MTA

The Apple Store is coming, and Grand Central may never be the same. That, at least, is a dramatic take on the latest news.

Later today, the MTA Finance Committee will vote to approve a 10-year lease with Apple for the current Metrazur space, and after months of rumors, the computer and tech giant will begin preparation for the space. It is, for Apple, an ambitious undertaking. At 23,000 square feet, the Grand Central store will be the company’s largest, and Apple was the only company to respond to the MTA’s RFP for the space. They — and not the MTA — will pay Metrazur $5 million to terminate their lease early and have vowed to make only “modest alterations” to historic elements while keeping signage at a minimum. Still, the store’s presence will be felt.

First, the lease terms: Apple will be renting out the entire northern balcony for payments that start at $800,000 a year and grow to over $1 million by year ten. They will also be renting an additional amount of ancillary facilities for over $300,000 a year, growing to $400,000 by year ten. The lease contains two five-year options as well. In addition to the Metrazur space, the currently-closed northeast balcony will be a part of Apple’s retail store as well.

In its own materials, the MTA feels it is getting an above-market offer from Apple even though they were the only ones to respond to the RFP. They are paying significantly more than Metrazur does now. Apple has said that construction will last approximately 120 days once they obtain control over the property. So it seems as though opening in time for the 2011 holiday season would be optimistic at best.

What intrigues me most about Apple’s arrival is its sheer popularity. The MTA isn’t charging a sales percentage on the lease, but the authority anticipates that the presence of the Apple Store will boost gross sales to its other Grand Central terminal by at least 1 percent which would add $500,000 to the MTA’s take. The dollars, though, are the least of my concerns.

The staff summary of the lease has a sentence that piqued my curiosity. “Recognizing that the Apple Store is expected to attract many customers and entail a substantial back-of-house operation, Apple Metro-North and MTA Police Department personnel have engaged in intensive planning effort to ensure that Apple’s operations will be compatible in all respect, and not interfere with, the primary use of the terminal as a transportation facility.”

In other words, keep those long lines out of the way of harried commuters.

Even as Grand Central matures into a retail and food hub, it is as its most basic level a place that services people going somewhere else. It’s home to one of the busiest subway stations in the city as well as the largest number of train platforms in the world. Turning it into a destination has increased its popularity and made it a more pleasant place to wait for trains, but it still must get people to their destinations.

So Apple will have to compromise. When the iPad 2 came out in March, I checked out the line on 14th St., and it went from the corner of 14th and 9th Ave. to 17th and 10th Ave. That won’t work in Grand Central as commuters try to navigate gadget-crazed fans. Apple has vowed to make it work, and so has the MTA. In a few months, we’ll see it in action.

Vornado says they will fund and maintain transit improvements underneath 15 Penn Plaza. (Click to enlarge)

The relationship between transit and development in New York City is a tight one indeed. While early subway routes snaked their way through population centers of the day, the expansion of the system throughout Brooklyn, Queens and the Bronx spurred on dense development in areas of the city far from Manhattan’s Central Business District. It’s no stretch, then, to say that without the subways, the city wouldn’t be as big and as far-flung as it is, and landlords wouldn’t be nearly as well off as they are.

Why then do management companies and building owners have such a tenuous relationship with transit investments? Those constructing new buildings and complexes that will exert a pull on the transit system must contribute to expansion plans, but those landlords who enjoy the benefits of transit improvements are reluctant to pay for routine maintenance and upkeep. The Union Square escalator saga is a prime example of that phenomenon.

In the Real Estate section in today’s Times, Julie Satow explores how the MTA is trying to work with developers to improve investment in transit-related properties and encourage better cooperation between interested the parties. She writes:

There are more than 600 miles of subway track and hundreds of stations in New York City, and zoning requires that developers in high-density areas like Midtown Manhattan, Union Square and Downtown Brooklyn move nearby subway entrances into their property lines and renovate them. As a result, private entities may be responsible for public services, a situation that some experts say is not always ideal.

“The M.T.A. has learned the hard way that it is one thing to ask a developer to make an upfront capital investment, and quite another one to maintain something on a day-to-day basis over the years,” said Juliette Michaelson , the director of strategic initiatives at the Regional Plan Association, a policy, research and advocacy group. “In 10 years, when that escalator fails, who fixes it? These details must be worked out in advance.”

To improve its dealings with private developers, two years ago the transit authority quietly opened a three-person Office of Transit-Oriented Development. It hired Robert Paley, a real estate expert who spent time in the private sector — as an executive at AvalonBay Communities he helped develop Avalon Chrystie Place on East Houston Street — and also worked previously at the M.T.A. on projects like the Atlantic Terminal Mall in Brooklyn.

