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MTA Economics

Dodging a question, Lieber shows an MTA unwilling to confront its cost crisis

by Benjamin Kabak
written by Benjamin Kabak on February 18, 2022
Well over budget and long delayed, London’s Elizabeth Line, shown here in a tour I took with Andy Byford in November, costs just one-third per kilometer than future phases of the Second Ave. Subway. (Photo by Benjamin Kabak)

Albany oversight hearings are staid and rote affairs. Every now and then, a panel of state legislators call in the technocrats in charge of state agencies to talk about the topics on the minds of those legislators. Unfortunately, those topics often run to the banal when it comes to transit and the MTA. Why is this bus stop in my district on one corner but not the other? Why isn’t the MTA building platform edge doors? When will Staten Island get better transit service?

These are questions with well-known answers, but for the sake of their constituents, our elected officials have to go through this exercise. I find it very frustrating. The Senate and Assembly could hold wall-to-wall hearings on any number of issues plaguing our transit system, but these 90-minute sessions once or a twice a year if we’re lucky is all we get. When MTA CEO and Chair Janno Lieber appeared before a joint committee panel this week, I didn’t expect much to come of it, and by and large, my low expectations were met. The session even featured Diane Savino asking why the MTA plans to build the IBX but there are no plans to build a subway to Staten Island, a topic worth its own post exploring why her constituents don’t want one and no one is currently pushing funding for it. But I digress.

Midway through Lieber appearance, one brief exchange leapt out at me. George Borello, a Republican who represents Jamestown and a district as far away from the MTA’s service area as possible, was the only member of the panel to ask about the MTA’s runaway construction costs. The exchange was brief, and the emphasis is mine:

Borello: It’s been widely reporting that MTA construction costs are up to seven times the global average. Why is that the case? And what steps is the MTA taking to address these out of control costs?

Lieber: The bigger question of how we compare to the rest of the world is part of a longer conversation, but when people throw those numbers around, they frequently don’t even look at what’s the scope. So comparing a mile of New York City subway tunnel to a rubber-wheel facility where they have three cars that carry 100 people is nonsense. So if these comparisons are going to go on, you have to do apples-to-apples work…When you look at those kinds of comparisons, frequently they are informed by nonsensical lack of effort to compare projects based on scope, technology and the conditions of work.

This is a breathtakingly dismissive answer from the MTA head, and it’s wrong. A lot of people, from advocates to journalists to researchers, have conducted rigorous examinations into the MTA’s cost problems. They have indeed compared apples to apples – they’ve compared the Elizabeth Line’s deep-bore subway tunnel underneath London to the Second Ave. Subway’s deep-bore subway tunnel underneath Manhattan – and these efforts are simply not “nonsensical” nor lacking in effort. These four sentences uttered by the MTA head to a panel of legislators during an oversight hearing tells me all I need to know about the lack of sincerity of the MTA’s cost reform efforts.

The MTA’s cost problems are well documented and rigorously documented. Brian Rosenthal of The Times produced a thorough and accessible piece four years ago analyzing how everyone from unions to contractors to public officials is to blame and how the MTA’s usual excuses – environmental review laws, powerful unions, old utilities, fire codes – don’t hold up when compared with the Parises, Madrids and Londons of the world. Alon Levy and Eric Goldwyn at Transit Costs have established a database of global transit projects that break down each by its components. These are the apples-to-apples comparisons that show the MTA paying between three or five times more per kilometer than even the second most expensive projects in the world. These are completely sensical comparisons that show out of control costs.

So why would Lieber dismiss this question out of hand when it’s one he should face every time he is called to Albany? For one, an entire ecosystem exists based on the MTA’s construction costs. Contractors in NYC are a powerful political interest group, and they would lose the most if the MTA could cut even a third of their astronomical construction costs. So the impetus to cut costs would come at a political price for Lieber’s boss. For another, cost reform is almost as impossible a task as it can be in NYC. Lieber alone can’t reform the MTA’s construction costs, and he’s overstepping his bounds to suggest the MTA is flushing money down the toilet. His job to lead to the agency, and it’s the politicians’ job to back work rule reforms and overhauls of review laws that drag down MTA construction projects. He doesn’t have the power or political backing to do any of this himself. It’s both a flaw and the purpose of the MTA as a quasi-independent government authority.

Ultimately, Borello was right to ask, and his fellow Senators should be beating the drum on this topic non-stop. The MTA will not be able to expand its network sufficiently until the costs are under control, and understanding how and why the costs are so out of control and admitting it all publicly is the necessary first step. And all those cost comparisons floating out there? They’re accurate, and they’re not nonsense. Anyone in charge of the MTA should admit that.

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Doomsday BudgetMTA EconomicsMTA Politics

Facing a $6 billion deficit in 2021, MTA could cut subway, bus service by 40%. But is this a real threat or simply a political one?

by Benjamin Kabak
written by Benjamin Kabak on November 29, 2020

What happens to New York City without its transit system? Can the city function? Can it succeed? Can it serve as the self-professed Center of the Universe if the subways and buses that, in normal times, serve well over 7 million riders a day, can’t run frequently throughout the day? Can the Big Apple recover from the economic crisis of the pandemic without robust transit or will a transit decimated by political failures at every level drag down the city and the country as NYC and the USA, both hanging on by a thread right now, look to a post-COVID future? We may soon find out.

Facing billions of dollars in revenue shortfalls due to the ongoing pandemic, the MTA Board two weeks ago took another step toward enacting the agency’s Doomsday budget. With paralysis gripping the U.S. Senate and Mitch McConnell still refusing to negotiate a new stimulus package, the MTA’s financial picture has not improved since the Board first contemplated the worst-case scenario in August. Now, with the remainder of 2020 measured in days rather than months, the MTA has just a few weeks left to wait for federal relief before the Board is faced with the unenviable task of approving the budget presented at November’s meeting. It’s one that could cut service by up to 40 percent, but it remains a very political document aimed at Washington and with a glimpse at what the MTA truly needs to stay afloat through 2021.

During November’s Board meeting, the MTA did not vote on a 2021 budget; that procedural move will wait until December’s meeting, likely to be scheduled shortly before Christmas. Instead, the agency rehashed the same story it has been telling since the spring and again reissued its non-stop call for federal aid.

“The MTA continues to face a once-in-100-year fiscal tsunami and this is without a doubt one of the most difficult and devastating budgets in agency history,” MTA Chairman and CEO Patrick J. Foye said. “No one at the MTA wants to undertake these horrific cuts but with federal relief nowhere in sight there is no other option. As I have said, we cannot cut our way out of this crisis – we are facing a blow to our ridership greater than that experienced during the Great Depression. We are once again urging Washington to take immediate action and provide the full $12 billion to the MTA.”

What we learned was this: Since the MTA’s July budget, its financial picture has worsened, largely due to federal inaction on a pandemic relief package. Ridership remains as expected — subway ridership is hovering at around 31-32 percent of normal while buses have seen between 45-50 percent of riders return — but the $3.9 billion in HEROES Act funding never arrived. The latest budget projections include a total deficit of $15 billion, as you can see below, and here is where this document turns political.

