While Metropolitan Transportation Authority officials have been touting the need for congestion pricing revenue during multiple public hearings, observers have cited broader challenges for the state-run agency that has been in crisis mode throughout the COVID-19 pandemic.
Debt is high, federal aid won’t last forever and New York City area mass transit ridership is uncertain.
Its financial outlook is precarious, state Comptroller Thomas DiNapoli reinforced on Tuesday in his annual report on the authority’s finances. “The MTA is the engine that drives New York City’s economy and it is running on borrowed time,” he said.
Bloomberg News
Federal aid, its lifeblood the past two years, will run out in 2023.
“The comptroller’s report is correct, if nothing too surprising,” said infrastructure expert Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research.
MTA debt, according to DiNapoli, will continue exceed 20% of operating revenues. While the share of total revenue needed to fund debt service averaged 16.1% from 2010 through 2019, it rose to 23% in 2020 — excluding federal aid, Federal Reserve Municipal Liquidity Facility proceeds, and new fare and toll increases — and could flirt with 20% in the out years.
DiNapoli’s report came out one day ahead of a planned state Senate hearing in Lower Manhattan on the MTA’s finances by two standing committees: Corporations, Authorities and Commissions, and Transportation.
“Predicting the pace of post-pandemic ridership recovery is difficult, but as revenue levels emerge and stabilize, all stakeholders will need to evaluate strategies to address the deficit created by COVID’s impact on MTA farebox revenues,” MTA spokesman Aaron Donovan said. “For its part, the MTA will continue to identify cost efficiencies while aligning service to meet public needs.”
If Congress passes a federal infrastructure bill now under debate, the MTA could receive more federal support than its capital plan now anticipates, DiNapoli said. Such support, he said, could lessen the need to borrow.
“There is no certainty that [President] Biden will come through again with a new operating-budget revenue,” Gelinas said.
The MTA is one of the largest municipal issuers with $49.3 billion of debt including special credits, authority documents show.
According to data on the Municipal Securities Rulemaking Board’s EMMA website, a block of Series 2016-D transportation revenue refunding bonds maturing in 2031 that originally priced at 119.934 cents on the dollar with a 2.72% yield, sold to a customer Tuesday at a price of 117.25 cents and a 1.547% yield.
Public hearings have begun throughout the tri-state region for congestion pricing, which would involve the tolling of vehicles entering Manhattan south of 60th Street. MTA officials expect this program to generate $15 billion for its 2020-2024 capital program.
While the MTA now assumes to start it in 2023, the launch date is still unknown and pending federal regulatory approvals. The Trump administration held it up for two years after the state included the measure as part of the budget it passed in April 2019.
Transit advocate Lisa Daglian said that while congestion pricing is essential, dedicated operating revenue such as more federal aid or other measures such as raising the gas tax, must also be part of the equation.
“The MTA and its riders need a long-term plan to avoid a financial crisis after federal emergency funds dry up,” said Daglian, executive director of the watchdog Permanent Citizens Advisory Committee to the MTA.
“Cutting service and raising fares, as the MTA is considering as it looks to the future, will only drive away riders,” Daglian added. She called on MTA officials to embrace “more equitable and creative fares” to restore ridership, including discounted 20-trip tickets and broader-based discounted commuter rail fares.
The MTA, after ridership plummeted as the pandemic escalated, is back to three million riders a day, though that’s still nearly half off pre-COVID ridership.
“It can’t really cut service commensurate with lower ridership, because people aren’t going to wait 15 minutes for a train,” Gelinas said. “Right now is the time for the MTA to be working with its workforce to deliver service more economically, not declaring an emergency sometime next fall.”
The authority has earmarked $10.5 billion of federal aid to close operating budget gaps from 2021 to 2025. That amounts to nearly two-thirds of its measures. Other maneuvers include fare and toll increases, deficit financing, service reductions, transformation plan savings and a wage freeze from 2022 to 2025.
The MTA’s forecast assumes the issuance of $2.4 billion of long-term bonds in 2023 to repay the bond anticipation notes issued to the Fed’s MLF to stem pandemic-related operating losses.
“Deficit financing is regarded as an undesirable fiscal practice that creates a long-term liability to manage short-term needs,” DiNapoli said. “The practice creates more costly fixed expenses in the long run for services already rendered, and takes valuable funds away from long-term capital investments.”
Speaking at Wednesday’s Senate hearing, Citizens Budget Commission vice president for research Alexander Heil said the MTA could save nearly $3 billion by 2024.
Steps include increasing subway and bus operations; increasing bus speeds; overhauling conductor deployment and modernizing commuter rail fare payment; and reducing employee and retiree healthcare spending.