New York's Metropolitan Transportation Authority has to close a $1.2 billion deficit in the next fiscal year, MTA officials said at a special finance committee meeting yesterday.
A combination of fare hikes and cuts to operating expenses will cut that deficit to $521 million in calendar 2009, leaving the MTA looking to a state commission and the federal government for help as it faces a double whammy of falling tax revenues and rising debt service costs, according to MTA officials and an update of the July financial plan.
Since July, projected revenues and expenses for 2009 worsened, opening up an additional net $284 million gap. In the face of the slowing economy, the state Budget Division has slashed projected business taxes, a portion of which is dedicated to the MTA.
Gov. David Paterson created a commission in April to find way to fund the authority's capital and operating expenses over the next 10 years. The panel, headed by former MTA chairman Richard Ravitch, will release its recommendations Dec. 5. A proposed 8% increase in fares and tolls for 2009 could go even higher, and services could be cut, if officials don't find additional revenue, the agency said.
"The financial information provided this morning to the MTA finance committee is another reminder of the dire fiscal situation facing all New Yorkers," Paterson said in a statement. "Addressing the fiscal challenges facing the MTA and the state over the next several years will require shared sacrifice, difficult choices, and cooperation from all funding partners."
Rising debt service costs that were around $400 million annually at the end of the 1990s are projected to rise to $2 billion by 2012, due to past borrowing. "The 2000 to 2004 capital program was essentially put on a credit card," said executive director and chief executive officer Elliot Sander. "What has occurred on top of that is now the deterioration of real estate taxes and other taxes."
Since July, projected debt service costs has risen by $18 million and $54 million in 2009 and 2010, respectively, due to higher interest rates expected on fixed-rate bonds, MTA chief financial officer Gary Dellaverson said. In light of market conditions, the agency raised its interest rate assumption for fixed-rate debt to 6.5% from 5%. The MTA has not modified its bonding programing in the new projections, Dellaverson said.
In June, Sander said the authority was facing a $15 billion to $20 billion shortfall in its 2010 to 2015 capital plan which will be proposed next year.
Earlier this year, the MTA created a $29.55 billion capital plan proposal for 2008 to 2013 as part of debate over a proposed congestion-pricing plan that would have charged fees to drivers entering or traveling within much of Manhattan. That proposal died in the state Assembly.
According to published reports, the Ravitch commission may recommend tolling bridges on the East River and bringing back some of the congestion-pricing proposals. The bridges are owned by the city which would have to approve such a plan.
Sander, who is a member of the commission, said he was comfortable with tolling the East River bridges but stopped short of endorsing it as a proposal.
Sander said the MTA does not want to cut back on its capital program.
"We need to adopt a robust capital program," Sander said. "The issue is how we finance the capital program as opposed to cutting back. We feel passionately ... that we cannot go back to the '70s and '80s."
The MTA's July financial plan had counted on city and state actions, such as the city taking on costs for a paratransit program, that it now no longer expects to benefit from. Those actions would have been worth $966 million from 2008 through 2010.
While the MTA has painted a dire picture, Standard & Poor's director Laura MacDonald said that the projected gaps were not unlike others it had face before.
"The numbers are similar to what they've previously forecasted in other years and they've always managed to find a way ," she said. "The only other substantive difference is it's just a harder operating environment for them given the overall economy."
The MTA has a $23.7 billion capital program for 2005 through 2009.