For the past few months, I’ve been enmeshed in the MTA’s finances stretching back to 1970, and I can see now why politicians have such a tenuous grasp on how the authority is funded. The MTA is made up of various constituent agencies that each operate essentially for 24 hours a day, seven days a week. It has a massive payroll, an extensive operating budget and a separate capital budget. For state legislators who must balance competing demands, understanding this financial structure isn’t — and probably shouldn’t be — a top priority.

Yet, yesterday, while watching MTA CEO and Chair Jay Walder respond to questions from the State Senate Transportation Committee, I was reminded again just how poorly Senators understand how their own actions impact the MTA and downstate regional transportation. Throughout the committee hearing, the State Senators repeatedly spoke out against the payroll mobility tax. It’s somewhat odd that these representatives chose a hearing with Walder to attack the tax because Walder wasn’t even in the United States when the tax was approved as part of the funding package. Plus, the Senate — and not the MTA — was the driving force behind the tax, and if anything, they should debate amongst themselves the best way to fund transit. But I digress.

As the hearing wore on, the Senators ramped up the rhetoric. One from Long Island called it a “draconian” measure that has allegedly crippled the downstate economy. Another wondered why the MTA is so adamant about the millions generated by the tax now if, three years ago, it operated perfectly fine without one. “We didn’t have a payroll tax a few years ago. Why can’t we go back to that?” asked one Senator who later said that it “may be difficult” for the state to replace the $1.4 billion the tax generates.

Walder was unequivocal in his statement in response. “It would be impossible for the MTA to replace $1.4 billion,” he said. He calmly and forcefully explained that the service cuts instituting in June saved the MTA $100 million while the fare hikes raised another $350 million and internal belt-tightening led to $500 million in recurring savings. To go through that process again would hinder the authority’s ability to deliver the subway service its riders demand, and it can’t raise fares 33 percent to cover a potential billion-dollar operating gap.

So why do these myths that the MTA could do without the payroll tax persist? It is in fact a myth of Albany’s making. The reason why the MTA saw its operations budget deficit jump precipitously toward the end of the last decade is debt. As Albany scaled back its direct contributions to the MTA’s capital plan, the authority turned to bond financing instead, and the repayments started coming due. Thus, debt service payments jumped into the $1-$2 billion range, and the MTA had to scramble to pay for both the transportation services is must provide and the debt service it is contractually obligated to repay.

State Senators seem to have a myopic view of MTA financing. If it worked three years ago, why can’t it work today? The problem is that MTA’s economic obligations have increased because of Albany action from decades ago. When past leader try to make future generations pay for their capital work, the bill will eventually come due, and that’s what our current Senators don’t seem to understand.

To take away the payroll tax would starve the MTA of funds it needs to operate. Albany could find other funding mechanisms, but it now must lay in the bed it made. The MTA didn’t ask for this exact tax, but it needs the money. Anyone have a better solution?

Newsstands dominate the underground retail scene. (Photo by flickr user lornagrl)

The MTA’s retail offerings are making headlines this week as one of the era’s most iconic computer brands is eying retail space in the country’s most iconic train terminal. As The Observer reported earlier this week, Apple may be gearing up to open a store in Grand Central.

As is often the case with rumors about future Apple Stores, none of those with any knowledge of the deal could talk to reporter Laura Kusisto, but ifoAppleStore confirmed Apple’s interest in the landmarked terminal. The process to rent space from the MTA is a long one involving stringent RFPs and tight control over the space by the landlords. Still, as Apple looks to siphon customers away from its crowded 5th Ave. store while tapping into the crowds that pass through Grand Central, it’s enticing rumor at least.

For its part, the MTA said little to Kusisto about a next potential tenant, and we’ll just have to wait out the RFP process. “We select tenants through a public process that features a formal request for proposals,” said Aaron Donovan, a spokesman for the MTA. “We don’t comment on prospective tenants outside of the process.”

Even if no one wants to talk, this rumors got me thinking about the MTA’s retail division. A frequent charge leveled by politicians at the authority concerns the way it does or doesn’t make use of its extensive holdings. As I walk through the subway system, I’m often struck by how little space is actually used. While some stations see peak crowds too overwhelming to squeeze more onto a platform, most have open areas to spare, and yet, retail is sparse.

Those stations that do sport stores do not seem to feature much in the way of use or creativity. A few storefront ATM locations populate the 42nd St./Times Square terminal while a record store earned headlines when it reopened a few years back. By and large, though, newsstands are all that we see in the subway, and even those are only set up at the big hubs.

The headlines about subway retail aren’t particularly pretty. A long-standing dispute in Jackson Heights simmered over during the fall, and that type of coverage is more representative of the MTA’s retail reality. They want to attract more stores, but something about the subway doesn’t work. Perhaps it’s being identified with something New Yorkers consider dirty and inconvenient, rat-infested and unclean. Perhaps its the ebb and flow of crowds that aren’t looking to shop and don’t notice the store.

Still, as Stephen Smith pointed at Market Urbanism this week, retail in the subway is a great missed opportunity. While urging transit agencies to maximize their real estate holdings, he ponders the economics of it all. “Does anybody know how much money such schemes can generate?” he asks. “Obviously allowing vendors to set up shop in train stations isn’t going to obviate the need for a thorough reform of the way this country does mass transit to make it profitable and sustainable, but can it amount to anything more than a drop in the bucket?”

As San Francisco’s BART looks to develop its retail offerings, here in New York, Jay Walder would like to do the same. The guys in charge answer Smith’s question by proclaiming profitability. The MTA CEO and Chair discussed underground retail with me in November. “We will make more money if we can improve the retail environment in the subway system, get greater value out of the spaces that we have there, improve the ambiance and the customer satisfaction,” he said while praising new retail initiatives at Times Square. “We’ll make more money than all of the naming rights deals.”

Ultimately, though, the rest of the system doesn’t carry the passenger volume of Times Square or the cachet of Grand Central that has seemingly enticed Apple to ask some questions. It might be possible to milk some money out of constantly crowded stations, but subway travel is so fleeting. Neighborhood stations are crowded for an hour or two every morning and serve as ghost towns after that. Would a up-market retailer take that risk? I don’t think so.