STATE BUDGET DOES HELP MASS TRANSIT, BUT MTA CAPITAL PLAN UNCERTAINTY RISING

The MTA received two significant infusions of new money in the State Budget adopted effective this April 1st. The first is a full $836 million to be provided to the MTA by December 31st of this year, to fund the Phase One Subway Action Plan developed last July by Chair Joseph Llota and the MTA management. The second is a new tax on for-hire vehicle trips by taxis, Uber, and other for-hire vehicles, that starts Jan. 1,2019, to be imposed on trips in Manhattan south of 96th street. The tax revenue will put an estimated $400 million a year into the MTA  budget to provide regular, ongoing support for the increases in maintenance related to the Subway Action Plan. The new money is very welcome for the beleaguered transit system, but major policy and funding questions like the MTA’s long-term capital construction program and whether congestion pricing will become integral to future sources of funds remain unanswered.

The $836 million to be delivered in 2018 is a combination of about $500 million in operating funds to cover the expense of several thousand new maintenance positions in subway car overhauls, replacing track and signals, deploying emergency personnel, and other staffing, with the rest investments in related physical assets. Half the money for the 2018 infusion was initially put into the proposed Executive Budget submitted by the Governor to the Legislature from State funds. The State Legislature agreed to compel the City of New York to come up with the other half of the funds, $418 million, despite Mayor De Blasio’s objections to the City being required to provide the money when proposed last year after Governor Cuomo declared the Transit Emergency. The ongoing deterioration of subway service that led to the emergency declaration impelled the Legislature to agree that both the State and the City must provide additional support to the MTA.

Two other proposals in the budget by the Governor to force the City to pay even more money to the MTA were rejected by the Legislature, with the Assembly specifically denying the approvals in both its One-House budget and later in its summary of the Enacted Budget. These proposals were viewed as far more onerous than the Subway Action Plan mandate. One required the City to pay the full cost of the New York City Transit Capital Plan, which is supposed to be $17 billion over the five years of the current 2015-19 MTA Plan. Right now the City’s scheduled contribution is $2.5 billion. The second proposal gave the MTA the authority to determine how much property tax revenue in New York City it could take from “Value Capture “. This budget bill allowed the MTA to decide how much property tax value is added due to transit improvements it makes around the City, and then direct the incremental property tax revenue to itself without the City having a right to approve it, or even have a say in how much money is involved.  The Citizens Budget Commission called this proposal “confiscatory “. Although rejected, versions of these proposals are likely to resurface in the future as the Cuomo administration tries to find ways to shift financial responsibility from the State to the City to fund the MTA.

The State Assembly deserves thanks from the public for the $400 million for-hire vehicle trip surcharge for mass transit. Governor Cuomo never put legislation to create a congestion pricing plan into his proposed budget, despite endorsing the concept last summer and creating the FixNYC Advisory Panel, which offered a congestion pricing framework in a report that was released at the time of the budget. However, in early March the State Assembly, in its one-House budget, proposed the surcharge to fund the recurring maintenance program. A similar surcharge had been a lesser part of the FixNYC Report, the main element of which consisted of the charge to enter Manhattan south of 60th street for most vehicles, and was designed to yield up to $1 billion a year. But both the main entry fee and the trip surcharge had not actually made it into the Governor’s budget.

Governor Cuomo had the good sense to rapidly endorse the Assembly’s trip surcharge, and it was approved by the Senate after the tax was limited solely to Manhattan, with no new charges in the outer boroughs or the suburbs. The new tax, however, has not included a congestion pricing set-up. There is no funding for any infrastructure to electronically record entries into the Manhattan business district. Existing technology in the taxi and for-hire vehicle industry will pinpoint when those vehicles traverse Manhattan south of 96th street.

A congestion pricing plan remains in limbo, even as the MTA’s long-term capital construction budget may unravel. In March of this year Standard & Poor downgraded the MTA’s bond rating one notch after an MTA report showed the agency would have a $400 million operating deficit in 2020 and a $600 million operating deficit by 2021, even after two fare and toll hikes. The primary cause of the deficit was reported to be a drop in real estate transaction revenues like the mortgage recording tax, which in part are dedicated to mass transit. The $32 billion 2015-19 MTA Capital Plan, to which the MTA is now committing significant funds as it finally wraps up the prior plan, includes $11 billion from the MTA itself, primarily from money it will borrow. The forecast deficits, however, are very likely to constrain the ability of the agency to actually borrow that much money. Not only that, but the State government’s share of the 2015-19 Capital Plan, $ 8 ½ billion, included $7 billion for which there was only an I.O.U. with no stream of revenue to back it up. Shortfalls in the 2015-19 Plan could materialize soon.

The MTA also has to propose its 2020-2024 Capital Plan in October 2019. The recent five-year plans have cost about $30 billion each- but if the current plan begins to unravel the 2020 plan will be in trouble. A fall 2017 State Comptroller report expressed concern that the 2020 plan might have shortfalls ( meaning lack of sources of funding to pay for projects) similar to the $15 billion shortfalls that plagued decision-makers for both the 2010 and 2015 plans before funding schemes were patched together.

The public and the State Legislature need critical information from the MTA very soon to determine the agency’s ability to sustain a meaningful capital program. In 2007 the Legislature made the MTA accelerate submission of its Capital Plan at that time earlier than the law had provided – and it could do so again, scheduling a submission for early 2019 rather than the end of the year to get a better handle on what the problems really are.

Congestion pricing involved rational policy proposals to deter vehicles from entering Manhattan to reduce pollution and congestion, and provide a long-term funding stream for the MTA. But this is the second time in ten years a push for congestion pricing has not been successful in the State Legislature.  If congestion pricing won’t fly there is no shortage of possibilities for taxes to fund the mass transit system. There are payroll taxes, personal income taxes, corporate income taxes, sales taxes, millionaires’ taxes, mansion taxes, you name it. The issue is the political will. A consensus on funding this most vital of services remains frustratingly elusive, along with the leadership to forge that consensus.

 

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