the agency is broke, suffering from declining revenues while costs are climbing. Real estate-related taxes dedicated to the MTA are plummeting, thanks largely to the subprime crisis. Next year’s budget gap won’t be $220 million, but as much as $700 million.

The editorial ends with an exhortation to Sander and Hemmerdinger to “shoot straighter.”

Now, that’s all well and good except there’s a problem: Sander and Hemmerdinger did shoot straight last year, but they were trumped by then-governor Eliot Spitzer who lessened what would have been a substantial fare hike.

This is not a new story. In November, when Eliot Spitzer spoke out against the fare hike, I lambasted him for ignoring the financial realities of the MTA’s situation, and I wrote about how Spitzer’s pandering was reminiscent of the five-cent fare follies of the early 20th Century. I still think this current debacle is Spitzer’s fault.

To anyone watching our economy and the MTA’s books, disaster was looming in November. The MTA was relying on real estate tax revenues to cover its operating deficit, and Sander routinely stressed, rightly so, that this revenue stream was in danger of drying up as soon as the economy went south. Well, the real estate market went south in a big way, and the MTA is seeing its worst fears realized.

Had the MTA been allowed to implement its desired fare hike at the end of the 2007 instead of Spitzer’s reduced hike proposal, we wouldn’t be discussing a potential 2009 fare hike. As it is, Spitzer’s proposal benefitted cars and tourists more than anything else, and we and the MTA are still paying the price.

I bet you didn’t see this one coming: According to transit experts and sources at the MTA, New Yorkers may be in store for a second fare hike in two years come 2009 if the authority doesn’t come up with some money stat. It would be just the second time in city history that subway fares increased in consecutive years.

Pete Donohue has more on this alarming news:

A rare back-to-back increase – along with service cuts – could be in store for commuters now that MTA number crunchers are suddenly dealing with a massive hole in next year’s budget.

The Metropolitan Transportation Authority’s projected 2009 budget gap has ballooned – doubling or even tripling original estimates, sources said. Without new state money, officials may soon raise the spectre of increases, service cuts – or both, sources and experts said. “They don’t have many options,” one source said…

The latest projections had the MTA struggling to fill a $220 million budget hole. That number has grown to $500 million to $700 million, sources said. Part of the problem is that last year the MTA predicted that revenue from fees on real estate transactions would drop by $160 million between January and May. Instead, they plummeted by $240 million, MTA documents show.

And despite pledges to fight for more MTA funding, the state Legislature later joined Gov. Paterson in slashing expected subsidies from one state account by $40 million earlier this year. The hit repeats next year.

Meanwhile, Donohue notes that Richard Ravitch, tasked with forming a panel to figure out how to close the MTA budget gap, is still reviewing the beleaguered authority’s finances. He has yet to put together the panel.

To those who have been watching the MTA this year as tax revenues have dried up, the arrival of this news comes as no surprise. For the last few years, in fact, city officials have grown increasingly wary of how the MTA has relied on tax revenues to shore up its budget, and a few public advocates had been sounding alarming bells for a while. The state legislature, however, seems loathe to give money to the MTA, and its decision to slash subsidies is both alarming and bewildering.

So what now? Well, this story — anonymous sources, rising numbers — could be a political ploy to get those in charge of the purse strings focusing on the MTA. But the reality is that if outside money doesn’t start flowing to the authority, the fares will have to go up.

Despite Donohue’s man-on-the-street Bryan Tran’s statement — “Any higher and I will have to walk everywhere. It’s ridiculous.” — the fares just aren’t that high. The average cost-per-ride for an unlimited ride user is still well below what the $1.50 base fare we all used to pay in the late 1990s and early 2000s.

If anything, this news just drives home what Sheldon Silver and the anti-congestion pricing contingent did when they opted to let that MTA-saving measure die in committee. Perhaps it’s time to start paying closer attention to Ted Kheel after all.

Who had March 24th in the “We’re going to delay service upgrades after the fare hike” pool? After talking up service additions across the board, the MTA is unsurprisingly postponing the planned upgrades due to lower-than-expected real estate tax revenues and a generally shaky economy.

William Neuman, writing on City Room, has more of the bad news:

Subway and bus riders are about to feel the impact of the slowing real estate market and Wall Street turbulence. The Metropolitan Transportation Authority has postponed a $30 million package of service improvements that it had promised to riders as a way to sweeten the pill of a fare increase, which went into effect at the beginning of this month…

Officials had previously warned that the beefed-up service would only be approved if the authority produced healthy financial results in the first three months of the year.

