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The Empire Review
Who's Building New York's Transit System?
Congestion pricing has arrived in New York City, and as $9 tolls begin hitting drivers' wallets, widespread skepticism looms over whether the MTA will actually deliver improved transportation. This skepticism isn't unfounded—the transit authority's track record with budget management is troubling, illustrated perfectly by projects like the East Side Access that exceeded initial budgets by billions.
But beneath this frustration lies an unexpected opportunity. While you're paying congestion tolls, have you considered owning a piece of the companies receiving those dollars? From Singapore Technologies Engineering (which secured a $550 million contract through its subsidiary Transcore) to Kawasaki Heavy Industries (which has delivered 2,200 subway cars since 1982), numerous publicly-traded companies stand to benefit from the MTA's massive $68 billion capital plan.
This approach connects directly to economist Thomas Piketty's groundbreaking work on wealth creation. While many of us focus on homeownership as our primary wealth-building strategy, Piketty's research reveals that "true wealth always consists primarily of financial and business assets." The wealthiest segment of society doesn't just own real estate—they own financial stakes in productive companies. As John D. Rockefeller once said, "I would have every man a capitalist... Own the industries, own the railroads."
New York's transportation infrastructure desperately requires investment—not just for city residents but for America's continued prosperity. As the financial capital of the world and the nation's third-largest economy, New York's functionality depends on reliable public transit. Whether you ride the subway or not, the people you depend on certainly do. Rather than just paying increased tolls and fares, perhaps it's time to consider owning shares in Kawasaki, Alstom, Thales Group, Skanska, and other companies building New York's future. After all, if they're getting your money either way, wouldn't you prefer to be on the receiving end too?
Welcome to the Empire Review, the channel that gives you a front row seat at the courtrooms shaping New York. I'm Jonathan Arias, so congestion pricing is officially in effect, and not everyone is happy, predictably. Now, in my last segment, I mentioned that the main reason why I think New Yorkers are against the plan is that we don't particularly trust that the MTA will improve public transportation based on its history. The real concern is that the MTA will squander the money that it receives from the tolls, and people have a reason to believe this. For the MTA, staying within a budget seems notoriously difficult. To use one example, the East Side Access Project was initially budgeted for $4.3 billion, but ended up costing nearly $12 billion. After doing some research on this segment, I was convinced that the state would implement this plan no matter what, and that nothing was going to stop it. I came to this conclusion after discovering that the MTA signed a $550 million contract with a company named Transcore, based out of Tennessee. I dug deeper and saw that Transcore is a subsidiary of another company named Singapore Technologies Engineering. It's based out of Singapore and goes by the shorter name ST Engineering. St Engineering is a publicly traded company on the Singapore Exchange, which is Singapore's primary stock exchange. After seeing this, I had a sort of epiphany. If the state is plowing $550 million of your dollars into ST Engineering, then we should seriously think about buying shares in this company. If the value of this company will now likely rise because of this lucrative government contract, wouldn't it make sense to get on the side where the money is going? After realizing this, I went on a sort of wild hunt for similar companies, companies that are building New York. I have a long list, but before I share it, I want to discuss I guess I'll call it higher level ideas that I hope this episode resonates strongly with you. If you don't want to wait, I understand, but you can skip to the end if you don't want to wait. I do warn, though, that this background information is what makes this list even more valuable.
Speaker 1:One book that has left a strong impression on me is this book called Capital in the 21st Century by French economist Thomas Piketty. In that book, he basically explains why and how wealth inequality has skyrocketed in the United States, as well as the entire world, since the 1970s. It's a massive book, but the most important lesson I took from it is the vital role of ownership and the role that it plays in generating wealth as well as exasperating inequality. To most of you, this isn't a surprise, right? We've all been told, for example, that owning a home is an elemental step to building wealth. Why pay rent when you can own a home? And when it comes to a car, the conventional wisdom is that you should pay it as soon as possible. But after reading this book, piketty made me see that I didn't truly understand this idea of ownership. Let me share a quote from the book. He writes nearly everyone in the top 10% of wealth distribution owns his or her own home, but the importance of real estate decreases sharply as one moves higher in the wealth hierarchy. In his research, piketty's data shows that people who are in the top you can say 9% hold half to three quarters of their wealth in real estate, but that the top 1% have nearly all their wealth in financial and business assets. Here's another quote Housing is the favorite investment of the middle class and the moderately well-to-do, but true wealth I'm emphasizing that true wealth always consists primarily of financial and business assets. Large fortunes consist primarily of financial assets, mainly stocks and shares and partnerships. Whoever owns ST Technologies, the company that the state is plowing millions of dollars into is likely in a position to create wealth. Let me raise the abstraction of this segment one last time.
