Second Ave. Sagas

Category: MTA

  • A big Apple splash at Grand Central Terminal

    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.

  • Jay Walder to resign as MTA CEO and Chair

    Jay Walder has tendered his resignation as MTA CEO and Chair, effective October 21, 2011, the MTA announced this afternoon. Walder, who has served as head of the MTA since October 2009 and has led a remarkable effort to trim internal costs and improve the authority’s bureaucracy, will be joining the joining the MTR Corporation — a publicly-traded company based in Hong Kong that operates rail services in Asia and Europe — as Chief Executive Officer and a member of the Board of Directors.

    Walder’s controversial Golden Parachute provisions will not be triggered as he is ostensibly departing the MTA on his own. This is, however a big blow to the authority, and one that seems to be a complete surprise to those in both the transit community and the upper echelons of New York government.

    “I want to thank Governors Cuomo and former Governor Paterson for the honor of serving the people of New York State,” Walder said“The MTA’s transportation system is the foundation of the metropolitan region and we are fortunate to have thousands of dedicated men and women who work so hard to provide these critically important transportation services to millions of people each and every day. I believe that we have accomplished quite a lot in a short period, with the support of two Governors, the Mayor, a hard-working Board and many others.”

    In an internal memo circulated to his colleagues at the MTA, Walder, a 52-year-old New York native, said he made this decision with “mixed emotions” but has faith that the MTA will continue on its slow upward trajectory. “I believe that this path that we have collectively set forth on together as a company, to amke every dollar count, deliver the best possible customer benefit is one that will serve the MTA and the region well today and in the future,” he wrote. Sources tell me that he sent a similar note to the MTA Board.

    Walder will leave New York to head up the Hong Kong-based MTR Corporation which operates commuter rail in Hong Kong and intercity rail services from Hong Kong to Beijing, Shanghan and Guangdong in China. It is also building new rail lines in Hong Kong and China and operates rail systems in London, Stockholm and Melbourne. MTR consults in Asia, Australia, the Middle East and Europe as well and has become a leader in transit-oriented development. The company had total revenues of $3.8 billion and $1.1 billion in underlying profit.

    “This is an exciting opportunity for me to lead a publicly-traded, multi-national corporation with a broad set of business activities,” Walder said. “The MTR Corp. is widely recognized for its world-leading rail systems and the innovative property developments that are built around stations.”

    MTR’s revenue figures, as The Wall Street Journal posited, may have been a motivating force. According to The Journal, the current CEO of MTR made approximately $1.78 million in 2010, not including stock options. Walder makes $350,000 as head of the MTA with a housing subsidy.

    During his two years as CEO and Chairman, Walder has led a successful turnaround in the way the MTA does business. He has cut nearly $1 billion in annual expenses from the MTA’s operating budget and recently unveiled a plan that would cut capital expenses by a total of $4 billion over five years. These savings helped stave off financial doom for the MTA. Meanwhile, Walder pushed through a customer service-focused agenda that included train countdown clocks, real-time bus tracking projects, a commitment to open information and two redesigns of the website. He was also amidst a project that will see the MetroCard phased out within the next few years.

    “In challenging times, we brought stability and credibility to the MTA by making every dollar count, by delivering long overdue improvements and by refusing to settle for business as usual,” Walder said.

    My Take: For the MTA, Timing Could Not be Worse

    As the news sinks in, I’m finding little good in this announcement. The next few months are going to be of paramount importance for the MTA as it must figure out how to close a $10 billion capital funding gap and negotiate a new contract with the Transport Workers Union Local 100. Walder had been a vocal part of both of those efforts, and it appears as though he likely won’t be around to see either through. Gov. Andrew Cuomo will likely appoint an interim CEO at a time when the authority can ill afford to suffer through turmoil at the top.

    I also can’t help but feel as though Walder is leaving before the job is done. The MTA is very much in transition as it has tried to cope with an austerity budget, major capital projects and technological innovation. The job isn’t done yet though as funding isn’t in place and projects are in flux. Will the next leader push through countdown clocks and better fare payment technologies? What will happen with the bus tracking projects and the authority’s commitment to providing datasets for developers? What happens with the labor negotiations and the capital budget wrangling?

    Walder was the best and most knowledgeable MTA head during the past few decades, and his departure is clearly a blow to the MTA and those fighting for better transit in the New York City area.

