MTA Economics

Can Richard Ravtich deliver a miracle? (Photo courtesy of The Observer)

The news rests for nothing, and on Wednesday night, while most people were home spending time with their families and away from the Internet, The Times released the early word from the Ravitch Commission. Using a combination of tolls, taxes and slight fare increase, Richard Ravitch will save the MTA. That is, if anyone will help him.

As expected, the Ravitch Commission report will contain elements of all the plans we’ve heard over the last few weeks. It will call for payroll taxes and East River Bridge tolls. It will call for higher fares and no service cuts.

William Neuman detailed the early version of the plan with a caveat that the draft is not yet final:

The tax on payrolls, expected to be less than one half of 1 percent, would apply to businesses in the 12-county area served by the authority. It would bepaid by businesses, not employees. The tax would be designed to raise $1 billion a year or more.

It would be coupled with the new bridge tolls, which would generate about $600 million a year, after the cost of maintaining the bridges and collecting the tolls is accounted for. Drivers would pay a higher rate on the East River bridges than on the Harlem River bridges under the plan.

There would be no toll plazas: Most tolls would be collected through a system of E-ZPass readers. Drivers without E-ZPass would be identified and could be billed using digital cameras that snap a picture of each vehicle’s license plate.

Control of those bridges, which are owned by the city, would be transferred to the authority under the plan, although it was not clear how that would be achieved.

The third main element of the proposal is a more modest increase for next year in fares and existing tolls on the bridges and tunnels already controlled by the authority. That increase would allow Mr. Ravitch and his supporters to argue that the cost of running the system was being shared by all those who benefit from it.

That sounds like a pretty solid plan. Ravitch is staying away from the politically explosive congestion pricing plan, and he’s allowing the MTA to raise fares, albeit modestly, without cutting service. Considering all of the talk surrounding the MTA’s Doomsday proposal, Ravitch’s all-encompassing plan seems like a beacon of light.

Of course, some aspects of it are tough to stomach. No one wants higher taxes. Even an increase of less than 0.5 percent is a tough sell. No one wants East River tolls either. But at some point, New Yorkers have to make a trade-off. They can’t complain about bad subway service without accepting some costs on the other side. This plan allows for good service and some smaller increases in other costs. Nothing, in the end, is free.

The problem right now though is one of attention and support. This plan needs a champion, as William Neuman explained in the Sunday Times. The plan needs a David Rockefeller to rally political and business leaders behind it. This plan needs a public face, someone New Yorker trust, to sell it. Who that will be is up for debate.

Later this week, Ravitch will release his set of recommendations, and the time to act is now. The MTA can’t dally as its finances head south. It needs a clear-cut plan of action. It can either act on its own by cutting service and raising fares or it can hope that Ravitch’s plan becomes a reality. We’ll learn quickly how this tale ends.

MTA officials are in a bit of a bind. They are routinely vilified for the fare hike and service cuts proposal by a public that doesn’t understand how the Board must operate and by a press that does.

Basically, the Board has to pass a balanced budget. Otherwise, they’ll face some civil penalties — but not jail time — and the state legislature probably wouldn’t approve it.

The MTA Board members don’t want to have to cut service and raise fares. They would rather get the money they need from congestion pricing plans and commuter taxes, from city and state contributions and from federal grants. That money however just isn’t coming, and so the Board has turned to the one tool at its command: service and the fare.

The Board members and MTA bigwigs too are aware of this problem. To that end, Hilary Ring, the MTA’s director of government affairs. At a recent public hearing — the first since the Doomsday scenario was unveiled — Ring urged the public to protest vocally the fare hikes and service cuts. Get in touch with your elected officials, he urged. Tell them to fund the MTA.

Pete Donohue and Leo Standora were there to report on the hearing for the Daily News:

Describing the cutback package as “terrible,” MTA director of government affairs Hilary Ring urged people at a public forum to express their anger at public hearings in January.

