CONGESTION PRICING TRAIN ALREADY RUNNING LATE IN ALBANY

There is plenty of debate ongoing in Albany now about the pros and cons of congestion pricing-but little discussion yet about the purpose of creating such a large flow of money($1-1.5 billion a year), which logically must be a way to fund the next MTA Capital Plan. That plan is due out in the fall of 2019 for a five-year cycle from 2020-2024. The MTA had estimated that both the existing plan(15-19) and the prior plan(10-14) would cost about $30 billion each. But the Agency, the Governor, and the Legislature had trouble figuring out how to raise the money to cover the immense costs of both plans, and the 2010 plan was ultimately downsized. The next cycle will have the same problem-where to find money to pay for it. In fact, the problem of paying to keep the mass transit system in a state of good repair and pay for expansion projects will continue for decades.

In 2013 the MTA put out its 20-year Capital Needs Assessment for 2015-34. This assessment identified system needs which would cost $106 billion to keep mass transit in a state of good repair, without even considering the cost of the expansion projects. In the current plan, the big expansion projects like East Side Access and Second Avenue Subway cost $7 billion. The State of Good Repair( regular replacement of track,signals, stations,subway cars and buses, etc.) for the existing system costs $25 billion.

Governor Cuomo, MTA Chair Joe Lhota, and legislative leaders have said very little about just how problematic the MTA’s long-term funding needs really are. There is a proposal in the new State budget to force New York City to pay half the recurring maintenance costs of Lhota’s Subway Action Plan, estimated at $300 million a year by 2020, but that is primarily for a step-up in regular maintenance, not capital projects. Mayor DeBlasio has refused to support the idea. The current capital plan had a shortfall of half, or $15 billion, of the $30 billion in needed funds. The Governor and the Legislature patched up the problem in 2016 by promising in State law in 2016 that the MTA would get the money when it needed it, meaning it would have to spend down what it had available first.

There is still no congestion pricing bill to accompany the Fix NYC Panel report released by Governor Cuomo at the same time as his January budget,that gave a framework for a congestion pricing setup. The Legislature has already left Albany for its annual Presidents’ week break and will not return until the end of February, at which time it will have to begin the process of negotiating with the Governor and adopting the main budget, due April 1. The main budget itself is controversial, as always, with the Governor seeking $1 billion in new revenue to plug the deficit, and Mayor DeBlasio protesting cuts and cost shifts of $750 million to the New York City budget, excluding any MTA-related costs shifts.

Each house of the Legislature will adopt its own preliminary one-House budget in mid-March, and must decide what will be in those budgets by the end of the first week in March. With so many tough issues to resolve just for the regular budget, it is very possible that resolving major mass transit issues will be delayed until after the budget, with congestion pricing still an open question. This will leave the mass transit debate to continue until the end of this year’s legislative session in June.

State Comptroller Tom DiNapoli reported last fall the MTA was likely to face another $15 billion shortfall for its 2020-24 Capital Plan, and possibly much more because the MTA’s Subway Action Plan Phase Two indicated a need for another $8 billion for New York City Transit. But right now the State’s leadership is not articulating this problem. It is an election year and if congestion pricing fails there would be a shortfall for the MTA of the sum of money congestion pricing would raise. If that was the case, there would be no place to go to except tax increases or fare hikes to fund the long-term needs of the mass transit system. The City of New York can only raise its property tax. Only the State government can raise the payroll tax, the corporate income tax, the personal income tax, the sales tax, the real estate transaction taxes, and others. The City must get approval from the State to raise any of its own taxes except the property tax.

Chair Lhota claimed the City is responsible for the capital needs of the New York City Transit Authority ( $16-17 billion in the current 5-year plan) on the grounds that a 1953 law said so. That law, Section 1203 of the Public Authorities Law, did in fact say that but added that the City was responsible for a limit of $5 million a year without approval of the New York City Mayor. That $5 million cap has not been changed since 1953, making the law obsolete; an anachronism.

The concepts that have funded mass transit since have radically changed and are connected to the fact that New York City can only raise its property tax and is responsible for the City’s basic services and much of its social welfare and health care funding. When the MTA was created in 1968 the Legislature allowed the City to draw down bridge and tunnel surpluses to fund New York City Transit. In 1981 the Legislature began passing new State taxes within the MTA region to dedicate to the MTA because of the obvious limitations on the capacity of the City government.

