New York Transit Woes Demonstrate Need for Reform

The New York Times is reporting that the New York Metropolitan Transportation Authority, or MTA, will cut pay for nonunion workers by 10 percent and reduce service to find $340 million to plug its deficit. We’ve come a long way since the summer of 2008 when rising gas prices were sending tens of thousands of people onto the nation’s transit systems and transit advocates were using these ridership numbers to boost expanded service. No one seemed to notice that the transit business model is fundamentally broken. That’s the lesson, IMO, we should take from New York (and Chicago, and Los Angeles, and….) fiscal debacle.

Of course, union workers will be protected by a hefty package negotiated a couple of years ago that virtually guarantee compensation increases (after an illegal strike) even as the transit system collapses around it.

This all begs the question: How can transit be sustainable if it loses money when it gains ridership (because subsidies don’t increase with ridership) and transit agencies collapse when fares fall from lower ridership? Answer: It can’t.

Three reforms would help put transit on a more sustainable footing.

First, federal labor laws will have to be relaxed to allow transit agencies to reconfigure their workforce efficiently to free up revenues for service-enhancing programs. Second, they will have to follow the lead of highway managers and recognize that sometimes it makes sense to price discriminate–charge higher prices for higher quality services based on what the market will bear. This is increasingly an accepted strategy on highways with High Occupancy Toll (HOT) lanes and new capacity that is funded through tolls. Third, transit agencies should be able to generate revenues from rising land values directly tied to increases in accessibility through land value capture.

These reforms wouldn’t solve transit’s problems, but it would restore some level of efficiency on the revenue and fiscal side.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.