New York's transit system is in a financial crisis — but saving it is vital to the US economy, experts say

Experts say the consequences of a meltdown at the MTA could spread far beyond the New York metro area.

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• New York's transit agency, the Metropolitan Transportation Authority, says it needs $12 billion in emergency federal aid to fund itself through 2021. 
• Subways and buses are vital to New York's $1.8 trillion economy — if the transit network fails, the entire region could suffer.
• But that's not all. Experts, activists, and transit officials warn that not funding New York transit could deal a devastating blow to the nation's financial health and recovery.
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New York's transit system is in a financial crisis, and to anyone outside of the New York metropolitan area, that probably sounds like someone else's problem. 

But experts disagree. Dependable, robust mass transit is vital to New York's economic health and recovery, and if the agency is left high and dry, many say the entire country's economy will suffer.  

Right now, the Metropolitan Transportation Authority — which runs New York's buses, subways, and commuter trains — needs billions in federal aid. It received close to $4 billion in March through the CARES Act, but that money dried up quickly. The May HEROES Act would have given the MTA and other transit agencies a fresh round of funding, but the package stalled in the Senate.

The MTA is pushing for another round of emergency federal aid to fund its subways, buses, and commuter trains.

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As the MTA grapples with an increasingly dire financial outlook brought on by the pandemic, the agency is sounding the alarm about extreme cost-cutting measures it'll be forced to pursue without a lifeline from the federal government. 

But the cuts couldn't come at a worse time, according to transit advocates and policy experts. A deterioration of the subway, they say, would have a ripple effect throughout the country. 

Without emergency funding, the MTA might need to decimate service, cut jobs, and stall vital construction projects

At a board meeting in late August, the MTA warned it would need to slash service and table major infrastructure-improvement projects without $12 billion in emergency funding. The aid would carry the floundering agency through 2021 — without it, drastic changes, including job cuts, could come as soon as this fall. 

Under the doomsday plan, the agency would need to cut subway and bus service by up to 40%, leading wait times to balloon by up to eight minutes on subways and as much as 15 minutes on buses. An estimated 7,200 employees would lose their jobs. 

The city's commuter rails, tasked with transporting workers from nearby suburbs to New York's central business district, would suffer an even worse fate. The MTA said it may need to cut service in half, spacing Long Island Railroad and Metro-North trains at 60-minute or 120-minute intervals and possibly shutting down some routes entirely. 

Meanwhile, the MTA said not receiving the federal funding could pause projects from its $51.5 billion Capital Plan — a long-overdue investment into things like modernization, line expansions, and accessibility upgrades — scheduled for 2020 through 2024. 

With ridership in the gutter, the MTA may be forced to enact drastic cuts to service and spending.

Seth Wenig/AP

The MTA itself, as part of its latest push for emergency tax dollars, has contended that its well-being is a national concern deserving of a federal solution. Data shows that in addition to the MTA's indirect financial impact, the agency directly does business with vendors from nearly every US state.

"Not only does investment in the MTA benefit New York City, the New York City business community, New York State and the tri-state region, but it also benefits the national interest," MTA Chairman and CEO Patrick J. Foye told Reuters recently. "It's in the national government's interest to fund this because of the importance of New York and the importance of the MTA to New York."

The proposed cuts reflect a severe financial crisis at New York's transit authority

The proposed cuts, unprecedented as they may be, reflect the severity of the financial crisis New York's transit system faces. The MTA was no stranger to financial distress before the pandemic hit, but in March, its ridership plummeted virtually overnight, decimating farebox revenues and sending the agency into free fall. 

Subway ridership dropped by 93% at the height of the outbreak in New York. And although straphangers have slowly returned to transit as the city has creaked open, ridership on subways had only reached around a quarter of normal levels in early September, and buses were still down 50%. The Long Island Railroad and Metro-North have also been slow to bounce back, now seeing approximately 25% and 20% of their typical weekday ridership levels, respectively. 

The MTA is seeking a fresh round of funding as it loses $200 million per week.

Frank Franklin II/AP

The MTA received $3.9 billion in funding through the CARES Act in March, but it blew through that money by late July. Now, with the agency hemorrhaging $200 million per week and no followup stimulus bill in sight, it's pleading for another infusion of cash.

The MTA is vital New York's massive economy

A $12 billion allowance would be a drop in the bucket of any trillion-dollar stimulus package, and many experts and advocates say that, in this case, an ounce of prevention is worth a pound of cure. Saving New York's transit system from ruin, they say, is essential to clawing the city — and the nation at large — out of the current economic recession.

With its approximately $1.8 trillion GDP — comparable to that of Canada — the New York metropolitan area accounts for roughly 8% of the national economy, and the region's financial success is driven in large part by its robust transit system. In normal times, more than 3 million workers use the MTA and other smaller transit agencies to get to work each day across the New York region. Millions more take public transit for non-work-related trips. 

In normal times, more than 3 million people use transit each day to get to work in the New York region.

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New York's strength lies in its density, multiple experts told Business Insider, and that's not possible without strong public transit. The city's jam-packed central business district only thrives because of its expansive transit system, which can shuttle vast numbers of people to lower Manhattan and between meetings. 

