Complaining about the subways is the God-given right of New Yorkers, especially when fares are on the rise or service is on the decline, which seems to be always.
Offering ways to fix the subways, though, is generally reserved for pundits and think tankers, with the proposed solution varying depending on whether it comes from mainstream liberals (increase transit funding, says the New York Times editorial board), the corporate middle (use private contractors, says the Partnership for New York City), or the libertarianish right (cut costs, says the Manhattan Institute).
The latest entry comes from Johnny Knocke, a Columbia MBA student who spent the spring as a Metropolitan Transportation Authority intern and came away with enough gripes to make for a Medium article. According to Knocke’s calculations, the MTA is losing $6 billion a year, with labor costs alone outstripping its revenues—thanks to ballooning salaries, benefits, and overtime. This, he says, is not sustainable. "If the MTA were a company in a functioning free market, it would have filed bankruptcy and restructured a decade ago," he writes.
His prescription: Turn the MTA into a public-private partnership that can slash labor costs, and explore new market-based ways of raising funds, like charging for Wi-Fi access.
For many New Yorkers—though surely not the MTA’s 50,000 workers or their families—this probably sounds great. Make those union fat cats work for a damn living!
Sure, busting public transportation unions doesn't exactly have a history of glorious outcomes in the U.S., but if it keeps a subway ride from soaring past three bucks, who cares?
Unfortunately, a look at the numbers shows that while cracking down on crafty employees may be satisfying—it's pretty tough to defend practices like calling in sick so you can get overtime for working the same hours—it's not likely to do much to bring down fares.
First off, it's important to remember that budgets have two sides: revenue and spending. In 2015, the MTA took in about $8 billion in revenue (from your MetroCard swipes, LIRR/MetroNorth tickets, and bridge and tunnel tolls) and spent about $14 billion—on everything from conductor salaries to those little yellow handle thingies that keep trains from crashing into walls. This difference (between revenue and spending) is the source of Knocke’s "losing $6 billion a year" claim. The gap is filled in by cash payments from the city and state, i.e., your tax dollars.
Given the pain New Yorkers already feel buying that nearly $120 monthly pass or, worse, living ride to-ride (why am I paying taxes to support the incompetent old MTA when I’m already paying through the nose to be suffocated on the C train?), this seems outrageous, but it’s no worse than in other cities. What makes New York an outlier is that it sticks riders with the bill, rather than all taxpayers. In 2013, when the New York City Independent Budget Office last did a comparison with other cities' transit systems, it found that the share of each ride being paid for by riders was higher in New York (58 percent) than in Chicago (44 percent), Boston (38 percent), or Philadelphia (36 percent).
"NYC Transit is definitely at the high end compared with other providers of local service," says IBO chief of staff Doug Turetsky. Fares would be even higher if it weren’t for the sheer volume of MTA riders. No other city can boast a subway system that is packed to the gills 24/7.
You can debate whether this is a good or a bad thing—higher subsidies let city businesses ride free on taxpayers by providing cheap transit for their employees, while lower subsidies screw over poor residents who have no choice but to ride the train to get to work—but the notion that the subways are in crisis because they're "losing money" is nuts. Every U.S. transit system loses money—just like every highway and every public park—because public transportation is meant to be a public amenity.
Looking more closely at those $14 billion in costs, meanwhile, it's not clear that reining in the unions would do much to change the equation. While it is true that payroll eats up the biggest chunk of the MTA’s budget (just under $5 billion a year) and overtime payments have soared from $385 million a year to $755 million over the past decade, just getting rid of collective bargaining wouldn’t suddenly make the trains run on time. Transit jobs tend to be high-skilled and union or no union, you need to pay people to do skilled labor. And despite all the bluster about do-nothing workers, these jobs aren’t a walk in the park. Most labor contracts don’t have to include a standard provision for leave time after someone commits suicide by jumping in front of your train.
High labor costs for public transportation agencies aren’t unique to New York. Transit worker wages are similar in cities like Chicago, Boston, and Seattle, all cheaper than New York. (As a side note, maybe it’s not a terrible thing for a bus driver or track worker to earn enough to pay Brooklyn rents and maybe support a family.)
Nor are high labor costs unprecedented among other city or state agencies in New York. The NYPD, for example spends about $5 billion a year on operations, about 10 percent of it overtime—an even worse ratio than the MTA. Yet think tanks aren't calling for the city to balance its budget by putting an end to "wasteful" police spending.
The real problem in the MTA budget is debt service. Big construction projects, like the $4.45 billion-and-counting Second Avenue Subway, technically go in the MTA's capital budget. But because the state doesn't want to pay construction costs up front or dedicate future tax revenues to paying them off, the MTA instead sells bonds to pay for them—bonds that then have to be paid back out of the authority’s annual operating budget. It’s all a budgetary sleight of hand.
