Doomsday Budget

Everything is a mess in Albany right now. Malcolm Smith has no control over his party, and Senators who once supported tolls are flip-flopping for no good reason.

The problem starts at the top, and nowhere is that more apparent in Malcolm Smith’s statements. “I haven’t yet put together a plan, nor have I (seen) a plan that I think is worthy of having that kind of discussion,” he said. Elizabeth Benjamin has more from Smith:

“We are going to try and put something together and hopefully we get there. I know they have this deadline; I just don’t think it’s appropriate for the MTA to sort of hold the public hostage and say, ‘Well if we don’t get to the deadline we’re going to charge you more.’

“The public didn’t cause their failures in terms of how they managed their budget. It’s the failure of their performance that has now asked the legislators to help. Yes, we can be there to help, but then we should have together have decided what the deadline was. Not them to impose their will on us and say ‘because we screwed up, that we now are going to tell you if you don’t help us we’re now going to have a problem or cause a problem for the public.'”

Smith is ignoring years of Pataki Era neglect and poor management to punt on the issue. But he’s not the only one. Hiram Monserrate, a Queens Senator who had once supported tolls, changed his mind. Criticizing what he terms the “so-called Ravitch plan,” Monserrate doesn’t want to institute tolls and the blames the MTA for “failing to explain ‘specifically’ how toll revenue would be used to pay for service and capital improvements.”

What does Monserrate want the MTA to tell him? It’s really quite simple. The East River bridges get tolled; the MTA collects the revenue — as it current does from its own Bridge & Tunnel division; the money goes into the budget; and out comes a better-funded transit agency. Is he really asking for a specific count of how the MTA plans to spend all of the few hundred million dollars it stands to earn if the East River bridges are tolled? Or is he just being dense and/or obstructionist?

Meanwhile, the man behind the so-called plan spoke out against the Albany ineptitude. “I understand it’s a tough environment and that our recommendations represent painful choices, but there is no way of avoiding a decision,” Richard Ravitch said to William Neuman of The Times. “Doing nothing has consequences.”

Indeed it would. As Ravitch noted and as I’ve said numerous times over the last few weeks, forcing the MTA to adopt its Doomsday budget would, in the words of Ravitch, be “disastrous to the economy and the people of the MTA region.” Neuman had more:

He warned that failing to enact a comprehensive rescue plan that includes new tolls and taxes this year would create a deficit next year larger than the $1.2 billion budget gap the authority is struggling to bridge this year. It would also force a fare increase in 2010 much larger than the 23 percent rise the authority has proposed for this year, he said…

In an interview, he said that if the Legislature ultimately offered the authority a one-time cash infusion, the authority should go ahead with the fare increase and use the state funds to pay for long-term maintenance, or perhaps hold onto it to help close the budget gap next year.

The authority’s board will meet on Friday in a special session to review its finances with and without a rescue plan. The board will meet again on March 25 to vote on the size of a fare increase, which would take effect in June. It will also vote then on whether to move ahead with planning for a series of deep service cuts, most of which would take place later this year.

The MTA Board meets this morning, and I’ll try to have an update up this afternoon. In twelve days, though, transit in New York City will never be the same, and those changes will not be for the better if the Senate continues to dilly-dally in Albany.

As the MTA bailout plan dies its slow death and the MTA Board prepares to move forward with its Doomsday budget plan, city commentators are gearing up to wage a war of words against the New York State Senate.

Nicole Gelinas, an editor for City Journal, roundly criticized the Senate in today’s Post. While the Senate, she notes, wants to exact concessions in the form of MTA CEO and Executive Director Elliot Sander’s job, the Senators are the ones who should losing their jobs. She writes:

So after months of stalling, Albany has reportedly decided that the problem with the state-controlled Metropolitan Transportation Authority is its management. If so, it’s a fatal misreading by Gov. Paterson – and New Yorkers should start to worry fiercely about the subways and the rest of our transit infrastructure…

This is simply bizarre. By any fair reading, the MTA’s woes aren’t current management’s fault. The authority’s biggest problem is the massive amounts of debt it took on years ago, in the Pataki era. Politicos, including then-Executive Director Marc Shaw, forced that debt to bloat knowing full well that it would blow up after they had left.