    Politicians, Advocates Respond: ‘An inopportune time’ for a departure

    As the news develops, transit advocacy groups and New York State politicians are readying their statements. “MTA Chairman and CEO Jay Walder has been an effective, innovative leader. He helped restore the agency’s credibility and changed the way it does business, finding billions of dollars in savings during his tenure,” Kate Slevin, Tri-State Transportation Campaign Executive Director, said.” But his departure comes at an inopportune time. New York’s regional transit system faces a capital funding gap that could be as large as $9 billion, and which needs to be addressed in the coming months. Straphangers are at risk. Governor Cuomo must quickly fill this vacancy with an effective leader who has a deep understanding of the transit system.”

    Paul Steely White, executive director of Transportation Alternatives, echoed those sentiments. “Jay Walder steered the MTA through its toughest challenges since the bad old days of the 70s,” he said. “Facing a daunting fiscal situation brought on by the governor and state legislature’s repeated budget raids, Walder kept our trains and buses serving millions of New Yorkers 24 hours every day. His work to bring Select Bus Service and Real-Time updates to transit riders is bringing New York City’s transit system into the 21st Century and will help keep the city and region competitive with other global leaders vying for business,
    talent and capital. Mr. Walder’s commitment to the necessity of transit in the lives of New Yorkers has set a high bar, and his successor must come with equal leadership to steer the MTA and the region through the rough terrain ahead.”

    The RPA put out its perfunctory statement as well: “Jay Walder has done a superb job at the MTA during the past two years of extreme economic challenge. New York will miss his deep knowledge of and passion for the transportation network that makes the region’s economy possible. That network, of course, is bigger than any one individual. We have every expectation that Governor Cuomo will appoint an outstanding transportation professional to replace Jay and continue his work on modernizing and investing in the future of the subways, buses, commuter railroads, and river crossings.”

    While speaking with Albany reporter Liz Benjamin, Senator Martin Golden bemoaned Walder’s departure. Golden called it “a loss to the city and state of New York” but doesn’t believe he was pushed out, sentiments I’m hearing from inside the MTA as well. “I think he was just hitting his stride,” Golden said, “and got an offer he couldn’t refuse. It’s unfortunate for us.”

    Governor Cuomo, who will have the chance to appoint a successor, issued his own statement: “For nearly two years, Jay Walder has shown true leadership at the helm of the MTA and been a fiscally responsible manager during these difficult financial times. Riders of the MTA are better off today because of Jay’s expertise and the reforms he initiated will benefit all for years to come. Jay’s departure is a loss for the MTA and for the state, but I thank him for his service and wish him the best in his future endeavors.”

    Mayor Michael Bloomberg added his take: “Jay Walder is a world-class transportation professional and any city in the world would have been lucky to have him. He set a new course for the MTA during an extremely difficult period when the agency was not given the resources required to meet the City’s needs. He expertly shepherded major projects like the 7 line extension and new bus rapid transit lines, and by embracing new technology, he made significant improvements to the customer experience – from gateless tolling on bridges to countdown clocks in subway stations – that the public will appreciate long after his departure. I was proud to work with him on these and many more projects. He is a first-rate leader with big ideas, and I will miss collaborating with him. He is the type of person we can’t afford to lose, and his departure is a real loss for New York City, the metropolitan region, the state and the country.”

    James Vacca, the head of the City Council’s Transportation Committee, didn’t mince his words. “This resignation comes at a crucial time. A year after the worst service cuts in the MTA’s history and yet another fare and toll increase, the most serious challenges for straphangers may still lie ahead,” he said. “While Chairman Walder deserves credit for taking on many structural issues that previous MTA leaders had delayed for a tomorrow that never came, the MTA continues to face a $250 million operating gap and a capital budget that runs out January 1. It’s getting harder and harder to do more with less, and the MTA needs someone at the helm not only who understands the role mass transit plays in the lives of everyday New Yorkers but who is prepared to get to work on day one.”

  • Public Finance lawyer named to MTA board

    Jonathan Ballon, a public finance lawyer, is the newest MTA Board member. The New York State Senate confirmed Ballon yesterday to a six-year term. He was appointed to the board by Gov. Andrew Cuomo at the suggestion of Robert P. Astorino, the county executive of Westchester, and is likely replacing Donald Cecil, a holdover appointee whose term had expired in 2009.

    A Business Wire piece has a bit more on Ballon’s background: “Mr. Ballan is a Member of the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and heads the firm’s New York Public Finance practice group. He has served for many years in a number of significant appointed governmental positions, including as Chairman of the Municipal Assistance Corporation for the City of New York, Chairman of the New York State Public Asset Fund, and Board Member and Chairman of the Capital Committee of the New York City Health and Hospitals Corporation.”

