“The Fly” warned you before; he will no longer offer such pleasantries. From here on, you will get the “black flag.”
The next shoe will be a fucking boot in your face, as municipalities struggle to balance their budgets, due to egregious price surges in raw materials.
NYC is telling you what you need to know:
The Metropolitan Transportation Authority released a cascade of grim financial assessments on Monday that mean delays in subway station renovations and other major improvements, as well as possible cutbacks in service and increases in fares and tolls.
In a series of public meetings of authority board committees, officials said the authority would be forced to cut projects valued at $2.7 billion from its 2005-9 capital spending program, largely because of soaring costs on construction projects already under way.
Officials also said the revenues from taxes on real estate transactions, which have buoyed the day-to-day operations of the transit system in recent years, were falling off at an alarming rate, resulting in a shortfall this year of $122 million. Revenues from the real estate taxes are on track to end the year about $280 million below budget projections.
And costs are up, especially in subway and bus operations, where overtime and fuel prices have led New York City Transit to go $60 million over budget through May.
“Should riders be concerned?†Mr. Sander said in an exchange with reporters at the authority’s headquarters in Midtown. “Absolutely. Am I concerned? Absolutely.â€
Mr. Sander said the financial picture would become clearer next month when he presents a preliminary budget for 2009.
“We remain hopeful that revenues will rebound and subsidies will increase, but if they do not then we will, of course, have to consider fare and toll increases and/or service cuts,†he said.
But there is likely to be plenty more bad news before then. The authority must present a preliminary 2009 budget next month, and Mr. Sander said that would include “a variety of potential scenarios.†Those would appear to include possible service cuts and fare and toll increases. Fares and tolls went up last March, and the authority had proposed raising them again in 2010. Only once before, in 1980 and 1981, has the authority raised fares two years in a row.
The authority said it was also scrapping the accelerated capital program that it created in a rush earlier this year to coincide with the legislative debate over Mayor Michael R. Bloomberg’s congestion pricing plan. The failure of congestion pricing means the authority will stick with its regular schedule for capital spending on big-ticket items, with the current plan ending next year and a new five-year plan beginning in 2010.
The current $23.7 billion plan includes spending for new buses and train cars, nuts-and-bolts infrastructure items like subway ventilation fans and tunnel lighting and major projects like the Second Avenue subway.
But rapidly inflating costs have resulted in the trimming of many projects from the program as the budgets for others grow.
The station renovations that will be cut include 15 in Brooklyn: 10 on the D line; 4 on the N line; and 1 (Smith and Ninth Street) on the G and F lines. Four stations on the No. 6 line in the Bronx were also cut.
The amended plan also cuts $366 million in projects to build fans that draw smoky air out of the subway in case of fire and $223 million to modernize subway track signals and switches.
The changes will be submitted to the authority’s board for approval next month, and most of them must then be approved by the state’s Capital Program Review board, which includes representatives of the governor, the mayor, the Assembly speaker and the Senate majority leader.
Mr. Sander said the changes should not be viewed as cuts because most of the projects would be included in the next five-year program for 2010-14. But subway advocates were leery, citing the uncertainty surrounding the financing for that program.
“To me, a cut is a cut is a cut,†said Gene Russianoff, the staff lawyer for the Straphangers Campaign, a transit advocacy group. “Their spin is that they’re deferrals, but they’re deferred into no man’s land.â€
In the context of the authority’s financial difficulties, Mr. Sander was asked about the appropriateness of a raise he received this year that increased his compensation by $10,000, to $350,000.
Mr. Sander portrayed the raise as being in the best interest of the authority, saying that other transit systems paid their executives more. “Our ability to retain and attract talent is significantly at risk,†he said. “The reality is the salary structure for the M.T.A. is set in relation to my salary.â€
Keep in mind, NYC has not been gravely affected by the housing crisis. As a matter of fact, some assholes believe NYC will skirt by, unaffected.
This, as you know, is impossible.