At the time, everyone – from liberal transit advocates to conservative fiscal watchdogs – warned unanimously that this debt was a disaster scheduled to blow up around . . . now. Yet the MTA willfully hurt itself, its riders and the city to keep the pols happy.

In fact, current management has been making a good effort to cut back costs to pay all of that debt without hurting customers too much – making the back office take twice its proportional fair share of cuts, for example. And the MTA, over the last two years, has credibly started long-overdue savings reforms, like merging back offices that were the legacy of the separate transit systems New York used to have before creating the MTA – four decades ago.

More alarming to Gelinas is what this bit of politicking could mean for the future of the MTA. She worries:

If the talk is true, the immediate danger for the city is that Albany won’t be able to find someone to head the MTA with any real “experience” – because people with Pataki-era experience are those most responsible for commiting malpractice on the MTA via that horrible debt albatross. (Of course, Albany could hire these people back – but that would be worse than no experience.)

The longer-term – and graver – danger is that part of the reason that Paterson and the Legislature may force Sander out is that they just want someone to be much quieter about the region’s biggest risk: not fare hikes, but the MTA’s unfunded capital plan.

Her conclusion too is strong. “The bottom line,” she writes, “is that New York will never get the modern transit it needs unless some governor (likely pressured by a mayor) makes it clear to the public that it’s a huge priority for him – and then gives someone like Sander the years, resources and reasonable, accountable independence to do the job.”

There is absolutely nothing else to say here. The state’s system for dealing with the MTA is so far broken that the State Senators are considering doing something to “save” the MTA that would harm the agency for years to come. Until New Yorkers realize this and hold our elected responsible, we may as well get used to the idea of a $104 30-Day Unlimited Ride MetroCard.

A few hours ago, I reported on the impending death of the Ravitch Commission plan. While the New York State Assembly is ready and willing to support Sheldon Silver’s amended plan, the State Senate is nowhere near a resolution.

Earlier in the day on Wednesday, though, the MTA had already assumed that the Senate wouldn’t be riding to their rescue. The agency sent out a press alert about an emergency board meeting scheduled for Friday at 11 a.m. The meeting, according to the Daily News, will not be a happy one:

The MTA is moving closer to pulling the trigger on its doomsday option after a plan to rescue the agency’s crippled budget with new bridge tolls appears to have derailed.

The Metropolitan Transportation Authority has scheduled an emergency board meeting tomorrow to discuss failed efforts to win approval of a revenue-raising plan crafted by former MTA Chairman Richard Ravitch.

Also on the agenda are plans to gear up for fare hikes – between 25% and 30% – that will hit turnstiles and fareboxes June 1. A monthly MetroCard, now $81, could skyrocket to as much as $103 under the budget adopted by the MTA board in December.

The MTA isn’t throwing in the towel, and neither is the State Senate. According to the News:

Senate Majority Leader Malcolm Smith, a Queens Democrat, said tolls were “not off the table” but could not say whether any agreement was within reach. “We’re still working – that’s the best I can tell you right now,” Smith said.

But the reality is that the March 25th deadline — a slightly flexible one at that — is rapidly approaching, and the MTA has to start gearing up for the worst-case scenario that awaits them. It’s not too late for New Yorkers to make their voices heard on this issue. Far more people stand to suffer from service cuts and fare hikes than from bridge tolls. The state can ill afford to let the MTA fail.

A few hours ago, Jimmy Vielkind reported no progress from Albany on the potential MTA bailout plan. The news, however, grew worse an hour ago when Sen. Martin Dilan (D-Brooklyn), the head of the transportation committee, declared the Ravitch plan to implement bridge tolls and a payroll tax dead.

This dismaying development comes to us via amNew York’s Urbanite blog. Writes Heather Haddon:

The plan to prevent a fare hike through a payroll tax and tolls on free bridges is over in Albany, observers say. “It’s dead,” said Sen. Martin Dilan (D-Brooklyn), the transportation committee chair.

Dilan said five Senate Democrats who wouldn’t support bridge tolls essentially killed the plan, which was recommended by the Ravitch Commission, and supported by Gov. Paterson and the majority of the Assembly.

Also Wednesday, the MTA backtracked on its March 25 deadline for the commission proposals to be approved in Albany, saying if a bill clears within “a week or so” of that date, it could reverse its decision on the planned 23 percent fare hike, said spokesman Kevin Ortiz.

