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Long Range Planning: Infrastructure Needs & Financing: Funding the Capital & Operating Needs of New York City's Bridges & Streets




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Long Range Planning
Infrastructure Needs & Financing
PT2209893
PT220980L
Contract D000642
Task 3.0


The preparation of this report was financed in part with funds
from the U.S. Department of Transportation, Federal Highway
Administration, under the Federal Highway Act of 1956, as amended,
and the Urban Mass Transportation Act of 1964, as amended.  This
document is disseminated by the New York City Department of
Transportation in the interest of information exchange.  It
reflects the views of the New York City Department of
Transportation, which is responsible for the facts and the
accuracy of the data presented.  The report does not necessarily
reflect any official views or policies of the Urban Mass
Transportation Administration, the Federal Highway Administration,
or the State of New York.  The report does not constitute a
standard, a specification, or a regulation.



     Prepared by:
     New York City Department of Transportation


     Michael A. Weiss
     Chief of Staff

     Edward S. Seeley Jr.
     Deputy Assistant Commissioner

     Ann Marie Sledge,
     Director of Strategic Plan Development

     Erica Caraway, Deborah J. Molina,
     Graphics


 
T A B L E  0 F  C 0 N T E N T S




I.   EXECUTIVE SUMMARY                                               1

II.  FUNDING NEEDS                                                  32

III. NEW REVENUE SOURCES                                            43

V.   TOLL COLLECTION SYSTEMS                                        58

VI.  ENVIRONMENTAL CONSEQUENCES                                     71

VII. THE TOLLING ENTITY                                             76

VIII.LEGAL ISSUES                                                   89

IV.  A BRIDGE TOLL SCENARIO                                         47

APPENDIXES                                                          96



I. E X E C U T I V E     S U M M A R Y


OVERVIEW

     This report details preliminary findings about the operating
and capital funding needs of New York City's surface
transportation infrastructure, and options for meeting these
needs.

     This critical infrastructure system is composed of 877 bridge
structures (including five short tunnels), 18,596 lane miles of
highways and streets, plus the traffic lights and other control
facilities needed to assure safe and smooth traffic flow.  Because
of the heavy traffic loads that the surface transportation
infrastructure must carry in supporting New York's economic and
social life, meeting its operating needs (which include adequate
on-going maintenance) is just as important as meeting its capital
reconstruction needs.

     The findings in this report are the preliminary results of an
analysis that focused on a ten year evaluation period beginning in
1994 and running through 2003.  The analysis is part of an on-
going assessment that is being conducted by New York City's
Department of Transportation, which is responsible for this
infrastructure system.  Helpful advice and input was provided by
the City's Office of Management & Budget and by its departments of
Law and Environmental Protection.

     The two primary concerns of this analysis were to:

     *     Estimate the funding shortfall in being able to meet the
           operating and capital needs of the surface
           transportation infrastructure if the City were to rely
           only on its existing revenue sources.

     *     Identify possible new revenue sources, evaluate their
           practical feasibility, and estimate their potential for
           assuring adequate funding of the infrastructure system.

     The analysis has found that the City will be able to fund
less than three-quarters of its surface transportation
infrastructure needs during the ten year evaluation period if it
must rely entirely on existing revenue sources.  The projected
funding shortfall, which totals 26 percent of these needs, seems
disturbingly large and could restrict future economic growth. 
Tolling the City's East River and Harlem River bridges may offer
the best option for assuring full funding of the infrastructure
system.  The benefit

                                   1



potential and practical feasibility of bridge tolls appear high
enough to warrant serious efforts to pursue this new revenue
option ahead of all others.  These efforts should be undertaken as
soon as possible.

     To pursue the Bridge Toll option, the City should:

     *     Ask the New York State Legislature to create a New York
           City Surface Transportation Authority.  This new
           authority would have the power to implement tolls on the
           East and Harlem River bridges; to issue bonds secured by
           toll revenue that would fully fund the capital needs of
           all City bridges; to use toll revenue to fully fund the
           operating needs of these bridges; and to use any revenue
           surpluses remaining to help fund the capital and
           operating needs of City streets and traffic control
           facilities.  The authority would be controlled by the
           Mayor, with input from the City Council.

     *     Commission a series of technical studies to provide
           detailed answers to the various issues that must be
           resolved before tolls can be implemented.  These issues
           involve such matters as environmental consequences,
           changes in traffic patterns, toll collection systems,
           revenue projections, economic impacts, enforcement, and
           the impact of tolls on various categories of tripmakers. 
           Many of these issues are discussed in this report and
           require comprehensive analysis by qualified
           professionals.


SUMMARY OF PRELIMINARY FINDINGS

     1.    The operating and capital funding needs of the surface
           transportation infrastructure are projected to total
           $10.6 billion during the ten year evaluation period. 
           However, the City expects to be able to fund only 74
           percent of these needs, by providing $7.9 billion from
           existing revenue sources.  The resulting 26 percent
           shortfall totals $2.7 billion during the evaluation
           period.  Given the current condition of the surface
           transportation infrastructure, the size of this
           shortfall raises troubling questions about the
           infrastructure's ability to serve New York City's future
           social and commercial demands.

     2.    The extent of deterioration of the twelve East and
           Harlem River bridges, and their critical role in
           providing entry to Manhattan, has made it necessary for
           the City to allocate 23 percent of all expected

                                   2



           capital resources for surface transportation
           infrastructure to their needs.  This has unbalanced the
           City's funding plan - mainly at the expense of streets,
           where existing capital resources will be able to meet
           less than two-thirds of funding needs. one consequence
           of this is that the City's recent success in improving
           streets in the four residential boroughs would come to a
           halt, and the previous trend of on-going street
           deterioration would resume during the ten year
           evaluation period.

     3.    Despite the high priority given to Manhattan's East and
           Harlem River bridges in the City's funding plan, less
           than three-quarters of their operating and maintenance
           needs can be funded from existing revenue sources. 
           Since lack of adequate maintenance in the past is a
           major reason why these twelve bridges must consume such
           a high proportion of the infrastructure's total capital
           resources, the City's inability to meet their future
           maintenance needs is especially troubling.

     4.    The infrastructure's overall 26 percent shortfall, the
           inability to meet bridge capital needs except by
           shortchanging streets, and the lack of adequate
           maintenance funding for the Manhattan bridges provide
           clear indications that the City is unable to fund
           surface transportation infrastructure in a satisfactory
           manner from existing revenue sources.  New revenues must
           be found.

     5.    Three possible sources of new revenue are a local
           gasoline tax, an increase in the City's auto use tax,
           and tolling the City's East and Harlem River bridges. 
           The infrastructure funding shortfall could be covered by
           a 21 cents per gallon tax on gasoline sales in the five
           boroughs, an increase in the auto use tax of $155 per
           vehicle, or a $1.50 (each way) toll on the City's
           Manhattan bridges.

     6.    All things considered, tolling Manhattan's East and
           Harlem River bridges appears to be the most reasonable
           option for generating the new revenue needed.  Under
           present circumstances, these twelve bridges constitute
           such an enormous drain on the City's existing resources
           that they make a balanced funding plan impossible.  But
           tolls can correct this.  They would convert the
           Manhattan bridges into a funding source for their own
           needs plus the needs of surface transportation
           infrastructure facilities in all five boroughs, rather
           than allowing them to remain a funding drain.

                                   3

   

     7.    Bridge tolls could also improve traffic flow and reduce
           air pollution if toll rates on the City's Manhattan
           bridges were set at levels equal to TBTA's rates on its
           four Manhattan crossings.  Severe traffic congestion on
           the approaches to the City bridges due to vehicles
           seeking to avoid TBTA tolls imposes a heavy cost burden
           on commercial vehicles.  The air pollution generated by
           this congestion presents a major barrier to the City's
           efforts to attain the air quality standards that are
           mandated by the federal Clean Air Act.  Failure to
           attain these standards could expose the City to costly
           sanctions that would reduce the capital funds available
           for improving its bridges and streets.

     8.    If tolls on the City's Manhattan bridges were the same
           as TBTA tolls, they could produce net revenues of $7.9
           billion during the ten year evaluation period (after
           allowing for trip diversions due to the presence of
           tolls, collection costs, and other costs and losses). 
           This would enable bridge tolls to:

     *     Fund 100 percent of the operating and capital needs for
           all City bridges, plus

     *     Eliminate the projected funding shortfalls for streets
           and traffic control facilities, plus

     *     Provide the City with $5.7 billion in expense budget
           relief to help address the structural deficit and hold
           the line on taxes, plus

     *     Reduce the City's capital borrowing needs by $5.2
           billion, plus

     *     Generate an additional $1 billion in revenues that the
           City could use to fund other transportation
           improvements.

9.   Bridge tolls at TBTA rates would also enable TBTA to
     recapture the crossing vehicles that it now loses to the
     toll-free City bridges.  This would mean a revenue gain to
     TBTA of about $1.1 billion during the ten year evaluation
     period.  Under existing law, all of these new TBTA funds
     would be turned over to the Transit Authority and the
     commuter railroads.

                                   4



10.  Electronic toll-collection technology that is now in
     operation in other cities would make it possible to toll the
     City bridges without the need to build elaborate toll plazas
     and without generating new traffic congestion and air
     pollution problems that could not be mitigated.  Surveys
     indicate that over 90 percent of Manhattan-bound vehicles
     come from the New York State portion of the metropolitan
     region.  This very high "local origin" percentage enhances
     the potential for enrolling a significant proportion of the
     vehicle owners who make Manhattan trips in an electronic
     collection/payment system similar to the one that TBTA and
     the Port Authority plan to implement at their toll crossings. 
     However, nearly three-quarters of the drivers entering
     Manhattan would still have the option of paying cash tolls on
     the TBTA crossings they would normally use, or on those City
     bridges where cash payment lanes can be provided to
     supplement the electronic payment lanes.

11.  The consensus of environmental experts is that bridge tolls
     would have generally positive environmental consequences. 
     There could be some localized negative consequences at
     certain Manhattan crossings, but none that could not be
     mitigated.  This is a complex issue that requires careful
     analysis in the course of the technical studies that we have
     recommended.

12.  We believe that the tolling entity should be a newly-created
     New York City Surface Transportation Authority.  This
     authority would be self-supporting from bridge tolls, would
     be responsible for fully meeting the operating and capital
     funding needs of all City bridges, and would use its revenue
     surpluses to help meet the funding needs for City streets and
     traffic control facilities.  The authority would be
     controlled by the Mayor, with input from the City Council.

     A more detailed discussion of these findings is presented
below.

FUNDING NEEDS, RESOURCES, AND SHORTFALLS

     For the purposes of this report, New York City's surface
transportation infrastructure has been defined as consisting of
four distinct facility groups.

                                   5
    

     *     The twelve Manhattan bridges that cross the East River
           and the Harlem River.

     *     The City's other bridges and five short tunnels that
           carry motor vehicle traffic throughout the five
           boroughs.

     *     The 18,596 lane miles of limited access highways,
           through streets, and local streets.

     *     The traffic lights, street lights, signs, and other
           facilities to provide for the safe and efficient control
           of motor vehicle traffic.

     The report's estimates for the operating and capital funding
needs of these four infrastructure groups over the ten year
evaluation period reflect minimum levels required for safe and
adequate performance.  The estimates are based on certain
assumptions about future condition levels, deterioration rates,
cost inflation, and other factors that are difficult to forecast
with precision.  These assumptions are under continuing review and
are subject to periodic revisions that may result in new
estimates.

     For the purposes of this report, the estimates presented
should be regarded as reasonable assessments of funding needs that
reflect currently,available information and the functional
definitions outlined above for the four infrastructure groups. 
The nature of these definitions, which were developed specifically
for this report, may result in some of the needs estimates
appearing to differ from estimates made previously.  Any such
differences are contextual and arise from the constraints imposed
by the definitions, except where they reflect up-dated
information.

     Estimates for the funding resources that may be available to
meet these needs reflect projections of expected federal and State
grants, plus projections of City funds that can reasonably be
expected to be available from existing revenue sources.  These
estimates are also under continuing review and may change in the
future.

     To facilitate comparisons, the evaluation period begins in
1994 - the same year that bridge toll collections are assumed to
begin under the illustrative revenue scenario outlined below. 
Except where noted, all estimates of funding needs and resources
are presented in terms of their actual demand on City revenues
during the period in question.  This enables operating and capital
estimates to be shown on the same basis.

           Total operating and capital needs for the ten year


6
evaluation period are $10.6 billion. Existing City revenue sources
plus expected federal and State grants appear to be sufficient to
provide $7.9 billion in funding resources, which would cover only
74 percent of these needs.  The resulting shortfall totals $2.7
billion, or 26 percent of needs.

     The five pie charts on the next page facilitate comparisons
of funding needs, available resources, and shortfalls for the
surface transportation infrastructure as a whole and for each of
its four component groups.  In each case, the entire pie
represents ten year funding needs, the large slice represents
expected resources, and the smaller slice represents the
shortfall.

     For each of the four surface transportation infrastructure
     groups, the estimates break down as follows:
     *     The Manhattan Bridges:
           -    Ten year total operating and capital needs are $1.6
                billion, or 16 percent of total infrastructure
                needs.
           -    Existing revenue sources and grants are expected to
                provide $1.5 billion, which is 19 percent of total
                infrastructure resources.  This would be sufficient
                to cover 90 percent of Manhattan bridges needs (100
                percent of capital needs, but only 73 percent of
                operating needs).
           -    The ten year funding shortfall for the Manhattan
                bridges is $165 million, or 10 percent of needs. 
                All of this shortfall is on the operating side.  It
                accounts for 6 percent of the total infrastructure
                shortfall.

     *     The Other Bridges

           -    Ten year total operating and capital needs are $1.4
                billion, or 13 percent of total infrastructure
                needs.

           -    Existing revenue sources and grants are expected to
                provide $1.1 billion, which is 14 percent of total
                infrastructure resources.  This would be sufficient
                to cover 83 percent of the needs for these other
                bridges.

           -    The ten year funding shortfall for these bridges is
                $238 million, or 17 percent of needs.  This
                accounts for 9 percent of the total

7



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infrastructure shortfall.

           *    Streets

                -     Ten year total operating and capital needs are
                      $5.2 billion, or 49 percent of total
                      infrastructure needs.

                -     Existing revenue sources and grants are
                      expected ,to provide $3.3 billion, which is 41
                      percent of total infrastructure resources. 
                      This would be sufficient to cover 63 percent
                      of the needs for streets.

                -     The ten year funding shortfall for streets is
                      $1.9 billion, or 37 percent of needs.  This
                      accounts for 70 percent of the total
                      infrastructure shortfall.

           *    Traffic Facilities

                -     Ten year total operating and capital needs are
                      $2.4 billion, or 23 percent of total
                      infrastructure needs.

                -     Existing revenue sources are expected to
                      provide $2 billion, which is 26 percent of
                      total infrastructure resources.  This would be
                      sufficient to cover 83 percent of traffic
                      needs.

                -     The ten year funding shortfall for traffic
                      facilities is $410 million, or 17 percent of
                      needs.  This accounts for 15 percent of the
                      total infrastructure shortfall.

     (The "pie chart equation" on the next page illustrates these
relationships among the four infrastructure groups.  It is
followed by a table that summarizes the numbers.)


IMPLICATIONS OF THE SHORTFALLS

     The 26 percent total funding shortfall constitutes a major
problem, given the existing condition of the surface
transportation infrastructure.  If New York's economy is to grow
at a satisfactory rate in the future, the many barriers preventing
smoother and faster traffic flow in all five boroughs must be
addressed.  This is unlikely to be accomplished by a funding plan
that meets less than three-quarters of infrastructure needs.

     The total shortfall masks another serious problem.  As 

                                    8



Click HERE for graphic.



Click HERE for graphic.


     
the discussion in the previous section indicates, lack of
sufficient funds from existing revenue sources has made it
impossible for the City to develop a balanced infrastructure
funding plan.  This is illustrated by the pie charts referenced
earlier.  The twelve Manhattan bridges have a much higher
percentage of their needs funded than the average for all four
groups.  As a result, they gobble up 19 percent of the City's
available infrastructure resources, including 23 percent of the
resources available for capital improvements.

     The reasons for this are simple.  Decades of under-
maintenance and postponed capital reconstruction have accelerated
the structural deterioration of the Manhattan bridges.  They are
now at a point where their restoration can no longer be delayed. 
The City has had to give this first priority in its infrastructure
funding plan.  It has done so by allocating 23 percent of its
expected capital resources to these twelve bridges during the ten
year evaluation period.  This enables 100 percent of their capital
needs to be met.

     However, despite the high priority given to the Manhattan
bridges, only 73 percent of their operating needs (which are
mainly for on-going maintenance) could be met from the City's
existing revenue sources.  This is virtually the same funding
percentage for operating needs as the average for all four
infrastructure groups.

     A funding percentage this low for operating maintenance of
the Manhattan bridges raises questions about whether some of the
benefits expected from their capital reconstruction would be
compromised during.the evaluation period.  Lack of adequate
maintenance in the past is a major reason why these twelve bridges
must consume such a large share of total capital resources for
surface transportation infrastructure.

     The priority that the Manhattan bridges must have in the
City's funding plan comes at a high price.  Only 56 percent of
operating and capital needs for streets can be funded from
existing revenue sources.  Having to underfund streets so severely
may not compromise their inherent safety.  But it does reduce
their ability to accommodate New York's legendary traffic demands. 
Deteriorated street surfaces force vehicles to travel more slowly
than normal traffic volumes would otherwise permit.

     The consequences of this problem are especially serious on
the City's heavily-used highways where vehicle slow-downs can
ripple back through the traffic flow like giant waves for a mile
or more, producing stop-and-go conditions that are equivalent to
what would occur if an entire highway lane

9



was removed from service.  The additional congestion generated by
this functional "narrowing" of City highways greatly increases
vehicle trip times.  A high proportion of these vehicles are
making commercial trips.  Therefore, increases in trip times
impose heavier burdens on business costs that could constrain the
future growth rate of the local economy.  This impacts the profits
of New York business firms and the tax revenues needed to fund
municipal services.

     Another consequence of deteriorated street surfaces is
greater vehicle wear.  There is evidence that vehicle life in New
York (as measured by total miles driven) is materially lower than
the national average.  Since so many of these miles are driven for
commercial purposes, shorter vehicle life increases New York's
already high cost structure.

     In summary, the most important implications of these
shortfalls are as follows:

     *     With its existing resources, the City can only meet the
           capital needs of the twelve Manhattan bridges by
           severely underfunding streets.  This imposes a heavy
           burden on the four residential boroughs, where most of
           these streets are located.

     *     Despite the high priority given to the Manhattan bridges
           in the City's funding plan, less than three-quarters of
           their on-going maintenance needs could be funded.  This
           means that an underlying cause of their present
           deterioration cannot be addressed with existing City
           resources.

     *     The four infrastructure groups constitute a single
           integrated transportation system.  Therefore, a funding
           shortfall in one group can limit the benefits gained
           from spending for the other groups.  Under these
           circumstances, the dollars spent by the City are unable
           to deliver their full value to New Yorkers.

     These implications underscore the urgent need to find
practical and productive new revenue sources to cover the
projected $2.7 billion shortfall and assure a rational, balanced
plan for funding infrastructure needs.

RAISING MORE REVENUE
     Any steps taken to raise more revenue locally for the
10



surface transportation infrastructure will impact New York City's
overall cost structure.  In this sense, increases in municipal
taxes or user fees are no different from increases in the price of
food, electricity, medical services, or other basic necessities. 
The real issue is how the cost of raising more revenue compares to
the cost of failing to cover the surface transportation
infrastructure's funding shortfall.  This is a complex issue that
needs to be evaluated carefully.

     Under favorable circumstances, the overall economic
consequences of raising new revenue to cover the surface
transportation infrastructure's funding shortfall may not be
entirely negative and could be positive.  It all depends on the
manner in which the new revenue is raised and how it is used.

     To the extent that any new revenue raised is spent locally,
there will be offsetting benefits in the form of greater economic
activity.  This is especially significant in the case of revenue
used to support more capital spending.  The construction.activity
arising from capital spending has a high multiplier effect,
causing each dollar of direct spending to generate considerably
more than a dollar of increased economic activity.  This
translates into more jobs, higher personal income, increased
business profits, and higher revenues from existing local taxes.

     The Port Authority and several private economic consulting
firms have developed computer models of the local economy that can
facilitate quantitative evaluations of these issues.  It would be
desirable to make use of these models for the economic analysis
that should be part of the technical studies we have recommended.

