In late February, as the MTA Board was approaching its date for enacting the Doomsday budget and funding efforts out of the State Senate had yet to collapse, I noted that the MTA deficit may wind up higher than $1.2 billion. At the time, the MTA’s year-to-date tax revenues were well below expected, and the deficit figures I tossed around were in the $1.8 to $2 billion range. The situation, in other words, could get worse before it gets better if Albany fails to find a permanent solution to the MTA’s funding woes.
Today, that scenario became one step closer to a reality. According to new financial documents released Monday, the MTA is now expecting to wind up with revenues at least $200 million less than expected. The agency may have to resort to more fare hikes and service cuts to balance its budget. William Neuman of The Times has more:
In the latest forecast, released Monday in materials for a coming bond sale, the authority said the state had informed the authority that it should expect a shortfall as large as $200 million in revenue this year from a basket of taxes dedicated to mass transit, including portions of the sales tax and a tax on corporate profits.
That is more than double what the authority projected in February when it tried to gauge how its tax revenues would be affected if the decline in the region’s economy became much worse. At that time it estimated that if the economy hit bottom, its dedicated state tax receipts could be down by as much as $82 million.
Making the picture even bleaker, the projected shortfall in dedicated taxes is in addition to a previously disclosed drop in revenue from taxes on real estate transfers and mortgages. For just the first three months of the year, those taxes were $123 million below the levels written into the authority’s budget.
In February, the MTA predicted at least a $651 million increase to the deficit, bringing the total to $1.8 billion on the year. That was before the state unveiled this bad news. Now, the deficit could reach the $2 billion mark before 2009 is out.
As I explored on Friday, this crushing debt is due to some very bad political decisions made during the Pataki Administration. In the mid-1990s, then-Gov. Pataki opted to pay for the MTA Capital Construction budget on credit, and now, the debt payments are due.
The news though for the agency keeps getting worse, and at some point, Albany will be forced to act. Whether that point arrives before the MTA is sitting on the brink of bankruptcy remains to be seen. Either way, what happens over the next few months will impact the future of New York City for years to come.
8 comments
Pataki Admin made the decision to finance through debt, but of course the MTA didnt need to borrow $30B either. Alot of blame to go around but its not accurate to suggest it was only Pataki’s – this is a case of that plus over over expansion fueled by debt (sound familiar). The MTA over expanded – too many capital programs financed by debt. The warnings where there 5 or 6 years ago that this was a disaster yet all officials- the Gov, the Mayor, and MTA, still raised the full $30B.
I’m sure the advertising group (run by CBS Outdoor) contributes just a tiny bit of income for the authority, but I’m sure they could be doing a better job soliciting advertisers andp putting their signs in stations and trains.
This morning on the LIRR I saw several signs advertising the premier of cable TV show … that debuts in February. The Atlantic-Pacific Avenue station is still blanketed with Museum of Modern Art signage, including the ones saying that the artwork would hang until March 15. Banners on the outsides of the 1, 3, and 7 trains marketing a new History Channel TV show stayed on well past the promoted October date. Promotions for the “waterfalls” in the East River remained long after the falls themselves were taken down. And I’m pretty sure the photo of Dr. Zizmor was taken 20 years ago. Nobody knows how much free advertising goes to Budweiser and Delta Airlines, since there is no clear end date on those ads.
Except for the Dr. Zizmor example (which puzzles all of us), this seems like MTA/CBS is not aggressive enough in removing old ads and replacing them with newer, paid sponsors. Perhaps there is a rut in the advertising market and there are no takers for these spaces. But to give an additional month of free advertising to MoMA in Atlantic-Pacific, even despite the 3-day vandalism incident, seems like a wasted opportunity.
The advertisement issue is a huge red herring. With a very aggressive push to get more ads in the subway, the MTA has raised its advertising revenue from about $75 million to $125 million. There’s just no way to cover a deficit in the billions with advertising revenue, particularly in a bad economy.
You’re absolutely right, there’s no way advertising can cover the billions of dollars in operating deficit. But if this is a red herring, then aren’t the service cuts that you discussed here, on December 30 just the same?
The service cuts, combined, will save an estimated $25 million. The new-found money from the advertising push has generated double that amount. And as I mentioned earlier, there’s still untapped potential.
We need to stop dismissing these smaller figures as insignificant, because collectively, they add up and get us into trouble.
I’ve said all along the service cuts are just a way to attract attention. Transit agencies pull this stuff all the time. In the early 90s, the NFTA (Buffalo) cut all service for a day. Were they literally broke? Of course not. But the message was received loud and clear. Same thing here.
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