“There was never a hard deadline,” Ortiz said. “But the longer we have to wait, the harder it becomes to reverse the decision.”

Despite this proclamation from Dilan, transit advocates were not yet ready to write off Richard Ravitch’s thorough but politically ambitious recommendations. “The last rights haven’t been said, but it’s pretty close,” Straphangers Campaign head Gene Russianoff said to Haddon.

While Sheldon Silver, assembly speaker, has enough support in his chamber to implement a $2 toll plan with the payroll tax, Malcolm Smith’s senate is a far more independent legislative bodies. Senators whose constituents rely on mass transit aren’t supporting the toll plan, and the MTA’s Doomsday budget — 23 percent fare hikes and drastic service cuts — is inching one step closer to reality.

Time to check in on Albany. With two weeks left before the MTA Board gathers to vote on the proposed Doomsday budget, the State Senate remains deadlocked, and Senate Majority Leader Malcolm Smith, as I noted yesterday, is prepared to blow the MTA-imposed March 25 deadline.

Meanwhile, the Democrats find themselves fractured over tolls and taxes. Some NYC-based representatives oppose tolls and support a payroll tax while most of the Senators from outside the city are pushing back on the tax issue but have no problems with the tolls. It is, in other words, a typical effort by the State Senate to address a vital part of the state economy.

As part of the never-ending attempts by State Senators to find some politically feasible deal, two more Senators have proposed their own half-cooked bailout plans for the MTA. Carl Kruger, one of the men opposing tolls, wants to create a convoluted borrowing scheme. E.J. McMahon at NY Fiscal Watch doesn’t buy into this plan. Kruger’s plan would consist of:

Legislation .., enacted to create an asset management group — a public benefit trust which would then own the free bridges. This new state agency would borrow $4.25 billion through the issuing of a 30-year bond, give about $1 billion of that sum to the MTA and invest the remaining $3.25 billion with the state’s common retirement system.

McMahon’s analysis follows:

To pay debt service on $4.25 billion in bonds issued at, say, 5.25 percent, a back-of-the-envelope estimate suggests a $3.25 billion “investment” in the pension fund would need to return 8.7 percent a year. But Sen. Kruger seems unaware that the retirement fund’s “historical rate of return” is … history.

During the fiscal year ending June 30, 2008, the pension fund gained just 2.6 percent–well short of its 8 percent target rate. As of Dec. 31, the fund had lost 21 percent of its value, according to state Comptroller Thomas DiNapoli. Since then, needless to say, its asset values have plummeted further. At the rate things are going, the fund will be lucky to hold its losses to 30 percent in the current year. And the recovery outlook isn’t great: Wall Street economist Henry Kaufman is not alone in predicting returns of just 4 to 5 percent over the next five years. In that case, tax-funded employer contributions to the pension fund will be skyrocketing.

If the fund’s returns fall short of Kruger’s expectations, his bridge bonds could only be serviced by siphoning more cash from the same shrinking pension pool–which, come to think of it, means this idea probably violates the anti-impairment clause (Article V, Section 7) of the New York State Constitution.

I personally don’t feel that the MTA should be borrowing against it and the city’s future to cover its current deficit. That doesn’t seem like sound economics to me.

Meanwhile, Senate Transportation Committee Chair Martin Dilan believes that a gas tax is the cure for what ails the MTA. As Elizabeth Benjamin notes though, a one-cent gas tax would generate $24 million in revenue for the MTA. To cover a $1.2 billion budget gap, then, the state would have to impose a 50-cent tax. Somehow, I don’t think that’s politically possible.

The Senate heads back to the drawing board as the Ravitch plan remains the most equitable and most realistic plan. Hopefully, the Senate will soon realize that itself.

Jimmy Vielkind, one of Politicker NY’s Albany-based reporters, has been doing a top-notch job with his reports on the state of the MTA bailout. Last night, he focused on the utter lack of unity among State Senate Democrats as they attempt to save the MTA. Some Senators want to reinstate the commuter tax; others want to ensure money for transit agencies in the Niagara areas; others are afraid of tolls; and still others are against the payroll tax. Yikes.