Visual representation of the MTA's five-year $15 billion budget deficit.

The MTA keeps asking for $12 billion in federal funding, and that number has raised eyebrows. Could the agency actually be this far into the red through only eight months of the pandemic? As the chart details, the answer is no, the MTA’s deficit does not stand at $12 billion for one year. Rather, this is the MTA’s ask across multiple years. To be whole through the end of this year, the MTA needs $2.4 billion – which it can secure through the Fed’s Municipal Liquidity Facility. That loan though will come with more interest that we the riders will have to pay off over the years. It’s an imperfect, though necessary, way to keep the trains running.

For 2021, the MTA’s immediate need is around $6 billion or half of its continued request. The agency then anticipates deficits of $3.6 billion in 2022, nearly $1.8 billion in 2023 and almost $2 billion in 2024 for a total of around $13 billion. Securing $12 billion in one lump sum gives the MTA flexibility to restructure this out-year deficits, incorporating whatever internal cuts the MTA can institute with the federal funding to show balanced budgets on paper, but its immediate needs are $6 billion. If that amount comes in, the MTA can fight anew for a few more billions for 2022 and 2023 – if the Biden Administration and whoever controls the Senate are still in the mood to pass stimulus packages.

Ask for all you need now because you don’t know what will come later. At its very heart, it is a political request, and the MTA is not shying away from politics. Earlier this year, MTA CFO Bob Foran stated the MTA’s ask included $1 billion to account for the Trump Administration’s slow-walking of congestion pricing, and the MTA is asking for more than it needs in the hopes that it can start negotiations with recalcitrant Senate Republicans at a higher baseline. It’s a dangerous game. For most of its existence, the MTA has been politically neutral while leaving the lobbying to politicians, but with federal politicians playing a game of economic chicken with states and municipalities, current MTA leaders have, at the behest of Gov. Cuomo, turned into partisan lobbyists. In fact, Foye recently penned letters to leading Georgia-based companies warning them that MTA capital funding could dry up without federal aid. This was a clear partisan shot aimed at drawing support for the Democratic candidates in the upcoming Georgia Senate run-off.

But the MTA is also hedging on its ask, aiming to draw out that $6 billion. Take a look at the MTA’s internal deficit reduction plan – a series of cuts that lowers its long-term deficit to a still-unmanageable $7 billion over five years.

Make no mistake about it, though, these cuts would be devastating. The MTA plans to cut $343 million from annual subway service expenditures and $641 million from annual bus service expenditures. For subways, this means service cuts of up to 40%, including 15-minute weekend headways and other off-peak frequency adjustments. One of the questions driving a cut of this nature is whether the MTA can actually implement a 40% reduction in service. As with overnight trains running but without passengers, there is simply not enough room to park trains that aren’t running, and it’s not cost-efficient to cut service significantly. Just the thread is enough to see how this would ruin the subway system and save a small percent of what the MTA actually needs.

The buses, as always, would bare double the cuts as subways, and a 40% reduction of bus service would practically zero out many local routes. “Bus service reductions of up to 40% may result in reduced frequencies by up to
33% on bus routes that are not eliminated,” the MTA notes ominously. The agency is planning only $265 million in annual cuts to the LIRR and Metro-North but still halving service by up to 50 percent.

But this is all still a threat aimed at scaring the Senate into saving the MTA and the U.S. economy. In my view and in the views of many advocates, the MTA should cut service as a last resort, especially as the pandemic drags on and essential workers need to be able to maintain their commutes. “Failing to save transit at this pivotal moment is not an option,” Betsy Plum, executive director of the Riders Alliance, said. “Should Congress fail to act, the MTA’s doomsday budget must be the absolute last resort. As Chairman Foye said, literally everything must be on the table. At the end of the day, Governor Cuomo must do all he possibly can to safeguard our transit system and New York’s future.”

Yet, the MTA is heading down this path as a way to exert political pressure on Washington. Let New York fail? We dare you.

The state, in fact, has yet to do much to shore up its own struggling revenue picture, and Andrew Cuomo has a responsibility to ensure transit survives. I know various budgets and services have seen the pandemic blow billion-dollar holes through their budgets, but the state should look at other possible revenue streams — gas tax increases, legalizing marijuana, taxing the rich — while at the same time avoiding service cuts and lobbying for federal aid. (Streetsblog’s Dave Colon had a deep dive on this topic worth reading.)

As a last ditch resort before cutting service, the MTA should also look to restructure its debt and secure more credit. The state could help enable this as well by legislatively permitting the MTA to explore bankruptcy, an option currently foreclosed to it due to state prohibitions. This would be additional bargaining chips, designed to bolster political support in Washington for a direct transfer of funds back to a state that, in normal times, pays more in federal taxes than it gets back.

While we can appreciate the budget as the political document that it is intended to be and hope these service cuts are a threat rather than an omen, at some point, though, reality has to settle in. Mitch McConnell isn’t very likely to fund transit on his own, and the state should use the levers it has to cut into the MTA’s deficit so that subway and bus service could survive un-cut in a New York City on the rebound. Otherwise, with transit on the chopping block, cars will choke a city that grinds to a halt, hinder mobility and New York’s recovery and the national one at a time when the country can least afford it.

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MTA Economics

Doomsday Budget: MTA threatens 40% service cuts to buses, subways if federal aid fails to arrive

by Benjamin Kabak
written by Benjamin Kabak on August 26, 2020

As the U.S. Senate Republican majority has refused to bail out states, cities and public transit agencies, the MTA has unveiled its own proposal for addressing a budget deficit expected to reach $12 billion by the end of 2021. In a presentation to the MTA Board today, agency CFO Bob Foran warned of a 40 percent cut to subway and bus service, a crippling decrease in commuter rail service, the loss of nearly 10,000 jobs across the entire transit agency and a halt to much or all of the MTA’s capital work.

The following images show the top-line budget reductions that could be on the table if the federal government does not step in to fund transit. As MTA Board members called upon the feds to act and some urged the MTA and state to prepare alternative solutions, it’s worth examining if this presentation is a promise of bad things to come, a political salvo in the funding fight or a mix of the two. I’ll have more analysis on that front later, but at a top line, implementing cuts of the nature contemplated by the MTA today would spell the short-term collapse of public transit in the New York City region and a bleak prospect for the area’s and the nation’s economic recovery out of the pandemic.

“The future of the MTA and the future of the New York region,” MTA Chair Pat Foye said today, “rests squarely in the hands of the U.S. Senate.”

Cuts to New York City Transit would drastically increase wait times and crowding

Commuter rail cuts would make some lines nearly useless while others may shut down entirely

The MTA could shelve most or all of the ambitious 2020-2024 Capital Plan, delaying expansion, modernization and accessibility initiatives throughout the region

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MTA Economics

A few thoughts on flattening ridership and the MTA’s economic abyss

by Benjamin Kabak
written by Benjamin Kabak on August 18, 2020

The mezzanine above the Lexington Ave. line at Grand Central sits empty on a recent Thursday morning. When will ridership start to grow again? (Photo by Benjamin Kabak)

The following post is an updated version of a post I published a few weeks ago on my Patreon. As a reminder, Second Ave. Sagas is entirely reader-funded, and I depend upon you to keep the site running. Now that my wrist is finally on the mend, I expect a more regular posting schedule, and I promise not every post will be about how the MTA is completely out of money.

