MTA Economics

Two weeks ago, Hurricane Sandy swept through New York, leaving death and destruction in its path. With the cleanup and recovery efforts well under way, the monetary costs of the storm are slowly coming into view. The initial price tag, at least, tells only part of the story though as the effects from salt water exposure will be felt for years.

As the cleanup began in earnest a little more than a week ago and the subway system slowly came back online, The Wall Street Journal ran a short piece on potential costs of recovery. One recent study pegged the cost of cleanup at close to $60 billion citywide, and MTA executives warned that transit repairs would be substantial.

“Think of it as a 90- to 100-year-old patient that got into an accident and is in the hospital,” MTA Chairman Joseph Lhota said to The Journal. “Things always happen when you get in the hospital that you don’t expect. The amount of saltwater that is in the system, as we clean it out, we’re finding other things.”

Today, The Times reported that Gov. Andrew Cuomo will ask Washington, D.C., for at least $30 billion, and a good portion of that will be for transit repairs. The article notes that Cuomo will ask for $3.5 billion “to repair the region’s bridges, tunnels and subway and commuter rail lines.” Already, the Governor has pledged to refund the MTA fares lost to the days when transit was offline and then subsequently free, and with the precarious state of the MTA’s budget, these are dollars the authority can ill afford to lose.

Yet, there’s more to it then just this starting point. In The Times’ article, reporter Raymond Hernandez mentions how the $30 billion total would be allocated. Cuomo hopes to spend some money not just repairing infrastructure but upgrading it. Power delivery systems would be modernized, and the fuel supply lines would be upgraded to prevent the shortages currently impacting the region. Missing though is any talk of upgrading the subway infrastructure, and boy, does it need upgrading.

The immediate problem concerns one of avoidance. How do we prevent this storm surge from flooding out the subways the next time we get a big storm? (And, yes, there will be a next time.) Over the past few weeks, some have suggested giant inflatable plugs that can dam tunnels, but those still lead to flooding in front of the plug. Others have talked of storm doors, surge barriers and better drainage systems. Whatever the answer, something must be done with an eye toward prevention.

The long-time problem focuses around that exposure to salt water Lhota mentioned. Even with the system up and running, salt water will impact the useful lifetime of this equipment. Switches and signals will degrade faster than they otherwise would have, and the MTA will have to spend money it did not anticipating needing on necessary infrastructure repairs. Who will fund these projects as well?

We’re in unchartered territories here in many ways. In the post-election climate in D.C., multi-billion-dollar allocation requests may be tough to see pass through the House, but the region needs money and support. The services provided by the MTA, as we saw, are too critical for the region and its economy to be swept under the rug. A discussion focusing on storm preparedness if one we need to have sooner rather than later, and the money must follow.

According to New York State Comptroller Thomas DiNapoli, the MTA’s finances are, temporarily, in good shape. Or perhaps they’re not. In a report released on Tuesday evening but not yet available on the Comptroller’s website, DiNapoli noted that the MTA has aggressively cut costs while reining in spending over the past few years. He warned of an increase in debt service payments and noted how looming fare hikes will outpace inflation. In other words, there’s nothing new here.

I haven’t yet seen the Comptroller’s report because I’m not on his press distribution list and, in a move that screams “lack of transparency,” his website hasn’t been updated as of nearly midnight on Wednesday morning, but I don’t need to see it to understand. Press reports make it abundantly clear that DiNapoli has, once again, examined a series of documents made publicly available by the MTA and is essentially paraphrasing them. Instead, let us look at the words of Carol Kellerman, the president of the Citizens Budget Commission.

In a piece late last week in Crain’s, Kellerman questioned the MTA’s approach to its looming budget crisis. Highlighting the MTA’s decision to push back the fare hikes by a whopping 60 days, Kellerman wondered if the authority was sacrificing short-term good will for long-term fiscal health. Here is Kellerman’s take:

Although some might get mixed signals from these developments, nobody should doubt that the MTA is in serious financial trouble. Everyone—commuters, MTA employees, city and suburban residents, and elected officials—must face reality and contribute in some way to a long-term solution to the MTA’s fiscal problems. And periodic, predictable fare increases along with continued belt-tightening, including a trimmed service schedule, are unavoidable elements of a sensible solution.

