Gene Russianoff on the MTA’s $17.5 Billion Hole

Gene Russianoff, senior attorney for the Straphangers Campaign, talks to Streetsblog about the future of transit funding without congestion pricing. Direct quotes are in quotation marks.

generussianoff.jpgStreetsblog: Without pricing, how will the MTA get funded?

Russianoff: They currently have a proposed $29.5B capital plan. The vast majority is for stuff that absolutely has to be done — rehabbing 44 stations, buying buses, signal and track work, and so on. There is a $9B projected deficit plus $4.5B that will not be coming from pricing bonds, plus $4B that won’t be coming in additional city and state money that was promised if pricing passed.

"Traditionally the MTA has raised funds from broad-based taxes — corporate income tax, mortgage recording tax, real estate transaction tax, sales tax, gas tax — and through fares and tolls. With tolls, excess from upkeep of bridges and tunnels is given to the MTA, and a large chunk of that is used for capital projects. Now [without pricing], we can do what [former MTA chief Peter] Kalikow said five years ago and increase all of them a little bit."

But these are all subject to fluctuation, as we’re seeing now with the dip in real estate tax revenues, which had previously allowed the MTA to run surpluses.

"So one solution is the traditional one, which is to raise one or more of those taxes." Richard Brodsky has said relying on a broad-based tax is what he prefers.

Streetsblog: What about this millionaire’s tax proposal?
"Doesn’t seem like it’s going to pass this time around. Senate Republicans have rejected it. Bottom line is they’ll have to come up with the money from somewhere."

Streetsblog: What about Fidler’s payroll tax?
"In the 25 years I’ve followed transit, just about every kind of tax has been proposed."

In 1984, the Democrats proposed a version of the payroll tax to support the MTA. Republicans didn’t want it, so they proposed the corporate income tax, which passed. They put in a sunset clause, so now it comes up for renewal every few years. Legislators use it to "extract their pound of flesh from the MTA" — i.e. the threat of lowering the rate or not renewing the tax is used as leverage to get projects they want.

"I suppose you could make the tolls five times higher, but I think that would be even less popular than pricing."

  • Larry Littlefield

    (Now [without pricing], we can do what [former MTA chief Peter] Kalikow said five years ago and increase all of them a little bit.)

    Wrong. With seven years more debt, and vastly higher pension costs and retiree health care costs, a vastly larger share of the dedicated MTA taxes are no longer available for the capital plan.

    They go to PAST capital spending, not FUTURE capital spending.

    Have you heard about all those people defaulting on their mortgages and losing their homes after using home equity lines of credit, repeatedly, for short term spending until they couldn’t pay the interest anymore? Things were fine until then. That’s where we are.

  • momos


    You’ve made an excellent point here and repeatedly in other posts about the vast percentage of the MTA’s budget eaten by pensions and past borrowing.

    I hope you’ve shared these views with Silver and other Assemblymen. They need to know the public is aware of the “fuzzy math” they engage in, ie unfunded mandates, etc.

    I just wrote to O’Donnell and Silver demanding they fully fund the MTA with no fare increases, service cuts or new taxes on wages.

  • Larry Littlefield

    (I hope you’ve shared these views with Silver and other Assemblymen.)

    Among the issues that prompted me to run against my Assemblymember was the debt ridden 2000 to 2004 MTA Capital Plan, and the stock market peak 2000 pension enhancement.

    I scared them so much they passed the debt-ridden 2005 to 2009 MTA Capital plan, and passed an unfunded 20/50 pension plan (from 25/55) for the TWU, later vetoed by Pataki prompting a strike.

    Somehow I don’t think a letter from me, of all people, is going to make much difference. In fact, unless the legislature has the power of time travel, and can undo the past, I’m not sure a letter from anyone can make much difference.

  • Larry Littlefield

    Which reminds me, was Russianoff right (and I wrong) for refusing to go along with any fare increases, having farebox revenue continue to fall relative to inflation and labor costs, and not worrying about the consequences for the future of the transit system?

    After all, if we are doomed anyway and the game of chicken is going to be followed to its logical conclusion regardless…

    And not just in mass transit.

  • Oboe

    Let’s remember that Silver, Brodsky and the rest did jack to find real funding for transit throughout the Pataki borrow-and-spend era (the Assembly approved every capital program in the 1990s and 2000s) that have put the MTA in its current crater of debt.

