A Rough Ride Awaits New MTA Chief
Left photo (cc) Kurt Raschke, Right photo (cc) Ti.mo
The Metropolitan Transportation Authority needs to find at least $15 billion to fund its next capital plan, debt service on previously issued bonds continues to climb exponentially, and pension costs are skyrocketing. More than 8 million people depend on MTA services each day, and state legislators seem to prefer charging the authority with mismanagement and malfeasance to really grappling with its serious fiscal problems. It couldn’t have said all of that in the job posting that Jay Walder recently answered, but a man of his experience no doubt knew what he was getting into.
Walder, Gov. David Paterson's pick for MTA chairman, has a resume tailor-made for the post. He’s a native New Yorker, hailing from the Rockaways, with childhood memories of riding the el. He studied at the Kennedy School of Government at Harvard, where he later taught. Through the 1980s and 1990s, he climbed his way up the ladder at the MTA, from financial analyst to chief financial officer, before heading to London’s transportation agency, where, under former MTA chairman Bob Kiley, he worked on congestion pricing, a large expansion of the bus system, the introduction of a high-tech no-swipe fare-card called the "oystercard" and the agency’s first issuance of Municipal Eurobonds.
Still, leading New York’s largest and most combustible authority, especially at this particular moment in the city's political and economic timelines, offers rare complications.
Following Lee and Dale
Presuming that Walder is confirmed by the state legislature, a process that some recalcitrant elected officials imply may be more like a late night G-train ride than an express trip, he’ll be filling two vacancies. That alone gives some indication of the post’s instability.
Walder’s job combines the role of chairman, previously held by Dale Hemmerdinger, with that of chief executive officer, a position formerly filled by Elliot "Lee" Sander. It was created as part of the MTA bailout legislation passed this spring, which also mandated an end to Hemmerdinger’s tenure. Although the new post comes with a six-year term intended to shield appointees from day-to-day political worries and short-term concerns, the experiences of his predecessors suggests something very different.
Sander’s resignation, which seems to have come reluctantly -- in a departing interview, he called it "my dream job" and expressed "a feeling of disappointment" -- came a day after state lawmakers approved the very publicly debated MTA bailout and just hours after the governor promised new leadership at the top of the agency. Although it’s common for governors to choose top MTA players -- both Hemmerdinger and Sander were appointed by former Gov. Eliot Spitzer -- the two resignations and their replacement came so long after Paterson became governor and so close on the heels of the funding debacle that it's hard not to read them as an indicator of the political perils faced by the authority's top officials. Walder, then, if appointed, might truly serve at the pleasure of the governor.
The problem with such an arrangement, especially at a time when gubernatorial pain is more likely than pleasure, is that it can leave the chairman facing the choice of keeping his job or making the unpopular decisions that are essential to the betterment of the authority. Many of these decisions, like instituting bridge tolls, fare hikes, new issues of bonds, new taxes or other funding mechanisms, have an impact on pocketbooks, polls and Election Day results. All the evidence -- despite public promises to the contrary -- suggests that Paterson or his successor could all but send Walder packing if the going gets tough.
The Fare Hike Four
As if that weren’t trouble enough, the MTA-funding crisis also helped empower a group of state senators dubbed by readers of the urban planning website streetsblog.org as the "Fare Hike Four" and now more widely known as the leaders of a coup that stalled the state capital for weeks this summer and solidified Albany’s role as the poster child for dysfunctional government.
These renegade senators -- Pedro Espada Jr. and Hiram Monserrate, as well as Carl Kruger and Ruben Diaz Sr. -- smelled their power in the East River bridge toll debate, tasted it in overthrowing Malcolm Smith and the Senate leadership, and by all logic, will revel in it at the next critical opportunity. That will likely come on Walder’s watch.
Despite this spring’s bailout, the authority is in rough financial shape. It is short at least $15 billion for its next capital plan, has very recently passed the hat and tapped new resources, and still is paying off the debt incurred during the massive borrowing that took place under former Gov. George Pataki. It will almost certainly need to establish new sources of financing soon.
In the minds of most experts, the biggest challenge facing the new MNTA board chairman is figuring out how to close the budget gap without reigniting a "debt bomb" like the recently exploded one lit by Pataki-era bonds. One possible solution would be for the state to issue bonds that would benefit the MTA, as opposed to the MTA issuing its own. The debt service would have less impact on state’s balance sheets than on the MTA's, but issuing such bonds requires approval by the state government.
