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The NYC Subway Ripoff

Even if you don’t live in New York City, trust me, you’re going to want to read this amazing New York Times story [1] about how labor unions, city politicians (the overwhelming number of whom are Democrats), featherbedding companies, a bloated bureaucracy, onerous regulations, and other factors make it staggeringly more expensive to build subways there than anywhere else in the world. Check this out:

An accountant discovered the discrepancy while reviewing the budget for new train platforms under Grand Central Terminal in Manhattan.

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there.

“Nobody knew what those people were doing, if they were doing anything,” said Michael Horodniceanu, who was then the head of construction at the Metropolitan Transportation Authority, which runs transit in New York. The workers were laid off, Mr. Horodniceanu said, but no one figured out how long they had been employed. “All we knew is they were each being paid about $1,000 every day.”

The discovery, which occurred in 2010 and was not disclosed to the public, illustrates one of the main issues that has helped lead to the increasing delays now tormenting millions of subway riders every day: The leaders entrusted to expand New York’s regional transit network have paid the highest construction costs in the world, spending billions of dollars that could have been used to fix existing subway tunnels, tracks, trains and signals.

The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world. The recently completed Second Avenue subway on Manhattan’s Upper East Side and the 2015 extension of the No. 7 line to Hudson Yards also cost far above average, at $2.5 billion and $1.5 billion per mile, respectively.

The spending has taken place even as the M.T.A. has cut back on core subway maintenance [2] because, as The New York Times has documented, generations of politicians have diverted money from the transit authority and saddled it with debt [3].

More:

The critics pointed to several unusual provisions in the labor agreements. One part of Local 147’s deal entitles the union to $450,000 for each tunnel-boring machine used. That is to make up for job losses from “technological advancement,” even though the equipment has been standard for decades.

“I’m not anti-union at all, but it’s amazing how much they dictate everything that happens on a job in New York,” said Jim Peregoy, a Missouri-based cost estimator who has worked on 240 projects in 27 states, including the Second Avenue subway. Mr. Peregoy said labor was a far bigger part of his estimates in New York than elsewhere. “You have to account for it, because it’s huge.”

Fatcat labor unions are only one piece of this stinking pie, but a pretty big piece. The story goes on to compare a similar project in Paris — capital of a country where labor unions are very powerful — costing much less, in large part because unionized workers are not taking advantage of the system. These NYC unionized construction workers come off as like United Auto Workers in Detroit circa 1977.

But then, everybody in the Times story comes off as greedy, except the people who run the city’s Metropolitan Transit Authority, who come off as helpless dopes.

Read the whole thing.  [1] What a scandal. What’s so interesting about this is that every city has labor unions, regulations, bureaucracies, and so forth, to contend with when it undertakes projects like this, but no other comparable city on earth has remotely the costs that NYC does. What is the hard-pressed NYC taxpayer getting for his money?

Great job, New York Times!

77 Comments (Open | Close)

77 Comments To "The NYC Subway Ripoff"

#1 Comment By Kathryn On December 31, 2017 @ 9:33 am

Hi Rod,

Great article; thanks for pointing me to it. As a former NYC resident, now happily living in Florida, I was amazed to find that the words ‘mob’ and ‘mafia’ are nowhere in the article. You have to live in NYC to really understand the power that the mob quietly has. Everything costs just a bit more due to kickbacks and payoffs. A job of this size..those little ‘bits’ add up big time.

#2 Comment By Maggie Gallagher On December 31, 2017 @ 9:52 am

New York City is a one party state. I get all the bad things about Republicans. But any bad thing about governance in NYC is not about that. How do we help a one-party state?

#3 Comment By Bernie On December 31, 2017 @ 10:04 am

“It’s always amusing when someone from the great state of Louisiana mentions civic or municipal corruption elsewhere.”

As a fellow Louisianian of Rod’s, I think there’s another way of assessing our criticism of such corruption. Perhaps those of us who have seen, experienced and suffered first-hand from such rip-offs and abuse of power have a heightened credibility to warn others of them.

