Incentives

 

For New York City to plan for the 21^st century, it should embrace its 19^th and early 20^th century history. During this time, the city grew rapidly; in the 1930s, the city had almost 7 million people – an increase of almost 6 million people from the 1850s. And we could accommodate all this growth because we had less interference – fewer zoning rules, for instance – so that we could build transit and housing rapidly. In fact, 40 percent of the buildings in Manhattan couldn’t be built with today’s regulations – they’re too tall, with too many apartments or businesses.

 

The private and profitable elevated railroads of the 19^th century voluntarily lowered their fares and expanded into the outer boroughs with more frequent service, back when much of the land was rural, betting on the explosive growth of the city – and they took an active role by developing much of the real estate themselves. Since they sought profit, they had an incentive to provide fast service for their paying customers – they knew that delays mattered for their bottom line, and that being efficient, frequent, and reliable meant being fast. Delays require overtime, more crews, more trains, more power, and so on.

 

As the city continued to develop, the City contracted private operators to build and operate subways. The subways were more expensive, but unlike the noisy els, which blocked natural light, the subways had the support of developers; the elevated portions of the subway network continued to get built where the land was less valuable or less dense. (It was cheaper to build elevated structures, and the outer boroughs were still so rural that there was little opposition; by the 1930s, building elevateds became politically impossible – the last 7 extension to Flushing was built underground, and the IND built everything underground except for a section over the Gowanus Canal. It’s a myth that bad weather caused the construction of the subways – after all, the weather isn’t any different in the outer boroughs; the subway was built due to real estate pressure and it also increased speeds, since it was closer to the street than the els, decreasing travel time. It’s also a myth, by the way, that bedrock has much to do with NYC’s skyscrapers.)

 

America was a poorer and less productive country in the 1900s, and most people could not afford automobiles, which had only recently started getting mass produced. (The subway’s original fare, a nickel, is around a dollar in today’s money, which is cheaper than today’s fare, but we are also a wealthier society today.) Back then, and still today, most New Yorkers commute with mass transit. So the city “sprawled”, but through dense, efficient, transit-oriented development. Today, our region now has more than 20 million people, though New York City itself has only 1.5 million more residents than in the 1930s – largely due to slow growth today, and a historical exodus to auto-oriented suburbs and to the Sun Belt.

Our metropolitan region is actually less dense than the LA region, but our city is denser – it has taller buildings and more people. It’s also more walkable, but not necessarily because it’s denser (there are plenty of dense American CBDs with lifeless, auto-oriented streetscapes, and even NYC has tall apartment buildings with few residents). But over all, NYC is not dependent on automobiles due to its transportation infrastructure – its bridges and buses, subway and sidewalks, buses and bike lanes, ferries and… not freeways. Public transportation makes sense in NYC.

 

While some people may want to have their own single-family home with a large lot, in a quiet neighborhood, the truth is that smart growth makes more sense socially, economically, and environmentally. It’s just more efficient, and it takes up less space. If transit isn’t slow, it can be possible. It was easier, of course, for the els of the 19^th century to build onto farmland, but now we raise fares and cut service and complain that there’s no more room for growth, even though the LA metro is denser than the NY metro. They built denser suburbs in LA largely because there weren’t already NIMBYist small towns in the area, like in the Mid-Atlantic and New England.

Smart growth is feared, for various reasons – perhaps people may be concerned that expanding a transit system into their neighborhood would raise property values, or make the neighborhood noisier and crowded. Maybe they just don’t like tall buildings or they don’t trust government. Regardless of the reason, if the supply of housing doesn’t increase, the city can’t grow sustainably – and that means housing prices will continue to rise, as people clamor to move here, and many others just can’t even attempt to migrate. The subway was originally built partly to decrease congestion in Lower Manhattan; the subway allowed for the city to sensibly expand.

 

While building a luxury condominium in a poor neighborhood may usher in drastic changes compared to not building anything new, if nothing gets built, many people will also eventually get priced out, sprawling further and further away. And rent control certainly won’t increase the supply of housing. Allowing developers to build – in exchange for affordable housing, transit improvements, schools, parks – is the smart choice. The city has plenty of capacity for more people; the subways aren’t overcrowded because of ridership, but because of mismanagement and delays, causing crowding. If the trains ran on-time and quickly, there wouldn’t be crowding; it’s an excuse.

