Testimony to the Senate Transportation and Corporations Committees on MTA Funding

TESTIMONY OF
CITIZENS UNION OF THE CITY OF NEW YORK
on the Metropolitan Transportation Authority Financing Commission’s Recommendations
Before the New York State Senate Standing Committees on
Transportation and Corporations, Authorities, and Commissions
February 18, 2009


Good morning Chairs Dilan and Perkins, and other members of the Senate.  My name is Dick Dadey, and I am the executive director of Citizens Union of the City of New York, an independent, civic leader for good and effective government that seeks solutions to problems of political and government reform and those of significant citywide importance.  For more than a century, Citizens Union has served as a watchdog for the public interest and an advocate for the common good.  I thank you for holding this hearing and giving me the opportunity to present Citizens Union’s views on the dire need to provide additional funding for the Metropolitan Transportation Authority (MTA), which are similar to our position on congestion pricing in 2008.  We believe that finding new revenue sources to fund the MTA is a critically important issue in need of a solution.  If properly constructed, new funding sources can be supported by all stakeholders who benefit from the MTA’s services, either directly or indirectly, and contribute to the needed maintenance and expansion of our city and state’s transit infrastructure.   It is for this reason that we support many of the funding proposals on the table before you today.

Citizens Union commends Governor David Paterson for forming the Metropolitan Transportation Authority Financing Commission (Commission), headed by former MTA chief Richard Ravitch, to evaluate the MTA’s financial predicament and recommend strategies to fund its essential capital projects and operating needs.  We also commend the Commission for its thorough analysis of ways to stem the MTA’s projected budget shortfalls, and were particularly pleased that it sought to find the common ground on this critical, yet controversial issue by ensuring that all who benefit from reliable mass transit in the region share the burden of contributing the necessary additional funding to the support the system.

We believe that an efficient, reliable, and safe public transportation system is crucial to the functioning of New York City’s economy and the vitality of life in the city.  We believe that the state in responding to the Commission’s recommendations must act expeditiously, yet responsibly to protect the quality of life in the city and region that is made possible in part by our very good public transportation system.   

The MTA is projecting record shortfalls in its 2009 operating budget of $1.2 billion, rising to $3.0 billion in 2012 if no action is taken to close these gaps.  The financial situation faced by the MTA is severe – as the MTA’s projected expenses have grown due to rising labor and large debt costs, and the amount of state and city subsidies for public transportation, not including dedicated taxes, remained flat at about $1 billion from 1990 to 2007, according to the Independent Budget Office.  Revenue from dedicated taxes, such as the Mortgage Recording Tax and Real Property Transfer Tax, has declined substantially in the past two years to approximately half of its 2007 amount.  If the State does not assist the MTA in creating new revenue sources by the time it adopts its 2009 final budget in March, the MTA has proposed to address these shortfalls by reducing service significantly and increasing tolls and fares by approximately twenty-three percent beginning in June. We simply cannot afford to let this happen.  Citizens Union calls upon the Governor and Legislature to seize this opportunity to adopt a holistic approach identical to the Commission’s recommendations to address this deficit ensuring the MTA’s long-term financial solvency, instead of just a series of stop-gap measures to address the MTA’s existing budget distress – especially since it has become clear in recent days that the federal stimulus package will not include needed funding for MTA operations, but rather will support capital projects.  

Citizens Union recognizes that solving this fiscal challenge entails making tough choices that may not be politically appealing, but are necessary to guarantee the viability of the city and state’s public transit system. In creating a package of revenue raising items, we urge the Governor and the Legislature to embrace the measures proposed by the Commission, not just because they are singularly good ideas, but taken as a whole instead of piecemeal, represent a thoughtful and comprehensive approach.  Citizens Union advocates that all interested parties work together, and make sacrifices to ensure that no one stakeholder contributes an inordinate share of the funding needed to solve the MTA’s funding deficits.  

After thorough review and consideration of the Commission’s recommendations, Citizens Union specifically:

1.    Supports the enactment of the following new revenue sources to avoid or reduce MTA service cuts and excessive fare hikes:
    a.    a regional Mobility Tax of one-third of one percent on all payrolls and income of self-employed persons within the twelve counties of the MTA district; and
    b.    Institution of cashless tolls on all presently un-tolled East and Harlem River bridges.  
2.    Supports the non-revenue changes regarding governance and transparency with the exception of combining the duties of the Chairman of the MTA Board with those of the Executive Director; and
3.    With added measures to ensure increased transparency and accountability, supports the authorization of bi-annual regional Consumer Price Index (CPI) based fare and toll increases.

