MTA Economics

The MTA Finance Committee is currently meeting to debate and vote on the fate of the Doomsday budget. I’ll be liveblogging the event for you.

At 11:45 a.m., the MTA’s Finance Committee will meet to approve recommendations for a fare hike and service cuts in an effort to close a budget gap in excess of $1.2 billion. While Richard Ravitch had proposed a plan that, through East River bridge tolls and an equitable payroll tax, would minimized the hike and cuts, a bitterly divided Senate could reach an agreement, and while Sheldon Silver’s Assembly was prepared to pass a modified Ravitch Plan, the Senate has tabled any MTA rescue package for now.

As this drama has unfolded over the past few weeks, Gov. David Paterson has taken up a lot of airtime urging Senate Majority Leader Malcolm Smith to get his caucus in line. The Democrats, who hold a 32-30 majority in the Senate, have been bitterly divided on the issue with many objecting to the tolls. On Friday, Paterson changed his stance a bit and based the State Republicans for doing exactly what he wants the Democrats to do: holding rank. The Republicans refuse to support the Ravitch Plan because it includes a payroll tax, and while it would be far worse to let mass transit in the city fail, the New York GOP is closing ranks on ideological grounds.

Pete Donohue and Glenn Blain talked about Paterson’s ire in the Daily News this weekend:

Paterson rapped Senate Republicans for taking a partisan stance against a revenue-raising plan, crafted by former MTA Chairman Richard Ravitch and featuring tolls on the East and Harlem River bridges. “I’ve been talking to them about this for the last four months,” Paterson said, referring to the GOP. “And I think that if 30 members of a party all vote the same way – what we used to call that when I was in the Senate was a party vote.”

There are 32 Democrats in the Senate and 30 Republicans. Several Dems oppose tolls, so the Ravitch rescue needs the support of at least some Republicans. Paterson said the package would not only avert whopping fare hikes and service cuts, but fund the MTA’s capital construction and maintenance program.

The program is a significant source of jobs in several upstate districts where there are subway and bus assembly plants, and other businesses with MTA contracts. “I don’t see any reason why they wouldn’t be voting for it because it has a direct economic, imperative affect on their districts,” Paterson said.

While Republicans denied to the Daily News reporters Paterson’s statements, the sentiments ring true. If even a handful of New York Metropolitan Area GOP Senators were willing to support the Ravitch Plan, not only would the MTA stave off a 23 percent fare hike and massive service cuts, but the entire state would benefit from sage investment in transit infrastructure.

Alas. It is not likely to be. New York politics remains stuck in a heavily bipartisan world where compromise between parties is unlikely and even sanity among a solitary party, as the Democrats have shown lately, is not to be expected.

Later this morning, the first of many days of reckoning will arrive. Just remember that the politicians — and not the MTA heads — are the ones responsible for this mess.

When New York State Senate Majority Leader Malcolm Smith introduced his version of the MTA rescue package this week, the resulting condemnation was swift and universal. None of the major players — Richard Ravitch, Sheldon Silver, David Paterson, Michael Bloomberg — felt that the Senate’s temporary fix did anything to address the long-term issues plaguing the MTA or the need to fund its capital campaign.

While some critics on Tuesday questioned the numbers behind Smith’s plan, little did anyone realize just how terribly inaccurate and inappropriate his plan would turn out to be. In The Times today, William Neuman goes behind the numbers to reveal that the Senate plan is based on poor assumptions, incorrect calculations and just plain old errors. What’s worse is Smith’s camp trying to blame the MTA for their sloppy mistakes. This is a New York political folly of epic proportions.

Allow me to quote at length from Neuman’s article for full effect:

As an alternative [to Richard Ravitch’s tax-and-toll plan], the [Senate Democrats] propose imposing a smaller payroll tax than the one in Mr. Ravitch’s plan and increasing fare revenues by 4 percent. Mr. Smith says that his plan would provide the authority enough money to operate through next year and buy time for a longer-term solution.

But aides to the governor say that the Senate plan contains at least two basic errors — and a review of the data backs up their critique: the Senate plan overstates the amount of money it would raise over the next two years by more than $700 million. The governor’s office said that to make up for the shortfall, the Senate would have to increase fare revenues by a total of 13 percent.

Marc Shaw, a senior adviser to the governor, said the Senate plan miscalculated the amount of payroll tax that could be collected this year, overstating the amount by about $300 million. The reason is based in the way the state collects taxes and the way the authority does its bookkeeping. The Senate plan assumes that a full year’s worth of tax receipts would pour into the authority’s coffers this year.

