New York’s MTA Running on ‘Borrowed Time,’ Comptroller Says

(Bloomberg) -- New York’s Metropolitan Transportation Authority, the largest U.S. mass-transit provider, is running on borrowed time, facing budget and revenue challenges as federal aid is set to tap out in 2025, state Comptroller Thomas DiNapoli, said in a report Tuesday.

Ridership sank on the MTA’s subways, buses and commuter rails during the coronavirus pandemic. Its subway system is still only carrying about half the number of weekday passengers it did in 2019. Recent severe weather has pummeled the transit network with record rainfall, flooding subway stations and suspending service.

While $14.5 billion of federal aid is covering the sharp drop in fare-box revenue collections, the MTA estimates it will deplete those funds in 2025. The risk of permanently lower ridership, damage from extreme weather and the end of federal assistance are challenges for the MTA that can turn into emergencies if not dealt with promptly, according to DiNapoli.

“Bringing riders back, protecting against extreme weather and maximizing new sources of revenue are all challenges the MTA needs to address before emergency federal funds dry up in 2025,” DiNapoli said in a statement Tuesday. “After that, the MTA faces enormous budget shortfalls that could harm the regional economy with no easy solutions.”

Operating Deficit

“Predicting the pace of post-pandemic recovery is difficult, but as revenue levels emerge and stabilize all stakeholders will need to evaluate strategies to address the deficit created by Covid’s impact on MTA fare box revenues,” Aaron Donovan, an MTA spokesman, said in an email. “For its part, the MTA will continue to identify cost efficiencies while aligning service to meet public needs.”

The MTA, which owed $48.5 billion of debt as of Sept. 1, projects a $3.5 billion operating deficit in 2024 and 2025. Its ambitious $51.5 billion multi-year capital plan will rehabilitate Penn Station, the nation’s busiest rail station, modernize its subway network with updated signals to reduce chronic delays, and extend the new Second Avenue subway line to Harlem.

A congestion-pricing plan that will charge motorists entering Manhattan’s central business district will bring in about $1 billion a year that would support an estimated $15 billion of financing for the capital plan. Still, the MTA won’t start collecting that revenue until 2023, at the earliest, as the agency works on an environmental assessment of the new tolling program, according to the report.

“The timely implementation of the congestion pricing program could help bring more riders to the system and support the MTA’s recovery while reducing ever-increasing traffic congestion,” according to the report.

Riders Needed

Restoring pre-pandemic ridership levels is crucial for the MTA’s finances and whether employees choose to work from home is key. Fare revenue in 2022 could be $500 million lower than budgeted if workers telecommute an average three to four days starting in the spring, according to the report. Conversely, those revenue collections could be $300 million higher than planned if employees work from home an average 1.5 days per week.

The MTA is at risk of using $2.9 billion of deficit financing to pay operating expenses in 2024 and 2025, if overtime costs come in higher than projected or the agency fails to realize estimated savings from workforce reductions, according to the report. The MTA’s current plan is to use $1.3 billion of deficit financing in 2025 to help close budget gaps.

“The MTA’s chronic structural budget imbalance will get even worse if non-recurring resources, such as deficit financing, are used to balance budgets,” according to the report.

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