If there is one thing that virtually every public policy commentator and politician seems to believe, it is that more should be spent on infrastructure. And yet the direction of public policy has been in the exact opposite direction, with maintenance often unfunded or funded by debts that now soak up a large share of revenues dedicated to roads, bridges, airports, and transit, water and sewer systems. The trend has been at its worst in the Northeast. And as costs from the past, including pension funding and debt service, increased between FY 2004 and FY 2014, expenditures on the future – on the infrastructure – decreased when measured per $1,000 of personal income. It’s a trend that, according to anecdotal evidence, continues to this day, with consequences that continue to appear over time as the sold out future becomes the present.
This is yet another post in a series based on state and local government finance data from the U.S. Census Bureau, for FY 2004 and FY 2014. The first post, which explains where the data comes from and how it was tabulated, and includes a spreadsheet with data for all the states and all the categories, is here.
A separate, reorganized spreadsheet with a table showing, for all the states, state and local government finances data for expenditures on highways, streets and ferries; mass transit, airports, seaports, water supply, sewers, electric and gas utilities, and all the charts in the rest of this post, is here.
As for the spreadsheets in the other posts in this series, I left in a tab with a table from the 2012 Census of Governments, with data for every county in New York and New Jersey and selected counties elsewhere in the U.S.
Debt and infrastructure expenditures have long-term effects, and thus what matters isn’t expenditures during just one year, but rather expenditures over many years. I analyzed such expenditures and debts over the period from 1972 to 2012, for New York City, the Rest of New York State, the U.S. average and all the other states, back in mid-2015, and put the findings in this post.
I may repeat that analysis, which should be read first, at a later date when additional years of data are available. But for now, let’s see what happened in FY 2004 and FY 2014, two economically similar years.
The data shows that U.S. spending on streets and highways, parking, mass transit, air transportation, seaports, water and sewer infrastructure totaled $24.50 per $1,000 of U.S. residents’ personal income (2.45% of personal income) in FY 2014. New York State’s total, at $40.68 per $1,000 of state residents’ personal income, ranked fourth among states that year, not so much because New York’s expenditures went up but because expenditures in most states, and the U.S. average, went down.
New Jersey was below average but middle of the pack at $23.38 in expenditures per $1,000 of state residents’ personal income, while Connecticut was dead last at $14.72. Joining Connecticut in the bottom 10 were New Hampshire ($15.71), Massachusetts ($17.70) and Rhode Island ($17.71). While the Northeastern states are growing slowly if at all, and thus require less infrastructure expansion, they are also old, and require ongoing infrastructure replacement to avoid deterioration and eventual abandonment. That hasn’t happened.
While it is less common in the Northeast, state and local governments do operate electric and gas utilities in some places. Within New York State most expenditures in this category were by the large and important New York State Power Authority. On the other hand, while most water systems are publicly owned, most of those in New Jersey are privately owned. Local government expenditures in this category were low in New Jersey in FY 2014 as a result of this private ownership, not public efficiency.
Infrastructure spending is only relatively high in New York and New Jersey because of high mass transit expenditures in the New York Metropolitan Area. And mass transit expenditures include vehicle operating and purchase costs that are the equivalent of people buying and operating their own motor vehicle elsewhere.
If one considers only infrastructure construction costs, including transit rights of way and stations but not vehicles, and excludes operating costs and non-construction capital expenditures, New York City’s local government expenditures were above average in FY 2014, but the Rest of New York State and New Jersey were below average. The totals for transportation (roads, bridges, transit, airport, seaport, parking) and utility construction expenditures were $5.66 per $1,000 of personal income in the U.S., $9.91 in New York City, $5.23 in the Rest of New York State, $3.93 in New Jersey, $2.93 in Connecticut, $2.95 in Massachusetts, and $2.73 in Pennsylvania. Also not spending much on infrastructure construction at the local government level were Maine ($2.43), New Hampshire ($2.04) and Vermont ($3.40).
The extent of public infrastructure varies from place to place, but just about every place has roads, streets and highways. New York State’s expenditures on this function were below the U.S. average in FY 2014, mostly because of low state government expenditures. There are few state highways in densely populated New York City, and this reduces total state expenditures in the category. Adding up state and local expenditures on highways, streets, ferries, and parking, the U.S. average was $11.08 per $1,000 of personal income (1.1% of personal income), with New York State at $9.46, New Jersey at $10.00, Connecticut at just $7.31, and Massachusetts at $7.66.
