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March 2010

Rail News: Passenger Rail

Languishing economy, dreary funding outlook, won't stand in the way of progress at New York City Transit, agency execs say

by Angela Cotey, associate editor

Jay Walder and Thomas Prendergast know a low point at New York's Metropolitan Transportation Authority (MTA) when they see one. Walder served MTA and Prendergast served New York City Transit (NYCT) in the mid-1980s, when the United States' largest transit agency was known for unreliable service, graffiti-filled subway cars and a decaying system.

During that same decade, the two played an integral role in the agency's turnaround. Walder headed MTA's capital program budget office and helped create the first five-year capital program, which called for investing billions of dollars in MTA systems. As NYCT's senior vice president of subways, Prendergast helped carry out those capital plans.

Walder left MTA in 1995; Prendergast, who went on to serve as president of MTA Long Island Rail Road, left the authority in 2000. Both later held stints in the private sector and gained international transportation experience. They also helped lead other transit agencies — Walder was Transport for London's managing director for finance and development; Prendergast was chief executive officer of Vancouver's TransLink.

Now, Walder and Prendergast are back at their former agencies; Walder was appointed MTA chairman and CEO in October 2009 and Prendergast took over as NYCT president in December 2009. They're seeing firsthand how the groundwork they helped lay nearly two decades ago has greatly improved NYCT's safety and reliability. New rail cars are in operation, track is in a state of good repair, many of NYCT's 468 stations have been renovated and the agency is expanding its system for the first time in years.

But they also see evidence of an agency mired in mid-80s-like problems. Stations (even those that have been overhauled) are dirty, technology is outdated or nonexistent and customer information is severely lacking, Prendergast says. The way MTA conducts business hasn't changed, either. Administrative functions between the authority and its member agencies aren't streamlined, and that's a problem when it comes to controlling costs, says Walder.

"MTA is essentially the product of a merger among several companies, but it never took the first step that is always taken by management in any private-sector merger — eliminating redundancy by taking the best from each asset and using those building blocks to transform the newly merged company," said Walder in "Making Every Dollar Count," a report he issued in January about his observations of the MTA after his first 100 days on the job.

Reining in costs and improving efficiency will be critical as MTA and its member agencies — which, in addition to NYCT include Metro-North Railroad, Long Island Rail Road, Long Island Bus, and Bridges and Tunnels — seek to close a $400 million budget gap for 2010, on top of a similar-size hole they quickly needed to fill late last year. MTA and its agencies also need to determine how they'll close a multi-billion-dollar revenue shortfall in the upcoming capital plan.

Any sort of cost-cutting measures made by MTA are sure to heavily impact NYCT, which accounts for more than half of MTA's total budget. But in the wake of cost cuts and penny-pinching, Prendergast and Walder plan to implement initiatives that will improve the customer experience by addressing station cleanliness and upgrading technology. Dismal economic conditions can't stand in the way of progress, they say.

"I arrived here with a view that we could do more with the system — that we're not doing all we could do to have the level of service we want to have for our customers," says Walder. "We can't let the economic downturn be an excuse for standing still — we need to push on with things we know we can do, and we're committed to doing that."

A Dire Situation

But MTA's fiscal crisis has demanded much of Walder and Prendergast's time during their first months on the job. In December 2009, just two weeks after MTA released a final proposed 2010 budget plan, agency officials learned that some dedicated taxes were far below what had been projected. They also learned the state decided to cut MTA funding by $143 million as part of its deficit reduction plan. And, MTA lost an appeal to an arbitration decision that awarded Transport Workers Union-represented employees 11 percent raises during the next three years.

As a result, MTA was facing a budget deficit of $383 million in 2010 (about half of which needed to be addressed within NYCT, says Prendergast) and a state statute that requires the agency to pass a balanced budget by Jan. 1.

MTA made up the deficit by implementing a series of service reductions, cutting payroll expenses by 10 percent through furloughs and a pay lag, and reducing student discounts on tickets.

