Watchdog Testimony to NYC Council on MTA Capital Plan

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 Metropolitan Transportation Authority (MTA).

We thank the City Council for holding this oversight hearing. This is a critical time at the MTA. It is in the throes of a massive reorganization ordered by the Governor, which will be undertaken as the MTA takes on the biggest capital plan in its history. The Council has an important, ongoing role to play to ensure the city’s voice is heard and that the capital plan directly benefits subway and bus service.

For instance, the Council should be actively pressing for the Mayor, Governor and State Senate to fill the city’s soon to be two empty seats on the MTA Board. The Council should also be intensely focused on ensuring the city gets its fair share of capital spending, and that city projects essential for restoring good service are given priority.

As representatives of the city’s subway, bus and rail riding public you should expect the MTA to be able to answer basic questions about what projects come first and how it knows how much spending is needed for items such as subway signals, tracks and cars and new buses. Specifically, you should expect the MTA to:

Publicly release its 20-year needs assessment and federal Transit Asset Management (TAM) plan. This raises the question: without these, how did the MTA determine how much restoring the system to a state of good repair will cost? If not the needs assessment, show us what was used.

1. Release a schedule of start and completion dates for major components of the 2020-24 plan, and eventually all projects, so the public knows which projects will come first, second, and ultimately last.
2. Show how much it can realistically spend per year, given that it only spent $6.6B on all capital projects in 2018, the most per year to date.
3. 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. Relatedly, the MTA must commit to always comparing original to current costs/schedules, instead of “re-baselining” from amended plans.
4. Release a detailed debt plan showing exactly how it will pay for $10B in additional borrowing, which may result in fare hikes. The Council should call for an independent debt affordability study to determine where the red line is with debt payments. This could be done by the State or City Comptroller.
5. $6B in new state and city capital funds for the 2020-2024 plan should not be contingent upon the MTA exhausting its resources. Exhaustion as a principle is bad policy, and the state and city should provide the MTA cash rather than paying service on more MTA debt. Additionally, the City Council should keep a close eye on the state’s 2015-2019 plan pledge of $7.3B.
6. The cost to the operating budget of all 2020-2024 capital projects must be made known, given that expansion projects like East Side Access have operating budget impacts that are beginning to show in the 2020 budget.

Lastly, Reinvent Albany we would like to mention concerns about three other timely MTA issues:

1. The MTA’s hiring freeze is a bad management policy and leads to key positions being left empty based on who happens to retire, while less important jobs are retained.
2. The MTA’s debarment of contractors is bad public policy, as it will lead to a smaller vendor pool, reduced competition and quality, and higher costs.
3. The MTA police force should not be expanded without significant analysis of how it impacts the operating budget and to ensure it does not result in service cuts – both immediately and in the long-term as the full cost of the officers ramps up.

Limited MTA Capital Spending Capacity

Regarding the MTA’s capital projects, 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.

Reinvent Albany has examined past spending trends 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 MTA has limited capacity to spend capital dollars, and in 2018, only spent $6.6B on all capital projects – a record level for the agency. The most spent in a single plan in one year was $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. See the chart below of past spending.

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.

Concerns about spending capacity are 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. This reorganization has created severe morale problems at the agency, with senior level staff not being replaced after they retire, creating a “brain drain”. The disruption of the reorganization itself may also create challenges for quick implementation of this plan.

Therefore, ensuring greater accountability and transparency of this spending is crucial because it may take the MTA more than a decade to completely spend down all its capital funds and complete all capital projects, which date back to the 2005-2009 plan.

MTA Must Release Sequencing for Major Components of 2020-2024 Capital Plan

Reinvent Albany and our colleagues in the Build Trust campaign have called repeatedly for the MTA to release an implementation plan showing the sequence of major components of the 2020-2024 capital plan work, and ultimately data regarding when all projects will be started and completed, as well as cost targets. Whatever information is available at this time should be provided before the Capital Program Review Board approves the plan. This data will inform the MTA’s capital dashboard, which we also recommend be overhauled.

