MTA Economics

A new report by New York State Comptroller Thomas DiNapoli lays bare the MTA’s debt crisis.

If it seems inevitable that congestion pricing will arrive in New York City, that’s because it is. Although no one in Albany appears to be in a hurry to push through pricing plan, every gubernatorial candidate, including the incumbent set to win by 20 points or so in two weeks, has, to one degree of enthusiasm or another, endorsed a fee on cars entering Manhattan. But with expectations high, can congestion pricing be the savior everyone is hoping it will? Can it fund Andy Byford’s Fast Forward plan or is the money already earmarked for something far less sexy? if I’m even asking, you can already guess the answer.

The most recent answer comes to us from a comptroller’s report on the MTA’s tenuous financial outlook. As Thomas DiNapoli explores in a new release [pdf], the MTA’s mounting debt is set to explode over the next few years, and with numerous competing demands on any new sources of revenue the state may authorize, along with a need to modernize the system, the MTA is in a position of promising the moon and stars while stretching dollars to cover investments it simply cannot afford. It’s a dire picture indeed.

The state comptroller summarized his findings in a press release on the report. In essence, even without addressing Andy Byford’s $40 billion Fast Forward plan, the MTA’s debt service payments are set to balloon to $3.3 billion by 2022 with the MTA’s total debt to reach $41.9 billion that year, and that’s before the agency starts bonding out Byford’s plan. Meanwhile, even though the MTA plans to raise fares next year and in 2021 and reduce certain expenditures, the operating budget gaps are projected to be $262 million in 2020, $424 million in 2021 and $634 million in 2022. To close those gaps, the MTA will need to implement massive cuts or fare increases or receive a new dedicated funding stream.

Even then, a balanced budget is no sure thing. As DiNapoli notes, the MTA’s current budget projections rely on “the assumption that the current economic expansion will continue uninterrupted.” As DiNapoli writes, that’s not sure thing: “As evidenced by the sharp drop during the Great Recession, the MTA’s revenues are sensitive to economic fluctuations. Changes in business cycles are inevitable, and the likelihood of an economic setback grows with each passing year.” Additionally, DiNapoli notes that, despite recent trends (including a very negative report on August ridership I’ll cover later this week), the MTA’s fiscal outlook relies upon a ridership increase in 2019. As the comptroller charitably notes, “While subway service has improved marginally in 2018, it remains far below riders’ expectations, and the improvement may not be enough to persuade riders to return in the face of higher fares.” Fare increases, as DiNapoli charts, have already outpaced inflation over the past decade, and if the MTA’s assumptions fail — if the economy falters and/or if ridership continues its precipitous decline — the MTA’s deficits, and corresponding fiscal pressures, will grow.

So how, you may ask, does this implicate the fight over congestion pricing? Well, the MTA has multiple competing fiscal demands right now. The agency is legally required to balance its operating budget and needs money over the next decade, as part of the next two five-year capital plans, to fund Byford’s Fast Forward program. Without it, service reliability will continue to decline, and eventually, the subway crisis will grind New York City to a halt. So essentially, the MTA needs two new revenue streams — one to fund its capital program and one to fund budget deficits (driven by the increased debt load from its capital spending). Congestion pricing can’t cure two ills in one fell swoop, but it’s being billed as a grand solution for the MTA’s woes.

On the one hand, New York City needs congestion pricing for numerous reasons. It needs to clear out congestion for economic, environmental and sustainability reasons, and it needs a new dedicated funding stream for transit. On the other, the MTA needs far more reform than congestion pricing. It needs a strong commitment from Albany to fund the capital budget through direct investments rather than new debt. It needs a strong commitment to reform capital spending so that projects aren’t orders of magnitude more expensive here than they are anywhere else in the world. And it needs an immediate response to the ridership and reliability crisis. These are not ills congestion pricing can solve immediately, and in certain ways, congestion pricing will put more pressure on the transit system to deliver reliable service immediately.