But last month, the budget situation took a turn for the worse. MTA officials learned that revenue projections from dedicated taxes were continuing to spiral downward, leaving the agency with another nearly $400 million budget shortfall for 2010 on top of the $383 million gap they just filled.

After reviewing MTA's expenses, Walder found the agency has 5,000 people performing administrative functions throughout the organization and spends $500 million annually on overtime costs.

"In this economic climate, it's my responsibility to assure our customers and taxpayers that we're using every dollar as effectively as possible," Walder said during a Jan. 15 speech he gave to the Association for a Better New York. "Unfortunately, as of today, it's not true."

On Feb. 22, he announced the first step toward a resolution: eliminating more than 1,000 positions, including up to 500 NYCT station agents.

That's not sitting well with the Transport Workers Union, which represents the majority of NYCT's subway workers. NYCT is "testing the waters" with the station agent layoffs and "if they succeed, there's no guarantee they will stop at stations," according to a flyer posted on the union's Web site.

"The MTA is targeting our conductors. They want to remove them from the train. Fight back against the layoffs. Make the MTA find more funding," the flyer also states.

Capital Pains

MTA has another looming budget issue, as well. The authority's $30 billion 2010-2014 capital program — which provides a significant earmark for NYCT — includes a $10 billion budget gap. The first two years of the five-year plan are covered, but funding falls short during the remaining three years, says Prendergast.

As a result, MTA and its service agencies need to find new, creative revenue sources to help fund the program — although what those sources might be are up in the air at this point, says Prendergast. Not that he seems too worried.

"When you've been doing this as long as I have, you develop a set of confidences that you'll get there at the end of the day," he says. "Exactly how that recipe will turn out, I'm not sure, but I'm confident that in a year we'll have it sorted out. It helps that the chairman's strength is on the financial side."

And it is that confidence that's enabling Prendergast to focus on service improvements despite the funding troubles. He has outlined a series of improvements he intends to begin implementing at NYCT — though the specifics on how Prendergast would carry them out weren't worked out as of mid-February.

At the top of his list: refining the agency's line general manager program. Implemented in 2008 under the direction of Prendergast's predecessor, Howard Roberts Jr., the program calls for assigning general managers to oversee each of NYCT's 26 subway lines. Line general managers are responsible for managing all aspects of a line's operations, from customer service to maintenance to equipment to station cleaning.

"I like the idea that you have someone responsible on a line-by-line basis for the customer experience, because it's not just about running trains, it's about delivering a service, and the concept goes a long way toward reinforcing that," says Prendergast.

But some elements of NYCT's operations aren't suited for line-by-line management — specifically, the power, signal and communication systems, as well as track maintenance, which are "the underpinning of the operation," he says.

"I'm looking at moving those functions back to their former structure," says Prendergast. "We have 400-some track miles and 6,000 cars, and we need to be able to deploy those resources where the needs exist. To separate them and align them by line doesn't necessarily serve the needs of the system as a whole."

Prendergast set that change in motion on Feb. 26 when he announced the first step toward restructuring the subway department. He appointed Carmen Bianco senior vice president of subways and Steven Feil, to the newly created position of vice president and chief maintenance officer.

Bianco served NYCT between 1991 and 1995 as assistant vice president for system safety, then went on to hold similar senior-level positions at New Jersey and Amtrak. Feil, who had served as NYCT's senior VP of subways since 2007, "has vast experience and knowledge in the many areas of maintenance and technical functions related to rail systems" and "has a keen appreciation for the need to embrace and utilize new technology," Prendergast said in a prepared statement.

The men, who assumed their new roles on March 1, will work to centralize NYCT's maintenance resources and refocus the line general manager program to concentrate more on transportation and customer service.

As part of its efforts to improve customer service, NYCT also needs to address station cleanliness, Prendergast believes.

"We've made a considerable investment in our stations in terms of renovating them and putting in new tile surfaces, but you might not notice that," he says.

Walder has weighed in on NYCT's station cleaning issues, as well. While finding ways to clean stations more efficiently and cost effectively, the agency also needs to set up a station maintenance program that complements the capital investments made in stations, he says.