     Also important in evaluating new revenue sources is the
degree of linkage between those who pay and those who use City
bridges and streets.  Available evidence suggests that
substantially less than 100 percent of these users are city
residents.  For example, surveys conducted by TBTA at all nine of
their toll bridges and tunnels within the five boroughs show that
about 44 percent of the tripmakers using these crossings have trip
origins outside the city.  Most of these tripmakers are probably
not city residents.  From this perspective, a revenue source that
taps both non-residents and residents is preferable to one that
taps only city residents.


POTENTIAL REVENUE SOURCE: GASOLINE TAX
     Imposing a gasoline tax to provide new revenue for the
                                 
                                   11



surface transportation infrastructure has the advantage of
directly charging motor vehicles users to improve the bridges and
streets that they depend on.  Since the amount each driver would
pay would reflect the amount of gasoline purchased in the city,
and since gasoline purchases roughly reflect the number of miles
driven on City bridges and streets, charges would be more or less
linked to use.  This would make a gasoline tax a classic
application of the user charge concept that has become a popular
way to fund certain kinds of municipal functions.

     Conservative estimates indicate that motorists purchase
approximately 1.3 billion gallons of gasoline in New York City
each year.  Therefore, each nickel per gallon increment in a
gasoline tax would generate about $65 million per year in new
revenue.  To close the entire funding shortfall, a 21 cents per
gallon gasoline tax would be needed.

     Since gasoline consumption per mile driven has been declining
over time as new cars that offer better gas mileage replace
elderly gas guzzlers, future increases in revenue would depend on
incremental increases in the tax.  More auto use would also
increase revenue.  But this could exacerbate New York's traffic
congestion and air quality problems and would conflict with the
policy goal of encouraging a greater percentage of local trips to
be made by public transportation.

     If the gasoline tax was charged only on purchases made at gas
stations within the city, it is likely that only a small
percentage of the revenue collected would come from non-residents
who use City bridges and streets.


POTENTIAL REVENUE SOURCE: AUTO-USE TAX INCREASE

     New York City's $26 per year Auto-Use Tax is actually a fee
imposed on cars registered within the five boroughs.  The amount
paid is unrelated to how many miles driven on City bridges and
streets.  It is therefore not a true user charge, even though its
application is limited to local auto owners.

     There are currently about 1.733 million automobiles
registered in New York City.  Each $10 increase in the Auto-Use
Tax would produce about $17 million in new revenue.  To close the
entire funding shortfall with the Auto-Use Tax, it would have to
be increased to $155 per vehicle.  All of this revenue would be
generated by city residents and none by non-residents who use City
bridges and streets.

                                   12



POTENTIAL REVENUE SOURCE: BRIDGE TOLLS

     Tolls are the oldest and most classic form of user charge for
surface transportation facilities.  In most cases, toll revenue is
dedicated exclusively to supporting the tolled facility - as is
the case with the New York State Thruway.

     In New York City, however, toll revenue has been more broadly
applied.  TBTA's revenues from its nine tolled crossings are co-
mingled, and are used both to support the nine crossings and to
help subsidize the New York City Transit Authority and the two
commuter railroads.  The Port Authority's revenues from its six
tolled Trans-Hudson crossings are applied even more broadly.  They
are co-mingled with PATH fares, World Trade Center rents, airport
revenues, and seaport facilities charges to support the entire
range of Port Authority activities.

     Tolls on the City's East River and Harlem River bridges could
generate substantial amounts of new revenue for the surface
transportation infrastructure.  How much revenue depends on the
toll rates used.  For example, under one minimum effort" scenario,
bridge tolls could produce $3.6 billion over the ten year
evaluation period.  This assumes that the toll rate in 1994 would
be $1.50 for all vehicles (half the projected TBTA auto toll rate
in 1994) and would rise by a quarter each time the TBTA increases
fifty cents.  Under this scenario, tolls would completely cover
the projected shortfalls during the evaluation period and would
produce an additional $1.6 billion that could enable tolls to
assume a larger share of the infrastructure funding burden (see
Appendix D for details of this scenario).

     Bridge tolls also provide a way to allocate the payment
burden among drivers based on their use of the East and Harlem
River bridges (and the other City bridges and streets they use
before and after crossing these bridges).  TBTA surveys that were
focused only on their four Manhattan crossings (therefore
excluding the five bridges that do not provide entry to Manhattan)
show that about 49 percent of the drivers using these crossings
have trip origins outside the five boroughs.  The percentage of
non-resident drivers using the City bridges may be somewhat lower,
but probably not much.

     Finally, bridge tolls go right to the heart of the
infrastructure funding problem - which is the magnitude of the
needs that these twelve bridges impose on the City's existing
revenue sources.  Their capital needs can be funded, but only by
leaving nearly half of the needs for

13



streets unfunded.  And less than three-quarters of the on-going
maintenance needs for these bridges can be funded.

     Tolls would change all that.  In fact, tolls have the
potential for turning the Manhattan bridges into a funding source
with enough strength to assure that all surface transportation
infrastructure needs in all five boroughs are completely funded. 
How this potential could be realized and what it could accomplish
is illustrated in the next two sections.


AN ILLUSTRATIVE REVENUE SCENARIO FOR BRIDGE TOLLS
     The more comprehensive scenario described in this section
assumes that toll rate's on the City's Manhattan bridges would be
the same as the toll rates on TBTA's four Manhattan crossings. 
Equalizing tolls would provide some major benefits in addition to
new revenues to fund surface transportation infrastructure.  One
of these benefits is that equal toll rates on all entry points to
Manhattan would eliminate the present cost incentive for many
drivers to go out of their way to use the City bridges.  These
trip diversions increase traffic congestion and worsen air quality
problems.  The other benefits are described in the next section.

     At TBTA's projected $3.00 one way toll rate for automobiles
in 1994, first year net revenues from tolls on the Manhattan
bridges would be $685 million (after allowing for trip diversions
due to equalized tolls, toll collection costs, and other losses
and costs).  Over the ten year evaluation period, as toll rates
rise to $3.50 in 1997 and $4.00 in 2001 (keeping pace with
projected increases in TBTA tolls), net revenues would increase at
an average rate of three percent per year, totaling $7.9 billion.

     For comparison purposes, the first year's $685 million in net
revenue would be equivalent to a 53 cent per gallon New York City
gasoline tax, and a $395 per vehicle increase in the City's Auto
Use Tax.

     These estimates reflect the following assumptions:

     *     Toll collection begins in 1994.  It seems unlikely that
           tolls could be implemented before then because of the
           environmental reviews and other technical studies that
           would have to be completed, as well as the need for
           action by the New York State Legislature.

     *     Estimated 1994 gross vehicle crossing volumes on the

                                   14




Manhattan bridges would be the same as actual 1990 volumes, and
would remain at the 1990 level throughout the ten year evaluation
period.  It should be noted that TBTA's Official Statement for
their June 1991 bond sale projects crossing volume growth rates
averaging 0.88 percent per year during the evaluation period for
their four Manhattan crossings.  In the absence of measures to
discourage Manhattan entries by motor vehicle, similar increases
in crossing volumes at the City bridges seem likely.  If these
increases were to materialize fully, net toll revenue over the ten
year evaluation period would be $487 million (6.2 percent) higher
than the scenario projects.

     *     The initial one-way toll rate would be $3.00 - equal to
           TBTA's projected one-way auto toll rate in 1994.  The
           same toll rate would be charged all vehicles except
           buses, which would be exempt as public transportation
           vehicles.

     *     The one-way toll rate would increase by fifty cents each
           time the TBTA toll rate increases fifty cents, in order
           to avoid undesirable trip diversions based solely on
           cost.  TBTA's toll rates are driven primarily by the
           funding needs of the New York City Transit Authority,
           the Long Island Railroad, and Metro-North (which TBTA
           revenues help subsidize).  Based on the rate projections
           in TBTA's June Official Statement, we are assuming that
           City bridge toll rates would increase to $3.50 in 1997
           and to $4.00 in 2001.  This results in an average annual
           toll rate increase during the ten year evaluation period
           of 3.25 percent, which is about two-thirds of the
           average 4.8 percent rate for local Consumer Price
           inflation that New York City's Office of Management &
           Budget has assumed in its current Four Year Financial
           Plan.

     *     In addition to the exclusion of buses, another 17
           percent of 1990 gross crossing volumes would not be
           tolled.  This reflects the diversion of trips from the
           City bridges due to the implementation of tolls.  These
           are highly preliminary assessments.  Detailed economic
           and traffic analyses are needed to develop more precise
           estimates, The "revenue value" of our diversion loss
           estimate is $133 million in the first year of the
           evaluation period (19 percent of net toll revenues).

     *     On the Alexander Hamilton bridge, through traffic

                                   15


     between the Bronx and New Jersey would not be tolled because
     it already pays a toll on the George Washington Bridge.  This
     through traffic amounts to 17 percent of 1990 gross crossing
     volumes.

     *     Toll collection costs are estimated at about $50 million
           in the first year of the evaluation period (7.4 percent
           of gross collections).  These costs rise each year at
           the rate of local Consumer Price inflation and total
           $618 million during the evaluation period.  They include
           both on-going operating costs plus the amortization of
           all start-up costs for issuing free toll tags to local
           motorists as well as planning, equipping, and
           implementing all other facilities needed for collecting
           tolls.

     *     Other costs and losses are estimated at $271 million in
           1994 (40 percent of gross collections) and $3.2 billion
           for the ten year evaluation period.  They include
           revenue lost through toll beating and the costs of
           enforcement.  These costs and losses are offset by fines
           collected on tickets issued to toll beaters.

     Charging the same toll for all vehicles regardless of size or
type is a simplifying assumption for this illustrative scenario. 
In practice, the City bridges may charge higher tolls for trucks -
as does TBTA.  This would produce somewhat more toll revenue.

     Trip diversions from the City bridges to TBTA's four
Manhattan crossings due to the equalization of toll rates would
increase TBTA's toll revenues in the first year by $91 million
(assuming a $3.00 TBTA toll in 1994), and by about $1.1 billion
over the ten year evaluation period.  Under existing New York
State law, this new revenue would be divided equally between the-
Transit Authority and the commuter railroads.  The new funds in
1994 would represent a 33 percent increase in funding for public
transportation, relative to the $274 million in operating
subsidies that TBTA paid to the Transit Authority and the commuter
railroads in 1990.

     If this additional TBTA revenue was used to support bonds
issued to fund new MTA capital projects, it would generate roughly
$1.4 billion for public transportation improvements during the
evaluation period.  This represents about 20 percent of the
estimated funding shortfall in the MTA's proposed third Five Year
Capital Program.

                                   16


     
     These revenue estimates reflect-prudently conservative
assumptions about crossing volumes, diversions from the bridges
due to the imposition of tolls, the costs of installing and
operating the toll collection/payment system, and other costs and
losses.

     But the estimates do not reflect any assumptions about the
growth rate of the local economy during the ten year evaluation
period.  Changes in the growth rate from year to year could cause
changes in the underlying demand for trips to Manhattan, which
would have an impact on toll revenues.  The implementation of
bridge tolls, and subsequent increases in toll rates, could have
some influence on the local economy's growth rate.  So could
changes in the level of capital spending on the surface
transportation infrastructure, which has a high multiplier effect. 
In the interest of simplicity, none of these economic factors is
reflected in this illustrative scenario.

     The toll revenue estimates projected by the scenario provide
a reasonable picture of the new funds that could be generated. 
But a more thorough analysis of these estimates should be
undertaken because of the various assumptions made.


AN ILLUSTRATIVE FUNDING SCENARIO

     The toll revenues projected in the previous section would
easily cover all surface transportation infrastructure funding
shortfalls during the ten year evaluation period.  In fact,
funding these shortfalls would only consume about one-third of net
revenues.

     This makes it possible to consider having toll revenues take
over direct responsibility for funding all operating and capital
needs of the Manhattan bridges (not just the shortfall), and all
other City bridges as well.  Such a scenario means that:

     *     The operating needs of all City bridges would be 100
           percent funded - rather than only 77 percent funded,
           which seems likely if they must rely entirely on
           existing City revenues.  This would mean an end to the
           tradition of under-maintaining bridges.

     *     The capital needs of all City bridges would be 100
           percent funded - rather than only 91 percent funded, as
           projected if they must rely on the capital funds that
           the City could make available.

     *     The City's budget would be completely relieved

                                   17

          

           of the need to appropriate bridge operating funds.  This
           would result in a net budget saving of $673 million
           during the ten year evaluation period.  This on-going
           budget relief could help reduce the City's structural
           deficit - or reduce the impact on other municipal
           services of future measures to eliminate the structural
           deficit.

     *     If a way can be found to issue bonds secured only by
           toll revenues, all bridge capital needs could be funded
           without requiring the City to issue any general
           obligation bonds for this purpose. over the ten year
           evaluation period, this would reduce the City's
           projected general obligation borrowings by $2.2 billion. 
           The resulting net reduction in City debt service over
           the evaluation period would be about $1.4 billion,
           raising net budget savings to $2 billion. (Since City
           debt service costs are normally funded by a portion of
           the real estate tax that is reserved exclusively for
           this purpose, the debt service savings could be used to
           help limit future increases in real estate tax rates or
           make a larger portion of total real estate tax revenues
           available for operating purposes.)

     Under this scenario, there would still be toll revenue
surpluses remaining after all bridge needs were funded.  Over the
ten year evaluation period, these surpluses would total $5.9
billion.  The surpluses could be used by the City in various ways
to improve the surface transportation infrastructure.  One
possible sequence of options is outlined below.

     *     FIRST:     each year's surplus toll revenue would be
           applied to covering the capital and operating funding
           shortfalls for streets and traffic facilities.  This
           would enable these two infrastructure groups to become
           fully funded.  Doing so would use up $1.7 billion (29
           percent) of the surpluses over the evaluation period,
           leaving $4.2 billion still available.

     *     SECOND:    to the extent possible, each year's remaining
           surplus would be used to replace the operating and
           capital funds for streets and traffic that are now
           expected to be from existing City resources.  This would
           provide an additional $3.7 billion in net budget savings
           over the evaluation period and offset 71 percent of the
           funding burden on existing City resources.

				   18

    

     *     THIRD:     after these City funds are replaced, the $1
           billion worth of toll revenue surpluses still remaining
           during the first six years could be used to fund other
           important transportation improvements that shortages of
           existing City resources might otherwise rule out.  These
           could include the development of more park-ride
           facilities to serve auto commuters to Manhattan.

     Other options for using the toll revenue surpluses are
possible.  But the sequence described above has two intriguing
benefits.  It would assure full funding for all capital and
operating needs of streets and traffic control facilities.  And it
would provide $3.7 billion in additional City budget savings for
operating costs and debt service, by assuming much of the funding
burden that is now expected to be borne by existing City revenues.
.

     Apart from its ability to assure full funding for all
infrastructure needs, the potential that this complete funding
scenario offers for City budget relief is attractive.  Over the
ten year evaluation period, net budget relief would total $5.7
billion - $2 billion in City operating and debt service savings
for its bridges, and $3.7 billion in City operating and debt
service savings for streets and traffic control facilities.

     (This entire infrastructure funding scenario is diagramed on
the next page.)


TOLL COLLECTION

     The classic method of collecting tolls is to have each
vehicle stop at a toll booth and make cash payment.  This method
requires the construction of elaborate toll plazas and, under the
traffic volume conditions common at the City's Manhattan bridges,
can result in long queues of vehicles backed up waiting to pay
tolls.  Exclusive reliance on cash payment toll collection for the
City bridges is not feasible.  It would require the acquisition of
additional land on which to construct toll plazas, and the
resulting vehicle queues are likely to cause serious environmental
problems.

     However, electronic toll collection technology is now
available that could minimize these problems by substantially
reducing the reliance on cash payment collection.  This technology
is in operation on a heavily used toll road in Dallas, on two
major river bridges in New Orleans, on Oklahoma turnpike system,
and on toll roads in France and Italy.

                                   19



Click HERE for graphic.



TBTA and the Port Authority have-been field testing this
technology since 1988.  They have also formed a "working group"
with other toll authorities in New York, New Jersey, and
Pennsylvania to adopt a single, compatible electronic collection
system for toll facilities in all three states in order to
facilitate development of a very large user base.  The working
group intends to issue a hardware procurement request in the Fall
of 1991.

     The technology employs a radio frequency sensor to "read" a
unique ID number coded into a toll tag that is fastened to the
inside of each vehicle's windshield.  The toll tag is about the
size of a credit card and is held against the windshield by velcro
strips so that it can be easily removed when the vehicle is left
unattended.  The system does not require toll booths and can
process streams of traffic at normal highway speeds.  Toll
collection with such a system on the City bridges would eliminate
the need to build elaborate toll plazas and would minimize the
incidence of negative environmental consequences caused by lengthy
traffic queues backed up waiting to pay cash tolls.

     Motorists using such a system on the City bridges would be
given payment accounts against which each of their crossings would
be charged.  Monthly payments could be by any major credit card,
automatic debits to checking accounts, or regular checks.  There
need be no surcharges, account maintenance fees, prepayment
requirements, or other cost disincentives to motorists for
participating in the electronic toll collection system.

     The extent to which such a system can reduce reliance on cash
payment depends on the degree of participation by motorists making
trips to and from Manhattan.  A major factor affecting
participation is the proportion of these motorists who have local
origins and can therefore be assumed to register their vehicles
locally.

     Surveys at TBTA's four Manhattan crossings show that 98
percent of their Manhattan-bound vehicles have trip origins in the
Tri-State region, and 93 percent have trip origins in the New York
State portion of the region.  These "local origin" percentages
should be at least as high on the City bridges.  This suggests a
high potential for enrolling a sizable proportion of motorists who
make trips to Manhattan in an electronic collection/payment
system, especially if enrollment imposes no additional costs or
hassle on these motorists.  Once they are enrolled, the
conveniences of electronic payment (i.e. faster trip times and no
need to fumble for currency at toll booths) make it likely that
they will use the system to pay for all or most of their
crossings.  Therefore, as the number of motorists enrolled

                                   20



in the system increases, the number of vehicles seeking to pay
cash tolls on the City bridges will decrease.

     On the basis of consumer surveys and other market research,
TBTA and the Port Authority have indicated that 20 to 30 percent
of the drivers using their toll crossings could be expected to
participate in an electronic toll collection system for these
crossings.  However, because of bond covenants and other
restrictions, the system used by these two authorities would.have
to require advance payment, with motorists laying out money ahead
of time to maintain positive balances in their payment accounts
against which crossings could be charged.  This is an obvious
barrier to high participation rates, as is demonstrated by the
actual participation rates for the electronic toll systems in
Dallas and New Orleans where advance payment is required.  Since
the City bridges need not require advance payment for their
electronic toll system, higher participation rates may be
achievable.

     In any case, cash payment facilities would still be needed to
accommodate the 2 percent of vehicles with origins outside the
region (or the 7 percent with origins outside the New York State
portion of the region).  Such facilities would also be needed for
local vehicles whose owners decline to use the electronic system.

     The four TBTA crossings will always offer the option to pay
cash tolls, even after they implement electronic collection. 
Assuming the trip diversion percentages used in estimating
tollable crossings on the City bridges, 35 percent of all vehicles
making Manhattan trips would normally be using the four TBTA
crossings - and will therefore have the option of paying cash
tolls.

     The cash payment option could be made available to nearly
three-quarters of all vehicles making Manhattan trips - and at a
more widely distributed selection of crossings by providing some
cash payment lanes on City bridges to supplement those on the TBTA
crossings.  Therefore, the percentage of vehicles that would have
the option of paying cash tolls on the crossing they would
normally use corresponds closely to the 70 to 80 percent of
vehicles that TBTA and the Port Authority anticipate will continue
to pay cash tolls at their crossings after electronic collection
(with its advance payment requirement) is implemented.

     Preliminary analysis of peak hour traffic volumes on the City
bridges indicates that such lanes could be provided at a number of
locations without causing negative environmental consequences that
could not be mitigated.  Obvious candidates for such lanes would
be the Manhattan,

21



Williamsburg, and Queensboro bridges over the East River (which
are expected to carry 26 percent of all vehicles making Manhattan
trips after tolls are implemented), and the Broadway, University
Heights, Macombs Dam, and Madison Avenue bridges over the Harlem
River (which are expected to carry 12 percent of these vehicles).

     The success of efforts to address the inevitable problem of
toll beating is an important factor in maximizing revenues.  A
certain number.of drivers will use the electronic payment lanes
without having valid toll tags or accounts.

     To deal with this effectively, the primary focus of
enforcement efforts should be on maximizing revenue, not on
preventing drivers from misbehaving.  This is an important
distinction.  Trying to change human behavior is a costly and
frustrating endeavor.  But..maximizing revenue from those who
insist on misbehaving is not.  It simply requires a "toll beating"
fine schedule that is high enough to assure that fine revenue is
at least equal to the toll revenue lost through fare beating,
under reasonable assumptions about ticketing and fine collection
rates.

