Public transportation

New York's Public Transit Head Says the Subway Needs $40 Billion to Save it From a Death Spiral

The nation's most transit-dependent city has one of its worst performing transit systems.

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Manuel3d/Dreamstime.com

New York City's public transit is facing a "death spiral" according to the person in charge of running it.

According to a recent Bloomberg report, Andy Byford—CEO of the New York City Transit Authority, a subunit of the state's Metropolitan Transportation Authority (MTA)—has been telling anyone who will listen that the city's subway needs an infusion of $40 billion over 10 years to buy new trains, new signals, and otherwise shore up a system in a desperate state of disrepair.

Without that money, Byford argues, MTA will have to cut service and raise fares, leading to a self-perpetuating cycle of exiting riders and higher fares that could bring the whole transit system down—you know, a death spiral.

And while some 8 million New Yorkers still ride MTA-operated public transit each day, the doom and gloom from Byford is not a bad description of where the agency in charge of buses and trains in the densest, most transit-dependent city in the country finds itself.

Since 2015, ridership on New York's subway system has fallen precipitously as commuters have become increasingly frustrated with rising delays, worsening service, and overcrowded trains. That decline in ridership—which has come at a time when the city is adding both jobs and people—has led to a steadily worsening fiscal situation for MTA.

Starting in 2020, the agency predicts it will be running a budget deficit of roughly $500 million, which will rise to some $990 million come 2022.

And that rosy picture is only if Governor Andrew Cuomo—who has ultimate responsibility for the state-run MTA—allows a planned fare increase to go forward, something he says he won't do. Without the fare hike, New York's public transit system will be $244 million in the red next year, rising to about $1.6 billion by 2022.

Riders, as you can imagine, are not happy about this state of affairs.

"Riders have been paying more every two years for almost a decade. But in that time, public transit service has deteriorated," said John Raskin, head of the city's Riders Alliance, to The New York Times in November."I don't know of any business model where people can charge more money for worse service," said one woman to Byford at a recent townhall, according to Bloomberg.

MTA's response to this death spiral has largely been to throw in the towel.

Absent a huge infusion of new state and local tax dollars, the agency has said it will start cutting service even more in addition to its plans to raise fares, neither of which is a good way of getting people back on the subway.

The state and local politicians holding the purse strings have, for their part, proposed a mix of new revenue streams for the subway. Some of these are sensible. Others are not. All will be controversial.

Cuomo has proposed a congestion pricing plan that would charge drivers a flat fee to enter portions of Manhattan, and then spend that money on subway operations. This is not a bad idea, but is bound to piss off suburban commuters.

Mayor Bill De Blasio has suggested a tax hike on the city's millionaires that would pay for a mix of subway operations and fare subsidies for low income riders, an idea I criticized when it was first proposed. A few New York City politicians have gotten behind the idea of the state legalizing and taxing marijuana to pay for the subway.

Whatever the merits of these proposals, none will generate enough revenue to pay for the subway's badly needed renovations. At best they'll keep the MTA operating in the black for a few more years. All rely on people who don't generally use the subway paying more for its operation.

Something that might address that problem would be the increased use of value capture financing, whereby a slice of increased property values near mass transit stops are taxed to pay for the subway. Indeed, Cuomo has proposed doing just that, taking a slice of New York City's real estate taxes and devoting it to mass transit. It's an idea that Baruch Feigenbaum, a transportation expert with the Reason Foundation (which publishes this website), endorsed as a way to fund the subway with money from people who actually receive value from it.

Whether these prove politically palatable enough to be implemented—De Blasio has already come out strongly against an increased use of value capture financing—remains to be seen. In their absence however, a shrinking number of New Yorkers will continue to suffer the same poor service, while paying more for the privilege.

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  1. At this point the State would be better off to simply transfer the entire transit system over to a private entity and let them run it; rather than dumping billions down a hole they might actually realize tax revenue from such a venture that, if efficiently operated, might even turn a profit. But then it is not likely Cuomo will ever relinquish control of anything, even it it kills it.

    1. Convert IP Unit 2 to run a 50Hz generator and power the trains with nucular power! The buses can still run on whatever shit they’re currently burning

    2. It’s doubtful that it could ever be made profitable. No mass transit system is. That’s why there is no “solution” to this problem that doesn’t involve mass subsidies.

      1. they’re not profitable because it’s not politically expedient to make them profitable. Every year you see rate increases AND increases to the set of people that qualify for discounted or free fares. Add to that the cushy union contracts with no fiscal accountability associated to them at any level. That doesn’t even get into the abuses like pension spiking that add inflated costs for nothing in return.

  2. Just wait it out until they get a Democratic president and congress, and they’ll get a bailout in the next federal transportation bill.