 

Housing costs aren’t the only skyrocketing costs in the Big Apple. Transportation costs are also rising, making it difficult to expand and connect the system – the costs to build new subway lines in New York are a lot higher than the costs in other wealthy cities, such as London and Paris, which also pay high wages, have union employees, and have strong property rights and many regulations. To be fair, the city’s original subway, the IND, was also more expensive than its private predecessors, the IRT and BMT, but the MTA’s costs today are highly unsustainable. We used to make capital investments to reduce operating costs; prior to unification, the subway continued to become more efficient. Today, even if we can build new subway lines, which would require leadership (if it were a priority, perhaps it would get done quickly), we’d need to first stop slowing down the subway. Smart growth doesn’t work if rapid transit isn’t rapid anymore; we need leaders to understand that speed matters, and to be honest and accountable. And, of course, even successfully implemented projects that are on-time and on-budget can be failures, if the project itself isn’t designed well. But with good leadership, even government agencies can be run well; the extensive IND was built quickly, and NASA even went to the moon!

 

Beautiful stations are nice, but speed is more important, and it’s what people mean when they say that they want reliable, frequent service. If travel time is minimized, after all, it means service is reliable and frequent (passengers don’t need to wait long on the platform or the train). It also means stations are quickly accessible (ideally right below the street) and nearby. Countdown clocks help too, because wait time and transfer time can be minimized. The main purpose of rapid transit is to be fast, and we can be both safe and fast, especially with 21st century signaling technology.

 

Delays make service slower along the line, adding running time and requiring more crews and trains to meet demand, adding costs. But the MTA (and other government agencies) don’t need to worry as much as a private company about costs – or about its customers. As a political agency, the MTA needs to care primarily about looking good. Cuomo wants to look good, and MTA leadership wants to look good for Cuomo, too. So perhaps, to avoid bad news, problems are hidden from leadership, or leadership hides things from politicians, the press, and the public. Paid time ends up getting spent hiding problems, misstating facts, cherry picking good news, and often making the system worse, or at least causing a lot of internal and external confusion, and not spending time making things better. If a private business acted like that, and often cut corners to take the easiest or sexiest route, they’d be out of business quickly. Their employees wouldn’t know who to trust or what to believe, or they’d just be ignorant of reality and make poor, wasteful, ill-informed decisions and policies — not necessarily because they don’t care (though that may be the case), but because they don’t know any better and aren’t distrustful of their own press releases.

 

The private subways were originally profitable, especially in the CBD, even though they were prohibited from having advertisements or retail (except for newsstands). They made more money than the els, because they were more efficient and moved more people. They were paying back the City as well. But they did not realize that inflation would become a problem; they didn’t know WW1 would start and the gold standard would slowly be chipped away. The City promised New Yorkers that unification would keep the fare at 5 cents, since there would be no profits, taxes, and they could have an economy of scale by unifying operations. But they removed the incentive for efficiency and costs began to increase, along with rules and regulations.

 

Arguably because costs have risen so much, the Second Avenue Subway doesn’t have express tracks and the 7 extension didn’t end up including an additional station (or station shell) at 10th Avenue. Back then, the City and the private operators both dreamed big. Now, politics comes before profits, and the MTA has become a monstrous bureaucracy; there are few incentives to be efficient and few to prevent purposeless busy work. Without good leadership (which is hard to come by, given all the gerrymandering, campaign finance, and winner-take-all issues in the USA), the system will suffer. And in our region, where the subway is governed from Albany and commuter rail systems don’t only traverse various municipalities, but also across state boundaries, having strong leadership is especially necessary.

 

Privatization is not necessarily the answer; the St. Petersburg and Moscow Metros in Russia, for instance, run quite well, and there are many private companies with poor service. Even PATH, which also runs 24/7, is clean, though it has higher operating costs than NYCT and essentially has a slush fund from the Port Authority. The MTA contracts out advertising, so why not other things, too? Perhaps the MTA could privatize aspects of its operations; European systems often contract out station cleaning and train maintenance, but the MTA has separate internal groups for station cleaning, track cleaning, and train cleaning. There’s no simple solution, especially with such powerful unions and fractured political leadership, which lately only wants to look good and ignore responsibilities when there’s bad news.

 

The MTA was formed in an attempt to create one unified transportation agency in the New York metropolitan area – at least for the portion within New York State. It succeeded at removing Robert Moses from power, but it also took away the subway from the City’s control (PATH was never in the City’s control, but it became governed by Tobin’s Port Authority around this time.) This isn’t necessarily an issue; Mayor Bloomberg took an active role nevertheless, understanding the relationship between land use and transportation, and helping to extend the 7 to Hudson Yards. But some politicians do a better job than others, and it seems many just want to look good, even if it means hiding the truth.

 

The NYC subway arguably has enough ridership and demand to be profitable, just like Hong Kong and Tokyo. Compared to other global cities, New Yorkers have quite a good deal right now. The fare is not based on distance or time of day, which means that poorer residents farther from Manhattan don’t pay more, and, the subway is also quite extensive. For $2.75, 24/7, one can go from the tip of the Bronx, all the way to the Rockaways in Queens. MetroCard also allows for free transfer between buses and subways.

