MTA Faces Financial Destruction Without Federal Aid – Testimony at Special MTA Board Meeting

Good morning. I am Rachael Fauss, Senior Research Analyst for Reinvent Albany. We advocate for more transparent and accountable state government, including for authorities like the MTA.

We are here to amplify what Chair Foye and others have been saying for months: the MTA faces destruction without a huge influx of federal emergency Aid. There is no “Plan B” that results in an economically and socially viable New York City. The U.S. Congress must deliver a huge emergency aid package with the more than $10B the MTA needs through 2021.

Given your role as members of the MTA Board, we ask that you be prepared to address the possible scenarios for the future well ahead of the release of the November financial plan, and the anticipated adoption of the 2021 budget in December. These times are unprecedented, and the earlier a public dialogue is created about the possible scenarios, the better all stakeholders can weigh in about what options will be the least harmful, both in the short- and long-term. Further, the consequences of Congressional inaction will also be made more stark.

While we were encouraged to hear Chairman Foye say to Politico that deficit borrowing would be like “going to the top of 2 Broadway and lighting million dollar bills and throwing them into Broadway,” a true red line must be drawn on how much debt is too much for the MTA. With COVID ravaging the MTA’s finances, debt payments will reach nearly 26% of operating revenues in 2021. This is up from 11% in 2004. The MTA must learn from the past, and ensure that riders in future years aren’t suffering under a transit system so saddled with debt that it can’t maintain service levels or a state of good repair. There should be an independent assessment of MTA debt affordability conducted by the State Comptroller, and robust discussions by the MTA Board about how to mitigate debt payments.

While it is a positive development that the MTA was able to borrow $450M from the Federal Reserve’s Municipal Liquidity Program than the public markets, this borrowing still comes at a cost of 1.92% interest, must be paid back in three years and only provides a nickel on the dollar of what the MTA needs to bridge the $10B gap. The Fed should significantly improve the program to include zero- or much lower-interest rates over a longer period of time. Only they have the power to make a limited level of borrowing or debt refinancing a potentially viable option for the MTA. Similarly, Congress must deliver the $10B in emergency aid to the MTA, as the MTA cannot cut or borrow its way out of a deficit of this magnitude without devastating consequences for riders.

Thank you for your time.