M.T.A. Increases and Cutbacks

[Kris]

November 5, 2004

Transit Agency Softens Its Plan to Increase Subway Fares

By ANDY NEWMAN

The Metropolitan Transportation Authority scaled back its dismal forecast for subway and bus riders yesterday, saying that while fare increases and service cuts were still necessary, they need not be as drastic as the agency had feared. The price of a 30-day MetroCard will rise to no more than $76 starting next year, the authority said in a proposal made yesterday.

Last month, the agency had said it might need to raise the monthly unlimited-ride MetroCard price to $84 from $70 to help cover a gaping budget hole. But more than $400 million in increased tax revenues and savings has taken some pressure off the agency, said Tom Kelly, a spokesman.

Under the new proposal, the express bus fare, now $4, would be raised to $5, not to $6, and fares on the commuter railroads would rise by about 5 percent rather than 8 percent. Furthermore, the authority said that clerks at more than 150 token booths could be redeployed elsewhere in stations rather than laid off, although booths would still be closed. Layoffs of more than 900 other employees would also be canceled. And a plan to shorten the G subway line by 13 stops in Queens could be shelved for the time being. Plans to make riders wait longer for buses during off-peak hours would also be phased in more slowly under the proposal.

A plan to raise the price of a 7-day MetroCard to $24, from $21, still stands, officials said.

Transit officials stressed that the new proposal had little bearing on the agency's 2006 budget, for which a $1 billion deficit is projected, or on an $11 billion hole in the agency's new five-year plan for capital improvements.

"This is not the end of the financial problems that we have," Mr. Kelly said. "This is a temporary relief for the present time."

Still, with public hearings on fare increases and service cuts scheduled to begin next Monday, the authority is hoping riders will greet the lessening of bad news as, well, good news.

"The M.T.A. is going in the right direction but needs to do more," said Gene Russianoff, a staff lawyer for the Straphangers Campaign, a rider advocacy group.

The proposed changes, contained in a memo that the authority's executive director, Katherine N. Lapp, wrote and delivered yesterday to the agency's chairman, Peter S. Kalikow, will probably be voted on at the agency's meeting next month.

According to the memo, the agency's slightly rosier future was made possible largely by higher-than-expected revenue from general real estate taxes, including the mortgage recording tax, that are collected by the state and earmarked for the M.T.A. Real estate prices have held steadier than many analysts predicted, generating $160 million in extra tax revenue for the authority this year and an expected $117 million next year, officials said.

The agency expects to save an additional $180 million this year and next by delaying for at least a year a series of bond issues (and their attendant costs) and a move of the agency's headquarters, along with other measures.

The authority acknowledged the extent of its financial problems in July, when it announced that it expected a $436 million deficit for 2005 and a shortfall of about $1.3 billion for 2006. The deficits are due largely to the cost of keeping up with payments on a $17 billion maintenance and expansion program that the authority embarked upon in 2000, ignoring warnings from many fiscal watchdogs.

In July, the authority said it would need to increase bridge tolls and mass-transit fares to offset the ballooning debt service.

Forecasts for real estate tax revenue have brightened considerably since July, as interest-rate increases expected in September, which would have hurt the market, never came. But Mr. Kelly said the authority held off revising its proposed increases until yesterday in order to be sure it was putting the most current numbers possible before the public, which has chafed at the prospect of spending more money to get less service.

"The chairman and the committee members have been very concerned about the amount of the increase that would be needed and the severity of all the cuts," Mr. Kelly said. "They have requested the executive director to notify them if there are any adjustments in the figures."

Among the employees who would now not be laid off are train cleaners and bus drivers. The agency had originally proposed increasing the wait for buses during times other than rush hour by up to five minutes on all routes. Yesterday Mr. Kelly said that the agency would begin by running buses less frequently on just a few routes and gradually expand the cuts to other routes.

The more severe cuts still being contemplated for 2006 include reducing evening and weekend subway service, eliminating several branches of the Long Island Rail Road and eliminating all-night bus service on some routes.

Copyright 2004 The New York Times Company

[Kris]

November 10, 2004

Bloomberg Chides the M.T.A. for Its Failure to Control Costs

By ANDY NEWMAN


In the hearing yesterday, board members listened to criticism from Mayor Bloomberg, standing, before an audience of about 150. Two final hearings are scheduled today.

Mayor Michael R. Bloomberg sharply stepped up his criticism of the Metropolitan Transportation Authority yesterday at a hearing on its plans to increase fares and cut service, accusing the agency of presiding over "bloated payrolls" and "out-of-control spending."

Mr. Bloomberg said that rather than ask riders or the state or city for more money, the authority should "look in the mirror" and realize that "business as usual just doesn't cut it anymore."

In recent weeks, the mayor had urged the authority, which runs the city's subway and bus system and suburban rail lines, to "do more with less" and consider raising fares only as a last resort. But his comments yesterday, at a hearing in a theater in the Museo del Barrio in East Harlem, were considerably less diplomatic.

After citing a recent report from the state comptroller that noted, for example, that the authority retained a legal staff of more than 440 people and that its own internal audits had turned up considerable waste, the mayor raised his voice a notch.

"Bloated payrolls, out-of-control spending, needless redundancies," he said. "Ladies and gentlemen, this is no way to run a railroad - and no way to earn the trust of the people who ride the nation's largest bus and subway system, either."

The audience of about 150 people greeted Mr. Bloomberg's comments with applause, though the claps turned to boos when he added that most of the cuts would have to be made not at the top of the authority but "out on the streets and under the ground," among the vast majority of the authority's workers.