While expenditures are low in the Northeast, there seems to be a correlation between cold winters and higher road expenditures otherwise. Minnesota and Pennsylvania are among the highest spending states, along with Wisconsin and Vermont.
State highway expenditures fell per $1,000 of personal income from FY 2004 to FY 2014, in the U.S. and in most states. The decrease was 7.7% for the U.S. as a whole, 19.6% for New York State, 14.6% for Connecticut, 47.0% and for Massachusetts.
New Jersey’s state expenditures increased in this category, by 26.7%. In FY 2014 both the New Jersey Turnpike widening and the Pulaski Skyway reconstruction were under construction. With New Jersey’s transportation trust fund revenues now going almost exclusively to past debts, both were funded by money originally intended for a new rail tunnel under the Hudson River. The Port Authority also has a new Goethals Bridge between New Jersey and New York under construction, and it is raising the Bayonne Bridge. Sometimes the Port Authority and Turnpike tolls seem to be the only source of transportation money New Jersey has.
In keeping with the high cost of winter for roads, Upstate New York has long has among the highest local government highway and street expenditures, per $1,000 of area residents’ personal income, in the U.S. Data specifically for Upstate is not available for FY 2014, but taking the entire portion of New York State outside New York City, local government expenditures on this function fell by 22.7% from FY 2004 to FY 2014, measured per $1,000 of personal income. The $5.63 in expenditures per $1,000 of personal income in the latter year remained above the U.S. average of $4.44 psf.
Despite a small amount of street space per person, as a result of its high density, New York City’s local government highway and street expenditures were also above the U.S. average at $4.67 per $1,000 of personal income, though down 9.3% from FY 2004. The fact that the city is built on islands, and has many bridges and tunnels, increases its expenditures in this category.
All the expenditures on bridges and tunnels in New York City count as local government expenditures in this data, including the expenditures of the Port Authority of New York and New Jersey in the category, which I allocated half to New York City and half to New Jersey.
Even with the addition of half the Port Authority’s highway expenditures, New Jersey’s local government highway and street expenditures were well below average at $3.06 per $1,000 of state residents’ personal income in FY 2014, and down 16.6% from FY 2004. Local government expenditures on highways, streets, and ferries were low but rising in the rest of the Northeast over the decade.
The largest cost of private motor vehicle transportation is the extensive space it requires, for movement and for parking. In New York City a large share of city-owned land is given over to vehicle storage, in the form of parking on the street, sometimes with a charge (from a parking meter) but generally without. Aside from taking up a share of the street, most local governments have tried to ensure parking by forcing private property owners to provide it rather than providing it themselves. So public parking expenditures are very low and falling in the U.S. as a whole, and even lower but rising in New York City and the Rest of New York State. Recently NYC has been selling off public parking lots and garages for development, rather than building more of them, but the installation of more sophisticated meters may have driven up spending in FY 2014, relative to FY 2004.
Illinois is spending less on maintaining its parking facilities and meters. But the city of Chicago, in addition to contracting out the responsibility for maintaining those meters, sold off the right to all future street parking revenues, and has already spent all the proceeds. It did the same with a toll road. If these deals don’t epitomize the Generation Greed era, I don’t know what does.
A very large mass transit system, of course, is what makes New York City the city that it is. Its expenditures in this category equaled $25.00 per $1,000 of city residents’ personal income (2.5% of income) in FY 2014, more than five times the U.S. average of $4.52. While one expect urban areas to have more mass transit that states and the nation as a whole, the more detailed data available for FY 2012 showed that only San Francisco and the Downstate New York Suburbs came close to New York City’s transit expenditures as a percent of their residents’ personal incomes. Even taking the Rest of New York State, including Upstate New York, as a whole for FY 2014, no other state was higher than its $9.87 per $1,000 of personal income. New Jersey, at $6.89, also ranked high was also but behind Hawaii at $9.17 and Illinois at $7.35.
