Gotham Gazette https://www.gothamgazette.com/component/tags/tag/1302 Thu, 19 Sep 2019 15:11:20 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) The State’s $7 Billion MTA IOU Comes Due https://www.gothamgazette.com/130-opinion/8766-the-state-s-7-billion-mta-iou-comes-due https://www.gothamgazette.com/130-opinion/8766-the-state-s-7-billion-mta-iou-comes-due govcuomoprogre

(photo: the governor's office)


MTA officials acknowledged at their June 2019 board meetings that the agency is borrowing money to be repaid through a New York State law that promised to have the State of New York provide the MTA $7.3 billion once the authority had exhausted its own funds on spending for the current five-year capital program.

The 2016 state law was merely an “IOU," there had been no specific source of funds identified for how the state would pay the money, nor has there been any plan developed since enactment in the state budget that year.

The state's total commitment was $8.6 billion, including some new capital funds it added as part of the newer Subway Action Plan and other promises, which to date have provided about $1 billion in actual funds. It is the $7.3 billion IOU that is still outstanding. New York City was also required to provide $2.7 billion to the agency as part of a mutual obligation with the state. The city has provided about $800 million to date.

These commitments refer to the current 2015-2019 Capital Construction Program, not the 2020-2024 Program to be released in a few weeks by the MTA. That new program, not yet adopted, will have its main funding coming from the congestion pricing system passed earlier this year, with revenue from the tolls scheduled to begin in 2021.

The elements of the 2015-2019 MTA Capital Program were patched together in the 2016-2017 state budget (a year late), my final year in the State Assembly while I was still chair of the Assembly Committee on Corporations, Authorities, and Commissions. The full 2016 package that became the Capital Program was about $30 billion; some $3 billion has been added since I retired. The MTA Capital Program Review Board adopted the plan in 2016 shortly after the budget was enacted.

The question of the state’s outstanding commitment to the MTA capital program, written into the law as the last dollars to be spent in the overall plan, has been the source of limited scrutiny, but is now in the spotlight as the IOU comes due and the next capital program is designed.

At the June 26 public meeting of the MTA Board Finance Committee, finance chair Larry Schwartz and board member Veronica Vanterpool expressed concerns about an agenda item authorizing the MTA to borrow an extra $2 billion to fund the capital program.

Per the minutes of that MTA Finance Committee meeting (page 12):

"Ms. Vanterpool voiced her reservations about increasing the amount, noting that there is that $7.3 billion commitment from the State that has not been received, as well as the commitment from the City. Mr. Foran [the MTA's Chief Financial Officer]... noted that the commitment from the State is predicated on MTA to spend MTA dollars first and that MTA is already beginning to commit against the State's portion (about $2 billion commitment, with some expenditures already incurred) and the State has agreed to that.”

The discussion continued (page 13), "Mr. McCoy [MTA Finance Director] commented that regarding the State funding, the $1.2 billion in BANs [bond anticipation notes] were issued in two components; $1 billion for MTA funded projects, and $200 million is designated for the projects under the State Commitment. Mr. McCoy stated that it was clearly communicated with the State that, when the notes are due, the State will need to provide the funding."

The MTA Board proceeded to add the $2 billion in new borrowing at its main June 26 board meeting two days after this finance committee discussion. State Comptroller Thomas DiNapoli, in an August 7 report on New York City's financial condition, stated (on page 34), "According to the MTA, it has committed all of its capital resources and has begun to commit up to $3 billion against the State's obligation. Consequently, the MTA will require funding from the State beginning next State fiscal year (2020-21) to cover the cash cost of these capital commitments"

Where Will The Money Come From?
The question now is: How will the state meet this new commitment in the coming budget?

The state has the option of itself providing the MTA the money directly, or creating a stream of funding for the MTA to enable the agency to secure the borrowing of the funds, or some combination thereof. But there are serious challenges, the first of which is that 2020 is an election year for the state Legislature.

To enable the MTA to borrow $7.3 billion, a revenue source, i.e. another tax, would need to provide the authority about another $400 million a year. Does the Legislature want to do another tax increase in an election year? Maybe 2021, not 2020. Seven of the eight new Democratic State Senators that won the Democratic party the majority come from the New York City suburbs. Four of these seven suburban races were super-close, with the Democrats winning by just 2-3 percentage points, or even less.

Several other races were won by less than ten points. Many of these newly-minted legislators could be uncomfortable voting for another tax increase for the unpopular MTA, after voting this year for congestion pricing, a real estate transfer tax surcharge, and internet sales taxes. They are already likely to face Republican attacks in the election for these votes.

The state's ability to borrow the funds directly (the MTA does not need all $7.3 billion next year, but over several years) is also severely constrained by limits on the state government established by the Debt Reform Act of 2000. This law limits state-supported debt to 4% of the state's total personal income from the preceding calendar year. The following chart from a July 2 state comptroller report on the 2019-2020 budget shows how the state's capacity to borrow is dwindling.

divisionbudget chart

Next year the state's ability to borrow funds in support of the entire state budget and the entire capital program will be limited to about $1.36 billion and by 2023-24 will be nonexistent. Borrowing for the MTA would be competing with roads and bridges, water and sewer, the state and city public university systems, mental hygiene, and the environment. Little could be anticipated from this source given the constraints.