Only 18 months after increasing the basic subway and bus fare to $2 from $1.50, the authority announced over the summer that it faced deficits in coming years of more than $11 billion and that more fare increases and service cuts were necessary, although they would not nearly be enough to close the gap.

In its most recent proposal, released last week, the authority seeks to increase the price of a seven-day MetroCard to $24 from $21, a 30-day card to $76 from $70, the express bus fare to $5 from $4, and fares on its commuter rail lines by 5 percent. The authority also wants to close 164 token booths and deploy their clerks elsewhere in stations and to run fewer buses during off-peak hours.

The authority's board members, who sat on the stage of the theater yesterday listening to the mayor and the dozens of speakers who followed him, are scheduled to vote on the changes next month.

Most independent analysts who have studied the transit system have concluded that its situation has been caused not by excessive staffing but by the years of reductions in government subsidies, particularly by the state, and by the size of the debt the authority incurred when it borrowed billions of dollars to fill the financing gap.

The mayor did not address these issues, instead telling the authority to follow the lead of his administration, which he said had cut spending rigorously.

The authority's chairman, Peter S. Kalikow, said his agency was already doing more with less. "We've cut $200 million this year alone and are looking at probably $120 million next year," he said. "But we don't think that we can get to 'no fare hike' just on doing more with less."

The head of a rider advocacy group, Beverly Dolinsky, said she was disappointed by the mayor's comments.

"He knows that this is a debt that can't be filled with service cuts and fare increases and personnel cuts," said Ms. Dolinsky, executive director of the Permanent Citizens Advisory Committee to the authority.

Many of the speakers at yesterday's meeting called on Gov. George E. Pataki, who sets the state's transit financing policy and appoints more of the authority's board members than any other official, to help the authority find more money even if that means creating new taxes.

Ms. Dolinsky said it would have been tricky for Mr. Bloomberg to take on the governor, given the city's own budget gap and its history, extending back to the administration of Mayor David N. Dinkins, of allocating less and less to the transportation authority.

"Not only is he looking for money from Albany," Ms. Dolinsky said, "but people will say, 'How can you attack the governor when you haven't given money yourself?' ''

The authority's public hearings on the fare increases and service cuts will conclude with two sessions at 4 p.m. today, one at Franklin K. Lane School on Jamaica Avenue in Cypress Hills, Brooklyn, and the other at the Westchester County Center in White Plains.

Copyright 2004 The New York Times Company

[Kris]

November 12, 2004

M.T.A. Plans Few Cuts in Its Headquarters Staff

By MIKE McINTIRE

While the Metropolitan Transportation Authority is proposing major staff cuts in the operation of its subways, buses and trains over the next four years, it would spare its headquarters staff from the same reductions, according to authority budget documents.

Barring a significant infusion of money by 2008, the authority plans to reduce the staff at New York City Transit, which runs the city's subways and buses, by 8 percent, about 4,000 jobs. Staff cuts at the Metro-North, Long Island and Staten Island railroads would range from 4 percent to 12 percent, for a total of 900 jobs.

By contrast, the authority proposes to cut just 18 positions - about 1 percent - from its central office, which has a staff of 1,371 and a budget of $300 million.

The disparity between the belt-tightening at headquarters and at the operating level is at the heart of complaints by the state comptroller, budget watchdog groups and Mayor Michael R. Bloomberg, who say the authority is not doing enough to cut administrative expenses that do not affect the riding public.

Although the amount of money to be saved would fall far short of what is needed to close the billion-dollar deficits the authority foresees in coming years, turning the budget knife on itself would give the authority's management more credibility when demanding that riders pay more for less, these critics say.

"Eliminating wasteful management spending at M.T.A. headquarters will send the same message that everyone, from the top on down, takes budgetary discipline seriously," Mr. Bloomberg testified at an authority hearing on Tuesday.

Tom Kelly, an authority spokesman, said that 727 of the employees at headquarters are police officers, whose jobs are considered untouchable because of the need to maintain security in the transit system. Excluding the officers, the reduction in central staff would be closer to 3 percent, he said.

Mayor Bloomberg likes to point out that since taking office in January 2002, he has reduced the staff in his own office by 18 percent, or 104 positions, and the Police Department has shed 3,000 officers, while still managing to take on additional antiterrorism duties. In addition to cutting spending to close multibillion-dollar deficits in recent years, the city also increased the property tax 18.5 percent.

But the authority seems unlikely to embrace the mayor's mantra of efficiency.

At Tuesday's hearing, the chairman, Peter S. Kalikow, said he did not believe the authority could "get to 'no fare hike' just on doing more with less," and he noted that it had reduced spending by $200 million this year and was proposing another $120 million in cuts next year.

The authority, which has an $8.4 billion budget, is projecting a deficit of $745 million this year, rising to $2 billion by 2008. Much of the increase is due to increased interest payments on its debt, which are expected to nearly double to $1.7 billion over the next four years.

Independent budget analysts say the authority cannot hope to close such gaps without a major new source of revenue, like an increase in state and city aid, a tax on commuters from outside New York City or the establishment of tolls on the free East River and Harlem River bridges.

"It's an $8 billion operation, so clearly there has got to be room for savings," said Gene Russianoff, a staff lawyer with the Straphangers Campaign, a rider advocacy group. "But no amount of savings is going to address their debt service doubling in a four-year period. You can't belt-tighten your way out of a mountain of debt."

The proposed staff reductions are included in the authority's four-year financial plan, which says the authority "has embarked on an aggressive program to reduce costs and to achieve expense reductions" in its administration. Reductions in administrative spending account for 30 percent of the amount the authority says it needs to close this year's budget deficit. It proposes to come up with the rest by cutting services and raising fares.

