Cuomo’s broken promises: What an increase in the MTA’s debt ceiling really meansBy
As the clock on March expired and the calendar flipped to April, New York State legislators passed a $155 billion budget. The state has a lot of money to play with, and as interest rates remain low, it’s very easy to borrow. It would be, in other words, a great time to fund mass transit through direct contributions, and even $3 billion in annual direct contributions would lead to a guaranteed $15 billion for the MTA’s five-year capital plan. This money would lessen the MTA’s need to borrow and then fund borrowing through fare revenue. Less than 2% of the state budget should go toward MTA capital improvements. But that’s not what happened.
As I explored shortly after the budget passed, the MTA didn’t get much out of it except for some funding earmarked toward future phases of the Second Ave. Subway and, apparently, a vague promise to approve the capital plan following a second round of amendments. Meanwhile, Cuomo has promised to fund a sliver of the MTA’s current five-year, $28 billion capital plan only when the agency has exhausted all other revenue streams. To that end, no one expects the MTA to realize any of this money until the mid-2020s, and Cuomo has insidiously allowed the MTA to raise its debt ceiling. Thus the agency can borrow even more before the state’s obligations to pony up a few billion dollars come due.
Over at NY1, Zack Fink broke the story:
After staying up all night, the New York State Senate finally voted on the last budget bills before 9 a.m. Friday. One of those bills raised the debt ceiling for the Metropolitan Transportation Authority (MTA), allowing the agency to borrow up to $55 billion. “What kind of message does that send, that we’re allowing one state authority to issue more debt than the entire state of New York is allowed to?” said State Assembly Member Nicole Malliotakis of Staten Island and Brooklyn. “It’s going to lead in the future to higher tolls, fares, and service cuts.”
…Observers said the new MTA debt ceiling explains how Cuomo will fund the agency’s ambitious capital program construction, which includes East Side Manhattan access to the Long Island Rail Road and the Second Avenue Subway. “Cuomo said he’s going to give $8.3 billion to MTA; he only showed up with $1 billion,” said Nicole Gelinas of the Manhattan Institute. “And so where is he going to get the rest of this money? Obviously there’s your answer.”
Critics say commuters will ultimately get hit with the bill. “Somebody has to pay for this. The MTA already has budget gaps over the next several years, so people’s fares and tolls will go up to pay for all this debt,” Gelinas said. “It’s just that the governor probably expects that this will happen after he leaves office.”
It is my understanding that the MTA’s debt will come in the form of so-called moral obligation bonds and not general obligations bonds. Thus, if the MTA defaults on its bond obligations in order to force bondholders to the table, the state will not step in to cover any outstanding debt service payments. In other words, by hook or by crook, we the subway and bus riders of New York City (along with the Metro-North and LIRR riders and those paying bridge and tunnel tolls) are stuck with mounting debt and mounting debt service obligations that would put more pressure on fares and the MTA’s ability to provide and expand service. That’s Gov. Cuomo’s New York.
Meanwhile, the Governor has promised upstate drivers parity and breaks on New York State Thruway tolls. It seems unlikely that they will be saddled with debt this high that could be easily avoided for a small percentage of the overall budget. Cuomo too has proposed a series of transit projects that aren’t in line with what the city needs. He’s singularly focused on improving the way people enter and exit New York City rather than on improving how they get around New York City once they’re here, and even some ideas — such as the Willets Point Laguardia AirTrain — are worse than doing nothing.
It’s easy to saddle future generations of New Yorkers who will never have the opportunity to vote for Cuomo or the current batch of legislators will the debt that arises out of transit ideas built today, whether they’re good or bad ideas, and that is exactly what our politicians have done. It’s a devious way to make decisions that affect us all for decades to come.