Second Ave. Sagas

Category: MTA Economics

  • DiNapoli highlights economy’s impact on MTA ridership, revenue

    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?

  • With good reason, Walder shoots down stimulus spending on deficit

    While the big stories out of yesterday’s Richard Brodsky’s committee hearing with Jay Walder focused around the Assembly rep’s pledge to help fund student transit, another comment by Jay Walder gave me hope for the MTA’s long-term capital plan. As Christine Quinn and Gene Russianoff’s Straphangers Campaign are pushing using stimulus spending to cover the MTA’s operating deficit, the MTA CEO and Chairman rejected this plan yesterday. Comparing this plan with Abe Beame’s 1970s decision to use capital funds to avert a fare hike, Walder explained why we need to continue investing in the long-term growth and maintenance of the system during times of temporary operating budget crunches. “I think the result of that [1970s move] was to drive the transit system into the ground,” Walder said.

    Meanwhile, Crossroads, a Lehigh Valley-based smart growth blog, featured a recent report that explained why capital investment in transit makes economic sense. The a new study from Smart Growth America (PDF here) notes that spending on public transit produces twice as many jobs per dollar spent than investing in highway construction does. To remove stimulus funds from the capital plan and shuffle it to the operating deficit would both unnecessarily drain the capital budget and impact job creation at a time of economic uncertainty.

    In the end, if the MTA can’t avert cuts and has to either reduce service to unacceptable levels or fire more people than they would hire through capital spending, I would begrudgingly support shifting stimulus dollars to the operating deficit. Until all other funding avenues are exhausted, though, Walder is right to reject this plan.

  • Quinn’s Council proposal: Almost getting it right

    After spending the early part of this week highlighting politicians who do not seem to care enough about transit to educate themselves, we find ourselves faced with a high-ranking New York official who nearly gets it. Christine Quinn, speaker of the City Council, has engaged in a very public campaign to support the student MetroCard program and to speak out against the MTA’s proposed service cuts. She’s nearly on the right track with some of her words, but I am wary of fully supporting her plan.

    At a rally on Tuesday to protest cuts to the student MetroCard program, Quinn spoke about throwing Council support behind the student rides. More importantly, she stressed how the City Council would consider more funding for student transportation during the spring budgeting sessions and how she would prioritize this item. “I recognize there is a city responsibility in this funding, and we are willing to have that conversation and see what can be done,” Quinn said.

    For this, I applaud Speaker Quinn. She is doing what a politician should be doing. She is promising to explore how the city can fulfill its funding obligations to the both the MTA and the New York’s students, many of whom rely upon free transit to get to and from school. She recognizes that these cuts aren’t something the MTA would choose to do but that years of financial neglect from the city and state have backed the MTA into a corner.

    But beyond this proposal, Quinn’s actions get a little murky. In addition to her vow to find more money for student rides, she calls upon the MTA to take four actions immediately to stave off the cuts. Those are, according to her action center, as follows:

    • Reallocating 10 percent of direct stimulus aid to MTA operating expenses ($91.5 million);
    • Using budgeted PAYGO capital funds for operating ($50 million); and
    • Reallocating 10 percent of additional stimulus transit aid to State to operating ($30 million).
    • Do not implement any actions without a full set of public hearings.

    First, let’s dispose of the last item. Numerous politicians have tried to criticize the MTA for passing a budget a week after it was unveiled and with no input for the public. This ignores the reality that the MTA Board was, by law, required to pass a balanced budget before the end of the 2009 calendar year and had just three weeks from the time the budget crisis was announced to do so. The agency has pledged to hold hearings this year and will reevaluate the proposed cuts before they need to be implemented in June.

    The other three are, in effect, the Gene Russianoff Plan, and I’ve already voiced my reticence over using capital funds for operating deficits. In a nutshell, my fears concern the precedent such a financial move would set and the MTA’s dire need to continue investing in system maintenance and expansion even in the face of a short-term operating deficit.

    If the agency is to reshuffle its budgets to cover its operating gap with capital funds, such a move will become the lazy legislature’s fallback every time a hole opens up in the MTA budget. Albany will begin reducing capital expenditures in order to meet operating budget projections, and the agency’s capital budget will empty faster than a raided piggy bank. If this is the last-gasp proposal to stave service cuts, I would support it, but until every other available long-term funding option has been exhausted, we cannot fund the MTA through a short-term reshuffling of its two separate balance sheet.

    Right now, Quinn is an ally of transit, and she should remain so. I won’t sign her petition yet, but I won’t begrudge those who do. Until we know that other options — bridge tolls and congestion pricing — simply will not work, we cannot rob from the future for a short-term fix today. It won’t solve the systemic problems with the way the MTA is funded and will only exacerbate these shortcomings in the future.

