MTA Politics

A few weeks ago, Gov. Andrew Cuomo uttered a phrase that could go down in New York state history. “I am the government,” he said in a radio interview in early November. Since then, Cuomo has run roughshod over Albany, enforcing his whims over those of the state legislature and public, and New York City’s transit service will soon be paying a heavy, heavy price.

The fun started earlier this week when Gov. Cuomo announced an agreement forged with Dean Skelos and Sheldon Silver to reform New York’s tax code. As a favor to suburban legislators who enjoy transit access but want the city to subsidize their commuter rail service even more than we already do, Cuomo threw in a partial repeal of the payroll mobility tax. That tax, by the way, supports the MTA to the tune of $1.5 billion a year. Without it, the authority would be facing massive fare hikes or service cuts.

Originally, the new tax proposal was to cost the MTA $250 million in annual revenue, but that number has since increased to $320 million. No one is happy. The Times editorialized against MTA cuts, and a group of transit advocates spoke out against the decision. In a statement endorsed by the General Contractors Association, Straphangers, the RPA and the Tri-State Transportation Campaign, the group highlighted the issue with the state’s approach:

The problem with this approach is three-fold:

• estimates of what’s needed can be incorrect, exposing the MTA to serious financial risk;
• payrolls can grow over time, subsidies do not; and
• subsidies can be lowered over time, as was the appropriation for student MetroCards;

A better way can be found in the way public schools are being treated right now. These schools now pay the PMT and then apply for reimbursement from the State.

Right now, Cuomo and state leaders claim their find $320 million through alternative funding sources, but as Streetsblog noted yesterday, the MTA’s payroll tax funding has now become discretionary. The state can remove the funding; they can fail to find it; they can do whatever they want because they are the government. While congestion pricing with dedicated transit revenues would likely generate the $320 million needed to cover this new funding gap, that option has been off the table since the fall, and leading congestion pricing advocates tell me it could be a few years before those efforts are revived.

To make matters worse, in a special session in Albany yesterday, Cuomo essentially striped the Transit Lockbox Bill of any bite. What was a strong bill with stringent requirements has now become a shell of its former self. Originally, the lockbox, which passed by the Assembly and Senate with nary a dissent, prevented the state from removing transit funding without the full support of the state legislature. It also required a public statement detailing the amount diverted from mass transit and the impact that diversion would have on the level of service, maintenance and security.

Those key provisions are now entirely gone. In the new bill, foisted on Albany by Cuomo, the governor as the power to divert funds if he “declares a fiscal emergency,” and the reporting requirements have been removed entirely. The public will not know the extent of the raids on service levels unless others report on them. This is a lockbox without a lock, and a group of union leaders and transit advocates are not happy. “We do not support the substitute legislation passed in this special session,” the coalition that saw the bill through originally said. “It does not constrain future raids on transit funds, and deletes the requirement that the of the diversion of transit dedicated funds be reported.”

The bill’s original sponsors have vowed to restore the language next year, but Gov. Cuomo never indicated that he would sign the more powerful piece of legislation. And so we are left with an MTA striped of $320 million, no clear sign from where replacement funds will originate, and a lockbox that isn’t. As Andrew Cuomo said, he is the government, and his is a government with no sense of the role transit funding plays in New York City. Sad times indeed.

As New York state leaders in Albany look to reform the tax code, the payroll tax that, in part, funds the MTA will be cut, Gov. Cuomo announced this afternoon. The new plan, which enjoys the support of a bipartisan coalition of lawmakers will see the state directly reimburse the MTA for last payroll tax revenues, but I’m wary of any plan that weakens the MTA’s dedicated revenues.

The payroll tax cuts are part of a larger plan that relieves the tax burden on middle class New Yorkers while targeting the upper classes instead. It’s also designed to spur job creation through infrastructure investment, although the transit part of that picture appears to be missing. For more on the overall package, feel free to browse through the Governor’s press release. The following bit buried at the end of the release though is important:

The Governor and the legislative leaders have agreed to reduce the MTA payroll tax on small businesses while maintaining the necessary funding for the MTA from other sources. The payroll tax would be eliminated or reduced for 294,900 taxpayers overall. The tax would also be eliminated from an additional 415,000 taxpayers by raising the self-employment income exemption. In addition, private elementary and secondary schools, as well as parochial schools, would be exempt from the tax. The State would compensate the MTA for the $250 million in lost revenue.

When the original plans for a payroll tax overhaul were leaked earlier this week, the reimbursements were backwards. The state was going to reimburse tax payers for the monies they had to pay out under the payroll tax, and the MTA would see no loss in revenue from the state. Now, the state will use “other sources” to ensure that the MTA gets its $250 million while the taxpayers won’t need to pony up the dough any longer.

Of course, we know how that story ends. Without a steady stream of money from the payroll tax, the state will suddenly be unable to find the $250 million it owes to the MTA, and legislators will blame the MTA when the authority comes forward with a budget deficit. It’s unclear right now if that $250 million payment would cover just 2012 or would be implemented on an ongoing basis. As it stands now, the MTA’s budget projects long-term deficits with over $1.5 billion in payroll tax revenue. Reducing that figure by $250 million a year would increase the MTA’s deficits as well as the pressure on the public to carry that debt through fare increases, service cuts or both.