Anyway, this afternoon’s filing from Vielkind focuses the March 25 deadline. Some State Senators — majority leader Malcolm Smith included — believe that the fast-approaching drop-dead date is flexibile. In other words, the MTA, believes these senators, is bluffing on its intentions to implement the Doomsday buget in short order. Writes Vielkind:

Senate Majority Leader Malcolm Smith is calling the March 25 deadline for the M.T.A. bailout “questionable” and saying that while his members are “working on it every day” there is no consensus on a package to address the authority’s deficit.

A few reporters caught Smith on the way to an event on reforming Rockefeller drug laws. He didn’t say why he is questioning March 25, but spokesman Austin Shafran said the deadline is “artificial because it came from the M.T.A. board.”

Assembly Speaker Sheldon Silver, however, after speaking at the same event, said “I’m not going to engage in a game of chicken.”

Smith’s statements are patently absurd because the MTA is required by law — New York State law nonetheless — to pass and balance its budget. They have to do so when they meet on March 25 unless the legislature somehow commands them otherwise.

It seems as though Smith is engaging in just that game of chicken against which Sheldon Silver is speaking. Smith doesn’t have the votes or party loyalty to save the MTA right now, and instead of shouldering that responsibility, he is playing politics to shift the blame to the beleaguered transit agency. It’s a fairly transparent move, and it won’t help avoid fare hikes and service cuts when the MTA Board meets in two weeks from tomorrow.

It is odd when a member of Congress injects him or herself into local debates, but as the MTA bailout plan edges toward a resolution, that is exactly what happened late on Monday.

Congressman Anthony Weiner, a Democrat from New York’s 9th District and a potential mayoral candidate, threw a wrench into the molasses-like pace of discussions in Albany when he presented his own plan via a letter to Assembly Speaker Sheldon Silver and Senate Majority Leader Malcolm Smith. The plan would include $4.15 tolls for non-New York City residents and a paring down of the MTA similar to Richard Ravitch’s plan. How this all adds up to the nearly $2 billion the MTA is going to need to close its deficit is well beyond me.

City Room, The Daily Politics and Streetsblog reported on this rather half-baked idea from someone trying to impress New York voters ahead of November’s mayoral race. Let’s go with Elizabeth Benjamin’s reporting. Weiner, the Daily Politics scribe says, expressed his support for five Democratic tolling holdouts but voiced his support for his own plan:

The mayoral hopeful sent a letter today to Smith and Silver telling them that the “time has come for a sober discussion about how to create a plan for the MTA that is sustainable and affordable.” To that end, he proposed:

– Cutting MTA overhead by 10 percent a year for four years.
– “Sensible” tolls on the East and Harlem river bridges to the tune of $4.15 – slightly less than Ravitch called for, but more than Silver’s $2 – but, and this is a big but, ONLY on non-city residents. (Weiner says this would generate an estimated $391 million annually – exactly the same as the commuter tax used to bring in before it was eliminated in 1999).
– Giving control of the MTA to the city by giving four more votes on the board to the mayor, taking away two from the governor and three from the surrounding counties.
– Opening the MTA’s books, which to Weiner means making every dollar “contained in a digitized, searchable form.” Weiner said he does not support the payroll tax Ravitch proposed.

So Weiner wants to fill a budget gap that, when last reported, was at around $1.8 billion with a plan that will draw in $391 million annually while cutting another 10 percent off of the MTA’s overhead each year. I wonder if he passed third grade math. One Streetsblog commenter wondered if “a scheme that privileges one set of residents over another would be unconstitutional.”

Outside of the main purpose of the MTA ballout tax-and-tolls plan — to fund the MTA — Weiner’s plan also doesn’t reach another aspect of the toll plan. People should be paying for the resources that they’re using. Bridges aren’t free. Driving exacts a social and environmental cost on society, and municipalities have to expend a lot of resources to maintain roads and bridges as well as other vital transportation networks. Those who use the bridges — either by choice and luxury or by necessity — should shoulder the costs of doing so. I ride the subway, and I pay for it. So should drivers.

Weiner’s plan simply shifts the burden to those outside the city, and it does so in a politically infeasible way. While city represented may prefer this plan to a blanket toll, no one from outside of the five boroughs would be caught dead supporting what is a commuter tax in sheep’s clothing. This is just another dead-in-the-water diversionary contact designed by a politician to make headlines. Meanwhile, the MTA’s Doomsday date draws ever nearer.