 

Again, the subway used to be profitable until government bankrupted the private operators with too many rules (keeping the fare low, not being allowed to advertise, etc.) and removed the incentive for efficiency through unification; Tokyo continues to have more than one subway operator. If fares are raised and people are too poor to pay, which is an extremely valid concern, perhaps they can receive transit stamps, but we should not directly subsidize the company itself. Subsidies just make things more expensive (healthcare, agriculture, housing, college, etc.) People may end up with better service and lower taxes, saving them time and money.

 

The same applies for other agencies, like Amtrak. They may be a private company on paper, but they don’t act like it. In reality, they are a government agency. Perhaps we can privatize NEC operations, and let the government maintain the tracks – as they do in many European countries. The MTA doesn’t own and maintain private vehicles that use TBTA bridges and tunnels; perhaps they should let private businesses run commuter railroads on their ROW. There are ways to prevent problems associated with monopolies. Develop smart contracts with the right incentives and relationships. Develop leaders, not ranks and titles.

There are many private and profitable passenger railroads; there are even privately-owned bridges in the US. The Hong Kong MTR is profitable even without its real estate development. Their OTP is 99.9% and their fare is low (and their farecards can be used to purchase most things in the city). There are many differences between HK and NYC, but we can do a lot better, too. Even though old age isn’t a good excuse, they have a newer system. They also are denser (and more comfortable with density) and have a political boundary preventing suburbanization and massive car ownership, and didn’t have a history of white flight. They also don’t have as many rights (property rights, etc.) so it is easier to build, and their government is more centralized and can collaborate better (for zoning changes, etc.) In New York, outer boroughs would block the tall buildings needed for value capture. And the MTA is rarely synergized with the City (it’s a State public authority), although in HK, they are able to zone things to allow MTR to build very tall. Plus, we have so many other agencies and political boundaries; the connection between land use and transportation is difficult to form.

Developing TurnStyle was an ordeal, but almost all MTR stations have retail space. TurnStyle is a success largely because the MTA decided to turn the reins over to private developers; they also let developers manage the Fulton Center. The MTA is a state authority, so they technically don’t need to follow local zoning laws or pay local property taxes, and they can be given leniency for developments with a transportation purpose (renovating stations, etc.) But in practice, they aren’t developers and if they don’t follow local zoning, they need to self-certify their buildings, which they don’t have the capacity or expertise to do, so they work with the City. Besides, the City owns most of their assets anyway, which the MTA leases, and the MTA Board is appointed by politicians.

 

Grand Central is owned by a single man, and Amtrak owns Penn Station, leading to quite a few real estate issues there now. But railroads commonly developed real estate in the U.S. and around the world, from the CN Tower in Toronto and the Château Frontenac in Quebec City, to Terminal City in NYC. The MTA is developing their property as well, but a major difference is that often, it’s not a profitable venture. Grand Central Terminal was constructed for 2 billion dollars in today’s money, while the new WTC hub was twice as expensive. What’s more, Grand Central’s reconstruction in the early 20th century was extremely profitable for the New York Central, as they decided to electrify the entire complex, and bring it underground, so that real estate could be sold for Terminal City. They also rebuilt the terminal because of the Park Avenue Tunnel wreck, caused by poor visibility due to a lot of emissions from steam locomotives, which were far less efficient than electric locomotives or diesel locomotives, invented later. The Park Avenue Tunnel was built underground (while other railroads ran along the streets) because Park Avenue was already a corridor of wealth and influence. The tracks are elevated in Harlem, and there are advertising and real estate opportunities below the tracks, such as La Marqueta.

 

Unlike New York Central, government agencies don’t really have a need to make a profit, or maximize their assets, or really care about their customers. Of course, many MTA employees do care and do their best (plus the Metro-North bar cars are returning), but there are few financial incentives to care, and few penalties for inaction. And it’s not just the MTA; these are valid concerns for most government agencies, such as the Port Authority. P3s may bring healthier incentives into the mix; LaGuardia is getting redeveloped under a P3, and perhaps the MTA could accelerate the disposition of its real estate assets to developers, and get developers to pay for improvements. The Low Line will eventually get built; perhaps the MTA and DOT will eventually lease out the wine cellar underneath the Brooklyn Bridge.

 

Our subway system is vast and complicated, and there’s so much potential for New York City. But it’s being hampered by poor incentives and mismanaged institutions. Regardless, the one year anniversary of the opening of the Second Avenue Subway is something to celebrate, and hopefully the next few phases get finished within the next few decades, while the existing section is properly maintained.

 

And there were many other accomplishments in 2017 as well, such as the reopening of the new South Ferry terminal, and other newly reopened and renovated stations. Hopefully 2018 will see many more accomplishments, and perhaps, better service vis-a-vis faster performance.

 

Born and bred in Brooklyn, Rayn Riel (RR) is a Senior Editor at PlaNYourCity.