    Ballon reported has “broad experience developing innovative legal structures for financings for numerous state and local governments.” At a time when the MTA’s finances are on a shaky foundation, his expertise could come in handy.

  • In the news: The future Lady McCartney

    Now that the proverbial cat is out of the bag and everyone knows current MTA Board member Nancy Shevell is set to marry Paul McCartney, The Times decided to profile her. The article, which appeared in yesterday’s New York section, is light on details and high on fluff. The current board member will carry the honorific Lady McCartney due to the former Beatle’s knighthood, and her fellow board members will fete her at some point.

    While Shevell couldn’t be reached for comment, the pieces notes that her term will expire at the end of next month. As she is a freight executive who was once chided for missing too many board meetings, I’ve recently questioned whether she will be reappointed. Now if only The Times would profile other MTA Board members who aren’t set to marry folks as famous as Paul McCartney.

  • ‘She’s got a ticket to marry…’

    In frivolous MTA news, board member Nancy Shevell and her long-term beau Paul McCartney are getting married, Christine Haughney of The Times reported this week. Shevell, who cut her transportation teeth in the freight and shipping industries, has made headlines in the past for her relationship with the former Beatle and for skipping out on MTA Board meetings. She was appointed to the board in 2001 by then Gov. George Pataki, and her appointment expires at the end of June. It’s unclear if Andrew Cuomo will reappoint her or use the first vacancy on the MTA Board during his term to appoint someone he knows with more rail experience.

  • Reports: Apple out at Grand Central

    In early February, the Internet was all abuzz with news about an Apple Store in Grand Central. Supposedly, the computer giant would take over the Metrazur space on the balcony above the Main Concourse. Those dreams were, perhaps, dashed by a tweet though.

    On Thursday afternoon, Jeffrey Roseman, an executive vice president of Newmark Knight Frank Retail, said, “Let’s see if Apple NOT coming to Grand Central, gets as much press as it got, when the rumor started.” Since then, both Cult of Mac and The Observer claim that the talks between the MTA and Apple, categorized as “preliminary,” have fallen through. Neither party is talking on the record about the goings-on, but for some reason, I am not surprised to hear this.

  • A tenuous relationship between transit and developers

    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.

  • Evening Musings: Board OKs million-dollar McKinsey deal

    Here’s a story worth watching over the next few days if only for some excellent outrage: The MTA Board has approved a five-year deal with the management consulting firm — and Jay Walder’s former employer — McKinsey & Co. As part of the contract, McKinsey, earning a nine percent fee, will assess $879.6 million in spending in ten categories identified by Accenture during its 2010 MTA treatment. The MTA believes McKinsey can help identify $20 million in annual savings, and if so, the company would receive less than $2 million. McKinsey thinks it can achieve “significantly greater savings” and could earn as much as $11.7 million if it identifies savings of $130 million or more.

    So why will this be a story? Well, for one, people do not take kindly to the threat of consultants because it means job losses and consolidations are usually on the horizon. The public too looks at these contracts warily. As Brian Lehrer’s radio show proved in November, the average person thinks consulting treatments cost far more than they do and realize far less in savings than they do. The P.R. blowback then can be problematic. When coupled with the fact that McKinsey is Walder’s former employer, it’s easy to see a potential firestorm on the horizon.

    Yet, in the Board PDF announcing the deal — check out pages 40-41 of this PDF — the MTA explains the justification for the treatment. McKinsey’s rate is actually a percentage point lower than what Accenture charged, and the MTA won’t have to pay much at all if the company fails to realize significant annual savings. The MTA, in its words, called the contract “fair and reasonable,” and it’s clear that it costs money to save even more. So I submit this to you for consideration: A deal such as this one should initially raise an eyebrow, but it seems as though this is not an improper contract for the MTA to approve.

  • Post: GCT Apple Store targeting Metrazur spot?

    As we try to figure out where in Grand Central the rumored Apple Store may land, today’s Post sheds some light on the topic. According to Garrett Sloane, the computer giant is targeting the Terminal’s main hall and will take over the balcony area currently inhabited by Charlie Palmer’s Metrazur restaurant. Reportedly, Metrazur’s backers are “scouting new locations,” and the MTA could open some closed balcony space to make room for the vast store. On the record, Metrazur called this a “rumor” while Apple and the MTA declined to comment on the speculation.

  • Despite cuts, 2010 ridership sees an increase

    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?