The MTA And the Past
According to an article in Newsday, the current MTA funding crisis is the result of decisions made nine years ago, when the state legislature passed the 2000 to 2004 MTA Capital Plan. “Nine years ago, in collaboration with state officials, the mighty investment company Bear Stearns played a special role in shaping the course on which the region's transit system now finds itself” according to this source. “Not only did this financial titan advise the Metropolitan Transportation Authority on a five-year, $17-billion capital program, but more notably its executives personally sold the plan to state lawmakers - helping generate commissions for the firm while temporarily funding mass transit. From today's perspective, of course, the deal represents fiscal risk and folly. Bear's collapse a year ago signaled other global financial failures to come, and the debts carried by the state-run MTA drive its latest threat of massive fare hikes and sharp service cuts.” That’s true as far as it goes, but a highly incomplete picture. In fact, that capital plan was one of a series of similar decisions and deals that sold out the future that has now arrived. Every decision has been like that, for closer to 25 years than nine. And not just at the MTA.
The year 2000, for example, was also the year of the massive pension enhancement, which its advocates -- the public employee unions and then-Comptroller Carl McCall who sought their support for a run for Governor, claimed would be "free." In fact, counting on a stock market bubble that (in other reports issued by his office) McCall had called “unsustainable,” the MTA and other local governments in New York State had been under-funding the existing pensions for years, and that would have caused problems even without the 2000 pension deal. But when the 2000 pension giveaway passed the state legislature without a single “no” vote, the future collapse of the transit system was assured.
“MTA debt service payments of $609 million in 1996 have spiked to a forecast $1.5 billion in 2009,” according to Newsday. According to MTA budget documents pension costs totaled $464 million in the 2004 budget and will total $949 million in 2009 on the way to over $1 billion in 2012, a figure that I believe to be an under-estimate. The spiraling cost of retiree health insurance is on top of that. But debt service is on the way to $2.3 billion in 2012, according to the MTA budget documents, so New York’s transit services will be re-destroyed primarily by debts rather than early retirement giveways -- unless the transit workers get to retire at age 50 rather than 55, which is what they went on strike for. That deal, which would re-establish the pension burden created by then-Mayor Lindsay, by the way, has already passed the state legislature without a single “no” vote. Instead, it is New York City’s public schools that will be re-destroyed by retirement giveaways, as a result of a deal to allow teachers to retire at 55 instead of 62 that passed the legislature little more than a year ago. That restores Lindsay-era burdens on the city’s children in favor of ex-teachers who used to commute in from the suburbs.
It wasn’t just decisions in 2000 that destroyed the future of New York’s transit system, however. In 1992-93, faced with a fiscal crisis caused by a recession, then- Governor Cuomo and the-Mayor Dinkins virtually cut off state and city capital funding for the MTA. The MTA officials appointed by Cuomo also agreed to allow TA labor services on capital projects to charge the capital plan, so borrowed money could be used to pay for them. Suddenly all the flagmen and work train operators, station personnel giving directions and train operators who worked a little overtime as a result of construction-related delays, all billed capital projects funded by borrowed money. And the 1992 to 1999 MTA Capital Plan was nearly as debt ridden as the 2000 to 2004 plan referenced by Newsday.
The Cuomo and Dinkins administration could perhaps be forgiven for selling out the future in the middle of a fiscal and economic crisis. The Obama Administration is being advised by every economist out there to do the same, and Cuomo and ex-Mayor Koch had been fiscally responsible in the 1980s boom. But during the 1994 to 2000 boom, however, the Pataki Administration, working with legislative leaders Bruno and Silver, continued to run up the debts, and never restored the state funding to the MTA. Neither did Mayor Giuliani, who had to provide some funds due to contractual relations with the MTA, but looked forward to those obligations expiring. This despite all the extra tax revenues rolling in at the time. The MTA borrowed additional $billions during these years, as state and city funding was diverted elsewhere, to tax breaks and deals, and spending increases in categories where spending was already high here proliferated.
It wasn’t just the recipients of those tax breaks and spending increases that prospered at the MTA’s expense. How about riders whining about fares? The $1.50 subway fare in 1995 is the equivalent of $2.08 today, if one adjusts for inflation. If you buy a pay-per-ride Metrocard for $10 or more the cost is $1.70 per ride, and that ride gets you a bus-to-subway transfer that cost an extra fare in 1995. Unlimited ride cards put the per-ride cost even lower. Even if the “doomsday” fare increases are made now, the MTA might still receive less per ride than it did in 1995. And a fare hike now wouldn’t make up for all the revenues the MTA didn’t get for more than a decade, lost revenues balanced by debts that must be repaid. Riders shorted the MTA too, cheered on by Gene Russianoff and the Straphangers, who was happy about the “everybody wins” deal -- figuring someone else would end up the loser in the end. And if the game of chicken led to disaster, you can always retire and move way, right Gene?
