The future of the controversial Congestion Pricing toll for vehicles entering the downtown and Midtown areas of Manhattan is in court once again. After nearly a dozen cases filed in federal courts by the plan’s opponents, none of which prevented the Triborough Bridge & Tunnel Authority (TBTA) from collecting the tolls for the benefit of ongoing capital projects at the Metropolitan Transportation Authority (MTA), the toll program was implemented on Jan. 5.
But on Feb. 19, U.S. Transportation Secretary Sean Duffy issued an order to kill the toll, with a March 21 deadline. The same day, the Empire State, through the TBTA and MTA, struck back in federal court in the Southern District of New York, as we previously reported. Behind these battles lurk some issues that have received little attention in the popular media: just how far the toll money will go toward keeping New York’s transit in a state of good repair, what about New Jersey’s role in all of this, and what the battle means for transit riders on both sides of the Hudson. We will take a closer look at those issues in this article.
How Much for Capital Projects?
By early accounts, the tolling program is doing well. The TBTA and MTA reported some of that success in the first few paragraphs of the Complaint that they filed in court the same day that Duffy wielded the ax. More recently, on Tuesday, Feb. 25, the New York Times reported that the toll raised $48.6 million during its first month of operation, which exceeded earlier expectations that gross monthly revenue would be about $40 million. The same article reported that about $11 million of that amount went toward of expenses of setting up the collection system, which leaves about $37.5 million available to spend on capital improvements for transit. Over the year, that would amount to $450 million for the capital fund, less than half of the $1 billion that the toll’s supporters originally claimed would be spent on the city’s transit (80%) and Metro-North and the Long Island Rail Road (10% each). Still, any extra money for improvements that would benefit transit service in a time when transit everywhere in the country is threatened by the upcoming fiscal cliff (on which we reported extensively last summer) and an anti-transit attitude apparently emerging in Washington, would be very welcome.
That doesn’t mean that the toll money will go particularly far, given the needs of the nation’s largest transit system, which is also one of the biggest in the world. Millions of New Yorkers depend on it, and visitors use it too, often marveling at its vastness and how it moves people. In their desire to maximize the utility of the toll money to keep the system going, managers are using it as collateral for loans that will bring many times the face value of the toll’s revenue into the agency’s capital accounts.
With the original $15.00 base toll for standard passenger vehicles and adjustments like higher rates for trucks and a “night rate” that was only one-fourth the base toll, the projected gross revenue was $1 billion per year, which the MTA had claimed could be monetized to deliver $15 billion for the capital fund. That was 15 times the face value of the revenue collected. Of course, the agency would have to repay that money to the bondholders, which effectively translates to an expensive long-term mortgage.
When she delayed the implementation of the toll last June, Gov. Kathy Hochul acknowledged the political reality that her fellow Democrats would be hindered in their campaigns for re-election because the toll was so unpopular among officeholders outside the City and even in its “outer boroughs,” an attitude expressed by Republicans and Democrats alike, she put the toll “on pause.” That move helped Democrats capture some House seats in the state, but not enough to win the chamber nationwide. When Hochul reinstated the toll, the base rate was reduced and would start at $9.00 for standard passenger vehicles for the first three years, go to $12.00 for the next three years, and climb to $15.00 starting in 2031. In raw numbers, the MTA’s capital fund will receive $2.3 billion less than originally planned during the first six years of tolling. In terms of the value of those dollars, the amount of the sacrifice of near-term dollars also affects future revenue projections, as “future dollars” are worth less than “current dollars” when calculating the Net Present Value of an income stream. This writer would not dare to predict how much in terms of long-term benefits Hochul’s political sacrifice of $2.3 billion over the next six years will end up costing, since such calculations depend on factors like interest rates and overall uncertainty, and the times for transit around the nation appear more uncertain than ever. New Orleans transit advocate Alan S. Drake told this writer: “With the current President proclaiming himself as a king and with the power that would go with that position, bondholders have reason to worry if he would arbitrarily cancel their chances of getting repaid or even zero out the source of repayment.”
In a statement submitted in one of the court cases last year, MTA’s chief financial manager said that the agency could realize its target of $15 billion in capital funds, even with the $9.00 base toll. I do not claim the expertise to support or dispute that assertion (I took only the single required course in finance when I was in business school 55 years ago), but can collateralizing $500 million in revenue to get $15 billion in financing end up being a difficult feat? After all, the loan to be repaid would equal 30 times the face value of a year’s toll revenue from prior expectations. At the now-projected amount of $450 million yearly, $15 billion rises to a factor of 33 1/3. Can the MTA get that sort of a deal? That remains to be seen, and it might bring only a short-term benefit to the City’s and the region’s riders if it can.
