By Neysa Pranger, Director of Public Affairs and Bob Yaro, President
At the end of this month, the Metropolitan Transportation Authority will release its July Financial Plan for 2011. For transit watchers and advocates, the plan will provide a rough sketch of where the agency finances are and what steps will need to be taken to close an expected gap. For transit riders and commuters across the region, it will be an indicator of how much more they will be paying to ride the subways, buses and commuter trains in the year to come.
The numbers are likely to bring even more bad news. Given what we know already about MTA shortfalls for this year, the continued fragile state of the economy, the lapse of the federal homebuyers incentive (leading to fewer home purchases and fewer mortgage recording taxes for the MTA), and state and federal governments unwilling and unable to provide additional stimulus, the gap will probably be at least $400 million.
In 2008 the Ravitch Commission proposed that the MTA adopt a long-term fare and toll policy, in which modest increases would be adopted every other year. While this was not codified in final legislation, the MTA responded by scheduling a 7.5% net fare and toll increase in 2011 and 2013. The agency is expected to propose at least that much, accompanied by continued belt-tightening on the part of both management and labor. But if the gap is higher than expected, more creative thinking will be required.
The MTA's continuing budget challenge is compounded by the fact that virtually no one expects Washington or Albany to ride to its rescue. The federal government is now borrowing just to sustain current transportation obligations, and New York State is projecting a $12 billion deficit for next year.
The MTA's proposal for the coming year is unlikely to include another round of service cuts on top of the reductions now being felt around the region. These included elimination of many local and express bus routes and two subway lines and reduced overnight and weekend service. The MTA has said that they are reluctant to make additional service reductions given the cuts they've already made. This could still happen, however, if funding problems get much worse, or if the agency is prevented from proceeding with reasonable fare and toll increases.
The MTA also cannot rely on debt restructuring, as New Jersey is expected to do with its transportation trust fund. This is because back in 2000, the agency did a major debt restructuring which spread out the payment period for old bonds and effectively left the agency paying for equipment no longer in use. The MTA is now facing a load of debt that is taking up a larger and larger percentage of the operating budget. While borrowing and debt restructuring is on everyone's mind lately, the agency will probably not be able to extend current debt in the same way it was able to in 2000.
So, this leaves the MTA with the necessity of relying on its own tool box: increased efficiencies and fare and toll increases. Here the MTA has already made painful cuts to both management and rank and its unionized workforce. There will probably be more to come as the agency looks to further merge back office functions and demand productivity gains from its workforce. This debate will heat up as TWU Local 100's contract expires at the end of 2011.
All of this points to the fare box to make up at least part of the gap and the question will almost inevitably be not "whether," but "how much." Hopefully the agency won't need to propose increases above the 7.5% average already on the books.
If a significant fare hike is proposed, one side benefit may be that it might warm politicians to again consider road tolling to offset the increases and spread the burden amongst beneficiaries. If a fare hike really is the only viable short-term alternative to keeping the system healthy, the MTA and state, city and federal leaders must make sure the formula is equitable to low-income riders and that riders are getting something in exchange, including adequate service levels.
One way fare increases can be minimized is for the agency to rationalize its fare collection system, which the MTA is now examining. Right now, 15 cents for every revenue dollar collected goes to administrative costs of MetroCards such as printing, maintenance, and distribution. One option being considered, for example, is a service charge on newly issued MetroCards to incentivize topping up of existing cards. And there has already been some discussion about ways to reduce the impacts of fare increases on the agency's low-income passengers. We look forward to participating in this important debate.
Whatever the outcome of this year's budget battle, it will frame a larger debate next year about how to fund the last three years of the MTA's five year capital program. This will require new financing strategies and support from Albany. But the immediate challenge before us is sustaining the MTA's essential transportation services for the coming fiscal year.
@RegionalPlan
Your article - like the Ravitch Commission, the Legislature and most media – makes no mention of one major transit stake-holder, and a primary beneficiary of subsidized subway service, which should be included among those being asked to ante up more to support our essential transit grid: namely, owners of realty within walking-distance of subway lines. Especially in Downtown and Midtown cores, where most towers are a stone’s throw from several interconnecting stops, subways are not a luxury, but something as essential to the viability and value of high-rises, as elevators and HVAC. Without public taxpayer subsidies for subway operations, most of these parcels would be worth a miniscule fraction of their present value!