     The projections for gross fine revenue described earlier
assume that 10 percent of all drivers crossing the City bridges
will beat the toll, and that half of these drivers can be issued
tickets.  This ticket issuing rate should be achievable without
disrupting traffic if television cameras on the bridges can
successfully record the license plate numbers of 50 percent of all
crossing vehicles, so that toll beaters (who are assumed to be
randomly distributed among all drivers) can be identified and
tickets mailed to them. (This use of television cameras may
require enabling legislation from the State Legislature.) Since
the City's Parking Violations Bureau currently collects about 60
percent of its tickets, a similar collection rate was assumed in
the revenue projections.  The toll beating fine was assumed to be
twenty times the toll rate (or $60 in,1994).

     The practical feasibility of electronic toll collection is
one of the most critical factors affecting a decision to toll the
Manhattan bridges.  Reliable assurances that it can do the job in
New York City'S environment are essential. This is an issue that
must be evaluated carefully in the course of the technical studies
we have recommended.

                                   22

        

ENVIRONMENTAL CONSEQUENCES

     This is obviously an important issue, since the federal Clean
Air Act could effectively prohibit the imposition of tolls if they
resulted in negative environmental consequences that could not be
mitigated.  At the same time, many environmental specialists
believe that bridge tolls would, on balance, have positive
environmental consequences.

     New York City has not yet attained the air quality standards
for carbon monoxide and ozone that are mandated by the Clean Air
Act.  By November 15, 1992, the State must submit to U.S. EPA a
revised "State Implementation Plan" (SIP) describing the measures
that will be used to attain the Act's standards for
carbon..monoxide. Failure to meet this schedule could expose the
City to costly sanctions, including loss of the $538 million in
federal highway funds that were assumed in the estimates given
earlier of the funds available for bridge and street restoration. 
To avoid the possibility of sanctions, the City must complete work
on its portion of the revised SIP by Spring 1992 so that the State
will have adequate time to meet the submission deadline. 
Candidate measures for inclusion in the SIP are currently being
evaluated by the City's Department of Environmental Protection and
DOT.

     Since motor vehicles account for most of New York's carbon
monoxide air pollution (especially in Manhattan), SIP measures
must reflect credible strategies for reducing pollution from this
source.  Bridge tolls are an obvious candidate measure for
accomplishing this.  But they are only a candidate measure, and
nothing should be done at this time that either precludes, or
obligates, their inclusion in the revised SIP.

     It is unlikely that tolls could be included in the SIP unless
the legal power to impose them was available.  Such power is
available for the East River bridges, but not for the Harlem River
bridges.  It might be prudent to obtain toll authorization as soon
as possible in order to assure that the City has the option of
including tolls in the portion of the SIP that it must send to the
State by Spring 1992.

     Bridge tolls will require an analysis of their environmental
consequences, regardless of whether or not they are included in
the revised SIP.  Such an analysis should be started as soon as
possible, as one of the technical studies relating to bridge tolls
that we have recommended.  The legislation authorizing tolls can
specify that this analysis should focus exclusively on the impact
of tolls on traffic flow and air quality.  This would eliminate

                                   23



the need to analyze their impact on such unaffected areas as water
quality and archeological relics, which would be required in a
Environmental Impact Statement prepared for a typical large-scale
construction project.

     DOT and Task Force staff have discussed the environmental
consequences of bridge tolls with DEP and private sector
environmental specialists.  They emphasized that quantifying the
environmental consequences of tolls would be a complex task.  At
the same time, they expressed their belief that the net impact of
tolls would be positive and would enhance the feasibility of
attaining Clean Air Act standards on schedule.

     Assessment of environmental consequences must consider both
the immediate local consequences in the areas adjacent to the
bridges that would be tolled and the longer term system-wide
consequences.  In the past, the immediate local consequences
appeared to be negative, because the presence of toll plazas would
slow traffic and increase polluting emissions in the surrounding
areas.  The use of electronic toll collection could mitigate this
expected reduction in traffic speeds and could be crucial in
avoiding negative consequences.

     More complex assessments of system-wide consequences rest on
the ability to project changes from current traffic volumes and
patterns that would be caused by tolling the City bridges.  The
kinds of questions to be addressed include the following:

     *     Current estimates indicate that upwards of 35 percent of
           the vehicles now crossing the City bridges could reach
           their destinations more directly if they used the tolled
           TBTA crossings.  Would they choose these crossings if
           the price differential was eliminated? What would the
           environmental consequences be on the City bridges and
           the TBTA crossings?

     *     If all Manhattan crossings charged the same toll, it
           would be possible for the City bridges and TBTA's
           crossings to charge a round-trip toll for Manhattan
           entries and nothing for exits (as the Port Authority
           currently does on its three Manhattan crossings).  What
           would be the environmental consequences of round-trip
           tolls at the TBTA crossings?

     *     Would bridge tolls eliminate some vehicle trips to or
           from Manhattan entirely? Would their occupants

                                   24


           switch to public transportation, or simply cease making
           trips to Manhattan?

     *     Electronic toll collection has the potential to allow
           differential price strategies based on time of day and
           type of vehicle.  What would be the environmental
           consequences of such strategies?

     A comprehensive analysis of the environmental consequences of
bridge tolls is needed to provide detailed, defensible answers to
these kinds of questions.  But the judgements expressed by some
leading environmental specialists leads us to conclude that, even
though these consequences are complex, they no longer present any
obvious barrier to moving forward.  Therefore, the environmental
analysis should be started as soon as possible.


THE TOLLING ENTITY

     Options for the tolling entity include the City itself, TBTA,
a new authority that would be responsible only for the tolled
bridges, and a new authority that would have broader
responsibilities for surface transportation infrastructure.

     Three considerations should be kept in mind in evaluating
these options.

     *     The need for an explicit link between toll revenues and
           spending levels to improve City bridges and streets.  It
           may be difficult to persuade motorists (and their
           lobbying groups) to accept tolls if they believe that
           most of the revenue will end up being used for non-
           transportation purposes.

     *     The need to maximize the amount of budget relief that
           tolls can provide to the City by assuming some of the
           funding responsibility for the operating needs of the
           surface transportation infrastructure.  These needs must
           now be funded by existing City revenues and therefore
           compete with a multitude of other important municipal
           functions.

     *     The need to establish a new issuer of infrastructure
           debt whose bonds will not be general obligations of the
           City.  Representatives of the investment banking
           community have pointed out that many institutional
           buyers of municipal bonds are approaching their charter
           limitations on the percentage of their portfolios that
           can be invested in City bonds.  They believe that
           additional "New York" debt issuers whose bonds are not
           general

                                   25


           obligations of the City can help assure a more favorable
           market in the future for new City general obligation
           bond sales.  It should also be noted that debt service
           costs on City bonds have to be funded in the expense
           budget through a special component of real estate tax
           revenues.  At a given overall real estate tax rate,
           higher debt service costs mean that less real estate tax
           revenue is available to fund the operations of municipal
           services.

     If the City itself were to be the tolling entity, toll
revenue would flow directly to the General Fund - as is now the
case with parking fees and fines.  There would be no explicit link
between toll revenue and spending to improve bridges and streets. 
Each year's allocations for surface transportation infrastructure
would depend on overall needs for all municipal functions.  This
maximizes the Mayor's control over how toll revenues would be
used.  But motorists might believe that the tolls they pay would
be used primarily to support City programs that were of little
benefit to them.  This perception would greatly increase the
difficulty of gaining legislative approval for bridge tolls.

     Also, the New York State constitution requires that all debt
issued by the City be general obligation debt.  If the City were
the tolling entity, this would make it impossible to issue bonds
to improve bridges and streets that were secured only by toll
revenues.  Thus, the opportunity for tolls to reduce the City's
future general obligation debt burden (and debt service costs)
would be lost.

     If TBTA became the tolling entity, their engineering and
operating expertise would become available for the tolled
bridges - though not for the other City bridges or streets. 
However, the Mayor would lose direct control over the level of
toll rates, the pace of bridge restoration, etc.  All such
decisions would be made by the MTA board (since TBTA is a
subsidiary of the MTA).  Only four of the MTA's thirteen board
members are appointed on the recommendation of the Mayor.

     Under existing State law, TBTA is required to turn over all
revenue in excess of its operating and debt service needs to the
Transit Authority and the commuter railroads.  Under the
illustrative revenue scenario presented above, the needs of the
tolled bridges would consume only 14 percent of toll revenues
during the ten year evaluation period, leaving 86 percent to be
divided equally between the Transit Authority and the commuter
railroads.  This would amount to $6.8 billion over the evaluation
period.  None of these funds would be available for the other City
bridges, the

                                   26



street system, or City budget relief.  This would be good for
public transportation.  But it would exacerbate the opposition of
motorists, who would assume that only fourteen cents out of every
toll dollar they paid was being used for their benefit.

     State laws affecting TBTA could be amended to direct that the
surplus revenues be turned over to the City, or paid into a
dedicated "surface transportation infrastructure fund" that the
Mayor would control.  But neither option would eliminate the need
for the City to issue general obligation bonds for capital
projects involving the other City bridges and the street system. 
Also, the amendment process risks providing an opportunity for
motorist groups to reduce or eliminate TBTA's current ability to
provide funds for public transportation from its existing
revenues.

     A more practical approach may be to ask the State Legislature
create a new authority to be the tolling entity.  It would have
the power to collect tolls on the Manhattan bridges and be able to
issue revenue bonds that were not obligations of the City. 
Members of the authority's board of directors would be appointed
by the Mayor.

     The funding responsibilities of this authority could be
limited only to the tolled bridges.  In this case, its enabling
legislation could direct that toll revenues in excess of the needs
of the tolled bridges be turned over to the City or paid into a
fund dedicated to surface transportation infrastructure that the
mayor would control.

     If the excess revenues were simply turned over to the City,
they would flow into the General Fund.  Again, this maximizes
Mayoral control over these revenues and assures their availability
for any municipal function.  But motorists would tend to see this
as a way to make them pay for programs that didn't benefit them,
which would stiffen their resistance to bridge tolls.

     If the revenues were paid into a special surface
transportation fund, there would be an explicit link between toll
revenues and surface transportation spending.  Mayoral control
would be more limited, in the sense that the revenues could only
be used to support the other City bridges and the street system. 
During the early years, when annual revenues significantly exceed
annual needs, none of this surplus could be used for short-term
budget relief.  Some of it might be used to fund capital projects
involving bridges and streets on a pay-as-you-go basis.  Or it
could be used to fund debt service payments on City bonds
previously issued for surface transportation infrastructure
projects.  Alternatively, it could simply be hoarded within

                                   27



the surface transportation fund against future needs.

     Such hoarding might cause.motorists to protest against tolls
that seemed to be "higher than necessary".  But charging tolls at
lower rates than TBTA would lead to undesired trip diversions
based solely on cost, which would reduce the ability of bridge
tolls to improve traffic flow and air quality.  Lower toll rates
would also reduce the potential for bridge tolls to help fund the
needs of other City bridges and the street system, and to provide
the City with budget relief.

     Apart from the possibility of some pay-as-you-go capital
project financing during the early years, a dedicated surface
transportation fund would still not eliminate the need for the
City to issue general obligation bonds to restore the other
bridges and the street system.  This could only happen if the fund
were, in fact, a "surface transportation authority" with the power
to issue revenue bonds.  In which case, the bridge authority
becomes an unnecessary complication.  Its powers to toll the
bridges and issue revenue bonds for their restoration could simply
be incorporated into the powers of the surface transportation
authority (or the bridge authority expanded into a surface
transportation authority, with no need for a separate dedicated
fund).

     Such an authority would be:

     *     Entirely self-supporting from tolls on the Manhattan
           bridges.

     *     Fully responsibility for meeting the operating and
           capital funding needs of all City bridges.

     *     Able to use its revenue surpluses to eliminate the
           funding shortfalls for streets and traffic control
           facilities, and to help the City address its structural
           budget deficit.

     The authority could fulfill its direct operational
responsibilities for the bridges by entering into contracts with
DOT, TBTA, other public agencies, and private corporations for the
operating services it needs.  There would be no need to build up a
large, in-house staff before it could start functioning.  However
this option could be pursued in the future at whatever level was
considered desirable.                   

     On balance, it seems most practical that the tolling entity
be a new authority with direct responsibility for funding the
capital and operating needs of the tolled

                                   28



bridges and all other City bridges, and with the power to help
fund the needs of the street system and traffic control
facilities.  Such an authority should be controlled by the Mayor,
with input from the City Council.


CONCLUDING NOTES

     As stated at the beginning of the Executive Summary, this
report recommends that the bridge toll option be pursued further
in order to validate its apparent potential.  Such a
recommendation is unlikely to be greeted with universal applause. 
It will disturb many firmly-held perceptions about some of the
things that hold New York together, or cause it to fragment. 
These perceptions are deeply rooted in New York's civic history
and need to be evaluated thoughtfully.

     As a municipal entity,'New York City is little more than
ninety years old - making it the youngest major American city.  In
1898, the cities and towns in what are now the five boroughs voted
to form a federation of counties in order to pursue effective
solutions to such region-wide problems as water supply, sewage
disposal, and transportation.  Thus was born the nation's only
full-service regional government.

     But federal law makes no allowance for the realities of
regional government.  That is why New Yorkers were recently forced
to abolish the Board of Estimate - their only legislative body in
which each of the five counties had an equal voice.  This loss has
sharpened always-present concerns over the ability of certain
counties to dominate the others.  At their most extreme, such
concerns can threaten the viability of the five county federation
by causing some of its residents to believe that they would be
better off "going it alone".

     Any discussion of bridge tolls hits a nerve that lies at the
heart of these concerns.  Some people will be horrified by the
prospect of "having to pay to enter Manhattan".  While this
perception may be irrational, it is nonetheless real and may be
the most important issue to be addressed in discussing bridge
tolls.

     In the early days, everyone entering Manhattan had to pay a
fee (toll, fare, whatever) in order to use the private ferries
that provided the only way for most people to cross the rivers. 
The construction of the four East River bridges did nothing to
change this.  They were built primarily to carry elevated railways
and trolleys, which charged a fare and usually required a transfer
(and another fare) on one

                                   29



side of the East River or the other to complete a Manhattan trip. 
Even their roadway lanes charged tolls until 1911.  Most of the
people entering Manhattan across the Harlem River bridges used
public transportation, which meant paying at least one fare and
mote probably two because of the need to transfer at the river's
edge.

     The perception of paying to enter Manhattan began to blur
around 1920 when completion of the IRT and BMT subways systems
eliminated the transfer and second fare requirement for many
Brooklyn, Queens, and Bronx residents.  They still had to pay a
fare on the subway to reach Manhattan, but they had the cost-free
option of remaining on their trains through Manhattan to reach one
of the other boroughs.  The perception was furthered blurred after
World War Two, when two of the East River bridges were stripped of
their passenger rail facilities and became devoted exclusively to
motor vehicles.  This helped accelerate the use of private
automobiles to enter Manhattan.  And private automobiles could
avoid any explicit entry payment by using the toll-free City
bridges.

     This "cost-free" entry option theoretically remains available
to anyone who has access to a private automobile for trips to
Manhattan.  But practical realities dictate that only a small
minority of those who make trips to Manhattan can do so by
automobile.  Therefore the option is not actually available to the
majority of tripmakers.  They must use public transportation,
which means paying a fare for each Manhattan trip.  Survey data
indicates that, on average, the family incomes of those who drive
to Manhattan across the toll-free City bridges are materially
higher than the family incomes of those who must pay to reach
Manhattan by public transportation - which raises some troubling
equity questions.  These issues of comparative Manhattan entry
costs by mode, by tripmaker income, and by trip purpose are
complex and important.  They merit some judicious analysis in the
context of the technical studies that we have recommended.

     The concept of bridge tolls is obviously not without
potential for being a divisive issue.  But it need not turn out
that way.  The real issue is how to provide adequate funding for
the City's surface transportation infrastructure.  We can face
this issue squarely, or we can try to ignore it.  But facing this
issue can help assure that our pocketbooks will be fatter in the
future, by removing an important constraint on the ability of New
York's economy to grow and prosper.

                                   30

  

The findings outlined above, along with the methodologies
used in the analysis that led to them, are covered in more detail
in the sections of the report that follow.  It should be kept in
mind that the findings are preliminary, that the analysis was not
comprehensive, and that all conclusions still need to be validated
through the technical studies we have recommended.

                                   31



F U N D I N G   N E E D S


     New York City's Department of Transportation has been
conducting an on-going analysis of the capital and operating
funding needs for the surface transportation infrastructure.  This
analysis has two purposes.

     *     To estimate the annual levels of funding needed to
           restore the infrastructure to a condition of good
           repair, keep it in good repair, and operate it in a
           manner that assures satisfactory service.

     *     To estimate the annual levels of funding that can be
           expected from the City's existing revenue sources to
           meet these needs, so that potential shortfalls can be
           identified.

     For the purposes of this report, the analysis has focused on
a ten year evaluation period running from 1994 through 2003. 
Selection of the initial year of the evaluation period reflects
the fact that 1994 appears to be the earliest feasible year that
bridge tolls could be implemented.  Use of this ten year period
facilitates comparisons between various potential sources of new
revenues.

     The analysis has projected that existing revenue sources can
be expected to meet only 74 percent of the surface transportation
infrastructure's funding needs during the evaluation period.  The
anticipated shortfall totals $2.6 billion, measured according to
actual revenue demands.


INFRASTRUCTURE COMPONENTS

     For the purposes of this report, the surface transportation
infrastructure is defined as consisting of:

     *     The City's East and Harlem River bridges, which connect
           Manhattan with Brooklyn, Queens, and the Bronx.

     *     The City's other roadway bridges and five short tunnels
           that carry motor vehicle traffic.

     *     The City's 18,596 lane miles of streets and highways.

     *     Traffic control facilities, including signals, signs,
           and street lights.

                                   32

  

Taken together, the four component groups of this municipal
infrastructure system provide access for people and goods to all
parts of the five boroughs.  This function is essential to New
York City social and economic welfare.

     The estimates presented in this report for the operating and
capital funding needs of the four infrastructure groups over the
ten year evaluation period reflect minimum levels required for
safe, adequate performance.  The estimates are based on certain
assumptions about future condition levels, deterioration rates,
cost inflation, and other factors that are difficult to forecast
with precision.  These assumptions are under continuing review and
are subject to periodic revisions that may result in new
estimates.  Therefore, the estimates presented here should be
regarded as reasonable assessments of funding needs that reflect
all currently available information.

     Operating needs reflect all appropriate costs for the on-
going operation of the surface transportation infrastructure. 
These include maintenance, supervision, engineering,
administrative overhead, pension contributions, and other fringe
benefit costs.  Capital needs reflect all appropriate costs for
facility restoration and reconstruction, equipment purchases,
engineering, and contract supervision.

     Estimates for the funding resources that may be available to
meet these needs reflect projections of expected federal and State
grants, plus projections of City funds that can reasonably be
expected to be available from existing revenue sources.  These
estimates are also under continuing review and may be changed in
the future.


HOW FUNDING NEEDS WERE MEASURED

     The most practical and realistic measure of funding needs is
in terms of their actual demand on City revenues each year.  This
is simple enough for operating needs.  A hundred dollars worth of
operating needs in a given year implies a demand for that amount
of City revenues in that year to meet these needs.

     Capital needs are more complicated.  A hundred dollars worth
of capital contracts awarded in a given year does not make a
hundred dollar demand on City revenues in that year.

     *     The full dollar value t)f a capital project is not paid
           out when the contract is awarded.  Rather, it is paid
           out to the contractor in a series of progress payments
           as work is completed.  Many

                                   33

         
           infrastructure projects take-more than a year to
           complete.  Therefore, progress payments may occur over
           several years.

     *     Normally, the progress payments made in the course of a
           year are not funded with City revenues (as are operating
           payments).  Instead, the City raises cash to cover these
           progress payments by selling bonds.  These bonds are
           paid off serially over a period of years (corresponding
           to the "period of probable usefulness" for the capital
           projects in question, as specified by State law).

     *     Each year's debt service on these bonds is funded with
           City revenues.  Debt service in a given year consists of
           payments to redeem bonds plus payments of interest on
           bonds still outstanding.

     Therefore, each year's debt service on bonds issued to fund
capital contract progress payments is the most realistic measure
of capital funding needs.  It fully reflects the actual demand on
City revenues in that year.  That is why the summary tables of
year-by-year infrastructure funding needs presented later in this
section show totals for each year's operating costs plus capital
contract debt service (and federal and state capital grants). 
This is the true bottom line.  The figures for existing resources
were computed according to the same methodology so that resources
could be compared with needs in identifying funding shortfalls. 
All references to needs, resources, and shortfalls reflect
operating costs plus capital contract progress payments, except
where noted.

