A generous settlement with Long Island Rail Road unions could divert critical pay-as-you-go funds from critical Metropolitan Transportation Authority capital needs and force more debt issuance, Moody's Investors Service said Friday.
New York's MTA already is one of the largest municipal issuers with roughly $34 billion of debt as of May 30.
A strike by the eight unions who work on the nation's largest commuter railroad and represent 5,400 workers have threatened could occur in nine days. About 300,000 people ride LIRR daily. The authority has established a strike-scenario web site and will release its contingency plan soon, if necessary.
A five-hour bargaining session Thursday afternoon, the first that included MTA Chairman Thomas Prendergast, produced nothing.
Both sides are scheduled to meet Friday, each saying it has a counteroffer.
"We're all concerned with trying to reach a resolution with this particular issue, and we will continue our discussions," Prendergast told reporters late Thursday.
Two emergency mediation boards, which the federal Railway Labor Act requires and which President Obama appointed, failed to broker a settlement in the previous months.
The MTA proposes a 17% salary hike over seven years, retroactive while the union wants that amount over six. The MTA's proposal would increase expenditures by about $21 million each year from 2015-18, which Moody's said is manageable considering that the cumulative amount is about 1% of total labor costs.
"If the union successfully negotiates a higher increase in salaries, the MTA would likely have to cut pay-as-you-go capital spending or reduce its voluntary deposits to a trust for retiree healthcare benefits [or other post-employment benefits, OPEB]," Moody's said in a report Friday morning.
The MTA is calling for health care contributions of 2% from existing employees and 4% from new employees. LIRR employees now contribute nothing. The authority also wants to stretch out the period from which employees can move up in pay grade.
"We have agreed to stay at the table," Anthony Simon, the chief union spokesman, after Thursday's session.
Moody's assigns an A2 rating to the MTA's transportation revenue bonds, the authority's largest credit. Standard & Poor's and Fitch Ratings assign AA-minus and A ratings, respectively.
The MTA's proposal includes $64 million for 2010-14 retroactive labor costs. According to Moody's, if the MTA reaches a deal similar to its proposed terms with unions for its other commuter rail line, Metro-North Railroad, that amount would double to $126 million for 2010-14. Labor expenses account for about 60% of the MTA's operating costs.
The MTA in April settled with the Transit Workers Union Local 100, which represents 34,000 subway employees. Moody's said costs from the TWU deal and agreements with LIRR and Metro-North Railroad unions could increase the MTA's operating budget by $152 million above the MTA's current budget projections for 2015.
Moody's said the MTA might similarly pay for the higher labor expenditures that would result if the LIRR settlement is generous.
