Joseph Krist

Publisher

MTA

For a credit which has not received much good news in the last 2 ½ years, it will take what it can get. What it gets this week is a maintained rating of A3 from Moody’s with a stable outlook. The rating reflects “the system’s essential service to a vast and economically robust service area and strong political and financial support from New York State, New York City and the Government of the United States of America, which have been instrumental in supporting the credit through the coronavirus pandemic and recovery.

The rationale for why we have had concerns about the credit for some time are reflected in Moody’s comments. “Due to the structural increase in remote work, MTA’s forecast for its “new normal” ridership level has dropped to 80% of pre-COVID levels by FY2026. As a result, MTA’s large structural budget gap will remain 16% of budget, and the authority will exhaust its federal stimulus aid a year earlier than previously forecasted.

In addition, budget gaps could grow if ridership recovery underperforms, future fare increases are deferred or canceled, upcoming collective bargaining agreements exceed plan, and/or high inflation or a weakening economy depress dedicated tax collections. MTA’s high leverage position will remain well-above pre-COVID levels due to reduced revenues and new borrowing, and debt service costs will grow steadily to meet substantial capital and debt plans.”

The rating news comes as MTA reaches a post-pandemic high in ridership. Subway and bus ridership is roughly 60 percent of pre-pandemic levels on the weekdays. The LIRR and Metro-North commuter rail lines report daily ridership at 200,000 and weekend ridership is at 90% of pre-pandemic levels. At the same time, 1 million vehicles traveling on MTA bridges and tunnels on Friday Sept. 16 which puts the use of those facilities above 2019 levels.

Over the next 24 months while MTA draws down its remaining federal aid, some policy decisions will highlight a real dilemma for the Authority. New York is the only major metro system in the world which provides 24-hour service. Whenever the issue is raised it is usually concurrent with budget concerns for MTA. The reality is that a significant segment of lower income employment is held by people who rely on mass transit to get them to and from night shifts.

That is not going to change regardless of daytime office attendance. So, in deciding how to achieve long-term cost reduction, it will walk a fine line as it seeks to reduce service without hurting employment where it matters the most. The politics will reflect the fact that the same working class cohort which rides the subway at night is the same class cohort which was deemed “essential” during the pandemic.

D.C. TRANSIT EXPERIMENT

Over the last several years, the District of Columbia has undertaken a number of efforts to address concerns over traffic as well as issues related to the Metro. On traffic, the City established a program which linked traditional taxis with city employees. It was intended to reduce the size of the fleet of city cars and traffic while providing support to the taxi community impacted by Uber and Lyft. Another program established loading/drop off zones in the evening hours for Ubers and Lyfts around clubs and the like.

The operating issues which have plagued the Metro are well known and the process of reintegrating idled rolling stock is underway. Those issues have made pandemic recovery all the more difficult and limited demand and ridership. To stimulate demand, a bill has been introduced to offer direct payments to Metro passengers. It would provide a monthly $100 subsidy to D.C. residents to be used on Metro, building on the existing Kids Ride Free program, which serves more than 50,000 D.C. school children on an annual basis. 

Qualifying residents would get the initial $100 subsidy, and get monthly installments thereafter to keep them at that level. (So, if a rider only spent $25 on Metro in a given month, they would get $25 as a subsidy the following month to bring them back to $100.) Any expenses above the monthly subsidy would have to be covered by the user. According to the council committee analysis, the $100 a month would cover the transit needs of 92% of adult users in the city.

The city’s chief financial officer has estimated the cost of the subsidies at $373 million for the first four years. The council estimates that 78% of D.C. residents do not currently receive any transit subsidies from their employer.  Federal employees already get transit vouchers so they do not qualify. The concern over the program has to do with the issue of funding. The legislation says the costs will be covered by the additional (and unexpected) revenue that D.C. has been taking on a yearly basis, the committee report also concedes it is “by no means a predictable funding source” as federal pandemic funding runs out.

It’s another example of the impact of federal funding for pandemic-related issues which has allowed a short-term condition to become a long-term assumption. The bill is based in part on an assumption of steadily growing District revenues even in the face of a recession. That and the full draw down on pandemic aid would create real fiscal pressure.