In the comments to my post on the five Democratic State Senators who are current not supporting the plan to toll the East River bridges in order to support the MTA, reader John asks me list the contact info for the five holdouts. That is a great suggestion, and below you will find their information.

Remember these numbers from the Daily News when you call, write or e-mail these State Senators, urging them to support an MTA bailout plan. The numbers are similar for Kevin Parker (Brooklyn) and Ruth Hassle-Thompson (Bronx):

Fewer than 4% of Espada’s constituents drive to Manhattan, two-thirds use mass transit and more than 70% of households have no car. His people face subway reductions on the 1, 4, B and D lines. The Bx20, Bx34 and X28 buses would disappear, along with night service on the Bx10.

Only 5% of the commuters in Diaz’s district drive to Manhattan, and about 60% use transit. They’d see crowding on the Nos. 4, 5 and 6 subway lines. The Bx4, Bx14 and Bx28 buses would be wiped out.

About 5% of Kruger’s constituents drive to Manhattan; 10 times as many use transit. They’d get longer waits on the B, D, F, N and Q lines and elimination of weekend or night service on the B2, B4, B7, B31 and B64.

Kevin Parker (D-Brooklyn)
E-mail: parker@senate.state.ny.us
District Office
4515 Avenue D
Brooklyn, NY 11203
Tel: (718) 629-6401
Fax: (718) 629-6420

Albany Office
411 Legislative Office Building
Albany, NY 12247
Tel: (518) 455-2580
Fax: (518) 426-6843

Carl Kruger (D-Brooklyn)
E-mail: kruger@senate.state.ny.us
District Office
Office of State Senator Carl Kruger
2201 Avenue U
Brooklyn, NY 11229
Tel: (718) 743-8610
Fax: (718) 743-5958

Albany Office
Office of State Senator Carl Kruger
803 Legislative Office Building
Albany, NY 12247
Tel: (518) 455-2460
Fax: (518) 426-6855

Ruben Diaz, Sr. (D-Bronx)
E-mail: diaz@senate.state.ny.us
District Office
1733 East 172nd Street
Bronx, NY 10472
Tel: (718) 991-3161
Fax: (718) 991-0309

Albany Office
307 Legislative Office Building
Albany, NY 12247
Tel: (518) 455-2511
Fax: (518) 426-6945

Pedro Espada, Jr. (D-Bronx)
E-mail: espada@senate.state.ny.us

Albany Office
420 State Capitol Bldg.
Albany, NY 12247
Tel: (518) 455-3395

You can also use this form on his website to reach Espada.

Ruth Hassell-Thompson (D-Bronx)
E-mail: hassellt@senate.state.ny.us
District Office
767 East Gunhill Road
Bronx, NY 10467
Tel: (718) 547-8854
Fax: (718) 515-2718

Albany Office
613 Legislative Office Building
Albany, NY 12247
Tel: (518) 455-2061
Fax: (518) 426-6998

Today’s New York Times featured a story on the rising number of transit riders across the nation. When gas prices hit record highs last year, transit ridership peaked, and commuters found that leaving the car at home was both better on the wallet and less stressful.

It is, then, the perfect time for New York State to invest in transit. The City — already dependent upon its transit network — needs to ensure its system is in good repair. It needs to ensure that trains run frequently and reliably for a relatively low cost. What it doesn’t need are fictionally free bridges that serve a tiny minority of Upper-Middle class commuters.

To that end, then it is dismaying that now five state Democrats are willing to let the MTA ballout plan die. Brendan Scott, a correspondent for The Post, reports:

Unless five Democratic state senators can be convinced to change their minds, the plan to bail out the MTA by imposing tolls on East and Harlem river bridges is dead in the water, a Post survey has revealed.

The holdouts say the $2 toll proposal, the key element of the plan proposed by former MTA head Richard Ravitch, would unfairly hit outer-borough residents without access to mass transit. “If it’s 1 cent, I’m against it,” said state Sen. Kevin Parker (D-Brooklyn). The others who have ruled out tolls are Carl Charger of Brooklyn, and Ruben Diaz Sr., Pedro Espada Jr. and Ruth Hassle-Thompson, all of The Bronx.

