MTA Economics

Over the last few days, we’ve talked a lot about the MTA’s stimulus plans. Backed by statements by MTA CEO and Executive Director Elliot Sander, we explored the revival of the Fulton St. dome. Spurred on by idle speculation, on Monday, we contemplated the fate of the 7 line extension.

Now, according to one report, the agency may have something of an official wishlist. The MTA, however, maintains that this list is simply a recycled summary of projects and that the authority’s planners will not publish a planned list of stimulus projects until and unless the package is approved by Congress.

Matthew Sollars, a reporter with Crain’s New York, reported on the MTA’s alleged wishlist on Tuesday afternoon:

Sander said last week that the authority would spend $497 million from the federal stimulus package to complete the Fulton Street Transit Center in Manhattan. But the agency expected to receive more than $1.5 billion if the package is passed as it stands now, and while it says other mega-projects like the Second Avenue Subway will get funds from the stimulus a large amount of money remains for upgrading dilapidated stations and other lower-profile projects.

Many of these projects were cut from the authority’s capital budget last summer when the Wall Street collapse first started. Some of the projects on the list include $34 million to replace the “gap fillers” on the 4, 5, and 6 lines at the Union Square station and roughly $120 million to rehabilitate 10 subway stations in Brooklyn…

The stimulus money would also be used to prevent the chaos caused by flooding during a massive rainstorm in 2007. The MTA plans to spend $47 million to install public announcement systems in 43 stations throughout the subway network that do not have them. During the 2007 floods, riders piled up on platforms and agents at the stations could not make announcements saying the trains weren’t coming.

According to a list of projects being passed around by transit advocates last week, the authority will also spend $200 million to install raised ventilation grates and bike racks in Queens and Manhattan, aimed at preventing future floods. An MTA spokesman says that figure is too high.

It’s easy to see why many think the MTA’s stimulus list stems from these pre-existing plans, but this is simply isn’t the case, according to Jeremy Soffin, the authority’s press secretary. In an e-mail to me on Tuesday in response to my post about the 10th Ave. station stop on the 7 line extension, Soffin said that “a final list will only be determined when there is a final bill.” Mostly, he noted, the MTA has a list of potential projects, and the breadth of the work will depend upon the amount the city receives in the final package. Soffin said:

We are grateful for the work of Senator Schumer and Congressman Nadler to increase funding for public transportation. We continue to maintain and update a list of projects that could be funded by the stimulus. We have proposed a long list of projects, which will be pared based on the final amount of the stimulus and the limitations set on the money by the legislation. Potential projects include some deferred from the current capital program, including some subway and commuter rail station work and maintenance of key infrastructure (shops, interlockings, substations, yards), purchase of subway cars and flood mitigation grates, and funding for mega-projects (Fulton Street, East Side Access, Second Avenue Subway).

It would of course be a boon for the MTA if they can receive funding to knock many of these projects off of the “to-do” list, but the overall impact of the Ravitch Report should not be forgotten. Stimulus spending is great for all, but the MTA needs a financial plan too. While transit watchers seem to be counting their stimulus chickens before the plans hatch, we can’t lose sight of the long-term problems facing the MTA.

When he’s not down in Washington, Senator Chuck Schumer lives around on the corner from me in a nice building on Prospect Park West. His base of power stems from New York City; his roots are in Kings County. Where has he been, then, amidst all of this talk of transit stimulus plans and the financial woes of the MTA?

On a national level, things are building to a head. The Streetsblog Network has been tracking the ups and downs of the efforts to restore the transit funding to the stimulus bill that was allegedly removed by Lawrence Summers. While the House denied one transit-based amendment earlier this week, Jerrold Nadler’s efforts to add $3 billion to the stimulus plan will come to a vote soon. (To urge your member of Congress to act, check out Transportation for America.)

On a New York level, though, things are far more dire. Sure, the city could use the jobs and funding for major MTA capital projects that a massive transit stimulus package could deliver, but the focus right now is on the MTA operations budget and its $1.2 billion deficit. The MTA is in fact just one of 51 transit systems facing operations budget problems, and the federal government seems unwilling to bailout this vital artery of the nation’s economy. We are left then with internal options, and our national leaders have been notably silent on the issue.

