MTA Economics

Facing a budget deficit of nearly $1 billion and with no relief in sight, the MTA is preparing an agency-wide cut of 4.5 percent. While officials say they will cut management costs first, if enough money can’t be trimmed, the agencies will be forced to cut operations costs, which, in plain English, means subway, bus and rail service could face the axe.

William Neuman of The Times has more on this dismaying but unsurprising news:

The Metropolitan Transportation Authority has begun exploring possible cuts in subway, bus and commuter rail service to shore up its budget in the face of a projected deficit next year of nearly $900 million, officials said on Monday.

The cuts could be necessary if the authority does not receive enough additional money from the state and city or if the economic crisis deepens significantly, the officials said. They cautioned, however, that any service cuts were purely theoretical at this point…

Gary J. Dellaverson, the authority’s chief financial officer, said that he had directed the heads of the agencies that make up the authority…to come up with alternative budgets “in the event either the economy is worse than predicted, which is possible, or assistance from government partners in its entirety is not forthcoming.”

Jeremy Soffin, a spokesman for the authority, said that the agencies were told to explain how they would make cuts of 4.5 percent or so in their expenses. He declined to say how much that would amount to, but a 4.5 percent reduction of the total authority-wide budget projected to be $9.7 billion next year would equal $437 million. “This is an exercise in case of a hypothetical situation,” Mr. Soffin said. “It’s very preliminary.”

While everyone at the MTA stressed the hypothetical nature of this exercise — Doreen Frasca, head of the MTA Board’s transit committee, hopped on that bandwagon too — it’s hard to feel too good about it. New York has yet to experience the economic fall-out from the recent collapse of the investment banking business, and tax revenues — and thus city and state contributions to the MTA — are sure to be down.

Meanwhile, these hypothetical cuts do not preclude a fair hike. So, in other words, we could be in for both another fare hike in 2009 as well as across-the-board service cuts. Clearly, that’s not news anyone in New York wants to hear right now.

As riders, our options are limited. The best we can do is lobby our elected representatives and urge them to find more money for the beleaguered transit agency. Since voting them out of office didn’t pan out, our options are severely limited. Maybe now will be a good time for the MTA to ask Richard Brodsky for some money. After all, he promised them funds last July if only they would ask.

In the end, though, I bet the rest of us, through service cuts and fare hikes, will have to pay. That, sadly, is the way of it in New York City these days.

While we spent much of Tuesday discussing the controversial and brilliant idea to turn over control of the East River bridges to the MTA, not every bit of testimony from the first Ravitch Commission hearings were as sensational as that one. Yet, each idea will be given equal weight by Ravitch as he attempts to come up with some grand fix.

Over at Streetsblog, Ben Fried ran down the day’s other themes. I’ve excerpted the relevant parts:

Responsibility for adequately funding the MTA should fall on those who benefit from its services. This encompasses a fairly broad swath of people, including straphangers, the real estate industry, and car commuters (who get less traffic on the street when more people use transit)…Several people testified that some form of road pricing or bridge tolling would be an additional stream of revenue consistent with this philosophy.

The MTA needs more consistent and reliable revenue streams. Congestion pricing fits the bill in this regard, too. The need for predictable revenue also led speakers to suggest more broad-based taxes…Kevin Corbett of the Empire State Transportation Alliance recommended both road pricing and a payroll tax…

The city and state have been derelict in their contributions to the MTA, and debt financing has gone too far. [Ed. Note: I’ve covered this issue in depth over the last few months. It is a point worth repeating.]

It is reasonable, even desirable, to institute regular and predictable fare increases, but straphangers are currently shouldering too much of the burden… Through the farebox, MTA riders fund 55 percent of the agency’s operating costs, the highest share in the nation…Corbett appeared to encapsulate the general sentiment when he called for “modest and regularly scheduled [fare increases], not more than once every other year.”

The MTA must become more efficient and financially transparent. Many speakers praised the progress Lee Sander has made in streamlining the MTA, and just as many wanted to see further opportunities for efficiency identified. Two speakers, Gene Russianoff of the Straphangers Campaign and City Comptroller Bill Thompson, recommended creating an independent watchdog agency to monitor the MTA’s finances.

These suggestions clearly run the gamut from desirable (congestion pricing) to politically unfeasible (payroll taxes) to guardedly unnecessary — an independent watchdog would just add another layer of bureaucracy to an organization trying to shed unnecessary positions.

What these ideas do suggest, however, is that the MTA has options other than a fare hike that they need to explore in full. The agency big wigs would have to lobby our state legislature and city leaders to secure more funding and a congestion pricing; they could reorganize the entire MTA agency. But in the end, these ideas must be exhausted before a fare hike is instituted.

I don’t know what Ravitch’s final recommendations will look like. For the committee to be effective and for the MTA to have a chance at securing some kind of governmental approval to a controversial plan such as congestion pricing, Ravitch’s final report will have to take a strong position on one recommendation. Anything more than that will become a muddled mix of solid policy that doesn’t make for a good talking point, and the MTA would face the same issues with which the Barack Obama campaign is grappling when it comes to the economy.

