Infrastructure

The Price Of Transportation Gold

Beneath Manhattan, crews are slowly tunneling to what is expected to be billions of dollars’ worth of transportation treasure. 

The question is: How are they going to pay for it when they get there? 

That’s the scenario the Metropolitan Transportation Authority is grappling with as its 2010–14 capital plan comes to a close and it plots out its next five-year upgrade and improvement plan. While the capital plan is supposed to create a road map for system-wide improvement, Superstorm Sandy, a bubbling labor spat and the general cost of megaprojects has created uncertainty. 

“It’s the 800-pound gorilla,” said Assemblyman James Brennan, who chairs the Authorities committee. “The MTA is currently completing a $25 billion plan over the past five years, and borrowed about 60 percent of the money for it—and the main factor in raising fares is the debt service on those borrowings in the operating budget. So the next plan will have to continue vital, critical investment in track and rail, as well as the big expansion projects—and it’s estimated to be about $31 billion. And there aren’t identified sources of funding at this time for this.” 

One critical question is how to pay for one of the biggest projects in the current plan. The East Side Access project will connect the Long Island Rail Road to Grand Central Terminal, a long talked-about project. But cost and completion time estimates keep rising, with the latest figures indicating that the project will run upward of $6.5 billion over budget ($10.8 billion total) and finish in 2023—14 years past the initial 2009 estimate. 

What’s more, East Side Access is only one of many projects. An overwhelming majority of the current plan consists of upgrades to crucial existing infrastructure, such as subway tracks. Though it has gone through revisions, the capital plan was initially approved at more than double the cost of East Side Access ($23.8 billion). Superstorm Sandy repairs brought it over $30 billion. 

The Manhattan Institute’s Nicole Gelinas cautions that fare hikes will not be enough to offset massive new debt the MTA may have to take on to fund the next capital plan. Add to that questions about state funding for the agency, and the recipe for uncertainty gets stronger. 

“They’ll pay $2.3 billion in debt service costs this year. By 2017 it will be closer to $3 billion,” Gelinas said, referring to the $11 billion in debt for the 2010–14 plan. “That’s not even with new debt for the next capital plan. … If they have to borrow $11 billion for the next five-year capital plan, they’re going to need some kind of new source of revenue.” 

MTA spokesman Adam Lisberg said the current plan is fully funded and pointed out that long-term debt and debt service is part of an ongoing process. He said the MTA would have to determine how to find the money it needs without increasing its reliance on borrowing. 

The MTA could face hurdles in boosting its revenue, though. Gov. Andrew Cuomo has already put a damper on proposed fare hikes and is pushing for lower tolls on the Verrazano-Narrows Bridge. He also is trying to divert $40 million from the MTA to offset state debt in the next budget plan. 

“The needs of the system way exceed what the existing available revenue sources are by three- or fourfold in many cases,” Tri-State Transportation Campaign Executive Director Veronica Vanterpool said. “The question is how large that gap is. And what are the potential revenue sources to close that gap?” 

Further complicating the MTA’s fiscal outlook is an ongoing labor spat between the A uthority and the Long Island Rail Road workers’ unions, which could turn ugly this summer. MTA Chairman Tom Prendergast has said the agency would need to slash more than $6 billion from its next plan in addition to hiking fares, or raise fares by 12 percent to make up for the money the unions are looking for. 

Gelinas said that quickly making a deal with the unions might not be the MTA’s best option. “It would be better to take a short-term hit of the strike and everyone can be miserable for a week, than to have everyone miserable forever because there is no money for capital upgrades,” she said. 

So far MTA brass has been mum on when the next plan will come out, but advocates are already calling for more of the infrastructure upgrades that constitute most of the current plan. 

More upgrades could mean less money for flashy headline projects, which transportation and fiscal advocates and some at the MTA view as far less important. MTA Director of Special Project Development and Planning William Wheeler said at a City & State transportation forum last month that the MTA needs to focus on its current network before it looks to heap on major projects, such as a rail extension to LaGuardia Airport. 

While capital plans represent tens of billions of dollars in funding, Lisberg said, they are a small portion of the MTA’s roughly $1 trillion value. And part of keeping up that value is investing in infrastructure. 

“While a capital plan of—our current was $24 billion to start—is a lot of money, that’s putting in 4 percent of its entire value to reinvest and make sure it’s running. That’s a relatively small percentage,” Lisberg said. “It is an enormously expensive undertaking to keep a century-old system in a state of good repair, but all of New York learned in the ’70s and ’80s that the price of not taking care of it is much larger.” 

The Tri-State Transportation Campaign wants more investment in smaller projects. The group is looking for a universal fare system for MTA riders and an expansion of select bus service options, among other possibilities. 

Some of those infrastructure upgrades aren’t just wish list items, either. A recent report from the Center for an Urban Future on the city’s infrastructure argues that subway signal upgrades (no small undertaking at an expected $2.4 billion in the next capital plan), general subway station modernization and additional station access points are essential as the MTA’s ridership continues to increase. 

Some worry that major projects from the current capital plan might hinder future movement, however. 

“Before projects can be tackled in the next capital program, the MTA needs to really bring to the public what it’s doing to keep these megaprojects on time and on budget moving forward,” Vanterpool said.