So as we talk about solutions to the MTA’s problems, and digest DiNapoli’s report in light of the MTA’s own budgetary picture, we have to be realistic. Congestion pricing is a piece of the puzzle, but that money will disappear into the agency’s budget as fast as it can. Perhaps congestion pricing can delay the inevitable, but can the MTA save itself from, well, itself? That’s the billion-dollar question upon which the fate of New York City rests, and as the Magic 8 Ball might say, “Reply hazy; try again.”

A new RPA report, released as part of the group’s fourth Regional Plan, delves into NYC’s high construction costs.

It’s high times for close-ups on the MTA’s out-of-control capital spending, and hot on the heels of The Times’ deep dive into the MTA’s cost problems comes a long awaited Regional Plan Association report on the very same topic. The title is staid — Building Rail Transit Projects Better for Less — and doesn’t exactly roll of the tongue, but the conclusions are forceful. “The entire process of designing, bidding, and building megaprojects needs to be rethought and reformed top-down and bottom-up,” the RPA says, not mincing words.

In a certain sense, the RPA’s report takes a modest approach to cost reform goals. The RPA believes the MTA could save between 25-33% by implementing its recommendations. While those savings would bring costs more into line with the most expensive international transit projects, the MTA would still be a leader in the cost realm if, for instance, East Side Access came in at $7 billion instead of $10 or Phase 1 of the Second Ave. Subway checked in at $3 billion instead of $4.5. But the extra billions in essentially free money would be put to good use.

The full report is available as an 80-page PDF and, while not perfect, is worth the read. It delves into three case studies focusing on the Second Ave. Subway, the 7 line extension (the best of three overly expensive projects) and East Side Access before analyzing New York City in the context of its international peers. When stacked up against London (Crossrail and the Northern Line extension), Los Angeles, Paris and Madrid (along with a few other cities thrown in for good measure), our models fall apart. New York doesn’t adopt best practices when it comes to capital construction and thus cannot keep pace with technological innovations that would improve service reliability and modernize an old system as many international peer systems of a similar age have. It’s an ugly and familiar story all around.

A comprehensive set of recommendations

As with other recent pieces on the topic, the RPA is careful to spread the blame. Much to the frustration of those outside the transit realm, there is no silver bullet. “The extraordinarily high costs associated with building transit projects in New York are due to many factors, at every stage, from decisions made by political leaders at the inception of the projects to the final stages of lengthy planning, design, and construction processes. Long tolerated as an accepted natural consequence of New York’s size and dominance, these costs threaten to strangle the region’s future economic growth. Other global cities have outpaced New York in building modern infrastructure and attracting new business and residents as New York struggles to simply keep up with basic maintenance.”

To fix the problem, the RPA sets forth 22 recommendations. These include a streamlined environmental review process that could cut years off the planning process. Projects in New York can take up to seven years to get off the ground due to the environmental review requirements while similar work in Europe can begin in 18-24 months. The RPA also recommends accurate project budgets and timelines to avoid funding and procurement problems down the line; more of a reliance on off-the-shelf design and construction elements to avoid costs of customization and change orders; industry-standard project management and procurement practices; streamlined post-project review; the ever-popular work-rule reform; a ten-year capital funding pipeline to better align with construction timelines; and a reform of land-use and zoning practices so that the city and state coordinate on value capture. As a break from the familiar laundry list of reforms, the RPA also points to a shortage of skilled and qualified laborers for the work on the MTA’s slate and urges the creation of job-training centers as well.

Inside the Second Ave. Subway case study

While the RPA by and large seems to reinforce what many in the know have urged the MTA to do for years, the case studies, particularly with regards to the Second Ave. Subway, lay bare the the MTA’s problems. You can read Aaron Gordon’s analysis on the impact of cutting the third track at 72nd St., and take, for instance, the cost of phasing out the entire line:

SAS’s first phase offers many lessons for phase two, starting with how best to manage the overlap of a project with multiple phases. To date, the MTA has not completed engineering and design for phase two, which is only just getting started. This has made it impossible for the agency to coordinate the winding down of phase one with the ramping up of construction for phase two, which would have allowed the experienced crews working on phase one to move directly onto the next segment. Instead, the MTA ended major construction in January 2017 and left the neighborhood, with plans to return in roughly three years. The loss of experienced labor, current staging docks, and remote office spaces means the MTA will have to start the process all over again — adding to the time and costs of phase two as well as the disgruntlement of the neighborhood. And without institutionalizing the lessons learned from phase one, the MTA risks the loss of institutional knowledge that agency staff and project managers have developed on the job over the course of building SAS.

