DiNapoli: State Aid Avoids Crisis But MTA Not Out of Woods
Comptroller Stepping up MTA Audits
Additional state assistance, combined with higher fares and internal belt-tightening, will allow the Metropolitan Transportation Authority (MTA) to close a two-year $5 billion operating budget gap and contribute to its next capital plan, according to a report released by New York State Comptroller Thomas P. DiNapoli today. The report identified relatively small budget gaps in calendar years 2009 and 2010 and pointed out that while the MTA should be able to manage this problem, there are budget risks that could make that task more difficult. DiNapoli also announced three new audits of the MTA in addition to the two MTA audits already underway, continuing his review of the financial operations of the MTA.
“An unprecedented increase in state assistance will stabilize the MTA’s operating budget and could help fund the next capital program, but the MTA is not fully out of the woods yet,” DiNapoli said. “The MTA has to deliver on its promise to reduce costs. I’m also concerned that the next five-year capital plan may rely too heavily on debt, which would divert resources from operating needs, just as heavy borrowing in the past has contributed to the MTA’s current fiscal crisis.
“The audits we’re announcing today will help make sure the MTA stays on the right financial track.”
DiNapoli said his office was initiating three new MTA audits:examining the authority’s cash management controls and its banking services and fees; reviewing the efficiency of the MTA’s maintenance program; and an examination of the costs and timeliness of the MTA’s capital program.
The report found that the mobility tax and other taxes and fees approved by the state will generate almost $1.1 billion in 2009 and more than $1.8 billion in 2010, only $20 million less than the amount forecast by the New York State Division of the Budget.
The MTA intends to create a new bonding credit backed by the mobility tax to support $6.8 billion in bonds. The Comptroller’s report estimates that a borrowing of this size would consume $440 million in annual mobility tax revenues by 2020. The report cautioned that while the revenue diverted from the operating budget would be small initially, the amount would grow as the bonds were fully issued.
The report also noted that the MTA’s current four-year financial plan assumes the issuance of a total of $15 billion in new debt to support the 2010-2014 capital program, 60 percent more than the current program. Such a level of bonding would more than double the amount the agency spends on debt service over the next decade, from $1.5 billion this year to nearly $3.2 billion in 2020. The MTA is required to release the new five-year capital program by October 2009.
The report also found:
- The MTA still faces budget gaps of $100 million in 2009 and $60 million in 2010, which should be manageable given the MTA’s $10 billion budget and $75 million in annual reserves;
- Nearly three-quarters of revenues from the mobility tax would come from employers in New York City, with Nassau, Suffolk and Westchester counties making the next largest contributions. The report includes a break-out of expected revenue from the mobility tax by county;
- School districts will initially pay $67 million in new mobility taxes for 2010, with half of that amount coming from New York City. The state intends to reimburse school districts within the MTA’s 12-county service region for the cost of the tax;
- Real estate transaction tax collections peaked at nearly $1.6 billion in 2007, but are projected by the MTA to decline by more than $1 billion by 2009. The report also found that collections have been weaker than expected through May and could be $125 million less than projected by the MTA for the year;
- The MTA is expected to save $227 million in 2009 and $359 million in 2010, but the MTA has a history of falling short of target and the operating agencies often identify new funding needs. The MTA is also counting on savings of $65 million in 2009 and $112 million in 2010 from certain state and federal actions. In the event the anticipated savings are not realized, the MTA ought to identify alternative actions;
- Ridership on the MTA’s subways, buses and commuter railroads is not declining as fast as the MTA had feared. In April, the MTA predicted a 7.2 percent decline in ridership in 2009 but ridership was down by only 2 percent through March. If ridership declines by 4.5 percent in 2009 instead, fare collections could be higher by $125 million;
- The MTA could generate surpluses in 2011 and 2012, but the amounts will depend on the economic recovery, the realization of planned savings, and whether fares and tolls rise by 7.5 percent in 2011 as planned. The report recommends that surpluses, if they materialize, be used to fund reserves or the capital program on a pay-as-you-go basis.
Click here for a copy of the full report.