MTA Economics

Thomas DiNapoli, the New York State Comptroller, issued a brief report on the state of the MTA ridership levels yesterday. The report is written in a way to draw headlines. “Ridership declines cost MTA $100 million,” screams his press release, but behind the figures is another story about the MTA’s precarious economic position.

First, the news, as DiNapoli’s office put it:

State Comptroller Thomas P. DiNapoli today released a report [PDF] showing 75 million fewer customers used the Metropolitan Transportation Authority’s (MTA) system through October 2009 than during the same period in 2008, costing the MTA more than $100 million in lost fare and toll revenue. DiNapoli attributes the sharp decline to the 110,000 jobs lost in New York City between October 2008 and October 2009.

“The MTA is vital to the strength of the regional economy – and the health of the economy has a huge impact on ridership,” DiNapoli said. “People don’t commute when they’re unemployed.”

In 2008, more than 2.6 billion riders used the MTA’s buses, subways, and commuter railroads and about 300 million vehicles crossed the MTA’s bridges and tunnels. Subway ridership, which had grown by 242 million trips between 2000 and the peak year of 2008, accounted for the biggest decline in 2009, with about 44 million fewer riders from January 2009 through October 2009 than during the same period in 2008.

As far as the facts go, nothing DiNapoli says is wrong. As the MTA’s own internal indicators show subway ridership is down in 2009 over the same period in 2008. DiNapoli is right to blame job loss figures and the overall state of the economy as well. Those out of work are taking fewer rides into Manhattan’s central business district, and fewer people are taking extraneous subway trips.

His conclusion though — that the decline in ridership has cost the MTA over $100 million — isn’t quite right. It is certainly headline-grabbing. Nearly all of the articles about the report lead with that news. But that’s now how the MTA’s budget calculations work.

The MTA each year calculates ridership revenue based on their expected ridership figures. When the authority issued its 2009 budget at the end of 2008, it allowed for the economic downtown and projected lower ridership figures and lower farebox revenues. Through November, subway ridership totals were just 3.9 million passengers lower than projected while Bridge & Tunnel and bus ridership totals were higher than expected. In the end, the MTA hasn’t really lost revenue, but as with any business, in a better economy, the authority would draw in more money. That seems to be the more obvious point DiNapoli is trying to make. Charging the MTA with a $100 million loss when it wasn’t expecting that $100 million in the first place is a bit misleading.

DiNapoli’s report brings up an interesting quandary about the MTA and the city’s subway system. It’s clear that the subways are a part of everyone’s daily life, and the ridership and revenue totals hew closely to the state of the economy. To me — and to many urban policy experts — the subways are a public good then. The city exists on a large geographical scale with a highly concentrated business district in Manhattan because people can get from the Rockaways and Coney Island to the Bronx for a MetroCard swipe. The public good aspect of the subways are also why the fares are so low. For the subways to serve their purpose, fares must remain affordable and, in a sense, artificially low.

Yet, when it comes to funding, politicians prefer to treat the transportation network as a luxury good. It takes political arm-twisting and threats of “Doomsday budgets” to gain even modest concessions and half-hearted funding plans. The MTA is a creature of the state. It was established by the state to serve the public in a vital role, and the people in power refuse to recognize it.

DiNapoli’s report underscores why the MTA shouldn’t have to rely heavily on farebox recovery for its primary source of funding. When will the politicians realize this as well?

City Council member Peter Vallone, Jr. (D) carries with him a familial legacy of New York politics. His grandfather was a judge in the Queens County Civil Court, and his father was the city’s first City Council speaker and a long-time representative from Astoria. When Senior stepped down in 2001, Junior took up the Vallone City Council seat mantle.

Yesterday, Peter Vallone, Jr. joined the long line of New York politicians who proved they know little to nothing about how the MTA works and how the city’s relationship with the transit agency is structured. For Vallone, ignorance of transit issues is nothing new. He opposed congestion pricing despite representing a transit-dependent district. In Astoria, according to a report from NYU’s Furman Center, 67 percent of all residents rely on public transit, and the 2000 Census found that just 53.2 percent of those who live in Vallone’s district don’t even own cars.

So what does Vallone have to say about the MTA? Lots! And none of it makes much sense. Daniel Edward Rosen of the Daily News had the report:

Vallone assembled a rally outside the Ditmars Blvd. station to slam the Metropolitan Transportation Authority for its proposed cuts, deemed necessary to plug a $400 million budget shortfall. “A lot of people think that the city officials have control over this, but we don’t,” said Vallone (D-Astoria). “What I can do is speak out for my district, and that’s what I will continue to do.”

Protesters held up signs that read “Save Our Subways” while Vallone chided the MTA for granting an 11.3% raise to its workers over three years. “You can’t give raises and then cut services. It’s Business 101, and they failed it,” said Vallone.

Chris O’Leary at On Transport has the comprehensive takedown. First, O’Leary notes that “Vallone failed Labor Relations 101.” As we know, the MTA and TWU went to binding arbitration over the new labor contract, and when the arbitration panel sided with the TWU, the MTA appealed. Ultimately, the agency lost the appeal, but Vallone is content to ignore that reality.