“Please come,” he appealed to the crowd of about 125 at Swinging Sixties Senior Center in Williamsburg, Brooklyn, last night. “The only way it’s not going to be implemented is if you express outrage.”

“The budget we presented to the board is not the budget we want to see adopted,” he said. “We had to make very tough choices. We don’t want to make these cuts. We think the state and city should increase their contributions to us.”

To mince words, the city and state have pulled the rug out from under the MTA, and if anyone should bear the brunt of the public anger, it is those officials. They won’t fund our mass transit; they won’t embrace alternate and out-of-the-box revenue-generating and environmentally-friendly schemes. They will just sit back and criticize an agency with its back to the wall.

So get there and get your voice heard. As Peter Finch screamed in Network, “I’m mad as hell and I’m not going to take this any more.” Tell that to Mayor Mike as he seeks his third term.

Everybody wants to ride to the MTA’s rescue. Politicians from all walks of New York life are trying to propose ways through which the MTA could cover some — or all — of its $1.4 billion deficit without resorting to fare hikes and service cuts. Let’s take a look.

First up is the New York City comptroller. William Thompson just wants to add high fees to every car registration in the Big Apple and its surrounding counties to cover the deficit. He also wants to implement a commuter tax. Colin Moynhian had the story:

The New York City comptroller, William C. Thompson Jr., said on Sunday that the Metropolitan Transportation Authority’s gaping budget deficits could be diminished by increasing automobile registration fees in 12 counties served by the authority’s trains and buses.

At a press conference outside Grand Central Terminal, Mr. Thompson said that drivers now pay $30 every two years to register a vehicle in New York City, though they also pay additional state fees. He proposed adding an annual fee of $100 for drivers in the city and nearby counties who register vehicles weighing up to 2,300 pounds, with vehicles above that weight also being assessed an additional 9 cents per pound.

The fees, which Mr. Thompson said would go directly to the authority, could total about $1 billion per year, with some $350 million from New York City residents. The authority faces a $1.2 billion deficit next year, and it unveiled a budget on Thursday that called for a 23 percent increase in tolls and fares along with cutbacks in service and layoffs. Mr. Thompson, a Democratic candidate for mayor, said he feared that the proposed fare increases would make mass transit unaffordable for some riders.

Thompson also called for a revival of the commuter tax, last seen around these parts in 1999. He believes these combined fees could raise nearly $2 billion for mass transit while serving to cut down on traffic as well.

Of course, the problem is that this plan, proposed by a potential mayoral candidate, is completely politically infeasible. If congestion pricing — a fee targeted at those that actively enter and exit the Manhattan Central Business District — couldn’t pass, a passive fee levied on everyone probably wouldn’t stand much of a chance.

This is a sad reality really because this would be a great plan. Owners of cars would reconsider their lavish purchases while businesses wouldn’t be taxed nearly as heavily as they would have been under the congestion pricing plan. Meanwhile, those businesses would easily be able to pass on the costs to their consumers.

I’m sure Richard Ravitch will include this idea in his proposal. After all, Thompson brought it up in his testimony to the commission, but whether it could become a reality is another question entirely.

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In other news, Council members Eric Gioia and David Yassky have again urged the MTA to better manage its real estate holdings. The problem here is that this is a one-time solution. If the MTA sells their buildings or stops leasing what is now mostly vacant space in Brooklyn, they get an infusion of cash for now but not a steady income stream going forward. We need real long-term solutions and not a short-term fix.

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Update 4:23 p.m.: The Comptroller has released the details of his plan. You can read the whole thing right here as a PDF.

During one of the various discussion about the service cuts sure to come out of the MTA’s financial crisis, Dale Hemmerdinger issued what has become my favorite quote of the week. “We are charged,” he said, “by law to propose a balanced budget by the end of the year. We only have two ways we can handle that: We can either cut service or we can raise fares. That’s all we can do. If we don’t balance the budget by the end of the year, we could all go to jail.”

