The MTA Expects to Shrink Its 2025 Deficit — to $1.4 Billion
(Bloomberg) -- New York’s Metropolitan Transportation Authority is forecasting a $1.4 billion deficit in 2025, far below previous expectations, as the transit agency relies on federal aid and borrowed money to help close budget gaps.
In July the MTA projected a combined $3.5 billion deficit for 2024 and 2025. The agency may use nearly $1.4 billion of cash it borrowed last year through the Federal Reserve’s emergency lending program to fill the 2025 gap, Bob Foran, the MTA’s chief financial officer, said Wednesday during the agency’s monthly board meeting.
“The pandemic hit and it just blew us out of the water,” Foran said during the meeting. “We all know that, but we’re balancing through this additional one-shot federal funds and perhaps deficit financing.”
The MTA is the largest public transit system in the nation and the pandemic decimated its finances as subway ridership fell by as much as 90%. About $10.5 billion of federal pandemic aid will help cover lost farebox revenue and prop up its operating budget through 2025. The new federal infrastructure law is expected to allocate another $10 billion for capital projects, such as extending the new Second Avenue subway line into Harlem and rehabilitating Penn Station.
The updated budget forecast follows Governor Kathy Hochul’s announcement on Monday that the MTA won’t raise fares for at least six months and will postpone service cuts indefinitely. The transit provider needs ridership to increase as subway usage is still just a little more than half of what it was in 2019.
The MTA’s projected deficit shrunk as the agency expects to receive $1.5 billion more in state and local subsidies and dedicated taxes through 2025, according to board documents.
The transit provider faces a potential long-term structural imbalance, as subway ridership may only reach 86% of pre-pandemic levels in 2024, according to McKinsey & Co. analysis. That’s a $1 billion shortfall every year in farebox revenue, according to Foran.
The MTA will need future fare and toll increases, operational cost savings and new recurring revenue sources to end structural imbalances. Janno Lieber, MTA’s acting chief executive officer, said he’s already begun those discussions with the governor’s office and key legislators.
“We’re an essential service that needs to be paid for and it shouldn’t be all on the backs of the riders,” Lieber told reporters following the board meeting. “We’re looking to Albany, not tomorrow but in time, to provide a predictable recurring source of revenue so it all doesn’t become about the farebox.”
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