New York MTA Warns It Will Slash Service, Raise Fares Without Federal Aid

(Bloomberg) -- New York’s Metropolitan Transportation Authority may cut subway and bus service by as much as 40% and boost fares by 5% in 2021 if the federal government fails to extend $12 billion of aid to make up for the revenue lost since the pandemic struck.

The possible service reductions and fare and toll increases by the nation’s largest mass-transit system would help the MTA balance a budget that’s losing $200 million a week. Its revenue collections are down 40% as people avoid taking subways, buses and commuter rail lines or work from home.

MTA officials detailed the potential changes during a special board meeting Wednesday. It follows MTA Chief Executive Officer Pat Foye’s warning Tuesday to state lawmakers that the agency -- which is crucial to the economy -- is focused on its survival. The MTA, which had $45.4 billion of debt, as of July 8, is facing an estimated $16 billion deficit through 2024.

The scale of the shortfall has left it pleading for more aid from Washington, where the Republican-led Senate has balked at providing another large round of economic stimulus. Without such help, the MTA may cut subway and bus service by as much as 40%. That would generate about $880 million of savings annually but increase the additional time between subway trains by as much as 8 minutes.

“The federal government must deliver for the MTA,” Foye said during the board meeting. “It is literally our only option for survival. It is shameful and outrageous that the U.S. Senate leadership continues to ignore our needs.”

MTA’s board would vote on the possible changes in November or sooner if the federal government doesn’t allocate the additional aid, Foye told reporters after Wednesday’s meeting. The MTA earlier this year received about $4 billion in the first federal coronavirus relief package.

The potential cutbacks would also heavily affect the commuter railroad lines into the biggest U.S. city. The agency may slash Metro-North Railroad and Long Island Railroad service by as much as 50%, including eliminating one or more Long Island Railroad branches, according to the presentation. The MTA could also delay the start of its East Side Access program, which would bring Long Island Railroad service to Grand Central Station.

The potential service reductions across the system could result in 8,350 permanent job cuts, according to the presentation.

No federal aid would be a “financial catastrophe for the state of New York,” Governor Andrew Cuomo said Wednesday on a conference call with members of the media. The lack of federal funds wouldn’t just mean a “hole in the dike called the MTA,” Cuomo said. “It would be a shotgun blast at the dike and you couldn’t possibly fill all the holes.”

The MTA was set to increase fares by 4% in 2021 and 2023 but may boost that to a 5% hike. Tolls may increase by an additional $1 in those years.

Officials have said large capital projects are also at risk of being delayed. That includes the long-awaited expansion of the Second Avenue subway, updating train signals and creating direct access to Penn Station from Connecticut and New York City suburbs.

The financial hit has unnerved bondholders, who have demanded high penalties for the risk of owning the agency’s bonds, causing it to become only the second to borrow from the Federal Reserve’s lending line for state and local governments. MTA bonds due in 2029, some of the most actively traded on Wednesday, sold for an average yield of 3.1%, or about 2.4 percentage points more than those on top-rated securities, according to data compiled by Bloomberg.

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