The “surplus” announced for 2012 is based on an accounting approach that focuses only on immediate cash needs. By this calculation, the MTA has a surplus this year because its projected cash receipts are modestly ahead of projections made at the start of the year. But current-year obligations to be paid after Dec. 31 and the need to keep up with capital repair and replacement needs, known as depreciation, are left out.

Using the more appropriate accounting principles followed in the MTA’s audited financial statements, the agency has an estimated deficit of $2.7 billion in the current year and faces even larger deficits in the next four years. Indeed, it has had a surplus only once in the past 20 years (in 1996, after a large fare increase). Deficits exceeded $2.5 billion annually from 2008 to 2011, sums that are equal to at least 16% of annual expenses, and they continue to be large despite enactment in 2009 of the now-threatened payroll tax.

The MTA needs the revenue from the planned 2013 and 2015 fare hikes; delaying them, as announced, from January to March will worsen the 2013 deficit by $67 million and the 2015 deficit by $69 million, for a combined loss of $136 million. While we all may welcome service restorations, the $29.5 million going for this purpose should be better justified. The 2010 service cuts were selected based on analysis of ridership patterns and services that were little used. Overall bus ridership has not been growing enough to warrant major service restorations; instead, adjustments can be made to deploy buses in accord with shifting usage patterns.

We know this story inside and out. The MTA has taken on so much debt over the past decade and has committed so much of its finite pie to pension obligations that the payments will soon come due. Without labor reform, increased state commitments and higher fares, the agency will suffocate under the weight of debt service payments. Kellerman’s answer isn’t sufficient enough.

I don’t believe the MTA should look to cut services until every other avenue of potential revenue has been exhausted. Even though the MTA often resembles a pension organization, its ostensible mission is to supply transit service. That means meeting demand while increasing options. The MTA should run services to replace other modes of transit, and often that means running routes that aren’t profitable. Cutting services simply leads to disgruntled commuters, more congestion and a less productive city. Maintain service, but bleed dollars out of every other potential revenue stream.

Ultimately, though, Kellerman’s conclusion serves as the unifying theme. She writes “It’s only natural to complain about taxes, fare hikes and service cuts, but the alternatives can be far worse. The economically devastating consequences of a deteriorating transit system loom if all New Yorkers do not acknowledge our collective responsibility for the system on which our jobs and family incomes depend.” That cannot be said often enough.

Later this morning, at a breakfast hosted by Crain’s New York and in front of a crowd of influential New Yorkers, MTA Chairman and CEO Joseph Lhota will take the microphone to defend and promote the MTA. He is likely to talk about the power of transit and its role in shaping New York, and inevitably, as his talk with mirror recent headlines, he will have to defend the payroll mobility tax. Under assault by a state judge with an agenda, the payroll mobility tax was no one’s good idea other than David Paterson, but the MTA can ill afford to lose over $1.5 billion in annual revenue.

The payroll tax has always been an odd creature. The state approved it despite congestion pricing or bridge tolling schemes that may city-based transit advocates thought were more progressive. It is a seemingly small tax — just 34 cents for every $100 in payroll — that has generated opposition from the end of Long Island to the norther reaches of Metro-North. Politicians want to see its demise, but no one has yet offered up how the MTA can replace a gaping hole of approximately 17 percent of its annual operating budget. We are at an impasse.