Has transit ridership plateaued? I first asked this question when New York City entered Phase 4 of the governor’s reopening plan in late July, and the answer nearly three weeks later still appears to be guardedly yes.

It’s been a disjointed reopening in the city so far. While the open restaurants program has enlivened NYC streets and shown us that public space isn’t just for cars, city residents are the only New Yorkers not permitted to dine indoors (rightly so, in my view). Meanwhile, gyms and museums have only just been cleared for opening within the next few weeks while most white collar office workers are still telecommuting and the state of schooling is very hazy. With few places to go, transit ridership has plateaued.

In the week before and the week after Phase 4 began, subway ridership had leveled out at around 1.22 million per weekday, approximately 23% of an average 2019 weekday, and bus ridership settled at an average of 1.18 million. For Phase 4, daily subway ridership now sits at 1.25 million, still not even 24% of an average weekday, and bus ridership has creeped upward to 1.21 million. A system that used to serve nearly 7.5 million per day is now seeing just 2.46 million, many of whom are still riding local buses for free, and ridership that had been increasing by 100,000 per week is going up by just a few tens of thousands instead.

Despite a one-day dip for Tropical Storm Isaias last week, the plateau is visible if we look at subway ridership throughout the pandemic, beginning with the start of Gov. Andrew Cuomo’s NY PAUSE order on March 23.

You can see the big jumps in ridership each week once New York City entered Phase 1 on June 8 and smaller increases in recent weeks. Despite lower ridership on Wednesday and Thursday last week compared to the week before, a strong Friday pulled total weekday subway ridership to 6.5 million, a pandemic high. Had Tuesday, August 4th been storm-free, the total ridership figures for the past two weeks would have been nearly identical.

Bus ridership has shown a similar trend.

While the trajectory is an upward one of slight growth, barring some unexpected spikes over the next few weeks before school starts, transit ridership in New York City is no longer adding more than a few thousand new riders each week. After all, without indoor dining, entertainment or culture and with offices still largely vacant, New Yorkers simply have few places to go that requires transit trips.

There are, however, reasons to think this plateau may last only until early September before we see our next big bump in ridership. First, the upcoming museum openings — even at reduced capacity — will give people more places to go. Second, local bus fare collection is expected to resume soon, and that could lead some travelers to return to the subway (while driving up revenue generated from buses). Third, while tourism powers NYC over the summer, July and August are generally low ridership months as school is out of session and many families decamp from the city for the summer. This year, many New Yorkers with family or second homes out of the city have left and are planning to return to the city when schools start up again in September. Fourth, while many white collar employees will be working from home for the foreseeable future, some offices are expecting to reopen after Labor Day especially as kids return to school. Thus, September and October, traditionally the MTA’s busiest months, could see an uptick in transit ridership.

How much of an uptick the MTA can expect is an open question. In April, when consulting firm McKinsey modeled ridership and fare revenue based on the severity of the pandemic, they presented a “moderate” trend line and a “severe” trend line. Right now, the MTA is tracking at or below the “severe” trend line with fare revenue around the 30% range in August, jumping to 40% in September before a second wave in October sends ridership and revenue plunging back into the teens. With local bus trips still free, it’s tough to get a handle on the MTA’s current fare revenue figures (as opposed to ridership numbers), but the MTA is near the 30% fare revenue threshold.

Reaching 40% – or 2.2 million per weekday – is a questionable bet right now, and the rosier projections of 50-60% seem like relics of another era. The restoration of bus fares is in limbo over labor disputes regarding adequate driver protection, and the wild card remains schools. If schools open for in-person learning and stay open while avoiding an uptick in infections, ridership will increase on the backs of school passes but how much will be on the revenue side is an open question. As more companies keep workers at home for longer than expected, the revenue might still fall short of expectations. (On the ridership side, as a side bet, Gotham Gazette’s Ben Max and I set the over/under for subway ridership on Thursday, September 10 at 1.6 million.)

So what does this all mean for the MTA’s revenue and tattered economic outlook? Nothing good.

It’s hard to overstate the dire impact the pandemic has had on the MTA’s finances. With paid subway ridership holding steady at under one quarter of 2019’s figures, the agency is on the precipice of a nearly unimaginable fiscal cliff. I wrote about the agency’s multi-billion-dollar budget gap in a lengthy post last month, and nothing good has happened since then. The Senate GOP and Trump Administration failed to endorse the House Democrats’ plan to fund cities, states and transit, and my point from July stands: While the MTA should look to streamline operations and cut expenses and while the state could explore a gas tax increase to help the MTA close its budget gap, fare hikes and service cuts would decimate transit in NYC without moving the needle more than a few percentage points. It’s federal bailout or bust.

But that comes with a caveat. A few weeks ago, my MTA sources felt confident that the feds wouldn’t hang the MTA out to dry, and they still might not. But it seems increasingly unlikely that a bailout will materialize before Election Day unless the country’s municipal funding crisis begins to torpedo the stock market. If Trump loses, it’s likely that federal transit funding will be available come January, but that’s a long five months. Even if New York, scarred from its tragic spring, avoids a second wave, the MTA won’t see transit ridership rushing back to pre-pandemic levels before a cure or vaccine arrive. So what is the MTA to do?

I’ve started to think the MTA should just keep borrowing. It’s a dangerous and risky strategy that could lead to an eruptive disruption in the municipal bond market, but so long as someone is willing to lend the MTA against the promise of eventual federal bailout, the agency should just keep tapping that line of credit to keep service running while avoiding calamitous fare hikes and service cuts that would dig the MTA out of this current hole by only a few percentage points. The MTA, transparent and consistent in its spending, has been maintaining its operations per usual at the cost of around $200 million a week and has consistently stated it will need $10-$12 billion to get through the end of 2021. The agency should look to streamline operations and reduce its costs, but it should also hold the line on service.

Borrow until the money runs out, the federal funding comes through, and ridership rebounds. The city’s future depends upon it, and the lenders realize this. It’s certainly not a sound fiscal strategy for the long term or a sustainable one should the federal government fail to come through. But none of this is normal. The subways and buses will power New York’s eventual recovery, and keeping the lights on and trains moving is going to require a bit more fiscal and operational creativity than usual.

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MTA Economics

The MTA faces a $10 billion deficit. What does this mean and how can the agency close this gap?

by Benjamin Kabak
written by Benjamin Kabak on July 13, 2020

The MTA has taken a $10 billion hit due to the ongoing pandemic.

Ten years ago, during the depths of the Great Recession, the MTA faced a budget deficit we then considered massive. At the time, the agency was staring down a hole of $900 million, and to close the gap, the MTA implemented a series of staffing reductions, contract renegotiations and service cuts. Amidst the current coronavirus crisis, as the MTA is facing a $10 billion deficit over the next 18 months, I’ve been thinking more and more about the 2010 service cuts, how costly they were for commuters and how little money they ultimately saved the MTA.