"The benefit of New York is that it's the only place where you have an abundance of face-to-face contact, and the reason it's possible is because of mass transit," Mitchell Moss, a professor of urban policy and planning at New York University, told Business Insider. "In Los Angeles, you might be able to have three physical face-to-face meetings a day. In New York, you can have eight."

Nicole Gelinas, a senior fellow at urban-policy think tank the Manhattan Institute, said although many white-collar workers have made due working remotely for months, Manhattan's ultra-high-density business district will remain an important driver of economic activity.

"The entire point of being in Manhattan was you can walk to meetings," she said. "You can have many, many meetings every day with your potential vendors, your customers, your competitors. So if you're going to try to recreate that in suburban office parks or work-at-home, you will see a less productive economy five years, 10 years from now."

The MTA helps New York draw on a vast workforce beyond just the city's five boroughs.

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Another key to New York's prosperity is that it draws its workforce not just from within the city limits, but also from neighboring areas served by the MTA and other outfits. Of the roughly 2 million people who worked in Manhattan's central business district before COVID-19, more than 600,000 commuted from New Jersey, Long Island, Southwest Connecticut, or the Hudson Valley. The overwhelming majority took transit. 

Transit will only become more vital to the New York economy during this time of mass unemployment, multiple experts told Business Insider. Although the city's cost of living is high, its robust, low-cost system of subways and buses creates a low barrier of entry to the workforce. 

In other parts of the country, Gelinas said, one might need to spend thousands of dollars annually financing and maintaining a car just to get to work. In New York, you can commute on subways and buses for around $1,500 per year. 

MTA buses and subways are a huge driver of workforce participation in New York.

John Minchillo/AP

In 2018, Gelinas studied the importance of the MTA to workforce participation, determining that the subways "are both a cause and an effect of New York's labor-market boom."

"New York's mass transit system — especially its subways — has been a crucial factor for encouraging and enabling more of the residents in the city's historically poorer neighborhoods to work," Gelinas wrote. "Any sustained deterioration in subway services endangers this success story."

Experts warn of a "death spiral" if the MTA doesn't have the funds to maintain its system.

John Minchillo/AP

Abandoning or reducing capital projects, which the agency warned it would need to do without aid, could accelerate that deterioration. Multiple experts and activists warned of a "death spiral" — a vicious cycle of disrepair and disuse — that could hit the transit system if it winds up diminishing service too greatly. 

"If the system becomes far less useful and far less accessible, then it would lose more revenue," said Danny Pearlstein, policy and communications director for advocacy group Riders Alliance. "And so the MTA would find itself in an even worse position six months or a year from now. And so it might not be too long before there was no transit system."

The MTA's capital projects planned for 2020 through 2024 would spur more than $60 billion in economic activity, according to an independent study.

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The MTA's capital endeavors constitute a significant source of economic activity for the region. The Partnership for New York City, an independent nonprofit organization, analyzed the MTA's capital investment plan for 2020 through 2024 and found it would create more than 57,000 jobs per year while spurring $62 billion in economic activity. 

In a recent report, the Regional Plan Association, a prominent tri-state area planning group, argued that Congress should preserve the New York region's transit investments as a way of protecting its infrastructure and putting people to work. The RPA argued that capital programs from the MTA and other regional transit agencies could be cornerstone components of a national stimulus package similar to the Works Progress Administration — a 1935 employment and infrastructure program under President Franklin D. Roosevelt, which created millions of jobs during the Great Depression. 

"It's essential that we continue that capital program to employ construction personnel and the other folks that make those things happen," said Brian Fritsch, a manager of advocacy campaigns at the organization. "If those things go away, it's really dire for the region economically."

The widespread ripple effects of the MTA's success or failure 

Experts, activists, and transit officials warn that the financial damage of not funding the MTA could spread far past the city and region.

In addition to propping up New York's massively important economy, the MTA contributes directly to economies across the country, according to a June report from watchdog group Reinvent Albany. From 2011 to 2018, the organization found that the MTA spent close to $8 billion on vendors in states outside of New York State, including $1.6 billion in New Jersey, $1.4 billion in Pennsylvania, and $797 million in California. During the period studied, the MTA spent money in all but three US states, as well as Puerto Rico and the US Virgin Islands. 

Advocates argue that funding the MTA benefits the country at large, and hope that aid will come through sooner rather than later.

Angela Weiss/Getty Images

Advocates hope that emergency aid for the MTA will make it into a reauthorization of the FAST Act — a 2015 law that expires soon, but originally authorized $305 billion in transportation aid over fiscal years 2016 through 2020 — or a bill to fund the federal government, both of which need congressional action by September 30.

But with negotiations surrounding a second coronavirus stimulus bill stalled — Democrats proposed nearly $16 billion for transit agencies in the May HEROES Act, but Republicans' latest plan included no such funding — the MTA and transit agencies across the country face an uncertain future. 

At a Wednesday board meeting, MTA officials said the agency may need to borrow $2.9 billion from the Federal Reserve for some short-term relief, on top of the $450 million it borrowed from the Fed in August. 

"There would be global economic impacts to the fact that people can't get to work in the financial and cultural capital of the United States," Pearlstein said. "There is literally no better investment in the nation's economic recovery than keeping New York humming [and] keeping riders able to quickly and reliably get around the city by the millions.

"It's a simple thing for Congress to send us $12 billion. Every other way out of this is far more complicated and painful."

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