MTA Economics

Remember the Kheel plan, a Ted Kheel-funded study by Charles Komanoff and other transit experts? In it, the study’s creators proposed a way to fund the MTA via a steep congestion fee while keeping transit free. While it’s a very revolutionary plan, it hasn’t been embraced politically.

Well, as Ben Fried at Streetsblog reported this morning, Kheel is unveiling a new version of the plan. Kheel apparently doesn’t like the Ravitch plan. He calls it an immobility tax and doesn’t think it addresses the problems of congestion and car overuse that plague New York.

“The Ravitch Immobility Tax is a 1970’s-era plan that disconnects transit and traffic, making no real impact on the congestion problem that chokes our regional economy,” Kheel said in a press release. “The Ravitch Plan ignores the staggering social cost to the city of automobile traffic, leaving drivers to pay little for mass transit, and imposing the burden instead on vulnerable segments of our society that can ill afford it in these times. Instead of taxing jobs during the largest period of unemployment in recent history, we need an innovative plan that fuels economic growth, fixes traffic, and provides long-term benefit for working New Yorkers.”

Rather, Kheel proposes free subways except at rush hour and higher tolls for all. Kheel’s new plan, according to Fried, includes the following:

• A dramatic cut in subway fares (75 percent on average), including a complete fare elimination on weekends and holidays, overnight and mid-day,
• A variable fare during the weekday peak periods that’s lower than the current fare;
• Complete fare elimination on all NYC Transit buses at all times;
• Congestion pricing on car and truck traffic into the Manhattan Central Business District (CBD), with tolls varying sharply by time of day and averaging $16 per trip;
• A 46% surcharge on medallion taxi fares (note that medallion taxis, and no other vehicles, would be exempt from the congestion pricing charge);
• 25% higher tolls on MTA bridges that don’t directly access the Manhattan CBD.

Using their comprehensive proprietary model of the city’s transit system and road network, Kheel’s team concluded that the plan would:

• Yield over $1 billion in net revenue — sufficient to wipe out more than three-fourths of the MTA’s projected FY-2009 deficit;
• Increase overall subway ridership by 12% even as use of the system shrinks by 6% in the morning peak hour (8-9 a.m.) and 10% in the evening peak hour (5-6 p.m.);
• Raise traffic speeds in the chronically gridlocked CBD by one-third during the day and one-quarter overall, while also boosting travel speeds throughout the City.

I want to like this plan, and I want to support. But something gnaws at me. Maybe it’s the fact that Ravitch’s plan generates more than the MTA needs so they can help fund the capital campaign. Maybe it’s the fact that Kheel’s plan is just too far out there for most New Yorkers to appreciate. Sadly, I think Kheel’s plan will forever remain a good idea in principle but will never be a New York reality.

Let’s talk New York State drivers licenses for a bit. They have become quite the hot topic on the transit front lately.

Right now, it seem as though the most popular alternate to the Ravitch proposal concerns drivers licenses. As I discussed last week, a group led by Assembly rep Micah Kellner and New York City Comptroller William Thompson have proposed increased fees for car registrations and licensing fees in lieu of the controversial East River tolls.

A few readers e-mailed me skeptically about the registration fee plan, noting that the numbers did not quite seem to add up. So I ran the numbers. There are, according to the 2007 DMV records, 6.78 million licensed drivers in the 12 counties served by the MTA and 5.59 million licensed automobiles. It was then that I realized the catch.

Right now, those of us with New York State drivers licenses pay, more or less, around $50 once every eight years to renew our licenses. It was my understanding that this alternate plan would simply raise this rate to $100 every eight years. The way I figured it, this new fee would generate an additional $42 million a year and not the promise $300 million Kellner and Thompson had noted.

The catch, you see, is that Kellner and Thompson would charge New Yorkers that $50 fee every year. Instead of paying $50 for eight years, we would instead be paying $400 extra over that eight-year period to enjoy the privileges and benefits of having a drivers license no matter how little or how much we drive.