#4 Comment By LFM On December 31, 2017 @ 11:29 am

Stefan, for some reason you have chosen to interpret Rod’s comment, which was only partly concerned with the villainy of unions, as being entirely concerned with it. Rod stated that unions were a ‘large part’ of the problem, but he made it clear that it was particularly true in the context of New York City, not necessarily elsewhere.

You would probably also find it to be true or partly so in the context of Canada, Australia, and the UK, i.e. within the Anglosphere; the UK in particular has a long history of unions adding to the expense of public works. The question is, why? Speculating upon an answer to that might be more interesting than another series of comments about the perfidy of the left vs the dishonesty of the right, which is where you appear to be trying to steer the discussion.

So, I’ll try to start the speculation in a better direction by offering two possibilities: one is that countries like Japan, Switzerland and France have more regulated economies and that the relationship between unions and management there is more structured and less adversarial, leading to less mutual hostility. The other possibility is that in nations in which individualism has had a long, strong historical presence, unions and unionism are individualistic – pardon the paradox – in that they have little care for the greater good of society, but only for the good of the union. Others who know more about this are welcome to add to what I have said, or contradict it if necessary, but I think these points deserve some thought.

#5 Comment By Noah172 On December 31, 2017 @ 1:19 pm

muad’dib:

The links you provided say that Cuomo and Christie expect the feds to provide most of the funding for the project, and that Trump doesn’t approve.

Your comment also underscores the point of this post: NYC hasn’t done a lot of the infrastructure expansion it should have in the last 40 years because of the inflated costs, cumbersome bureaucracy, and powerful development opponents.

#6 Comment By Youknowho On December 31, 2017 @ 1:46 pm

@Bernie

I do not doubt that NY corruption is as bad as Louisiana’s.

But at least in NY they got a subway out of it. What did Louisiana get?

[NFR: What a tiresome question. How would one begin to answer it? — RD]

#7 Comment By catbird On December 31, 2017 @ 2:09 pm

This whole discussion is a beautiful illustration of why the United States can’t have a serious infrastructure improvement bill, even if in their heart of hearts both Republicans and Democrats think it’s needed.

We simply don’t agree that objective public needs should be placed above the usual “red state”/”blue state” divides.

If we did, we’d build and elect people on a platform of staying up late and making sure that corruption doesn’t get out of hand.

And since the current guy in the White House is the very opposite of a stay up late and make sure it gets done enforcer, that’s why all his promises of infrastructure are so much gas.

And for those gloating about how much better the New York subway is than Abilene (!), well that’s how much better the Beijing subway is than New York’s.

So no, refusing to criticize overpriced New York public works, because it might bring aid and comfort to the enemy (i.e. Republicans), is not a smart way to ensure that New Yorkers will always be on top of the world.

#8 Comment By Alex Brown On December 31, 2017 @ 2:10 pm

The senior management is a rotating cast of appointees, many of whom don’t give a damn about anything that doesn’t directly impact their constituents in the next 2-3 years, when they will move on to another appointee gig.
In the USSR, these people were called ‘nomenklatura’. Party apparatchiks who thrown from place to place. Except they didn’t have real ‘constituents’.

NYT regularly pushes for more immigration. So the newly arrived huddled masses can earn over $100K manning token booths? The new motto seem to be ‘Replace robots with immigrants’.
Hello, Kafka…

#9 Comment By Siarlys Jenkins On December 31, 2017 @ 2:29 pm

Bernie is absolutely correct.

However, without unions, elites would never have shared with workers any of the profitable fruits that workers earned for them.

Wave that red banner high Fran! No, human nature cannot be changed by decree, but the distribution of the worldly things can be adjusted considerably, and that even has a modest salutary effect on human nature.

Well, then maybe, Mr. Peregoy, it’s okay to be a little anti-union, yes?

