This final blog of the TfL series focuses on New York’s Metropolitan Transportation Authority (MTA). The MTA may sound like a strange candidate: pre-pandemic ridership was already declining the system suffers frequent delays and difficulties improving its infrastructure. In 2017, the New York Times even called London’s tube a wonderland in comparison to its city’s own network.
Despite these issues, the one part of the MTA that London should be envious of is its funding model. The fiscal independence that New York State has allowed the MTA to both diversify its sources of funding and adapt them when required. This could serve as inspiration for TfL in its current negotiations with the Government to find a post-pandemic long-term funding settlement – although it would require a different governance model with further fiscal powers for the Mayoral Authority.
MTA has a vast and diversified range of funding streams
Unlike the funding models analysed in the previous blog series, New York has a very diversified model. According to 2019 data, fares accounted for 37 per cent of overall revenue – almost half of TfL’s. More than that share (around 43 per cent) is raised through the following dedicated taxes, levies, and tolls:
- Toll revenue: MTA does not have a congestion charge yet, but it does implicitly charge for car use by collecting tolls from tunnels and bridges. Depending on the location, tolls (one-way) range from $2.45 – $10.17 . This tool collects 12 per cent of MTA’s revenue.
- Payroll mobility tax: This sees a contribution of 0.34 per cent from employers within the Metropolitan Commuter Transportation District (MCTD), which include 12 counties. This tool accounts for around 10 per cent of total revenue. A system like the Parisian VT.
- Metropolitan transportation business tax (‘corporate surcharge’): A surcharge of 30 per cent on any firm operating in the MCTD. This is around 8 per cent of total revenue.
- Sales tax: New York’s mass transit system received a 0.375 per cent sales tax surcharge, which is raised in the MCTD counties. It accounts for approximately 6 per cent of the MTA’s revenue.
- Real Estate related taxes: This is composed of two taxes. The Real Property Transfer Tax raises revenue from commercial property transactions and the Mortgage Recording Tax levies revenue from commercial property mortgages in New York City. These two are only applied in New York City and allocated to MTA. On aggregate they account for 4 per cent of revenue.
- Petroleum Business Tax: An additional levy of 0.75¢ per gallon for petroleum businesses operating in the Metropolitan Commuter Transportation District. This accounts for around 4 per cent of MTA’s revenue.
In addition to raising revenue and diversifying MTA’s revenue streams, these tools also achieve other policy goals. Some of them implicitly aim to charge for car use (tolls or the petroleum business tax), like in Singapore; while others (payroll mobility tax, sales tax, and corporate surcharge) fund the system as a public good for the whole metro region, like in Paris.
Fiscal devolution would allow TfL to have a diversified and responsive funding model
This diversified revenue stream is a consequence of the existing governance model at the subnational level. The MTA is controlled by the New York State Government in the same way the GLA owns TfL. The main difference between both is that New York State has the power to create new public transport funding tools, without any negotiation with the Federal Government. This has allowed it to both diversify its income and swiftly adjust to change. For example, the Payroll Mobility Tax (and other tools) were introduced in 2009 to support the Transit Authority during the financial crisis.
London does not have this powers to create similar taxes, and primary legislation would be necessary to give these to the Mayor. This has resulted in TfL being far more reliant on fares and its ongoing protracted negotiations with central Government.
The current negotiations between the Mayor and the Government should go beyond balancing TfL’s books in the coming years. As a priority, both parties should aim to build a new funding structure that diversifies TfL’s revenue away from the farebox, much like MTA. This would require fiscal devolution but would allow the Mayoral Authority to act swiftly and effectively in a fast-moving world.
This blog is part of the TfL series, where the Centre for Cities explores different Mass Transit System funding models around the globe.
Note: The revenue data from MTA Proposed Budget 2019, figures based on “Final Proposed Budget 2019”, from MTA’s financial plan (2019-2022).