Another possibility would be for the state to provide the MTA money from the financial industry settlement windfall. Some $2.6 billion is available in 2020-21 from this source, but, once again, the MTA would be competing with upstate economic development commitments, Javits Center and transportation commitments, and general budget relief. But Governor Cuomo and the Legislature could make several hundred million dollars available from this source -- once again, very limited, given the competition for other funds.

Of course, the Legislature could do a tax/fee hike in 2021, even something as simple as extending the for-hire vehicle surcharge on Uber and Lyft to trips with outer borough destinations or adding to the Manhattan business district price. But it is a tax increase of sorts.

Late in the 2015 legislative session, as we struggled to deal with funding the 2015-2019 MTA Capital Program, I worked with MTA senior officials to introduce legislation to provide the MTA a new source of money without a tax increase. The bill provided for a staggered diversion of existing personal income tax revenue from the MTA region over a four-year period to enable the MTA to borrow what was viewed then as $6-7 billion, providing about $400 million a year in revenue to which the agency would be entitled at the end of four years.

Growth in the state's personal income tax revenue would now bring in about $500 million a year under the formula in the bill (A. 8227-a from the 2015-2016 session), so the percentage amount in the old bill could be shaved.

The critical concept of the bill was that it statutorily entitled the MTA to the revenue, enabling it to borrow the money itself and not be a debt of the state subject to the Debt Reform Act and the limits on the state’s capacity to borrow. As written, it would start in the first year with a small three-tenths of one-percent diversion of PIT revenue in the region to the MTA , reaching 1.2% in the fourth year. Each year's revenue piece was separated in a schedule pursuant to law, so if a recession hit, the state could suspend the following year's diversion and preserve revenue in the general fund.

The governor and the Legislature should continue to examine this concept, which was believed to be workable by MTA officials at the time, though viewed by senior Assembly Ways and Means staff as just not needed. But the $7 billion IOU has come due.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

 

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The State’s $7 Billion MTA IOU Comes Due Thu, 29 Aug 2019 04:00:00 +0000
The Threat to Byford’s Fast Forward and Other Major Flaws in Cuomo-De Blasio MTA ‘Reform’ Plan https://www.gothamgazette.com/130-opinion/8329-the-threat-to-byford-s-fast-forward-and-other-major-flaws-in-cuomo-de-blasio-mta-reform-plan https://www.gothamgazette.com/130-opinion/8329-the-threat-to-byford-s-fast-forward-and-other-major-flaws-in-cuomo-de-blasio-mta-reform-plan govcuomoearly

(photo: governor's office)


My organization, Reinvent Albany, strongly supports congestion pricing and new revenue for the MTA, but we believe the MTA’s biggest organizational problem is the Governor’s endless political meddling and sidelining of the MTA’s and New York City Transit’s (NYCT) professional staff.

We hope the hastily contrived MTA restructuring recently presented by Governor Andrew Cuomo and Mayor Bill de Blasio in their “10-Point Plan to Transform and Fund the MTA” withers under public scrutiny and is rejected by the State Legislature and key county stakeholders in the MTA region. This is not real reform: it is a counter-productive distraction that continues the politicization of the MTA, and even codifies it.

Transit riders and those interested in a functioning system should stay focused on the 2016 pledge of Governor Cuomo and the Legislature to give the MTA 2015-2019 Capital Plan $8.3B, with $1B appropriated upfront. The governor and Legislature still owe $7.3B. Where is this money? To date, the MTA has received only $805 million from the state in cash it can actually spend on the current plan. We are especially concerned Governor Cuomo is about to renege on his $8.3B pledge because new revenue from congestion pricing will go to the next MTA capital plan – the 2020-2024 plan.

Reinvent Albany strongly supports congestion pricing for the Manhattan Central Business District and we thought Sam Schwartz’s Move New York plan was a masterpiece of public policy, but we have numerous concerns about the new 10-point plan from the governor and the mayor. Here are five big ones:

First, highly-respected NYCT President Andy Byford is stripped of power (Item #1). The governor’s proposed reorganization takes away a huge amount of fundamental management authority from New York City Transit President Andy Byford and shifts it to MTA Headquarters (HQ). We wonder what happens with Byford’s Fast Forward Plan if he can’t implement it? The governor proposes shifting engineering, contracting and construction management to MTA HQ. Why? NYCT just hired Pete Tomlin, an internationally respected expert, to lead NYCT in modernizing the subway signals, a cornerstone of Byford’s plan. What happens to this hire? MTA HQ has completely mismanaged the East Side Access project with up to $7B in cost overruns.

Second, the Cuomo plan creates new loopholes in the congestion pricing plan by creating vague exceptions for motorists (Item #2). Given the disastrous experience with state and New York City issued parking placards, the public should be concerned about the potential of these loopholes to be abused by politically powerful groups.

Third, what happens to the MTA if inflation is higher than 2%? (Item #3). A two-percent hard cap on MTA fare and toll hikes makes no sense. More reasonable would be to index to inflation, since inflation has historically regularly exceeded 2%.

