MTA Economics

When all permanent measures fail, take the temporary road. That’s the lesson the State Senate is prepared to unleash upon the Metropolitan Transportation Authority, according to sources in Albany.

Faced with a March 25 deadline, irrational hatred of East River bridge tolls, an Assembly on board with Richard Ravitch and the need to do something quickly, the State Senate is prepared to unveil a temporary fix that will solve the MTA’s budget problems for this year.

According to NY1, the plan is a stop-gap measure: Tolls are out, any support for the MTA’s capital plan is out and a 25 percent fare hike is out. In will be a payroll tax, a four percent fare hike and a few other measures. While Richard Ravitch, the architect behind an equitable tax-toll-fare hike plan that would have saved the MTA, warned Albany against temporary fixes, the State Senate has all but officially rejected tolls and is going its own way.

Nicholas Confessore and William Neuman, writing an elegy to the East River bridge tolls in The Times, called the latest plan a “a scaled-back, short-term alternative to bail out the authority.” Reports the duo:

The Senate proposal, which was presented privately to Democratic Senators on Monday afternoon, would include a 4 percent fare increase, half of what Mr. Ravitch had proposed. It would also impose a tax of 25 cents on every $100 of payroll on employers within the 12 counties served by the authority. That would be significantly less than the 34 cents that Mr. Ravitch had proposed.

“The immediate impact would be, all service cuts are restored, fare increases would be cut in half, and there would be no tolls,” said one of the two people briefed on the plan.

Democratic staff members reviewed some of the authority’s finances in recent days and concluded that a scaled-back plan would suffice in the short term. But the Senate proposal would require the transportation authority to submit to a deeper forensic auditing, a step lawmakers from both parties have demanded as a condition of laying out more taxpayer money for the authority, long dogged by waste and corruption.

Senate staff members have not finished calculating precisely how much revenue their plan would generate. But it would clearly be far less than Mr. Ravitch’s plan, requiring lawmakers to return to the issue again within months. But one of the two people who were briefed said that since the authority’s capital spending plan was already financed through the end of this year, Senate Democrats believed there was time to return later to find a more comprehensive solution.

If this is what Carl Kruger earlier on Monday called “comprehensive and so outside the box that everybody should want to partner with it,” it’s clearly time for some new New York state leadership.

This is really just a punt by the State Senate. They’re enacting the least offensive measures of the Ravitch Plan while pushing off the MTA’s impending Doomsday by a few more months. Richard Ravitch knows what he’s talking about, and Sheldon Silvery, the Assembly speaker prepared to support tolls, recognizes now what the Senate will have to again tackle in a few months. The MTA’s long-term fix lies with the East River tolls just as it rested on the Triborough Bridge revenue a few decades ago.

If this is actually the plan to emerge from the Senate, I guess transit supporters should be happy. After all, if the MTA doesn’t have to cut back service while raising fares just four percent, New York has been saved from a transit doomsday. The MTA, though, is left with no clear vision for a future at a time when it should be laying the financial groundwork for more of the Second Ave. subway and more capital projects.

In six months or so, the Senate will have to revisit this issue. Maybe by then Malcolm Smith can corral the missing toll votes. The battle might be over, the war in a truce, but this whole story — a Ravitch-inspired fix that will require sacrifices from everyone — isn’t over yet.

As the MTA’s self-imposed Doomsday rapidly approaches, New York Gov. David Paterson is resorting to a tried and true political method of buying time and votes for the MTA. According to The Post, Paterson is attempting to buy MTA votes with a $279 million slush fund for Senators. It’s government pork at its finest.

Fredric U. Dicker writes:

Gov. Paterson plans to tap into a little-noticed, $279 million slush fund to “buy” the votes of state Senate Democrats who are resisting his bridge-toll plan and pared-down budget, The Post has been told.

The slush fund is buried in Paterson’s $121 billion proposed “bare bones” state budget and is made up of reappropriated pork-barrel “member item” money left over from past years.

Much of the slush money was appropriated for projects backed by Senate Republicans, who narrowly lost their majority to the Democrats in the November election. That money could now be shifted to Democrat-favored pork.

It’s unclear if this move will actually help win votes for the MTA. New York State Senators are anything but honest and could just take this money and run. But if it works, Paterson’s about-face on pork spending will just be another move in the long line of political compromise for the sake of the MTA.

Hopefully, this $279 million gamble works. We can’t afford for it not to.

On Friday afternoon, I linked to a Sewell Chan piece on The Times City Room blog about the impending cut backs and fare hikes the MTA may soon have to enact. As the day dragged on, Chan’s piece generated over 180 comments on The Times’ website, but as one of my readers noted, these readers are woefully uninformed about the state of the MTA.

