Update on Emerging State Budget and MTA Emergency Financing

March 31, 2020

Update on Emerging State Budget and COVID-19 MTA Emergency

Draft summaries of the state budget and discussions with Albany sources suggest the Governor and Legislature are taking short-term steps to address the MTA’s plunging fare, toll and tax revenue. Three new sections, if enacted, would allow the MTA to borrow more, and seem to give the MTA more flexibility in how it spends revenue from the Internet Sales Tax, Mansion Tax and planned Central Business District Tolling. While these proposals may not be enacted, the concepts have been part of the “short list” discussions in Albany.

Reinvent Albany continues to believe the MTA’s financial situation is dire, despite $4B from the third federal COVID stimulus package. Draft documents show discussions remain open regarding the fate of the MTA’s 2020-2024 capital plan.

We want to flag three provisions that have caught our eye:

  1. “MTA emergency lockbox authorization” – We believe this provision would give the MTA more flexibility in how it uses revenue from the Internet Sales and Mansion Tax and planned Central Business District tolling. State law currently requires revenue from these sources to be bonded and placed in the 2020-2024 MTA capital project “lockbox.” We do not know what, if any, restrictions will remain on these funds and whether the MTA will have to repay them. Revenue from the Internet Sales and Mansion taxes is already available, and CBD tolling revenue remains slated to arrive in early 2021.
  2. “MTA 2020-24 Capital Program $3 billion contribution – NYC” – We think this provision could require NYC to provide $3B for the MTA’s 2020-2024 capital plan. Alternatively it may make $3B in state support for the 2020 plan contingent on the $3B in New York City support. Mayor de Blasio has not yet included the $3B for the MTA in the city’s budget. In 2016, state and city funding were linked, and to be provided together upon the “exhaustion” of MTA resources.
  3. “NEW PART — MTA deficit bonding?” – This draft provision may allow the MTA to issue “COVID” bonds to pay for day-to-day operating expenses. It is unclear if this would be counted toward the MTA’s debt cap — $90.1B under the Executive Budget legislation — or whether the MTA would be limited to short term Bond Anticipation Notes. Borrowing operating funds is akin to racking up credit card debt to pay rent and groceries, and is unsustainable. If the MTA does borrow to pay day-to-day bills, its credit rating will be downgraded and MTA will pay higher interest and debt service payments. Prior to the COVID-19 emergency, the MTA already had a huge debt load, which was slated to climb to 22.5% of its operating budget by 2023.