The report includes a one-page featurette on the decision to forego development at the six lots along 2nd Ave. that are home to ventilation plants and station entrances. The MTA lost out on approximately $100-$125 million had the city and state coordinated on rezoning and air rights transfers. As costs go, the Second Ave. Subway was subject to thousands of change orders, and the costs add up:

According to the GCA, the SAS had thousands of change orders, with 96th Street issuing 200 orders during the acceleration phase alone (a claim the MTA disputes). Change orders modified more than 30% of the contract plans. An extreme example occurred with the electrical contractor at 96th Street having over 70% of its bid scope of work modified by change orders, which were issued serially as items were discovered. “This required the general contractor to perform other work out of sequence,” noted GCA, “and in many instances, remove and replace (at its expense) work that had already been completed and installed.”

The stories and dollars just keep adding up. Take, for instance, the station costs:

The high costs of the 96th Street station can be partly explained by the inclusion of 65,000 square feet for the MTA workforce in underground facilities and office space, requiring expensive blasting. The station has hundreds of non-public-access employee spaces. This equates to three to four times as many employee spaces as any other station along the line. The MTA’s justification was that 96th is a terminus, which is only temporary because the line will actually terminate at 125th Street when phase two is completed. Instead of spending the extra millions of dollars to build these temporary facilities, the MTA should have explored the cost-effectiveness of providing employee spaces at the surface by renting commercial space.26 There are also redundant employee facilities at 86th Street and 72nd Street.

Of course, another reason SAS’s stations were extraordinarily expensive lies with the materials. The archway entrances, for example, are built of granite that is six to eight inches thick. As one MTA project manager noted, part of the problem is nothing is off the shelf, with all of the granite being custom-produced.27 Granite, by nature, is nonstandard; each piece is unique due to its geologic formation. Under Buy America procurement rules, the MTA was required to buy American materials. Yet the United States has only a few suppliers that could provide granite of this size, custom-cut to curve at around eight inches thick to support the weight of the archways. This was a deliberate material design decision that almost surely should not be repeated in the future if the MTA hopes to contain costs.

The examples go on and on and on, and by the end of the case studies, one may think that the Second Ave. Subway was designed with no regard to cost at all. The construction of Phase 1 was, from start to finish, a textbook example of how not to build a subway line at a reasonable cost and within a reasonable timeline, and the MTA has shown no indication that things will be different for Phase 2.

Criticism of the RPA’s report

For the strength of its examples, though, the RPA report has not been immune from criticism, and Alon Levy, the resident expert on transit construction costs, has weighed in with a thoughtful critique of the report that is also worth the read. Levy highlights mistakes in the details of the RPA’s cost comparisons that are hard to ignore and rightly charges the organization with an Anglo bias in that it “overvalue[s] other English-speaking countries, even when their construction costs are the highest in the world outside the US.”

Levy doesn’t hold back in his conclusion, urging the creators of reports such as these to delve deeper and draw out the necessary comparisons. He writes:

One of the things I learned working with TransitMatters is that some outside stakeholders, I haven’t been told who, react poorly to non-American comparison cases, especially non-English-speaking ones. Ignorant of the world beyond their borders, they make up excuses for why knowledge that they don’t have is less valuable. Even within the group I once had to push back against the cycle of failure when someone suggested a nifty-looking but bad idea borrowed from a low-transit-use American city. The group’s internal structure is such that it’s easy for bad ideas to get rejected, but this isn’t true of outside stakeholders, and from my conversation with Tom Wright about Gateway I believe the RPA feels much more beholden to the same stakeholders.