Fourth, the proposed Regional Transit Committee duplicates and subtracts from the MTA Board’s authority and will create even more confusion (Item #7). If the Legislature wants representation on the MTA board or changes to the board, it should make them instead of creating a confusing mess that further reduces accountability. Moody’s – one of the MTA’s credit raters, which typically issues muted statements – even said that the this plan “will not necessarily reduce the management complexity that has complicated fare increases and capital program approval.” The MTA board should determine fares, tolls, and budgets, etc. If it does it poorly, reform it.

Fifth, the MTA, like other state authorities and agencies, should be run by professionals, not overseen by arbitrarily selected academics hand-picked by the governor (Item #8). There are many people in the world with more far more expertise in transit engineering and technology than the deans of Columbia and Cornell engineering schools – including within the MTA, like NYCT’s new hire, Pete Tomlin. Why should these informal advisors to the governor determine what kind of signals technology the MTA uses?

This is not the time to make major changes to redistribute power over the MTA’s governance structure, as there are too many stakeholders at risk. Changes to the governance of the MTA should be made independently of the budget after full and thorough discussion by MTA stakeholders and the public - something that we can truly call reform.

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Rachael Fauss is Senior Policy Analyst at Reinvent Albany. On Twitter @RachaelFauss & @ReinventAlbany.

 

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The Threat to Byford’s Fast Forward and Other Major Flaws in Cuomo-De Blasio MTA ‘Reform’ Plan Wed, 06 Mar 2019 05:00:00 +0000
LIRR’s Heavy Subsidies and the Coming Debate Over MTA Funding https://www.gothamgazette.com/130-opinion/8182-lirr-s-heavy-subsidies-and-the-coming-debate-over-mta-funding https://www.gothamgazette.com/130-opinion/8182-lirr-s-heavy-subsidies-and-the-coming-debate-over-mta-funding 2 29916410110 9953f914b2 z

(photo via the Governor's Office)


This fall Governor Cuomo signed a campaign pledge with Long Island State Senate Democratic candidates, many of whom won their elections, to make New York City bear greater responsibility for the subway and bus system’s capital needs. The campaign pledge was the continuation of a long-standing demand by the governor that New York City contribute more toward the enormous costs of the MTA capital budget. He even suggested in his budget proposal that the city take full financial responsibility for the MTA New York City Transit capital plan, but it was not accepted by the Legislature at the time of budget adoption in April 2018.

The political candidates from Long Island who signed that pledge may not have realized that today the Long Island Rail Road is the most heavily subsidized operation of the three transit systems, including New York City Transit and Metro North.

These excerpts from the new MTA budget, adopted in December, show that LIRR riders pay the lowest share of the respective operating budgets of the three systems. Called the FareBox Operating Ratio, the table shows the percentage of each system’s costs paid for by the fare and other basic operating revenue, like advertising. The data come from the MTA Dec. 2018 Adopted Budget, p. 1-7, Vol.2.

FAREBOX OPERATING RATIOS

  November Forecast 2018 Final Proposed Budget 2019 Plan 2020 Plan 2021 Plan 2022
New York City Transit 52.50% 51.10% 49.90% 48.50% 47.10%
Long Island Railroad 47.80% 43.40% 42.30% 39.30% 38.30%
Metro-North 54.20% 54.80% 54.90% 56.20% 56.40%


The data show the LIRR farebox will contribute 43.4% of the LIRR’s operating costs in 2019 and declines to about 38% by 2022. New York City Transit’s fare provides 51.1% in 2019 and about 47% in 2022. Metro North riders contribute a higher share than either system. The costs do not include debt service, which must be paid, of course, or an item like depreciation, for which there is no out-of-pocket cash charge but still measures wear and tear on the original costs of putting assets in service. The MTA also provides the FareBox Recovery Ratio, which shows theses fare revenue and cost figures.

Is there a dollar figure that can be put on the LIRR’s higher loss ratio, compared to the other MTA systems? I have made an estimate that adds debt service to operating expenses.

First one can look at the amount of fare and other revenue each part of the system contributes to the total amount of revenue. New York City Transit fare revenue brings in $4.87 billion a year, 75% of total system revenue. The Long Island Rail Road brings in $790 million a year, about 12% of total system revenue.

FAREBOX AND OTHER OPERATING REVENUES

  Revenue (000) % Total System Fare & Other
NYCT $4,870,000 75.2
LIRR $790,000 12.2
MN $815,000 12.6
TOTAL $6,475,000 100


Then one can compare the percentage of system revenue contributions with the total deficits each part of the system experiences. The deficits have to be made up from taxes and other subsidies.