To me, this doesn’t quite get at the heart of the problem. It certainly provides an alternate source of revenue and wouldn’t require tolling the East River bridges, but it’s an unfair demand. In fact, while Thompson claims that the East River crossing tolls would hit those who cannot afford to pay them the hardest, I believe his alternate registration plan would.

Take me, for example. I have a New York State drivers license, and I always will. The last time I personally drove a vehicle across one of the East River bridges was in 2006 when I had to drive a van from Manhattan to Brooklyn. Under the Ravitch plan, I would pay $0 a year to cross the East River bridges because I take the subway to Manhattan every day. It’s significantly cheaper than owning a car; it’s convenient; it’s quick. But I’m not going to give up my drivers license.

Under the Kellner/Thompson plan, I would be paying an additional $50 a year to own a form of government identification. The people who can afford this plan will shrug it off and pass the costs on; the people who can’t will have to decide between relinquishing a drivers license of paying more. It’s not really equitable.

On the other hand, the Ravitch proposal would charge you for use. If you use the East River bridge tolls —  if you avail yourself of a service that isn’t free to New York City but that the city refuses to charge for right now — you should have to pay. My ownership of a drivers license shouldn’t fund mass transit, but your use of the roads at the economic, social and environmental expense to everyone else should. And that’s why this registration fee plan is bogus.

Richard Ravitch has heard the critics over the last few days, and he doesn’t like it. Responding to those who are skeptical of his bailout plan, Ravitch took a hardline position in an interview with the Daily News.

“Obviously, I have to assume they must know of some secret fairy godmother who has piles of money she is going to send and solve the problem,” Ravitch said. “Otherwise, they’d better damn well explain how the system is going to be paid.”

For the most part, these critics are pushing the standard line. As City Comptroller Bill Thomson has argued, the tolls will supposedly penalize those who don’t have access to the buses and subways. Never mind that every toll will be along a route that has ample bus and subway service. Never mind that people who can’t afford these tolls generally can’t afford a car in New York City either. Tolling roads in New York — actually charging people for the city services they use — has become some political taboo. No wonder Ravitch is a bit feisty.

But of course there are other concerns beyond obstructionist politicians. William Neuman highlights some of the legal challenges facing implementation of the Ravitch proposals. No one seems to know quite yet who has the ability to transfer control of the bridges from the city to the MTA or how the city could go about doing so.

“Our conclusion is that the city would not be permitted to transfer the bridges to the M.T.A. without a new state law,” Kate O’Brien Ahlers, the communications director for the city’s Law Department, said in a written statement on Friday.

City officials said that under state law, the bridges were similar to streets and parks, which are inalienable properties of the city. It is a status that requires state legislative action if they are to be sold, leased or otherwise removed from city control.

There is a law that allows the city to transfer property to the authority if it is to be used for transit purposes, such as land for a subway station. But the city officials said they did not believe that would apply to the bridges.

In reality, this is more of a political issue than it is a legal issue. If the impetus is there, city and state officials will work to affect the transfer. But as Neuman explores, the political impetus just isn’t there.

At some point, we’ll have to pay. Someone will have to shoulder the costs of running a transit system. It could be all of us; it could be some of us. Sadly, this decision will wind up in the hands of New York’s risk-averse politicians.

Now that we’ve all had a weekend to digest the Ravitch Report, let’s check in with the prevailing opinion. How the wind blows in the pages of New York’s editorial pages will go a long way toward determining the success or failure of this plan as it hits the state legislature.

Let’s start with the Paper of Record. The New York Times voiced its unconditional support for the plan:

Almost every commuter recognizes that a fare increase is inevitable, but that is unnecessarily onerous. The cost of a vibrant city, fed by its daily influx of commuters, should be shared by others who benefit. That means drivers, who face less traffic because so many other people leave their cars at home. And businesses that can draw employees from across the metropolitan area should also contribute…

Some of New York City’s most vocal politicians complained about how the Ravitch plan affects local drivers, especially in Queens and Brooklyn. Vetoing new tolls makes little sense unless these officials can come up with other ways to maintain and improve the enormous city transportation network.

