'Good News' On Fares Risks Future Chaos
AFTER months of flogging from the riding public and some media outlets, Gov. Spitzer has given the people what they want: a smaller fare hike on the city's subways and buses for next year.
Short term, this "good news" may not be as good as it seems. Longer term, the MTA's finances are still a mess, and yesterday's deal likely makes its future problems a little bit bigger - so a future fare hike will be bigger, too.
In real life (rather than in media-and-political-world), the MTA's July proposal to raise tolls and fares was no big deal. Basically, it was going to hike the "base fare" by about 13 percent, from $2 to $2.25, along with hikes in commuter-rail fares and car tolls. This allowed for smaller hikes on the fares that most New Yorkers actually pay - just a 4 percent hike for 30- and seven-day passes, for example, under one of the MTA's two plans.
Nobody likes a fare hike - but subway riders got the better end of that deal. The hikes would've about kept up with inflation, and lagged the price-riseof gasoline or rent, since the MTA last raised fares.
The proposal looked even more modest when viewed against the agency's looming fiscal woes. The hike would have raised about $300 million a year, while the MTA projects $2 billion-a-year deficits starting in two years - that is, a shortfall amounting to 15 percent or so of its expenses. (In fact, it would face a big deficit now if it hadn't run up huge surpluses in recent years.)
But all those deficit numbers are iffy - because a key source of MTA revenue may well plummet off the charts.
About half of the MTA's money comes not from fares, but from government subsidies - including funds dedicated to the agency from taxes on real-estate transactions.
The torrid local property market has pushed receipts from those taxes up by more than two-thirds in the past three years. But the MTA notes that if they drop back to 2004 levels - as they very well could - the agency would "lose" about $300 million a year, starting next year.
But while revenue is uncertain, costs continue to climb. MTA employee health-care costs are up 37 percent since 2004; pension costs, up 79 percent. And payments on the MTA's massive debt are up 82 percent since 2004, to more than $1.5 billion a year. (Thank ex-Gov. George Pataki for that.)
All of which pretty much guarantees that yesterday's deal is, at best, a one-time thing. And it's not much: The MTA believes it can keep the $2 base fare through 2009 - but it hasn't made any specific announcements on unlimited-ride cards and other bonus packages, or commuter fares and tolls.
Why the reprieve? The MTA found an extra $220 million over two years. But that doesn't translate into similar savings every year. More than a quarter of the amount ($60 million) comes from higher-than-expected real-estate-tax receipts - which, as noted, may soon fall short. And nearly half - $60 million in "underspending" and $40 million in lower debt payments - includes some costs that must be paid in future years.
And the numbers don't quite add up. The MTA had expected to raise nearly $600 million over the next two years with its fare and toll hikes - and the "found money" is only a third of that. Barring fresh windfalls, and keeping in mind the governor's pledge not to raise the $2 base fare, that means the hikes in unlimited-ride fares may be only slightly smaller than they were already going to be.
But the big problem starts two years from now - and those numbers really don't add up.
Consider: The modest fare hike next year was only the first step in closing the MTA's deficit. The plan also included another hike in early 2010, to raise about as much money. And the MTA still needs all that money.
Which means that the longer the governor and the MTA stall the hike, the bigger that fare hike will eventually have to be. The now-scrapped 5 percent average fare and toll hike could be 11 percent in two years' time.
And that hike will come just months before Spitzer bids for re-election. Maybe he's hoping that some of the MTA's problems will somehow just . . . go away?
But the odds are that the MTA's finances will only grow worse. Even the current gloomy outlook assumes the agency will see a big jump in government aid ($600 million more per year - about equal to what it expected from the fare hikes) starting in 2010. In fact, the state and city will likely be mired in their own multibillion-dollar budget deficits by then, without extra money for the MTA.
For the real MTA future, it's best to listen to what MTA chief Lee Sander had to say in his July proposal: "There is a steep cliff that will need to be addressed that I believe should be dealt with sooner, not later."
In that light, it would've been more prudent to use the one-time windfall to pre-pay future costs now. Yesterday's deal was a step in the wrong direction - toward the cliff rather than away.
Original Source: http://www.nypost.com/seven/11212007/postopinion/opedcolumnists/spitzers_mta_mess_617187.htm