The state comptroller, Alan G. Hevesi, issued a report late last month that was highly critical of the authority's financial management, including its gap-closing plan for this year. Mr. Hevesi said that even the 30 percent reduction in administrative spending failed to focus on staffing levels, which he suggested remain too high.

"Cuts to areas categorized by the M.T.A. as 'administration' total $69.2 million, but two-thirds would come from savings on materials and supplies, postponing new initiatives and from an audit of the employee health benefit trust fund," he wrote.

Mr. Hevesi said the authority still had 698 people in human resources administration, 443 in legal services and 359 in "budget and accounting." By comparison, the city, with a budget of $47 billion, has 257 employees in its Office of Management and Budget.

That the authority's budget documents are even available for public inspection is a change from past years, and reflects a decision by the authority's board to make its financial-planning process more open. Although the greater transparency provides the opportunity for more-informed scrutiny, it also shows that not all of the authority's various departments approach the process of long-range budget cutting with the same degree of enthusiasm.

One department, bridges and tunnels, submitted a plan that includes just one job reduction from a staff of 1,816 people. Another department, Long Island bus, with 1,194 employees, plans no staff cuts for the foreseeable future.

Copyright 2004 The New York Times Company

[BrooklynRider]

This really is one of the most bloated agencies around. When you consider the size and concentration areas of their staff, it is hard not have your jaw drop that their only solution is the mantra, "Fare Hike"

[Kris]

November 13, 2004

M.T.A. Officials Argue That Fare Increases Are Justified

By ANDY NEWMAN


Katherine N. Lapp, the Metropolitan Transportation Authority's executive director, and Peter S. Kalikow, its chairman, at a hearing yesterday.

Top officials of the Metropolitan Transportation Authority defended their proposed fare increases yesterday after a state legislator questioned their recent decision to put a $200 million windfall into a rainy-day fund.

The legislator, Assemblyman Richard L. Brodsky, the chairman of the Assembly's Standing Committee on Corporations, Authorities and Commissions, said the authority had not made its case that a fare increase in 2005 was absolutely necessary. The authority seeks to increase the price of unlimited-ride MetroCards, train tickets and bridge tolls to help close a $436 million gap in its operating budget for next year.

"I do not think you have justified the need for a 5 percent fare hike, based on the events of the last week," Mr. Brodsky told Peter S. Kalikow, the chairman of the authority's board, and Katherine N. Lapp, the authority's executive director, during a hearing at the Assembly's office in Lower Manhattan.

Mr. Brodsky was referring to published reports last week that between cost-saving measures and higher-than-expected proceeds from real estate taxes dedicated to the authority, the M.T.A. had an extra $300 million on hand.

Ms. Lapp had recommended using $90 million of the extra money to prevent layoffs and service cuts and $200 million to set up a "stabilization fund," which could either serve as a hedge against future revenue drops or give the authority a head start on closing its projected 2006 operating deficit.

Mr. Kalikow and Ms. Lapp told Mr. Brodsky they thought the fare increases were the best course of action. The agency's most recent proposal calls for the price of a seven-day MetroCard to rise to $24 from $21; the price of a 30-day card to rise to $76, up from $70; fares on the commuter railroads to rise around 5 percent; and bridge and tunnel tolls to go up by 50 cents.

After the meeting, Ms. Lapp and Mr. Kalikow said, in essence, that a rainy-day fund was a necessity given that the agency's long-range budget forecast calls for a 100 percent chance of a deluge of debt. Because of delayed debt-service payments coming due, the projected deficit in the operating budget for 2006 is more than $1 billion, and is set to grow in the years that follow.

"Basically what I've been charged by the M.T.A. board is to come up with a good fiscal plan that will see this agency through its next couple of years when these fiscal problems are looming," Ms. Lapp said.

Mr. Brodsky, who has held a series of hearings on the authority's finances, noted that $200 million was about the amount the fare increase was expected to bring in.

"They have enough revenues to go forward without a fare increase," he said. "Whether that's good long-term policy is a second issue. But they came to us with a model for how you raise fares, that it's used to close an operating gap and it's a last-resort deal. Then they find additional revenue that means they don't have an operating gap, but they want to raise the fare anyway. I have a problem with that."

At least once in the past, the authority tried to put away money in reserve and the savings were raided to help balance the state budget.

Mr. Brodsky, a Democrat, also tried to prod Mr. Kalikow to hold Gov. George E. Pataki responsible for the authority's fiscal problems, which include an $11 billion shortfall in financing for the authority's new five-year capital plan. The governor sets the state's transit policy and appoints more members to the authority's board than any other official, and the agency is generally seen as under his control.

Mr. Kalikow would only say that it would take a coordinated effort by all branches of government to come up with a way to finance the capital program, which pays for long-range maintenance and system expansion. He said the authority would propose a financing plan for the program within a few weeks.

Copyright 2004 The New York Times Company

[Kris]

November 20, 2004

Transit Experts Say Savings Alone Won't Bail Out Agency

By RICHARD PÉREZ-PEÑA


Because of discounts on MetroCards, like those sold at this Grand Central stop, subway riders pay less per ride on average than they did in 1996.

The people who run the metropolitan region's financially troubled transit network are getting no shortage of suggestions for how to save money and refrain from demanding more from riders.

Gov. George E. Pataki wants laws passed to streamline the Metropolitan Transportation Authority and possibly reduce its pension costs. Mayor Michael R. Bloomberg demands that it rein in "bloated payrolls, out-of-control spending, needless redundancies." State Comptroller Alan G. Hevesi says hundreds of desk jobs could be eliminated. Financial watchdogs outside government cite ideas like privatization.