No, its not okay to be anti-union. Its okay to be critical of the way a union operates. I note however that the last major attempt to legislate reform of entrenched union bureaucracies, the Landrum-Griffin Act, resulted in a legal “duty to represent” which has siphoned off 40 percent of union funds defending people who most union officials agree damn well ought to be fired. And now the courts are peeling back even the right of unions to be paid an “agency fee” (in lieu of dues) if the duly represented worker doesn’t believe in unions.

the astronomical increase in cars due to Uber and Lyft, which was so successful because the subway system is too broken to count on.

When I was in NY with a dear friend for my niece’s HS graduation, my friend asked why we didn’t take a cab, instead of the subway, from where we were staying to the graduation. I summarized how long we would have spent in traffic taking a cab, compared to the relatively short time covering many miles in an underground tunnel. Sometimes late at night a cab might be faster, but not in the daytime, even on weekends.

#10 Comment By ROB On December 31, 2017 @ 3:44 pm

It is nonsense to claim that the MTA was the creation of Robert Moses. MTA was the brainchild of Moses’ enemies Rockefeller and Lindsay in large part to bring an end to Moses career.
MTA operates the NYC subways and commuter RRs entities Moses had nothing to do with in any of his 22 public positions.
Moses was head of the Triborough Bridge and Tunnel Authority which issued bonds and collected tolls from its enumerated projects. Moses controlled these revenues directly through a Board he appointed.
Under the MTA Moses and his TBTA were brought under the control of a Board appointed by Rockefeller AND control of the surplus toll revenues and bond proceeds were dedicated by law solely to the subways and commuter RRs. To think that Moses contrived in the creation of an MTA that stripped him of power is ridiculous.

#11 Comment By ROB On December 31, 2017 @ 8:07 pm

Robert Moses had nothing to do with New York City Transit Board and later Authority ever. The MTA created by Rockefeller, Lindsay and Ronan was designed to strip Moses of his power over the surplus creating and bonding giant Triborough Bridge and Tunnel Authority and dedicate by law those TBTA revenues to the subways and commuter RRs through the MTA. The problems of MTA Capital Construction in the Sunnyside Yards preventing access the 63rd Street Tunnel can no more be laid on Moses than on the sandhogs.

#12 Comment By mrscracker On December 31, 2017 @ 8:17 pm

Youknowho,
Re.corruption:
Louisiana got Huey Long who paved roads, built bridges, got the LSU stadium built by incorporating dormitory rooms into it, provided free textbooks and busing to all school children and established adult literacy programs that taught over 100,000 people to read.
He was quoted as saying something to the effect that sure , he stole money but he stole it for the people, too.
For obvious reasons subways would be a challenge with such a high water table but you can still occasionally get your speeding tickets “fixed” in Louisiana. I guess that’s a sort of rapid transit.
🙂

#13 Comment By ROB On December 31, 2017 @ 9:58 pm

Yes, it is never ok to be anti union. I think they often get things wrong, back distasteful candidates and in those things it is right to oppose their positions. It is never right to seek their destruction because their absence would make the working man’s (include women) plight worse. Were it not for Meaney, Dubinsky et al we might have had something approaching a soviet like state.

#14 Comment By Jack B. Nimble On January 1, 2018 @ 7:08 am

‘……….Rentierism, er, “pork,” is a big part of how we redistribute wealth in this country……..’

That is exactly right, and while labor unions may be skimming millions in NYC, we should also note recent outrageous examples of rent-seeking behavior that will cost consumers billions nationwide:

ending net neutrality – so ISPs can start milking Netflix, Hulu, etc.
ending safety regs for deep-water drilling – cost here is partly pollution and maybe lives
21% tax rates for pass-thru LLCs including passive landlords/investors – no big tax breaks for those unionized construction workers!

……..etc.

#15 Comment By connecticut farmer On January 1, 2018 @ 9:44 am

“Fatcat labor unions”

NYC is the worst offender but let’s not forget Boston’s Big Dig (c/othanks to Senator Rumpot of Chappaquiddick fame) and the 14 BILLION dollar cost overrun. And the tunnel STILL leaked.
Both the NYC subway project and the Big Dig serve jointly as Exhibit one on why so many companies moved to right-to-work states down South or, worse, offloaded jobs overseas.