The Mayor’s recent request to the MTA for greater detail about project schedules and timelines echoes this recommendation. Because the MTA will not be able to deliver all $88B worth of capital projects at once – some of which are funded with city dollars – it is important that the MTA be honest and transparent about which projects will come first, second, and ultimately, last. The public is counting on the 2020-2024 capital plan to fulfill the MTA’s commitments in a number of high-profile areas – addressing core maintenance, resignaling 6 lines, accessibility, and new subway cars and buses – and we deserve to know which of these priorities will be addressed first.

State and City Funding Should Not be Upon “Exhaustion” of MTA Resources

We are concerned with the position of the City to have $3B of its funds for the 2020-2024 plan provided upon “exhaustion” of the MTA’s own resources. We oppose the concept of “exhaustion,” because we believe it is vague and creates the potential for the Governor and Mayor – or future administrations – to renege on billions in capital funding, because the funding will be delivered so late in the process.

For example, the MTA still has not received the $7.3B in state funds pledged in 2016 for the 2015-2019 plan, which was conditioned upon exhaustion. The state will not be providing this as direct aid, but instead said at the November 12, 2019 state legislative oversight hearing that the state will pay the MTA’s debt service payments on additional MTA borrowing toward this $7.3B. This is far from a clear path of accountability for delivery of these funds.

The state and city providing cash is a preferable approach, and the City Council should keep a close watch on state funding coming in for 2015-2019 and 2020-2024 plans to ensure that the state is delivering on its commitments while asking more of the city.

Also worthy of note is that the MTA’s debt plan for the 2020-2024 plan is predicated on the $3B each from the state and city coming in before it borrows $10B on its own to fund the plan. They are essentially saying that debt service payments will increase beyond its already-high load (currently 17% of operating budget) if it has to borrow before state and city funds come in. The MTA’s operating budget is already precarious, with large forecasted deficits – up to $1B for 2023 according to the Citizens Budget Commission if it goes through with hiring 500 more police officers, which we oppose.

The Continued Hiring Freeze is Damaging to the MTA as an Institution

Lastly, on MTA reorganization, this effort will have profound implications for delivery of the MTA’s capital plan, core operations, and the institution as a whole. The MTA faces profound operating challenges, and the reorganization is continuing what has been a damaging hiring freeze. The reduction in staff from attrition and expected staff cuts in 2020 goes beyond consolidating back-office functions like human resources and information technology, as it is also affecting capital program, engineering, and maintenance staff. The reorganization plan was sold as creating “efficiencies” and “cutting waste”, but what that means is fewer staff have to do more work with diminishing resources, all while decades of experience walks out the door.

The reorganization could, however, focus on non-core areas which will have a positive impact, and align with Chairman Foye’s priorities such as revamping Freedom of Information law (FOIL) and open data processes. Centralization and standardization of Freedom of Information Law (FOIL) responses and Information Technology between the MTA’s agencies could have important transparency benefits for the MTA and public.

Debarment of MTA Contractors is Bad Policy

A similarly damaging policy is the MTA’s debarment provision, which we strongly oppose. At last week’s MTA Board meeting for its NYCT Committee, it was revealed that three vendors didn’t submit proposals on a design-build contract because of risks from debarment. This risks includes factors beyond their control. Debarment is bad policy and a big mistake because it reduces competition. This means higher prices and a smaller pool of expertise to draw from.

NYC’s Vacant MTA Board Seats Must be Filled ASAP

Beyond the MTA’s capital plan, the City Council should be concerned about the lack of representation the MTA Board for the City. Of the four seats appointed by the Mayor, only two will be full at the end of December. Dan Zarilli, who was nominated by the Mayor prior to the end of the state legislative sessions, was not moved forward by the Governor in time for Senate confirmation. An additional seat will become vacant with Veronica Vanterpool’s departure in late December. It is crucial that all of NYC’s elected representatives push for these seats to be appointed as soon as possible so that NYC residents have a greater voice on the MTA Board.