Prendergast: $15 Billion Gap in MTA Capital Program “Unconscionable”

Post-election, the political discussion about transit funding in New York has entered a new phase. Albany can now turn its attention to the most pressing transportation issue in the state: closing the $15.2 billion gap in the MTA's next capital program. Yesterday, MTA Chair and CEO Tom Prendergast made his first public comments since the election. He said elected officials must be educated on the need for transit investment and repeated his call for new revenue sources to keep the region's trains and buses running smoothly.

Prendergast's remarks came at an event hosted by a construction industry group -- the General Contractors Association of New York. Also participating in a panel on the MTA capital program and transit funding were Citizens Budget Commission President Carol Kellermann, NYU Rudin Center for Transportation Director Mitchell Moss, former NYC Economic Development Corporation chief Seth Pinsky (now with RXR Realty), and CUNY Institute for State and Local Governance Chair Marc Shaw.

Debt levels at the MTA have skyrocketed as capital programs have grown while state and city funding has shrunk. Borrowing costs consume an ever-greater share of the agency's operating budget, contributing to higher fares and less service for riders. "Continuing to the load the MTA up with debt is dangerous," Pinsky said. "We do need to talk about new sources of revenue.”

One potential source is the city's own capital budget. Under Ed Koch, the city chipped in $200 million annually. Under Giuliani, the city cut its contribution down to $100 million. The number has stayed steady ever since. The MTA's new capital plan assumes the city's annual contribution will increase to $125 million, and Shaw, a former Giuliani budget director, was bullish that the city would commit to it. If it does, an extra $25 million in cash per year is still just a drop in the bucket when it comes to the capital plan's budget gap.

Pinsky, the former NYC EDC president, sees potential in the real estate sector. Local governments could levy special taxes on development near transit -- a strategy known as value capture -- both in the city and around suburban rail stations, which he said are too often surrounded by a "sea of parking" in areas that could serve as vibrant downtowns.

Investing in transit by tapping the increased value of real estate has promise, but the devil is in the details, and it hasn't always worked well in New York. Kellermann pointed out that development at Hudson Yards, which was supposed to pay for the 7 train extension, has been lackluster, leaving city taxpayers to pick up the tab. And even if the value capture mechanism is calibrated perfectly, she said, it can't bridge a $15.2 billion gap.

Kellermann suggested the cost of a MetroCard should go up to help fill the gap, on top of back-to-back four percent fare hikes already scheduled for 2015 and 2017. She also thinks drivers should pony up. “There needs to be a lot more money contributed by auto users,” she said. “I wouldn’t give up on the East River tolls. The Move New York plan is a good start."

Pinsky said tolls are "worth looking into," while Shaw said his "gut" was bearish on tolls getting a sign-off from Albany, though he acknowledged the state will have to find money one way or another. “Every capital plan needs a revenue source," he said. “The solutions will be found in the politics of the moment."

At this particular moment, State Senate Republicans are ascendant. Their leader, Dean Skelos, represents a constituency that fought tooth and nail against the MTA-supporting Payroll Mobility Tax since its creation in 2009. Prendergast warned against further cuts to the PMT. "There’s about $15 billion in question [for the current capital plan]," he said. "If there’s rollbacks to PMT, that number grows, and that would be a concern to us.”

But before elected officials can be asked to generate new revenues for the MTA, Prendergast said, they must be convinced that the investment is necessary. "We establish the need first, then we establish the finances," he said. "If we don’t reach consensus and we don’t get the funding we need to do this program, we will actually lose an asset we already have. That, I think, is unconscionable."

After Prendergast's remarks, a reporter asked if Governor Cuomo is among those who must be convinced of the capital program's merits. Prendergast didn't answer directly. “It’s all the stakeholders. It’s all the elected officials. It’s everybody," he said.

The cost side of the equation came up for discussion as well. Kellermann noted that mega-projects like East Side Access and the Second Avenue Subway eat up enormous shares of the MTA's capital spending with little accountability. "There’s no cost-benefit analysis," she said, noting the authority's enormous cost and schedule overruns.

Kellermann and Prendergast both called for more public-private partnerships and design-build contracting for large projects. “That’s not a core competency of ours,” Prendergast said. “We need to do more of it.” He also cited the Montague tunnel rehabilitation, which came in early and under budget, as an example that can provide "lessons learned" as the agency proceeds with other tunnel rehabs.

Both the Citizens Budget Commission and the Regional Plan Association have called on the MTA to ramp up the installation of Communications-Based Train Control signal upgrades. Prendergast framed improved signals as both a safety issue and a system expansion issue, because CBTC allows for more trains per hour. Kellermann urged the MTA and the public to develop a stronger stomach for long-term shutdowns on lines that will receive signal upgrades.

A major bottleneck for CBTC expansion: Finding qualified contractors. The MTA has two companies that it can call on for CBTC jobs, and is in the process of adding a third to the list. The MTA says it expects CBTC bids to be less costly once there are three companies vying for contracts.

The next likely step in the debate over MTA funding will likely be a report from the transportation reinvention commission, which has been on ice since September. Commission members tell Streetsblog that draft copies of the report tackle funding issues. Its recommendations should provide grist for discussion before the legislature starts its session next year. After yesterday's event, a reporter asked Prendergast when the reinvention commission report will be released.

“It will be coming out soon," he said.