Ex-MTA Chiefs: Fund the Capital Plan, Don’t Gamble With the Transit System

With the election over and Albany in session, the time for tiptoeing around the $15.2 billion gap in the MTA’s next five-year capital program is over. Today, three former MTA chiefs lined up to say that, one way or another, the plan must be fully funded.

Former MTA Chairman (and current Alta Bicycle Share CEO) Jay Walder speaks at Grand Central Terminal today. Photo: Stephen Miller
Former MTA Chairman (and current Alta Bicycle Share CEO) Jay Walder at Grand Central Terminal today. Photo: Stephen Miller

“The governor, the legislature, and the mayor must do the heavy political lifting to find new revenue sources,” said former MTA chief Elliot Sander, joined by fellow ex-MTA leaders Peter Stangl and Jay Walder this morning in Grand Central Terminal. A roster of NYC civic groups and private sector interests, from environmental advocates to big business to the construction industry, stood behind them in support.

“The message today, in case you haven’t heard it, is ‘mind the gap,'” said Regional Plan Association Senior Advisor Bob Yaro. “Everybody’s gonna have to belly up for a piece of it.”

A variety of solutions have been floated to fill the funding gap, from a gas tax increase to a regressive sales tax hike. The best one from a transportation, environmental, and economic development perspective would involve reforming the region’s dysfunctional toll system. While no one speaking today would come out in favor of one fix over the others — “this is not the time for that,” Sander told a scrum of reporters after his remarks — with Albany in session, the clock is now ticking.

Ultimately, closing the capital program gap is up to Governor Andrew Cuomo and the legislature.

The governor is set to combine his State of the State speech and budget address in one event on January 21. I asked Sander if he is looking for Cuomo to say anything about the MTA during the speech. “Whatever works for the governor and the legislature and the city in terms of how to deal with it,” he said. “We don’t — you know, no.”

Sander was less circumspect about City Hall’s role. “I think there’s a recognition by the mayor’s senior staff that the city may need to contribute more. There’s no greater beneficiary than the City of New York,” he said. “I am optimistic that the mayor will be there.”

In the 1980s, the city sent $200 million each year to the MTA’s capital budget before dropping its annual commitment to $100 million in the 1990s, where it has stayed ever since. The MTA already assumes the city will increase its annual contribution to $125 million for the next capital plan. But even a sizable boost from the city will go only part way to closing the $15.2 billion gap.

The ultimate solution must come from the governor. After calling the capital plan “bloated” at one point last year, Cuomo decided to keep his options open and say that “everything is on the table.”

Without a new revenue source, the MTA will likely take on more debt. The agency already spends 17 percent of its operating budget on debt service, and is planning to issue $6.2 billion in additional debt for the next capital plan. Sander said he is “comfortable” with that proposal but is worried that elected officials could paper over the funding gap by cutting investments and piling on more borrowing for the rest, leaving straphangers to pick up the tab.

“More debt and higher fares, and a reduced program. That is our greatest fear,” Sander said. “The public may not see the impact until several years later when the damage has been done.”

  • Bolwerk

    How about NYC taking responsibility for some SoGR work? Looks to me like NYC’s borrowing rates are significantly below the MTA’s. Even if the state ultimately pays, at least the interest costs could be lower.

    The state would have to approve, I guess.

  • Ian Turner

    Normal ongoing maintenance and repair work should not be funded by debt. Period.

  • Bolwerk

    Who said anything about normal ongoing maintenance and repair work? SoGR is work that has scope measured in decades. Neither the words “maintenance” nor “repair” nor “ongoing” were mentioned by me nor the above article. Were they mentioned in this PR bit?

    (The capital budget is by definition not the day-to-day repair and maintenance necessary to operate the system.)

  • al

    How about demanding the slated work be done within the funds available (~15 billion). If they protest, invite firms from out of state or even from Canada, Japan or Europe to come and show how its done.

  • Larry Littlefield

    That’s how we ended up with a $30 billion debt. And might end up with a $100 billion dollar debt, and 100 percent of fare, toll and tax revenue going to debt service.

    That’s where New Jersey is right now.

    We could just keep expanding “reimbursable” operating expenses until they cover 100 percent of the operating budget, because the system operates in an area where there are capital projects. Then we wouldn’t even need a fare — for a few more years.

    Notice no grandstanding comptrollers ever sought to audit that legerdemain.

  • Larry Littlefield

    “With Albany in session, the clock is now ticking.”

    The (last?) MTA Capital Plan already expired.

  • Bolwerk

    If anything the opposite is true: we got $30 billion in debt by simply ignoring normal (operating) repair and deferring (capital) replacement. The result was a shorter system life and higher replacement costs.

    Either way, how that relates to my initial comment or the article I was commenting on is still glaringly unexplained.

  • Bolwerk

    Well, we tried a reinvention commission, but only ineffectual English-speaking countries and one developing country were allowed to offer input. 🙁

    I’m not sure that addresses the problem: foreign or domestic, the rules are poison. But the work still needs to be done.

  • Larry Littlefield

    What I suggested was four things, one of which relates to your suggestion:

    1) The tolls — $5 billion for this plan, next plan, every plan.

    2) Contractors give back some of their massive cost increases over 20 years. $5 billion this plan, next plan, every plan.

