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Congestion Pricing in New York, a New Mayor in Chicago

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Congestion Pricing in New York, a New Mayor in Chicago

10 Blocks podcast April 17, 2019
Cities
Politics and law
Economy, finance, and budgets

Nicole Gelinas and Aaron Renn join Seth Barron to discuss recent developments in New York and Chicago.

In the first week of April, both cities marked milestones: Manhattan got the nation’s first congestion-pricing plan, courtesy of the state legislature, while Chicago elected its first black woman as mayor.

New York City’s transit system badly needs improvement, but Gelinas argues that this congestion-pricing plan is effectively a state money grab. Meantime, Mayor-Elect Lori Lightfoot is a political outsider, but Renn writes that she has an opportunity to change the “Chicago Way” of doing business.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is Brian Anderson, the editor of City Journal. Coming up on the show today, my colleague Seth Barron invited two of our contributing editors, Nicole Gelinas and Aaron Renn, to give us an update on recent developments in two of the nation's big cities, New York, where we are, and where you might hear some of the construction sounds we're living with these days, and Chicago. There's been a lot of developments in both cities lately. A few weeks ago, Chicago elected its first black woman as mayor of the city. Her name is Lori Lightfoot and she's a political outsider in a town traditionally known for its machine politics. The day before that election, New York State Legislature passed the country's first ever congestion pricing plan, which will allow the state and city to charge drivers entering the most crowded parts of Manhattan. We'll have Nicole Gelinas to give us the details on the podcast about that and Aaron Renn on Chicago, but a few more announcements before we get started. First, City Journal readers will be happy to know the spring 2019 issue has officially arrived at our offices and we'll start rolling out essays from the issue in the weeks to come. Head over to the website, though, to learn more about it and-- better, subscribe to the magazine. Second, if you live in the New York Metro area and you're interested in local politics and policy, don't forget to subscribe to our newsletter, The Beat. You can find it at www.thebeatmi.com. Lastly, don't forget to follow City Journal on Instagram. You can find us there @cityjournal_mi. That's it for me; after the music Seth Barron will talk with Aaron Renn and Nicole Gelinas. We hope you enjoy.

Seth Barron: Aaron, welcome back to 10 Blocks.

Aaron Renn: Thanks for having me back again.

Seth Barron: So, our listeners might not know this, but the city of Chicago had a big election for mayor a few weeks ago. Is that correct?

Aaron Renn: Yes they did.

Seth Barron: And the winner was Lori Lightfoot, a Democrat. What do you know about her?

Aaron Renn: Well, she is someone who is largely an outsider to politics. In many ways she's the classic face of the new Chicago. She's not from Chicago originally. She grew up in a small city outside of Canton, Ohio, went to the University of Michigan, then attended law school at the University of Chicago and went to work for Mayer Brown, one of the most prestigious law firms in the city, so she's a representative of essentially the new professional class of Chicago. She worked in city government a bit in various agencies, and then she was also a federal prosecutor for a while. So she's no stranger to public service, but she was never part of the political class of the city, and it'll be interesting to see how she does as mayor.

Seth Barron: People who don't necessarily know a lot about Chicago nevertheless associate the city with a certain brand of machine politics. This is the long history of Chicago. You know what I'm thinking of, that book "Boss" by Mike Royko, and the Daleys and Rahm Emanuel. So is this a departure? Does this represent a radical change for Chicago?

Aaron Renn: You'd have to say that Lightfoot getting elected is the definitive proof that the machine as traditionally understood is dead. Now, old school machine politics was really essentially a patronage operation. You know, people got jobs and in return they were supposed to essentially deliver the votes in their wards or whatever. That sort of machine has long been gone. But there was a very powerful political establishment in the Cook County Democratic Party that basically was very difficult for anyone to overcome. You know, Mayor Daley, the second Mayor Daley steamrolled for five terms over people. Then he handed the baton off to his handpicked successor Rahm Emanuel. And this election was wide open, there was a huge number of candidates in the first round. Coming into the second round Lori Lightfoot's opponent, Toni Preckwinkle was the chairman of the county's Democratic Party and a longterm insider, who was crushed. So the power of the political class in, certainly winning the mayoral election is certainly much less than it was. This is really unprecedented for the city.