Governor Paterson said New Yorkers face “one source of pain or another” to keep the M.T.A. up to speed. The right choice would be to spread that pain around beyond those who take public transit.

The Daily News, somewhat surprisingly but very pragmatically, liked the plan as well:

It is particularly sensible to build long-term fiscal stability on the three-legged stool of reasonably increased fares for riders, a modest tax on businesses and new tolls for drivers. Without effective and functioning mass transit, businesses might as well relocate to Toledo. A small additional per-employee fee would yield huge dividends.

Drivers coming over the bridges benefit from the reduced traffic and cleaner air that trains, buses and subways help provide. Which was the idea behind the congestion pricing proposal Mayor Bloomberg put forward – though without the $354 million in federal transit money the city would have gotten along with it. And for those who use public transportation every day – well, an 8% increase is far, far preferable to the doomsday 23% hike that would be required if Ravitch hadn’t found a way to spread responsibility around. Plus, the predictability of biannual fare hikes, tagged to inflation, makes sense for family budgets.

Paterson is right to have come out in support of this plan. Now, it falls to lawmakers to have the courage to implement it, even as they face the massive, still-outstanding challenge of grappling with gallons of red ink.

On the other side of the aisle, The Post wrote a disjointed piece bemoaning the tax increases. They write:

Think about it: Do companies need further incentive to cut labor costs in New York’s current recession economy?

It would be one thing if Ravitch had suggested sharing the pain – by squeezing some concessions from the MTA’s labor force, for example, but he does not. And while there is a lot of talk about cutting state and city spending, very little has actually happened – and very little is likely to happen.

Finally, Newsday thinks Ravitch was too kind on the MTA, and the Long Island paper voices its support for the alternative licensing and registration fee increase proposal that I will get around to debating as soon as the demands of my finals allow me to:

A report delivered last week by a high-profile commission, intended to solve the MTA’s funding problems for good, dances around the integrity issue but never addresses it head-on. The problem with the MTA is not just lack of money but lack of faith.

In this respect, the report is a disappointment. It offers no reassurance that management has wrung wasteful expense out of the behemoth agency. Yet, one after another, news stories suggest there are savings to be had. A report by State Comptroller Tom DiNapoli last month found the agency weighted down with 70,000 employees, many in redundant jobs, with plans to hire hundreds more. In marketing and public relations alone, the MTA employs 444…

The commission, headed by the highly respected former MTA chief Richard Ravitch, was charged with finding new revenue sources to cover a $1.2-billion shortfall next year, as well as a five-year construction and maintenance program. The Ravitch Commission should have looked internally first. How about a five-point plan, outlining how the agency would be restructured, top to bottom?

I’m particularly intrigued by the Newsday suggestion. I know some commenters here and on Streetsblog were a bit shocked that the report did not advocate more internal cost-cutting measures at the MTA. But otherwise, support is shaking down as expected. While Newsday’s support is lukewarm, three papers champion the East River tolling plan while one out-right dismisses the whole endeavor. Hopefully, the voices for change can outshine those clamoring for a disastrous status quo.

In the end, we’ll either get slammed with a huge fare hike or everyone can bear the costs. I know what I prefer. Do you?

Getting his committee’s ambitious plan to save the MTA out in front of the public was easy for Richard Ravitch. A public desperate to avoid the MTA’s doomsday scenario hadn’t been this excited for a government report in ages. But now that we have all the details and a few supporters, the hard part — convincing both the properly suspicious and misguided skeptics — begins.

Reaction to the plan was both swift and all over the place with groups coming out, for, against and in mixed support of the plan. As expected, the MTA seemed accepting of it. “The MTA is pleased that the commission appointed by Governor Paterson and led by Richard Ravitch has identified a comprehensive plan for putting the MTA back on sound financial footing. We thank Governor Paterson, Mayor Bloomberg and all of the commission members for their support of increased funding for the critical operating and capital needs of the transit system that powers the state’s economy,” the agency said in a statement e-mailed out to reporters this afternoon.

