Joe Lhota Admits Defrauding the Public About Costs

The Wall Street Journal is reporting a bombshell story about New York’s subway station renovation program. The MTA had a budget of $936 million for renovating 32 subway stations, but nearly the entire budget is exhausted after the MTA has spent it on only 19 stations. These renovations do not include accessibility, which New York is lagging on. I’m interviewing people in the disability rights community about New York’s problems in this area, but the smoking gun about Lhota is not that issue, on which he is no worse than anyone else. Rather, it’s that Lhota hid the fact of the cost overrun from the MTA board. Per the Journal:

On Monday, Carl Weisbrod, a commissioner who represents New York City, said the program was “ill-conceived,” and that he is glad it has come to an end.

“I don’t know when the MTA management realized that the program had run out of money but it would’ve been helpful to have informed the board when this matter was under discussion,” he said.

Mr. Lhota said he was aware of the increased costs last year, but he chose not to mention it until now. “I didn’t think it was relevant to the debate,” he said.

An alternative way to phrase Lhota’s own words is that he is concealing critical information from the public relevant to public spending priorities. In other words, he is defrauding the public when it comes to costs. Previously he had been merely making excuses for high construction costs (e.g. saying New York, founded in the 17th century, is old, and thus naturally has higher costs than cities founded in the Middle Ages or even in Antiquity). But now it turns out that he’s not only trying to deflect criticism, but is actively putting obstacles in front of board members, journalists, and ordinary citizens who want to discuss MTA capital expansion.

Absent democratic mechanisms for oversight of the state, the state will not engage in cost-effective projects. We know this, because the part of public policy most insulated from public criticism, the military and security in general, is the most bloated. The US is wasting a trillion and a half dollars on the F-35, and allies like Israel are wasting money buying this jet from the US military industry. It’s hard to question the costs when overconfident military commanders say “this is necessary for national security.” The intelligence community is even worse, with self-serving slogans like “our successes are private and our failures are public.”

Evidently, facing criticism over costs, domestic agencies portray their projects as necessary rather than useful, hence the weak claims that Gateway is required to avoid shutting down rail service across the Hudson. My specific criticism of the argument that Gateway is required is that the study recommending long-term shutdowns of the existing tunnels did not even attempt to provide a comparative cost of maintaining the tunnels on nights and weekends as is done today. An informed public can more easily demand an end to bad investments, and specific interest groups can highlight how they are harmed by bad spending: the Journal article mentions disability rights advocates demanding that the MTA instead spend money on putting elevators at stations to make them accessible to people in wheelchairs.

The station renovations are especially at risk of being canceled if an informed public finds their costs offensive. The benefits include better maintenance standards, but those are almost self-evidently useful but not necessary. Activists can complain about costs or demand that the money be spent elsewhere.

In Astoria, activists complain that the MTA is renovating stations at a cost of $40 million per station without even installing elevators for accessibility. In London, the cost of the Step-Free Access program is £200 million for 13 stations, or about $20 million per station, and in Paris, where only Metro Line 14 and the RER A and B are accessible, disability rights activists estimate the cost of making the remaining 300 stations accessible at €4-6 billion. This is profoundly different from the situation with tunneling costs, where London has a large premium over Paris and New York has a large premium over London. It is likely that New York can install elevators at the same cost of its top two European peers if it puts its mind to it.

However, such investments are not possible under the current leadership. If a hack like Lhota stays in charge of the MTA, there is not going to be transparency about contracting and about costs, which means that small overruns can blow out of proportion before anyone notices. In such an environment, high costs are not surprising. If New York State is interested in good, cost-effective transit, it will get rid of Lhota and replace him with an experienced transit manager with a good history regarding cost control and respect for the democratic process.

