It’s Comptroller Week on Second Ave. Sagas. Hot on the heels of his report that the MTA is spending frivolously on contracts, New York State Comptroller Thomas DiNapoli has issued another report on the state on the MTA. In this one, he tells us something that we already know: The MTA’s latest capital plan proposal faces a funding gap of $9.9 billion and will depend too heavily on debt.
While I first explored this problem when the MTA announced its capital plan a few months ago, DiNapoli explores the issue in depth. According to the comptroller, only 67 percent of the plan has funding, and this figure does not include any money for the Second Ave. 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.
As DiNapoli analyzed the MTA’s current financial state, his findings are fairly drastic. The MTA, he says, will need $128.8 billion over the next twenty years simply to “restore and modernize the existing system.” Additional funds, he says in the understatement of the year, “would be needed to expand the system to meet future needs.”
On Wednesday, the MTA Board is going to approve the next five-year capital plan. It will then head off to the state for a Senatorial debate. It is missing funding for Phase II of the Second Ave. Subway; it includes debt service that will grow from $1.5 billion this year to $3.5 billion by 2020; and it is vitally necessary for the MTA to maintain a state of good repair. And that is one bad financial bind.