     Estimates of debt service on bonds issued to fund these
progress payments reflect the constraints imposed by State law on
the maturity structure of City bond issues.  In simple terms,
these constraints mandate that each year's dollar value of bonds
redeemed for a given bond issue be roughly the same as the
previous year's dollar value.  When interest payments are added
in, the effect of this requirement is that a bond issue's annual
debt service is highest in the first year (when the largest
interest payment is made, because the maximum amount of bonds are
outstanding) and declines each year thereafter.

     The following steps were used to compute estimates of capital
debt service (for needs and for resources) in each of the four
infrastructure groups:

     1.    A given year's dollar value of capital contract awards
           was allocated in equal installments over a number of
           years corresponding to the rounded integer

                                   34



           of the weighted mean of the expected progress payment
           schedules for the various kinds of capital projects in
           the infrastructure group.

     2.    Each year's estimate of progress payments was assumed to
           be funded entirely by the proceeds of new City bond
           issues.

     3.    The maturity schedule for each bond issue assumed equal
           annual bond redemptions over a number of years
           corresponding to the truncated integer of the weighted
           mean of the periods of probably usefulness for the
           various kinds of capital projects in the infrastructure
           group.

     4.    A borrowing cost of 8.066 percent was assumed for all
           bond issues.  This was the True Interest Cost of the
           City's August 7 bond sale.

     5.    Full debt service payments were assumed to begin in the
           year following the borrowing year.  Since interest
           payments are normally made every six months, one of
           these (half-year) interest payments was assumed to be
           made in the borrowing year.

     This methodology is somewhat crude, but it provides
reasonable order-of-magnitude estimates for City debt service.

     The tables in Appendix A provide both annual and ten year
totals for needs, resources, and shortfalls.  Ten year totals are
shown in two ways - as a simple sum of the annual amounts, and as
a Net Present Value of the annual amounts (using 8.066 percent as
a discount rate).  The simple sum reflects the actual dollar
total, with no allowance for the impact of time on the present
value of annual dollar amounts.  This is the dollar value implied
in all references to "totals", except where noted.  The Net
Present Value is a standard measure of the dollar total after
allowing for the impact of time.  In certain cases, it allows for
more meaningful comparisons.


ANALYSIS RESULTS: TOTAL INFRASTRUCTURE

     The chart on the next page and the table that follows it show
the analysis results for the surface transportation infrastructure
as a whole during the ten year evaluation period.  They provide a
picture of the estimated needs, the resources that are expected to
be available from existing City revenues to meet these.needs, and
the resulting shortfalls that would require new revenues to cover.

                                   35



Click HERE for graphic.



Click HERE for graphic.


     *     Needs

           Ten year needs total $10.6 billion.  The annual needs
           begin at $443 million in 1994 and increase by an average
           rate of 16 percent per year through 2003, when they
           reach $1.7 billion.

           The operating component of these needs totals $4.6
           billion over the ten year period.  This is 44 percent of
           the combined needs total for the period.

           The capital component totals $6 billion over the ten
           year period, or 56 percent of the combined needs total.

     *     Resources

           Ten year resources are expected to total $7.9 billion. 
           This is 74 percent of total needs for the evaluation
           period.  The operating component of resources is 43
           percent of total resources and meets 74 percent of
           operating needs over the ten year period.  The capital
           component is 57 percent of total resources and meets 75
           percent of needs.

           Shortfall

     *     A comparison of needs vs. resources indicates a
           potential shortfall of $2.7 billion over the ten year
           evaluation period.  This is 26 percent of total ten year
           needs.  In dollar terms, it rises at an average rate of
           15 percent per year - from $119 million in 1994 to $412
           million in 2003.  In terms of percent-of-needs, however,
           it peaks out at 30 percent in 1996, then declines to 24
           percent by 2003.

           The operating component of the shortfall is $1.2 billion
           over the ten year period - 26 percent of operating needs
           and 44 percent of the total shortfall.  This is a vivid
           demonstration of the City's inability to-properly
           maintain its surface transportation infrastructure with
           existing revenues.

           The capital component totals $1.5 billion over the
           evaluation period.  This is 25 percent of needs and 56
           percent of the total shortfall.  The capital shortfall
           demonstrates the City's inability to adequately fund
           infrastructure restoration with its existing general
           obligation borrowing power.


                                   36



ANALYSIS RESULTS: MANHATTAN BRIDGES

     The chart on the next page and the table that follows it show
the analysis results for the twelve East and Harlem River bridges.

     *     Needs

     *     Ten year needs total $1.6 billion, or 16 percent of
           total infrastructure needs.  Annual needs begin at $88
           million in 1994 and increase by an average rate of 11
           percent per year through 2003, when they peak at $244
           million.

     *     The operating component of these needs totals $623
           million over the ten year period.  This is 38 percent of
           total Manhattan Bridge needs for the period.

     *     The capital component totals $1 million over the ten
           year period.  This is 62 percent of total Manhattan
           Bridge needs.

     *     Resources

     *     Ten year resources total $1.5 billion, or 19 percent of
           total infrastructure resources.  This is 90 percent of
           total needs, for the evaluation period.  The operating
           component of resources is 31 percent of total Manhattan
           Bridge resources and meets 73 percent of operating needs
           over the ten year period.  The capital component is 69
           percent of total resources and meets 100 percent of
           needs.

     *     Shortfall

           A comparison of needs vs. resources indicates a
           potential shortfall of $165 million over the ten year
           evaluation period, or six percent of the total
           infrastructure shortfall.  This is 10 percent of total
           ten year needs.  In dollar terms, it is largest in 1995
           (at $25 million), then fluctuates in the $13 million to
           $18 million range thereafter.  In percentage terms, it
           is largest in 1994 (at 27 percent) and declines
           thereafter.

           At $165 million, the operating component of the
           Manhattan Bridge shortfall constitutes the entire
           shortfall over the ten year period.  It is 27 percent of
           operating needs.



                                   37



Click HERE for graphic.



Click HERE for graphic.


     As the discussion above indicates, the Manhattan bridges come
closer to being fully funded than any other infrastructure group. 
Their total shortfall as a percentage of needs is less than half
as great as the overall percentage for the surface transportation
infrastructure.  However, less than three-quarters of their
operating needs (which include on-going maintenance) can be met
from existing City resources.  Inadequate maintenance in the past
is a major reason why these twelve bridges must consume such a
large share of total City resources for infrastructure capital.


RESULTS: OTHER BRIDGES

     The chart on the next page and the table that follows it show
the analysis results for the City's other bridges (including its
five short tunnels).

     *     Needs

           Ten year needs total $1.4 billion, or 13 percent of
           total infrastructure needs.  Annual needs begin at $47
           million in 1994 and increase by an average rate of 20
           percent per year through 2003, when they reach $240
           million.

           The operating component of other Bridge needs totals
           $415 million over the ten year period.  This is 30
           percent of the Other Bridge total for the period.

           The capital component totals $950 million over the ten
           year period.  This is 70 percent of the Other Bridge
           total.

     *     Resources

           Ten year resources total $1.1 billion, or 14 percent of
           total infrastructure resources.  This is 83 percent of
           total Other Bridge needs for the evaluation period.  The
           operating component of resources is 38 percent of total
           Other Bridge resources and meets 83 percent of operating
           needs over the ten year period.  The capital component
           is 62 percent of total Other Bridge resources and meets
           82 percent of needs.

     *     Shortfall

           A comparison of needs vs. resources indicates a
           potential shortfall of $238 million over the ten year
           evaluation period, or nine percent of the total

                                   38



Click HERE for graphic.



Click HERE for graphic.


     infrastructure shortfall.  This is 17 percent of total ten
     year other bridge needs.  In dollar terms, it is largest in
     2003 at $59 million.  In percentage terms, however, it is
     largest in 1994 at 27 percent of needs.

     The operating component of the shortfall is $69 million over
     the ten year period - 17 percent of operating needs and 29
     percent of the total Other Bridge shortfall.

     The capital component totals $169 million over the evaluation
     period.  This is 18 percent of needs and 71 percent of the
     total Other Bridge shortfall.


ANALYSIS RESULTS: STREETS

     The chart on the next page and the table that follows it show
the analysis results for the City's streets and highways.

     *     Needs

           Ten year needs total  $5.2 billion, or 49 percent of
           total infrastructure  needs. Annual needs begin at $142
           million in 1994 and increase by an average rate of 23
           percent per year through 2003, when they reach $941
           million.

           The operating component of Streets needs totals $1.5
           billion over the ten year period.  This is 30 percent of
           the Streets total for the period.

           The capital component totals $3.6 billion over the ten
           year period.  This is 70 percent of the Streets total.

     *     Resources

           Ten year resources total $3.3 billion, or 41 percent of
           total infrastructure resources.  This is 63 percent of
           total Streets needs for the evaluation period.  The
           operating component of resources is 26 percent of total
           Streets resources and meets 56 percent of operating
           needs over the ten year period.  The capital component
           is 74 percent of total Streets resources and meets 67
           percent of needs.

                                   39



Click HERE for graphic.



Click HERE for graphic.


     *     Shortfall

           A comparison of needs vs. resources indicates a
           potential shortfall of $1.9 billion over the ten year
           evaluation period, or 70 percent of the total
           infrastructure shortfall.  This is 37 percent of total
           ten year Streets needs.  In dollar terms, it is largest
           in 2003 at $292 million.  In percentage it is largest in
           1996 at 51 percent of needs.

           The operating component of the shortfall is $678 million
           over the ten year period - 44 percent of operating needs
           and 36 percent of the total Streets shortfall.

           The capital component totals $1.2 billion over the
           evaluation period.  This is 33 percent of needs and 64
           percent of the total Streets shortfall.


ANALYSIS RESULTS: TRAFFIC

     The chart on the next page and the table that follows it show
the analysis results for the City's traffic control facilities.

     *     Needs

           Ten year needs total $2.4 billion, or 23 percent of
           total infrastructure needs.  Annual needs begin at $167
           million in 1994 and increase by an average rate of 7 per
           year through 2003, when they reach $305 million.

           The operating component of these needs totals $2.1
           billion over the ten year period.  This is 85 percent of
           the Traffic total for the period.

           The capital component totals $362 million over the ten
           year period.  This is 15 percent of the Traffic total.

     *     Resources

           Ten year resources total $2 billion, or 27 percent of
           total infrastructure resources.  This is 83 percent of
           total Traffic needs for the evaluation period.  The
           operating component of resources is 88 percent of total
           Traffic resources and meets 86 percent of operating
           needs over the ten year period.  The capital component
           is 12 percent of total Traffic

                                   40



Click HERE for graphic.



Click HERE for graphic.


           resources and meets 67 percent of needs.

     *     Shortfall

           A comparison of needs vs. resources indicates a
           potential shortfall of $410 million over the ten year
           evaluation period, or 15 percent of the total
           infrastructure shortfall.  This is 17 percent of total
           ten year needs.  In dollar terms, it is largest in 2003
           at $48 million.  In percentage terms, it is largest in
           1997 at 19 percent of needs.

           The operating component of the shortfall is $291 million
           over the ten year period - 14 percent of operating needs
           and 71 percent of the total Traffic shortfall.

           The capital component totals $119 million over the
           evaluation period.  This is 33 percent of needs and 29
           percent of the total Traffic shortfall.


     The three pie charts on the next page show each
infrastructure group's share of ten year needs, resources, and
projected shortfall.  Note that both the dollar shortfall ($1.9
billion) and the percentage shortfall (37 percent) are greatest
for streets.  From a pure funding standpoint, this indicates that
streets face the most severe problems if the City must rely only
on existing resources.


CONCLUSIONS

     It is widely recognized that the present condition of the
City's surface transportation infrastructure is far from ideal.  A
great deal of capital restoration must be undertaken to make up
for decades of neglect.  A great deal more on-going maintenance is
required to assured that newly restored facilities never again
deteriorate to such levels.  That is why infrastructure needs are
so substantial - and exceed the resources that the City can
realistically be expected to make available from existing
revenues.

     The potential consequences of allowing these funding
shortfalls to remain unfilled are serious.  Lack of restoration
and continued under-maintenance will exacerbate existing patterns
of deterioration.  This will lead to reductions in functional
traffic capacity, increased spending for emergency repairs to keep
facilities functioning safely, longer trip times for motorists,
higher goods movement costs, more traffic congestion, increased
accident rates, and greater vehicle wear.

                                   41



Click HERE for graphic.



These consequences would impose additional cost burdens on
the local economy that can constrain its future growth rate.  A
lower growth rate negatively impacts the outlook for enhancing the
living standards of New York residents, the profits of New York
business firms, and the tax revenues needed to fund the municipal
services that residents and business firms depend on.

     In other words, the real issue is not whether we as an urban
society should provide more funds in the future to meet
infrastructure needs, or use these funds for other purposes.  The
funds in question may not be in our pockets at all if we fail to
meet our infrastructure needs.  The economic growth needed to
generate them would not have occurred because of the cost burdens
imposed by a deteriorated surface transportation infrastructure.

     That is why the need to find new revenue sources to cover
infrastructure funding shortfalls in a practical and productive
manner is so urgent.  This is something that will be discussed in
the next section.

	                           42



III.  N E W   R E V E N U E   S 0 U R C E S


     As noted in the Executive Summary, any steps taken to raise
more revenue locally for the surface transportation infrastructure
will impact New York City's overall cost structure.  Increasing
municipal taxes or user fees have the same kind of economic effect
as increasing food prices, electricity rates, medical fees, or
other basic necessities.

     But failing to cover the surface transportation
infrastructure funding shortfall will also impact New York's
economy and overall cost structure.  The trade-off between raising
more revenue and failing to meet our needs is very complex and
must be analyzed carefully in the course of the technical studies
that we have recommended.

     At the same time, new revenue that is spent locally will
generate more economic activity.  This is especially significant
in the case of revenue used to support more capital spending.  The
construction activity arising from capital spending has a high
multiplier effect, so that each dollar of direct spending
(therefore, each dollar of new revenue) generates considerably
more than a dollar of increased economic activity.  This can
result in more jobs, higher personal income, increased business
profits, and higher revenues from existing local taxes.

     Therefore, it is possible that the overall economic
consequences of raising new revenue to cover the surface
transportation infrastructure's funding shortfall may be at least
neutral and could be positive.  It all depends on the manner in
which the new revenue is raised and how it is used.  These
considerations are reflected in the subsequent discussions of
potential new revenue sources.

     Another consideration worth keeping in mind in evaluating new
revenue sources is how fairly they allocate the cost burden among
those who use City bridges and streets, whether they are residents
or non-residents of the five boroughs.  As noted earlier, TBTA
surveys indicate that about 44 percent of the tripmakers using
their nine tolled crossings have trip origins outside the five
boroughs.


A NEW YORK CITY GASOLINE TAX

     New York State currently imposes an 8 cents per gallon tax on
gasoline purchases.  This is the second lowest state gasoline tax
in the nation and has not been increased since 1973.  There is no
City tax on gasoline.

                                   43

  

As a result, the true cost of gasoline in New York City -
when adjusted for the impact of inflation - is lower now than at
any time since the early 1950s.  That is why many people believe
that a higher gasoline tax is a reasonable source of new funds for
surface transportation infrastructure.

     Approximately 1.3 billion gallons of gasoline are purchased
in New York City each year.  Therefore, each nickel per gallon
increment in a gasoline tax would generate about $65 million per
year in new revenue.  In rough terms, this means that a City
gasoline tax of 21 cents could be sufficient to cover the $270
million average annual shortfall in infrastructure funding
identified in the last section.

     If the tax was imposed only in the five boroughs, city
residents would have to bear the entire funding burden.  Non-
resident drivers who use the City's surface transportation
infrastructure would avoid buying gas in the five boroughs in
order to escape the higher cost because of the tax.

     One partial solution to this problem would be for the State
to impose the tax (i.e. raise its existing tax) in all twelve
counties of the Metropolitan region.  This would remove the
incentive to avoid buying gasoline in the five boroughs.  The
State could then return to each county the tax revenue it
collected in that county.  Under this arrangement, non-resident
drivers would absorb some of the funding burden (to the extent
that they purchased gasoline in the five boroughs).  But it seems
likely that their share would be far less than would be warranted
by their use of the City's surface transportation infrastructure.

RAISING THE CITY'S AUTO USE TAX

     The City currently imposes a $26 annual Auto Use Tax on cars
registered in the five boroughs.  There are about 1.733 million
such vehicles.  Each $10 increase in the tax would generate about
$17 million in new revenue, which could be applied to the
infrastructure shortfall.

     To cover the entire shortfall in this manner, the Auto Use
Tax would have to be increased to $155 per vehicle.  This does not
seem like a realistic possibility.

     The Auto Use Tax is paid only by owners who register their
vehicles in the five boroughs.  Non-resident drivers would
therefore absorb none of the funding burden if this mechanism was
used.  Since the charge per vehicle is

                                   44

  

unrelated to how many miles it travels on City bridges and
streets, it is not a true user charge.


BRIDGE TOLLS

     Tolling the City's East River and Harlem River bridges could
generate substantial amounts of new revenue for the surface
transportation infrastructure.  The actual amount generated each
year would depend on a variety of complex factors.

     Bridge tolls would allocate the payment burden among drivers
based on their use of the East and Harlem River bridges, and their
use of other City bridges plus streets they use before and after
crossing the Manhattan bridges.  TBTA has found from surveys that
about 49 percent of the drivers using their four Manhattan
crossings have trip origins outside the five boroughs.  While
reliable data for the City bridges is not available, it is
estimated that the percentage of non-resident drivers using these
bridges is somewhat lower than at TBTA's Manhattan crossings.

     A major factor that determines revenues from tolls on the
City bridges is the extent of traffic diversions (from the City
bridges, to the TBTA's four Manhattan crossings) because of tolls. 
It is generally assumed that a certain number of drivers whose
most logical routes would involve one of the TBTA crossings
currently divert to one of the City bridges in order to avoid the
cost of tolls.

     The only available quantitative information on the impact of
such diversions is contained in the 1977 report entitled Traffic
Impact of Tolls on the East and Harlem River Bridges, which was
prepared by the New York City Transportation Administration (now
DOT).  This report provides diversion percentages for each of the
City bridges and the TBTA crossings.  However, it assumes equal
tolls on all crossings and provides no information about
diversions for various degree of toll equality less than 100
percent.  Therefore, we can estimate crossing volumes on each of
the City bridges with no tolls (using actual 1990 figures) and
with tolls equal to TBTA rates.(by applying the report's diversion
percentages to the 1990 figures).  But we cannot estimate crossing
volumes with tolls at less than TBTA rates.  This requires the
kind of macroeconomic analysis that we should be undertaken in the
course of the technical studies we have recommended.

     The best we can say at the present time is that each 25 cent
toll increment on the City bridges would produce first year gross
revenues of between $56 million (assuming the

                                   45



same diversions that tolls equal to TBTA rates would produce) and
$70 million (assuming no diversions due to tolls).  Toll
collection and enforcement costs, which must be subtracted from
gross revenues, are estimated at about $120 million in 1994 (based
on assumptions discussed in the illustrative scenario presented in
the next section).  They are unlikely to vary with the toll rate
level.  Other costs and losses are assumed to be offset by fine
revenue on tickets issued to toll beaters.  In rough terms,
therefore, a City bridge toll of $1.50 (half TBTA's projected auto
toll rate in 1994) that rose by twenty-five cents each time TBTA's
auto toll rate rose fifty cents could provide sufficient revenue
to cover the average annual funding shortfall during the
evaluation period.  It would also generate a $1.6 billion surplus
during the evaluation period that could enable tolls to assume a
larger share of the infrastructure funding burden... (See Appendix
D for details.)

                                   46

        

IV.  A  B R I D G E   T 0 L L   S C E N A R I 0


     This illustrative scenario is designed to provide a more
comprehensive picture of the potential that bridge tolls may have
as a source of new revenue to help meet surface transportation
infrastructure needs.  It assumes that tolls would be implemented
in 1994 on the City's four East River bridges and eight Harlem
River bridges.

     Preliminary estimates indicate that first year net revenues
would be about $685 million, after allowing for traffic diversions
from the bridges due to the imposition of tolls, toll collection
costs, and other costs and losses.  Over the ten year evaluation
period, net revenues would rise at an average rate of three
percent per year, to total $7.9 billion.

     This breaks down as follows:

     *     $375 million in 1994 from the four East River bridges
           (55 percent of total net revenues), or $4.3 billion over
           ten years.