Paley, writes Satow, is in charge of coordinating “the many public agencies and other stakeholders that are often involved in large, privately financed transit improvements.” His role, he says, is taking on increased importance as the real estate market begins to rebound. “It was very quiet when I first came onboard, but in the past several months, the phone in our office has begun ringing, indicating to me that developers are warming to the idea of building again,” Paley said.

The test case for the authority’s new approach will be Vornado’s plan to reopen the Gimbel’s Passageway as part of its 15 Penn Plaza development. Vornado is hoping to build a two-million square foot office building at 15 Penn Plaza, and in exchange for gaining an exemption to the zoning regulations, it has pledged to fund extensive transit improvements at Penn Station.

Paley wants to hold the company’s feet to the fire. “if the construction starts, and the building moves quickly, there is a risk that the public improvements that were promised will get left behind,” he said of efforts to secure a firm plan for the upgrades before 15 Penn Plaza rises.

Still, as Satow highlights, even these pre-build deals don’t fully address issues of continuing maintenance. That’s the real problem. Escalators that remain broken and never get repaired are a blight upon the system and inconvenient as well. Entrances that remain closed over disputes between upkeep — such as the one at the north end of the 50th St. station along 8th Ave. — lend only the illusion of access. Developers and building owners should be more committed partners in this dance, and hopefully, Paley can realize that goal.

When the MTA readied its service cuts in late June of 2010, the media coverage focused on those who were going to eschew the subway for surface transit. An amNew York article found a few commuters who said they were going to bike while other stories featured interviews with people claiming they would begin to drive instead. Shockingly, that has not come to pass.

In its Transit Committee books for this week’s upcoming meeting (pdf), the MTA has released its year-end data for 2010, and the numbers show growth across the board that persisted past the date of the fare hikes. Subway ridership hit 1.6 billion in 2010, the second-highest total since 1950, and the MTA drew in over $3.3 billion in fare box revenue. Although the authority’s final ridership totals were 0.1 percent below expectations, the number represents a 0.2 percent increase over 2009.

Breaking it down, we see subways that are getting more crowded as buses grow emptier. Weekday subway ridership hit 5.2 million per day, the second highest total since 1950 and a 1.4 percent increase over 2009, while weekend ridership, despite myriad service changes and generally poor service, reached a two-day total average of 5.36 million. Saturday ridership climbed above 3 million while Sunday hit 2.3 million. That is, says the MTA, the highest weekend total in over 40 years.

Buses, meanwhile, have not been as lucky. Ridership in 2010 decreased by 2.8 percent to 696.9 million. Perhaps New Yorkers are growing fed up with bus service. When it’s routinely faster to walk over significant distances, only those physically unable to do so will hit the pavement. Pre-board fare payment systems can’t come soon enough.

The MTA attributes the increased ridership to the economy, and in doing so, they present the below graph. It clearly shows how ridership — the dashed line — tracks with changes in the city’s job figures. If ridership is going up, so too must be the city’s key employment numbers.

Subway ridership aligns closely with the state of employment in New York City.

In the fare department, the MTA saw the average cost it charges per ride go up. In 2009, the MTA drew in $1.485 per swipe while in 2010, that climbed to $1.562. That increase is directly attributable to the full-year effect of the June 28, 2009 fare increases. Interestingly, now over 33 percent of riders use the 30-day unlimited ride card. That is, I believe, a high-water mark, and I’ll be curious to see what the new triple-digit price tag does to that figure over the next few months.

Meanwhile, despite the added revenue, the fare still remains well below 1996 levels. That year, prior to the introduction of discounted MetroCards, the MTA drew in $1.38 per swipe. In numbers adjusted for inflation, they’re earning just $1.03 per swipe in 1996 dollars. As much as we bemoan the fare hikes, the subway is still a very good deal.

So what then can we see from all of us? First, it appears as though the service cuts had a negligible impact on ridership. While the pre-cut numbers in May showed ridership on the rise, so too did the months after the service cuts. In fact, the 12-month rolling averages have been increasing since July. Apparently, cutting service doesn’t impact transit usage as much as many feared. That is, however, a dangerous lesson to learn. While it highlights the inelasticity of transit demand, at some point, there will be a breaking point, and cuts will begin to impact transit usage.

Second, the city’s buses suffered a far worse fate than the subways in the cuts. While bus ridership has been declining nearly steadily since December 2008, the cuts have not stopped the bleeding. While bus ridership figures have nearly leveled out, the cuts — along with the inherent problems with bus service I mentioned above — ensured that those numbers would not increase at all this year.

Politically and economically, 2010 was a terrible year for the MTA, but New Yorkers need their transit. People are waiting longer for trains, but they’re still coming out in droves. When will our city and state politicians realize that?