Would-be Governors Eliot Spitzer and John Faso are saying the right things about transportation finance. That is the good news. They want to see major mass transit projects built to support the Manhattan-based economy that is the tax base of the entire state. Spitzer called the finances of the MTA the “greatest transportation concern” and said fare and toll increases, increased local funding, and other tax increases, as well as efficiencies, would be required – reversing 12 years of policy. Faso agreed. They both called for weaning the MTA off debt by going to pay-as-you-go financing; hopefully they have the same idea about financing road construction elsewhere in the state. The candidates even mentioned making tough decisions, a big change after the something-for-nothing-now, then move-to-Florida-later policies of the recent past. All good.
The bad news? The candidates were speaking in front of the Regional Plan Association, and may have been simply telling them what they want to hear. And the horse is out of the barn, with the MTA facing a fiscal disaster and debt service sucking up a huge share of the funds allegedly set aside for road maintenance. In this gloomy but hopeful context, this post is about what I would do about transportation finance.
Essentially, I would do two things:
1. Have transportation (and other infrastructure) entirely paid for as-you-go, in cash, through dedicated transportation-related revenues (federal aid, dedicated taxes, tolls, fares, fees, fines), and have all those revenues go exclusively to transportation. Not to other things, or to existing debt service.
2. Have all the transportation revenues collected Upstate spent Upstate, and all the transportation revenues collected Downstate spent Downstate.
Dedicated transportation revenues are not a new idea. The MTA, for example, already has a separate dedicated tax base, as well as its fares and tolls. So do other state transit agencies. Late in the Cuomo Administration (1991), a road fund was set up with all state revenues from gasoline taxes, the gasoline portion of the sales tax, the sales tax on cars, motor vehicle fees, etc. set aside for the roads. The reason separate, dedicated revenues are important is because investment in infrastructure benefits the future, disinvestment carries no visible cost in the present, and when the budget deal is done in the back room, other powerful interests trump the infrastructure every time.
The problem is these dedicated funds were raided almost as soon as they were created. The dedicated MTA taxes were not set at a level high enough to meet all ongoing needs on a year-by-year basis, so when the city and state cut off assistance to the agency in the early 1990s, it borrowed against future revenues instead. There was also a fare and toll freeze from 1995 to 2002, and the MTA borrowed to make up for that as well. Meanwhile, the Transportation Trust fund was raided almost immediately in response to the early 1990s budget crisis, and since Governor Pataki, Speaker Silver and Majority Leader Bruno have chosen to replicate the fiscal policies Cuomo implemented in desperate times in both good times and bad, only 28 percent of trust fund revenues were available for transportation in Fiscal 2004-05, according to report from the State Comptroller’s office. The rest goes for non-transportation-related spending and debt service on the money state transportation agencies borrowed, to make up for money diverted. In some cases, tolls were removed.
Not only does the mixing of transport and non-transport revenues allow irresponsible raids from outside the transportation world. It also allows irresponsibility within transportation. Why pay tolls, fares and gas taxes that go up by the rate of inflation when, by playing a game of chicken with rising debts, you can hope someone else will eventually have to pick up the bill? Why not demand more and more staffing for transportation systems when the money may not come from you? Why oppose richer pensions? And why not pursue the most expensive transportation investments possible, and overpay for them, when the money is borrowed so there is no “loser” to complain? A direct connection between revenues paid and money available would increase the pressure to limit spending, and get value for the money.
To provide counter-pressure on the other side, transportation (and other infrastructure) asset databases should be created, maintained, and published on the internet, sortable by the places affected. Those whose critical facilities and systems are closest to falling apart would be made aware that it is they who would be the loser if the depletion of revenues and big debts forced ongoing reinvestment to stop. After all, one way to “save money” on infrastructure is to reduce the amount of work that is done, but in the long run that isn’t really a savings.
Subway signal systems, for example, have a purported useful life of 50 years, but have been replaced on an ongoing basis at about a 60 year replacement rate since the creation of the current MTA capital planning process in the early 1980s, and from the early 1950s (when the existing system was more or less finished) to the late 1960s. During the 1970s fiscal crisis, however, normal replacement stopped. The outer limit for these systems to remain reliable is purportedly 75 years. As a result of the 1970s pause, unfortunately, the signal system of almost the entire IND, built in the late 1920s and early 1930s, is about to pass 75 years old, and disruptions due to signal problems are suddenly becoming more and more common on these lines. All the lettered routes from A up to G, plus the V, run on IND lines for at least part of the route. What would a collapse of the signal system on those lines mean, especially to Queens?
If people knew they personally were next in line, not only for subway signal replacements and station rehabs, but for street repaving and reconstruction, bridge maintenance and replacement, and school repairs, then there would be a constituency for making sure reinvestment continued, rather than being borrowed against until it stopped altogether. This corresponds with one of my anti-Albany principles – let the losers, not just the winners and insiders, know who they are.
