3Create a Subway Reconstruction Public Benefit Corporation

The subway system may be the spine of the city, but it is also its Achilles’ heel. Surging ridership and decades of underinvestment have taken their toll. According to the Independent Budget Office, train delays have increased three-fold over the past five years—from roughly 20,000 delays a month to over 65,000—due to overcrowding, signal failures, and other daily disruptions. As the public has become increasingly aware, delays lead to overcrowding, which causes further delays and even more overcrowding. Failures and breakdowns cascade and ripple throughout the system, compounding problems and delaying riders. Stations are hot, loud, damp, and for the most part, not ADA accessible. New Yorkers now talk openly of a transit crisis that threatens the city’s future.

The MTA is staffed by talented public servants, and has achieved great things over the past generation. It should be commended for repairing the subways in the 1980s and 1990s, restoring service quickly after Superstorm Sandy, extending the 7 and Q lines, and adopting a modern train control system on the L line. It recently announced plans to move to a modern fare-collection system. But the pace of these improvements has been too slow compared to the city’s tremendous need for capacity expansion and modernization. Demand is growing rapidly as the city adds jobs and residents. Climate change is accelerating. And technology is raising passengers’ expectations for customer service. The MTA, as currently funded and structured, cannot keep up. Unless we can find new ways to deliver improvements and modernization, the subway system will continue to slip further behind.

Fixing the subways and bringing them up to modern standards of speed, efficiency, and service must be the highest transit priority for the region. And despite strong leadership and dedicated staff, there are institutional reasons the MTA will not be able to reconstruct the subways in a reasonable amount of time. They include:

• Competing demands: The MTA is an enormous legacy institution responsible for funding and operating one of the largest subway networks in the world; two commuter railroads and the Staten Island Rail Road; local and express buses; and nine bridges and tunnels. In addition to operations, it is responsible for financing, designing, and overseeing all capital improvements to these properties. Although managing the subway system is tremendously complex, particularly in this time of crisis, it is just one of many competing priorities for the MTA leadership.
• Inefficient institutional practices: The MTA, like any decades-old large corporate institution, has acquired layers of regulations and competing organizational silos within the bureaucracy. Some of the rules that make the MTA less nimble at building megaprojects include limited constructability assessments and excessive customization, a fractured construction management process, and an overly complex procurement process that stifles innovation. Changing this structure has proven extremely difficult because it is so embedded in the legacy institutions that comprise the agency, and the different divisions have competing agendas. The agency in charge of rebuilding the subways needs to be “first among equals” in the hierarchical structure, in order to drive projects forward.
• Anachronistic and overly burdensome regulations: Some of the contracting, procurement and labor practices required by the MTA are inefficient and out-of-date. Contracting regulations actively stifle innovation and create costly delays. Work rules that lead to excessive staffing and unproductive work time, requirements to use the operations workforce on construction projects, limited training capacity, and project pipelines that contribute to labor shortages all increase project costs and delivery times. With his recent declaration of a state of emergency at the MTA, the governor recognized these challenges and streamlined some operations to expedite contracting and procurement, but these steps still need to be expanded and institutionalized.
• Unclear lines of responsibility and accountability: The MTA has an opaque structure, with different divisions going back to the legacy institutions that were merged into a single authority in 1968, a board appointed by different political leaders representing different constituencies, and complicated funding formulas that make it hard to determine who is paying what. As a result, the riding public does not know whom to credit for improvements, or blame for failures. While most riders believe the New York City mayor is in charge of subways and buses, power in fact rests with the governor, who has a plurality of appointees to the MTA board, chooses the MTA’s leadership, and controls most of the funding. Until these responsibilities are clarified in the eyes of voters and transit riders, there will always be confusion about who is in charge.
• Lack of funding: Nobody likes to raise taxes, fees, or fares, and the current structure of the MTA and the budgeting process incentivizes politicians to defer maintenance and increase debt rather than find additional resources to pay for necessary maintenance, repairs, and expansion. But the needs of the system are clear. The MTA is $40 billion in debt, requiring 16 percent of its $15.75 billion annual operating budget to be dedicated to debt service. Its operating budget is increasingly unbalanced, with expenses growing 30 percent faster than operating revenues due to rapidly escalating employee-benefit costs and debt-service payments. Even as it must find ways to reduce operating-cost increases and reduce debt, the MTA needs additional dedicated resources of several billion dollars a year. These funds could be generated by charging motorists to enter the region’s central business district and putting a price on greenhouse gas emissions from the transportation section, among other options. 

