How bad are the finances of the state-controlled Metropolitan Transportation Authority? Last week, the MTA was forced to borrow money from the Federal Reserve, the country’s central bank and the lender of last resort to financial companies – not transit authorities. As the months tick by without the help of Congress, the MTA’s options disappear, causing Gotham’s recovery to return.
Even when people try to get back to daily life, they hide crowds, which means shunning transit. The MTA’s rider has, after spiking in the early summer, put an end to a fraction of pre-pandemic trips. Last Wednesday, subway driving was down 77 percent.
Metro North’s ridership is down 83 percent, illustrating that the white collar workforce in New York has not returned to Manhattan.
People who need to move use other options. Ridership of Citi Bike runs even with last year, and the toll bridge traffic of the MTA is only 12 percent down.
That transit tariffs have only cratered this year, by $ 5.3 billion, along with the tax dollars the MTA receives from Albany.
Even with the $ 4 billion Congress delivered in early April, the MTA expects a budget gap of $ 10.3 billion, against a two-year budget of $ 34.5 billion this year and next – as much as 30 percent of the ascent.
Because of these figures, the MTA can not borrow from traditional bond markets, at least not at an interest rate it wants to pay. Last week, it sought to borrow $ 451 million from traditional lenders (such as banks), with a three-year repayment period, but lenders demanded an interest rate more than double the January double.
That the MTA went to the Fed, and benefited from an emergency program. It is only the second government loan to do so, after the state of Illinois, which has long been broken. And the agency had to pay another 50 percent higher than January.
The MTA will not get much for this new debt because it can accelerate projects such as metro signal modernization.
The new loan only repays previous debt, which September would have repaid. 1. The action of the Fed is just as much a bailout of the existing lenders of the MTA, who would have gotten into trouble if the MTA could not pick up new debt around the old one.
OK, the MTA has bought time – but time for what? Congress would have to come through with a new aid package. But what if Congress does not come up with enough or for long enough?
A nightmare scenario is, three years from now, an MTA hobbling along with, say, 60 percent of pre-pandemic ridership. People with options have left the city or stuck with bikes in Manhattan and cars in the districts. The MTA has no resources to repair and maintain its infrastructure, and it needs to slash service to repay its existing $ 46 billion in debt.
Note: $ 2.6 billion in annual debt expense, in last year’s pre-pandemic budget, represented 17 percent of MTA revenue. Next year, $ 3 billion in debt costs will consume a full quarter of sharply lower revenues.
For the moment, it is not bondholders who are worried. Legally, they first claim income. There are riders who will suffer immediate sharp service and cut maintenance that will later lead to even less service. (Of course, if the transit crisis lasts a few years, the reality on the ground will erode the protection of bondholders, as in Puerto Rico and Detroit.)
The MTA has limited choices. It has been budgeting for $ 1.8 billion in budget cuts for two years now, ranging from hiring-free to cutting-edge advisers.
Much further, a wage freeze would be needed, including for union workers – for which the state’s political support is needed. Mar Gov. Andrew Cuomo has awarded a new statewide vacation, Juneteenth, without taking away an existing vacation, an annual additional cost of $ 32 million to the MTA.
The MTA budget next March already has a 4 percent tariff increase – now a tax on essential workers. It could consider increasing tolls by much higher, and faster, than rates, since car and truck traffic has been reduced. But even a 20 percent drop in bombs – much more than drivers would send all the way from New York – raises less than $ 300 million.
The MTA, with political support, can do faster. But big picture: For New York to return to normal, we count on Congress as a fax miracle – and then a quick return to office life five days a week.
Nicole Gelinas is a contributing editor to the City Journal of the Manhattan Institute.
.
