Cuomo, Albany Balance MTA’s Books on the Backs of Straphangers

The MTA is already paying $2 billion a year to take care of past borrowing. The state comptroller's office forecast that debt service would rise to $3.5 billion per year by 2018 if the agency had to finance the rest of its current capital program with debt. That is essentially what Governor Cuomo and the state legislature are forcing the MTA to do, and transit riders will be left holding the bag. Image: NYS Comptroller

Ever since the State Senate killed bridge tolls in the 2009 MTA funding package, the question has lingered: How is Albany going to finish the job and pay for the final three years of the MTA’s five-year capital program?

To simplify somewhat, the options were: A) Implement a new revenue stream, such as the aforementioned bridge tolls or congestion pricing; B) Make deep cuts in the MTA capital program and give up on finishing mega-projects like the Second Avenue Subway and East Side Access; or C) Borrow, borrow, borrow, and make transit riders pay later.

The big news today is that Albany is going with Option C. To fill the $9 billion gap in the capital program, the MTA will borrow about $7 billion and scrounge up the rest from what seems to be a set of one-shot deals. The one-shots include transparent gimmicks like selling transit vehicles to the Port Authority for a lump sum up front, then leasing them back.

All of which is bad news for transit riders. The more the MTA has to borrow, the more it will have to spend on debt service and the less will be available to run trains and buses. Riders will have to pay more at the farebox to keep transit service from deteriorating.

While the MTA apparently believes it can avoid large, unplanned fare hikes in the next four years (increases of 7.5 percent are planned for 2013 and 2015), make no mistake: The only people who are being asked to pay for the remainder of this capital program are transit riders. Eventually, high debt payments will kick in and the upward pressure on the fare will be enormous.

Right now, the MTA’s total operating budget is about $12 billion. Under a debt-backed scheme like what Albany and the MTA are proposing, debt service will consume $3.5 billion of that budget by 2018, according to a forecast by the state comptroller’s office last year [PDF].

“This is another ‘Make Your Kids Pay!’ plan that simply kicks the problem down the road to the next generation,” said Kate Slevin of the Tri-State Transportation Campaign.

If the pain won’t be felt at the farebox immediately, so much the better for the political leaders whose decisions got New York City’s transit system to this point.

To recap: In 2008, congestion pricing died in Sheldon Silver’s Assembly; in 2009, the Fare Hike Four kept the State Senate from enacting bridge tolls; and even now, Governor Andrew Cuomo and the state legislature are passing up the chance to fund transit while fixing NYC’s irrationally priced road system, which causes toll-shopping drivers to clog the streets leading to the city’s free bridges.

Andrew Grossman at the Wall Street Journal reports:

The MTA had hoped to find new revenue to pay for its plan, officials said. But they were rebuffed by lawmakers and Cuomo administration officials in Albany, who said there was no appetite for any sort of new taxes.

Let’s be clear. When it comes to transit funding, the choice Albany faces right now is not between “new taxes” and “no new taxes.” Cuomo and the legislature could have decided to design a more functional transportation system, where motorists pay for the infrastructure they use and contribute to the transit system that keeps roads passable, where bus riders don’t get bogged down in so much traffic, and where transit is funded properly. Instead they chose to let the dysfunction on the streets continue and saddle transit riders with a future of higher fares.

  • Larry Littlefield

    It should be noted that the above chart assumes all ongoing normal replacement stops in 2014, and the gradual deterioration of the transit system begins that year.  Alternately, if the MTA keeps borrowing, the debts would be higher.

    Per the Post:  “Every five years we say we should never borrow all this money for our capital plans, and then we do it again,” said William Henderson, head of the MTA’s Permanent Citizens Advisory Committee.  “The problem is there doesn’t seem to be a good alternative.”

    Perhaps it the band of cronies on the MTA board had said “no” 12 to 15 years ago, we wouldn’t be in the fix. 

    At the very least, the MTA should cut bus purchases, rail car purchases, and non-structural station improvements out of the capital plan.  Those are the things people can see, but do not affect the viability of the transit system 20 years from now.  Continuing to spend money on them in this situation is more pandering to those who want to grab all they can for as long as they can while covering up the consequences.

  • car free nation

    The reason we need congestion pricing is so we can increase the price of transit to the point it covers itself. If you don’t have a “free” subsidized driving option, transit prices could go much higher, and still be a very good deal for people.

    The advantage of having transit at a price that pays for itself (including past capital expenses) is that improvements that add value (re: increased ridership) are seen as net-positives from a long-term cash perspective.