22 comments

    • Michael James

      Perhaps you are being ironic but for those who don’t know the local pollies: Lhota served various high-level positions in the Giuliani mayoral administration ending up as deputy mayor for finance and economic development. His first stint as CEO of MTA was interrupted when he (Wiki:) “resigned as head of the MTA on December 31, 2012, to explore running for mayor of New York City.” While winning the Republican primary obviously he lost the election. His proposed program has a familiar (toxic) ring to it;

      Lhota’s economic plan focused on job creation primarily through municipal tax cuts. He said he wanted to lower the General Corporation Tax, phase out the Commercial Rent Tax, reform the Unincorporated Business Tax, and lower the hotel tax.[41] He proposed to cut the hotel occupancy tax to 5% from 5.85%, and to lower property taxes. … He planned to improve education in New York City by doubling the number of public charter schools, particularly in low-income neighborhoods. … He also proposed universal pre-kindergarten without raising taxes.

      He is a pure administrator and political operator. He has a business degree from Georgetown U followed, bien sur, by a Harvard MBA. Though he has had a wide range of senior administrative and CEO roles in politics and business, one wonders if he has ever taken a subway in his adult life (sorry for the snark but his CV just screams chauffeured limos and towncars all the way; I doubt a yellow cab features in his transport routines let alone transit). Being such a strong neo-liberal ideological Republican one wonders why a democratic governor Cuomo appointed him as Chairman of MTA (though Wiki notes:) “Lhota will remain (senior VP & chief of staff) at NYU Langone, as he will not be the day-to-day executive of the MTA …” Apparently Cuomo had faith that Lhota could bring some rational changes to MTA to stem its fiscal bleeding while improving services that were reaching crisis point. And he could do all this while being a part-timer … (This is the “administrator as super-hero” scenario.)
      One wonders if his appointment wasn’t just another fiendish ploy in Cuomo’s apparent war against de Blasio and New York City? And one cannot help but assume that this position is merely another step in Lhota’s own political ambitions.

      I’m sure he is a very clever person. No really, there is no end of very clever people involved in all these financial and operational disasters in the Anglosphere. Maybe a Harvard MBA is fine for a career in business but not necessarily so much in politics (maybe he overlapped with G.W. Bush at Harvard?), but perhaps such positions in managing transit in the US should have a prerequisite of a degree from the Ecole Polytechnique and the Ecole Nationale des Ponts et Chausées. I’m deadly serious. And an MBA from INSEAD (the Fontainebleau business school equally prestigious as Harvard’s) is no substitute.

      • Nicolas Centa

        I very much agree that the X-Ponts training you mention in France is much more valuable than an MBA because it is including both very scientific and technical stuff as well as management – and this is management in the sense of what knowledge is required to build roads, bridges, railways etc. that can actually be used. It includes budget control but does not focusing much on business theories and making money as this course is designed to train civil servants.

        So maybe the background of the people chosen in the USA for this kind of job is a problem indeed…

        • Michael James

          It’s worse.
          Clearly the appointment of Lhota as Chairman of MTA is some kind of political maneouver by Cuomo. I know close to nothing about NY state and city politics, other than that this kind of thing is completely normal, even between seemingly hardline Democrats and hardline Republicans. Cuomo must either have owed some favour to Lhota or has given a favour in expectation of some return favour later, almost certainly related to Cuomo’s higher political ambitions (which will be paid for by generations of NY taxpayers and NYC commuters to come). Then the third offence to good governance is that it is clearly just seat-warming by Lhota as he too intends to move on to whatever next phase of his intertwined business-political career; ie. he has next-to-zero serious interest in running the MTA, let alone serious reform which takes years and years (and could incur some interruption to one’s upward trajectory of career … any serious reformer is going to create a whole army of powerful enemies).