     *     $290 million in 1994 from the eight Harlem River bridges
           (42 percent of total net revenues), or $3.3 billion over
           ten years.

     *     $21 million in 1994 from the Alexander Hamilton Bridge
           over the Harlem River (3 percent of total net revenues),
           or $241 million over ten years.  Note that most of the
           traffic crossing this bridge would not be tolled because
           it is through traffic between the Bronx and New Jersey
           and uses the George Washington Bridge, where it already
           pays a toll.

     For purposes of comparison, 1994's net revenue estimate would
be equivalent to the revenue produced by a 53 cent per gallon New
York City gasoline tax, or a $395 per vehicle increase in the
City's Auto Use Tax.

     These estimates reflect the following assumptions:

     *     Gross 1994 crossing volumes would be the same as actual
           1990 volumes and would remain at this level throughout
           the ten year evaluation period.

     *     The TBTA's one-way-auto toll would be charged to all
           vehicles except buses, which would be exempt as public
           transportation vehicles.  This toll rate is expected to
           be $3.00 in 1994.

                                   47

  

*     The toll rate would increase by $0.50 in 1997 and 2001
           to keep pace with the rate increases that TBTA has
           projected on its four crossings that provide entry to
           Manhattan.  Keeping all toll rates at the same level
           avoids undesirable trip diversions based solely on cost.

     *     Annual "tollable" crossing volumes are assumed to be 31
           percent less than gross volumes.  The 31 percent
           reduction is to allow for trip diversions resulting from
           the implementation of tolls, and for through traffic
           between the Bronx and New Jersey on the Alexander
           Hamilton Bridge that would not be tolled because it
           already pays a toll on the George Washington Bridge.

     *     Toll collection costs would be $50 million (7.39 percent
           of gross collections) in 1994 and would increase each
           year at the rate of local Consumer Price inflation. 
           Collection costs include both on-going operating costs
           and amortization of all start-up costs for toll
           collection equipment and facilities and issuing free
           toll tags to motor vehicle owners.

     *     Other costs and losses directly related to toll
           collection would total $201 million in 1994.  These
           include revenues lost from toll beaters and from
           motorists who never pay their electronic payment bills,
           plus enforcement costs.  They would be offset by $268
           million in ticket fine revenue collected from toll
           beaters.

ANALYSIS OF ASSUMPTIONS

     These assumptions can impact toll revenue in various ways.  A
discussion of the logic behind each assumption follows.

     Crossing Volumes

     Holding gross crossing volumes at actual 1990 levels
     throughout the ten year evaluation period is a simplifying
     assumption that imposes a conservative bias on revenue
     projections.  It should be noted that TBTA projected a 0.88
     percent average annual growth rate for crossing volumes at
     their four Manhattan crossings in the Official Statement for
     their June 15, 1991 bond sale.  These projections were
     prepared by Wilbur Smith Associates, a nationally recognized
     private firm of consulting engineers, economists, and
     planners.

                                   48

  

Increases in motor vehicle entries to Manhattan are generally
     considered to be undesirable because they would result in
     more traffic congestion, worse air quality, and greater
     delays for commercial vehicles making economically important
     trips.  Therefore, the crossing volumes used in these revenue
     projections allow for the potential impact of measures that
     the City may have to implement in order to attain federal air
     quality standards.

     Actual crossing volume demand depend upon the level of local
     economic activity.  This could be negatively affected by the
     implementation of bridge tolls.  It could be positively
     affected by the higher level of capital spending that toll
     revenue would support, since capital spending has a high
     multiplier effect.  Neither of these potential impacts, which
     are complicated to estimate, was evaluated in this
     preliminary analysis.  This should be done as part of a
     comprehensive study of bridge tolls.

Toll Rates

     TBTA currently charges automobiles a $2.50 one-way toll on
     the on the Brooklyn-Battery Tunnel, the Queens-Midtown
     Tunnel, and the Triborough Bridge.  A toll of $1.25 is
     charged automobiles crossing the Henry Hudson Bridge.  This
     illustrative scenario assumes that all tolls on entries to
     Manhattan would be the same at each crossing in order to
     avoid undesirable trip diversions based on opportunities to
     minimize toll costs.

     TBTA toll rates can be expected to rise in the future, since
     these rates are driven primarily by the funding needs of the
     Transit Authority, the Long Island Railroad, and Metro-North
     (for which TBTA provides funding support).  According to
     TBTA's Official Statement for its June 15, 1991 bond sale,
     the one-way rate for automobiles is expected to be $3.00 in
     1993, rising to $3.50 four years later in 1997.  If TBTA toll
     rates continue to rise while the rates on City bridges
     remained unchanged, there-would probably be traffic
     diversions away from the TBTA crossings to the City bridges. 
     This would mean more toll revenue for the City bridges.  But
     it would also result in greater traffic congestion on the
     approaches to these bridges, which could have negative
     environmental consequences.

     In the interests of simplicity during this preliminary
     evaluation, we assumed that TBTA toll rates would increase by
     $0.50 in 1997 and 2001 and the rates on

                                   49



     City bridges would keep pace.  This results in an average
     annual increase of 3.25 percent during the ten year
     evaluation period, which is two-thirds of the 4.8 percent
     rate for local Consumer Price inflation that the New York
     City Office of Management & Budget has assumed in the City's
     current Four Year Financial Plan.

     TBTA charges higher toll rates for eight categories of
     vehicles that are larger than automobiles.  For simplicity,
     we have assumed the same toll rate for all vehicles without
     reference to size or type.  We have also assumed no trip
     diversions to the City bridges by these other vehicles in
     order to exploit cost savings.  In actual practice, it is
     possible that toll rates equal to TBTA's for each class of
     vehicle would be charged on the City bridges.  The revenue
     impact of this (which is likely to be modestly positive)
     requires some fairly sophisticated analysis that must still
     be undertaken.

     All buses are assumed to be exempt from tolls.  Most buses
     entering Manhattan are public transportation vehicles, whose
     use we wish to encourage.

Annual Crossing Volumes

     The 1994 crossing volume on each bridge to which tolls would
     be applied was estimated in the following manner:

     *     Actual 7AM to 7PM weekday crossing volumes (in both
           directions) for each of the five classes of vehicles
           counted during DOT's 1990 survey were used as a starting
           point.

     *     Percentages figures were computed to determine each
           vehicle class's proportion of total 7AM to 7PM crossing
           volume.

     *     These percentages figures were adjusted to reflect
           likely percentages per vehicle class during 24 hours.

     *     The adjusted percentages were applied to actual 24 hour
           crossing volume to obtain estimated volumes for each
           vehicle class.

     *     These volumes were multiplied by an analyzing factor to
           obtain estimates of total crossings during 1990.  The
           annualization factor used was 330, which reflects the
           judgement of DOT traffic specialists about the,.relative
           balance between weekday, weekend, and holiday volumes.

                                   50

    

     *     1990 bus crossings were subtracted from 1990 total
           crossings to obtain an estimate of theoretical
           "tollable" crossings before allowance for trip
           diversions due to tolls.

     *     On the four East River bridges and eight of the Harlem
           River bridges, trip diversions due to tolls were
           subtracted from theoretical tollable-crossings to obtain
           an estimate of actual tollable crossings.  Trip
           diversions for each bridge were computed by applying the
           percentage factor estimated in the 1977 report Traffic
           Impact of Tolls on the East and Harlem River Bridges. 
           Each bridge has a different percentage factor. 
           Together, they average 17 percent of theoretical
           tollable crossings.  These factors were developed from a
           detailed analysis of changing traffic volumes on each of
           the seventeen Manhattan crossings following various TBTA
           toll increases.  A new analysis of equivalent
           sophistication needs to be done to determine whether
           these factors are still valid.

     *     On the Alexander Hamilton Bridge, through trips were
           subtracted from theoretical tollable crossings to obtain
           an estimate of actual tollable crossings.  Through trips
           were estimated by subtracting Port Authority data for
           the volume of eastbound through trips on the George
           Washington Bridge from DOT data for total eastbound
           trips on the Alexander Hamilton Bridge.  The difference
           was assumed to be trips originating in Manhattan and, in
           percentage terms, was assumed to be the same in each
           direction.

     *     1990 tollable crossings were applied to each year of the
           evaluation period.

     Appendix B includes 1990 output tables from the Tollable
     Crossings estimation model that follows this methodology.

     The most critical factor in the methodology is the estimate
     for total diversions due to the implementation of tolls.  The
     "net revenue value" of these diversions (at $3.00 per
     crossing) is $133 million in 1994, or 19 percent of net
     revenues.  Since these diversions reflect the estimates
     published in the 1977 report, additional analysis is needed
     to determine whether they are still appropriate.

                                   51

  

The Alexander Hamilton Bridge

     As noted above, through trips between the Bronx and New
     Jersey that use this bridge already pay a toll on the George
     Washington Bridge.  Therefore, we assumed that these trips
     would not be charged an additional toll.

     Westbound trips on the Alexander Hamilton Bridge that have
     Manhattan destinations would be tolled on the exit ramps from
     the Trans-Manhattan Expressway.  Eastbound trips originating
     in Manhattan would be tolled on the entry ramps to the Trans-
     Manhattan Expressway.

     Toll Collection Costs

     First year toll collection costs were estimated at $50
     million (7.39 percent of gross collections).  They cover the
     amortization of hardware acquisition and installation,
     implementing and operating the electronic collection and
     account payment systems, distributing free toll tags to
     motorists, and implementing and operating the supplementary
     cash payment facilities.  These costs were assumed to rise
     each year at the rate of local Consumer Price inflation. 
     During the ten year evaluation period, total collection costs
     would be $618 million, or 7.9 percent of gross collections.

     This estimate is based on information provided informally by
     a private corporation that offers to provide, install, and
     operate on a contract basis the kind of hybrid
     electronic/cash payment toll collection system described in
     the next section.  Under this kind of contract arrangement,
     such a corporation would retain a portion of gross toll
     collections in order to cover its operating costs and provide
     a return on the capital it invested to install the toll
     collection system.  Using a cost estimate based on this
     approach enables start-up and on-going costs to be annualized
     in a realistic manner.

     Other Costs And Losses

     Some percentage of motorists can be expected to use various
     methods to avoid paying tolls.  Enforcement mechanisms will
     be needed to minimize this, but they are unlikely to be 100
     percent successful and will cost money to implement.

     We have estimated that 10 percent of all crossing vehicles
     will "beat the toll" by running electronic collection lanes
     without having valid toll tags or payment accounts.  This
     results in lost toll revenue of

                                   52

  

     $67 million in 1994 and $782 million during the ten year
     evaluation period.

     We have assumed that half of these toll beaters can
     successfully be issued tickets for this kind of misbehavior,
     that 60 percent of these tickets will actually be paid (this
     is the current collection rate for the Parking Violations
     Bureau), and that the ticket fine will be twenty times the
     toll rate.  These assumptions result in ticket fine revenue
     of $335 million in 1994 and $3.9 billion during the
     evaluation period.

     The operating costs of thus ticketing program are estimated
     at $70 million in 1994 and $873 million during the evaluation
     period.  These estimates were based on PVB's FY92 $4.45 "cost
     per ticket processed", which was multiplied by an inflation
     factor of 1.128 to get a 1994 figure of $5.02. An additional
     25 percent was added to reflect the cost of identifying toll
     beaters and issuing tickets.  The resulting "issuing and
     processing cost per ticket" of $6.27 rises by 4.8 percent per
     year after 1994 to reflect inflation.  In addition, 20
     percent of gross collections has been set aside to cover
     potential losses from vehicle owners who never pay their
     electronic collection bills.  This reserve amounts to $134
     million in 1994 and $1.6 billion during the evaluation
     period.

FUNDING CAPABILITY OF BRIDGE TOLLS
     There are many possible scenarios for the use of the ten year
$7.9 billion bridge toll revenue stream presented above.  The
scenario outlined here illustrates some of the possibilities.  It
concentrates on three goals:

     *     Assuring that 100 percent of the surface transportation
           infrastructure's operating and capital funding needs are
           met during the ten year period.


     *     Maximizing the amount of budget relief that can be
           provided to the City.

     *     Minimizing the amount of general obligation debt that
           the City has to issue for surface transportation
           infrastructure.

     To facilitate meeting these goals, the scenario assumes that
the tolling entity is an independent authority with the power to
issue revenue bonds that are not obligations of the City.

                                   53


     STEP ONE:

     The authority assumes full responsibility for meeting all
     operating and capital needs of the twelve Manhattan bridges. 
     Since these are the bridges that generate the toll revenue,
     their needs must have first call on toll revenues.  The ten
     year cost of fully meeting these needs (as measured by the
     drawdown on toll revenues during the period) is $1.1
     billion - $623 million for operating costs, and $470 million
     for debt service on the revenue bonds issued to meet the
     capital needs of these bridges.

     The methodology used to estimate the amount of toll revenue
     drawn down in each year of the ten year evaluation period is
     described below.

     *     The cost of each year's operating needs (as given in the
           FUNDING NEEDS section) is covered entirely by toll
           revenues.  This comes to $623 million over the ten year
           evaluation period.  In the course of meeting these
           needs, toll revenues replace $458 million in City funds
           that are otherwise expected to be provided through
           expense budget appropriations.

     *     The cost of each year's "Capital Contract Progress
           Payments" is reduced by the amount of federal and State
           capital grant funds estimated (in the FUNDING NEEDS
           section) to be available.  The ten year total of capital
           contract progress payments is $1.5 billion.  The ten
           year grant fund total is $301 million.  The $1.2 billion
           balance is the share of progress payments that the
           authority would have to fund.

     *     Each year's authority share of contract progress
           payments is assumed to be funded entirely by issuing
           revenue bonds that mature serially over 30 years.  The
           structure of bond maturities is designed to produce
           equal annual debt service payments (like a home
           Mortgage).  The interest rate for the bonds was set at
           eight percent, on the recommendation of Goldman Sachs.

     *     The resulting series of equal annual debt service
           payments is assumed to begin in the accounting year
           after the bonds are issued.  This reflects the
           authority's favorable cash flow situation, with toll
           revenues in each year substantially exceeding

                                   54

        

           the combined total of that year's debt service, bridge
           operating cost, and capital contract payment
           commitments.  Therefore, the authority need not issue
           bonds before the seventh month of each year, so that the
           first interest payment on these bonds would not be due
           until the next accounting year.

     *     Total debt service payments on these borrowings is $470
           million over the ten year period.  Because of the more
           favorable debt service schedules possible with revenue
           bonds, the debt service payments on these borrowings
           (which fully funded the capital needs of the Manhattan
           bridges) are 65 percent as high as the $724 million in
           debt service payments on City borrowings (which would
           also have fully funded bridge needs).  City debt service
           payments would be funded with expense budget
           appropriations, which toll revenues make unnecessary.

     *     Additional debt is issued each year to maintain a debt
           service reserve fund equal to the following year's debt
           service on contract payment borrowings.  It was assumed
           that the reserve fund's assets would be invested to
           produce annual income equal to annual debt service on
           the borrowings done to produce these assets..'
           Therefore, total debt service payments that to be funded
           by toll revenue total $470 million over the evaluation
           period.

     *     Each year's operating and debt service costs are added
           together to produce an annual estimate for drawdown on
           toll revenue.  This totals $1.1 billion over the ten
           year evaluation period, or 14 percent of net toll
           revenues.

     Therefore, after fully meeting the operating and capital
     needs of the Manhattan bridges, $6.8 billion in toll revenues
     remains available.  Gross expense budget savings to the City
     total $1.2 billion ($458 billion in bridge operating costs-
     and $724 million in debt service on borrowings to fund bridge
     capital projects).  These savings net out to $1.1 billion. 
     The difference reflects the fact that engineering costs are
     appropriated through the expense budget but are ultimate
     funded through capital borrowings.


     STEP TWO:

     In this scenario, the authority also assumes full
     responsibility for meeting the operating and capital needs of
     the City's other bridges and five short tunnels.  The
     resulting toll revenue drawdowns and

                                   55

  

     budget savings to the City were computed according to the
     same methodology used in Step One.  Therefore:

     *     The authority uses $415 million worth of toll revenues
           over the evaluation period to fully fund bridge
           operating needs.  This replaces the $346 million in City
           funds that would have been provided through expense
           budget appropriations.

     *     The authority uses an additional $472 million in toll
           revenues to cover debt service payments on the revenue
           bonds it issues to fully fund the capital needs of these
           bridges.  This replaces the $574 million in City debt
           service payments (on borrowings that would have resulted
           in only 83 percent of bridge needs being funded) that
           would have been provided through expense budget
           appropriations.

     *     As a result, the authority draws down another $888
           million in toll revenues to fully fund these bridges. 
           This use of toll revenues generates gross expense budget
           savings of $920 million for the City and $895 in net
           savings.

     Steps One and Two achieve full funding of the capital and
operating needs of all City bridges over the evaluation period. 
This requires toll revenue expenditures of about $2 billion (25
percent of net toll revenues).  The City's net expense budget
savings total $2 billion.

     After meeting its responsibilities to fully fund the
operating and capital needs of all City bridges, the authority has
$5.9 million in "surplus" toll revenues remaining. in this
scenario, they are applied as follows:

     STEP THREE:

     The authority uses its surplus revenues to cover the
     operating and capital shortfalls identified in the FUNDING
     NEEDS section for Streets and Traffic.  This results in all
     four infrastructure groups becoming fully funded.

     *     Funding the Streets shortfall draws down $1.4 billion in
           toll revenues during the evaluation period - $678
           million for operating costs and $680 million for debt
           service.

     *     Funding the Traffic shortfall draws down $341 million -
           $291 million for operating costs and $50 million for
           debt service.

		                   56

  

     Following these drawdowns, $4.2 million in surplus toll
     revenues still remain.

     STEP FOUR:

     Each year's remaining surplus is used to replace expected
     City funds for Streets and Traffic.  During the evaluation
     period, $4.9 billion (71 percent) of these City funds are
     replaced - $1.9 billion for operating and $3 billion for
     capital.

     *     For Streets, $3.8 billion (77 percent) are replaced -
           $783 for operating costs and $3 billion for capital. 
           The City would not have to provide any operating or
           capital funds for Streets until 2001, the eighth year of
           the evaluation period.

     *     For Traffic, $1.2 billion (57 percent) are replaced -
           all for operating costs.  The City would not have to
           provide any operating funds for Traffic until 2000, the
           seventh year of the evaluation period.

     These uses of the toll revenue surpluses therefore result in
     an additional $3.7 billion gross saving for the City in
     budget appropriations for operating costs and debt service. 
     Adjustments for capital engineering costs (which would
     ultimately be funded from City bond sales) would reduce this
     by about $69 million.

     After completing Steps Three and Four, about $1 billion in
toll revenue surpluses would still remain.  They occur during the
first six years of the evaluation period.

     This illustrative scenario shows how toll revenues could be
used to:

     *     Assure full funding for all operating and capital needs
           of the surface transportation infrastructure during the
           evaluation period.

     *     Provide the City with $5.7 billion in net expense budget
           savings for operating costs and debt service, plus an
           additional $1 billion in residual toll revenue
           surpluses.

     *     Reduce City borrowings for infrastructure capital
           projects by $5.6 billion.

     Appendix C provides output tables from the computer model
that was used to develop this scenario.

                                   57



V. T 0 L L


     Until recently, toll collection always involved some kind of
manual cash payment system.  This requires the construction of
toll plazas with a high multiple of toll lanes for each traffic
lane in order to minimize serious queuing problems when traffic is
heavy.

     In the last few years, electronic collection-systems have
become operational.  These systems can eliminate the need for
classic toll plazas and can process vehicles at normal highway
speeds so that queues do not develop.  Extensive use of electronic
toll collection supplemented by cash payment facilities may be the
most effective way to implement tolls on the East and Harlem river
bridges.

CASH PAYMENT TOLL SYSTEMS

     The traditional way to collect tolls is by means of a cash
payment toll booth placed astride a traffic lane.  But the need
for each vehicle to stop and wait during the toll payment process
impedes the flow of traffic on roads that experience demand levels
common at the Manhattan river crossings during the day.

     For example, if it takes an average of fifteen seconds per
vehicle to make a toll payment, this means that a toll booth can
process only four vehicles each minute, or 240 vehicles each hour. 
This is equivalent to an average speed of about four miles per
hour, which becomes the maximum speed of the traffic flow in the
lane approaching the toll booth.

     To maintain higher speeds in the approach lane, more toll
booths are needed to serve that one lane.  In order to maintain an
average speed of 30 mph in the approach lane, eight toll booths
would be needed - just for that one lane.  If there are three
lanes approaching the toll collection point, the same multiple
applies in order to maintain an average speed of 30 mph. 
Therefore, 24 toll booths would be needed to serve the three
lane's.

