Amtrak and the Metropolitan Transportation Authority — with New York Sen. Chuck Schumer as an intermediary — have reached funding agreements on two essential New York-area rail projects.
Quasi-public Amtrak commit $500 million toward upgrading rail lines north of Manhattan for completion of the Penn Station Access project, which will enable MTA-operated Metro-North trains from New York City’s northern suburbs to go to Penn Station on Manhattan’s West Side. All Metro-North trains now end at Grand Central Terminal on the East Side.
In exchange, the MTA, which operates New York City’s mass-transit system, will allocate $432 million toward rehabilitating Amtrak-owned tunnels under the East River that connect rail lines from Manhattan to Queens and Long Island, which sustained damage from Hurricane Sandy in October 2012.
Amtrak owns the East River tunnels, which the MTA’s Long Island Rail Road uses. The agencies have squabbled over the years.
Both Amtrak and the MTA can access a $30 billion rail account that was part of a $1 trillion infrastructure bill President Biden signed last month, Schumer, D-NY, said.
“The glue that put all this together was the $30 billion in the bill,” he told reporters.
The state-run MTA, meanwhile, is lining up its operational spending and borrowing for the upcoming year.
At least $2.6 billion of projected borrowing for 2022 will be on the table when MTA’s board meets Wednesday.
The board will also vote on the authority’s $18.6 billion operating budget and four-year financial plan. The MTA operates its finances by calendar year.
The MTA is one of the largest municipal issuers with nearly $50 billion of debt.
According to finance director Patrick McCoy, MTA officials next year expect to issue up to $1.8 billion for approved transit and commuter capital programs, up to $500 million for separate Triborough Bridge and Tunnel Authority projects; and the remaining $305 million of financing costs related to the central business district tolling program — Manhattan congestion pricing — which is under federal review.
“What this resolution does is also authorizes refundings that meet the board policy from time to time,” McCoy said before the finance committee on Monday. “We are 20 years past our MTA debt restructuring so we are expecting a substantial amount of refundings in 2022.”
The MTA is planning to offer $103 million of TBTA general revenue variable rate bonds, Subseries 2003-B-1, in January. Authority officials are replacing a letter of credit from Bank of America with one from U.S. Bank.
While transportation revenue bonds remain the authority’s primary credit, one municipal bond analyst said the MTA may continue to refund its transportation revenue bonds with its new and higher-rated payroll mobility tax bonds.
Payroll mobility bonds are senior to the TRBs, so payment of PMT debt service reduces pledged revenues to the TRBs.
“The PMT bonds are an overall positive for the MTA because they are lowering interest costs,” said John Ceffalio, senior municipal research analyst at CreditSights, in his overview of the MTA’s finances.
Continued refunding of TRBs with payroll mobility bonds would lower TRB debt service and also reduce the flow of residual PMT revenues into the TRB indenture, Ceffalio said.
“We expect the MTA to maintain good coverage in the TRB lien, yet we note the increased prominence of the PMTs leaves the remaining TRBs more exposed to farebox revenues.”
New York State, as part of an MTA bailout in 2009, enacted the payroll mobility tax, a 0.34% levy on payroll expenses and net earnings from self-employment, assessed in New York City and seven surrounding counties.
The bonds are remote from farebox revenues and MTA operations, “which make them more similar to other transit bonds around the nation,” Ceffalio wrote.
Ridership on the MTA’s subways, buses and commuter rail is slowly recovering from COVID-19, yet still about 49% below pre-pandemic levels. Work-from-home trends and the severity of coronavirus variants are huge variables.
The MTA has multiple debt liens, “each with differing but interrelated securities,” Ceffalio said. The transportation revenue bonds have been the authority’s working lien for many years. Both the PMTs and dedicated tax fund bonds have open-loop indentures and residual funds flow to the TRB indenture.
State Comptroller Thomas DiNapoli, meanwhile, called on the MTA to publish a new assessment of its long-term capital needs that focuses on the threat of climate change to transit.
He said the authority’s most recent 20-year assessment shows many capital needs are overdue for attention.
“The MTA is getting a large infusion of federal infrastructure funds, but its long-term finances are still in trouble as it wrestles with an overdue list of repairs and upgrades and growing debt,” DiNapoli said in his
