MTA board member: Congestion pricing talks limited to first phase

As lawmakers hash out the state budget less than a week before the deadline, one of the key debates is how to fund repairs and upgrades for New York City’s crumbling subway system. The main proposal is congestion pricing, or charging a fee to drive in Manhattan, but neither Gov. Andrew Cuomo nor the Republican-controlled state Senate included congestion pricing as part of their budget proposals, even though the governor’s Fix NYC panel proposed such a solution.
Meanwhile the Democratic Assembly included a scaled back version that would just implement a surcharge for for-hire vehicles, like Uber, in Manhattan. 

Scott Rechler, a real estate developer and member of the Metropolitan Transportation Authority board, stopped by the Slant Podcast and said that a comprehensive plan doesn’t need to implemented all at once, and that he still feels confident part of the congestion pricing plan will be included in the budget as a first phase.

“Today, we have the crisis on our hands,” Rechler said. “Every person in New York is feeling the pain right now. So when that happens, it leads me to believe that there's going to be a political will to get something done.”

Rechler added that value capture is another effective way to fund subway projects, crediting it for the extension of the No. 7 line to Hudson Yards. He also weighed in on the floundering Gateway Program, and the recent controversy surrounding Cuomo’s campaign donations from various members of boards he appointed.
Check out highlights of the interview below. To listen to the full podcast, click on the link at the top of this article or subscribe to City & State’s podcasts on iTunes.

C&S: With budget talks expected to come to a conclusion this week, where do you think congestion pricing is? How likely are we to get it this year, and if we do, what sort of version are we going to get?

SR: One of the reasons I think something is going to get done different than 11 years ago when (former New York City Mayor) Mike Bloomberg and his team tried to do it, it was a plan that had the foresight to say, "If we don't do something now, we're going to have a crisis on our hands." Today, we have the crisis on our hands. Every person in New York is feeling the pain right now. So when that happens, it leads me to believe that there’s going to be a political will to get something done. 

The other key element of the congestion pricing plan when it was designed by Fix NYC was to actually have it as a phased-in approach. And it was supposed to be phased in over a two-year period of time. And not only is that good politics, it's good policy, because the key here is, you can’t start charging fees for those coming into the commercial system in New York and pushing them down to a subway system that’s not functioning. So the first thing you need to do is get our transit system functioning even at a level that can handle the increased capacity and getting our streets open again. And so now, I think the only real question from what I’m hearing out of Albany is, what is that first phase? What’s included in that first phase? Is it just a charge on for-hire vehicles? Is it a charge on for-hire vehicles with the addition of some of these enforcement measures that help open up the street? Or is it both of those in addition to maybe setting the foundation to fund the infrastructure for the cordoning that would ultimately be needed for the full rollout of congestion pricing some time in the future?

C&S: One way you have suggested helping to fund the subways is value capture. How do you see this working? How do you bridge the disagreement between the city and the state?

SR: So I think there are a couple of issues here that play into this. First, the concept of value capture is based on the fact that if you actually invest in public transit, you're actually going to increase the value of the real estate, which then is going to create more real estate taxes than existed before. And that if you didn't invest in the transit, the real estate taxes in theory would be same as they would before. So the city would have no incremental real estate taxes if it weren't for that transit investment. So when we talk about taking money, it’s really taking money that didn't exist unless the investment was made. Personally, I'm big believer in value capture. I think the issue that’s sort of at debate right now is sovereignty, which is, can the MTA and the state dictate where there's going to be value capture without the cooperation of the city. And I think that's where the debate is right now. I think as a matter of policy, generally speaking, you'd want to have a situation where the state and the city are cooperatively working towards agreeing where there will be value capture, what are those terms in terms of setting those standards to what the taxes used to be versus what that incremental value would be. What's the zone which you’re actually evaluating the real estate impact for that?

C&S: Does the dynamic between Gov. Andrew Cuomo and New York City Mayor Bill de Blasio come into play at all in the MTA board, because you have members who are appointed by the governor, like yourself, and you have members who are appointed by the mayor?