Can you imagine the scene when U.S. Marshalls or NYPD officers show up to cart Hemmerdinger and his co-conspirators off to jail? I wonder if Norman Seabrook would turn into a devout Jew while stewing in his cell in Rikers.

While Hemmerdinger was using a little bit of rhetoric to make a point, it was certain a silly-sounding statement to make. To that end, William Neuman poked a bit of fun at Hemmerdinger in a column this weekend. He wrote:

So, is it possible? Could the authority’s board be tossed in the hoosegow if the budget it passes shows a negative balance in its bottom line?

Or what about another possibility, given Mr. Hemmerdinger’s evident heartache over the proposed budget’s dire measures: What if the board, all 23 members, in an act of civil disobedience, refused to pass a budget until state lawmakers rescued the transit system with more money?

Legal experts said they did not believe the board would be sent to jail for a budget that showed a negative balance. At most, the authority might become the target of a lawsuit, they said. In theory, if a judge then ordered the authority to balance its budget and the board repeatedly refused, its members might be held in contempt of court, which could ultimately lead to a bread-and-water diet behind bars. But, as they may say, that train has not left the station yet.

Gene Russianoff, the ubiquitous head of the Straphangers Campaign, joined in the mockery. “I take that requirement as a requirement that’s not backed up by a year in the slammer,” he said to The Times “If they really had criminal liability, they might be eligible for a jury trial. I’d worry about the jury coming in with a verdict of capital punishment. They’re not too popular.”

Hemmerdinger later clarified his thinking, as Neuman writes:

“I just assumed that if we didn’t do the law we would go to jail,” he said. “I’m not a lawyer. I said something without thinking of all the implications.” He said that upon reflection it was clear to him that the laws involved were civil and not criminal, and so were not likely to lead to Rikers Island.

But he added: “Some of the riders I’m sure would like to send me there, after the comments I’ve heard on the radio this morning.”

Of course, the MTA Board won’t go to jail, and New Yorkers will probably end up paying more for the agency’s financial troubles than the wealthy moguls who sit on the board. But in our dreams, we can imagine MTA officials in jail, not for failing to pass the budget, but for holding the public responsible for the fiscal improprieties of both our state government and the MTA’s overseers.

In a little bit of hyperbole on Thursday, Dale Hemmerdinger, the MTA Chair, opined on the monumental task facing the MTA Board. Somehow, someway, the board has to find a way to balance a budget with a $1.4 billion deficit.

“We are charged,” he said, “by law to propose a balanced budget by the end of the year. We only have two ways we can handle that: We can either cut service or we can raise fares. That’s all we can do. If we don’t balance the budget by the end of the year, we could all go to jail.”

While Hemmerdinger and his MTA co-conspirators probably won’t get carted off to Rikers if they don’t offer up a balanced budget next month, they do have the unenviable task of selling service cuts and fare hikes to a very skeptical public. So just how are they going to save the money?

In my post on the budget presentation, I listed the MTA’s proposed cuts. Let’s take a second look at the subway cuts.

NYC Transit: Savings of $167 Million in 08/09, $280 million annually 2010-12

The cuts to New York City Transit represent the highest dollar total of all the cuts and also seem to impact the greatest number of people. Off the bat, the MTA is planning a 7.5 percent reduction in staff. Furthmore, the agency will condense a few lines and eliminate others. They plan to shorten G service, operate N trains via Manhattan Bridge late nights, eliminate the W and extend the Q to Astoria, operate M trains only to Broad St. during rush hours, eliminate all Z trains and add J local service. For growing neighborhoods in Brooklyn and Queens that depend on these trains, that’s a big blow.

Meanwhile, for the rest of us, the MTA will be reducing non-rush hour service along the lettered lines from around 15 trains every two hours (one per eight minutes) to 12 trains every two hours (one per ten minutes). Late-night service will arrive every 30 minutes instead of every 20 minutes, and bus service will be cut heavily. Ouch.

