Remembering the MTA crisis

MTA Nears ‘Doomsday;’ Still No Albany Action
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GlobeSt.com | April 30, 2009

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By Cody Lyon
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Sander
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NEW YORK CITY-If Albany fails to reach a workable solution to close the Metropolitan Transportation Authority's budget gap over the next few days, the daily commutes for eight million New Yorkers will become more expensive, and the time it takes to get from point A to B, will increase markedly. In addition to decreased rail service, several bus routes will disappear on weekends and evenings while others disappear entirely. In fact, if a new funding mechanism does not see consensus at the state capital, the city that never sleeps may eventually see a complete shutdown of the transit system during late evening hours, under a "beyond doomsday" scenario MTA outlined on Wednesday after revealing that its deficit is even wider than originally forecast.

Fallout from what the MTA calls its "doomsday" plan has begun to spur outrage among city residents. On Tuesday afternoon, transit advocates came together with concerned citizens in Manhattan's Union Square, raising their voices against the proposed cuts. One speaker, 76-year-old resident Carl Van Putten of Hunts Point, shouted "where I live, we're not talking about inconvenience, we're talking about survival." Speakers at the event, largely organized on social networking site Facebook, sought to persuade attendees that New York City's economic backbone is its transit system and without it, the entire city suffers unimaginable trauma.

"I think it's a big myth that's been around for around 50 years that New York is somehow not a mass transit town," Wiley Norvell, communications director for the group Transportation Alternatives, told GlobeSt.com as trains rumbled underneath during another rush hour at the Union Square subway hub.

According to the MTA, a plethora of service cuts will be phased in over the next few weeks and months. The cuts began Thursday, as the traditional seasonal Long Island Rail Road service to Belmont Park was eliminated. But perhaps the true reality of the crisis will begin to settle in on May 31--when fare hikes of up to 29% are set to start on the subways and buses, with LIRR and Metro-North following suit the next day.

Then, June 28, train service cuts begin on a set of subway lines that reads like an elementary school chalkboard. The A, D, E F G N, Q and R lines will all see significant service reductions that day. Meanwhile, a list over two pages long details bus routes that will be either sharply reduced or eliminated entirely cutting off entire neighborhoods from the transit network.

"The people who will lose out the most on these cuts are people from Brooklyn, Queens and the Bronx who when they lose their neighborhood bus lines lose their public transit altogether," Norvell told GlobeSt.com.

Blame has largely centered on members of the state Senate who have made their opposition to bridge tolls widely known. Norvell makes no qualms about it, saying it was the Senate that was essentially blocking the proposed plan constructed by former MTA chairman Richard Ravitch's commission. Speaking to what he called the shared pain contained in the Ravitch proposal, Norvell says the plan is the only way the state can raise $2 billion in a politically expedient way.

Introduced last December, the Ravitch plan would have instituted a payroll tax in the 12 counties served by the MTA, implemented a $5 toll on East River and Harlem River bridges and increased fares on the subways moderately. The plan called for a transfer ownership of the East and Harlem River bridges from the city to the MTA, a process that Ravitch described in 2008 as "very complicated."

Despite complications associated with the transfers, Gov. David Paterson strongly supported the plan, as did regional leaders including Assembly Speaker Sheldon Silver. "The speaker was supportive and is strongly supportive of the underlying concept behind the Ravitch Plan which is that all of those who benefit from the public transit system should share in its cost," a spokesman for Silver tells GlobeSt.com.

The spokesman stresses that the people who benefit from the MTA aren't just its actual users, but also businesses and motorists who benefit indirectly, as with drivers who enjoy less congested roadways. "The speaker often talks about the last transit strike, when it took up to three hours to travel from Brooklyn into Manhattan," he says.

MTA leadership, including executive director Elliot Sander, endorsed the plan, saying it was fair and offered both a lifeline for continued operation, but also a means to continue progressing capital improvements and opening windows to future infrastructural improvement and expansion. But opposition to the bridge tolls stood in the way leading Silver to introduce a compromise plan, reducing the bridge-crossing fee to $2 from $5.

