Transportation – Big City Economics

There is no question that New York City is not viable as we know it without its mass transit system, so the snowballing problems of the Metropolitan Transportation Authority should be of concern to everyone who lives or works in the city, whether or not they are regular users of the system.

Increased funding for NYC Transit (the subsidiary of the MTA that operates the subways and buses within NYC) may not be a sufficient step for improving the system but it is certainly a necessary one. Finding additional funding in an already heavily taxed city will not be easy, however, and already the Governor and Mayor are at war over whose responsibility it is. In addition to each arguing that the other already has money in their budget that can be used to help, Mayor de Blasio has proposed an income tax surcharge on tax filers earning in excess of $500,000, while Governor Cuomo is considering some version of the congestion pricing system originally proposed by Mayor Bloomberg.

When Bloomberg made his push for congestion pricing in 2007, I was working as the Chief Economist for New York City Comptroller William C. Thompson. The Comptroller is an independently elected citywide official who frequently serves as the chief antagonist of the Mayor, and at that time Bloomberg was maneuvering to have the city’s term limits waived so he could run for a third term. Thompson, who was planning to run for Mayor in 2009 all along and now faced the prospect of opposing Bloomberg, was casting about for an alternative to Bloomberg’s proposal. As it happened, I already had drawn up an alternative as a think piece and Thompson was intrigued. He eventually adopted it as the position of the Comptroller and as a plank in his 2009 and 2013 Mayoral campaigns.

Before describing my proposal I should note that residents of New York’s “outer boroughs” have a deep-seated suspicion of schemes to restrict access to Midtown Manhattan, whether they be in the form of tolls on the East River bridges or the more high-tech congestion pricing plan Bloomberg sought. I share their suspicion. There is, of course, a distributional effect, as a congestion pricing regime would disproportionately charge residents of the outer boroughs in order to improve a subway system that disproportionately serves Manhattan residents. But I think outer borough residents have a more visceral objection as well. Many of them work in Manhattan, study in Manhattan, play in Manhattan, and have family roots in Manhattan. They see Manhattan as the city’s commons, not as a separate borough to which its increasingly wealthy residents should have privileged access. It’s that possessiveness that all New York residents feel toward Manhattan that underlies their hostility to bridge tolls and congestion pricing. It was ultimately outer borough opposition that sunk Bloomberg’s congestion pricing proposal, and that Thompson was seeking to appease.

The proposal I devised for Thompson would impose a registration tax on motor vehicles registered in the five boroughs according to the curb weight of the vehicle. Thompson modified the proposal only by expanding it to all 12 counties of New York’s metropolitan commuter transportation district. Passenger vehicle registration fees in New York State average only about $20 per year and neither the State nor City imposes a personal property tax on vehicles as many states do. As proposed, a vehicle weighing up to 2,300 pounds (think Toyota Yaris) would pay an annual registration fee of $100, and the fee would increase by $.09 per pound above that weight, bringing the annual registration fee for, say, a Lincoln Navigator SUV to about $430. The registration tax could generate about $350 million annually just from the 2 million automobiles and trucks registered in the city. The revenue generated could be adjusted, of course, by adjusting the weight formula. More precise estimates of the revenue could be made beforehand using data on the makes and models of vehicles registered, which we did not have access to at the time.

Continue reading “Time for an SUV Tax”

It is becoming increasingly obvious that the Trump Administration is incapable of pursuing any coherent, sustained legislative strategy. The Administration was unable to play any useful role in fashioning a viable “repeal and replace” health care bill, and it seems equally clueless on the other big agenda item, tax reform. Seeing the Republican legislative machine stall out on those two priority items does not auger well for a third Trump initiative that was once thought to hold some bipartisan appeal: infrastructure spending. That is probably just as well, since any wide-ranging infrastructure bill coming from this Administration and Republican congress would likely be an ideological monstrosity that would entice little Democratic support.

An infrastructure program is, however, more suitable to a piecemeal approach than is health care or tax reform, so it is likely that some sort of new infrastructure policy emerges over the next eighteen months. Trump’s first budget programmed $200 billion over ten years to implement his infrastructure program (while cutting the Department of Transportation’s budget for the coming year by 13 percent). A fact sheet outlined some of the principles that will guide infrastructure policy.

The Trump infrastructure program will invariably seek to maximize the private-sector role, although the Administration’s fact sheet only hints at that direction with proposals such as removing the cap on private activity bonds. Administration officials are also touting the concept of “asset recycling,” whereby government agencies sell existing public infrastructure to private operators and use the proceeds to invest in new infrastructure projects.

The notion of private firms providing public infrastructure is polarizing, with conservatives portraying public agencies as inherently corrupt and inefficient and the left portraying private operators as inevitably predatory. In reality, the economic infrastructure of the United States has always been a patchwork of private and public operations and whatever prevails in a particular region tends to be taken by its residents as the natural state of affairs. Most passenger rail transportation, for example, was originally developed by private firms but virtually all of it was eventually taken over by government entities. Similarly for water supply systems, although about one-quarter of the U.S. population is still served by private water. Conversely, about 70 percent of American households buy their electricity from private, investor-owned firms. Roads and highways, and commercial airports, have always been developed and operated primarily by governments.

In recent years governments have explored privatizing, or re-privatizing, some infrastructure or contracting with private firms to operate it. Encouraging privatization appears to be a key part of the Republican infrastructure agenda, and that will be controversial enough. Even more problematic, though, will be efforts to incentivize the private creation of new economic infrastructure. In that regard the development of Florida’s long-distance passenger rail network is instructive, highlighting both the opportunities and perils of relying on private firms to develop new infrastructure.

The Florida High Speed Rail Project

Efforts to reestablish intercity passenger rail links in Florida have a checkered history reaching back decades. In 2000, Florida voters approved a constitutional amendment mandating the establishment of a high-speed intercity rail system. In order to implement that mandate, the Florida legislature established the Florida High Speed Rail Authority (HSRA) in 2001. However, Florida Governor Jeb Bush was opposed to the idea of a constitutional mandate for transportation infrastructure and was skeptical of the endeavor’s cost. He managed to get the rail mandate repealed in 2004, although the HRSA remained in existence and oversaw the completion in 2005 of an EIS for the Tampa-Orlando segment of a proposed system that was envisioned to eventually run from Tampa to Miami.

Continue reading “The Perils of Private Infrastructure”