Gotham Gazette

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At the same time that recent reports by the State and City Comptroller add immeasurably to our understanding of the funny numbers the Metropolitan Transportation Authority used to justify the new fare increase, they also illustrate how unaccountable public authorities actually function, exposing the insular, smug attitude that MTA officials exude, even under the gun.

Representing a public corporation controlled by Governor George Pataki, these officials are blunt. They ignore public mandates, deny simple facts, and apparently think the average citizen is a fool.


State Comptroller Alan Hevesi's April budget report, "An Examination of the Finances of the MTA", (in pdf format) charges that the MTA hid more than $500 million of its surplus in 2002, which "foreclosed any consideration of [other] fare options." The result was that the public hearing process was a "sham."

The state comptroller found that the MTA kept two sets of financial plans, one public and one internal, and that its budget officials "cultivated an insular budget system," creating a "culture of secrecy." Officials "deflect requests by parsing language, invoking technicalities, and providing evasive responses to direct questions." When the comptroller's staff asked whether certain resources could have been used in 2003, Gary G. Kaplan, the MTA's Director of Budgets and Financial Management, "responded on three occasions that the answer depended on what 'could' means."


The state comptroller's report identifies the impact of the fare increases imposed through this flawed public process on subway, bus and commuter-train riders -- a full-year (2004) increase of $542 million overall, $430 million of which falls on Transit Authority riders; $430 million, ironically enough, is roughly what the old, repealed commuter tax generated for the city budget.

The report also showed how the state's share of capital spending is declining dramatically. The state share of the MTA's first two capital plans was 18 percent, but in the 1995-1999 plan declined to seven percent. (The state's share of the $19 billion 2000-2004 plan is not yet clear, but beyond some dedicated taxes, it is not expected to make any direct contribution)

The MTA recently restructured $13.5 billion in outstanding debt. This helped pay for current capital expenses and helped balance the operating budget. It also in the short run lowered annual debt service, but at the cost of higher future costs. In fact, the restructuring will mean a net increase of $5.8 billion in debt service costs between 2003 and 2032.

Debt service costs (which the MTA has now detailed only because the comptroller subpoenaed the figures) become more important as the MTA increasingly resorts to borrowing money. Nearly two-thirds of the 2000-2004 program will come from debt, far higher a share than the roughly 25 to 40 percent share in the four previous plans, going back to 1982. (The city share has been minimal - about $105 million a year - and Mayor Bloomberg has proposed a 30 percent reduction in that.)

The MTA's debt service has increased from 13.4 percent of revenues in 2000 to 19.7 percent in 2004 (before factoring in the fare hikes). One recent analysis projected an increase to 25.5 percent by 2020. All of these increases will impose new burdens on transit riders.


City Comptroller William Thompson's April "Audit Report on the Financial Practices of the NYC Transit Authority," (in pdf format) tells a similar story. His report finds that the Transit Authority's "financial statements and budget documents were incomplete, misleading, and obfuscating." The key charge is that the TA "improperly included capital costs and interest expenses on long-term debt as operating expenses on its financial statements." The effect was to make it "impossible" for the public to judge whether a fare increase was necessary.

The numbers in question are huge: The report says that in 2001 financial statements, operating expenses were overstated by approximately $859 million, and in draft 2002 financial statements by approximately $853 million. The Transit Authority has subsequently revised its 2002 statements.

On public process, the city comptroller found that the TA "did not provide the public with complete, clear, and accurate information about its current and future financial position." The MTA did release on March 27, 2003 - three weeks after the fare increase was approved -- a revised budget with a more comprehensive version of the Transit Authority's financial condition. In response to the auditor's question about this timing, the MTA and Transit Authority answered:

"The finances of the MTA are complicated, which is why the case was set forth in what we believed were 'digestible' pieces that would make it easier for the public to understand MTA's finances." They also claimed the MTA budget process "is one of the most open of all governmental budget processes."

The auditor's comment rejected the notion of 'digestible pieces,' and suggested that "presenting bits and pieces of information at various times in various documents with changing numbers and assumptions makes it even more difficult to digest and evaluate the MTA's financial situation."


In addition to its lively exchange on digestive processes and a democratic budget process, the Thompson audit report makes another important point, that city transit riders pay a "significantly higher percentage of TA operating expenses when compared to the percentage of operating expenses paid for by the ridership of the commuter railroads and Long Island Bus":

" TA riders will pay 53.87 percent of operating expenses in 2003
" Long Island RR riders will pay 38.83 percent
" Metro-North RR riders will pay 45.26 percent
" Long Island Bus riders will pay 35.03 percent

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.