MTA Chairman Tom Prendergast faces a huge challenge as the MTA needs a new round of capital funding starting in 2015. At the CityLaw Breakfast on November 21, 2014 Chairman Prendergast laid out a well-thought out five year plan designed to maintain the system, modernize it, make it more resilient and extend it geographically. The price tag: $32 billion. In the intensive competition for public money, elected leaders find funds in that range only when engineers and managers in charge of infrastructure publicize the actual costs required to maintain these services. Chairman Prendergast has done a great public service by setting out costs realistically even if he cannot now identify where all the money will come from.
Chairman Prendergast’s $32 billion plan includes about $20 billion for state-of-good-repair, $5 billion for enhancement of the existing system, $5 billion for expansion and about $2 billion for bridges and tunnels. The MTA has been able to identify about half the funds needed, around $16 Billion.
Chairman Prendergast also stressed a new need that previous MTA chairmen did not have to consider- that of resiliency. The MTA suffered greatly post 2012’s Superstorm Sandy. Subway tunnels became flooded rendering several tubes and stations inoperable. Parts of the system, including the new South Ferry station, are still closed. Protecting the largely underground subway system from storm surges is ever more important with climate change predictions of rising sea levels and fiercer storms. The MTA has a multi-year, multi-billion dollar program included in the MTA’s five year plan.
Chairman Prendergast explained the needs of the MTA as a function of the value of the assets. The MTA’s assets have been valued at $965 billion or just shy of a trillion dollars. A rule of thumb used by engineers is that about 2-3% of the asset worth is needed for basic maintenance annually. At the lower value that would mean a need of about $19 billion/year. Chairman Prendergast stated that the MTA was budgeting about $8 billion/year for basic maintenance and about $4 billion/year for state of good repair capital work for a total of $12 billion. So he may in fact need more than he’s asking for. On a capital basis if the MTA is spending about $6 billion/year then it is spending about six tenths of a percent a year. Another way to look at it is that it would take about 160 years at $6 billion/year to replace the entire system. Maybe some steel elements have a life span of more than 100 years, but most systems such as electrical networks, rolling stock and rail have a shorter life probably in the vicinity of 40 years or so. Once again, it appears the MTA’s program may be too small to sustain the system long term.
Chairman Prendergast recognized the need to expand the system, pointing out that millennials ride transit more than previous generations and if that pattern continues there will be even more riders. In addition, the city population is expected to increase by over 700,000 people by 2030 further straining the system. In fact, he pointed out that for five days in September 2014 more than six million people rode the subway system. He has set aside about $5 billion for expansion over the next five years. Sad to say, with $5 billion maybe only a mile or two of subway, say expansion of the Second Avenue Subway to Harlem, can be built.
So the MTA clearly needs more money than is budgeted now or even than what the MTA is asking for. At the CityLaw breakfast during the question period I asked Chairman Prendergast what are the potential revenue sources, in addition to the MOVE-NY plan I’ve been advocating, that can support the MTA’s needs. Chairman Prendergast responded by suggesting as one source tapping the value of real estate enhanced by sustaining a modern transit system. He said:
“I do believe it’s important that we get a menu of different funding sources up there that are sustainable. Sustainable in terms of the revenue they bring, and sustainable in terms of their long-term. In the sine-wave cycle that some of these revenue sources have, you hopefully have ones that are in a peak while others are in a valley. Value capture on real estate, there’s different elements of it, different cuts of it, but the idea of Seven West funding, where New York City is giving us [money] to fund the 7 Line is an example of that. There are cases, you can read Crain’s, as recently as 6 months ago, where someone bought a piece of property directly adjacent to the current phase one of the Second Avenue Subway, and they’re selling that property at increased value because of the investment that the MTA and the region is putting into the construction of the second avenue subway. It’s reasonable to expect that some of those profits should be shared by the people who actually made the improvements to the infrastructure and replow those revenues to further increases in the infrastructure network. The other one is cap and trade.”
Value capture on real estate should be pursued and institutionalized. Cap and trade is another idea worth considering. But both will take years before revenue is realized. In the short term I think the MTA and the State of New York has to look at the tried and true approach of using road pricing as a revenue source. The MOVE-NY plan, which I advocate, lowers tolls significantly at bridges that are nowhere near Manhattan’s Central Business District (CBD) and restores tolls to the East River bridges (all built with tolls) and tolls vehicle entries to Manhattan’s central business district across Sixtieth Street. The plan would rise about $1.5 billion/year, more than $1 billion/year for the MTA. It would plug much of the MTA’s funding gap in Chairman Prendergast’s plan and perhaps provide funding for the more aggressive maintenance plan which I believe may be necessary.
Sam Schwartz, the Daily News’ Gridlock Sam, is a former deputy commissioner in the city Transportation Department under Mayor Ed Koch.