Earlier this year, as the MTA went about securing its capital future, an infuriating state law concerning the issuance of debt rose to light. Even as New York State has required the MTA to issue debt, it is also takes a fee of about 8.4 cents per every dollar of debt issued. Thus, if the MTA issues $1 billion in debt, New York State, the body that required the MTA to issue the debt, takes in $84 million. As the state has collected over $100 million from the MTA over the years, I called it the great bond swindle.
When The Daily News brought the issue to light in February, it caught the attention of some New York politicians who were, rightfully so, outraged. Now, the MTA is, as the Staten Island Advance notes, getting a temporary reprieve. In an editorial calling for the permanent elimination of the debt fee, the Staten Island newspaper summarizes recent developments:
The authority would have had to fork over $50 million in BIC over the next two years alone to borrow the money it plans to raise through bond issues. Of course, this added financial burden has meant that the hard-pressed MTA, which is required to have a balanced budget, has been forced to resort to fare hikes, service cuts and even more borrowing to fund its operations.
As Ms. Malliotakis said, “This policy was completely counterproductive as it was bleeding the MTA dry and contributing to the agency’s chronic failure to maintain adequate bus service and keep tolls and fares at a reasonable level,”
Now that wrong has been righted, however – at least temporarily. At the urging of MTA officials, including Staten Island board member Allen Cappelli, and elected officials such as Ms. Malliotakis and Assemblyman Michael Cusick, who authored legislation to eliminate the fee, Gov. Andrew Cuomo finally relented and waived the bond issuance charge for new MTA bonds, but only on those issued in 2012 and 2013 to refinance old debt.
MTA Board members have quickly called for the authority to use the savings to restore services lost to the 2010 cuts. “The MTA needs to look at the additional money from this and increased passenger revenue and invest it in restoring much needed bus and subway restorations as well as some additions to service,” Cappelli said. Meanwhile, city workers removed two bus stops around the corner from my apartment that once served the late great B71, leaving me with the feeling that these lost routes ain’t never coming back.
Meanwhile, this absurd measure by the state has been rectified for now, and as the Advance says, it should be overturned permanently. Good riddance to bad polices.
9 comments
An 8.4% cut by the state on debt issuance? They must have gotten that tactic from organized crime. How many mafia cases has NYS tried over recent decades?
In theory, it’s not a bad thing if there is a fiscally responsible MTA, and the goal is to make sure they don’t raise debt unless they absolutely have to. In practice, it turned into one way to raise debt for the state through the back door – and makes it looks like revenue.
However, it is notable that the usual right-wing complaint about abusing “other people’s money” doesn’t come up when it actually happens. Because, let’s face it, a lot of this is probably upstate’s and the exurbs’ cut for allowing the city to continue to function.
Call it the cut for “Joe Bruno’s gang”. Or is it “Dean Skelos’s gang” now? It ain’t going to your average upstate citizen.
I can’t believe they got away with using different computations for different districts for the purpose of claiming that the Senate should have 63 seats (which the Constitution clearly says it shouldn’t), so that they could gerrymander the hell out of the legislature again. We have to break these monsters on the wheel.
Great blog. I try to read it everyday. Suggest checking your math: 8.4% of $1B is $84 million.
how about refunding the stolen $100M now?
Tom- a little confused… thats exactly what it says up above – where’s the math error?
The fee is .84 cents/dollar, not 8.4 cents as Ben states here (Ben’s previous article had it right).
The fee on new issuance makes some sense since the MTA gains a credit enhancement from its implied support by the state. But it’s logical to eliminate the fee for refinancings that reduce the interest burden on current debt.
Capelli mentions removal of two B71 bus shelters. One of them was first being constructed after the cuts were announced. I almost got that story on TV.