N.Y. MTA Cuts Deficit Forecast on Rising Real-Estate Tax RevenueEsmé E. Deprez
New York’s Metropolitan Transportation Authority, plagued by budget deficits for years, boosted its surplus forecast this year and lowered estimates for future gaps due in part to rising real-estate tax revenue.
The biggest U.S. transit system will end 2013 with a cash balance of $141 million, up from the $48 million projected in February, according to budget documents presented to the MTA board today in Manhattan. The MTA faces $240 million in deficits next year through 2016, down from the prior estimate of $325 million. Riders will gain $18 million in service restorations and additions, including to the G and M subway lines.
“It is a favorable plan,” Chief Financial Officer Robert Foran told reporters after addressing the board. “We’re able to add service, I think we’re addressing those out-year deficits and I think we’re doing those things that we pledged to do, which is trying to address these long-term costs and also preparing for the next capital program.”
The agency has been battling the growth of what it calls uncontrollable costs, which include retiree pensions, employee health care and debt service. Those expenses are projected to rise about 6 percent annually through 2017. By contrast, controllable costs, such as salaries, wages and materials like toilet paper are expected to rise 1.6 percent, in line with inflation.
Officials embarked on an aggressive cost-cutting plan beginning in 2010 and pared $700 million from the operating budget last year, Foran said. Those savings are set to increase by $1.3 billion by 2017.
Rising tax revenue from real estate transactions in New York City, of which the MTA receives a portion, drove the improvement over the previous estimate in February, transit officials said. This year, the agency is slated to receive $871 million, according to budget documents. That’s up from $379 million in 2009, though still less than the $1.6 billion it got in 2007, prior to the recession, Foran said.
The agency considers such revenue as nonrecurring because it fluctuates with the economy, Foran said. Instead of boosting service by more than $18 million, officials put money toward some of the agency’s long-term liabilities, including an $80 million contribution to the pension plan for Long Island Rail Road retirees, which is underfunded by $1.2 billion.
“Adding service means we’re adding ongoing expenses and the funding must be sustainable,” Foran told the board. “The worst thing we could possibly do is have to add service and then take it back.”
Allen Cappelli, a board member from Staten Island, called the $13.7 billion budget for next year a “prudent, sensible plan” that continued the efforts begun in 2012 to restore $93 million in services cut in 2010.
Higher toll revenue from the MTA’s bridges and tunnels, reduced debt service and energy costs worked in the agency’s favor, Foran said. Issues working against the MTA included lower fare revenue and increased insurance premiums following Hurricane Sandy, which hit the region in October and destroyed transit infrastructure.
Risks to the budget remain, including the assumption that the agency will achieve the net-zero wage increases it seeks from unionized employees currently working with expired contracts and the continuation of biennial fare and toll increases in 2015 and 2017.
The MTA employs 66,000 workers and carries 8.5 million riders a day on subways, buses and commuter railroads. Board members will vote on the final budget in December.