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A few thoughts on the flattening of passenger traffic and the economic abyss of the MTA Urban Planning

The mezzanine above Lexington Ave. Grand Central is empty on a Thursday morning. When will the number of drivers increase again? (Photo by Benjamin Kabak)

The following post is an updated version of a post that I published a few weeks ago my patreon. As a reminder, Second Ave. Sagas is fully reader funded and I rely on you to keep the site up and running. Now that my wrist is finally on the mend, I expect a more regular release schedule and I promise that not every post will mention that the MTA is completely blank.

Has the transit ride reached a plateau? I first asked this question when New York City entered phase 4 of the governor’s reopening plan in late July, and the answer almost three weeks later still seems to be a cautiously yes.

So far it has been an incoherent reopening in the city. While the Open Dining program has livened up the streets of NYC and showed us that public space isn’t just for cars, the only New Yorkers are the only New Yorkers not allowed to dine indoors (rightly in my opinion) . In the meantime, gyms and museums haven’t opened for opening until the next few weeks, while most office workers are still teleworking and the school status is very murky. With just a few seats, the number of transit drivers has increased.

In the week before and in the week after Phase 4 began, the number of subway drivers had decreased to around 1.22 million per weekday, which is roughly 23% of an average weekday in 2019, and the number of bus drivers averaged 1.18 million. In phase 4, the daily number of metro trains is 1.25 million, still not even 24% of the average weekday, and the number of bus drivers has risen to 1.21 million. A system that previously served nearly 7.5 million a day now only sees 2.46 million, many of whom still ride local buses for free, and the number of drivers, which has grown by 100,000 per week, is rising instead only by a few tens of thousands.

Despite a one-day slump for Tropical Storm Isaias last week, the plateau is visible if we look at subway riders during the pandemic, starting with Governor Andrew Cuomo’s NY PAUSE order beginning March 23.

You can see the big leaps in driver count each week as New York City entered Phase 1 on June 8th, and smaller increases in the past few weeks. Despite lower rider numbers on Wednesday and Thursday last week compared to the previous week, a strong Friday pushed the total number of subway riders on weekdays to 6.5 million, a pandemic high. If Tuesday, August 4th, had been free of storms, the total number of drivers in the past two weeks would have been almost identical.

The bus driver community has shown a similar trend.

While the trajectory is increasing slightly, barring a few unexpected peaks in the weeks leading up to school, New York City doesn’t add more than a few thousand new drivers a week. After all, with no indoor restaurants, entertainment, or culture, and with largely vacant offices, New Yorkers have few places where transit travel is required.

However, there is reason to believe that this plateau may only last until early September before we see our next big surge in driver numbers. First, the upcoming museum openings – even with reduced capacity – will give people more places to go. Second, local bus fare collection is expected to resume soon and this could result in some travelers returning to the subway (while increasing bus revenue). Third, while tourism drives NYC during the summer, July and August are generally low-passenger months as the school is empty and many families are moving out of town for the summer. This year, many New Yorkers have left the city with family or second homes and plan to return to the city when schools start again in September. Fourth, while many employees will be working from home for the foreseeable future, some offices expect to reopen after Labor Day, especially when the children return to school. September and October, traditionally the MTA’s busiest months, could see an increase in the number of transit drivers.

How much upswing the MTA can expect is an open question. When consulting firm McKinsey modeled revenue from passenger numbers and fare based on the severity of the pandemic in April, they presented a “moderate” trend line and a “heavy” trend line. Currently, the MTA is hovering at or below the “strict” trend line, with tariff revenues in the range of 30% in August and up to 40% in September before a second wave in October causes driver numbers and revenues to drop back into youth . With local bus rides still free, it is difficult to get a handle on the MTA’s current tariff revenue (as opposed to passenger numbers), but the MTA is close to the 30% tariff revenue threshold.

Hitting 40% – or 2.2 million per weekday – is a questionable bet right now, and the rosier projections of 50-60% seem like relics of another era. The restoration of bus fares is pending due to labor disputes over adequate driver protection, and the wild card remains the school. If schools are open to face-to-face learning and stay open while avoiding an increase in infections, the number of drivers on the back of school cards will increase, but how much will be on the revenue side is an open question. As more companies keep their employees at home longer than expected, revenue may still fall short of expectations. (On the driver’s side, Ben Max and I from Gotham Gazette have the as a side bet Over / Under for subway drivers on Thursday September 10th at 1.6 million.)

What does all of this mean for the MTA’s revenue and poor economic outlook? Nothing good.

It’s hard to overstate the dire impact the pandemic had on the MTA’s finances. With the number of paid subway drivers below a quarter of the 2019 figures, the agency is on the brink of an almost unimaginable tax cliff. I wrote in a long post last month about the agency’s multi-billion dollar budget gap, and nothing good has happened since then. The Senate GOP and Trump administrations have not endorsed the House Democrats’ plan to fund cities, states, and transit, and my position in July is, while the MTA should try to streamline operations and cut costs, and during The State Might Consider Increasing Gas Taxes To help the MTA fill its budget gap, price increases and service cuts would decimate NYC transit without moving the needle more than a few percentage points. It’s federal rescue or bankruptcy.

But that comes with a caveat. A few weeks ago my MTA sources were confident that the government wouldn’t hang the MTA out to dry and they still couldn’t. However, it is becoming increasingly unlikely that a bailout will take place before Election Day unless the country’s municipal funding crisis begins to torpedo the stock market. If Trump loses, federal transit funds will likely be available in January, but that’s a long five months. Even if New York, ravaged by its tragic spring, avoids a second wave, the MTA won’t see transit driver numbers return to pre-pandemic levels before a cure or vaccine arrives. So what should the MTA do?

I’ve started to think that the MTA should just keep borrowing. It is a dangerous and risky strategy that could result in an eruptive disruption of the municipal bond market. However, as long as someone is willing to loan the MTA against the promise of an eventual federal bailout, the agency should continue to use that line of credit to keep it running while avoiding catastrophic price hikes and service cuts that leave the MTA only a few percentage points off would get out of this current hole. The MTA, who is transparent and consistent in its spending, has continued to do business as usual at around $ 200 million per week and has consistently stated that it will need $ 10 to 12 billion by the end of 2021 to get through. The agency should take care of streamlining operations and cutting costs, but you should also keep the management running.

Borrow until the money runs out, federal funding comes through, and the number of drivers increases. The future of the city depends on it, and lenders realize it. It certainly isn’t a solid or long-term financial strategy if the federal government doesn’t get through. But none of this is normal. The subways and buses will fuel New York’s later recovery, and keeping the lights and trains moving takes a little more fiscal and operational creativity than usual.

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