Bumps Down the Track
The MTA’s shaky finances
The MTA’s recent message to riders is that half a decade of "doomsdays" — regular fiscal crises and too-frequent service cuts — is over. But the doom — in the form of debt and employee benefits — hasn’t gone far. And the opportunity for the MTA’s political overlord to fix the problems is vanishing.
The MTA has been a font of good news lately. It will add bus lines and subway and rail service. Suburban riders will have more time to turn in unused tickets and may be able to order online (a constant request). All this will cost $29.5 million a year.
Plus, it will delay the fare hike that was supposed to kick in next January to March. "We owe it to our riders to collect when we absolutely have to collect," said MTA chief Joe Lhota (though another reason is less heroic: It takes time to program the machines).
It’s all a big change from the time of constant MTA crisis that started late in 2008.
On top of that, Lhota is doing a solid job operationally. He’s cutting costs by getting maintenance work done late at night; he’s looking to save $96 million a year on handicapped vans by giving disabled riders free MetroCards to get them onto buses, which already help 1.1 million wheelchair users a year to get around.
The turnaround has earned the MTA glowing editorial praise, especially in the politically crucial Long Island suburbs.
But don’t get too used to the, um, gold-plated service. Yes, the MTA has the tiniest of surpluses this year and next — about $46.5 million each year, or about four-tenths of 1 percent of its $12.5 billion budget.
But starting in 2014, it’s business as usual: a $129 million deficit, growing to $231 million in 2016.
And that’s if everything runs like clockwork. For example, the MTA’s assuming that its biggest union, the TWU, won’t get any raises in its next contract round, or will "pay" for them with money-saving work-rule changes and/or increases in the worker share of health-care costs.
But you can’t find savings in the past, and the contract expired more than half a year ago. Meanwhile, annual health-care costs are rising $243 million by 2014, and the union wants an improvement in benefits. A bad contract could double the 2014 deficit.
The economy has to pull itself out of its stagnation, too. The MTA is projecting that its take from real-estate-related taxes will grow by a third over the next two years. If the property market stalls or slides back, that’s another $100 million deficit.
Plus, the MTA is growing more vulnerable to a shrinking Wall Street by the day. How? As the agency grows less dependent on its income from old-fashioned taxes on mortgages, sales and petroleum, it’s more dependent on the funds from the new (2009) tax on downstate payrolls — now more than 10 percent of the budget.
But as Wall Street falls as a share of the city’s economy, payrolls shrink — and so does the MTA’s income. Soon enough, service must shrink, too.
The agency’s biggest problems, though, are debt and pensions.
To keep up the subway system, the state is forcing the MTA to borrow more than $14.1 billion in new debt — not refinancing — over five years. So the MTA needs interest rates to stay near their current unprecedented lows to build or fix much of anything.
That means it’s Federal Reserve chief Ben Bernanke and global investors who are truly in charge of the future of downstate transit — because they determine interest rates, which could just as easily be 12 percent in two years as six. (Plus, even "cheap" debt isn’t so cheap — the MTA will spend $2.6 billion a year on interest and principal payments by 2014, up from $2.1 billion now.)
Pension costs for MTA retirees aren’t growing much. But they’re already way too high, at $1.3 billion a year, having nearly doubled in five years. And if the stock market doesn’t do well, those costs will rise.
Give Lhota lots of credit for talking about this stuff, pensions in particular. He brings it up a lot more than his predecessors did.
But nobody is listening. Gov. Cuomo already did his major pension reform, and he didn’t touch MTA workers’ retirement ages.
What about giving the MTA state money so that it doesn’t have to borrow so much for capital projects? Sorry, Cuomo is understandably far more focused on how to pay for the Tappan Zee Bridge project.
Riders, then, are on their own politically. Things are OK now they’ll get bumpy soon.
This piece originally appeared in New York Post
This piece originally appeared in New York Post