  • Another day, another know-nothing politician: Peter Vallone, Jr.

    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.

  • Assembly rep re-writes history to bash MTA

    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?

  • How much is that pension in the window?

    As the MTA has come to grips with its $400 million operating gap, we’ve heard a lot about rising labor costs and pension problems, but few have quantified exactly how much of the fiscal pie pensions take up. In a piece this weekend in The Post, Susan Edelman explored the cost of these pension plans. The numbers are startling. She says that 24,000 former Transit employees enjoy pensions and full post-retirement health care benefits. “The transit agency spent $533.6 million on pension expenses last fiscal year,” she writes, “and is expected to pay $550.5 million this fiscal year.”

    What can anyone do though? One solution would be to try to raise the retirement age from 55 to something more in line with corporate America, but the demands of physical labor take their tolls on workers’ bodies before desk jockeys start to feel the effects of age. Somehow, though, these pension costs are going to have be reeled in because as the MTA pays more to former workers, its current customers are losing out.

  • Teaching John Liu, comptroller-elect, a lesson in MTA economics

    When it comes to educating New Yorkers about the MTA’s problems, I’m all in favor of advocacy journalism. I’ve long believed the most New Yorkers who don’t actively seek out transit news are ill-informed on MTA matters because our major news outlets both in print and on TV do not adequately and thoroughly report on the MTA’s problems. So when PIX 11’s Project S.O.S. (Support Our Students) came along, I thought I would be able to applaud a major news organization’s transit advocacy efforts.

    Boy, was I wrong. Instead of a true educational/journalistic endeavor, PIX’s coverage is sycophantic and just plain wrong. Instead of examining how systemic long-term funding droughts from New York City and New York state have left the MTA, the region’s economic driver, struggling to stay afloat, PIX is using its TV time to blame the MTA for its financial straits and to urge it to restore student MetroCards without coming up for ways to pay for the program or to cover the $400 million gap.

    Since Project S.O.S. launched last week, PIX has featured numerous local politicians and transit advocates, and none have advocated for just and proper MTA funding. The news reporters on Channel 11 are making a sham out of advocacy journalism. The most infuriating appearance came from long-time MTA ignoramus John Liu. The current City Council member and New York City Comptroller-elect appeared last week, and if you have the patience for it, watch the video above. I’m going to parry with Liu. The italicized quotes are his; my responses follow.

    “It’s a real sad situation. You never what to expect from the MTA nowadays except that they are always asking for more money and threatening to reduce service in all different ways, and this latest round is really…they have reached a new low here.”

    Liu makes it sound as though the MTA is choosing to cut services for its own joy. The truth is that the MTA has no choice. They’ve been hung out to dry by Albany and cannot continue to offer the current level of services and pay the current levels of compensation owed to its employees without service cuts or a fare hike. Since Albany mandated no fare hikes in 2010 as part of the sub-par rescue package last spring, the agency is left with one option to balance its books: service cuts.

    “It’s absolutely abominable. A number of people have commented this morning that the students are being used as pawns, and that’s exactly right because you know what? Not allowing the students to take free mass transit to and from school, that’s not actually going to save the MTA a single red cent. The fact of the matter is they need to continue the service, allow the students to get to and from school without interruption.”

    Here, Liu begins to show a firm misunderstanding of basic economics. According to a 2007 comptroller study, students took 133.4 million free trips during the 2005-2006 school year at a total cost to the MTA of $161.5 million. Simply put, it costs more to the MTA as more people use the system. They have to ramp up the number of buses and subways available, increase the number of employees and clean up afterward.

    “Part of it is that it’s a very real situation that the state cut its budget to the MTA, but it is also true that the MTA is jumping the gun here. We don’t really know exactly what the deficit they’re facing is. we don’t know how bad it is. the number keeps changing. The current crisis just came to light a few days ago, last week, and the numbers are shifting. And they’re now saying these reductions will take place months from now and a lot of this is a threat and they’re just trying to angle for more money.”

    This one is simply a mess. Liu insinuates that the MTA is jumping the gun because the cuts won’t take place for another month. This is a logical fallacy. The MTA issued its budget last week because it has a legal mandate to approve a balanced budget before the end of the calendar year. It’s true the numbers might shift a bit, but careful accounting and transparency — another of Liu’s tried and tired points — requires the agency to detail why it has a $400 million gap and how it plans to close that gap. If Liu can’t understand that, I fear for the future of the comptroller’s office.

