Second Ave. Sagas

Category: MTA Economics

  • Amidst a payroll tax appeal, MTA gets a credit boost

    Even as Nassau County and various other suburban counties appeal the ruling upholding the payroll tax as constitutional, the MTA has enjoyed a credit boost from one ratings agency. According to a report issued this week by Moody’s, the payroll tax ruling represented “a credit positive” for the MTA, but as an appeal is ongoing, it’s a fragile step in the right direction for the debt-laden agency.

    As Moody’s noted, the payroll tax represents nearly a tenth of the MTA’s annual budget, and overturning the tax would be very costly. “Loss of this revenue stream would add significant financial strain on the MTA and eliminate a sizable resource available for payment of debt service on the transportation revenues bonds,” the report explained. The MTA currenty has $33.2 billion in outstanding debt on the books, nearly $19 million of which are in those bonds.

    The stark reality of the MTA’s budget situation has seemingly escaped those protesting against the payroll tax. The same group of politicians and business interests strenuously objected to a congestion pricing plan and were left with the payroll tax as the best option among a sea of bad ones. Overturning it would be incredibly costly not just to the MTA but to the suburban areas that benefit from having a direct transit connection to New York City. Yet the appeal, likely to be unsuccessful for Nassau County, rolls on.

  • Nassau County to appeal payroll mobility tax ruling

    Even though numerous lower courts have upheld the Payroll Mobility and even after New York State’s Appellate Division judges overturned the lone Supreme Court case that didn’t find the tax constitutional, Nassau County isn’t giving up. The Long Island plaintiffs will appeal this week’s decision to the Court of Appeals, the highest state court in New York’s judiciary system, Newsday reported today.

    Details on the appeal as scarce for now, but it seems that Nassau County Executive Edward Mangano is content to spend more taxpayer dollars pursuing a lawsuit he has no chance of winning. Meanwhile, those from north of the city are still bemoaning the tax as well. “Dutchess County can’t afford this tax. It’s bad for the economy, whether it’s constitutional or not,” Assembly rep Kieran Lalor from Fishkill said. (This isn’t the first time Lalor has slammed the tax.)

    Ultimately, though, this tax isn’t any more of a job-killer than completely defunding the MTA to the tune of $1.3 billion annually would be. The regional economy would simply dry up without this subsidy. The tax is constitutional, and it will remain on the books. If Lalor and his ilk dislike it, it’s up to them and other state representatives to find a better solution that they feel is more equitable than a payroll tax.

  • On appeal, NY state court OKs MTA payroll tax

    While most of the country had its eyes trained on the Supreme Court down in D.C. on Wednesday, New York’s Appellate Division in the Second Department issued an opinion that should pique the interests of transit advocates throughout the region. Ten months after a Long Island Supreme Court justice ruled that the MTA Payroll Mobility Tax was unconstitutional, an Appellate Division judge has overturned that ruling, guaranteeing that the MTA can continue to collect nearly $1.4 billion annually. While the ruling was expected to be a favorable one for transit, those fighting for the tax can breath a sigh of relief.

    In a statement issued on Wednesday, the MTA called its transit network “the backbone of the region’s economy” and thanked the judges for the ruling. “Removal of the tax’s revenues would have had a catastrophic impact on the region’s 8.5 million daily transit riders,” the MTA said. On the other hand, Edward Mangano, the Nassau County Executive who brought the case, bemoaned the ruling. “We maintain the tax is overburdensome and just plain unfair,” he said.

    As to Mangano’s second point, the Appellate Division disagreed. When Justice Bruce Cozzens issued his original ruling last year, he claimed that the Payroll Mobility Tax — and, by extension, state schemes to fund the MTA — did not serve a legitimate state function and did “not bear a reasonable relationship to a substantial State concern.” It takes only a class in basic municipal economics and not law to know how laughable Cozzens’ line of argument was, and the Appellate Division quickly dismissed it.

    Citing precedent that found rapid transit in New York City to be a substantial state concern and previous cases that involving Nassau County that upheld regional funding plans because they “transcended the concerns of Nassau County alone and affected a sizable portion of the State as a whole,” the Appellate Division reversed Cozzens. They four-judge panel wrote:

    Here, the Sponsor’s Memo for the MTA Employer Tax Law noted that continued investment in mass transit provides direct benefits to mass transit users and to the regional and state economies. Chapter 25 of the 2009 Session Laws enacting the bill announced that “[m]ass transportation services in the [MCTD] are essential to meeting the basic mobility and economic needs of the citizens of the [MCTD], the state and the region.” The 2008 report of the Commission on Metropolitan Transportation Authority Financing also observed that the benefits of the MTA’s capital program boost economic activity across the State and could create jobs in New York City and in “communities as far away as Buffalo, Albany, and Plattsburg[h].”

