MTA's debt levels worry one board member

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The debt-service level of New York’s Metropolitan Transportation Authority worries board member David Jones, who wonders if it should cap its debt to a percentage of its operating budget.

“When I was chairman of a small bank, the regulators forced us to stress-test whether the finances of an institution would hold up,” Jones said at Monday’s MTA finance committee meeting.

“Do we stress test our borrowing? We already had one downgrade,” said Jones, a 2016 appointee of Mayor Bill de Blasio to the board and the chief executive of the nonprofit Community Service Society of New York.

Jones from 1996 to 2000 was chairman of the board of Carver Federal Savings Bank, the nation’s largest African-American managed bank.

“Are we taking into account a likely recession in 2019 or 2020, which is what my advisors are talking about? Are we calculating in further downgrades that might occur?” Jones added.

S&P Global Ratings in March lowered the MTA to A-plus from AA-minus, citing a spike in operating expenses and debt service requirements without matching revenue growth. The outlook is negative.

The MTA, a state-run authority that operates New York City's mass transit system, is one of the largest municipal issuers. According to MTA documents released Monday, it carries $38.8 billion of debt, not including MTA special obligation bonds or Hudson Rail Yards Trust obligations.

“Are there limits to more debt we can take on and reasonably operate the system?” Jones said.

New York City caps its debt at 15%.

MTA chief financial Robert Foran said debt service will amount to 16% of the operating budget he intends to release to the full board Wednesday. The authority operates on a calendar-year budget, with its board scheduled to hold a final vote on it in December.

“We have had projections that with each financial plan, when we look four years out, it’s been building up and getting to about 19%, but when we get there it seems that it’s always less, because we’re conservative in the estimates that we have for debt service,” Foran said.

“That’s been consistent over a number of plans.”

The MTA has scheduled a series of refundings and remarketings for August, said finance director Patrick McCoy. They include $275 million of Series 2018B Triborough Bridge and Tunnel Authority general revenue refunding bonds, and $160 million of Series 2018C TBTA general revenue variable rate bonds to refinance some outstanding debt.

Doug Johnson is retiring as director of budgets, the MTA announced Monday. Johnson has worked for the MTA for 35 years and held his current position for the last nine.

Last month Stephen Morello retired as the MTA’s counselor to the chairman.

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