The MTA took my baby away
December 21, 2009 10:15 AM Subscribe
Why does the New York City's Metro Transit Authority keep losing money?
After seeing fares rise significantly in my tenure as a New Yorker, I have read over and over again that the MTA is going to have to put service and lines on the chopping block in order to overcome budget shortfalls, but I have yet to see an article that thoroughly explores what is causing these budget shortfalls. Can anyone tell me why this continues to happen, especially in light of the fact that they had a budget surplus in the winter of 2005-2006?
After seeing fares rise significantly in my tenure as a New Yorker, I have read over and over again that the MTA is going to have to put service and lines on the chopping block in order to overcome budget shortfalls, but I have yet to see an article that thoroughly explores what is causing these budget shortfalls. Can anyone tell me why this continues to happen, especially in light of the fact that they had a budget surplus in the winter of 2005-2006?
Real estate transaction taxes, which represent an important share of M.T.A. revenue, provided the authority with more than $1.4 billion in 2006 and nearly $1.6 billion in 2007. This year, the authority is on track to collect only $995 million in such taxes — about $50 million less than had been projected in July.
And the situation is expected to get even worse. The authority now expects to collect $895 million in real estate taxes next year, and $877 million in 2010.
from 2008
Also from 2008, showing the MTA's growing debt-service expenses.
Basically, aging infrastructure > need for repairs > need to raise capital > reliance on debt to finance repairs, rather than government money > increasing proportion of later funds earmarked for interest payback rather than still-needed repairs.
posted by ofthestrait at 10:28 AM on December 21, 2009
And the situation is expected to get even worse. The authority now expects to collect $895 million in real estate taxes next year, and $877 million in 2010.
from 2008
Also from 2008, showing the MTA's growing debt-service expenses.
Basically, aging infrastructure > need for repairs > need to raise capital > reliance on debt to finance repairs, rather than government money > increasing proportion of later funds earmarked for interest payback rather than still-needed repairs.
posted by ofthestrait at 10:28 AM on December 21, 2009
Pension fraud. People close to retirement work tons of overtime and get inflated pension. They also go to questionable doctors to get disability.
posted by Frank Grimes at 10:30 AM on December 21, 2009
posted by Frank Grimes at 10:30 AM on December 21, 2009
Remember that fares are not expected to completely cover costs. Transit authorities are subsidized by a number of factors. In many coastal cities the same group that gathers revenue from port operations, pools that money with other sources to fund public transit projects.
posted by nomisxid at 10:44 AM on December 21, 2009
posted by nomisxid at 10:44 AM on December 21, 2009
StreetsBlog has a lot of text on all of this.
The MTA is a quasi-public agency. Fares only cover a fraction of their budget - a lot comes from the city, the state, and the Federal Government in the form of various subsidies.
Every time the MTA gets close to having (or has) a surplus, one or more of these agencies cuts back their budget.
The fiscal crises of earlier this year? Supposedly patched by a new state payroll tax covering the 12 counties serviced by the MTA. Until 2 weeks ago, when:
* That tax came in at $200M under projections
* The state (in it's own crises) cut their portion of the subsidy by $143M
* The MTA lost an arbitration decision resulting in an 11% pay hike for TWU members.
Hence, the latest crises. The current operating budget is now instantly $400M in the red.
Mismanagement is a problem, as it is with any large organization that is subject to political forces & various meddling by members of government. If you look at the books, labor is by far their biggest expense. Note that the TWU is a fairly powerful union in a state where union power determines whether or not you get elected.
But city/state officials have screwed the MTA at every turn. In the 1990s, the Pataki administration effectively stopped funding the MTA capital plan, forcing the MTA to take out billions in loans to continue to fund upkeep and other capital expenditures. Those loan payments are now blowing a big hole in the MTA budget. The operating budget may be $400M in the red, the capital budget is $10 BILLION short.
Best comment made by one of the posters on Streetsblog from last week effectively sums it up:
The whole point of the MTA since it was created seems to insulate elected officials from responsibility of actually managing transportation. Instead they can take pot shots from the sidelines like Olbermann and look like they are on the right side of an issue while doing nothing to actually solve the issue.
posted by swngnmonk at 11:06 AM on December 21, 2009 [1 favorite]
The MTA is a quasi-public agency. Fares only cover a fraction of their budget - a lot comes from the city, the state, and the Federal Government in the form of various subsidies.