Earlier this week, Charles Brecher and Rahul Jain from the Citizens Budget Commission ran the numbers and determined what would happen if the MTA had to face a future without a payroll tax, in part or in whole. As many have suggested in the comments to my post, it’s not unreasonable to assume that the MTA would look to jack up fares for the suburban riders whose neighbors are so opposed to the tax. The outcome, the two write, would be quite extreme. They note that of the $1.4 billion in revenue generated by the payroll tax, 70 percent came from city-based employers. So how do we replace the remaining $428 million if the suburban portion of the payroll tax were to be eliminated? Take a read:

Since the forgone money came from the suburbs, the MTA could reasonably look to those counties to make up the gap by either paying more in another way or taking cuts in services — to the Long Island Rail Road (LIRR) and Metro-North Railroad (MNR).

Both railroads are heavily subsidized by regional and statewide taxes in addition to the PMT. In 2012 the LIRR will cost more than $1.6 billion to operate and MNR will have expenses surpassing $1.3 billion. Passenger fares are expected to cover only about 36 percent of the LIRR budget and less than 46 percent of the MNR budget. Relatively small amounts come from Connecticut for MNR and from advertising and other “earned” revenue sources. The bulk of both railroads’ costs are covered by taxes like the PMT appropriated through the State budget.

What if the LIRR and MNR had to deal with the $459 million in lost PMT revenue? This would mean expenditure cuts of about 16 percent for the LIRR and 15 percent for the MNR. In rough terms, that is the equivalent of ending service one day per week. If offset by higher fares, the lost sums would require a 46 percent increase on the LIRR and a 32 percent increase on the MNR. The price of a ticket to Ronkonkoma, the largest station by ridership on Long Island, would increase from $334 a month to $488; a 32 percent change in the price of a monthly ticket from White Plains to Grand Central Terminal on MNR would increase the price from $229 to $302. These changes do not include already planned fare hikes of 7.5 percent for all MTA riders for 2013, bringing the monthly fare to more than $513 for Ronkonkoma and $319 for White Plains. Neither the service cuts nor the fare hikes would make riders happy.

A few days ago, Greg David at Crain’s wrote about how the payroll tax has “undermined support” for transit amongst certain suburban leaders. He advocated for a combination of a restored commuter tax and a tolling proposal. In essence, the dollars should be the same as the payroll tax, and those paying are the same as well. It’s basically just reallocated the money to similar constituents and calling it something else. Maybe that would work or maybe not.

Perhaps the solution is to stiff suburban riders — at least temporarily. Suburban representatives would cry bloody murder over such a fare hike, but they can’t have their cake and eat it too. Transit service provides a benefit to those towns and residents who don’t live in the city but want easy access, and nothing is free. As Brecher and Jain wrote, “People should be careful about what they wish for; the theory of an unconstitutional PMT could be far less pleasant in reality. There is no such thing as a free lunch or a free train ride; the LIRR and the MNR must be paid for in one way or another, and the PMT may be less painful than many other options.”

Until Albany finds a better, more equitable solution, the payroll mobility tax should stand, and even though neither he nor his predecessor Jay Walder proposed the idea, Lhota will fight for it until the end. The MTA budget has little other choice right now.

As hyperbolic as it sounds, it’s no stretch to say that the MTA’s world was rocked by Judge R. Bruce Cozzens, Jr.’s shocking ruling Wednesday overturning the payroll tax and a slew of other fees and taxes that support the MTA. After four other cases were tossed out, a Nassau County judge elected to his position on the same party line as key payroll tax opponents fulfilled the wishes of suburban politicians and torpedoed up to $1.8 billion in annual MTA money — or over 16 percent of the agency’s budget. The ruling left transit advocates fretting, and many wondering what comes next.

So what does come next? First up, the MTA isn’t going to see its revenues decrease in the short term. According to agency officials and Gov. Cuomo, the state will continue to collect the tax while suffering through the appeals process. “There won’t be any disruption in the MTA funding,” the governor said yesterday. “We believe the ruling is wrong and we believe the ruling is going to be reversed.”