  OptgExp DebtSvc TotalExp Deficit %ofDef Compare %RevCont
NYCT 8,754 1,324 10,078 5,208 70.9  Over $312
LIRR 1,686 449 2,135 1,345 18.3 Under $448
MN 1,322 285 1,607 792 10.8 Over $134
 TOTAL 11,762 2,058 13,820 7,345    


This analysis shows that the Long Island Rail Road’s deficit is $1.345 billion a year and is more than 18% of the MTA’s total deficit, although its fare and other operating revenue provide about 12% of the MTA’s total revenue. The difference -- 12% vs. 18% -- amounts to an under-contribution by the Long Island Rail Road from the fare of $448 million a year that has to be made up by taxes and subsidies. New York City Transit is about 71% of the system’s total deficit. If one measured NYCT’s percentage of contributing revenue, compared to the percentage of the deficit, NYCT fares are over-contributing $312 million a year more than the taxes and subsidies needed to make up the deficit.

New York City Transit’s deficit, $5.2 billion, is numerically far larger than the deficits of the other two systems, but that is not really an issue because the New York City economy is the main generator of the taxes and subsidies within the region that are used to make up the deficits.

The money to make up the system deficits comes overwhelmingly from a group of taxes enacted by the state Legislature levied on the metropolitan region but not Upstate New York. Begun in the early 1980s and continued into the 21st century, the regional taxes include a payroll tax, a surcharge on corporate profits, a sliver of the sales tax, the mortgage recording tax, and a New York City stand-alone commercial real property transfer tax. The commuter rail systems and New York City Transit split about $590 million in surpluses from the bridge and tunnel tolls about 60%-40% for the suburban systems pursuant to an early ‘70s formula. The state, city, and county governments contribute small amounts from their general funds.

About 75% of the wages paid within the region go to persons employed in New York City, according to 2017 data from the state Labor Department, and that compensation forms the base of the payroll tax. A Rockefeller Institute of Government estimate of business profits surcharges from 2009 data showed nearly 78% of taxes from business profits in the region came from the city (and the city is a larger share of the regional economy today than nine years ago). This surcharge is the second largest dedicated regional tax contributor for the system.

One large dedicated tax to the MTA is the city’s commercial real property transfer tax, which provides a sum of more than $600 million a year for New York City Transit. Looking at where these streams of revenue come from leaves little doubt that taxes collected within the city cover New York City Transit’s farebox deficits and, must, by logical extension, cover some of the Long Island Rail Road’s deficits too.

The governor justifies his demands that the city cover more system cost by citing a 1953 law that created the New York City Transit Authority and required the city cover its capital costs. With cost estimates of the MTA’s next capital plan, and New York City Transit President Andy Byford’s Fast Forward Plan, reaching $40-$60 billion, who should pay is a very important question. But the answer already exists.

As the transit system deteriorated during the New York City-State financial crisis of the ‘70s, Governor Carey and the Legislature devised a solution to the problem of the city’s obligation to cover the NYCT capital costs. That solution was the set of dedicated taxes just listed above, the enactment of which began in 1981-82.

Since the city only has the power to increase the property tax and has many basic governmental obligations already (schools, police, social welfare), the city would have needed the Legislature to approve a group of special new taxes to cover the transit system’s costs at that time. The Legislature just required the region’s residents and businesses to do indirectly -- pay new taxes going to the MTA -- that which the city and the other local governments would have had to do directly -- levy new taxes -- for the same purpose. If the city was forced to contribute billions in new revenue to the transit system it would need to get permission from the Legislature for new taxes now, just as it would have had to do nearly 40 years ago. Otherwise funding for the basics like schools, cops, sheltering the homeless, etc., could be seriously impaired.

The net effect of the regional taxes was that New York City residents and businesses continued financial responsibility for the system anyway since most of the taxes collected came from the city. The taxes from the suburbs contribute to the commuter rail system, except the Long Island Rail Road’s riders don’t cover a proper share of that system’s costs and get subsidized by taxes collected from the remainder of the region.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

 

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LIRR’s Heavy Subsidies and the Coming Debate Over MTA Funding Wed, 09 Jan 2019 05:00:00 +0000
Stabilizing the MTA’s Rocky Finances in 2019 and Beyond https://www.gothamgazette.com/130-opinion/8179-stabilizing-the-mta-s-finances-in-2019-and-beyond https://www.gothamgazette.com/130-opinion/8179-stabilizing-the-mta-s-finances-in-2019-and-beyond MTA modernization

(photo: Marc A. Hermann/MTA)


New York’s colossal and crumbling mass transit system is headed toward another cliff -- this one financial. The MTA’s just-adopted budget says it will have a $500 million deficit in 2020 and the deficit will rise to about $1 billion a year by 2022, even with two fare and toll hikes, in 2019 and 2021. The authority’s summary of its situation actually says it is running deficits right now (2018 and 2019), which are being addressed by using all of its reserve funds, drawing down its inventory, and other methods of scraping cash together. Its expenses already exceed its revenues.