But no matter the outcome, the MTA should follow up on and each every bit of testimony they hear this week. Congestion pricing may be the best outcome for the MTA and for the city, but they should explore selling the bridges and streamlining agency operations too. Every little — and big — bit helps.

While Wall Street was suffering through its worse day since Sept. 2001, leading transit advocates gathered at NYU to testify on the state of the MTA’s finances. In the first Ravitch Commission hearing, leaders from all walks of New York public life stressed the need for a lifeline of money from New York City and State. The MTA, they warned, could face dire consequences if the MTA’s fiscal health is not restored.

I spent much of Monday at NYU but in classes. So I missed the hearings. Luckily, the good folks from the Tri-State Transportation Campaign were on hand to report on the testimony:

Leading transportation, environmental and labor groups warned today that New York faced major fare hikes, and cuts in transit service and vital repairs unless new City and State aid is raised to address the MTA’s “titanic” financial problems.

The warning came at the first public hearing of the State Commission on MTA Financing. The Commission – appointed by Governor David Paterson and headed by former MTA Chairman Richard Ravitch – is charged with recommending ways to meet the MTA’s financial needs over the next ten years. Its report is due out by December 5th.

In July, the MTA officially announced major operating deficits in its $6 billion operating budgets for 2009 and 2010. The deficits are caused in large part by declining tax revenues in a bad economy; rising fuel costs; and the impact of years of massive borrowing to finance badly needed repairs.

More alarming, TSTC reports, is the current state of the MTA as one of the nation’s leading debtors. At a time when the country is falling into crippling debts, the MTA is the country’s fifth leading public debtor. Only New York City and three states owe more money. Clearly, the MTA cannot remain solvent and operate a viable transit network for a region of nearly 19 million people.

“Years of borrowing as a result of the City and State’s disinvestment in mass transit are coming to a head as the price of fuel has drawn many new people to transit, with total ridership up in the last year by more than 5% on the subways. What’s more, the proposed hikes would come at a time when working and middle class New Yorkers are already struggling with a rising cost of living, and real economic hardship,” TWU President Roger Toussaint said.

Toussaint testified on Monday along with prominent activits such as Gene Russianoff of the Straphangers Campaign, Kevin Crobett of the Empire State Transportation Alliance, Robert Yaro of the Regional Plan Association and Kate Slevin of TSTC. As each organization head passed through the commission sessions, they all had the same message.

“Failure to make the necessary investments in the critical transportation infrastructure would severely hamper New York’s economic viability. We simply can’t allow this to happen,” Corbett said.

As Monday’s market crash proceeded as expected — and Tuesday promises to be no better — the MTA is certainly facing an uphill battle. New York State doesn’t have any money; New York City doesn’t have any money; and the Federal Government is too busy bailing out the country’s housing market to focus on the New York City transit network. But the ramifications for our region and for our nation are just as drastic.

Without a viable transit network, New York City will face a precipitous decline. In all sectors, the New York economy will suffer, and as we’re seeing on Wall Street, when New York suffers, the rest of the nation will suffer. It doesn’t have the cachet of a Fannie Mae or a Freddie Mac, but in its own way, more than just New Yorkers rely on the MTA.

In the end, the Ravitch Comission will probably tell the city and state to spend more money. The panel will probably recommend a congestion fee as well. And in the end, our elected officials won’t respond. As Paul S. White, head of Transportation Alternatives said, “The MTA’s problem is clear: The City and State have inadequately funded mass transit for years. The formula for funding mass transportation should be changed.”

While much of the news focus surrounding the proposed 2009 MTA fare hike has focused on the burden this imposes on we the riders, every now and then, an astute editorial draws attention to the real issue: unacceptable levels of government subsidies for the MTA. Today’s comes to us from The New York Times’ editorial board:

Neither the city nor the state is paying its fair share, despite what they claim. With the Metropolitan Transportation Authority facing a budget gap of nearly $1 billion next year, direct subsidies from both governments last year totaled about $600 million, not much more than what they were a decade ago, according to the nonpartisan Independent Budget Office. Adjusted for inflation, subsidies have actually declined, saddling riders with an ever-increasing burden.

The main problem is that New York’s state legislators have failed to put a dependable source of financing — like congestion pricing — in place. Transit has been forced to rely on fluctuating taxes from real estate and other sources and, increasingly, rising fares…

The M.T.A. has said it needs the city and state together to contribute an additional $300 million next year. State lawmakers say they are awaiting the recommendations of a commission led by Richard Ravitch, expected after the November elections. Mayor Michael Bloomberg insists that the city has already done its part, contributing $1.2 billion last year.

But Mr. Bloomberg gets to his $1.2 billion figure by including not only the city’s direct subsidies, which are what really matters, but also an assortment of other kinds of payments that do not directly benefit the M.T.A. They include $344 million in interest payments on money the city borrowed for previous transit aid.

