MTA Given Power to Move Money Around and Borrow $10B for Day-to-Day Expenses
Reinvent Albany Analysis of State Budget Implications for MTA Finances
- Allows MTA to borrow $10B to pay for operating costs. (Last resort measure.)
- Allows future congestion pricing, internet sales and mansion taxes to be used for operations, instead of 2020 capital plan, limited through 2021.
- Requires NYC to contribute $3B to 2020 capital plan, and also to paratransit.
- Includes a number of other small measures.
The just-passed state budget includes measures proposed by the Governor and MTA that give the MTA power to move funds from capital to operating, and borrow a whopping $10B for operating expenses. The changes are included in the Article VII Transportation, Economic Development and Environmental Conservation (TED) legislation and are necessary due to the COVID-19 emergency, which has destroyed the MTA’s already precarious fiscal situation.
The State also faces huge shortfalls because of COVID and appears unable to bail out the struggling MTA. The MTA is running low on cash and faces plunging revenue and a frozen national municipal bond market. Notably, the state budget includes revenue and spending assumptions for the MTA made before the COVID-19 emergency devastated MTA fare, toll and dedicated tax revenue and inflicted huge future deficits on the state.
Our review of the state and MTA budget suggests the MTA must get billions more in direct federal recovery grants and some other kind of help, which could include having MTA bonds purchased by the Federal Reserve Bank.
Below is Reinvent Albany’s summary of the major changes made regarding the MTA in the Article VII TED legislation.
- Part LLL – Authorizes Borrowing to Offset COVID-Related Decreases in Operating Revenue
- Allows up to $10B in borrowing for operating costs through 2022 due to the COVID emergency. The MTA already has $35B in outstanding debt dating back to 2001, which is expected to rise to $54B by 2023 as projected by the State Comptroller. Adding $10B in debt over two years would be a huge increase and result in higher debt service payments.
- Requires seven days notice to the State Comptroller and Director of the State Division of the Budget (DOB), or receipt of comments on the proposed sale and terms from the State Comptroller. The State Comptroller is not required to approve private sales, however, though the Director of DOB must approve the sale and terms for all borrowing under this provision.
- Operations borrowing will not count toward the MTA’s total debt cap for capital borrowing (raised to $90.1B under the legislation), or require Capital Program Review Board (CPRB) approval.
- Includes a reporting requirement to the State Legislature, Mayor, City Council MTA Board, and CPRB to explain revenue losses and the need for operations borrowing, which will also be posted on the MTA website.
- Part MMM – Allows 2020-2024 Capital Lockbox Funds to be Used for MTA Operations
- Use of lockbox funds (internet sales tax, increased mansion tax (properties over $25M), and proceeds from Central Business District tolling) is only allowed through 2021 due to drops in revenue from the COVID emergency.
- Requires MTA Board and Division of the Budget (DOB) Approval. (Note DOB Director Robert Mujica also serves ex officio on the MTA Board.)
- Allows for repayment of the lockbox for capital projects if federal funds are secured.
- Includes a reporting requirement to the State Legislature, State Comptroller and Director of the Division of the Budget for the MTA to explain the COVID-related revenue losses and need for use of lockbox funds.
- Part UUU – Linking of State and City Contributions to 2020-2024 Capital Plan
- Requires the State and City to each contribute $3B “concurrently” toward the MTA’s 2020-2024 capital plan. (Also note that the Capital Appropropriations legislation includes the State’s $3B which includes the “set-aside” funds to be distributed by the state legislature. Reinvent Albany and other groups have called for the size of this pot and the individual items to be made public as soon as they are finalized.)
- Requires a schedule to be determined for payment of city funds by the Director of State DOB through a newly created MTA Capital Assistance Fund.
- The City, as well as State DOB, must be given reports by the MTA on capital programs and financial activities upon request.
- If the City does not pay toward the $3B on the DOB’s schedule, the State Comptroller can redirect other state aid for the City to the City’s MTA capital plan contribution.
- Also requires the City to contribute toward paratransit operating expenses: $215M in 2022, $277 in 2021, $290M in 2022 and $310M in 2023. If the City does not provide these funds, the State Comptroller can redirect other state aid for the City to the City’s paratransit contribution through a new MTA Paratransit Assistance Fund.
- Separately from the Article VII TED legislation, the City and MTA have come to an agreement on redeveloping 347 Madison Avenue, the site of the former headquarters of the MTA. The redevelopment will generate more than $1B to fund MTA capital projects, with $600M being counted towards the City’s 2015-2019 MTA Capital Program commitment.
- Part VVV – Property acquisition for 2015-2019 and 2020-2024 MTA Capital Plans
- Allows the MTA Board to authorize the transfer of real property to the MTA’s lease with the City for installation of elevators, electrical substations, or Penn Access commuter rail stations.
- Requires the “fair market value” to be determined through use of an independent appraiser, who cannot be employed by the MTA. The City may ask for a second appraisal to be completed, which, if it is higher, must be reconciled with the first appraisal within 10 days.
Additionally, the ability to use Tax Increment Financing (TIF) was extended for the MTA until 2022, which has been proposed for use in the Governor’s Penn Station redevelopment plan.
The Article VII TED legislation also removed a number of items that were proposed in the Executive Budget, including changes to the MTA procurement processes. Reinvent Albany in testimony to the State Legislature in January raised concerns that the procurement changes would limit competition and transparency, and asked that the criminal issues be discussed outside of the budget process. While the subway sex offender ban legislation was taken out of the TED legislation, a final proposal was adopted through the Education budget bill, ELF.
Funding for operations and the capital program that is appropriated by the State to the MTA through the state budget did not see reductions from the Executive Budget proposed in January to the final budget adopted yesterday, (see the state operations, aid to localities and capital appropriations budget bills). Some MTA dedicated funds, however, are not appropriated through the state budget, but are provided directly to the MTA, like the Payroll Mobility tax which was anticipated to bring in $1.65B for the MTA this year.
All MTA dedicated funds are certain to see major declines in the coming months due to COVID and the pending economic recession. These shortfalls, along with fare and toll reductions, point to the need for more federal rescue funds, as the $4B from the federal stimulus 3 does not fully solve funding needs. This is why Reinvent Albany and other groups have asked for the MTA to share more data regarding its finances and dedicated fund shortfalls. The MTA will likely see major cash flow problems again in the summer.