Benjamin Kabak

Repairs from Sandy will add to the MTA's debt load. Image via RPA/ESTA.

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.

Uptown & The Bronx, if you have a boat or submarine handy. (MTA New York City Transit / Leonard Wiggins)

Since getting wind of the MTA’s $600 million request for funds to repair and restore the South Ferry/Whitehall St. station complex, I’ve had a tough time wrapping my head around the exceedingly high figure. The total — which may not include repairs to the Montague St. Tunnel or nearby Broad St. station — is over ten percent higher than the cost of constructing the new South Ferry station, and a time when budgets at any level are maxed out, it seems on the surface to be just another example of the MTA’s inability to rein in capital construction costs.

The South Ferry price tag isn’t the only shocking number from the MTA’s Sandy Impact List. Restoring the A train’s Broad Channel connection to the Rockaways will cost $650 million, and repairing the damage to the signal system will run up to $770 million, nearly as much as initial estimates for a full CBTC treatment of the Queens Boulevard line. While we can argue that emergency dollars from the feds represents an untapped revenue stream of which the MTA should take full advantage, something else might be at work here. The MTA may be overestimating it needs.

After facing a rumbling of shock over the cost estimates, officials at New York City Transit have repeatedly stressed that the figure is just a guess for now. They don’t know how much it will cost and hope to get the total well below $600 million. Ted Mann of The Wall Street Journal followed up this argument with a piece on South Ferry this evening. He writes:

The Metropolitan Transportation Authority is still in the earliest phases of assessing the damage to its facilities, including how much it will cost to rebuild South Ferry, which filled with flood water and debris carried in by the tidal surge of superstorm Sandy…The MTA will seek to repair damage to South Ferry for less than the $600 million asking price, Transit Division President Thomas Prendergast said on Tuesday.

The transportation agency is keeping its damage estimates high enough to account for potentially high costs of reconstruction–especially if the station suffered serious structural damage–or for expensive components like escalators and elevators that could need to be replaced. “You don’t want to pad” damage estimates in seeking federal aid, Prendergast said. “If you destroy your credibility by padding numbers, that’s bad too. But you start with a number that you think is going to capture all your costs and you work back from that. And if we find we end up delivering it less, we’re not going to bill anybody for more.”

There is the possibility — though no guarantee — that some damage estimates will fall as evaluation continues and repair work begins in earnest, Prendergast said. “When you’re dealing with third parties who may reimburse you, you never want to start low and then work high,” he said.

In a sense, the MTA is following a practice it rarely pursues: By overestimating the costs now, the agency may look better in the public eye when repairs come in below target. They also may not know the full extent of the damage, and it is possible as well that the repairs will cost that much. After all, the entire South Ferry station was flooded, and salt water mitigation and subsequent repairs and hardening efforts will be substantial.

Still, these estimates bring to light a problem that has bedeviled the MTA for decades: Construction costs in New York City cannot remain this high if the MTA wants to continue to expand its network to meet growing demand. We can’t pay $600 million to repair a single subway stop just like we can’t pay $4.5 billion to build barely two miles of new subway. The MTA has needed to engage in a serious discussion of its capital construction spending scale for years. Maybe Sandy can push that dialogue in the right direction. After all, New Yorkers are beginning to suffer from subway repair-induced sticker shock.

MTA List No Mitigation

Earlier this morning, I posted on the steep costs of repairs in the aftermath of Sandy, and this afternoon, the Governor’s list of fiscal requests for the MTA hit the net. Via Transportation Nation comes the above list with the detail breakdown. You can also download it from here in PDF form, and the line items are shocking.

We already heard of the $600 million request for the South Ferry/Whitehall St. station, and now we know restoring A train service to the Rockaways will cost even more. The MTA Impact List requests $650 million for the restoration of the Broad Channel service, a figure that will embolden those wondering if restoring the line is the best use of resources. Overall, tracks and signals suffered $300 and $700 million worth of damages respectively, and the Hugh L. Carey (nee Brooklyn-Battery) and Queens-Midtown Tunnels suffered a combined damage total of nearly $800 million.

Further down the line, while the MTA’s major capital projects — the 7 line extension, Fulton St., the Second Ave. Subway and East Side Access — escaped major flood damage (in some cases by 25 feet or so), construction delays have mounted as well. East Side Access suffered $20 million worth of delays while the other three projects totaled around $5.6 million.

All in all, it adds up to $5.022 billion in repairs, and with these figures, it’s safe to assume that it will be awhile before 1 trains return to South Ferry and the A crosses into the Rockaways.