Predicted savings from combining all such ideas range from less than $50 million a year to perhaps as much as $200 million a year, depending on who does the predicting. But the authority says it must come up with at least $14 billion in new revenue over the next five years to cover day-to-day operations, payments on its debts, maintenance and planned capital improvements.

As a result, the people who manage transit systems or study them for a living say the authority needs either much higher fares; or billions of dollars in additional help from City Hall, Albany and Washington; or more likely some combination of both.

"If you're going to keep up the service and make improvements, you're going to raise fares on a regular basis, and you'll need significant, predictable government support," said Robert R. Kiley, commissioner of London's transit network, who was chairman and chief executive of the New York system in the 1980's. "That's been missing in New York."

New York has a century-long tradition of politicians' fighting higher transit fares, a resistance that contributed to the bankruptcy of many private rail and bus companies whose fares were controlled by government. Each proposed increase is typically greeted by great protest, a reaction that may explain why the base fare has risen just once in nine years. Thanks to MetroCard discounts, New York City riders actually pay less per ride on average than they did in 1996.

State subsidies have risen, but only because taxes earmarked for transit generate more money than they used to; the city and state contribute less cash directly from their budgets today than they did in the late 1980's. And these days, the state and city have little money to spare.

The current administration at New York's transportation authority is trying to alter this landscape, to change the way the public and politicians think about how to pay for mass transit. Peter S. Kalikow, the chairman, and Katherine N. Lapp, the executive director, are asking for much more government support and a fare increase, and are talking about regular fare increases every two years.

Despite the occasional call for self-sufficiency, transit experts say that no large system anywhere in the world gets by without heavy government subsidies, and New York's system is less subsidized than most.

"It could never be completely self-supporting," said Robert E. Paaswell, director of the University Transportation Research Center at City College, and a former executive director of the Chicago Transit Authority. "You would have to set the fare so high you would drive away riders."

Adam Barsky, deputy secretary to the governor and Mr. Pataki's liaison to the transportation authority, said higher fares and more government help may be needed, but first, "I think we have to exhaust all of those options and avenues" for cost-cutting.

Of all the ideas that have been floated for raising or saving money without higher fares or government subsidies, there are just two that, according to their supporters, could generate hundreds of millions of dollars a year: turning some of the bus lines over to private companies, and putting tolls on the East River and Harlem River bridges. But such claims are not universally accepted, and each idea would face fierce political opposition.

Some conservatives say cities like London and San Diego have had some success in turning bus lines over to private companies through competitive bidding.

"We took a pretty good look at this a couple of years ago and concluded that they could save 38 percent on bus operations," said E. J. McMahon, a senior fellow at the Manhattan Institute, a policy research group. Even so, he said, fares would need to be higher.

Transit officials and more liberal analysts contend that privatization would save little money, if any, in part because federal law makes it hard to cut labor costs by transferring the service to private contractors. Labor unions and many politicians would try to block any move to turn bus service over to private lines, and even Mr. Pataki, a Republican who generally favors privatization, has never embraced the idea.

Groups like the Independent Budget Office and the Regional Plan Association have promoted the idea of charging tolls on the city-owned East River and Harlem River bridges, and investing the revenue in mass transit. This idea is raised every few years, and never gathers much support, and would also need the approval of the State Legislature.

Savings from the more widely accepted ideas, like streamlining administration, merging some offices and changing the way pensions are financed, would most likely be measured in the tens of millions of dollars a year, according to government and transit officials.

As it tries to solve its budget problems, the transportation authority may look to the examples of other urban centers. While these may be apples-and-oranges comparisons, they typically show that riders in the New York region bear a greater share of the financial burden for their transit systems than riders elsewhere.

New York City subway fares, for instance, pay about two-thirds of the cost of operating the subway, and more than one-third of the combined operating and capital expenses. Those are higher proportions than those of any other big transit system in the country, according to figures compiled by the American Public Transportation Association and the federal Department of Transportation.

By the same measures, New York City's buses rank near the top among the nation's bus systems, and the authority's Metro-North and the Long Island railroads are around the middle of the pack of commuter railroads.

New York's transit officials like to cite those figures, but the comparison to other American cities is imperfect. New York's system, especially the subway, is so much more heavily used that it is almost guaranteed to collect far more fares per train, or per mile, allowing it to be more self-sufficient.

The most apt comparison may be abroad, with major cities like London, Paris, Berlin, Moscow, Hong Kong and Tokyo. New York's system is more self-sufficient than most, but not all.

London's transit system comes closer to paying its operating costs, in part because its fares are higher. But it cannot cover most capital costs, one reason the Tube has fallen into disrepair over the years. New lines added over the last three decades were paid by the central government, even under no less an opponent of big government than Margaret Thatcher.

Hong Kong's subway is often cited as the only one in the world that pays all or nearly all its expenses, but it is a smaller, more crowded system than New York's, generating many more fares per mile. In addition, land that the government sold at a depressed price to the subway system soared in value when a new line was built there, turning the transit agency into one of the city's biggest landlords. Income from that real estate helps pay for the subway.

"Various people, including us, have tried to compare the world's great transit systems, how they perform financially," said Mr. Kiley, the London transit chief. "There's no clear answer, of course, but it's safe to say New York holds its own."

Copyright 2004 The New York Times Company

[ablarc]

"...charging tolls on the city-owned East River and Harlem River bridges, and investing the revenue in mass transit. This idea is raised every few years, and never gathers much support..."

Why not?

