DiNapoli: MTA Capital Program Has $9.9 Billion Funding Gap
Report Finds Only 67 percent of MTA’s Capital Needs Would Be Funded
The Metropolitan Transportation Authority (MTA) has a funding gap of at least $9.9 billion in its proposed five-year capital program for 2010-2014, which the MTA would close with debt in the absence of additional resources, according to a report State Comptroller Thomas P. DiNapoli released today. Even though the proposed capital program would be the MTA’s largest ever, it would fund only 67 percent of the MTA’s capital needs for maintenance and modernization, and does not include any funding for the next phase of the Second Avenue Subway.
“Maintaining and expanding the MTA’s public transportation system is vital to the region’s economy, but finding adequate resources to meet demand will be difficult in the current economic environment,” DiNapoli said. “The MTA plans to close the funding gap with debt if it does not receive any additional aid, but that much new debt would strain the operating budget and increase pressure to raise fares and tolls.”
DiNapoli’s report indicates approximately 75 percent of the MTA’s proposed $28 billion capital program is allocated to maintain and modernize the existing system (i.e., the core program). Of this amount, the New York City Transit Authority would receive 65 percent, the Long Island Rail Road would receive 13 percent, the Triborough Bridge and Tunnel Authority would receive almost 12 percent and the Metro-North Railroad would receive about 8.5 percent. Another $5.7 billion would be allocated to complete East Side Access and Phase 1 of the Second Avenue Subway.
While the MTA has identified funding for the first two years of the program, the program has a funding shortfall of $9.9 billion over the following three years. DiNapoli’s report found that the funding gap could grow because the MTA is counting on a 56 percent increase in federal funding compared to the current five-year program.
The MTA’s July 2009 four-year financial plan assumes it will sell $16.5 billion in new debt to help finance its 2010-2014 capital program if it receives no additional financial assistance. This assumption is based on the planned issuance of $6 billion in bonds backed by new State revenues and another $9.9 billion in debt to cover the funding shortfall. Under such a scenario, debt service would more than double to $3.5 billion in 2020 from $1.5 billion in 2009.
Debt service is expected to consume 16.6 percent of revenues in 2009 and DiNapoli projects that it could consume 24.6 percent of revenue by 2017, assuming no future fare hikes, if the MTA undertakes a borrowing of that magnitude.
In May 2009, New York State increased financial aid to the MTA to help close a two-year operating budget gap of $5 billion and to help fund the 2010-2014 capital program. The MTA plans to leverage $400 million annually of these resources to generate $6 billion in bond proceeds to help fund the proposed capital program.
The MTA’s transportation system has improved greatly since 1982 (when the system was on the verge of collapse), due to a capital investment of more than $75 billion. Despite this progress, many parts of the system are still in need of repair and modernization. In fact, the MTA estimates that it needs to invest $128.8 billion over 20 years to just restore and modernize the existing system. Additional funds would be needed to expand the system to meet future needs.
The New York City Transit Authority has the greatest backlog of needed capital investments.
- Of its 468 subway stations, more than 82 percent – 386 stations – require capital repairs, and 32 percent of the system’s 11,000 station components do not meet current standards. Even those stations that have been renovated have begun to show signs of declining conditions.
- Only 57 percent of high-priority subway ventilation fans, 66 percent of tunnel lighting, and 39 percent of the repair shops meet current standards.
- More than 10 percent of the bus fleet is older than its useful life of 12 years.
- The Transit Authority recommends investing $4 billion over the next five years and $14.5 billion over the next 20 years to modernize the subway signal system.
Overall, the MTA would fund only 62.5 percent of the agency’s capital needs over the next five years. While the MTA would fund the Transit Authority’s subway track projects, the rest of its capital needs would be underfunded. The MTA would fund only 36 percent of the capital needs for power projects; 44 percent for subway cars; 44 percent for shops and yards; 47 percent for line equipment, such as pumps; 58 percent for signals and communications; and 67 percent for stations.
The MTA would defer some subway car purchases until the next five-year capital plan, but the Transit Authority plans to maintain performance through increased maintenance, which could increase costs in the operating budget.
The LIRR’s capital program is focused on bringing East Side Access into revenue service. Overall, almost 80 percent of the LIRR’s capital needs would be funded, including all of its rolling stock and most of its track needs. Only 36 percent of the amount needed for stations would be funded, however, and line structures (e.g., bridges and tunnels), which are not in a state of good repair, would receive only 69 percent of the recommended funding.
About 87 percent of Metro-North’s capital needs would be funded over the next five years. While most of this agency’s capital elements would be well-funded, stations and parking, as well as signals and communication, would be significantly underfunded.
The capital program allocates $250 million for security projects, which is $191 million less than recommended in the MTA’s capital needs assessment.
The report is the latest component of DiNapoli’s ongoing monitoring of the MTA’s finances. Since 2007, DiNapoli has released six reports on MTA finances and policy, as well as 10 audits. DiNapoli has several other MTA audits underway.
Click here for a copy of the report.