30 Oct Airo Security Report: Metropolitan Transportation Authority (MTA) fiscal nightmar
“The MTA’s fiscal situation is incredibly dire,” said Andrew Rein, president of the Citizens Budget Commission. “They need to use every tool at their disposal.”
Rein said in addition to any federal stimulus money, the MTA will also depend on overall economic activity and negotiations with labor unions to shore up its budgetary woes.
But time is running out. The MTA will be submitting its 2021 budget to ts board in November and voting on it in December. Without any guarantee of federal funding, the service cuts will likely need to be outlined by that time.
More than 450,000 jobs across the region would be lost by 2022 if the planned cuts go into effect, according to a new report commissioned by the Rudin Center for Transportation Policy at NYU.
“It would totally devastate the city. It would isolate millions of people,” said Danny Pearlstein, policy and communications director at the Riders Alliance. “The MTA has been living on borrowed time since late summer when the CARES Act aid ran out.”
The Rudin Center report estimated an economic loss for the New York City region to be as high as $65 billion in the event the federal government fails to provide the $12 billion in requested federal aid to the MTA.
So far Congress has refused to budge, mainly because of reluctance from Senate Republicans, who say the nation shouldn’t spend that much money in states that have not manged their finances better. The Democratic House of Representatives has twice passed a stimulus package with the aid money included, only to see it languish in the Senate.
“This is money Congress could conjure into existence with ease and it would avert a fiscal crisis that would take the city decades to come out of,” Pearlstein said. He said some senators may not recognalize that New York makes up nearly 9% of the nation’s GDP.
The MTA has already begun preparing for alternative measures to shore up its fiscal house in the event Washington cannot come to an agreement on a fiscal rescue package this year, according to MTA Chief Financial Officer Bob Foran.
The agency has already tapped the Federal Reserve’s Municipal Liquidity Facility, a short-term lending program, and may borrow as much as $2.9 billion more in the coming months. Even so, the agency’s bond rating has been downgraded this year—it owes nearly $46 billion in loans from previous decades of fiscal mismanagement.
“The question is do they use these financial levers, their pension funds, their OPEB liability (Other Post-Employment Benefits), or do they borrow more before the end of the year?” Rein said. “That’s a really tough fiscal choice because they need to pay that money back over the next three years.”
The principal and interest payments on the debt risk “suffocating” the MTA, according to New York State Comptroller Thomas DiNapoli; 19.4% of revenue is scheduled to cover debt-payments in 2020, up from 16% in annual payments over the previous decade, with that debt-payment percentage jumping to 25% of total revenue by 2021.
For now, adding more debt may be the best choice for the MTA to avoid the worst-case scenario service cuts.
“It might be a way to bridge until other solutions arrive,” Rein said. “They still need to do everything they can to restructure and save money inside, and labor has to be at the table.”