This is not actually a revelation. In February 2018 the MTA publicly reported these problems and its bond rating was dropped by Standard & Poor’s. Information about the problem has been public for several years. MTA budgets passed in July 2016 and November 2017, both public documents, presented the gloomy outlooks, as quoted in these MTA Board excerpts:

Presentation to the Board, July 27, 2016: “FINANCIAL PLAN IS BALANCED THROUGH 2019 WITH A 2020 DEFICIT OF $ 371 MILLION”
Highlights of the 2018-2021 November FInancial Plan - November 2017: “BUDGET CONTINUES TO BE BALANCED THROUGH 2019: 2020 and 2021 GAPS HAVE INCREASED TO $352 MILLION AND $643 MILLION RESPECTIVELY”

The ability of the MTA to sustain its operations is contingent on securing recurring revenue sources beginning in 2020 and beyond. The budget adopted in December 2018 forecasts through 2022 and reports the MTA will issue $12 billion in bonds to pay for asset replacements, like tracks, signals, trains, and buses, and continue the Expansion Projects, like East Side Access and Second Avenue Subway. Paying the interest on these bonds will cost the MTA an extra $500 million a year by the end of 2022. The MTA also projects that by the end of 2022 its labor costs will rise by 10%, from $10 billion a year, to $11 billion a year, including pension and health care for retirees.

Although the Governor and the Legislature added a tax on certain rides in for-hire vehicles, including traditional taxis, in the 2018 budget, to take effect on January 1, 2019, these funds will be going directly into the Subway Action Plan to sustain maintenance improvements to reverse the deterioration of basic service (and that congestion charge has been at least temporarily blocked by a judge). The separate long-term financial deterioration of the MTA was not addressed in either 2017 or 2018 by the Governor nor the Legislature.

At the time of state budget adoption in April 2018, the MTA Sustainability Advisory Workgroup was created, consisting of appointees of the Governor, the Mayor, the Assembly, and the Senate, and others. The mission of the group was to advise the state’s political leadership on critical choices and offer policy guidance. The group, chaired by the Partnership for New York City President & CEO Kathryn Wylde, an appointee of the Governor, issued its report on December 17, 2018.

The Workgroup report had many thoughtful recommendations, including supporting congestion pricing as the immediate revenue priority. Governor Cuomo’s support for congestion pricing is now well-known, but neither the Assembly nor the Senate have ever taken a vote, not even a vote in a committee, on congestion pricing, and the recommendation were not binding on the members of those institutions.

The Workgroup report confirmed that the MTA still has not fully costed out, or provided a detailed plan, for its Advanced Technology Fast Forward Plan, or the next phase of capital construction, the 2020-2024 Capital Plan, estimated to cost somewhere between $40 and $60 billion. The sums of money involved still have no clear overlap between MTA New York City Transit President Andy Byford’s Fast Forward Plan and the new MTA Capital Plan.

At the end of the legislative session in 2018, the State Assembly passed a bill to require the MTA to advance the release of the 2020-2024 Capital Plan, due under current law in October 2019, to January 2019, in an effort to have the Capital Plan become contemporaneous with the state budget, but the then Republican-controlled Senate did not pass it. It is now possible the Capital Plan and the Fast Forward Plan will not be available to act on during the 2019 Albany legislative session.

The Workgroup suggested that the state should proceed with congestion pricing despite the lack of information about future costs, because of the obvious need for immediate revenue; the Workgroup also said the capital planning process might be better aligned if it moved to a ten-year plan like the Port Authority --- a useful idea for the future while the existing plan’s shortfalls get addressed.

The MTA’s current 2015-2019 Capital Plan is seriously incomplete. To date, the MTA has received only $7 billion of the $33 billion cost of the plan, and the huge deficits reveal new revenue is needed to continue. Providing the MTA a revenue source for its 2022 deficit -- an extra $1 billion a year-- will provide the money for the $12 billion borrowing and address the operating deficits. Federal funds and bridge and tunnel bonds are still available sources that can feed into the pipeline for the current plan, leaving it about two-thirds funded through 2022, if the agency gets that extra $1 billion a year in a timely fashion -- meaning now.

The projected October 2019 MTA submission of its 2020-2024 Capital Plan, which presumably will incorporate the Fast Forward Plan, at least some version of it, presents an even more severe political test for the state’s governing authorities than congestion pricing itself. That is because MTA investments that cost $40- $60 billion will require revenue sources that bring several additional billion dollars a year to the agency beyond congestion pricing.

Moving to a ten-year capital planning cycle could allow the Governor and the Legislature to separate the additional billions in revenue needed to pay for such mammoth expenses into two five-year phases to avoid excessive tax hikes for the unpopular agency. But the difficulty of finding such a new level of revenue could bring about the return of the divisive regional conflict between funding the New York City Transit Authority and the suburban commuter rail systems.

This conflict was presaged by Governor Cuomo demanding that New York City and the state split the MTA’s shortfalls 50/50 in both 2017 and 2018. He followed up on that demand during his campaign this fall, when the Governor co-signed a pledge with Long Island Democratic State Senate candidates that they would force New York City to bear the cost of the New York City Transit system’s new capital needs. Mayor de Blasio and Assembly Democrats had resisted the Governor’s demand on this point in the legislative session in 2018.

These Long Island political newcomers may not realize that the Long Island Rail Road’s (LIRR) operating costs are the most heavily subsidized, on a proportional basis, of the three MTA transit systems, far more so than New York City Transit or Metro North. The MTA’s poster child for cost overruns is East Side Access, the giant construction program to link LIRR commuters to Grand Central Station at a final cost of $11 billion -- by far the largest drain on the capital budget. A pushback demand from New York City and Metro North legislators to force Long Island residents to pay their true share of LIRR costs could become an unpleasant regional counterpoint to add more political stalemate, not less, in the legislative process, enabling each constituent piece of the MTA system to drown separately, rather than keep everybody in the lifeboat and make progress.

