American Dream

City Journal Spring 2005
How to Save the Subways—Before It’s Too Late
Nicole Gelinas

Quotes:

As New Yorkers learned in January, when a fire in a signal-relay room knocked out service for the half-million people who ride the A and C trains daily, Gotham’s subways are in deep trouble. Bad enough that the inferno showed that any bum (or terrorist) with a lighter could paralyze New York; worse still was New York City Transit chief Larry Reuter’s announcement that this critical lifeline for Brooklyn and Queens residents would be out for three to five years. When transit officials responded to riders’ outrage by getting most service up and running within two weeks, public relief mingled with anxiety that transit brass didn’t understand how their system worked or that they were responsible for keeping it going, no matter what.

Perhaps most troubling of all was the revelation that this essential element of the region’s economy depends on fragile technology that predates the Great Depression. And further, though all this equipment desperately needs updating, the Metropolitan Transportation Authority (MTA), the state agency that runs New York City Transit and the region’s commuter trains, doesn’t have the money to replace it or even maintain it properly, and will have even less wherewithal for vital infrastructure investments over the coming decade. The MTA faces bills now coming due for decades’ worth of poor operational and financial management—for which not just the bloated and clueless MTA but also Governor Pataki’s political leadership are ultimately to blame.

Below all these ills lies a still more fundamental problem, also the fruit of politics. State and local pols ensure that the price of a subway ride falls far short of the actual cost, but refuse to make up the difference with reliable subsidies. Meanwhile, the political clout of the Transport Workers Union (TWU) ensures that that cost is outrageous, thanks to lavish labor contracts and pension benefits. So the MTA, squeezed from both the cost and the revenue sides, runs chronic operating deficits that are about to become unsustainable.

Here’s why the numbers will never add up. The MTA will rake in $3.5 billion in mass-transit fares this year, plus $1.1 billion from its bridge-and-tunnel tolls. That $4.6 billion covers less than half the agency’s $9.4 billion in expenses. Correspondingly, the $2.8 billion in fares that 1.4 billion subway riders will pay this year is barely half of what it costs to run the trains. So dedicated taxes must provide a $2 billion dump into the MTA’s coffers each year. State and city subsidies add another $600 million, along with the bridge-and-tunnel profits. And it’s still not enough.

So the MTA has increasingly turned to debt, and looming interest costs will soon widen today’s huge operating gaps and constrict capital investment for decades. The 12 percent of revenues (and subsidies) that the MTA must spend this year on interest will rise to 21 percent by 2008 and 24 percent within a decade, while city and state subsidies remain flat and fare revenues creep up by single digits. This is a blueprint for physical asset deterioration—and for a serious breach of safety.

All that debt is just a symptom of the real problem. The MTA can’t rationally budget its capital spending without first paring back its out-of-control operational costs—because new revenues now would just go to fund waste. As it is, the $6.2 billion needed to pay the MTA’s 55,000 workers covered under 62 separate contracts will exceed fare and toll income by nearly $1.7 billion, or 35 percent, this year, and so will chew up a chunk of the dedicated taxes and subsidies originally earmarked for capital, not operational, spending.

The Transport Workers Union opposes any real cost-cutting efforts, such as a plan to restructure all above-ground rail operations into a single new subsidiary, and all bus operations into another—a consolidation that could save $210 million over three years. Why the resistance? The new bus division would have the authority to cut civil-service protections for new employees—who would still have their union security, of course, but transit workers are accustomed to two layers of insulation from management.

The one modest consolidation that Kalikow did get labor to accept carried a stiff condition that means it will save only millions instead of tens of millions, as the MTA had first hoped. In 2002, bus lines in Brooklyn and the Bronx—formerly private lines that the MTA had purchased decades ago—were merged with the rest of the MTA bus operations. Until then, these lines operated as separate units, so that a mechanic from a Brooklyn depot could not repair a Bronx bus that had belonged to a private company decades previously, even if the bus had broken down across the street from the Brooklyn depot. But when the TWU accepted the consolidation, the MTA had to give legacy employees of the formerly discrete bus units full MTA benefits, including 12 days of sick leave each year instead of five.

[Click the heading to see the full article]