But beyond the MTA’s unconditional support, battle lines were swiftly drawn. For the most part, public advocacy organizations such as the Straphangers Campaign and the New York League of Conservation Voters issued statements in favor of the Ravitch recommendations while elected officials issued the tired, knee-jerk reaction to tolling the East River bridges and higher taxes.

At some point, these officials will understand that driving isn’t free in any social aspect and that funding mass transit, a more important part of the tri-state area than unnecessarily cheap tolls, is more vital to the area’s health. Perhaps, they’ll also understand that tolling the currently-free East River bridges would result in no increases in the cost of the current East River tolls. This is a subtle but important point the plan’s proponents will have to propagate.

CityRoom posted a full array of statements yesterday afternoon. In today’s New York Times, William Neuman and Jeremy Peters offer up a more nuanced look at the reactions.

State legislators, mainly from Brooklyn, Queens and the Bronx, said the plan by a state commission headed by Richard Ravitch, a former authority chairman, would unfairly burden drivers from their districts.

But many of those same legislators, along with some business leaders, were more supportive of another part of the plan: a proposed tax of one-third of 1 percent on payrolls in the 12-county region served by the authority, which includes New York City, Long Island and five counties north of the city…

“Any solution that disproportionately burdens middle- and working-class people who live in the Bronx, Queens and Brooklyn is not a fair way to deal with this, and that’s what tolling the bridges would do,” said Assemblyman Michael N. Gianaris, a Democrat from Queens.

Gianaris was one of many assembly representatives and City Council members to pursue this line of thinking. One day, he and others will understand that New York’s lower class residents are the ones who rely on the subway most of all. They don’t owe cars; they can’t afford gas. In fact, they stand to benefit the most from a healthy and vibrant mass transit system.

But beyond that, it seems as though the politicians who matter here are going to ask for more oversight of the MTA and try to lobby for lower or no East River tolls and higher payroll taxes. The pols really don’t like the East River tolls. The issue of the driver licensing and car registration fees will rear it’s ugly head too. (Look for more on that this afternoon.)

Meanwhile, Ted Kheel promises another plan focusing around mass transit, and Roger Tussaint warns about ensuring that any recommendations are a-OK with his Transit Workers Union Local 100. Some things never change.

For now, things are shaking down as expected. The tough work begins right away though. The MTA has to present a balanced budget before December is out, and the legislature needs to act quickly. Can New York finally look forward to a progressive solution to its transit woes? We’ll find out soon.

With the Ravitch Report available for public consumption, allow me to make it easy. The document is embedded below and available as a PDF here. I’ll have feedback and more analysis over the next day.

RavitchReport – Get more Business Documents

The Ravitch Plan is out. As expected, it features a broad call for tolls on the East River crossings, a blanket payroll tax and a slightly higher fare hike. Ravitch believes that his plan can generate well over $2 billion a year and can help the MTA cover its operations budget while funding some of the authority’s ambitious capital campaign as well.

William Neuman and The Times are on the scene at the press conference. Here’s the news so far:

A state commission led by Richard Ravitch, a former chairman of the Metropolitan Transportation Authority, on Thursday presented a wide-ranging rescue plan for the region’s subways, buses and commuter railroads that includes a new “mobility tax” on corporate payrolls; tolls on the East River and Harlem River bridges; a much smaller fare and toll increase than the cash-strapped authority has threatened; and improvements in bus service.

The plan would permit automatic, inflation-adjusted fare and toll increases every two years without public hearings, ending what Mr. Ravitch called a “political circus” the M.T.A. goes through every few years. The plan calls for a state takeover of the Brooklyn, Manhattan, Williamsburg and Queensboro bridges, which have historically been free to motorists.

The mobility tax — 33 cents on every $100 of payrolls — would provide $1.5 billion a year, and the tolls would produce $600 million in net revenue a year ($1 billion a year in gross revenue minus expenses), Mr. Ravitch said, and the revenue stream would help finance a $30 billion to $35 billion M.T.A. capital plan for 2010 to 2014 that would help stimulate the economy while maintaining vital infrastructure.