     This little exercise illustrate one of the major problems
inherent in attempting to toll a previously toll-free Manhattan
river bridge by using a cash payment toll collection system.  A
substantial amount of space is needed to provide enough toll
booths so that traffic is not impeded - much more space than is
available within the right-of-way of the bridge's lanes.  So
additional land must

                                   58



be acquired outside the existing right-of-way to allow
construction of a large enough toll plaza.

     If other constraints make it impossible to acquire enough
land, then the number of toll booths that can be provided is not
sufficient to maintain a reasonable speed in the approaching flow
of traffic.  The result will be long queues of vehicles extending
back a considerable distance from the toll plaza.  Since each
gasoline-fueled vehicle in the queue emits carbon monoxide in
amounts that are inversely proportional to its speed, these queues
can produce serious air quality.problems that violate Federal
Clean Air Act standards and may not be subject to mitigation.  If
detailed environmental analysis establishes that this is likely to
be the result of imposing a cash collection toll system on a
particular bridge, then Federal law would prohibit the imposition
of tolls on that bridge.

     The 1977 report entitled Traffic Impact of Tolls on the East
and Harlem River Bridges included sketch plans for toll plazas on
each of these thirteen bridges.  These plans were prepared by the
traffic engineering firm of Madigan-Hyland.  It appears that a
major goal in developing the plans was to minimize the need for
land acquisition, though the report did not discuss this.  But the
report stated that the toll plazas would cause major delays during
peak inbound periods on seven of the bridges, with vehicle queues
of up to a mile in length on three of the Harlem River bridges. 
It should be noted that average daily crossing volumes on the East
and Harlem River bridges were 17 percent higher in 1990 than they
were in 1975 (the year used in the report).  So delays and queues
lengths may be proportionately worse then the report estimated.

     The report also estimated the construction cost and time for
these toll plazas.  In 1991 dollars, their construction cost would
be about $145 million and they would take at least three and one
half years to build (following completion of an acceptable
Environmental Impact Statement).


ELECTRONIC COLLECTION SYSTEMS

     These systems rely on a sensor unit mounted above each
traffic lane at the toll collection point.  The sensor "reads" the
unique ID number encoded into an inert "toll tag" that is carried
in each vehicle passing the toll collection point.  The system's
computer records the passage of the vehicle and automatically
bills the vehicle owner's payment account for one crossing at the
toll rate in effect at the time of the crossing.  Account payments
can be made

                                   59



by major credit card, automatic debits to checking accounts, or
regular check.

     One family of such systems uses radio frequency electronic
identification (RFID) technology, which its advocates claim is
superior to optical or magnetic identification technology because
it can identify vehicles at greater distances and higher speeds,
and because its performance is unaffected by bad weather or dirt..
RFID systems are becoming available for a number of different
transportation-related purposes, including toll collection.

     RFID toll collection systems are currently in operation on
the Crescent City Connection Bridge and the Lake Pontchartrain
Causeway in New Orleans, the Dallas North Tollway, the Oklahoma
Turnpike, and on several toll roads in France and Italy.  The Port
Authority and TBTA have been field testing this technology since
1988.  The Port and TBTA have also formed a working group with
seven other toll authorities in New York, New Jersey, and
Pennsylvania in the expectation of being able to establish a
single electronic toll collection system for all major toll
facilities in the northeast.  These seven agencies expect to issue
a procurement request for toll tags and other RFID hardware in the
Fall of 1991.

     An RFID Operating Scenario

     The following scenario illustrates how an RFID system might
     operate on the East and Harlem river bridges.

     *     Sensor antennas would be mounted above each traffic lane
           near the middle of the bridge.  These antennas are small
           and unobtrusive.

     *     Any vehicle wishing to use the RFID lanes on one of
           these bridges would be required to have a toll tag and a
           valid payment account. (A start-up scenario for
           distributing toll tags and establishing accounts is
           described below.) Vehicles without tags would have to
           use cash payment lanes The toll tag itself is about the
           size of a credit card and is fastened to the inside of
           the vehicle's windshield with velcro strips so that it
           can be easily removed when the vehicle is unattended.

     *     As the vehicle passes beneath the sensor antenna while
           crossing the bridge, its toll tag is read.  This will
           not require.the vehicle to slow down, change lanes, or
           make any other movements that are not dictated by the
           traffic flow itself.  The flow of traffic on the RFID
           lanes is unaffected by the

                                   60

          

           tag reading process, which takes only a fraction of a
           second to complete.  There would be no barrier gates at
           which vehicles must wait while the system is processing
           the tag reading (possible enforcement measures are
           outlined below).

     *     After reading the toll tag, the sensor transmits to the
           system's central computer the tag's unique ID number
           (which identifies the vehicle and-its account), the
           bridge ID, the lane ID, and the date and time of day. 
           This information is entered into the vehicle owner's
           account.

     This is obviously an ideal scenario.  It seems likely that
     some cash payment capability would have to be provided on the
     City bridges to supplement TBTA's facilities.  Options for
     doing this are discussed below.

     A Possible Start-Up Scenario

     A critical element in the success of the system is that a
     high percentage of the vehicles using the Manhattan river
     crossings have toll tags and valid accounts.  Surveys at
     TBTA's four Manhattan crossings indicate that 98 percent of
     their Manhattan-bound vehicles have trip origins within the
     Tri-State region, and 93 percent have trip origins within the
     New York State portion of the region.  It is likely that
     these "local origin" percentages are at least as high on the
     City bridges.  This makes it feasible to seek to enroll in
     the electronic collection payment system a high percentage of
     the vehicles that make trips to Manhattan.

     Achieving this goal would require a well-designed and
     professionally implemented marketing program.  Such a program
     might include the following features:

     *     At a suitable time in advance of the day when tolls are
           implemented, toll tags would be mailed to each motor
           vehicle owner (one tag per vehicle registered in his
           name) in the New York State portion of the metropolitan
           region.  These mailings would be require the assistance
           of the New York State Department of motor Vehicles.

     *     Accompanying the toll tag would be a brochure describing
           the electronic collection/payment system, the date when
           tolls begin, and details of the payment account that has
           been established for the vehicle owner.  The brochure
           would stress that

                                   61


           there is no charge for the toll tag, no charge to
           maintain the payment account, no premium to pay for
           using electronic collection rather than cash payment,
           and no pre-payment requirement.

     *     Vehicle owners would be billed monthly for the crossings
           that they made the previous month.  Each owner would be
           given the option of making account payments by the
           credit card of his choice by mailing back an
           authorization form.  In this case, his crossings would
           automatically be billed each month (as a lump sum) to
           his credit card.  He could also elect to receive monthly
           or quarterly statements that detail each crossing billed
           to him, showing the date, time of day, direction, and
           toll rate charged (much like the detail for long
           distance calls on a telephone bill).

     *     An 800 telephone number would be maintained so that
           vehicle owners can easily replace lost toll tags, obtain
           new tags (for newly purchased vehicles), get information
           about their accounts, etc.

     A Possible Implementation Scenario

     There are three different options for implementing a toll
     collection/payment system.

     *     The tolling entity can buy the necessary hardware, have
           it installed by private contractors, and operate the
           system with its own personnel.

     *     The tolling entity can buy the hardware and retain a
           private firm to install it and operate it for a flat
           annual fee.

     *     The tolling entity can enter into a long term contract
           with a private firm under which the firm would accept
           full responsibility for installing and operating the
           system at its own expense, in return for a share of
           gross toll revenues.

     The third option may be attractive because it requires no
     direct capital expenditures by the tolling entity to acquire
     and install the system, relieves the entity of the need to
     operate and market the system, and shifts the risks
     associated with system reliability to the contract operator .
     In effect, the tolling entity would simply receive an
     electronic funds transfer each day for its share of the toll
     revenues.



                                   62

  

     If such a contract is competitively bid, potential bidders
     might include large utilities, banks, credit card companies,
     and other corporations whose current business activities
     provide them with experience that may be relevant to
     implementing and operating an electronic collection/payment
     system.

     Differential Tolls

     Each crossing by a motor vehicle gets charged when it is
     posted to the owner's account by the system's computer.  This
     makes it possible to charge different prices for each
     crossing based on such factors as:

     *     The type of vehicle.

     *     The bridge used for the crossing.
           
     *     The day of the week that the crossing was made.
     
     *     The time of day that the crossing was made.

     *     The traffic demand conditions on the bridge at the time
           that the crossing was made.

     *     The owner's income, residential location, or degree of
           physical disability.

     The use of differential tolls is an option that electronic
     toll collection facilitates.  But decisions about how, when,
     or even whether to pursue this option do not automatically
     follow from a decision to use electronic toll collection on
     the City bridges.  Such decisions involve policy issues that
     are outside the scope of this report.

     Inflation Indexing

     The same capability could be applied to maintain the "real"
     (i.e. inflation-adjusted) toll rate at a constant level. 
     Modest percentage increases each year, or even each month,
     could be implemented to match percentage increases in the
     local Consumer Price Index without concern for the change-
     making implications of odd penny or nickel increments.

     Environmental Implications

     Under the operating scenario described earlier, an RFID
     system itself would have no direct environmental impact.  The
     process of collecting tolls electronically

                                   63

  

     would not change the speed of the traffic flow on any newly-
     tolled crossing.

     However, the elimination of toll-free crossings is likely to
     cause some of their traffic to divert to TBTA crossings when
     they offer a more direct route.  This would mean lower
     traffic volumes on the newly-tolled crossings, resulting in
     higher traffic speeds.  But it would also mean higher traffic
     volumes on the TBTA crossings, which would.reduce their
     traffic speeds. on the other hand, the gain in traffic speeds
     on the TBTA crossings when they convert to an RFID system may
     be sufficient to absorb this.

     A more detailed discussion of these issues is presented in
     the ENVIRONMENTAL CONSEQUENCES section.  They need to be
     explored comprehensively in the course of the technical
     studies that we have recommended.


HYBRID SYSTEMS

     It would be possible to implement a toll collection system on
City bridges that includes a mix of electronic facilities and cash
payment toll booths.  This could be necessary if it was determined
that the cash payment booths that TBTA will retain on its
Manhattan entries are not sufficient to handle vehicles that do
not have toll tags.

     Based on the diversion percentages published in the 1977
report, TBTA's four Manhattan crossings are expected to handle 35
percent of all Manhattan trips if tolls are implemented.

     TBTA's four Manhattan crossings are (reading from south to
north):

     *     The Brooklyn-Battery Tunnel: which the 1977 report
           indicates would handle 8.7 percent of all Manhattan
           trips if tolls are implemented.  According to TBTA
           surveys, 1.6 percent of the Tunnels Manhattan-bound
           vehicles have trip origins outside the Tri-State region,
           and 3.4 percent have origins outside the New York State
           portion of the region.  This crossing could provide a
           cash payment option for vehicles that might otherwise
           use the Brooklyn and Manhattan bridges, which are
           expected to handle 15.3 percent of all Manhattan trips
           if tolls are implemented.




                                   64

  

     *     The Queens-Midtown Tunnel: which would handle 8.8
           percent of all Manhattan trips if tolls are implemented. 
           TBTA survey data shows that 2.1 percent of its
           Manhattan-bound vehicles have trip origins outside the
           Tri-State region, and 3 percent have origins outside the
           New York State portion of the region.  This crossing
           could provide a cash payment option for vehicles that
           might otherwise use the Williamsburg and Queensboro
           bridges, which are expected to handle 20 percent of all
           Manhattan trips if tolls are implemented.

     *     The Triborough Bridge: which would handle 11.3 percent
           of all Manhattan trips if tolls are implemented.  TBTA
           survey data shows that 1.3 percent of its Manhattan-
           bound vehicles have trip origins outside the Tri-State
           region, and 6.9 percent have origins outside the New
           York State portion of the region.  The Triborough could
           provide a cash payment option for vehicles that might
           otherwise use the Queensboro, Willis Avenue, Third
           Avenue, Madison Avenue, 145th Street, Macombs Dam, and
           Washington bridges.  These seven City bridges are
           expected to handle 36 percent of all Manhattan trips if
           tolls are implemented.

     *     The Henry Hudson Bridge: which would handle 6.6 percent
           of all Manhattan trips if tolls are implemented.  TBTA
           survey data shows that 2.5 percent of its Manhattan-
           bound vehicles have trip origins outside the Tri-State
           region, and 12.7 percent have origins outside the New
           York State portion of the region.  This bridge could
           provide a cash payment option for vehicles that might
           otherwise use the University Heights and Broadway
           bridges, which are expected to handle 5.6 percent of all
           Manhattan trips if tolls are implemented.

     However, it would not be necessary to rely only on the TBTA
crossings for cash payment.  Preliminary analysis of peak period
traffic volumes on the City bridges suggests that most of them
would be able to accommodate at least one cash payment lane
without worsening traffic flow in ways that could lead to negative
environmental consequences that could not be mitigated.

     The most suitable locations for such lanes appear to be on:

     *     The Manhattan Bridge (which is expected to handle 5.6
           percent of all Manhattan trips if tolls are
           implemented).

                                   65

    

     *     The Williamsburg Bridge (8.2 percent of trips).

     *     The Queensboro Bridge (11.8 percent of trips).

     *     The Madison Avenue Bridge (2.9 percent of trips).

     *     The Macombs Dam Bridge (3.9 percent of trips).

     *     The University Heights Bridge (3.6 percent of trips).

     *     The Broadway Bridge (2 percent of trips).

     Providing cash payment lanes on these bridges would broaden
the distribution of-crossings that offer a cash payment option. 
It would also make this option available to nearly three-quarters
of all vehicles on the crossing they would normally use.

     It is worth noting that this proportion corresponds closely
to the 70 to 80 percentage of crossing vehicles that TBTA and the
Port Authority anticipate will continue to use cash payment booths
even after they provide electronic collection facilities on their
river crossings.  The expected low participation rate at
electronic facilities at these crossings reflects the advance
payment requirement that these two authorities have indicated they
will impose.  Requiring motorists to maintain positive balances in
their accounts against which crossings can be charged is a barrier
to high participation rates in an electronic toll collection
system.  This is consistent with the experience in Dallas and New
Orleans, where advance payment is required of motorists wishing to
use electronic collection lanes at the toll facilities in these
cities.

     However, the City bridges need not require advance payment. 
Therefore, it is possible that the participation rates for
electronic toll collection could be much higher than at the TBTA
and Port Authority crossings.  If this turns out to be the case,
it might eventually be possible to replace some of the cash
payment lanes on the City bridges with more electronic payment
lanes.  This would improve traffic flow.

                                   66



ENFORCEMENT

     If tolls are implemented on the City bridges, it is likely
that a certain number of motorists will attempt to "beat the
toll".  Some will-use electronic collection lanes without
displaying valid toll tags or having active payment accounts. 
Some will neglect to pay their account bills.  Some may even try
to rush through cash payment booths without stopping.  All of
these actions will result in lost toll revenue.  The credibility
of any bridge toll proposal is closely linked to the level of
confidence that can be established in an enforcement program to
minimize revenue losses from toll beating.

     Classical enforcement programs follow two basic approaches.

     1.    Active Enforcement

           This approach would require a large and highly visible
           presence of uniformed enforcement officers at each
           bridge.  Any driver who attempts to cross without paying
           would be pulled over and ticketed.  The idea is that the
           presence of officers would deter drivers from
           misbehaving by causing them to believe that it is highly
           likely that attempting to beat the toll would result in
           a ticket.

           Such a program has the following shortcomings:

     *     It would be very expensive to implement because of the
           large number of enforcement officers that would be
           needed.

     *     Stopping and ticketing misbehaving drivers would disrupt
           traffic during high demand periods.  This could result
           in negative environmental consequences.

     *     It only addresses toll beating on the bridges
           themselves.  Drivers who beat tolls by neglecting to pay
           their account bills would have to be dealt with by an
           entirely different set of procedures.

2.   Passive Enforcement

     Under this approach, large signs on the roads leading to each
     bridge would warn drivers of the fines or other penalties
     they stand to incur if they attempt to beat the toll.  The
     deterrent

                                    67

  

     effect of these warnings would depend on two factors:

     *     The likelihood of being caught.  If drivers believe that
           the likelihood is high, the deterrent effect can be
           substantial.  On the bridges themselves, this would
           require the presence of enforcement officers, though
           probably in much fewer numbers than for active
           enforcement.  To deter drivers from neglecting to pay
           their account bills, an effective (and well-publicized)
           collection effort would be needed - with appropriate
           cost,penalties for late payment.

     *     The cost of being caught.  If this cost is high enough,
           the likelihood of being caught can be quite low.  For
           example, a fine of $5,000 for toll beating might be high
           enough to deter most drivers from beating the toll even
           if the presence of officers on the bridges was largely
           occasional and random.  The risk of being caught might
           be so low as to seem almost non-existent.  But the cost
           of being caught would be so high that the risk, no
           matter how low, would not be an acceptable one.  A
           similarly high fine for neglecting to pay account bills
           would have the same deterrent effect on this kind of
           behavior.

     Both of these enforcement approaches attempt to change human
behavior.  This can be a difficult and costly undertaking under
the best of circumstances.  Its credibility can be suspect unless
a considerable amount of money is being spent on enforcement
measures.

     A very different and more pragmatic approach begins by
rejecting any attempt to change human behavior.  It focuses
instead on simply maximizing revenue from the bridges through some
feasible combination of tolls collected from law-abiding drivers
and fines collected from toll beaters.

     The key to this approach is the fact that revenue lost
because of toll beating can be offset by revenue gained from the
collection of fines for toll beating.  If the fine for toll
beating is a high enough multiple of the toll rate, then fines
need to be collected from only a modest percentage of those who
beat the toll.  Therefore, a fine that is twenty times the toll
rate and is collected from only one out of every twenty toll
beaters can completely offset the revenue lost from toll beating.

                                   68


     
     The chart on the next page (and the table that follows it)
illustrates how effective this approach can be in maximizing
bridge revenues.  It demonstrates that revenue maximization need
not depend on unrealistically low toll beating rates.  In fact,
high toll beating rates can actually increase gross bridge
revenues, while also providing funds to help cover the cost of
this approach to enforcement.

     The chart and table reflect the assumptions described earlier
in the BRIDGE TOLL SCENARIO section.

     *     The number of tollable crossings is as projected for
           1994.

     *     The toll rate is $3.00.

     *     The initial fine for toll beating is $60.00 (or 20 times
           the toll rate).

     *     One out of every two toll beaters can be successfully
           ticketed.  This rate should be achievable by having
           television cameras record the license plate numbers of
           all vehicles crossing the bridges (which would require
           new legal authority that could be included in the
           enabling legislation for tolls).  In practice, such
           cameras are something less than 100 percent effective. 
           But they should be able to record the plate numbers of
           at least half of all crossing vehicles.  Since we can
           assume that toll beating vehicles will be randomly
           distributed among all vehicles, this suggests that 50
           percent of toll beating vehicles can be identified and
           tickets mailed to their owners.

     *     Sixty percent of the tickets issued are actually
           collected.  This is the current ticket collection rate
           for the Parking Violation Bureau.



CONCLUSIONS

     Three points seem apparent as a result of this preliminary
analysis:

     1.    The ability to make use of an effective electronic toll
           collection/payment system may be a necessary (though
           probably not sufficient) condition if bridge

                                   69



Click HERE for graphic.



Click HERE for graphic.


           tolls are to be viable.  Exclusive reliance on
           conventional cash collection systems could generate air
           quality problems that may not be mitigable.  Also, toll
           plazas are expensive to build and would delay the start
           of revenue flow by at least three years.

     2.    Serious consideration should be given to awarding a
           competitively-bid contract arrangement with a qualified
           private corporation to be fully responsible for
           collection system implementation and operation
           (including provision of cash lanes on City bridges where
           they are needed).  This kind of privatization"
           eliminates the need for public sector capital outlays,
           may result in lower operating costs, and transfers
           responsibility for making the system work effectively to
           a private corporation that has an important financial
           stake in a successful outcome.

     3.    Suitable protection against toll beaters need not be
           either difficult or impossibly costly, so long as the
           focus is on maximizing bridge revenue rather than on
           changing human behavior.  In fact, the critical question
           may well be whether the toll beating rate will be high
           enough to generate fine revenue that is sufficiently
           greater than lost toll revenue to cover a significant
           portion of the costs of identifying, ticketing, and
           collecting fines from toll beaters.

                                   70

        

VI.  E N V I R 0 N M E N T A L   CO N S E Q U E N C E S


     Bridge tolls have the potential for causing a host of
environmental consequences.  Most are expected to be positive. 
But there are circumstances under which some could be negative and
would have to be mitigated.