#16 Comment By connecticut farmer On January 1, 2018 @ 10:00 am

I worked for the insurance company who provided the primary liability insurance coverage to the project management company which was hired to oversee the Second Avenue Subway Project.
The year was 1977. Forty years ago–nearly two generations ago. And it has only “recently” been completed.

‘Nuff said?

Big Business…Big Labor. Same venality. Same corruption.

#17 Comment By MKW On January 1, 2018 @ 10:05 am

It’s not just New York. Infrastructure products of similar size are vastly more expensive in the United States than they are in Europe.

#18 Comment By L617 On January 1, 2018 @ 10:21 am

“Three words. Big. Dig. Boston.”

Which was worth every single penny. The Big Dig removed an elevated highway eyesore which ran through the middle of the city – by taking it down and replacing it with a more efficient tunnel system, the city hastened massive amounts of development along the waterfront. Billions of dollars are flowing into the city. I live just west of Boston. When I fly out of Logan, it’s typically on an early morning flight, long before rush hour traffic is a factor. Before the Big Dig, that drive to Logan would have taken me over an hour, even at 5 am. Now, it’s 20 minutes. So, yeah, give me the Big Dig again and again and again.

#19 Comment By cka2nd On January 1, 2018 @ 10:23 am

Youknowho says: “But at least in NY they got a subway out of it. What did Louisiana get?”

“[NFR: What a tiresome question. How would one begin to answer it? — RD]”

Under Huey Long, at least – and I’m assuming that the Long Administration was at least marginally corrupt – hospitals, schools, roads, bridges, seawalls, airports, pipelines, the LSU School of Medicine, adult education, free immunization, prison health care, lower property taxes and utility rates and an end to the Poll Tax.

#20 Comment By Alex Brown On January 1, 2018 @ 11:07 am

I was wondering for years why cost of ‘essentials’- housing, education, health care-is going through the roof while non-essentials, like home electronics, is falling. Economists don’t seem to have a clear explanation. But a good thoughts could be found on Scott Alexander’s blog.
Hint ‘But the biggest and most important examples of cost inflation are in precisely those industries where government picks up a major ….’
[4]
[5]
The unavoidable answer: The number of people it takes to produce these goods is skyrocketing. Labor productivity — number of people per quality adjusted output — declined by a factor of 10 in these areas. It pretty much has to be that: if the money is not going to profits, to to each employee, it must be going to the number of employees.
How can that happen? Our machines are better than ever, as Scott points out. Well, we (and especially we economists) pay too much attention to snazzy gadgets. Productivity depends on organizations not just on gadgets.

Rod, you committed a sin. You forced me to use parts of my brain that would be soaked with alcohol on the New Year eve. For this, I’m truly grateful to you. It was a pleasure reading many of yours unexpected and thought provoking posts. Looking forward for more. May you have a Happy and Prosperous 2018.

#21 Comment By Youknowho On January 1, 2018 @ 2:17 pm

@cka2nd

Yes, I had forgotten Huey Long. He has an impressive list of achievements.

#22 Comment By Siarlys Jenkins On January 1, 2018 @ 2:48 pm

Yes, the Long administration was corrupt, egomaniacal, and dictatorial. But his memory remains precious to those who remember Louisiana before Huey Long. Corruption was measurable… Long took ten percent of everything, including civil servants’ paychecks, to fill up a campaign fund called “the DEduct box.” I love his speeches. I admire his accomplishments. I’m glad he never became president.

Were it not for Meaney, Dubinsky et al we might have had something approaching a soviet like state.

That would have been wonderful! Keeping in mind that “soviet” translates “workers council” not “secret police.” Actually, I would have settled for what Walter Reuther might have accomplished without the mulish behavior of Meany, and Pat McDonald. He was firmly anti-communist, having both visited the USSR, and noticed that all was not paradise, and, observed communists in the UAW playing a particularly diversionary and destructive role, even if they did a lot of basic grunt work for free.