The state legislature, including the Fare Hike Four, is responsible for the bond sales, levying taxes and just about every other likely MTA revenue stream. Espada and his colleagues have made it abundantly clear that they believe the MTA’s budget troubles have much more to do with mismanagement and allegedly dodgy books than the economic downturn. They also have made it apparent that creative revenue generators, like the congestion-pricing program that Walder used to help balance the budget in London and East River Bridge tolls, are a non-starter.
Labor Pains
The next MTA chairman will also have a new Transport Workers Union contract to negotiate in the first few months of his term. As of last year, personal service costs, including salaries, overtime, health insurance, pension contributions and fringe benefits consumed two thirds of the MTA's $10.8 billion annual operating budget, according to Comptroller Thomas DiNapoli. More than $861 million went to pension contributions alone in 2008 -- a $552 million increase over 2003 levels.
One of the simplest and most effective ways to lower these numbers is through smart negotiations with the Transport Workers Union. Unfortunately, Walder may have a tough time with that too.
Soon after his appointment, the Daily News’s Pete Donahue wrote, "Bus and subway workers could be in for a bumpy ride if former London transit chief Jay Walder becomes MTA chairman, a London labor leader warned Tuesday." The story went on to paint a picture of an "evasive" character only concerned with the bottom line.
For a chairman of an organization that employs nearly 70,000 mostly unionized people, that kind of publicity could prompt the union, already one of the city's more confrontational, to adopt a hard-line approach.
The Public Interest
Of course, Walder’s greatest challenge may come from the people he has been hired to serve -- the people who will ride his subways, trains and buses. The MTA has an image that only a public relations consultant on retainer could love. Long-disproved rumors about two sets of books and rampant waste circulate widely, fueled by legislators and the press. That these are untrue has no bearing. That they're talked about is everything. If Walder wants to set the MTA straight, he'll need to figure out a way to have people associate the authority with progress, professionalism or something else positive.
Walder recognizes as much. In the news conference following his appointment, he said, "Any long-term solution to funding requires us as the MTA to show people we are using funding as efficiently and effectively as possible." That is another way of saying, we need to win, or at least not lose, the media war.
In his relatively short tenure, Sander tried. He installed managers on each line, publicly cut hundreds of administrative positions and even got in front of the cameras on occasion. Unfortunately, all of that proved insufficient when the MTA ran into fiscal chaos and fare hikes, and service cuts became the meat and potatoes of every story.
Perhaps Walder will have better luck, both financially and practically. His technical savvy won hearts and minds in London -- the "oystercard" grabbed headlines around the world -- and congestion pricing naysayers were neutralized by reams of evidence and analysis. In New York, though, particularly in these politically treacherous and tight-fisted times, the opportunity for such victories may prove elusive.
Graham T. Beck is the managing editor of Transportation Alternatives' StreetBeat and a freelance writer. He lives in Brooklyn.
Will the Bailout Plan Save the MTA?
Photo (cc) ultrahi
New York City straphangers won’t see their fares skyrocket or their service slashed next month. That much seemed certain after Gov. David Paterson Thursday signed a bill to bail out the Metropolitan Transportation Authority. Just about everything else surrounding the MTA's future and the service it provides to millions of New York transit riders, however, remains up in the air.
Critics from various camps challenged almost every aspect of the bailout bill: the way it was negotiated, the fees and taxes it implements, its short and long-term efficacy, and the effect it might have on New Yorkers' travel habits. To further complicate the picture, the MTA's chief executive officer resigned the same day the bailout passed.
The future health of the MTA will depend on, among other things, the economy, the state's next round of elections and the federal government's interest in increasing aid to the authority. The bailout bill, though, will play a major role. So how will it work and what do its supporters and detractors say about it?
Bailout Basics
Through a series of taxes and fees to be applied in the 12 counties served by the MTA, the state Legislature aims to raise about $1.8 billion for the cash-strapped authority. The bulk of the money will come from a 0.34 percent payroll tax ($3.40 per $1,000) applied to all businesses including the self-employed, except for schools, which won a reimbursement clause in negotiations. This payroll tax is estimated to raise $1.53 billion. The rest of the money -- totaling a little more than $270 million -- will come from additional fees on driver's licenses and learner's permits ($2), vehicle registration ($25), yellow-cab trips ($.50) and an additional 5 percent sales tax on car rentals.