For purposes of this dataset I allocated expenditures on the PATH system by the Port Authority of New York and New Jersey two-thirds to New Jersey and one-third to New York City. State highway expenditures are relatively low in New York State per $1,000 of state residents’ personal income, thanks to how little the state government spends in that category of the city of New York, which accounts for 45 percent of the state’s population. The tracks, tunnels, and viaducts of the subway and commuter rail systems, however, are the equivalent of state roads for Downstate New York. And are also a state responsibility. Even if the state doesn’t seem to want to fund them with anything other than debt.
Mass transit expenditures actually edged up when measured per $1,000 of personal income from FY 2004 to FY 2014, in the U.S. as a whole and in New York City. Despite deep transit service cuts just about everywhere over that decade. With regard to total expenditures per $1,000 of city residents’ personal income, New York City was up 1.6% over a decade. And the U.S. average was up 5.5%. It seems counter-intuitive, but there is a reason for this, and it is not a good one.
Just about everywhere mass transit is provided by separate public authorities, rather than by municipalities with a wide variety of functions. Like the public schools, therefore, when transit agencies report their expenditures to the Census Bureau, they include public employee pension funding in total transit expenditures. Whereas for many other functions, pension and fringe benefit expenditures are often lumped together into the “General- Other,” category and not included in expenditures on particular functions such as police or sanitation. Particularly for New York City.
I confirmed, via a comparison with an MTA budget document, that the dollar total for New York City Transit expenditures in Census Bureau data includes pensions and fringe benefits. These costs, and interest payments, are going up for the MTA over time. Thus while total New York City “mass transit” expenditures are stable relative to city residents’ personal income, current operating and capital expenditures are still going down, because a higher share of expenditures are being sucked into the past.
Meanwhile mass transit expenditures fell per $1,000 of personal income in the Rest of New York State, by 13.7%. There was also a decrease of 7.6% in New Jersey and 9.2% in Massachusetts. These states had yet to face up to higher pension costs in FY 2014, so their falling expenditures on actual transportation were not offset by rising pension spending in the data.
Consider the case of Massachusetts, and the MBTA. The economy is heading for an economic peak, in an economic upturn that has been vastly more prosperous for metro Boston than just about anywhere else. With young people flooding into close-in areas, transit ridership soared despite ongoing service cuts and failures. It just doesn’t get any better than this fiscally for the MBTA. And yet the agency is in such trouble that is considering ending commuter rail service on weekends.
What no one is asking is how did this happen, and who benefitted from it? And is there a way to make them give something back before they head for Florida? There have been cutbacks, deteriorating service and budget deficits across the country.
Connecticut’s mass transit expenditures were higher in FY 2014 than in FY 2004, but only because it was paying for the M8 rail fleet on the New Haven Line in the latter year. The operating expenditures for most mass transit in Connecticut are counted as New York State spending in Census Bureau data, along with the rest of Metro North, the LIRR, and all the big upstate transit agencies. I was unable to disentangle spending on the New Haven Line alone. In that sense spending in Connecticut is in reality somewhat higher, and spending in the Rest of New York State somewhat lower, than they appear in the chart.
Metro New York’s airports may have a reputation as the worst in the country, but at least they were cheap in FY 2014. I allocated the Port Authority’s air transportation expenditures two-thirds to NYC, and one-third to New Jersey, in this dataset. With that allocation state and local government air transportation expenditures totaled $1.26 per $1,000 of state residents’ personal income for New York State, and $1.30 for New Jersey, compared with the U.S. average of $1.46. Connecticut and Pennsylvania were also below average, in keeping with the low infrastructure expenditure level of the Northeast in general, with Massachusetts slightly above average. The State of Massachusetts runs Logan Airport in Boston, and that is why local government air transportation expenditures are low in that state.
I assigned all of the Port Authority’s sea and port facilities expenditures to New Jersey, because let’s face it, that’s where the vast majority of the Port of New York is located today. And with that allocation, New Jersey’s state and local government sea & port facility expenditures equaled $0.72 per $1,000 of state residents’ personal income, about the same as the $0.71 for Florida though below the $0.92 for California and the $1.27 for the state of Washington. The other big East Coast ports are the Port of Virginia and Savannah, each operated by state governments. Virginia’s state government sea and port facility expenditures equaled $0.92 per $1,000 of that’s state’s residents’ personal income in FY 2014, with Georgia state expenditures at $0.59.
