Amid its myriad struggles, New York’s Metropolitan Transportation Authority has renewed hope for movement on its stalled Manhattan congestion pricing program.
According to Chief Development Officer Janno Lieber, Federal Highway Administration officials under the Biden administration have said they would fast-track and clarify an environmental review process that has sat in Washington limbo for more than a year.
The MTA anticipates $1 billion in annual net revenue from congestion pricing, which passed in April 2019 as part of the state budget package. Authority officials expect to be able to issue up to $15 billion of bonds related to the project for the 2020 to 2024 capital program.
“While we don’t have certainty about the exact timeline, there’s hope that this funding stream is going to be restored by the end of this capital program, and we hope well in advance of the end,” Lieber said at Thursday’s monthly board meeting. "What they conveyed was that they understood that this had been sat on by the previous [Trump] administration and had not been dealt with timely or appropriately."
The board approved up to $506 million in Triborough Bridge and Tunnel Authority second subordinate bonds and bond anticipation notes — the third lien, basically — to fund Central Business District tolling system costs, including collection infrastructure.
“This is to get us poised to get up and running for the time we get the federal nod,” Deputy Finance Director Marcia Tannian said.
The state-run MTA, one of the largest municipal issuers with $48.3 billion of debt including special credits, operates New York City’s subways, buses, two commuter rail lines and several interborough bridges and tunnels.
Debt service accounts for 17% of its operating budget.
At a five-hour meeting that included discussions about safety and policing, a proposed diversion of $145 million from the MTA by state officials to balance its general fund and the need for further federal rescue aid, the board approved toll increases of 7.1% on average for its bridges and tunnels. Officials said this would add $62 million and $116 million in 2021 and 2022, respectively.
It previously put biennial subway and bus fare hikes on hold.
Despite a combined $8 billion from the federal CARES Act and the Coronavirus Response and Relief Supplemental Appropriations Act plus $2.9 billion from last year’s Municipal Liquidity Facility deficit financing, the MTA still faces an $8 billion cumulative gap through 2024, Chief Financial Officer Robert Foran said in his four-year financial plan update.
The MTA is asking for $8 billion in the American Rescue Plan, President Biden’s $1.9 trillion package before Congress. Transit systems nationwide are seeking $30 billion.
Foran said the authority will be able to defer its use of Municipal Liquidity Facility proceeds until this year. The Federal Reserve discontinued the MLF on Dec 31.
While the MTA was able to hold off on draconian service cuts of up to 40% on subways and buses, and 50% on commuter rail, Foran said “rightsizing” service could still be on the table. He referenced a report by consulting firm McKinsey & Co. that projected ridership to return to only 80% to 92% or pre-pandemic levels by the end of 2024.
“The wolf isn’t at the door this year,” Foran said. “[But] if the new normal is less than pre-pandemic levels, it’s a question of when do we start to address it.”
Rachael Fauss, senior research analyst for the good-government organization Reinvent Albany, called a reported $145 million diversion by the state budget office from the MTA to the general fund “a backdoor tax on riders,” and said the move could trigger a capital markets backlash. The switch would include about $100 million from the Metro Mass Transportation Operating Assistance Fund, and $6.5 million from the Central Business District Trust Fund.
“Without transparency of the money, as taxpayers, we can’t hold state government accountable, and as fiduciaries of the MTA, the board cannot uphold its duty to the agency, bondholders and riders,” said Fauss. Citing a Kroll Bond Rating Agency report, she called the timely release of state-appropriated funds “critically important.”
Foran said the $145 million in question involves aid to localities and agencies such as the MTA, and hinge on the levels federal funding the state will receive.
“The MTA is part of that, but it affects school districts and others,” he said.
New York State’s executive budget capital plan, released Jan.19, calls for a $22.9 billion increase in net debt outstanding over the fiscal 2022 to 2026 period, with more than $6 billion in increased debt for the MTA. According to Moody’s Investors Service, the state had originally intended to offset certain MTA debt service costs with increased annual aid payments rather than bonded debt.
“The change would not affect the state's overall obligations, but the state's higher debt burden will reduce its longer-term financial flexibility, a credit negative.” Moody’s said. “The shift from annual budget outlays to bonded debt for the state’s MTA commitments underscores the credit implications of the close financial relationship between the state and some of its subsidiaries providing critical services.”
Transportation systems nationwide are in a Catch-22 quandary of service-level costs and economic revival from the pandemic. The effect of a crime on ridership and farebox revenue is also a concern. A spike this past week included four attacks and two killings on the A-train. City officials have agreed to deploy 644 additonal officers to the system.
The MTA this week narrowed its overnight closure to 2 to 4 a.m., effective this Monday, from the 1 to 5 a.m. in effect since May 6.
“We have 24-hour vaccination sites but not 24-hour subway service,” City Council Speaker Corey Johnson said at a council transportation committee oversight hearing last week. People most affected, he said, are low-income persons and critical workers such as healthcare personnel.
“I want to make sure we're not compounding the inequities,” Johnson said. “I’m frustrated that the economy will continue to be hobbled a bit."
Johnson repeated his call for the city to to take over the MTA's New York City Transit operations.