Although the bill does not establish how much MTA fares and tolls will increase -- the authority’s board makes that decision -- it has been widely reported that, in the wake of the bailout bill, the single-ride fare will increase to $2.25 from $2, the cost of a 30-day MetroCard will increase $8 from $81 to $89, and other fares, such as bridge and tunnel tolls, Access-A-Ride trips and commuter-rail tickets, will increase about 10 percent. This is appreciably less than the 20 to 30 percent increases called for in the MTA's doomsday plan.
The more modest increases will raise about $500 million per year for the authority and help stave off the service cuts proposed in the doomsday plan. Additional hikes are scheduled for 2011 and 2013.
The bailout bill also mandates a series of reforms intended to bring more accountability and transparency to the MTA. Measures aimed at curbing abuse include an annual forensic audit of the authority by the state Legislature, a clear and public policy on the granting of privileges and benefits to authority employees, such as using livery cars and authority-owned automobiles, as well as a whistle-blower provision that ensures contractors receiving MTA funds provide workers with information on how to report fraud or waste.
The bill seeks to improve transparency and accountability by calling for the regular posting and reporting of revenue and expense targets, updated financial projections and gap-closing initiatives in, as the floor memo insists, "plain English."
The bill also consolidates the positions of MTA chairperson (a job still held by H. Dale Hemmerdinger) and MTA chief executive officer (the post from which Elliot "Lee" Sander resigned), a move seen by some as a harbinger of Sander's abrupt departure.
Everyone’s a Critic
The pride expressed by the legislators who eventually passed the MTA bailout bill seems to have little foundation in fact. Even advocacy organizations that went to the mat during its passage have measured praise.
In their comments on the rescue, most credit the legislators for taking action, but express reservations. Mary Barber, managing director of Living Cities for the Environmental Defense Fund said in a representative statement, "Our political leaders deserve credit for ending this crisis for today. However, we remain concerned that the MTA capital plan is not fully funded and that the continuing downward economic spiral leaves the MTA's financial situation vulnerable. Identifying dedicated, long-term revenue sources in order to maintain the health and affordability of our transit system must remain a high priority for the governor and state legislators."
On the other hand -- and seemingly voicing the more popular point of view -- are the plan’s critics. Suburban representatives, cab-drivers’ groups and advocacy journalists imply the bailout bill violates a traditional tenant of dedicated-tax policy: that the thing being taxed ought to have an immediate and demonstrable relationship to the thing receiving the money from the tax, or at least induce beneficial behaviors related to the thing receiving revenues.
The Senate voted along party lines on the bailout, with all 32 Democratic members giving the bill their blessing. But some dissenting Assembly Democrats -- 15 voted no -- harshly criticized the plan, charging that the payroll tax places too great a burden on areas that receive few services from the MTA. Assemblymember Sandra Galef, an Ossining Democrat, told the Poughkeepsie Journal, "The further out you get from the city, the less connection there is between businesses and transit. There's no connection between transit and a hardware store in Putnam Valley." Republican Sen. Steve Saland of Poughkeepsie concurred, claiming that Dutchess County was a "revenue hostage" of the MTA.
Bhairavi Desai, the executive director of the Taxi Workers Alliance took issue with the bill's $.50 surcharge on every yellow-cab ride, telling the Daily News that it was not fair or feasible to collect. "They are not looking to do the right thing or the fair thing," she said. "They want to do the easy thing."
Most pointedly, Aaron Naparstek, editor-in-chief of the Website Streetsblog, said, "What is most striking about this deal is the way in which it punishes New Yorkers who don't own cars. If you're someone who gets around via mass transit, taxis and rented cars, the state Legislature has just socked you with a bunch of new fees and taxes. If, however, you regularly commute over the East River bridges in a gas guzzling 2008 Cadillac like, say, state Sen. Carl Kruger, you can still do that for next to nothing. When it comes to transportation policy, it's almost as if the New York State Legislature is living in 1956 when gas was a nickel a gallon, rush hour was actually only an hour and climate change meant that you better not forget your umbrella when you left your house in the morning."
