The fifth and final blog in Centre for Cities' TfL series draws inspiration from New York’s Metropolitan Transportation Authority.
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.
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:
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.
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).
A short blog series examining different Mass Transit System funding models from around the globe.
The second blog in Centre for Cities' TfL series shows that while Hong Kong’s mass transit operator may not be the answer to TfL’s short-term funding issues, it needs to be considered in the long-term.
The third blog in Centre for Cities' TfL series explores how Paris uses local payroll taxes to fund its public transport network.
The fourth blog in Centre for Cities' TfL series looks at Singapore's urban mobility model which shows that congestion charging and ULEZ are not the only policies available to simultaneously raise revenue and reduce car use.
The first blog in Centre for Cities' TfL series looks at how the pandemic has affected London’s transport network, and why TfL should move away from a fare-driven funding model.
Analyst Guilherme Rodrigues explains how following other cities’ examples could help TfL diversify its revenue sources.
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Simon C
I really enjoyed reading these blogs and it provided me with a much greater understanding of the different funding models from other world cities compared to TfL’s.