  • so disappointing. Really wish Jay Walder will use his final weeks to give a honest portrayal of how little Albany cares about NYC transit.  It may be scathing attack, but if he speaks the truth.. it may just get enough straphangers knocking down the doors of their electeds… rightfully so.

  • Larry Littlefield

    One more point:  is the Transportation “Trust” Fund for the state’s roads in any different circumstances?  I don’t think so.  And the Thruway Authority is mortgaged to the hilt, with no money for a new Tappan Zee.

    Meanwhile, they’ve started raiding the Port Authority.  They’re still collecting that ticket tax, but only a small portion of the Airport Access system that was promised has been built.

  • carma

    i for one can not back congestion pricing.  lets face it.  EVERY program recently has been raided to balance the budget for something else.  at this rate, what is to assure that all funds from congestion pricing will go towards the MTA’s finances?

    there is virtually none.  any fund that was initially for the MTA has been raided.  unless you can assure that congestion pricing will go STRICTLY and ONLY for the MTA, it is going to be a hard tax for anybody to swallow.

    remember that the original concept for congestion pricing was to IMPROVE mta service.  to me, that means better subways, more buses, etc…  now, the push for congestion pricing is to save the MTA.  VERY different and very twisted logic.

    now, im not saying that everybody should get a free ride.  but the push for congestion pricing without a real plan of how to use that money wisely is certainly not a viable option.

    the first step is to have albany STOP raiding transit funds.  whatever revenue that is supposed to go to the MTA should and MUST go to the mta.  if that means cutting senior centers, so be it.  if that means cutting welfare.  great.  if that means cutting childrens services.  too bad..  only after these options are exhausted, and we have a clear order on how funds are SUPPOSED to be distributed to their intended sources, can i say YES for congestion pricing.

  • Worker

    You’re half right that transit riders will pay for the capital plan, but don’t forget the share that MTA wants transit workers to pay for.  The MTA wants transit workers to take no raises for three years. If inflation stays roughly where it has been, that’s like taking a 7% to 8% pay cut. 

  • Larry Littlefield

    So what was the pay increase, relative to other workers and inflation, in the previous contract?  Would it balance out?
    We don’t know, and that’s the reason I think these long term deals are nuts.  If we get into a deflationary spiral, the MTA may not be able to afford even the raises being offered.  But if we get into an inflationary spiral, the inflation-adjusted pay cut could be a lot more than 7 to 8 percent. 

    Either is possible, given the debt-laden mess our economy is in, with the former getting out debts down to affordable levels through mass bankruptcy and the latter by inflating them away.

  • carma

    lets put it simply this way.  why should mta workers or any govt worker merit any raise, when the private sector has not issued any substantial pay raises in the last few years?

    the last negotiation/arbitration between twu 100 accelerated this disaster that the MTA is facing.

    i agree w/ larry.  long term deals are nuts.  focus on a year to year basis.

  • Driver

    “If you don’t have a “free” subsidized driving option, transit prices
    could go much higher, and still be a very good deal for people.”
    I think the working poor in this city would see it differently.

  • Anonymous

    the point of car free nation’s post is not that revenue from congestion pricing would necessarily be dedicated to transit, but that by increasing the price of driving you could thereby increase the price of substitute goods (i.e. transit.)

    If this were true, fare increases could be larger than the 7.5% every 2 yrs now projected, and thus fare revenue could provide a larger share of the operating costs.

    There are a couple problems with this.

    First, even if we assume the basic premise is true, the major problem is that fare revenue doesn’t come close to covering the capital plan deficit unless you are talking about increases in the range of 50-100%. 

    Second, it is not clear that the premise is true.  There are other substitute goods, at least for certain trips, such as biking and walking.  Increasing the marginal cost of both driving and transit may even push some transit users back to cars, as cars have high fixed costs but relatively low marginal costs.  Furthermore, a significant amount of transportation use in general is for non-essential travel, such as recreation, visiting family and friends, etc.  If the price of transportation by any means increases, it is likely that people will cut back on some of this discretionary travel.

  • Anonymous

    Flat pay over the next 3 years mirrors pretty closely the median pay for US workers over the last 3 years.
    To address what Larry brought up, you could have  a system like the 1970s with inflation-based COLA increases.
    Don’t forget, however, that the retirement benefits have become more valuable in this low interest rate environment.

  • Driver

    Another consideration is that congestion pricing in midtown would affect a very small segment of NYC drivers, while the increase in the cost of transit would impact everyone who uses transit throughout the five boroughs. Implementing congestion pricing does not translate to much if any increase in cost to many if not most drivers throughout the boroughs.