Speaking of mixed money leading to irresponsibility, that is certainly the case with the ongoing tug of war between Upstate and Downstate on transportation. Transportation funding has become little more than a way for politicians to get elected by telling each part of the state to dislike the other, kind of like divorce lawyers fanning the flames while padding their bills. I propose to make the divorce final by splitting the State Department of Transportation into two agencies (at, say, I-84), one for Upstate and one for Downstate, changing the state constitution to prohibit legislators for one part of the state from voting on the budget for the other, and keeping all revenues remotely related to transportation on one side or the other of that line. Special exceptions could be made for MTA extensions to the north, and the NY State Thruway extension to the south.
This proposal is a more limited version of the "scorched earth" proposal referred to in the response to a previous point on state taxes. That commenter wondered “what exactly is the point of the New York state government. More to the point, why is upstate linked politically with New York City and the suburban counties, when there is no longer any economic links, and these places sure aren't linked culturally.” He suggested a total fiscal separation. I pointed out that it would never happen, in part because Upstate lives off Downstate money, and could not live without it.
That is less of an issue, however, for transportation-related revenue than for income taxes and education and social spending. Most transportation-related revenues – sales and use taxes, tolls, fares, fees, fines – are regressive, providing no transfer of resources from richer parts of the state to poorer. Overall Downstate, including high-poverty New York City, is taxed to benefit Upstate. Just considering transportation alone, however, that isn’t necessarily the case. Both parts of the state assume they are being ripped off, and thus would probably welcome a separation. In any event, compared with the transfer of resources from the future into the past, any regional transfer is likely small, regardless of the direction. Whichever part of the state is coming out “ahead” on transportation versus expenditures is still probably “behind” given that the assumption that it is someone else’s money diminishes the incentive to use it efficiently.
Moreover, the two parts of the state are so different, and their transportation systems have little in common, that any influence of one part of the state on the other is detrimental. Upstate is spread out, so financing transportation by toll (and thus hiring may toll collectors) is less efficient than doing so by tax. Downstate fewer miles are driven by locals, so there is less gas tax revenue, but expensive facilities, like bridges and tunnels, must be maintained for the benefit of those passing through. And since Downstate is congested, tolls provide the possibility of imposing congestion charges and managing demand. Upstate, mass transit is a social service. Downstate, it is the very essence of the region’s comparative economic advantage.
One final question: how would I pay for the major transit investments that have been proposed Downstate? With the exception of the Flushing Line extension, which the City of New York is paying for, and a short stretch of the Second Avenue Subway, virtually all of these have, as their purpose, improved access from the suburbs to the high-wage job center in Manhattan. The big money is for connecting the LIRR to Grand Central, building a new rail tunnel to New Jersey, routing some MetroNorth trains to Penn Station, building a new Sunnyside Station in Long Island City, and connecting the LIRR and Airtrain directly to Lower Manhattan. Even the upper half of the Second Avenue Subway, to the extent that it would take city residents off the Lex Express providing more room for Grand Central riders to get on it and allow MetroNorth riders to take it from 125th Street to the hospital complex on the Upper East Side, has a substantial suburban benefit.
Like the highways in the 1950s and 1960s, these investments would provide faster and more comfortable ride to the city from outside than is available from within most of the city itself, thereby providing an opportunity for the better off to once again flee beyond its borders leaving the less well off behind. Once could argue that improving the schools in the city, having the better off live there, and having the less well off, who generally do not work in Manhattan, live in the suburbs is a lower cost alternative.
Even so, I favor the investments, but not at New York City’s expense. The non-federal share of the cost should be paid for by a reinstated commuter tax. Not a small tax, like the one repealed, collected indefinitely. A big tax, collected over a decade when construction was going on, and then re-repealed. The modest suburban contribution to the upper half of the Second Avenue could be considered compensation to city residents for having the city torn up to benefit those outside, who weren’t even willing to accommodate one new rail yard to in any of their communities to facilitate vastly improved service on the Port Jefferson branch of the LIRR. Its cost is a fraction of that of the other investments. And, please, let’s get it built up to 125th right now, not just to 96th Street. In fact, all these investments should be made in the next recession, when the cost of construction will be lower, and before the soaring cost of the rising number of seniors suck up any and all public dollars. After 2016 or so, we’ll be lucky to be able to maintain, let alone improve, our infrastructure – another reason why transportation has to pay for itself.
What I would do about transportation finance is to stop the beggar-thy-neighbor (or offspring) game of chicken between the present and the future, and one part of the state and another, with our infrastructure and economy as the hostage. By making today, and each part of the state, take care of itself according to its own needs, fairness and efficiency would at least become possible.