The cycle of failure that the RPA participates in is not the RPA’s fault, or at least not entirely. The entire United States in general and New York in particular is resistant to outside ideas. The political system in New York as well as the big nonprofits forms an ecosystem of Americans who only talk to other Americans, or to the occasional Canadian or Brit, and let bad ideas germinate while never even hearing of what best industry practices are. In this respect the RPA isn’t any worse than the average monolingual American exceptionalist, but neither is it any better.

The RPA of course knows its audience and knows how far recommendations can go within the MTA. Scott Rechler, the chair of the RPA, is a bright voice on the MTA Board, and he knows that institutional resistance to reform runs deeper. So perhaps in that sense, the report is written for its audience and goes as far as this audience is willing to go. That may be part of the problem. It is another salvo in the MTA’s war on costs, one I would read with Levy’s grain of salt but not dismiss out of hand. The question is: Who’s listening and when and how will change arrive? The city cannot afford to spend more while getting less and less each year.

Can the city save its subway system before it’s too late? The Times Magazine Section asked just that question this weekend.

Needless to say, taking the subway these days is a bit of a crapshoot. Last week, before it even started snowing, the MTA couldn’t sustain semi-reliable service during Wednesday night’s rush hour commute as crews were working to move trains out of the way of an incoming snow storm while dealing with the fallout from a mid-morning assault at Jay St. and a signal problem along 4th Ave. in Brooklyn. It resulted in multi-hour commutes for thousands of people who just wanted to get home before a winter storm descended on the city, but it even seemed very familiar to anyone watching the subway system’s slow-and-then-fast descent into unreliability and madness. Things are a mess. When will they get better?

Riders aren’t the only people wondering about the fate of the subway. Following The Times’ exposé before the New Year on the MTA’s out-of-control cost problem, the Grey Lady took another deep dive underground this weekend. In a magazine piece that’s been months in the work, Jonathan Mahler made the case of the subways, as his headline suggests. The idea that New York City must absolutely invest in its subways seems like one you and I may take for granted, but Mahler’s piece is somber reminder of the path we may face if our politicians do not find a way to fix the subways.

Coming just a few days after Brian Rosenthal’s magnum opus on costs, Mahler’s piece overlooks the reality that the MTA probably shouldn’t be trusted with massive amounts of dollars before reforms are implemented, but that is besides the point. In fact, the editorial board of the paper cleared up that conflict today, and more on that later. Mahler’s piece takes a deep dive into the importance of the subway to very fabric of New York City and concludes that we simply cannot afford to whiff on the opportunity to fix the subways. Doing so could lead to an inexorably decline in the success of this city. Mahler too pinpoints the class issues inherent in the discussion, a notable aspect of any discussion of public transit. “Can the gap between rich and poor be closed,” he asks, “or is it destined to continue to widen? Can we put the future needs of a city and a nation above the narrow, present-day interests of a few? Can we use a portion of the monumental sums of wealth that we are generating to invest in an inclusive and competitive future?”

The essence of his piece is laid bare in a comparison with international views on subway systems:

Most countries treat subway systems as national assets. They understand that their cities are their great wealth creators and equality enablers and that cities don’t work without subways. The public-private corporation that runs Hong Kong’s subway expects 99.9 percent of its trains to run on time, and they do. (If you are traveling to the airport, you can also check your luggage at a central downtown train station and not see it again until you’ve landed at your destination. Imagine!) China has been feverishly building new metro systems in cities across the country, a recognition that subways are the only way to keep pace with the nation’s rapid urbanization and the needs of its citizens. And it’s not just new cities that are seeing major investments in their subways. Two decades ago, the decline of London’s Underground became a national crisis; now it’s moving toward running driverless trains. For that matter, Los Angeles — Los Angeles — recently embarked on a 40-year, $120 billion project to build out its mass-transit system.

New York City’s subway, meanwhile, is falling apart. If you are a regular rider, you know this firsthand. But even if you aren’t, it has probably become difficult to ignore all the stories about the system’s failure: the F train that was trapped between stations for close to an hour without power or air conditioning, the Q train that derailed in Brooklyn, the track fire on the A line in Harlem that sent nine passengers to the hospital. The cumulative impression of all these miserable underground experiences — and all these stories about miserable underground experiences — is that the situation is hopeless, that the subway cannot be fixed. The subway has been wrecked, and in this era of short-term thinking and government mistrust, public-works projects with benefits larger than any single mind can realize are no longer possible. But it is possible to fix the subway. And we must. Our failure to do so would be a collective and historic act of self-destruction.

