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PCAC Statement – July 16, 2014 – Reinvention Commission

Statement of William Henderson, Executive Director,

Permanent Citizens Advisory Committee to the MTA (PCAC)

before the MTA Transportation Reinvention Commission

 July 16, 2014

Good Morning.  I appreciate the opportunity to speak to you as this commission studies our region’s public transportation system and makes recommendations for changes and investments that should be made to more effectively operate, maintain, and improve the system and the service it provides to its riders.  This is a particularly opportune time to be addressing these issues, as the demographics of our nation and region continue to change, we recognize new vulnerabilities of our infrastructure as a result of climate change, and the demands that a new generation of riders places upon our transportation system evolve.

The Permanent Citizens Advisory Committee to the MTA, in addition to studying and providing recommendations to the MTA on questions that go beyond the bounds of a single MTA operating agency, serves as the coordinating body for three riders’ Councils:  the Long Island Rail Road Commuter Council, the Metro-North Rail Road Commuter Council, and the New York City Transit Riders Council.  You will hear from each of the Chairs of our constituent councils today, who will speak to issues that more directly affect the concerns of their particular councils.

Today I would like to discuss with this commission some of the conditions for making wise decisions about the nature of our public transportation system and the resources that we will invest in it.  Clearly the MTA’s capital stock is immense, recently valued by Chairman Prendergast at approximately $1 trillion. A system of this size clearly demands a robust planning function to guide the investment and operational changes that are necessary to meet future needs.  It’s significant that the creation of this commission itself is closely linked to the MTA’s planning function, as you have been charged with reporting preliminary findings in advance of the MTA’s adoption of its next five-year Capital Program.

The MTA currently maintains a Twenty Year Needs Assessment program as a part of its capital planning process.  This function began in the 1980’s and seeks to provide a strategic vision of the necessary capital investments and a framework for prioritizing competing needs.  This program, however, focuses primarily on existing assets and the resources needed to maintain them in or return them to a state of good repair or to protect them.  This work is critical to the health of our region’s public transportation system, but we need something greater if we are to effectively deal with the challenges our region faces.

If the MTA is to plan effectively for its future a more comprehensive plan for the future of the system must be developed. We must not only know what is required to maintain the current system in good operating condition and to protect it from damage resulting from climate change, but also must craft a vision of the region’s public transportation system that transcends current planning efforts.  We must go beyond a twenty-year time horizon, as many of the transformative improvements that will build the system of the future will have useful lives of 100 years or more, and many of the system’s larger projects will require more than 20 years from conceptualization to completion.

We must also plan for our public transportation system in the context of our larger region.  At a minimum, the MTA’s plans must be coordinated with the future initiatives of other transportation agencies, development regulations and incentives, emergency management plans, and other public functions.

Ideally, the MTA would be part of a planning effort that is truly regional and multidimensional, done for its own sake rather than to satisfy federal requirements. The planning framework of the future must also recognize public transportation’s role in driving development, rather than viewing improvements to be undertaken as reactions to existing trends. The development of our region was fundamentally guided by the availability of infrastructure.  Subway lines built through raw land were soon met with new neighborhoods around their stations, but, with a few exceptions such as the 7 line extension, we have given little emphasis to public transportation improvements as a generator of development activity.

Of course, planning will mean nothing if resources necessary to achieve our plans are unavailable, and the PCAC remains apprehensive that necessary resources will not be at hand to make necessary transportation investments. Recent history does little to quell those fears.  The current MTA Capital Program was not fully funded when initially adopted, was reduced to meet available funding, and was largely financed through increased debt backed by funding originally intended to provide capital funds on a pay as you go basis.  The outlook for the next MTA Capital Program is, if anything, worse, as sources of local funding for the projects that will be included in this plan are extremely uncertain.

We continue to be concerned about the MTA’s debt load.  The MTA currently has a debt of approximately $33 billion.  While the Authority is not in danger of reaching its statutory debt limit, which was raised in 2012, this is an exceedingly heavy burden.  As a result of heavy borrowing to fund past Capital Programs, the MTA expects its annual debt service expenses to rise from $2.2 billion in 2013 to $2.8 billion in 2017.  To provide some perspective, in 2017 the debt service that the MTA must pay will amount to over 48 percent of the fares that it collects.

It is our position that the MTA’s future capital needs must be met without bonding against existing revenues.  It is not reasonable to ask an entity that cannot meet its full operating costs through farebox revenues and can only with great difficulty produce a self-sustaining budget to fund capital investments through bonds backed by fare revenues. Despite our misgivings about debt, however, we are not necessarily opposed to bonding as a means of financing capital improvements, as long as additional funding sources that are stable, reliable, and able to grow to meet increasing needs and inflation are made available and dedicated to debt service. Whether the revenues that currently support the MTA meet these criteria is questionable, with the Payroll Mobility Tax regularly under attack by legislators, communication and energy-related taxes facing the prospect of long-term decline, and real estate-related takes subject to large swings based on the fortunes of the real estate market.

The question is where this stable, reliable, and expandable funding can be found.  In past years both the State and City of New York provided substantial capital funding for the MTA.  Presently, the MTA receives no regular capital funding from the State, and, other than funding for the 7 line extension, the City’s contributions to the MTA Capital Program have remained stagnant for almost 20 years, after being cut significantly in the 1990’s, and amount to about 2 percent of MTA capital spending.   In the first two MTA Capital Programs, the State provided 19 percent of the necessary resources, while the City provided between 10 and 14 percent. We need to find new ways that State and local governments can directly make resources available for MTA capital investments.

We also should also take a fresh look at funding sources that are tied to benefits that the system generates in terms of traffic reduction and real estate values.  In addition to its overall economic benefit to the region and State, the MTA system generates specific and significant benefits to motorists and to owners, developers, and users of real estate.  Creating a strong and equitable funding structure for the MTA may require consideration of measures such as rationalization of bridge and tunnel crossing charges to generate additional toll revenue while reducing the negative impacts of “bridge shopping” on neighboring communities.  Another possibility for new revenue is the capture of a portion of the value created through the construction or improvement of transit facilities through special assessment districts or other means.

Finally, the robust planning function necessary for a successful program of capital investment requires an experienced, informed and professional staff of an appropriate size to carry out that function.  The first MTA Capital Program was launched over thirty years ago, and many of those involved in early planning efforts either have retired from the MTA and its agencies or will soon do so.  This loss of institutional memory is occurring throughout the MTA and its agencies, but it is particularly troubling where a degree of perspective is needed to plan for the future system. The MTA’s recent financial difficulties and the resulting elimination of positions throughout the organization profoundly impacted the staffing of positions that are not immediately connected to the operation of the system.  We believe that one of the most important investments that the MTA can make is in its people, and urge that this commission seriously consider this issue as it conducts its deliberations.

Thank you for the opportunity to present our views.  I would be glad to address any questions that you may have.