Update, 2/4/10: Here we go again. The MTA will continue to be the punching bag of the media for something that’s entirely Albany’s fault, so I resurrect this post again with one new myth:
Myth: The new $400 million budget shortfall announced on February 3rd is the MTA’s fault.
The shortfall is entirely the fault of the state. Last year, to cover the budget gap that the MTA was facing, politicians in Albany opted for an increase in the payroll tax and a taxi surcharge to cover the gap, rather than a more stable solution like East River bridge tolls. The state projected that the MTA would receive $4.17 billion from the payroll tax over three years to help fund their operations. Now, the state has realized that they overestimated that tax revenue by a whopping $700 million (in December, they told the MTA they were off by $200 million, which spawned the currently proposed service cuts.
While this shortfall is a direct result of the recession, the state should have seen this coming. They promised a solution to the MTA’s budget woes and it fell short. Now (mark my words), those same people who championed the payroll tax solution will blame the MTA for their newfound budget shortfall.
I posted much of this rundown of myths about the MTA’s financial situation eight months ago, and unsurprisingly, it’s timely again. The MTA is again in dire fiscal straits, and the media and subway riders are all pointing their fingers squarely on the MTA, and their finger-pointing is without merit.
Now, enjoy this newly-updated version, which still includes some myths about bridge tolls and congestion pricing, since Bloomberg now indicates that it might be on the table again.
For extensive coverage of the MTA’s latest state-created fiscal crisis, head over to Ben Kabak’s Second Avenue Sagas.
Myth: The MTA is entirely to blame for this most recent deficit.
There are three main sources for this deficit:
1. In December 2009, the state stole $124 million of dedicated tax revenue from the MTA and placed it in the general fund to reduce their deficit.
2. The state provided the MTA with overly optimistic projections for payroll tax revenue – coincidentally, the tax that the State Senate passed to avoid a doomsday financial situation like this. Last week, the state announced that it had overshot projections by $200 million – an amount that the MTA anticipated to have in their budget.
3. A court refused to overturn an arbitrator’s decision to award the largest labor union of MTA workers an 11% raise over three years in the height of record unemployment, and layoffs and furloughs in the private sector. This will add $100 million in new labor expenses in 2010.
An argument can be made that the MTA should have accounted for the raise for union workers, since it was unlikely that the courts would overturn a ruling in binding arbitration. Regardless, though, the other two sources of the deficit were completely unexpected and for those, blame lies squarely with the state.
Myth: The MTA can find the money, somewhere, to cover this gap and stop the service cuts
When people say this, I ask, how? Nobody has an answer, they just have a feeling. Well, I invite anyone who wants to make this claim to go into the MTA’s financial statements and find enough money to fill their $400+ million deficit. It’s not possible. They are out of money. And there’s a good explanation, which brings me to my next myth.
Myth: The MTA is always in this mess and it’s their own damn fault
This is a cop-out when there’s no constructive criticism about the MTA’s finances, so let’s explain how the MTA got saddled with a deficit every year – and sometimes multiple times a year. One of its biggest sources of revenue is real estate transaction taxes. Look at what real estate has done in the past two years. That revenue has barely topped 50% of its projection. If the real estate market was booming, we might not be in as big a mess. Secondly, one of the MTA’s biggest expenses is paying down debt on bonds it took out during the Pataki administration, when the MTA was terribly underfunded and MTA money was diverted to road maintenance. These are two key reasons the MTA has had such a huge deficit for the past three years. Neither of these are within the control of the MTA, and especially not the MTA’s current management, which has been on the job for less than four months.
Myth: The MTA could’ve had public hearings on this before they voted on the service cuts.
The MTA is mandated by state law to balance their budget prior to the beginning of the calendar year. Hey, that’s in two weeks! These cuts to their budget all materialized in the past two weeks. To spin wheels and rush to hold a set of public hearings across the region would serve no useful purpose, would waste the MTA’s money, and would not stop any service cuts.
For those worried that the MTA Board’s debate and vote on service cuts will take place behind closed doors, today’s hearing will be webcast live online on the MTA’s site and then archived. It’s all part of the MTA’s often-ignored efforts to be more accessible and transparent.
Myth: The MTA has a responsibility to fund free fares for schoolchildren.
They don’t. In fact, they were doing it voluntarily – out of the kindness of their hearts. Okay, perhaps that’s too rosy a picture to paint, but it’s the city whose responsibility it is to provide transportation for students to and from school.
In the past ten years, the cost to the MTA of free student fares has nearly tripled. This isn’t because the fare has tripled – it’s because the MTA voluntarily took on the cost of free student rides when the city and state pulled back their money. Compared to 2000, when the MTA, city, and state were sharing the cost of student rides almost equally, the MTA now covers more than three-quarters of the cost – the city actually chips in a much smaller share than they did ten years ago, and the state now contributes almost nothing.
Myth: We should just raise fares again.
Who would say that? Nobody, most likely. But raising fares would further widen the MTA’s already huge credibility gap. The agency promised there would be no fare hike in 2010. If they raised fares in 2010, nobody would take them seriously again.
Besides, as New Yorkers, we don’t deserve higher fares.
Does that sound whiny and self-righteous? Probably, but let me explain. The New York City subway has the highest farebox recovery ratio of any public transit system in the United States. That is, the MTA relies on our passenger fares for over 60% of its revenue for the subway. As a basis for comparison, Chicago’s CTA has a ratio of 44%, LA County’s Metro has a ratio of 30%, and the lowly Staten Island Railroad’s passenger fares account for just 15% of its revenue. Where does the rest of its revenue come from? Mostly from state subsidies. And as we’ve already addressed, Albany gutted the MTA’s funding years ago.
