Three Ways the MTA’s Finances Are Severely Screwed

The seemingly unending conversation about how to pay for the massive project of rescuing the city's ailing subways misses the point.

New York City Transit President Andy Byford holds up a copy of his $37 billion "Fast Forward" plan to fix the subways and buses. Photo: David Meyer
New York City Transit President Andy Byford holds up a copy of his $37 billion "Fast Forward" plan to fix the subways and buses. Photo: David Meyer

The MTA is in a death struggle of cutting its budget and reducing service, setting off another round of finger-pointing about who should pay to save the cash-strapped state authority. But securing dedicated funding for mass transit is only half the battle. Here are three reasons why:

The Funding Options on the Table Aren’t Enough — And Politicians Don’t Have a Clue

Under fire from Governor Cuomo for the city to pony up, Council Speaker Corey Johnson managed to convince Mayor de Blasio this spring to contribute half of the funding for the MTA’s short-term, $900-million “subway action plan.” Now the governor wants more: a city commitment to paying half of the $37-billion “Fast Forward” plan drawn up by New York City Transit President Andy Byford.

That’s a lot of money. But none of the proposals for raising cash — congestion pricing, Mayor de Blasio’s millionaires tax proposal, bringing back the commuter tax — would come even close. Tolling cars to enter Midtown would only raising about $1 billion annually, which is enough to cover only about $12-15 billion in capital borrowing, former Assembly Member Jim Brennan wrote in Gotham Gazette last week.

Brennan’s piece argued that Albany should raise state corporate taxes to get back some of the cash the private sector got from Trump’s tax cuts. Gubernatorial candidate Cynthia Nixon says the state could raise $7 billion with a carbon tax, with some of that going to the MTA.

But Brennan isn’t in Albany anymore. And Nixon won’t likely get there.

Meanwhile, elected officials aren’t thinking that big. Their public discussion remains limited to useless binaries of “city vs. state” and “congestion pricing vs. millionaire’s tax.” If the MTA is serious about funding Byford’s plan, however, everything needs to be on the table — and then some.

Declining Ridership Means Less Money

The MTA’s July financial update delivered sobering news: The agency anticipates cash deficits to grow in the coming years, rising higher than the last peak in 2009, during the Great Recession. Even the regularly scheduled fare and toll increases and savings goals won’t close the $634-million anticipated deficit for 2022, which represents 3.4 percent of the agency’s $18.6-billion operating budget that year.

The subway’s ongoing ridership decline, which shows no evidence of letting up, means future financial prospects are even more precarious. Last month’s budget update predicted $376 million less fare revenue through 2022. Farebox revenue will drop from 52 to 48 percent of the agency’s operating budget.

And that’s slated to happen when New York’s economy is thriving, at least relatively speaking. “These deficits are basically as large as they’ve been since the last recession,” said Jamison Dague of the Citizens Budget Commission. “This is when the economic is, if not [doing] as well as a couple of years ago, still growing.”

More money passing through the city should mean more people riding the subway. That’s not happening right now — in huge part because New Yorkers have lost faith in transit and abandoning it in droves.

The City Has No Reason to Trust #CuomosMTA With Its Money

De Blasio has balked at forking over money for subway repairs. He has good reason to be skeptical because the MTA and the governor’s office have not been forthright about its financial situation: The MTA spent Johnson’s $418-million subway action plan contribution to hire 2,700 new employees for overdue maintenance work, but the agency also suddenly found $562 million by cutting “non-essential vacant positions,” Nicole Gelinas of the Manhattan Institute noted in the New York Post last week.

Is it any wonder that the mayor doesn’t trust the MTA?

Meanwhile, the governor routinely robs the agency for cash for other projects. On Thursday, a broad coalition of business, labor and advocacy groups called on Cuomo to sign the Statewide Transit Lockbox bill [PDF]. The legislation requires the state be transparent and forthcoming about any diversions of funds away from mass transit. It’s been passed before, but Cuomo has never signed it.

“It’s easy to understand why the city hasn’t wanted to put up this money. It really does start with much better governance,” Gelinas told Streetsblog.

  • JK

    You forgot another big reason MTA finances are screwed, the current MTA capital plan is in a $7.5B hole before the theoretical Byford Plan/Fast Forward is even discussed. Cuomo pledged $7.3B in state aid to the MTA’s 2015-2019 capital plan. He has not yet paid up, and the fine print is the money does not have to be paid until 2025 or “the MTA has exhausted” other funding (aka borrowed to the max.)

  • Larry Littlefield

    It’s over they won. Same with the schools. And Social Security and Medicare.

    We can either make them admit it or not — including Brennan, who voted for every pension increase, every debt increase while in Albany, with the rest of them.

    They want to celebrate in private, while wringing their hands and pretending to give a damn in public.

  • gepap

    The MTA Capital plan does not work on a cash on hand basis – most of the projects for which that money would go haven’t even entered the bidding process, and money won’t actually be disbursed well into the future. So, if you want to argue that the pledge isn’t serious, that is one thing, but your specific claim is specious.

  • Larry Littlefield

    “Most of the projects for which that money would go haven’t even entered the bidding process.”

    That’s the plan for 2015 to 2019, and we are 42 months into a 60 month plan.

    As predicted…

    https://larrylittlefield.wordpress.com/2014/02/23/the-2015-to-2044-mta-capital-plans-generation-greeds-accidental-not-our-fault-plan-to-leave-new-york-state-in-ruins/

    After a couple of decades of paying for ongoing normal replacement (ie. maintenance) and “reimbursable operating expenditures” (ie. service) with debt, ongoing normal replacement has stopped and the system is in a downward spiral.