#23 Comment By EngineerScotty On January 2, 2018 @ 11:11 am

I find it odd to read lots of comments herein, coming from those who would eagerly spend gabillions of dollars to rebuild Middle America so that Mayberry would once again exist in its most memorable form (even if the memory isn’t quite accurate)–are spitting nails about graft on an urban subway project.

I’m not going to defend the SaS, or the notoriously expensive cost of doing business in New York City. But if you are going to criticize it on principles of “efficiency”–that the taxpayers and other funders of this project are not getting the most bang for their buck–consider that the reason Youngstown is rapidly turning into a white ghetto (and ditto for many similar places across the country) is for the same reason.

Turns out providing broad-based prosperity, and the social stability that comes with it, is inefficient. And this problem will become worse in an increasingly automated society, in which fewer and fewer hands will be needed to do the work.

Economic efficiency is what puts bread on many tables, people. Our greatest national prosperity occurred at a time before widespread computerization, in which many tasks now done at the push of a button required a small army of clerical staff. All those savings went to the boss. The secretarial pool all got pink slips.

My regret about the SaS is that rather than paying people for make-work jobs, that money could have been instead gone towards more productive work, on a better or longer subway. But in the end, the Big Apple will have a new subway line; much of the dollars involved will put food on the table of blue-collar New Yorkers, and life will go on.

#24 Comment By mrscracker On January 2, 2018 @ 11:26 am

Siarlys Jenkins says:

“Yes, the Long administration was corrupt, egomaniacal, and dictatorial. But his memory remains precious to those who remember Louisiana before Huey Long….I love his speeches. I admire his accomplishments. I’m glad he never became president.”
********
He’s mostly unpopular among older Cajuns I know because they associate his era with the policy of being forced to speak English in school & a general disrespect of French/Cajun culture. But I think most other poor folks thought a lot of Huey Long.
I read that before his administration Louisiana had the lowest literacy rate in the nation. Maybe one in four people were illiterate. There are some still older folks in our area who can’t read or even sign their name.

#25 Comment By Youknowho On January 2, 2018 @ 5:54 pm

Evidently Huey Long was a practitioner of “honest graft”.

Or as this Brazilian politican put it “Roba, pero hace obra” ‘He steals, but he delivers”

#26 Comment By rhine-gold cowboy On January 2, 2018 @ 9:07 pm

20-year NYC heavy-construction vet of big infrastructure projects, licensed rigger and union tradesman here.Read “The Power Broker” and loved it.

A commentator above has it correct: unions in NYC are paid so well because they are powerful enough to demand their share of the pie.

Get rid of the unions and costs are not going to decline. They’ll just be split up among fewer players.

Everyone I work with voted for Trump. You should check out the historical event known as the “the Hard Hat Riot”, Rod. It would cause you a bit of cognitive dissonance.

#27 Comment By Alex (the one that likes Ike) On January 3, 2018 @ 4:31 pm

It’s always amusing when someone from the great state of Louisiana mentions civic or municipal corruption elsewhere.

It’s hard to figure out what it is even supposed to mean. It’s always amusing when someone from the great [state/region/ autonomous community/whatever] of [anywhere on the globe] mentions civic or municipal corruption in any other place. The world is corrupted to its core (and please spare me the fairy tales about the “absent corruption” in “countries like Germany”; with an unelected official ruling longer than Netanyahu they sound risible).

So what? If a journalist doesn’t live somewhere, he ain’t got no right to cover the events there? Fine. Then stop with that liberal whining about blackshirts running around Southern and Eastern Europe. SJW bloggers don’t live there and never know that it actually was blackshirts, not a couple of psychonautic hipsters on a DMT trip who found demonic blacksirt legions awaiting at the gates of bathroom hell and Mussolini’s spirit haunting them every time they tried to approach the fridge.