Back to the obvious: it’s an election year and in my considered opinion the Governor and the Legislature are not likely to raise taxes, and the MTA will not do a fare hike. That means it’s congestion pricing or bust this year as far as mass transit is concerned.

With MTA Facing Massive Shortfall, A Lot Riding on New Congestion Pricing Push

Governor Cuomo’s “Fix NYC” Commission produced a framework for a congestion pricing plan, released just after the Governor’s Executive Budget for the 2018-19 Fiscal Year, whihc begins April 1. The congestion pricing framework outlines a three-year phase in that would provide revenue of $1 billion to $1.5 billion a year by 2020, most of which would be intended for the MTA Capital Plan.

That is also the year the MTA must begin its next five-year capital plan for continued investment in the upgrade and preservation of the subway, bus, and commuter rail systems. The current $30 billion plan, the 2015-19 plan, faced a shortfall of $15 billion when initially proposed in 2014, and it was not until 2016 that the Governor and the Legislature finally adopted a framework for that plan. The 2020-2024 Five Year Plan likely faces a similar funding shortfall of $15 billion, so money flowing from a congestion pricing plan for the MTA in 2020 would arrive just in time to fill much of that shortfall, although the Fix NYC framework did not outline a specific disposition of the money from a congestion pricing setup.

A November 2017 report by State Comptroller Tom DiNapoli, “ Financial Outlook for the MTA,”  stressed that the MTA’s capital funding shortfalls could be even larger than $15 billion because more than $7 billion in the 2015-19 plan that the State government committed to providing the MTA still does not have an identified funding source.

Beyond that, Chair Joseph Llota’s Subway Action Plan Phase Two indicated a need to add $8 billion in capital funding for the subway system. The MTA is not under an obligation to offer the details of its 2020-2024 Capital Plan until the fall of 2019 so it is not clear how all these unmet needs and proposals might fit together. But a shortfall of more than $20 billion is likely.

The Comptroller’s office suggested the MTA accelerate the release of the details of its 2020-24 plan to enable greater public engagement in the process of coming to terms with these important decisions. The MTA should do this- the Governor, the Legislature, and the public need to get a handle on what the MTA thinks is needed sooner rather than later. ( The Comptroller’s report confirmed the concerns raised in my September 30 Gazette column, “The MTA’s Long-Term Financial Problem is Severe and May Soon be Worse. “)

If the Legislature does not enact a formidable congestion pricing plan, worth $1 to $1.5 billion a year, enough revenue to support $10 billion or more in bonded funds for the mass transit system, or find some other alternative, it will be catastrophic for the subway, bus, and commuter rail systems, the fundamental infrastructure that allows for the wealth of the New York City metropolitan area. In fact, even if the congestion pricing plan was adopted, the MTA’s greater than $20 billion shortfall  would only drop by half, $10 billion, and there would still be $10 billion to find unless the Federal government stepped in to provide much larger amounts of money than at present.

Mayor DeBlasio’s proposal to tax millionaires was envisioned to raise ¾ of a billion a year, with $500 million to fund $8 billion worth of bonds for the MTA, and $250 million to subsidize low-income New Yorkers’ subway and bus rides with ½ Fare Metro cards. Together the congestion pricing plan and the millionaire’s tax might raise nearly $20 billion for the MTA, coming close to closing the gaps in meeting mass transit capital needs.

Both proposals face significant opposition in the Legislature, from State Senate Republicans opposed to the millionaire’s tax, to everyday legislators of both parties who simply don’t wish to impose new charges or fees on their constituents to drive into Manhattan, either because they feel the charges are unfair or won’t solve the congestion problem.

Governor Cuomo has not yet submitted a bill to the Legislature that provides the details of the congestion pricing plan or how the money would be used. He has said he wants to discuss the issue with the legislature first, although he has embraced the concept advanced by MOVE/NY that the tolls on the outer borough bridges that don’t feed the Manhattan Central Business district should be reduced. That means some of the FIX NYC revenue would be diverted to reduce those particular tolls and not available to the MTA for its capital needs.

The Governor has also submitted bills in the budget to force the New York City government to come up with much more money for the MTA, a move the de Blasio Administration is strongly opposing.

One bill would force New York City to pay the 50% of Chair Llota’s Subway Action Plan that the Chair had demanded of the City and that Mayor DeBlasio had refused to pay. Another bill would give the MTA the power to create special districts in New York City where subway expansions add property value, and allow the MTA to obtain portions of New York City’s property taxes related to the new value created, for the MTA Capital Plan. The concept was used to pay for the #7 Train Extension by dedicating revenue from property in the Hudson Yards area to cover the costs, although that plan was a creation of the City of New York and the City controlled the dispositions of funds, unlike the Governor’s proposal here, where it does not appear the City has a say in the matter.