  • car free nation

    My point is that it’s always better off in the long run if a government service can support itself (just look at social security). Otherwise, you’re always at the mercy of feckless politicians. The thing that makes it impossible for NYC transit to support itself is that there is an alternative that is heavily subsidized, and that also makes NYC Transit less efficient. If there were fewer cars on the roads, the buses would move faster as well. If we charged the market rate for parking, we could have more dedicated lanes for buses (or bike lanes and bike share). If we had more space in the bridges and tunnels we could have dedicated buses that were faster than car trips. etc.

    Perhaps congestion pricing as it was envisioned isn’t enough. You need to bring the marginal price of driving to the actual cost to society, so you’d probably charge $20 to get to midtown, and maybe $10 to get to downtown brooklyn, sobro, or western queens. You’d charge $20/day for parking on the streets in manhattan, $10 in brooklyn. You’d greatly reduce the number of available spots. You’d charge taxes for land and other space used for parking. Certainly you could figure the value of what that land would bring in if used for something more useful.

    In a level playing field, transit wins hands down.

    And don’t take the money and give it to transit. Give it to education. That’s more valuable to society, and more necessary. It might even be easier to sell to those same feckless politicians in Albany.

  • Larry Littlefield

    “My point is that it’s always better off in the long run if a government service can support itself (just look at social security).”
    They raised the regressive payroll tax so Social Security could run a surplus. And then diverted it to other things.  Now they want to cut it, for those age 54 and younger.  Nothing is safe from the generations now in charge.

  • carma

    @c532664ee53360b077c1c21f04fb7920:disqus My point is that it’s always better off in the long run if a government service can support itself (just look at social security)
    This cant be anything but a false statement.  If you think SS can support yourself, you are dead wrong.  Lets face it.  6.2% employer, 6.2% employee contributions totalling 12.4%.  now, lets consider that SS wipes out 19.6% of the budget.sorry, but that means you are borrowing 7.2% EXTRA just to pay for something that cant be payed for solely on its own revenue

    http://en.wikipedia.org/wiki/File:Fy2010_spending_by_category.jpg
    im not saying we should wipe out SS.  but lets face it.  it is a HUGE LEGAL ponzi SCHEME.

    and THAT is my point with congestion pricing.  if it is so accurately accountable.  Then the revenue for congestion pricing 100% goes to the MTA.  we all should know that that would never happen.  instead it goes to other coffers at the expense of drivers,(not all are rich you know).  AND to the expense of commerce.  commerce DOES need to flow into manhattan as well.

  • Larry Littlefield

    Look, EVERYBODY — riders, workers, taxpayers, contractors — got more out than was there in the past, which is why somebody, perhaps everybody, is screwed in the future.

    And the only trick they know is a repeat — put off SOME of the cost (since they can no longer put off all of it) and screw the future even more.

    If people continue just looking out for themselves, and are in capable of enlightened self interest, collapse is inevitable, and not just at the MTA.  I only hope it comes along sooner, so those older can experience and there is a chance my children will be around for the recovery.

  • carma

    larry, well said.  ill be willing to pay 50 cents more per ride.  but the unions have to give back on some of the pensions.  the contractors need more accountability in not doing shady work, workers have to agree that current economics dont merit 7% pay raises, etc…

    but theres one thing we CANT accept, and thats service cuts.  if you want NY to reduce its dependency on cars, you need a world class system.  thats not going to happen with service cuts.

  • Mike

    carma’s post doesn’t make the slightest bit of sense.  s/he is comparing the percentage of an individual’s income that is taxed to the percentage of the federal budget that’s spent.  total apples and oranges comparison.

  • carma

    Mike, you dont seem to understand at all.

    A budget is simple.  Income and spending.  How much income you have dictates how much you can spend.

    currently ss collected is 12.4% of total income collected.  ss expenditures are 19.6% of payments.

    its not apples and oranges.  how else does the fed collect money other than income taxes, coorporate taxes.
    tell me, what OTHER sources of income does the US take in other than taxes?

    to make up the remaining 7.2%, that money has to come from other sources, such as investments, repayments, etc…  how can you continue to operate a system, if each year you grow a 7.2% deficit.  guess what, its going to get worse. less jobs, and more folks who eventually start collecting equals MORE deficit.

    so you still dont get it huh?

    geez….

  • Mike

    carma, you don’t know what you’re talking about.

