Why does the MTA‒which is supposed to be consolidating‒need a subsidiary to manage the East Midtown Terminal?


Testimony to MTA Board
Recorded for May 26, 2021

Good morning. I am Rachael Fauss, Senior Research Analyst for Reinvent Albany. We advocate for more transparent and accountable New York government, including for authorities like the MTA.

Reinvent Albany is concerned that the possible creation of a new MTA subsidiary responsible for maintenance of the East Midtown Terminal as part of the East Side Access (ESA) project is intended to mask potentially huge operating deficits.

In February, the MTA issued an RFP to outsource operation and maintenance of the new terminal located within Grand Central. The responsibilities of the new vendor would go beyond maintenance of the concourses and platforms to also include maintaining tracks, signals and communication, and vent plants. The RFP says the MTA intends to “create a new subsidiary agency that will be responsible for the oversight and contract management of the service provider during the term of the contract and the contract will be awarded by MTA C&D in the name of this new agency.”

The MTA already has a vast bureaucracy, and it is unclear how this new subsidiary will fit into the MTA’s existing governance structure. If this subsidiary is created, who within MTA will actually own responsibility for the new terminal given that LIRR, MNR, and MTA C&D will also retain some roles? At a time when the MTA is seeking to reorganize and centralize its operations, creation of a new subsidiary is completely counter to that goal. It will also be harder to assess labor costs with the use of an outside vendor.

Additionally, we are concerned that creation of this new subsidiary would shift substantial maintenance costs off the books of LIRR, and make the MTA’s already complex budgeting process even more opaque. The State Comptroller in 2019 found the operating deficit for ESA to be upwards of $190M, and the MTA’s November 2020 financial plan shows a budget impact of about $200M once service begins in 2022. Given these concerns, we ask the MTA staff to provide the MTA Board, public and Legislature with a detailed rationale for creation of a new ESA maintenance subsidiary. The MTA Board should not approve the creation of this new subsidiary without detailed financial information about how it will impact the MTA and LIRR’s budget.

The MTA Board, Legislature and public should also be wary of the creation of new subsidiaries given their proliferation in New York State, and the limited capacity of oversight bodies. There are more than 1,000 public authorities and subsidiaries which have issued 96% of outstanding state-supported debt, with 585 authorities subject to Authorities Budget Office (ABO) oversight. The ABO has only a staff of 11 and a budget of $2M to do the herculean task of overseeing all of these authorities and subsidiaries.

Thank you for your consideration.