Massive borrowing for essential transit projects in the face of operational deficits is a dilemma for New York’s Metropolitan Transportation Authority as state officials pore through its proposed $51.5 billion
A review panel must act within 90 days on the program, which the MTA's board
The capital plan assumes 30% more revenue than from the 2015-2019 program, from imposing congestion pricing on lower Manhattan and a mix of new taxes, with both categories lockboxed for capital projects.
It’s also generated more scrutiny of the MTA on several fronts.
The $38 billion in debt through the new program stands to stands to push the MTA's debt ratio to more than 400% of revenue, Moody's Investors Service said Wednesday. Moody’s, while citing a “credit negative," acknowledged that significant system improvements could offset it through increased ridership and fare revenue, and enhanced regional economic growth.
While board member Veronica Vanterpool voted for the program, she worries about debt levels, given that operating deficits could worsen to $1 billion by 2022.
“One of the largest concerns that I have with this capital program is we have this historic [funding level] at a number we have never seen before,” said Vanterpool, an appointee of Mayor Bill de Blasio and a board member since 2016. “At the same time we’re facing unprecedented levels of deficit on the operating side. So how are you going to reconcile that?”
Gov. Andrew Cuomo, who essentially controls the state-run authority, has called for a forensic audit of the capital program. In a letter to MTA chief executive Patrick Foye, Cuomo also asked for inspector general review of the integrity of the authority’s procurement and inventory control systems.
Cuomo said the MTA's estimate for building elevators to provide disabled access at a single subway station at roughly $82 million per station "strains credulity.”
The MTA, which operates New York City subways and buses, two commuter rail lines and several intraborough bridges and tunnels, is one of the largest municipal issuers with roughly $44 billion in debt including special credits.
On Thursday the authority was scheduled to issue $600 million of transportation revenue bond anticipation notes.
The MTA also stands to benefit from nearly $16.7 billion of state, city and federal grants, which Moody’s expects to add capital asset value well above the new debt load. With the grant funding, said Moody’s, the increase in the MTA's debt-to-capital asset ratio will probably be more moderate than debt to revenue, rising to 65% from 57% in fiscal 2018.
The Federal Transit Administration has yet to approve the $2.9 billion New Starts grant for the Second Avenue subway along Manhattan’s East Side, which opened in December 2016.
“Therefore, grant funding has the potential to be less than expected and a drop in federal funding would likely delay completion of the Second Avenue subway project,” Moody’s said.
The pace of the MTA’s borrowing will heavily influence its debt ratios, though Moody’s said its ultimate debt burden would be consistent across various scenarios.
An important variable will be whether New York City and New York State backload their $3 billion apiece commitment, which they did for the current 2015-2019 program. In addition, borrowing on the new congestion tolling revenues will depend on the construction of the new collection system and the actual amount of revenues.
Upfront payments from the city and state are essential, according to state Assemblywoman Amy Paulin, D-Scarsdale.
“[Previously], the city-state money was the revenue of last resort,” Paulin told members of the advocacy group TransitCenter on Monday. “This time, if it’s the money of last resort, we’re not happening. So both at the state level and the city level, it’s got to be upfront money.
“The money of last resort has got to be the MTA’s $9.8 billion,” she added. “Because otherwise the money that’s borrowed is going to incur such a deficit into the operating budget that we’re not going to be able to fulfill the obligation of the $52 billion.”
The $32 billion capital plan for 2015-2019 — $3 billion of which was self-funded through bridge and toll revenue — materialized only after an intricate funding agreement among the state, the MTA and New York City and only after Cuomo initially balked, suggesting the plan was bloated.
