On debt, a comptroller’s report reveals the obvious

The latest Comptroller's report echoes findings issued last month by the RPA. Image via RPA/ESTA.

When the MTA unveiled its latest three-year budget projections, transit advocates and transportation experts raised the debt alarm. As I detailed in early August, the MTA’s three-year projections relied on numerous assumptions and a larger debt burden. A few weeks ago, a recent report by the Regional Plan Association and the Empire State Transportation reinforced that idea. Debt service could account for nearly a quarter of the MTA’s operations budget by 2014.

It is, then, no surprise that yet another report issued by Thomas DiNapoli, New York State Comptroller, reaches the same conclusions. What is surprising, though, is the amount of time it took DiNapoli’s office to release this report and the ways in which it does little to help the MTA’s economic position. In an eight-page report (available here as a PDF) with lots of graphs published at a size far too small, DiNapoli explores the MTA’s basic assumptions and raises the same debt alarm.

“The MTA is in a very difficult position as it struggles to hold together a strained operating budget while proposing the largest borrowing program in its history to fund capital projects,” DiNapoli said. “There is no debating that the capital program is critically important, but my analysis shows that the magnitude of this borrowing plan will have serious implications for the operating budget in the coming years. Before taking on nearly $15 billion in new debt, the MTA must present the public with the facts about the potential long-term implications of this new borrowing on services, fares and budget gaps.”

The MTA hasn’t yet been forthcoming with the real impact the debt will have on services, fares and budget gaps, but the RPA/ESTA analysis did. DiNapoli’s work basically rehashes those findings. Here are his key conclusions in bullet-point form:

• Debt service as a percent of total revenue could rise from 16.4 percent in 2011 to 22.7 percent in 2018 without new fare and toll increases. (The burden could reach 20.5 percent in 2018 even with biennial fare and toll increases of 7.5 percent).
• In total, the proposed financing program would cost the authority’s operating budget $33 billion over the term of the loans, or nearly $13 billion more than the approved financing program.
• The July financial plan assumes that any wage increases during the first three years of a new labor agreement will be offset by savings from union concessions. Wage increases at the projected inflation rate, for example, without offsetting savings would increase costs by $62 million in 2011 and as much as $327 million by 2015.
• Spending continues to rise at a rate more than twice that of inflation. Despite an assumed three-year wage freeze, the MTA projects annual spending increases of 5.1 percent through 2015 based on rising costs for health insurance, pensions, debt service and services for disabled commuters.
• The pace of the economic recovery is a matter of grave concern. Roughly one-third of the MTA’s revenues come from economically sensitive taxes, and the use of mass transit is closely tied to employment levels in the region.

Now, over the years, I’ve been fairly critical of DiNapoli’s reports. They don’t really shed light on any new problems with the MTA. In fact, we’ve known about the debt bomb for years; the recent three-year plan just accelerates the high percentage of the operating revenue that will have to be spent on debt service rather than on transit service. How many taxpayer dollars are going to DiNapoli’s office to duplicate research that’s already been published?

Yet, this report shows glimpses of, well, something. DiNapoli notes that spending has increased at twice the rate of inflation, and he pinpoints a variety of causes — labor costs, debt service and services for disabled commuters — as the primary culprits. The next steps then involve addressing these problems. How can the MTA lower its health care and pension obligations? What must be done to streamline debt service? How can we reduce Access-A-Ride costs? Those question don’t even address the concerns astutely raised by Andrew Smith in this extensive comment he left yesterday.

At some point, New York politicians who are in these positions of power are going to have to get serious about identifying cost savings plans. This report by DiNapoli is a small step toward that goal, but to save the MTA will require more than just small steps.