N.Y. Transit Woes Spawn Novel Ideas, Funding Quandary

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New York’s regional transportation woes, notably underfunding and overcrowding, are generating a wave of creative proposals.

They go well beyond the headline plan of former city transportation commissioner "Gridlock Sam" Schwartz, who would toll East River bridges and vehicles crossing 60th Street in Manhattan while reducing some outer-borough bridge tolls. That plan has 15 sponsors in the New York State General Assembly.

Other initiatives include ferries and bike rentals across all five boroughs, a streetcar line, new and restored rail service, and a push for public-private partnerships. One transit advocate even touts double-decker New York City transit buses, where feasible, to alleviate congestion.

Observers say heavy-artillery subway expansion projects, notably the Second Avenue subway line and the No. 7 line extension to Hudson Yards, don’t go far enough to solve the problem.

“Hey look, the reliability of the system is going backwards,” Tom Wright, president of the tri-state area think tank Regional Plan Association, said last month at a Bloomberg transportation conference in midtown Manhattan. “We are operating so close to the margin. We have got to ramp up spending, because the level of investment that we're making doesn’t keep up.”

While more people are thinking outside the box, the new ideas beg the same question as the old: how to fund them.

Metropolitan Transportation Authority Chairman Thomas Prendergast labels his agency a “trillion dollar asset,” but its pending capital plan earmarks only $30 billion over five years, $3 billion of which is self-funded through bridge and toll revenue. Even that amount followed a year of political wrangling and an intricate agreement among agency, state and city officials.

Juggling bare-knuckle maintenance with modern priorities is a major challenge, according to Prendergast, whose state agency operates New York City’s subways, buses and regional commuter rail and is one of the largest municipal issuers with roughly $36 billion in debt. Record ridership frequently exceeds 6 million daily.

According to Hartsdale, N.Y., transit advocate Murray Bodin, double-decker buses could transport more passengers and give them some breathing room.

“You certainly can't put it through a tunnel, but over a bridge you can, and in fact, we did try them some years ago,” he told the MTA’s transit and bus committee last month. “Megabus runs double-decker buses all over the place. Why can't we?”

The MTA’s initial five-year capital program in 1982 was all about basic maintenance, or so-called state of good repair, “because the system was falling down around its ankles,” said Prendergast.

More than 30 years and $115 billion later, expectations are different.

“We have to move beyond state of good repair, because what I thought were luxuries – connectivity, and improved and enhanced experience – are things that people now, especially millennials, see as entitlements,” Prendergast said. “They’re becoming a larger percentage of our ridership base and we have to respond to that.”

The MTA last year opened its first new station since 1989 – Hudson Yards on the extended No. 7 line – and hopes to open the first phase of its Second Avenue subway line along Manhattan’s East Side in December.

The city-backed $2.4 billion westward No. 7 expansion from Times Square to the 34th Street-Hudson Yards station, involved a so-called value capture financing plan through the issuance of $2 billion in special-purpose bonds, to be repaid from revenue streams generated by Hudson Yards development and other sources, including payments in lieu of taxes.

Talk of a Second Avenue line – the latest cost estimate for full completion is $17 billion – has bounced around since the 1920s. The $156 billion fiscal 2017 budget Gov. Andrew Cuomo signed in December included an additional $1.5 billion for Phase II of the project, from 96th Street to 125th Street in Manhattan.

“A lot of the monies supporting this are to be dedicated to the capital program,” said Howard Cure, director of municipal bond research for Evercore Wealth Management. “We’re not sure how this will be financed. That's a big question.”

The state budget also includes an unspecified amount for the MTA to conduct a feasibility study of restoring the Rockaway Beach rail line in Southern Queens. The news was music to state Assemblyman Phillip Goldfeder, D-Queens, whose borough lacks north-south rail service.

The cry for other new transportation modes resonates throughout the outer boroughs.