SR: So I just joined the board last June. And I think, naturally and throughout history, there's always been state-city challenges between the mayors and governors of many different administrations. And I think that's played itself through, from what I understand, at the MTA at different times. I will say, over the last number of months, we’ve seen a good consensus and teamwork of trying to figure out the problems with the New York City members and the non-New York City members, and there are the county members, of trying to address some of the challenges. At the last MTA board meeting, I put forth the concept of trying to have a dialogue and a vocal consensus in support of congestion pricing. And not only did we have members of the city vocally support it, we had members of the counties vocally support it, and I think that's a great step in a direction that we need to move for. 

C&S: There's been a lot of tension over the Gateway Program. The federal spending bill included some indirect funding for it. Being the chairman of the Regional Plan Association, where are we with the program? How should we be feeling?

SR: So I would frame that what we received in the last budget has kept Gateway on life support. So I wouldn't say that's something to be optimistic about, but at least we're on life support right now, versus the alternative, which would be horrific. (President Donald Trump) also made it clear that he doesn't want to fund a $30 billion project to the New York region. And he's also made it clear that he doesn't want to consider the debt that would be funded using federal programs as part of the New York/New Jersey half of the contribution, to be considered part of their half of the contribution because he considers that federal dollars. But I would take a step back, if I were in this position, and I would actually go out now and say, let's now negotiate on his terms a little bit more, and let's try to resize the Gateway Project to a level that’s more of the $10-12 billion. It can be done, it can be value-engineered to a level where it makes sense and get that rolling, particularly the critical parts related to where we have the tunnel failure in the mix. Ultimately, to fund that debt, we were actually going to create user fees. So we were going to have an incremental revenue stream. I would not debate whether or not we should be using Washington's money, I'd go out to the private sector and use that incremental revenue stream to fund bonds on behalf of New Jersey and New York, to fund their half. 

C&S: What kind of role do you see developers like yourself playing in New York City's housing crisis?

SR: I think it actually ties into transit. I think one of the things we're facing in New York City is, we're a victim of our own success. We are ideally situated in this idea-based economy for companies to want to locate here, to be able to capture the talent who wants to live here. And we’ve seen, even last week, there was a report that was talking about the growth our population level, I think it was something I read, that New York City had the equivalent of a New Rochelle every year in terms of new population. It's extraordinary. So when you have new population, new workers, new people living and visiting here, it strains the capacity of our transit system and it creates an affordability issue on our housing. And on the housing side, our approach is to think more regionally. Where you have the capacity for density is outside of the borders of New York City. So one of the initiatives we've been pursuing is transit-oriented developments in downtowns, in the old suburban historic downtowns, that in the heyday, they were the vibrancy. They have great architecture, great diversity, great walkable streets and a lot of parking lots that were used for commuters. So we're now developing about 4,000 units in places like New Rochelle, Yonkers, Glen Cove, Hempstead, right by rail stations, that are 30 minutes away from midtown Manhattan, but we're producing product that's half the cost than if you were living in Brooklyn and Long Island City.

C&S: You were appointed to the MTA board by Gov. Andrew Cuomo. You've donated heavily to Cuomo before and after you were appointed to this board. Do you see any sort of conflict of interest there?

SR: I've been a big supporter of Andrew Cuomo, probably back from his first race for governor, back in the early 2000s, and I’ve known his father Mario. So this goes way back with me. To answer your question, I don't see any conflict. I think, first of all, I'm not an appointment at will. So the New York state Senate actually approved my appointment, and the governor can't remove me. It was the same way at the Port Authority. So I take many positions that may not be consistent with what the governor would have wanted, but that's the point of the job. And actually, when he asked to take this role, I made it clear that when I speak and when I vote, it's going to be what I think is best for the region. And part of the challenge when you're on these boards is to actually think beyond the election cycles, is to be able to think away from that passion of what the poll is. And that’s what we talk about congestion pricing, you can't be thinking about the moment, you can't be thinking maybe parochially, you've got to be thinking five or 10 years down the road. And that's what I try to bring when I sit on these boards and play that through.