Let me offer a few suggestions to provide a disciplined approach to this total mess:

1. Stabilize the MTA’s immediate funding crisis with the adoption of a $1 billion-per-year plan for congestion pricing, which will keep the capital and operations budgets in balance through 2022. This is the most logical and efficient way to address the immediate crisis and offers some relief for Manhattan’s horrible traffic, too. If the Legislature could do this by budget time, April 2019, the system could be in operation hopefully within a year. To avoid disruption to the construction program from implementation delays, the state and the city could provide the MTA cash from reserves or short-term borrowings, and even get repaid.

A component of congestion pricing could serve as the source for the state’s unfunded $7 billion obligation to the current 2015-2019 Capital Plan, triggering New York City’s $2.5 billion matching obligation, and bring the current plan to about three-quarters funded.

2. Do a Capital Program Ten-Year Restart: Require the MTA to integrate Fast Forward, the unfunded balances of the current plan, the Expansion Projects, and other essential investments into a 10-year Plan, 2020-2030, with two five-year cycles. The first five-year cycle would have a linkage to the revenue requirement necessary to proceed. The 2015-2019 plan elements funded from congestion pricing would be recognized in the cycle. This was a concept advanced by the Workgroup.

3. Use the Cash Windfall to Businesses from the 2018 40% Federal Corporate Income Tax Cut: A divisive regional confrontation is unwise and potentially politically catastrophic for all involved. The most efficacious revenue on the horizon is a restructuring of the state’s corporate income tax in the metropolitan region to capture a portion of the multi-billion cash windfall to corporate New York from a 40% cut in their federal corporate income taxes. The Legislature could exempt smaller businesses and still find $1 billion a year as a recurring source of revenue from the windfall. (I wrote more about this idea in a prior column.)

Corporate taxes, unlike income taxes, remain fully deductible as a business expense, and avoid more damage to New York from the inability of our taxpayers to deduct most of their New York personal income taxes from their federal taxes after the new federal cap on those deductions (a matter of litigation itself). Further revenue sources would probably still be needed, but the vehicle-for-hire surcharges could be enhanced for the app-based services like Uber and Lyft and further differentiated from the traditional taxis. Charges for for-hire vehicles in the outer boroughs and suburbs, which were excluded from the first round of this tax, could be brought into the vehicle-for-hire fee system, and be linked to transit improvement.

4. A full overhaul of the MTA’s Capital Construction Program, with a plan to cut its costs 20-25%, remains a challenge that can be taken up with a Capital Plan realignment into a ten-year cycle. A separate new construction agency with aggressive powers to cut costs and innovate may be necessary.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

 

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

Note: this article has been updated to remove an incorrect statement about how legislatively-appointed members of the MTA Workgroup were acting -- they were voting as representatives of their legislative body, not as individuals as originally stated.

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Stabilizing the MTA’s Rocky Finances in 2019 and Beyond Mon, 07 Jan 2019 05:00:00 +0000
The Mayor’s Best Argument on Transit System Funding https://www.gothamgazette.com/130-opinion/7107-the-mayor-s-best-argument-on-transit-system-funding https://www.gothamgazette.com/130-opinion/7107-the-mayor-s-best-argument-on-transit-system-funding de Blasio

Mayor de Blasio (photo: Edwin J. Torres/ Mayor's Office)


Governor Cuomo’s declaration of a state emergency after the Harlem subway derailment in June offered hope to suffering transit riders because it was an acknowledgement there was a crisis and the Governor was taking responsibility for addressing it.

An emergency declaration in New York law requires an affected agency to develop plans to deal with whatever disaster the Governor has declared. After a review, new MTA Chair Joseph Lhota  proposed to spend an additional $450 million in maintenance programming and $380 million in capital investments to reduce delays and breakdowns. The Governor and Lhota also are seeking half the new money from New York City, reigniting public rancor between the Governor and Mayor de Blasio and raising anew the question of responsibility for the transit system between the State and the City.

Both the State and the City have billions of dollars in reserve funds available now and can afford to make the contributions. Whether de Blasio makes a decision to contribute to the plan or not, an understanding of who is paying for the transit system at this time is essential.

The basic facts are that the City and its suburbs already pay virtually all of the MTA’s costs, either directly or indirectly.

The budget adopted by the MTA for 2017 reports that 57%, more than $4.5 billion, of New York City Transit’s costs are paid by the fares from riders of the subway and bus systems. The next largest amount, about $3.5 billion, came from a group of dedicated taxes which, although imposed by the State, are levied within the 12-county MTA region, and not in the rest of the State.

These dedicated taxes include a payroll tax, a corporate profits tax, a sliver of the sales tax, the New York City real estate transfer tax, and others. The New York City government directly contributes $362 million to New York City Transit, including a required match of a corresponding State subsidy, as well as reimbursements for paratransit, students, and the elderly. New York City Transit also receives a cross-subsidy from excess cash available from the tolls of the Bridge and Tunnel system of $287 million.