The history of the 2010 cuts is a tortured one, and I’ll spare you the back-and-forth. In broad strokes, the MTA passed a budget at the end of 2009 that required the agency to implement cuts in 2010, and the cuts ran deep. As I detailed at the time, Transit eliminated two subway lines — the V and W trains — rerouted the M, pared back the G, and instituted new load guidelines so that trains wouldn’t be considered crowded enough to warrant more service until even more riders were crammed aboard. The cuts to the city’s bus network were even worse with over 40 routes partially or fully eliminated outright and service on others reduced to bare bones. Bus ridership, which was around 2.3 million per weekday prior to these cuts, has been in a downward spiral since then, bottoming out at 1.77 million per weekday last year.

For all of the inconvenience, added crowded, slower travel and worsened bus service, the MTA saved barely any money. The subway service cuts generated $16.6 million in annual savings and the bus reductions $51.2 million. The service cuts also lead to less revenue as the most inconvenienced riders will find other way to travel. Ultimately, then, cutting — at least on the service side — yields pennies while sacrificing frequency and travel times, key drivers of the utility of transit.

A $10 billion budget hole

The MTA’s current crisis makes 2010’s budget deficit look like a walk in the park. Since March, the MTA has lost most of its riders, most of its toll-payers, much of its advertising revenue and a lot of the transit-supporting tax revenue. As the agency officials detailed in a presentation to Board members last month, the MTA faces a $3.75 billion deficit this year even after a $4 billion infusion of CARES Act cash and approximately $6.6 billion next year. Senior leadership has engaged in a media blitz, lobbying constantly for federal funding (though most of the TV appearances have been local to New York where the Congressional delegation already supports a federal transit bailout rather than national). At this point, though, one “Fox & Friends” appearance by Pat Foye would be more likely to move the right needle than ten more NY1 hits.

This week, the MTA Chair took his message to The Wall Street Journal, as Paul Berger, the paper’s transit beat writer, took a deep dive into the financial state of the MTA:

The nation’s largest transit system teeters on the edge of an unprecedented financial crisis as it emerges from the new coronavirus pandemic, leaving it with few options other than imposing major spending cuts and borrowing billions of dollars, officials say. Patrick Foye, chairman of New York’s Metropolitan Transportation Authority, said in a July 8 interview that the only way to stave off bleak measures is for the agency to secure $3.9 billion in federal coronavirus bailout funds in the coming weeks. Without the money, subway, bus and rail commuters could be consigned to diminishing services for years. “None of the choices are good, which is why the federal funding is essential,” he said.

The state-controlled authority, which runs New York City’s subway and bus systems as well as two commuter railroads, has almost exhausted $4 billion it received as part of the first federal coronavirus bailout in May. The Democratic-controlled U.S. House of Representatives included a further $3.9 billion for the MTA in a new $3.5 trillion relief package passed the same month. Mr. Foye said he remains cautiously optimistic about receiving the money soon, even though the bill has languished in the Republican-controlled U.S. Senate.

Senate Republicans, who return from recess July 20, have rejected the bill and remain divided on how much to spend and what to spend it on. Standard & Poor’s on Tuesday downgraded the MTA’s credit rating to BBB+ from A-. It said the first round of bailout funds will be exhausted by August and described the authority’s hopes of receiving a next round of federal funding as fading. Even if the authority receives the money, it would last only through the end of this year.

So what comes next?

The MTA cannot cut its way out of this hole…

A Riders Alliance study paints a bleak picture of the MTA’s doomsday scenario.

If the Senate fails to act in the coming weeks, the future is bleak for the MTA and for transit in New York City. The Riders Alliance determined that without federal funding, the MTA would have to generate cuts 20 times more impactful than the 2010 service reductions, and the advocacy group painted a picture of a Doomsday scenario in which half of all subway service is eliminated. Needless to say, New York City as we know cannot exist or rebound with half of its normal subway service, and the report is written to help riders conceptualize the depths of the MTA’s budget crisis. It’s not in any way, shape or form predictive of the future. Yet.

In the past, as Betsy Plum, executive director of the Riders Alliance, told The Journal, the MTA’s financial woes have worked themselves out, but this time, the deficit is simply too large for it to work itself out. “We may truly be in a moment where it cannot work itself out without dramatic injury to the people who most rely on transit,” Plum said to Berger.

Dramatic injury isn’t an outcome anyone wants. MTA leaders hope to avoid pandemic-related service cuts, and fare hikes — other than those already scheduled for 2021 — are off the table. After all, as with service cuts, a 500% fare hike would make the system unaffordable for millions of people who rode pre-pandemic and would exacerbate the city’s financial and affordability crisis. The hole is simply too deep for the MTA to use its usual set of tools to balance its budget, and we should view the MTA as a public good, required during a pandemic and vital to the city’s success all other times. It should always be funded that way.

…Which is not to say they shouldn’t try

Yet, as we well know, the MTA is not a paragon of efficiency, and the current crisis should cause the agency to do some soul-searching on its runaway cost problems. After all, if the MTA cannot reform its spending practices now, amidst the worst budget crisis in 50, if not 91, years, when can they expect to do so?

Most commentators do not seem to grasp the depths of the dollars ands have urged modest business-as-usual approaches. The Citizens Budget Commission issued a new report this week, and while they acknowledged the depths pf the crisis, their five recommendations sounded like every other CBC recommendations on transit spending we’ve heard over the last few decades. “Achieve greater efficiencies”? “Prioritize planned capital projects”? “Optimize service levels”? Borrow money? Those seem like fine suggestions for closing a $100 million budget gap but seem woefully inadequate for some 10 times that size, let alone 100 times, as the MTA currently faces.

Other ideas have more legs. While the MTA may not be able to cut $6 billion and still operate any trains or buses, the savings are there for the taking as The LIRR Today discussed last month:

There’s not $10 billion worth of things to cut, but there’s plenty of room for cost savings, and you don’t even have to look all that hard. Instituting proof of payment on the railroads and eliminating conductors will on its own save about $411 million per year. If LIRR and Metro-North were both forced to cut down their vehicle maintenance costs to the nationwide average without impacting reliability, that would save $347 million per year. Just making LIRR operate as efficiently as Metro-North (not a high standard, by any means) would save $121 million per year. Going to One Person Train Operation (OTPO) on all subway lines, a practice ubiquitous elsewhere in the world, would save about $300 million yearly. There are certainly no shortage of ways to further reign in overtime spending. And that’s just scratching the surface…

Internally, the MTA has options too. Sarah Feinberg, the interim president of NYC Transit, wants to cut spending on pricey consultants as she reorganizes the massive workforce powering subways and buses, and the MTA has outlined what it could do if the federal funding doesn’t come through. To that end, the MTA could use congestion pricing revenue (if the program is approved by the feds) to bond out operating expenses; reduce the workforce; freeze wages; borrow more; or, as a last-gasp measure, cut service and raise fares. It shouldn’t come to that end though as the city can least afford it.

