Mayor Michael Bloomberg, in his plan for a Greener, Greater NYC, acknowledges a key problem: New Yorks transportation infrastructure, the backbone of the citys private-sector economy, is badly out of date and insufficient to meet the needs of a 21st-century city.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 peoples quality of life by prioritizing social spending over infrastructure spending. The mayor proposes two solutions. First, hed 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 citys subways and buses, can complete maintenance and upgrade projects.
Second, the city would fund new projects. The mayor plans to invest in the MTAs long-planned Second Avenue Subway project, help pay for a new track on the MTAs 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 its 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. Its unlikely to come from cutting back spending: since Bloomberg took office, the citys operating spending has risen over 40 percent, more than twice the inflation rate. City spending to pay back debtthat is, to fund capital improvements made in this administration and previous onesis 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, thered be room in future budgets for more debtbut he didnt.
Nor can the MTA add much to its own debt burden. Because of decisions made by the appointees of former governor George Pataki, the authoritys 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 contributionsstarting at more than $200 million apiece, and rising annually thereafterto 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 citys neglect, but its an unaccountable and opaque government entity in its own right, with its own share of problems. Its not clear that the solution is to create a new authority to scrutinize the state authority that was created because the city wasnt accountable in the first place. Further, if the governor and the mayor cant cooperate to effect real change at the MTAwhich Spitzer controls, and where Bloomberg has some voteswhat will make SMART, another city-state board, any different?
And another problem will result from the mayors plan to sign over the citys 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 authoritys debt, since bondholders like such dedicated, independent revenue streams. But the city cant 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 its supposed to be accountable will have no way of keeping a hand on the reins. The mayors own language on this point isnt comforting. In his report, Bloomberg notes that the city will seek a grant from the SMART Authority to cover the MTAs funding gap. If were already seeking things from a benevolent public authority that doesnt yet exist, were in trouble.
Its 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 citys spending, giving it more money to fund infrastructure debt. Now that would be SMART.