     There are two reasons why the issue of environmental
consequences is important.  First, implementing tolls is an action
that must comply with existing environmental law.  Second, tolls
could have negative consequences in some locations where existing
concentrations of carbon monoxide or ozone already exceed national
ambient air quality (NAAQ) standards.  This is complicated by the
fact that tolls could have positive consequences in other
locations.  Therefore, implementing tolls becomes an issue that
must be resolved within the context of the 1990 amendments to the
federal Clean Air Act.

     This means that tolling the East River and Harlem River
bridges would require an environmental review in order to comply
with existing law.  It is possible to argue that this review could
be something less detailed than a formal Environmental Impact
Statement (EIS).  As a practical matter, however, the formal EIS
process should be undertaken.

     Even if bridge tolls were to be considered primarily as an
air quality improvement measure, it would be necessary to show
that tolls were consistent with the existing State Implementation
Plan (SIP) and with the revised SIP that must be submitted to
federal EPA by November 15, 1992.  Alternately, we would have to
design a complete program around bridge tolls that could be used
as a control measure for reducing carbon monoxide or ozone
pollution.

     Either way, the same analysis and public hearing process
would be needed as for an EIS.  However, the level of detail can
vary depending on the goal that is to be met.  There are
additional requirements beyond an air quality analysis that must
be satisfied in order to include bridge tolls in a SIP revision
that EPA could approve.  This suggests that gaining approval of
bridge tolls as a SIP measure could be more time-consuming than
completing a normal EIS, which might still be required.

     Any quantification of the positive and negative environmental
consequences of bridge tolls is beyond the scope of this report. 
But the qualitative nature of these consequences can be described. 
Our sense is that the

                                   71



positive consequences will be substantial, and there will be no
negative consequences that cannot be mitigated.

POTENTIAL POSITIVE CONSEQUENCES

     Many environmental specialists believe that tolling the
Manhattan bridges would have positive environmental consequences. 
These consequences arise because bridge tolls can help reduce
traffic congestion within Manhattan, and on the approaches to the
City bridges leading into Manhattan.  Since traffic congestion is
the major cause of air pollution in New York City, reducing
traffic congestion in these locations would improve air quality.

     Some of the ways that bridge tolls could help reduce traffic
congestion include:

     *     Eliminating the cost incentive to use Manhattan streets
           for westbound trips to New Jersey from locations east of
           the East River.  When vehicles making such trips enter
           Manhattan across one of the City bridges and reach New
           Jersey via the Holland or Lincoln tunnels (which collect
           tolls eastbound only), tolls are avoided.  The result is
           that traffic congestion on some Manhattan streets (such
           as Canal Street) is increased because of the presence of
           vehicles making through trips via Manhattan solely to
           avoid tolls.

     *     Eliminating the additional trip miles generated by
           motorists who now divert from more direct routes using
           the TBTA crossings in order to take advantage of the
           toll-free City bridges.  All else being equal,
           additional trip miles by motor vehicles mean additional
           emissions of exhaust pollutants that degrade air
           quality.

     *     Reducing the additional traffic volume on and
           approaching the City bridges that is caused by motorists
           who divert from the TBTA crossings to avoid tolls.  The
           additional volume worsens traffic congestion in these
           locations, which increases air pollution.  According to
           the 1977 report traffic Impact of Tolls On The East &
           Harlem River Bridges, these diversions result in a 20
           percent greater traffic burden on the four East River
           bridges, and a 14 percent greater burden on the eight
           Harlem River bridges.

     *     Eliminating the perceived cost penalty of traveling to
           Manhattan by public transportation, which

                                   72

          

           requires payment of an explicit cash fare.  The
           perception that travel to Manhattan by car is less
           costly than travel by public transportation (especially
           when several people are traveling together) further
           enhances the apparent advantages of using automobiles
           for personal trips.  This has contributed to the long
           term growth trend of Manhattan auto entries, which has
           worsened traffic congestion in Manhattan and on its
           roadway approaches.

POTENTIAL  NEGATIVE CONSEQUENCES

     There are two categories of negative consequences that could
arise from tolling the bridges.  The first is related to the
actual process of collecting tolls.  The second is due to
motorists diverting from the City bridges to more direct routes
that are no longer more costly to use.

     The process of collecting tolls could have negative
environmental consequences if it reduces traffic speeds.  During
high demand periods, lower speeds would worsen traffic congestion
in the lanes approaching the toll collection point.  More traffic
congestion means more air pollution. 

     Such consequences are believed to be likely if cash payment
toll booths were the only method for collecting tolls.  As noted
earlier, the requirement that each motorist stop to pay a toll
imposes a low limit on the number of vehicles per minute that the
toll booth can process.  This becomes the limit on the maximum
speed of traffic in the lane approaching the booth, except when
very high demand levels reduce the number of vehicles per minute
that can reach the booth to a value that is less than its
processing rate.  Only when a comparatively large number of toll
booths is available to serve each approach lane can this
congestion problem be avoided.  On the City bridges, this would
require toll plazas too large to be practical.

     Electronic toll collection offers a way around this problem
if it can be used extensively and in a manner that has no direct
impact on traffic speeds.  As the percentage of vehicles using
electronic collection lanes increases, new congestion caused by
toll collection diminishes.  The critical percentage" required to
avoid unacceptable new congestion must be determined so that an
adequate number of cash payment lanes can be provided on enough
City bridges to accommodate (together with the TBTA's cash payment
booths) all vehicles that do not have toll tags.

	                           73

    
     
     As noted previously, TBTA origin/destination surveys have
shown that 98 percent of the vehicles entering Manhattan across
their four Manhattan crossings have trip origins in the Tri-State
region, and 93 percent have origins in the New York State portion
of the region.  Most of these vehicles can be assumed to be
registered locally.  These percentages are likely to be at least
as high on the City bridges.  This underscores the importance of
encouraging a high percentage of vehicle owners in the region to
join the electronic toll collection system, so they can use the
electronic lanes when crossing the City bridges.

     Among other things, this means making it as easy as possible
to join the system - by not requiring that tags be purchased (they
are sent free to each motorist in the region), by not charging
service fees to maintain payment accounts (motorists are charged
only for each crossing they make), and by not requiring advance
payments to maintain positive account balances (motorists are
billed each month either directly or to whichever credit card they
prefer for the crossings they made the previous month), etc.

     It may also mean imposing some disincentives for cash payment
by frequent users, which must be carefully planned to avoid
exacerbating air quality problems.  They might include
deliberately providing somewhat fewer than the optimal number of
cash payment lanes (to increase the time it takes to make a cash
payment crossing), locating most of these lanes on bridges that
are less convenient for most tripmakers to use, and perhaps
offering a modest discount on each crossing that is made via an
electronic collection lane.

     The second category of potential negative consequences
includes those arising from trips that divert from the City
bridges.  As noted earlier, these diversions also produce positive
consequences.  The-effect of one versus the other is not
necessarily off-setting since the locations benefiting from
positive consequences are different from the locations burdened by
the negative consequences.

     *     Westbound through trips that are no longer made via
           Manhattan will divert to the northern bypass route (via
           the George Washington Bridge) or the southern bypass
           route (via the Verrazano Bridge).  This will impose
           additional traffic volumes on these crossings and their
           approach highways.  Detailed traffic analysis is needed
           to quantify the impact of this new burden and determine
           whether it causes negative environmental consequences
           that must be mitigated.

	                           74

  

*          Trips that divert from City bridges to TBTA crossings
           will impose additional traffic volumes on these
           crossings and their approaches.  The 1977 report
           mentioned earlier indicated a 53 percent increase in
           volume for the Brooklyn-Battery Tunnel, a 26 percent
           increase for the Queens-Midtown Tunnel, a 27 percent
           increase for the Triborough Bridge, and a 37 percent
           increase for the Henry Hudson Bridge.  TBTA intends to
           equip its toll plazas for electronic toll collection
           (regardless of whether the City bridges are tolled) and
           believes that the resulting increase in the volume of
           traffic that its crossings can process will be
           sufficient to absorb the diversion volumes.  Detailed
           traffic analysis is needed to quantify the impact of
           these diversion volumes on the approaches to these
           crossings and determine whether there are negative
           environmental consequences that must be mitigated.  This
           analysis is especially important for the Manhattan sides
           of the Brooklyn-Battery Tunnel, Queens-Midtown Tunnel,
           and Triborough Bridge - all of which connect directly to
           the Manhattan street network.

     *     Trip diversions from the City bridges is likely to
           improve traffic flow on these bridges and their
           approaches.  There is a widely-accepted theory,
           reflecting several generations of experience in traffic
           engineering, that such improvements can induce new trips
           in enough volume to return traffic speeds to their
           lower, pre-improvement levels.  If this were to occur,
           the volume of new trips would worsen traffic congestion
           on roadways that connect with the bridge approaches -
           leading to negative environmental consequences. 
           Detailed traffic analysis is needed to quantify the
           potential impact of this phenomenon.  But it should be
           noted that the theory's cause/effect relationship
           between traffic flow improvements and new trip induction
           may be more apparent than real.  It is equally possible
           that empirical data from the past simply demonstrates
           the presence of a of natural growth rate in trip
           generation that could not have been accommodated if
           improvements in traffic flow were not made.  In which
           case, the improvements themselves cannot be said to have
           induced new trips and caused negative environmental
           consequences.  Rather, they partially mitigated the
           impact of negative consequences that would have occurred
           anyway.

                                   75


VII.   T H E   T 0 L L I N G   E N T I T Y


     There are four possible options for the entity that would
impose tolls and receive the revenue.

     1.    The City government itself, in which case the revenue
     would flow into the General Fund.

     2.    TBTA, to which responsibility for the Manhattan bridges
     would be transferred.

     3.    A newly-created New York City Bridge Authority, which
           would be self-supporting from toll revenues and would be
           responsible for fully funding the operating and capital
           needs of the tolled Manhattan bridges.

     4.    A newly-created New York City Surface Transportation
           Authority, which would be self-supporting from toll
           revenues, would be responsible for fully funding the
           operating and capital needs of all City bridges, and
           helping to fund the needs of City streets and traffic
           control facilities.

     Each option has its own set of legal issues, as well as
having some legal issues in common with the other options.  These
issues were researched by New York City's Law Department, and
their conclusions are reflected in the discussion below.


THE CITY GOVERNMENT

     New York City's government could implement bridge tolls
itself and assign overall responsibility for toll collections to
its Department of Transportation.  Toll revenues would flow into
the City's General Fund, where they would co-mingle with revenues
from many other sources.

     The allocation of toll revenues would be handled through the
City's expense budget.  There would be no automatic link between
any year's toll revenues and that year's funding levels for the
bridges or other portions of the surface transportation
infrastructure.  The relationship between the two would be
determined each year by the Mayor through the expense budget,
subject to approval by the City Council.

                                   76

    

     Operating Costs

     Annual funding for bridge operations (which includes
     maintenance) would be determined in the same way as it is
     now.  DOT would submit its expense budget requests for this
     activity.  OMB would review and modify them, based on its
     larger perspective of appropriate spending levels for a
     myriad of transportation and non-transportation activities
     throughout the City.  Some negotiation would follow.  The
     final spending level would be included in the Executive
     Budget, but could be modified somewhat after consultations
     with the City Council.

     If tolls were implemented, the revenues that the bridges
     would generate might become a factor in OMB's determination
     of the appropriate funding level for their operations.  How
     large a factor - and how consistent a factor from year to
     year - cannot be estimated.

Capital Restoration

     Annual funding for capital reconstruction of the bridges
     would also be determined in the same way as it is now.  DOT
     would submit its capital budget requests, reflecting its long
     term plan for restoration of the bridges.  OMB would review
     and modify these requests, etc.

     Normally, the City raises funds for capital projects by
     selling bonds.  As the Law Department pointed out, the New
     York State constitution requires that these bonds be "general
     obligation" bonds, secured by all City revenues.

     The State constitution also gives the City the power to levy
     a special tax on real estate at whatever rate is needed to
     generate sufficient funds to meet debt service payments on
     its outstanding bonds. (This tax is separate from the real
     estate tax for operating revenue, though the two are combined
     into a single bill for property owners.) However, the City
     also has the option of funding any portion of its debt
     service payments with General Fund revenues.  It also has the
     option of funding capital projects with General Fund
     revenues, on a pay-as-you-go basis.

     If tolls were implemented, the City could therefore use the
     toll revenue to fund some (or all) bridge reconstruction
     projects on a pay-as-you-go basis.  Or it could use the toll
     revenue to fund some (or all) of

                                   77

    

     the debt service on the bonds issued to fund these
     reconstruction projects.  But it is likely that any such
     decisions would be made on a year-to-year basis and would
     mainly reflect budget management and debt service management
     factors.  There would be no clear, consistent link between
     the toll revenues being generated by the bridges and spending
     for capital reconstruction.

     Budget Relief

     Toll revenues would provide some long term budget relief by
     adding a new revenue source to the General Fund.  If the
     budget allocations for bridge operations remained unchanged
     from currently planned levels, all of the toll revenue would
     be available for budget relief.  To the extent that
     allocations for operations were increased to meet actual
     needs, the amount of budget relief would be reduced.  At
     minimum, however, budget relief would equal..currently
     planned operations levels (which are now funded by other
     General Fund revenues).

     Credibility

     Perhaps the biggest problem with having the City's government
     act as the tolling entity may be that too many motorists will
     assume that implementing tolls is nothing more than a general
     revenue mechanism.  Without a formal link between toll
     revenue and transportation spending, it may not be possible
     to convince enough people that tolls will result in the
     bridges being restored and properly maintained.

     Public finance theorists have never been comfortable with the
     concept of dedicated revenues.  But increasingly, the general
     public is insisting that they will only pay more if they can
     be assured that the new revenue will be dedicated to
     supporting a public services that provide visible benefits to
     them.  It may be difficult to offer this assurance if the
     City government is the tolling entity.


TRIBOROUGH BRIDGE & TUNNEL AUTHORITY

     TBTA is a member of the MTA's family of transportation
authorities.  One of its missions is to operate and maintain nine
tolled river crossings in New York City.  It does this very well,
which makes it an obvious candidate to be the tolling entity for
the City's East and Harlem river bridges.

                                   78



Such an arrangement would probably require that complete
responsibility for these bridges be transferred to TBTA.

     As noted earlier, TBTA has been working with the Port
Authority since 1988 to field test electronic toll collection
technology.  TBTA has indicated its intention to begin installing
such a system at its toll plazas in 1992.

     Providing Funds for Public Transportation

     TBTA's second major mission is to generate operating and
     capital funds for the New York City Transit Authority, the
     Long Island Railroad, and Metro North three public
     transportation operators that also belong to the MTA family. 
     In recent years, its policies for setting toll rates have
     been driven primarily by this mission.

     Public transportation operating funds are transferred each
     year to the three operators from TBTA's "surplus revenues"
     (i.e toll revenues in excess of its operating and debt
     service costs).  Half of these funds are turned over to the
     Transit Authority to help support the operations of the City-
     owned subway and bus systems, which are leased to the Transit
     Authority.  The other half are divided between the Long
     Island Railroad and Metro North, which operate commuter
     railroads that bring suburban residents to jobs in the
     Manhattan CBD and downtown Brooklyn.  This allocation, which
     is specified in the New York State Public Authorities Law,
     has been in effect since 1968 when the MTA was established.

     TBTA provides capital funds to the three public
     transportation operators by selling bonds that are backed by
     its toll revenues.  This arrangement has been in effect since
     the early 1980s and has provided about 13 percent of the
     capital funds used in the MTA's first two five year plans to
     restore its public transportation systems to a state of good
     repair.

     Budget Relief

     Since the Manhattan bridges would be transferred to TBTA, the
     costs associated with their operations and restoration would
     be removed from the City budget.  On the operating side, this
     would represent a $623 million saving for the expense budget
     over the ten year evaluation period.  Since no new City bonds
     would have to be issued for capital restoration, City debt
     service costs would be $843 million lower over the evaluation
     period.

                                   79

    

     However, the illustrative toll revenue scenario described
     earlier showed revenues greatly in excess of the needs for
     these bridges.  Under existing law, none of this excess
     revenue would be available to the City.  Nor would the Mayor
     have any direct control over how it was used.  In fact, half
     of this revenue would be used to subsidize the commuter
     railroads - a purpose that some would argue does not directly
     benefit New York City residents.  This issue is discussed
     below.

     The Equity Issue

     Some people have problems with the formula under which TBTA
     provides operating funds to the three public transportation
     operators.  They argue that this formula shortchanges the
     City, since all of the funds are generated within the five
     boroughs but only half are allocated to the City's subway and
     bus systems.

     Two arguments are usually offered to counter this:

     *     City motorists account for only about 56 percent of
           TBTA's toll revenues.  Most of the remainder is
           generated by motorists who are residents of Long Island
           and the Northern Suburbs.

     *     The primary function of the Long Island Railroad and
           Metro North is to provide commuting transportation to
           the Manhattan CED for suburban residents.  This enables
           CBD firms to tap a larger and more varied labor pool
           than they could if these commuter railroads didn't
           exist, which enhances the attractiveness of the CBD as a
           business location.

     *     Public perception of this equity issue should be taken
           into account in determining whether TBTA would be an
           appropriate tolling entity for the Manhattan bridges. 
           Half of any surplus revenue generated by their tolls
           would be turned over to the MTA's commuter railroads
           unless new legislation is passed to modify the formula
           in the Public Authorities law.

           The Governance Issue

           Because TBTA is a member of the MTA family, its board of
           directors is the MTA's board.  The thirteen members of
           the MTA board are appointed for fixed terms by the
           Governor, subject to approval by the New York State
           Senate.  Four of these members are appointed on the
           recommendation of the Mayor.

                                   80


           Under this structure, the Mayor has no direct control
           over TBTA.  His only formal input on policy issues is
           through the four MTA board members who are
           (functionally) appointed by him.  If TBTA became the
           tolling entity for the Manhattan bridges, the Mayor
           might have only modest and indirect influence on
           decisions about toll rates, the pace of bridge
           restoration, whether differential tolls should be used
           to rationalize the flow of traffic entering and leaving
           Manhattan, etc.  These could be significant public
           policy issues.  There may be significant problems with
           having them decided by non-elected officials over whom
           the Mayor has no direct control.

           Other Issues

           There is no provision in the Public Authorities law for
           the TBTA to transfer any of its revenue to the City's
           government.  As noted above, this would rule out any use
           of toll revenues from the Manhattan bridges to provide
           budget relief (in excess of the operating and debt
           service costs of  the bridges themselves), or to help
           fund other portions of the surface transportation
           infrastructure.

           DOT's Bureau of Bridges has a large cadre of City
           employees who have substantial experience with the care
           and needs of the Manhattan bridges.  The Law Department
           pointed out that these employees would have to be
           transferred to TBTA under arrangements that protect
           their pension benefits, compensation packages, seniority
           rights, and union memberships.  This should be feasible,
           but there are many complex issues to be resolved.  Their
           resolution could be time-consuming.


A NEW YORK CITY BRIDGE AUTHORITY
     The tolling entity could be a new City authority specifically
established to assume responsibility for the Manhattan bridges. 
It would be under the Mayor's control, entirely self-supporting
from toll revenues, and with the power to issue bonds that would
not be obligations of the City itself.

     Scope of Responsibility

     There are two possible options for defining the scope of the
     new authority's responsibilities.

     One option is a classic "full service" authority like TETA. 
     It would take over the bridges, toll them,

                                   81

    

     operate them, maintain them, reconstruct them, etc.  This
     means that a significant portion of the activities (and
     employees) of DOT's Bureau of Bridges would be transferred to
     the new authority.  These operating costs would no longer be
     funded through the General Fund or appear in the City's
     expense budget.  And the City would no longer have to issue
     its own bonds to provide capital funds for bridge
     reconstruction.

     The second option limits the new authority's responsibilities
     to financing and overall planning. it would be empowered to
     toll the bridges, collect the revenues and issue its own
     bonds for bridge reconstruction.  But it would "contract out"
     the tasks of operating, maintaining, and reconstructing the
     bridges.  Some of the contracts could be with DOT's Bureau of
     Bridges, which would therefore retain the same functional
     responsibilities (and employees) that it now has.  But the
     General Fund would be reimbursed by the authority for the
     cost of these activities, which would continue to appear in
     the City's expense budget.  In effect, things would be the
     same as they are now except that:

     *     The General Fund would receive new revenue from the
           authority to fully reimburse the cost of operating and
           maintaining the bridges, even at a higher level of
           effort than now.

     *     The Authority could contract with private firms to
           provide additional maintenance and other services, thus
           "privatizing" some of bridge activities.