In the end, the MTA will not and cannot go bankrupt. The state will backstop the debt if push ever comes to shove. But as capital and cash dry up, the feds should come to transit’s, and to cities’, rescue, and the MTA should try to explore real and substantive cost control while pushing hard for that bailout. New Yorkers can’t afford an NYC without transit and neither can the country, whether the Senate wants to admit it or not.

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MTA EconomicsPublic Transit Policy

Numbers Update: City budget shows misplaced transportation priorities; MTA sits on the brink of fiscal collapse

by Benjamin Kabak
written by Benjamin Kabak on July 7, 2020

I’m a few days late with this post, and you’ll have to forgive me for the delay. I suffered a bad wrist fracture 2.5 weeks ago in a bike crash in Bay Ridge and had surgery 12 days ago. I haven’t been able to type too well since then. So right now I’m dictating this post and making corrections as I go (and there may be typos ahead). Anyway, we have a lot of news to catch up on, and none of it is very good.

Amidst a budget crisis brought on by the pandemic, it’s easy for me to say that my pet causes should always be funded. After all, we each have a tendency to think that what we know and what we believe in is what’s best for New York. But everyone has their own ideas on how to improve the city, and when money isn’t plentiful, these ideas will compete with each other for the few dollars that are available.

That said, during lean times, the goal of any budget and the goal of the mayor and the goal of the City Council should be to create a more livable city, one that is welcoming to everyone and accommodates its residents first and foremost as we all attempt to do the work to bring back the vibrant city we know and love. That effort should involve investing in ways to get around that accommodate more people and faster travel. That means supporting bus lanes, investing in safer infrastructure for people, and not sinking money into low-capacity, high-subsidy modes of travel. Unfortunately, that’s not what New York City’s new budget does by any means.

When the dust settled on the NYC budget negotiations last month, most of the good programs were cut or slimmed down considerably while the mayor continued to pour tens of millions of dollars into his ferry system. It is a budget whose burden falls heavily on those who can least afford it and one that betrays Bill de Blasio’s original campaign slogan of “A Tale of Two Cities.” Instead of bridging the gap between the two cities that embody New York, this budget widens it.

Fair Fares funding slashed by $65 million

The most notable cut was to the popular Fair Fares program — a half-fare transit subsidy for low-income New Yorkers. The budget eliminated $65 million in city funding for the program, reducing the program by about one-third. While politicians called this a right-sizing due to decreased transit usage during the ongoing pandemic, advocacy groups were dismayed. They had fought long and hard for the subsidy and felt betrayed by the administration.

“It was an effective, important program,” de Blasio, defending the cut, said last week at a press conference. “I think the whole underlying concept of the program got just disrupted profoundly by the coronavirus and we’re not going to see that turnaround in the short term.”

The Riders Alliance and the Community Service Society, two advocacy groups instrumental in pushing for this program in the first place, issued a strongly worded statement condemning the cuts:

“Community Service Society and the Riders Alliance are deeply outraged that funding for Fair Fares was slashed by $65 million in the FY21 budget agreement announced by Mayor Bill de Blasio today. This happened without so much as a word of warning or debate.

At a time of unprecedented, widespread unemployment, especially among black and brown New Yorkers and younger people trying to enter the workforce, Fair Fares provides a transit lifeline to job search, medical care and other necessities of life. Especially now, as the economy starts to reopen, half-price subway and bus fares will be even more important to both essential and returning workers.

Fair Fares was just being fully rolled out to all New Yorkers at or below poverty with the launch of a robust ad campaign in late January before the pandemic hit. Yet, Fair Fares is already helping 192,801 city residents who have enrolled. With so many of our fellow New Yorkers newly experiencing severe hardships, struggling to pay the rent, feed their families and find work, we expect the need for Fair Fares to grow, not shrink in the months ahead. We will need public transit ridership to return for our city to function, and New Yorkers who have lost jobs and depleted any savings will need to be able to afford the fare.

The mayor has appointed advisory groups to offer suggestions on forging a more equitable recovery. Here’s one: on behalf of our coalition of more than 70 organizations, we urge you to ensure adequate funding for the continued expansion of Fair Fares.”

For what it’s worth, the advisory groups mentioned in the statement were supposed to issue recommendations pre-reopening for the city to implement as it moves through the reopening phases, but as we are now firmly ensconced in Phase 3 and have seen no reports from any of these groups, it’s safe to assume the administration is keeping any recommendations to themselves. But I digress.

The MTA took the rare step of issuing a statement as well, echoing the advocates’ concerns. “The Mayor’s decision to slash the Fair Fares program will make it more difficult for tens of thousands of customers who rely on mass transit to afford to get to jobs, school and work as New York continues to reopen,” NYC Transit Interim President Sarah Feinberg said. “At a time when the MTA is hemorrhaging money at record levels due to the COVID-19 crisis, this cut sets us back and will further hurt our ability to provide critical services to New Yorkers.”

But the cuts to Fair Fares weren’t the only transit-related budget reductions. The de Blasio Administration went forward with its plan to cut around $6 million from its Better Buses program, and we learned this week that Corey Johnson’s Streets Master Plan, an aggressive proposal to rethink New York City streets, may also be delayed. Yet, as Johnson noted to The New York Post, cutting or slow-walking these plans at this moment during the pandemic shows a lack of clear thinking and a lack of proper response from the administration, a topic I explored in a post last month.

“The benchmarks laid out by the streets master plan were passed into law for a reason and they should not be delayed, especially now,” the City Council Speaker said. “We can’t let a painful budget slow down our city’s reimagining of what public space and mass transit look like.”

And so what wasn’t cut, at least not to the same degree? Well, the ferries, of course. Despite plummeting ridership, a subsidy that has long gone toward those who can most afford to pay a higher fare, and a general lack of vision on true city-wide transportation, de Blasio cut only $10 million from the ferry subsidy, and the administration still plans to spend over $63 million on the boats at a time when other investments would deliver far more transit bang for the buck. So over the last few weeks and months, the mayor has resisted a real open streets plan, failed to expand the bike network at a time of skyrocketing demand, allowed for only 20 miles of bus lanes when the MTA had requested 60, and cut Fair Fares by a third for maintaining his own ferry program. These are misplaced transportation priorities if ever we’ve seen them, and they do not show a mayor willing to make New York easier to travel around, better for the people who are here, or more attractive to people who may want to come here.

The MTA’s dire fiscal picture

Let’s shift gears and look at the MTA’s own fiscal crisis. I would be remiss if I didn’t discuss the MTA’s looming economic disaster. Following an initial infusion of cash from the feds to the tune of nearly $4 billion, the MTA is yet again facing a fiscal cliff, and there is no indication the Senate is willing to act. Ridership is only been about 20% of normal, and the agency expects to need between $7.5-$10 billion over the next 18 months to stay afloat. The feds have shown no signs that another bail out is coming, and the US government is slow walking approvals for congestion pricing as well, so the MTA and the state cannot yet generate its own money through a traffic fee.

