MTA budget gap looms despite new revenue sources, Kroll warns
Congestion pricing and other promised revenue streams for New York's Metropolitan Transportation Authority leave unanswered the question of how it will close its impending budget gap, Kroll Bond Rating Agency said.
Newly approved revenue sources will not affect holders of transportation revenue bonds, the MTA's workhorse credit, the rating agency said in a report Thursday.
Kroll rates the bonds AA-plus with a negative outlook. It rates Triborough Bridge and Tunnel Authority bonds, backed by bridge and tunnel toll revenue, AA with a stable outlook.
"TRB's indenture provides significant credit strength with a gross lien pledge that provides debt service coverage of 9.0 [times] based on 2018 actual pledged revenues," Kroll said in its report.
The state-run MTA, which operates New York City's subways and buses, plus Metro-North and Long Island commuter railroads and several intraborough bridges and tunnels, is one of the largest municipal bond issuers with nearly $42 billion of debt, according to documents from its May board meeting.
Congestion pricing for Manhattan's central business district is scheduled to take effect in 2021, with the tolling zone south of and including 60th Street. Neither FDR Drive nor the West Side Highway are part of the plan.
TBTA will be operator and administrator of the tolling program, with officials from the city's Department of Transportation collaborating on street management. A six-member transit mobility review board controlled by Gov. Andrew Cuomo will establish the tolls.
Kroll said the effect on demand for current TBTA facilities such as the Hugh L. Carey and Queens Midtown tunnels, and the Robert F. Kennedy Bridge, is unclear, although tolling program revenues and resources will reside outside the TBTA general revenue bonds waterfall.
Other dedicated revenue streams for the MTA under New York State's fiscal 2020 budget include portions of state- and city-collected Internet sales taxes, and a real estate transfer tax.
These new revenues, however, may not support operations or the MTA's outyear deficits.
According to an MTA disclosure supplement, those sources figure to provide the authority with nearly $1.7 billion by fiscal 2012, and up to $15 billion through bonding.
The MTA expects the funding to boost New York City Transit President Andy Byford's so-called Fast Forward plan, aimed at modernizing one of the nation's oldest subway systems.
"While the [Byford plan] addresses the immediate needs of the MTA, long-term fixes are still necessary," Kroll said.
On a cumulative basis, the MTA projects a $2.3 billion operating budget gap between fiscal 2020 and 2022, even after factoring in periodic fare and toll increases, cost-saving initiatives and other adjustments.
The MTA, and state and city political leaders, have yet to develop a plan to close the gap.
Pending labor deals also loom as a large variable, according to Kroll. "The pending labor contract negotiations and renewal present opportunities to close the budget gap or they could pose risks of widening the gap," Kroll said.
The MTA expects to submit its 2020 to 2024 capital plan request to a state review board by Oct. 1.
It got approval for the last one, roughly $32 billion, only after two years of political wrangling and an intricate funding deal among Cuomo, the authority and Mayor Bill de Blasio.
Kroll said it would continue to monitor the MTA's capital program, its funding sources and operating budget developments, as well as a pending reorganizaton. The authority is working with consulting firm AlixPartners on the reorganization.