Another budget bill is perhaps the most dramatic of all- it says the City of New York must pay the full cost of the New York City Transit Authority capital plan. The City of New York has a seat on the MTA Capital Program Review Board and a vote on the New York City Transit Authority Capital Plan, so it has the power to veto that part of the plan. This power does not quite fit with the obligation to fund the plan, nor does it square how parts of the New York City Transit Authority Capital Plan might get funded from other sources of revenue and how the City negotiates the package. The MTA’s capital needs are so immense it is reasonable to ask the New York City government to increase its contribution- perhaps even in a major way- but the Governor’s proposals are orders rather than requests and may simply be opening gambits in what must come from a negotiation, not an order from the State.

Another major issue is the gargantuan expense of the MTA’s construction programs and purchases. A recent New York Times series described the immense wastage of funds in the projects. The MTA, the Governor, and the Legislature cannot ignore the problem- the size of the MTA’s needs just costs too much money and the City and State just can’t afford to just write checks to cover $20-30 billion shortfalls.

Right now congestion pricing is the main issue on the plate. Mayor DeBlasio and the Legislature should support it.

Governor Cuomo and Mayor DeBlasio should bury the hatchet- at least as far as the mass transit system goes. There needs to be a consensus about addressing the giant shortfalls faced by the capital needs of the system. It’s also worth mentioning that both former Mayor Bloomberg and the newer MOVE/NY Plan sought to use congestion pricing funds to improve express bus service in areas of the City poorly served (or even not served at all ) by the subway system, and that issue, among others, certainly needs to be taken into account.

The MTA needs an astonishing $2 billion a year in new sources of revenue for the cash and debt service on bonds to cover more than $20 billion needed through 2024-25. If congestion pricing fails and there is no meaningful replacement the prosperity and public safety of the metropolitan area will be threatened

Contrary to Cuomo Claim, Upstate Economy Faltered this Century, Not Last

Governor Cuomo described the Upstate New York economy as suffering from a “ bad fifty years “ as he tried to explain why it was hard to stimulate rapid growth in the region’s economy, which has grown far more slowly than the rest of the State and nation (See Gotham Gazette Opinion, Upstate New York is Home to Heavy Voter Turnout, Major State Investment, and Minimal Job Growth, Nov. 21,2017). He said also that his administration had changed the trajectory upward. Residents of the state should be concerned about how successful these efforts are: Upstate York has more than a third of the State’s residents and is nearly fifty percent of the vote in Gubernatorial elections; the State has enacted intensive programming to uplift that region’s economy, and the State must make major decisions about the allocations of its resources and assets every year and set policy directions.

When I wrote the earlier column, I assumed the Governor’s description of Upstate’s economic decline was generally true. But in the course of verifying the accuracy of the fifty-year decline statement in order to elaborate on the issue for this column, I learned that it was not true that the region’s economy has been going downhill for fifty years.

Upstate New York’s Economy only slowed to a crawl in the years after 2000-  alongside the two recessions that occurred between 2000 and 2010. This major slowdown did, of course, occur before Andrew Cuomo became Governor in January 2011.  But a detailed look at the history of the State’s economy and employment growth shows that Upstate New York’s employment growth actually outpaced the rest of the State in the 1980s, and continued a moderate climb forward in the 1990s, although both regions grew more slowly than the rest of the nation. Employment grew 20% in each decade across the U.S.

New York State Labor Department figures show Upstate employment growing at 17% in the eighties, vs. 12% Downstate (1). Downstate consists of New York City, Nassau, Suffolk, Westchester, Rockland, and Orange counties (2). Upstate is the remainder of the State.

 

NYS EMPLOYMENT GROWTH, 1980-90, NY AND REGIONS (000)
1980 1990            % Growth
NYS 7113 8098 13.8%
Downstate 4645 5206 12.1%
Upstate 2468 2892 17.2%

 

Governor Cuomo seemingly was expressing a public perception that manufacturing job loss broke the back of the Upstate economy decades ago. Manufacturing job loss has in fact been relentless, both in Upstate New York and Downstate New York, and the nation as a whole. In 1979 the United States reached its peak manufacturing employment with 19.5 million jobs. Here is New York’s manufacturing employment history since then, divided between the regions.