     *     The Authority, rather than the City, would issue the
           bonds needed to fund bridge reconstruction.  These bonds
           would not be City obligations.

     Comparisons

     The first option would theoretically reduce the size of City
     government somewhat, because the activities (and employees)
     now housed in DOT's Bureau of Bridges would be absorbed by
     the new self-supporting authority.  The second option would
     provide the City with new revenue to (1) fully offset the
     costs of the current level of bridge activities, and (2)
     support a higher level of bridge activities.  Both options
     would provide the same degree of budget relief.

     The first option results in a large authority, which some
     people might view as a new public bureaucracy encompassing
     all the sins of existing bureaucracies.

                                   82

  

     The second option results in a small authority with a small
     staff of skilled professionals, which some people might view
     as an overpaid elite controlling a very large amount of
     public money.

     The first option may limit opportunities for large scale
     privatization of bridge activities, because the new authority
     would be implicitly intended to be a full service
     organization.  The second option may encourage much more
     privatization, because the authority would never be in a
     position to do everything in-house.

     Surplus Revenues

     Under either option, the new authority is likely to generate
     much more revenue than it needs simply to operate and restore
     the Manhattan bridges.  Provisions would have to be made for
     appropriate use of these surpluses.  For credibility reasons,
     it might be best to have such provisions written into the new
     authority's charter and any enabling legislation.  Surpluses
     would be defined as revenues in excess of the authority's
     annual needs for operating costs and debt service.

     Some possible (but not mutually exclusive) uses for the
     Authority's surplus revenues are listed below.

     *     Transferred annually to the City's General Fund to help
           support various City services.  The Mayor would
           determine how these funds are to be used.

     *     Transferred to a new City fund dedicated exclusively to
           helping support transportation services and facilities
           other than the Manhattan bridges.  The Mayor would
           determine how these funds are to be allocated among
           various transportation services.

     *     Used to support special bonds issued by the Authority to
           fund capital improvements to City transportation
           facilities other than the Manhattan bridges. (The
           advantages of issuing authority bonds, rather City
           bonds, for these improvements is discussed below.) The
           Mayor would control the allocation of the capital funds
           generated by these bonds.  However, the Mayor and the
           authority would have to agree on a long term schedule
           for issuing these bonds that is compatible with the
           authority's schedule for issuing bonds to fund bridge
           restoration.

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     Authority Debt

     Some people in the investment banking community have
     indicated that the level of outstanding City debt is
     beginning to reach a point where additional "New York" debt
     issuers may be needed in the future in order to help assure
     favorable market access for the City.  This is because most
     institutional buyers of tax exempt debt have limits on the
     percentage of their portfolios that can be invested in the
     securities of any single issuer.  Many such institutions are
     believed to be approaching this limit for City general
     obligation bonds.

     The Bridge Authority would be a new debt issuer.  It would
     issue debt for bridge reconstruction that would otherwise
     have to be issued by the City itself.  It could also issue
     debt for other transportation-related purposes that would
     otherwise have to be issued by the City.  The maturity
     structure of its debt issues would not be constrained by
     State laws that dictate the maturity structure of City debt
     issues, and this could facilitate more advantageous debt
     service schedules.  Finally, the authority could issue a
     greater volume of debt for these purposes than the City might
     be able to issue without encountering problems with the
     portfolio limitations of institutional buyers.

     This could become an important argument in favor of creating
     a new entity to toll the bridges.  Continued market access
     for the City's non-transportation debt must be maintained. 
     The volume of non-transportation debt that the City will wish
     to issue in the future is not insubstantial.  Creating a new
     entity to issue transportation debt can help assure a ready
     market for the City's other debt.

     Budget Relief

     In addition to relieving the General Fund of bridge costs,
     the authority could provide the City with some immediate,
     short term relief for temporary budget problems.  Its surplus
     revenues during the early years could be transferred to the
     General Fund.  The justification for this transfer could be
     as a down-payment on "purchasing" the bridges from the City. 
     An alternate justification might be that this transfer
     represented an "advance payment" on excess revenues that the
     authority would eventually turn over to the City anyway.

                                   84



A NEW YORK CITY SURFACE TRANSPORTATION AUTHORITY

     This would be a newly-created entity similar in all respects
to the Bridge Authority described above, except that its
responsibilities would also extend to other surface transportation
facilities.  These could include:

     *     Funding the capital and operating needs of all City
           bridges, not just those providing entry to Manhattan.

     *     Helping to fund the capital and operating needs of City
           roadways, including limited access highways, major
           arterials, and local streets.

     *     Helping to fund the capital and operating needs of
           traffic control facilities on the roadway system.

     *     Helping to provide more funds for public transportation
           in New York City.

     All of the issues and options mentioned above for a bridge
authority would apply to a surface transportation authority,
except as discussed below.

     The Credibility Issue

     As noted, tolling the Manhattan bridges is likely to generate
     more revenue than is needed simply to restore and maintain
     these bridges.  It may be prudent to assume that motorists
     will only accept tolls if they believe that toll revenues
     will be used mainly to improve the surface transportation
     infrastructure that they depend on.  In which case, we face
     the need to develop mechanisms to provide these assurances in
     a credible fashion.

     Creating a surface transportation authority to be the tolling
     entity could be the simplest way to accomplish this.  It
     would have formal, explicit responsibility for a range of
     transportation facilities whose needs are sufficiently great
     to absorb all or most of the toll revenue.  For the most
     part, these needs are well documented and already apparent
     (or can be made apparent) to the public.  And there is
     widespread recognition that these needs cannot be fully met
     with the financial resources that are currently available to
     the City.  Therefore, creating a surface transportation
     authority to become responsible for these needs - and giving
     it the power to toll the Manhattan bridges as the most
     feasible way to generate the financial resources to meet
     these needs - could be perceived by

                                   85

    

     the public as a reasonable and appropriate (if not painless)
     response by government.

     With a bridge-only authority, a complex of formal or informal
     ancillary mechanisms would have to be established to direct
     the authority's surplus revenues to other transportation
     needs.  Some might be quite elegant, and even efficient.  But
     there is danger that the public might perceive them simply as
     devices for laundering money collected from motorists and re-
     directing it to non-transportation uses.  This would be less
     of a problem with a surface transportation authority that had
     explicit responsibility for funding the needs of other City
     bridges and helping to support other portion of the surface
     transportation infrastructure.

     A Full-Service vs.  Financing Only Authority

     All of the issues and options discussed above for the bridge-
     only authority apply to a surface transportation authority. 
     But three additional points should be noted.

     *     A financing-only authority might be able to get started
           faster.  It would not have to spend time working out the
           details of transferring DOT employees to its payroll,
           which is likely to be a lengthy process.  Rather, it
           would simply contract with DOT to provide the
           transportation services that DOT currently provides. 
           Contract payments would be designed to fully reimburse
           the General Fund for these costs.

     *     Having a surface transportation authority provide
           special budget relief for the City might be more easily
           handled than would be the case with a bridge-only
           authority.  A surface transportation authority's broader
           responsibilities would offer a closer, and possibly more
           acceptable, link between special budget relief cash and
           actual General Fund costs for which relief was being
           provided.

     *     A financing-only authority could be given the power to
           gradually acquire some or all of DOT responsibilities
           and employees.  Since this would be done over a period
           of time as the details were worked out, it would not
           delay the Authority's ability to start doing useful
           things as soon as it is legally established.  All such
           acquisitions would require the Mayor's approval.

                                   86

    

     CONCLUSION

     The need to address the operating and capital needs of the
     City's surface transportation infrastructure is clear and
     compelling.  The City's current fiscal problems may provide a
     window of opportunity to do this in a fiscally-sound manner
     by implementing tolls on the Manhattan bridges.  This may
     also provide an opportunity to address a broader range of
     transportation problems whose implications can significantly
     impact New York's economic future.  But only by establishing
     a tolling entity with sufficiently broad  responsibilities. -
     The logic behind this argument runs as follows:

     Bridge tolls can provide new revenue to fund more maintenance
     and better operations of all City bridges and streets.  It
     can also help relieve the General Fund of the cost burden of
     existing levels of maintenance and operations.

     But motorists are likely to tolerate bridge tolls only if
     they are convinced that most of the revenue will be used to
     improve the bridges and streets that serve them - not
     siphoned off for non-transportation purposes.

     The most effective way to accomplish this is for the tolling
     entity to have explicit responsibility for funding all City
     bridges - not just the tolled bridges.  A Surface
     Transportation Authority could be given this responsibility
     in its enabling legislation.  A Bridge Authority, by
     definition, could not.  TBTA does not currently have this
     responsibility, and could be given it only by significant
     amendments to the laws that govern its operations.

     If bridge tolls are set at TBTA rates, net revenues during
     the first ten years would be about four times greater than
     the capital and operating needs of the tolled bridges.  A
     Bridge Authority could be required by law to-turn this
     "surplus" revenue over to the City.  But motorists would
     inevitably believe that most of this revenue will end up
     being used for non-transportation purposes, once it reaches
     the General Fund.  Perceptually, this would be no different
     from having the City itself be the tolling entity.  And
     motorists are unlikely to accept bridge tolls under these
     circumstances.

                                   87

  

     *     On the other hand, a Surface Transportation Authority
           can be required to use this revenue to improve the other
           City bridges and streets.  This would demonstrate to
           motorists that the tolls they pay really will be used to
           benefit them.

     *     To avoid the surplus revenue issue that is inherent in a
           Bridge Authority, tolls could be set at rates that are
           much lower than TBTA rates - just high enough to meet
           the needs of the tolled bridges.  But then there would
           be no new revenue to fund more restoration and better
           operations of the City's other bridges and the street
           system.  And budget relief to the City would be much
           less, with the General Fund still having to bear the
           cost burden of maintaining and operating the other
           bridges and the street system.

     All of which argues for a tolling entity with sufficiently
     comprehensive powers to assure the public that new revenue
     collected from motorists will be dedicated to improving
     transportation facilities in New York.

                                   88



VIII.  L E G A L  I S S U E S

     In connection with its evaluation of the proposed tolling of
the East River and Harlem River bridges, the Mayor's Management
Advisory Task Force requested the New York City Law Department to
provide a brief description of the various alternatives which may
be available to capitalize the toll revenue-stream.  The Law
Department's comments follow.

     ANALYSIS

     As a starting point, it should be noted that the City itself
is unable to issue bonds secured solely by dedicated sources of
revenues such as tolls.  Article VIII, Section 2 of the New York
State Constitution prohibits a city from contracting indebtedness
unless it pledges its full faith and credit for the repayment of
this indebtedness.

     Because of the City's inability to issue bonds that are
secured only be dedicated revenue sources, capitalization of toll
revenues with bonds secured by such revenues will require creation
by the State Legislature of a public benefit corporation with
revenue-bonding authority.  Thus, at a minimum, any public benefit
corporation for financing bridge reconstruction that is created
pursuant to State legislation must be given the power to issue
bonds, to set and collect tolls, and to pledge toll revenues
toward repayment of its bonds.  Beyond that common denominator,
the proposed authority's level of involvement in the operational
aspects of the tolled bridges can range from total to minimal. 
For the most part, the desired level of operational control is a
matter of policy.

     It seems likely that credit considerations will require a
transfer of the tolled bridges to the entity that issues the toll-
backed bonds.  This is the case regardless of whether the entity
is a new agency or an existing one, such as TBTA.  The enabling
State legislation will also provide the procedure for such a
transfer, thus overriding Charter restrictions on alienability. 
The legislation could also exempt the bridge transfer, as well as
tolling itself, from SEQRA and ULURP review.  More realistically,
the City might attempt to obtain authorization for expedited
versions of such reviews.

     While the City appears to have authority to impose tolls on
the East River bridges, it would need additional authority for the
Harlem River bridges.  The City itself will not be setting the
tolls under any of the scenarios described below.  Thus, the
legislation must give clear

	                           89



power to the new authority to implement and revise toll
structures.


     Finally, it should be noted that there is a significant
likelihood that the State Legislature will request a Home Rule
message from the City.  Consequently, it may be necessary to
obtain the approval of the City Council before the Authority
legislation can be enacted.


     AUTHORITY OPTIONS

     1.    No Operational Involvement.

           At one end of the spectrum, the proposed authority would
           have no role in the operation of the tolled bridges. 
           All construction, maintenance, and operation of the
           tolled facilities would be performed by the City in
           accordance with existing City procedures and
           regulations.  Although toll revenues would belong to the
           Authority, the City would collect such revenues on the
           Authority's behalf and turn them over to the Authority. 
           The Authority would reimburse the City for its operating
           costs, after debt service requirements have been met. 
           This arrangement would be spelled out in a contract
           between the City and the new authority.  The enabling
           legislation would specifically authorize such a
           contract.

           Since the Authority would have no operational function
           and would serve solely as a financing vehicle, there
           would be no need for full-time employees or any civil
           service structure.  The Authority's financing activities
           would be managed by City employees who would receive no
           additional compensation for performing such duties.

           Although there would be close ties to the City by virtue
           of the City's continued role in the operation of the
           bridges, the Authority would exist as a separate legal
           entity.  Moreover, bondholders would require independent
           certification that the City's operating and capital
           budgets relating to the tolled bridges (and perhaps its
           feeder roads and approaches) were adequate to insure the
           integrity of the revenue stream.

           Covenants may also be sought which could affect the
           City's regulatory activities with respect to bridge
           operations, to the extent that such activities could
           have an adverse financial impact on revenue streams.

                                   90

          

           For example, TBTA found it necessary to prohibit the
           construction of new, competing untolled bridges.

           This first alternative.essentially mirrors the structure
           of the City's Water Authority, with some slight
           deviations.  The new bridge financing arrangement will
           require hiring new employees (or contracting with an
           existing authority or private firm) to perform the toll
           collection function.  No new employees were hired in
           connection with the Water Authority.

           Further, the legal structure of the Water Authority was
           complicated by a prohibition in Article X, Section 5 of
           the State Constitution against the creation of a public
           corporation having Doth the power to contract
           indebtedness and the power to levy charges on property
           owners for services related to that property without a
           public referendum.  As a result, it was necessary to
           create two public corporations.  The Water Authority was
           empowered to issue bonds.  The Water Board was
           responsible for levying water and sewer charges.  Since
           Article X, Section 5 would not apply to services
           unrelated to real property, the powers to issue debt and
           implement bridge tolls may be vested in a single
           authority.  However, like the Water Authority and Water
           Board, the proposed Bridge Authority need not have any
           operational role outside of its toll setting and
           collection functions.

     2.         Transfer of operations to Existing Authority.

           A second alternative involves transferring some or all
           of the operational aspects of the bridges to an existing
           entity that has relevant operational experience.  Such
           an entity could be the Triborough Bridge and Tunnel
           Authority, the Port Authority, the New York Thruway
           Authority, or the New York City Transit Authority.  As
           in each of the various alternatives, financing functions
           would be performed by the new Bridge Authority.

           This option has certain advantages, such as capitalizing
           on the experience of existing entities.  On the other
           hand, the new Bridge Authority could enter into
           contracts with these other authorities to obtain their
           expertise.

           The primary disadvantage would seem to be the loss of
           control by the City in areas that have traditionally
           been the City's concern.  The option 91 may also prove
           difficult to implement, since transfers of employees
           from the City to TBTA or another existing entity that
           might take over bridge operations would probably have to
           be performed under Civil Service Law 70(2), which
           governs the transfer of personnel when a function is
           transferred from one civil division of the State to
           another civil division of the State.  Although such
           transfers have been implemented in the past (most
           recently with the School Construction Authority), it
           will probably require negotiation with the unions
           involved - which could lead to further delays.

           The complexities raised by personnel transfers would not
           be found in a scenario where the role of the existing
           authority is limited to toll collection operations,
           since no City agency currently performs this function. 
           If the City were to undertake this activity on its own,
           it would seem necessary to hire new employees or
           contract with a private firm to provide toll collection
           services.  Transfer of toll collection operations to an
           existing entity with an in-place, experienced work force
           would eliminate the need for new City hires.

           One potential advantage to transfer of bridge operations
           to TBTA derives from the federal limitations on the
           tolling of bridges whose construction or reconstruction
           was funded in part by federal highway funds. It is
           possible that TBTA may be able to take advantage of the
           "Golden Gate Bridge" exception to this prohibition. 
           This exception is available to agencies that do not have
           taxing powers but whose functions include operating a
           federally assisted public transit system that is
           subsidized by toll revenues (as long as the public
           transit subsidy exceeds federal bridge repair funds). 
           It could be argued that TBTA's relationship with the
           MTA, and the use of its surplus revenues to subsidize
           public transit would qualify it for the exception to the
           federal limitation on tolls.  However, this arguable
           advantage may be moot since we have been advised that
           pending federal legislation to nullify the toll
           restrictions appears likely to succeed.

           The transfer of operational functions to an existing
           authority could provide other incidental advantages,
           depending upon which entity is selected.  For example,
           contracts for bridge repairs entered into by the entity
           taking over bridge operations would not be subject to
           City contracting procedures.

                                   92

          

           Rather, it is possible that such entity may have more
           streamlined procedures available that would be
           appropriate under the circumstances.  However, any such
           advantages could conceivably be granted to the City in
           any enabling legislation that establishes the Bridge
           Authority.

     3.    Bridge Authority with Complete Operational Control.

           At the other end of the spectrum from the financing-only
           option, a third alternative would vest complete
           operational control of the tolled bridges, as well as
           financing powers, in the new Bridge Authority.  In
           addition, this option may be refined further depending
           on the scope of the Authority's operational
           jurisdiction.  Such jurisdiction could be limited to the
           tolled bridges or expanded to include all feeder roads
           and approach highways.

           As with the second alternative of transferring bridge
           operations to an entity like the TBTA, transfer of
           operations to the Bridge Authority would entail
           complicated personnel issues and would doubtless involve
           negotiation with the relevant unions.

           However, transfer of bridge operations to a completely
           new entity would afford the opportunity to fashion
           procedures in areas such as contracting in a manner that
           will most efficiently achieve implementation of the
           capital plan for bridges.  From a management point of
           view, the Authority's narrower focus on this aspect of
           the City's transportation network could also prove
           beneficial.

           On the down side, vesting complete operational authority
           in an independent public benefit corporation may raise
           concerns of political accountability.  These concerns,
           however, could be partially addressed by-including
           several City officials as ex officio members of the
           Authority's governing board.


CONCLUSION

     Since the City lacks legal authority to issue revenue bonds,
a public benefit corporation with revenue bonding authority must
be created by' State legislation in order to capitalize toll
revenue streams.  The new Authority must, at a minimum, be given
the powers to issue bonds and to

                                   93



implement and collect tolls that would be pledged to secure
repayment of the Authority's debt.

     The form that the Authority could take is largely dependent
on the degree of the Authority's involvement with bridge
operations.  This is basically a question of policy rather than
law.

     To summarize, the alternatives for the structure of the
     Authority include:

     1.    Financing Only/No Operational Role.

           Advantages

           -    Minimize staffing and bureaucracy.

           -    Minimizes complications and delays that could be
                associated with a transfer of functions.

           -    Existing successful model (the Water Authority),
                which may make the proposal more acceptable to the
                bond markets.

           -    Maintains City control over an area of traditional
                concern to City.

           -    Maintains City accountability for bridge
                operations.

           Disadvantages

           -    Unless specifically granted in enabling
                legislation, less of an opportunity to fashion
                streamlined operating procedures.


     2.    Transfer of Bridge Operations to TBTA or Other Entity.

           Advantages

           - Capitalize on the experience of the existing toll-
     collecting entity.

           - May offer opportunities for streamlining bridge
operations in areas such as contracts.

           - Transfer to TBTA may enable exemption from federal
toll restrictions.

                                   94

        

           Disadvantages

           -    Complications raised by the transfer of personnel.

           -    Loss of City control and accountability.

     3.    Full Operational Authority (Bridges only or Bridges and
           Highways).

           Advantages

           - Typical model, very familiar to the credit markets.

           - Full opportunity to streamline operating procedures.

           - Narrower management focus.

           Disadvantages
           -    Limited toll collection experience.

           -    Transfer of personnel complications.

           -    Loss of City control and accountability.

                                   95

                        

                         A P P E N D I X  A


     (Contains output tables from the computer model that was used
     to project the capital and operating needs of the city's
     surface transportation infrastructure.)
                                             
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                         APPENDIX B

     (Contains output tables from the computer model that was used                    
     to estimate "tollable" crossings.  It includes allowances for
     diversions from the City bridges due to the imposition of tolls,
     not tolling buses, and not tolling through traffic between the
     Bronx and New Jersey via the Alexander Hamilton Bridge.)



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