MTA’s Budget Surplus Has Hevesi Taking Aim at Fare and Tax Hikes
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This year’s subway fare hikes and tax increases aimed at boosting the Metropolitan Transportation Authority’s revenue stream were unnecessary in light of the MTA’s ever-growing budget surplus, now approaching $1 billion, the state comptroller, Alan Hevesi, said yesterday.
In July, the MTA projected its surplus to be about $833 million. Yesterday, Mr. Hevesi’s office released a report estimating the surplus will be about $928 million for this year, mostly from a windfall in revenue the authority receives from real estate transaction fees.
Mr. Hevesi called for “rolling back or delaying a fare increase” expected to be put in place in 2007. Fare increases on unlimited ride MetroCards are expected in 2009.
Transit advocates who opposed this year’s fare increases said the MTA had wildly underestimated its projected surplus to help it push through fare increases on unlimited ride MetroCards.
The MTA anticipated a $76 million surplus in February, the same month it began increasing fares and bridge and tunnel tolls.
“I think it’s outrageous,” the executive director of Transportation Alternatives, Paul Steely White, said. “The MTA keeps low-balling their budget projections to lock in future fare increases.”
Mr. White said the MTA should cancel plans to raise the base fare in 2007. Riders pay nearly 60% of the cost of running the subway and bus systems, compared to a national average of about 40%, he said.
“I think riders will be outraged,” Mr. White said. “They’ve already had their pockets picked twice in the last two years. In light of a tenfold increase in the surplus, riders are going to demand to know what’s going on.”
The MTA raised the base fare to $2 from $1.50 in 2003. State legislators in March pushed through several tax hikes to increase the MTA’s dedicated revenue stream. The new taxes included increasing by 0.125% the sales tax within the MTA’s 12-county service area, new motor-vehicle fees, and upping the mortgage-recording tax by 20%, to 30 cents from 25 cents for every $100.
A spokesman for the MTA, Tom Kelly, said no one in the authority or in other ranks of state and local government predicted the huge surplus and that it was likely a one-time event.
The Democratic mayoral nominee, Fernando Ferrer, yesterday criticized Mayor Bloomberg and his four appointees to the MTA board for inadequately disclosing the state of the authority’s finances.
“Unfortunately, under Mike Bloomberg’s watch, no one seems to know what’s going on with the MTA’s finances,” Mr. Ferrer said in a statement e-mailed to The New York Sun.
Mr. Bloomberg, whose appointees voted against the fare increase, did not return a telephone call seeking comment.
While industry experts said the surplus could not have been anticipated, the windfall has nonetheless intensified criticism over the MTA’s proposal in July to build a $481 million platform over the rail yards on the far West Side of Manhattan. The MTA’s executive director, Katherine Lapp, said at the time that the platform could increase the value of the property whose development rights it plans to sell.
“There are many ways to spend the surplus, but developing a plate over the yards is not one of them,” Mr. Hevesi said, adding that it was prudent for the MTA to ask for tax and fare increases late last year before it knew about the surplus.
The chairman of the City Council’s transportation committee, John Liu, said the budget surplus and the authority’s proposal to build a platform over the rail yards called into question the necessity of the fare hikes.
“The MTA consistently used doomsday forecasts to justify enormous fare hikes,” he said. “Increasing fares should always be a measure of last resort, and in this case it seems like it was the first thing the MTA thought of.”
The deputy comptroller, Kenneth Bleiwas, said the amount of new revenue from the tax hikes approximated the cost of the platform.
“Do you think the Legislature would have raised taxes to build a platform?” Mr. Bleiwas asked.
A more prudent idea, Mr. Bleiwas and transportation experts said, would be to use the money to pay off the authority’s debt and pension obligations, or invest it in capital projects that would have the net effect of reducing the MTA’s dependence on borrowing.
Although state and federal money has increased for the current 2005-09 capital plan, the MTA expects to borrow $9.3 billion in the next five years, increasing the percentage of revenue that must be dedicated toward paying off the debt to 18.3% in 2008 from 12.7% this year. If the authority borrows another $9.3 billion to support the next five-year capital plan, the number would grow to 25.7%, the state comptroller said.
“It’s extremely ill-advised for the MTA to be thinking about a major real estate project,” the executive director of the Fiscal Policy Institute, James Parrot, said. Mr. Parrot, who advocates paying off and reducing the authority’s dependence on debt, said the development of the MTA’s building at 2 Broadway, which exceeded its budget in the wake of corruption scandals, has discredited its record as a developer.
Others said the real estate market should determine the fate of the platform.
“If the platform is such a good idea, why isn’t there a developer out there who’d be willing to do it?” the associate director of the Permanent Citizens Advisory Committee, William Henderson, asked.
Mr. Kelly said the MTA board is considering other options, including paying off some of its pension obligations. The board will likely decide on how to spend the surplus at its December board meeting, when it will have a better idea of the size of the windfall.
Mr. Hevesi also reported yesterday that the MTA will have to repair thousands of defective railroad ties on commuter railroad tracks on the Long Island Rail Road and Metro-North Railroad.
The MTA will spend $44.2 million to replace 116,000 concrete ties that have deteriorated well before the end of their 30- to 50-year lifespan. Another 193,000 ties made by the same manufacturer, Rocla Concrete Tie Incorporated, may also be defective, bringing the cost of the repair to $80 million, Mr. Hevesi said. Rocla is considered a leading manufacturer of the ties and was contracted by the MTA, along with a quality assurance consultant.
Although the ties are under a 25-year warranty, Mr. Hevesi said the manufacturer disputes whether the warranty covers the labor involved in installing replacement ties.