During the press conference, Ravitch stressed how this recommendation is part of a whole. For it to work, the legislatures should not look at it as a piecemeal proposal. “This all fits together,” Ravitch said. “This is not a series of separable recommendations. This is an effort to spread the burden amongst the largest group that one possibly can.”

Gov. David Paterson, while allowing for negotiations with the state governing bodies, urged them to pass this package and be willing to take on necessary costs. “We’re gong to need to both houses of the Legislature to cooperate with us,” Paterson aid. “But I must reiterate to everyone here: These are tough times, and difficult choices will have to be made – by legislators, by executives, and even by the riders and rivers in the greater metropolitan area, with respect to the M.T.A.”

Mayor Michael Bloomberg too spoke out in favor of the plan at this morning’s press conference. “The Legislature stated at that time that they could find other solutions to the M.T.A. longstanding fiscal imbalances, and I’m pleased to say the at the Ravitch Commission today is offering them more information and options,” Bloomberg said.

Money doesn’t just come from the sky. Someone will have to pay for our transit system and transit improvements. Right now, this is the best plan out there. It spreads the cost equitably with an eye toward the future. Until someone trumps Ravitch’s recommendations, we have to hope it gets approved.

Podcast: Play in new window | Download

Subscribe: RSS

While we know what Richard Ravitch is going to propose — modest fare hikes, East River bridge tolls and a small, region-wide payroll tax increase — already this plan’s opponents are gathering to defeat it. Will no one step up to save the MTA?

As Streetsblog reported today, Micah Kellner, the anti-congestion pricing assembly representative from the Upper East Side, has unconditionally threatened the idea of East River crossing tolls. Kellner’s replacement plan — raising car registration and licensing fees — would bring in some money for the MTA’s coffers but wouldn’t accomplish what the Ravitch plan would.

Basically, the gist of Kellner’s proposal is that by raising the state’s relatively low registration fees and its relatively high licensing fees, the MTA could draw in $550 million. Here’s how he described it on his blog:

When CBC President Carol Kellermann testified before the Ravitch Commission she noted that today the cost for a driver license in New York is under $6 annually. Raising annual fees for driver licenses to $50 would yield nearly $300 million. New York has the 8th lowest vehicle registration fees in the country (according to the CBC’s 2006 study South Carolina has the lowest at $12, and Maine has the highest at $435), and raising the vehicle registration fees would net an additional annual revenue stream of $250 million.

With the Ravitch Commission’s report due to be released on Friday, now is the time to be examining all the options including this one and other good ideas like reinstituting the commuter tax…In these tough financial times, I believe that it makes sense that those who choose to drive should help bear the costs of maintaining our public transportation infrastructure. These two new recurring revenue streams would constitute a good start in getting the MTA’s finances back on track.

But then, in a letter to the Governor (link goes to PDF), he explicitly spoke out against the tolls:

Early indications suggest that the Ravitch Commission will announce Friday that tolls on the East River bridges are the centerpiece of their recommendations. This is a proposal that has been recycled time and again in each and every fiscal crisis but has always failed to gain the necessary support to be implemented. I don’t know why they think this time will be any different, but I am hopeful that the Governor’s office will look to other ideas like this one and reinstituting the commuter tax as he constructs his Executive budget.

I don’t really see why. As Streetsblog points out, tolls on the bridges are a “proven and equitable course of action.” Instead of front-loading the money in registration and licensing fees, tolls are a daily reminder about the costs of driving, and they generate somewhere between $100-$300 million more than Kellner’s plan would.

Additionally, as frequent commenter Julia pointed out last week, raising fees wouldn’t serve the environmental goal of reducing traffic and raising reliance on environmentally-healthy mass transit options. People will pay up front and just drive. Initially, car ownership levels may drop, but a $50 increase in fees will seem more like a minor annoyance than a big disincentive to automobile use.

In the end, the MTA is going to need some far-sighted politicians and business leaders to step and shepherd a toll-and-tax plan through the state and city’s legislative bodies. Earlier indications are that the Governor, Mayor and MTA heads may be taking the charge. But can they overcome assembly representatives who aren’t receptive to a plan before it is even published? The fate of transit in this city may depend on it.