To be on par with the subway systems of other major cities around the world, we need to aggressively address the backlog in critical infrastructure updates, modernize the signals system, right-size our most congested stations, and increase capacity in strategic locations. Reconstructing our subways will entail a significant increase in capital expenses, and require fundamental changes in how projects are designed, approved, and built. The scale of these governance changes is so significant, in fact, that a new quasi-governmental entity should be created specifically for that purpose: the Subway Reconstruction Public Benefit Corporation.

Give the Subway Reconstruction Public Benefit Corporation a specific mandate

A crisis demands undivided attention. A new Subway Reconstruction Public Benefit Corporation should be created with no other goal than to completely rebuild the subway system within 15 years. Without other distractions such as buses, commuter rail, roadways, and even operating the subway network, the new entity can focus entirely on subway capital construction. It can recruit leadership with specific expertise in that area, and motivate a team to meet specific goals within a specific timeframe.

The responsibilities of the Subway Reconstruction Public Benefit Corporation would be to determine the level of capital improvement required, determine how to balance construction with ongoing operating needs, identify ways to increase cost efficiencies in construction, secure the revenues needed, issue and negotiate a Request for Proposals, and oversee construction, enforcing performance measures and penalties for delays.

Allow the Subway Reconstruction Public Benefit Corporation more leeway to take a 21st century approach to capital construction

The specific structure and rules governing the Subway Reconstruction Public Benefit Corporation should be determined by the New York State governor, in collaboration with the New York City mayor and MTA leadership. Broadly speaking, its institutional structure should be designed for creative problem-solving, efficient decision-making, and accountability.

The Subway Reconstruction Public Benefit Corporation must be empowered to speed up the reconstruction process while maintaining a strong commitment to worker safety and the public interest. This may mean making it easier to engage in public-private partnerships, authorizing design-build, and revising some of the other rules and regulations that currently drive up the cost and timelines of projects built by the MTA. Today, the MTA Capital Construction Company has responsibility to deliver these projects, but it has not been given the full authority, funding, or support to do so—even as it has responsibility to deliver other capital projects.

Define clear lines of accountability

Like New York City’s Economic Development Corporation (EDC), the new Subway Reconstruction Public Benefit Corporation would not be a government agency, but rather a public-benefit corporation, with a board of directors from a range of public and private-sector fields. But like EDC, the Subway Reconstruction entity would be controlled by the government—in this case, the governor of New York.

Within the Subway Reconstruction Public Benefit Corporation, accountability would be key. The decision-making process should be transparent—from what projects the new entity would undertake to what mitigation measures would be provided. Contract negotiations should identify and plan for any potential construction issues and require the builders to meet performance standards or else suffer penalties.

The Subway Reconstruction Public Benefit Corporation would be required to report on its progress on a semi-annual basis and provide justification whenever budgets or timelines are not met, thus making sure the public interest is protected.

Provide the funding necessary

Even with more efficient institutional practices and work rules, rebuilding the subway system would still significantly increase capital construction budgets. The Subway Reconstruction Public Benefit Corporation would have access to a significant portion of the existing MTA capital plan, but that would be insufficient. Identifying and securing a diverse, stable, and sizable dedicated revenue sources—such as a carbon tax, congestion pricing, value capture, charging tolls based on miles driven, and other taxes and fees—would be essential to the success of this effort.

This recommendation would end the continuous cycle of runaway construction costs and delays on capital projects. Within 15 years, the subways would be faster, more reliable, less crowded, and more efficient than they have been in decades. A streamlined decision-making and construction process would result in faster and better project delivery. With modern signalling technology, stations with platform screen doors for better safety and pedestrian circulation, and modern communications, the subway system should be able to increase its capacity significantly, and provide service to more parts of the city—all at lower costs.

In addition, this initiative would create a new model of transit governance. The Subway Reconstruction Public Benefit Corporation could, in other words, become a pilot project that informs the process for reforming the MTA itself.

Creating the Subway Reconstruction Public Benefit Corporation would require upfront legal and administrative costs, while reconstructing the subways would need a significant amount of funding. But in this transit-dependent region where the system is so far over capacity, the long-term return on investment on transit projects would be very high. And the lessons learned from a new institutional structure to address the MTA’s most daunting challenges could be a model for other agencies that would have far-reaching impacts beyond the authority.