MTA Fare Hikes Untenable Thanks To Income Inequality: Analysts

NEW YORK — Higher fares won't give the MTA much bang for its buck. Growing income inequality makes it harder for the Metropolitan Transportation Authority to address its financial woes with fare hikes, a new report says.

The MTA's average fare has increased twice as fast as incomes for the New York City area's poorest straphangers since the mid-aughts recession, a gap that is "not sustainable economically or politically," according to the report from Moody's Investors Service, a major credit rating firm, that was released Thursday.

But earnings have risen much faster for the region's richer riders, indicating the transit agency would be in better financial shape if more of its revenue came from tax-funded subsidies, the report says.

"Lagging income growth among the lowest-earning residents of its service area will weaken the MTA's ability to raise fares and balance its operating budgets," Baye Larsen, a vice president and senior credit officer at Moody's, said in a statement. "However, the essential role of mass transit in the New York economy provides a strong incentive to tap the region's high and growing overall wealth to subsidize transit operations."

The report points to the potential consequences of the MTA's decade-old practice of raising fares every two years.

The most recent hikes went into effect this spring, when transit officials eliminated incentives for buying multiple subway and bus fares and raised prices for Long Island Rail Road and Metro-North Railroad trips.

MTA fares have risen at roughly the same rate as overall incomes for its service area over the past decade, Moody's says. But they have also far outstripped both inflation and income growth among the poorest 40 percent of the MTA's constituents, according to the report.

While more fare hikes are sustainable in the short term, they threaten to hurt MTA revenue in the long term if income growth continues to lag among cash-strapped riders, Moody's says.

"As a significant portion of the New York City area's population experiences slow income growth, mass transit becomes less affordable for low-earning residents, which risks curbing ridership and weakening political support for future fare increases," analysts wrote in their report.

The report also suggests the richest riders are not paying their fair share. Tax-funded subsidies comprise 35 percent of the MTA's operating revenues but account for just 0.5 percent of the area's personal income, analysts say.

Moreover, those subsidies have grown less than half as fast as overall incomes over the past five years — and the MTA could have raked in $800 million more in the 2019 fiscal year if they had risen at the same rate, according to the report.

Transit officials have argued that fare hikes are necessary to keep the MTA afloat, but the agency continues to face steep deficits even when they are factored in. The MTA projects a $433 million gap in 2023 if the MTA's recently approved reorgnization plan is implemented, a number that could hit $971 million without savings from the plan.

The New York City region has sufficient wealth to support the MTA and keep fares affordable, Moody's says. The system risks cuts to service and further drops in ridership without that support, which would "a drag on the region's economic competitiveness," analysts wrote.

Fare revenue is "critical" to the MTA as it faces future deficits even though the reorganization is expected to cut costs by half a billion dollars each year, according to MTA Communications Director Tim Minton.

The transit agency has been "conservative" in its plans for fare hikes, keeping projected increases below the inflation rate over the next four years, Minton said.

"A ride on NYC Transit remains one of the world’s greatest bargains," Minton said in a statement. "For $2.75 New Yorkers can ride anywhere in the system across five boroughs. The MTA is committed to continuing to provide New Yorkers with affordable and efficient mass transit."