NYS Joint Legislative Hearing on the MTA 2020-2024 Capital Plan
Re: Need for Ongoing Legislative of Oversight of $88B in Approved
MTA Capital Plan Spending
November 12, 2019
Good morning, my name is Rachael Fauss, and I am the Senior Research Analyst for Reinvent Albany. We advocate for more transparent and accountable state government, including for state authorities like the MTA.
We thank the Senate and Assembly for holding this joint oversight hearing, which is the first oversight hearing held by the Assembly in 5 years on the MTA as a whole, and follows the Senate’s hearings earlier this year on the MTA and other state transit systems.
The MTA has approved more than $88B in capital plan funding that has not yet been spent, as of mid-year 2019: this includes $54.8B from the 2020-24 plan (including Bridges & Tunnels), plus $23B from 2015-19, $9.5B from 2010-14, and $646M from the 2005-09 plans. The public is counting on the Legislature to provide continuing oversight of this massive public investment to ensure greater public transparency and accountability — especially because it may take the MTA more than a decade to completely spend all the funding from its plans.
Before speaking to what the MTA should do to increase accountability and transparency of the capital plan, we have a couple asks of the State Legislature:
- The Legislature should hold twice-a-year oversight hearings on the MTA capital program, as recommended by the Build Trust campaign. Regular oversight of executive agencies and authorities by the legislative branch is an important part of a healthy democracy. The MTA is the state’s largest service provider, and should be held accountable like other state agencies.
- The Legislature should tell the public the full value of legislative “set-aside” projects from the 2020-2024 capital plan, and provide project lists for all outer borough transit fund and legislative “set aside” projects to the public when they are finalized, as requested by Reinvent Albany and 17 other organizations in August 2019.
Now turning to our analysis of the MTA’s 2020-2024 Capital Program, I would like to first summarize our recommendations and questions, before going into detail regarding each topic.
Increasing Transparency of the 2020-2024 MTA Capital Plan
- The MTA must publicly release its 20-year needs assessment and federal Transit Asset Management (TAM) plan, which should have been the basis for developing the 2020-2024 capital plan.
- The MTA must release a schedule of start and completion dates for major components of the 2020-24 plan, and eventually an implementation plan for all projects, so the public knows which projects will come first, second, and ultimately last.
- The MTA should revamp its current capital program dashboard to always include complete data on original costs and schedules, and new data on contracts and bidding, to allow easy assessment of on-time, on-budget performance.
- The true cost to the operating budget of the 2020-2024 Capital Program must be made known, given the MTA’s already massive operating deficit. The MTA must explain how much debt service payments will increase as a result of the plan, and the full value of new operating costs for expansion projects like East Side Access.
- The Legislature should also ask the NYS Comptroller to do an independent assessment of the MTA’s debt load – a debt affordability study – to determine where the red line is with debt payments.
- $6B in new state and city capital funds assumed by the 2020-2024 plan in revenue should not be contingent upon the MTA exhausting its resources.
Questions for the MTA
- When will the MTA get the full $7.3B in state funds pledged in 2016 for the current 2015-2019 plan?
- Is the federal funding assumption realistic? Second Avenue Subway Phase 1 received $1.3B in federal dollars, while Phase 2 assumes $2.9B.
- How is reorganization affecting the capital program? The existing hiring freeze and further staffing cuts/mergers from the reorganization have created serious morale and workforce problems at the agency that may affect capital project delivery.
- When was the last time the MTA used the emergency procurement authority from Executive Order 168? The MTA Board has not ratified contracts under this order since March 2019, yet it was renewed again on October 9th for the 29th time, calling into question whether it should no longer be renewed.
Spending Capacity, Not Funding, Has Delayed MTA Capital Plans: 2020 Plan Could Take 15 Years
Now to turn to our analysis, Reinvent Albany has examined past spending on MTA capital plans, and our research shows the biggest constraint on completing MTA capital plans is the MTA’s ability to spend, not find funding.
The most the MTA has spent in a single year on all of its capital plans combined was $6.6B in 2018. The most spent in a single year was just under $4.5B, spent in 2009 on the 2005-09 plan. This is all while there is a considerable hangover of projects from prior plans that are not finished – as of mid-year 2019, there is $33.7B left to spend on projects dating back to 2005.
Given that the 2020-2024 plan is 70% bigger than the last, we question how will the MTA ramp up spending to deliver the plan in a politically meaningful timeframe, given that even if the MTA increases its spending capacity, this plan could take more than 15 years to finish. This is particularly crucial as the MTA is in the midst of implementing its “Transformation Plan”, which is forcing the MTA to deliver a larger capital plan with fewer staff. The disruption of the reorganization itself may also create challenges for quick implementation of this plan.