Meanwhile, as State Senators such as Jack Martins, a Nassau County Republican who won election on an anti-MTA platform, gloated like a child over the court ruling and Westchester politicians from both parties celebrated, the MTA issued dire budgetary warnings. “The payroll mobility tax drives the entire economy of New York,” MTA head Joe Lhota said. “Without the MTA, New York would choke on traffic.”

And how do you solve a potential a $1.8 billion gap? Through cuts and fare hikes of course. As Lhota said during a press conference, “Without the payroll mobility tax, the MTA would be forced to balance its budget with a combination of devastating service cuts and ever-increasing fare hikes.” As a comparison, the MTA’s draconian budget in 2010 resulted in only around $90 million in savings from service cuts, and a fare hike generates around $50 million in added revenue per one percent increase. To cover this potential funding gap, the MTA would need a fare hike of nearly 30 percent. That’s far far worse than the payroll tax.

Downstate, Mayor Michael Bloomberg, who had already washed his hands of the MTA-related mess in Albany, did not have kind words toward those who had earlier torpedoed his congestion pricing plan. Again on Friday morning, he took to the airwaves to call for a renewed effort.

“Is there a plan in place? Let me see if I can work out a plan for you,” he said Thursday. “Why don’t we toll people, I got it! Let’s toll people coming into the city, OK? Because then it wouldn’t be anything outside the city, there’s no jurisdictional issues, and we could use the money to improve mass transit! And that would get fewer people on their cars and more people on the subways. The subways would be bettter, more reliable, more pleasurable, and it would be paid for by people coming in and out. That’s a good idea isn’t it? I think so. But wait, now my recollection … I betcha the legislature thinks they have a better plan. So my suggestion is you address your question to those people who think they have a better plan.”

It’s still stunning to think that a supposedly impartial state judge thought the MTA budget not a “substantial state state concern” and somehow twisted home rule jurisprudence to create this ruling. Still, that’s where we are. The MTA and New York State will “vigorously” pursue an appeal, and the money will still flow. But politicians have won a talking point without actually finding an adequate solution.

It’s unlikely an appeals court will uphold this ruling, but if they do, as Joe Lhota said yesterday, “it would be a catastrophe for the entire region, and for the entire state’s economy that depends on it.” The payroll mobility tax is far from an ideal solution for MTA funding, but until politicians are willing to take a serious look at transit support in the region, it’s what we have. No one can afford to lose it.

A Nassau County Judge, elected on the Conservative party ticket last year, dropped a bombshell on the New York Metropolitan region early Wednesday evening when he issued a short and sloppy ruling declaring the MTA Payroll Mobility Tax unconstitutional. The tax, which leads to approximately $1.2-$1.4 billion in annual revenue for the perennially cash-starved agency, has been unpopular outside of New York City, but the alternative — higher fares and much less service — is worse. Now we’re left on the precipice of such a reality.

The decision itself — which you can read right here — is short and on shaky legal grounds. Supreme Court Judge R. Bruce Cozzens, Jr., divorces New York State economic conditions from reality and comes to the conclusion that the tax, as challenged by Nassau County, required a home rule message. Here’s the kicker paragraph:

It is not contested that the counties within the MCTD would be affected if there were a decrease in the capability of the MTA. However, it is hard to see how the residents in Buffalo or other upstate areas would similarly be affected. If this matter really is a substantial state concern, than the legislature could have reasonably taxed every county within the state under a general tax law to meet the MTA deficit. Instead, it chose to only tax those counties within the MCTD. This is because it is only the counties within the MCTD that are affected by the continuance of development of the MTA. By the actions of the legislature itself, it has been shown that the MTA payroll tax is only an issue that is of concern to the residents within the MCTD. Therefore, the budgetary crisis of the MTA is not a substantial state concern and the exception to the home rule message requirement does not apply in this case…The court finds that this law does not bear a reasonable relationship to a substantial State concern.

