Transformation czar compounds uncertainty at New York MTA

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Montreal businessman Anthony McCord will arrive next month as New York Metropolitan Transportation Authority's chief transformation officer to address the authority's myriad operational and capital funding challenges.

The MTA board on Thursday approved the hiring of McCord, who most recently worked at service industry company Veolia as site director of the University of Montreal Health Centre. He has also held leadership positions at Bouygues Energies & Services, Air Liquide Group and Cryolor SA.

The transformation plan, which the MTA board approved in July and based on a recommendation by consulting firm AlixPartners LLP. MTA officials say the plan could save $1.6 billion overall, and $530 million alone by reducing up to 2,700 jobs — primarily through attrition and vacancies — largely through eliminating redundancies such as legal and human resources alone across the authority's seven agencies.

"Transformation is not transportation," said McCord, a native of Vancouver, British Columbia, whose salary will be $325,000. "It's about doing the stuff better that transit riders don't see."

MTA Chairman Patrick Foye scoffed at the media's "hatchet man" label on McCord, and denied that McCord and other expected high-end arrivals could form a new bureaucracy at the C-suite level.

"It's not cluttering," Foye told reporters.

The MTA is one of the largest municipal bond issuers with $44.6 billion in debt, including special credits.

According to Chief Financial Officer Robert Foran, the authority faces deficits of nearly $1 billion by 2023 without the transformation plan. "The transformation plan is critical. Otherwise, we will have unmanageable deficits in the future."

Foran on Thursday presented the November update to the authority's proposed $17 billion operating budget, which features no service cuts. The MTA functions on a calendar year and its board must vote on the spending plan in December.

The four-year plan factors in nearly $250 million for 500 additional police officers, fueled by a fare-evasion spike. Biennial fare increases will continue at a rate below that of inflation.

According to Foran, the state has begun to fund its $7.3 billion commitment to the 2015-19 capital program. "Our debt service is higher but operating aid is coming in, so there's no net impact on the operating side," Foran said.

Other financial variables, Foran said, include labor negotiations — the contract with Transport Workers Union expired May 15 — controlling overtime, and renegotiating the authority's Access-a-Ride paratransit service with New York City.

The MTA, citing costs that have spiked to $549 million this year from $11 million in 1994, when the authority assumed the service, wants the city to double its annual contribution to $372 million. A 50-50 split, according to Foran, would save the MTA more than $100 million per year.

City Hall responded by calling for an independent audit of the MTA's paratransit service.

The authority's proposed $51.5 billion, five-year capital program awaits action from a state review panel. The amount represents increases of 70% from the 2015-19 plan and 157% from the program for 2005-09.

The 2015-19 plan materialized after several amendments and a compromise among state, city and MTA officials. That caused an estimated $10 billion worth of project delays.

"The good news this time around is that based on the MTA's transformation plan mandate, any veto [by a Capital Program Review Board member] must be accompanied by an explanation," said Kroll Bond Rating Agency. "This will allow the MTA to address and revise the plan proposals to avoid any unnecessary delay."

Rachel Fauss, senior research analyst for the advocacy group Reinvent Albany, called on the MTA to release a detailed debt plan. She cited negative outlooks from Moody's Investors Service and S&P Global Ratings.

Andrew Rein, president of the watchdog Citizens Budget Commission, said the reliance on bonding and new revenue streams — including congestion pricing for Manhattan — will pressure the operating budget, with future capital plans needing additional new revenues.

Another $10 billion for the plan is to come from bonds backed by the expansion of the real estate transfer “mansion” tax and a new portion of state and city sales tax revenue.

"Long-term debt is an appropriate financing mechanism because it reflects the useful life of the assets and spreads the cost over time to those who use them," Rein said. "Still, its impact on the operating budget should be carefully considered. Debt service is paid with funds that otherwise pay for car cleaners, station maintenance, and other operating budget needs that improve the customer experience."

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Infrastructure State budgets Corporate governance Patrick Foye Andrew Cuomo State of New York City of New York, NY Metropolitan Transportation Authority New York