Over the last few years, New York State Comptroller Thomas DiNapoli has emerged as one of the state’s leading authorities on the MTA’s financial crisis. He has repeatedly asked the agency to perform some internal belt-tightening and seems to display an understanding of the agency’s expenses and revenues that few New York State politicians possess.
With that qualification in mind, I would hope that, when he releases a report, people would listen. Outside of a few inches of space in the local papers, though, DiNapoli’s analysis is often discarded. Yesterday afternoon, while announcing three new audits of the MTA — one of its cash management controls and banking services and fees; one of the agency’s maintenance program; and one examining the costs and timeliness of the MTA’s capital program — DiNapoli issued a preliminary report on the current fiscal health of the MTA.
While the Albany bailout will help the beleaguered transit agency, the MTA is, in the words of the comptroller, not out of the words yet. “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,” he said. “The audits we’re announcing today will help make sure the MTA stays on the right financial track.”
Most notable in DiNapoli’s reports are the debt warnings. While fairly technical and seemingly far off into the future, the MTA’s current projected borrowing levels will come back to plague the agency. The MTA is going to use the mobility tax to generate $6.8 billion in Bonds. By 2020, according to DiNapoli, debt service will cost the MTA $440 million in revenue from the mobility payroll tax. Furthermore, the agency is going to take on new debt to fund the 2010-2014 capital plan, and the MTA could be mired in $3.2 billion of debt service spending by 2020.
DiNapoli bullet-points some other key findings:
- 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;
- 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.
Missing from the bullets is a short note on pensions found in the report (PDF). The MTA may have to increase its already sizable pension contributions due to a shortfall in the New York City Employees’ Retirement System.
In the end, DiNapoli’s report is and is not surprising. We know that the MTA is suffering through some financially bad times, but while Albany has proclaimed itself a savior, it hasn’t improved the agency’s long-term financial outlook. The MTA still has to turn to crushing debt; it still has unresolved revenue issues; and it will be back at Albany’s door, cap in hand, waiting congestion pricing and East River Bridge tolls, before we know it.