Who Pays for the MTA?
Like the man says, “It’s déjà vu all over again.” Unless the State Legislature intervenes, on May 31, facing a more than $1.8 billion budget gap for 2009, the MTA will hike the base fare for NYC’s subways and buses to $2.50. That one-day Metrocard will now cost you $9.50; a month will run $103. And there will still be brutal service cuts: among other changes, the W and Z trains will vanish from the rails, and late-night trains will run even scarcer. Even with these draconian changes in place, as the Rail went to press the MTA was still anticipating coming up short by $600 million in 2009.
The MTA’s recurring, dramatic deficits and drastic fare hikes have become a ritual of city politics over the last decade. This time around the Working Families Party has campaigned to “Halt the Hike.’” “We have come out in favor of the Ravitch principles,” says Dan Levitan, the WFP’s spokesperson, referring to a report from a commission chaired by former MTA commissioner Richard Ravitch, “which say that you can’t ask transit riders alone to bear the burden of a system that everyone relies on. Our requirement is just that [any plan] meet the necessity of funding the MTA and do it by keeping fares affordable.”
While ideas for how to calibrate the share of the burden shouldered by riders, drivers, government, and business abound, whether the curtain will close on MTA’s ritual theater rest is another question.
As the city’s Independent Budget Office recounted in an unusually caustic 2007 report, “the MTA’s 2000-2004 Financial Plan, released in September 1999, projected that the deficit would reach $1.3 billion by 2004. By the beginning of 2004 the projected deficit had become a modest surplus.” That one billion dollars was going to come due in 2007. Lo and behold, when the MTA published its financial plan that year, it was anticipating being a couple hundred million in the black. That billion-dollar hole was still looming, only in 2009.
While these deficits receded perpetually into the future, the tabloids were ablaze with accusations by State Comptroller Alan Hevesi’s office that the MTA was effectively keeping two sets of books: one public and filled with ominous numbers, the other private and far less dire in its projections. This was back in 2003, when the MTA successfully argued that those projected deficits necessitated a fare hike. Now the deficits have returned, and the medicine is harsher than ever.
These austerity measures come at a time when more riders have been catching NYC’s subways and buses than ever. In 2007, 5 million people rode the rails on your average weekday, the highest number of riders in more than 50 years. Add in an average weekday on the buses and another 2.35 million come along for the ride.
When it comes to the subways, more and more of those riders are getting on board in Brooklyn, which lays claim to almost half of the top 50 stations ranked by growth in ridership over the last decade (predictably, most of those stations are on the N and L lines). If the MTA’s service cuts go into effect, some lines could see 10-18 more riders in every car, depending on the time of day.
Why a system seeing more riders than ever before is in a state of perpetual crisis is a complicated story. “As a group that’s often critical of the MTA, we think this financial pickle is real,” says Gene Russianoff, head of NYPIRG’s rider advocacy group the Straphanger Campaign. Analysts at the Independent Budget Office and the City Comptroller’s office agree that the MTA is no longer maintaining two sets of books.
The primary explanation for why the Authority was able to keep its deficits at bay lies in the city’s real estate boom. Some of the MTA’s funding comes from real estate taxes (the logic being that mass transit contributes to the value of the property), and those returns exploded over the last decade, swelling the MTA’s coffers and allowing it to postpone the day of reckoning. But the deficits predate the boom, and expecting the superheated real estate bubble to keep the MTA afloat was bound to sink it sooner or later.
Facing consistent shortfalls in its capital spending program (which funds improvements for the system, from normal maintenance to the perpetually in-theworks 2nd Avenue subway), the MTA has borrowed to fill the gap. For the 2005-2009 capital plan, which called for about $22.5 billion in spending, this meant hawking $8.3 billion in bonds. Keeping current devoured $1.5 billion in 2008, and is expected to demand $2 billion a year by 2012. “They’re the fifth largest debtor in the United States of America,” says the Straphanger Campaign’s Russianoff. “That’s a fixed cost that’s killing the system.”
