John Petro

MTA Fare Hikes Don’t Even Solve the Budget Crisis

Yesterday, the MTA board voted to approve unprecedented increases in transit fares and devastating cuts in service. The vote is in response to the Authority’s deteriorating finances. Before the measures were implemented, the MTA was facing a budget shortfall of $1.2 billion. The worst part is: these measures won’t even bring the Authority’s finances into line. The MTA is still forecasting a shortfall of $290 million in 2010 and $612 in 2012, even with the fare increases and service cuts.

How did we get here? In short, the economic slowdown has seriously impacted the amount of tax revenue that the MTA usually receives from the state. The MTA’s forecast of these revenues was overly optimistic. In November of 2007 the MTA was already predicting a budget shortfall for 2009 of $204 million. Then it all hit the fan, so to speak. The “austerity budget” released in February of 2009, shows a decrease in MTA-dedicated tax revenue of $409 million, and increases in operating expenses of $301 million. The only bright spot was the projection of increased fare and toll revenue of $151 million (without the fare and toll increases).

However, this bright spot now appears to have dimmed. An article in the New York Times from February states that the MTA is now predicting a “$123 million decline in fare and toll revenue, below what was budgeted.” The article also states that the MTA is now predicting that dedicated tax revenue could fall an additional $528 million.

The real problem, however, is the long-term outlook. As I said earlier, the MTA is looking at shortfalls of $290 million and $612 million in 2010 and 2012, respectively. Even as the economy recovers and tax revenues return to normal, the MTA will still be saddled with the need to make payments on its debt. These debt payments are going to rise 52 percent between now and 2012, to $2.2 billion a year.

That’s what the Ravitch plan was supposed to fix. The Ravitch Commission called for the introduction of a payroll tax that would be applied to every employer in the 12-county Metropolitan Commuter District. These taxes were expected to raise $1.5 billion a year. The payroll tax was going to be used to pay down the MTA’s debt as well as continue its program of system improvements. The MTA took on this debt in the first place, beginning in 1982, in order to pay for system maintenance, upgrades and expansion. Before 1982, the system had fallen into a state of deplorable disrepair.

The New York State legislature appears to have until the end of April to get its act in order. Currently, the Assembly has stated its support for a watered-down Ravitch proposal while the Senate has indicated its support for the miniscule minority of NYC residents that drive into Manhattan. The State Senators who have blocked the implementation of the Ravitch plan are Carl Kruger, Ruben Diaz, Sr., Pedro Espada, Jr., and Hiram Monserrate, whom Streetsblog has named the “Fare-hike Four.”

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Posted at 2:18 PM, Mar 26, 2009 in New York | Transporation
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