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Bridging Mass Transit's Budget Gap

by Graham T. Beck, May 06, 2008
 
Photo by Duco Nihilum
Photo courtesy of Triborough

In 1982, Richard Ravitch, then chairman of the Metropolitan Transportation Authority, cobbled together $8.5 billion in city, state and federal financing to fund an MTA Capital Plan that helped turn the troubled system around.

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On April 8, Gov. David Paterson announced that Ravitch would have the rare opportunity to try his hand again. This time, Ravitch will not be serving in an official MTA capacity but as the head of a blue ribbon panel of business, civic leaders and economists charged by the governor with recommending ways to patch the $17.5 billion hole in the MTA's $29 billion Capital Plan.

When the New York Sun asked Ravitch about his appointment, he said, "I am not sure it is anything but a Sisyphean task, but I will undertake it with energy and enthusiasm," an appropriate response considering that he has pushed the MTA's budget boulder uphill before, and today it's low on the slope once again.

The Capital Plan

The MTA's 2008- 2013 Capital Plan was released in late February, 18 months ahead of schedule, in accordance with the deal that formed the New York City Traffic Congestion Mitigation Commission, the panel that recommended congestion pricing. Many of its specifics, including use of revenues from congestion pricing, are now moot because of the state legislature's failure to approve the plan to charge people to drive in Manhattan. The capital plan, though, still stands as a fairly accurate predictor of the MTA's financial needs for system maintenance, improvement programs, completion of current expansion projects and expansion to provide new capacity.

The Capital Plan consists of three funding tiers. The first tier, the Core Program, allocates just over $20 billion to address the agency's core needs including bringing the systems to a state of good repair, normal replacement and system improvement. The vast majority of tier 1 funding, about $15 billion, would go to NYC Transit, with around $2.6 billion going to the Long Island Rail Road, $1.8 billion to Metro North, and $400 million to MTA buses.

The second tier allocates $5.5 billion for existing expansion projects like phase one of Second Avenue Subway construction, the Fulton Street Transit Center, the South Ferry Terminal and regional investments that would maximize the benefits of expansion projects.

The third tier focuses on new expansion projects, allocating $3.2 billion for computer-based train control and more cars on the 7 Line, Penn Station Access, phase 2 Second Avenue Subway construction and Jamaica Station improvements.

Meanwhile, rising construction costs have opened up a $3 billion gap in the 2005-2009 Capital Plan.

The MTA's financial situation extends beyond construction and equipment budgets, however. An analysis of the July four-year Financial Plan by New York State Comptroller Thomas DiNapoli shows several items straining the budget. These include the debt service on bonds issued during the Pataki administration to finance past Capital Plans as well as the rising costs of healthcare and pensions, and the economic downturn. DiNapoli's report predicted that the operating budget deficit will grow from $965 million in 2008 to $2.1 billion by 2011.

Paying the Bill

To cover all these costs, the MTA has four potential funding sources: fares from subway, bus and commuter-rail riders; city, state and federal government contributions; an increase in existing taxes dedicated to transit, like the mortgage recording tax; and new revenue streams slated for transit, such as congestion pricing.

An increase in all four of these sources will almost certainly be needed if the MTA wishes to maintain the level of service, reliability, cleanliness and safety that 8.5 million daily riders have grown accustomed to and if the agency hopes to expand and improve the system.

The agency will almost certainly, however, have to raise fares more sharply than it did a few months ago if it hopes to keep up with the rate of inflation and balance the operating budget. DiNapoli, in his analysis, reported that the MTA has proposed another 5 percent fare increase for January 1, 2010. That said, it is very unlikely that the MTA will look to fare increases or fare backed-bonds to fund the Capital Plan.

Increased support from the city, state and federal government is always on the MTA's agenda. Former Gov. Eliot Spitzer had made it clear that he planned to fully fund the MTA's Capital Plan, although he never offered details on how he would do that. Paterson has been less explicit, though there are rumors in advocacy circles that another transportation bond act may be in the state's future.

On the federal level, in his State of the MTA Address, Sander pointed out that China spends 9 percent of its gross domestic product on infrastructure, while India aims to boost its spending from 3.5 percent to 8 percent in the coming years. The United States spends less than 1 percent of its GDP on infrastructure.

"Even after Albany and City Hall resume making significant contributions to the MTA Capital Program, it still won't be enough," Sander said, "We must join other national transit providers to persuade Washington to pitch in and provide a much higher level of federal support."

Increasing transit-dedicated taxes and fees will certainly be a big part of the equation. The economic slowdown, though, makes this a daunting task. The MTA will require increases in several transit-dedicated taxes and fees like the mortgage recording tax, the petroleum business tax and vehicle and license registration fees, to simply compensate for money lost, let alone to generate billions of more dollars.

Looking for Money

The heart of any Capital Plan funding strategy, then, in large part may be focused on identifying new transit-dedicated revenue streams. A 2004 report by the Regional Plan Association titled "Financing Options for the MTA Capital Program" looks at possible sources of revenue. It considers a few possibilities

--Traffic pricing, such as the congestion pricing plan: With the State Assembly having refused to even vote on Mayor Michael Bloomberg's proposal to charge a fee to drive in Manhattan during the work week, this seems off the table for the time being. However, according to Marc Shaw, former chair of the Traffic Mitigation Commission, Ravitch has not taken the option off the table.

--A gas tax: As gasoline prices have risen, some politicians, notably presidential candidates John McCain and Hillary Clinton, have called for doing away with the gas tax. Raising it in the current political climate appears unlikely.

--A commuter or payroll tax: The commuter tax, which raised $325 million the last full year it was collected, has popped its unpopular head out of the water repeatedly since it was drowned in 1999 by Assembly Speaker Sheldon Silver. Mayor Michael Bloomberg, Kathryn Wylde of the Partnership for New York City, the Queens Civic Congress and others have at various times all floated the idea, but the general consensus is that the commuter tax is a non-starter in Albany.

Acknowledging this, the Regional Plan Association report suggests that the commuter tax could be refashioned into a mobility fee or payroll tax that draws on more earners and employers and is openly dedicated to transit. Based on 2000 income data, a 1 percent tax on wages after the first $50,000 could generate $820 million annually.

Looking Ahead

Tough times for the MTA mean tough times for the city and tough times necessitate tough measures. That could mean anything from service cuts to further construction delays to double-digit fare hikes to layoffs.

For now, we'll have to wait and see what revenue-generating proposals Ravitch's Commission recommends, what the 2009-2014 Capital Plan looks like and whether the economy warms, cools or stays where it is.

Despite the tough times, seasoned transit advocates are hopeful. "I'd be deeply depressed if we hadn't managed" to fund the capitol plan since 1982 said Gene Russianoff of the Straphangers Campaign. "If there is anyone who can find the funds needed to keep fixing transit now, it's Ravitch."

Graham T. Beck is the managing editor of Transportation Alternatives' StreetBeat, and a freelance writer. He lives in Brooklyn.  


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