In his annual report on the Metropolitan Transportation Authority’s (MTA) debt levels New York State Comptroller Thomas P. DiNapoli found that the MTA does not have the resources to fully fund its $54.8 billion 2020-2024 capital program. The report states that delays to capital projects, severe revenue declines, and increased borrowing, caused by the Covid-19 pandemic, are making the Authority’s capital program to repair, modernize and expand the transit system appear increasingly unrealistic. “The MTA’s mounting debts and devastated revenue make it unlikely that it can afford all the work it planned. The numbers just don’t add up. Either ridership and revenue must recover faster than the MTA expects, or the MTA must find new sources of income, or other financial support, to pay for additional debt service. The President’s proposed infrastructure program may provide capital funding to help the MTA reduce its borrowing, but this is still uncertain. If not, the MTA, and its customers, likely face serious cuts to upgrades and other work that could impact the quality of service.” DiNapoli said.
To cover farebox and other revenue losses during the pandemic, the MTA borrowed $2.9 billion to pay operating expenses. It now can no longer afford to pay for the debt service on $9.8 billion in debt it had planned to issue for the transit and commuter rail portions of its capital program. Unless the MTA can find new sources of income or cut expenses, it will have to cut the program by $2.9 billion or more or further delay projects.
The MTA’s outstanding long-term debt has tripled in the last two decades and the percentage of revenue it must put toward those debts has also grown dramatically. During the past decade, the MTA generally spent about 16 percent of its operating revenue on debt payments, but by 2024 debt service will devour 23 percent of revenues. Debt service is projected to reach $3.8 billion by 2028, which is $1.1 billion or 42 percent more than in 2020.
A recent report from Moody’s Investors Service puts bleak numbers on the future of mass transit agencies. The report states that changes in working patterns and lifestyle will trigger a permanent drop in mass transit systems’ ridership compared to pre-pandemic levels, creating an enduring loss of operating revenue for the largest public transit agencies in Europe and North America, including the MTA. As motorists recently learned, the MTA’s desperation for cash does not only mean increased tolls, it means increased penalties on top of tolls.
However, there is at least one major inaccuracy in the comptroller’s report. He notes that when congestion pricing is fully implemented that it will bring in $15 billion in revenue. First of all, given the changes brought by the pandemic it is at best optimistic and at worst reckless to assume pre-covid projections but even assuming pre-covid projections, congestion pricing is a debt scheme. The plan is to collect $1 billion in annual net revenue from congestion pricing. Using that, the MTA believes they can then issue up to $15 billion of bonds for the 2020 to 2024 capital program. So while the capital programs may have some more room to work with the agencies massive debt load will actually be increased by congestion pricing making it a poor solution to a gargantuan problem.