Con­trol of NY Sub­way De­bated

The Bond Buyer - - Front Page - By Paul Bur­ton

New York’s mass tran­sit cri­sis has prompted some trans­porta­tion ad­vo­cates to ar­gue the city would be bet­ter off tak­ing back sub­way and bus op­er­a­tions from the staterun Met­ro­pol­i­tan Trans­porta­tion Au­thor­ity.

They say 50 years of state man­age­ment of city tran­sit hasn’t worked and their move­ment, how­ever po­lit­i­cally dif­fi­cult, is not just blow­ing off steam amid wide­spread break­downs, de­lays, over­crowd­ing, po­lit­i­cal bick­er­ing and tales of woe about MTA fi­nances.

“This is not an overnight fight,” said Bradley Tusk, a ven­ture cap­i­tal­ist and for­mer po­lit­i­cal op­er­a­tive. “But do I think that this could be the ral­ly­ing cry for the may­oral cam­paign in 2021? Ab­so­lutely.”

Tusk spoke last Mon­day night as about 100 peo­ple met at the Lower Man­hat­tan head­quar­ters of the non­profit ad­vo­cacy group Tran­sitCen­ter to dis­cuss build­ing mo­men­tum for the change.

The MTA, one of the largest mu­nic­i­pal is­suers with roughly $41 bil­lion in debt, has long been at the core of city-state wran­gling, in­clud­ing the cur­rent rift be­tween Gov. An­drew Cuomo and Mayor Bill de Bla­sio. Trig­ger points have ranged from Cuomo’s in­tru­sive man­age­ment style to the state’s pe­ri­odic raids on tran­sit ac­counts to bal­ance its own gen­eral fund.

MTA Chair­man Joe Lhota, speak­ing at Wed­nes­day’s board meeting, said un­planned fare hikes and dra­co­nian ser­vice cuts could ma­te­ri­al­ize with­out new rev­enue sources.

“Un­less we get a sus­tain­able new source of rev­enue, we have no other op­tions to bal­ance our bud­get af­ter 2019,” Lhota said. The au­thor­ity’s bi­en­nial fare and toll in­creases, im­ple­mented since 2010, and any Man­hat­tan con­ges­tion pric­ing plan may not pro­vide enough funds, he added.

S&P twice this year down­graded the MTA, most =re­cently in Au­gust when it low­ered the au­thor­ity’s trans­porta­tion rev­enue bonds to A from A-plus. The out­look is neg­a­tive.

New York City Tran­sit, which op­er­ates the sub­ways and buses, ac­counts for roughly half the MTA’s $33.3 bil­lion cap­i­tal pro­gram for

2015-2019. About $3 bil­lion of the cap­i­tal plan is self-gen­er­ated through bridge and toll rev­enue.

Andy By­ford, pres­i­dent of the MTA’s New York City Tran­sit di­vi­sion, said his so-called Fast For­ward triage-and-mod­ern­iza­tion ini­tia­tive could cost $40 bil­lion over 10 years. He is lob­by­ing for city, state and fed­eral sup­port and has called on the MTA board to ad­vance its 2020 to 2024 cap­i­tal pro­gram.

Fir­ing away at the MTA has long been a sport of choice. For­mer Mayor Ed Koch, for ex­am­ple, called for its abo­li­tion in 1983. “It was too invit­ing a tar­get not to at­tack,” for­mer MTA chair­man Richard Rav­itch wrote in his book, “So Much to Do: A Full Life of Busi­ness, Pol­i­tics and Con­fronting Fis­cal Crises.”

A state-run agency serv­ing a city whose 8.6 mil­lion pop­u­la­tion amounts to 40% of the state’s pop­u­la­tion pro­vides an in­her­ent dis­con­nect. The state leg­is­la­ture essen­tially al­lo­cates few statewide rev­enues to the MTA, but en­ables lo­cal and re­gional taxes.