  • Larry Littlefield

    Patterson is going to appoint a “Blue Ribbon Committee.”

    Let me tell that committee now, I am unwilling to pay anything or give up anything to maintain the transit system and thus the region’s economy. Not one dime.

    Nor am I willing to see anyone younger or poor than I pay one dime.

    I’m convinced. If we pay more, a 20/50 pension plan will pass, more MTA dollars will be used for Upstate New York, state aid will be cut BELOW zero and we’re right back where we were.

    No fare increases.
    No service cuts.
    No debts — go ahead and borrow, but we won’t pay them back.
    No taxes on wages — they are too high already.

  • LuvTheSmellOfTrackFires

    Face it. There’s gonna be a fare increase. It’s the only thing the MTA can do it without the legislature. Actually, the State is too broke (and dysfunctional) to do anything anyway. Actually, the only real option for solving the MTA’s money woes is a Federal bailout, but we all know that isn’t going to happen.

    Wait a second, I got an idea. Let’s propose a massive new highway and development project that’ll run alongside a waterway, and then get it funded by the Feds without doing any environmental reviews. Then we find some fish willing to spawn there, and we’re golden!

    Otherwise, it’s gonna be hello 1978 real soon.

  • Larry Littlefield

    What about bankruptcy. I’m not kidding. Want to “run the government like a business?” What would a business do in this situation? Chapter 11.

    Note that the City of New York owns the subway infrastructure — I believe it leases it to the MTA for a dollar a year, on condition service is provider. It also owns the R32 and R40 cars still in the system. These could be seized.

    The Port Authority in reality owns many of the other subway cars, and while they could sell them given system incompatabilities they couldn’t get more than scrap prices. So maybe the Port Authority goes down too, and the cars are purchased for use for a scrap price.

    All the employees are probably post-MTA, meaning only the bankrupt MTA would be on the hook for pension and retiree health care, although the retirees are in the city system. And the buses could be sold anywhere.

    But the city could operate a cut-down subway system terminating half-way down the line, with people further out taking bikes or private vans that far. The “middle class,” of course, would be better off than they are today, since they could all drive to Manhattan.

    The game of chicken, with everyone sucking out as fast as possible and no one kicking in, has probably gone to the point of no return. Only suckers would kick in more now. Might as well take it to its logical conclusion.

    Among those who have no right to ask me, or anyone younger or poorer, to accept or contribute anything are Gene Russianoff and any current or former member of the state legislature or their appointees.

  • JF

    What about bankruptcy. I’m not kidding. Want to “run the government like a business?” What would a business do in this situation? Chapter 11.

    Might as well wait until one of the major banks does it, then no one will think it’s anything unusual.

  • Larry Littlefield

    (Might as well wait until one of the major banks does it, then no one will think it’s anything unusual.)

    Frankly, I’m amazed at how well we are doing.

    The Governor said yesterday that so far this year tax receipts from the state’s 20 biggest taxpayers have fallen only 86 percent this year, compared with last year. That means at least one financial insitution made money and paid taxes. I don’t think that’s going to last.

  • LuvTheSmellOfTrackFires

    “What about bankruptcy. I’m not kidding. Want to “run the government like a business?” What would a business do in this situation? Chapter 11.”

    You know perfectly well that the situation isn’t analagous. The MTA (financially dysfunctional as it may be) doesn’t really meet the tests of bankruptcy. Its credit rating is still pretty good; the markets still buys its bonds; there’s a lot of room for fare raises before ridership will be impacted; it hasn’t really done any cost cutting yet; it has other untapped revenue opportunities (e.g., cell service, naming rights, advertising, real estate/development rights it could sell). There’s a long way to go before it won’t be able to meet payroll and pay its suppliers.

    Moreover, if the City’s experience (bankruptcy in all but name) is any guide, bankruptcy would be a disaster for its capital program.

  • Larry Littlefield

    (Moreover, if the City’s experience (bankruptcy in all but name) is any guide, bankruptcy would be a disaster for its capital program.)

    I’ve concluded that disaster is likely in any event. So why pay more? No one else will.

    (There’s a long way to go before it won’t be able to meet payroll and pay its suppliers.)

    Not if it doesn’t use bonds to pay for operating costs, and end up eliminating capital spending for that reason. Let’s see how dedicated MTA revenues hold up over the next 12 months. Let’s see if they make it to November.


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