    “The students are already up in arms and rightfully so. The parents, the families, they are going to be screaming bloody murder if this every goes through…and like I said before, the MTA is not going to save any money simply by getting rid of these transit passes….There’s no marginal cost to providing the students with the bus and subway service so taking them away from them isn’t going to save any money. They’re not going to be able to eliminate trains because they don’t allow students to get on.”

    That, ladies and gentlemen, is a statement on economics from the next comptroller of the City of New York. That is a statement on economics from the person in charge of overseeing the city’s economy. That is a statement on economics from one who doesn’t really understand economics and should never have been elected to the comptroller’s office.

    Liu seems to believe that there is no marginal cost to the MTA. He seems to believe that 133.4 million free rides don’t impact the transit agency’s bottom line. He doesn’t understand that free isn’t actually free and that subsidies are subsidizing something that carries a price tag. He doesn’t understand that, by charging, the MTA can capture added revenue, and he doesn’t understand that, by not charging, the MTA is offering up services it must pay for to those who ride at no cost to themselves.

    In the end, I can’t say I’m too surprised by John Liu’s ignorance. He has served as the head of the City Council’s Transportation Committee for the past few years and has exhibited no willingness to learn about the city’s transit issues. In the end, we’re simply stuck with another person in a position of power and no idea how to exercise it. The MTA continues to founder.

  • Using stimulus funds but from another source

    Last week, I explained why I was not in favor of Gene Russianoff’s plan to use stimulus funds to cover the MTA operating gap. It’s not sound policy to move money from capital projects to operating deficits, and to do so would risk future MTA financial problems without solving the current one on hand. Today, Cap’n Transit comes out in favor of using stimulus funds but with a twist. He wants the unused Department of Transportation stimulus funds — those not being used to widen the Major Deegan or those earmarked twice for Brooklyn Bridge repairs — to fund the MTA’s operating gap. It is, of course, far better to use someone else’s capital funds to cover the MTA’s operating gap than it is to use the MTA’s capital funds to do the same thing. Sign me up.

  • Getting worse before it gets better

    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

  • How Atlantic Yards impacts the MTA’s bottom line

    Late last week, amidst all of the talk about the MTA’s budget crisis, State Sen. Pedro Espada nearly made a good point. In a letter to MTA CEO and Chairman Jay Walder, Espada urged the authority head to examine the state of the MTA’s real estate holdings. His point though was a bad one.

    “MTA budget gap needs must be measured against real numbers, and the MTA must prioritize fiscally prudent lease and sale of assets before deciding to leave children, seniors and hard-working citizens stranded without a safe, reliable and affordable means to get to and from work, school, grocery shopping and doctor’s appointments,” Espada wrote. “I would like to hear from you as soon as possible regarding the MTA’s real property holdings as a solution to the Authority’s serious budget concerns.”

    Now, it doesn’t take an economic genius to understand the folly of Espada’s remarks. First, he is urging the MTA to sell its real estate holdings during one of the greatest periods of market depression in U.S. history. Second, MTA real estate sales are simply another one-off quick fix and provide no long-term secure solution to the agency’s financial problems. To sell now, in other words, would be folly.

    Unfortunately, for transit advocates, Espada missed an opportunity to make a point. He could have used the MTA’s summertime decision to accept just $20 million up front from Bruce Ratner for the Vanderbilt Yards land rights to question whether the MTA is fiscally smart enough to take advantage of its real estate holdings. Originally, in 2005, the MTA extracted a promise for $100 million from Ratner, and even then, the price was a below-market rate. Today, the deal looks even worse.

    Last week, Atlantic Yards opponents lost a legal challenge to the renegotiated terms of the Atlantic Yards deal. A state judge upheld the lower upfront payment in light of the fact that all new deals must be subjected to an open bidding process. This, he said, was simply a renegotiation of a payment plan. “If every change were to be viewed as a new plan so as to trigger anew each mandated review process, no development plan could ever reach final approval — let alone ultimate completion. The MTA had a rational basis for continuing to use the 2005 appraisal rather than ordering a new one in 2009,” the judge wrote.

    There may indeed be a solid legal argument the MTA can make here, but it is one to which I find myself very unsympathetic. At a time when the agency must maximize its revenue potential, the authority — and the state along with it — is simply handing over free money to Bruce Ratner while the rest of us face the specter of service cuts. A full market rate payment for the Vanderbilt Yards land wouldn’t close the 2010 gap by itself, and since the MTA can sell that land only once, it wouldn’t help the future. But a better deal would benefit both the authority and its riders.

    As the Ratner deal becomes one step closer to reality, Pedro Espada’s words are the last ones we should be following. If this is the best the MTA can do with its real estate holdings, the authority is far better off not selling during a depressed market or perhaps not even selling at all.