Perhaps for sea and port facilities, absolute spending levels are a better measure. The FY 2014 totals reported to the Census Bureau are $350 million for the Port of New York-New Jersey, $384 million for the Port of Virginia at Hampton Roads/Norfolk, $230 million for the Port of Georgia at Savannah, and $606 billion for ports at Miami and Jacksonville in Florida. Along with $1.84 billion combined for the Ports of Oakland, Los Angeles and Long Beach and those smaller in California.
By itself New York City’s FY 2014 airport expenditures equaled $2.37 per $1,000 of city residents’ personal income in FY 2014. That was above the U.S. state and local government average of $1.46 per $1,000 of personal income. But NYC’s air transportation expenditures were down 23.9% from a FY 2004, when measured per $1,000 of personal income, compared with a U.S. decrease of 18.8%. The Port Authority of New York and New Jersey contracts out almost every aspect of running its three airports, and has virtually no employment in the category.
There were big drops in air transportation expenditures around the country between FY 2004 and FY 2014, when measured per $1,000 of personal income. Illinois bucked the trend with an increase of 19.1%. More upgrades to O’Hare Airport are under discussion, even though its owner, the City of Chicago, is broke.
New Jersey’s sea and port facility expenditures were down 35.1% from FY 2004 to FY 2014 when measured per $1,000 of state residents’ personal income. Florida’s expenditures were unchanged. California went up. Among our East Coast competitors, Georgia went up, and Virginia was down only slightly.
I was going to write about how the de facto bankruptcy of the Port Authority of New York and New Jersey, and the collapse of its management, threatened the port, when I came across some unreported good news. I would have written that the Port of Virginia has infrastructure that allows containers to be offloaded directly from ships onto trains for an express run to the Midwest via the recently-built Heartland Corridor. The ports of Los Angeles and Long Beach have the same capability, thanks to the recently-built Alameda corridor. Whereas ships docking at the Port of Newark-Elizabeth, I had believed, were forced to load their containers onto trucks to be driven in heavy traffic to train yards elsewhere before being put on trains.
But it turns out that just prior to FY 2014 the Port Authority had spent $600 million to make such direct ship to train container movements possible. So sea and port expenditures were low in FY 2014 because they were done. That’s great, though I might suggest that perhaps six smaller trains a day would attract more containers than one big one. In the 12 hours waiting for the train to leave, an independent trucker, violating both the speed limit and the mandatory rest laws and putting everyone on the road at risk, could be in Chicago.
One more note about seaports. They lose money. Like convention centers, state and local governments have over-invested relative to demand because of the lure of associated economic development benefits. At one time Port Newark-Elizabeth generated profits for the rest of the Port Authority. More recently it was losing money. According to the latest budget documents for the agency, it is now breaking even but may face subsidized competition.
One difference between state and local government transportation, and services that are funded exclusively by n general tax revenues, is that there are a lot of specific transportation-related revenues. At the local government level, which is where most of the expenditures actually take place, these include dedicated federal and state government transportation aid, motor vehicle fuel and license taxes, and a host of fees. Road and bridge tolls. Transit fares. Airport and seaport charges. Parking fees.
In FY 2014 these “transportation-related” revenues equaled more than 90.0% of the total expenditures (operating and capital) on highway, street, ferry, mass transit, airport, seaport and parking facilities in New York City, and nearly 70.0% in New Jersey, compared with just over 60.0% in the United States. Which makes sense, given that New York has a very high gas tax (as of today so does New Jersey). We have more toll road and bridges than anywhere. Transit fares that cover a higher share of operating costs than anywhere else. High parking fees. High landing fees for airlines, and a high passenger facility surcharge on airline tickets. Etc.
It is important, however, to remember the expenditures that are not being included in the denominator. Interest on debts. We have more of those than anywhere else, too, and they absorbed a high share of the transportation-related revenues in New York, New Jersey, New York City, Connecticut, Massachusetts, everywhere. Which is why rather than having nearly enough transportation-related revenues to pay for our transportation system, more and more money is being borrowed – a revenue source that doesn’t show up in the numerator. Meaning more and more interest, leaving less and less money for transportation, in the future.
