September 21, 2011
DiNapoli Analysis Identifies MTA Budget Risks
Capital Borrowing Program Could Increase Future Budget Gaps
The Metropolitan Transportation Authority's current financial plan includes significant budget risks according to a comprehensive analysis of the authority's finances released today by New York State Comptroller Thomas P. DiNapoli. The report also shows that the MTA could further complicate its financial situation if it proceeds with its plan to borrow $14.8 billion, the largest amount in its history, to fund its capital program.
"The MTA is in a very difficult position as it struggles to hold together a strained operating budget while proposing the largest borrowing program in its history to fund capital projects," DiNapoli said. "There is no debating that the capital program is critically important, but my analysis shows that the magnitude of this borrowing plan will have serious implications for the operating budget in the coming years. Before taking on nearly $15 billion in new debt, the MTA must present the public with the facts about the potential long-term implications of this new borrowing on services, fares and budget gaps."
In July, the MTA released a revised financial plan for calendar years 2011 through 2015 that showed balanced budgets for 2011 through 2013 and relatively small budget gaps for 2014 and 2015. The MTA's estimates assume fare and toll increases of 7.5 percent in 2013 and 2015.
Another challenge facing the MTA is filling the $9.9 billion funding gap in the last three years of its capital program that covers 2010 through 2014. To close the gap, in July the MTA proposed scaling back its capital program, increasing borrowing by $6.3 billion to a total of $14.8 billion and seeking additional assistance from the State and the City. The borrowing program will have to be approved by the MTA board and New York State's Capital Program Review Board.
Such a heavy reliance on debt would place a huge burden on the operating budget, just as heavy borrowing in the past has contributed to the MTA's current problems. If the MTA goes forward with the proposed borrowing program, debt service would reach $3.3 billion by 2018, which is 64 percent more than in 2011. Even with biennial fare and toll increases of 7.5 percent in 2013, 2015, and 2017, the MTA could still face budget gaps rising from $600 million in 2016 to $1.2 billion in 2018.
"The next MTA Chairperson will face a number of challenges including negotiating new collective bargaining agreements, squeezing additional savings from the operating and capital budgets, and keeping fares affordable in the face of rising debt service costs for the capital program," DiNapoli said.
The Comptroller's report on the MTA's July plan also found that:
For a copy of the analysis visit: http://osc.state.ny.us/reports/mta/mta-rpt-11-2012.pdf