Tri-State Transportation Campaign – Transportation 101
The Metropolitan Transportation Authority (MTA) is downstate New York’s main operator of transit service. It is the parent company for NYC Transit, which runs subways and buses in NYC; Metro-North Railroad, which runs commuter rail lines into the Hudson Valley and part of Connecticut; along with Long Island Rail Road and Long Island Bus.
This decoder is meant to explain the MTA’s finances in a way the public can understand.
About $11 billion to operate the system and about $5 billion to maintain and improve it.
The MTA system is huge, and provides service for one-third of the transit riders in America. The system employs over 67,000 workers and covers an area of over 5,000 square miles. If all the track in the New York City subway network were laid end to end, it would run from NYC to Chicago.
The MTA system is old, in many cases over 100 years old, and it’s expensive to maintain. New subway cars, station rehabilitations, and big projects like the Second Avenue Subway require intense amounts of labor and engineering.
No, like virtually all public transit and most road systems in the country, the MTA system does not make a profit. Fares cover less than half of the cost of running the subways, buses, and commuter railroads.
The MTA does not make a profit by design, for at least two reasons:
- The transit system creates huge benefits for many who do not use it. New York City could not exist in its current form without a healthy mass transit system, which supports the density and urban life that attract global businesses and a skilled workforce. Suburban homeowners and businesses benefit from easy access to the city. Drivers benefit too, because many of the roughly 11 million people who ride MTA services daily would choose to drive and further congest the road network if they did not have a transit option. This is why businesses and drivers help fund the MTA (see below).
- The transit network makes car ownership and all its associated costs a choice, not a necessity. The MTA network provides access for New Yorkers who do not have alternatives, such as students, the elderly, and the disabled. For example, a bus that connects a poor neighborhood with jobs and senior centers elsewhere in the city may lose money for the MTA. But because it brings people to jobs and essential services, the bus route is likely a net benefit to society (and the city economy and budget, too, if it allows many people to stay out of the government support system).
Like road and other public goods, our transit network relies on subsidies, toll revenue, and portions of a variety of taxes to make up the difference. A small portion of the sales tax, petroleum business tax, certain NYC real estate transfer taxes, and a newly enacted payroll tax all go to the MTA. The state and City also provide direct aid but their collective contribution has remained stagnant for years.
MTA OPERATING REVENUE: Where the Money Comes From
(Source: MTA – 2010)
Why do my fares keep going up while my service is cut? Why does the MTA always seem to have a deficit?
The short answer is funding. Elected officials have underfunded the MTA for years, and transit riders are left paying the additional cost.
The long answer is more complicated and requires understanding the agency’s two budgets—the operating and capital budgets.
The operating budget is the day-to-day costs of running the system — worker pay and benefits, fuel, etc. The capital budget pays for maintenance and improvements to the system. This includes the new subway cars and buses, station rehabilitations, and big projects like the Second Avenue Subway. The two are related because the operating budget pays for the service you get, while the capital budget dictates the quality of that service.
Costs in the operating budget, including health care, insurance, and fuel, have increased in recent years, meaning it costs the agency more to provide the same service.
Shortfalls in the capital budget put additional pressure on the operating budget. When the MTA began to seriously rebuild its system in the 1980s, the state, city, and federal government covered large portions of the cost of capital construction. But state and city support has been cut back. For example, the State contributed 19% of the cost of the MTA’s first two 5-year construction programs, but less than 8% of the cost of the 2005-09 program.
When the agency doesn’t have enough funding to pay for construction projects, it borrows money to pay for projects. Payments on this borrowed money are made through the operating budget (and are called “debt service”). The larger the MTA’s outstanding debt, the more of its operating budget goes to debt service, and the less goes to train and bus service.
So, when you pay more for your ride, you are paying for increased costs to run the system, and you are paying off the agency’s debt.