Let’s take a peek at some of the more egregiously ill-informed comments, starting with comment 8:

It’s because there workers demand raises every year since they are part of a union, they are entitled to a raise. That’s what the last hike was about not our budget problem but giving the workers more money.

Comment 9:

Didnt they just have a billion dollar surplus?!? What happened to that money?

Comment 23:

LIES!!! There is no fiscal crisis in the MTA. The MTA runs 2 sets of books, as proven by State Comptroller Alan Hevesi in 2002. They hide millions of dollars in this second accounting ledger so they can cry “Bankruptcy!” and squeeze millions of more dollars from the state and city budgets.

Comment 53:

The MTA has been paying fraudulent LIRR disability cases and inflated overtime/social security benefits. What happened to the surplus a few years back? What happened to the second set of accounting books

My personal favorite, e-mailed to me by fellow transit supporter Chris, at Comment 130:

This is RIDICULOUS!!!!!!! These idiots decide to “invest” the money into dangerous and ultimately pathetically awful securities….actually, more like “get-rich-quick” schemes for the highest levels of our society….you know, those geniuses who know better than us morons…..and now we have to foot the bill? Why cant Peter Kalikow, in all his brilliance take a pay cut, huh? He makes upwards of 400K for what? To bury the MTA in debt and have to impose these hardships on us? They should be dragged out into the streets and each given 100 lashes. Then they can keep their jobs. I bet you it wont happen again after that!

In case anyone has forgotten, Kalikow last served as head of the MTA in 2007. To say that anyone who doesn’t know that hasn’t been paying attention would be a gross understatement.

If there’s any doubt about who is winning the PR game, I think this wraps it up in favor of the anti-congestion pricing, anti-tolling, anti-MTA crowd in the New York State legislature who would rather cut their own arteries than fund transit. People are hung up on six-year-old scandals, on misunderstandings surrounding MTA finances, even on how the tolling plan would work. And of course, some people don’t even know who’s in charge of the MTA.

When the MTA votes to enact its Doomsday budget in ten days, people will again protest the MTA. They’ll call for the heads of Dale Hemmerdinger and Elliot Sander. Again, transit advocates who have failed so far will attempt to educate the public, but the public just isn’t listening. They’ve made up their minds about the MTA, as at the City Room readers show, no amount of facts, truth or logic will convince them otherwise.

The MTA is not efficient, and its history as way too many separate entities has never been more glaringly obvious. A new public benefit corporation built from the bottom up with streamlined operations and inter-agency lines of communication would be far better for the City of New York in 2009. But right now, we’re stuck with what’s there, and whether New Yorkers know and understand it, when Albany fails to act, the state legislature will have won the anti-tolling war, but they will lose the mass transit battle for all New Yorkers.

The numbers in today’s editorial in The Times are telling. In Carl Kruger’s State Senate district — one far away from the densely packed Manhattan — 33,000 of his constituents rely on transit on a daily basis while just 6000 drive. And yet, despite this glaringly obvious disparity — and protests in support of tolls — the Senate will not act on a permanent plan to fund the MTA.

In a board meeting this morning, the MTA Board did not paint a rosy picture of the future. While they could be accused of politicking, the transit agency will face a huge budget deficit if nothing is done to rescue them. Sewell Chan reports on the layoffs, fare hikes and service cuts that will come if Albany continues to stall:

With the State Senate balking on a financial rescue plan that would impose tolls on East River and Harlem River bridges to help close a mounting budget gap, officials at the Metropolitan Transportation Authority warned on Friday that if Albany does not act by March 25, they will have no choice but to order steep fare increases, impose “painful” service cuts, and lay off at least 1,100 employees.

“The situation is dire,” the authority’s chairman, H. Dale Hemmerdinger, said at a special meeting of the authority’s board. He described “25 to 35 percent increases in the cost of getting to work” and “serious and painful cuts in service.”

…The Friday board meeting was in large part held to place pressure on Albany to act.

“The Legislature has not been able to reach an agreement on the Ravitch Commission recommendation or any other solution on the M.T.A.’s fiscal crisis,” Mr. Hemmerdinger said. “It’s too soon to know what will happen, but with the March 25 board meeting rapidly approaching, it’s time for the board to refocus on the tough decisions that will have go be made to keep our budget balanced.”

So that’s that. Hopefully, this political move will help. If not, get ready to wait 20 minutes for your $2.50 ride on a dirty subway car. That is, after all, in the minds of the Senate, far better than tolling the precious East River bridges.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

McMahon’s analysis follows:

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

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

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

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

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

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

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

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

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

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

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

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

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