How Did Straphangers Make Out in the Cuomo-de Blasio MTA Deal?

On Saturday, Governor Cuomo and Mayor de Blasio reached a deal to close the gap in the MTA’s five-year, $29 billion capital program, with the state pitching in $8.3 billion and the city contributing $2.5 billion. The agreement ends a drawn out political fight between the governor and the mayor. But enough about politics. How do transit riders make out in the deal?

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There’s no new MTA debt in the deal reached this weekend, but it’s held together by the threat of mutually assured destruction. Photo cropped from Jere Keys/Flickr

The terms of the Cuomo-de Blasio fight were largely about how much of the burden of paying for the capital program will fall on straphangers. The size and extent of the capital program were ostensibly in doubt without new revenue sources, but the last time the MTA faced a large gap like this, in 2011, no one stepped up to close it, and the agency simply borrowed about $10 billion.

The interest on that $10 billion will be paid back by bus and subway riders in the form of higher fares. A repeat this time around would have put even more upward pressure on the fare.

On its surface, the deal reached over the weekend avoids that scenario, since Cuomo pledged that the state’s contribution will not be backed by MTA fares, but will be “provided by State sources.” (For reference, check the four provisions in the deal, lifted verbatim from the city’s announcement, at the bottom of this post.) Cuomo hasn’t gotten more specific than that, but presumably most of the “state sources” will be accounted for by the general fund or, more likely, bonds backed by the general fund. And that’s where another major sticking point comes into play.

Each of the last few years, Cuomo has pulled off a back-door transit raid by making the MTA pay off bonds that the state had originally promised to cover, even though a 2011 law requires the governor and the state legislature to declare a state of emergency to justify raiding MTA funds for other purposes. Here’s how the governor found a way around that: He said he wasn’t raiding the MTA. Simple as that. What’s to stop Cuomo from doing the same thing with new bonds issued to fill the gap in this capital program?

Mainly, it’s the fact that City Hall’s $2.5 billion contribution to the capital program is contingent on Albany refraining from transit raids in the future. If it’s budget season and the governor diverts MTA funds, the mayor’s recourse is to withhold that year’s share of the city’s capital program contribution. The city is basically using its only real leverage — money — to hold Albany to its “lockbox” promise.

So where does this leave transit riders? Well there’s no doubt that the starting point for this deal is better for straphangers than what happened in 2011. Instead of $10 billion in debt backed by fares, the new arrangement starts with zero borrowing backed by fares. If everything plays out smoothly, it really will slow down the rapid rise of MTA debt.

But there’s also a strong chance that the governor and the mayor will disagree over the provisions in this deal at some point in the future (one potential point of contention: how does each party define a diversion of MTA funds?), in which case, the only thing holding the arrangement together is mutually assured destruction. Taking a longer view, a future governor could also renege on this deal — the bonds that Cuomo transferred to the MTA’s books, after all, originated under George Pataki, not him.

This could be a very good deal for straphangers, but advocates and transit riders will have to remember it — and hold elected leaders accountable to it — for a long time.

******************

Terms of the deal:

1. The State guarantees $8.3 billion to the MTA Capital Program to be provided by State sources. The City guarantees $2.5 billion to be provided to the MTA by City sources. City sources include a guarantee of $1.9 billion from direct City sources and a guarantee of $600 million through alternative non tax levy revenue sources. This agreement is dependent upon all of the conditions below.

2. The City and State will fund on the same schedule on a proportionate basis.

3. Projects in the City which are funded by the $2.5 billion committed by the City (including projects funded through non tax levy sources agreed to with the MTA) will be planned by the MTA Board in collaboration with the City representatives on the MTA Board, with  priority consideration given for projects and timing based on input from the City. Likewise suburban projects which are funded by the suburbs will be planned by the MTA Board in collaboration with suburban representatives on the MTA Board and with priority consideration given for projects and timing based on input from the those suburban communities.

4. The State will not divert any funds or fail to provide any funding committed to this Capital Program or due and owing to the MTA for any other expenses unless in accordance with the provisions of Executive Law 182 passed in 2011. Likewise, the City will not divert any funds or fail to provide any funding committed to this Capital Program or due and owing to the MTA for any other expenses.

