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NYS Comptroller

THOMAS P. DiNAPOLI

Press Releases

September 29, 2015, Contact: Press Office (518) 474-4015

DiNapoli: MTA Faces $9.8 Billion Capital Plan Shortfall

How the Current Funding Gap Gets Closed Will Impact Riders and Taxpayers

Whether the Metropolitan Transportation Authority (MTA) will be able to limit future fare and toll increases to 4 percent as planned will depend on the amount of capital funding made available by New York state and New York City, and whether the economy continues to grow without interruption as anticipated by the MTA, according to a report released today by New York State Comptroller Thomas P. DiNapoli.

“The MTA is looking to the state and the city to close the remaining $9.8 billion funding gap in its five-year capital program. While we don’t yet know how the gap will be closed, we do know that the public mass transportation system is critical to the state and city economies” DiNapoli said.  “If the MTA doesn’t get the funding it needs, the MTA will have to choose between cutting the size of the capital program or borrowing more, which could lead to less reliable service or higher fares and tolls.”

While the short-term outlook for the MTA’s operating budget has improved with the economy, its 2015-2019 capital program is facing a $9.8 billion funding gap. To close this gap, the MTA has suggested that New York state increase its contribution to the MTA’s capital program by $7.3 billion to a total of $8.3 billion and that New York City increase its contribution to $3.2 billion, $2.5 billion more than currently budgeted. 

The Governor and the Mayor have acknowledged the importance of funding the MTA’s capital program, but the state and the city have not yet approved the MTA’s request for additional resources. As a result, it is not yet possible to assess the impact on the MTA’s finances, its fare and toll-paying customers, or the state and city budgets.

Under the MTA’s funding proposal, the MTA would contribute $11.7 billion. More than two thirds of that funding ($8 billion) would come from additional borrowing. Debt service and other operating budget resources devoted to the MTA’s capital program would reach $3.5 billion by 2019, $1 billion more than in 2014. Even with planned biennial fare and toll increases of 4 percent, the capital program would account for 21 percent of operating revenues during the financial plan period, compared with 17 percent in 2014.

The MTA’s current four-year financial plan extends through calendar year 2019. While the MTA anticipates balanced operating budgets through 2017, it projects growing budget gaps of $175 million in 2018 and $224 million in 2019 despite its plans to raise fares and tolls by 4 percent in both 2017 and 2019.

The MTA has not yet indicated how it intends to close these gaps in its operating budgets, and the potential exists for even larger gaps because the MTA is assuming the economy will continue to grow without interruption. Given the possibility of an economic setback during the financial plan period, DiNapoli’s report recommends that the MTA consider increasing its reserves, as the state and the city have done.

DiNapoli’s report also found that:

  • Subway ridership is on track to reach 1.77 billion riders in 2015, the most since 1949, and Metro-North ridership is expected to set a new record in 2015 with nearly 84 million riders. Long Island Railroad ridership remains lower than it was before the recession, despite gradual gains. Bridge and tunnel crossings have increased with job growth in New York City and lower gas prices, but crossings are not expected to approach prerecession levels until 2019;
  • The MTA’s revenues are very sensitive to changes in the economy. During the last recession, MTA tax revenues fell by $1.3 billion (36 percent) over a two-year period. In response, the MTA cut services and raised fares and tolls by 10 percent, and the state raised dedicated transit taxes by more than $1 billion. The MTA’s general reserve averages $155 million annually during the financial plan period, only 1 percent of expenditures;
  • The MTA’s cost-containment efforts since 2009 are expected to generate cumulative savings of $1.8 billion by 2019. Despite its efforts to keep costs down, spending is expected to total $15.1 billion in 2016, or 33 percent more than it did in 2010;
  • Overtime is on pace to set a new record of $759 million in 2015, $268 million more than in 2010;
  • Nondiscretionary costs, including debt service and fringe benefits, are projected to account for more than half (52 percent) of total revenue by 2019. Debt service alone would consume 18 percent of total revenue beginning in 2016;
  • The MTA raised fares and tolls by less than the inflation rate between 1996 and 2007, but since then it has raised fares and tolls by 33 percent, more than twice the inflation rate. The MTA has adopted a policy of biennial fare and toll increases, with projected increases of 4 percent in both 2017 and 2019. These increases are less than the projected inflation rate for these periods;
  • In the absence of new sources of capital funding to close the $9.8 billion funding gap, the MTA could be forced to cut the size of the capital program or borrow additional funds to finance its capital needs. Every additional $1 billion borrowed by the MTA would increase debt service by an amount comparable to a 1 percent increase in fares and tolls; and
  • Although still high by historical standards, subway car reliability (the average distance traveled between breakdowns) fell by 18 percent over the past three years. The MTA reports some improvement during the first seven months of 2015.

For a copy of DiNapoli’s report on the MTA’s financial outlook visit http://osc.state.ny.us/osdc/mta4-2016.pdf.

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