More Trouble Ahead

Henry J. Stern is the founder and president of New York Civic.
Friday, April 25th, 2003
The last two days’ newspapers did not produce happy faces at the MTA.

    The Daily News devoted its first four pages Thursday to charges against the authority.   Four separate stories, which you can link to here, deal with the MTA’s alleged iniquities.  Page One has a huge headline, FARE HIKE SCAM, with a picture of chairman Peter Kalikow, who “angrily denied that his agency had cooked the books.”   The lead story, by Pete Donohue and Greg Gittrich, reports the accusations by State Comptroller Alan Hevesi and City Comptroller William Thompson.  On page 2, Donohue and Celeste Katz describe MTA board members’ denials and Dave Goldiner describes the indignant reactions of straphangers attacking the $2 fare.  On page 4, under the headline “Now that M in MTA stands for messy”, Michael R. Blood reviews the agency’s missteps over the past year.

    Page B1 of the Times, the cover page for metropolitan stories, had two separate items on the subject.  A critical column by Joyce Purnick lacerates the style and manner of the MTA’s response  to the allegations as the predictable assault on the honesty, intelligence and motivation of the two elected officials whose staffs studied the MTA’s finances.  A news analysis by Randy Kennedy points out that while the MTA’s budget decisions are defensible and may even have been wise, the agency’s process “may mark an all-time low in its credibility.”  A bond expert is quoted as saying that low credibility can affect bond sales.  The recommendations are described in Tina Kelley's account on B6, which then discusses the controversy.

    The Post put the allegations on page 4, in a story by Clemente Lisi and a column by Douglas Montero, which focuses on the MTA budget director.  A Post editorial on the subject, A Political Pile-on, defends Kalikow and sharply attacks Hevesi and Thompson as political.  Peter Kalikow is a former publisher of the Post, which is now owned by Rupert Murdoch.

    Newsday has run many articles on the subject, including its Thursday front page headline, "NYers Complain They’ve Been…TAKEN FOR A RIDE".  Today, Glenn Thrush and Joshua Robin quotes Governor Pataki as saying he and the Legislature knew about the refinancing and authorized it.  You can find Thursday’s stories on the paper’s website,

    The facts are that the MTA shifted several hundred million dollars from 2003 to 2004 to look poorer this year and help their case for a fare increase.  Yes, they did it, but that is not a crime.  This isn’t Enron, nobody is accused of taking money improperly.  Nobody bought or sold MTA stock on the basis of misleading financial reports.  If the funds had not been shifted, the fare would have had to be increased a year later, perhaps by a larger amount.  The charges imply that the fare hike was unnecessary, while the legitimate issue is not its necessity, but its timing.  But, as  Mayor Bloomberg has learned, the sooner you make budget cuts or raise taxes or fees,  the less onerous the eventual actions will be.

    Was the MTA secretive about its budget maneuvers.  I think they were, but they were trying at the same time to set the stage for a higher fare, and to reduce wage expectations from the TWU.  So they pleaded poverty, which they themselves had temporarily created.  Should public agencies do that ?   I don't like it, but I can't object too seriously.  Why should the MTA be a sitting duck for rapacious unions and professional straphangers.  If those guys are as smart as they make out to be, they should have seen what the MTA was doing.   In fact, they may actually have known, but role playing requires them to appear to have been deceived.  Did the MTA really fool any insiders by its budget transfers. Who can be certain ?
    There are occasions when disingenuousness is in the public interest, especially when national security is involved.  Former CIA director Richard Helms who was put on trial for lying to Congress.  He was convicted, but applauded by his agency and many others who felt he had acted honorably in the national interest.  They took up a collection and paid his fine.  This case is far less cosmic, but there are sound reasons why the MTA acted as it did, just as it was appropriate for the Comptrollers to react as they did.  As Shakespeare wrote, "All the world's a stage / And all the men and women merely players."

    Both Comptrollers are in a tough competitive position with regard to advancement.  Attorney General Eliot Spitzer has a four year head start over Hevesi, and has earned a great reputation (among stockholders) by attacking the dishonest practices on Wall Street and in corporations which have costs the investing public uncounted billions of dollars.  City Comptroller Thompson must decide whether to challenge Mayor Bloomberg in 2005, or sit it out while a younger, more photogenic rival makes the race.  Politics is not an easy business, and when you can make page 1, or even B1, by attacking a secretive agency which has just raised fares, hey, why not?

    Having said that, one must in fairness report that the MTA is no bargain either.   It is bloated in management, and replete with dishonesty and waste in its construction practices.  Some of its engineers propose vast projects which benefit mainly contractors and unions, rather than the riding public.   But the MTA does a lot of things right, the trains and buses run safely and well, the employees have become much more polite, the stations are better lit and more attractive.   The agency has many honest and dedicated employees, but there is a disconnect somewhere in management, similar to the dichotomy and aimlessness that plagued the former Board of Education before it was put out of its misery.

    Katherine Lapp, the MTA’s executive director,  was brought in by Governor Pataki last year to run the agency, replacing Mark Shaw, who is now the city’s deputy mayor for operations.  She is a dedicated, competent and honest public servant, who did a fine job as Criminal Justice Coordinator for both Mayor Giuliani, and later for the Governor.   She is not, however, a transit person, as David Gunn was, and that has made her somewhat vulnerable to the deceits of other less principled employees.  But to Ms. Lapp’s credit, she has learned quickly about subways and buses, and she is a merit appointee.  I hope that she has the authority to shake up the MTA, and the wisdom to do it right.  She could take a few, but not too many, ideas from Schools Chancellor Joel Klein.

    Her boss, real estate developer Peter Kalikow,  inherited a fortune in 1982 from his father, H. J. Kalikow, a noted builder.  The younger Kalikow was appointed MTA board chairman by Governor Pataki in March 2001.  Kalikow is close to Pataki, but even closer to the man who picked Pataki from the obscurity of a back seat in the State Senate to become the Republican candidate for governor in 1994,  former U.S. Senator Al D’Amato, a man who now represents companies who have an interest in matters involving the MTA.

    We wrote a lot about the MTA during the ritual dance in December which constituted transit's labor negotiations.  The articles are on our website,  It is time to look at the MTA again, not demagogically to attack the first fare increase in seven years, which actually is less than it appears to be because of discounts for weekly and monthly riders.  How about looking at the management of the MTA, its capital plans and its construction costs, the size of its staff at 131 Livingston Street, a large office building comparable to its neighbor, 110 Livingston Street, which became a symbol of waste and bureaucracy when it housed the Board of Education.

    The biggest MTA scandal of all, still not fully exposed, is the tale of 2 Broadway.   We begin by asking why a public agency requires prime real estate, with spectacular views of New York harbor.  Why, if it does need that exquisite location, didn’t the State condemn the building and thus own it free and clear, rather than entering into a multi-million dollar extended lease from a well-connected landlord.  These question should be part of a thorough inquiry into 2 Broadway, which I would describe as the Tweed Courthouse of the 20th (or 21st) century.   Perhaps it is fitting that the Board of Education is now housed at the original Tweed Courthouse, itself a symbol of waste, extravagance and graft.

    We would welcome the investigative reporters of the four dailies, plus Wayne Barrett of the Voice, to find the facts and enlighten us about these transactions.  We could certainly use a Moreland Act Commission, appointed by the Governor, with subpoena power, to get to the bottom of MTA operations.  But I predict that the Second Avenue Subway will be completed before this Governor establishes an effective investigation of what, after eight years, is the Pataki MTA.

Henry J. Stern is the director of NYCivic.



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