Wednesday, July 30, 2014

New York MTA facing $12 billion capital shortfall

Written by  William C. Vantuono, Editor-in-Chief
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The New York Metropolitan Transportation Authority, which accounts for approximately 25% of all rail transit spending in the U.S., is staring at a potential $12 billion shortfall in its proposed 2014-2019 capital plan, according to New York State Controller Thomas DiNapoli.

The five-year plan identifies $26.6 billion in maintenance and infrastructure projects, and is to be submitted to a state review board in October. Longer term, $105.7 billion will be needed to complete major capital projects; MTA New York City Transit’s share alone is $60 billion and includes such projects as future phases of the Second Avenue subway and procurement of up to 2,500 new subway cars (about 40% of the NYCT fleet), a $2.5 billion investment. Among the other long-term projects are $15 billion in signal system modernizations and $9 billion in repairs to elevators and escalators and tunnel ventilation upgrades. These and other major capital projects, which were slated for completion by 2020, have been pushed back as much as 14 years, to 2034.

“The MTA has to find a way to finance improvements without putting the financial burden on riders,” DiNapoli said in a statement. “This can be achieved only by working closely with the federal government, New York State, and New York City to develop a long-term financing program and by using resources effectively and efficiently. ‘Otherwise, needed repairs will be pushed even further into the future, and fares and tolls could rise even faster.’’

DiNapoli, a 60-year-old Democrat, is running for re-election this year as New York State Controller.

The MTA’s previous five-year capital plan identified an initial funding gap of $9.9 billion, which was closed through borrowing and by cancellation of some projects. The agency had about $34 billion of debt as of May 30, 2014, and its principal and interest costs, which aren’t included in the 2014-2019 capital plan, are projected to surpass $3 billion by 2018 and have tripled since 2005, DiNapoli said. If the MTA closes the $12 billion funding gap through borrowing, annual debt service costs may climb to $4.4 billion by 2025, he said.

Standard & Poor’s on June 17 boosted the MTA’s transportation-revenue bonds by one step to AA–, its fourth-highest grade. Moody’s Investors Service rates MTA’s revenue bonds two levels lower, at A2, which is comparable to Fitch Rating’s A grade for the credit.

The MTA board of directors will be presented the capital plan in September. ‘‘Like all transit systems in America, the capital plan will always require public financial support, and we look forward to a robust discussion with our elected officials and stakeholders to identify resources,” said, said spokesman Aaron Donovan.

Meanwhile, the MTA presented to its Board a proposed 2014-2017 Financial Plan that it says “continues our commitment to implementing significant annually recurring cost reductions, totaling $1.3 billion each year by 2017. The Plan increases our emphasis on addressing long-term costs— like pension, debt service, and Paratransit—that were previously considered ‘uncontrollable.’ The Plan also reflects our commitment to add or restore service wherever sustainable.”

The Financial Plan “proposes $18 million in additional service investments that will improve both the frequency and quality of service,” the MTA said. “In addition, the Financial Plan includes $11.5 million in service adjustments that are primarily driven by service guidelines, and $11 million in other customer service initiatives.”

The MTA Board will vote on the Financial Plan at its December meeting.