Financial outlook 'dire' as New York MTA approves overhaul plan

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The board of New York's Metropolitan Transportation Authority approved a consultant's far-reaching transformation plan for the organization that leaves many questions unanswered.

MTA officials, meanwhile, were more straightforward about the authority's fiscal outlook, which includes projected out-year operating deficits that could reach $1 billion.

"The MTA's financial outlook continues to be dire," Chairman Patrick Foye said at Wednesday's meeting, which lasted nearly five hours. "A lack of new, recurring sustainable revenue sources for the operating budget means that we're frequently back in the same place.

"The low-hanging fruit from a cost-reduction point of view and the middle-hanging fruit from a cost-reduction point of view have been plucked."

The MTA, one of the largest municipal bond issuers with nearly $43 billion of debt, has also been in damage control of late, troubleshooting during Consolidated Edison power outages, internal computer glitches, gushing rainfall at station platforms and falling heavy debris.

"It hasn't been the best of runs," said Andy Byford, president of the MTA's New York City Transit division.

Board members overwhelmingly accepted, at Gov. Andrew Cuomo's urging, the $4 million plan by AlixPartners to remake the 51-year-old, state-run authority. It calls for rolling 40 functioning groups within MTA agencies into six uber-departments including a dedicated capital construction unit, among other measures.

"It's a blueprint with final decisions to come," Foye said.

The MTA has too many layers, AlixPartners managing director Foster Finley told board members.

Finley referenced "a high degree of segmentation, differences in standards, differences in policies, differences in procedures, which can in many situations make lines of accountability blurred. [It] can in many instances make lines of accountability blurred, which make rapid resolution of issues more complicated."

The report called for front-ending the plan within the first six to nine months with some aspects completed over an additional two years.

Board member Veronica Vanterpool voted against it while David Jones abstained. Both are appointees of Mayor Bill de Blasio. They called the three-month review a rushed process and cited a lack of public input, among other concerns.

"We've not had a public engagement process at all," Vanterpool said.

While AlixPartners said the plan could save $370 million to $530 million annually, at best it would cover merely half the MTA's proposed deficit for 2020.

Despite biennial fare and toll increases, a fare-evasion initiative, annual recurring savings of $350 million and one-shots such as a hiring freeze, restrictions on nonessential spending and a $165 million drawdown from the 2019 general reserve, "significant deficits remain," Chief Financial Officer Robert Foran said while releasing the authority's $16.7 billion preliminary 2020 operating budget.

Debt service accounts for 17% of the spending plan.

The MTA, which operates on a calendar year, must finalize its operating budget in December. It expects to submit its new five-year capital program request to a state review board in September. Congestion pricing and other projected revenue streams are intended for capital projects.

The transformation plan, according to Foran, could help trim out-year deficits and debt. The alternative, he said, would involve service cuts, significant layoffs and possibly additional fare and toll increases.

For now, the gap estimates for 2021, 2022 and 2023 are $569 million, $816 million and $971 million, respectively.

Several transit advocacy groups accused Cuomo of railroading the plan through. They said the separation of capital projects oversight and the creation of high-end positions including a chief transformation officer and chief operating officer could, instead of streamlining bureaucracy, create a new one and trigger a dysfunctional chain of command.

"We have a lot of balls in the air that we don't have the answers to," said board member Robert Linn, citing variables such as collective bargaining. Linn is New York City's former labor commissioner.

"These are unknown quantities," Linn said.

New York's public transit union, Transport Workers Union Local 100, worries about the loss of up to 2,700 jobs.

Manhattan Institute for Policy Research senior fellow Nicole Gelinas suggested earlier this week that the MTA could improve its bottom line by $10 billion over a decade through initiatives relating to work rules, materials costs, commercially driven revenue and other measures.

"It is unquestionably the case that as we get deeper into this, that there'll be significantly more opportunities for efficiencies and cost savings," Foye said.

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Infrastructure State budgets Budgets Andrew Cuomo Patrick Foye State of New York City of New York, NY Metropolitan Transportation Authority New York