The problem is that, if the MTA succeeds in getting $15 billion for the capital fund with the toll money available, it might be mortgaged severely to pay for the current capital program. The next five-year capital plan is under consideration and, as we reported, legislative leaders have warned that only about half the money that would be needed to pay for it has been found so far. The agency could then be so encumbered, with so many assets pledged to help raise the $15 billion for the current capital program, that it will become much more difficult to pay for the next one than it appeared under last year’s plans.
A Silver Lining?
The one “silver lining” that might accompany the dark cloud that now hangs over transit, both in New York and around the nation, is that the reduced amount of revenue that the MTA can get from the toll could serve to refute Transportation Secretary Sean Duffy’s allegation that the toll’s primary purpose is to raise money for transit, rather than to mitigate vehicle congestion on the streets of Manhattan. In his Feb. 19 order that purported to kill the toll, Duffy made that assertion, as we reported at the time.
His reasoning appears problematic on two counts. First, it seems to show an anti-transit bias in deciding which projects the DOT will fund through agencies like the FRA (railroad), FTA (transit), and FHWA (highways). Whether or not such a bias is present and, if so, how it will affect such funding remains to be seen. It also seems to make little sense, from an urban planning point of view, to separate congestion mitigation from upgrading transit, since they complement each other. Automobile use and transit are substitute goods, since they are different means for getting around a city. Reducing vehicular congestion on city streets means there are fewer vehicles on those streets, but people still want to go places. The alternative is transit. Keeping a transit system in a state of good repair so it can continue to serve those riders, including people who use it to avoid the toll when going to Manhattan, is a practical and sensible use for the toll revenue. Politicians who come from places that have little or no transit cannot reasonably be expected to understand how vital transit for getting around cities. In short, its importance would not be within the realm of the experience of people who are not familiar with cities.
Still, the reduced amount of revenue that the toll will realize for the transit system, compared to the original plan, militates against Duffy’s assertion that the primary purpose of the toll is to raise revenue for transit, rather than to achieve its stated primary object of reducing congestion. Even if the toll revenue were to be spent some other way, the program appears to be achieving its goal of mitigating the congestion caused by so many vehicles on the streets of downtown and Midtown Manhattan. While Hochul’s reduction in the tolls for the first six years appears to have been motivated by political considerations, it might also have succeeded in reducing the credibility of Duffy’s claim that they are collected primarily to fund the area’s transit. It is ironic, though, that reducing the proceeds for transit by fiat might play a role in saving the toll when a judge rules on the issue later this year.
Ominous Signal from Sean Duffy
In his directive, Duffy complained that the tolling plan places too much emphasis on supporting the transit system’s capital program. To this writer, that attitude seems to evoke a class-consciousness that appears almost Marxian in its style. In short, it appears to pit motorists against non-motorists, an adversarial situation that has been brought to the surface by the strong opposition that many motorists and the elected officials who represent them have expressed when they talked about the tolling plan.
Motorists can go anywhere they want, whenever it suits their convenience. Non-motorists do not have that option. They (and in the interest of full disclosure, this writer is a non-motorist) can only go where there is transit that can take them to their preferred destination, and only at specific times when it runs.
Throughout the controversy about the toll, one of the strongest objections that motorists have expressed goes beyond paying the toll itself, it’s that the revenue will be used to support transit. While transit in many places constitutes only the small amount of mobility that allows non-motorists (for whatever reason, whether because of age, disability, lack of money to afford a vehicle, by choice, or anything else) to go anywhere, that is not true in New York City. The cost of living is high there, and keeping a private vehicle in the city is a luxury that not many New Yorkers can afford, so many middle-class residents of that city are riding the subways, buses, and MTA-owned railroads that keep the city going.
Motorists who take their enhanced mobility for granted might not fully understand that concept, even if they drive their vehicles into the City for work or to visit. Essentially all elected officials, whether Republicans or Democrats, are motorists, too. They understand most of their constituents who also enjoy the level of mobility that only motorists have. These expressions of concern about money spent by motorists that will be used to benefit transit riders, whether expressed in a statement made from behind the wheel to a reporter, or by the Secretary of Transportation, are seldom expressed as blatantly as he expressed it. Still, the agreement among officials in both major parties sends an ominous message to transit agencies and to transit riders that the battle against them is beginning to heat up.
What About New Jersey?
One of the facts about the toll that should be obvious is that it is not a tax, but a user fee. Non-motorists are taxed to pay for roads and highways that only motorists can enjoy, but a toll is different. If taking an automobile into downtown or Midtown Manhattan requires a toll, anyone who does not wish to pay that toll has transit available and can use it instead. Elsewhere in New York City, that means the MTA’s city subway and bus systems. From New Jersey, it means PATH or NJ Transit’s trains to Penn Station or buses to the Port Authority Bus Terminal, both of which are located on the West Side of Midtown.
