The Metropolitan Transportation Authority is expected to devote one-fifth of total revenue to debt service by 2023 as it relies increasingly on borrowing to finance its capital needs, leaving a smaller share of revenue for other priorities and hindering budget flexibility during an economic setback, according to a report released today by State Comptroller Thomas P. DiNapoli.
“The MTA’s ambitious capital program promises significant improvements, but there are still too many unanswered questions,” DiNapoli said. “Heavy reliance on borrowing will also place additional pressure on the operating budget, which already faces risks. Unless the MTA can change the way it does business and reduce costs, for example, riders could be saddled with even higher fares and tolls than already planned.”
DiNapoli’s report finds that the amount of outstanding long-term debt issued by the MTA more than tripled between 2000 and 2019, rising from $11.4 billion to $35.4 billion. The MTA expects debt outstanding to reach $52.6 billion by 2023. As a result, debt service is projected to reach $4.2 billion by 2023, an increase of 59 percent since 2019.
Debt service is projected to consume an increasing share of MTA revenues. The share of total revenue needed to fund debt service will reach 22.5 percent by 2023 after averaging 16.1 percent for the past decade.
Last year, the state approved new sources of revenue that are expected to generate $25 billion for the MTA’s 2020-2024 capital program, nearly half of its $54.8 billion cost. While it is the largest capital program in the MTA’s history (costing 62 percent more than the 2015-2019 program), not all sources of capital funding are in place. The federal government, for example, will need to approve congestion pricing, which is expected to begin in early 2021 and generate $15 billion for the capital program.
At the same time the MTA begins work on the 2020-2024 program, it must still finish its 2015-2019 program. More than two-thirds of the 1,186 projects that make up the 2015-2019 capital program were not finished as of December 31, 2019. The MTA had completed 380 projects, but 409 were still in construction and construction had not even begun on the remaining 397 projects.
It also remains to be seen whether the MTA can manage a capital program of this size. To implement the 2020-2024 capital program and projects remaining from prior programs in five years, the MTA will need to more than double its annual capital commitments (from an average of $6.4 billion over the past five years to $13.5 billion annually).
The MTA raised fares and tolls by 4 percent in 2019 and plans to raise them by another 4 percent in 2021 and in 2023. It also is implementing a plan to streamline administrative functions, improve outcomes and reduce costs. The MTA is counting on this transformation plan to save a total of $1.6 billion through 2023 without compromising service or safety. Despite these actions and the assumption of continued economic growth, the MTA still projects an operating budget gap of $130 million in 2023.
DiNapoli’s report also notes:
- The MTA is counting on the federal government to contribute $10.7 billion to the 2020-2024 capital program, including $2.9 billion for the next phase of the Second Avenue Subway. Washington, however, has not yet agreed to contribute to the project.
- The MTA is counting on the State and the City to each contribute $3 billion to the 2020-2024 capital program. However, the state has not yet identified (or approved) the sources of its $3 billion contribution, and the City has not yet agreed to match the State’s contribution, as assumed in the MTA financial plan.
- The City is required by State law to contribute $2.7 billion to the 2015-2019 capital program. While it has allocated $2.1 billion, the remaining $600 million has yet to be identified.
- The MTA intends to issue bonds to finance $7.3 billion of the state’s commitment to the 2015-2019 capital program. The debt service on these bonds will peak at $470 million annually in 2028. The MTA’s budget assumes that the state will appropriate additional funds each year, which the MTA will use to fund the debt service on these bonds.
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