The Metropolitan Transportation Authority's recent efforts to improve service and upgrade its aging infrastructure comes with a steep price tag for the agency, whose own chairman repeatedly has described the MTA's financial situation as "dire."
From a newly proposed $51.5 billion five-year capital plan to an annual $16.8 billion operating budget to alarmingly high rates of overtime and debt, the MTA’s recent proposed spending spree has raised concerns among transportation and financial experts, who are dubious of the agency’s plans to pay its bills.
"I think they're overly optimistic. They're painting a very rosy picture of their financial sources," said Larry Penner, a transportation historian, writer and advocate who previously worked for the Federal Transit Administration for 31 years. “Their financial plan is pretty wimpy, to be frank. It’s based on a lot of assumptions. And if the economy goes downhill, you’re not going to get the same kind of revenues you anticipated.”
While expressing confidence in the funding strategy behind the agency’s recently proposed Capital Program, MTA chairman Patrick Foye has acknowledged that the agency still faces major challenges in keeping trains and buses running every day.
“From an operating point of view, we’re in a real dire financial situation and have real operating budget challenges,” Foye said last month. “Without new funding sources for operations or cost cuts, we will continue to face significant financial constraints, with forecasted deficits in future years.”
Andrew Rein, president of the Citizens Budget Commission, agreed that the MTA's financial plan counts on a lot going right, and very little going wrong. But, Rein said, the MTA could help its own fortunes, including by looking for more productivity from workers and getting its most important projects done first.
“I think they know their challenges. They’re being ambitious. But the proof will be in the pudding,” said Rein, whose nonprofit think tank commission has been critical of the MTA’s financial outlook. “I think they’re making serious efforts. But at the end of the day, they need to deliver. Part of that delivery, quite frankly, will be helped by building trust with people and being more transparent with their priorities.”
Here is a look at some of the MTA’s financial liabilities, and how it plans to make good on them.
Expenditure: Capital Program
Price tag: $51.5 billion
What the MTA gets for the money: The five-year Capital Program approved by the MTA board Sept. 25 will fund major infrastructure investments through 2024 at various agencies, including the LIRR. It includes funding for 160 new LIRR trains, the replacement of about a third of all track switches, and for new signals on the LIRR’s Montauk and Port Jefferson lines. The program also will fund efforts to make several more subway and LIRR stations handicapped accessible, advance the railroad’s effort to build a Third Track between Floral Park and Hicksville, and complete the East Side Access link to Grand Central Terminal. The plan is now before the state's four-member Capital Program Review Board for final approval.
How the MTA plans to pay for it: The MTA expects new revenue sources established in the 2019 state budget will be enough to back bonds covering about half the capital program, or about $25 billion. The biggest chunk of that — about $15 billion — would come from new congestion pricing tolls in Manhattan. Another $10.5 billion would come from the federal government. And the MTA is counting on New York State and New York City to evenly split $6 billion.
Potential problems: The MTA’s capital budget makes a lot of assumptions, including that the federal government, which has not been overly friendly to transit projects in the Northeast, will come through with nearly $3 billion in aid for the next phase of the Second Avenue Subway project; that congestion pricing tolls — which have not yet been set — will generate the $1 billion in annual revenue the MTA needs; and that the volatile tax receipts the MTA counts on will steadily grow. In addition, New York City Mayor Bill de Blasio has not yet fully committed to the city kicking in another $3 billion, and has suggested he would only do so if the MTA prioritized projects in the city. The plan also would add to the MTA's high level of debt, which the State Comptroller recently predicted would reach nearly $42 billion by 2022 even without the new Capital Program.
Expenditure: Operating budget
Price tag: About $16.8 billion in 2020
What the MTA gets for the money: Different from its Capital Program, which funds long-term infrastructure needs, the MTA’s operating budget covers the cost of running trains and buses throughout the region on a day-to-day basis. More than 60% of the agency’s operating costs go toward labor expenses, including payroll, health benefits and pensions. About 17% of the operating budget goes toward paying off debt. Other costs include fuel, insurance, materials and paratransit services for the disabled.
How the MTA plans to pay for it: About half the MTA’s operating dollars come from fares and tolls. Dedicated taxes account for the next-biggest chunk of revenue — about 37%. Other funding agreements, including from state and local governments, make up the rest. But the MTA has acknowledged that’s not nearly enough to address growing costs, and the State Comptroller’s office predicts the agency could face growing annual deficits that will reach $1.9 billion by 2023. The “MTA Transformation Plan” adopted in July aims to cut up to $530 million in annual costs, and reduce future deficits. The MTA also plans to continue raising fares and tolls every other year, including with another 4% hike in 2021. It also aims to crack down on fare evasion, which it said costs the agency about $300 million a year.
Potential problems: Critics have said the MTA’s planned savings from several cost-cutting efforts are highly optimistic. They assume that unions will settle for 2% annual raises in their next contracts — less than in recent agreements. Union negotiations are further complicated by the MTA’s plan to eliminate as many as 2,700 jobs by consolidating departments as part of the Transformation Plan. Labor leaders also have criticized the MTA’s plan to create several upper-management positions, which they said will contribute to the MTA’s bureaucracy. There's also some concern that the MTA's added borrowing in the Capital Program will put further pressure on the agency to dedicate more operating funds to paying off debt. The State Comptroller predicts that, by 2023, 20% of the MTA's revenue will go toward debt service.
Price tag: Projected to cost $838 million in 2020
What the MTA gets for the money: MTA leaders have said they believe the vast majority of the agency’s overtime is legitimate, including planned overtime that is built into the budget for projects, and unscheduled overtime that is necessary to respond to unexpected service disruptions, including those caused by weather emergencies. Several major infrastructure projects underway throughout the MTA, including the LIRR’s East Side Access and Third Track efforts, and service improvement initiatives, like the Subway Action Plan and LIRR Forward program, also have contributed to rising overtime costs.
How the MTA plans to pay for it: Although it makes up only around 5% of annual operating expenses, the MTA has prioritized reining in overtime costs because of concerns of fraud and abuse among some workers. The agency is looking to use biometric time clocks to ensure employees are working when they’re supposed to be. An overtime consultant made several other recommendations, including that the agency improve training on overtime procedures; appoint a specific office to monitor overtime; and institute minimum requirements for all MTA agencies’ overtime policies, such as requiring a supervisor’s approval before most overtime assignments.
Potential problems: Despite its efforts, there’s little indication of the MTA’s rampant overtime spending slowing down. In August alone, the MTA spent $104 million on overtime — about $13 million over budget. Through the first eight months of 2019, MTA overtime costs are 10.2% over budget — much of it driven by the Subway Action Plan. That initiative, and others, continue to add to what unions said is an unprecedented workload — as is a hiring freeze put into place last year.