The State’s General Fund provides about $356 million, including a contribution to compensate for a cut in 2011 of an unpopular payroll tax enacted within the region during the recession. While these funds derive from the general taxes of the State, a Rockefeller Institute study in 2011 reported that New York City and its suburbs were paying 72% of the State’s tax revenue in 2009, and that study did not reflect the fact that most economic growth in the State has occurred downstate since then.

The bottom line is that this all means that only about 1% of New York City Transit’s operating funds come from outside the MTA region.

All these resources together don’t just fund the operating budget, they also pay for the debt service on the tens of billions of dollars the MTA borrowed to pay for the capital programs of prior years as well as the ongoing borrowing  for the new one. About $1.3 billion a year goes to pay interest on debt associated with New York City Transit from these flows of funds, with another $250 million a year covering New York City Transit-related debt from Bridge and Tunnel toll surpluses.

The New York City government also pays substantial subsidies to other parts of the MTA system.

It provides $460 million a year to MTA Bus, the express bus system taken over by the MTA during the Bloomberg Administration; $58 million for the Staten Island Railway; and $98 million for station maintenance for Long Island Railroad and Metro North facilities that are within the City.

New York City also pays the cost of the New York Transit Police, more than 3,000 police officers who patrol the subways and other mass transit facilities. The Police Department budget is $10 billion a year, meaning the 10% of the police force committed to safety in mass transit costs the City roughly $1 billion a year. This large level of support is barely reflected at all in the MTA or New York City Transit budgets. Embedded within the State and City budgets are payments for interest on bonds issued by State and City government for the benefit of mass transit, with $301 million paid by the City and $180 million by the State, according to a 2015 report by the New York City Comptroller.

Commuter rail system support is comparable to New York City Transit. Fares, excess cash from Bridge and Tunnel tolls, and dedicated tax revenues collected from the suburban counties around the City pay the costs of Metro-North and the Long Island Railroad. The commuter rail systems receive more generous subsidies from Bridge and Tunnel tolls than New York City Transit, about $400 million a year compared to $287 million a year. Long Island Railroad fares contribute only 47% of the costs of that system, compared to 57% for New York City Transit and 59% for Metro-North. Money from the General Fund of the State contributes just a very small portion of the commuter rail budget, just like New York City Transit. The MTA Police patrol the commuter rail system, and the costs are included within the commuter rail system budgets.

Governor Cuomo has said that the State was adding a historic level of funding to the current MTA capital budget, the 2015-19 capital plan. There is but a scintilla of truth to that pronouncement. That is because, of the $8.3 billion claimed to be committed, sources for $7 billion of the contribution have yet to be identified, and the State law providing the support says the State does not have to come up with the $7 billion until the MTA exhausts all its own resources first, with a deadline of 2025 for the State’s $7 billion to be found.

Even when the State finally comes up with the money, it will likely come from the MTA region, either through some form of congestion pricing or a diversion of some current tax receipts from the region. The City’s $2.5 billion promised contribution to the plan, part of a deal with the State, is to be paid on a schedule concurrent with the State’s schedule, and the City’s own budget does not forecast its contribution being paid until after 2019.

If the Mayor wants the public to understand why the City won’t contribute further funds to the MTA, he needs to clearly explain that the City’s residents and businesses already cover the costs.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

 

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

 

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The Mayor’s Best Argument on Transit System Funding Thu, 03 Aug 2017 04:00:00 +0000
The Week That Was in New York Politics, October 12-16 https://www.gothamgazette.com/government/5936-the-week-that-was-in-new-york-politics-october-12-16 https://www.gothamgazette.com/government/5936-the-week-that-was-in-new-york-politics-october-12-16 week in review bus readers

photo: Stanley Kubrick via Museum of the City of New York


Gotham Gazette's Week in Review, Friday October 16

PHOTO OF THE WEEK: Mayor de Blasio and former Mayor David Dinkins at the ceremony naming The David N. Dinkins Municipal Building, via The Mayor's Office; Hillary Clinton and Council Speaker Melissa Mark-Viverito at a protest rally in Las Vegas before the Democratic presidential debate, via Pedro Julio Serrano

BdB Dinkins via mayors office

HRC MMV

TOP FIVE STORIES OF THE WEEK:

1. MTA Funding Deal: This past Saturday, after months of debate, city and state officials reached a deal over funding for the MTA’s capital plan. New York City will pay an additional $2.5 billion, while the state will contribute $8.3 billion to meet what was the outstanding need of the $26 billion plan to expand and repair the MTA system over the next five years. As part of the deal, the state cannot divert funds from the capital plan, as the state has repeatedly removed money from the MTA budget in the past. Questions remain, however, over how the state and the city plan to pay for their shares - Republican Senate Majority Leader John Flanagan has said his conference won’t support new taxes to pay for the commitment and questioned new borrowing. De Blasio’s team is expected to outline its plans as part of a reworked capital budget in 2016.