By July 1st, most municipalities need to have their budgets set for 2009. Unfortunately, for the stupid politicians, their infrastructure projects were pegged to the criminal CPI index, which is not an honest assessment of real inflation, particularly as it pertains to infrastructure projects: concrete, steel, copper, etc.
Once budgets are slashed, stocks like [[TEX]], [[VMC]] and [[ITW]] will get rocked.
What’s amusing to me is the low IQ nature of the talking heads on CNBC, willing to call a bottom, after every reversal. Fucking morons.
I have yet to hear anyone talk about this gigantic looming threat to the one industry that has been holding up this economy. Time will tell if Senor Tropicana is correct.
Lucky for me, I have a time machine.
Here is an interesting google keyword search.
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Mr Fly,
He is truly wise.
Here in the midwest, all I read is city after city planning on replacing old bridges.
Fly,
NYC real estate just started to crack in the last month or two…maybe Gunners has some insight.
No new infrastructure for you!
TSO
is putting in an outside day with volume.
NYC commercial real estate is not cracking. big sales happening as we speak (all of the macklowe portfolio is trading). people are still treating it like a safe haven. however, rental rates are dropping, and values have been dropping hard, and leasing velocity is way down. it is slow, but i don’t really envision a crack. a flight to quality and conservatism is all.
long term though, these public transportation projects that are being shelved will hurt values. people have bought up properties at premiums around future planned transportation expansion (2nd ave subway, moynihan station). as these projects get delayed, and owner’s carry costs build up, people will lose their shirts for paying up for the future too early.
check out http://www.therealdeal.com for daily articles about all these topics. i know i’ve promised a PG post about the status of the market, i just haven’t had the time lately. maybe this weekend. sorry guys.
Fly
Having lived in Manhattan for so many years — I can only imagine the nightmare commuters face this summer with potential cutbacks in service, etc. Not to mention the dreaded 7 train from Queens into the city — rode that sweaty dog many a year.
Anyway, it’s redundant on my part — but I really value and appreciate the work you do here.
If you have a minute – wondering about your macro thoughts regarding energy plays. I know you’ve backed off there and wondering why.
Best to you and yours always –
The Working Man
Yes we WisCANsin:
The key word is “plan.” The query word is “finance?”
I don’t know much about WisCansin, save that it’s an unheralded strong industrial state, even though it gets little credit for the fact.
Perhaps they have state budget surpluses, I’ll leave that to you to inform us.
In the meantime, do you think Brohm will be in the driver’s seat by October, or what?
_
Of course NYC real estate is doing well, it is being bought up by foreign investors. Soon they will rename NYC to New Euro City. sooner or later, they eat cake.
Hater of Duc:
Foreigners have been buying places in NYC for centuries, but even they tend to “top tick” in times like this.
Think about the Japanese in the mid eighties, buying Rock Center at diamond prices, while the Rockefeller family laughed up its’ collective embroidered silk sleeve.
Foreign buying has actually come down quite a bit as of late in NYC. they bought heavily in 2006 and 2007
IMO
if the fed raises rates or has very tough language towards inflation, stocks and the dollar will rip higher and crude and gold will have coronaries.
Infrastructure is dead?
You need to look a little farther than your apartment window.
Check what’s happening in Dubai, China, India, Brazil among other places.
TEX earning $7.90/share in 2009 — looks cheap.
jake-
do some research on the tax rates (property, sales, gas, cigs etc) in wisconsin.
when i moved here and got my property tax bill, i tossed it aside, laughing, thinking it was obviously a mistake and the decimal point was misplaced.
you know where this is going.
judging from where i think you are politically, its your worst nightmare.
excellent schools tho….and you wouldn’t believe the level of public services.
TSO
july 22.5 have traded 54,000 contracts more than 3 times open interest. someone thinks they know something.
also tso strongest refiner today by far.