Setting aside the fact that there is no one central government in the Metropolitan Commuter Transportation District that could issue a home rule request for a multi-county tax, Cozzens is charitably off his rocker if he thinks MTA funding isn’t a substantial state concern. Well over half the state’s population is centered in the MCTD and without the MTA, the entire’s state region would grind to a halt. We’re not asking Buffalo to fund the MTA (even though perhaps we should), but the impact of losing transit service downstate would definitely be felt upstate.

Meanwhile, from the perspective of precedence, this ruling, if upheld, could be disastrous. Various other taxes endorsed by the state are levied only in the MCTD, and those have stood for years or, in some cases, decades. Sales taxes, mortgage recording taxes, franchising taxes, fuel taxes — all of these could fall under similar logic to that issued in this misguided ruling. The MTA would be facing a multi-billion-dollar deficit that it would likely be flat-out unable to cover without defaulting on many of its outstanding fiscal obligations.

So where do we go from here? As transit advocates are calling on Gov. Andrew Cuomo and leaders in Albany to do something, the MTA says it will not let the case end here. “We will vigorously appeal today’s ruling,” the authority said in a statement. “We believe this opinion will be overturned, since four prior challenges to the constitutionality of the law making the same argument have been dismissed.”

In my mind, it is indeed likely to be overturned, but the short-term losses are unclear. Cozzens’ ruling simply declared the law unconstitutional; he didn’t stay his own opinion for the politics of it to work out. The defendants will have to ask for a higher court to grant a stay if they want to continue collecting the money during the appeals process, and then they’ll have to go through such a process. It’s not going to take a day, a week or even a month.

This is just another partisan jab at the MTA by a judge elevating politics over the law. It’s another sign that transit will never be on an adequately secure position vis-a-vis funding, and it’s another sign that Albany isn’t doing its part. In my thread earlier, some commenters suggested cutting LIRR service to cover the deficit. The MTA won’t do that, but such a doomsday future is one step closer today than it was yesterday.

The MTA and Dutchess County have a tenuous relationship at best. The local politicians rail against the MTA whenever it can, and one Poughkeepsie newspaper ran a factually incorrect and ideologically misguided editorial a few months ago calling for the MTA’s dissolution while repeating the tired two-sets-of-books trope. It isn’t friendly territory.

So yesterday, Joe Lhota, head of the MTA, spoke at a Dutchess County Regional Chamber of Commerce breakfast. He offered up a full run-down of the benefits the MTA provides to the region and spoke at lenght about both the need for subsidies and how the MTA relies less on those subsidies than many similarly situated transit agencies.

For full coverage of his back-and-forth, check out Dana Rubinstein’s full report; Lhota says some interesting things about people who commute into the city and Metro-North’s relationship with the overall economic health of parts north of the city. I’m most concerned and intrigued by what he said of the payroll tax:

“I need to find a way … whatever happens with the payroll mobility tax, to find a substitute for it that’s more equitable and more fair,” said Lhota. “But one thing you should know, is that the money … coming from the payroll mobility tax is not going to New York City. It’s actually going to the counties.

“But be that as it may, I will work with Senator Saland, I will work with the assemblymember, on trying to find ways to make the payroll mobility tax or its replacement more equitable,” he continued. “We do need the money. As I mentioned before, there’s no commuter railroad in the country that can work unsubsidized. So we need to find some form of subsidy that is more transparent, more direct, more equitable, than the payroll mobility tax.”

The payroll tax opposition never goes away. Even now, Long Island representatives are trying to whittle it away, but Lhota’s point is one that seems to go unheeded in Albany. The MTA cannot afford to lose the money from the payroll tax without an adequate replacement. Be that congestion pricing, tolling or other revenue streams, the money has to come from somewhere. Or else those upstate economies will suffer as services are lost. I’ll leave it to you to define “more equitable.”

The Grand Central Apple Store has sparked a dispute between the MTA and New York State Comptroller Thomas DiNapoli. (Photo by flickr user redswept)

In one corner, Comptroller Thomas DiNapoli and his deputies. They allege that Apple, Metrazur and the MTA engaged in some backroom dealings that lead to a biased RFP process and a favorable lease for Apple in Grand Central Terminal.

