How will new MTA Chairman Tom Prendergast do?

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Will the new Metropolitan Transportation Authority (MTA) Chairman Tom Prendergast follow in the footsteps of predecessors Joe Lhota, Jay Walder, Peter Kalikow, H. Dale Hemmerdinger and Elliot Sanders. Will he be more successful in dealing with the challenges ahead?  Time will tell. Several years ago the original proposed $29 billion Five Year Capital Plan was cut to $24 billion, but still ended up with a several billion shortfall. Prendergast has an excellent background having previously managed many key MTA operating agencies.  He served as President of Long Island Rail Road for three years and New York City Transit for five years.  He also has an excellent background in safety having held the critical function as Chief of the New York City Transit System Safety Department. Prendergast assumes his new position as perhaps the most experienced MTA Chairman in decades.

As the new MTA Chairman, he will have to deal with even more limited options than faced by recent predecessors Lhota and Walder.  There is only so much revenue from MTA Bridge and Tunnel toll fees available for transit. The infusion of $1.5 billion in American Recovery and Reinvestment Act (ARRA) funding three years ago was a one time only windfall.  Most of the projects have been successfully completed, are in beneficial use with the dollars having already been spent.  A majority of the billions of Hurricane Sandy Recovery and Relief funds will actually be applied for and used over coming years as projects come on line and are ready to be initiated.  Many of these projects have yet to successfully navigate and complete both the environmental, preliminary and final design process.  Completion of these steps are usually necessary prior to initiation of any procurement process to put a project out to bid.  This process could easily go on till the end of the decade for some of the anticipated envisioned longer-term capital improvements.

An 8 percent unemployment rate with 7 percent more having just given up looking for work continues to affect both ridership and farebox revenues on some routes. The economic recession continues to impact employee payroll, real estate mortgage transfer and other hidden tax revenues. Most people are not aware that the MTA is also dependent upon a Corporate Tax Surcharge, .25 percent sales tax in NYC, Long Lines Tax, 0.34 percent Payroll Tax including net Self Employment. They also receive $1 for each six month’s of a valid Driver’s License, auto registration fee of $25 per year on registration, renewal of motor vehicles $27, Taxicab Tax 0.50 cents per taxicab ride plus $85 fee on taxicab owners $85, Auto Rental Tax of 5 percent on the cost of rentals and supplemental regional petroleum business tax enacted in May 2009 by the State Legislature.  These are just a few. These revenue streams can go up or down based upon current economic conditions.

Past plans for creating new revenues by tolling free Manhattan East River bridges and implementing congestion pricing continue to face opposition by a majority of members in both the New York City Council and State Legislature. Neither the NYC Council, City Comptroller, Mayor, State Legislature, State Comptroller, Governor or any suburban County Executive advocates or identifies any sources for increasing funding by the billions of dollars needed. This cash is necessary to support keeping the current fare structure, maintaining basic state of good repair, safety and system expansions along with funding high tech improvements. For decades, under numerous past MTA Five Year Capital Plans, both the city and state collectively cut billions of their own respective financial contributions. They repeatedly had the MTA refinance or borrow funds to acquire scarce capital funding formerly made up by hard cash from both City Hall and Albany. This has resulted in long term MTA doubling from $15 billion to over $30 billion during this time frame.  Fast forward to today. The city, state and Federal governments all face current and future year multi billion to trillion dollar budget shortfalls accompanied by declining tax revenues.

To assist the MTA in balancing a potential shortfall of hundreds of millions or perhaps billions next year and billions more in the future years, just which capital improvement projects would any elected official propose the MTA cancel to avoid the next round of fare increases? Which route(s) would they support service reductions to save operating dollars? What public official would volunteer to reduce service, cancel or delay any capital projects benefiting constituents in their district? Delaying previously scheduled future fare hikes may not be a financially viable option.

Reductions in the frequency of cleaning subway and LIRR stations, buses, subway and LIRR cars, elimination of routes or adding to the waiting times for the next bus, subway or LIRR train as a means to save funds to fill budget shortfalls could be counter productive. Increasing crowding, reducing the number of available seats or trips on routes could make public transit less attractive. The reaction could result in a significant number of riders returning to automobile use. Fewer riders mean less farebox revenue, thus impacting budgets.

Give the MTA New York City Transit’s new FASTRACK initiative implemented by Prendergast credit for saving both time and money.  By completely suspending train service over a segment of a subway line, employees have uninterrupted access to tracks, signals, cables, lighting, third rail components and platform edges.  Any routine maintenance or capital improvement project is even more challenging when you consider that there are 24 subway routes with 660 miles of track serving more than 5.4 million daily riders on a system which runs 24 hours a day seven days per week.

Proposals for cost savings by consolidating various agency procurements or staff performing similar functions is a tired old cliché discussed for decades with limited results to date. The potential financial savings of several hundred million more in additional savings doesn’t come anywhere near bridging overall potential future budget deficits in the billions. There is little remaining non-union senior management in the pool to target versus others. Significant costs are locked in place such as salary, fringe, medical and pension costs for union employees. Negotiating with unions to allow management more flexibility in work rules and assignments might support greater productivity. Offering to share some of the savings accrued from this with workers to foster improved partnering between management and employees might also help. Yearly interest payments on the MTA’s $32 billion long term debt is taking a bigger bite out of future budgets leaving less money for both operating expenses, capital projects and making balancing budgets more challenging.

Future fare increases are inevitable due to inflation as well as increasing costs of labor, power, fuel, other supplies and materials necessary to run any transit system. MTA services are still one of the best bargains in town. Since the 1950s, the average cost of riding either the bus, subway or commuter rail has gone up at a lower rate than either the consumer price index or inflation. Prior to the introduction of the MetroCard in 1996, which affords a free transfer between bus and subway, riders had to pay two full fares. Purchasing either a weekly or monthly pass further reduces the cost per ride. Thousands of employers offer transit checks, which pays even more of your costs. Perhaps paying a smaller hike now is better then a much larger one later.

In the end, quality and frequency of service is dependent upon a secure revenue stream. We all will have to contribute — be it at the fare box or tax revenues generated for different levels of government redistributed back to the MTA.