Once Profitable, MTA is Now a Black Hole for Tax Dollars

New York’s Metropolitan Transit Authority is the largest transit agency in the United States, by every measure. A once profitable set of private transit firms, the MTA has been transformed into a taxcollecting nightmare for New York’s suburbs.

The mobility payroll tax, enacted retroactively in May 2009 to save the hemorrhaging MTA, has added six figures to the tax bills of Putnam’s largest employer, Putnam Hospital Center, and imposed fearsome consequences for Putnam’s schools, small businesses, and the county itself, which could not budget for them. The MTA’s opaque finances, and Putnam’s relative powerlessness on the MTA board, have made the transit authority a public enemy in the Hudson Valley.

The structure of the MTA’s governing board makes tax increases inevitable. Fares are held down by the city-dominated MTA board. Several bridges from the outer boroughs still have no tolls. The most expedient solution to the MTA’s financial problems was to raise taxes on the MTA region as a whole, which the MTA did, with legislative approval.

Meanwhile, the MTA and its employees lack for nothing. Managers and board members received their 2009 bonuses. MTA police will move into a new headquarters in June of this year, supposedly equipped with a security system from Lockheed Martin, that has ballooned in cost from $212 million to $461 million.

All these projects move forward, even as the payroll tax produced $200 million less in revenues than expected, owing to unemployment, and tens of millions less in fares due to the recession.

Facing hundreds of millions in shortfalls at the end of last year, the MTA board has discussed shutting down services as well as further tax increases. Layoffs and restructuring have been mentioned by the MTA’s new chief executive Jay Waldner, but no plans for reorganization have been put in motion.

At this date, the MTA employs 5,000 people in administrative jobs, costing taxpayers and riders $500 million per year. And in its over 40-year existence, there has never been an attempt to streamline MTA administration.

The MTA’s authority covers all of New York City’s subways, buses, and bridges, as well as commuter trains on Long Island and in the Hudson Valley. Though most of its railroads, tunnels, and bus lines were created by private firms, the city and state gradually consolidated control, forming the modern MTA in 1968.

The result was a revenue-hungry agency that has provided uneven service ever since, governed by a board of directors that can, with legislative approval that is almost always granted, tax the MTA region at will.

The MTA is governed by a 17-member board nominated by the governor of New York and confirmed by the NY State Senate. Six members are recommended by the governor, four by the mayor of NY City, and one each by the county executives of Nassau, Suffolk, and Westchester. Four members are recommended by the executives of Dutchess, Putnam, Orange, and Rockland Counties; each of these members has a quarter of a vote, bringing the total number of votes to 14.

The rail lines that run through the Hudson Valley were the product of the New York Central Railroad, helmed by Albany industrialist Erastus Corning, and later bought by Cornelius Vanderbilt, whose family owned and operated the Hudson and Harlem lines at immense profit until 1954.

But profits began to disappear from the entire rail nationwide. Railworkers began unionizing in earnest during the 1930s, beginning to cut into profits. Later the advent of the automobile and airline industries also slashed the profitability of the rail industry, which was then divided into large conglomerates.

In 1960, a 12-day strike by the Local 100 union in New York City, in control of all subway workers, brought New York to a standstill. City officials gave in union demands, hoping to save the city’s economy and prevent disorder, setting pattern of transit worker demands and public accommodation that has been followed to this day.

Originally the creation of the MTA seemed to solve a financial problem and a problem for politicians. City and state officials were not anxious to clash with unions or taxpayers, and so created board one step removed from democratic influence. This arrangement absolved politicians of the responsibility to closely monitor the MTA’s services and costs.

The result was the total dilapidation of subway and train lines. New York living in the 1970s was blighted by frequently interrupted, dangerous, and dirty commuter lines. What had been the most impressive rail-system became a graffitiand crime-ridden mess.

After another transit worker strike in 1980, the MTA’s financial crisis was temporarily solved by a series of tax increases, and federal aid dollars – amounting to nearly $80 billion in public investment over the next two decades.

Even though the 1990s brought an incredible decrease in crime, and an uptick in rail use, the MTA began to rely on debt-financing, squandering a decade of needed financial reform. The ‘90s boom deferred a financial reckoning that was coming due, with mushrooming pension liabilities, stacked debt, and increased costs. The financial irresponsibility culminated in last year’s MTA tax.

In January of this year, Jay Waldner, the new chief executive of the MTA, released a 24-page plan outlining an overhaul of the MTA’s finances. Waldner has been vocal in acknowledging that the MTA has not changed the way it does business since 1968.

But Waldner’s pretensions to reform only go so far. Despite pressure from all the commuter counties and their elected representatives, and the entire New York news media, including the New York Times, Waldner has not allowed the MTA to fall under the scrutiny of a public audit by an independent agency.

Further, he has gone on record saying that the mobility tax of 2009 will remain a revenue source for the indefinite future.

Waldner faces a nearly impossible task of reforming the agency from within. The repeated attempts to impose financial discipline in 1968, 1982, and 2005 have nevertheless resulted in an agency more ravenous for public dollars, more awash in debt, and less responsive to political pressure than ever.