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Guide to the Ravitch Commission Report

The long-awaited Ravitch Commission Report was released December 2, 2008. While not a magic wand, the study does make some important recommendations for added stable revenue sources, predictable fare increases, bus service improvements, MTA governance, and improved oversight of MTA’s budget and capital program.

By way of background, in June 2008, in the wake of the failure of the NYC congestion pricing proposal which would have provided an additional revenue stream to the MTA, Governor David A. Paterson created the Metropolitan Transportation Authority (MTA) Financing Commission which he charged with finding new strategies to fund MTA capital projects and operating needs. He appointed as Chairman the former MTA Board Chairman Richard Ravitch and, hence, this group became known as the Ravitch Commission.

Currently, two major MTA dedicated funding sources are highly sensitive to the vagaries of the economy: the real estate transfer taxes (mortgage recording taxes and sales tax portion of the Metropolitan Mass Transportation Operating Assistance) and the New York State corporate surcharge tax. The need for a more stable income stream has long been recognized and has only heightened in light of the unfolding national financial crisis in the latter half of 2008. The MTA announced in November 2008 that there would be a nearly $1.2 billion deficit by the beginning of 2009, mostly due to a faltering economy affecting real estate sales and corporate income. Without additional funding the only recourse would be to drastically raise fares and cut service, actions everyone is loath to see implemented. Therefore, the recommendations of the Ravitch Commission, the product of a six month intensive investigation, carry great import for legislative action in 2009. Indeed, upon accepting the Commission’s report Governor Paterson directed counsel to draft implementing legislation.

The Commission’s findings can be summarized as follows:

  • A new regional Mobility Tax is recommended to be imposed in the twelve county MTA commuter district as an excise tax equal to one-third of 1 percent (.0033) of wages paid, as well as on an individual’s net earnings from self-employment. This tax is expected to generate $1.5 billion on an annual basis.
  • With the exception of the first year of collections, which will be used to support the 2009 operating shortfall of the Authority, the Mobility Tax is proposed to be set aside in a separate “lockbox” that will be under the purview of a new, legislatively created MTA subsidiary – the MTA Capital Finance Authority (CFA). These revenues will be mandated to be used exclusively to pay for new borrowing and direct expenses related to the MTA’s capital program and the debt associated with the Authority’s current portfolio of expansion projects. The one time use of the Mobility Tax revenues should reduce the magnitude of the proposed July 2009 fare and toll increase from the 23 percent proposed by MTA to one of approximately 8 percent.
  • The MTA Board should be empowered to increase fares, without recourse to the full public hearing procedure, for fare increases that are no greater than the change in the Regional Consumer Price Index and no more frequent than every two years. This will provide more predictability in the budget-making process and produce more modest fare increases.
  • The MTA should be authorized to acquire the East River and Harlem River bridges from New York City and it should be empowered to impose an electronic, cashless system of tolls. East River bridges would be tolled equivalent to MTA’s other major bridges and tunnels; and, the Harlem River bridges will charge at a rate of the cost of a single ride subway fare. This additional bridge toll income is expected to generate a net $600 million annually. These revenues would be used for upkeep of the bridges, to pay for the cost of the electronic toll system and to support additional mass transit improvements. It is important to note that there would be no toll booths and no subsequent traffic backups with this proposal.
  • Bus service should be improved in the region, including implementation of Bus Rapid Transit.
  • The MTA statute should be amended to give full executive authority in a full-time chairman (as was the case prior to 2005) serving for a fixed term. According to the Commission, the current situation “is a fixed term Chairman with quite limited authority, and at-will Executive Director who nominally reports to a Board but is more akin to the head of a State agency.”
  • MTA Board members should not be permitted to remain on the Board for a period of longer than six months after their term expires. Further, all new Board members should possess relevant experience in one or more of the areas of expertise that are necessary to serve effectively, i.e., transportation, business management, finance, management of large capital projects and labor relations.
  • Finally, the MTA is urged to implement a variety of new management approaches and additional oversight with respect to the MTA’s budget and capital program. These changes do not require legislation but rather relate to agency processes, organization and culture.

The New York State legislature will be considering these actions in its session beginning in January 2009. Riders and concerned citizens should contact their representatives to urge the passage of some form of these measures to continue the critical revitalization of the MTA system. A well maintained, efficient public transportation system is a key component to the economic vitality of the New York City region. Providing for its financial health must be a priority.