DiNapoli: N.Y. MTA Finances Improving, Still Risky

New York's Metropolitan Transportation Authority has strengthened its financial condition over the past two years, but still faces continued challenges, said a report by state Comptroller Thomas DiNapoli.

They include the pace of economic recovery, litigation challenging the payroll mobility tax, collective bargaining and funding for its next capital program.

"Ridership is rising and the MTA's finances are stabilizing, but there are areas of concern," DiNapoli said after releasing the report on Wednesday.

The MTA runs the New York City subway system, regional commuter rail lines, and seven toll bridges and two tunnels.

DiNapoli said savings from debt refinancings now under way, or from a pending low-cost federal loan for the current capital program, could help fund the next capital program, mitigate future fare and toll increases or provide a reserve fund.

The MTA is refinancing $5.4 billion of its debt to take advantage of low interest rates. DiNapoli's office estimates that the refinancings could save roughly $75 million annually from 2015 to 2032, depending upon refinancing structure and interest rates.

Borrowing is on the rise, according to the comptroller. For the 2010-2014 capital program, $14.8 billion in borrowing accounts for 60% of funding for the program. Debt service is expected to reach $3 billion by 2016, 41% higher than in 2012, then level off at $3.2 billion in 2018.

The MTA plans $3.1 billion in bond sales over the final three months of the year. They will include several refunding and remarketing transactions, including floating-rate note deals.

Major capital projects include the Second Avenue subway line, East Side access for Long Island Rail Road trains and the overhaul of the Fulton Street subway hub.

Moody's Investors Service rates the MTA's transportation revenue bonds A2, while Standard & Poor's and Fitch Ratings assign A ratings.

The authority projects its baseline gaps to stretch from $487 million in 2013 to $759 million, $1.1 billion and $1.4 billion in the successive years. Fare and toll increases account for 82% of what the MTA identifies as resources to close the gaps, with new management actions accounting for the remaining 18%.

Its financial plan assumes 7% increases in fares and tolls in 2013 and 2015, which DiNapoli said is three times faster than the projected inflation rate for this period. If the MTA board approves the hikes in December, fares and tolls will have spiked by 35% since 2007.

"While the MTA has taken steps to hold down costs, more needs to be done to lessen the burden on riders," the report said.

Peter Derrick, a transit historian and former MTA executive, said DiNapoli should be asking Gov. Andrew Cuomo and the state legislature what funding sources, outside of MTA bonding out of the farebox, should be available for the 2015-2019 MTA capital plans, "since they don't want the MTA to publicly talk about this. Otherwise, MTA will need to keep raising its fares well above the rate of inflation. And, if the state does not continue to provide needed operating subsidies, the fare will go up even faster."

"I appreciate Comptroller DiNapoli's thoughtful and thorough analysis of our financial plan," MTA Chairman Joseph Lhota said in a statement. "His report recognizes the significant financial challenges the MTA faces in the near term, the aggressive steps we have taken to meet them, and our ongoing efforts to address longer-term challenges, including identifying funding sources for our 2015-2019 capital program."

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Transportation industry New York
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