Governor Hochul is taking heat after postponing the state’s years-old plan to charge drivers to enter lower Manhattan. As critics slam her for lacking “political courage,” it’s an appropriate time to examine some of the underlying issues that congestion pricing was meant to indirectly mitigate—because many if not most advocates were unwilling to touch those issues themselves. And if congestion pricing proponents are to be taken at their word about their concern for MTA finances, or traffic, or air quality, they must show some of the same courage they’ve accused the governor of lacking.

The Politics Behind the Price

The congestion pricing system that was poised to come online was, first and foremost, a revenue collection system. It wasn’t designed to confront the worst congestion and to push people to make marginal behavior changes. The price of entering the area south of 60th Street (the Central Business District, or CBD) wasn’t going to change depending on traffic, and the “peak” toll would most days be in effect from 5am to 9pm. The program had the markings of anti-car activists who wanted to penalize driving in general.

But the system would raise money, an estimated $1 billion per year over 15 years, which the MTA could borrow against to cover a spurt of construction and other capital improvements in the next few years.

To be sure, this wouldn’t be the only way the MTA would collect money: the system collects fares (generally) and myriad dedicated state taxes on business income, payrolls, automobile fuel, home mortgages and for-hire vehicle trips—on top of direct subsidies from the state and New York City.

Yet the MTA has an ugly secret: it has the highest construction costs of any mass-transit system in the world.

NYU researchers, for instance, found the cost of the Second Avenue Subway was eight to 12 times higher than a “composite baseline case” reflecting project costs elsewhere in the world. A 2017 New York Times investigation found “excessive staffing, little competition, generous contracts and archaic rules dramatically inflate capital costs for transit in New York.”

Congestion pricing was designed to cover those costs because governors and state lawmakers refuse to confront them—and Albany’s political sacred cows who benefit.

For starters, the MTA, like all local governments and school districts, is subject to New York’s “prevailing wage.” That forces a contractor on any MTA project to honor the terms of construction union contracts, even though most New York construction workers don’t belong to a union.

That means paying above-market rates for all workers: the prevailing wage for laborers in New York City, for instance, will be $99 per hour as of July 1. Carpenters will get $114 per hour. It also imposes different union work rules on projects, like mandatory double- or triple-time pay or restrictions on how many apprentices can work on a job.

Prevailing wage undercuts virtually every area of New York public policy, making it slower and more costly to modernize schools, repair water pipes, or maintain roads, among other things. State lawmakers ostensibly concerned about these things could easily reform how prevailing wage is calculated to bring it closer to market rates while complying with the relevant provision of the state Constitution.

However, New York’s construction unions are shrinking, and their general inefficiency has made it harder for them to win competitive bids without government help. For governors and state lawmakers who enjoy political support from construction unions, prevailing wage is the main mechanism for returning the favor—even at the expense of things these pols claim to care about, such as the MTA.

The MTA brass has exacerbated this problem in some cases by barring non-union contractors entirely from bidding on work by demanding “project labor agreements” (PLAs) between developers and unions. PLAs require contractors to use union labor, meaning often less expensive non-union contractors can’t comply and need not apply. But state law allows the MTA and every other government agency to do this, and PLAs allow state and local officials to steer work to some of the same construction unions that support their re-election.

MTA construction costs are also pushed higher by the local price of liability insurance, which is elevated as a direct result of Albany’s adoption of policies favored by trial lawyers. This is a systemic problem stemming from state law and generations of as-yet unreversed court decisions. One prominent example is what’s known as the Scaffold Law (Labor Law §240), a century-old law designed narrowly to promote safety on high-rise construction sites that’s expanded to slam contractors, homeowners and businesses with “absolute” liability in a wide range of circumstances.

The Scaffold Law alone is believed to have added at least $200 million to the cost of the $4 billion Tappan Zee Bridge replacement project. There’s no handy estimate of the total cost premium imposed by the tort system on public construction in New York (because the Legislature has failed to investigate it) but the next best measurement is the extent to which insurers have exited the New York market altogether.

Labor policies and insurance costs aren’t the only things driving up the MTA’s costs, but they’re both things that Albany could reform—with major benefits that would flow across both the public and private sector.

The Congestion Itself

Despite being a poorly crafted cash grab, congestion pricing would have had benefits with respect to traffic flow and air quality which are worth pursuing on their own.

Charging drivers to enter lower Manhattan was expected to reduce by 15 to 20 percent the number of vehicles coming in. But the drive toward congestion pricing absolved state and city officials from owning up to the extent to which they encourage many of these trips by providing free parking, either by issuing permits or by failing to crack down on illegal parking.

Traffic guru Charles Komanoff in 2019 estimated 20 percent of drivers coming into the CBD were parking on the street without paying, most with a city-issued parking placard.

Reviewing alternatives to congestion pricing, the MTA weighed reducing the number of parking placards by up to 10,000 and found it wouldn’t do enough to reduce congestion (a 0.3 percent reduction).

But New York City issued 95,000 parking placards in 2022 alone, mostly to city employees. For all the talk about encouraging transit, city and state officials have been reluctant to push their own public employees into using it. (Note that the New York City teachers union sued to block congestion pricing).

The New York City parking placard system is also rife with abuse and city officials have been reluctant to crack down on offenders—who are themselves often city employees.

Limiting the issuance of parking placards to people with disabilities or the tiny number of Manhattan workplaces more than a half-mile from a subway station or bus stop would make measurable improvements to air quality and traffic in Manhattan.

This wouldn’t be uncharted territory: Mayor Michael Bloomberg significantly reduced the number of placards issued to city workers—a reform reversed by his successor Mayor Bill de Blasio. But incremental improvements like this have been off the table because they didn’t deliver the MTA the bailout its costly capital operation requires.

Placard issuance is primarily a city prerogative, but state legislation could shield city agencies from the inevitable onslaught of union grievances (under both state and city collective bargaining law) that would result. Congestion pricing backers in the state Legislature could even go so far as to limit the city’s authority to issue placards, since they’ve been so problematic.

Public employees aren’t the only source of traffic congestion. However, they are the biggest contributor that public policy is inducing.

The bottom line: congestion pricing proponents seemingly offered city and state officials a silver bullet alternative to taking on public employee unions, construction unions and trial lawyers, one that Hochul has (for now) taken off the table. But elected officials are hired to do the hard work of managing public policy, not just creating new ones to address problems their other policy choices have created.

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