The Metropolitan Transportation Authority, the biggest U.S. transit agency, faces budget risks from labor costs, a sluggish economy and a plan to borrow $14.8 billion, the most ever, New York Comptroller Thomas DiNapoli said.
“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 service, fares and budget gaps,” DiNapoli said today in a report reviewing the state agency’s four-year financial plan issued in July.
Even with its plan to negotiate contracts that keep wages unchanged for three years and to increase tolls and fares by 7.5 percent every two years, the agency still faces budget deficits rising to $1.2 billion in 2018 from $600 million in 2016, DiNapoli said.
Debt service would reach $3.3 billion by 2018, which is 64 percent more than in 2011, DiNapoli said. The agency is facing a $9.9 billion funding gap in the last three years of its capital program that covers 2010 through 2014. It is borrowing $14.8 billion to close it.
An MTA bond maturing in 2031 traded at a yield of 3.45 percent today, or a 0.09 percentage point more than a top-rated municipal bond of the same maturity, according to data compiled by Bloomberg. In June, the same MTA bond traded at 4.7 percent, or 0.84 percentage point more than the benchmark index.
MTA Chairman Jay Walder is leaving the agency in October for a position with Hong Kong’s urban rail operator.
“The next MTA chairperson will face a number of challenges including negotiating new collective-bargaining agreements, squeezing additional savings from the operating and capital budgets, and keeping fares affordable in the face of rising debt-service costs for the capital program,” DiNapoli said.
The MTA operates the New York City subway and bus system, and the Long Island and Metro-North railroads. DiNapoli’s office issues reports on New York’s finances and conducts audits of state agencies.