New York MTA Eyes Spending Cuts Amid ‘Fiscal Tsunami’
(Bloomberg) -- New York’s Metropolitan Transportation Authority is considering nearly $1.4 billion of spending cuts and may impose steeper fare increases than planned as ridership may not return to pre-coronavirus levels until almost 2023.
The MTA, the largest public transportation system in the nation, is in the midst of a “fiscal tsunami,” that’s wiped away 40% of its revenue, Pat Foye, the agency’s chief executive officer, told board members Wednesday during its monthly meeting.
The MTA may impose bigger fare and toll increases, delay pension contributions, freeze wages, and postpone or reduce its record $51.5 billion capital program if Congress fails to allocate more relief funds to the agency, MTA officials warned board members. Without federal aid, the agency this fall may sell debt to cover operating costs, which is called deficit financing, Bob Foran, MTA’s chief financial officer, told reporters after the meeting.
The potential actions follow the MTA’s announcement last month that it may need to cut its workforce, reduce service and use deficit financing to fill budget holes if the federal government doesn’t give the transit agency $3.9 billion of aid for this year and more assistance in 2021.
“None of these are attractive,” Foran said during the meeting. “None of these are things that we want to do, but we do have to review them. We have to consider them because absent additional federal funds these are the items that we will have to look to to get us out of this financial crisis.”
The MTA, which had $45.4 billion of debt as of July 8, is facing a $16.2 billion deficit through 2024 and is seeking a combined $10.4 billion of federal funds through 2021. The agency is mulling nearly $1.4 billion of combined spending cuts through 2024 to help cover lost revenue and an increase in cleaning and disinfecting costs. The board may vote on such reductions in December when it’s scheduled to approve future budgets.
Even before the coronavirus pandemic, the MTA was planning on increasing fares and tolls by about 4% in 2021 and 2023. While there are fewer riders across the MTA’s network of subways, buses and commuter railroads, the agency may be forced to boost those hikes by more than 4%, Foran said. Pre-coronavirus ridership levels may not come back until almost 2023, he said.
“We’re not going to see the types of revenues that we expected until we return back to the pre-pandemic level of ridership, which in the analysis that’s done for the transit system and the commuter railroads, does not happen until we get close to 2023,” Foran said.
Without additional federal funds, the MTA will need to borrow to cover operating costs, a move that would require board approval.
“We’re going to have to probably do something this fall in terms of deficit financing,” Foran said, if federal aid doesn’t come through. “Deficit financing just takes financing away from our capital program. It’s not a productive use of funds, but it’s just a way of getting yourself out there and paying the bills.”
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