As part of his ambitious infrastructure blueprint for New York in 2030, PlanNYC, Mayor Michael Bloomberg wants to charge drivers to enter parts of Manhattan during peak traffic hours. The mayor’s plan would allocate the new revenue—hundreds of millions of dollars a year—to mass transit. But this week, Bloomberg got a fresh reminder of how difficult it’s going to be to implement this seemingly elegant plan, via news of a related crisis: looming billion-dollar deficits at the state’s Metropolitan Transportation Authority, which runs Gotham’s subways and buses, as well as the region’s commuter railroads.

Bloomberg’s plan calls for charging car drivers $8 and truck drivers $21 to enter Manhattan south of 86th Street, between 6 AM and 6 PM. Economically, this plan makes some sense. Manhattan’s roads are a scarce resource, and only two ways exist to allocate scarcity: waiting or pricing. Right now, New Yorkers wait, stuck in gridlocked traffic. The mayor makes a reasonable argument that it’s time to try pricing instead, even though his plan could create other problems—such as plaguing Manhattanites with yet more noisy nighttime truck traffic, as drivers avoid the new toll. If the city places a monetary value on the right to drive in Manhattan, some drivers will take the train, drive at a different time, or forego the trip altogether, freeing up road space and time for those drivers who consider the trip worth the price.

Through congestion pricing, the city could reap at least $400 million a year. The MTA would then use the money to get subway assets into a “state of good repair” for the first time in living memory, and to invest in technology to run trains on tighter schedules.

But there’s a catch: while the MTA would administer these projects, the mayor still wants the city to have some control over them. He proposes a new, city-state public authority to oversee these hundreds of millions in new city money. The mayor wants to make sure that the money doesn’t go toward the MTA’s day-to-day costs, and he wants the new authority to transfer funds to the MTA only for worthy projects and only if it thinks the MTA can complete the projects efficiently. To do all of this, the mayor needs the approval of Governor Eliot Spitzer, Assembly Speaker Sheldon Silver, and Senate Majority Leader Joe Bruno. That’s where political and fiscal reality intrudes.

This past Monday, the city’s independent budget office reminded New Yorkers that within the next couple of years, the MTA will face massive deficits in its operating budget—$800 million, or nearly 8 percent of its projected spending, for next year, nearly $1.5 billion for the following year, and nearly $2 billion, or a whopping 16 percent of its operating budget, by 2010.

Why the deficits? After all, the MTA has collected record real-estate-related taxes during the city’s property boom. Unfortunately, instead of using that money to cut costs, it pushed its problems to future years. And under Spitzer’s predecessor, Governor George Pataki, the MTA refinanced billions in debt and made sure the pain wouldn’t come until he was out of office.

Now, the MTA has to cut spending, find more money, or do both. But cutting spending means forcing the Transport Workers Union to improve productivity and modernize pension and health benefits so that they’re comparable with what’s on offer in the private sector. The MTA can’t do that without unified support on the part of city and state politicians, and it can’t do it before 2009, when the current union contract expires. Plus, MTA management is no example to follow. As the state comptroller reported a few years back, the authority’s offices are bloated with extra staff.

It’s far more likely that the MTA will try to hike fares and tolls (money from tolled bridges and tunnels goes to mass transit). Under this approach, subway and commuter-rail riders would see the price of an average ride go up anywhere from 20 to nearly 40 percent, depending on whether the state and city also increased tax rates and direct subsidies to the MTA. An unlimited-ride, monthly MetroCard would cost between $92 and more than $100, up from $76 today, while the price of a single ride would be as much as $3.

Economically, there’s nothing wrong with hiking fares; the cost of everything, from milk to movie tickets, goes up with time. In fact, the MTA should index its fares automatically each year to inflation, rather than delay until it has no choice. And a subway ride has always been a relative bargain. Even with the hikes, it would still be cheaper for city dwellers to ride the subway than, say, to buy a car and pay for insurance. But politically, governors hate raising the fare. Governor Spitzer said just a few months ago he’d do “everything possible” to avoid a hike. Speaker Silver won’t like the idea much, either.

These political hurdles imperil Bloomberg’s plan. Will Silver and Spitzer really agree, sometime in the next few years, to allow Bloomberg’s new public authority to control $400 million in annual revenues—a veritable gold mine—forever, when they can see those operating deficits coming down the track? (“Forever” is exactly what creating a public authority means; once done, it can’t practically be undone.) On the contrary, it’s likely that Albany will support congestion pricing for a reason Bloomberg didn’t intend: the governor’s MTA will covet that money to cover its costs, so that it can keep any fare hikes to a minimum. On Thursday, Governor Spitzer said that while he supports the idea of congestion pricing, he’s skeptical of sending the revenues to Bloomberg’s proposed public authority, preferring to use them to cut the MTA deficit instead. Bloomberg himself seems to be bowing to these realities, suggesting that his plan would indirectly help the MTA with its operating costs by investing in upkeep and encouraging more riders. But that’s speculative thinking, especially when a fare covers only about half the cost of a ride.

The mayor may soon learn that, while his plan to do an end run around the MTA’s storied dysfunction was creative, the MTA is simply too big and too dysfunctional to ignore. Rather than circumventing the MTA, Bloomberg would be better off spending some of his political capital in Albany by trying to reform this immensely important public authority, pushing it to modernize its own workforce and plan rationally for its own future.


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