During its June board meetings, MTA officials said they have no choice but to request federal funding. They cannot cut their ways out of a hole this large. Even with cost savings and cost reforms, the loss of so much revenue has created a deficit that’s simply too deep to close without government funding. The agency has said pandemic-related fare hikes are not on the table, but budget cuts are and service cuts may be. The giant $51 billion capital plan, including all of the accessibility upgrades that advocates and Andy Byford had fought so hard to secure, are on hold, and the MTA could use some of that money, if it materializes, to close the operating budget gap. Agency leaders have repeatedly gone on TV to request more federal aid, and Nicole Gelinas recently penned a piece in The Times sounding the alarm warning that absent federal funding, cities could be mired in fiscal and transportation crises for years. She makes the case for significant operating assistance from the federal government, and I strongly urge you to read her piece.

So where does that leave us right now? We have a mayor who doesn’t understand the urgency of a mobility crisis he could address, let alone the way to address it, and we have an MTA bleeding money as it continues to run full service despite low ridership. We have a federal government that’s unwilling to step in and do it it must to save its cities, its economy, and its citizens. We are, in effect, playing the worst game of chicken as the money is set to run out at the end of this month, and no one at the federal level wants to take the reins and lead.

I wish I had better news, and I wish we were talking instead about the ongoing capital work that was supposed to kick off this year. Instead, we are waiting with bated breath for the dam to break. Will the city, under Bill de Blasio’s poor transportation leadership, find itself in mired in a mobility crisis? Will the MTA have to start paring back service to nothing because its budget is in tatters? The outlook is bleak, bleaker than it’s been for the MTA and New York City in quite some time. We can’t make it through on New York Exceptionalism alone this time around.

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MTA Economics

MTA Budget Woes Headed Off the Rails as Subways and Buses Gear up for Phase 2

by Jose Martinez, THE CITY
written by Jose Martinez, THE CITY on June 23, 2020

This story was originally published on June 21, 2020 by THE CITY. Sign up here to get the latest stories from THE CITY delivered to you each morning. Jose Martinez and THE CITY have since published a follow-up after MTA officials warned of “financial calamity” as federal bailout money is set to dry up in July and ridership remains just 20% of normal.

The MTA’s financial troubles run far deeper than the dramatic coronavirus-driven drop in revenue from fares and tolls, new documents show.

The transit agency has fallen short by hundreds of millions of dollars in projected income from the dedicated taxes and subsidies that account for almost half of its nearly $17 billion annual operating budget, according to MTA records reviewed by THE CITY. But even as up to 300,000 people return to work Monday for the second phase of the city’s “reopening” — likely pushing daily ridership past the one-million mark for the first time since March 20 —  MTA officials this week are expected to declare the agency is nearing financial ruin and in need of a bailout.

“The MTA has gone broke literally saving New York and it needs federal funds,” said Lisa Daglian, executive director of the Permanent Citizens Advisory Committee to the MTA. “The economy can only come back when transit comes back.”

The funding through May 2020 has come up short from a variety of sources, records show. Those include:

  • $94.4 million less than projected because of weaker-than-expected real estate activity in the city from the so-called “urban taxes” on property transfers and mortgage recording taxes
  • $37.5 million less than expected from MTA Aid, which includes fees for licenses, motor vehicle registration and auto rentals
  • $30.3 million less than anticipated from the for-hire vehicle surcharge applied on taxi and ride-hailing app for trips south of 96th Street in Manhattan
  •  $19.4 million less than projected from the Petroleum Business Tax on petroleum businesses operating in New York State. 

Ridership, Toll Revenues Down

Those grim figures are on top of farebox revenue that, according to preliminary figures, last month generated just $53 million — or 86% less than the $343 million that had been projected at the beginning of the year by the MTA, which pinned the shortfall on state travel restrictions put in place to combat the COVID-19 pandemic.

On June 17, the last day for which MTA ridership figures are available, there were nearly 945,000 passengers in the subways and close to 975,000 on the buses. Prior to the pandemic, there were typically more than 7 million riders on weekdays.

Riders walk past a “how to wear a mask” MTA sign at the Times Square station on June 10, 2020. (Hiram Alejandro Durán/THE CITY)

Bridge and tunnel revenues at the nine crossings controlled by the agency have also taken a hit, with the revenue for April coming in at $73.5 million dollars — $104 million less than what had been forecast by the MTA. “It’s a serious cash-flow problem — everybody knows they’re not getting the money from the ridership,” said Rachael Fauss, a research analyst with Reinvent Albany, a watchdog group.

The numbers became public as MTA officials prepared to issue a bleak financial forecast at the agency’s Wednesday board meeting, where they will again make the case for another $3.9 billion in emergency federal funding. In March, as the pandemic began to clobber its finances, the MTA secured a $3.9 billion dollar commitment in emergency federal funding. That money arrived last month, but advocates say it will only go so far.

Huge Fare Hike Floated

The Regional Plan Association has raised the possibility of a $9 base subway and bus fare to fill an enormous budget gap. MTA board members warned that the return of riders to the transit system could be short-circuited if more drastic measures are needed to stem the financial losses. “If the MTA starts to talk about service cuts, they will lose the trust of New Yorkers forever,” said John Samuelsen, an MTA board member and international president of the Transport Workers Union.

The transit agency must also contend with how to pay for cleaning costs that have surged during the pandemic and the indefinite nightly shutdown of the subway from 1 a.m. to 5 a.m. “I would rather see additional funding such as a gasoline tax of two, three cents, instead of service cuts,”  said Andrew Albert, an MTA board member who represents the New York City Transit Riders Council. “It wouldn’t even be felt, but it would bring in much-needed money into the coffers.”

THE CITY is an independent, nonprofit news outlet dedicated to hard-hitting reporting that serves the people of New York.


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MTA EconomicsPodcast

Podcast, Episode 11: Inside the MTA’s COVID-19 financial crisis with Nicole Gelinas

by Benjamin Kabak
written by Benjamin Kabak on March 19, 2020

The MTA, along with the rest of the world, is in crisis. As social distancing has become the norm in New York City and the service industry has disappeared within the span of a few weeks, the bottom has dropped out of the MTA’s once-rosy ridership projections. After the city witnessed sustained subway ridership growth for the first time in a few years, no one is riding as ridership has plummeted by about 60% earlier this week, and the numbers should look worse in a few days.

Along with this ridership drop comes a huge loss in potential revenue. Already, the MTA is incurring massive extra costs in its attempt to clean subways, buses, commuter rail cars and stations to combat the spread of the coronavirus, and without riders, the revenues are gone. The agency is warning its bondholders of significant material events (a financial term for “very bad news”), and Pat Foye has asked the federal government for a direct $4 billion bailout.

As MTA Chairman Pat Foye said on Wednesday when announcing the MTA’s plans to draw down its credit line, the agency has “encounter[ed] a fiscal cliff.” I’ll have more on the grim details once the situation stabilizes, but today, I have an emergency podcast. Joining me to discuss what this current pandemic means for the MTA’s budget is Nicole Gelinas of the Manhattan Institute. We spoke for about 25 minutes, and Nicole talked us through the dire fiscal straits the MTA is in.