    Thus, the MTA Employer Tax Law, which provides a funding source for the preservation, operation, and improvement of essential transit and transportation services in the MCTD, serves a substantial State concern. As such, it was not unconstitutionally passed without a home rule message. Absent constitutional inhibition, the Legislature has “nearly unconstrained authority in the design of taxing impositions.” The plaintiffs’ arguments that the MTA Employer Tax Law violates article III, § 20 of the New York Constitution, article X, § 5 of the New York Constitution, and the equal protection clause of the New York Constitution lack merit.”

    In Albany, efforts to repeal or pare down the payroll tax will continue, but that’s the right approach. A legislative response is now required, and the payroll tax, imperfect but necessary, lives on as a permissible, constitutional exercise of legislative power that clearly serves a substantial state interest.

  • Updates from Albany: A lockbox bill and purple SBS lights

    As the legislative session in Albany winds down for the summer, there’s been a flurry of activity relating to the MTA. Unfortunately, that activity, despite a stridently-worded editorial from the Daily News, hasn’t yet involved a confirmation vote from the Senate for Tom Prendergast, but a recent Newsday story says that Senators are pushing for action on the nomination before next week is out. Still, there’s transit news aplenty so let’s dive in.

    Transit Lockbox (S3837)

    The transit lockbox is back. Since the late-2000s raid on the MTA budget, transit advocates in Albany have been pushing for legislation that would make it hardly and politically inconvenient for the state’s executive and legislative branches to reappropriate money that’s supposed to go to transit. The Senate first passed the lockbox concept in 2011, but Gov. Andrew Cuomo later stripped the bill of most protection.

    The Senate is at again. With only three votes against — including one from the same Bill Perkins working to roll back the 125th St. bus lane — the lockbox bill moved out of the Transportation Committee on Tuesday and was approved by the full Senate on Wednesday. If passed by the Assembly and signed by Cuomo, the bill would require a memo with every mass transit funding diversion outlining the total amount taken, that amount as the volume of current fare revenue, the cumulative amount taken over the previous five years, and a detailed statement of impact on service, maintenance, security and the capital program.

    Streetsblog penned a piece yesterday on this legislation, and its supporters are guardedly optimistic. The Assembly should take it up early next week, and then Cuomo will have to make a decision. “I don’t think the Governor can water the bill down this time,” Gene Russianoff said to Stephen Miller. “For Cuomo, the option is only yes or no.”

    Purple Lights for Select Bus Service (S5703)

    It’s been nearly five months since a bunch of Staten Island politicians threw a fit over the MTA’s Select Bus Services’ flashing blue lights. The buses are no longer easily identifiable from great distances, and riders have called upon action from Albany to permit the MTA to employ some form of flashing lights. Slowly, legislation is winding its way through the halls of government that would allow for colored lights on Select Bus Service vehicles.

    This new bill would amend the state’s vehicle and traffic law to permit buses owned and operated by the MTA or New York City Transit as part of the Select Bus Service to use flashing purple lights to indicate such service. The bill has the support of Jeffrey Klein in the Senate and Micah Kellner in the Assembly and so far has been referred to committee by each chamber. I’ll keep an eye on this one. Hopefully it can move forward.

    Assessing the Impact of Service Cuts (A6249)

    Finally, we have another intrigued bit of policy: The Senate and Assembly have both passed a bill requiring the MTA to issue a report detailing service cuts. The bill would require the agency to report detailed information on all services eliminated since 2008 and would be due by December 31. The report would require info on the following:

    • The number and geographic breakout of all customers impacted by such service reductions and eliminations, for each route;
    • The actual revenue savings versus the anticipated savings from such service reductions and eliminations, for each route;
    • The costs to fully restore such service reductions and eliminations, for each route; and
    • A detailed plan for full restoration of services that have been eliminated or reduced since January 1, 2008; or, alternatively, a detailed plan for equitable restoration of subways, buses, and commuter rails that substantially mitigates the negative impacts of such service reductions and eliminations and fairly restores the services across all impacted neighborhoods and regions.

    Most, if not all, of this information is available piecemeal in MTA budget and board documents, but this report would be a cohesive summary of the past five years’ worth of transit rollbacks and a way forward. It’s unclear if Gov. Cuomo will sign this bill into law.

  • On planning and estimating Sandy relief costs

    While I’m on the topic of tabloid coverage of transit, let’s consider the MTA’s post-Sandy spending spree and Nicole Gelinas’ recent questioning of the agency’s dollar figures. In light of the fact that it’s been a whopping seven months since Sandy and that service to the Rockaways will resume in a week, Gelinas claims that the MTA pulled its $6 billion post-Sandy price tag out of thin air and “has no clue how to spend $6 billion to keep our antique subway system dry.” Her argument rests on the fact that Andrew Cuomo, the public face of the MTA’s post-Sandy funding requests, has never said how his office and the MTA arrived at the final total.