This seems like such a natural idea. It would simultaneously raise revenues and cut congestion, especially if the tolls were high, like Livingstone's congestion tax in London. And if the tolls were low it would hardly have any impact on bridge users, who are a relatively small percentage of commuters anyway.

Cabbies and truckers? Just part of the cost of doing business.

[NewYorkYankee]

rasing on those bridges would make it MORE congested to me, I think.Cars would have to wait in line to go through the toll, and you know how it gets crowded sometimes. Areas around the bridges would probably become high traffic 24/7

[Kris]

November 21, 2004

THE CITY

Fix Today's System First

Commuters in the New York area are expected to sigh with relief now that proposed fare and toll increases have been cut back from horrific to unwelcome. That lukewarm news, however, obscures a far more important point. The Metropolitan Transportation Authority still faces a $436 million deficit this fiscal year, and that shortfall may as much as triple next year. Even the fare increases that have been postponed would have been only a modest down payment on the huge bill to come.

The authority is run by officials who are basically the creatures of the state and local politicians who appointed them. Those same officials have been the cause of many of their own problems by criticizing fare hikes while promoting new building programs the system cannot afford. The authority adopted an unsustainable $17 billion capital improvement plan in 2000, and the politicians are still talking about grand plans for new subway lines hither and yon.

The bottom line is this: Nobody should be planning new lines and tunnels if we cannot afford to maintain or upgrade what we already have. That means that Gov. George Pataki should give up on his hopes for a tunnel across the East River to link Long Island and Grand Central Terminal. It means that Mayor Michael Bloomberg should stop pining for a rapid connection from downtown to Kennedy Airport, or for an extension of the No. 7 subway line to the West Side of Manhattan. It means that the Assembly speaker, Sheldon Silver, will have to stop dreaming about cutting the ribbon on a new Second Avenue subway from the Upper East Side to his district in Chinatown.

We like most of those plans, particularly the extension of the No. 7, which is a much more efficient key to developing the far West Side than Mr. Bloomberg's ill-advised football stadium. But politicians cannot ask for more until they have made sure that existing infrastructure is in good working order and that commuters paying higher fares will not have to wait in longer lines for fewer buses.

State Comptroller Alan Hevesi has some good ideas for cutting costs, but the mass transit system cannot get out of its current hole solely by trimming fat. Mr. Pataki and the State Legislature should look for an inventive revenue source - like a small increase in income taxes for those in the authority's region, a kind of commuter tax for all users. And Mr. Bloomberg should find a way to contribute more.

In short, the politicians whose job it is to protect the system should spend less time dreaming of the future and more time in the here and now.

Copyright 2004 The New York Times Company

[TLOZ Link5]

And East Siders' hopes for some relief are crushed yet again. Maybe they'll get it right in another 29 years.

[NewYorkYankee]

AGREED. Anyways...is the nyc subway the largest subway system in the world? in terms of length?

[Kris]

December 4, 2004

M.T.A. Seeks Tax Increases Over 5 Years

By CHARLES V. BAGLI and MICHAEL LUO

Moving to address its financial crisis, the Metropolitan Transportation Authority is proposing to increase a half-dozen business, real estate and fuel taxes to raise $900 million a year to help pay for the transit network's five-year rebuilding program.

The proposal by the authority's chairman, Peter S. Kalikow, is being presented to the Pataki administration and the State Legislature as a way to deal with the authority's crushing debt and capital costs, a financial burden that has forced the authority to consider a mix of transit fare increases and service cuts when the authority's board meets Dec. 16. Mr. Kalikow is an appointee of Gov. George E. Pataki, and his plan presents a challenge to the Republican governor, an ardent opponent of higher taxes who has yet to come up with his own plan to meet the expenses.

The proposal includes raising the real property transfer tax and mortgage recording taxes, new levies that could cost homeowners and businesses hundreds if not thousands of additional dollars during property transactions. Mr. Kalikow also proposed raising corporate taxes and the petroleum business tax, a tax paid by importers of foreign fuel. The new taxes, to be applied statewide, would not prevent the fare increases or cutbacks that are being considered this month, but by supplying the debt service on a bond issue, it could improve the authority's financial situation in future years.

In an effort to demonstrate the authority's desperate financial situation and gain support for a plan that could be politically volatile, Mr. Kalikow and Katherine N. Lapp, the authority's executive director, have been meeting quietly over the past two weeks with business leaders from groups like the Real Estate Board of New York and the Partnership for New York City.

The authority needs to come up with $16 billion in new revenue over the next five years to cover planned capital improvements, like bringing the Long Island Rail Road into Grand Central Terminal and buying new rail cars for the Metro-North system. Of that, $11 billion is needed just to keep the system in good repair. The authority has also announced that it will need a series of additional fare increases starting in 2007 to cover multibillion-dollar operating deficits projected for the coming years.

Mr. Kalikow developed his plan partly because of the lack of action in Albany to deal with the authority's fiscal problems. The new capital plan starts in January, and any plan to raise taxes would have to gain approval from the Legislature and the governor.

People who have spoken with authority executives say the tax increases, which would be earmarked exclusively for transportation, would provide a stream of cash enabling the authority to float up to $13 billion in bonds.

Mr. Kalikow and Ms. Lapp yesterday confirmed that they had begun talking to civic and business groups about a solution to their fiscal woes. But they declined to go into detail. The authority is expected to deliver the proposal on Monday to the Capital Program Review Board, which is made up of appointees of the governor, the legislative leadership and Mayor Michael R. Bloomberg.

Although civic and business groups have generally been united in their support for the transportation authority's rebuilding program, Mr. Kalikow's proposal is getting mixed reviews even before it reaches Albany.

