The MTA Loses Six Billion Dollars A Year And Nobody Cares
New York City is the center of capitalism and financial markets. However, hiding underneath the towering skyscrapers is an organization that defies the free market forces by siphoning off increasing amounts of city and state taxpayer dollars. This organization is the Metropolitan Transport Authority (MTA), which loses on average more than $6 billion per year, dating back to 2009. If the MTA were a company in a functioning free market, it would have filed bankruptcy and restructured a decade ago. Instead, the city and state increase taxpayer subsidies and debt year after year while acquiescing to union demands, resulting in one of the highest-costing, least productive transit systems in the world.
When Cost of Labor Is Greater Than Total Revenue
The average salary of an MTA employee is nearly $90,000.
Salaries, benefits, and retirement at the MTA are out of control. In 2015, the MTA spent $9.85b on employee salaries, retirement, and post-employment benefits. This is one billion dollars more than the $8.4b in total revenue the MTA collected. Before paying any other business expenses, the MTA is already losing money.
Based on employee costs alone, the MTA is already losing money.An analysis of MTA salary data on seethroughny.net, excluding salaries below the lowest contractual union wage, shows that out of 62,507 MTA employees, the average 2015 salary was $89,779. The vast majority of these employees are bus operators, train conductors, station agents, maintenance personnel, and cleaners. Analysis conducted on 2010 salaries of bus/rail operators and maintenance personnel shows that MTA salaries range from 18% to 60% higher than other US metro systems (i.e. Chicago, SF, LA, Miami) with very few exceptions.
The MTA spent over $876m on overtime in 2015
Because the MTA Bus Company did not provide its overtime accounting, total overtime in 2015 is actually greater than $876m. This number is even more egregious when you consider that only a subset of roles is responsible for the vast majority of overtime due to union constraints and inflexible work rules that will be detailed in a later section. Exhibit 1 below shows that in 2015, there were three hourly employees who worked so much overtime they grossed a higher salary than the MTA Chairman, Thomas Prendergast.
Exhibit 1: Top 4 Salaries at MTA in 2015
The $876m overtime bill in 2015 represented 15% of payroll, which is nearly double the 8% benchmark of average private nonfarm manufacturing overtime tracked by the US Bureau of Labor Statistics. In 2010, when the MTA’s total overtime bill was $560m, or 13% of payroll, the MTA vowed to crack down. However, the overtime issues have only been exasperated.
High Absenteeism Drives More Overtime
Truancy resulting in last-minute scheduling is a large driver of overtime at the MTA. Over a quarter of MTA employees use more than 15 sick days per year. This is in addition to the 20 annual vacation days employees receive after three years of service. Employees also receive their birthday as a holiday.
There’s a certain percentage of employees who take the mental health day. They wake up and say ‘I don’t feel like working today.’ -Thomas Prendergast, Current MTA Chairman
Excessive usage and abuse of the Family Medical Leave Act (FMLA) is another driver of unplanned absences. Once an employee is approved under the act, he or she may take up to 60 unplanned/unpaid sick days per year. FMLA usage is not periodically reported by the MTA, however is 2010 it was revealed to be at 9% in the bus division and 20% in the Staten Island bus division.
MTA Employees Do Not Have a “Cadillac” Health Plan, It’s a Porsche
The MTA’s health and dental coverage is among the best of all comparable US transit systems and corporations. MTA employees pay 2% of their gross pay, excluding overtime, for health insurance. While the cost for an individual employee is in-line with the US average, the contribution for a family is significantly subsidized as seen in Exhibit 2 below. After paying the 2% salary contribution for insurance, MTA employees pay virtually nothing for any medical services for the entire family, with the exception of a $15 co-pay. Comparatively, the Chicago Transit Authority (CTA) has a deducible and 10% co-insurance, and the Los Angeles MTA has a very small deductible, but 20% co-insurance.
Exhibit 2: Comparison US metro health coverage vs US national average
Not to be outdone by the MTA’s health insurance plan, the MTA’s dental plan is even better. Employees pay no premium and the plan covers 100% of all procedures including crowns, root canals, and surgery up to $1,800 per person per year, and full orthodontics for 24 months.
When adding in the cost of health and dental insurance premiums, the average salary of an MTA employee exceeds $100,000, without even considering pension costs.
Unfunded pension and post-employment benefit liabilities pose a substantial future risk.
Exhibit 3: MTA 2015 operating revenue and expenses (in millions).
While employee salaries and wages are the highest operating expense, pension (retirement) and other post-employment benefits are increasing at an even faster pace. Since 2009, pension and other post-employment benefits have increased at an annual rate of 4.4% and 6.4% respectively.
In the current state, the MTA is able to cover these costs with subsidies from the state and city government. However, in the future, either subsidies will be drastically increased resulting in higher taxes, or fares will increase faster than inflation. As of November 2014, the MTA had a $17.8b unfunded liability for post-employment benefits, and then reallocated and suspended future contributions to the reserve in order to pay for the new union labor agreement. There are also several underfunded pensions, including the LIRR pension that had a funding level of 26.8 percent as of Jan. 1, 2012. An 80 percent level is considered optimal for funds to be able to pay future claims.
Union Work Rules Cost the MTA Billions
The Transport Workers Union (TWU) has a rich history, starting with its founding during the Great Depression when the private transit companies were abusing the nations dire situation, which consisted of underpaying, overworking, and mistreating their employees. Today many of these issues have been rendered moot thanks to increased transparency in the work place, government protections combined with an accessible justice system, and a wide variety of available jobs. Over the years, the union has grown in power with its ability to shutdown the city of New York, resulting in capitulation by management and the city and a plethora of work rules that stifle productivity.
Cost of construction for the MTA is 2–7 times more expensive than any comparable subway system in the world.
The MTA employs 25 people for work that Spain does with nine.The extension of the 7 line from Times Square to the Javits Center cost $1.6 billion per mile. It would be the most expensive in the world if not for the first phase of