While advocates for better transit in New Jersey have often said that nobody at NJ Transit ever did, at least not publicly, according to sources at the agency. Sadly for New Jersey’s transit riders, there is a reason why NJ Transit would refrain from promoting its own services as an alternative to paying the toll to enter Manhattan. Gov. Phil Murphy, who has the authority to apppoint the head of the agency and the members of the NJ Transit Board, is one of the staunchest opponents of the toll, as we have reported. Under his leadership, the State of New Jersey was the lead plaintiff in the case in federal court of the District of New Jersey that was filed to prevent the tolling plan from being implemented. We don’t know if Murphy personally gave the order to the Board and management at the state’s transit agency to keep their mouths shut about using transit to avoid the toll, but it would not have been necessary for him to issue such an order. They know the rules, and they know who appointed them. Under the circumstances, it might not be fair to blame them personally for not speaking out.
What the agency did say is that ridership into Penn Station on rail and to the Port Authority Bus Terminal has not increased substantially since the toll went into effect. We don’t know if ridership from New Jersey into the City would have increased more, especially at non-commuting times like weekends, if NJ Transit had actively promoted using its services. Still, almost every rider who takes the train or the bus adds to the revenue that NJ Transit collects, revenue that the agency can certainly use. As recently as Tuesday, Feb. 25, the MTA reported increasing ridership on Metro-North and the LIRR, compared to last year at this time. The result coming from the New Jersey side was different.
Murphy and other New Jersey officials complained throughout the pendency of the previous round of cases that the Garden State was left out of the planning and execution of the tolling program, acts by New York State and the MTA that they claimed were unfair. Whatever the technicalities of law say, that argument has a certain appeal on its face. It’s a simple argument that claims New Jerseyans are subject to the toll if they take their vehicles into the City, so they deserve more of a say about the toll.
It would have been reasonable to expect that, if New Jersey and NJ Transit officials had promoted the agency’s services, and riders used them as an alternative to the toll, the agency would have had to spend money to take those riders into the City and back to New Jersey. Some advocates had proposed that a 10% share of the toll revenue go to NJ Transit, for a 70/10/10/10 split. Of course, that would have meant that less money than the originally proposed 80% that now goes to New York City Transit.
We do not know about what might have happened in negotiations between New York and New Jersey over this issue, and it has been reported that Hochul had offered a “nine-figure” amount to New Jersey to settle the case, which means at least $100,000,000 if that report is accurate. If it is, then Murphy turned down a large sum of money that would have helped to remediate at least some of the situations that the State alleged would cause harm to its residents if the toll were to go into effect.
Those circumstances could come back to haunt New Jersey in the future. Without increased ridership into Penn Station and Port Authority, NJ Transit would not (and claim that, in fact, did not) incur additional expense that would have been needed to provide service for the new riders who decided to leave their vehicles home and switch to transit. Without incurring such expense, New Jersey would not have as strong an argument for getting a share of toll revenue than would have been the case if circumstances had forced its transit provider to spend money to accommodate motorists seeking to avoid the toll. That is not an issue as things stand now, but it could become one sometime in the future.
Longtime advocate Albert L. Papp, Jr., who commuted into NYC on NJ Transit and its predecessors for many years, calls the body of water that separates the states the “Hudson Ocean,” and with good reason. Will relations between the two states become more harmonious, or at least less strained, in the future? We don’t know, and it could depend on the upcoming election. This is Murphy’s second term, and he must leave office at the beginning of next year, when his current term ends. There are active primary campaigns brewing on both sides, so the Garden State’s next governor might be more willing to promote the state’s transit and work with the Empire State when it comes to the tolls. Then again, maybe not. As is always the case when it comes to transit and politics, time will tell.
What About Riders?
One thing that always seems to be true about transit riders is that they get caught up in political battles over their own mobility, and there’s nothing (or, at least, not much) they can do about it. Politics is a rough game in New Jersey and New York, and both Republicans and Democrats play rough-and-tumble hardball that often shocks observers from more-genteel venues when they learn about what it’s like.
New York’s riders will see some improvements from the toll revenue, at least in the short run, if the toll survives. Contracts placed on hold last year are being funded now, and riders and their advocates are looking forward to new railcars and buses, upgraded infrastructure, more stations that are accessible for persons with disabilities, and other improvements. How much improvement they get will depend on how much money the toll brings in, and what a judge does about Duffy’s death warrant.
It’s difficult to say what change, if any, would come to riders on NJ Transit. The agency has hardly said anything officially about the toll, and the agency continues to deny that ridership into New York has increased substantially. It makes sense to take their word for that, especially since nobody at the agency or in the state’s political establishment has had anything good to say about the tolling plan. Democrats control state government now, but Murphy has been reported to have expressed his hope that POTUS 47 will end up killing the toll, an initiative that Secretary Duffy has already started and that the TBTA and the MTA are challenging in federal court. These are, indeed, interesting times around here!