However, some Ravitch plan opponents says it was not opposition to bridge tolls per se, but instead what they call yet another fiscally irresponsible mechanism for raising much needed revenue. "Senate Majority Leader Malcom Smith's opposition to bridge tolls is not politically motivated," a Smith spokesman tells GlobeSt.com. "If the MTA assumes ownership of the bridges to collect tolls, they actually assume ownership of four of the oldest suspension bridges in the country. Over the course or the next few years, it's very likely, to almost certain, those bridges will incur significant costs for maintenance, upkeep and general deterioration. He adds that those costs would be passed on to straphangers.

Nonetheless, the severity of the crisis required the Senate to introduce its own plan, which did away with bridge tolls. The most recent Senate version being touted by Smith would include a tax on rental cars, fees on drivers' licenses and a $1 per drop-off fee on taxi drivers--with the exception of livery cabs.

Smith's spokesman says that contrary to critics, including state comptroller Thomas DiNapoli, the numbers in the Senate plan unequivocally add up. However, he adds that Sen. Smith is open to discussing improvements on the Senate legislation.

"We understand that we have to come together to clean up this mess we inherited, and the senator is confident that over the course of the next week, we'll be able to do just that," Smith's spokesman tells GlobeSt.com, adding that "the MTA has displayed years of gross mismanagement and fiscal irresponsibility."

Silver's office says there are a number of ideas on the table, and as of Thursday, conversations continue. "If there's a plan in the Senate that has the 32 votes to pass, it's something the speaker is going to look at," says the spokesman for Silver.

The most vocal opponents to the bridge toll aspect proposed in the Ravitch plan have been state Senators Karl Krueger of Brooklyn's district 27, Rueben Diaz of the Bronx's district 32 and Pedro Espada from the Bronx's district 33. On March 26, Espada insisted to GlobeSt.com that it was the need for increased financial transparency and accountability that the MTA needed to show the State Senate. Saying his district hadn't seen real capital improvements in its subway lines, Espada said the MTA needed to present an actual capital plan to the legislature before the Senate would approve any revenue streams.

However, alluding to automobile commuters, Espada said the MTA rescue must not have a disproportionate impact on any single group of constituents in his district, as well as throughout the city and Westchester, Nassau and Suffolk Counties. As GlobeSt.com reported on April 21, of the 77,284 residents of Espada's district who commute daily, 54,348 take public transit while only 22,936 drive an automobile.

Toll controversies aside, the MTA's doomsday budget was in great part related to the effects of what has turned into a severe economic recession, more specifically the transit agency's dependence on a volatile real estate market's revenue and taxes. "Month to month revenue the MTA takes in from real estate taxes and other sources of revenue fluctuate quite a bit," an MTA spokesman tells GlobeSt.com.

He adds "those taxes are sensitive to the health of the regional economy, the worldwide and global economy really." The spokesman tells GlobeSt.com that the MTA had forecast some reduction from real estate taxes, but the magnitude in the drop "has been beyond what we had forecast."

According to data provided by the MTA, around 8.75% of the agency's budget needs are met by real estate taxes. When broken down, a complex myriad of collection and distribution methods emerge. The tax formula is composed of two major components: the urban tax and the mortgage recording tax.

Urban taxes consist of two taxes applied to certain commercial real property transactions and commercial mortgage recordings within New York City. Tax receipts are available only for transit purposes in New York City with 90% of the receipts earmarked for New York City Transit general operations and 6% used for the partial reimbursement of NYCT "para-transit cost." The remaining 4% earmarked as subsidy for the New York City private buses; the city is currently utilizing these funds to reimburse MTA Bus expenses.

MRTs consist of two separate taxes on mortgages collected in the 12-county region served by the MTA. The first, MRT-1, is imposed on the borrower for recorded mortgages of real property, subject to certain exclusions, at the rate of 0.3% of the debt secured, raised from 0.25% in June 2005. Money collected from the MRT-1 must be applied, first, to meet MTA headquarters operating expenses and, second, to make deposits into the NYCT Account--55% of the remaining amount--and the Commuter Railroad account--45% of the remaining amount.

MRT-2 is imposed on the institutional lender of certain mortgages secured by real estate structures containing one to six dwelling units in the MTA's service area at a rate of 0.25%. MRT-2 gets applied first by the MTA, transferring an amount in excess of $5 million each year to Dutchess, Orange and Rockland Counties based on a formula found on page II-29 in the MTA's Preliminary budget. In 2007, this transfer was $32.9 million, says MTA's spokesman. Second, MRT-2 money is used to pay MTA operating and capital costs, including debt service and debt service reserve requirements if any exist.