Given that the MTA can’t complete all the 2020-2024 projects at once and has a significant backlog of prior projects, the MTA should clearly show the sequence of what will be built: what projects come first, second, third, etc.? This type of honest presentation will help to build trust in the agency and show it is working toward clear and reasonable goals. Reinvent Albany and our colleagues sent a letter to the appointers of the CPRB asking them obtain from the MTA: (1) in the short term, a schedule of start and completion dates for major components of the plan; and (2) in the long term, a full implementation plan with schedules/costs for each project, as recommended by the Build Trust Campaign.
Using data from the implementation plan, the MTA should continue to improve its current capital program dashboard, building off of Chairman/CEO Pat Foye’s commitment to overhaul open data at the agency. The MTA should include more complete information for projects beyond what is listed in the current capital program documents, including: specific projects instead of placeholders like “various locations”, and contract, vendor and bidding information.
MTA Must Stop “Rebaselining” Projects to Create Misleading Record of On-Time, On-Budget Delivery
The MTA should also commit to always comparing original capital costs/schedules to current costs/schedules, instead of “re-baselining” by comparing the amended to current status. The MTA commonly re-baselines capital projects listed on the homepage of the dashboard and in Capital Program Oversight Committee materials, making it very difficult for the public and even MTA Board to tell if the MTA is hitting basic targets.
Release 20-Year Needs Assessment and Federal TAM Plan
The MTA must also publicly release its 20-year needs assessment and federal Transit Asset Management (TAM) plan. In a normal capital plan cycle, as noted in our report on the capital planning process, the needs-assessment would have been released before MTA Board approval. For the 2025-30 plan, the Legislature has mandated the needs assessment be released in October 2023. The TAM plan was due to the Federal Transit Administration on October 1, 2018.
Is the 2020-24 Capital Plan Going to Break the MTA’s Back with Debt?
The true operating costs of the 2020-2024 Capital Program are far from clear. In particular, we are concerned about the ability of the MTA to keep debt service payments at manageable levels. To better explain how it intends to address its debt load, the MTA should publicly release a detailed debt plan. The MTA currently spends 17% of its operating budget on debt service. According to the State Comptroller’s latest MTA Financial Condition Report, debt service payments will grow by a third, from $2.6 to $3.5B a year by 2023, representing 20% of revenue.
What is the MTA’s plan to ensure $10B of new borrowing will not further squeeze its operating budget and result in service cuts? The MTA is also considering increasing the size of its police force by 581 officers, which would increase the MTA’s operating deficit by $260 million. By 2023, the deficit would balloon to $1B, according to Citizens Budget Commission.
The MTA also need to clearly show what the operating costs will be for new capital projects. East Side Access will reach operating costs of $205 million by 2023, according to the State Comptroller’s report, but will only increase fare revenue by $14 million. How will the MTA fund the new operating costs for this and other new projects like the new Elmont Long Island Rail Road station (note this is part of the newly amended 2015-2019 plan)?
Where is the Funding for Past Capital Plans?
Reinvent Albany remains concerned that the MTA still has not received the $7.3B in state funds pledged in 2016 for the 2015-2019 plan, which were conditioned upon exhaustion of the MTA’s resources. Yet, the 2020 plan assume $3B more each in state and city capital funds. Mayor de Blasio has asked the city’s funds be provided upon exhaustion of the MTA’s resources. The Governor will likely also condition state funding upon exhaustion. We oppose the concept of “exhaustion,” which we believe is vague and creates the potential for the Governor and Mayor to renege on billions in capital funding, because the funding is delivered so late in the process.
As uncovered during the Senate’s oversight hearing in February, the MTA has “committed” toward only $3B of the $7.3B. The MTA considers commitments the time when funds are planned to be used in the future when a contract is signed, or they intend to use employees to complete a project. This is not the same as actual spending on employees or paying a contractor. Commitments are the first step in a lengthy process, expenditures the last. Further, the $3B from the state will not start coming in until the next state fiscal year at earliest, which begins April 1, 2020, according to the State Comptroller. Once the $3B is actually delivered, that still leaves the MTA with $4.3B left still owed by the state.
If the MTA must again exhaust its resources before getting state and city capital dollars, will it have the cash on hand to deliver the 2020-2024 capital plan? This is particularly concerning, given that the central business district tolling system won’t be up and running until 2021.
Revenue Assumptions for 2020-2024 Plan
Lastly, we question whether the federal funding assumption is realistic. The 2020-24 plan assumes $2.9B in federal funds for the Second Avenue Subway Phase 2 project, while Phase 1 only received $1.3B in federal dollars. This would be the largest federal new starts grant in the country. Why does the MTA believe it will get this level of funding from Washington?
Thank you for holding this important hearing. Should you wish to discuss any of these issues in detail, I am available to answer questions.