Without more revenue, New York’s Metropolitan Transportation Authority will exhaust its capacity to bond for new projects after 2014, MTA officials said Monday.
The authority’s 2011-2014 financial plan projects it will issue $9.02 billion of bonds over the next four years, including $6 billion backed by a tax on payrolls in the 12 counties served by the MTA.
“We think we’re tight,” chief financial officer Robert Foran told reporters following a meeting of the authority’s finance committee. “We think this is it.”
The new borrowing will increase the MTA’s annual debt service by more than $1 billion in six years — to $2.89 billion in 2017 from $1.73 billion in 2010, according to an MTA presentation. Debt service would then increase slightly and plateau until 2031, when it will hit $2.92 billion and then begin a series of drops until falling to $1.13 billion in 2040.
“So what you’re looking at is a time bomb,” said finance committee chairman Andrew Saul. “This is what’s happening when there is no other aid to our capital plan and we are strictly beholden to the debt market in order to keep the capital plan going.”
Foran said the funding streams for the new-money bonds have all been identified and approved. They include additional revenue from a fare and toll increase that was enacted this year, another fare and toll increase in 2013, the payroll mobility tax, and forecasted growth from existing dedicated taxes such as real estate taxes that have begun to improve after taking a big hit in the economic downturn.
The MTA expects to issue $1.36 billion of bonds this year, with $500 million in the second quarter and $860 million in the third quarter. A $750 million taxable Build America Bond deal that priced last month ahead of the program’s expiration took care of financing needs that the authority would have had in the first quarter of 2011. The MTA currently has $29.9 billion of debt outstanding.
The future of the payroll mobility tax appears less certain since Gov. Andrew Cuomo took office on Jan. 1. Cuomo did not mention transportation in his state of the state address and has called the tax “onerous,” according to published media reports. Cuomo’s office did not respond to queries about the tax.
The payroll tax has been unpopular in suburban counties served by the MTA. Long Island’s Nassau and Suffolk counties, along with several municipalities, have filed a lawsuit that seeks to overturn the tax, which was enacted in 2009 by the Legislature as part of a bailout package.
“Cuomo was just in the Hudson Valley again saying they should take another look at it,” Neysa Pranger, spokeswoman for the Regional Plan Association, said in an e-mail. “Not helpful.”
Gene Russianoff, chief attorney for the Straphangers Campaign, a group that advocates on behalf of riders, said in a statement that he hoped Cuomo’s apparent reappointment of MTA chairman and chief executive officer Jay Walder would preserve funding.
“Hopefully, this positive signal will be followed by positive actions, including Gov. Cuomo’s not raiding dedicated transit funds, as well as coming up with the billions needed to repair our aging transit system,” Russianoff said.
The agency referred queries regarding Walder’s reappointment to Cuomo’s office, which did not respond to calls or e-mails.
“The MTA is definitely not an island,” said Standard & Poor’s analyst Joseph Pezzimenti. “They require support from their constituencies.”
Standard & Poor’s rates the MTA’s primary credit, transportation revenue bonds, A with a stable outlook.
“What our ratings factor in is — despite them year after year forecasting out-year deficits — their ability time and time again to achieve a structural balance,” Pezzimenti said. “If their gap-closing measures and cost-containment measures don’t track close to forecast, well, then they’re going to have to offset that.”
Offsetting measures could include more rate increases, additional support from the city or state, or other types of new revenue streams, he said.
The MTA has yet to issue long-term bonds against the payroll mobility tax.
“We’re working on creating a PMT credit,” said MTA finance director Patrick McCoy. “We’re not prepared to talk about schedules at this point, but it’s something we’re working on.”
A new credit would require approval from the MTA board, a state-level review board, and credit ratings, McCoy said. An inaugural issuance this year is “a possibility,” he said.
The payroll tax was originally forecast to generate $1.5 billion in 2010, but came in at $1.35 billion, according to final figures released Monday. The MTA’s $26.27 billion, five-year capital plan is only funded for capital commitments made in 2010 and 2011, leaving a $9.9 billion gap.
“If the Legislature wants to close the $10 billion gap and they identify bonding as a source, we would hope that they would provide a revenue source to take care of that,” Foran said.