NYS MANUFACTURING EMPLOYMENT, 1979-90(1),1990-2010(1)
1979 1990 1990 2000 2010
Upstate(000) 707 574 513 421 276
Downstate(000) 787 557 468 328 181

 

In 1979-80, manufacturing jobs were 29% of Upstate New York employment, and 17% Downstate. Manufacturing job losses were seriously affecting employment in New York, but in the fifty-year lookback to the late sixties and seventies, it was New York City’s economy that was in freefall in the early seventies. New York City lost 600,000 jobs, including 300,000 manufacturing jobs, from 1969 to 1976 (Federal Reserve Board of New York, quarterly review, summer 1977). But the City economy recovered in 1977 and beyond. Two recessions, in 1980 and 81-82, hit the steel and auto industries in Western New York hard. The huge Bethlehem Steel plant in Erie County closed in 1982. Erie and Niagara Counties lost 41,000 manufacturing jobs from 1979-85. IBM and Kodak began their manufacturing job declines in the mid-to-late eighties and continued through the nineties. Despite these cutbacks, the Upstate economy as a whole still continued to expand once the recessions were over and grew by more than 400,000 jobs in the eighties.

In the 1990s, both regions saw their employment grow at a pace of about 5% during the decade, including the severe recession of the early nineties. In 1990, manufacturing was still 18% of Upstate employment but had fallen to 9% Downstate, meaning its transformation to a service-based economy had effectively been completed. After the recession was over, the Downstate area did grow more rapidly, but Upstate employment growth still gained over 200,000 jobs and had 7.4% growth over a seven-year period.

NYS EMPLOYMENT GROWTH, 1990-93-2000, NY AND REGIONS
1990 1993 2000 90-00 93-2000
NYS 8203 7750 8624 5.10% 11.30%
Downstate 5319 4941 5606 5.40% 13.50%
Upstate 2884 2809 3018 4.60% 7.40%

 

Foreign immigration, especially into New York City, began to make a major difference in population growth in the two regions in the 1990s. According to New York City Planning reports, the City gained 800,000 foreign immigrants in the nineties .This gain in the City, where 2/3 of the population Downstate lives, roughly mirrored the 800,000 person growth in population in that decade for the Downstate region. Between 2000 and 2015 the City had gained another 340,000 foreign immigrants and Downstate gained another 425,000 persons. Between 1990 and 2016 Downstate gained more than 1.6 million people and more than 14% increase in population. Upstate New York gained only 2% in population. With population growth comes new demand for goods and services and employment gains.

By 2000 manufacturing employment was 14% of employment in Upstate New York and only 6% Downstate. The United States entered another recession in 2001 and employment actually declined for two years, including a loss of 2 million manufacturing jobs. The terrorist attack that destroyed the Twin Towers and killed thousands also had significant effects on employment in New York beyond the impact of the recession. After the recession ended employment in the Downstate region grew rapidly until 2008. But the growth rates of the two regions differed sharply, with Upstate growing only 1.7% in the five years vs. 6.1% in the Downstate region, when the Great Recession hit New York and the nation. New York City’s economy took off after the Recession, but Upstate New York had lost another 145,000 manufacturing jobs in the decade, more than a third of its remaining factory jobs from 2000 (See Manufacturing Jobs Table). By 2010, Upstate New York had fewer jobs than it did in 2000. The Upstate economy had a very bad ten years, from 2000 to 2010, and the manufacturing and other job losses during this period truly shook the base of the Upstate economy.

2000 2003 2008 2010 Growth 2003-2008 Growth 2000-2010
NYS 8624 8395 8777 8544 4.6% -0.9%
Downstate 5606 5434 5765 5622 6.1% 0.3%
Upstate 3018 2961 3012 2922 1.7% -3.2%

 

The past column reported that Upstate private sector economic growth from 2010 to 2016 was 5.8%, with slightly faster growth in the bigger metro areas like Albany, Buffalo, and Rochester, but weak to no growth in other areas. How and where the State government is allocating its resources and assets will be the subject of the next column, along with a continued look at its economic development polices and overall strategic efforts to leverage meaningful improvement in the Upstate economy.

 

 

 

 

  • Older historical employment data contained different employment classification systems, that mixed proprietors and payroll together, among other differences, so the series used for 1980-1990, and for manufacturing from 1979 to 1990, is not comparable to a later 1990 base that uses only payroll employment coming forward from that time.
  • The New York State Labor Department metro area employment data places Orange County in a Westchester-Rockland-Orange region, so Orange County is counted in Downstate employment.

