The MTA has money now, but how will it be spent?
The MTA has money now, but how will it be spent?
Thanks to the new state budget, the state-run Metropolitan Transportation Authority will soon have a $20 billion infusion to its next five-year budget for heavy infrastructure investments, which begins next year. But $20 billion, in the context of the MTA’s needs, isn’t enough – especially if the MTA doesn’t spend the money wisely.
Last week, lawmakers rushed through this new funding, as well as approving new MTA Chairman and CEO Patrick Foye in the middle of the night, without carefully examining how the authority spends its money – and why projects so often exceed their budgets and schedules. As The New York Timesobserved, “(Gov. Andrew) Cuomo Promised Transparency at the M.T.A. Then Its Leader Was Confirmed While You Slept.” Except for a hearing held on short notice on a Sunday, the state Legislature passed on the opportunity to demand answers as to how the MTA and its next chief plan to get spending under control. The state budget included weak measures intended to speed up construction work that fall far short of what is needed. Lawmakers are nowhere near taking action to enable the MTA to bring its construction spending closer to that of other leading global cities.
Unless that happens, we’re stuck with hoping the MTA can reform itself, without much help from the political class and with obstacles to cost-savings in state law – such as prevailing wage laws that drive up labor costs. That’s especially concerning as more money, including money that hasn’t even been raised yet, goes to the troubled transit authority.
The MTA isn’t just about to spend current New Yorkers’ money – it’s about to spend one or two future generations’ taxes and fees too. Most of the MTA’s new windfall, $15 billion, will come from congestion pricing. The remainder will come from higher and more progressive real estate transfer taxes, as well as a new sales tax on purchases New Yorkers make from out-of-state internet vendors. Congestion pricing, the largest of these new fees and taxes, which will hit drivers entering Manhattan below 60th Street, will raise about $1.5 billion a year – meaning that the MTA will have to borrow against future revenues to amass $20 billion in the near term.
In 2030, the person buying groceries in Manhattan will pay a congestion fee that only goes to pay off debt; the money would have been spent a decade prior. We have only one chance to get this right; we will not get a do-over here. The MTA, which collected $6 billion in annual tax revenues on everything from mortgages to downstate payrolls even before the Legislature awarded it congestion pricing, is running out of potential revenue sources to tap. If the current $33.2 billion capital investment budget, which ends this year, is any guide, $20 billion will go quickly. Of the existing capital budget, $16.7 billion goes toward basic repairs, maintenance and upgrades of the existing system – well before the MTA launches its aggressive Fast Forward program to modernize the signals on five subway lines within five years.
And consider the MTA’s performance on the current capital budget. In 2018, New York City Transit – the division that runs the subways and buses – finished just 22 percent of its planned completions of major capital projects. It only “substantially completed” two-thirds of planned projects. Despite intense public attention to the MTA, this performance was actually worse than in 2017. New York City Transit closed out 36 percent of its projected construction in 2017 and “substantially completed” 70 percent. Of the 25 projects that the division closed in November and December 2018, only 10 were on time or early; the remainder were from one to 95 months late.
The MTA couldn’t even scramble to demonstrate better results ahead of the passage of the state budget: As of February, New York City Transit only finished 11 percent of the projects it had planned to close out during the first two months of this year, and only substantially completed two-thirds.
When people think of MTA construction delays, they tend to think of delays on big projects – the $11.2 billion East Side Access project to bring the Long Island Rail Road beneath Grand Central Terminal, which, if all goes well, will open 13 years late, in 2022. But the MTA consistently fails to meet its own deadlines on small projects too. Delays, more often than not, mean more money; a pump project on the Eighth Avenue subway line, six months late, recently cost $7.3 million instead of $3.5 million – more than double the original estimated cost.
Why are projects late and chronically over-budget? The MTA often gives circular answers. Last July, for example, it noted that a staircase project was three months’ late because a sole supplier was late with materials – even though the materials to rebuild staircases should hardly be so proprietary. Last June, it noted in its monthly report to board members that the completion of its project to rebuild the F train station at 23rd Street was eight months late “due to the need to complete additional work” – not a reason at all. Similarly, other station rehabilitation projects – at Clinton-Washington Avenue in Brooklyn and at 163rd Street in Manhattan – were seven months late “due to cost overruns.” Testing a digital signaling system on a portion of the F line was seven months late due to “software development issues and … late completion.” These absurd nonexplanations – the MTA is late because it is late – are all publicly available, but no lawmaker brought them up to Foye at his confirmation hearing on March 31.
The state Legislature’s fixes to this deep dysfunction are superficial. First, the state budget now requires the MTA to use “design-build” – under which the same contractor or partnership of contractors does both design work and construction work – on all projects over $25 million. Design-build, it is true, can help solve problems of coordination between contractors, such as when a designer draws up a construction project that is impracticable to execute. But it is not a panacea. The rebuilding of the Clifton maintenance facility for the Staten Island Railway, which is being done under design-build, is now 10 months late on its original four-year budget. The reasons are ones that should have been foreseeable and predictable: delays on disposing of hazardous materials.
Second, the Legislature has failed to grapple with prevailing wage laws that govern public sector projects – laws that mean when contractors are months or years late with projects, extra time spent by workers is not just money, but a lot of money. Under prevailing wage, a piledriver makes $54 an hour, plus $51 in supplemental hourly benefits (mostly contributions to pension and health care). It would be one thing if we could be certain that workers earning upward of $100 an hour were highly productive. The public, though, has no idea whether workers are productive or not; even though taxpayers are the ultimate funders of such projects, agreements governing work rules are decided in private between contractors and construction unions, another topic in which the Legislature showed little interest. (In fact, New Yorkmay soon expand prevailing wage requirements to private projects benefiting from government subsidies, which, in the long term, simply means more government subsidies; $500 million of planned subsidies to Amazon, for example, was to pay for union construction costs.)
What would real reform look like? Lawmakers could require that contracts between construction industry employers and their workforces be made public; the taxpayer, the party paying, should be able to see this information. With a toughened stance, the state would have leverage – lawmakers, after all, could suspend prevailing wage requirements until the public sees the rules that govern the work done for these prevailing wages. The Legislature should also seek transparency on all purchases of materials, not just labor: as it is, the public can’t know if the MTA is consistently paying above global market rates for concrete, steel and other physical inputs. Lawmakers should also show more interest into the specific reasons why the MTA consistently fails to meet its own internally set deadlines on simple, monthslong projects, and withhold the proceeds of congestion pricing and other new revenue sources until the MTA demonstrates, on a sustained basis, that it can do better.
Projects such as repairing staircases and rebuilding maintenance shops are far simpler than what the $20 billion from congestion pricing and other new sources are supposed to pay for: the modernization of subway signals on five separate subway lines, for example, within five years – a schedule never before attempted. (New York has modernized two lines in well over a decade.)
For the Legislature to give the MTA more money without demanding modest results first – and without giving the MTA the tools to cut construction costs – was a disservice to lawmakers’ constituents.