In the other corner, Jeffrey Rosen, the MTA’s director of real estate. He says the process was transparent and resulted in major fiscal gains for the MTA. Only Apple or a similarly wealthy retail company could have bought out the Metrazur lease while upping the rent payments. It’s a fight for the ages and one indicative of the problems the MTA faces as a quasi-governmental agency with significant and sought-after real estate holdings.

This tale of government bureaucracy and a mostly insignificant much-ado-about-nothing got its start in December when The Post starting drumming up controversy over the Apple lease. For reasons unknown, Alexander Hamilton’s former newspaper continued to harp on the fact that Apple was paying a relatively low $60 per square-foot and did not have to share a percentage of profits with the MTA.

The Authority, noting that Apple is paying four times more than what Metrazur would have paid for another seven years, called the deal a good one for an anchor tenant. Apple’s rising tide could lift all real estate boats with increased traffic, and the early returns, in fact, bear that out. Even amidst a sluggish retail economy, business at Grand Central has been booming since the Apple Store opened up.

So seemingly at the behest of The Post, New York State Comptroller Thomas DiNapoli had his people do some digging, and yesterday, they released their report [pdf]. How you interpret it depends upon your experience with the way commercial real estate works. On the one hand, the Comptroller’s Office was none too pleased. “While Apple may turn out to be a good tenant, the MTA set a troubling precedent when it played favorites and gave Apple a competitive edge over others for the Grand Central space,” DiNapoli said in a statement. “Apple was directly involved in setting the terms of the lease and given exclusive access to information more than a year before any other vendor knew the Grand Central location was available. The company even signed a $2 million agreement with the current tenant to vacate its space five days before the MTA issued the RFP.”

Essentially, as the Comptroller’s Office notes, the timeline is more than a little bit favorable to Apple. Apple and the MTA started talking about the Grand Central space in November of 2008, and the MTA later approached Metrazur concerning a buy out. In July of 2009, Metrazur and Apple began negotiations, and the two sides settled on a $5 million payout. As DiNapoli’s office notes, this amount eventually became a key requirement for the MTA and provided a significant barrier to entry for tenants not in Apple’s shoes. Whether or not this is a controversy depends upon we interpret that payment.

Meanwhile, once Metrazur and Apple had their price, on May 18, Apple agreed, in a non-binding document, to advance $2 million to Metrazur to vacate early. This money was contingent upon Apple’s winning the RFP. So with many of the financials worked out, the MTA opened the RFP on May 23 and closed it on June 27, receiving just one bid from Apple. Here’s how the Comptroller summarized things:

Although the RFP was competitive in the sense that other bidders were able to submit proposals, the circumstances of the MTA’s lengthy and substantial dealings with Apple support the conclusion that the playing field was not level amongst all potential bidders. At a minimum, Apple had both an informational and time advantage spanning many months, whereas other vendors were afforded approximately one month to determine if the space was practical and the price feasible for them. Moreover, Apple was directly involved in negotiating the amount of the buy-out of Metrazur which ultimately became a key requirement of the RFP.

As a result, the competitive process followed by MTA RED in this instance was at a minimum severely slanted toward Apple. While this procurement may not be unlawful, it surely evidences non-compliance with the intent of our prior audit recommendation requiring RED staff to ensure all rental units are marketed through one of the competitive processes required by the MTA. Moreover, we are concerned about the existence of such behind the scenes close dealings between a vendor and MTA officials prior to issuance of an RFP.

DiNapoli’s report also highlighted one bidder who claimed potential lessees should have been free to negotiate a buy-out with Metrazur and that the $5 million was simply too high. That seems like an oversimplification of a complex real estate transaction.

