A new revenue source

The MTA’s financial problems aren’t new. For decades, fares have had to increase while service has declined, a loss for all users. Part of this is that the agency simply cannot make a profit while its required expenditures increase faster than it can make money. Only so much money can be gained from fares and advertising, but as the system ages it requires more maintenance for station rehabilitation, signal replacement, track work, and ever-rising labor costs. Perhaps a new model, or at least a partly-inspired one, could work.

In stark contrast is the MTR Corporation in Hong Kong, unique in that it operates at a profit. While a number of factors here are at play, mainly the system’s relatively young age and lower labor costs, one in particular stands out: its subsidiary, MTR Properties. Essentially, the corporation develops above its stations, using the money it makes from rent to pay for required work as well as inducing demand for public transportation. Of course it’s nowhere near as simple as that, but the point remains.

It made me think of how New York could improve its rapid transit system’s finances, but one problem in particular remains: the city is mostly out of developed space near subway stations. Instead, I realised that the city could institute a policy (or small set of them) that would bring in property-related revenue to help fund its lifeline. To accomplish this, the city government would have to pass legislation that would require landlords within one-avenue or three-street blocks of a subway entrance or exit to pay a transit proximity tax (TPT), probably 7% of so, from the money accrued from renting office, residential, or commercial space, or any combination of them. In doing so, the MTA would have an alternate revenue source without burdening passengers with additional fare increases or service cuts because a constant stream of money would fund improvements and operating costs.

To understand how much money this would generate, let’s take the Rockefeller Center complex as an example. Located directly above one of the city’s busiest stations, 47-50th Streets on the Sixth Avenue Line, it boasts eight million square feet of office and commercial space that would be liable for the transit proximity tax. While I don’t know specifically how much money it charges per square foot, I’ll make a low assumption that it’s $60/sq ft (although I’ve seen the statistic of $71 thrown around, but again that depends on the building). That equates to $33.6 million alone in MTA-bound revenue. To take this on a more regional level, Midtown Manhattan has about 45 million square feet of office space alone. Assuming about 80% of that space falls within the TPT zone, or 36 million square feet, revenue at $60 would be $151.2 million. Adding Lower Manhattan, and eventually much of Manhattan and even Downtown Brooklyn, would result in gains of at least $300 million, drastically lowering the amount of money needed to be borrowed from Albany and possibly postponing further fare increases.

Of course this may dissuade certain companies from locating within TPT-designated areas as rent would increase to combat losses from the tax, but they would then relocate within the city to less-congested areas, although this doesn’t help those who merely interchange or pass through them, as locations eligible for the TPT usually contain a number of important station complexes. Still, it’s an admirable goal. The likelihood of the city even passing such a tax is essentially 0, further compounding the problem. Yet I wonder if there are any other ways of increasing revenue, as it seems that few people, if any, have proposed them.


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