DiNapoli to MTA: Fill Capital Gap, But Don't Soak Riders

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Fully funding its next capital program without burdening riders poses an immediate challenge for New York's Metropolitan Transportation Authority, according to state Comptroller Thomas DiNapoli.

Deep cuts to fill its projected $15.2 billion capital program gap could compromise its operations and imperil its megaprojects, DiNapoli said in a report on Tuesday.

"Additional borrowing could increase pressure on fares and tolls, and while the MTA should look for opportunities for savings, deep cuts could affect the future reliability of the transit system and jeopardize expansion projects," DiNapoli said.

Every $1 billion the MTA borrows to fill the estimated $15.2 gap in its four-year capital plan would increase debt service by an amount comparable to a 1% increase in fares and tolls, the comptroller said.

The Capital Program Review Board, consisting of top state officials, rejected the MTA's proposed $32.1 billion, four-year capital plan earlier this month.

The gap represents nearly half the program's total value, even factoring in the MTA's own contribution of $8.5 billion.

"The MTA network is a $1 trillion asset and is the engine that drives the New York economy," authority spokesman Kevin Ortiz said in a statement.

"The comptroller's report emphasizes how critical it is for all the MTA's stakeholders to engage in a dialogue about how to fund the capital program to renew, enhance and expand the MTA network," Ortiz said.

Lacking new resources, the MTA may have to close the shortfall through program reductions and increased borrowing, which according to DiNapoli is how it closed the gap in its current capital program.

The MTA's short-term outlook has been buoyed in part through its own efforts and in part by an improving economy, the comptroller said.

DiNapoli praised the authority for reaching new labor agreements - including a deal with Long Island Rail Road right before a planned July strike ---without accelerating the timetable for fare and toll increases, and funding new services.

Those agreements, though, will cost $1.5 billion more than the MTA originally budgeted, said DiNapoli.

He added, however, that labor agreements will begin to expire in 2016, and health insurance and debt service costs are rising faster than revenues, all of which elevate uncertainty about the latter part of the capital plan.

While the plan eliminates budget gaps from 2015 to 2017, a $262 million gap hovers over 2018.

"Health insurance, debt service, overtime and liability claims are all growing faster than revenues, and some long-term obligations are not well-funded," said DiNapoli.

The authority is one of the largest municipal issuers, with nearly $34 billion of debt. It operates New York City's subway and bus systems, Long Island and Metro-North railroads, seven bridges and two tunnels.

DiNapoli projects the amount of debt outstanding for the current and prior capital programs to reach $39 billion by 2018, more than twice the 2003 level. He added that debt service and other operating budget resources that support the capital program will reach $3.3 billion by 2018, or nearly four times higher than in 2003.

Speaking at a recent transportation conference at Baruch College, MTA Chairman Thomas Prendergast called debt service the lesser of the evils, and invoked the dark days of the early 1980s, when subway breakdowns and track fires were prevalent.

"I don't like debt finance. I don't like greater finance, but I'll tell you what. I'll take that increasing debt finance as a bridge to another day if in my fiduciary responsibility I have to make sure the asset doesn't go back to what it was in 1982," said Prendergast.

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Transportation industry New York
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