NJ Transit CEO says fare hikes will keep agency from ‘death spiral’

NJ Transit CEO Kevin Corbett defended double-digit fare hikes the agency’s board approved Wednesday, arguing to lawmakers that more farebox revenue will help the agency maintain services as it braces to meet fiscal cliffs in the two coming budgetary years.

Corbett told the Senate Budget Committee Thursday that the fare increases, which were broadly opposed by activists who fear its impact on low-income commuters, are necessary to avoid service cuts that officials worried could depress fare revenue and send the agency into a “death spiral.”

“We’ve seen that firsthand with the private carriers who lost so much ridership after reducing their service levels. They were unable to recoup that ridership and abandoned their service this past year on our bus side,” Corbett told the panel.

Last year, numerous private bus carriers — including Coach, DeCamp, and TransDev, among others — announced they would stop servicing their bus lines, citing the worsening economics of commuter bussing and staggering ridership losses spurred by the pandemic.

The fare hikes — some as high as 15% — and the annual 3% fare increases the NJ Transit board greenlit Wednesday will allow the agency to overcome a $106.6 million budget gap it faces in the fiscal year that begins July 1, Corbett said.

The agency’s farebox revenue is projected to grow by $170.7 million in the new fiscal year, with the fare hikes that are effective July 1 responsible for $106.6 million in additional collections. NJ Transit faces a $766.8 million fiscal cliff in the fiscal year that begins July 1, 2025.

Gov. Phil Murphy has proposed the state fill that gap by enacting a new surcharge, called the corporate transit fee, to its corporate business tax that would impose a 2.5% surtax on businesses with more than $10 million in profit. The tax is forecasted to generate more than $800 million in revenue annually that lawmakers could dedicate to NJ Transit.

One Democrat, Assemblyman John Burzichelli (D-Gloucester), called Murphy’s proposal “a very unpopular move in some view” Thursday and told the New Jersey Monitor he does not support it.

“I personally think we have to fund New Jersey Transit a different way. I’m not favorable to that tax,” he said. “I think it happens this year, but that doesn’t mean it has to stay there. We have to find another way.”

Burzichelli acknowledged transit’s need for investment, invoking bankrupt railroads that were later nationalized into Conrail, and said his final vote on the tax could depend on whether it was a standalone bill or a provision within the state budget. He said he expected the surtax to win legislative approval either way. 

Sen. Paul Sarlo (D-Bergen), the Senate’s budget chair, previously opposed an extension of the corporate business tax surcharge — a substantially similar policy that imposed a surtax on businesses with more than $1 million in profit — but he declined to comment on the corporate transit fee proposal Thursday.

Praise for MVC

Lawmakers on both sides of the aisle on Thursday praised acting Motor Vehicle Commission Chief Administrator Latrecia Littles-Floyd, a turnabout from pandemic years when the agency was a frequent legislative punching bag.

Sarlo said calls to his office about wait times at MVC locations had largely abated recently, and Littles-Floyd won praise for her stewardship from some of the committee’s Republican members. She took helm of the agency responsible for issuing licenses and vehicle registrations in 2022.

“You’ve been really responsive. You’ve really fallen into the position very effectively. All of my communication with you, you’ve been responsive. Your staff has as well,” said Sen. Declan O’Scanlon (R-Monmouth).

Littles-Floyd told the committee her agency is exploring a legislative proposal that would allow New Jersey residents to register their vehicles for multiple years — at present, multi-year registrations are extended only to new vehicle purchases — but warned agency officials are concerned about the prospect of refund requests.

That bill, sponsored by O’Scanlon, would allow vehicles to be registered for up to 10 years, with annual registration fees paid upfront.

“One of our major concerns, too, is it results in refund processes or requests. We did talk about it when you and I met earlier this year, but we’ll continue to work with you,” Littles-Floyd told the senator. “I don’t want to really speak on legislation that’s still pending too much, but it’s something we’re looking into right now.”

Others asked about a new $50 million subsidy Murphy has proposed for the MVC that has raised eyebrows within the nonpartisan Office of Legislative Services. In a budget analysis, the office said it is “not clear as to why an operating subsidy in the magnitude of $50 million is necessary” for the coming fiscal year.

The analysis said administration officials had cited rising staffing and information technology costs, though OLS noted salary expenses are projected to rise by roughly $600,000 less than the agency’s revenue.

William Kelly, the commission’s chief financial officer, said high staffing and retainment had contributed to growing costs — MVC staffing in the fiscal year that begins July 1 is projected to be 7.4% higher than it was in fiscal year 2023 — but pointed to rising benefit costs as a bigger driver.

The agency’s fringe benefit costs had risen to 77% of employee salaries, Kelly said, more than twice what benefits cost the agency in 2019.

“We’re expected to pay $120 million,” Kelly said. “That significant increase is really impacting our budget.”