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MTA Strike Has Deep Roots in Agency's Past Mistakes

Finances: Mammoth debt, costly union contracts and ambitious plans left directors with two choices: lower workers' pay or raise riders' fares.


The transit strike that has brought the nation's second-largest bus system to a standstill is the direct result of the MTA's past decisions to build the nation's most expensive subway system, take on billions of dollars in debt, sign relatively generous union contracts and keep pushing to expand mass transit.

As a consequence, the MTA's Board of Directors has boxed itself into a financial corner, caught between past obligations, future dreams and a demanding present.

While the agency is flush with billions of dollars to build more rail and bus projects, it struggles to pay to operate what it already has. The agency's annual budget is $2.5 billion, of which 50% comes from a penny-on-the-dollar state sales tax, 9.3% from fares, and the balance from state and federal subsidies and annual appropriations. The latter are earmarked for construction.

After opening almost 60 miles of rail lines in the last decade and being forced by a federal court consent decree to improve its long-neglected bus service, the MTA faces a massive $438-million operating deficit over the next decade.

That's before the agency takes on the responsibility of running light-rail lines from downtown Los Angeles to Pasadena and the Eastside or building busways across the San Fernando Valley and along Wilshire Boulevard. To do so would add an additional $287 million to the projected shortfall.

To close this gaping hole, the MTA board sees only two choices--cut operating costs by forcing unionized workers to make concessions or take the politically unpalatable step of raising fares for poor and minority passengers.

So the board has decided to finance future expansion by savings from its workers, politically the path of least resistance.

Unwilling to surrender their standard of living to pay for MTA's past mistakes, 4,400 bus and train operators have shut down the MTA's bus and rail system.

But the MTA board is determined not to give any ground this time. "The MTA must reduce its costs if we are going to expand service to this community," said county Supervisor Yvonne Brathwaite Burke, chairwoman of the MTA board. "The community is demanding more buses, more services. But unless we can get a reduction in our costs, we are going to have to start reducing services. We need to expand services."

With California's booming economy generating a huge budget surplus, Gov. Gray Davis has promised well over $1 billion in state funds to the MTA for new projects, including a light-rail line from Union Station to the Eastside, a busway across the San Fernando Valley from Warner Center to North Hollywood, and a busway along Wilshire Boulevard from downtown to Beverly Hills. The largess includes money to buy another 385 clean-fueled buses to replace older vehicles.

Despite this infusion of capital, the MTA doesn't know how it will pay the cost of operating the new service. The agency already is struggling with the consent decree to which it agreed to settle a federal civil rights suit. Part of that settlement requires the agency to reduce overcrowding and improve bus service. It is awaiting a decision by the 9th Circuit Court of Appeals on its appeal of a federal judge's order to buy hundreds of additional buses.

The MTA already is committed to running a light-rail line from Union Station to Pasadena, although state lawmakers stripped the agency of responsibility for building the project.

The prospect of more rail lines is far more appealing to most MTA board members than running a bus system. Rail projects are seen as politically sexier than buses. They bring the potential to award large contracts to engineering, construction and other companies, which have a history of being active contributors to political campaigns, which the MTA's board members must regularly conduct.

And rail projects like the subway tend to attract a higher-income rider who will not ride a bus.

When it comes to finding operating funds, the MTA's hands are tied by the board's past penchant for borrowing to cover the cost of building rail projects.

The agency has amassed more than $7 billion in debt, including principal and interest to be repaid over the next 30 years. Most of those borrowed funds paid the cost of building two light rail lines and the local share of the Metro Rail subway from downtown Los Angeles to the San Fernando Valley, including cost overruns.

So today, one of the agency's biggest expenses is payments on that debt. Debt service alone consumes $343 million a year or 13.4% of the MTA's $2.5-billion budget. The money must be paid to MTA's bondholders before any buses roll or trains run.

To control other expenses, the MTA board has zeroed in on workers' paychecks.

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