What about all those MTA surpluses? The MTA was borrowing $billions and deferring retiree costs every year, and the politicians considered it a “surplus” when the MTA didn’t borrow as much as expected. That’s is the reality behind two sets of books. Isn’t the borrowing for “capital expenditures?” Most of it is for ongoing normal replacement, not one-time-only investments. If ongoing normal replacement stops, the system starts to fall apart. That is what we are facing.
Also during the Pataki/Giuliani era, the Pataki administration decided that suburban MTA tax revenues would go to suburban roads in places like Rockland County, not the MTA. Later, more of these "dedicated" taxes paid by people downstate were paid to transit agencies in upstate New York. Nassau County, facing a budget crisis due to pre-Tom Suozzi mismanagement, stopped paying for Long Island Bus. The legislature made the MTA swallow that too. All during this period, politicians realized that if they yelled at the MTA money would suddenly appear, as if it had plenty. People in Williamsburg complained about subway diversions during December. The MTA cancelled its planned work, and paid the contractor another $1 million or two. The money was borrowed. Nobody cared. In fact, as long as the money was borrowed discipline lapsed as far as the cost of capital projects in general, which is fine with the rapacious contractors. (I was working in capital budget at the MTA at the time). Borrowed money is free, grab it while you can.
Roads and bridges fared no better. It should be said that a whole bunch of tolls were eliminated in the past 20 years. Meanwhile, money has been borrowed to pay for road and bridge maintenance, to the point where all those gas tax revenues and much of the toll revenue is going to debts, leaving New York unable to maintain its roads and bridges, either.
Mayor Bloomberg arrived to a budget crisis, but when the tax money later flowed during the housing in he didn’t restore any funding for the MTA either. He didn’t want to offend anyone by caring about the future until after his re-election in 2005, only subsequently even discussing congestion pricing. The housing and real estate bubble disguised the MTA's problems up until a few years ago, due to soaring real estate transfer tax revenues. That was a one-time only windfall, which the MTA should have invested in the long run. But every time real estate revenues came in higher than expected, politicians got their name in the newspaper accusing the agency of lying. Now when those revenues are collapsing to more realistic levels, the MTA is being accused of inflating them, which is closer to the truth. Little of that windfall was saved. But I don’t want to hear any complaints from the state legislature, which if anything was upset that more money wasn’t handed out to those few that matter back then, making us even worse off today.
The 2005 to 2009 capital plan was just as debt-ridden as the one before. The only difference was a share of it was counted as "state debt" not "MTA Debt" because it was paid for by an indefinite 1/8 cent increase in the sales tax in the MTA region. We’ll be paying that extra sales tax for the MTA forever, but it isn’t available for future capital plans. It will all go to pay for past debts. According to Newsday, “Lee Sander, the MTA's executive director, said: ‘In 2000, Albany put our entire capital program on a credit card.’" What he doesn’t understand is that while the 2000-04 capital plan was put on the MTA’s credit card, the 2005 to 2009 plan was put in part on the MTA’s credit card and in part on an off-balance sheet credit card. Was that better? Well, that is what the Ravitch Plan would repeat.
Through much of this period the NYC schools were underfunded, at least the classroom and administrative part, with high spending in only one category -- the retirees, and that was before the 2008 pension enhancement. And funding for services for the poor was slashed during this period as well. And New York’s state and local tax burden was among the highest in the country. And yet everyone celebrated, because the saints, heroes and geniuses in Albany were handing out little gifts here and there. (The big gifts tended to be handed over quietly).
So when a state legislator plays the hero by opposing any and all plans that would impose any sacrifices on anyone who matters, just remember that (because they serve forever) it is that state legislature that happily wrecked our future, no even caring enough to think about it. The MTA Board went along because being willing to go along is what gets you on the MTA Board. I would have loudly objected to every decision above, gone public if needed, and resigned in protest when the deals went through. (In fact I did resign from a job at the MTA to run against the state legislature in 2004, because I just couldn’t stand it anymore). Now the money is gone. I did what I could to stop it. Anyone else?
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