"We're not thrilled at higher taxes," said Steven Spinola, president of the Real Estate Board of New York. But, he added: "The capital plan is important, and we recognize that the industry is going to have to share in the pain. This seems to be a fair attempt to have everyone participate in the pain of raising $12 billion."

Robert Yaro, president of the Regional Plan Association, and Richard Ravitch, a former authority chairman, expressed strong support for the plan, because, they said, the region needs a thriving public transportation system to prosper.

Mitchell Pally, vice president for government affairs for the Long Island Association, a business group, did not disagree, but he opposed increasing business taxes.

"I don't think there's any question that the business community is going to have to pay a larger share than it pays now," Mr. Pally said. "The question is what is equitable and what that share should be. I would say, at least in relation to the corporate surcharge, that is going to be a very difficult sell."

Kathryn S. Wylde, the president of the Partnership for New York City, which met with Mr. Kalikow and Ms. Lapp on Thursday, said that Mr. Kalikow was "absolutely right to be fighting for whatever resources are necessary" to keep the region's subways and trains running. But, she said, her group also opposes increasing business taxes.

She said her group favored reinstating a commuter tax, which would effectively ask people in the outlying suburbs to pay their share of the costs. But, she said, Mr. Kalikow believes that the commuter tax is not viable politically. That tax, in any event, would raise less than half the amount in the authority's proposal.

"The commuter tax is the fairest way to go," Ms. Wylde said, "but if it's not feasible, we'll have to go to Plan B."

At a hearing sponsored by Assemblyman Richard L. Brodsky last month, Mr. Kalikow promised to put forward his own plan to revitalize the authority.

"Peter Kalikow is keeping not just a promise he made to my committee but to everybody," Mr. Brodsky said yesterday. "He's made a lot of people very uncomfortable. If you don't have a good subway and commuter system, the economy will falter. The leaders of the private sector will have to make some harder choices."

The decision by the authority to peddle its own plan to pay for its capital program is an unusual one. Those plans have traditionally been left to politicians to devise. The one notable exception came in the 1980's, when the system was on the verge of collapse and Chairman Ravitch came up with the idea to issue a five-year capital program to pay for repairs and lobbied for a slew of dedicated taxes to pay for it.

Portions of six separate taxes are already dedicated to the authority. Mr. Kalikow is proposing a 50 percent increase in the amount of money generated by these taxes. For instance, under the proposal, the one-quarter-percent portion of the mortgage recording tax and the transfer tax on commercial buildings that goes to the authority would be increased to three-eighths of a percent.

Beverly Dolinsky, the executive director of the Permanent Citizens Advisory Committee to the authority, said, "Usually, the M.T.A. states the problem and leaves it up to their funding partners to come up with the solutions." But, she added: "The funding partners have not been forthcoming. At least this starts the discussion."

Copyright 2004 The New York Times Company

[NewYorkYankee]

MTA to ask for tax boost

Newsday


December 5, 2004, 8:37 PM EST


The MTA will today ask for a 50 percent boost in revenues from several state taxes to help pay for a five-year program to expand, maintain and secure the region's transportation network, officials said Sunday.

But the plan might not have the support of Gov. George Pataki, who controls the MTA and whose support for the tax hike would be critical.

"The governor ardently opposes tax increases and has not yet been presented with this proposal by the MTA," a spokeswoman, Lynn Rasic, said Sunday.

She declined to say how the governor plans to fund the capital plan, which faces a $16 billion hole.

MTA chairman Peter Kalikow's request, made in a letter to be sent to a state panel that oversees the capital program, warns that if the funds are not forthcoming, the region's transit network could slide into disrepair.

What's more, the MTA might also be forced to abandon ambitious expansion projects like the Second Avenue Subway and the Long Island Rail Road connection to Grand Central Terminal in favor of basic maintenance.

"There is no question that expansion is the proper policy to pursue," Kalikow says in the letter, which was read to a reporter. "But without the core program to shore up our existing infrastructure, the transit system will inevitably begin to deteriorate, and we will not let that happen."

A 50-percent increase in the taxes would generate about $850 million a year, officials said. The capital program calls for $27.6 billion to be spent from 2005 to 2009.

Kalikow asks for increases in real estate, business, gas and other taxes, but no change to the sales tax. He has previously indicated a willingness to float more fare-backed bonds to pay for the next program, even as debt service from previous bonds is causing significant strain on the agency's operating budget. The authority is expected to raise fares on Dec. 16, but still faces a deficit of more than $1 billion in 2006.

Kalikow set a deadline of mid to late 2005 for an increase in state aid to the agency, saying that if money doesn't begin to flow by then, he will direct executive director Katherine Lapp to use an unspecified amount once slated for expansion projects for maintenance instead.

"We cannot jeopardize our core infrastructure," he wrote.

[Kris]

December 7, 2004

Winners in M.T.A.'s Bond Sale: Underwriters and Politicians

By JIM DWYER

Four years ago, the governor of New York and leading state legislators gave permission for the Metropolitan Transportation Authority to pay off old bonds by borrowing $14 billion, creating a steep pile of new debt for a transit system filled with ancient structures, middle-aged equipment and little money to replace them.

Today, with the M.T.A. facing short- and long-range financial crises, the public benefit of that decision remains a matter of vigorous dispute.

Yet for two small groups involved in the $14 billion borrowing - the seven private underwriting firms commissioned by the M.T.A. to raise the money, and leading state political figures who wield influence over the M.T.A. - the bond issue has been an unambiguous success, an analysis of public records shows.