While New York City has a sky-high state and local debt burden, the Rest of New York and New Jersey do not. Transportation-related debts are high because a high share of debts have been loaded onto the transportation system, even when the money has been used for other things. Perhaps because transportation systems are so essential, and Wall Street knows it can squeeze the serfs a little harder to make sure the bonds get paid back, by threatening to shut them down.
What is being squeezed, specifically, is transportation, with rising fees and falling expenditures relative to population – with more and more money diverted to interest and pensions. As a result, transportation-related revenues covered a higher share of actual transportation spending in FY 2014 than in FY 2004 just about everywhere. Except places where there was big-time borrowing in an attempt to get out of deferred maintenance in FY 2014, as in Massachusetts.
Bear in mind that not all “transportation-related revenues” are captured as such in Census Bureau data. As far as the Census Bureau knows, the $5 billion in “dedicated” MTA tax revenues collected in FY 2014 were just general New York State tax revenues, able to be spent on anything or anywhere, even outside the region where they were collected. Include those revenues and transportation-related revenues probably totaled far more than 100 percent of actual transportation expenditures in New York City in FY 2014.
Also counted as general revenues, and not transportation-related revenues, are the sales taxes on motor vehicles and parts, and bicycle sales and sales in bike shops. Motor vehicles and parts sales totaled $26 billion in New York State in the year February 2013, with state sales taxes of more than $1 billion, plus local sales taxes. Based on a national estimate of bike shop and other bicycle sales, and the city’s share of the U.S. population, the state and local sales taxes on those sales would exceed the City of New York’s bicycle infrastructure expenditures.
So when transportation advocates push for more dedicated transportation revenues, no matter how objectively needed they are, this is what they are up against. People know they are already paying so much for what they are getting. They have no idea where the money is going. And no one wants to fess up and tell them they were robbed by Generation Greed, particularly if they are members of Generation Greed who benefitted in the past, and that there are all bad choices going forward.
While New York is getting what it pays for with regard to its low airport expenditures, its water and sewer system is a bargain. New York City’s expenditures in this category, not including debt service, totaled just $4.70 per $1,000 of city residents’ personal income in FY 2014. That was less than the U.S. state and local government expenditure average of $7.28 per $1,000 of personal income, even though many people across the country are served by private wells, private water companies, and cesspools rather than public water and sewer. Including many people in the Rest of New York State and New Jersey, where public water and sewer expenditures were nonetheless nearly as high per $1,000 of their residents’ personal income as in New York City. Moreover, New York City’s water system provides of public water to large parts of Westchester, and sewage treatment facilities to communities in the city watershed. This shows up as New York City local government expenditures in Census Bureau data.
The Northeast is blessed with an abundant water supply and extensive existing infrastructure, which keeps spending low throughout the region. When measured per $1,000 of state residents’ personal income public water and sewer expenditures totaled $10.70 in California and $8.32 for Texas, most of it for water. Most of New York City’s expenditures, meanwhile, are driven by environmental regulations, including the new need to filter some of its otherwise pure, gravity-fed water, and to treat the stormwater runoff that mixes with sewage in its combined drains. NYC not only has a superb natural endowment but also benefits from huge investments made in the past.
New York City’s water utility expenditures equaled just $0.94 per $1,000 of city residents’ personal income in FY 2014, just a quarter of the U.S. average of $3.87 and half the average for the Rest of New York State at $2.03. This despite the ongoing construction of the third water tunnel. But NYC sewerage expenditures totaled $3.76 per $1,000 of city residents’ personal income, above the U.S. average of $3.41, the Rest of New York State at $2.25, and New Jersey at $2.92.
U.S. state and local government water and sewerage expenditures were about the same in FY 2014, when measured per $1,000 of personal income, as they had been in FY 2004. There were small increases in the Rest of New York State and Connecticut, and a small decrease in New Jersey.
There was, however, a 26.7% decrease in expenditures per $1,000 of personal income in New York City. The city’s population and income increased strongly over that decade. But no new streets with new water and sewer pipes were built, and a major project to provide all of Staten Island with sewers was wrapped up by FY 2014. Water conservation has eliminated the need to add more reservoirs or sewage treatment plants even as the city population and employment increase. Spending fell relative to the total income of all city residents because NYC was able to get greater use of on the unused capacity of an existing resource, with little additional cost. In suburban and exurban areas, in contrast, more people means more new land developed and thus the need for more water supply, more water mains and more sewer mains. And more water utility and sewerage expenditures.