You can listen below or at any of the usual suspects: iTunes, Google Play, Spotify or Pocket Casts.

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MTA EconomicsMTA Politics

Thoughts on overtime spending and the MTA’s ’emergency’ Board Meeting

by Benjamin Kabak
written by Benjamin Kabak on May 10, 2019

When Andrew Cuomo wants results, things in New York tend to happen quickly. Case in point: MTA overtime spending and, in particular, the LIRR.

The Long Island Rail Road’s overtime spending issues have been a low-level concern for quite a well. Due to various work rules and pension calculations, overtime accrual can benefit workers in retirement, and Gov. Cuomo, who has pressured the MTA to sign off on labor agreements without management-suggested reforms that would combat high overtime costs, has grown tired of bad headlines about overtime payments. The Post recently reported on one LIRR worker who earned over $300,000 last year due, in part by logging over 3800 overtime hours, and the LIRR’s overtime costs have outpaced inflation over the past six years.

And so, Larry Schwartz, Cuomo’s right-hand man and the chair of the MTA Board’s Finance Committee since September of 2016, suggested an emergency meeting. Since Schwartz is Cuomo’s direct proxy, when he says jump, the MTA asks, “How high?” The emergency meeting will be at held at 4 p.m. this Friday afternoon. MTA CEO and Chairman Pat Foye issued a statement on the meeting when it was announced late Wednesday: “The issues of excessive overtime and the inadequacy of the MTA time and attendance systems must be addressed, which is why last week I ordered an immediate investigation into these matters and why I am convening a special Board meeting on this issue this coming Friday. Overtime is an important and useful tool as we urgently seek to modernize our entire system but we must be sure it is being used effectively, accurately and appropriately.”

Now, general overtime spending and the LIRR time-and-attendance concerns are two separate issues. The LIRR issues The Post was willing to put firmly on Cuomo’s shoulders:

Gov. Andrew Cuomo, who controls the MTA, helped renegotiate the [LIRR labor] deal in 2014, averting a looming strike. That contract was renewed in 2016 with minimal changes, delaying any talks of serious reforms until last week, when that agreement expired, sources say. In 2014, Cuomo was happy to accept praise for stepping in to help hash out the contract over a seafood lunch in Midtown, with a subsequent MTA press release celebrating his role in the deal…But when asked on Thursday how he would ensure the next contract curbed overtime costs, Cuomo claimed he had no power to slam the brakes on the off-the-rails spending in a new deal…

In the 2014 contract, LIRR brass were seeking reforms to curtail payroll and overtime costs…Among them: scrapping the system that gives people with the most seniority first dibs on overtime and instead equalizing it among all employees based on attendance and overtime already worked, according to a federal report into the contract dispute. Other proposed measures included changing some double-time payments to time-and-a-half and eliminating extra pay given to conductors when they work on both a passenger and freight train in the same shift. None of the reforms was made, according to an MTA source.

If this sounds like a leader attempting to have his cake and eat it too, that’s because it is, and it’s a prime example of why good governance groups are skeptical of Cuomo’s faux-reform efforts. More on that shortly. Melissa DeRosa, a top Cuomo aide, also sent a strident letter to MTA officials, bemoaning how “abuses in the attendance system demonstrate again that basic management control is lacking.” She has not — and will not — acknowledge how these “abuses” were essentially baked into the system when Cuomo approved the 2014 labor deals.

In the lead-up to today’s “emergency” Board meeting, the MTA first sicced its police force on LIRR workers, alleging that cops would enforce time-and-attendance practices. This drew an immediate backlash from the TWU, and the MTA hastily retreated on this Pinkerton-esque approach. Never mind that the MTA’s cops are among the most egregious abusers of overtime. We’ll see where enforcement goes after today’s meeting.

Meanwhile, back to “normal” overtime spending, a separate issue from LIRR bookkeeping. Here’s a quick snapshot of the MTA’s planned overtime spending and actuals with the total adjusted for inflation set to 2018 dollars during Andrew Cuomo’s entire tenure as governor (which coincides with his entire tenure as being responsible for the MTA). Figures are in “millions.”

As you can see, the MTA is consistently blowing past its overtime budgets, but the problem has seemingly increased significantly in 2017 and 2018. Last year, in fact, that MTA blew past its initial overtime estimates by $400 million. Why? Well, MTA Board materials point the biggest fingers at overtime spending due to Andrew Cuomo’s very own Subway Action Plan. His Emergency Order sets the stage for the MTA to spend without certain budget controls, and the governor’s demands that the MTA realize the goals of his Subway Action Plan have led to a steep increase in overtime spending. In both 2017 and 2019, the Subway Action Plan was one of the key drivers. Here’s what New York City Transit had to say in its Board materials: “Higher overtime expenses of $218.9 million (47.0 percent) were essentially driven by track, signals infrastructure, station maintenance and car equipment requirements, including Subway Action Plan (SAP) initiatives.” (The reports on 2017 expenditures said essentially the same thing regarding overtime and the Subway Action Plan.)

Will today’s emergency Board meeting focus on how Cuomo’s own initiatives are forcing the MTA to rely on increased overtime spending? I wouldn’t hold my breath. After all, Schwartz, the Cuomo confidante who called for this Board meeting, has been in charge of the Finance Committee since 2016 and has been receiving these OT reports monthly since then. Is he blaming the MTA for his own oversight failures? Why hasn’t Schwartz been aggressive in attacking overtime since he began serving on the Board when, as the chart shows, it was already clear the MTA couldn’t project or control overtime costs? It’s hard sometimes to look in the mirror.

Good governance group Reinvent Albany is equally skeptical. They called today’s meeting “political theater” and pointed to three key facts about overtime spending:

1. The Governor controls the day to day operations of the MTA via his ability to hire and fire the CEO of the MTA Patrick Foye. The CEO hires and fires the MTA agency presidents, including the president of the Long Island Rail Road (LIRR).

2. The MTA Board has no say over the day-to-day operations of the MTA and no involvement in day-to-day authorization or tracking of overtime.

3. There is no sudden overtime “emergency.” MTA management asks employees to perform overtime, all overtime is either at behest of management or approved in advance, and is carefully tracked. The MTA board and senior staff have frequently discussed overtime at MTA board meetings. There is no new information about overtime, just public embarrassment to the Governor and MTA caused by press coverage. Further, no public materials or agenda have been released for today’s meeting, showing that this response is being rushed and will not be a serious review.

I’ll give the final words to Reinvent Albany Executive Director John Kaehny: “The public will not trust the MTA until the Governor and his appointees acknowledge simple truths and stop with the political theater. The Governor controls the MTA through the CEO he hires and fires. Today’s ’emergency’ board meeting about overtime is a reaction to press coverage, not new information. MTA and LIRR management completely control the overtime process and know exactly what is going on. They ask employees to do overtime and track it carefully. What’s really going on is that the MTA hiring freeze and management pay freeze are creating dysfunction and shortages of skilled workers that are aggravated by work rules.”

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Fare HikesMTA Economics

Fare hikes and service cuts and death spirals, oh my!

by Benjamin Kabak
written by Benjamin Kabak on November 18, 2018

A $3 base fare for subway and bus rides are among the fare hike options the MTA is currently debating.