Mahler’s piece, magazine-length at that, deserves a close parsing, and he traces the political machinations over responsibility for the decline of the subway. It features stunning photos by Damon Winters of a system falling apart, and it concludes that no amount of money is too little to spend on the subway:

Just this partial list — I haven’t included the platform doors, for instance — brings the total to about $111 billion. It’s a big number. But not when you put it in context. New York City and its environs generated $1.7 trillion in gross metropolitan product in 2016. That’s roughly 9 percent of the nation’s overall G.D.P. How much of that activity is dependent on the subway? About a year before Hurricane Sandy, a state-funded group of scientists and engineers produced a comprehensive (and as it happens, prescient) report on the damage that a hundred-year storm surge could cause to the system. One of the study’s authors, Klaus Jacob, a geophysicist at Columbia University, told me that losing the subway for a month would cost the city about $60 billion in lost economic output.

The reality of this apocalyptic scenario hasn’t sunk in. Absent sufficient resources, the subway has been left with diminished ambitions and empty spectacles…

New York won’t die, but it will become a different place. It will happen slowly, almost imperceptibly, for years, obscured by the prosperity of the segment of the population that can consistently avoid mass transit. But gradually, an unpleasant and unreliable subway will have a cascading effect on New Yorkers’ relationship with their city. Increasingly, we will retreat; the infinite possibilities of New York will shrink as the distances between neighborhoods seem to grow. In time, businesses will choose to move elsewhere, to cities where public transit is better and housing is cheaper. This will depress real estate values, which will make housing more affordable in the short term. But it will also slow growth and development, which will curtail job prospects and deplete New York’s tax base, limiting its ability to provide for citizens who rely on its public institutions for opportunity. The gap between rich and poor will widen. As the city’s density dissipates, so too will its economic energy. Innovation will happen elsewhere. New York City will be just some city.

I generally agree with Mahler though believe cost reform must be a key part of any effort to fix the subways. After all, $100 billion spent efficiently will go a lot further if 30-40 percent of those dollars aren’t assumed to be the cost of corruption right off the bat. In a real city not beholden to corruption in fact, $100 billion could lead to a completely updated and modernized subway system, but we ad the people we elect to represent us seem stuck in this rut of ignoring the 800 pound gorilla in the room.

Mahler’s piece wasn’t the only one to make the case for the subways this weekend. Today, the edit”orial page of The Times includes a call for our leaders to do something. “Billions of dollars that could have gone to maintaining and improving the subways,” the piece notes, “have been wasted on exorbitant costs. Projects have also been delayed by mismanagement.” In fact, The Times notes that based on Alon Levy’s calculations, the first phase of the Second Ave. Subway could have cost a quarter of its $4.5 billion price tag were it built literally anywhere else in the world. Without cost reform, the editorial states, “no amount of revenue, whether it comes from higher fares, from a tax on millionaires as Mayor Bill de Blasio has proposed, or from congestion pricing as Mr. Cuomo has suggested, will be enough to fix the subways. Too many of those added dollars would be frittered away.”

And that’s the key. We can spend $100 billion; we can, as David Leonhardt eloquently argues, implement congestion pricing in a way that makes sense and improves New York city for everyone; we can vow to fix the subways. But until cost reform are part and parcel of any reform effort, no amount of money will fix the subway because it will all just be siphoned away into the great unknown of the New York City subway system’s blackhole of institutional corruption.

Transit analysts and advocates have engaged recently in an interesting, if wonky, battle over the state of the MTA’s finances. Taken as a whole, these arguments lead to the conclusion the MTA is both over- and under-funded. It doesn’t have enough money but can’t spend the copious billions it does have efficiently or quickly enough to warrant giving it more. It is stuck between a proverbial rock and a hard place.