    3) State operating aid for downstate buses diverted to the capital plan. Payroll tax revenues turned over the NYC and the counties — to use for buses, or eliminate if they choose. NYC takes over its bus and paratransit system, leaving the MTA a rail agency operating on its own infrastructure not city streets. Net $800 million MTA savings/NYC cost per year, plus the state money now used for buses from the other counties. That’s close to another $5 billion this year, next year, every year.

    4) Subway and commuter rail made to break even on an auto-equivalent, covering the purchase, maintenance, repair, and operation of the trains. The rail infrastructure, like the roads for autos, are paid for otherwise. Subway fare increases in excess of those proposed would be required, balanced by a higher minimum wage. And the MTA would have to confront the LIRR problems.

  • ahwr

    The MTA doesn’t have a financing problem or a cash flow problem, it has an insolvency problem. Instead of a gimmick to try and hide that for a little while longer the city and state should put together new revenue streams and cut costs at the authority.

  • Bolwerk

    *shrug* I was just wondering why that comment was (apparently) directed at me. Besides being irrelevant to my comment or the thread, nobody can say I lack cost-cutting advocacy cred and you can find ample pissed off reactions from union people to prove it! As for your laundry list…

    #1: peg it to inflation or labor expense growth (whichever is greater)

    #2: definitely need to do something to control those costs, not sure what

    #3: probably injures some of the most vulnerable riders; the subway at least in theory can bear its own costs with a mix of technology improvements and labor cuts. Buses probably never could.

    #4: hard to say for sure, but that may already be achieved depending what you mean by “operation of the trains.”

  • Bolwerk

    We should cut costs at the authority, but unburdening it from some of its most intractable cost problems is a “gimmick”? Rather bizarre comment for someone who thinks there is a solvency problem.

  • ahwr

    The MTA doesn’t have a financing problem. Hiding their debt in city bonds doesn’t change the fact that there isn’t enough money coming in to maintain the system. Call it state of good repair work, long term capital improvements, or whatever other term you come up with, it doesn’t matter, at current costs the MTA is facing an annual shortfall of ~3 billion to maintain and operate the system that exists today. That doesn’t get fixed with more debt, it gets fixed with more revenue and lower costs.

    What bond issues are you comparing that makes you think that city issued debt is so much cheaper?

  • Bolwerk

    So what? If you think you can fix it without debt, lead us to your Scrooge McDuck-esque money vault. Seriously: there is absolutely utterly no realistic scenario for financing the capital program that does not involve issuing debt. No, this is not my opinion. It’s not being said because it’s what I want. It’s cold, hard reality.

    And not to overload you with critical distinctions, but I wasn’t talking about hiding anything. I was talking about having the city just pay for some SoGR itself. Many SoGR problems probably go back to the days of city ownership or before anyway.

  • ahwr

    Thought you meant have the city issue debt then have the state pay it back through the MTA in some convoluted scheme. If the city wants to increase its contribution to the MTA that would be welcome, but if it isn’t for system expansion then it shouldn’t be done with debt.

    The MTA has an annual three billion dollar funding shortfall to maintain and operate the system. Use debt to cover some of that one year? Then the next year there is a shortfall of three billion dollars+ some extra for debt service. Doesn’t matter if the debt is issued by the city or state or the MTA.

  • CostContainment

    This is just one more thing that happens when the Union bloats the cost structure for a taxpayer supported system. Cut staffing costs by 10% across the board – management and union – through a combination of attrition, staff reductions and pay cuts, and you’ll close most of the hole and no one will know the difference in either service or safety.

  • al

    “Buses probably never could.”

    Commuter buses sit idle most of the day. A combination of intercity and commuter buses could work.

  • Bolwerk

    Like it or not, system replacement (!= operating maintenace) is financed with debt issuance for all the same reasons system expansion is. If you know some way around that, perhaps you should tip off the comptroller. Until then, finding ways to cut cost of capital is pretty helpful.

    Yes, new revenues are needed, cost cutting would be great, blah blah. Probably we can expect a lot of fare hikes between now and the 2030s. Unfortunately, most cost cutting means cutting jobs, so that’s hard. None of that makes the above up for dispute.

  • Bolwerk

    Huh? Transit buses and commuter buses, let alone intercity buses, are not interchangeable.

  • ahwr

    Outside of expansion the 2015-2019 plan spends ~26.5 billion. The twenty year capital needs assessment calls for average ~26.25 billion spent in each five year plan. The MTA might be paying for different projects with ten, twenty, thirty, or forty year lifespans each five year plan, but total needs over the next five years are comparable to the needs over each of the next three five year plans. It doesn’t matter than you are replacing more subway cars than you usually will have to, you are also replacing fewer signals and buses. Unless the city or state up their contributions this plan is paid for 60% with debt for ongoing expenses. There’s no cash flow problem to paper over with debt. The system is insolvent.

  • Bolwerk

    Even if that were all true, and much of it is, none of it alters basic facts of the universe like the changing of the seasons and that the next capital plan will include a big debt financing component. It’s not my doing, and it won’t change because you wish it won’t happen. I might have trouble believing this is crisis-level the way Larry seems to, but since I’m far from against remedial measures against long-term debt obligation growth, I don’t even see what you have to disagree with me about.

    The MTA actually becoming insolvent is only a remote possibility. The MTA stays solvent through a mix of dedicated incomes and government subsidies. Reduce or eliminate either and it would indeed be insolvent. The only remotely probable scenario for MTA insolvency is political: refusal by the state legislature to increase subsidies or find new dedicated revenues, when and if needed. Possible? Yes. Probable? No.

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