Seth Barron: So what does this portend? Is Lori Lightfoot going to overturn the way business is done in Chicago? The Chicago way, as it were?

Aaron Renn: Well, the previous two mayors have essentially governed in a coalition with the business community focused around building up The Loop and the new economy of Chicago, which they have often felt-- they had this, call it the second city complex, this idea that they have a bit of an inferiority complex toward the coast and need to really work hard to make sure they're a global player. There's been a lot of talk about the need to bring the rest of Chicago along with the downtown, which is a legitimate need. But unlike some of the hardcore progressive activists, some of whom were elected to the city council. I don't see Lori Lightfoot as someone who's going to really attack the business community. In fact, she very quickly got on board with a massive real estate development there that was going to get a lot of TIF subsidies. So I would see her as a voice of continuity with the traditional way of economic development, but hopefully more open political system there in someone who's also able to essentially bring in some of these other constituencies in other parts of the city that haven't been there. So I think there's some continuity, but maybe with change.

Seth Barron: Well, over the last few years a big story coming out of Chicago has been crime, and the number of shootings and murders particularly in the south and west side of Chicago. What's going on with crime now, and what is Lightfoot going to do?

Aaron Renn: Well, the good news for her and for the city is that crime has been in decline, particularly murders. The murder rate was down again last year, certainly still elevated by New York standards, but down from where it had been. And then, so far this year the number of murders in Chicago has been down 30%, so that's a significant drop. And with crime trending in the right direction she hopefully won't take office under some immense crisis of policing, as things seem to be heading the right direction. Obviously crime is still going to continue to be a big focus of her administration, but those numbers are heading in the right direction.

Nicole Gelinas: Why do you think crime is heading in the right direction?

Aaron Renn: That's a good question. To be honest, I don't know. The police department has put this new superintendent in place who seems to have been rather effective. I don't believe Lightfoot has committed to replacing him, but I think maybe the leadership has improved there a bit and they've continued to evolve their tactics. And then there's some of these things that are really just a little unpredictable. So I don't want to claim that I have a great handle on exactly why it happened, but I think it's certainly very good news.

Seth Barron: We hear a lot about the public finances in Illinois, which sound like they're kind of dire. What's the situation in Chicago?

Aaron Renn: All levels of government in Illinois have horrific finances. So, the state obviously has huge problems, the city does as well. Just in pension debt, unfunded pension debt alone in the city is about $28 billion outstanding. Local analyst Ted Dabrowski has added up the share of all the unfunded liabilities in the state that are essentially attributable to Chicago's taxpayers in some way, and came up with $130 billion. So that's an enormous liability, most of which is in the form of pensions that cannot be touched as per the Illinois Supreme Court rulings. And then just the regular operating budget is not in great shape either. She's going to have to put a budget together pretty quickly, by the early fall, and they're already projecting a deficit of as much as $800 million, and that's going to have to be dealt with. The city has routinely used financing gimmicks to essentially balance the budget, so she's going to have a tremendous financial challenge, there is no doubt. Rahm did everything he could to try to get out from under some of these liabilities, but he really wasn't able to make that much progress in restructuring things, and set the city on a tax increase path, some of which has already kicked in, but much of which is scheduled to come into force during the next term. So, they're going to have to start coughing up over $1 billion additional per year toward pensions in the not-too-distant future, and where that money's going to come from is a big question mark.

Seth Barron: Well, with her resounding three- or four-to-one victory, it seems like she has some political capital. Can she claim a mandate and start cutting the budget?

Aaron Renn: Well, again, I think the budget's going to be tough to cut given that much of this financial liability is for loans that have been taken out, bonds that have been sold, pensions that have to be funded, and it can't be restructured as per the Illinois Supreme Court. Obviously she's probably not going to want to cut back on the amount of money they're spending on the police, maybe she'll even want to spend more money on police. There are contracts coming up with the teachers and the firefighters and the police. Rahm Emanuel did do some budget cuts and he did things like close half the city's mental health clinics and things of that nature. There's just not a lot of big-dollar items you could really cut and fix the government. I think that's one of the things that Bruce Rauner discovered when he came in as the Republican governor of the state. He thought he could do something like what Scott Walker did in Wisconsin, but Wisconsin's pensions are in great shape. Wisconsin has sort of a budget issue, but they didn't have this huge liability issue, and you can't cut fraud and waste to get out from underneath the kind of debts that you have in Chicago. Essentially they're going to have to pay up and that's going to mean tax increases.