          I can see the movie, where Pacino plays mayor de Blasio (the height difference is one of those Hollywood in-jokes; they almost went with Danny DeVito!), Danny Aielo plays Lhota, Anthony Franciosa plays Cuomo and our heroes–the hapless underlings trying to keep it all together–are played by John Cusack and Brigitte Fonda. Martin Landau, David Paymer and Richard Schiff are other lowly smucks who pay for the omnishambles because they have zero political power. Now, in the original movie Franciosa convinced Aielo to blow his brains out (in a car in a riverside park, not by accident reminiscent of the Vince Foster/H. Clinton story which was contemporaneous then) but I doubt this will be the plotline in todays remake. In fact today, any heroes will get squashed* (and shuffled sideways somewhere out of the spotlight) and the villains will walk free unblemished–or at least untouched by the MSM or perhaps the alt-news–as they continue their journey to the political uplands. No Hollywood ending in today’s gritty-realism.
          And of course the cost of the MTA will continue its march towards impossible highs in an infinite regress.

          *Funny enough, the movie’s closing scene was Cusack handing out political flyers on the pavement at the top of subway stairs in his first move in his own political campaign! Fonda was coming up the subway steps and promised to vote for him. He was a political cleanskin, and of course that was a ridiculous Hollywood ending that could only be excused in a film of New York politics, as pure irony.

          • Henry

            The appointment really has nothing to do with how terrible NYS politics is (although that is how we got to the current situation in the first place.) Rather, this is Cuomo following a very common American political script, where the son of a political dynasty starts off as a prosecutor pursuing corruption, then parlays that populist popularity into being governor, then works across the aisle with people like Lhota to Get Things DoneTM, then he successfully become president so he could finish the job that Father started.

            Never mind that this failed for more than five people in the last election and that the ultimate loser of all of that was also a neoliberal member of a large political dynasty from New York. Never mind that his actual popularity ratings are very low for a governor like himself. He’s doggedly sticking to the script because if it worked for one Bush, it can work for him too.

          • Nathanael

            Andrew Cuomo has had a reputation as an incompetent idiot since his days at HUD. I just want him to leave. Cynthia Nixon would clearly be better.

        • Michael James

          Hah, or instead of X-Ponts, maybe Lhota could go back to school at his alma mater (sponsor content in today’s CityLab):

          Georgetown University Master’s in Urban & Regional Planning
          Our master’s degree prepares you to effectively and responsibly shape the communities of tomorrow. Learn more at scs.georgetown.edu.

      • GUEST

        Apparently Cuomo had faith that Lhota could bring some rational changes to MTA to stem its fiscal bleeding while improving services that were reaching crisis point.

        No. That’s not it at all. He wanted a bulldog to do his bidding and in particular, someone who’d have no trouble attacking the mayor and blaming NYC for the problems of the MTA. And Lhota is that shameless. I mean, it takes some serious f—ing chutzpah to do the sh-t he’s doing and then blame the city for failing to fund their money pit blackhole Action Plan. It’s such a farce. Glad to see EIS die. It was incredibly stupid and even worse value. My (now former) local stop was out of commission for 6 months. It’s prettier than before. But “looks” weren’t it’s problem.

  1. HalMallon

    Interesting that this comment is made public *after* the state budget is passed with the FHV and taxi surcharges implemented…

  2. petey

    glad to see this post, when i read yesterday about lhota’s comment i was, seriously, shocked.

  3. Alex

    It seems these projects are designed for looting rather than to do their stated purposed. Maybe if some big fish gets thrown in jail, will we get some serious cost reform.

  4. Henry

    Lhota and Cuomo are essentially trying to pull off a Great Value Robert Moses. A hallmark of Moses projects was that they would be lowballed, the overruns would happen, but the sunk cost fallacy would sink in so it would all be okay.

    The major difference here is that Moses was able to self-fund for the most part using tolls, so he had goodies with which to grease the wheels. Lhota has to go to board meetings, the Legislature, and City Hall to grovel, and in the age of FOIL, citizen journalism and social media the required information asymmetry for the Moses model isn’t there.