My main gripe is with Sen. Schumer’s seeming unwillingness to thrust himself into the issue. As a Brooklynite, he could have a significant impact on the debate, but right now, the only thing Schumer is trying to get is to secure a tax break for commuters if the MTA raises its fares. Pete Donohue reports:

MTA commuters can counter pending fare hikes with increased tax savings if proposed legislation is enacted, officials said Tuesday.

Sen. Chuck Schumer said his mass transit tax break has been included in the Senate version of the economic recovery package.

The provision would raise the monthly cap on mass transit commuting costs not taxed by the federal government to $230 from $120.

That’s all well and good, but what about a statement supporting the payroll tax to counteract the MTA’s fare hikes and service cuts? What about unqualified support for the plan to toll the East River Bridges from one of Brooklyn’s native sons and prominent political representatives?

Later tonight, Brooklyn takes center stage as the MTA brings its hearings circuit our way. Council members are urging vocal protests, but where’s our solution? Will Bill de Blasio support tolls that impact just 3.1 percent of the borough’s commuters or will he offer up nothing to stop fare hikes and service cuts that will impact 60 percent of Brooklyn residents who rely on the MTA to get to and from work? Will a national leader lend his voice to this problem? Time is running out.

In The Times today, William Neuman explores an ill-timed and ill-advised bond issue by Citigroup on behalf of the MTA. It’s your typical financial meltdown story of the kind that have grown so prevalent in over the last few months.

In August 2007, Neuman reports, Citigroup analysts grew alarmed at instability in the auction-rate securities market. Yet despite these fears, Citigroup continued to push bond offerings. Neuman tells of the MTA’s perceived woes:

But that did not stop the bank from peddling the securities to investors and working with government agencies — including the Metropolitan Transportation Authority, which runs New York’s sprawling subway, bus and commuter rail system — to bring more bonds into the already stressed market. With Citigroup Global Markets as one of its underwriters, the authority issued $430 million of auction-rate bonds on Nov. 7, 2007.

Almost immediately the deal soured. Interest rates on the bonds, set in weekly auctions, began to climb, to 4 percent from about 3 percent, and finally, by February, to 8 percent. By then, the entire auction-rate market had collapsed as panicked investors worried that they could not get access to their money.

Stunned by the soaring rates, which were costing it up to $560,000 a week, the authority redeemed the securities in March. To do so, it issued a new round of bonds, outside the auction system and at more favorable interest rates. But the move came with a cost: about $5.6 million in fees to bankers, lawyers and others, including the state, according to data provided by the authority.

That sounds bad, right? The MTA, long in debt and facing a budget crisis, added its own demise by flushing money away in a bad Citigroup investment in 2007. Let’s break out the pitchforks and burn down MTA Headquarters! Power to the people!

If only it were that simple. In reality, this is a long and complex story about something through which nearly every single organization has suffered over the last few years. The MTA didn’t make money in a bad investment. But as the agency has a diversified portfolio, they were, until the markets went south in late 2008, able to make up for it, and they could offset these losses by saving $150 million in the variable-rate debt market. “This was a calamitous disruption in the credit markets,” MTA CFO Gary Dellaverson said to Neuman. “We managed our way through it.”

It’s other worth noting that $5.6 million represents less than 1/2 of one percent of the MTA’s overall debt. While every little bit helps, these Citigroup losses were but a drop in the MTA financial bucket. You decide how much this really matters in the grand scheme of transit in New York City.

Rockland County, it seems, is a place where dreams come true. It’s an area of New York state where unicorns prance among leprechauns and genies ready to grant everyone three wishes abound. It also seems to be an area where fiscal reality and financial responsibility are concepts unheard of in legislative life.

To wit, take a peak at this recent article in The Journal News. It is entitled “Lawmakers vow to oppose MTA fare hikes, service cuts,” and that’s only half of it. Take a look:

Rockland’s state delegation ripped into the Metropolitan Transportation Authority’s plan to implement a wide range of service cuts and price increases to cover a $1.2 billion deficit. Everything from New York City buses and trains to bridges and tunnels to commuter trains and ferries would be affected. Locally, Metro-North Railroad riders would face a 20 percent fare increase.

Broke and broken seemed to be the dominant theme of the day.

