By Joan Gralla
(Reuters) - In the next fare hike, New York City's bus and subway riders might lose some of the current discounts that cut the average cost of a ride to $1.63 from the $2.25 base fare, the chairman of the Metropolitan Transportation Authority said on Wednesday.
"Do we need a discount that deep?" asked MTA Chairman Joseph Lhota after addressing a Crain's New York breakfast. Discounts are part of the city's culture, he noted, but added: "I think we need to have a very good public debate about fare prices and discounts."
The cash-poor MTA, which runs the city's buses, subways, commuter railroads and some major bridges and tunnels, plans to increase fares and tolls in March 2013 to raise $450 million of revenue on an annual basis.
By mid-October, the MTA plans to release a brochure that will outline the new fare and toll options.
The MTA is the biggest U.S. mass transit agency, with 8.5 million daily riders. Its finances are strained by the costs of maintaining a system that dates back to 1904 and paying for spiraling debt service and pension benefits.
A spokesman could not immediately say how much it costs to keep the subway system in good repair.
Currently, bus and subway riders get 7 percent discounts on a $10 MetroCard. Unlimited MetroCards for a week or 30 days let users ride for free after a certain number of trips. All these discounts are being examined, officials said.
Lhota said the MTA's savings should reach $1 billion a year by 2016. For example, he said subway station ceilings will no longer be repainted and instead the concrete will be exposed.
The MTA is expanding its network with a new $4.45 billion Second Avenue subway on Manhattan's East Side and a tunnel that will bring Long Island Rail Road commuters to midtown's Grand Central Terminal, a project that will cost $8.24 billion.
In August, a state court ruled that an MTA payroll tax was enacted unconstitutionally because it applies only to 12 downstate counties and not the entire state.
Lhota said he was confident the top state court will reverse the court ruling that could cost the MTA $1.8 billion of revenue a year. That estimate is $300 million more than earlier forecasts as it includes related funds that also would be lost.
Asked about contract talks with the Transport Workers Union - which called the last transit strike in 2005 - Lhota said only that the union does not want to accept his proposal for three years with no wage increases.
Some MTA board members complain of burdensome TWU work rules, which the union has resisted softening. Lhota underscored the difficulty of winning concessions, saying: "Clearly, incremental improvements would be transformational."
The MTA chairman also called for removing statutory barriers that hinder the use of Tax Increment Financing. That is the financing strategy Mayor Michael Bloomberg used for an extension of the No. 7 subway from Times Square to West 34th St when the MTA could not afford the new link.
With this financing, bondholders are repaid by the extra tax revenue a capital project, such as a new transit link, is expected to bring to an area by spurring development.
(Reporting by Joan Gralla; Editing by Dan Grebler)