They vowed to block any tolls, even if that pushes talks past the MTA’s March 25 deadline for fare hikes and services cuts.

These State Senators do not understand simple numbers. Far more people rely on the MTA than drive. Far more people — the entire region, in fact — rely on a healthy MTA to get them to work. Far more people stand to lose out if a $2 toll — matched the cost of transit — is instituted on bridges connecting Manhattan with the rest of the world. If only these representatives knew that driving isn’t free, and free driving isn’t some sacred right protected by some higher authority.

The editorial page of The Daily News gets it. Relying on the Tri-State Transportation Campaign numbers, an oft-cited resource here at Second Ave. Sagas, they urge Malcolm Smith to rein in his party rebels:

Fewer than 4% of Espada’s constituents drive to Manhattan, two-thirds use mass transit and more than 70% of households have no car. His people face subway reductions on the 1, 4, B and D lines. The Bx20, Bx34 and X28 buses would disappear, along with night service on the Bx10.

Only 5% of the commuters in Diaz’s district drive to Manhattan, and about 60% use transit. They’d see crowding on the Nos. 4, 5 and 6 subway lines. The Bx4, Bx14 and Bx28 buses would be wiped out.

About 5% of Kruger’s constituents drive to Manhattan; 10 times as many use transit. They’d get longer waits on the B, D, F, N and Q lines and elimination of weekend or night service on the B2, B4, B7, B31 and B64.

Espada, Diaz and Kruger are threatening the well-being not only of their constituents, but of everyone who rides subways and buses. Smith must make that clear in private and, if necessary, in public. He must win.

That unequivocally says it all. I am not, however, too optimistic any longer.

As the MTA has lobbied in Albany for a state-sponsored rescue package, I have been waiting for the state legislature to bring the hammer down on the transit authority’s leadership. On Friday, they did just that as sources in Albany suggested that an MTA rescue plan may come with conditions requiring changes at the top of the MTA leadership structure.

Pete Donohue and Glenn Blain broke this development in the Daily News, and according to the two reporters’ sources, the MTA bailout could hit the floor of our bicameral state legislature as early as today. The Albany-based Blain and News transit guru Donohue report:

State legislation designed to rescue straphangers from massive service cuts and fare hikes could emerge in Albany as soon as Monday, sources said Friday. If approved by the state Assembly and Senate, the plan not only could put the Metropolitan Transportation Authority on firmer financial ground – but also under new leadership.

The rescue plan, which proponents hope is finalized over the weekend, merges the MTA’s unsalaried, part-time chairman’s position with the full-time chief executive officer’s post.

And it’s unclear who would get that powerful top job. MTA Chairman Dale Hemmerdinger already has a lucrative full-time position running his family’s real estate conglomerate. Transit advocates and some elected officials have praised current CEO Elliot Sander’s running of the bus, subway and commuter train network. But Gov. Paterson may bring in a fresh face to declare a new era for an authority still struggling – fairly or not – with a negative image solidified over decades.

On Saturday, Mayor Bloomberg voiced his support for the Albany plan and Elliot Sander. “Lee Sander has done a great job. He’s worked very hard, but first let’s see what the law is. If it’s changed I would certainly be happy to give my opinion to the governor,” Bloomberg said. “In terms of who should run it, if he were to pick Lee or not, I just don’t know.”

It makes political sense for the state legislatures to require something from the MTA in return for a tax-and-toll plan. A restructure and a removal of some of the MTA’s chief executives would also send a signal to New Yorkers that their representatives understand the frustration — properly directed or not — that subway riders feel with MTA leadership.

That said, Elliot Sander isn’t the problem with the MTA, and in fact, Elliot Sander is probably the best advocate the MTA could hope to have leading it through troubled times. Sander may not be the sexy political choice to head up the transit agency, but he’s a transportation wonk through and through. He knows what city transit agencies need to succeed, and he has the academic and practical experience necessary to lead the MTA through and beyond its current crisis. With a blank slate, in fact, he would bring true vision to the MTA.

In the end, it’s tough to see where this will go, but in a few weeks, one way or another, things will be different at the MTA. We’ll see record service cuts and fare hikes or some new faces at the top.