On the one hand, the MTA has access to around $30 billion in capital funding (though the dollars will materialize through debt service and other questionable financial practices), and on the other hand, $30 billion at the MTA’s current spending levels and efficiencies isn’t enough for the agency to do everything that needs doing. Two recent articles underscore these tensions, but the fix remains elusive.

The first comes from The Post. Former MTA Chairman Peter Kalikow had some unkind words for his one-time ally Gov. Andrew Cuomo over MTA financing:

“It’s not right. Cuomo is wrong. He’s nickled an dimed the MTA on the capital program,” Kalikow told The Post, in rare criticism of the governor from a former MTA chair. He said while Albany has promised $8.3 billion toward in the $27 billion five-year capital plan, the state has handed over less than two billion dollars of the promised funds so far. “They have not funded it properly,” Kalikow said. “If you get Prendergast the money needed, he could do the job.”

It’s not quite clear how much Kalikow wants, but there is a sentiment that the MTA needs more than $30 billion to keep things running smoothly. One problem with that argument is that the MTA’s spending practices are woefully inefficient, and cost control is something I’ve covered extensively in the past. The other is that it isn’t clear if the MTA can spend more than what it has. After a while, there are only so many qualified contractors in New York City who can do the work the MTA funds. But the former point is more important than the latter. Should the MTA get more money before it improves its spending practices?

The second article is even wonkier. Here’s The Wall Street Journal on how recent accounting changes have exposed the MTA’s long-term pension obligations:

New accounting rules are shining a light on more than $7 billion in pension liabilities facing the Metropolitan Transportation Authority. While the disclosures won’t force the MTA to raise tolls or cut service, they quantify the authority’s tab for commitments to pay retirees, and some critics detect a mounting potential burden on riders and taxpayers. “I would hope there would be some sticker shock” with the pension-cost reporting, said Charles Brecher, director of research at the Citizens Budget Commission, a civic group based in Manhattan. “You want to inform people about the cost of these promises.”

The MTA pays steeper costs for employee pensions and other retirement benefits than its peers in London and Paris, Moody’s Investors Service analysts said in March report. For each ride, the MTA paid $3.06 in overall personnel costs in 2014, compared with $1.05 for Paris and 75 cents for London, according to the report. Nearly $1 of every MTA ride goes to health care, pension and retirement costs…

the MTA’s labor-related costs could reduce its budget flexibility and compete with capital improvements, the Moody’s report noted. An MTA spokeswoman said the market understands the authority’s cost structure “and still rates our bonds highly.” A downgrade in the MTA’s bond ratings could increase its borrowing costs…The relatively high cost of the MTA’s pension liabilities could increase pressure to raise fares and tolls or cut service. “If you have some downturn in your revenues, those are expenses you can’t cut so all the cuts have to come out what’s left of your budget,” said Marcia Van Wagner, a Moody’s analyst.

The MTA’s pension costs have been a long-standing issue that few people like to take up because of the explosive nature of issue. In the article, TWU President John Samuelsen defends the MTA’s pensions for its drivers as part of a “dignified retirement.” He doesn’t address how workers pad their pensions through overtime in their final years or how employers across the nation outside of the public sector have essentially eliminated pensions entirely. Rather, he offers us this defense of the job: “They,” he said of financial analysts, “would pee themselves if they had to drive a bus up Utica Avenue for an eight-hour shift.” It’s part of a straw-man argument that cuts both ways.

The MTA’s pension obligations are a part of a broader conversation about how the MTA spends its money. The pension dollars will eventually come out of fare revenue, and the fares will go up to support pensions. Meanwhile, the capital dollars — which should fund more than they do — are bandied about by politicians as part of a game. The MTA can’t spend the money it has wisely and can’t access the dollars it needs properly. Talk about being stuck between a rock and a hard place.

Whenever the MTA raises fares — a biennial occurrence for the foreseeable future these days — the price increases if often called a regressive tax. While the fare hikes are generally applied across the board, these increases have a larger negative impact on those from lower economic classes as it takes out a larger percentage of their incomes. If public transit is supposed to equalize the way we New Yorkers get around the city and access job centers, schools and everything else the city has to offer, constant fare hikes should, at a certain level, be a policy concern.

