New York MTA Finances in ‘Perfect Storm’ as It Seeks Federal Aid

(Bloomberg) -- New York’s Metropolitan Transportation Authority has a list of immediate needs: liquidity, bond market access, additional federal aid and a way to solve what could be a $8.5 billion budget deficit this year.

“They’re all happening at the same time and so that really is bringing us kind of just a perfect storm financially, but I think we’re prepared to address it,” Bob Foran, the MTA’s chief financial officer, told reporters Wednesday following the agency’s monthly board meeting. “The federal government has come through, the state government has come through for us, and I believe that the bond market will come through as well.”

The MTA is seeking an additional $3.9 billion federal bailout to help cover lost revenue for the nation’s largest mass transit system in New York City, the epicenter of the virus. Ridership is down about 95%, and system officials project MTA traffic may only recover to as much as 60% of pre-pandemic levels by the end of this year.

Calling this an “unprecedented financial situation,” the MTA is seeking additional lines of credit from commercial banks after tapping $1 billion last month, Foran said during the board meeting. MTA has $3.4 billion of liquidity, he said. The agency will test the municipal-bond market as it plans to sell bonds to roll over most of $1 billion of short-term debt maturing on May 15.

The MTA, which had $45.3 billion of debt as of March 6, may refinance debt for savings and possibly restructure bonds to push out maturities, but isn’t considering reducing principal payments, Foran said.

“Debt service after about 2032 drops off significantly, so we have a lot of room to put maturities out there,” Foran said. “We are not talking about haircuts.”

A future funding source is still in limbo. The MTA may not start receiving new congestion pricing revenue in January as expected. The agency plans to use those funds to back $15 billion of borrowing for capital needs. MTA is still waiting on federal guidance on environmental studies for the program, Pat Foye, the agency’s chief financial officer, told reporters.

“Given a combination of the pandemic and the delays in Washington, a January 2021 start is unlikely but we are doing everything we can on our side, on the MTA side, to advance it as much as possible,” Foye said.

The financial challenges come as 83 MTA workers have died of Covid-19, Foye, said during the meeting. The board Wednesday approved new benefits for families of MTA workers who died from the coronavirus.

The new benefit program will cost an estimated $37.4 million, according to MTA board documents. It gives a $500,000 payment to victims’ families and also provides health insurance for three years for spouses and dependents up to age 26.

“As we grieve these heartbreaking losses we want to make sure the families of these fallen heroes are cared for,” Foye said during the meeting. “Simply put it’s the right thing to do.

All three credit-rating companies have cut the MTA’s rating because of the dramatic revenue loss during the pandemic. The agency carries single-A credit ratings.

Passenger and toll revenue is down $238 million this year through March 31 as people follow recommendations to stay at home and avoid public transportation, according to MTA documents.

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