  • Brian Howald

    Do any of the suburban MTA counties have transit revenue sources dedicated to fuding the MTA Capital Plan?

  • Kevin Love

    “…the only thing holding the arrangement together is mutually assured destruction.”

    Except the destruction is not quite mutually assured. If MTA goes down the toilet, NYC swirls right down with it.

    But someone sitting in Albany may not be feeling that pain.

  • Mark Walker

    There is a payroll tax that applies in both NYC and some of the downstate counties.

  • Brian Howald

    Yes, that I knew. What I meant to ask is outside of our shared support mechanisms, why is only New York City being asked to contribute again?

  • Brian Howald

    Albany may not see it, but if NYC suffers, so does Upstate which lives off us.

  • bolwerk

    The notable thing is de Blasio got virtually nothing in return. He should have won some fiscal independence from Albany, or at least more direct say over the MTA. If he didn’t have feel the need to fellate suburban drivers, he would have demanded toll reform.

    Meanwhile, the next mayor will have less leverage to negotiate with Albany.

  • Mark Walker

    Theoretically, higher fares would be the most direct way for the suburban counties to shoulder more of the burden if that were politically possible.

  • Andrew

    Projects in the City which are funded by the $2.5 billion committed by the City (including projects funded through non tax levy sources agreed to with the MTA) will be planned by the MTA Board in collaboration with the City representatives on the MTA Board, with priority consideration given for projects and timing based on input from the City.? Likewise suburban projects which are funded by the suburbs will be planned by the MTA Board in collaboration with suburban representatives on the MTA Board and with priority consideration given for projects and timing based on input from the those suburban communities.

    Where does East Side Access fall? (The project itself is predominantly if not entirely located physically within the bounds of New York City, but it predominantly benefits suburban residents.)

  • Kevin Love

    This is true, and if it were believed in Albany, the people there would behave a lot differently. Do I really need to list the times Albany has jerked NYC around?

  • JK

    Key point is that the State of New York does all of its borrowing through public authorities like the MTA or Dormitory Authority to avoid debt caps and public votes. So when Cuomo talks about State borrowing he means via the MTA. The State will borrow through the MTA using MTA “service contract” bonds, which are issued by the MTA with the promise that the State will pay for them. However, legally the bonds are ultimately backed by the MTA and transit riders. $8.3B in borrowing will require about $500m a year in debt service for 30 years. given that Governor Cuomo is reneging on Pataki era bonds during these flush times, consider what will happen over the next 30 years during bad times.

    The City pledge is less of a worry since the City will be bonding using city bonds that the MTA and its riders cannot be responsible for.

  • Matthias

    News keeps mentioning that the city gave less than the state asked for, already forgetting that the state originally asked for $657 million.

  • ohnonononono

    That statement “Likewise suburban projects which are funded by the suburbs” makes no sense. What suburban projects are funded by the suburbs? Who is “the suburbs”? Suburban counties? Suburban municipalities? Suburban residents?

    “The suburbs” aren’t paying for ESA any more than anyone else is, as far as I know. It’s not like Nassau or Suffolk County governments are making some special contribution to the project, and if they were asked I’m pretty sure they’d say absolutely not and prefer it not be completed.

  • ohnonononono

    Doing this comparison is further convoluted by the fact that the MTA runs local transit in NYC but does not run local transit in the suburban counties. The suburban counties run their own bus systems. Westchester’s Bee-Line bus is the 2nd largest transit system in New York State.

  • neroden

    What’s to stop Cuomo? Throwing the bum out of office. Can we get a decent Democratic candidate for governor, well in advance, next time?

  • neroden

    He did get something: the city money will go to projects specified by the city. So, NONE of it goes to East Side Access or other LIRR boondoggles for the suburbs.

  • neroden

    Frankly, I think most of upstate understands this.

    The place where they don’t understand this is, bizarrely, Long Island, which has had an extremely adversarial relationship with NYC, even though Long Island depends on NYC like a parasite.

  • neroden

    The percentage of subsidy is astronomically higher on the commuter railroads than on the subway or bus. It’s also significantly higher on LIRR than on Metro-North.

  • bolwerk

    That is smaller defeat, not a victory. Ultimately he probably would have, and should have, gotten state money for those projects by sitting tight.

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