In truth, the MTA would rather not pay the raises and doing so will impact the bottom line over the next three years. But it is simply incorrect to say that the agency is giving out raises. Going to arbitration was a foolish move, but the MTA is legally obligated to follow the arbitration award now that it’s been judicially affirmed.

But the real problem with Vallone’s comments come in his ludicrous claim that city officials “don’t” “have control over this.” O’Leary highlights and disputes this claim by a City Council member: “Vallone seems to miss the fact that the city controls a portion of the funding provided to the MTA. Coincidentally, the city’s $159 million tithe for transit operations has been virtually unchanged since the mid-90s. If the services provided to the MTA are so important to his district, why isn’t Vallone suggesting that the city step up their funding of the MTA? That’s certainly within his control.”

Earlier this week, I took to task Assembly rep Aileen Gunther for her spurious claims about MTA financing and East River Bridge Tolls. Today, I will point my finger at Peter Vallone, Jr. as the next in a long line of politicians distorting or simply ignorant of the truth to make a populist anti-MTA point. It’s far easier to blame someone else for systemic funding problems than it is to find the political will and fiscal capital to improve the system.

Let me take a minute to introduce you to Aileen Gunther. Ms. Gunther, pictured at right, is the Democratic Assembly representative from the 98th District. She represents parts of Orange and Sullivan Counties, and based on her biography sounds neither clueless nor stupid.

Gunther has served in the Assembly since a special election delivered her to Albany in 2003. She has amassed a generally left-of-center voting record. She has won reelection every time she was up for it and is probably well-respected in her district — or at least as well-respected as any no-name Assembly representative can be. How then can she be so utterly clueless and in fact reckless when it comes to taking about transit policy in New York City?

In a piece over the holidays in the Times Herald-Record, Gunther opined on the MTA’s financial picture. She wrote:

Jay Walder, the MTA chief, who has been blaming the Legislature for the MTA’s problems, has an excessive — and baseless — $350,000 salary. In addition, the MTA failed to put tolls on the New York City bridges, which would have generated vital revenue for the state. It is that kind of frivolous spending and financial mismanagement that has put the MTA in this awful predicament — not the Legislature.

Where to begin? Where to begin?

We’ll start with the claim — the laughable, ludicrous, downright stupid claim — that the MTA itself “failed to put tolls” on the city’s bridges. Perhaps Ms. Gunther missed the brouhaha last spring, but it is up to her august legislative body and her colleagues across the hall in the State Senate to approve bridge tolls for New York City. Lest we forget, five State Senators quashed the toll plan in March and proposed the current funding plans a week later. The MTA would gladly have accepted tolls but couldn’t because of Albany and not some “financial mismanagement” as Ms. Gunther would have you believe.

Now, what about Gunther’s claims of Jay Walder’s “excessive” and “baseless” salary? Well, Walder was a top executive in London and is now in charge of thousands of MTA workers. He’s earning a salary barely comparable to other transit executives who oversee smaller authorities, and as Chris O’Leary at On Transport pointed out, he is in line for a pay reduction due to the budget crisis.

In the end, this piece by Gunther is an irresponsible hack job. She’s not representing anyone to the best of her ability and is displaying an utter lack of knowledge about recent transit problems in the area. Yet, her piece goes unanswered by the MTA for days and festers in its ignorance online. As O’Leary asked at his site, where is the MTA’s P.R. department to combat these spurious articles? Where are the editors of The Times Herald-Record?

One the major causes of the MTA’s current fiscal short fall is a $143 million reduction in previously-approved state appropriations. Now, the state’s fiscal picture is growing darker by the day, and as the MTA prepares to close a budget gap of nearly $400 million, recent developments are leaving me wondering if they should look for even more ways to save.

In a rather gloomy story over the weekend, the Daily News reported that things will very likely get worse before they get any better. Wrote Kate Lucadamo and Pete Donohue:

The MTA’s budget crisis could worsen, a financial rating company said Friday – just days after the authority announced plans to slash services and charge students to ride buses and subways. A Moody’s Investment Services report raises concerns that the state again will cut funding to the Metropolitan Transportation Authority.

A deepening or longer recession also could drive down ridership and revenues from taxes that are supposed to help pay for the subway, bus and commuter train system, according to the report…Gov. Paterson and the state Legislature cut nearly $3 billion in state spending early this month, including money for student MetroCards. Mayor Bloomberg warned yesterday things will get worse.

“People are screaming about what they do now; wait until they see what happens in March,” Bloomberg told WOR’s John Gambling during his weekly radio show.

In March, the state may very well be faced with a budget gap of $9 billion. That could spell the end of any major state subsidies for the MTA.

Of course, cutting off the MTA is a major mistake. Whether or not Albany realizes it, New York City’s mass transit system drives the state’s entire economy. Our politicians though are far more willing to play with fire than they should be. If we’ve learned one thing over the last year, it is exactly that.

In the end, the MTA should begin to evaluate its options now. It can cut services only so much before the fares have to start inching up. As I’ve said in the past, I’d rather see service levels remain as they are now with fares going up. It’s more important to have adequate service and slightly higher fares than it is to have sub-par service and fares artificially deflated. Still, congestion pricing and East River Bridge tolls are going to have to be considered as solutions, and as the economy stumbles in New York state, we can only hope the MTA can survive relatively intact