A safe, clean and reliable mass-transit system is not only environmentally sound; it is also essential to New York’s economy. We know the city and state have their own huge, looming budget gaps. But both need to dig deeper to keep mass transit moving.

I’m quoting at length here because the point is a very important one. The government — but the city and the state — need to find a way to fund our mass transit network. New York’s economy depends on it, and if these legislatures don’t kick back more money, the city, the region and the state will suffer.

The F’s Seventh Ave. stop in Brooklyn is just one of many stations in need of rehabilitation. (Photo by Benjamin Kabak)

Back in June, when the MTA announced $2.7 billion in capital construction costs, subway advocates around the city groaned. Among those cuts were plans to rehabilitate 19 stations in dire need of renovations, and it seemed like business as usual for the cash-starved MTA.

Well, look what happens in an election year. Patrick Arden of Metro New York reports today that the MTA has withdrawn the plans to cut $2.7 billion for its construction budget and may be amending and resubmitting the planned cuts. He reports:

The MTA withdrew a controversial plan to slash 15 percent from its current five-year capital program last week, just days before the proposal faced a state panel’s deadline.

“We were prepared to support the amendment,” said Long Island Republican John Flanagan, the state Senate’s rep on the MTA Capital Program Review Board. “But the Assembly had some major concerns.”

These concerns centered on $2.4 billion in cuts to city subway and bus programs, including the loss of rehabs to 19 stations. Overall, the $2.7 billion in MTA cuts were technically “deferred” into the next five-year capital program, yet funding for that plan remains uncertain. In shifting resources, the MTA had proposed several new projects to address subway flooding and overcrowding, altering subway vents and buying new cars. For now, those items are in limbo.

While Arden couldn’t get a hold of any Assembly members willing to dish, MTA spokesman Jeremy Soffin told the reporter, “We expect to resubmit the amendment.”

To me, this seems like a classic case of legislative cold feet. Faced with an upcoming election and recent attention to the state legislature’s unwillingness to fund the MTA as it should, Assembly representatives are asking the beleaguered transit agency to cut back on the cuts. If I were a betting man, I’d say that some of the 19 stations scheduled for rehabilitation will get that overhaul, but the Smith/9th Sts. stop probably won’t get the extensive face lift it needs.

I’m sure in a few days or weeks — once we have a better sense of the Ravitch proposals — the MTA will resubmit their plans for budget cuts, and I’m sure the Assembly won’t like it one bit. But until state leaders are willing to fund the MTA, this cat-and-mouse budget game will continue ad nauseum. And some people say history doesn’t repeat itself.

When it comes to the MTA and its recent economic difficulties, the media has enjoyed laying all of the blame for rapid fare hikes and fiduciary black holes squarely on the backs of the transit authority. Absent are many mentions of the inadequate city and state contributions to the MTA’s coffers. New York City’s Independent Budget Office would like to see this media approach change and, more importantly, would like to see more government contributions to the MTA.

In a report (PDF) released yesterday, the NYCIBO slams the city and state for shortchanging the MTA and blasts the media for failing to focus on the real financial issues at hand. City Room’s Sewell Chan reported on the IBO’s findings:

State and city subsidies to the Metropolitan Transportation Authority have remained largely flat since 1990, exacerbating the authority’s fiscal pressures at a time when it is threatening to raise fares and facing steep deficits because of the turbulence in the real estate market, according to a new report.

The three-page report…did not make any policy recommendations, but it suggested that the intense news coverage of the authority’s troubled finances has largely overlooked the issue of government subsidies. The authority collects far more revenue from subway, bus and commuter rail fares, dedicated taxes, and bridge and tunnel tolls than it draws from direct government aid.

“It remains to be decided whether new types of subsidies are necessary, or whether existing levels should be altered by adjusting terms that have held some subsides flat for a decade,” the report’s authors, Alan Treffeisen and Doug Turetsky, wrote. “But in order to best decide how to aid the M.T.A. in the future, a common understanding of how much assistance the city and state provide today is needed.”

You won’t hear me disagreeing with this assessment. In fact, I have long called upon city and state officials to stay true to their words and adequately and fully fund the beleaguered Metropolitan Transportation Authority. Of course, politicians love to posture, and while New York’s leaders are happy to give lip service to this IBO statement, none of them will accept financial responsibility for the MTA.

On Thursday, in fact, Mayor Bloomberg illustrated just how the politicians are willing to talk the talk but not walk the walk. “Generally speaking, given the quality of mayors, they should be in control of their transportation systems,” Bloomberg said yesterday, The Times reports.

But when pressed to commit a greater level of city money to the MTA, Bloomberg changed his tune. “We have no money to do that, and it’s up to the state to find the money,” he said.

It’s always up to someone else to find the money, and as the city and state — two financially-strapped institutions in their own rights — bicker over funding, the MTA will turn to its one steady source of revenue: fare hikes. The only way to change this course of events is to convince elected representatives once and for all to show the MTA the money. That’ll be the day.