The Metropolitan Transportation Authority may delay payments to its pension fund if a New York State deficit-closing proposal reduces funds available to repay revenue anticipation notes, the MTA said yesterday.
Earlier this month Gov. David Paterson proposed a mix of cuts and revenue-raising measure to close a $3 billion current year deficit that, among other proposals, would reduce appropriations of certain dedicated taxes and fees to the MTA by $115 million. The cuts would hit the authority in mid-November.
The authority has to repay $600 million of Rans that are backed by those and other dedicated taxes on Dec. 31.
“We’d have six weeks to deal with it,” MTA chief financial officer Gary Dellaverson said at finance committee meeting. “Most likely we would delay payments to the pension fund.”
The authority’s monthly pension fund payment would be delayed until sometime in 2010.
Paterson’s proposed cuts require legislative action because the funds have already been appropriated to the MTA. Paterson has called for a special legislative session for Nov. 10 to address the state’s budget deficit.
The MTA sold the notes in July to make up for anticipated delays in revenue payments, including a new payroll tax and other revenue streams created by the Legislature as part of a state bailout package in May. Funds from the payroll tax, which is expected to bring in $1 billion this year, “are very slowly dribbling into MTA’s accounts,” Dellaverson said.
Paterson’s proposed cuts would reduce funds to the Metropolitan Mass Transportation Operating Assistance Fund by $90 million, he said. So-called MMTOA funds are made up of dedicated sales, petroleum, and transportation-related taxes. The remaining $25 million reduction would be in revenue that was to come from the state’s general fund and reimbursements for providing reduced fares for schoolchildren. The reduction in appropriated funds would hit the authority in mid-November, he said.
Dellaverson said the MTA has a substantial amount of cash-management actions it can take to deal with revenue shortfalls.
“I would probably agree with that assessment on the short term but on the longer term it’s a not a good trend you want to see,” said Standard & Poor’s analyst Laura MacDonald. It’s too soon to say what impact Albany’s potential action could have on the MTA’s credit, she added.
“The assumption is that once [funds] get appropriated that they’ll be receiving it,” MacDonald said. “There is appropriation risk but you look at their record, at least in the recent history of the MTA, money that has been appropriated by Albany they’ve eventually received.”
The MTA also announced yesterday that it would be in the market in early November with $150 million of bond anticipation notes sold on the Triborough Bridge and Tunnel Authority credit. The bonds will be sold competitively and may be used to refund $150 million of mandatory tender bonds sold earlier this year.
The MTA sold the tender bonds as variable-rate demand bonds that reset after the mandatory tender date of Jan. 20, 2010. The authority has not decided yet whether it will refund the bonds or remarket them, but it is required to have cash on hand at the mandatory tender date, MTA finance director Patrick McCoy said.
The Bans could be sold with a maturity between one to three years. The mandatory tender bonds and the notes allow the MTA to take advantage of low short-term interest rates at a time when the credit enhancement needed to sell traditional variable-rate debt has become very expensive. McCoy said he expects the MTA to sell the Bans at rates between 40 and 60 basis points.
Goldman, Sachs & Co. is financial adviser on the deal and Hawkins Delafield & Wood LLP is bond counsel.
The MTA also reported yesterday that its swaps have a negative mark-to-market value of $431.9 million. It has swaps with eight counterparties on a notional $4.28 billion of debt, out of a total of $27.3 billion of debt outstanding.
