New York’s Metropolitan Transportation Authority could face a downgrade on its transportation revenue bonds unless it finds new revenue sources, Moody’s Investors Service said in a special comment Thursday.

“The lack of recurring revenues, beyond sizeable fare and toll increases coupled with deep service cuts, puts the MTA on an operating path that may not support the current A2 rating on the system’s transportation revenue bonds,” the Moody’s report said.

Nearly half — $11.86 billion — of the authority’s $26.33 billion of debt outstanding is on its transportation revenue credit.

The MTA board voted on Wednesday to slash services and raise fare and toll yields by 23% in light of the New York Legislature’s failure to act on a proposal to create new revenue streams to support the authority’s operating and capital budgets. The MTA relies heavily on dedicated taxes, such as real estate transaction taxes, which have fallen precipitously over the past year.

Without new recurring revenues, “the MTA’s budget-balancing options will continue to rely heavily on fare and toll increases as well as service cuts. In addition, capital costs, (including debt service) will likely consume an increasingly larger share of the budget and thus strain operations,” the report said.

Increased fares and tolls, along with service cuts, will also likely hurt system utilization which has already been weakened by the recession, the report said. Large out-year budget gaps and tighter cash flows raise concerns about the MTA’s flexibility in managing its financial operations, Moody’s said.

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