MTA Eyes Rans to Close Gap From Withheld Subsidies

The Metropolitan Transportation Authority could sell revenue anticipation notes to fill a hole caused by New York’s withholding of subsidies, officials said at a finance committee meeting yesterday. This month the state has withheld $275 million of certain aid payments to the MTA, officials said.

“The state, because of its own fiscal issues, is not releasing certain funds to any of the transportation authorities in New York State,” said MTA budget director Douglas Johnson. The state has informed the agency that it won’t release certain funds to the MTA until it passes a budget, he said. The state has been operating on emergency spending bills since lawmakers failed to pass a budget for the fiscal year that began April 1.

The state is withholding funds, including Metropolitan Mass Transportation Operating Assistance revenue and certain motor-vehicle related taxes and fees.

Not all state aid is affected. A payroll tax on employers in the 12 counties served by the MTA and certain petroleum business taxes are still being transferred to the authority.

Chief financial officer Robert Foran said the MTA will wait to see how the summer and state budget shape up before deciding whether to sell the notes. 

“It all depends on, when is the state’s budget going to come in?” Foran said. “Right now we have cash in the bank — we’re doing fine, we’ve got the liquidity that we need.”

Earlier this year, the MTA authorized the issuance of $700 million of Rans and in March sold $475 million, leaving the issuer with excess short-term borrowing capacity if needed. Board member and New York City budget director Mark Page said the state “needs to get its act together.”

“Sure we’ll issue Rans, but it’s in anticipation of money that we’re dependent on the state to get,” Page said. “There’s no way to run this place without the state of New York functioning.”

The authority has been rolling out cost-cutting measures over recent weeks to help close its $800 million current-year deficit.

Also yesterday, the MTA finance committee deferred approval of a contract with New Jersey firm Swap Financial Group LLC for derivative advisory services after a board member called their proposed fees “usurious.”

Swap Financial proposed a $5,000 monthly retainer and hourly professional service fees that range from $200 to $600 for new transactions and agreed to reduce its fees by 10% for the first year of the contract.

Foran said he was prepared to renegotiate for a lower fee. Swap Financial managing director Peter Shapiro declined to comment. The finance committee approved hiring Lamont Financial Services Corp. to replace Goldman, Sachs & Co. as its financial adviser.

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Transportation industry New York
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