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By Nicole Gelinas

After The Fall: Saving Capitalism From Wall Street--and Washington

Eye on the News

Nicole Gelinas
The Other Green in Bloomberg’s Plan
Money.
24 April 2007

Mayor Michael Bloomberg, in his plan for a “Greener, Greater NYC,” acknowledges a key problem: New York’s transportation infrastructure, the backbone of the city’s private-sector economy, is badly out of date and insufficient to meet the needs of a 21st-century city. But the mayor is murky on the $31 billion question: how will the city pay to fix its infrastructure, and how will it create the accountability necessary to ensure that the repair funds are spent wisely?

In his blueprint for the next three decades, the mayor rightly notes that “for the last 50 years, we have underinvested in our most critical network, transit.” By citing New Yorkers’ stories of miserably long commutes, he implicitly acknowledges that the government has harmed working people’s quality of life by prioritizing social spending over infrastructure spending. The mayor proposes two solutions. First, he’d spend money to whip existing transportation assets into a “state of good repair.” That means mending roads, as well as spending city funds so that the state-run Metropolitan Transportation Authority, which runs the city’s subways and buses, can complete maintenance and upgrade projects.

Second, the city would fund new projects. The mayor plans to invest in the MTA’s long-planned Second Avenue Subway project, help pay for a new track on the MTA’s Long Island Rail Road, create dedicated express-bus lanes in the city, and buy technology for implementing “congestion pricing” in Manhattan--that is, charging cars to enter parts of the borough, and thus reducing auto traffic and allowing bus riders a faster commute.

Bloomberg estimates that these and other transportation projects would cost a total of $50 billion, or a little under $2 billion a year. That sum may sound like a lot, but it’s not revolutionary. Under its current capital plan, the MTA already plans to spend $4.2 billion a year. (And New York City spends $5 billion annually on Medicaid.)

Still, where will the money come from? The mayor says that we can “reasonably” expect just under $20 billion from sources outside the city, including the federal government. That means the city must find the other $31 billion. It’s unlikely to come from cutting back spending: since Bloomberg took office, the city’s operating spending has risen over 40 percent, more than twice the inflation rate. City spending to pay back debt—that is, to fund capital improvements made in this administration and previous ones—is up about 25 percent, and will increase by another 27 percent over the next three years. If Bloomberg had spent the past six years reforming such big-ticket budget items as Medicaid and city workers’ pensions and healthcare benefits, there’d be room in future budgets for more debt—but he didn’t.

Nor can the MTA add much to its own debt burden. Because of decisions made by the appointees of former governor George Pataki, the authority’s spending on debt will skyrocket over the next few years, leaving it little room for more.

So to pay for the improvements without sacrificing anything else, the mayor will turn to a time-honored New York tradition: creating a new public authority, the Sustainable Mobility and Regional Transportation Financing Authority (SMART). This “partnership” between the city and the state “would not operate or build anything,” says the mayor, “but rather would invest in projects proposed by other transportation agencies,” like the MTA, and “would then monitor those investments, assuring accountability.”

So that SMART could raise its own billions in debt, the city would award the authority a new, “dedicated” source of revenue: the annual proceeds from congestion pricing, $400 million in the first year alone. And to supplement this money, the city and state would make equal annual contributions—starting at more than $200 million apiece, and rising annually thereafter—to SMART. The idea is that with money as a lever, SMART could hold the MTA accountable for project-cost overruns and wasteful spending. Why Bloomberg thinks that the state will commit to giving money to SMART every year, when it can barely afford its annual subsidies to the MTA, is a mystery.

New Yorkers should be skeptical. After all, the state created the MTA in 1968, taking the management of subways away from New York City, to solve the opposite problem: the city had stopped caring about its transit system. Starting in the 1980s, the MTA did rescue the subway system from the city’s neglect, but it’s an unaccountable and opaque government entity in its own right, with its own share of problems. It’s not clear that the solution is to create a new authority to scrutinize the state authority that was created because the city wasn’t accountable in the first place. Further, if the governor and the mayor can’t cooperate to effect real change at the MTA—which Spitzer controls, and where Bloomberg has some votes—what will make SMART, another city-state board, any different?

And another problem will result from the mayor’s plan to sign over the city’s congestion-pricing revenues to SMART irrevocably and to “enshrine” the annual city and state contributions into law. Those steps are necessary to secure a good interest rate on the authority’s debt, since bondholders like such dedicated, independent “revenue streams.” But the city can’t award the new authority financial independence without awarding it political independence too. If SMART can depend on $800 million in dedicated revenues in its first year alone, the city and state politicians to whom it’s supposed to be accountable will have no way of keeping a hand on the reins. The mayor’s own language on this point isn’t comforting. In his report, Bloomberg notes that the city “will seek a grant from the SMART Authority to cover the MTA’s funding gap.” If we’re already “seeking” things from a benevolent public authority that doesn’t yet exist, we’re in trouble.

It’s hard to buy the argument that the way to a bright future of accountability and efficiency is by further complicating both city and state government. Instead, the mayor and the governor should do the opposite: simplify. They could start by reforming the MTA. And Bloomberg also could cut back the city’s spending, giving it more money to fund infrastructure debt. Now that would be SMART.

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