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Dire Straits at MTA

The New York Metropolitan Transportation Authority unveiled a beggar's budget yesterday that threatens draconian service cuts and fare and toll increases if it doesn't get help from the city, state and federal governments. In order to close a $1.2 billion gap in 2009, the MTA would reduce staff and cut subway lines and bus routes as well as hiking tolls and fares to yield an additional 23% of revenue.

MTA executive director and chief executive officer Elliot Sander called on the state legislature to implement the forthcoming recommendations of a state commission headed by former MTA chairman Richard Ravitch to prevent or lessen the cuts and fare increases.

"The Legislature has the authority to mitigate all fare and toll increases," Sander said. The so-called Ravitch commission will release a set of recommendations on Dec. 5 that will include funding options for operating and capital spending.

Sander, who is a member of the commission, did not say what proposals would be coming forth. He deferred to Ravitch a question about whether the commission would recommend the creation of a new credit and revenue stream the MTA could bond against. Sander said that he was "supportive of the concept of debt service when you have a revenue source backing it up." He criticized the 2000 to 2004 capital program as having been "totally refinancing, there was no real money."

According to published reports, the commission could recommend tolling bridges on the East River. Ravitch did not return calls yesterday but told The Bond Buyer in April that he hoped "the congestion pricing issue can be back on the table." Congestion pricing would have charged vehicles a fee to travel in much of Manhattan and those fees would have been securitzed.

The faltering economy has hit the MTA hard as dedicated tax revenue from real estate transactions, business and other sources has fallen.

The authority has to pass a balanced budget by the end of the year - before the Legislature is likely to act - and can only make spending cuts or raise fares. However, fare and toll increases were scheduled for June 2009, which allows some time for new revenue sources to be found.

The proposed 2009 budget does not include any cuts to the current 2005-2009 capital program and MTA officials have long said that the agency should not makes cuts there.

"Going back to the broken down transportation system of the '70s is not an option," MTA chairman Dale Hemmerdinger said. "Federal dollars, large amounts, should be invested in serious infrastructure projects around the country and particularly in our MTA."

The MTA's $21 billion capital plan runs 2005 to 2009 and it is in the process of creating a 2010 to 2014 capital plan that it will have to pass next year. The authority plans to market $2.29 billion of new money bonds in 2009, $2.2 billion in 2010, $1.91 billion in 2011 and $2.6 billion in 2012.

During that time annual debt service is forecast to rise from $1.45 billion next year to $2.24 billion in 2012, a 54% increase

The authority assumes it will pay 4% on its variable-rate debt during that period. This rate may be conservative. The Securities Industry and Financial Markets Association Municipal Swap Index, which is compiled from the resets of seven-day variable-rate demand obligations, has rarely approached that level over the past five years and has stayed well below 3% for most of 2008.

The authority assumes its fixed-rate debt will cost between an average 5.6% and 6.03% next year and will rise to between an average 5.9% and 6.36% in 2012.

The fare and toll increases would raise revenue by $670 million in 2009. Along with another 5% net increase in 2011, fare and toll revenue would increase by $1.51 billion by 2012.

The MTA has $26.35 billion of debt outstanding.

It's not clear what the next capital plan will look like, but earlier this year the authority created a 2008-to-2013 capital plan when the congestion pricing plan was being considered.

That plan called for $29.55 billion of capital spending - averaging $5 billion a year - of which $20.04 billion would have been for what the MTA termed its core program, $5.52 billion would have been to complete existing expansion projects, and $3 billion would be for new expansion programs. That program assumed $8.5 billion of new bonds backed by congestion pricing and additional support from the city and state. The congestion pricing plan died in the state Assembly.

Assemblyman Richard Brodsky, D-Westchester, chairman of the assembly committee on authorities and corporations, suggested a tax on millionaires as one solution to the MTA's budget woes.

"We're short a lot of money and we're either going to deal with it or we're not," he said.

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