On its own, a fare hike doesn’t portend a looming transit death spiral. In fact, regular and predictable fare hikes for, say, a subway ride designed to ensure that revenues remain fairly consistent with inflation and other costs over the long term can be a sign of a robust and well-managed transit system working to compete with other modes of transit. But when a fare hike is coupled by service cuts amidst a prolonged period with an overall decline in ridership and revenue, the transit death spiral canary starts chirping a bit louder in that coal mine. Last week, the canary showed up at the MTA Board’s budget meeting as the board books showed a continued decline in ridership, the budget forecast called for service cuts, and the MTA started debating the structure of next year’s fare hike. It certainly seems like New York City’s transit system sits on the edge of a death spiral.

The transit death spiral is a particularly prickly beast to pin down. A few months ago, Aaron Gordon wrote about it in his newsletter, and I’d like to reframe Aaron’s model slightly. The death spiral encapsulates a budget cycle in which a transit agency recognizes a revenue shortfall due to lower-than-project ridership, raises fares and cuts service to compensate, and thus further dampens ridership, leading to additional shortfalls. As the cycle repeats, the spiral becomes inescapable until a massive bailout or death. When the topic arose over the summer, Cap’n Transit wrote a rebuttal to Gordon’s piece, and in the intervening few months, the spiral seems to have worsened.

The current cycle will come to a head soon when the MTA Board reconvenes to approve a 2019 fare hike. On its own, the 2019 fare hike isn’t a surprise as the MTA instituted biennial fare hikes beginning in 2011, but with service reliability on the decline, riders seem particularly up in arms over next year’s planned hike. You can see the proposals in the chart atop this page, and I’m agnostic as to which one the MTA should choose. With the introduction of subsidized Metrocards for low-income New Yorkers on the horizon, eliminating the pay-per-ride discount and keeping the increase on unlimited passes at a minimum is probably my preferred outcome, but that choice is akin to just shuffling deck chairs. In a handful of months, we’ll be paying more.

You can view the fare and toll hike proposals in this pdf, but the details of the hike aren’t the big story. Rather, the big story is the MTA’s worsening financial picture. That story unfolds in this pdf, and it’s a dire one. In the span of two years, since the July 2017 financial plan, the MTA’s long-term outlook has worsened by over $800 million. According to MTA documents, the biggest drivers are declining ridership ($485 million), paratransit costs ($321 million), workers compensation payments ($125 million) and overtime ($100 million). The MTA has relied on a series of one-shot budget moves to stave off deficits, but these one-shots are drying up. As Robert Foran, MTA CFO said last week, absent healthcare and pension reform, the MTA is out of cost-savings measures, and no politicians have desired to leap into that fraught battle. (In fact, Gov. Cuomo did just the opposite when the MTA labor contracts were up recently.)

So the options are fare hikes and service cuts, the two best ways the MTA has of controlling revenues and expenses. With fare hikes scheduled for 2019, service cuts loom for 2020 – the first cuts since the crippling scalebacks in 2010. The MTA, of course, hasn’t said exactly what the service cuts will be, but it sounds as though the agency could change “service guidelines” to allow for more crowded trains and less frequent service. The total cuts to the subway will equal around $10 million – which is modest and projects to a few fewer trains per hour during certain times of the day on some, but not all, lines – and $31 million for buses which will devastate the bus network. Perhaps then the buses, with extremely steep ridership declines, are closer to that death spiral than the subways.

Service cuts by themselves won’t close the MTA’s budget gaps and will harm the long-term health of the transit network by driving down ridership.

Still, service cuts are a last-gasp approach. As Foran detailed at last week’s meeting, the MTA prefers to seek out a separate revenue streams to avoid service cuts while closing its budget deficit, and I think back again to the piece I wrote on the fight for congestion pricing revenue. The money may have to go to shoring up the MTA operations budget before it can go to the capital plan (or Andy Byford’s Fast Forward fund) as everyone is laying claim to a magical cure-all that won’t be.

If that doesn’t further complicate the picture, Aaron Gordon in his newsletter last week noted yet another issue the MTA budget projections: Their out-year projections do not account for planned or potential work that could further stifle ridership and revenues. I quote from last week’s edition:

The L shutdown, for example, begins next year. The MTA predicts the vast majority of trips will still take place within its ecosystem, but it’s easy to imagine ridership falling due to discretionary trips not being taken or a higher-than-projected rate of folks opting for rideshare or bicycling instead. Indeed, the MTA now predicts a 1.1 percent decrease in ridership in 2019, following a 2.8 percent decline this year. This is a major revision from the July plan, where they predicted ridership *increases* in 2019 and 2020 despite acknowledging the L shutdown. Their logic: the economy is good.

These explanations are more confusing than insightful. Pegging ridership trends to future employment projections may be accepted practice but it’s been demonstrably unreliable in recent years due to fundamental changes in how we work, shop, and travel…But there’s an even bigger red flag in their ridership projections. If the MTA does get funding to move ahead with the Byford Plan, entire trunk lines in Manhattan as well as major branches in Queens and Brooklyn will be shut down on nights/weekends for months if not years on end. In other words, the most extreme planned work shutdowns in the city’s history will occur in the next decade if Andy Byford gets his money. Ridership will almost certainly suffer.

That’s not an argument against doing the work, but merely a consideration therein, especially when projecting budgets. But, as of now, the MTA is predicting flat ridership for 2020-2022. Of course, the MTA cannot budget for a plan that has yet to be funded, but they don’t even flag this as a potential risk. This is emblematic of the agency’s tendency to get caught flat-footed by predictable ridership trends.

In other words, the plan to repair the system will, by necessity, lead to temporarily lower ridership, and the MTA isn’t accounting for it now. Their budgets for outyears aren’t conservative enough, and we’ll have to go through this process sooner than the MTA currently anticipates. You see where this is going? That’s also part of that death spiral.

Meanwhile, the MTA itself is struggling to figure out why service is declining. This came up first over the summer during the presentation of the July financial plan when the MTA failed to distinguish between the cause and the effect of the ridership decline. Ridership is declining because off-peak and weekend service isn’t reliable, and with easy and cheap alternatives such as for-hire vehicle apps, those who take discretionary subway trips are opting for more reliable means of travel. Last week, the MTA bigwigs tried to blame fare evasion as the leading cause of ridership declines without offering any evidence whatsoever, and it seems like the gatekeepers don’t know what ails the transit network. Between the lack of foresight in budget planing and the lack of understanding of the ridership decline, it’s hard to say if the current MTA Board and management can work its way out of this mess before the spiral leads to death or at least temporary paralysis cured only by a steep infusion of cash.

I am ultimately not particularly optimistic as we sit here a few days after Joe Lhota’s departure and a few months before fare hikes and the L train shutdown start to tax the system. It’s not clear what the future holds for Fast Forward, and it’s not clear where these downward trends lead. Enough people are watching that I hope we can escape the spiral before it gets worse, but like I said, that canary just won’t stop chirping.

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