New York Mayor Bill de Blasio hopes to maximize value capture with a 17-mile streetcar line that would run through Brooklyn and Queens waterfront neighborhoods. De Blasio, whose initial estimate to purchase and install the system was about $2.5 billion, said the city would raise capital through a nonprofit that could issue tax-exempt bonds.

Cure questions how much development revenue the city could develop along that route.

“I'm dubious about that,” he said. “I think the trolley project in Brooklyn will involve less of a large business economic base.”

De Blasio is also pushing for citywide ferry service by 2018. He announced last month that San Francisco-based Hornblower Cruises and Events would run the service.

According to de Blasio's office, the city plans to spend $55 million of capital program money in infrastructure upgrades and provide $30 million in operating support per year over six years. Potential sponsorships could offset operating costs and the city stands to receive a portion of fare-box revenue if ridership exceeds 5.6 million passengers.

On Staten Island, meanwhile, business and political leaders are pushing for a West Shore rail line that could connect with New Jersey's Hudson-Bergen light rail over a rebuilt Bayonne Bridge.

City transportation commissioner and MTA board member Polly Trottenberg calls millennials “modally agnostic” and sees the ferry service, expanded Citi Bike bicycle rental service and the streetcar project as essential for reaching underserved swaths of the outer boroughs.

On a bigger scale, the region is ripe for public private partnership activity, as is the nation. Moody's Investors Service last month said the U.S. P3 market, for years slow and fragmented, could become the world's largest.

“The U.S. in general is tremendously lagging behind what our foreign competitors are doing. We're still struggling to make it happen on a pretty ad-hoc basis," Trottenberg said at the Bloomberg conference.

Cuomo, whose P3 projects include the Goethals and Tappan Zee bridge reconstructions, the LaGuardia Airport rebuilding and a planned new Pennsylvania Station in Manhattan, is leaning on the MTA to streamline its procurement process through P3 use.

The dry nature of procurement law makes P3s a hard sell, according to Trottenberg.

“That’s because procurement law is the wonkiest, most complicated, dreary thing on the planet,” said Trottenberg, a former undersecretary for policy at the U.S. Department of Transportation. “When you translate it, it’s just a bunch of words, but when you translate it into something people can understand, than I think they more readily embrace it.”

New approaches are resonating in other regions as well.

In Florida, a transportation bill that Gov. Rick Scott signed April 4 opened the door for tax-exempt financing as part of transportation P3s. The legislation creates the nonprofit conduit Florida Department of Transportation Financing Corp., which would assume responsibility for project debt payments.

 Omitted was a provision to enable cities including Tampa the authority to hold referendums on whether to impose a sales tax of up to 1% to fund infrastructure projects. Florida law now only permits chartered counties to hold such referendums.

“In New York City we would really like to use [P3],” said Trottenberg, whose agency maintains 789 bridges and tunnels and is pushing state lawmakers in Albany for enabling legislation. "We could save tens of millions on bridges and speed up the time of doing these projects."

Trottenberg considers Citi Bike, which began in 2013, “a true P3” in under the city’s system, which involves no direct public subsidy.

From a contract management perspective, she added, that can be challenging.

 “If you're not paying an entity and they're not performing as you might want them to, you don't have much of a stick to hold over their heads.”

Problems with vendor Alta Bicycle Share surfaced in Citi Bike's early days. An audit by City Comptroller Scott Stringer cited “spotty maintenance, poorly-cleaned bikes and substandard docking stations.” A new Alta ownership team late in 2014 named former MTA chief Jay Walder as its CEO.

"Jay has really tackled the operational and equipment problems," Trottenberg said.

A big question is how to monitor projects. Under Florida’s new law, a joint legislative budget commission must vet project expansions whose costs exceed $3 million, triggering some concerns that excessive lawmaker oversight could stall needed projects.

 Trottenberg admitted that the original Citi Bike contract was “immensely complicated and pretty prescriptive” and that the city has since dialed down its micromanaging.

 “We're taking our hands off the steering wheel and saying we’re going to monitor your performance, but we’re not going to monitor every little thing you do every minute.”

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