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Doing Good Things Badly: Congestion Pricing and MTA Reforms


cuomo carol kellerman

(photo: governor's office)


Everyone complains that our regional mass transit system is in disrepair, but no one wants to pay to make the needed fixes and modernizations. Have we finally found a way?

Ten years after legislation was first proposed by Mayor Bloomberg, the state Legislature passed a plan for what has been named “central business district tolling,” otherwise known as congestion pricing, in Manhattan as part of the fiscal year 2019-20 budget. The basic concept is that driving into the central core of Manhattan – defined as south of 61 Street – will incur a fee to achieve the multiple worthy aims of providing revenue for mass transit investments, cutting down on intense traffic congestion, and curbing air pollution.

Full details are still to come, with responsibility for administering the fee collection system vested in the Triborough Bridge and Tunnel Authority (TBTA), a subsidiary of the MTA, and the new charges will not go into effect until 2021.

Congestion pricing systems have been in effect in London, Stockholm, and Singapore for some time, but this will be the first such system in a major city in the United States. Given its novelty, the intensity of resistance from suburban legislators and officials (and indeed, even from some in Queens and from my dear, admired friend Dick Ravitch, a former MTA chair) and the distaste for user fees in general, it is a major accomplishment that this proposal was adopted.

Kudos are due to Move New York, the Riders Alliance, various other groups and officials, including Governor Cuomo, and the many voices in the business community who showed the foresight to press for this groundbreaking outcome. Nonetheless, it must be acknowledged that the legislation is imperfect and the so-called governance reforms to the MTA that were included may be a cure that is worse than the disease.

Will the new tolling generate enough revenue to fund all the transit system’s capital needs? The law requires that tolls set by the TBTA be sufficient to generate enough revenue to finance $15 billion to fund all or a portion of the 2020-2024 MTA capital plan, which is expected to be more than twice that amount in order to overhaul subway signaling and get the system to a modern state of good repair. This projected total seems to assure that exemptions (i.e. for disabled drivers) and credits (i.e. for people who live in Manhattan below 61 Street and have annual incomes below $60,000) will not be so extensive as to force excessively high tolls on other drivers. Good.

Let’s hope that a rising tide of complaints doesn’t sidetrack this initiative by the time it is supposed to be implemented a whole two long years from now. The revenue is to go into a “lockbox” to be used 80% for MTA subway and bus needs, 10% for the Long Island Rail Road, and 10% for Metro-North. This seems to be an appropriate distribution and is far better than some of the more project-specific kinds of allocations that had been discussed in previous iterations of proposed congestion pricing schemes. But $15 billion is not enough to fund everything needed, not by a longshot. So two other new revenue sources have also been adopted into law and earmarked for MTA capital use.

First, specific amounts of the projected revenue to be generated from a new internet sales tax are to be deposited in the MTA lockbox. It is appropriate to impose a broad-based tax on internet sales, but it would be better to make it part of the state’s general operating revenue stream. If the estimated revenue turns out to be unduly optimistic there will be pressure to reduce the amounts going to the MTA.

Second, the tax on transfers of residential property has been increased. Again, it is not optimal tax policy to earmark general taxes to a particular use, and this one can be expected to be somewhat volatile. Nevertheless it is far superior to the pied-a-terre tax that had been advocated by some.

It must be remembered, however, that no matter what the new law says, the revenue from these new taxes and indeed, from the new tolls, cannot be guaranteed to be dedicated to the MTA in perpetuity. A lockbox enacted by the Legislature can also be modified or eliminated by a subsequent law. Presumably, covenants in the bonds underwritten by these revenues will help assure that cannot occur if and when money gets tight in another area of government services.

These new revenue streams dedicated to the MTA also do not change the fact that regular, planned fare increases will be necessary, largely to support the authority’s annual operating budget. That budget continues to grow too rapidly, in part due to exorbitant labor costs, which must be addressed in the near future but elected leaders do not appear inclined to tackle. Moreover, the revenue from these new sources must additions to, not substitutes for city and state aid to the MTA. Those resources will continue to be needed.

There is also a welcome new requirement that the MTA conduct an assessment of all its capital assets and needs over the next 20 years, although it doesn’t kick in until 2023.

Also, in the grand bargain that is the state budget, the governor has succeeded in imposing more obligations, costs, and controls on the MTA. It seems that after trying unsuccessfully to convince the public that he is not in control of the transit authority, he has decided to completely own it and subject it to endless oversight and review by (no doubt costly) consultants and advisory bodies. He is, in effect, going to create studies and reviews of his own actions.

The new law decrees there shall be a “complete personnel and reorganization plan” for the MTA submitted to its board no later than this coming June 30 and, in addition, there shall be an independent forensic audit conducted by a certified public accounting firm, a fiscal review by a different financial advisory firm “with a national practice,” a new construction review unit composed of a panel of internal and external experts, and a traffic mobility review board that will not only advise the TBTA on setting the new congestion tolls but, inexplicably, review the MTA capital plan!

Finally, the governor has touted that he is responsible for changes to the law on appointments to the MTA board so that no member serves for more than a very short period after the official who appoints the member is out of office. The goal is apparently to assure that everyone is beholden for their seat to the official (governor, mayor, county executive) that appointed them and that the next elected official has the prerogative to assert ‘ownership’ over the seat.

It is inevitable that appointees to prestigious boards like the MTA feel allegiance to their appointing official and since the sources of the MTA’s power and revenue derive from the political process this is appropriate – to an extent. But the way this or any governor should assert their authority over the MTA (or any public authority, e.g. the Port Authority) is to appoint a full-time Chair and CEO and allow and expect that leader to run the agency. All gubernatorial concerns and requests should be directed to and through that CEO, not through extra-agency review panels or by going around the CEO to the staff.

Pat Foye has been appointed and confirmed in that role and it is to be hoped that Governor Cuomo will now step back and let him get the MTA to marshal its new resources and do its job professionally and effectively. That is the only governance reform that is needed.

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Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

 

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