Every time the MTA gets close to having (or has) a surplus, one or more of these agencies cuts back their budget.
The fiscal crises of earlier this year? Supposedly patched by a new state payroll tax covering the 12 counties serviced by the MTA. Until 2 weeks ago, when:
* That tax came in at $200M under projections
* The state (in it's own crises) cut their portion of the subsidy by $143M
* The MTA lost an arbitration decision resulting in an 11% pay hike for TWU members.
Hence, the latest crises. The current operating budget is now instantly $400M in the red.
Mismanagement is a problem, as it is with any large organization that is subject to political forces & various meddling by members of government. If you look at the books, labor is by far their biggest expense. Note that the TWU is a fairly powerful union in a state where union power determines whether or not you get elected.
But city/state officials have screwed the MTA at every turn. In the 1990s, the Pataki administration effectively stopped funding the MTA capital plan, forcing the MTA to take out billions in loans to continue to fund upkeep and other capital expenditures. Those loan payments are now blowing a big hole in the MTA budget. The operating budget may be $400M in the red, the capital budget is $10 BILLION short.
Best comment made by one of the posters on Streetsblog from last week effectively sums it up:
The whole point of the MTA since it was created seems to insulate elected officials from responsibility of actually managing transportation. Instead they can take pot shots from the sidelines like Olbermann and look like they are on the right side of an issue while doing nothing to actually solve the issue.
posted by swngnmonk at 11:06 AM on December 21, 2009 [1 favorite]
Human Transit has a great post exactly on this subject.
posted by parudox at 11:14 AM on December 21, 2009
posted by parudox at 11:14 AM on December 21, 2009
Is there a citation for the pension fraud claim?
posted by Pants! at 11:21 AM on December 21, 2009 [1 favorite]
posted by Pants! at 11:21 AM on December 21, 2009 [1 favorite]
Public services are told what services they must provide, and what their budget is. Usually these do not match up. Unlike a free-market solution, they do not have the ability to cut services, raise prices, or outsource at will.
posted by blue_beetle at 11:31 AM on December 21, 2009
posted by blue_beetle at 11:31 AM on December 21, 2009
Frank Grimes: Pension fraud. People close to retirement work tons of overtime and get inflated pension. They also go to questionable doctors to get disability.
I call total "blame everything on the workers" bullshit on this. Back it up.
posted by mkultra at 11:34 AM on December 21, 2009
I call total "blame everything on the workers" bullshit on this. Back it up.
posted by mkultra at 11:34 AM on December 21, 2009
Re: Pension issues -
Pension Fraud is an improper term here. A better explanation would be extremely generous pension terms in the last few labor contracts (e.g. 20/50 retirement provisions, defined benefit pensions, benefits based on last year of service which encourages heavy overtime). That, and work rules combined with lax management that create serious inefficiencies in the system.
Blaming the unions is an easy out, but then again so is blaming management. The entire system, as designed, results in a completely inefficient system where everyone acts in their own self interest, and the people who get screwed are the taxpayers and riders.
posted by swngnmonk at 11:39 AM on December 21, 2009
Pension Fraud is an improper term here. A better explanation would be extremely generous pension terms in the last few labor contracts (e.g. 20/50 retirement provisions, defined benefit pensions, benefits based on last year of service which encourages heavy overtime). That, and work rules combined with lax management that create serious inefficiencies in the system.
Blaming the unions is an easy out, but then again so is blaming management. The entire system, as designed, results in a completely inefficient system where everyone acts in their own self interest, and the people who get screwed are the taxpayers and riders.
posted by swngnmonk at 11:39 AM on December 21, 2009
New York Times: A Disability Epidemic Among a Railroad’s Retirees
posted by BobbyVan at 12:33 PM on December 21, 2009 [1 favorite]
posted by BobbyVan at 12:33 PM on December 21, 2009 [1 favorite]
Why does the New York City's Metro Transit Authority keep losing money?
I've never been wholly convinced they are. Just 5 years ago they were caught lying about a similar budget problem. Of course, now everyone pretends it never happened.
posted by overhauser at 12:43 PM on December 21, 2009 [1 favorite]
I've never been wholly convinced they are. Just 5 years ago they were caught lying about a similar budget problem. Of course, now everyone pretends it never happened.
posted by overhauser at 12:43 PM on December 21, 2009 [1 favorite]
Personally, I think a chunk of it is due to the bazillion freakin' morons who try to farejump by sneaking onto the buses through the back door.