The MTA issued a vehement response to DiNapoli’s audit. “This audit is not fact-based, and accordingly, their opinion is worthless. The MTA’s lease process with Apple was open, transparent and followed both the spirit and letter of the law,” MTA Chairman Joe Lhota said in a statement. “The overt bias against the MTA and Apple in this audit is breathtaking. Trust, honesty, humility, transparency and accountability are the building blocks of a positive reputation. It’s a shame the Comptroller’s staff who prepared this audit showed none of these fine qualities.”

Offering up less bombast and more nuance, Rosen went into detail on the MTA’s process and outlined how the buyout of Metrazur would not have been possible without negotiations. The MTA, he noted, has increased their revenue from the space, if not maximizing it based upon the size and identity of the tenant. If no one else bid on the space, that’s because no one else could meet the steep financial demands that Metrazur, a tenant with a binding lease, could ask for and receive.

So where does this leave us? In the real world where Comptrollers aren’t free to poke around in every real estate transaction, what the MTA, Apple and Metrazur did was to make a deal. A landlord had a tenant in a below-market rent with a potential tenant interested enough in the space to pay a few million dollars to the restaurant. The landlord facilitated the deal and realized significant increased revenue because of that deal. It’s highly doubtful the landlord would have enjoyed such a bump in income without the deal, and no one else seemed interested enough in the space anyway. Because the MTA is subject to government oversight though, it’s a controversy.

As with many of DiNapoli’s audits, I believe there are bigger fish to fry. Of all the wasteful MTA real estate holdings, the East Balcony at Grand Central with Apple as a tenant ranks pretty low on that list, and the desire to grab political points seems to outweigh a truly egregious violation of decorum of the law here.

The MTA's most recent budget projections rely heavily on a net zero wage increase to avoid larger deficits down the road. (via)

A few years ago, the MTA faced a precarious financial situation. Amidst a bad economy with debt payments and pension obligations coming due and healthcare and benefits costs spiking, the agency that powers the transportation backbone of New York City had cut costs, slash services and raise fares to make ends meet. In the intervening years, the MTA has managed to find ways to find savings of nearly $1 billion per year, but as the agency’s long-term budget, unveiled on Thursday, is a bit rosier than it has been, it’s still a budget fraught with problems.

For now, the MTA is cautiously optimistic. As budget documents show, the 2013 Preliminary Budget and July Financial Plan for 2013-2016 contain some good news. With aggressive cost-cutting and a bump in tax revenue, the MTA expects to break even this year and next as its out-year deficits shrink. Still, in the documents presented today, those deficits could still reach $231 million in 2016, and that’s only if all goes according to plan.

“I’m pleased that we will be able to keep the MTA’s budget in balance despite our challenges, but I am concerned about the long-term trend in our expenses,” MTA Chairman Joseph Lhota said. “The MTA’s underlying cost structure is increasing for reasons that are beyond the authority’s control, so we are depending on all stakeholders coming to the table to find ways to address those areas that we can control.”

So what then needs to go according to plan? Who are these stakeholders? First, the MTA believes it must be its own stakeholder. Cost-savings measures will increase to $1.13 billion annually by 2016. Unfortunately, a big part of that equation has led to no raises or wage increases for non-union employees since 2008 (and the subsequent brain drain is a topic for another day). The authority is also relying on the “continued receipt of dedicated taxes as projected,” always a dicey assumption when Albany and its piggy bank raids are involved.

Additionally, the MTA is relying on biennial fare increases in 2013, 2015 and 2017, for starters. With a brighter financial outlook, though, the agency said today it would delay the fare hikes from January to March of each year. Such a move will cost the authority $67 million in 2013 and $69 million in 2015. I’ve questioned the wisdom of such a move, but MTA officials feel it is a positive customer service move.

Finally, we arrive at the key and controversial part of the plan: The MTA will keep its out-year deficits low only through a net-zero increase in labor costs. Without those savings, the deficit in 2014 could top $400 million, and 2016 could dawn with the MTA as much as $530 million in the red. As you might expect, TWU officials, still working on negotiating a contract, were not happy to hear this.

Already claiming that $29 million in service enhancements means the MTA is swimming in enough money to