Labor costs, some analysts point out, far outstrip the MTA’s profligate borrowing. Depending on how you crunch the numbers, they ate up at least half of the MTA’s operating budget in 2007. It’s worth noting that the fastest growing element of those costs – approaching an estimated $1 billion in 2012 – is spending on “Health & Welfare.” While universal health care already seems to be off the table in the Obama era, such a plan would help the MTA as much as it would Detroit.
These are prime circumstances for demanding concessions from Transport Workers Union Local 100, which is currently in contract negotiations with the Authority. Yet Jesse Derris, a TWU spokesperson, was uncompromising on the union’s solidarity with riders: “We completely oppose a fare hike. Riders are already carrying more than their fair share of the burden. Government—at all levels— needs to step up its investment in mass transit and stop years of indifference and disinvestment.”
Between 1975 and 1978, the MTA scored 78% of the funding for its capital program from the federal government. After then-commissioner Richard Ravitch established the MTA’s capital program in the early ’80s, federal funding settled at around 30% of the total, with the State coughing up 15% and the City another 10%.
By 1992 Pataki and Giuliani had taken power, and state and city aid to both the capital program and the operating budgets dwindled. In a 2007 report, City Comptroller William Thompson estimated that if the city and state fully funded their existing obligations to the MTA’s operating budget, that alone would bring in $1.8 billion from 2008 to 2011.
In a statement to the Rail, Laura Rivera, a spokesperson for the City Comptroller, declared: “That is why the Comptroller has called on Albany to fund transit adequately, with appropriate help from the City if financially possible. Unfortunately, all too often, governors, the Legislature, and mayors try to blame the MTA for its financial problems when they themselves helped to create them.”
There’s no shortage of plans for how the MTA might dig itself out of this hole. The most common proposals are for some form of congestion pricing as well as tolls on the East River bridges (and possibly the Harlem River bridges as well). In the congestion pricing plan, drivers would be charged electronically (via EZ-Pass or a similar system) for entering the heart of the city; prices would be steeper when traffic was more intense to encourage drivers to take mass transit. Costs could run as high as $10 during rush hours.
Tolling the bridges alone is projected to bring in about $600 million. The WFP’s Levitan states that “We’re in favor of the tolls [Assembly Speaker Sheldon] Silver laid out, so that it’s not cheaper to drive than to take the train.” As for congestion pricing, the Citizens Budget Commission estimates that, including bridge tolls, it could draw more than $1 billion annually.
Skeptical of the “complications and costs” of congestion pricing, the Ravitch Commission went with tolling the bridges along with a new “mobility tax.” Unlike the old commuter tax, which only applied to people working in New York City who didn’t live in its confines, the mobility tax would apply to everyone working in the twelve counties served by the MTA. By dramatically increasing the base for the tax, it could be set at an extremely low rate but still net as much as $1.5 billion a year.
City Comptroller Thompson’s office has also gotten in on the act, proposing that the registration fee for private and commercial vehicles be based on weight. The heavier your ride, the higher the fee. Such a system could bring in just over a billion dollars a year. As the comptroller’s study points out, the weight of a car is also highly correlated to its fuel efficiency. If you want to drive an SUV, get ten miles to the gallon, spew greenhouse gasses, and hog parking, Thompson wants you to pay for the privilege. As opposed to congestion pricing—a flat tax that inevitably takes proportionally more out of the pockets of those with less—the Comptroller’s proposal would provide a much needed incentive to kick our addiction to oil, achieving some of the environmental impact of congestion pricing without regressive taxation.
Any combination of these measures would be enough to reinvigorate the MTA. For the long-term, the Ravitch Commission has proposed that fare hikes be “programmed,” occurring about every two years and tied to regional inflation, so riders aren’t taken by surprise. And more radical proposals abound, such as that by Nurture New York’s Nature, which would impose harsh congestion pricing and use the proceeds to make the subways and buses essentially free, or at least to slash fares.
At press time, the factitious Democratic majority in the State legislature seemed unable to agree on even the most modest of these proposals. The fare hike seems inevitable. The Straphanger Campaign’s Russianoff is willing to accept it, provided “it’s part of a plan to make the system whole. What we really want is safe, decent, and affordable transit. How do you get to that? If an 8% fare hike brings along new contributions from motorists and from business, then we support it. But we have a very strong stance that it not be the riders alone.”
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