Another factor in New York City’s decreasing water and sewer expenditures relative to personal income was the Bloomberg Administration’s pushback against federal requirements that it treat its stormwater. The city had been building large sewage underground sewage holding tanks to spread out the load from heavy rainstorms, but switched to less costly “bioswales” and other plantings instead.
Meanwhile, from the suburbs, leaking cesspools, and the dumping of all stormwater runoff from separate storm sewers directly into waterways, are polluting the Long Island Sound, the Great South Bay, and the Great Peconic Bay. New York City was forced to absorb the cost of extensive environmental infrastructure at a time when it was nearly bankrupt, with rising water and sewer charges that burdened low and moderate-income households. Thus far there has been no push to force the installation of sewers in Long Island and Connecticut communities that do not already have them, or to force the suburbs to store and treat their stormwater runoff.
To understand the chart above, and the one to follow, one needs to understand what is left out. On the revenue side the chart excludes bonds, which are often used to pay for capital expenditures, which are included in the expenditure totals. And on the expenditure side, the chart excludes debt service, which is used to pay back those bonds, but which is not presented for sewerage separately from other government functions. When a local government is borrowing heavily to pay for high capital spending, its charges for water and sewer service can be a low share of total expenditures. But when it is paying those bonds back, it may charge more than the 100 percent of operating and capital expenditures at the time, because the additional money is going to interest payments.
So it was for New York City and Massachusetts in FY 2014, with water and sewer charges that totaled more than 140 percent of expenditures that year, with debt repayment and interest charges are excluded. This compares with water and sewer charges at 68.5% of expenditures in the Rest of New York State, 115.2% for New Jersey, 89.5% for Connecticut and 105.0% for the United States as a whole.
Back in 2004, when New York City was doing more debt-funded spending but had less in past debts to pay back, its water and sewer charges equaled just 87.3% of its water and sewer expenditures, rather than the 145.5% for FY 2014. For the U.S as a whole, charges increased from 91.9% of expenditures in FY 2004 to 105.0% in FY 2014. For New Jersey the increase was from 97.5% to 115.2%, with a gain from 78.7% to 89.5% in Connecticut. But in the Rest of New York State charges decreased from 73.4% of water and sewer expenditures in FY 2004 to 68.5% in FY 2014. The rest of the state is holding out for state funding, paid for in part by residents of New York City, to repair its water and sewer systems. Even as New York City residents, even the poorest, pays for their own water and sewer repairs.
Widespread municipally owned electric utilities are a consequence of the federal Rural Electrification program, during and after the new deal. Federal loans allowed rural governments to extend electric and telecommunication wires to remote areas of the country that private utilities had been unwilling to serve. Although there are some local government electric and telecommunications agencies in New York State, the main player here is the New York State Power Authority, which is big enough that New York’s state and local government expenditures on electric utilities were above the national average, per $1,000 of state residents’ personal income, in FY 2014. While the cities of Los Angeles and San Francisco also have publicly owned utilities providing electricity (and water), the New York Power Authority is one of the largest public power producers in the U.S.
Apparently after years of Thruway tolls being used to keep the Erie Canal going, New York Power Authority profits are now being used instead. Somehow the idea of something as important as this being run by the New York State legislature is pretty scary. In any event, with solar power on the rise, one thing that most people don’t know is that Niagara Falls is “turned off” every night when the tourists aren’t around, to generate more electricity. I wonder what share of New York’s overnight electricity demand is met by the falls.
I don’t recall any reports of state and local government utilities being privatized. And yet spending on publicly owned electric utilities fell from FY 2004 to FY 2014, when measured per $1,000 of state residents’ personal income. By 11.8% in the United States, by 10.1% in New York State, by 13.4% in New Jersey, by 8.1% in Connecticut — and by 43.4% in California by 43.4%. A dam in California recently came close to collapse. Evidently utility ratepayers would prefer to spend their incomes on other things. The answer to the question “what type of organization is cash cowing the infrastructure, private-owned utilities or publicly-owned utilities” is apparently yes.
The next post will be on Parks, Libraries, and a couple of oddities.