When sub­ways fail, “that state se­na­tor from Batavia is about as likely to pay the po­lit­i­cal con­se­quences as the premier of Saskatchewan or the king of Thai­land,” said Tran­sitCen­ter ex­ec­u­tive di­rec­tor David Brag­don.

Chicago, he said, has ben­e­fited from strong city rep­re­sen­ta­tion on the Chicago Tran­sit Au­thor­ity board. “Illi­nois has one of the most cor­rupt state gov­ern­ments in the coun­try, but the clown show that goes on in Spring­field has only a lim­ited im­pact on tran­sit in Chicago,” Brag­don said.

Los An­ge­les County and Seat­tle’s Puget Sound re­gion have the na­tion’s two largest tran­sit cap­i­tal plans. Lo­cals con­trol both boards.

“The res­i­dents and lead­ers of Los An­ge­les County do not go to Sacra­mento to ask to be given per­mis­sion to ba­si­cally spend their own money in their own com­mu­nity,” Brag­don said. “The lead­ers and res­i­dents of Seat­tle do not have to go down to Olympia and make all kinds of silly and crazy deals in or­der to man­age their own tran­sit sys­tem.”

Pry­ing away state con­trol in New York is a tall or­der, ac­cord­ing to Howard Cure, di­rec­tor of mu­nic­i­pal bond re­search for Ever­core Wealth Man­age­ment.

“The state likes to have the city as a vas­sal of it,” Cure said.

City Coun­cil Speaker Corey John­son, a pos­si­ble may­oral can­di­date in three years, has said he would fa­vor the city rid­ing solo on a con­ges­tion-pric­ing pack­age, which to date has stalled in the leg­is­la­ture.

Tusk, cam­paign man­ager for New York Mayor Michael Bloomberg in 2009 and a for­mer Illi­nois deputy gover­nor and ex-com­mu­ni­ca­tions di­rec­tor for U.S. Sen. Charles Schumer, cited as prece­dent the city’s decade-long bat­tle to wrest con­trol of its pub­lic school sys­tem from the state.

“You need one per­son, whether it’s By­ford or who­ever, who re­ports to the mayor, just like the po­lice com­mis­sioner, just like the schools com­mis­sioner,” said Tusk. “We can work out the rest — fund­ing mech­a­nisms, gov­er­nance. The MTA is not the law of na­ture. It’s not the 10 com­mand­ments. It’s a se­ries of old laws that came to us be­cause they made sense po­lit­i­cally.”

Cure sees a higher de­gree of dif­fi­culty in ob­tain­ing tran­sit au­ton­omy.

“I think it would be re­ally dif­fi­cult to do com­pared with, say, the school ed­u­ca­tion depart­ment,” Cure said. “With the schools, the city pays into a gen­eral fund, and they for­mu­laically get an amount like other school dis­tricts. You could say the city gets short­changed, but it’s still a well-es­tab­lished fund. The MTA is dif­fer­ent.”

In ad­di­tion, Cure said, state of­fi­cials have lim­ited city use of de­sign-build project de­liv­ery and pub­lic-pri­vate part­ner­ships, and Al­bany would also have to ap­prove spe­cial taxes the city might need to ef­fec­tively op­er­ate NYC Tran­sit.

Other vari­ables would in­clude rev­enue from bridge and tun­nel cross­ings and com­muter rail rid­er­ship within the city’s five bor­oughs.

Cuomo, who con­trols a plu­ral­ity of seats on the 17-mem­ber MTA board, has tight­ened his grip over the au­thor­ity the past two years. He de­clared a state of emer­gency for the sys­tem in June 2017 and has im­posed such ini­tia­tives as a tech­nol­ogy “ge­nius chal­lenge” that in­vited pro­pos­als from out­side firms and ran­kled in-house en­gi­neers.

Rav­itch called on MTA board mem­bers to step up, say­ing the board is re­spon­si­ble for the sys­tem’s well-be­ing.