But Mr. Shaw said that because the tax, like other similar taxes, is collected quarterly (in part this is meant to make it easier for employers), money from the final three months of this year would not reach the authority until January 2010. That means that the authority, which uses what is known as a cash method of accounting, cannot show the final quarter’s tax revenues on this year’s books.

The Senate plan gets that wrong, projecting four quarters of tax receipts this year.

So the Senate — the same Senate that has criticized the MTA for not offering up a full audit — doesn’t even know how the MTA records revenue or how tax collection in New York works? Who are these fools in Albany? If Marc Shaw, an adviser to Paterson and potential heir to Elliot Sander’s CEO-ship, knows this information, so should Malcolm Smith.

The problems, according to Neuman, continue:

Under the Ravitch plan, the authority would use hundreds of millions of dollars from the payroll tax to finance bus costs that had previously been paid for by New York City and the surrounding counties.

The Senate plan eliminates that provision. But in its proposal, it makes a mistake in accounting for those bus costs. Instead of simply removing them from the transportation authority’s balance sheet, it turned them into income. The mistake adds up to $409 million over the two years of the Senate plan.

Initially, Senate officials denied that they had made any mistakes in their calculations. But subsequently they blamed the authority for the errors. “The blatantly ambiguous manner in which they categorized their numbers clouded the picture of their finances,” said Austin Shafran, a spokesman for Mr. Smith. “If the math was wrong,” he said, “it was wrong based on the way they gave us the numbers.”

But Mr. Shafran said that Senate staff members had not checked their numbers with the authority or sought clarification.

Meanwhile, as Neuman notes, Smith has been questioning why the MTA is going to raise its fares 23 percent next week while under the Ravtich plan, the agency would enact just an 8 percent fare increase. Apparently, our State Senate Majority Leader is too daft to realize that under the Ravitch plan, the MTA would also enjoy dedicated revenue streams from taxes and tolls.

This isn’t rocket science. While your average New Yorker may not understand the MTA’s financial troubles, the State Senate is paid to do so. If I can comprehend these difficulties, if David Paterson’s advisers, Richard Ravitch’s team, the MTA Board and Michael Bloomberg can, then so could a bunch of people who have taken it upon themselves to fix the problem. The State Senators, however, would rather grandstand on the issue than bother to check their work against that of the MTA. How utterly sad for the state of New York.

In the end, of course, this gives me no confidence that an MTA rescue package will be approved before Wednesday. The Ravitch Plan is dead, and with it will go decent subway service in New York City for the foreseeable future.

Two days ago, Democrats from the State Senate unveiled a universally panned plan to rescue the MTA. Since then, the politicking has trickled to a stop, and as Gov. Paterson and Senate leaders attempt to hammer out a plan, the MTA’s Doomsday clock is ticking closer to 12.

In four days, the MTA’s finance committee will meet to approve a fare hike. In six days, the entire board will vote to approve those hikes and numerous service cuts. Meanwhile, Paterson is lashing out at Senate leaders. Glenn Blain reports:

Gov. Paterson launched a radio offensive against fellow Democrats Thursday, accusing lawmakers of “hijacking” the effort to bail out the MTA and save straphangers.

In a three-station blitz, Paterson said Senate Democrats have been unable or unwilling to make the tough decisions needed to save riders from the crushing fare hikes and service cuts. “This is just a classic example of Albany thinking it can make up its own rules,” Paterson said on WOR’s John Gambling Show…

Paterson ripped the Democratic plan Thursday as incomplete and said it was done largely just to win public favor. “Either you’re going to have to put tolls on the bridges or you’re going to have to increase the fare dramatically,” Paterson said. “You can’t go in a third direction.”

At this late hour, Paterson is right, but it’s of little consolation. Unless the State Senate acts quickly and smartly, straphangers will be left paying more for worse service. That’s no way to treat a transit system.

While Senate Republicans are waiting for a call from Gov. Paterson in an effort to save the MTA, no one is too optimistic that any sort of acceptable plan will pass the Senate before next Wednesday. So with just six days left until the MTA Board is set to vote on its Doomsday budget proposal, word of the transit authority’s proposed new fare structure has hit the press.

The news is, of course, not very promising. A single fare will go up 25 percent to $2.50, and 30-day Unlimited Ride cards, while still a good deal, would pass the century mark. Shockingly, MTA Board members are calling this fare hike “the lesser of two evils.” Daily News transit beat reporter Pete Donohue has the story:

The price of a single subway or bus ride will soar from $2 to $2.50 under a menu of new fares the MTA is expected to adopt next week.

The Metropolitan Transportation Authority is on the verge of raising fares for millions of daily subway, bus and commuter train riders that would go into effect if the state doesn’t come through with a rescue plan. The MTA board’s finance committee is expected to approve the new fares Monday, followed by a full board vote Wednesday. Hikes are needed for the authority to have a required balanced budget and would take effect June 1, officials have said.

