In contrast to the recent months of uncertainty swirling around the Metropolitan Transportation Authority's financial health, the New York agency released its preliminary 2010 budget and financial plan with little fanfare at its board meeting yesterday.
The worsening economy is hurting the authority's revenue, but the bailout approved by the state Legislature in May, as well as fare increases and gap-closing actions, will keep the budgets for the current year and next year in balance, according to the plan.
The preliminary budget calls for an $11.94 billion operating budget in 2010, a $820 million increase over the current year. The MTA expects to sell $2.58 billion of new-money bonds next year to finance its capital program, a drop from the $2.89 billion it expects to issue this year. The authority's new five-year capital plan will be released in the fall.
The bailout created new revenue streams that the MTA will initially use for operating expenses before using them to back bonds. The "mobility tax," a payroll tax levied in the 12 counties served by the MTA, is expected to generate $1.54 billion in 2010, but the plan doesn't assume the creation of a new credit backed by the tax and other motor-vehicle related fees.
"We'll start to make judgments about the credit after you start to see routine collections," said chief financial officer Gary Dellaverson. The MTA will wait to see how accurate their forecasts for the tax's revenues are before selling bonds against it.
"If it were a good credit early next year and we felt it was going to be better than [transportation revenue bonds], which it would be, you could be leveraging it as soon as issuances in 2010," he said.
The MTA sold $600 million of revenue anticipation notes backed by the new revenue streams earlier this month.
The four year financial plan forecasts selling $1.68 billion of bonds in 2011, $2.61 billion in 2012 and $3.45 billion in 2013. The plan forecasts a reduction of the split of new issue fixed-rate versus variable-rate debt to 90% and 10%, compared to an 85% and 15% split forecast in February.
Dellaverson said that the authority was being conservative in light of the volatility of the variable-rate market in recent history but that the mix could change in response to the market.
Annual debt service is projected to double from last year's $1.77 billion to $3.45 billion in 2013. As a percentage of operating revenues and subsidies, debt service will rise from 15% to a projected 19% during that time.
In April, Moody's Investors Service put the authority's transportation revenue bonds on watch list for a downgrade citing the magnitude of budget shortfalls and the absence of long-term funding to finance the system's operations and future debt service. Moody's rates the credit A2.
"In May they did get a solution but numbers weren't available until today," said Moody's analyst Nicole Johnson. Moody's will now begin a review of the credit but Johnson did not give an estimate for how long it would take.
The worsening economy has lowered the authority's revenue projections in the current and outyears, with ridership falling, pension costs increasing, and dedicated state taxes falling. The biggest drop has been in dedicated real estate taxes, which are projected to fall from a $1.59 billion peak in 2007 to $456.7 million in the current year before beginning to rise again slowly next year.
"This is a cautionary tale," Dellaverson said. "The more we rely on these kinds of taxes, the more the impact this has on us. The less we rely on these kinds of volatile taxes then the more stable it is and the more time one has to deal with it."
The MTA, which increased fares and tolls by a net 10% this year expects to increase them again by 7.5% in 2011 and 2013.
