MTA Prepares to Make Capital Program Cuts in Response to Congestion Pricing Pause

Congestion pricing tolls were projected to generate net revenues sufficient to leverage $15 billion for the MTA's 2020-2024 Capital Program, which includes several transformational projects.

MTA Prepares to Make Capital Program Cuts in Response to Congestion Pricing Pause
New York Gov. Kathy Hochul FILE PHOTO

NEW YORK—Five days after New York Gov. Kathy Hochul blindsided many transportation advocates by putting the controversial congestion pricing program on “pause,” Metropolitan Transportation Authority CEO Janno Lieber warned there will likely be cuts to its capital program.

Gov. Kathy Hochul's announcement on June 5 to put congestion pricing in Manhattan on “indefinite pause” was described by one transit advocacy group as a “punch in the gut” that will likely cause cuts to the MTA’s budget and place funding for some large ticket capital projects in limbo.

Congestion pricing tolls were projected to generate net revenues sufficient to leverage $15 billion for the MTA's 2020-2024 Capital Program, which includes several transformational projects. After Gov. Hochul put the program on pause on June 5, Lieber said that the MTA will immediately begin to assess the impacts the governor’s decision will have on its current capital program, and its next capital plan (2025-2029), which is expected to be unveiled later this year. The MTA Board of Directors is scheduled to meet on June 26. He also noted that the MTA will work to protect federal grants it has already received, including $ 3.4 billion for the next phase of the Second Avenue Subway project.

“The priority is that throughout we are going to fight like hell to make sure that we don’t have to reduce service,” he said.

In a joint statement, MTA Chief Financial Officer Kevin Willens and MTA General Counsel Paige Graves spelled out some of the dire impacts. “The MTA cannot award contracts that do not have a committed, identified funding source. Until there is a commitment for funding the balance of the 2020-2024 Capital Program, the MTA will need to reorganize the 0rogram to prioritize the most basic and urgent needs. As such, the MTA Board will be evaluating what changes need to be made to the Capital Program in the lead-up to this month’s Board meeting. Modernization and improvement projects like electric buses, accessible (ADA) stations and new signals will likely need to be deprioritized to protect and preserve the basic operation and functionality of this 100+ year old system.”

Gov. Hochul failed in her attempts to replace congestion pricing with a business tax, with the alternative plan drawing widespread criticism from state legislative leaders. The legislative session ended without a funding mechanism in place to replace congestion pricing program revenues.

While the governor’s indefinite-pause decision was applauded by mostly suburban lawmakers, major stakeholders in New York City and transportation industry groups immediately criticized her for caving to political pressures outside the region and the state. Many suggested the governor was attempting to help Democratic lawmakers who are facing tough election contests with national implications this November.

One major construction trade group, the New York Building Congress, blasted the pause and a subsequent business tax the governor proposed as a failed backfill to meet capital program costs: “Yesterday’s decision by the governor to delay congestion pricing indefinitely was a punch in the gut—not just to our industry and our workforce, but to the entire future of New York City.”

Since the announcement, the governor has stressed that she intends to have the MTA capital program fully funded. “I will be very clear: the MTA will be taking necessary action to reflect a pause in this program. And the leaders and I have a shared interest and responsibility to ensure that the MTA and its capital program is fully funded. And I've made it clear. After many, many conversations, I am prepared to continue working with them from this moment on…to continue to avoid any disruption in the MTA Capital Plan,” Gov. Hochul said.

Perhaps, but the MTA is in a fiscal limbo and is preparing for future significant capital and operational budget shortfalls until those funding sources are found or until congestion pricing is implemented or modified.

If the congestion pricing program is indeed on “pause” and not scrapped, Lieber made it perfectly clear what the authority’s position on the program is going forward: “We at the MTA aren’t giving up on congestion pricing, not at all.”

While New York State Comptroller Thomas DiNapoli has not commented on the congestion pricing pause at press time, he did release a report last month on the MTA’s capital program needs that cautioned about delays in implementing congestion pricing and finding other revenue sources to undertake large ticket capital projects and state of good repair work.

“The MTA’s capital program is critical to winning riders back to public transportation and increasing fare revenue. When capital projects are delayed, repairs and upgrades are put off, causing parts of the system to deteriorate further,” DiNapoli said. “There’s more at stake than just delayed projects. If the MTA covers the shortfall in capital funds by using its operating budget to pay for more borrowing, less money would be available for day-to-day operations and goals, like increasing service.”

Some of the key highlights of the report included delays, uncertainties, and lawsuits around congestion pricing’s implementation have slowed down the MTA’s capital work. The report stated that before the pandemic, the MTA averaged $7.1 billion in commitments to capital projects (2016-2019). In 2022, it put a record $11.4 billion toward capital work. However, those commitments slipped to $8 billion last year and the MTA’s target for 2024, once estimated at $12 billion, is now less than $3 billion. Congestion pricing was supposed to provide about $15 billion of the MTA’s current $54.8 billion 2020-2024 capital program. The State Comptroller noted that implementation delays have pushed back much-needed projects, with $9 billion in 2024 work currently at risk.

The report also noted that the 2025-2029 MTA capital program is scheduled to be released on Oct. 1, 2024, and at the time of the report’s release the State Comptroller expected the program would be at least the same size as the previous capital plan.

“If other dedicated capital revenue sources are not available, there could be at least a $25 billion funding gap in the next capital program, which would create pressure to increase debt and impact the operating budget,” the report warned. “Without additional money from better-than-anticipated tax and fare revenues or added savings from cost efficiencies, the MTA would eventually have to raise fares or tolls or cut service to cover such a gap, which would negatively affect riders’ experience.”

The New York City Independent Budget Office was critical of the governor’s decision and warned of its future impacts on MTA operations. “To delay the program now halts decades of policy and implementation work representing unquantifiable amounts of time, money, and other resources,” the New York City IBO stated.

Citing the MTA capital dashboard, the New York City IBO stated that the MTA has allocated more than $427 million to plan and build out the infrastructure to implement congestion pricing so far. In addition, the MTA has a contract with TransCore to install, operate and maintain the tolling infrastructure for the next six years, for a total cost of $556 million (amended from an original $507 million due to delays in the implementation of congestion pricing). If the program is not enacted at a future point, MTA investments made to date will potentially be written off as bad spending.

John Jordan

Editor, Real Estate In-Depth

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