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.