DiNapoli’s Press Release Obscures Biggest Source of MTA Budget Woes

The MTA is spending more and more on debt service, contributing to higher fares and service cuts. Without $9.9 billion between 2012 and 2014, that debt service will eat even more of the operating budget. Image: NYS Comptroller.
The MTA is spending more and more on debt service, contributing to higher fares and service cuts. Without $9.9 billion to fill the gap in the capital program, that debt service will suck even more money out of straphangers' pockets. Image: NYS Comptroller

Earlier this week State Comptroller Tom DiNapoli came out with his latest report on the MTA’s troubled finances [PDF], and if you take a look at the numbers, the big takeaway is pretty stark. Without funding for the $9.9 billion hole in the agency’s capital program, MTA debt will soar even higher. If legislators don’t secure more revenue for maintaining and expanding the transit system, there are basically two options: either the MTA can reduce its capital spending or straphangers can pay the price through higher fares and worse service.

But if you read the release from DiNapoli, the takeaway is different:

We’re seeing the effect of the recession and years of undisciplined bloat and inefficiency. The MTA’s current administration is working to close its budget gap, but commuters and taxpayers are demanding results. The MTA needs to change the way it does business. Repeated fare hikes and service cuts can’t change a culture of complacency. My office has identified more than $296 million in waste and savings opportunities over the last year alone, and we recently began a forensic audit of the MTA’s $600 million overtime budget. These are tax dollars. Inefficiency and complacency just don’t cut it.

“Undisciplined bloat and inefficiency”… “culture of complacency”… These are the phrases that leap out of DiNapoli’s presser. Streamlining the MTA is all to the good, and $296 million is significant, but relying on too much borrowing to fund the capital program is a much bigger problem: Debt service is projected to cost the MTA $1.7 billion more in 2019 than in 2010, under the current scenario.

DiNapoli notes that the gap in the MTA capital program is a major threat, but manages to do it in a way that deflects responsibility from legislators: “The MTA assumes that the state and local governments will fill the gap, an optimistic assumption in the current economic environment.” DiNapoli conveys no expectation that Albany or the city should step forward and enact new revenue streams to fill this shortfall. This is the sort of rhetoric that continues to let state representatives like Brooklyn’s Joan Millman off the hook for failing to fund transit.

The report itself is a different story, laying out quite clearly some of the major causes and effects of the MTA’s budget crisis.

Straphangers are already being forced to carry the weight of the capital plan, for instance. When the 2010-2014 capital plan was written, the MTA included $6 billion in revenue from bonds supported by the payroll mobility tax. The payroll tax ended up raising less revenue than expected and the MTA now expects only $4.4 billion from those bonds. The remaining $1.6 billion is coming from operating revenue including fares and tolls.

To put that number in perspective, the MTA’s service cuts are projected to save a total of only $523 million between 2010 and 2014, according to DiNapoli’s report.

It makes you wonder why the comptroller’s “forensic audit” will be focusing on overtime and not the runaway costs of big-ticket construction projects like the Second Avenue Subway and East Side Access.

The report also graphically shows how paratransit costs have doubled over just the last four years and are projected to keep on rising:

mta_paratransit_costsTax revenues nosedived after the recession. Real estate taxes alone plummeted 75 percent, bringing in $1.6 billion in 2007 but only $389 million in 2009:

mta_tax_revenues

  • Larry Littlefield

    See that “debt service on bonds issued for prior capital programs?” The built almost nothing new in those programs. Just made plans.

    Did they do catch up repairs? Not according to the MTA’s own estimates of how long capital assets are expected to last. They just proceeded at the ongoing normal replacement rate.

    We are paying $2 billion in interest for past maintenance. And “cutting capital spending” doesn’t mean no more expansions. It means cuts in maintenance, like those that took place in the 1970s, unless those cuts are in the cost of work and not in the amount.

    That $2 billion isn’t going away. And how does the MTA expect it to remain $2 billion when some of the debt is variable rate and interest rates are at historic lows, with a dollar crisis possible?

    http://noir.bloomberg.com/apps/news?pid=20601010&sid=aoB6cWYcz8Yo

  • Harry Wilson is looking better and better with everything DiNapoli does.

