Editorial: A Federal Bailout to Put the MTA Back on Track
August 11th, 2008
The new MTA budget shortfall likely to cause consecutive fare hikes is abhorrent, but unsurprising. The authority’s financing is, after all, supposed to include much heavier subsidies from the state and city. Public financing is always part of the deal on public transportation—no system in the world is self-sustaining, and the subsidies public transit requires are more than justified by the greater public benefit they provide. How New York’s elected leaders came to ignore the need for large subsidies is one of the great public policy mysteries of modern times.
At this point, there seems to be no hope of getting the subsidies back to the levels where they once were, especially with Gov. David Paterson and Mayor Michael Bloomberg making clear that their own budget shortfalls leave no money to spare.
Their thinking on this is not quite right. But their insistence that the MTA must do more to trim its own expenses is. The MTA, however, will clearly not do this on its own. The MTA already announced two improvement cutbacks this year before the latest shortfall was revealed, which leaves little question that accuracy and competence are not among the authority’s strengths. Now Paterson and Bloomberg should make a joint effort to wade through the murky laws governing public authorities to force a new accounting system on the MTA. Sure, the economy is rough and getting rougher, and state and city governments around the country have been off the mark in their revenue projections.
Nothing, though, compares to the MTA.
But there is only so much that even an entirely revamped financing structure could do. At this point, one-fifth of the authority’s budget goes to pay debt service on bills racked up from bad decisions made a generation ago (and some more recently). The MTA is now the fifth largest debtor in the nation, behind only the federal government, California, New York State and New York City. Even a wizard accountant would eventually be crushed by that kind of burden.
The MTA needs be able to start from scratch.
Perhaps the Ravitch Commission will come forward with a revolutionary plan that will do this, and solve all the MTA’s problems. But in the meantime, our representatives in Washington should begin working on a plan to get the federal government to provide the kind of bailout that has now been extended to Fannie Mae and Freddie Mac. The $29.8 billion debt, with its annual $2 billion debt service, is unmanageable. Wiping it away with a one-time injection of money could just be the kind of radical solution the MTA needs. And if we cannot get all $29.8 billion, perhaps we can get enough to pay down a significant enough portion of the debt to reduce the debt service fees.
This is an investment in America’s future: New York City is the engine of so much of the nation’s economy—the metropolitan area is the top contributor to America’s gross domestic product, according to a new analysis by City Comptroller William Thompson—and its public transportation system is the tracks on which that engine is able to run. Only by moving more people at faster speeds to more places can the city economy really grow. If the federal government can pay for a $25 billion bailout to rescue private banks for the sake of propping up the economy today, it can also pay for a $29.8 billion investment into a public entity now for the sake of seeding the economy of the future.
Our senators and members of Congress should start making that case.
At this point, there seems to be no hope of getting the subsidies back to the levels where they once were, especially with Gov. David Paterson and Mayor Michael Bloomberg making clear that their own budget shortfalls leave no money to spare.
Their thinking on this is not quite right. But their insistence that the MTA must do more to trim its own expenses is. The MTA, however, will clearly not do this on its own. The MTA already announced two improvement cutbacks this year before the latest shortfall was revealed, which leaves little question that accuracy and competence are not among the authority’s strengths. Now Paterson and Bloomberg should make a joint effort to wade through the murky laws governing public authorities to force a new accounting system on the MTA. Sure, the economy is rough and getting rougher, and state and city governments around the country have been off the mark in their revenue projections.
Nothing, though, compares to the MTA.
But there is only so much that even an entirely revamped financing structure could do. At this point, one-fifth of the authority’s budget goes to pay debt service on bills racked up from bad decisions made a generation ago (and some more recently). The MTA is now the fifth largest debtor in the nation, behind only the federal government, California, New York State and New York City. Even a wizard accountant would eventually be crushed by that kind of burden.
The MTA needs be able to start from scratch.
Perhaps the Ravitch Commission will come forward with a revolutionary plan that will do this, and solve all the MTA’s problems. But in the meantime, our representatives in Washington should begin working on a plan to get the federal government to provide the kind of bailout that has now been extended to Fannie Mae and Freddie Mac. The $29.8 billion debt, with its annual $2 billion debt service, is unmanageable. Wiping it away with a one-time injection of money could just be the kind of radical solution the MTA needs. And if we cannot get all $29.8 billion, perhaps we can get enough to pay down a significant enough portion of the debt to reduce the debt service fees.
This is an investment in America’s future: New York City is the engine of so much of the nation’s economy—the metropolitan area is the top contributor to America’s gross domestic product, according to a new analysis by City Comptroller William Thompson—and its public transportation system is the tracks on which that engine is able to run. Only by moving more people at faster speeds to more places can the city economy really grow. If the federal government can pay for a $25 billion bailout to rescue private banks for the sake of propping up the economy today, it can also pay for a $29.8 billion investment into a public entity now for the sake of seeding the economy of the future.
Our senators and members of Congress should start making that case.