Speaker 1:Over the last year I've been slowly reading a biography of John D Rockefeller by Ron Chernow. It's titled Titan. There's a section in the book where Chernow writes about the time that Rockefeller sets up his infamous Standard Oil Trust and he encourages his employees to take shares in the company. Now Rockefeller thought that if his employees held shares in the company that they would work harder. That seems reasonable. Chernow then shares a quote from Rockefeller that stood out to me and seemed a bit odd. Rockefeller supposedly said I would have every man a capitalist, every man, woman and child. I would have everyone save his earnings, not squander it. Own the industries, own the railroads, own the telegraph lines. This is a pretty remarkable thing to hear from the gold capitalist. Now, whether he genuinely believed or practiced this can be debated, especially considering how he ruthlessly stamped out his competitors. I highly doubt it. But to hear him say that everyone should own the industries is interesting. It almost sounds like something Karl Marx would say.
Speaker 1:Karl Marx is a sort of boogeyman to people like Rockefeller, but here's a quote from Marx that shows the ironic similarities between the two. In his infamous Communist Manifesto he writes you are horrified at our intending to do away with private property, but in your existing society, private property is already done away with nine tenths of the population. Its existence for the few is solely due to its non-existence in the hands of those nine tenths. Marx essentially believed that the few should not own the productive assets of society, because such an arrangement inevitably leads to exploitation, especially for the people who don't own them. What he's basically saying is that the top 10% of the population, or rather the 1%, can only own everything if 90-99% of the population does not. This idea is oddly similar to Rockefeller's idea of making every man, woman and child a capitalist and for everyone to own the industries, the railroads and the telegraph lines. These two historical figures clearly saw the world differently, but what they both seem to agree on is this idea of ownership. Let me repeat Piketty's line again True wealth always consists primarily of financial and business assets.
Speaker 1:This leads me to congestion pricing and the NTA in general. Congestion pricing is projected to generate $500 million per year at $9 a toll. Now, with this revenue, the state plans to issue $15 billion worth of bonds. This means it will borrow $15 billion, backed by the revenue it receives from the tolls. Now that $15 billion is only part of the $68 billion that the MTA says it needs to fund its capital projects over the next four years. All of this means that the MTA is planning to spend tons of money. It needs to.
Speaker 1:Our transit system is outdated and desperately needs repairs, and I will say that it's not just New Yorkers that need a better system. I would argue that the entire country needs New York's system to run better. Think about it New York is crucial to the continued prosperity of the United States. I know we can be arrogant, but we have the third largest economy and if we were a country, we would be the 14th largest economy in the world. On top of that, new York is also the financial capital of the world. So, considering that public transit is the backbone of New York's economy, it wouldn't be hyperbolic to say that the continued prosperity of the US depends on the MTA's ability to move people around. We all need this. Even if you're wealthy enough never to ride the train, the people you need rely on the subway. Even if you're wealthy enough to remove yourself from society in general by avoiding public transportation. Your nannies and housekeepers can't, your waiters need it, your chefs need it, the people who do your nails need it, your delivery people need it. In reality, we all depend on a properly functioning transit system. If we put all this together, it should be clear that New York will go above and beyond to get its money. Whether through controversial measures like congestion pricing, raising fares or increasing taxes, the state will find a way.
Speaker 1:So let's go back to the main idea of this video. Who are the companies that are building New York's transit system? What are the business assets that Piketty says creates true wealth? What are the industries that Rockefeller says he would have every man, child and woman owned? And what property does Mark say nine-tenths of the population doesn't have? I've already mentioned ST Technologies, through a subsidiary, transcor. That's one.
Speaker 1:Here's another Kawasaki Heavy Industries. It's a Japanese public multinational corporation traded on the Tokyo Stock Exchange. Why are they important? Well, because since 1982, dave successfully delivered 2,200 subway cars to New York Transit. To be more precise, the company that contracts with the MTA is Kawasaki Railcar Incorporated. Is Kawasaki Railcar Incorporated, which is a subsidiary of Kawasaki Railcar Manufacturing, which is itself a subsidiary of Kawasaki Heavy Industries. Tons of subsidiaries here. Kawasaki has a tight relationship with the MTA and also with New York, and actually has a factory in upstate New York and employs hundreds of people. This clearly shows that it has deep roots in New York. In 2018, the MTA awarded Kawasaki a $1.4 billion contract to supply R211 subway cars. Part of that contract gives the MTA the ability to order more subway cars. So in total, if the MTA exercises all its options, kawasaki would have earned $4.1 billion.
Speaker 1:Okay, I gave you one, but before I get to the rest, I need to lay out some warnings. First, I'm not a financial advisor. If you decide to invest in these companies, you're doing it at your own risk. You have to be aware that my coverage of these companies is limited to their activities in New York. You should conduct further research into other activities to get a better risk profile. So, for example, st Engineering has a solid contract with New York, but I don't know if they're another Enron. Second, I'm not suggesting that any of these companies are getting rich off of you or that they're price gouging the state or doing anything else wrong. I don't have any proof of that, but I think it's vital for us to know who's building our city, for a couple of reasons One, to monitor that they're indeed doing good work. And two, so you can get an ownership share if you can. Okay, with that out of the way. Let me get to it.