AUTOMATION COMES TO PRISON

When one talks about automation it is usually about the negative impact on employment. The pandemic changed the view of a lot of people about the work they did, where they did it, and for how much pay. That phenomenon is being seen throughout the country as businesses and governments cope with new attitudes towards in-person work. Help wanted signs are everywhere.

The latest sector to experience the phenomenon is the field of corrections. Most of the reporting one sees in this sector revolves around efforts by usually rural localities to keep the local state prison open and providing secure jobs with pensions and benefits. As incarceration rates fall, the need for some facilities no longer exists and corrections officers lose their jobs.

Now changing attitudes towards the nature and value of corrections jobs is causing a rethink among potential employees. The situation is leading to understaffing of the guard function. It is estimated that some states see 25% of their corrections jobs unfilled. It is a combination of the nature of the work and improving pay at other jobs. In some jurisdictions, higher minimum wage requirements have raised wages such that they are becoming competitive with jobs like those in corrections.

So, what are states to do? Florida has “temporarily” closed three prisons. Nevada is taking a unique approach based on technology.  The Nevada Department of Corrections is seeking funding for the use of drones and surveillance bracelets to minimize the need for a physical presence. It is part of a plan called “Overwatch”. Ultimately through the use of technology, the DOC hopes that a centralized surveillance system could be established which would allow limited staff to see activity inside housing units and outdoor areas at facilities throughout the state.

Other states are taking a more traditional approach. Nebraska raised an officer’s typical annual salary from $41,600 to $58,240, under a 2021 law.  Pay matters in places like West Virginia where salaries for corrections officers are among the lowest in the country. Corrections officers in West Virginia currently start at a salary of $33,214, which is lower than the neighboring states of Virginia ($34,380), Ohio ($37,630), Pennsylvania ($40,270), and Maryland ($43,370). West Virginia estimates that it is short 1,000 officers in its system. Gov. Jim Justice declared a state of emergency earlier this year over staffing issues, bringing in 150 National Guard troops to provide support.

While the nature of the job may not be typical, the issue of government wages in a period of inflation is still a problem. It is legitimate to ask what would someone rather due for $15/hour with benefits – load shelves at Home Depot or spend 8 hours + in a state corrections facility? The corrections officer gets $15.97/hour to work in a de facto mental health/corrections system. It’s one example of the realities facing government employers which implies higher costs and revenue demands for taxpayers going forward.

MILEAGE FEE SETBACK

San Diego and its neighboring municipalities announced a wide-ranging plan for transportation in the greater San Diego region. The price tag was $160 billion. It is designed to fund a variety of initiatives through 2050. The plan included the imposition of a “road usage charge.” The fee was planned to be implemented in 2030.

The plan includes building out more than 800 miles of express or “managed” lanes designated for service buses, carpools and toll-paying customers. It also funds the completion of improvements a 70-mile regional bicycle network. Mass transit investment would fund a proposed Purple Line rail project between National City and the San Diego neighborhoods of City Heights, Kearny Mesa and University City. In total, the plan calls for building a 200-mile commuter rail system stretching from the U.S.-Mexico border to downtown San Diego, El Cajon and Oceanside.

Designed to placate as many constituencies with stakes in the rollout of a significant capital construction program, the plan has instead created some unexpected alliances and pitted historical political allies against each other. The plan assumes that voters will approve three half-cent sales tax increases by 2028. The first proposed tax increase under the plan was to be voted on this November.

Interest group politics got in the way. Organized labor and environmental groups supported the plan but they were unable to get enough voters to sign petitions this summer to qualify the first such tax hike for November’s ballot. It seems that “progressive” officials don’t like the idea of removing the usage fee. If that pattern continues, the plan will have a $14 billion hole in the agency’s spending plan. The debate exposed all of the potential political hurdles facing efforts to thwart climate change in the transportation space.