 

 

 

 

Upstate New York is Home to Heavy Voter Turnout, Major State Investment, and Minimal Job Growth

Responding to criticism that his administration’s efforts to help the economy in upstate New York have been ineffective, Governor Cuomo recently stated at a luncheon in Glens Falls, a small upstate city, ” It’s been a bad fifty years.” He added, ” You’re not going to turn it around in a couple of years. But have we changed the overall trajectory? Yes ” (Albany Times-Union Oct.25,2017).

A great deal has been written not just about weak economic growth in upstate New York, but also about the lack of accountability and transparency of the state’s economic development agency, Empire State Development. It is essential to examine these concerns in the larger context of the health of upstate and how the region fits into the larger New York State economy. the allocation of state government resources, and state politics.

A major political fact about upstate New York stands out in the context of any discussion about its destiny. Upstate New York provides a huge share of the vote in the state’s gubernatorial elections, which occur every four years in the even years not home to presidential elections.

Census 2016 estimates of the population of upstate New York,defined as all the counties north of New York City,Long Island, Westchester, and Rockland, were that the region was about 36% of the state’s total population. But in 2014 upstate New York was home to almost 49% of the gubernatorial vote, when Cuomo won re-election. New York City was home to only 26.5% of the statewide vote, although its share of the state population is 43%. That equaled about 1 million of the 3.8 million total gubernatorial vote that year.

These proportions were not just a fluke of one fairly uninspiring election. In 2010, when Andrew Cuomo was first elected Governor, the upstate vote was 46.5% of 4.6 million votes on the governor line, while New York City was 29%. In 2006, when Eliot Spitzer easily won the Governorship, upstate was 48% of the vote, while New York City was 28% of the 4.4 million votes. The City did do better in last year’s presidential election: in 2016, 2.7 million votes were recorded in New York City of the 7.7 million votes statewide, or 35%.

Upstate New York’s share of the vote in gubernatorial elections-nearly half- means that the area is politically important to whomever the Governor might be and explains the major focus on attempts to meet the needs of the people who live there. This, in combination with other factors, can help explain Governor Cuomo’s intense focus on Buffalo and other upstate areas, and the many economic development programs the state has launched to reinvigorate the upstate economy.

Downstate residents-especially people from New York City- ought to take upstate’s staggering disproportion of the vote as a wake-up call on the issue of how voter turnout may impact the allocation of resources. Not for the purpose of taking resources away from an area with a stagnant economy, but to make sure there are rational, articulated reasons and shared goals as to why state policies put resources in one place or another.

Let’s look at job growth over the past six years, measured as annual average employment in 2010 versus the annual average in 2016, and how upstate New York compared to the rest of New York and the nation.

Upstate New York gained 132,000 private sector jobs, growth of 5.8%, but lost 37,000 jobs in government, making total growth a meager 95,000 jobs, a gain of 3.3% from 2010 to 2016. Total state employment grew 851,000 jobs, with private sector growth of 916,000 jobs.

New York City gained 616,000 private sector jobs and 610,000 overall. The City gained 72% of the total number of jobs across the State. The City had job growth of 16% compared to 2010, and a strong 19% in private sector growth from 2010 to 2016.

Long Island and the northern suburbs( Orange-Rockland-Westchester is the metro area unit) gained over 7% in total jobs compared to 2010, with over 10% growth in the private sector.

New York State as a whole grew 10% overall, and 13% in the private sector, very similar to the national growth rates, which were 10.7% total growth and private sector growth about 13%. The figures, all 2016 compared to 2010, certainly show that upstate New York was growing far more slowly than the rest of New York and the nation as the United States emerged from the Great Recession of 2008-9.

Upstate New York has nearly 7 million people, meaning it has a larger population than at least 33 states, and has 3 million jobs. It is a substantial economic region itself and, like many parts of the United States, its job base has been battered by recessions and loss of manufacturing jobs.

Upstate New York has 12 metropolitan areas, and its three largest fared better than a number of the metro areas with smaller core cities. The Buffalo-Niagara region and the Rochester metro region both gained about 30,000 private sector jobs, almost 7% growth from 2010 to 2016. The Albany area gained 34,000 private sector jobs, about 9%. The Syracuse area, upstate’s fourth largest metro area, grew more slowly, gaining only 3% in private jobs. All these areas lost government jobs, affecting their net job growth.

