In my post on a way out for the MTA, I proposed making the subway and commuter rail systems semi- self funded. They would be required to cover their costs on an “auto-equivalent” basis, with riders paying for the ongoing purchase, maintenance and operation of railcars and the collection of fares through fares – but not for tracks or stations. Motor vehicle drivers, after for comparison, pay to purchase, maintain and operate their own motor vehicles, but they drive on streets funded by general taxes (as well as highways and bridges funded by gas taxes and tolls). A simple requirement for specific costs to be covered could cure some of the dysfunctional politics that is destroying the transit system.
The MTA’s rail transit services are essential to the functioning of the state’s economic base, and need to be protected from those who would gladly destroy them to gain more for themselves. Simply put after 30 years of self-dealing by Generation Greed, those who are not willing to pay for public services will not have them. Taxes are going elsewhere, to the retired and the debts they ran up. If the rail transit systems could cover their costs based on a reasonable criteria, they would be less vulnerable to political attacks and financial raids by non-users. That will be essential for their survival.
Moreover, rail transit is provided with a unique privilege – an exclusive right of way. If mass transit cannot cover its auto-equivalent costs with such a right of way in an environment such as the New York metro area, when could it. And if it could, what is the justification for it not doing so? It is not a justification that the enemies of the transit riders, including virtually the entire state legislature, all local suburban politicians, and most of the New York City Council are likely to accept. If transit is not covering its costs, then transit is at their mercy.
Today the Transit Worker’s Union, transit riders and managers are free to make unlimited demands because they can pretend the money would fall from the sky instead of coming from another party to the negotiation. But the money didn’t fall from the sky, it was stolen from future transit workers, riders and managers. If forced to agree to the distribution of a fixed pie, each would be forced to adjust their demands to the reality of finite resources. Transit workers would have to justify their wage and pension demand to riders, who would have to justify their fare and service demands to managers. Transit workers could offer to do a better job with less supervision if it would mean higher wages for themselves, instead of trying to do less work in exchange for more money, etc.
What costs would have to be covered for rail transit to break even on an auto-equivalent basis? For the New York City subway, I am talking about having fares cover the Car Equipment Division and Rapid Transit Operations departments, as well as the maintenance of Metrocard machines and turnstiles and the collection of revenues. The fare would also need to be set high enough to cover the ongoing purchase of subway cars at a rate of 1/40th or 1/50th of the fleet each year. If no cars were purchased in a given year that money would still be collected in fares and set aside – perhaps lent to other parts of the capital program. Part of the cost of providing transit service, moreover, is the pension and retiree health benefits the workers are earning as they work. The fare would have to cover that as well. The soaring retirement costs that should have been funded in the past but have been shifted to the present would have to be covered otherwise.
With more efficiency and somewhat higher fares, I believe the subway could cover its costs on an auto equivalent basis. I also believe the auto-equivalent yardstick, minus the purchase of the vehicles, should also be imposed on express buses, and select bus service – which gets an exclusive right of way.
Fares may rise somewhat higher under this proposal, in the short run, though in the long run they may rise less due to more pressure for efficiency. The history of the New York City subway is full of “save the fare” politicking leading to debts, deferred maintenance, deferred pension funding and eventually deterioration and collapse. Eventually the fare goes up anyway.
Under this proposal those who didn’t want to pay a higher fare would have the option of riding local buses, which local officials could choose to subsidize as much or as little as they wanted. The City of New York, and counties and municipalities outside the city, could also be permitted to purchase fare media from the MTA at full price and resell it at a discount to their residents or those with certain characteristics. The subway is a quasi monopoly for rush hour commutation to Manhattan south of 110th Street, but those who work there offset the cost and time required to travel there from long distances by demanding the highest average pay of any county in the United States. For the minority of Manhattan workers who are too powerless to demand higher wages to offset higher fares, a higher minimum wage could be imposed for that area.
What about the commuter railroads. Their employees are paid more than New York City Transit workers, and productivity is lower – especially on the LIRR. They might not be able to cover their auto-equivalent costs without substantial reforms. Fine – substantial reforms should be demanded, even if rail service needs to be shut down for a time. The economy could survive without them.
Having the commuter railroads break even on an auto equivalent basis is not as impossible as current data might imply, given that the subway covers a far higher share of its costs than the railroads. Commuter railroad riders get more space, but they also pay higher fares. They cover more distances, but also travel at higher speeds. They need more track and more stations relative to the number of people they move – the LIRR has almost as many track miles as New York City Transit and MetroNorth has more. But under the break even on an auto-equivalent basis stipulation, tracks and stations would not be funded by fares.
If they were subject to the same financial requirements as the subway, perhaps the commuter railroads would have to reduce their labor costs per hour worked to the level of New York City Transit – respective figures for NYCT, the LIRR and MN for 2006 were $59, $83 and $71 according to the National Transit Database. Perhaps the commuter railroads would have to automate fare collection the way the subway has, with swipe cards and “honor systems” backed by enforcement sweeps to and hidden cameras to nail those walking past the turnstiles without tapping.
Whatever. When the TWU complains that the MTA always looks for savings on the subway when money gets tight, they have half a point.
What I am calling for, to an extent, is a re-creation of the dual contracts under which most of the subway system was built. The City of New York paid for the infrastructure, which it owns. The IRT and BMT paid for operations and equipment out of fare revenue, and then received a guaranteed profit. Above that profit the subway companies were supposed to help the city pay off the bonds, but that never happened. The fare was set at a fixed five cents, because the transit companies were worried about political pressure to cut it, but inflation and rising wages meant it soon wasn’t enough. And once motor buses and the automobile, riding on taxpayer-funded infrastructure, grew in popularity, the transit companies had to resort to diminished maintenance (a recurring theme in transit history).
In retrospect, it was unrealistic to expect to the transit companies to cover the cost of ongoing normal replacement and rehabilitation of their infrastructure and stations, so it never occurred until public takeover. And it is unrealistic to have the subway and railroads cover those costs from fares today. But it is not unrealistic to have fares cover the cost of operating the trains.
Because in the aftermath of Generation Greed, a large share of future tax revenues have already been spent in the past, and those who are not willing to pay for things will not have them. And without the rail transit system, New York States’s most important remaining economic asset — the Manhattan CBD that generates half of all private sector earnings in the state (excluding the governmennt-financed health and social services sector) and perhaps three quarters of the state’s economy given its multiplier effect will rapidly decline.