Filling the Budget Gap
There are also questions and criticisms concerning how much funding the rescue plan will actually bring in and where it will go.
William Neuman and Nicholas Confessore of the New York Times point out that the amount that will be collected through the bailout plan this year -- about $1.1 billion -- is a far cry from the $1.8 billion that state legislators keep claiming their bill will generate annually.
This is in part a result of vague language (the need for "plain English" comes to mind). In addition, while earlier versions of the legislation retroactively applied the payroll tax to wages earned since Jan. 1, the final bill applies only to wages since March 1. Thus the actual amount raised will be less than originally estimated. Neuman and Confessore also report that the taxi surcharge will not be collected until January 2010, further reducing the amount of money generated in the short-term.
However much the bill actually brings in, some experts believe it will not solve the authority's basic problems. John Petro, an urban policy analyst at the Drum Major Institute wrote that the “plan does not address the root cause of the MTA's budget troubles: an over reliance on debt to finance the transit system's maintenance, repair and expansion. Albany's plan would force the MTA to continue to borrow for these needs, increasing the already crushing debt burden. Without long-term investments in capital needs, the MTA will forever be facing budget shortfalls, deferred maintenance, crumbling stations and stalled projects." He added, "We will be back at square one soon enough. This vicious cycle needs to end."
In the view of some political insiders, the bill's shortcomings are a direct result of how it was negotiated. They fear the horse-trading over the bailout signals a new era in Albany politics, one that could be even more self-serving and craven than previous regimes. These observers attribute part of the problem to the Democrats' two-vote edge in the Senate. The Senate majority can pass a bill only if every Democrat agrees to it or if the Democrats manage to gain some defections from Republican ranks. On the bailout, for weeks the Democrats leadership proved unable to move the party in unison, lengthening the process.
In an excellent piece in the Observer, Jason Horowitz and Jimmy Vielkind quote Gene Russianoff of the Straphangers Campaign as saying, "Things have gotten unhinged. It has been really frustrating for advocates and public-policy people to think that two or three senators can hold up the whole thing."
An advocate with intimate knowledge of the process said on background, "We're not out of the woods at all. It's just not clear that this [bailout] is going to fly, and particularly that this is going to support the capital plan. All they [the state Legislature] has done is push out all of the hard choices until after their next election."
Better than Nothing?
Certainly, the MTA bailout bill isn’t the most popular piece of legislation passed this year. Even those in positions that would seemingly obligate them to support any strategy that keeps fares low and eliminates the threatened service cuts commend the rescue plan carefully.
Former MTA chief Richard Ravitch, who at the behest of Gov. Paterson laid out an alternate funding plan including East River Bridge tolls, "was disappointed that the bill only funds two years of the capital plan, but said the rescue needs to happen," according to the New York Post.
Mayor Michael Bloomberg told reporters in Atlanta, "Look, while it's not perfect and it's not everything that we would want ... something had to be done."
And, indeed, something was done. Just how effective it will be, only time will tell. What’s certain is that the next time the MTA is in a heap of budget trouble, there will be lots of people with lots of divergent views waiting in the wings and wondering whether they will be able to take center-stage, bow and loudly proclaim, "I told you so." With so many voices making such diverse claims, surely someone will have that odd honor.
Graham T. Beck is the managing editor of Transportation Alternatives' StreetBeat and a freelance writer. He lives in Brooklyn.
On the MTA, Leaders Will Take What They Can Get
Gotham Gazette image by Ya-Hsuan Huang
An aura of exasperation hung over Senate Majority Leader Malcolm Smith and Assembly Speaker Sheldon Silver as they left a leaders meeting on Monday evening. The topic was a plan to rescue the financially strapped Metropolitan Transportation Authority, and as they spoke to reporters it quickly became clear that their discussions had not produced an obvious way forward.
"It's not about merit, it's just about what gets us there with the votes that we need to get it passed," Smith told reporters.
His statement confirmed the fears of many transportation advocates and straphangers. The negotiations to address the MTA's finances and the impending fare hikes and service cuts no longer center on the best way to address the problem. Instead they are about how to appease fickle legislators who are taking advantage of the slim Democratic majority in the Senate.