The Binghamton and Elmira areas, in the Southern Tier, and the Utica-Rome area in central New York, lost 10,000 jobs between 2010 and 2016, although 7,000 of the jobs were in government. Utica-Rome did not lose private sector jobs but had almost no growth in them either. The remaining regions varied in their growth patterns but in general had slow growth. Loss of government jobs in upstate New York stabilized by 2013 after several years of cutbacks as the economy and State and local budgets improved.

job growth two

Job growth overall in New York has continued in 2017, but a recent report by the Federal Reserve Bank of New York stated that growth in the upstate New York economy has slowed in 2016 and 2017.

Governor Cuomo stated that upstate New York has had a bad fifty years but the state has changed the trajectory. It is important to acknowledge the economic damage that occurred in upstate New York before Cuomo was elected in 2010 as one looks at economic development efforts his administration has undertaken to change the trajectory.

New York’s efforts include not just the activities of Empire State Development, but substantial budget allocations and other development tools like the allocation of cheap hydroelectric power. Given the range of initiatives, from the Buffalo Billion to Start-Up New York, new casinos, the nano-technology centers, the Regional Economic Development Councils, and other efforts, it would be unfair to say the New York State government is not trying to help upstate New York. It is trying.

The next columns in this series on the state’s economy and economic development efforts will look at these concerns together: the severity of upstate New York’s manufacturing and other job losses; the extent of the effort by the state government to put resources into upstate; whether those resources are being used effectively or are being squandered; and to what extent the outcomes of these initiatives are transparent and being reported in meaningful ways.

The MTA’s Long-Term Financial Problem is Severe and May Soon Be Worse

Summer 2017 saw a political breakthrough for mass transit riders when Governor Cuomo declared a “ Transit Emergency “ after the Harlem subway derailment, effectively acknowledging the State’s responsibility for addressing the deteriorating and delay-plagued subway, bus, and commuter rail system. Within a month, the MTA’s new Chair, Joe Llota, proposed an $836 million “ Subway Action Plan “ to address the emergency, meaning major upgrades to the MTA’s maintenance operations and other investments to attack the constant delays and bring some meaningful relief to the riders. He proposed the MTA and the State split the cost of the new program 50-50 with the City, which drew a near immediate rebuff from Mayor De Blasio .

The MTA began implementing the plan, deploying massed late-night work crews on system segments to clean debris and fix track and signals, without a clear answer to where it will get the money. The money for the Subway Action Plan became part of the MTA’s constant dilemma- where can it pull together resources for both its short-term and its long-term needs, which are far larger than the $836 million subway action plan. But the Emergency Declaration and the Subway Action Plan response precipitated another move by Governor Cuomo.

In mid-August Governor Cuomo endorsed “ CONGESTION PRICING,“ claiming it was an idea whose time has come. Congestion pricing puts a toll on the free East River Bridges into Manhattan, as well as a toll for vehicles crossing 60th street toward the City’s business district. The money from the tolls would provide the cash to repay money the MTA generally borrows for its capital needs. Those needs include buying new subway cars and buses, replacing track and signals, rebuilding stations, elevators, escalators, and railyards, continuing expansion projects like the Second Avenue Subway and East Side Access, and installing computer-based train control, which could increase the number of subway trains running during the crowded rush hours.

MOVE New York, an advocacy group, has a detailed plan, which includes vehicles paying one round-trip at the same rate as the Battery and Midtown Tunnels($5.76 easy pass, $8- no easy pass), and lowering tolls on many of the non-Manhattan destination bridges in the rest of the boroughs

The Governor does not yet have his own specific plan, and imposing these tolls must have approval of the State Legislature, which is not in session and will not return to Albany until January. This means Cuomo will likely submit a congestion pricing plan with the budget, in January, with the hope it would be approved by April 1,2018. Mayor Michael Bloomberg made a congestion pricing proposal in 2007 and 2008, but the Legislature would not approve it, although it consumed a year’s worth of debate. It never even came to a vote.

Meanwhile, Mayor De Blasio said he opposes congestion pricing because it is “regressive” by which he means that it is a tax on ordinary working people, not the rich.

I served in the New York State Assembly for 32 years, and in 2007 I was Chair of the Assembly Cities Committee, which dealt with the internal workings of the State’s 62 City governments. I had regular dealings with the Bloomberg administration and endorsed congestion pricing. Most of the debate, however, was not about funding the MTA, but about whether the tolls would really deter cars from driving into Manhattan, and whether the neighborhoods in Brooklyn and Queens near the bridges would fill up with cars parked by drivers looking to avoid the tolls and then taking the subways into the City for the last leg of their trip. Of course, unfairness to people of modest means was another major concern. My point of view was that the MTA Capital Plan needed a major new source of funding but that perspective was less of a priority then than it is today.