Though this point appears obvious, it’s odd how rarely our business, media and government officials -- dependent on advertising and campaign dollars from New York's real estate industry -- have dared to utter a word about this other community of transit beneficiaries.
No one should ask owners of transit-dependent land to carry all the cost of closing MTA’s budget, but neither should they be omitted from discussion. Surely, owners in prime office areas who willingly assess themselves added Business Improvement District taxes for such minor amenities as fancy paving or designer benches, would readily help to maintain operation of the transit rolling stock that helps deliver occupants to their floor space, if the MTA’s need, and the equity of the situation, were fairly presented!
It really comes down to the basic question of whether drivers, straphangers and regional employers should subsidize the value of New York's priciest real estate, without some fair contribution from the owners of benefited parcels! The question answers itself!
Everyone who gains from transit service should share the burden. But with all respect, most in the business/political/media establishment pushing to hike only payroll taxes, fares and tolls, must either be less than candid, or in deep denial, to exempt owners of center city transit-served land, from the group of stakeholders who should help "share the burden."
As I stated in a submission to the MTA last year, Frederic C. Howe, a prominent urban planning expert nearly a century ago, found only shortly after NY's first subways were built, that increased land values near to, and caused by, this new subway service, in only a portion of the benefited neighborhoods, could have financed construction of the entire system at that time, still leaving room for a handsome landowners’ profit. And this was before the boom in skyscraper development!
Over the past century, these owners have reaped unspeakable windfalls from subway service, but -- sadly for New York's less wealthy -- the realty lobby seems to have plowed much of their gain into media ads and campaign contributions, making it tough for journalists and politicians to speak candidly about the fairness of charging the workers of Queens, Brooklyn and the Bronx, hundreds more to subsidize service, while tower owners owing most of their land value to those subsidies, contribute nothing to them!
Moreover, by forcing drivers to pay more to commute from areas too far from subways, the Ravich plan could, ironically, boost center city subway-served land values even MORE – making it even MORE outrageous that this land might continue to escape any form of transit benefit zone assessment!
The unfairness of this picture demands that the State Senate scrap the Ravich plan, and build an alternate proposal from scratch, placing at least a third of the cost of closing the MTA budget, on transit's high-rise, subway-served land owners. In all candor, skyscrapers, not straphangers, are the greatest beneficiaries of our subsidized transit network, and they should be asked to contribute to its sustenance accordingly!
Another irony: By shunning active discussion of transit benefit zone assessments in areas of EXISTING subways, the real estate industry misses a major opportunity to introduce this concept to help finance expansion of our transit grid into outlying parts of our region! If benefit zone assessments were established in areas where new transit lines are planned, then a modest tax on some of the foreseeable resulting jump in realty value from these new routes, could be dedicated to financing new bonds that can finance this ambitious construction, without unfair burden to taxpayers in general. And this is precisely the kind of ambitious new planning that our region, and the nation as a whole, will need, if we're to manage land development in the more energy-efficient manner required to combat climate change!
How strange it would be to plan new transit routes to cut our carbon footprints in outlying areas, while DISCOURAGING transit within the 5 Boroughs, by raising the cost on existing riders? If for no other reason, drawing a fair share of subsidy support from benefited land, is essential, to avoid causing an increase in energy use and CO2 output, by commuters!
After all, while unhappy businesses, and subway or car commuters can vote with their feet -- by escaping to other regions -- landowners have not yet found a practical way to "move land" (!) to avoid paying their fair share for subway service.
On a related point, we can't reasonably ask landowners in areas of any new transit extensions to use some of their value increase to finance new service, without finally phasing in a charge for the historic windfalls on existing subway areas, and also, a fair charge for the cost of current subsidies needed for ongoing operation, maintenace, and capital replacement on existing routes! After all, isn't a century long enough for ordinary taxpayers to subsidize these private windfalls?
Again, let's make sure our leaders understand this basic fact: Straphangers AND Skyscrapers are BOTH major beneficiaries of subsidized rapid transit, so BOTH should bear a fair share of the subsidy burden!