How to Save New York City's Infrastructure: Dedicate Revenues
Recommendations
In this period of fiscal austerity, the MTA has notably found billions of dollars of efficiencies in its capital program, reducing its overall cost while maintaining the same projects. Other government agencies should replicate this rigorous cost management effort, which should be continuous. Nevertheless, without new, dedicated revenue sources, government cannot maintain its current level of support for critical capital investments – much less make the additional investments necessary to harden its infrastructure in the wake of Superstorm Sandy and climate change.
The Building Congress recommends that government carefully examine and work to adopt the following measures.
TOP LINE RECOMMENDATIONS
UNIFORM TOLL POLICY • In 2007, Mayor Michael Bloomberg proposed, and the City Council approved, a plan to charge drivers for access to Manhattan's core business districts. Revenues were to be dedicated to regional mass transit infrastructure. That proposal, however, was shelved by the State Legislature.
A refined plan currently being discussed proposes charging vehicles a more uniform fee for crossing bridges and tunnels within the five boroughs, or for entering Manhattan below 59th Street. The plan could initially lower the cost of some crossings, while generating more than a billion dollars of new revenue annually. Polling taken in 2008 showed public support for this policy, particularly if the revenues are dedicated to mass transit.
PUBLIC-PRIVATE PARTNERSHIPS • Government can better stretch its limited resources by deploying public-private partnerships (PPPs). The term PPP encompasses a variety of collaborative design, delivery, financing, and maintenance arrangements between government and the private sector. All have the potential to reduce project costs. For example, design-build construction permits a single development consortium to undertake an entire project from design to completion. In this way, the design and construction phases proceed in tandem, shaving months or even years off a project's schedule. PPPs also can achieve cost savings by shifting risk to the contractor for design delays and construction cost overruns. They also permit creative financing options not typically available to government that can reduce the long-term cost of maintaining an asset after its completion.
While New York has been slow to embrace the concept, PPPs are being employed for two of the largest bridge construction projects of the past 50 years – the Goethals and Tappan Zee Bridges. If done correctly, each will demonstrate that government can create the next generation of infrastructure more efficiently and without ceding control of its assets to the private sector.
VMT FEES • In July, Oregon became the first state to approve a version of a vehicle miles traveled fee (VMT) as a partial replacement for its gas tax, which has produced declining revenues for the state as cars become more fuel efficient. The Oregon program, now being implemented on a limited basis, charges drivers according to how many miles they have traveled instead of taxing fuel sales, a fee that more accurately reflects each vehicle's actual use of the state's roads.
New York State funds transportation through a Dedicated Highway and Bridge Trust Fund, underwritten by a variety of taxes on petroleum. Once envisioned as a stable, payas- you-go funding mechanism for the State's road and bridge infrastructure, the Fund is used increasingly to service existing debt and requires a substantial subsidy to meet its other obligations. The Building Congress has reported that the Fund can no longer support significant new transportation infrastructure investment. If, with time, the VMT proves operational, it offers a potential alternative to generate stable, costindexed funds for future highway investments.
FINANCING ENTITIES • The WFA plays an essential role for the City – issuing debt backed by water and sewer fee revenues. Water and sewer fees are established by the New York City Water Board, which is mandated under state law to set rates sufficient to meet the system's obligations. The revenues dedicated to bond repayment are constitutionally protected – creating a lock box – to ensure obligations are met. Since their creation in 1985, the WFA and the Water Board have maintained a stable financial outlook and allowed the City to plan and implement system expansion and maintenance outside the normal budget process, making rational, sustained investments in the system that will pay dividends for the next century, ultimately saving the City money and protecting public health. In order to provide long-term stability, proposals for new revenues for infrastructure should employ models similar to the WFA, which guarantee revenues are collected and allocated independently of the normal budget process. For example, New York City's 2007 congestion pricing plan proposed a public authority to collect these new revenues and issue debt for regional transportation projects. Similar models could be used for other revenue streams discussed here, including a sanitation financing entity or a parking and transportation financing entity.
ADDITIONAL ILLUSTRATIONS
PARKING • Residential Parking Permits.
New York City possesses an estimated 3.4 million to 4.4 million unmetered on-street parking spaces from which it derives zero revenue. Of America's 10 most populous cities, New York is the only one without a residential parking permit program, charging residents a fee in return for easier and preferred access to a parking spot. Such programs provide a wealth of benefits – including reduced congestion and pollution, improved residential quality of life, and the ability to generate new revenues, which could be dedicated to the $2 billion annual cost of maintaining and modernizing the City's transportation network.
Pay-by-phone parking in commercial areas is another innovation that could increase revenues while providing a benefit to users. The system allows drivers to pay for parking with a credit card via an application on their mobile phone or computer. In addition, advanced pay-byphone technology, used in other major cities, like London, would allow the City to introduce more sophisticated metering along already priced commercial thoroughfares and enhance enforcement and revenue collection.
SANITATION • New York City spends $2 billion annually to collect and then export its trash, which New Yorkers generate at a rate of 18 tons per minute. Residential disposal costs, which are borne entirely by City taxpayers, have quadrupled in the past 20 years. The City can broaden its revenue base and protect its general fund by charging fees that reflect each user's impact on the system.
Pay-As-You-Throw (PAYT) requires residents to pay based on how much household waste they generate. Such a system, which has proven effective in Zurich and Seoul and more locally on Roosevelt Island, would reduce costs by creating incentives for residents to recycle more and waste less. The revenues generated should be dedicated to support ongoing sanitation capital programs and operations.
Waste-to-Energy (WTE) technology provides low-cost, environmentally sound waste disposal. Instead of carting millions of tons of solid waste out of the City each year to be buried in out-ofstate landfills, WTE uses facilities equipped to combust solid waste and convert it into usable power. A Citizens Budget Commission analysis also found revenue potential from energy generation; however, this requires new investment as the City's existing capacity is extremely limited.
Many large European cities have won public support for and operate WTE facilities. As with PAYT, revenues should be dedicated to support sanitation operations and investment.