But that's a bit of a personal peeve and perhaps I may be inflating its importance. However, I'd be curious to know just how much of the financial loss could be due to rider scofflaws like that.
posted by EmpressCallipygos at 12:44 PM on December 21, 2009
But that's a bit of a personal peeve and perhaps I may be inflating its importance. However, I'd be curious to know just how much of the financial loss could be due to rider scofflaws like that.
posted by EmpressCallipygos at 12:44 PM on December 21, 2009
"Total revenue from fares was $3,029 [million] in 2008.... Fare evasion (turnstile/gate evasion) was estimated to be 0.32% in 2008, 0.32% in 2007, and 0.33% in 2006. This is an improvement from 1996, when fare evasion was estimated to be 1.45% and from the 1991 high of 5.91%." -NYCTA FY2008 report (PDF).
Using that estimate, NYC subway and bus fare evasion amounted to something like $100 million total. Those are really low fare evasion rates (assuming they are accurate), and it's unlikely that stricter enforcement would increase net revenue. So this is unlikely to be a serious issue.
posted by parudox at 1:16 PM on December 21, 2009
Using that estimate, NYC subway and bus fare evasion amounted to something like $100 million total. Those are really low fare evasion rates (assuming they are accurate), and it's unlikely that stricter enforcement would increase net revenue. So this is unlikely to be a serious issue.
posted by parudox at 1:16 PM on December 21, 2009
Is there any government-run business that doesn't lose money?
posted by Chocolate Pickle at 2:16 PM on December 21, 2009
posted by Chocolate Pickle at 2:16 PM on December 21, 2009
snark
Yeah those firemen need to start pulling their own weight.
/snark
OP: Make sure you differentiate between "losing money" and having budget shortfalls. Few public transit systems are able to sustain themselves on fares alone.
posted by ropeladder at 4:08 PM on December 21, 2009
Yeah those firemen need to start pulling their own weight.
/snark
OP: Make sure you differentiate between "losing money" and having budget shortfalls. Few public transit systems are able to sustain themselves on fares alone.
posted by ropeladder at 4:08 PM on December 21, 2009
Overhauser raises a very good point. The MTA is an authority, its officials answer only to the governor, and its books are notoriously opaque. They've basically said, oh snap, we found some money over here! (For more info on authorities, read "The Power Broker.")
Some (myself included) argue that this is merely the latest in a long-practiced game of chicken between the MTA and the state. The MTA dangles a doomsday scenario, and the state forks over just enough money to keep the shit from hitting the fan.
posted by computech_apolloniajames at 5:58 PM on December 21, 2009
Some (myself included) argue that this is merely the latest in a long-practiced game of chicken between the MTA and the state. The MTA dangles a doomsday scenario, and the state forks over just enough money to keep the shit from hitting the fan.
posted by computech_apolloniajames at 5:58 PM on December 21, 2009
Is there any government-run business that doesn't lose money?
Who said the MTA's mandate is to make money? The MTA's mandate is to provide public transportation to the NYC metro area on an approximately 24x7 basis at a reasonable cost.
If the MTA was supposed to make money, it wouldn't receive government subsidies, and the fares would be twice as much, if not more.
posted by swngnmonk at 9:37 PM on December 21, 2009
Who said the MTA's mandate is to make money? The MTA's mandate is to provide public transportation to the NYC metro area on an approximately 24x7 basis at a reasonable cost.
If the MTA was supposed to make money, it wouldn't receive government subsidies, and the fares would be twice as much, if not more.
posted by swngnmonk at 9:37 PM on December 21, 2009
I've never been wholly convinced they are. Just 5 years ago they were caught lying about a similar budget problem. Of course, now everyone pretends it never happened.
Before that meme spreads any further - Alan Hevesi's claims were later discredited, and he resigned his position in a bid to avoid prison after pleading guilty to fraud and corruption while in office.
posted by swngnmonk at 9:40 PM on December 21, 2009
Before that meme spreads any further - Alan Hevesi's claims were later discredited, and he resigned his position in a bid to avoid prison after pleading guilty to fraud and corruption while in office.
posted by swngnmonk at 9:40 PM on December 21, 2009
This thread is closed to new comments.
At base, I think it's a combination of 1) high demand, 2) aging infrastructure, and 3) high labor costs. Possibly also CHUD-related expenditures.
posted by Admiral Haddock at 10:21 AM on December 21, 2009 [2 favorites]