New York MTA May Get to Borrow $10 Billion for Operating Costs

(Bloomberg) -- New York’s Metropolitan Transportation Authority may get the authority to borrow for operating expenses as the coronavirus sends the mass-transit agency’s revenue into free fall.

New York state lawmakers are considering allowing the MTA, the largest public transportation provider in the nation, to borrow up to $10 billion for operating costs between 2020 and 2022, according to the budget bill for the fiscal year that started Wednesday. At this time, the agency isn’t looking to do such borrowing, according to Bob Foran, the MTA’s chief financial officer.

“The MTA currently has no plans to issue such debt, but this provides an important option given the uncertainty relating to the magnitude and duration of the pandemic,” Foran said in a statement Thursday.

The MTA already owes $45 billion and runs on an annual budget of $17 billion. Any borrowing for day-to-day operations would illustrate the financial damage the coronavirus pandemic has inflicted on the agency. The MTA is losing an estimated $125 million each week in fare box revenue and bridge and toll receipts.

“It’s full deficit financing,” said Eric Kazatsky, senior municipals strategist at Bloomberg Intelligence. “But given the breadth and depth of the situation they really need to be able to use the $10 billion to bond for operating expenditures.”

MTA’s ridership decline is striking. There are 90% fewer customers on its subways and Metro-North Railroad usage is down 94%. The agency is set to receive nearly $4 billion in federal aid to cover lost revenue. But Pat Foye, the MTA’s chief executive officer, has said the system needs even more help from the state and federal government.

Financial Challenges

S&P Global Ratings last week cut the MTA one step to A-, the fourth-lowest investment grade, due to the financial challenges the agency faces from the virus. Moody’s Investors Service is reviewing the agency for a potential downgrade.

Yields on MTA debt jumped in March as the virus prompted investors to pull a record amount of cash from muni mutual funds. MTA transportation revenue bonds maturing in 2045 traded Thursday at an average yield of nearly 4.97%, up from an average 1.74% in February, data compiled by Bloomberg show.

“If this is the only way to make it operate for the riders, then this is what we’ve got to do,” Lisa Daglian, executive director of the Permanent Citizens Advisory Committee to the MTA, an internal watchdog, said about the potential deficit borrowing. “You’re holding your nose while you’re giving your thumbs up. It’s what the system is going to need to survive.”

Exposed Workers

Beyond the cash crunch, the MTA is also dealing with the outbreak’s impact on its workforce. More than 600 MTA workers have tested positive for Covid-19 and eight have died, said John Samuelsen, international president of the Transit Workers Union of America, which represents 41,000 MTA workers.

He faulted the agency for not supplying workers with personal protective equipment like masks and gloves sooner. More than two weeks ago, he said, the MTA told workers not to wear masks, a position it later reversed. Since then, the agency has been slow to provide masks, gloves and cleaning solution, he said.

“It’s been an epic failure on the part of the MTA to prepare,” said Samuelsen, a member of the MTA board. “They’ve absolutely exposed the workforce to Covid-19 through neglect.”

Still, he said, the agency was “much quicker than other transit systems, particularly given the size of the MTA, to understand the importance of disinfecting the trains and decontaminating trains and buses. But in terms of providing for the workforce, which is at this point among the most essential workforces in the country, they’ve been woefully and willfully neglected.”

The MTA is handing out an additional 100,000 masks to workers and has already distributed 240,000 masks since March 1 and 3.2 million gloves, the agency said in a statement Thursday. The MTA had been following -- up until last week -- the direction of the World Health Organization and Centers for Disease Control and Prevention regarding masks, which state such face coverings are not recommended for healthy people.

“We have made the decision to disregard previous medical guidance on masks so that we can provide additional comfort and safety to our steadfast, dedicated workforce,” Foye said in the statement.

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