The MTA unviled its four-year budget plan last week, and inside of this document are a series of somewhat rosier projections than we’d expect. Despite a crushing deficit this year, if CEO and Chairman Jay Walder can realize all of his cost savings plans, the authority will run net cash balances in the black for 2010, 2011 and 2013 with significant but not too costly deficits in 2012 and 2014. To make these projections, the MTA had to rely on economic assumptions from the city and state, but in the past, these numbers haven’t been too far from reality.

In the consolidated statement which features a line-by-line breakdown of MTA costs, one item jumps out at me. That is the authority’s dept service payments. Last year, the MTA made $1.4 billion in debt service payments and is on pace this year to see that number reach $1.8 billion before jumping up over $2 billion in subsequent years. By 2014, debt service will reach $2.555 billion, and it will consist of approximately 13 percent of the MTA’s annual expenses.

Meanwhile, as debt service remains a significant annual cost on the operations ledger, the MTA is moving ahead with another five-year capital plan that will see the authority issues more revenue and construction bonds. Thus, these debt totals will not lessen or disappear from the ledger any time soon, and MTA Board members are growing leery of the capital spending. Every time we spend money on this capital plan, we’re increasing the debt, increasing the debt service, and this is like a time bomb here,” Andrew Saul, the authority’s vice chairman, said last week.

Saul wasn’t the only board member to question the wisdom of maintaining debt-producing programs as the MTA struggles to close a budget gap. “We’re paying interest during the construction periods of projects in part from the fare box, so we are paying for capital with the fare box,” board member Doreen Frasca said. “That means that less money is dropping down to pay maintenance expenses. We’ve cut 20 percent out of many of the agency budgets. We certainly haven’t cut the capital budget by 20 percent.”

For its part, the MTA defended its capital budget and noted that it had reduced its five-year plan by approximately $2 billion. “A series of five-year capital programs have revitalized our transit system,” the authority said in a statement. “While the more than $64 billion spent in that time has helped turn around our regional economy, maintaining and improving the 100-year-old transportation system is an ongoing need and we cannot afford to disinvest. The current $26.3 billion program reflects a nearly $2 billion reduction as the result of a comprehensive review of projects.”

All of this begs an important question: What should the MTA do about its capital spending and the need to take on debt? Once upon a time, the state contributed more money annually to the MTA’s capital plan, and the authority didn’t have to take on the debt. But as New York’s finances went south, successive governors have pulled more funding and have urged the MTA to bond their projects instead. Some of those — such as new subway lines — can be bonded because the revenue from the increase in ridership will cover the debt service payments in the future. But other programs — such as State of Good Repair initiatives and other routine maintenance, upgrade and rolling stock proposals — are funded without that guarantee of future returns. People stop using the subways as the system breaks down but spending billions to maintain it doesn’t lead to an incremental jump in ridership.

What the MTA can’t do is halt its capital program. It would be far too costly to cut back on maintenance and capital repairs while moving forward only on ambitious (and often delayed) expansion efforts only because the economics of bond issuances work out that way. The authority must make sure the system doesn’t slide into a state of unreliability because that would exert a huge cost on the city’s economy.

So for now, the debt system stays as it is. Unless the government can find more money for capital investment, the authority will have to take on more debt, and we’ll be paying tomorrow for upgrades today. It’s not an ideal situation by any means, but when it comes to funding transit, what is these days?

Now that the MTA Board has set in motion the next round of fare hikes, transit advocates have begun to lay out their positions on the MTA’s latest foray into the economic morass. While some people would prefer to lay the blame at the feet of Jay Walder and the rest of the authority, the truth is that Albany has dropped the ball. The legislature in November moved $143 million of dedicated MTA funds into the general fund, and the state’s tax accountants promised more revenue from the payroll tax than the MTA received. Today, fingers are pointed squarely at Albany, and a few groups are clamoring for better solutions.

To highlight the MTA’s plight, the Empire State Transportation Alliance — a coalition of business, civic, labor and environmental organizations that support sound investment in public transportation — voiced its begrudging support for the fare hike. Praising the authority for its “substantial cuts to administration,” the alliance stressed how “the MTA’s financial problems are real.” The organization’s co-chair summed up ESTA’s position. “We support the MTA’s decision move ahead with this scheduled fare increase,” Bob Yaro, also president of the Regional Plan Association. “The alternative would be another disastrous round of service cuts on top of the recent cuts that were necessitated by the Legislature’s decision to divert $143 million in dedicated MTA tax revenues to the state’s general fund.”

Albany’s failures were a key theme to the various statements from advocates and officials from around the spectrum. Paul Steely White, head of Transportation Alternatives, expressed his hope that voters would hold Assembly representatives and State Senators responsible for the MTA’s financial mess. After all, these politicians are the ones who are so cavalier when it comes to transit funding. “The riding public is footing more and more of the bill to keep our transit system running, and all the while the services they rely on are disappearing before their very eyes,” he said. “If our elected officials in Albany think the riding public is going to stomach massive service cuts and a whopping fare hike during an election year, they’ve got another thing coming.”

Kate Slevin, executive director of the Tri-State Transportation Campaign, also stressed voter accountability. “You can’t just blame the MTA,” she said. “Elected officials who simply point fingers are dodging their responsibility to ensure our region’s transit service remains safe, affordable, and reliable. Voters angry about the recent service cuts, especially bus riders on Long Island, should ask candidates how they plan on dealing with the MTA’s financial crisis.”

The more intriguing calls though were from those advocating for a pricing or tolling solution. The MTA, as Slevin said, should not keep foisting more fares on riders while others — drivers — also enjoy the “congestion busting benefits of our transit system.” Many of these influential voices called for some sort of tolling or congestion plan. “Everyone who benefits from a healthy transit system should help pay for it,” Kevin Corbett, co-chair, ESTA, said. “We understand the short-term need to raise fares and stave off further reductions in service but Albany must return funding taken from the transit system and end the practice of shuffling dedicated MTA tax revenues. New, long term revenues such as tolling must be considered as severe shortfalls in capital and operating funding are on the horizon.”

Gene Russianoff and the Straphangers, in a release decrying the fare hikes, wondered the same thing. “Why,” they asked, “should transit riders pay to cross the East River, but drivers on the East River bridges get a free ride?”

At this late stage in the game, I’d support congestion pricing or East River bridge tolls. Congestion pricing targeted to peak hours and only the Manhattan Central Business District seems to be the more equitable of the pricing solutions. It targets the people who drive as a luxury while those who work at off-hours and commute over far distances that aren’t easily transit accessible won’t be expected to pay as much. Lower tolls could be used during off-hours to supplement congestion pricing or variable tolling could accomplish the same goals. The revenue should be placed in a lockbox that Albany cannot touch and that the MTA can use only for operations.

Right now, though, the state’s politicians aren’t willing to take this step, and the rest of us pay. As Denise Richardson of the General Contractors Association of New York, said, “As we evaluate this fare increase proposal, we have to decide what cuts we will accept in lieu of it. No one likes higher fares, especially at a time when the economy has yet to fully recover and the job market remains weak, but we cannot expect the MTA to maintain the system and balance its books simply by making cuts in administrative personnel.”