    12.4% of *wage* income gets paid into SS by active workers.  0% of investment, dividend, corporate, etc income, even though those are all taxed in various ways, and exist in very large amounts.

    the percentage of the federal budget that goes to SS payments is not comparable to that figure in any way.  the problem with SS is the demographic bulge coming up as the baby boomers retire; without that, it’s perfectly sustainable.

    please learn some basic math and don’t demagogue based on apples and oranges.

  • carma

    Mike, grow up.

    I know very well what im talking about.

    the system is based on current payments pay for past collectors.  isnt that what a PONZI SCHEME IS???

    the system works under the assumption we always have positive employment numbers, we dont have baby boomer bulges, ppl die at the ripe age of 72, etc.

    guess what, in the real world things happen which skew this equation.  and guess what its skewed due to longer life spans, a shitty economy, and the baby boomer generation.

    this is not sustainable the way it is.  thats why you DO have a deficit.

  • Mike

    sure, the baby boom bulge makes SS unsustainable as it’s now set up. but that doesn’t make it ok to lie with statistics and to use ponzi-scheme scare tactics. until 2010, the govt took in more in SS taxes than it paid out. since then, fewer people are working and the baby boom retirees have started. but it’s not fundamentally unsustainable and your percentage comparison is still a textbook example of how to lie with numbers by comparing apples and oranges.

  • Mike

    sure, the baby boom bulge makes SS unsustainable as it’s now set up. but that doesn’t make it ok to lie with statistics and to use ponzi-scheme scare tactics. until 2010, the govt took in more in SS taxes than it paid out. since then, fewer people are working and the baby boom retirees have started. but it’s not fundamentally unsustainable and your percentage comparison is still a textbook example of how to lie with numbers by comparing apples and oranges.

  • carma

    mike, you CAN make a comparison of income vs. spending.  it IS accurate to say how much income you get dictates how much expenditure you can spend.  that surplus that you perceive, is through the ss trust fund that has a certain payout.  but its a falacy full of IOU’s.  if everything was so perfect, then why is obama saying that social security payments past august 1st will NOT be payed b/c we wont have money.

    hmmm….

    could it be that we really dont have the money.

    its no scare tactic.  the original implementation IS a ponzi scheme.  the first taxes for SS were collected in 1937.  The first payment was made in 1940?  that means there were already 3 years needed in payments to fund this.  the young covering the old.  ponzi schemes takes money from new investors paying old investors.

    if you REALLY think that its your money paying yourself.  get an education.
    its your money paying SOMEONE ELSES retirement with the promise that you will also collect when you retire.

    btw: if ss was so perfect, then the fed wouldnt need to revisit revising the program every 10 years.  think about that before you claim my bad numbers

  • Mike

    look, i’m not going to continue to argue the math with you, especially after you’ve shown your complete lack of understanding of statistics on another thread about surveys.

    want to compare the *dollar amount* of receipts by the federal gov’t for FICA taxes vs SS outlays?  fine!  that’s a discussion worth having, and it points to the probability that the retirement age will need to increase, or the tax rate will need to go up, or means-testing, or whatever.

    but you tried to compare a percentage of *personal wage income* that’s taxed with a percentage of the *federal budget*, and argue that because one is greater than the other, that SS has a huge fiscal problem.  that’s just not a sound use of numbers, in any form, and it makes you come off as incredibly ignorant.

    (the obvious rebuttal to your apples-and-oranges comparison: pretend the federal government only gets income taxes and SS/FICA taxes, and individuals are taxed at an average of 25% income taxes on their wages and 12.4% FICA taxes on their wages.  that means that FICA taxes would be about 33% of federal receipts, which means that paying 19.6% of the budget for SS would be perfectly sustainable.  see how i just lied with numbers?  you did very much the same thing.)

    i’m done with this thread.  either learn how percentages of very different things work, or go back to your tea party rally.

  • carma

    Mike, if you think one of the tea partiers. you’re dead wrong.  i just dont believe that our gross overspending and overtaxing solves any of our main issues.  I so happen to be a fiscal conservative democrat, and i do think most of the tea party is just a bunch of bigot racists.

    you claim i lie with my numbers.  if i lie, than why do we have a major problem with social security payments.  you claim this problem only stirred in 2010.  why is it that folks argue about this EVERY year.  even during the bush administration when there was a “so-called” surplus in the SS program that it was important enough for debate on how to salvage the program?

    heh, i would like to save social security.  but its a running train wreck.  im sure you know that by 2037, we wont be able to pay for the program.  oh wait, maybe you didnt.

    and no, i dont pull that from Fox news since you think im a tea partier.
    http://ssa.gov/oact/trsum/index.html

  • Danthebeatmann

    this fuckin sucks

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