Risky Fare Games
There’s a solid policy reason for Gov. Cuomo to want the state-run Metropolitan Transportation Authority to keep subway fares and bridge tolls down. There’s also a craven political reason. Let’s hope the MTA made its good-news announcement last week for the right reason — but don’t be too sure.
Compared to New York state and city government, the quasi-independent transportation authority is a model of fiscal rectitude.
Consider: New York state faces a $1.7 billion budget deficit next year. Gotham has a $2 billion deficit.
But in the 2014 budget it released last week, the MTA projects surpluses almost as far as the eye can see. Two years ago, the MTA was predicting a $141 million budget deficit for the budget that starts in six weeks.
Now, the $13.6 billion budget for next year is $106 million in the black — with no deficit seen until a modest hole opens in 2017.
Thanks to this turnaround, the MTA says it will hike fares by only 4 percent in 2015, rather than 7.5 percent — and do the same thing two years later.
That means fare hikes won’t exceed inflation for the first time in half a decade. The monthly subway pass would cost around $116 — up from $112 — rather than $120.
How’d the MTA do it? The agency will spend $208 million less this year than it expected to just two years ago, and expenses should track inflation this year. If it keeps up with these savings, it can afford to sacrifice $196 million in expected fare revenue in 2015 — and $470 million a year by 2017.
The MTA has done some good things. It’s spending $100 million less than it expected this year on transit vans for the handicapped, down from $468 million to $368 million. That’s by encouraging people in wheelchairs, for example, to take advantage of better bus ramps. In fact, it’s spending $12 million less here than it spent in 2010.
It’s had good luck, too. Debt costs are $80 million below what they were supposed to be this year because of record-low interest rates.
The New York economy is OK. Tax revenues are roughly in line with what the authority expected for next year — but $127 million higher than expected for 2015, the fare-hike year. And the stock market is doing fine, meaning $1.3 billion in annual pension costs have leveled out. Even $1.5 billion in annual health-care costs are growing more slowly.
Still, though, there are huge risks. The MTA expects its unions, chiefly the city-based Transport Workers Union, to take three years’ worth of zero raises, saving $303 million annually. The TWU’s contract has been expired for nearly two years now.
Then, there’s overtime. The MTA was supposed to spend $460 million on overtime this year. Instead, it will spend $594 million.
Some of that is Sandy stuff, but the authority admits that its own overtime-savings goals were "not realistic" for other reasons. It’s way behind on regular signal, track and other maintenance work.
Then, there’s the MTA’s long-term investment needs. Starting in 2015, the MTA will embark on another five-year capital plan worth $20 billion or so, not including the next phase of the Second Avenue subway. The authority plans to put some of its savings — about $370 million a year starting in 2015 — toward that program, including paying for $5.2 billion worth of new debt. But if something doesn’t work out as expected, there’s little room for error now that the MTA has closed off a higher fare-hike option — politically, at least.
So what’s Cuomo’s strategy? The good case: The governor knows that if the MTA’s finances look too good, the unions (or "independent" arbitrators who may ultimately decide contracts) will want that money.
The governor also knows that New York City, too, faces years’ worth of expired contracts. Perhaps it’s a signal to Mayor-elect Bill de Blasio: The MTA has no money for retroactive raises, so don’t do a deal that puts us in a bad position.
Still, though, it’s hard not to notice that the fare-hike stuff takes place in 2015 — magically after Gov. Cuomo’s 2014 re-election. Making the announcement now allows him to run on keeping costs down.
At the same time, pushing the MTA to stash money away for future capital spending gives him a handy pot of money to take from rather than raising fares if something doesn’t go his way — or, maybe, if he wants to eliminate the much-hated payroll tax for the MTA in suburban counties right around re-election time.
Whether the early good news on fare hikes was a good show or a bad one, it was still a show.
This piece originally appeared in New York Post
This piece originally appeared in New York Post