The Metropolitan Transportation Authority will be challenged to close multimillion dollar deficits over the next four years but the New York agency is expected to balance its budget through state and local government assistance, fare increases, or operating cost reductions, Standard & Poor’s said in a report last week.

The MTA last week proposed a 2009 operating budget, which includes a fare and toll increase in July 2009 that does not have the support of the governor. The increase would be designed to yield an additional 8% of revenue.

“Without a fare and toll increase, as well as other revenues from city and state resources, MTA would likely have to consider reducing services,” the report said.

The authority is already dealing with rising fuel costs and declining real estate tax revenues at the same time it has a “limited ability to look to either the city or the state for further financial assistance, given their own funding problems.”

The Standard & Poor’s report said that additional funding from local, state, and federal sources as laid out in the MTA’s preliminary budget were “less than certain.”

Without additional the implementation of gap-closing measures, the agency projects a deficit of $191 million in the current year that would jump to $712 million next year and $1.67 billion by 2011.

“The MTA must decide how to balance additional revenue generation against maintaining services and conserving its limited debt capacity to ensure it can continue services to its customers,” Standard & Poor’s said.

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