Seth Barron: Nicole Gelinas, our resident expert on New York City finances, the MTA. You've written recently a lot about congestion pricing, which you've been in favor of. And now the new New York state budget has a provision for congestion pricing, but you're not that happy.

Nicole Gelinas: Yeah, I'm like John Kerry. I was in favor of it until I was against it. And of course, in theory, congestion pricing is an economically sound idea. If you think about Manhattan's congested streets, we're not going to be making any new street space, yet we have record demand for that street space. We have record number of cars on the road in the form of Ubers and Lyfts that have made taking a car cheaper, we have a record number of trucks in the form of Amazon deliveries, UPS and FedEx trucks out on the streets, and you have a record number of pedestrians. You can't take space away from the pedestrians to give over to the cars. You're not going to make any more, so you have to address the demand side, and you can do that by pricing the streets. If you were using a resource that was free, which is driving your car or your truck on a Manhattan street, effective in 18 months from now, it will cost probably $12 to bring a car into Manhattan below 60th Street and well above $20- $25 for a truck, although we don't know the exact prices yet. So again, perfectly valid economic idea. But the problem with this law is that it's essentially a state revenue takeover of local resources. If we think about who pays to maintain the streets, fill in potholes, repave the streets, keep up the East River bridges-- which are the way that most of the people who are coming into Manhattan, if they're not already paying a toll, that's how they're coming in-- it's city taxpayers that pay these costs, which are well more than $1 billion a year, but yet all of the revenue that's now going to be generated from these streets is going to go to the state because the state runs the transit system. Now of course the MTA, the state-run transit authority, is supposed to spend this money on improving public transit for city residents, city workers, city visitors, but the city is not going to have very much of a say on how that money is spent. Those decisions will be made at the state level or at a board level where the city has very little representation. And so we've seen a long history of money being taken out of the city for mass transit and going disproportionately to suburban transit projects because the suburbs are the swing districts. If you're running for governor or you are governor and you want to get people to vote for you, if you're a Democrat, New York City is already going to vote for you. It's the suburbs that could go either way depending on the political climate, so the politicians of either party always like to make the suburbs happy. Which is fine, there's nothing wrong with some of these suburban projects that they're building, but are they being paid for equitably? Not really. If you think about East Side Access, a project to bring Long Island railroad trains to the east side of Manhattan, the $12 billion project has consumed multiple MTA investment programs over the past 15 years or so. But there's nothing equivalent to congestion pricing where if you have property along this Long Island corridor where the property will be worth more because of this, they never did anything like an extra tax to capture that value, and so the city is paying a disproportionate share.

Seth Barron: Well, just on a basic level, and I'm kind of confused about this, is the point of congestion pricing to reduce traffic or to raise money?

Nicole Gelinas: Yes. But the longer answer is that we don't really know, because if you look at the language of the bill that the governor signed into, or I guess governor hasn't technically signed the state budget, but if you look at the proposed law that the Senate and the assembly sent to the governor there's nothing that indicates a congestion goal in the language of the law. In other words, there's nothing that says 'we want to improve Manhattan traffic speeds by 20%' or 'we want to reduce the number of cars and trucks by 20%.' They mention congestion, but they don't say what the goal here is. So how can you know five years from now if they accomplish this goal? This isn't like a cigarette tax; a cigarette tax has never been a large portion of New York City's budget. When Bloomberg increased the cigarette tax, he was very clear that he would like to collect no revenue from the cigarette tax. The whole purpose of this was to get people not to smoke. But in this case, the MTA needs $1.5 billion worth of congestion pricing revenue every single year in order to service the bonds that they're going to take out: probably $15- $20 billion worth of long-term debt, 20- to 40-year borrowing. So the purpose here is not to reduce congestion so that they don't take in these revenues. It can be seen more as a tax on congestion in that they don't want to be on the side of the Laffer curve where they're actually reducing the activity too much, because then that means they wouldn't have money to service all of this debt that they're going to take out. So if people are expecting extreme reductions in the traffic that's coming through Manhattan, they may be disappointed.