Several years later I became Chair of the Assembly Committee on Corporations, Authorities, and Commissions, which has jurisdiction over laws affecting the MTA. I also helped lead the Assembly’s negotiations with the Governor and the Senate over the mass transit aspects of the transportation budget. By 2014 the MTA’s 2015-19 Capital Plan had become the subject of extensive discussion, and the MTA had a $15 billion shortfall in funding for the $32 billion plan that was in the works. Move New York had made its new congestion pricing proposals by then, which I supported. Concerned that congestion pricing might never be approved by the Legislature, I also introduced about six bills intended to help meet the MTA’s shortfall. Some of the bills addressed road and bridge funding as well. But the Governor’s office argued that providing specific additional funds to the MTA would not work because they could not spend more money (which the MTA leadership did not agree with but would not disagree publicly with Cuomo).

Governor Cuomo vetoed the MTA’s initial Capital Plan proposal in October 2014, which ended up forcing the MTA to cut the plan from $32 billion to $29.5 Billion. In the 2016 budget, the Legislature approved the Governor’s plan to commit the State to $7 billion in new funding for the Capital Plan, while New York City would supplement the funding with $ 2.5 billion of its own. With those commitments in place, the MTA proceeded with its approved plan. The problem then, as now, is that the $7 billion from the State was just an IOU. There was no identified source of funding for the $7 billion, only a commitment in law that the State would provide the funds after the MTA ran out of its own resources.

In late 2019 the MTA will have to submit a proposal to the Capital Program Review Board for the 2020-2024 plan, which is expected to be similar to the past several plans, needing $30 billion for full funding. In the current plan, the MTA had identified about ¼ of the funding from the Federal government and about 1/3 of the funding from its own resources, meaning either cash upfront or enough cash to cover the interest on borrowed funds, before the State government settled on the 2016  plan that passed.

For 2020-24 it is not known how much more cash the MTA can squeeze out from its current resources. The MTA’s Financial Plan adopted by the Board in July showed rising deficits because revenue from real estate taxes is showing a decline, meaning its ability to generate more cash resources internally will be very limited. A reasonable person could foresee a shortfall for the 2020-24 plan similar to the one that affected early planning for the current Capital Plan, namely $15 billion. When you combine that with the unidentified resources for the State share of the current plan, some $7 billion, the total shortfall going into 2020 would be $22 billion. Does this suggest the MTA needs a new source of revenue?

A shortfall of more than $20 billion going into the 2020-24 capital plan is pretty catastrophic. Not all the cash is needed  right away, of course, but the Governor and the Legislature, I think, should probably do something meaningful pretty soon.

 

The Mayor’s Best Argument on Transit System Funding

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 DeBlasio 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 DeBlasio makes a decision to contribute to the plan or not, an understanding of who is paying for the transit system 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(excluding debt service) 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 surcharge, 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 all this 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 MetroNorth facilities located 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 also 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 paid 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 taxes collected from the suburban counties around the City pay for 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 MetroNorth. Money from the General Fund of the State provides just a very small portion of the commuter rail budget, just like New York City Transit. The MTA Police patrol the commuter rail system, but their 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 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 that 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 within the MTA region, either some form of congestion pricing or a diversion of some current tax receipts from the region. The City’s promised $2.5 billion 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 the City’s 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.

 

 

 

The Governor cannot duck a reckoning for mass transit’s decline

New York’s mass transit riders are experiencing a serious and rapid decline in service.  The negatives are palpable and documentable; ever-worsening delays are aggravating and angering the millions of New Yorkers who need the subways, buses, and commuter rail systems to move them around. A State Comptroller’s audit found on-time weekday performance for the subway system had declined from 80% in 2013 to 74% in 2014; the MTA’s investor disclosure documents show OTP declined to 70% in 2015, to 67% in 2016, and the MTA website shows OTP through March 2017 at 63%. Increases in equipment failures are real too. The subway mean distance between failure improved dramatically with the capital program reinvestments of the 80s and 90s, from its low point of 7,000 miles in 1981 to a peak of 178,000 miles in 2005, but since 2011 has declined from 172,00 mdbf to 112,000 in 2016, another rapid deterioration.

Explanations for these serious problems include difficulties in loading and unloading passengers as the trains and platforms become more and more crowded, delays due to emergencies like sick passengers and police actions, the aging of the subway car fleet, and capital and maintenance work being conducted on the rights-of-way even as the trains are running.

