In the wake of the Enron and Worldcom scandals, a reasonable expectation could be that the Metropolitan Transportation Authority – a quasi-corporate entity with an annual budget of $7 billion – would have learned a thing or two about the dangers of shoddy accounting practices.
Unfortunately, recent audits by City Comptroller William Thompson and State Comptroller Alan Hevesi suggest otherwise.
With the revelations that the transit authority secretly kept two sets of books, one for public and another for internal use, and also hid more than $500 million in order to justify higher bus and subway fares, the MTA is now caught in its worst crisis of public confidence in its 35 year history.
Over the years, the MTA has not given the people of this city much reason to think that we are treated fairly. After all, we move about 84 percent of the transit riders in New York State, but we receive only 63 percent of all state aid for mass transportation. At a time when the city is being forced to cut back on basic services like fire and police, this costs us more than $300 million a year.
But now public opinion threatens to turn even more forcefully against the MTA. As one straphanger from the Bronx put it, “They’re always going to cheat us. We’re always going to get a raw deal out of it.”
Such feelings are understandable – but they should not go unchallenged. The MTA should face up to its crisis of confidence and take concrete steps to win back the public’s trust, both for their own sake and also for the sake of the city. For all its problems, the MTA performs a vital service and we need it to be strong in order to finish essential projects like the transit hub at Ground Zero and the 2nd Avenue Subway.
As the person primarily in charge of appointing officials to the MTA, Governor George Pataki also shares in the blame for this crisis of public confidence. Throughout his re-election campaign last year, he maintained that no fare hike would be necessary. Immediately after the election, however, the MTA suddenly announced that it faced a two-year deficit of nearly $3 billion and would have to raise fares in order to close it.
To address this crisis and restore the public’s confidence, the MTA should take three steps.
First, give New York City its fair share of state aid for public transportation. We pay far too much to the state in terms of taxes when you compare the amount we get back in services. This must end.
Second, shed light on its finances. In order for New Yorkers to feel that they are not being cheated, the MTA must submit to a full airing of their accounts. This is only fair given that they are asking subway and bus riders to plunk down more of their hard earned cash.
Third, the MTA should postpone the fare hike scheduled to begin on May 4 as a good faith gesture to New Yorkers.
For its own sake, the MTA should take these very reasonable steps. Public institutions work best when they are trusted by the people. And right now, the MTA has a great deal of work to do in order to repair that trust.
New York City Councilmember John Liu represents the district 20 in Queens and chairs the transportation committee.
RELATED ARTICLES:
The Fare Hike Mess by Bruce Schaller
The MTA’s Numbers Don’t Add Up by New York City Comptroller William C. Thompson Jr.
The Metropolitan Transportation Authority is facing a crisis of credibility. In just a few days, subway and bus riders will be hit with the largest fare hike in history. Earlier this year, when talk of a fare hike was growing, I urged the MTA to delay consideration of an increase and open its books – so all New Yorkers could know if such an increase was necessary.
Had the MTA heeded my call, their integrity would not be in question.
After three months of analyzing the New York City Transit Authority’s finances, I have concluded that the MTA has broken its public trust and misled New Yorkers with unclear and inaccurate reporting of its financial position.
The issue is clear: Straphangers should not be asked to accept a fare hike without accurate evidence detailing its necessity. That is currently not the case. We have found that the books used by the MTA’s Board to determine the need for an increase were incomplete, misleading and obfuscating. There is simply no way these books could have provided the board with the basis for sound policy making.
My audit made five key findings:
• Specifically, it found an undisclosed $300 million account that was characterized as an “investment pool.” What this money was for, how it was spent and when it was spent remains a mystery, because the MTA refused to disclose this information.
• Furthermore, the Transit Authority’s numbers just did not add up. For example, in 2001 and 2002 financial reports, the Transit Authority overstated its operating expenses by more than $850 million. This kind of accounting error gave the impression that the authority’s operating deficit was actually larger than it was – and exaggerated the need for a fare hike.