The other agencies will see extreme cuts as well. Metro-North will suffer through $35 million worth of personnel and service cuts; Long Island Rail Road will drastically cut back on people and trains to the tune of $36 million in 2009 and $53 million annually 2010-12. Even the money-making Bridges and Tunnels division will scale back by about $17 million a year.

In the end, these savings are substantial for the MTA, but the cost to New Yorkers is immeasurable. Late-night subway service will become a burden. Missing that one train could result in a 30-minute wait. Non-rush hour trains will be slower and more crowded. People will be unhappy about paying more for less service.

For the most part, New York politicians are saying the right things. “Neither the city nor the state has any money. There’s not enough money to go around, and we’re all going to have to work together,” Mayor Bloomberg said. Considering that Bloomberg himself is wealthy enough to cover the MTA’s gap, that’s hardly sympathy from the mayor.

Sheldon Silver, the scourge of congestion pricing, has kind words for Richard Ravitch. “Clearly, [Ravitch] will be talking about ways to raise revenue,” Silver said to The Times. “I’m not afraid of reasonable, responsible tax policy, plain and simple. I think that both the residents and the businesses of the city of New York, understanding the significance of mass transit in the city, would be understanding of some revenue raises to continue affordable mass transit.”

Whether Silver is politically willing to do the right — but perhaps unpopular — thing for the MTA is another question entirely.

So here we are in November with but four months to spare. The MTA Board must adopt a balanced budget by the end of December, and MTA CEO and Executive Director has given the state until March to come up with money. If funds are not forthcoming, the agency will start cutting service with fare hikes to follow by June. Stay tuned; with the Ravitch report due in two weeks, the fun is just getting started.

It’s official; baring a government bailout, in 2009, the MTA is going to implement extreme service cuts and raise fares by 23 percent in order to cover a deficit now estimated at $1.4 billion. Additionally, to keep pace with projections, the authority is planning for a 2011 fare hike of at least another five percent.

William Neuman and Sewell Chan were at the MTA Board Meeting this morning and covered the news for The Times’ CityRoom blog. They reported:

The deficit-closing plan, outlined by [MTA CEO and Executive Director] Lee Sander at a meeting of the authority’s board in Midtown, would involve eliminating 2,700 jobs, saving $261 million next year, and “significant cuts that will affect every part of our operation and cannot be sugar-coated.”

For New York City Transit, the biggest component of the authority, the deficit-closing plan would eliminate the W and Z subway lines; eliminate service on the M line to Bay Parkway in Brooklyn; shorten the route of the G line, which will permanently stop at Court Square in Long Island City, Queens, instead of 71st and Continental Avenues in Forest Hills, Queens; lower the frequency of most letter-line trains to every 10 minutes from every eight minutes on weekends; lower the frequency of all trains to every 30 minutes from every 20 minutes from 2 to 5 a.m.; eliminate overnight bus service on 25 routes; and eliminate the X27 and X28 express-bus lines.

Mr. Sander said the route alterations “will result in extra transfers, longer travel times, longer wait times and longer walking time.” Trains would be more crowded. Subway cars would be cleaned less frequently. Station booths would be closed. Bus service would be cut back on weekends and at nights. The express-bus fare would rise to $7.50 from $5. The cost of the Access-a-Ride paratransit service for disabled riders would rise.

The Long Island Rail Road would cut 173 positions, cancel and combine some train lines, reduce service on weekends and off-peak hours and cut train crews. The Metro-North Railroad would cut 88 positions, shorten trains, increase the loading guidelines, slow down the restoration of Grand Central Terminal and cut cleaning and maintenance at the terminal. Fares would rise by 43 percent on the Long Island Bus.