WORKER SHORTAGES IMPACT LOCAL OPERATIONS

The worker shortages plaguing local governments continues to impact operations. A number of transit agencies are having to cut back service as the result of an inability to hire workers. The result has been reduced service in a variety of jurisdictions impacting both local needs as well as long established commuter routes. The latest examples of the problem come from the western US.

The Utah Transit Authority has announced that beginning in December, it will reduce or eliminate service on 20 bus routes in Salt Lake, Davis and Weber counties.  The move reflects the inability of the Authority to attract drivers. The agency is down 85 bus drivers from a roster of 1,200 budgeted positions. That is a vacancy rate of 7%. UTA pays trainees $20 an hour and increases the wage to more than $21 an hour after training. 

In Colorado, the CO Department of Transportation (CDOT) has announced that it will develop housing in an effort to lower the cost of housing for snow plow drivers and other workers. CDOT is current short of some 300 maintenance workers who fill potholes, fix guardrails, and plow snow. The Department is planning to spend $6.5 million on housing projects along the Interstate 70 corridor and in mountain towns. Some of this reflects competition from the wealthy villages for the same workforce at either higher wages or affordable housing.

PORTS

Ports have been at the center of the post-pandemic trade recovery. Volumes have shown steady increases as demand ramped back up for consumer goods. There has been much focus on activities at the West Coast ports especially those at LA and Long Beach. Between labor stoppages, container backups, and issues related to air pollution, the two San Pedro ports have been under pressure. Put all of that together and add US/China trade issues to the mix and changes were bound to occur.

Now, the Port of New York and New Jersey moved 843,191 TEUs (imports + exports) in August, its busiest August ever. The Port of Long Beach and LA were second and third in cargo volume as more trade moved away from the West Coast due to ongoing concerns about labor strikes and lockouts. The Port of Los Angeles ranked third in the nation in August, moving 805,314 total containers. That was 37,877 less than the Port of New York and New Jersey. The Port of Long Beach came in second, moving 806,940 export and import containers.

The Port of Los Angeles diverted 40,000 containers to the Port of Long Beach in August when dockworkers at the Port of LA refused to work at the automated section of APM Terminals, the largest container-handling facility citing safety concerns. An International Longshore and Warehouse Union slowdown is claimed to have resulted in reduced productivity at the Oakland and Seattle-Tacoma ports.

PIPELINE HEADLINES

Officials in 44 Iowa counties have now taken action to express concerns about the three proposed carbon pipelines for the Hawkeye State. The latest counties to do so expressed “concern about training for emergency crews who’d have to respond to pipeline ruptures, as well as potential construction damage to land and drainage.” A second letter from Adair County said that “its board is not opposed to the purpose or construction of the pipeline, but is opposed to eminent domain being used “as a way of achieving it.”

Everyone acknowledges that state law allows the pipeline developers to use eminent domain currently. Those laws were practically intended to support public utilities. Pipeline opponents as well as impacted landowners contend that the carbon pipelines are not “public utilities”.

In Illinois, the Navigator CO2 developer of its planned pipeline to transmit captured carbon dioxide from ethanol plants. Navigator CO2 has refused to make public the list of landowners along a proposed half-mile-wide corridor covering 250 miles in Illinois. The company has informed many landowners that “Navigator CO2 would be seeking right-of-way “on or near” their property, and noted that if it can’t reach voluntary agreements with landowners to allow permanent easements, “we may need to request the right of eminent domain (‘condemnation’)” from state regulators. 

They already are. Navigator Heartland Greenway LLC, a wholly-owned subsidiary of Navigator, in July filed with the Illinois Commerce Commission seeking permission to build the pipeline and request eminent domain powers.  

The Commission will ultimately decide the eminent domain issue. A 2011 Illinois state law – the Carbon Dioxide Transportation and Sequestration Act – requires the Illinois Commerce Commission to consider local landowners’ concerns about public safety, infrastructure, the economy, and property values before approving permits for carbon dioxide pipeline projects to use eminent domain. 

Ironically, the law was enacted primarily to facilitate a prior attempt at successful sequestration which ultimately failed in 2015. There are systems being tested at the municipally-owned Prairie States Energy Campus but results to date are underwhelming.

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