But the authority revealed today that the money it receives from taxes on real estate transactions had fallen significantly in February and March.

Gary J. Dellaverson, the chief financial officer of the authority, called the economic outlook “gloomy” and used words like “frightening” and “dramatic” to describe the fall in real estate-related revenues.

The agency has taken in $21 million less than forecast, and officials are concerned that Wall Street layoffs could depress ridership and fare revenue. In my opinion, the latter is a bit of a red herring because even if a few firms layoff a few hundred employees, millions of other people are still riding the subways each day.

MTA skeptics won’t be surprised by this latest development. To them, it’s business as usual with the MTA, and so far, the agency hasn’t said when the upgrades — which were supposed to include more G service and later hours for B and W trains as well as more trains along the 1, 4 and 6 lines — will be enacted, if ever. Considering the state of the economy, we could be in a for a long wait.

Meanwhile, this news is bound to fuel the fires of the congestion pricing opponents. If the MTA can’t even make good on its fare hike service promises, will they really be able to take the revenues from congestion pricing to provide the service we need? This news cast a pall over what had been a pretty good year for the MTA. It is a sad day for New York City subway riders indeed.

New York City Transit token photo by flickr user photoshoparama.

On the first weekday after the fare hike, Metro, one of New York’s free dailies, ran an article on the rider reaction to the fare hike. As anyone could imagine, most straphangers were complaining about the increase in fares. Of course, they were; no one likes it when prices go up.

But the article wasn’t that outlandish; Metro saved that for the survey — shown above — they included with the piece. In this survey, Metro asked 193 members of their Metro Life Panel their thoughts on the fare hike, and the results are stunningly ignorant.

First, 70 percent of respondents didn’t feel that the subways were still a good deal. To which I say, “Are you kidding me?” The maximum amount anyone pays per ride for the subway is $2, and only about 11 percent of all subway riders pay the full fare. That number didn’t go up.

So for less than $2.00, New Yorkers can get anywhere via the MTA’s public transit system. Want to go from Coney Island to Inwood? Less than $2.00 on the subway. The same trip would cost someone around $60 in a cab. Want to go from South Ferry to 14th St.? Less than $2.00. It ain’t that cheap in a taxi. Meanwhile, the subways are still running 24 hours a day, and we will even get added service because of the fare hike. How is this remotely close to a bad deal? It’s a fantastic deal.

But the fun doesn’t stop there. Over 80 percent of the respondents felt that the revenues generated from the fare hike would not go to a good use. If funding the MTA isn’t a good use of the revenue the agency draws in, I’d love to hear what these people think a better use of the money would be. As I said, we’re getting more bang for our buck through the planned service upgrades. That is indeed a good use of the fare hike.

We move next to the left column. Eight percent of respondents — a relatively small number, I know — believe the subway is no longer the cheapest option. You got that? A fare hike that, at most, is a 6.5 percent increase prices the subway out of the realm of the cheap. That cab, by the way, from South Ferry to 14th St.? A cool $10.60 before the tip. The only cheaper option is walking.

Finally, the kicker: Metro Life Panel respondents would like the average subway ride to cost $1.70. Now, seemingly, that’s a far cry from the current $2.00 fare. Right? Not even close.

As I mentioned, approximately 89 percent of subway riders use some form of discounted MetroCard. Whether those are pay-per-ride cards with free rides or Unlimited Ride cards where, as I showed, the cost per ride could drop to nearly $1.00 per ride, people aren’t paying a full fare. As I’ve written in the past, the average cost per ride comes out to approximately $1.31. Even with a 6.5 percent increase, the average cost per ride would creep up to a shade under $1.40 or 30 cents less than what Metro Life Panel respondents believe they should pay. Geniuses, the lot of ’em.

Now, I know that most subway riders don’t pay obsessive attention to MTA detail as I and many of my readers do, and I know that Metro is trying to, well, not exactly sell free newspapers but draw eyes. Still, the paper shouldn’t run things so blatantly wrong and potentially inflammatory.

While I’m a proponent of the fare hike, I know people are going to complain and moan about it. But the subways are still a good deal. In fact, at $1.40 a ride, the subways are a better deal than nearly everyone thinks they are. Don’t tell the MTA; they may raise fares even more.