Public finance veteran Robert Foran will today be named the new chief financial officer of New York’s Metropolitan Transportation Authority. Foran, 53, a public finance banker for nearly three decades, has been working with MTA since the 1980s and was a key figure in its $15 billion restructuring that began in 2002.
“Bob is brilliant in my book and incredibly knowledgeable about the MTA,” said chairman and chief executive officer Jay Walder. “We need to find ways to be able to drive costs out of our company and really overhaul the way we do business and find the ways to do that without impacting our customer service, and I think Bob’s going to be a terrific asset in doing that.”
Foran, who last year joined Samuel A. Ramirez & Co. as a managing director, starts his new job on April 5. He replaces Gary Dellaverson who resigned in December.
The announcement comes just two days after the MTA board enacted $93 million of service cuts to help close an $800 million current year budget gap. The recession hit the agency’s revenue hard: dedicated real estate taxes that boosted the bottom line during the boom have tumbled; the state pulled back aid last year; and a bailout package enacted last year hasn’t performed as well as hoped.
“The biggest challenge I see is reducing our cost as much as possible while continuing to provide as much service as we can,” Foran said. The MTA’s deficits are “significant and they have to be addressed, so I’ll be part of the team putting together the overall plan to figure out what’s the right approach.”
Walder and Foran have known each other for awhile. The current chairman worked on the MTA capital plan in the 1980s when Foran was a banker at Morgan Stanley working on MTA deals.
Foran moved on to Bear Stearns in 1989 and kept working on MTA deals as Walder rose to be its executive director and chief financial officer. Foran also worked on the Long Island Power Authority’s acquisition of Long Island Lighting Co. in the 1990s.
New Jersey Transit CFO and treasurer Kim Paparello Vaccari called the hire “an incredibly smart choice.”
“He developed a lot of the MTA borrowing programs,” said Vaccari, who was finance director during the restructuring. “He’s brought a lot of Wall Street creativity to the MTA and has allowed them to finance a whole host of different projects.”
As debt service costs have risen at the MTA, some have criticized the debt restructuring for pushing out costs that are coming due now and adding to its fiscal troubles. Foran was the lead banker at Bear Stearns that worked on the $15 billion restructuring of the MTA’s debt that allowed it to borrow an additional $4.3 billion for its capital program.
“There was a bond act that had failed, the capital program was short $4 billion because government had failed to fully provide for it,” Foran said. “The MTA knew that they needed to continue to invest so that the system wouldn’t fall into a state of disrepair. And so our job as bankers was to try to figure out how they could raise the capital they needed within the existing revenues.”
The restructuring consolidated the authority’s 16 credits into four: Transportation Revenue; Dedicated Tax Fund; Triborough Bridge and Tunnel; and state service contract. The transportation revenue credit combined commuter, subway and bus revenues into a single credit with a higher rating. “It reduces the borrowing costs,” Walder said. “I think from that perspective it was terrific.”
Foran will also be working on the MTA’s revised five-year capital plan that Walder said he expects to present to the board next month. Gov. David Paterson last year rejected the original $28 billion plan which had a nearly $10 billion funding gap. Walder said another reason for hiring Foran was his experience in presenting complicated financial issues.
“We need to be able to have a financial plan that has clarity and transparency,” Walder said. “I think Bob’s experience will go far to that end.”