The overcrowding is palpable and documentable too; ridership increased 58% between 1996 and 2016. Employment in New York City grew by more than 630,000 between the end of the recession in 2009 and the end of 2016, and is continuing to grow. New York City’s economy is successful, but its infrastructure is choking. The MTA announced a 6-point improvement plan in May, including adding EMS and other personnel directly placed at major stations to address emergencies more rapidly, accelerating subway car replacements, especially on the 8th Avenue Line, and increased track maintenance. These improvements sound hopeful but will take time. In part they are just about adding resources to the operations and maintenance budget.

Governor Cuomo nominated Joe Llhota, the former MTA Chair and Giuliani Deputy Mayor, to the Chair and President position on June 21, and the New York State Senate confirmed him in one day. The Governor is also seeking governance changes. Cuomo has asked the legislature to give him more seats on the MTA board to create an outright appointed majority of the seats for the Governor, as if he did not already have effective control. He is also proposing separating the Board Chair from the President to strengthen executive leadership. The former Chair and President, the widely respected Thomas Prendergast, retired several months ago, and the Llhota appointment brings in someone of stature and competence. More than a decade ago,then Governor Pataki and the Legislature had combined the Board Chair and President positions for that same purpose, stronger leadership. While Llhota may be a positive choice, the notion that Governor Cuomo has not been in charge is ridiculous.

In a June 8 blog,” Cuomo Gave MTA Chump Change…”, I discussed how the Governor had allocated less than 5% to the MTA of a $9.9 billion windfall to the State from financial settlements with Wall Street Badguys due to pre-recession wrongdoing. Only $278 million is left unallocated; in addition, $1 billion is authorized for cash to the Javits Convention Center Expansion. I pointed out that the hotel industry and the giant “ New City “  being developed in Hudson Yards offered  ready- made alternatives for financing Javits, and the money might better be spent to help the straphangers.

Extra cash for critical operations, maintenance, and capital work won’t provide miraculous relief, but ought to help. Even getting these funds assumes Cuomo will step up to the plate and the record is pretty bad so far. In the current $29.5 billion capital plan the State has committed $1.3 billion in identified resources, with an I.O.U. written in State law that the State will provide another $7 billion by 2025 or whenever the MTA runs out of current resources, meaning many years before the State has to come up with more money. This year Cuomo even reduced the State’s commitment in replacement funds to the MTA, authorized when the MTA lost revenue when its dedicated payroll tax was cut in 2011, by $67 million.

When Cuomo became Governor in 2011, both the State and the MTA were emerging from the financial crises that had confronted them during the recession. The 2010-14 MTA capital program, originally conceived at $32 billion, had been proposed in 2009 at $28 billion but scaled back to $26 billion that fall, with only two years of identified funding. As a last resort the MTA indicated it could borrow heavily.In July 2011 the MTA, lacking large commitments from outside parties, scaled the capital program back further, to $24 billion, and would borrow $14.8 billion to provide the resources. The State would contribute a meager $770 million. The huge borrowing would assure continued substantial fare hikes as the interest on the debts would be paid.

Fortunately economic growth, improved ridership, and low interest rates allowed the transit system’s finances to stabilize for several years and fare and toll hikes dropped from 7 ½% every two years to 4%. By 2014 the review process had begun for the new 2015-19 capital program, which once again was proposed at $32 billion, the same amount as had originally been contemplated for the 2010-14 program. Transit advocates proposed a new Round II version of Congestion pricing, imposing tolls on the East River bridges and below 60th street in Manhattan, but lowering tolls on other City bridges, as a way to fund the capital program, but Governor Cuomo never supported it. Instead,his appointee to the MTA Capital Program Review Board vetoed the MTA’s $32 billion plan in October 2014. It was 17 months before a plan would finally be adopted. Legislation submitted by my office to divert a tiny fraction of existing revenues from the personal income tax within the region to fund a large portion of the plan drew no response from the Governor, even after Senate Republicans latched onto my proposal by linking funding for roads and bridges within their districts.

The recession was a financial catastrophe for the MTA, and was a factor in funding setbacks. Hurricane Sandy proved a physical catastrophe, causing major setbacks while repairs were made and are continuing, along with diverting much managerial attention.  New York City’s substantial employment growth is a good thing but is straining the mass transit system. On the political front, Governor Cuomo has been a catastrophe for this huge State agency.