The MTA announced this morning that former Bear Sterns executive and MTA debt expert Robert Foran has been the authority’s new Chief Financial Officer. The Harvard MBA is taking over the position at a time when the agency is rife with financial strife and facing a debt crisis of historic proportions.
“Bob’s expertise in municipal finance is unparalleled and his experience with the MTA means that he will hit the ground running,” MTA Chairman and CEO Jay H. Walder said in a statement. “His arrival will be critical in helping guide the MTA through one of the most difficult financial periods in its history.”
Foran is taking over from Gary Dellaverson who stepped down in January. Although the MTA’s own release didn’t contain much on Foran’s background, Business Week’s Martin Z. Braun profiled the new CFO in an extensive article published today. In one sense, Foran is coming in to help clean up a debt situation he helped to create. Writes Braun:
When the MTA faced a $4 billion gap in its five-year capital program in 2000 after voters rejected a transportation bond measure, Foran and Bear Stearns engineered a debt restructuring that allowed the agency to continue to finance long-term projects such as the Second Avenue subway without raising fares. “The question was, was there a way to raise that capital with the existing resources that the MTA had, because Albany was not going to give them any more money,” Foran said.
Bear Stearns’s role drew criticism in a New York Times article after his bank earned tens of millions of dollars in underwriting fees for advising the MTA on the restructuring. Budget watchers such as Brecher also said the financing reduced debt service costs in the short run while pushing expenses into the future…Both Walder and Foran said the restructuring should be judged as a success because it raised the MTA’s revenue-bond credit rating to A from BBB+ and lowered borrowing costs.
While debt service costs were shifted to the future, the financing freed up enough revenue so the MTA could issue $3 billion of new debt and release $1 billion of reserve funds, Foran said. The agency’s overall debt-service burden did increase because the average life of the borrowings increased, said Foran.
“The $4 billion additional debt that we were able to sell was for assets that were going to have lives much much longer than 30 years,” he said.
Last month, the MTA had the credit rating on more than $12 billion of bonds cut by Moody’s Investors Service to A3, the fourth-lowest investment grade, from A2 with a negative outlook, after the agency said it may collect $350 million less than projected from a new payroll tax. The MTA has $28.6 billion of outstanding debt.
Despite this seemingly daunting task, Foran told Business Week that he is up for the job. “I know the MTA probably better than any other client that I worked with,” he said, “and I think the greatest value I can add is to work with the MTA right now.”
With the agency staring down a $751 million gap in its operating budget and a $10 billion funding gap in its next five-year capital plan, Foran will have to hit the ground running. The future of transportation in New York City is in his hands.