Lately, as the MTA has been forced to balance its budget on the backs of its riders (rather than, say, through some sort of congestion pricing or tolling plan), anti-poverty advocates have focused on transit fares as a point of concern. A few weeks ago, the Community Service Society of New York in conjunction with the Riders Alliance released a report [pdf] with some sobering numbers. Approximately 1 in 4 New Yorkers simply cannot afford to pay transit fares and thus are very limited in their potential job searches. Meanwhile, low-income New Yorkers who are more heavily reliant on transit than their richer neighbors spend a disproportionately higher percentage of their incomes on transit.

The study traces how certain transit benefits programs aren’t set up properly. While the MTA’s fare structure is set up to reward frequent travelers, only 18 percent of low-income riders are buying 30-day Metrocards, mostly because they cannot afford the initial outlay of $116.50. So they end up paying more over the course of the month — either through weekly purchases of the 7-day card (which adds up to a pro-rated $132.86 over 30 days) or through pay-per-ride cards. Additionally, tax breaks for transit usage often do not reach low-income riders. Here’s how the report puts it:

While the tax deduction for monthly MetroCard passes can save higher-income New York City families over $600 per year, the deduction is worth less to lower-income families who face lower tax rates. In fact, some families with lower earnings who are eligible for the Earned Income Tax Credit (EITC) would actually be worse off if they were to enroll in commuter benefits.

The pre-tax commuter parking benefit also yields higher tax savings to relatively more affluent suburban commuters who claim both the transit and parking allowance (e.g., those who drive to a commuter rail station). Most of the neediest commuters, however, do not own cars and benefit from the parking deduction; they are also more likely to live in New York City and rely on the MTA, allowing them to claim less than half of the $255 transit allowance for monthly MetroCard expenses. The pre-tax commuter benefits program offers considerable savings to many middle- and upper-income commuters. The cost to the state of New York of a tax subsidy such as this is the forgone state and city income tax revenues. Between the commuter benefit tax subsidy, half-price MetroCards for the disabled and elderly, and discounted monthly passes that are not affordable to low-income families, substantial public resources are being used to subsidize transit fares without reaching the majority of low-income families.

An estimated 800,000 riders would be eligible for a half-price fare for poor New Yorkers, saving those who opt to participate up to $700 per year.

The solution, the group argues, is a half-fare discount plan, such as those currently available for seniors or students, targeted at poor New Yorkers. The CSS argues that those eligible number around 800,000, and they would save approximately $700 a year in transit costs. The CSS estimates similar eligibility and participation rates as food stamps and believes the program would cost approximately $194 million in lost farebox revenue. It is worth noting as well that other cities, including Seattle, San Francisco and London, have already embraced some form of discount fares for low-income riders.

“Economic mobility and transit affordability go hand in hand. To get to work, pick up your kids from school, go to the doctor, to do almost everything you need to do in New York City to survive requires riding the subway or bus, “ David R. Jones, President and CEO of the Community Service Society, said in a statement. “Yet one-quarter of the city’s working poor often cannot afford bus and subway fare. The MTA should be available to everyone in our city, not just those with credit cards in their pocket who can afford a monthly pass, but to those with a few bucks in their pockets who are struggling to take care of their families and get ahead.”

The supporters of the plan haven’t pitched this is an idea the MTA should drive; it is, after all, something that will have to be made available to transit riders with a corresponding increase in MTA funding to offset the potential lost revenue. But so far, over two-thirds of New Yorkers surveyed have expressed some level of support for low-income fare subsidies. How the city and state could pay for this program is up for debate. The CSS argues for a share of some fare tolling/congestion pricing revenue, but everyone will have their hands in the pot. A surcharge on taxis, including Uber and Lyft rides, is mentioned in the report as are gas tax hikes, a so-called “millionaires” tax or direct budgetary contributions. It certainly warrants a robust public discussion. In our current climate, with lackluster support from transit from both Albany and City Hall, can this become an argument over economic fairness and livability in New York City in 2016? It should be.