The sales of the new bonds generated an estimated $85 million in commissions and fees to the M.T.A.'s bond underwriters, lawyers and financial advisers.

In pursuit of a share of profits from those and other M.T.A. deals, the underwriters reported that they paid more than $3 million to consultants, among them three men with ties to Gov. George E. Pataki, who appoints the M.T.A. chairman.

And even though the securities industry has tried to limit campaign contributions by companies doing bond work for public agencies, the firms hired by the M.T.A. gave at least $1.1 million to state political funds since 2000, when the decision to borrow the money was announced.

Their political contributions peaked in 2002, when most of the bonds were issued. That year, the firms made $408,000 in campaign contributions, twice as much as they gave in the years before and after.

The largest was a check for $100,000 paid to the New York State Republican Housekeeping Fund in 2002 by a political action committee at J. P. Morgan Chase, which was the lead underwriter that year on $1.8 billion in M.T.A. bonds. A spokesman for the bank, Michael Dorfsman, would not say what prompted the contribution.

A spokesman for the M.T.A., Tom Kelly, said the contributions had no bearing on which underwriting firms were selected. All of the M.T.A. underwriters work with other New York agencies as well.

Since 2000, the state's Republican Party or its candidates received about $2 from the M.T.A. underwriters for every $1 given to Democrats, the records show.

In that period, UBS Financial Services gave $62,000 to the Conservative Party, a small but influential presence in New York that has delivered its spot on the ballot to Governor Pataki all three times he was elected. UBS also contributed $115,000 to the Democratic Party, which controls the State Assembly, and $109,000 to the Republicans, who hold a majority in the State Senate, along with the governor's office.

A spokeswoman for UBS, Susan Austin, said, "All contributions made by UBS Financial Services Inc. as a firm - and contributions made by the firm's employees - are made in compliance" with industry rules and state laws.

The adequacy of those rules has been reconsidered in recent months by the governing body of the public finance industry, the Municipal Securities Rulemaking Board, which has expressed concern that government agencies, known as issuers, have pressured underwriters seeking their business to hire certain consultants or make political contributions, according to the board's executive director, Christopher A. Taylor.

"The board members are well aware of what practices are going on, the pressures being brought to bear on them by issuers," Mr. Taylor said. "We were looking at trends that caused concern on the part of the board: increased use of consultants, increased compensation, increased political giving." He was speaking, he said, about the industry in general and not a specific agency.

In the early 1990's, the board developed regulations to eliminate "pay to play," the practice of underwriters making campaign contributions in exchange for public business. Even so, these rules - issued after widely reported scandals in the industry - have allowed underwriting firms to continue to make substantial political contributions in New York and elsewhere.

Political money may be given by affiliates of the underwriters not directly involved in public finance or can be channeled into general party housekeeping accounts, Mr. Taylor said. The board warned the industry last year that payments to political housekeeping accounts could not be used to make contributions that were otherwise forbidden, he said.

As for consultants, the board recently proposed banning them but dropped the idea after protests from its members, Mr. Taylor said. It is now considering other limitations.

Nixon Peabody, a law firm that was paid $812,000 by the M.T.A. to work on the bond issue - and which is not bound by the same nominal limits on political donations as the underwriters - has given $91,000 to Friends of Pataki since 2000, making it the largest corporate contributor to the governor's campaign.

The firm works with many agencies in New York other than the M.T.A. Including contributions from some of its partners, the firm gave at least $232,000 to public officials and political parties at every level of government in the state, the records show.

Arthur F. McMahon, a partner in the firm, did not respond to a request for comment.

Goldman Sachs, which was paid $12 million by the M.T.A. to be a financial adviser on the bond refinancing deal, gave at least $136,500 to state Republicans and Democrats.

The smallest amount given by any M.T.A. underwriter was $7,000 from a firm then called Salomon Smith Barney.

In 2000, when the M.T.A. solicited proposals for the underwriting positions, Merrill Lynch contributed $15,000 each to the housekeeping accounts of the state Republican and Democratic parties; in mid-2002, the company hired Powers, Crane & Company, a firm that included William Powers, the former chairman of the state's Republican Party.

Mr. Powers, now in a firm called Powers & Company, is being paid $16,000 a month to help Merrill Lynch gain state business, according to the latest disclosure records. He did not return a call requesting a comment on his role.

Mr. Kelly, the M.T.A. spokesman, said that seemingly influential consultants played no role in the choice of underwriters. "None of the people that you mention were involved in the selection process, met with anyone in the selection committee, or to the best of what they're telling me, ever discussed it with anybody," Mr. Kelly said.

At least two of the M.T.A.'s underwriters, however, stated unequivocally that their consultants helped them get M.T.A. business, according to disclosure forms.

First Albany, which did not participate in the $14 billion refinancing but went on to capture other M.T.A. work, listed Davidson & O'Mara as its consultant, for a fee that reached $20,000 a month. John O'Mara, the former chairman of the Public Services Commission under Governor Pataki, is a partner in the firm. He is the chairman of a panel that screens judicial candidates for the governor, and also represents him in negotiations over Indian tribal land claims, many related to casino development.

First Albany did not reply to a request to discuss the matter, but shortly after it was selected as one of the underwriters for M.T.A. work in 2000, the company reported that Mr. O'Mara had made that happen. "First Albany was recently appointed to the senior manager rotation of the Metropolitan Transportation Authority," the report stated, under the heading "municipal securities business obtained or retained" by the O'Mara firm. The report was submitted to the Municipal Securities Rulemaking Board.