Under the proposal most board members appear to favor, the price of a monthly MetroCard would rise by $22 to $103. A weekly unlimited-ride MetroCard would jump by $6 to $31. The board is leaning against another set of proposed hikes that would jack up the $2 base fare to $3 and eliminate the 15% bonus on cash-based MetroCards valued at $7 or more.

“It really is the lesser of two evils,” MTA board member Allen Cappelli said. “Nobody wants to make these changes.”

NY1 had a few more details on the proposed fare schedule. Riders who stick with the pay-per-ride model will still earn a 15 percent bonus for all purchases over $7. That discount brings the actual cost of a pay-per-ride card down to $2.17.

Basically, these numbers are the same as those from November. At the time, the MTA hinted that fares could cover only half of the projected deficit. The other half will come from massive service cuts and personnel reductions. The details of those plans have yet to be announced.

With a $2.50 base fare, transit is slowly getting more and more expensive in New York City. Twenty years ago, a token cost $1.00. Ten years ago, the base fare sat at $1.50. Fares are now far out pacing inflation. Meanwhile, the East River bridges remain unnecessarily free.

One day, someone with the political will and power to do so will save the MTA. It doesn’t like that day will be any time this year though, and across the city, straphangers will have to soon budget for a $103 monthly MetroCard.

New York’s leaders roundly rejected the Senate Democrat’s idea for the MTA. (Click the image for a much larger and very readable version of this chart.)

In the end, the Senate Democrats came up with an idea yesterday that was exactly as reported. In an effort to close what they viewed as a $1.128 billion budget gap — a number about $700 million off from reality — the Senate Democrats propose no tolls and no service cuts but a four percent fare hike and a payroll tax of $0.25 per $100. The Senators would also request a full audit of the MTA and administrative trimming.

Even its proponents admit that this plan would be hust a stop gap measure. Meanwhile, New York’s leaders came out swinging, and no one liked this idea. It doesn’t provide a long-term solution to the MTA’s financial woes, and unlike the Ravitch plan, the Splan does not fund the MTA’s ambitious capital plan. It is, in the grand tradition of state assistance to the MTA, a token gesture designed to postpone, and not fix, a real problem. While the Four Amigos can claim a victory over tolls, the rest of us are losers.

Early in the day, Mayor Bloomberg was highly critical of this effort. With New York political commentators wondering just how little control Majority Leader Malcolm Smith has over his own party members, Bloomberg slammd Albany. “We need a plan that solves the problem, not something that’s going to get us to next year,” the mayor said.

Bloomberg also took the opportunity to bash the Senate system: “There’s a tradition, sadly, in the Senate which I’ve never agreed with that you do all your party, and the other party doesn’t really get counted. And that’s not democracy. I think we’d all be better off if we had changed some of that, but that’s the tradition up there. So it’s going to have to be the Democratic senators to come together with the Democratic Assembly people and a Democratic governor and solve this problem.”

That system, though, might be changing. Reports from Albany suggest that Gov. David Paterson, upset with a splintered and obstructionist Democratic party, may be willing to court Republicans. The Times reported on this potentially bipartisan development:

Mr. Paterson chided the Democratic majority in the Senate for choosing what he described as a short-term solution that left big holes in future budgets at the authority. His strong stance suggested that the debate over how to prevent sharp fare increases and service cuts could drag late into the budget season…

The governor was asked if there were any way the Senate plan could be adopted and provide a solution for the authority’s problems. He answered bluntly, “No.”

The governor suggested he may seek Republican support to break the impasse, saying he is willing to sit down with leaders from both parties in the Senate to discuss the issue. So far, however, Republicans have refused to back any version of the rescue plan.

On a more practical level, as everyone from Sheldon Silver to Regional Plan Association officials called this plan “Irresponsible,” “Disappointing,” “Stopgap” and “Slapdash”, transit advocates challenged the Senate math. MTA Chair Dale Hemmerdinger said that the Senators did not “do their homework.” The fare hike with this half-baked plan could be closer to 15-20 percent than the projected four percent.

At this point, this whole thing is one giant mess. The MTA board meets in seven days to assess the agency’s short-term future, and the Senate has offered up no opinion on the Ravitch plan, the best of the long-term plans. Malcolm Smith can’t keep his caucus in line, and both the mayor and governor are ready to engage in open partisan warfare against a splintered caucus while transit in the city struggles to stay afloat.

Maybe it would be best for the MTA to fail. At least then constituents could vote out their Senators in favor of people willing to assess the numbers and take a real chance on a plan to save the city. That’s probably just a dream though.