Seth Barron: Aaron, I know you've studied or looked at various toll roads across the country and privatization of roads. I wonder what kind of perspective you have on congestion pricing given what's happened in other jurisdictions. Maybe it doesn't relate.

Aaron Renn: Well congestion pricing is something that has been put in place in other cities overseas. Singapore has had it for a long time, London famously introduced a congestion pricing charge, Stockholm has it, so this is not something that is new. So I think the idea-- I would be with Nicole-- the idea of a congestion price for people coming into Manhattan, particularly tolling those East River bridges, or however exactly they're going to be implementing this, makes eminent amount of sense, particularly because we have such great public transit and there's no prospect of widening these streets. So it makes sense in terms of the actual putting in place of a congestion fee, the question is, how is it done? And I think Nicole has raised some very cogent objections to it.

Seth Barron: You said something interesting there, that New York has such great transit, because that's not something you'd hear a lot of New Yorkers bragging about lately, Nicole, but on the other end, we do have great transit.

Nicole Gelinas: Yeah, it is nice to hear Aaron say that in a non-sarcastic tone. And it is true that if you were to look at other American cities, New York has the most extensive extensive transit system, and even though it declined in service between 2013 to the beginning of last year, it is a reliable system where half the people in New York don't have to have a car. And you really can't say that about other major cities. I mean even places like Washington, Boston.

Aaron Renn: I lived in Chicago, and I did not own a car for a while, and you can get around Chicago without a car, but it's not that convenient. Their subway system is entirely downtown-focused. It's essentially a commuter rail system for people who work in The Loop, whereas here in New York, I've never once said to myself, 'it would be great if I had a car'. It's just not something that even occurs to me because we do have great coverage. It's not perfect, but I think we still have one of the top 10 ridership systems in the world in terms of the number of people who are riding it. So could it be better? Certainly. But I think we should appreciate the fact that it does make living here without a car something that does not seem like a second class option, but just seems like the default option.

Nicole Gelinas: I'll give you some, some numbers if you want to put some statistics to the idea 'is the subway system getting worse or better?' We know clearly that it got worse for the five years leading up to early 2018, but the good news is that it is getting better. If you look at the MTA's metrics, they just had a board meeting, almost 80% of weekday trains were on time in March compared to 65% for the previous March. And if you look at the 12-month average, about 71% of trains are on time compared to 63% for the 12 months looking back to the previous year. So yes, they are. And the number of a weekday trains delayed for the past year has been about 51,000 a month, for the year before that it was 64,000. So the good news is that the governor very famously, almost two years ago, said the MTA was in a state of crisis. He was taking ownership of this problem. And they have turned things around. Not to this sense that they're actually better and that we can declare victory, but they have stopped this slide that was going on for half a decade. And the new management team seems to realize that they need to do a lot better. So what does that mean for the future? Who knows, but things are not getting worse anymore.

Seth Barron: That reminds me, in the last couple of years, Mayor de Blasio oddly made a virtue of disowning any responsibility for the subways. And he would always say 'this is not the mayor's problem, this is the governor's problem. This is Cuomo's MTA.' He loved to say this, and it seemed very strange. In New York City you think about mayors like Koch or Giuliani or Bloomberg who would embrace difficulties and say 'I'm going to solve this. I'm a nuts and bolts guy.' And maybe the MTA isn't in de Blasio's bailiwick, but it still seemed like an odd thing to do and it seemed kind of emblematic of his governance style. What are some of the problems that you see in New York now, both of you, that maybe stem from the mayor's hands-off executive approach, or just generally speaking as we go to the next couple of years, he seems to be focused on his national reputation. What is he missing? What do we need here?

