MTA Economics

For the past few years, through the tenures of three different MTA heads, “net zero” had become a mantra. Without a net-zero labor increase, the MTA’s budget would be deeply in the red with the costs expected to fall on the riders in the form of service cuts, fare hikes or both. As late as February, the MTA warned of steep fare hikes if they couldn’t toe the net-zero line. The Citizens Budget Commission has long since endorsed the approach, and the MTA and TWU were at war.

Then, suddenly, it was election season, and the MTA and TWU were, with the help of Gov. Andrew Cuomo, shaking hands and best buds. Without exacting much in the way of labor reform — and certainly without anything close to net-zero — the MTA gave the TWU a new contract with only a few concessions. The raises — 8 percent over five years — are deserved, and there are some givebacks. But ultimately, the MTA’s labor costs are going to increase by $411 million through 2016. That ain’t net-zero.

In a document released yesterday to bond investors [pdf], the MTA offered the public its first glimpse at the ramifications of the deal. The Memorandum of Understanding won’t be released until after the TWU votes on it, and such a vote isn’t likely until after next week’s MTA Board meeting. So what we know is that the MTA is on the hook for a lot of money. The deal includes retroactive payments of $126 million and a current bump in labor expenses of around $55 million. In 2015 and 2016, the MTA expects to spend $116 million and $114 million respectively, though some experts — notably Nicole Gelinas — believes these estimates to be low.

To cover some of the costs, the new deal includes an increase in the amount of employee contributions to health and other benefits as well as a new “wage progression schedule.” Still, someone has to come up with $411 million, and MTA Chairman and CEO Tom Prendergast insists it won’t fail to the fare paying public this time around. So how is the MTA going to pay? Read it (and weep):

MTA anticipates that the onetime payment for retroactive wages in 2014 will be funded from monies derived from released 2013 general reserves budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions that would have reduced the unfunded liability and future expenses. Increases in current year and annual ongoing costs are anticipated to be paid from funds budgeted for voluntary deposits to the MTA Long Island Rail Road Plan for Additional Pensions, and a portion of monies earmarked for voluntary deposit into the OPEB trust for future retiree healthcare costs.

It gets better. If other unions that do not have contracts in place sign similar deals, the MTA would have to find another $300 million. This money, the agency says, will come from voluntary deposits into the OPEB trust and a reduction of PAYGO capital funds of approximately $70 million. To say this doesn’t fall on the riders is sleight of hand accounting. In fact, this entire budget is sleight hand accounting.

But now we know: The MTA is robbing future riders to pay for the present. It doesn’t bother Cuomo because he’ll be gone from Albany before the bill comes due, but for the rest of us, this isn’t a good deal. We may not pay now because the MTA will keep those looming fare hikes low, but give it a few years. We the riders will be paying then or else the system will suffer.

Allow me to dip for just a minute into a quote from 2012’s The Dark Knight Rises. As Anne Hathaway’s Selina Kyle shares a dance with Bruce Wayne at a masquerade ball, she warns him of impending troubles. “There’s a storm coming, Mr. Wayne,” she warns Wayne. “You and your friends better batten down the hatches, because when it hits, you’re all going to wonder how you ever thought you could live so large and leave so little for the rest of us.”

It’s a bit of an overly dramatic line, but when Bane takes over, Kyle’s words aren’t wrong. Today, when I read WNYC’s coverage of the MTA’s latest budget machinations and the current state of management’s relationship with labor, I had a flashback to the film. “Underground where I work,” Christine Williams, a station agent based in Brooklyn, said. “There’s a storm brewing — and it’s not good. It’s not a merry Christmas when you can’t afford to get to work and when you get to work you’re working at a $7 an hour job. It’s like you can’t win in New York.”

This too a bit overly dramatic. A search through the SeeThroughNY database revealed that Ms. Williams earned $25 an hour back in 2008 — which is hardly a challenging amount — and it’s a far cry from minimum wage. Still, the point remains: As the MTA passed a $13.5 billion budget that rests largely on the shaky assumption of a net-zero labor spending increase, the workers are not happy. “We’re certainly not looking for the stars,” TWU president John Samuelson said during a protest outside this week’s MTA Board meeting. “We’re looking for raises that keep up with the cost of living.”

The debate and the battle aren’t necessarily either/or propositions. The MTA’s stated goal — and one that will help avert massive fare hikes or service increases — is a net-zero scenario. That doesn’t mean wages can’t go up. Rather, it means if wages go up, something else moves along with it. Wages go up; worker count and staffing levels go down. Wages go up; pension contributions go down or retirement age goes up or benefits contributions go down. The options are out there, but the TWU isn’t readily embracing anything at a time of good economic feelings for the MTA.

The real question right now as the TWU Local 100 heads to work each day nearly two years removed from the expiration of their last contract concerns a strike. We all still remember those few days in 2005 when the TWU walked out of the job. For New Yorkers, it was disruptive; for the TWU, it was destructive. Would they do it again? The Taylor Law makes a strike seem doubtful, but union officials are threatening “job actions” which could be slowdowns of any shape or form. They grow tiresome after a while.

Meanwhile, within the MTA’s leadership, the net-zero concept is a controversial one. Perennial Board gadfly Charles Moerdler challenged the assumption this week. Moerdler called such an approach “indefensible and fictional.” As Prendergast pointed out that each percentage point increase in wage increases would add $50 million to the MTA budget, the idea of net-zero seems both perfectly defensible and nearly entirely necessary. A five-percent raise, for instance, would be devastating to the MTA’s budget.

So this gap between the rock and the hard place seems to be narrowing. Rank-and-file are growing dismayed over the fact that it’s been years since their last raise (though non-unionized labor have felt that sting for even longer). At MTA HQ, the lack of labor spending could lead to an even faster brain drain while disgruntled union workers could make service worse. Of course, there’s plenty of room for reform across the board. Will we get there or will this awkward detente be steady enough to support slow movement on a new contract for the TWU? It’s a key issue for the MTA heading into 2014.