Paying off bonds is increasingly an albatross for transit riders. The IBO estimates that the MTA’s debt service costs have increased 134 percent in the past decade, compared to a 39 percent increase in payroll costs during that period. Almost 17 percent of the authority’s annual budget is now devoted to paying down debt, up from 12.4 percent ten years ago. And as Turetsky notes, ”every dollar the MTA pays in debt service is one less dollar available for other operating needs."
As for the possibility of bringing in private companies to run the system, the track record there isn't especially great, either.
One of the most comprehensive urban privatization pushes in recent U.S. memory came in Indianapolis in the 1990s under the mayoralty of Stephen Goldsmith, a staunch foe of municipal unions. (Goldsmith later served a brief term as a New York City deputy mayor under Michael Bloomberg.)
Goldsmith's attempts to remake Indianapolis government were mostly a wreck, as I’ve previously documented. (For a more in-depth accounting of Goldsmith’s time in office, pick up the anthology To Market, To Market.) A deal to privatize city swimming pools ended after three years, during which private operators quadrupled fees and pool usage plummeted. The privatization of golf courses led to windfall private profits and increased public costs. One local good-government advocate found that the $190 million in savings Goldsmith claimed was offset by $300 million in new city expenses for private services.
So are there ways for the MTA to raise money than don’t involve pouring in more from taxes?
Knocke touts Hong Kong's subway system, which is run by a public-private partnership (the government owns three-quarters) and manages to turn a profit without subsidies. But in addition to taking advantage of cheap labor—Hong Kong lacks any collective bargaining laws and the government is tightly controlled by business leaders—the subway system there has a unique source of revenue: It actually holds and develops land around newly built subway stations, effectively paying for new transit lines by profiting off the increased land values that come with better access to public transportation.
This mechanism has been used in New York in the past—just not on behalf of the public. When the Interborough Rapid Transit subway system first sprung up in the early 20th century, it was built by a group of private investors led by a financier named August Belmont. They earned back the cost of building a way for people to ride around in a hole in the ground in part by collecting millions of nickel fares, but also through real estate speculation. Have you ever wondered why the original IRT lines run to the outskirts of the Bronx and Brooklyn but don't touch, say, the Lower East Side? It's because bringing subway access to virgin territory along upper Broadway or the Bronx’s Southern Boulevard would drive up local land values—lining the pockets of speculators—but bringing it to Avenue A, already developed, would just help out the legions of proles. (Decades later, the city ended up having to build the IND to fill in the gaps left by private subway operators.)
Could the city or state do the same? Sure, but the government would need to find a way to grab land before its value went up in anticipation of the planned construction—something the city has failed to do with rezoning for the past umpteen decades.
The Hudson Yards 7 train station. (Scott Lynch / Gothamist)
The city did use a similar mechanism to pay for the new Hudson Yards stop on the 7 train. As Fiscal Policy Institute deputy director James Parrott explains, the city diverted new tax money from increased property values on surrounding blocks to cover part of the $2.4 billion cost of extending the line one stop.
But this approach isn’t nearly as lucrative as grabbing development rights themselves as Hong Kong does for its subway. Property taxes are just a thin sliver of actual land value. Besides, New York effectively dipped into one public pocket to put the money in another—if the property tax money hadn’t been reallocated to the MTA, it would have been available to cover the cost of the new schools, roads, and expanded police, fire, sanitation, etc. services necessary to support the new development.
And in the case of the Hudson Yards, Parrott says, city officials ensured that the city would take a loss on its maneuver by capping the amount of payments property owners would have to make. To do otherwise, he wryly points out, "would have been pre-empting billions of dollars in private profits."
For better or worse, the New York subway system is an expensive, expansive beast. It carries far more riders to far more places than any other transit system in the nation, it doesn't stop in the middle of the night like even those in London and Tokyo do. Any construction of new lines or stations takes place under some of the world's priciest real estate and amid a vast tangle of underground pipes and wires.
So what can be done? We can try to ensure more reliable state and city funding so that the MTA doesn't have to pay off old debts with current fares, and we can try to pass around the costs more fairly. This decision ultimately comes down to Governor Cuomo, who has been bullish on high-profile expansions of Penn Station and LaGuardia Airport but hasn’t expressed much interest in the MTA. (Perhaps this is because he takes helicopters more often than the subway).
Cuomo has also been cool to transportation engineer Sam Schwartz's MOVE NY plan, which would install tolls on East River crossings and use the proceeds to reduce tolls elsewhere, plus fund $15 billion in MTA capital expenses. The plan isn’t perfect, but at least it’s a start.
Move NY has gathered some steam in Albany, but with upstate Republicans in control of the state senate, unless Cuomo decides to put his weight behind it, it’s not going anywhere. Given the governor’s history of intransigence, it’s probably going to take a groundswell of public clamor to get legislation pushed through.
It may not be as sexy as blaming Big Bad Unions, but sometimes you've just got to pay the price of making the trains run on time.
Neil deMause has covered transit and budget issues for the Village Voice, City Limits, and Metro New York. His new book, The Brooklyn Wars, will be published this fall.