OP-ED: A financial iceberg dead ahead for the NY MTA

Just like the Titanic, the New York Metropolitan Transportation Authority (MTA) faces a potentially devastating financial iceberg between now and 2024. The following issues, which combined, has placed the MTA on the path to a looming financial crisis.

On May 16, 2022, NYC Transit Workers Union (TWU) members received a 2.75 percent wage increase under the last year of their contract. The previous agreed upon contract in 2019 provided for wage increases of two percent in May 2019, 2.25 percent in 2020 and 2.5 percent in 2021. The annual cost of wage increases under this contract will total more than $1 billion through 2023.

Inflation was 4.16 percent in 2021 and eight percent in 2022. It could grow even more in coming months. This will also have a future adverse impact on the overall MTA agency budget. The next round of contract negotiations is in less than a year. Union leadership will ask for wage increases to offset inflation. The MTA never budgeted for such a large increase in employee wages. Whatever the TWU obtains, you can be sure that Long Island Rail Road (LIRR) and Metro-North Railroad unions will ask for the same.

Ongoing fare evasion averages several hundred million per year. The ongoing loss of farebox revenue due to many pre COVID-19 riders failing to return will also continue to adversely impact the overall MTA budget. NYC local district attorneys continue to refuse prosecuting those who do not pay their fare.

In 2019, fare increases for the MTA NYC Transit bus, subway and Staten Island Railway, along with LIRR and Metro-North were already assumed as part of the approval process for the $51 billion 2020 - 2024 Five Year Capital Plan. Former Gov. Andrew Cuomo, former NYC Mayor Bill de Blasio and members of the New York State Legislature and New York City Council were all in on this financial arrangement. This included four percent increases in 2021 and 2023. Continuing to postpone fare increases will add to the MTA financial shortfall.

In the summer of 2021, before resigning, outgoing MTA Chairman Pat Foye said that he believed President Joe Biden and the White House when they claimed that ongoing inflation was temporary. Fast forward one year later, and inflation has become part of our daily lives with no end in sight. The price of both gasoline and diesel fuel has doubled. Just like you and I, the MTA has to pay more for basic necessities required to provide the day to day service riders count on. The engineers cost estimates for capital construction projects will have to be reevaluated for procurement contracts that will be advertised over the next 30 months remaining in the MTA $51 billion 2020 - 2024 Five Year Capital Plan.

The same also applies for the purchase of materials for routine maintenance and state of good repair in house track, signal and other projects performed by MTA employees. Future purchases of buses, subway and commuter rail cars may cost more. Vendors who bid on MTA material purchases and capital projects will inevitably pass on their own increased costs for materials including delivery costs.

Congestion Pricing continues to be politically sensitive. Final details of who will pay has yet to be determined by the MTA Traffic Mobility Review Board. Elected officials will lobby for discounts or exemptions for police, fire, teachers, low income, NYC outer borough residency, seniors, physically disabled, small commercial delivery businesses, users of electric vehicles or other special niches. These discounts or exemptions will be adopted to placate the constituents of elected officials running for reelection in 2023 or 2024. More discounts translates to less revenues. You can't capture five years of toll revenues estimated to be $1 billion per year (leveraged to raise $15 billion in support MTA’s $51 billion 2020-2024 five year capital plan) when you implement the program four years more after 2020 or the final year of a five year capital program. Who knows if $1 billion in annual toll revenues will actually appear.

Since November 2019, former Gov. Andrew Cuomo delayed announcing his appointments to the MTA Traffic Mobility Review Board. Even former NYC Mayor de Blasio filled his one seat in July 2021. Since taking office, Gov. Kathy Hochul has never made this one of her transit related priorities to fill her five seats.

The MTA $51 billion 2020 - 2024 Five Year Capital Plan was adopted in late 2019 under the assumption that $15 billion would come from Congestion Pricing. Not a dime will appear until December 2023 or some time in 2024. How will the MTA raise $15 billion over one year rather than five years?

The late start for implementation, downturn in the economy, inflation, more people telecommuting full and part time, along with a series of discounts and exemptions to tolls, will result in billions of lost anticipated revenue.

Just how will the MTA bridge a future funding shortfall of up to $15 billion within the previously approved $51 billion 2020 - 2024 Five Year Capital Program? Both New York State and New York City have yet to fully contribute their respective $3.5 billion contribution toward this program. Difficult decisions need to be made by MTA Board Chair Janno Lieber and MTA Board members today before it is too late.

MTA budgeted $6.9 billion for Second Avenue Subway Phase Two. This project benefits a handful of the pre COVID-19 five million daily transit riders. There is also $2.6 billion for the new Metro-North New Haven Line Bronx East Access to Penn Station. Both projects need to be postponed until the next MTA 2025 - 2029 Five Year Capital Program. Preservation of safety, state of good repair and ADA station accessibility projects are a higher priority than any new system expansion projects.

End both the MTA "Arts in Transit" one percent expenditure requirement for capital projects and Cuomo's "New York Buy America Act." Lobby the New York Congressional delegation for more reasonable federal Buy America requirements. This impacts the ability of the MTA to get the best return when spending $1.5 billion in annual grant funding from the Federal Transit Administration.

Stop wasting several hundred million on outside consultants. Use available in-house resources to do the same work. Ask District Attorneys to go after deadbeat riders who refuse to pay their fare. In pre COVID-19 2019, they contributed to $300 million in lost revenue. Even in COVID-19 times with fewer rides, there is still significant revenue losses due to non payment of fares.

Limit employee overtime to legitimate needs such as additional cleaning and maintenance due to the unexpected impacts of COVID-19 and dealing with malfunctioning equipment, accidents or adverse weather conditions when attempting to restore service. End the approval of excessive overtime used as the basis to fatten up pensions calculated on the final year's base salary. All combined could save the MTA billions. All of the above will be needed to bridge the inevitable multi-billion budget shortfall on the horizon. Better to bite the bullet now, rather then pay a higher price later.

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Larry Penner is a transportation advocate, historian and writer who previously worked for the Federal Transit Administration Region 2 New York Office. This included the development, review, approval and oversight for billions in capital projects and programs for the MTA, NYC Transit, Long Island Rail Road, Metro North Rail Road MTA Bus, New Jersey Transit along with 30 other transit agencies in NY & NJ.