New York State Comptroller Thomas P. DiNapoli today released a report showing that the Metropolitan Transportation Authority’s (MTA) short-term financial outlook has been buoyed by the economy, but that significant challenges remain, in particular closing the unprecedented funding gap in its proposed five-year capital program. 

“The MTA is in better financial condition thanks to its own efforts and a stronger economy,”DiNapoli said. “Over the coming months, the MTA will have to work closely with its funding partners to close the $15 billion gap in its capital program. Additional borrowing could increase pressure on fares and tolls, and while the MTA should look for opportunities for savings, deep cuts could affect the future reliability of the transit system and jeopardize expansion projects.”

Rising tax revenues and increased ridership on subways, Long Island Rail Road and Metro-North have improved the MTA’s financial outlook. Additionally, the MTA is making progress toward its goal of finding $1.5 billion in recurring annual savings by 2017. These improvements have helped the MTA close projected gaps in its operating budget for calendar years 2015 through 2017, leaving a manageable shortfall of $262 million for 2018. 

Despite its healthier operating finances, DiNapoli’s report found that the MTA still faces fiscal challenges.  Labor agreements will begin to expire in 2016, and health insurance and debt service costs are growing faster than revenues. 

The authority’s most immediate challenge is funding its next capital program without putting the financial burden on riders. The MTA’s proposed $32.1 billion capital plan for 2015-2019 has a $15.2 billion funding gap, representing nearly half of the program’s total value. The MTA closed the $9.9 billion funding gap in the current capital program mostly by reducing its size and increasing borrowing to a record level.

It remains to be seen how the MTA will fill the gap this time around, but DiNapoli’s report cautions that every $1 billion borrowed would increase debt service by an amount comparable to a 1 percent increase in fares and tolls. The analysis notes that the MTA’s outstanding debt is already projected to reach $39 billion by 2018 — more than double the amount in 2003 — even before taking into account any new borrowing for the proposed capital program.

The authority’s proposed capital program counts on a 25 percent increase in city funding but no contribution from New York State. The MTA expects federal funding to continue at current levels for the next five years, although federal authorization for transit funding expires in May 2015 and would have to be renewed by Congress.

Each year, DiNapoli releases a report on the MTA’s financial outlook. Other major findings of DiNapoli’s analysis include:

• 1.7 billion subway riders in 2013 were the most since 1949; Metro-North ridership was a record 81.8 million riders in 2013 and is projected by the MTA to pass LIRR ridership by 2018;
• New labor agreements are expected to cost the MTA $1.5 billion more than originally budgeted and will begin to expire as soon as 2016;
• Overtime costs in 2014 are expected to reach a record $801 million, $186 million (30 percent) more than four years earlier;
• The potential liability from personal injury and property damage claims against the MTA has nearly doubled over the past eight years, from $1.2 billion to $2.3 billion;
• Unfunded liabilities for postemployment benefits other than pensions, such as health insurance for retirees, was $19.9 billion as of 2012;
• Outstanding debt from MTA’s current and prior capital programs will reach $39 billion by 2018, more than double the 2003 level;
• Debt service and operating budget funds going to the capital program will reach $3.3 billion by 2018, almost four times the amount in 2003;
• The MTA raised fares and tolls by 29 percent between 2007 and 2013, more than twice the rate of inflation during that period;
• Fares and tolls are expected to rise another 4 percent in 2015 and again in 2017, nearly half the rate originally planned but still faster than the projected inflation rate.

For a copy of the report, click here: http://www.osc.state.ny.us/osdc/rpt10-2015.pd