New York's Patented Formula For Decline: Spend More To Get Less
/In New York, we love to feel good about ourselves because of our great "compassion" in turning high taxes over to the government so that it can solve all human problems. As you undoubtedly know, New York not only has a State income tax, and also a City income tax, and these are at such stratospheric levels as to place us right near the very top among the states. (California actually has a top rate of 13% that slightly exceeds the maximum New York State plus City rate at the very highest income levels.) The state closest to us in population -- Florida -- has no income tax.
You may be less aware of some other comparisons between New York and Florida. After rapid growth in recent years, Florida actually has slightly greater population: 20.1 million versus 19.8 million. Yet New York's annual state budget is about double Florida's: $150.7 billion for New York, versus $78.4 billion for Florida. Surely, though, for all that money, New York would have a much lower poverty rate than Florida? Not at all! In fact, the most recent reported poverty rates for both New York (State) and Florida are exactly the same: 14.7%. In New York City, where we spend even more money to cure poverty, the poverty rate is still higher: 15.4%. Per student school spending for K-12? In Florida it's $8881, and in New York $21,206. Go through the NAEP data here, and you will find that Florida outperforms New York slightly in most categories.
Our current Governor, Andrew Cuomo, is just getting started on his re-election campaign for his third term. The Republicans have at least one quality candidate running against him, Assemblyman Brian Kolb of upstate Geneva. But Kolb is little known in New York City or its suburbs, home to close to 70% of the state's population. Barring a melt-down by Cuomo, he is thought likely to cruise to an easy victory. Would you think that New Yorkers might care that they pay double and more national norms for inferior outcomes in most areas? Not that you can tell.
And indeed, if anything Cuomo is busy doubling down on failure. His two most recent big initiatives would seem to suggest that the whole idea of government in New York is to pay at least double what you need to to get basic services -- and perhaps far more. Here are the two big initiatives:
Congestion pricing. You may be aware that the New York subway system has experienced a recent spate of problems and extensive delays, leading some to start referring to the situation as a "crisis." Beginning in November, the New York Times ran a series of big articles about the decline in maintenance and increase in problems and delays, for example here and here. The series culminated with an article on December 28 by Brian Rosenthal, which finally got to the heart of the problem: New York's costs of construction and capital maintenance for the subway are way out of line when compared to national and international norms. In many instances the level of excess costs in New York runs five to ten times international norms. In a post here at Manhattan Contrarian on December 30 I commented that various projects in the pipeline "cannot and should not be built" until the costs come under control.
Ah, but that is not the New York way! On January 16 the New York Times reported that the "solution" that Governor Cuomo has come up with is a big new revenue raiser known as "congestion pricing," or, in other words, we're going to institute a charge to enter the southern half of Manhattan by car. A few days later, a commission appointed by the Governor issued a report called FixNYC, laying out the proposal in considerable detail. It looks like the charge will be around $11+ every time you come into the district. (Wait a minute -- I live here!) A version of the congestion pricing plan is now expected to be in the Governor's budget, due out soon.
So how about doing something about the way-out-of-line costs before we just throw multiple new billions at this problem? You will not be surprised to learn that there is not one single word about cost control in the FixNYC Report. Hey, the Governor wants the support of the Transport Workers Union in the upcoming election, so what do you expect?
Clean energy jobs and climate agenda. That's the euphemistic title of the Governor's upcoming plans for the energy sector, released January 2. Here are some highlights:
- Expand Regional Greenhouse Gas Initiative and Reduce Emissions Equitably From the Highest-Polluting, High Demand "Peaker" Power Plants
- Issue Solicitations in 2018 and 2019 to Develop at Least 800 MW of Offshore Wind Projects and Foster Offshore Wind Industry and Workforce in New York State
- $200 Million Investment to Meet Unprecedented Energy Storage Target of 1,500 Megawatts by 2025 In Order to Increase Transmission of Clean and Renewable Energy
- Create the Zero Cost Solar for All Program for 10,000 Low-Income New Yorkers
Where even to start? Of course, once again, there is nothing in this proposal about costs. Don't you know that this will create jobs? The more money we waste the better!
OK, I'll start with the third bullet -- $200 million to provide 1500 MW of storage. Do they know that storage is measured in MWH rather than MW? As far as I know, after recent large price declines, you can get battery storage for about $200,000 per MWH. The $200 million for 1500 MWH, if that's what they mean, would imply they're hoping for further price declines to about $133,000 per MWH, which may be optimistic, but perhaps not crazy. But the problem is that New York State has a capacity requirement of 40,000 MW, which means it could use up to close to 1 million MWH of electricity per day (that's 40,000 x 24). That 1500 MW(H) of batteries they are buying will be good for about 2 minutes of peak usage. Wind power can go dead for days on end. Do you want, say, three days worth of battery storage? That will run you more like $300 billion -- about double a full year's worth of the entire state budget. Do you think they would provide even the smallest amount of basic information about this extraordinary cost? Sorry, that's not the New York way.
And then there's the hare-brained idea that we can get rid of our fossil fuel electricity and replace it with lots of "offshore" wind. 800 MW worth! Oh, that's around 2% of our peak capacity requirement -- and wind doesn't work most of the time, only when it feels like it. Robert Bryce of the Manhattan Institute had a piece in the New York Post on Friday, dissecting the craziness of this proposal, headline "Cuomo's latest green-power fiasco." Key quote:
According to the latest data from the Energy Information Administration, by 2022 producing a megawatt hour of electricity from offshore wind will cost a whopping $145.90. Offshore wind promoters claim costs are declining. Maybe so. But according to the New York Independent System Operator, the average cost of wholesale electricity in the state last year was $36.56.
So the offshore wind starts out at a cost about four times that of our existing sources of power, and that's before you get to the extra costs for back-up, and storage (see above) and transmission that go along with the offshore turbines. By the time you're done making a full system that actually works 24/7, the total costs could easily be ten times what we currently pay.
But, that's how we do it here in New York. Cuomo will likely cruise to victory.