    On the one hand, Gelinas’ coverage of the MTA’s budget is usually pretty spot-on. She’s highlighted the ever-increasing labor costs and the impact pension obligations have on future fare hikes and service cuts. But on the other hand, her claims in this week’s columns are off base. I’ve been told by a few sources within the MTA and outside of it that their repair estimates were not just cobbled-together guesses. The FTA, the federal body that approves these funding requests, reviews the assessment process and helps estimate repair costs. Essentially, anything under water will have to be replaced, and the MTA and FTA worked to figure out what exactly was under water and how much replacement parts and efforts would cost. The MTA is still working on mitigation plans that will not come free or cheap either.

    In fact, Gelinas’ piece runs the risk of drying up the well of federal money for disaster relief and mitigation. All governing bodies, from the state-run transit agencies to municipality-run DOBs, need flexibility in assessing spending requests, and the MTA has only just begun its work. Extensive efforts to replace parts in the East River Tunnels will commence soon enough and a plan for South Ferry will be put in place. Instead of objecting to costs reasonably estimated by everyone involved, maybe a better investigation would involve focusing on why everything costs so much to build in the first place. That is, at least, a legitimate concern.

  • Zocalo shutter paves way for GCT Shake Shack

    The ongoing saga of the Grand Central Shake Shack has reached an end as Zocalo, the overpriced and decidedly mediocre restaurant, closed at end of April paving the way for Shake Shack to open, Crain’s New York reports today. After numerous legal challenges that failed and a bankruptcy declaration last fall, Zocalo and its owners decided to comply with a vacate order set to come due on April 30, and now Danny Meyer’s burger chain will move in.

    For the MTA, this move is a boost to the money it draws in from Grand Central’s lower level food market spaces. Zocalo had been paying a minimum rent of $336,698 per year while Shake Shack’s lease starts at $435,000 a year with escalators to $567,000 by year ten. Meyer’s group will also pay a percentage of gross sales to the agency. “We are pleased to be able to move forward at last with our ongoing effort to re-bid the retail spaces in Grand Central,” an MTA spokesman said to Crain’s. “Doing so in a regularized, periodic way ensures that the public receives the maximum benefit for this valuable retail space.”

    Say what you will about Shake Shack’s food — and plenty of people have plenty of opinions on those burgers and fries — but this place will mint money in the food court at Grand Central.

  • Debating what to do with that extra $40 million

    Toward the end of March, with a general increase in state tax revenue and a slightly rosier financial picture emerging, the MTA revealed a surplus of $40 million that would make its way into the perennially strained budget. Since then, everyone and their mothers has tried to lay claim to these dollars, but the MTA is playing coy. The agency hasn’t determined how to spend or who gets it, and the race is on for the big bucks.

    The money itself comes from Andrew Cuomo’s budget. Despite the obvious lessons of Superstorm Sandy, our car-lovin’ governor hasn’t quite seen the transit light yet. Rather, as the overall state economy picks up, there are more dollars to go around, and the MTA will get to benefit. That said, when Cuomo announced the new funding, he called upon the MTA to better serve as the “circulatory system” for the region’s economy. How best to accomplish that is the latest debate.

    The loudest calls have been for more service. Over the weekend, the Riders Alliance (of which I’m a board member) held a rally with various MTA Board Members and local politicians urging the agency to reinvest in long lost services. Restoring lost buses, reducing off-peak subway headways and expanding the CityTicket were all on the agenda. “Any budget surplus should and must go toward restoring and improving the transit services on which our city relies — especially in the wake of yet another fare increase,” State Senator Daniel Squadron said.

    Others echoed this call. “The MTA must realize that now more than ever the loss of service continues to impact our community and the MTA must do everything it can to restore and expand service for riders who all depend on it,” Assembly representative Nily Rozic, a rising star from Eastern Queens, said.

    At various MTA Board and Committee meetings this week, Board members, especially those from Staten Island, argued to use the money to restore services lost in the 2010 cuts. Increasing bus service would be a big help to the city, and reducing subway headways is seemingly a no-brainer. The MTA though remained non-committal, and others have called for the money.

    On the labor front, TWU President John Samuelsen has called upon the MTA to use the money to up his union members’ wages. At the Board meeting yesterday, Tom Prendergast, future Chairman and CEO, discussed using the dollars to steep avoid a 2015 fare hike. No one, meanwhile, has mentioned applying the money to the MTA’s crushing debt load and paying off some loans ahead of schedule. In a sane fiscal world, that’s likely the wisest solution and the one that would help the MTA and its riders most in the long run.

