4:35 pm Feb. 20, 2013
Whatever nominal headway former Metropolitan Transportation Authority chairman Joe Lhota made in winning over the reflexively anti-M.T.A. politicians of the suburbs seems to have been as short-lived as his chairmanship.
Last week, comptroller Tom DiNapoli issued an audit finding that the M.T.A. financial management practices could use some work. The M.T.A., according to the report, has about $90 million residing in various accounts that the comptroller argued could, theoretically, be put to better use.
(The M.T.A., took strong issue with the findings, arguing that it "rigorously monitors its funds, balances and investments.")
In real life, arguing that the M.T.A.'s finances could be managed more efficiently is not the same as arguing that the chronically underfunded agency should be defunded.
But that, once again, is how some suburban Republicans are playing it, using the comptroller's report to argue for an end to the transit-dedicated Payroll Mobility Tax.
In the depths of the recession, when the M.T.A. was in a particularly perilous condition, the state passed the tax, levied on the payroll of employers in the 12-county region served by the M.T.A.'s subways, buses, and commuter rail. Since then, legislators representing the suburbs surrounding the city have argued that the tax is unduly onerous and have, with some success, been doing everything they can to roll it back.
Following DiNapoli's audit, on Monday, the Mid-Hudson News Network ran a story headlined, "Calls continue for total repeal of M.T.A. payroll tax," in which Rhinebeck state senator Terry Gipson said the report "validates" his belief that the 2009 passage of the payroll mobility tax was a "mistake."
Orange County Chamber of Commerce president John D'Ambrosio said that, "while that is a lot of money to us, I’m not sure that’s a lot of money to the M.T.A.," and he hopes that now that money has bee "found," "the M.T.A. tax will be a thing of the past forever."
Neither outdid Greenwood Lake assemblywoman Annie Rabbitt, a particularly outspoken proponent of the payroll tax repeal who, as it happens, is also running for Orange County clerk.
She called for a criminal investigation.
“While it is prudent to review the details, there really is not much more that we need to know," she said. "The M.T.A. is the most mismanaged state authority and I believe that we need to look into the criminal liability of those responsible for mismanaging this multi-billion dollar mess. Taxpayers, employers, schools and local governments have been paying for the negligence of this authority for too long, and we cannot tolerate it any longer. I am pleased the comptroller conducted this audit, but we need to look at criminal sanctions.”
DiNapoli has put out plenty of reports detailing the fragility of the M.T.A., like this one, detailing among other things the vital $1 billion contribution the payroll mobility tax makes to its bottom line.
Asked for comment on the suburban legislators' latest broadside against the transportation agency, DiNapoli spokesman Eric Sumberg emailed, "The Comptroller's audit was focused on ways that the M.T.A. could make specific improvements to their cash and investment management practices."
UPDATE: M.T.A. spokesman Aaron Donovan sends over this lengthy response to the comptroller's report:
The State Comptroller’s press release mischaracterizes the MTA’s cash and investment management practices. The Comptroller’s main premise is akin to saying that a household can manage its finances without maintaining a bank account.
Much of the $27.6 million listed in the Comptroller’s report are regular revenues - which are appropriately used for operating and capital maintenance expenses. MTA Treasury, like all other treasury operations, faces a daily investment deadline. Typically any monies not invested on a particular day are transmitted the following day. Therefore, the Comptroller’s implying that money sits idle – either unused or un-invested for an extended period of time is simply untrue.
Also, the Comptroller ignores the fact that overnight bank balances earn a credit towards bank fees. In fact, under the current low yield investment environment, those credits are worth more than investment returns.
While the MTA agreed with the Comptroller on examining the number of open bank accounts, the Comptroller left out the fact that these 100+ bank accounts are spread out across nine legally distinct entities. For proper financial control, each MTA agency maintains separate accounts for categories like revenue deposits, payroll, and accounts payable.
The Comptroller ignored the most dangerous financial threat posed to the MTA during its audit period: Investment balances dropped dramatically, from $4.7 billion in April 2008 to $2.4 billion in April 2009. During that time, tax revenues to the MTA fell precipitously while it still had to pay for debt service and ongoing operating and capital expenses. This is the most important reason to have cash balances – called working capital – in our “checking” accounts. We simply need cash to pay our bills.
The Comptroller’s assertion that $64 million in “excess” monies “lacked any designation of use” is simply and categorically untrue. Buried at the end of the Comptroller’s report is an exhibit that details MTA’s designation of each fund. In fact, two of the three funds listed as “excess” in the Comptroller’s report were returned to the operating budget.
The third and largest fund identified as “excess” by the Comptroller belongs to MTA Bridges and Tunnels. This is a true reserve fund for financial emergencies such as paying for costs associated with repairs after events like Superstorm Sandy. Rating agencies look to this fund as providing financial strength to MTA bonds. The $56 million listed as “excess” in this fund is the Comptroller’s opinion – not based on any rule or mandate.
The Comptroller’s ”finding” on investment management totally ignores the principal of risk management. No responsible entity – like responsible households would bet the mortgage payment or grocery budget on speculative investments. Before the start of the credit crisis in 2008, MTA felt uncomfortable with investments such as mortgage backed securities. Even though these investments are permitted under State law and the Comptroller’s guidelines, the MTA sought to reduce its investment risk proactively. Each and every investment transaction is disclosed annually in a legally required report. Investment performance is also compared to market indices as part of both this annual report and a semi-annual investment report. Investments are audited quarterly by our internal audit department and annually by the external auditor.
More by this author:
- Lhota's solution to car congestion: subway terminus park-and-rides
- Anthony Weiner demands New York City's independence from public authorities