In addition, the taxes that support the MTA fluctuate with the economy — some wildly so. So when the real estate market crashes, for example, so does the MTA’s budget. On the other hand, when the economy is doing well, some of these taxes are high. This is the reason the MTA had a large surplus in 2007 and a deficit in 2008. In 2007, the agency received unusually high real estate transfer tax revenue that masked the underlying budget problem of too-high debt service. When the economy crashed in 2008, revenue from this and other taxes plummeted.
MTA OPERATING EXPENSES: Where the Money Goes
(Source: MTA – 2010)
Because the agency has to rely so heavily on debt, payments on this debt are consuming a growing share of the MTA’s annual operating budget. This means that fare increases are more likely, and the agency has a harder and harder time paying for subways and bus service. By 2030, debt will consume a whopping $3.5 billion a year. In other words, the next generation will be paying for the transit projects that we are building now. Fair? Not really.
While the MTA is certainly not perfect, state and city elected officials are the ones to blame for fare increase and service cuts. That’s because city and state officials control how much the MTA receives in subsidies, and when they don’t adequately fund the system, riders pay more.
Just as importantly, it is elected officials who ultimately control the MTA. Of the 17 voting members of the MTA board:
- The Governor recommends six board members, including the Board Chair,
- New York City’s Mayor recommends another four members,
- The county executives of Nassau, Suffolk, and Westchester Counties recommend one board member each,
- And the county executives of Orange, Putnam, Rockland, and Dutchess Counties recommend one board member each (those four board members cast one collective vote).
Like many large organizations, both public and private, the MTA often fails to spend money as effectively as it can. For example, in 2010 MTA Chairman Jay Walder announced that he had found $60 million in annual savings by instituting tighter overtime controls, and $40 million in savings by renegotiating contracts with vendors.
But the big problems have to do with debt and politics. That $100 million in savings was less than 1% of the MTA’s total budget. In that same year, the state cut aid to the MTA by $143 million and the MTA paid $1.7 billion in debt service. The MTA is regularly audited by the state and city comptrollers and its own inspector general, and now posts nearly all of its financial information online.
The Chairman and CEO of the MTA, Jay Walder, is paid $350,000 a year and a $5,000 housing allowance. While this is certainly a lot of money, it is actually less than he would make in the private sector.
The MTA Board is not paid, though members are allowed to take free rides on MTA subways, commuter trains and buses; and drive for free through MTA bridges and tunnels if they are traveling on official business.
The average MTA employee made $52,000 a year in 2005. Subway motormen and bus drivers made $63,000 a year and subway conductors made $54,000.
The MTA desperately needs additional sources of revenue or else transit fares will skyrocket, service will be slashed, safety will be compromised, and train delays and breakdowns will increase. Remember that our elected officials (in particular our city and state officials) are the only ones with the power to prevent future fare hikes and service cuts.
Below are some things you can do to advocate for more transit funding:
Urge Governor Cuomo and the State Legislature to keep their hands off of dedicated transit funds. In recent years, New York politicians have diverted over $100 million from taxes supposedly dedicated to the MTA to the general fund.
Urge Mayor Bloomberg and the City Council to contribute their fair share. NYC has not increased funding to the MTA since 1995. They must establish funding formulas for transit aid that account for inflation and escalating costs of running the transit system. Using the 1995 rates as the baseline for funding shortchanges the system in 2010.
New York City and State need to create new sources of revenue for transit. Options include:
Traffic pricing. This includes options like congestion pricing or charging drivers to drive into the busiest parts of Manhattan during the busiest times of day or East River Bridge tolls, which would charge drivers when they drive over free East River Bridges (Brooklyn, Manhattan, and Queensboro)
Higher gas taxes or payroll taxes. The gas tax is a prime source of transportation funding in the state, and the payroll tax (.033 for every $100 in wages paid) is another source of revenue.
More money from the federal government. Transit gets shortchanged by the federal government even though better transit aligns with national goals of reducing greenhouse gas emissions and reliance on foreign oil.