New York’s Metropolitan Transportation Authority is poised to issue $4 billion in short-term notes to cover operating needs because of a tri-state impasse over how to divide federal COVID-19 relief funds.
The full MTA board is scheduled to vote on the matter Wednesday.
"The regional allocation — what’s referred to as the whack-up — [among] New York, New Jersey and Connecticut is not resolved, and due to that continuing issue we need the money sooner,” MTA finance director Patrick McCoy told members of the board’s finance committee on Monday.
According to McCoy, the borrowing will cover expected federal grants under the Coronavirus Response and Relief Supplemental Appropriations Act and American Rescue Plan Act, both of which Congress approved this year.
The MTA stands to receive $10.5 billion of federal aid to compensate for lost revenue during the pandemic. Subway and bus ridership plummeted 90% in the early stages of the economic shutdown. New Jersey’s proposal would trim roughly $700 million from the MTA, a state-run agency that operates mass transit in the New York City region.
While New Jersey and Connecticut agree over the allocation, New York wants a larger slice.
“We do anticipate resolution soon,” McCoy said. The authority by Nov. 8 must file its application for a $2.2 billion competitive or discretionary grant for coronavirus support. “Part of that application process requires that regional allocations and sub-regional allocations must be resolved.”
The Federal Transit Administration will not mediate the dispute despite requests from interim MTA Chairman Janno Lieber and New Jersey Gov. Phil Murphy.
The MTA is one of the largest municipal issuers with roughly $50 billion of debt outstanding, including special credits.
According to McCoy, the MTA is scheduled to remarket $144.8 million of Series 2002F Triborough Bridge and Tunnel Authority general revenue variable rate bonds and $63.7 million of TBTA general revenue bonds Subseries 2008B-2. The MTA is converting the issuance from floating-rate notes to fixed-rate bonds, he said, because of market conditions.
The MTA designs its debt portfolio to manage budget volatility while maintaining a low cost of capital, McCoy said in the authority’s annual derivatives portfolio review.
The authority manages its interest-rate exposure by combining low-cost, synthetic fixed-rate and fixed rate portfolio management through refundings, and reasonable levels of floating-rate debt.
Exposure to liquidity events, he said, is manageable with variable-rate debt totaling $3.6 billion allocated between bank facilities and floating-rate notes.