• The Transit Authority’s 2003 operating budget proposal was woefully incomplete. It lacked basic, critical information, such as the costs associated with the recent collective bargaining agreement and the additional revenues that transit officials believed a fare hike would produce. Conveniently, the board voted to approve a revised budget that included this information three weeks after approving the fare increase. The agency even tripped over its own numbers. The proposal contained conflicting deficits – on one page it put the deficit at $1.632 billion and, on another, $2.009 billion. The public, elected officials, and the MTA Board put their faith in a document that told two different stories.
• The Transit Authority overestimated the drop in ridership due to the fare increase, contrary to its own historical data. This served to deflate future revenues and further justified their call for a 33 percent fare hike.
• My audit confirmed that New York City subway riders get shortchanged by paying a larger share of their system’s budget compared to their suburban counterparts, who ride the MTA’s commuter lines.
The MTA Board should re-examine the need for an increase, this time using clear and accurate financial information. At least then, all New Yorkers could be confident that a hike of this magnitude, while painful, may also be necessary.
Yet there is a larger issue at stake. We need to change the culture that leads transit officials to believe that the system belongs to them – and that they are accountable to no one.
The city’s transportation system belongs to the people. The people have a right to understand its finances and make judgements about its policies. It is the responsibility of the MTA to ensure that it answers not only to its board but also to the public and their elected officials.
William C. Thompson, Jr. is the Comptroller of the City of New York
RELATED ARTICLES:
The Fare Hike Mess by Bruce Schaller
The MTA’s On The Wrong Track by Councilmember John Liu, chair of the transportation committee.
The Metropolitan Transportation Authority is facing a crisis of credibility. In just a few days, subway and bus riders will be hit with the largest fare hike in history. Earlier this year, when talk of a fare hike was growing, I urged the MTA to delay consideration of an increase and open its books – so all New Yorkers could know if such an increase was necessary.
Had the MTA heeded my call, their integrity would not be in question.
After three months of analyzing the New York City Transit Authority’s finances, I have concluded that the MTA has broken its public trust and misled New Yorkers with unclear and inaccurate reporting of its financial position.
The issue is clear: Straphangers should not be asked to accept a fare hike without accurate evidence detailing its necessity. That is currently not the case. We have found that the books used by the MTA’s Board to determine the need for an increase were incomplete, misleading and obfuscating. There is simply no way these books could have provided the board with the basis for sound policy making.
My audit made five key findings:
• Specifically, it found an undisclosed $300 million account that was characterized as an “investment pool.” What this money was for, how it was spent and when it was spent remains a mystery, because the MTA refused to disclose this information.
• Furthermore, the Transit Authority’s numbers just did not add up. For example, in 2001 and 2002 financial reports, the Transit Authority overstated its operating expenses by more than $850 million. This kind of accounting error gave the impression that the authority’s operating deficit was actually larger than it was – and exaggerated the need for a fare hike.
• The Transit Authority’s 2003 operating budget proposal was woefully incomplete. It lacked basic, critical information, such as the costs associated with the recent collective bargaining agreement and the additional revenues that transit officials believed a fare hike would produce. Conveniently, the board voted to approve a revised budget that included this information three weeks after approving the fare increase. The agency even tripped over its own numbers. The proposal contained conflicting deficits – on one page it put the deficit at $1.632 billion and, on another, $2.009 billion. The public, elected officials, and the MTA Board put their faith in a document that told two different stories.
• The Transit Authority overestimated the drop in ridership due to the fare increase, contrary to its own historical data. This served to deflate future revenues and further justified their call for a 33 percent fare hike.
• My audit confirmed that New York City subway riders get shortchanged by paying a larger share of their system’s budget compared to their suburban counterparts, who ride the MTA’s commuter lines.
The MTA Board should re-examine the need for an increase, this time using clear and accurate financial information. At least then, all New Yorkers could be confident that a hike of this magnitude, while painful, may also be necessary.
Yet there is a larger issue at stake. We need to change the culture that leads transit officials to believe that the system belongs to them – and that they are accountable to no one.
The city’s transportation system belongs to the people. The people have a right to understand its finances and make judgements about its policies. It is the responsibility of the MTA to ensure that it answers not only to its board but also to the public and their elected officials.
William C. Thompson, Jr. is the Comptroller of the City of New York