Now, the state is again making riders face service cuts instead of adopting a system that would find a reasonable alternate revenue stream for the MTA: East River Bridge Tolls.
Myth: Putting a toll on the East River bridges would be unfair to the poor and would hinder open access to the city
This is the stance that politicians who opposed these tolls have taken, and it’s absurd. I could make plenty of arguments about drivers paying their fair share, cars contributing to pollution and congestion, and the fact that my tax dollars subsidize the maintenance of the roads that drivers use even though I don’t own a car. But let’s just cut to the chase: those who opposed adding a $2 toll to the East River bridges last year would rather see transit riders pay an additional 10% for their commute while car drivers get off scot-free.
Tell me, who do you think can afford to spend more money: a car owner who drives to their job in Manhattan, or someone who rides the subway every day? Nine times out of ten, it’s the former. Statistically, car owners make more money than subway riders, plain and simple.
The second part of this myth is a new point that surfaced toward the end of the early 2009 debate on tolls. That argument against East River tolls was that it would cut off Manhattan from the rest of the city, and would keep the five boroughs from being “open and accessible.”
This is absurd for two reasons: first of all, to anyone who doesn’t own a car, New York is already not “open and accessible.” I have to pay a subway fare (coincidentally, $2.25) to get to any other borough. Secondly, access between boroughs is already tolled, thanks to the Henry Hudson, Triborough, Bronx-Whitestone, Throgs Neck, Verazanno Narrows, and Marine Parkway Bridges, and the Queens Midtown and Brooklyn Battery Tunnels… all of which are more expensive to cross than the proposed toll on the East River bridges.
Myth: Adding tolls to the East River bridges will impact the cost of goods in Manhattan
This is a simple mathematics equation. Let’s say you have a small box truck that’s carrying half of its payload in tomatoes (roughly two tons). That small box truck would pay a $10 toll in the plan proposed by Sheldon Silver earlier this year. Let’s assume that the entire toll will be passed on to the consumer. How much more would a pound of tomatoes cost? One-quarter of a cent.
Of course, I forgot to mention that the tolls will likely take some cars off the road in Mahattan, making it easier for this truck to make its deliveries quickly without getting caught in traffic. So you might actually save close to $10 in labor costs for that truck driver.
Also, in March of 2008, the Port Authority raised the tolls on its Hudson River crossings by $2 for cars (more, naturally, for trucks). The inflationary change in the consumer cost of food between March and April in New York was 0.9%. This matched the national average. And by the way, a lot more of our food comes from New Jersey and west than from Long Island.
Myth: Adding tolls to the East River bridges will cause more congestion because of the addition of toll booths.
NO! I cannot believe the amount of times I’ve heard this argument, even from the most educated people. Have you ever heard of E-ZPass? Believe it or not, that technology can collect a toll at normal speeds, too. For those who do not have E-ZPass, cameras will capture their license plate numbers and they will be billed via mail. You may think that’s some pie-in-the-sky advanced technology, but it’s actually been around in North America for 13 years.
So, let me reiterate: there would be no toll booths on the bridges.
Myth: The MTA can just fire all those employees who do absolutely nothing all day – or at least cut their salaries
In a perfect world, this wouldn’t be a myth. As transit riders, we all see the waste firsthand, as employees sleep on the job, stand around and do nothing, and sit in their little booths and ignore customers. Believe me, I can guarantee you that many of the MTA board members wish they could lay off 10-20% of the MTA’s workforce to turn up the revenue they need.
First of all, in a time like this, do you think it’s politically expedient to lay off thousands of people in this economy, even if they could? Probably not.
But more importantly, the Transport Workers Union (TWU) and other labor unions representing transit employees have such a stranglehold on the MTA that there’s virtually no way to end this waste unless the MTA went private. It’s a terrible situation, but being opposed to unions is so politically unpopular in this city that nobody would be willing to take that stand publicly.
And lo and behold, in the midst of this crisis, courts refused to overturn an arbitrator’s decision that gave union workers at the MTA a 11% raise over the next three years. As a result, the MTA has to cough up that extra money, too.
It’ll be a long time before the MTA gets a chance to play hardball with the largest of the unions. And do you remember the last time the MTA asked for concessions from the union? We ended up walking to work in the brutal cold for three days.
By the way, to cover part of this deficit, 6,000 non-Union employees are taking a 10% paycut next year, including the top executives.
Myth: The MTA keeps “two sets of books”
Last April, during the MTA’s finance committee meeting, then-MTA chairman Dale Hemmerdinger said, “we must get away from this notion that the MTA keeps two sets of books.” Why? Because it’s just not true. THERE WERE NEVER TWO SETS OF BOOKS. It was an accusation made of the MTA by state comptroller Alan Hevesi nearly seven years ago – a charge that was resolved in court. And the board of the MTA should be offended by this accusation, since none of the members of the MTA’s leadership were in power back when this scandal broke in 2003. And in response to the scandal, the MTA became much more transparent, releasing all of their financial statements on their web site, and even holding webcasts about their finances. Oh, and to boot, Alan Hevesi was later found guilty of defrauding the state government.
But that’s not enough to satisfy the masses, apparently. Riders would rather get mad at the MTA for a seven-year old scandal than blame Albany, who knew for a year that this crisis was coming, waited until the last minute to rush a proposal through the legislature, and then decide to do nothing and let the transit riding public suffer through massive service cuts because educated politicians in Albany still believe that the MTA keeps two sets of books, no matter how many times they’re told otherwise.
Myth: Albany has the most corrupt, unopen, and incompetant state government in the entire country and voters need to clean house
Without the urging of constituents and the active participation of voters, the state and city will both continue to underfund the backbone of New York’s economy.