Furthermore, this move by the state highlights the need for the lockbox legislation. Not only would it make it more difficult for the state to rearrange MTA finances, but it would require the state to explain what $250 million in loss subsidies would mean for the MTA. Instead that legislation has languished on Cuomo’s desk.

The MTA in a statement was diplomatic: “”We are grateful to the Governor, Majority Leader and Speaker for reaching an agreement that ensures the MTA will continue to receive the level of funding needed to keep New York and its economy moving.” I can’t help but feel pangs of fear that the $250 million will disappear, and the MTA will slip further into the red as time goes by. A healthy MTA can spur the economy just as much as a reorganized tax code. Just ask these guys.

Now that Gov. Andrew Cuomo has pledged to overhaul New York’s tax code, Senate Republicans are chomping at the bit to do away with the controversial payroll mobility tax. As The Daily News reported last night, Senate leaders may even find a way to modify the tax without impacting the MTA’s bottom line.

“We have had some discussions about modifications on it — in certain ways for certain businesses — where it may be a little onerous,” one state source said. “It wouldn’t be money removed from the MTA because the MTA needs the money.”

According to the News, small businesses and parochial schools would likely be reimbursed for taxes, but even that relief doesn’t appease state Republicans who want the measure repealed entirely. That is, of course, an untenable position for the MTA. “It generates about $1.4 to $1.5 billion a year and it’s very important that we maintain that level of revenue to main our level of services,” the incoming MTA CEO and Chairman Jospeh Lhota said in an interview. “[The State legislatures] set tax policy; it’s their decision. I’m not a state legislator; I cannot support it one way or the other.”

With all of this politicking going on, Daily News columnist Pete Donohue has called upon the New York GOP to “drop the farce” of a payroll tax repeal effort. Donohue takes Sen. Jack Martins to task for his uninformed and misleading comments concerning the payroll tax.

“The idea that the MTA could provide anything remotely close to a safe and affordable service after such a financial pounding is fantasy,” Donohue writes. “That’s fitting because the whole Republican proposal is based on the fictional notion that the subway system is overly and unfairly subsidized by the suburbs.”

As Donohue notes, LIRR riders pay 47.8 percent of the railroad’s operating costs while NYC Transit riders are on the hook for 58.6 percent. Combine that reality with the fact that it’s nearly impossible to replace $1.4 billion in annual revenue, and the payroll tax should be safe. If it isn’t, that will spell trouble for our transit system.

Since earning an appointment to the MTA, Joseph Lhota hasn’t said anything at all to the press. He co-signed a letter to New York City district attorneys concerning assaults on MTA employees, but he won’t be giving one-on-one interviews to the press until after his State Senate confirmation hearing. Instead, we’re left with the public record of a one-time Giuiliani official who has little transit experience and has spent the bulk of the past decade in the private sector.

Today in The Times, Michael Grynbaum unearths a gem. During the 1999 brouhaha over a controversial art exhibit at the Brooklyn Museum, then-Deputy Mayor Lhota discussed his views on MTA control in a sworn deposition. As Grynbaum reports, Lhota espoused a view that has generated some debate over the years:

In 1999, while serving as Rudolph W. Giuliani’s deputy mayor, Mr. Lhota stated in a deposition that if he had his way, the responsibility for New York’s subways and buses would lie fully with City Hall, not with the state. “I do wish we controlled the transit authority,” Mr. Lhota said at the time. “I have gone to Albany constantly in my capacity as budget director, because I don’t think the way the transit authority works with the City of New York is very appropriate.”

Reminded of his comments in a brief interview on Tuesday, Mr. Lhota laughed, groaned and then said emphatically that he no longer held the same position. “I believed it then,” he said. “I don’t believe it now.”

…On Tuesday, Mr. Lhota cheerfully conceded that under the Giuliani administration, he was occasionally frustrated by the city’s lack of oversight of the transit system. “It is a matter of perspective,” he said. “I think that statement was consistent with what most budget directors in New York would have said.” But he added, “I do believe the management of the M.T.A. is in much better shape today than it was then, and I do not subscribe to the same thoughts.”

The context and Lhota’s comments are nearly incidental to the idea that has long since plagued New York: Who should be in control of the New York City subway system? For the first half of subway history, New York City was responsible for the subways. Mayor La Guardia oversaw an ambitious reunification plan that brought the IRT and BMT under direct city control, and the Board of Estimates set budgets and fare policies.

Although it made sense for the city to oversee its transit network, the bureaucratic and political structure was rife with problems. Candidates for office turned the subway’s nickel fare into a campaign issue, and from 1904-1948, the fare remained five cents even as inflation devalued that nickel. Eventually, thanks to overly ambitious plans to build out the IND lines and the declining fare revenue, overseeing the subways nearly drove the city to bankruptcy.