    But we live in the here and now, and New Yorkers, still adjusting to the new MetroCard prices, want more bang for their bucks. Service should be increased, and the $40 million could go a long way. “I’ve asked the staff of all the agencies to look at service proposals in terms of either restoration of services or enhancement of new services,” Prendergast said yesterday. In July, the MTA must release its annual budget, and we’ll know then how we all will enjoy the fruits of an additional $40 million in spoils. My money is on increased service, and that’s OK.

  • Is the MTA CEO paid enough?

    While overseeing an annual budget of $13 billion and employments rolls in the tens of thousands, the MTA CEO and Chairman earns $350,000 a year and a housing bonus, but by many accounts — particularly that of the TWU — that compensation is far more than he deserves. Even though a mid-six-figure salary sounds good, there’s an argument to ebe made that New York State is under-compensating the MTA head, and that’s just what Josh Barro put forth on Bloomberg News yesterday.

    As Barro argues, we as a society should be willing to pay top government officials far more than we do, in part in order to entice them to stick around and in part in order to entice them to do a good job. As he notes, in the private realm, someone tasked with leading a $13 billion organization would be compensated much better than the MTA head is, and as we saw with Jay Walder, when the right opportunity — notably at triple the salary — comes around, jumping ship is on the table. As Barro argues of recent MTA departures:

    Unlike presidents and governors, it’s hard to say that MTA executives are compensated in prestige: As Lhota’s poll numbers make clear, the public generally doesn’t know who runs the MTA, and if they do, they’re predisposed to think he’s doing a bad job. So Walder left for a job that … pays more and Lhota to seek one that would bring greater non-monetary benefits…

    Voters expect a lot from top public officials. We want them to be talented managers who run the government well. We want them to stay in their jobs long enough to see projects to completion. We want them not to be corrupt. And we want them to work for a lot less than they could make elsewhere. Dropping the last goal would make it easier to achieve the first three, which is a reason to give Prendergast a big raise.

    Over the last few years, we’ve tried to figure out how to get transit executives to stay in place for longer than a year or two. Absent employment restrictions in contracts — which aren’t legally permissible — a higher salary may be the only way to go. It’s a tough argument for the public to swallow, but how else can we retain top talent anyway?

  • Appellate Division hears Payroll Mobility Tax case arguments

    The MTA’s controversial payroll tax went back to court this week as an Appellate Division court in Brooklyn heard oral arguments from attorneys on both sides of the issue. The tax, which delivers $1.8 billion in badly needed revenue to the MTA’s coffers, was overturned by a Nassau County judge last summer in a deeply flawed ruling. The state has continued to collect the tax as the appeal has wound its way through the state court system, and now we’re awaiting a ruling once again on its constitutionality.

    Judy Rife of the Times Herald-Record filed a brief report from the court earlier this week. Although the initial ruling focused on home rule measures, lawyers wisely have opted not to pursue this line of reasoning as state precedence does not support the decision. Rather, as Rife writes, “Steven Cohn and Justin Adin, lawyers for the municipalities, now argue that the state is required to impose a tax throughout New York when it benefits an agency of statewide concern such as the MTA.”

    This argument is a bold but dangerous one for these lawyers to make. Attorneys for the state and MTA have said that the state “has the authority to enact the tax and to levy it selectively,” but if the court rules differently, the entire MTA funding scheme could collapse. Already, various taxes imposed only in New York City and the surrounding counties bolster the MTA’s bottom line, and denying the state the authority to levy these taxes could send the transit agency’s fragile budget into a tailspin. The odds of such a ruling though are remote, but I’ll feel better about it once the Appellate Division issues its ruling. The payroll tax is far from perfect, but without action from Albany, the alternatives are dire.

  • With newfound transit money, a debate over spending it

    As the New York economy has continued to improve, a bit of good news concerning transit funding emerged from Albany yesterday. Gov. Andrew Cuomo announced “major investments in public transit” as part of his 2013-2014 budget. For the MTA, this means an additional increase of approximately $40 million more than it requested for operations support and a reauthorization of capital financing for both the 2005-2009 and 2010-2014 campaigns.

    So how to spend it then? Opinions were diverse. “They should increase bus and subway service where they can,” \Gene Russianoff of the Straphangers Campaign said. “That should be their top priority.” MTA Board members agreed. “We ought to be looking for ways to give back,” Allen Cappelli said. “We did the fare and toll increases, and people have the right to expect we’d look to expand service.”

    TWU officials had other ideas. John Samuelsen, president of the union, said the money should go toward a new contract for the MTA’s workers — an idea long at odds with the MTA’s triple-zero approach. And therein lies the rub. It’s clear to me that the MTA should restore services lost to the 2010 cuts or expand its current offerings, but someone else always wants the money. For now, though, we’ll have to wait as the MTA won’t unveil an updated budget until the summer.