Paying for Mass Transit without Raising Fares

One of the central elements of Mayor Bloomberg’s plan for a sustainable New York City is to improve mass transit

One of the central elements of Mayor Bloomberg’s plan for a sustainable New York City is to improve mass transit and get people out of their cars and into busses and subways. In addition to better and more frequent transit service, the city also needs to ensure that the price of mass transit is kept under control. In the aftermath of the defeat of congestion pricing, we see that mass transit in this region is under greater financial stress than at any time since the fiscal crisis of the mid 1970’s.

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State and local tax collections are in decline, and the MTA bears the burden of the Pataki philosophy of borrowing to fund transit infrastructure. As a result, the MTA is about to raise mass transit fares for the second time in two years. Gene Russianoff of NYPIRG’s Straphanger’s Campaign argued the other night that the city contributes too little to the cost of transit-providing only 4% of the MTA’s budget. Mayor Bloomberg expressed no interest in raising the city’s subsidy and pushed the MTA to do more with less. Former Mayor Ed Koch made the point that fare payers should pay about 50% of the cost of their ride and Russianoff maintained that riders now pay 58% of the cost of each ride.

In Wednesday’s Daily News, Pete Donahue wrote that:

"City bus and subway riders pay a bigger share of transit operating expenses than straphangers across the nation… MTA bus riders pay 40% of NYC Transit division expenses through fares while subway riders cover 72%, federal transit data show. Riders in other major cities or metropolitan areas like Chicago, Los Angeles, Boston and San Francisco pay significantly less. MTA officials say comparisons are unfair because riders here have a system unlike any other – with 468 subway stations and 24-hour service."

The MTA response misses the point. New York’s larger system also includes larger ridership, and higher revenues to go along with higher expenses. The issue actually has nothing to do with the MTA-and everything to do with our elected officials in Albany who during the Pataki years steadily reduced subsidies for mass transportation. The issue is one of public policy priorities, not the management practices of the MTA. The goals of an effective transportation system are to move people from place to place at the least possible cost and the highest possible speed in as pleasant a way as possible. In this region that means mass transit. Our high population density requires us to reduce the use of autos. We all know that mass transit is more energy efficient and less destructive of the environment than the auto. Currently we use a variety of sources, including bridge tolls, to subsidize mass transit. Obviously, these subsidies are insufficient.

Keeping the fare low requires greater efficiency at the MTA, but no matter how efficient the agency is, public subsidies are still needed. One source of revenue for mass transportation is the real estate transfer tax which has been declining at the same time that energy costs have been rising. Debt service for the MTA is also growing and will total 20% of their budget by 2012. Mass transit is caught in a cost squeeze and new forms of revenue are needed. Some of the capital needs of the agency should be borne by the state and city and not be part of the MTA’s budget. Former MTA Chairman Richard Ravitch and his state-appointed Commission are looking at transit financing and hopefully will develop a realistic long-term plan. The plan needs to take another look at congestion pricing and on raising the other taxes now charged on autos, trucks and taxis.

We need to get away from the idea that mass transit can be funded on the cheap. Capital finance-or borrowing for infrastructure-is appropriate, if the revenue sources are removed from the fare box. If a facility is being used for a decade, it makes sense to pay it off in ten years. One of the best potential sources of revenue for mass transit remains congestion pricing. Maybe, if the choice is between higher fares or high auto use fees, our courageous leaders will reconsider congestion charges. I wouldn’t make any bets…

Paying for Mass Transit without Raising Fares