    1. I was hoping to see Cuomo go hat in hand to see Trump for a handout. Let the laughter ensue…

  3. New York City’s public transit is facing a “death spiral” according to the person in charge of running it.

    No, that’s the whole problem – you’re not facing a death spiral. Unsustainable business models are unsustainable. If you need $40 billion from outside the system you’re in a death spiral and refusing to face the fact that you’re in a death spiral.

    1. No, if you need $40 billion from outside the system, you have passed through the death spiral and are well into zombie territory. You are already dead, you just refuse to accept it.

      1. ^ This.

        Straight up, if they need that kind of money they have already gone way past the failure mark.

  4. No one ever seems to ask why a place like New York City exists at all. How is it that people ended up living in such a high density? The answer to that is that New York City and places like it were largely built before cars and before the urban middle class was wealthy enough to own their own homes.

    When New York started to really grow in the early 19th Century, people had to live close to their jobs. There was no way to travel very far to get to and from work. Also, people were poor. Owning land was something that rich people and farmers did. The idea of owning your own small piece of land that was yours and that you didn’t have to use to make a living would have been fantastical to the typical New Yorker in 1830 or even 1870. So the surplus of people who were no longer needed on farms but were needed in cities piled into small areas. They all lived in apartments because they had to.

    The invention of the train alievated that some. Mass transit allowed people to live a bit further from work but not that far since you still had to get to the station. And peoeple still didn’t have the wealth to own a stand alone home anyway. So, you end up with New York City, a city with high density built around a network of public transit. And that made sense in 1912.

    1. Along came the automobile. With the car, it was practical for the middle class to live away from their jobs. On top of that, people got wealthier and could actually afford land of their own to just live on. The result of that was everyone moved away from the center cities, because it was not what they wanted and only existed because they were the only available option. So places like New York no longer made sense. Thus, the cities that grew up in the 20th century, like Los Angeles or Houston look nothing like New York or Boston or the older cities in the east that did not. This is because building a city like New York made no sense in the age of the car and real middle class wealth.

      Central planners have spent the last 50 years trying to deny this reality and keep places like NYC afloat via absurdly subsidized and inefficent mass transit. Well, the laws of economics like the laws of physics can e held at bay for a while but they always win out in the end. And that is what we are seeing here.

      1. The internet is also helping to kill off that model through remote working, where your coworkers could be as far afield as the other side of the planet yet you work closely with them every day.

  5. So, let’s see: $500mm deficit per year is about $1.4mm per day. 8mm riders per day. That would require a fare increase of about $.20 per ride. What a disaster! Sufficient reason to have the Feds come on board so the people in Wyoming and Georgia and Arizona can subsidize NYC riders.

    1. First rule of Transit Club: You do not talk about fare increases in Transit Club.

    2. I think the real number to keep the system going is a lot more than $500 million a year. That would cover the operating costs but would not cover the billions of dollars in defferred maintance that needs to be done.

      You are right that the solution here is to charge people who use the system to full cost of maintaining and operating it. If you did that, however, chances are people would stop using the system and it would go bankrupt. Deprived of the ability to attract workers from outside of New York, businesses and people would move out of New York to where the people are and it is practical to commute

      1. And/or they would increase wages, which would increase prices, which would transfer the costs to the people who live in NYC. But this could death spiral the system faster than wages and prices could adjust.

        Hence the idea to fund with property taxes?

    3. Where the hell do you get 8 million riders/day for the NYC subway system? NYC’s population is only 8.6 million.

      A quick google search puts the absolute record one day ridership at 6.3 million from 2014 and average daily ridership at closer to 4.3 million.

  6. Pension costs? Just curious…

    1. For 2017: $1.3B

  7. I too am in a death spiral, please remit $400B immediately!

    1. I don’t do spirals (I get motion sickness) but I am on a death glide path. You can donate $400B at fool-money.com. 🙂

  8. “Cuomo has proposed a congestion pricing plan that would charge drivers a flat fee to enter portions of Manhattan, and then spend that money on subway operations. This is not a bad idea…”

    Making people who don’t use transit pay to run that transit is not a bad idea? WTF?

    If you tax drivers, there will be less of them. Less drivers = more transit riders. If the system has problems now, how will adding riders (who are not paying what it costs to move them from point A to B as it is) improve things? I suppose, when the “pricing plan” fails to deliver the needed funds, you can just raise prices of the plan, right?

    1. Raise taxes
    2. *mumble mumble mumble*
    3. Success!

    1. I suspect the costs of the system are not strictly proportional to the number of riders, so more riders at current (or future) prices would be better for the system.

      1. Yes. And that is why raising the fairs will not necessarily save the system. You can only raise the fairs if doing so doesn’t reduce ridership enough to offset the increase in revenue. I suspect they are past that point and raising the fairs will not help.

        1. If the people who use the system aren’t willing to pay the cost of using it, is it a system that needs to be saved?

          1. No it does not need to be saved. See my point above about giant centralized cities like New York not making any sense in modern America.

  9. Seems like it would be cheaper if they’d use Rearden Metal for many of these items.

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