Senate’s MTA Bailout Plan Features Faulty Math

Before the MTA bailout plan proposal led by Malcolm Smith was off the presses, it was getting slammed by many. The major issue concerning many including Gov. Patterson & the MTA was the faulty math used in their funding calculations. Both parties claim that Malcolm’s plan would result in an approximate $1.1 billion dollar shortfall over 2 years. MTA Chairman Dale Hemmerdinger even went as far to say:

We believe their math is wrong, and they just didn’t take the time to do their homework.

In a report that will appear in tomorrow’s print edition, William Neuman of the New York Times takes a look into the faulty math in Malcolm Smith’s plan:

For weeks, Democrats in the State Senate have raised questions about a financial rescue plan for the Metropolitan Transportation Authority by repeatedly sounding a central theme: The authority’s numbers cannot be trusted.

But when the Senate majority leader, Malcolm A. Smith, proposed a scaled back, short-term bailout plan this week, he was met with a similar complaint from the transportation authority and its supporters: Mr. Smith’s plan, they said, would not work because he had the math wrong.

A review of the charges and countercharges shows that on several major points, Mr. Smith’s critics are right.

As an alternative, they propose imposing a smaller payroll tax than the one in Mr. Ravitch’s plan and increasing fare revenues by 4 percent. Mr. Smith says that his plan would provide the authority enough money to operate through next year and buy time for a longer-term solution.

But aides to the governor say that the Senate plan contains at least two basic errors — and a review of the data backs up their critique: the Senate plan overstates the amount of money it would raise over the next two years by more than $700 million. The governor’s office said that to make up for the shortfall, the Senate would have to increase fare revenues by a total of 13 percent.

Marc Shaw, a senior adviser to the governor, said the Senate plan miscalculated the amount of payroll tax that could be collected this year, overstating the amount by about $300 million.

The reason is based in the way the state collects taxes and the way the authority does its bookkeeping.

The Senate plan assumes that a full year’s worth of tax receipts would pour into the authority’s coffers this year.

But Mr. Shaw said that because the tax, like other similar taxes, is collected quarterly (in part this is meant to make it easier for employers), money from the final three months of this year would not reach the authority until January 2010. That means that the authority, which uses what is known as a cash method of accounting, cannot show the final quarter’s tax revenues on this year’s books.

The Senate plan gets that wrong, projecting four quarters of tax receipts this year.

The second error in the Senate’s plan is one of simple math: the Senate mistakenly turned a series of expenses into income.

Under the Ravitch plan, the authority would use hundreds of millions of dollars from the payroll tax to finance bus costs that had previously been paid for by New York City and the surrounding counties.

The Senate plan eliminates that provision. But in its proposal, it makes a mistake in accounting for those bus costs. Instead of simply removing them from the transportation authority’s balance sheet, it turned them into income.

The mistake adds up to $409 million over the two years of the Senate plan.

Initially, Senate officials denied that they had made any mistakes in their calculations. But subsequently they blamed the authority for the errors.

Click here for the complete report.

This report is another bullet in the arsenal of those who feel Malcolm Smith is clueless about how things work regarding the MTA. If you had your doubts about it, this should have clinched it for you. This is the same man who feels that the MTA Board is bluffing at having to have a balanced budget but a certain date because it is the law.

Yes, ladies & gentlemen, the Senator you elected is completely clueless about the actual laws in his own state. Are we really supposed to hope that someone so clueless could help spearhead a desperately needed MTA bailout plan?

I know that I have no confidence in this man as he clearly is out of his league on this issue. In all honesty, he looks completely out of his league for his role in government. As a registered Democrat, I am ashamed to know that he is a representative of my party. However that is not the important issue here.

In just a short time, the countdown to the potential & at this point likely passing of the “doomsday scenario” will reach 5 days. We are seriously running out of time for a plan to be created that will help millions of mass transit riders. Who is going to be the hero to save us? If I had to place a wager on who it would be, I would put my money on “Mr. Absolutely No One”!

xoxo Transit Blogger

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I read an article here and it says they want to raise the base fare to $3. Do you believe this?

It’s possible there talking about the single ride/cash on buses that will be $3.

Hello Abba,

I hope you are doing great! I took a look at the article in question. From my understanding, the MTA would consider a couple of different fare hike structures. The $3 base fare is part of the proposal that the board is leaning against going with.

Ok.Let’s hope they don’t raise the fare at all!

Unfortunately that is not an option. One way or another, we will have fare hikes. All that is left to decide is the amount of them.

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