New York MTA Says Federal Aid Deal Avoids ‘Devastating’ Cuts
(Bloomberg) -- New York’s Metropolitan Transportation Authority said it stands to receive $4 billion of aid from the economic stimulus agreement struck in Congress, allowing the nation’s biggest mass-transit system to avoid thousands of job cuts and deep reductions to bus, subway and commuter train service.
The latest coronavirus relief package will help balance the MTA’s budget through 2021 by making up for its steep revenue loss over the course of the pandemic. The MTA last week approved a $17.1 billion budget for 2021 that put off some of the draconian measures under consideration to close its deficit, assuming Congress would allocate more money to the agency.
“We are relieved and thankful to see Congress pass another coronavirus relief bill that includes $4 billion in federal relief for the MTA,” Pat Foye, the agency’s chief executive officer, said in a statement late Sunday after federal lawmakers announced a deal. “This crucial funding will allow us to get through 2021 without devastating service cuts and layoffs of over 9,000 colleagues.”
Such drastic reductions, which included some service cuts of as much as 50%, would likely have exerted a major drag on New York City’s economic recovery by wreaking havoc with residents’ daily commutes after the pandemic ends. The steps would have resulted in a $65 billion loss in yearly gross domestic product for the region and cost an estimated 450,000 jobs by 2022, according to an estimate by the NYU Rudin Center for Transportation Policy and Management.
Since the coronavirus first shut down New York City in March, the MTA’s revenue has tumbled as ridership on its subways, buses and commuter trains drops to about one-quarter of what was anticipated before the pandemic. The agency helped close the gap by borrowing as much as it could -- $3.4 billion -- through the Federal Reserve’s emergency-lending program, joining Illinois as the only two that borrowed from it.
The stimulus agreement struck in Congress over the weekend would give $14 billion to mass-transit systems throughout the U.S., less than the $32 billion public transportation agencies have been requesting. The MTA has been asking for $12 billion of federal aid.
The MTA has seen multiple credit-rating downgrades because of the pandemic and all three of the major credit rating companies give it a negative outlook, signaling it could be downgraded further. S&P Global Ratings grades the transit agency BBB+, the third lowest investment grade, while Moody’s Investors Service and Fitch Ratings hold it one step higher at A3 and A-, respectively.
Some MTA bonds gained following the agreement among federal lawmakers on the stimulus bill. MTA transportation revenue bonds maturing in 2028, among its most actively traded Monday, rose to an average of 128 cents on the dollar from 124 cents Friday. That cut the yield to about 0.8% from 1.33%, according to data compiled by Bloomberg.
While the $4 billion of federal funds will help cover the 2021 budget, the MTA projects a $16 billion deficit through 2024, according to budget documents. That gap will drop to $8 billion after the MTA implements anticipated spending cuts and redirects revenue from its capital plan.
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