    Just to make sure the money is there when the bidding process “imminently” begins, how about the MTA does a bond issue for $15 billion right now — with me calling for a default on Generation Greed’s debts. Let’s see what interest rate they get, and how much of their revenue is left after they start paying it.

  • Joe R.

    Anyone with a shred of common sense should be calling for a default on most types of government debt. The only time the government should be borrowing (and thereby shifting costs to the future) is for major infrastructure projects whose benefits will also go far into the future. Borrowing for operating costs or pensions is just ludicrous. People will be paying 30 years from now for the pensions of people who will be long dead by then.

    And what’s this idiotic trend of bonding against a future revenue stream so you get to spend it all in the short term? That basically means after the money is spent, the new revenue stream will be going solely towards paying interest forever. Or put another way, it will be spent to make the (mostly) rich people who bought the bonds even richer. Sounds like the type of debt we should default on. Ditto for student loans. People should stop paying them en masse because without them the cost of education wouldn’t have been so high that they would have had to borrow. And you can make a good case for government paying for higher education given that it means it reaps higher taxes over a person’s working life.

  • Larry Littlefield

    Debt is the cause of inequality. Debt is the cause of our trade imbalance. Debt is what allowed most people to be paid less, but sold more.

    https://larrylittlefield.wordpress.com/2014/03/09/debt-and-inequality-go-together-rising-debt-is-the-cause-of-rising-inequality/

    How much of our income will be going to pay rent to the rest of the world for Generation Greed’s party, and for how many generations? That’s money that won’t be there for transit, housing, health care, education, anything!

  • JK

    No, the plan isn’t cash basis, but what actually is the “plan” now? It’s losing it’s meaning politically, fiscally and politically because the bulk of planned income and expenses occur many years outside of the plan years. When does the Byford Plan/Fast Forward start if the 2015 capital plan doesn’t get a big chunk of it’sfunding until 2025? Unless Cuomo is in office for fifteen years, he will not be governor in 2025 when his $7.3B pledge to the MTA comes due.

  • Oscar_DeGrouch

    NOWHERE in this article is any mention of actually cutting the MTA budget and bringing down exorbitant costs. “Socialist” countries spend 1/5 – 1/6 of the amount to do the same projects as the MTA.

  • Larry Littlefield

    Many of those future MTA costs were actually incurred in the past on public AND private projects, as I explained here.

    https://larrylittlefield.wordpress.com/2018/08/15/an-open-secret-mta-capital-costs-have-soared-to-pay-for-underfunded-metro-new-york-construction-union-pensions/

  • Larry Littlefield

    Right. The “approved” a plan with no money, and someone is telling the MTA that if they try to float more bonds, no one will buy them.

    And that’s BEFORE the bankruptcy of New Jersey, Connecticut and Illinois.

  • Daphna

    NYC had better get protected bike lane in and get them in fast. And make them wider. And build out a robust network. Don’t be shy about dedicating space away from free/underpriced parking, or from excess travel lanes that encourage speeding. Re-prioritize space towards bikes and pedestrians. With the MTA dying, New Yorkers need the option of biking. NYC could reach 30% modal share of bicycling with a robust, safe bike lane network and with a faltering mass transit.

  • Larry Littlefield

    Need the option of biking to a different subway line, while the one nearest to them is shut down for years as money is scraped together for the least repairs possible.

    The caption for the picture atop this post:

    “Shhhh. Don’t talk about how our current financial situation related to deals and non-decisions when Pataki was Governor, Giuliani was Mayor, AND I was his budget director. And don’t bring up that quote that we should be issuing 100 year bonds instead of 30 year bonds to pay for five years of maintenance.”

  • homer2101

    With all due respect to Mr. Littlefield, he’s making the usual mistake of conflating money with real wealth. The subway system is a real thing that produces real wealth. Money is only relevant insofar as it can purchase real wealth, and much of the MTA’s wealth isn’t exactly portable. Let’s imagine tomorrow the MTA defaults on its bonds and tells its financiers to pound sand. Will the banks foreclose on the tracks across the Manhattan Bridge?

    The reality is that any government can effectively dictate its borrowing terms. The financial sector knows this, and it also knows that government bonds are still a safer bet than most private sector opportunities. Which is why governments with a well-established history of defaulting on debt still have no trouble financing their activities. Besides, there is so much money sloshing around in the parasitic financial sector that billion-dollar money-pits like Uber can get perpetual funding despite lacking any path toward profitability.

  • adjust the price of uber/lyft licenses : 100,000 at $5,000 a year is $ 5 billion in 10 years.

  • AMH

    Is Lhota shushing Byford?

  • Larry Littlefield

    So, borrow $40 billion at zero percent?

    Or default on the $40 billion already borrowed?

    I am well aware of the difference between pieces of paper that say you get a share of other people’s future work and real wealth. Those types of pieces of paper were once backed by real wealth, and now they are not.

ALSO ON STREETSBLOG

No, the MTA Can’t Afford Cuomo’s Transit Raids

|
I think most transit riders would laugh — cynically — at the idea that the MTA has more than enough funds to meet its needs. But this is exactly what the MTA’s chairman Tom Prendergast said when he learned that the state would be diverting $30 million from the MTA’s funding stream to balance the […]

Brennan Proposes $4.5B Transpo Bond for Next MTA Capital Plan

|
With the next three years of the MTA capital plan officially moving forward — even without dedicated funding from Albany — it’s time to start talking about 2015. That’s when the next MTA capital plan starts. And distant as it may seem, on the political calendar it’s just around the corner. In fact, in Albany, […]