The Metropolitan Transportation Authority (MTA) has fended off fiscal disaster brought on by the COVID-pandemic, but it is not out of the woods yet, according to a report released today by New York State Comptroller Thomas P. DiNapoli. The Comptroller’s annual report on the MTA’s finances details how the combination of higher spending, the winding down of federal aid, the risk of permanently lower ridership levels, the increased impact from extreme weather, potential service reductions and other factors will create escalating challenges with limited time for the authority to solve them.

“The MTA is the engine that drives New York City’s economy and it is running on borrowed time,” DiNapoli said. “It has so far survived the worst crisis in its history by covering budgets with massive federal aid. The MTA and its funding partners face tough choices on challenges that can turn into emergencies if not dealt with promptly. Bringing riders back, protecting against extreme weather and maximizing new sources of revenue are all challenges the MTA needs to address before emergency federal funds dry up in 2025. After that, the MTA faces enormous budget shortfalls that could harm the regional economy with no easy solutions.”

The MTA plans to close significant budget gaps ($4.8 billion in 2021, $2.9 billion in 2022, $2.5 billion in 2023, $2.8 billion in 2024 and $3.3 billion in 2025) predominantly through the use of $10.5 billion in one-shot federal assistance. Over that period, MTA spending will increase annually by an average of 4.2%, higher than projected inflation.

In 2025, when federal aid runs out, the MTA plans to balance its budget through more than $1 billion of deficit financing, a dangerous practice of long-term borrowing to pay for short term needs like cleaning and maintenance. Of greater concern, if the MTA is not able to execute its plans to manage budget risks through savings and revenue measures, it will begin using borrowed funds a year earlier, in 2024. DiNapoli has long cautioned against the use of such practices, which, when used on a recurring basis, become unsustainable. Besides adding to MTA’s already outsized debt-burden, which DiNapoli detailed in April, borrowing to cover operational costs runs the risk of reducing funds for the MTA’s badly-needed capital investments.

Additional federal support in Congress’ proposed infrastructure bill (H.R. 3684 - Infrastructure Investment and Jobs Act) could help alleviate the debt burden by allowing the MTA to borrow less, but passage of the bill remains uncertain. In addition to planned capital funding, timely implementation of the congestion pricing program could bring more riders and funding to the system and reduce ever-increasing traffic congestion.

DiNapoli’s report also calls for a thorough reassessment of the MTA’s capital needs to prioritize service and win back riders — whose return the Comptroller’s subway dashboard shows has been uneven — and review protections against future weather emergencies.

The pandemic continues to cast a long shadow over the recovery of the MTA and the broader economy. Work on MTA’s 2020-2024 capital program, far behind schedule, only began to pick up pace in the spring of 2021. Further delays in the approval of congestion pricing could further hamper capital spending and MTA’s need to strengthen the system’s resilience against inclement weather events.

Ridership also remains uncertain. Ridership during the financial plan period is not expected to reach pre-pandemic levels, but small fluctuations could have outsized impacts on MTA revenue. DiNapoli’s report estimates if workers telecommute 1.5 days a week on average next year, revenue could be $300 million more than planned. But if workers telecommute 3 to 4 days a week, revenue would be $500 million less than expected.

Among its other findings, DiNapoli’s report noted that:

• MTA expects revenue to remain relatively flat from 2021 to 2025 when federal funds are included.
• Not counting projected fare hikes, MTA assumes fare revenue will increase 4% annually between 2022 and 2025 from increased ridership, but the 2025 level would still be 14% below 2019.
• Congestion pricing is expected to bring in more than $1 billion per year, which would support $15 billion in new debt capacity for the 2020-2024 program, but the revenue is not expected until 2023.
• MTA’s debt burden will stay high as the pandemic’s impact recedes, consuming 21% of all revenue in 2023 through 2025. By 2031, debt service is projected to cost the MTA $4.1 billion, which is $1.4 billion (51%) more than in 2020.
• MTA’s operational and maintenance positions are understaffed, causing declines in service. Weekday subways delivered just 89% of scheduled service in Aug. 2021, down from 96% in Aug. 2020. Further declines could stall riders’ return.
• MTA eliminated 2,725 positions as part of its transformation plan to attain efficiencies through administrative consolidations, but 2,295 (84%) were in operations and maintenance and 1,840 of those positions were non-administrative positions. Savings from this initiative are likely at risk as the MTA continues to hire to manage service delivery.
• MTA is considering cost-saving reductions in service to adapt to the “new normal” of reduced ridership, which is expected to be between 82% and 91% of pre-pandemic levels by 2025. This would save slightly more than $200 million a year, but its impact on ridership and equitable economic recovery remains unknown.

Report:
Financial Outlook for the Metropolitan Transportation Authority

Other References:
Subway Ridership Dashboard
MTA Debt Report

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