Our analysis and rationale for these positions are as follows:

1.     Support for Revenue Proposals

    a.    Harlem and East River Tolling

Given Citizens Union’s support for tolling in the context of the debate around congestion pricing, we continue to believe philosophically that tolling has several favorable aspects.  Tolling would provide another reliable and substantial stream of funds to support the MTA’s operations.  It also would discourage cars from entering into Manhattan, thereby reducing congestion and improving air quality.  Citizens Union supports the Commission’s tolling proposal and offers the following recommendations to the Governor and Legislature to strengthen the proposal:

        i.    Implement the Commission’s tolling recommendation using “a fully coordinated tolling strategy, including the implementation of variable pricing and one-way tolling,” which would allow for reductions in tolls during off-peak travel and other mitigating factors to ensure fairness to motorists;
        ii.    Develop a more specific plan for cashless tolling that addresses the operational complexity of collecting cashless tolls from the many motorists who do not subscribe to EZ-Pass;
        iii.    Exempt charitable organizations and persons with disabilities from paying the tolls, while providing for adequate enforcement to ensure that there are not abuses of such exemptions;
        iv.    Enact a city income tax break for those who qualify based on the earned-income credit level, to help ease the financial burden on those for whom traveling to work by car is the only option; and
        v.    Implement a residential parking permit system in communities surrounding the affected bridges to avoid “park and ride” problems.

Citizens Union recommends that the Governor and the Legislature also consider other revenue generating proposals that are focused on motorists if tolling does not occur, such as New York City Comptroller William Thompson’s weight-based registration fee. Comptroller Thompson’s proposal would increase vehicle registration fees on private and commercial vehicles based on the weight of such vehicles, which is estimated to generate at least $1 billion annually for the MTA.  

    b.    Regional Mobility Tax

Citizens Union supports the idea of a substantial new tax source, such as the proposed regional Mobility Tax.  We believe it is the most desirable way of sharing the MTA’s financial burden among all those who benefit from the city’s public transit system because it will be broadly applied in the region.  This tax is projected to raise $1.5 billion annually from businesses, organizations and self-employed individuals in the twelve counties served by the MTA and would substantially assist the MTA in covering many of its capital costs and debt obligations.  Businesses would also benefit directly from this proposal as it would ensure that employees and customers have continued access to a functioning and maintained mass transit system.  

2.        Support for Non-Revenue Changes with Exception

The Commission’s report made several recommendations with respect to the MTA’s governance and operations structure that Citizens Union largely supports.  In particular, we support:
    a.    Requiring Board members to possess experience in relevant areas to ensure that Board members are more knowledgeable and competent;
    b.    Separating the MTA’s capital spending function from the operating expense function through the creation of a “lock-box” within a newly created MTA Capital Finance Authority in order to avoid burdening current operations with substantially increasing debt service charges;
    c.    Introducing greater transparency and accountability in MTA operations and increasing public awareness of the MTA’s finances and operating arrangements;
    d.    Promptly implement a program of enhanced and improved bus service and, particularly, a Bus Rapid Transit (BRT) scheme; and
    e.    Actively consider of innovative longer-term transportation initiatives to reduce traffic congestion in the boroughs outside of Manhattan, such as parking strategies and other congestion-reducing incentives.  

Citizens Union believes that although these changes will not result in any savings to the MTA, implementing these efficiency and economy measures will create a streamlined internal structure that is more accountable and transparent.  These changes are especially important if the public is to be persuaded that fare and toll increases are necessary.   

Citizens Union does not, however, support the Commission’s recommendation to modify the present MTA leadership structure to combine the MTA Chairman’s powers with those of the Executive Director.  We believe that the current separation of duties and reporting relationship between the Executive Director and the Chair of the Board is conceptually right, as has proven successful in the nonprofit context, but should be clarified and strengthened to ensure greater accountability and meaningful Board oversight.  We believe it is a conflict of function for the Chair to be the CEO while also providing leadership to the board’s proper role in oversight.  The Executive Director should be a strong CEO while the Chair should lead the Board and provide active oversight of the CEO and the MTA’s operations and budget.  The model suggested is an old corporate model while our model is what most successful non-profits now use.
 
3.    Support for the Authorization of Bi-Annual Regional Consumer Price Index Fare and Toll Increases with Measures to Ensure Increased Transparency and Accountability

Citizens Union supports the rationale for authorization of bi-annual CPI fare and toll increases because it would depoliticize the process of increasing fares and tolls and ensure that they remain price consistent with the cost of living in the region.  Citizens Union acknowledges, however, that this change would eliminate the existing requirement that hearings be held solely on proposed fare and toll increases, limiting the number of public hearings to those provided through the normal budget process. Citizens Union continues to believe strongly that public hearings play an important role in the course of the MTA budget process, but supports this change because past hearings have not necessarily been dispositive in determining the amount of final fare and toll increases.  We are confident that despite this change, the public will still have the necessary opportunity to express its concerns over proposed CPI-based fare and toll increases during the MTA’s normal budget process.  

Citizens Union strongly believes, however, that the fare and toll policy changes must be accompanied by measures to ensure greater accountability of and transparency in the MTA’s budget in order to increase the public’s trust in the MTA’s management and operations, as well as compensate for the elimination of dedicated fare and toll increase hearings.  We recommend that the Governor and the Legislature require the MTA to report bi-annually on important performance and management milestones, similar to the City’s preliminary and final Mayor’s Management Report, to ensure efficient use of MTA funds, especially those generated through the proposed CPI fare and toll increases.  This reporting will allow the public greater access to pertinent information to evaluate the MTA’s management of funds outside of the normal budget process, and aid the public in holding the MTA accountable for complying with performance goals.  

We thank you for the opportunity to testify today at this important hearing and look forward to working with you to sustain New York City’s public transportation system.