“We are united in our fight against the MTA’s outrageous spiking of fares and business taxes that really will impact negatively on the Hudson Valley, and particularly Orange and Rockland counties,” state Sen. Thomas Morahan, R-New City, said.

The three Republicans and two Democrats said they would oppose a proposal that would levy a new MTA payroll tax and would raise fares and tolls by 8 percent. The tax would cost Rockland employers more than $18 million a year, the Rockland County Business Association and the Rockland Economic Development Corp. have estimated.

So let me get this straight: In the space of about 140 words, Rockland County’s bipartisan group of representatives noted that they oppose MTA service cuts and fare hikes and they also opposed a new payroll tax that would potentially alleviate much of these proposed fare hikes and the vast majority of the service cuts. That is mindbogglingly terrible political pandering.

I’d love to ask the Rockland representatives what their master plans are for funding the MTA. After all, these services aren’t free, and the money has to come from somewhere. They don’t want service cuts and fare hikes, the MTA’s only internal way of cost control, and they oppose dedicated funding via payroll taxes, a powerful external way of keeping service cuts and fare hikes at bay.

Logic and reality, it seems, has no place in Rockland County.

Sometimes, the best story isn’t what happens at the MTA hearing. In fact, as one may surmise after reading my liveblog of last night’s Manhattan hearing, nothing too groundbreaking goes on during the comment period. It’s remarkable how MTA officials and board members can sit there maintaining self-control and composure as a half-informed public hurls insults their way, but beyond that, last night, the real story was right outside.

I arrived at the Hilton Hotel on Sixth Ave. between 53rd and 54th Sts. a little late last night. By the time I left the NYU area and trekked uptown, it was around 6:05 p.m. My first sign that something was about to go wrong arrived beforehand. In a bit of foreshadowing, the first train to show up on the Sixth Ave. tracks at W. 4th St. was a Queens-bound E running on the Sixth Ave. local line. This service change was an inauspicious beginning.

As I arrived upstairs at the Hilton, the line was a few hundred people long, and it moves slowly through the MTA’s airport-like security. At 6:25, the line stopped, and we didn’t know why. A few minutes later, word spread that the ballroom was full, and the Authority’s reps were scrambling to set up the back room with chairs and amplifiers. The amplifiers wouldn’t arrive for nearly two hours.

As the line stalled, I talked to a few of the people around me and overheard others. A retired teacher and self-proclaimed troublemaker was adamant about opposing the Doomsday measures. “We have to mobilize against these hikes,” she said. The Straphanging public is clearly not willing to take another round of fare hikes.

At 6:40, a conflict between those waiting on line and the Hilton security force nearly flared up. A group of people — led by the very vocal Save the M8 coalition — started chanting “Le us in,” and as the frustration grew, a security guard stepped in. “It’s a safety issue,” the guard said. “The bottom line is that you can’t protest in the building,” another guard said.

So far, people have been waiting online for a public meeting for over 40 minutes, and they’ve just been informed that they cannot protest. That’s a situation ripe for a conflict, but a few good people calmed the crowd. A few minutes later, Manhattan Borough President Steve Stringer emerged from the room. “It’s a disgrace. They’re idiots,” he said about those who would keep the public waiting outside a public meeting for nearly an hour. “I apologize on behalf of the city.”

As the clock ticked forward, more than a few people grow anxious. “It’s a public hearing,” said one. “A public hearing should be accessible to the public.”

At 7:04 p.m., the line starting moving again, and a few minutes later, we were in. Once in view of the hearing, I heard a lot of people talk about the problems of Access-A-Ride and a lot of people speak out against a fare hike and service cuts. But no one mentioned tolling the East River crossings, and even the politicians had few ideas about how they would specifically solve the MTA’s economic issues.

In that sense, I was disappointed. New York needs forward-thinking leaders, and while I heard a lot of criticism, much of it deserved, tossed at the MTA Board, no one offered real leadership. Programs — mass transit, bus lines, expansion — costs money, and paying for these services requires a cost.

As for the crowd inside, they were rowdy, raucous and, as The Times said, angry, but that was nothing compared to the feelings flowing through the line outside. With seven hearings left, things could grow very tense for the MTA and its not-so-adoring public.