When the state assumed control of the subway system and eventually created the MTA, it did so for purposes of financing. Surplus from the Triborough Bridge and Tunnel Authority helped cover the subway operating deficit, and eventually the state folded the regional transit network — including buses and commuter rail — into the MTA in an attempt to streamline operations. Without proper legislative support and authorization, it hasn’t always succeeded.

At this point in time, we know of the problems with the MTA. The state legislature refuses to own the problems; New York City disclaims as much interest as possible. It is at once everyone’s and no one’s problem. If the city were to assume control of the subway, as Lhota proposed in 1999, the state would quickly roll back a lot of funding, and the city would have to find those dollars. On the other hand, any such rollback could come with an expansive home rule grant that could allow the city to toll bridges or institute congestion pricing without Albany approval.

For now, of course, nothing will happen with MTA control. The state will continue to maintain its oversight, and the city, which isn’t interested, won’t be arguing for a larger role in subway management. It’s been that way for nearly six decades, and it won’t change any time soon.

Joseph Lhota, a former Giuliani official, has been named chairman and CEO of the MTA.

Jay Walder’s replacement atop the MTA now has a name and a politically pedigree, but much like the new incoming head of the Port Authority, he doesn’t have a resume replete with transit experience. After conducting an extensive search and interview process over the last few months, Gov. Andrew Cuomo has named Joseph Lhota, a MTA Board member and one-time deputy mayor during the Giuliana Administration, to succeed Jay Walder as CEO and Chairman of the MTA. Nuria Fernandez will serve as the authority’s Chief Operating Officer.

“I am pleased to accept the recommendation of the extraordinary search committee and nominate Joe Lhota to be the next chairman and CEO of the MTA,” Governor Cuomo said this afternoon. “Joe Lhota brings one-of-a-kind managerial, government, and private sector experience to the job and a lifelong commitment to public service that will benefit all straphangers. I look forward to working together as we continue to reform the MTA, reduce costs, and improve service for New Yorkers. I thank the members of the MTA Search Advisory Committee for their diligent work and thorough review.”

The search committee had also recommended Neil Peterson and current Transit president Thomas Prendergast as potential replacements for Walder, but Lhota earned the Governor’s stamp of approval. “Millions of New Yorkers depend on the MTA every day and they deserve the most efficient and effective service. Throughout my career in both the public and private sectors, I have initiated reforms that are performance-based and that cut costs, and I look forward to bringing this same approach to the MTA,” Lhota said.

Lhota, who will begin serving as the interim head of the MTA later this year and must face a Senate confirmation process, first came to light as a potential candidate last week. At a time when the MTA must confront intense union negotiations and a multi-billion-dollar gap in the capital funding plan, Lhota will be expected to serve as a manager during tense times. No stranger to New York State government, Lhota served as the Deputy Mayor for Operations under Rudy Giuliani and spent time as the city Budget Director as well.

While Budget Director, Lhota, according to the governor’s press release, “cut costs, led agency reorganizations and consolidations, and implemented performance-based strategic planning,” and it’s clear that he is expected to do the same with the MTA. Fernandez, his new COO, was the one-time head of the Chicago Airport Systems and has served as an executive with the U.S. Department of Transportation, the Washington Metropolitan Area Transit Authority and the Chicago Transit Authority. She has significant transit planning experience in the private sector as well.

Lhota, who will receive a salary that will be five percent less than Walder’s, has a full plate. Senate Republicans are still making noises about repealing the payroll tax — a move that would cripple the MTA — while riders want more frequent service and cleaner trains without having to pay a higher fare. Few people, it seemed, really wanted to inherit the CEO/Chairman job, and Lhota will have to convince skeptical New Yorkers and transit advocates who fear more service cuts that he’s up to the task.

Various members of the governor’s search committee praised the selection — some with more hyperbole than others. “The ideal candidate to lead the MTA is experienced in finance, business, and government, and cares deeply about public service. Joe Lhota meets all of these criteria, and I can think of no one better suited to this critical position,” Richard Ravitch said.

Other advocates were a bit warier. “We hope Mr. Lhota’s business acumen will help guide the agency towards more sound fiscal footing without compromising service and affordability for the system’s 8.5 million daily riders,” Kate Slevin from the Tri-State Transportation Campaign said. “We also hope he will continue the innovative service improvements executed by his predecessor, including subway countdown clocks, rapid bus service, and nonstop tolling.”

Lhota, who Robert Yaro of the RPA called a “fiscally prudent and seasoned manager,” will face increased scrutiny over the next few months as he readies for the job and undergoes what is sure to be a loud confirmation hearing. As Paul Steely White, the head of Transportation Alternatives, said, “To succeed, Joseph Lhota must continue Jay Walder’s commitment to transit riders. With the MTA facing a $9.9 billion gap in its capital budget, New Yorkers want an MTA Chair will ensure that elected officials increase the funding needed to maintain the public transit system and prevent further fare hikes and service cuts.” Savior or stop-gap, Lhota will have to deliver.