"One reason why our rail-car program has been so successful is not just because we had the money to invest in them, but because we set up a scheduled maintenance program that went along with it to keep the equipment in first-class condition," says Walder. "We never managed to do that with stations."

It won't be an easy task. NYCT has 468 stations — some, like Times Square Station, are massive in size and heavily used, while others, like end-of-line stations, are smaller and have far less passenger traffic.

"Each one of our stations is a distinct unit — no two are alike," says Walder. "We need to have a way to handle each one, and we won't be able to paint all the stations with the same brush, so to speak."

Prendergast and Walder also are working to determine how they can implement new technology throughout NYCT's system to improve efficiency, safety and the rider experience.

Prendergast's top technological priority is to improve the agency's signal systems. Some systems are 50 or 60 years old. In addition, NYCT's L line currently is the only subway route that features communications-based train control (CBTC), and it took nearly 15 years to install it, Prendergast says. The agency needs to find a way to resignal the entire system, and do it much more quickly, he adds.

"I believe strongly in CBTC because it not only gives you the ability to operate more trains on a line and increase throughput, but it does it safely because you have oversight and protection if the operator isn't doing what they should," he says.

'We Can Do Better'

In the meantime, there's another form of technology that NYCT currently is implementing: customer information signs in stations. The signage is "by no means earth-shattering in the transit world," but it's something that New York agencies haven't yet installed, says Walder.

"In London, customers go down the stairs, look up at the signs, see when the next train is coming and they can relax — they feel a sense of control," he says. "New York has a special way of doing it: People come down the stairs to the subway, look over the edge of the platform and look for a white light. We can do better than that."

NYCT officials expect to have 100 signs in place by 2010's end and install another 75 next year.

Also on tap this year: piloting new fare collection technology in partnership with New Jersey Transit, the Port Authority of New York and New Jersey, and Mastercard. The ticketing system would cost less to operate and also provide for better regional interconnectivity.

For the most part, the changes that Prendergast and Walder have in store for NYCT aren't on the same scale as the fleet replacement or state-of-good repair programs the agency has completed in recent years, but the two believe the initiatives they're working to implement will go a long way toward improving customer satisfaction.

"Clearly, the economic circumstances are making things more difficult, but Tom and I are both very committed to making these improvements," says Walder. "We need to focus on some areas where we believe we can make a difference."

And changes won't be made solely to improve the organization for customers' sake. Prendergast, who describes his management style as being "very interactive and participative," believes he can improve his employees' opinions of the agency, as well — in part by involving them in some of the issues he's trying to resolve.

"When you bring people into the definition of the problem and figure out together how you're going to solve it, people will buy in," he says. "It goes back to when you're a child — you're told that you're going to have to do something and you do it begrudgingly, but if you were told to do something you wanted to do, it was fun."

Putting a Face With the Name

To foster that sort of environment requires communication, communication and more communication — something Prendergast admittedly hasn't been able to put a lot of time into since taking the reins at NYCT.

"If there's one thing I'm a little frustrated about, it's that I've been here two months but I haven't been able to spend time out in the field, to see all of the different divisions and offices," he says. "There's a strong tie between those organizations that are successful and those that aren't when people can identify with the leader. But the only way you can do it is by getting out and talking to people."

Now that his feet are on the ground, Prendergast expects to start making that connection with his employees. He also plans to work with Walder to begin putting into motion some changes that can improve the quality of one of the nation's oldest transit agencies.

"My goal is to leave the organization in a better position than it was when I got here," says Prendergast. "And that can be defined in many different ways — it can be defined by better infrastructure, better service, and a workforce that is broader and deeper than the one I inherited."

It sounds much simpler than it is. Prendergast and Walder both know a lot of work needs to be done in order to meet any or all of those goals. But relying on the strategies they outlined, some they weren't yet able to, their transit and private-sector experience and knowledge of NYCT, Prendergast and Walder believe they have a good shot at better positioning NYCT to serve its riders, now and in the future.


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