Jonathan Bowles cringed when he saw the sinkhole outside the landmark Katz's Delicatessen in Manhattan's Lower East Side after a water main burst three weeks ago.
"It was crazy," said Bowles, executive director of the think tank Center for an Urban Future. "This kind of thing happens more than 400 times in New York City every year."
As Bowles pointed out, more than 1,000 miles of water mains in New York are more than 100 years old and the average age is 60.
"But the one outside Katz's was in its 50s," said Bowles.
In short, infrastructure in New York City and throughout the Northeast is crumbling. How to pay to upgrade it amid diminished federal and state aid, financial strains on localities and myriad conflicting political systems — all aside from hardening against another Hurricane Sandy-strength storm — is another matter.
Neither taxes nor user fees are popular with voters but belong in the discussion, Bowles said at The Bond Buyer's recent Tri-State Public Finance Conference at the Roosevelt Hotel in midtown Manhattan.
"We don't blink an eye about paying $150 for a smartphone but when the water bill goes up 5% or 10%, that's another story," said Bowles.
Pension obligations and debt are squeezing municipal budgets, said Mary Francoeur, a managing director for project finance and utilities for the Americas at Assured Guaranty Municipal Corp.
"If you look five, 10, 15 years forward, there is not a lot of tax and revenue flexibility," she said. "The dialogue needs to start soon because New York's budget for infrastructure will be squeezed out by a lot of other things."
Center for an Urban Future in early March called for $47 billion in New York City capital spending over five years in its report, "Caution Ahead." While New York City increased capital spending significantly — from fiscal 2002 to 2013, outstanding debt increased from $42.1 billion to $67.6 billion and annual debt-service levels increased from $3.9 billion to $5.8 billion — the center cited a $34 billion state-of-good-repair funding gap.
The Metropolitan Transportation Authority, which operates New York City's subway system, two commuter railroads and interborough bridges, has also borrowed more for state-of-good-repair needs as well as its more ambitious expansion projects such as its Second Avenue line. According to CUF data, MTA's outstanding debt rose from $14 billion to $32 billion and its annual debt service spiked from $1 billion to nearly $2.2 billion.
The MTA's "sizeable capital plan spending needs will result in increased leveraging of revenues for debt issuance," Moody's Investors Service wrote in late March when the MTA, which Moody's rates A2, sold $500 million of transportation revenue bonds.
"Sometimes we need shiny new things, but funding for our state-of-good-repair needs has fallen," said Bowles.
Connecticut's bond commission on May 30 approved $80 million toward a $1.15 billion, multiyear upgrade and expansion of the New Haven rail yard. The state funding will pay for a new warehouse for rail car components, storage tracks for rail cars, demolition of an old storage facility and a pedestrian bridge linking Union Station and the yard.
On Thursday, Gov. Dannel Malloy announced that a fifth power supply substation is in service on Metro-North Railroad's New Haven commuter line. Malloy said the new substation should mitigate the risk of prolonged power failures. Last fall an outage at Mount Vernon, N.Y., disrupted power for two weeks.
A survey by infrastructure firm HNTB Corp. said 98% of residents in the tri-state area — New York, New Jersey and Connecticut — think the region's transportation networks need urgent repairs.
The study, titled "America Thinks: Views on the Metro NYC Regional Transportation Network," said residents would embrace creative means to deal with critical challenges. They include price-managed traffic lanes and new technologies; sourcing additional funds to invest in infrastructure; and maintaining the transportation network in a good state of repair.
"There are proven options now available," said Mike Sweeney, HNTB chairman of professional services and New York office leader. According to the survey, 61% of respondents believe funding should come from tolls, user fees or public transportation fares, as opposed to sales and property taxes.
HNTB, citing greater demand to move transportation components underground in the aftermath of Hurricane Sandy, built out its tunneling practice over the past year. Tunnel construction, in particular, is expected to continue increasing as city planners view subsurface structures as efficient use of space, according to Nasri Munfah, senior vice president and HNTB chairman of tunnel services.
Industry estimates anticipate $70 billion in tunnel construction projects in North America over five years.
Former New York City transportation commissioner "Gridlock Sam" Schwartz is behind a plan to overhaul what he considers an unfair bridge tolling system in the five boroughs. He said his "MoveNY" initiative, backed by the Regional Plan Association, would produce $1.5 billion annually to fix roads and bridges.
East River bridge crossings, now free, would be tolled and drivers entering the central business district south of 60th Street in Manhattan would be tolled at the levels matching those on the Brooklyn-Battery and Queens-Midtown tunnels. In exchange, tolls on all other Metropolitan Transportation Authority bridges, such as Verrazano-Narrows and Throgs Neck, would drop by as much as 50%.
The MTA board in late February approved $7 million of discounts for Verrazano drivers between over the objections of former chairman Richard Ravitch, who told board members at a public hearing that they were wrong.
"I thought it was a clear breach of their fiduciary duty to voluntary reduce a revenue stream. They have no money to finance a capital plan and they're in the middle of labor negotiations," Ravitch, also a former lieutenant governor, said in an interview at Rockefeller Center.
New York Mayor Bill de Blasio's six-month old administration factored infrastructure into its East Midtown high-rise rezoning plans for the area surrounding Grand Central Terminal. On May 30, de Blasio announced a multi-pronged strategy to provide for more high-rise office space around Grand Central while calling for property owners to help alleviate transit bottlenecks. The 100-year-old terminal, home to many subway lines and Metro-North Railroad, will add Long Island Rail Road trains through the East Side Access project, completion of which is expected between 2021 and 2023.
De Blasio expects SL Green Realty Corp. to be the first to apply for the new zoning special permit with a proposal to mitigate pedestrian and subway congestion at the terminal. SL Green plans to construct a major office building nearby.
Dan Garodnick, a City Council member who vehemently opposed Bloomberg's plan to upsize the region, citing open questions about Grand Central, was on board with the de Blasio tweak. "This plan now puts the right emphasis on upfront infrastructure improvements and guarantees that there is a public review of the projects most likely to move forward early," he said.
Speaking at a recent Citizens Budget Commission breakfast meet at the Harvard Club of New York — a short walk from Grand Central — Deputy Mayor for Housing and Economic Development Alicia Glen called infrastructure improvement a magnet for private development.
"Each dollar we invest in the infrastructure is unlocking unbelievable amounts of not just housing but also retail," said Glen, the former head of the urban investment group at Goldman, Sachs & Co. and a former city housing official.
She meets regularly with the likes of Carl Weisbrod and Polly Trottenberg, city chiefs of planning and transportation, respectively. Breaking up silos is vital, she said. "A lot of it is not that deep; it's about getting everybody in the room and realigning our priorities and having a much more integrated approach to the capital budget-making process."
Glen said the city has earmarked $375 million in its five-year capital plan for infrastructure improvements related to de Blasio's affordable housing initiative.
While acknowledging East Midtown's stress on infrastructure, Glen added: "There's also an unbelievable opportunity to connect it to transit, which is fundamentally critical to those large financial institutions to have their workforce to come in."