After the leaders departed, Gov. David Paterson came out to briefly address reporters. He was dripping with frustration. "I think the issues could be resolved," said Paterson. "But the issue of voting seems to be the major issue, and I'm somewhat just offended by that at this point, because as professionals we've got to resolve this. Every day that we don't we're losing money."
Paterson arranged the leaders meeting in an attempt to devise a plan that he and both legislative leaders could agree on. Not only did Paterson's attempt at consensus fail, but it also became clear on Tuesday that Smith's effort to force a rescue plan through the Senate this week would not work. Changes made to the bill in committee probably mean the bill cannot be voted on until next week.
The bigger issue could be that a majority of senators cannot seem to reach consensus on any significant rescue plan. Meanwhile, in his desire to get something -- anything -- through the Senate, Smith seems to be trying to push measures without approval from Paterson and Silver —a move that does not sit well with the governor and his aides.
Advocates, who remain ever hopeful, have lowered their expectations as the clock ticks down to doomsday. Early on Monday the MTA had more sobering news about its finances: Its deficit will increase by $621 million even after pending service cuts and fare hikes are implemented in June. "Without assistance from Albany we are back to the only weapon in our arsenal," said an MTA spokesperson. "We are back to service cuts and fare increases."
The Rescue Plan Unravels
Experts have proposed solutions to the MTA's financial problem, but all would require politicians to make some hard decisions.
Last year Paterson announced his support for the Ravitch plan, which was designed to bolster the MTA's finances by instituting a payroll tax in the 12 counties that are served by the MTA; instituting approximately $5 tolls on the East River bridges and smaller ones on the Harlem River crossings; and moderately increasing fares. The idea was to have all interested parties pitching in to support the MTA. When it became clear that a number of politicians would not support $5 tolls , Silver offered up a compromise version of the Ravitch plan that would toll East River bridges at $2, or approximately the amount of a transit ride.
Things quickly fell apart in the Senate, though. A number of Democratic senators refused to support any plan that featured tolls on the East River bridges. Smith cobbled together another plan, which was mocked by critics as being a half measure. It did not include tolls but had a payroll tax and proposed moderate fare increases. Many questioned whether these measures would produce enough money to prevent the dreaded fare hikes and service cuts. Smith countered that the MTA's long term funding problem might not be as dire as the agency has claimed. He insisted the Senate needed more time to explore the MTA's finances and called for more auditing and further regulation of the authority.
Advocates feared that the plan would fracture the idea of shared sacrifice. And it did. As talks continued, suburban Senate Democrats said they would not vote for any plan that included a payroll tax. Then, early last week Smith introduced a new plan that featured a payroll tax, fees on driver's licenses and vehicle registrations, a tax on rental cars, the stipulation that the Senate could audit the MTA and what proved to be a very unpopular $1 per drop-off fee on taxi drivers. Many legislators said the plan was dead on arrival.
Advocates Want Action
So with the MTA's finances deteriorating and with the Senate clearly at an impasse, what can we expect the legislature to do?
"It's the kind of question everyone has been trying to avoid answering," said Neysa Pranger of the Regional Plan Association, "either because we don’t like the outcome or we don’t know the answer."
As the negotiations have gone on it has become increasingly clear that Smith does not have the votes to pass a serious solution that addresses the MTA's finances in the long term or even the significantly weaker plans he has presented. Pranger fears a watered down, short-term fix may be all the Senate can muster.
"They can implement a short-term fix and that gets us back where we started," said Pranger. "The MTA's finances have gone downhill quickly." She said the agency's announcement of its deepening woes should underscore the problem.
Pranger said she thinks legislators, including Republicans, need to make hard choices now. "They might as well just do it now and make unpopular choices far enough away from the election cycle," said Pranger.
It is difficult to know, though, what that plan might be. Currently at least four Democratic senators will not support any plan that includes a payroll tax. More Democratic senators say they won't vote for a plan that contains bridge tolls. There also is growing resistance among legislators to the $1 per drop-off fee on taxi drivers. A brigade of yellow cabs from New York City circled the capitol on Tuesday to protest it. The fee is designed to provide funding to upstate roads and bridges since Republicans have said that they can support an MTA rescue plan only if it includes funding for upstate roads and bridges.