“The law makes it very clear,” he said on a re­cent Bond Buyer pod­cast.

“Whereas the city owned the sub­ways prior to the cre­ation of the MTA in 1968, and whereas the city has al­ways contributed one way or the other to the fi­nan­cial needs of the sys­tem, the re­spon­si­bil­ity has not been pri­mar­ily that of the city. It’s been paid for far more over time by the state, by the re­gion, by fed­eral con­tri­bu­tions, and start­ing with what I ini­ti­ated in 1981, bor­row­ing against the fare rev­enues and is­su­ing debt,” said Rav­itch.

“The gover­nor has de­cided that he wants to run the MTA. The fact of the mat­ter is that the MTA is run by the sec­ond floor at the capi­tol [in Al­bany] be­cause the board mem­bers are will­ing to do it that way. That’s their fault, not his.”

In the 1960s, Gov. Nel­son Rock­e­feller cre­ated a re­gional au­thor­ity, the Met­ro­pol­i­tan Com­muter Trans­porta­tion Au­thor­ity — now the MTA — that sub­sumed then-bank­rupt Long Is­land Road, plus New York City Tran­sit and the Tri­bor­ough Bridge and Tun­nel Au­thor­ity, which op­er­ates wa­ter cross­ings.

Ab­sorp­tion of the lat­ter was a knock­out punch to Robert Moses, the decades-long city power bro­ker whose TBTA chair­man­ship was the last of his 12 lead­er­ship posts.

In the 1960s, Mayor John Lind­say, whom Rock­e­feller dwarfed po­lit­i­cally, saw a car­rot in a $2.5 bil­lion state bond­ing pack­age for mul­ti­modal tran­sit that in­cluded aid to the city’s deficit-rid­den sys­tem. City Hall and Al­bany worked out a fund­ing pack­age that in­cluded about $600 mil­lion in state funds from that bond pack­age. The city would shoul­der a fur­ther $700 mil­lion.

The city, mean­while, had com­menced its fi­nan­cial slide that spi­raled to a near-bank­ruptcy in the 1970s. “The city’s fi­nances had be­gun to weaken, but not ev­ery­one rec­og­nized it,” said Peter Peyser, a for­mer Koch op­er­a­tive and founder of con­sult­ing firm Peyser As­so­ciates LLC.

A city comptroller’s re­port in 1966 cited “abil­ity to ac­cess debt” as a bench­mark for the city’s fis­cal health. “They weren’t mea­sur­ing fis­cal health by the city’s bud­get im­bal­ance,” Peyser said.

Po­lit­i­cal vari­ables in the wran­gling for the MTA’s in­au­gu­ral five-year cap­i­tal pro­gram in 1981 ranged from the de­gree of Repub­li­can sub­ur­ban sup­port for Long Is­land Rail Road fund­ing to the back­ing of the “West­way,” a planned but never-built West Side ex­press­way.

Rav­itch him­self took three of the city’s top ex­ec­u­tives, David Rock­e­feller of Chase Man­hat­tan, Dick Shinn of Met­ro­pol­i­tan Life and Bill Elling­haus of AT&T, on a pre-dawn tour of de­crepit rail yards, prompt­ing their sup­port for a tax pack­age in Al­bany.

“The fund­ing ques­tions are re­ally im­por­tant when we’re look­ing at the gov­er­nance sys­tem. How does that func­tion­ally play out?,” said Rachael Fauss, a se­nior re­search an­a­lyst for the non­profit Rein­vent Al­bany.

A city agency, she said, could in­vite bet­ter scru­tiny from the city and state comp­trol­lers and the City Coun­cil. The move could also open up­zon­ing pos­si­bil­i­ties through tran­sit-ori­ented de­vel­op­ment, akin to the Bloomberg ad­min­is­tra­tion’s Hud­son Yards de­vel­op­ment site that in­cluded the ex­ten­sion of the No. 7 sub­way line west­ward from Times Square.

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