Years ago, when I was a financial journalist covering the greater New York region, one of the biggest stories I covered was the relocation of the area’s major companies to states like Texas, North Carolina, and Florida. Back then, a typical response of local political leaders to every departure was that those firms were short-sighted, preferring to save a few bucks on taxes for the sake of moving to places that “under invested” in quality of life. Their hospitals didn’t save as many lives as ours, the story went, and their schools didn’t create an educated workforce like ours did. Their infrastructure was “rural,” at best. Still, for some reason, the firms kept going. Some of us began wondering whether things weren’t quite as bad elsewhere as the defenders of the New York/New Jersey region’s model of high taxes, high costs, and deference to special interests made them out to be.

I can’t help recalling those days whenever the region experiences one of its increasingly common meltdowns—like the current commuting fiasco that’s plagued New Jersey Transit riders thanks to a Monday derailment in Penn Station. The spillover effects are also slamming commuters from Long Island and riders of the PATH trains. If you follow these issues closely, you know that the derailment itself—the second in ten days at Penn—is only a small part of the story of how the political culture of one of the nation’s richest regions has managed to squander its resources so thoroughly over the past several decades.

Consider the agencies tasked with dealing with the most recent mess. While it’s not clear yet whether Amtrak (which manages Penn Station and owns the tracks) or NJ Transit (whose train derailed) is at fault for the derailment, the accident has already led to a chain of negative consequences. When Penn Station riders were rerouted to Hoboken, for instance, they entered a station still under construction to fix the damage caused by the September 29 crash of a NJ Transit train that barreled in after the train’s operator apparently fell asleep or blacked out at the wheel. The construction work on the Hoboken platform worsened the overcrowding. Meanwhile, NJ Transit riders directed into the PATH system, operated by the giant bi-state Port Authority of New York and New Jersey, found that switching problems had overburdened that service, too, so that a system that could barely accommodate all the extra traffic under the best circumstances became unbearable for some commuters, who just gave up. Delays are expected to continue until Friday.

These are not isolated incidents. NJ Transit, after all, is the agency that parked trains below sea level during superstorm Sandy, causing $100 million of damage and contributing to service shortfalls. It’s also the agency that stranded thousands of people at Met Life Stadium after the Super Bowl in 2014, prompting fans to chant on the platforms, “New Jersey sucks.” The Port Authority, meanwhile, has already given the region some of the world’s worst airports. Neither Newark nor LaGuardia make the list of the world’s top 100 airports; Joe Biden famously described LaGuardia as “Third World.”

In the wake of accidents like Monday’s, you will inevitably read that the region needs to invest more in infrastructure, even if that means ever-higher taxes. What you won’t read about much is what resources we already have and how our political culture—the product of our voting habits—has frittered them away. One consequence is that we get higher taxes—as when New Jersey raised its gasoline taxes after the Hoboken crash—without reform, guaranteeing that many of the same practices that led to trouble in the first place will continue. New York and New Jersey are, respectively, first and third in taxes per capita collected from residents (Alaska and North Dakota collect more, but much of their tax revenue comes from energy companies). Even with all this tax revenue, transit agencies impose stratospheric fees. The Port Authority’s tolls for bridges and tunnels and its airline fees at Newark Airport rank among the highest in the nation, while NJ Transit charges riders the highest fares of any U.S. commuter train system.

Where this money goes is a mystery only to those who don’t pay attention. Less than a decade ago, the big story about NJ Transit, for instance, was not underinvestment but the upward-spiraling subsidies that the state had to pay to keep the agency afloat. One big reason: the rich contracts it awarded workers, which resulted in the agency spending 80 cents on employee benefits for every dollar it paid in wages. (In the private sector, the average is about 43 cents for every dollar in salary for the average worker and 53 cents per dollar for those in transportation.) Though NJ Transit has tried to hold down costs for years, employee benefits alone consume half of all revenues the agency collects from riders. Reforms have failed at least in part because workers can strike—a devastating tool for a government transit monopoly.

The Port Authority, for its part, infamously spent $4 billion on one PATH station, a classic boondoggle that came in at twice the original price.  In addition, thanks to years of rich worker contracts and poor controls over overtime and other costs, the average worker at the Port Authority’s steeply unprofitable PATH service earned $91,000 in 2014, while officers who police its facilities took home an average of $153,000 in cash compensation. Those high tolls and airport fees, in other words, finance salaries and benefits that are rich even by the luxe standards of New York and New Jersey public-sector contracts. Not to be outdone, New York’s Metropolitan Transportation Authority has taken a project to build a rail tunnel under the East River from Queens to Manhattan—originally priced at $3 billion and slated for completion in 2010—and turned it into at least a $10 billion undertaking that won’t get finished until 2022, according to current projections, largely because the original estimates purposely hid the real price of the work and union featherbedding, among other things.

This history suggests that the parties associated with planning and building two new rail tunnels under the Hudson River—New Jersey, New York, the Port Authority, and Amtrak are all involved—will do nothing to prevent something similar from happening again. Given that preliminary costs for the Hudson rail tunnels are already estimated at $23 billion, the project might well turn out to be the one that finally breaks the region financially. It wouldn’t be the first time that such a megaproject undermined the stability of an economy.

Why do residents put up with it? I’m often asked. Many don’t, actually. Faced with a political system rigged against reform (both states’ political districts are among the most gerrymandered, making it difficult to oust incumbents), people are voting with their feet. New York and New Jersey are leaders in outmigration of residents, and they rank among the states whose residents would most like to leave if they could. New Jersey, despite its wealth, is broke; New York’s budget sustains itself on the taxes that Wall Street throws off, but vast regions of the state resemble Appalachia, as Eliot Spitzer once said.

At times during my years covering the relocation story, I wondered how many of the businesses that fled the region would regret it. I’ve stopped wondering.

Photo by Pancho Bernasconi/Getty Images


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