Congestion pricing the hook in latest call to fix MTA

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The congestion pricing agreement by New York Gov. Andrew Cuomo and Mayor Bill de Blasio to overhaul the Metropolitan Transportation Authority made clear that the state-run MTA's needs extend far beyond a tolling fix.

Congestion pricing, a popular rallying cry from transit advocates and the linchpin of Tuesday's announcement, could raise $1 billion annually for the MTA, supporting nearly $15 billion of bonds. It may reduce the city's dire congestion problem by minimizing peak-time vehicle use in Manhattan.

"It's part of the solution and it will help, but it's not sufficient compared with [the MTA's] capital needs," said Howard Cure, director of municipal bond research for Evercore Wealth Management.

Cuomo and de Blasio, in a joint statement, announced a 10-point transformation program for the MTA, with some provisions subject to state lawmaker approval. It marked a rare accord between the often-at-odds politicians.

The MTA, one of the largest municipal issuers with roughly $41 billion in debt, operates the city’s subways and buses, two commuter railroads and several intraborough bridges and tunnels. Headline fiascoes of late have cast a harsh light.

Its need for a reliable revenue stream has triggered rating-agency backlash. S&P Global Ratings downgraded the MTA twice last year, landing at A with a negative outlook. Moody's Investors Service in December revised the outlook for its A1 rating of the authority's workhorse transportation revenue bond credit to negative from stable.

Congestion pricing has gathered steam over the decade since de Blasio's predecessor, Michael Bloomberg, floated a concept that was dead on arrival in Albany.

"A lot has changed since the Bloomberg years," said city transportation commissioner and MTA board member Polly Trottenberg. "We've got some new faces in Albany, the governor and the mayor are now looking at this and it seems to have a lot of momentum."

Other proposed changes would centralize common functions at MTA operating units; expand design-build project delivery; align board members' terms with those of appointing politicians; and appoint a "regional transit committee" to review five-year capital program requests.

Open questions surround many of these initiatives.

According to Cure, the regional panel could burden the authority with "another layer of bureaucracy designed for the governor and the powers that be to get their way with the MTA.

"That's not spelled out very clearly," he added.

Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research and a congestion pricing proponent, said the concept has existed de facto in New York for 50 years. She cited the allocation of surplus MTA bridge and tunnel toll revenue to mass transit -- about $600 million per year.

"This is essentially congestion pricing," Gelinas said. "You charge drivers a higher rate than they would pay if it was just break-even."

The proposed overhaul underscores how the MTA must manage costs — and itself — better, according to Andrew Rein, president of the watchdog Citizens Budget Commission. "Critical to those efforts will be the participation of labor and increased productivity by all segments of the workforce," he said.

A blueprint to unify core functions ranging from construction management to human resources at the MTA’s six operating units — New York City Transit, Long Island and Metro-North commuter railroads, MTA Capital Construction, MTA Bus and Staten Island Railway — is due out in June. This move would abandon the 1968-designed ”holding company” structure that critics say has balkanized operations.

Unmentioned was the MTA's Bridges and Tunnels unit, the logical entity to run point for the authority on congestion pricing street management, in conjunction with the city's Department of Transportation.

Electronic tolling devices would line the perimeter of the central business district, defined as streets south of 61st Street. It would not include the FDR Drive, nor would it toll East River bridges, the latter a political third rail. Also missing from earlier iterations is funding for road and bridge repair.

"I really think that ultimately, tolls at some point would be on the East River bridges," Cure said.

A memorandum of understanding between the city and the MTA will set parameters for installing and operating the system, with pricing expected in place by December 2020.

State and city revenue from a fixed amount of Internet sales within the city and marijuana taxes, should the state legalize cannabis, would backstop the toll revenue. Tolls could vary by time of day.

Richard Brodsky, a state assemblyman from Westchester County for 28 years and now an adjunct professor at New York University's Robert F. Wagner Graduate School of Public Service, fought Bloomberg on congestion pricing 10 years ago and still opposes it. He called the flat-rate tax regressive, among other objections that include price unknowns.

"It is arbitrary, it is unfair. It has all the defects of politics and none of the virtues of a well-thought out plan," Brodsky said during a Tuesday night debate with Gelinas at NYU Wagner that Trottenberg moderated. "It is submitted with the budget, which is a strong-arm tactic known to Albany well."

MTA critics point to bloated bureaucracy, cost overruns on major capital projects, longstanding political strife and the need for new revenue streams.

"The one piece that has not been actively worked on is how we can generate income outside the box, which we can do, but have not spent the time," board member Charles Moerdler said Monday. "There are ample opportunities."

The MTA board on Wednesday approved a fare-hike plan that holds base fares at $2.75 while eliminating the 5% discount for bulk MetroCard purchases. It also retained law firm Sive, Paget & Riesel PC to represent it on congestion-pricing related environmental reviews.

Board member Veronica Vanterpool has called for realigning the MTA's operating budget cycle to July 1 from Dec. 31 to better gauge state and local funding levels. State and city budget deadlines are April 1 and July 1, respectively.

"We have an irrational budget process and an irrational cycle," Vanterpool said. Chief financial Robert Foran has promised a detailed report by next month's board meeting on related costs and savings.

Under design-build, construction and engineering experts not affiliated with the MTA or its consultants would review all major construction projects. The MTA, meanwhile, could more aggressively exclude failed contractors.

"The idea of design-build is always something viewed favorably," Cure said. The state has used design-build on special capital projects such as the new Tappan Zee bridge. According to Cure, pushback could come from the MTA's internal engineers and from unions.

The overhaul would also audit assets and liabilities, with the initial audit due January 2020. "The forecasts, projections and capital plans they have put forth strain financial credibility," Cuomo said.

Richard Ravitch, when he became MTA chairman in 1979, immediately ordered an audit of the entire system. His findings laid the groundwork for state adoption of the authority's initial capital plan.

"I spent time with the engineers, not with the politicians, and I asked them what the replacement cost and useful life of every component part of the system was," Ravitch said on a Bond Buyer podcast. "And I produced a report of hundreds of pages, which spelled out the details and that was enough to persuade the political system."

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Infrastructure Transportation industry Toll revenue bonds Andrew Cuomo Bill de Blasio State of New York City of New York, NY Metropolitan Transportation Authority New York