Nicole Gelinas: Well, I think you're right, if you think about every mayor's broad problem that he wanted to solve. Koch inherited a fiscal crisis or the very active remnants of that fiscal crisis, and there was a sense that the city was ungovernable. So when the transit union went on strike very early in his term, he made it very clear that the city would have a plan to deal with a strike and that it would execute this plan reasonably competently, and everyone would keep their spirits up and go to work, and it was a huge difference from the previous transit strike, which happened under Mayor Lindsay, and it was just chaos. They asked people to voluntarily do things like carpool and they didn't do it, and it didn't work, and it just added to this idea that the city was just going nowhere. So Koch embraced some of these difficulties. Then, if you go into the Giuliani years, both Dinkins and Giuliani, I think it's fair to say that their major existential problem was violent crime. And both of them tried to address violent crime and were pretty successful with it. Crime peaked during the Dinkins era and went down when he hired Ray Kelly. We started to put in some reforms that Mayor Giuliani picked up, expanded, and Giuliani of course ended up making that problem not a solved problem, but a governable problem. And then you had Bloomberg, his main focus was education. He wanted to get some control over the public school system, introduce more charter schools. And so each of these mayors, whether they succeeded or failed, or you quibble with some of the policies, they embraced what they saw as the existential problems. But if you look at de Blasio, he's never done that with the transit system. And arguably the city is just, it's never been healthier in terms of population, tax revenues, businesses here, but he really hasn't taken advantage of those good times to put in place some of the reforms that we need on the budget side, on managing the streets, that eventually, if you have a recession, someone's going to have to deal with both the problems that the recession causes plus all of these missed opportunities that mayor de Blasio left behind.

Seth Barron: Has the mayor not put money aside for a rainy day?

Nicole Gelinas: There's always money put aside for a rainy day, but it's never very much money in the context of the budget. If you're looking at a budget that's topping out at $100 billion a year, putting $2.5 billion aside in cash for a rainy day, putting $4 or $5 billion in a healthcare fund, which can be used as a rainy day fund, even though you really shouldn't, that money in a recession is burned through in just a few months. Never have we saved enough money for a recession that we don't have to have painful layoffs and service cuts.

Aaron Renn: I think it's interesting to contrast the transit situation with Chicago where the mayor does have control over the transit system and things were not good in the 1990s there. In fact, I got my start writing about urban issues by publishing a transit newsletter about Chicago, and the mayors really have, over the course of about 20 years, done a lot of work to renovate the Chicago Transit Authority's elevated lines to the extent that it's probably one of the best performing transit systems in the country right now. They leveraged their federal delegation in the 2000s to get some earmarks back when there were still earmarks, to renovate their worst, most crumbling L lines, and then they've extensively used TIF revenues to rebuild stations. And they've made difficult decisions like closing the south end of the red line, which is the busiest in the system for five months, and replacing it with shuttle buses in order to do some renovations on the system. So the mayor there has stepped it up. And that's something that has certainly bedeviled New York, where, to be fair, the governor does control the transit system and arguably many of the problems in New York are more driven by the governor than by de Blasio, who's merely been neglectful.

Nicole Gelinas: I would agree except for one thing, which is that we can't forget the management of the streets. If you look at why bus service is so bad, a lot of it has to do with not keeping parked cars out of the bus lanes, or the cars don't have a dedicated lane in the first place enough of the time. And I think the mayor has done a pretty bad job on just day-to-day management of the streets, which is a mayoral responsibility.

Aaron Renn: We're talking about a guy who couldn't get carriages out of Central Park. He's really fairly ineffective in almost everything.

Seth Barron: Well, that was a pretty interesting review of New York and Chicago, two of our biggest cities, and their current crises. Nicole, Aaron, thanks for joining us. You can follow Nicole on Twitter @nicolegelinas. You can check out her work at City Journal and at the Manhattan Institute. Aaron, thanks for the update on Chicago. You can follow Aaron on Twitter at @aaron_renn. And you can also read his work at City Journal and at the Manhattan Institute. We'd love to hear your comments about today's episode on Twitter @cityjournal with the #10blocks. If you like our show and want to hear more, please leave ratings and reviews on iTunes. Nicole, Aaron, thanks very much for coming on the show.

Nicole Gelinas: Thank you, Seth.

Aaron Renn: Thank you.

Brian Anderson: Thanks for joining us for the weekly 10 Blocks podcast featuring urban policy and cultural commentary with City Journal editors, contributors, and special guests.

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Photos by Drew Angerer and Scott Olson / Getty Images

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