In delivering the bad news, Sander advocated for the agency as well. “No one on this board — and indeed no one should in this room — should leave here today thinking that this mix of service cuts and increase in fares and tolls are actions that I am eager — or that the staff is eager — to implement,” he said. “Nothing could be further from the truth. Even in a period of austerity, we cannot afford to lose sight of this simple fact: Continuing investment in the M.T.A.’s capital and operating needs should and must remain one of the highest priorities of our elected officials in New York City and Albany.”

Meanwhile, this plan as presented outlines the shocking ways in which our government just isn’t contributing to transit. According to MTA documents, fare revenue would cover over 80 percent of operating costs for New York City Transit’s subway system. This level of rider contribution is nearly unprecedented among the world’s public or semi-public subway systems.

Sander also stressed the ways in which the MTA must invest in its future as well. While the capital program is funded through a separate budget, the MTA cannot risk halting expansion and modernization plans. “If we don’t have a capital program, we’re definitely on the road back to where we were in the 1970s,” the MTA head warned.

After the jump, the extensive press release from the MTA, detailing the budget cuts. Things are going to get nasty and ugly before they get better.

The MTA has a problem. And no, I’m not talking about the duel threats of steep fare hikes and rampant service cuts. Instead, I’m talking about the capital campaign. The cash-strapped MTA needs $30 billion for its next five-year capital plan. Where that money is going to come from is, right now, anyone’s guess.

We know about the MTA’s current operating budget issue. The MTA has to find a way to balance a budget currently $1.2 billion in debt, and when they unveil their plans later today, the riders are going to suffer. But long term, the MTA has to remain in good shape.

For the past twenty years, the powers-that-be have pushed an aggressive capital expansion and modernization plan. Every five years, the MTA submits a new plan for approval and funds a significant part of that through borrowed funds and government contributions. But in a bad economy, the money has practically dried up, and as William Neuman explores in The Times today, the very future of the MTA is at risk if capital sources dry up.

“The authority,” he writes, “is uncertain how it will pay for the next five-year capital spending plan that could cost as much as $30 billion.”

The fare increases and cutbacks are meant to keep the system running next year. The capital plan is meant to keep it running for years beyond that through the purchase of new equipment, maintenance of tracks and renovation of stations…

The current capital plan expires at the end of next year, and the authority must submit a new five-year plan to the state for approval even as it seeks additional money to plug its operating deficit. Officials have estimated that the capital plan could cost $25 billion to $30 billion, much of which would be financed through bonds that the authority would repay over many years.

Both budgets are important, but Mr. Brodsky and others worry that the long-term needs will be lost in the tumult of settling the more immediate need. “It would be a terrible mistake to take whatever resources may be available and use them all on the operating side,” Mr. Brodsky said.

In the article, Richard Brodsky, Democratic assemblyman from Westchester, sounds like the MTA’s biggest booster. “The need for investment in the system is gargantuan,” he says. “Twenty-five years from now what we do on the capital plan will resonate much more loudly than what the debate is going to be about fare increases.”

He’s not lying, and in fact, the MTA chair backs him up. “Not enough people recognize that the system is vulnerable, and if you don’t keep spending this money it will go back to the way it was in the ’70s before you can blink an eye,” Dale Hemmerdinger said to Neuman. “All the focus and all the talk so far has been on the operating budget, and the capital budget runs out next year and we need to know the money is going to continue to flow.”

But Brodsky has also been one of the biggest thorns in the MTA’s side. From his position as head of the MTA’s oversight committee, he opposed congestion pricing, a progressive scheme to deliver $400 million annually earmarked for the MTA’s operations budget. He urged the MTA to ask the assembly for more money only to see the governing body deny the authority needed funds.

It’s very true that the MTA needs to find a way to ensure its capital campaigns continue. We can’t afford to see the subways slip back into the state of disrepair so rampant in the 1970s. That is indeed more important that arguments over short-term service cuts and fare hikes. But we also need politicians willing to put their necks out there to fund transit. Something has to give; what will it be?