Gov. Andrew Cuomo and the lead negotiators in the Long Island Rail Road labor talks left one major question unanswered.
What will the contract cost overall?
Despite assurances from Cuomo and Metropolitan Transportation Authority chairman Thomas Prendergast that the tentative 6-1/2-year LIRR contract would preserve the authority's long-term capital needs, skeptics questioned where the money will come from in the long run.
Cuomo, Prendergast and lead union negotiator Anthony Simon announced the deal Thursday, three days before 5,400 workers at the nation's busiest commuter railroad were to strike. LIRR carries 300,000 riders daily.
"I want to see what numbers Prendergast comes up with, because if it doesn't come from the fare payers it will come from [the capital plan,]" said Anthony Figliola, a vice president with Uniondale, N.Y., consulting firm Empire Government Strategies. "There's no magic leprechaun that comes out from behind the MTA building with a pot of cash."
Simon anticipates full union approval by Aug. 15. Prendergast expects the board to rubber-stamp it in September.
"We want to make sure that the fares don't go up," Cuomo said at a press conference in Manhattan. "We also want to make sure that the MTA has the funds necessary to do that capital repairs that they need to do to keep the system safe. And that was a balance."
The MTA, a state-run agency, is scheduled to impose fare and toll increases in 2015 and 2017. It operates New York City's subway system, the LIRR, the Metro-North Railroad, seven intraborough bridges and two tunnels.
Cuomo muscled into the LIRR talks earlier in the week as Sunday's strike deadline loomed and vitriol between the sides intensified. Cuomo also brokered a deal in May between the MTA and Transport Workers Union Local 100, which represents subway and bus employees.
The LIRR contract deal calls for 17% raises over 6-1/2 years, retroactive to 2010, mirroring the recommendations of two emergency advisory boards that President Obama appointed.
Cuomo and Prendergast said health-care savings would help pay for the raises and keep the MTA from whittling its capital plan. All employees will pay 2% in a first-time health-insurance contribution. The MTA had wanted new employees to contribute 4%. New employees will have different wage progressions and pension plan contributions.
"They said nothing about where the numbers are coming from," said Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research. "The bottom line is that the agreement is not going to pay for itself. It will mean new costs to a financial plan that already is looking at a $255 million operating deficit [in 2017] and no money for capital investments."
In the official statement in late June for its $500 million sale of Series 2014A transportation revenue bonds, the MTA said an LIRR settlement could cost an additional $64 million for the retroactive 2010-2014 period, then $18 million for 2015 and 2016, $24 million in 2017 and $23 million in 2018. That, however, assumed 4% health-care contributions.
"The source of payment for any increased labor costs over those costs reflected in the 2014-2017 financial plan would require revisions that would be reflected in [that plan] to be presented to the MTA board at its July meeting," the bond document said.
The board is scheduled to meet July 28.
New York Mayor Bill de Blasio also announced a health-care savings component to the city's nine-year contract with the United Federation of Teachers in the spring. De Blasio said the city could save $1 billion in such costs over that period.
Neither Cuomo nor Prendergast would quantify LIRR health-care savings.
"The same kinds of questions exist as in the de Blasio agreement, but at least de Blasio produced enough numbers to enable you to say it was bad," said Gelinas.
Moody's Investors Service expects the new capital plan to exceed its current $35 billion, given delays in the Second Avenue subway, East Side access and Fulton Street transit hub megaprojects, and the costs of hardening the system from hurricanes, even though federal aid is expected to cover about 80% of Sandy-related expenses.
According to Moody's, the MTA's 2010-2014 capital plan underscored the challenges of trying to cope with massive infrastructure maintenance and expansion needs amid increasing debt.
Moody's warned earlier this month that a generous settlement with LIRR workers could divert critical pay-as-you-go funds from the capital plan and force more debt issuance. Moody's rates the MTA's transportation revenue bonds, its primary credit, A2. Standard & Poor's and Fitch Ratings rate them AA-minus and A, respectively.
According to Moody's, preliminary new cost estimates for the capital plan are at least $1.08 billion higher for East Side access, originally pegged for completion in 2009. The MTA has pushed back that timetable to between 2021 and 2023.
"With no new outside funds identified, the MTA may need to issue more debt to complete the project," Moody's said in a special report.
While the LIRR labor crisis preoccupied the MTA, a Cuomo-formed Transportation Reinvention Commission met from July 15 to July 17 at the authority's Madison Avenue headquarters to generate support for the capital plan and discuss the MTA's long-term future.
The very name of the 28-member panel begs the question of whether such a gargantuan agency can actually reinvent itself.
"We're at a time like no other, given [Hurricane] Sandy and the huge bump in ridership. There's pressure to move beyond the status quo, so we'll see," said commission member Gene Russianoff, an attorney and chief spokesman for the Straphangers Campaign ridership lobbying group. "I'm hopeful, but I understand why people are so cynical.
"Does the [state] legislature OK $30 billion for the next five years at the MTA? That's my metric for doing well," he said.
The commission expects to complete its report by mid-September.
William Henderson, executive director of the Permanent Advisory Committee to the MTA, urged the authority not to bond against existing revenues to meet future capital needs.
"It is not reasonable to ask an entity that cannot meet its full operating costs through farebox revenues and can only with great difficulty produce a self-sustaining budget to fund capital investments through bonds backed by fare revenues," said Henderson, whose organization is the coordinating body for LIRR, Metro-North Railroad and New York City Transit riders' councils.
While Cuomo called the down-to-the wire LIRR tempest "agita," Charles Brecher, a consulting research director for the Citizens Budget Commission watchdog organization, blames a dysfunctional human-resource system for the heartburn.
"The fault is primarily due to the inconsistent legal framework for labor relations with a mix of federal and state laws setting standards and procedures for different parts of the organization," Brecher told the Reinvention Commission.
LIRR and Metro-North workers can strike because the federal Railway Labor Act governs commuter lines. Subway and bus workers cannot strike under New York State's Taylor Law, passed after a 1966 transit strike.
Brecher, also a professor at New York University's Robert F. Wagner Graduate School of Public Service, admonished the debt-ridden MTA to focus on doing the ordinary things unordinarily well.
For openers, he said, it could budget based on generally accepted accounting principles rather than the current cash basis, which he said leaves the authority with serious long-term fiscal problems.
"It's a pretty basic thing," he said.