Who the fuck cares about New York. Here in the the midwest, every farmer has a new truck and new custom chopper. They all have new tractors, along with brand new equipment. Each one of them has a new house miles away from the farm. Kansas City will be the next financial center of America.
are the bulls looking for dovish or hawkish talk tomorrow? i’m wondering if the mkt rallies on higher rate talk due to its impact on the dollar.
Those asshat farmers need to buy a boat, not a tractor. And if Kansas City becomes the next NYC, I will eat the FLYs blog….mark that!
Kansas City? That was the funniest thing I have heard all day you dumb tobacco chompin’ redneck.
Those dumb fucking farmers with their new John Deeres do not own them outright. Once commodity prices soften as a whole, they will have to pucker up real tight to make that payment on their shiny new tractor.
Then what do they do?
They come crying to the tax payer needing more farm subsidies.
This has happened before, it will happen again.
Kansas City, what a joke.
I love them midwesteners…
http://youtube.com/watch?v=kB-srEwhfuI&feature=related
F’ing NYC prices need to DROP. My wife and I are sitting on cash and a rental and getting very freaking impatient.
BHH, be patient prices will drop but slowly. i just saw some asshat i know on cnbc talking about the bottom in housing and some other bozo said nyc prices are holding up. if you look at the same property, prices are not holding up that well. there just aren’t as many people who can afford 10-20% down on a $1mm apt anymore.
Douche – take note:
TEX typically gets only 20-30% of its revenues from such countries overall. It still relies heavily on the US and old world Europe.
Patience is not something in the vocabulary of a (beautiful, sweet and loving) woman looking to nest. Apparently, the banks are laughing 800 FICO scores right out of the branch for anything less than 15% down – according to our guy at Chase.
FTK taking a Carrie Bradshaw Jimmy Choo to the nuts.
the market looks like shit
All the major index charts are fucking bearish, why in the hell would anyone think “we are going to see a bottom here.”
Bhh… fuck the banks and take the Four Yorkshiremand approach…
House! You were lucky to live in a house! We used to live in one room, all twenty-six of us, no furniture, ‘alf the floor was missing, and we were all ‘uddled together in one corner for fear of falling!
The one red flag on FTK is that it wont rally when the mkt is up or down….trying to make sense of it myself…
Funny bhh, I have banks willing to lend to 650’s with 2 payments down for equipment leases.
Fuck Chase…just gotta look around a bit.
I found a new target market for LULU.
http://www.signonsandiego.com/news/mexico/tijuana/20080623-0534-mexico-borderyoga.html
People who wear their clothes should have their heads worked on.
Null,
A couple years ago I had a conversation with a new Indiana resident, a former denizen of Wisconsin. His Indiana home had an assessed value identical to the one he owned in Wisconsin, but his property taxes were only one third of what he was used to paying. He said he’ll never move back.
Are the public services worth it?
I am fine with 20%, it is the asshats willing to keep throwing money at people who use a freaking Visa card for a down payment that are keeping things propped up.
I think there is only a .5 point spread now for jumbo vs. conforming as a result of the “stimulus”, does anyone know if that is suppose to expire anytime soon?
SMN chart looking good!
these people on tv are like, ‘speculators this, speculators that’. give me a break. there are plenty of shorts out there, too.
china prints money and buys all the oil they want. oil could trade at 150, and they’d still buy it vigorously.
wow, i guess that was pretty random on my part.
RS looks good here.
Death to CAT, TEX, CNH, FWLT, MDR, JEC, SGR, FLR & any other egregious infra stocks
Ag stocks getting beat with the Fugly sticks. Very bearish in light of successive days of upgrades in the sector.
I wouldn’t be short the market going into the FED meeting tomorrow. Recall the summer of 2006 when things were falling apart and we bottomed right after the FED announcement. A 200 point rally in a couple of hours. The market has been so weak as of late. You never know how they could spin the FED announcement to get a rally going.
NYC subway costs may be up but isn’t ridership up along with the revenue due to high gas prices?
Don’t know about NYC but in Philthadelphia, public transit ridership is up.