Advocates have been steadily applying pressure on legislators and raising public awareness. They have held funerals for the subway and had transit riders send their legislators mock invoices for the cost of the fare increases they may have to endure. The Facebook page 1,000,000 People Against the NYC MTA Fare Hikes was created, as its name suggests, to organize actual demonstrations that have taken place in Albany and New York City. And then there are those ubiquitous "WTF?" MTA posters.
"This campaign has been going on since November, and that is part of the reason why the pressure is still going," said Pranger, "People are saying, 'This is MTA doomsday and we don't want this.'" Groups involved in these actions go well beyond transit advocacy groups and include the Working Families Party the United Federation of Teachers.
Mayor Michael Bloomberg, after being criticized by the New York Times and others for not heavily lobbying Republican legislators to support an MTA bailout, also got into the act this week. Bloomberg signed a letter with United Federation of Teachers' president Randi Weingarten and Partnership for New York City president Kathryn Wylde asking legislators to move on a bailout plan. Jimmy Vieklind reported in The Politicker that aides to Smith are currently negotiating with representatives of the mayor’s office to have Bloomberg endorse part of Smith's plan. Earlier Bloomberg had criticized the taxi fee and the viability of Smith's plan.
New Focus. No Results
With the budget out of the way, legislative leaders seemed focused on the MTA issue as they returned from Easter vacation last week. And legislators like Sen. Kevin Parker, who came out earlier in the year against any plan that contains bridge tolls and had a no-rush attitude with regard to the MTA now seem to have been motivated by their constituents' outcry.
Smith and Paterson, however, should be especially motivated to seal the deal. They both deeply need a win. Smith wants to demonstrate an ability to pass controversial legislation despite his slim majority, and Paterson needs to look like a leader to bolster his image and combat his sinking poll numbers. But their apparent desperation to look like leaders on the MTA rescue plan has caused friction between the two and perhaps even hampered the process.
On Friday Paterson strongly criticized Smith's MTA rescue bill and seemed to acknowledge it did not have enough support to pass in the Senate. A call between negotiators representing Paterson, Assembly Speaker Sheldon Silver and Smith reportedly fell apart after Smith revealed he had introduced a bill without Paterson's input. Sources in the Senate griped to reporters that Paterson was hampering the process by not lobbying senators on the issue and not coming out in full support of Smith's plan. This prompted Monday's leaders meeting where the leaders apparently failed to reach agreement.
Also on Monday, the Senate, in a vote along party lines, moved the bill out of the Transportation Committee. Republicans slammed the bill. Even Sen. Martin Dilan, the Democratic committee chair, said he thought the $1 fee on taxi drop-offs was too much.
On Tuesday the Finance Committee passed the bill. Republicans attacked it. Still, a vote seemed set this week.
However, thanks to changes made in committee, which would exempt livery and limousine drivers from the taxi fee and make an audit of the MTA mandatory rather optional, it now appears that the bill cannot legally be voted on until next week. And even then it is unclear whether the bill will have anywhere near enough support to pass. There has been talk that the bill will be amended to make it more appealing to legislators, but so far the changes that have been made in committee have not been game changers. On Tuesday a spokesperson for Paterson said that negotiations are continuing.
Is it Already Too Late?
Pranger said that legislators are playing a dangerous game by letting whatever solution they reach come down to the wire. The MTA has set June 1 as the day fare hikes and service cuts start to go into effect. "The MTA really is moving ahead and the closer we get to June 1 the harder it is to undo this," said Pranger. "I've spoken to MTA representatives about how much time they would need to reverse course, and they would need just about as much time as they did to put it into effect, so they need to know by the end of the month."
Aaron Donovan, an MTA spokesman, confirmed some of Pranger’s concerns. "Every day that we wait it becomes more difficult to undo the actions that were approved by the board," said Donovan. Commuters who buy their tickets in advance for the Metro-North and Long Island railroads will begin to see fare increases in early May, he said. NYC Transit officials say that the process of writing and implementing a fare hikes takes about six to eight weeks. Officials have been working for some time to implement the changes, which would mean fare increases of up to 30 percent, and that process would have to start all over again if the legislature comes up with a more modest fare increase. "It’s not as simple as hitting a button," said Donovan.
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