  • Glenn

    It would be great to see transportation budgets at a more comprehensive level and see some ratios to see the utility of those expenditures.

    Generally mass transit is a fantastic deal for everyone involved – residents spend less income on transport, real estate values grow, businesses get access to a larger workforces, jobs associated with mass transit are local and at a living wage.

    Only in the screwed up world of public finance is highway spending considered “job creation” and “investment” while mass transit spending is considered a “subsidy” in the same boat as welfare payments to single mothers with eight kids by different fathers.

  • MyrtleGuy

    Bring back Congestion Pricing! (But let’s call it something better)

  • J:Lai

    I think the solution to the labor cost side of the problem (and the associated inefficiency) is to invest now in automation to achieve significant long-term reduction in the size of the labor force.

    Of course this would require a huge current capital expenditure to bring the infrastructure up to a level where it could be automated, vs. savings that do not really accrue until 1-2 decades into the future.

  • Glenn

    It’s interesting that the dedicated taxes are essentially just offsetting the paratransit and past debt obligations.

    What’s the actual operating costs vs. fare revenue??

  • Larry Littlefield

    “I think the solution to the labor cost side of the problem (and the associated inefficiency) is to invest now in automation to achieve significant long-term reduction in the size of the labor force.”

    Well, I think they tried that. They automated transit fare sales with metro card machines, but the union and the pols objected to a reduction in staff in the booths.

    They wanted to go with OPTO based on CBTC, but the union and judges squashed OPTO and CBTC has been so expensive it might not be worth it anyway.

    They went with master towers rather than local towers, but they end up with just as many people in the master towers as they used to have in the local towers. Plus overtime when someone doesn’t show.

    There were some productivity gains in the car barns.

    In any event, even real and sustained productivity gains (as opposed to service quality reductions) won’t get us out of this debt and pension hole.

  • JK

    Compared to what? Compared to what other government agencies serving New York City is the MTA “Undisciplined and bloated?” By what measurement and who is measuring it? My guess is that the MTA is fairly well run as NYC government agencies go. Why? Because the MTA is probably the most transparent and scrutinized public agency in New York City. Based on apples to apples comparisons of spending vs riders served, the MTA does very well compared to other US and world transit agencies — an inadequate measure, but what else have you got? Really now, is the MTA poorly run compared to city agencies? How do you know? I’ve seen far more cops sleeping in their cars than bus drivers sleeping in their buses. Has crime been eliminated? Is the MTA more screwed up than the NYC public schools with their rubber rooms and restrictive work rules? Next time a controller or comptroller starts making proclamations about agency inefficiency, transit advocates should ask them what accepted public management rubric they are grading from, and ask to see the criteria and grades.

ALSO ON STREETSBLOG

Albany Has Already Saddled the MTA With More Debt Than 30 Nations

|
As Albany contemplates paying for the MTA capital program by borrowing as much as $15 billion, it’s worth pausing to examine the debt load straphangers are already shouldering. To put it in perspective, the MTA carries more debt than Bolivia, Tanzania, and Luxembourg combined, according to numbers compiled by the Straphangers Campaign. The MTA owes more than at […]

Cuomo Cuts $100 Million to Transit [Updated]

|
Reactions to Governor Cuomo’s proposed budget are beginning to come in. The cuts to transit, which are being pegged at $100 million, are being portrayed as painful, though perhaps not devastating. The MTA itself sees Cuomo’s plan as cutting $100 million from its budget, not the $57 million we estimated earlier. That’s $200 million in […]

Comptroller: Paying for MTA Capital Plan With Debt Will Crush Riders

|
What does it look like when mild-mannered accountants hit the panic button? Something like the latest report on MTA finances from State Comptroller Tom DiNapoli’s office [PDF]. According to the comptroller, the MTA is entering a financial situation unprecedented since the agency’s first capital plan in 1982. In 2009, the transit agency put forward its […]