    And all of these problems derive from the inherent corruption that the New York State political system has allowed and entrenched, but no one will touch that with a ten foot pole because of various poison pills and such designed to make reform an impossibility. The wheels keep turning and the grease keeps going.

  5. Nathanael

    “I’m interviewing people in the disability rights community about New York’s problems in this area, but the smoking gun about Lhota is not that issue, on which he is no worse than anyone else.”

    To be clear, you mean no worse than anyone else in *New York City*. New York City is worse than anywhere else in the country and worse than any other person in the country with regard to blatant, abusive ADA violations.

    • Alon Levy

      Yeah, of course. Boston is much better, and I’m told so is Chicago.

      Paris, in contrast, isn’t. The Metro is the least accessible major metro system in the world – nothing’s accessible except M14 and the RER A and B, and the elevator down to the RER at Nation was out of service for several months for repairs last year.

      • Michael James

        Here’s a graphic graphical illustration of the problem:

        https://www.citymetric.com/transport/what-paris-metro-map-looks-if-youre-wheelchair-1153
        This is what the Paris metro map looks like if you’re in a wheelchair
        By CityMetric staff, 18 June 2018.
        Here’s what happens if you set it only to show “stations with wheelchair access directly to trains with no need for staff assistance”:

        …………………………….
        However, it is only fair to point out that the entire bus network is wheelchair accessible; and if you tried to display that map on this page it would be totally illegible it is so dense and extensive.
        http://www.chezbertrand.com/en/metro-bus-paris/paris-bus-map.html
        So the question is, just how much does the inaccessibility of the Metro+RER actually impact on mobility of the disabled. I don’t know.

        I think I must have said it before but there has to be a strong case for at least making the RER fully accessible (without the need for staff assistance) because of its critical role in transport across Ile de France. I would have thought most suburban stations are either already accessible by default, or are easier to bring them into compliance. Within Paris it is surely a much more realistic proposition to begin with those 33 RER stations than the Metro. However it is daunting for the entire system, with the 560 stations over 800+km of track, compared to say the 270 stations of London.

        Final query: isn’t there a plan to make it compliant by the time of the Olympics? Barely enough time …

        • Eric

          I think making the station accessible should be funded out of the health budget, not the transit budget.

          Then the health ministry (or whatever) can debate whether it is cost-effective.

          • Michael James

            Eric 2018/04/16 – 02:44

            I think making the station accessible should be funded out of the health budget, not the transit budget.
            Then the health ministry (or whatever) can debate whether it is cost-effective.

            I wrote a longish reply to this but then lost it while trying to post. I’ll take it as a sign because I wasn’t very PC. So I’ll just say that I agree with you. Of course I am pretty sure of the response of the Health Ministry (which in most countries is the largest budget item of all … and growing). First that it is better to spend that ($6bn) on other measures for the disabled and Second, there are cheaper and arguably more effective ways to solve the mobility issues.

            I see that Alon hasn’t replied to my question of whether–with 100% of buses in Ile de France being wheelchair accessible (and at least 70% of bus stops)–the disabled are truly disadvantaged by this arrangement. (ie. “all other things being equal”).

            Oh, and re the Paris Olympics 2024, I wonder if they are going to be inspired by the Commonwealth Games that have just concluded on Australia’s Gold Coast. Judged a great success (well we absolutely thumped the Brits and Canadians and Kiwis, the main criteria for us!) because it is the first big games that has fully integrated the disabled part which is usually run separately to, and after, the main event.

          • Eric

            > First that it is better to spend that ($6bn) on other measures for the disabled and Second, there are cheaper and arguably more effective ways to solve the mobility issues.

            Totally agree. And I suspect the health authorities would reach that conclusion.

  6. Nathanael

    With regard to station accessibility costs, London has a particular problem because the original Underground builders were very fond of sharply curved platforms on steep slopes. New York has a sum total of two stations with any similar sort of problem. So if London can to it for 20 million pounds per station, New York can do it cheaper.

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