Speaker 1:I started my research by reading the MTA's capital plan for the years 2025 to 2029. In this document, the MTA lays out all the projects it has in mind and many of the companies it plans to work with. The MTA organizes its many needs into several categories. For example, it says it needs to modernize its signaling system and renew its power systems. I'll explain these systems in a bit, but for right now, I just want you to know how I organize my research. I went category by category and found companies along the way. For this video, I'll cover four categories and a few companies within. You can find the entire list at my website, theempirereview.
Speaker 1:The first need listed in the capital plan is new rail cars. The MTA says that nearly 2,000 of its rail cars are reaching the end of their useful life. Because of this, they plan to buy 1,500 new subway cars and 500 rail cars. Old cars break down more often, so purchasing new ones seems like a sensible plan. Break down more often, so purchasing new ones seems like a sensible plan. For this need. The MTA proposed a $10.9 million budget.
Speaker 1:I've already talked about Kawasaki, who seems to be the premier manufacturer of train cars. Another one is Alstom Transportation, which is a subsidiary of Alstom, a French company traded on the Euronext. Just like Kawasaki, alstom has a close relationship with the MTA. Since 2002, for instance, alstom has delivered 1,000 R160 railcars to the MTA. On top of that, many of Kawasaki's trains the premier manufacturer uses a gearbox developed by Alstom, and this gearbox was developed by Alstom with a $500,000 grant from New York State's Energy Research and Development Authority. This is why I think Alstom is such a critical company. This is why I think Alstom is such a critical company. It supplies a critical component a gearbox to the primary manufacturer, kawasaki, and it has a relationship with the Energy Research and Development Authority.
Speaker 1:The next major need is for the MTA to modernize its signaling system. In short, a modernized system improves train speed, frequency and reliability. I used to live steps away from the 7 train in Queens and those trains run back to back to back. During rush hour it might be the most reliable and frequent train. Why is the 7 train reliable? Because in 2019, its signaling system was upgraded. Here's a video that describes what's known as communications-based train control or CBTC.
Speaker 2:Unlike the conventional fixed block system, where train spacing is identified by the rail system, trains continuously communicate their status via radio to the wayside equipment along the line. So trains continuously receive information regarding the distance to the preceding train, adjusting the safety distance accordingly. Due to this dynamic detection via the real moving block operation concept, shorter headways between trains are possible, headways of 90 seconds or less, meaning more trains on the line, maximizing capacity. Due to the optimized braking distances, we achieve energy savings of up to 20%. Remote connectivity and monitoring provides you with the improved insight into services and network condition. Another advantage with our CBTC system is that it is able to operate in mixed traffic environments and different train types. Therefore, it allows easy migration of existing networks to improve the performance. So what does this technology mean for both the rail operator and the passenger? It means maximum reliability, safety and availability. It means maximum reliability, safety and availability.
Speaker 1:The company that upgraded the 7 train is a publicly traded French company named the Thales Group and is traded on the Euronext Paris. Thales completed this contract for $405 million. The original budget was $265 million, but, like most MTA contracts, they never stay on budget. Bad for the New York taxpayers, good for the companies. Thales has a lot of work in front of it. For the MTA In 2015, it was awarded a $49.9 million contract to upgrade trains along Queens Boulevard, like the E, f, m and R trains. I think the project is still in the works, and recently the Thales Group was also awarded a $406 million contract to modernize the G train, which goes from Queens to Brooklyn. For this contract, thales is partnering with a company named TC Electric. Tc Electric is a subsidiary of a larger company named Iovino Enterprise. Now, these companies are private, which means you can't invest in them, at least publicly or without knowing the owners, but I included it because TC Electric will likely be a very reliable employer over the next several years.
Speaker 1:The MTA also needs to upgrade its dated power systems. Power stations basically deliver electricity from utility providers to the trains. If you lived in New York for, let's say, over two years, you've experienced a power outage. The most recent one was on December 11th 2024, when an old electrical substation in Brooklyn exploded, leading to a power outage. Over 3,500 people were stranded for hours waiting for service to return. Power outages don't happen often, but when they do happen, they're incredibly frustrating and dangerous. According to the MTA, 40% of subway stations in the city have major components in poor conditions. That number is higher for the Metro North and the LIRR Subway stations. Excuse me, substations are also needed to power newer signaling systems, as I covered in the last section.
Speaker 1:For this need, I identified eight companies, but I'll share only one. As I said, you can get the rest on the website. The most prominent is Skanska. It's a Swedish company traded on Stockholm's Nasdaq. Like the other companies, skanska has a significant relationship with the MTA. They were involved in the first phase of the Second Avenue subway station, where they constructed a substation and the seven-line extension that brought the train the seven train all the way to the west side. They've also performed other smaller-scale projects, like escalator replacements and restoring track beds, two things that the MTA plans to do as well In 2023,. They were awarded a $480 million contract to build a new energy-e efficient bus depot in Jamaica Queens. So, as you can see, skanska seems like a company to consider.