Even If It Gets the Subway Fixed, the MTA Is Still Broken

The state-run MTA has four new people in charge: one for “innovation and modernization,” one for day-to-day operations, one for big projects like the Second Avenue Subway and one — Chairman Joe Lhota — to keep an eye on the other three.

But Gov. Cuomo hasn’t charged any of them with fixing the authority’s deteriorating $15.7 billion annual budget. Instead, he simply wants the city to pay more.​ The mayor is taking the bait now, reportedly proposing a new income-tax hike on the rich — a terrible idea.

Last week, the MTA tasked Pat Foye, the former Port Authority executive director, with figuring out how to upgrade signals and the like. The MTA has also put two other people — Ronnie Hakim, a longtime transit vet, and Janno Lieber, who rebuilt the World Trade Center towers under developer Larry Silverstein — into a new “Office of the Chairman.”

All seem competent — though two of them, Foye and Lieber, are better at reducing the harm done by political malfeasance rather than reducing the political malfeasance itself. Which appears to be the governor’s preferred strategy.

Foye and Lieber managed to do good things at the Port Authority and for Silverstein respectively. Yet the PA is still a mess, trying to build way too many things at once.

Lieber, too, did a good job of managing the private-sector construction at Ground Zero. But higher-level decisions about what to build saddled New Yorkers with billions of dollars in debt, plus the $4 billion Oculus train station.

Managing the effects of bad political behavior is no substitute for fixing the behavior. Evidence of that is in the MTA’s latest budget, released just as Cuomo was making changes at the top.

The good news: The MTA has precariously balanced its budget for the next two years, plus the rest of this year. The bad news: After that, things get worse. In February, the MTA projected a $372 million annual budget gap for 2020. Now, the gap is double that.

The biggest problem is the slowing commercial property market. The MTA expects to take in nearly $800 million less in its property-related taxes. That’s not because we’re having a recession; it’s because this market was overheated.

Meanwhile, the MTA’s attempts to turn itself around are costly. It will spend $484 million in extra money over four years to increase inspections and maintenance, including $281 million at the subways and bus division.

The MTA benefits from ever-lower interest rates, which make debt cost less. But it’s not enough.

The agency will take some steps to address the deficit — but many are unwise. For example, it won’t make $59 million in contributions to its retiree health care fund, even though it already owes $18.5 billion there. And it will divert $158 million from a construction account.

One of the MTA’s assumptions demands something of the governor: $260 million in extra state money by 2020, to make up for the governor’s decision, in his first term, to reduce the MTA’s payroll tax on small businesses.

And the request is half-justified, in government world. The MTA’s payroll taxes are coming in $138 million higher than expected. But were it not for the governor’s tax cut, in the MTA’s reasoning, they’d be even higher.

A governor who regularly spends a little something on pet projects all around the state doesn’t want to give up some of those precious dollars to the MTA.

And this extra payment just delays $493 million of the deficit to 2021, when, as the authority’s budget officials mildly note, “it will need to be addressed.”

The governor’s slapdash answer: Make the bigger payment under cover of funding a huge new maintenance push at the MTA, and make the city pay, too.

Just before the bad budget news, Cuomo and the MTA asserted that the city should pay at least $236 million in extra operating costs — almost all of the extra subway and bus spending planned. But this would set a terrible precedent. City taxpayers and riders already provide the most MTA money.

Strip away all the theater, and the MTA’s biggest financial problem doesn’t come from its operational failures. Its announcements to improve service aren’t some radically improved strategy, but what it should have been doing all along. “We need short-term emergency financing now,” Lhota said on Sunday — but the fact is that the MTA’s internal incompetence created this emergency.

The MTA’s financial problem is old and predictable: Volatile tax revenues, like those related to commercial property, are indeed volatile.

If the city gives more, as Mayor Bill de Blasio seems set to propose, it’ll be saying that when the MTA can’t manage its budget in the good times, the city will bail it out.

This piece originally appeared in the New York Post

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Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.

This piece originally appeared in New York Post