Why is Transit in Such a Fiscal Hole?

Friday, June 25, 2010 - 11:42 AM

(Andrea Bernstein, Transportation Nation) There's not a transit system in the nation that isn't under water. MARTA in Atlanta is looking a cutting a quarter of its service. The board of the Caltrain, through Silicon Valley, is reserving the option of ceasing to exist entirely. But why is the NYC MTA, the nation's marqee transit system, facing an $800 million budget gap?

Some fifty percent of the people in the New York region use transit, according to a recent Brookings Institution report, more than ninety percent of people working in Manhattan get there on trains or buses. But the fiscal spiral continues downward.

There are lots of reasons -- a history of poor management and corruption, for starters. To give one example -- in the 1990's the MTA sunk at least $300 million, into a headquarters built by politically-connected contractors. Prosecutors charged there was a mob link. The new hq was never completed.

Then there are tight union rules which drive up operating costs for all US systems. But the real crisis began in the 1980's, when the federal government, under President Ronald Reagan, stopped giving operating aid to transit systems. In the 1990's New York City and State followed suit, cutting of hundreds of millions a year in operating aid. The MTA managed by borrowing its way out of a fiscal hole, taking on billions in new debt. The debt was masked by a booming real estate market -- real estate taxes buoy the MTA's farebox revenue.

But the crisis was coming.

In 2007, New York City Mayor Michael Bloomberg proposed a congestion pricing plan for New York City. Drivers entering certain parts of Manhattan during peak hours would pay a fee. The fee was meant to discourage automobile use, and under a Bush Administration regulation, that would entitle the city to hundreds of millions of dollars in federal transit aid. But the proposal had little support in the State Assembly, and it was effectively killed by Speaker Sheldon Silver.

Update: Federal grant money went to Minneapolis,  to install a congestion pricing, or "hot lane" scheme" there. (Hot lanes charge single drivers extra to ride in HOV lanes), for bus transit improvements and congestion price, or "hot lanes," along its I-35 corridor, where single motorists can pay to enter HOV lanes.  As Lee Munnich writes below, Minneapolis  "was able to get the necessary state and local political support to implement its project, while New York City was not."  Los Angeles, and ultimately, Atlanta got the grant money that would have otherwise gone to New York.

A year later, transit's fiscal woes weren't easing. New York Governor David Paterson enlisted the aid of former MTA Chief -- now Lt. Governor, Richard Ravitch -- to develop a plan. The "Ravitch Plan" called for increased employer taxes and tolls on the East River Bridges, among other fees. (Some bridges across the East River, owned by the MTA, are tolled. Others, owned by the city, are not. The plan would have charged all bridges equally.)

But the tightly -divided New York State Senate was in meltdown in 2009, with two Democrats bolting to the Republican party -- then back. That gave them huge power, and Senator Pedro Espada (now charged with fraud by NY Attorney General Andrew Cuomo) was an especially vocal opponent of the East River bridge tolls and the plan didn't pass the Senate. Employer taxes, a rental car charge, and taxi surcharges did, but, in a continuing weak economy, they've fallen far short of projections.

Congess last year voted an amendment to the Recovery Act which allows transit agencies to use 10 percent of their stimulus funds for operating costs, for the MTA, that would mean about $150 million. But Jay Walder and the MTA leadership have chosen to keep that money for long-term projects like the Second Avenue subway.

Senator Christopher Dodd has proposed a $2 billion emergency transit aid bill to stave off some of these cuts, but so far, it isn't moving. And long term help for transit is caught in the debate over reauthorizing a $500 billion transportation bill. Funding for the bill comes from a gas tax, last raised in 1993, and the gas tax revenues have fallen far short of need. The Obama administration has little appetite to propose a new tax in front of the mid-term elections.

And so the MTA continues to grapple with a $800 million gap. MTA Chief Jay Walder this week reminded New Yorkers that a fare increase is still planned for January, 2011. A metrocard will cost about $95 a month, a single fare, $2.50. But if revenues continue to spiral downward, the MTA could propose even higher fares.


Comments [4]

Alek F

I think, the root of the problem is in our government's funding policies. Unfortunately both the federal and state government have always favored the Automobile, while treating the Mass Transit no better than a scapegoat (as another sad example, our beloved California governor has been diverting billions of dollars from Transit money - to balance his budget). The whole funding structure needs to be changed. Why do we rarely (if ever) hear about transit problems in Europe? Because they have a much better funding allocation system, and subsidizing mass transit in Europe, as well as in Asia, is a PRIORITY, unlike in the U.S.
If our government would change the mentality, and stop viewing things in terms of money-money-money (yes, the Auto industry is a giant money-maker) and reduce subsidizing highways and increase subsidizing mass transit, then things might finally change!!

Jun. 30 2010 12:14 PM

Thank you Lee! You are of course, correct, and I've updated my post. Readers: Lee Munnich is the Director of the State and Local Policy Program at the Humphrey Institute at the University of Minnesota.

Jun. 30 2010 10:52 AM
Lee Munnich

A correction to your piece: Minneapolis won a federal grant for HOT lanes, transit improvements and telecommuting at the same time New York City was awarded a grant in August 2007. However, Minnesota was able to get the necessary state and local political support to implement its project, while New York City was not. When the New York plan failed to get the state legislative support necessary, USDOT reallocated the grant money for congestion reduction projects in Los Angeles and Chicago. The Chicago money was later awarded to Atlanta when Chicago failed to meet federal deadlines to receive the congestion reduction grant.

I would note that a significant portion of the Minnesota grant went for bus transit improvements that complement the congestion pricing in the I-35W corridor, a good example of how congestion pricing and transit should work together in reducing and managing congestion.

Jun. 30 2010 09:39 AM

Without subsidies, transit systems would just be too costly for the average person to utilize. Transit is not and was never a profit maker. As a transit advocate, it is increasingly difficult to justify the cost of using trains/busses because the cost continues to skyrocket. In some circumstances it is literally cheaper to drive than it is to take the train into the city.

Jun. 28 2010 01:49 PM

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