As RIOC’s Acting CFO Daeman Di Stefano reported financial troubles at the April 2023 board meeting, a jump in insurance premiums leaves a half-million dollar hole in the state agency’s budget. As the mostly superannuated board nodded in solemn agreement, he laid most of the blame on the Tram.
Last year, CFO John O’Reilly pinned increased costs for less coverage on the many lawsuits thrown at the Hochul/Haynes administration. But that’s not the picture preferred this year and may help explain why O’Reilly was abruptly ousted a few months later. Sunlight is poison for RIOC. It also adds weight to the profound losses from Tram operations.
by David Stone
Whether Di Stefano is correct or not in assigning blame, the inescapable fact is that the Roosevelt Island Tram is bleeding cash in buckets. And it appears that the Hochul/Haynes administration has no answer.
The Tram’s contribution to RIOC’s exploding insurance costs comes in at about $2 million of the $4.5 million total. Di Stefano pointed at increased ridership as the sole cause for a roughly 15% increase. But he also accurately noted that such increases are common nationwide this year.
Regardless of trends, that puts the Tram in a perilous position because it can’t operate at huge losses, year after year. It drains too much from an already poorly managed budget.
Note: While our numbers are reliable, they are rough estimates because neither RIOC nor the MTA are transparent about income or spending.
The Financial Troubles Imperiling the Tram
Before the Tram began accepting MetroCards, back in 2003, tokens allowed passengers to board. The Tram-specific coins had holes in the middle and were sold in 10-pack plastic bags. Even then, financial troubles over operations spurred efforts to trim back operating hours to save money.
MetroCards wiped that out, twenty years ago. Merging with subways eased travel by allowing transfers, but it also brought new revenue to RIOC. Part of the deal was sharing in income from transfers between systems.
A blessing then evolved into a growing burden now because RIOC agreed to a contract freezing sharing at the then-current $2.00 per ride. As charges increased, the MTA stuck with the deal, sharing two bucks and pocketing the rest.
As a result, RIOC’s annual shortfall – and the MTA’s windfall – grew to over $1 million per year.
What else changed?
In a misplaced attempt at containing costs, RIOC gave up management of Tram operations, contracting out everything to Leitner-POMA. Employees transferred too, keeping their jobs and silencing the most serious objections.
But while MTA revenue-sharing never budged, RIOC’s outsourcing contract did. The state agency now pays Leitner-POMA over $5 million per year for the Tram. The trouble is, RIOC now earns only about $4 million in revenue.
If RIOC successfully negotiates a new contract with the MTA, bringing revenue in line with current reality – a major if, given their hapless track record so far – it may bridge that $1 million gap.
That, however, does not alleviate the $2 million insurance burden.
However you slice it, the Tram operates today at an annual $3 million loss while RIOC continues pushing it as a tourist joy ride. Who benefits?
The most optimistic picture shows the Tram operating at a $2 million annual loss with no recognized source for filling the gap. With Roosevelt Island already the highest-taxed community in the U. S., taking even more from residents without any voice in governance may be the only option.