2. De Blasio’s First Town Hall: Mayor de Blasio held the first town hall of his mayoralty in Washington Heights on Wednesday evening. The mayor took questions from a crowd of about 250 during the two-hour town hall with a focus on rent security and tenant protection. The town hall seems to be part of a shifting strategy for public interaction that began in late August, when Mayor de Blasio began making more appearances on TV and radio shows, as well as more formal in-person outreach to New Yorkers.

3. Cuomo Team Returns to Puerto Rico: A delegation of New York State officials led by Lieutenant Governor Kathy Hochul returned to Puerto Rico this week in an attempt to help the territory deal with its debt and health care crises. The delegation included Health Commissioner Howard Zucker, Medicaid Director Jason Helgerson, and Assemblymembers Marco Crespo and Richard Gottfried. Cuomo led the first delegation to Puerto Rico about a month ago.

4. De Blasio to Israel: The mayor headed to Israel late Thursday to deliver a keynote address at the annual Conference of Mayors, where he will speak on the topic “Anti-Semitism in the West: How Cities Must Lead.” During the three-day trip, Mayor de Blasio will meet with Palestinians at a bilingual school in Jerusalem, a break from his predecessors, who only met with Israelis while visiting Israel in the past - though mayor won’t be meeting with official representatives of the Palestinian government. Questions remain around the private funding of de Blasio’s trip.

5. Cuomo’s Common Core Task Force: Governor Cuomo's "Common Core Task Force" met for the first time Friday. The panel, made up of 15 educators, lawmakers, and business leaders, could suggest overhauling the Common Core standards in New York. Governor Cuomo announced a ‘total reboot’ of Common Core was necessary after roughly 20 percent of state students opted not to take standardized tests aligned with the tougher standards. On a related note, earlier in the week, the State Assembly education committee held a meeting on the state's most struggling schools. After Friday's meeting the Common Core Task Force announced plans for at least a dozen public forums and that it had appointed its first "student ambassador." [From September 29 when the task force had just been announced: Absent from Cuomo's New Education Task Force: A Student]

THIS WEEK'S NUMBERS:

  • $1.67 million in unclaimed funds have been returned to the city after Public Advocate Letitia James led a push for the city to recover money from New York’s unclaimed funds registry, which found that the city had more than 2,000 accounts with unclaimed funds.
  • $174,000is outgoing Bronx District Attorney Robert Johnson’s new judicial salary, which he intends to collect in addition to his pension, which is estimated could be as much as $142,000 per year, according to The New York Post.
  • 41 months in federal prison for former Rikers correction officer Austin Romain for accepting over $11,000 in bribes as part of a scheme to distribute marijuana to Rikers inmates.
  • 3 states, 8 people, and over $100,000 in illegal weapons were involved in a gun-running ring busted by Brooklyn District Attorney Ken Thompson. 112 guns were sold to an undercover police officer during the year-long investigation into the gun-smuggling ring.
  • 11-year difference between the life expectancy of residents of Brooklyn’s impoverished Brownsville neighborhood and the residents of Manhattan’s more affluent financial district.

THE GLORY AND THE GOAT:

  • It was a good week for former New York City Mayor David Dinkins, who this week had the Manhattan Municipal Building renamed in his honor.
  • It was a bad week for Wendell Walters, former assistant commissioner of the New York City Department of Housing Preservation and Development, who was sentenced to three years in prison on Wednesday for accepting $2.5 million in bribes.

THE FLASH:

  • Around this time 103 years ago, on October 14, 1912, then-presidential candidate Teddy Roosevelt was shot in the chest by a Manhattan man while campaigning in Milwaukee. He went on with a scheduled speech despite his wound.
  • Around this time three years ago, on October 16, 2012, the FBI arrested Mohammed Nafis for plotting to detonate a 1,000 pound car bomb in front of the Federal Reserve Bank of New York.
  • Around this time last year, on October 14, 2014, Mayor de Blasio kicked off two Hurricane Sandy-related employment programs in Queens as a means to better connect residents with jobs and training programs in the storm-ravaged Rockaways.

GOTHAM GAZETTE HIGHLIGHTS OF THE WEEK:

The Mayor's Media Blitz, by Ben Max

Reform Proposals Fly as Panel Evaluates Ethics Watchdog, by Samar Khurshid

Measuring the Mayor’s Education Agenda, by Kaela Sanborn-Hum

Albany Transparency and the MTA Funding Deal: Show Us Our Money, by John Kaehny (opinion)

MORE FOR THE WEEKEND:

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NOTE TO READERS: we hope you enjoy this new Gotham Gazette weekly feature - please share it if you do; on Twitter, use our handle @GothamGazette.

If you have feedback on this feature for us, you can email editor Ben Max: bmax@gothamgazette.com

Watch Sunday evening for our latest Week Ahead in New York Politics, which gives you a preview of key issues and events to be aware of for the week about to start. In the meantime, catch up on the latest original reporting from Gotham Gazette here. And have a great weekend!

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by Meg O'Connor and Ben Max

Note: this article has been updated

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The Week That Was in New York Politics, October 12-16 Fri, 16 Oct 2015 15:31:18 +0000