Similarly, disclosure forms filed by UBS Financial Services state that Douglas Rutnik, employed at a fee of $5,000 a month, plus bonuses, helped it win M.T.A. business. Beginning in 2003, he was employed by Morgan Stanley at $10,000 a month, plus bonuses, according to disclosure forms, but these do not list any successes.

Mr. Rutnik, who did not respond to a request for comment, is solidly grounded in both political parties. A prominent upstate Democrat, he was a frequent hunting companion of the late Erastus Corning, the mayor of Albany for 42 years, and he has also been the companion of Zenia Mucha, the former director of communications for Governor Pataki. Mark Lane, a spokesman for Morgan Stanley, said the firm would not discuss Mr. Rutnik's services.

The M.T.A. bond sales are described in the industry as the largest refinancing in the history of municipal bonds. The amount of money borrowed is more than the cost of the most expensive public works projects ever undertaken by the state. Yet only a fraction of it will go toward the purchase of tangible new things like subway cars or new track.

Most of the money raised went to paying off existing bonds that were due to be retired within the next decade. The interest on the bonds that replaced them will continue until 2034. In effect, the M.T.A. has prolonged the payments for equipment bought years ago, and increased the interest costs by $8.6 billion, according to a report by Alan G. Hevesi, the state comptroller, and Kenneth B. Bleiwas, the deputy state comptroller for New York City.

Gene Russianoff, who has closely monitored the transit system for 25 years as a leader of the Straphangers Campaign, warned in 2000 that the refinancing plan, while granting a short spell of fiscal peace, simply postponed some problems and would cripple the system with debt. In a rare alliance, Mr. Russianoff was joined in his critique by a former M.T.A. chairman, Robert R. Kiley, and the president of Local 100 of the Transport Workers Union, Sonny Hall, as well as independent budget monitors.

Nevertheless, a capital review board with delegates from the State Legislature, the governor and the city gave their approval to the refinancing.

M.T.A. officials said that by refinancing at lower interest rates - along with improvements to its bond ratings - the agency received about $4 billion in "new money." That let the agency pay for its capital program for a short period without immediate pressure on the state budget or transit fares.

That respite has ended. The annual interest costs borne by the transit system will double between this year and 2008, according to the controller. By then, payment on the debt will command 21 cents of every dollar collected by the M.T.A.. Even with significant service cuts, M.T.A. officials say, fare increases will be needed to pay the mounting debt burden and higher labor costs.

Moreover, the costs of the 2002 bond refinancing will absorb so much money in the coming decades that the M.T.A. does not have funds to pay for ordinary replacement of equipment and facilities that have reached the end of their useful lives.

When Mr. Hevesi issued a report critical of the M.T.A. in late October, Peter Kalikow, the current chairman of the M.T.A., said responsibility for the $14 billion borrowing program rested not just with the M.T.A. but across a spectrum of New York public officials.

"He ignores the fact that the entire plan and its financing structure were unanimously approved by the Capital Program Review Board, comprised of representatives of both city and state government," Mr. Kalikow said in a written reply to Mr. Hevesi's report, alluding to Mr. Hevesi.

Last week, Mr. Kalikow proposed an array of tax increases to finance the agency's capital needs.

Copyright 2004 The New York Times Company

[Kris]

New roadblock for MTA funding plan

BY JOSHUA ROBIN
Staff Writer

December 6, 2004, 9:22 PM EST

The MTA's plan to fund capital projects by raising several state taxes suffered another setback Monday, when a key state legislator said he was against the idea.

A day after Gov. George Pataki raised similar concerns, Sen. Dean Skelos (R-Rockville Centre), one of four members of a state panel that reviews the MTA's capital program, said he would not support increases before the authority pares down what Skelos considers an irresponsible wish-list.

"Before you figure out how to pay for something, you have to figure out what you need to pay," said spokesman Thomas Dunham. "They've limited any dialogue to the 'Cadillac' plan that they first floated."

Metropolitan Transportation Authority officials, faced with a $16 billion gap in the agency's five-year capital plan, propose that the legislature and governor raise by 50 percent several taxes, including some statewide, real estate transactions, car fees, gas and other items.

The boost is expected to yield $850 million annually, which would be used to pay off debt service. That money would then be used to pay for the system's maintenance, expansion and security.

The suggestion drew immediate resistance from Pataki, who appointed MTA chairman Peter Kalikow and largely controls the agency. The governor has long said he is opposed to increasing taxes.

Why Kalikow would propose an idea that would be rejected by his boss was the subject of debate yesterday among transit observers.

An MTA spokesman would not comment. But Mortimer L. Downey, who served as the agency's chief financial officer and then executive director in the 1980s and 1990s, said that Kalikow might have simply wanted to begin talks on funding.

"I see this just as an opening round," said Downey, now a Washington-based transportation consultant. "It puts the ball on the other side of the court."

Others speculate that Kalikow was seeking to elbow into the fray for funds ahead of the release of the governor's executive budget in January. Pataki is under intense pressure to pay for the bulk of a $5.6 billion annual subsidy that a state panel earlier this month ruled needed to be added to city schools funds.

The MTA's tax increase proposal is now before the Capital Program Review Board, which consists of representatives from the governor, both houses of the State Legislature and the New York City mayor.

A State Assembly representative declined to comment, while a spokesman for Mayor Michael Bloomberg said that city officials were reviewing it.

But Kalikow's proposal received praise yesterday from the planning group, Regional Plan Association, and the Fiscal Policy Institute, a nonpartisan economic research organization.

"This is an important first step," said James Parrott, the Fiscal Policy Institute's deputy director and chief economist. "The clock is ticking on the five-year MTA capital plan, and there needs to be resolution on this."

Copyright © 2004, Newsday, Inc.