As we well know, the MTA has a debt problem. By the end of the decade, the MTA’s annual debt service payments should top $2 billion, and debt — as opposed to transit expenses and true operating costs — is the largest growing portion of the MTA budget. Even as the authority has engaged in historic cost-cutting measures over the past few years, the debt problem just doesn’t go away.
Now, the MTA has a Sandy problem as well. With the cost of repairs and some — but not all — hardening projects pegged at over $5 billion, the MTA has to find a way to fund these repairs. Eventually, federal money and insurance dollars will help cover the costs, but you know how these things work. It takes negotiations and time to get the checks cut and the dollars distributed.
Earlier this week, at the monthly board meeting, MTA officials spoke about the funding options for the repairs, and the MTA’s favorite four-letter word came up. To fund immediate repairs, the MTA will borrow money and take on more debt. If only my credit limit were as high as the MTA’s. While discussing the funding, MTA head Joe Lhota vowed to find ways to pay for it that don’t involve fare hikes. “The burden of Sandy will not be upon our riders,” he said.
Still, with the numbers the MTA is throwing around and their plans for funding, the riders will somehow, someway feel the pain. Before Sandy, the MTA’s financial picture was improving. Small surpluses for 2012 and 2013 were to lead to service enhancements — which the MTA says are still on the table — and further savings were on the table. The storm threw that plan fully out of whack as the MTA lost $268 million on fare revenue and increased operating costs and has to fund capital work worth $4.75 billion, the equivalent of a year in the capital budget.
In documents released this week, the MTA says it expects to receive federal reimbursement over a period of three years beginning in 2013. To fund the repairs sooner, the MTA will issue $2.9 billion of debt in 2013 and $1.9 billion in 2014. The MTA also anticipates that it could be left footing the bill for over $900 million in repairs without federal assistance. If the MTA has to bond out that difference, borrowing costs would add $62 million a year to the MTA’s already-substantial debt load.
That’s where Lhota’s statement comes into play. He feels the MTA could, if necessary, fund the difference through internal costs. The agency will not raise fares more than it is already planning to do to pay down this debt. But even if riders aren’t subsidizing the debt, they’re still paying for it. With more debt on the books, the MTA’s credit rating could suffer and borrowing costs may increase. With more debt on the books, the MTA will have less leeway in its tight budget for transit services. With more debt on the books, the riders are left in a very precarious position. Worse yet, we’re still not even contemplating ways to improve and eliminate flood-prone areas.
As is often the case, it’s all about the money for the MTA, and that dollar will just be stretched tighter and tighter as the transit network struggles to recover from the worst natural disaster in its 108-year history.