The Biggest Fare Hike Factor? It Could Be MTA Debt

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Saturday’s Times delved into the history of the MTA’s mounting debt burden, which, along with rising fuel costs and plummeting revenues from the real estate transactions tax, has severely squeezed the authority’s finances:

Debt payments are the system’s largest single cost after payroll, and
by 2012 they will account for one of every five dollars the authority
spends.

The problems facing the agency now are no surprise. Independent
analysts and the agency’s own financial planners have warned of rising
debt costs for years — most loudly and urgently after a huge debt
restructuring in 2000.

Called at the time the largest deal in
the history of American municipal finance, the refinancing — taking
advantage of lower interest rates — led to lower debt payments. The
agency, facing political resistance to fare increases and new taxes,
decided to sell new bonds to finance the system’s first major expansion
since the 1930s. In a few short years, the debt burden it had amassed
over nearly 20 years had doubled.

Before the debt restructuring, the article notes, state and city contributions to the MTA capital budget fell to historic lows during the 1990s, causing the authority to rely more on borrowing.

When former MTA chairman Richard Ravitch proposed the authority’s first bonds, issued in 1982, the cash made possible investments that revived a transit system in crisis. Now all eyes are again fixed on Ravitch, appointed by Governor Paterson to find a way out of the MTA’s current funding woes. With the state and city facing budget crunches of their own, where might the money for transit come from?

Graphic: New York Times

  • Shemp

    What do you mean “could be”?

  • Larry Littlefield

    The Times missed something. It isn’t as if today’s and yesterday’s state residents paid for 19% of the 2005 to 2009 MTA Capital plan. The “state share” was also borrowed.

    The only money since 1999 that has been real money, not borrowed money, is the federal share.

    And remember, most of those “capital expenditures” were for ongoing routine normal replacement, maintenance and catch up maintenance, not anything new.

    Next, they’ll try to tell us that after borrowing $25.7 billion, we cannot afford the new improvements.

  • Transit Guy

    Quick note to point out that Federal money usually pays for 80% of road projects.

  • What’s with only getting 2 percent from the city and state in 2000-2004? That’s pathetic!

  • Moser

    Larry, not entirely correct. The 2005 plan had an increase in metro-area real estate transfer taxes dedicated to the MTA. That helped generate more revenue than anticipated the last couple of years but is obviously not the steadiest of revenue-flows for anyone these days. Also, re: your reference to “1999” I don’t believe there was any real revenue addition during the Pataki years other than what I’ve just mentioned. There was a major increase in the petroleum business tax in 1993, allocated to the MTA and the state’s highway fund.

  • Ian Turner

    Don’t forget that the feds are also running up their share of debt, it’s not entirely accurate to say that their contributions are “real money”, either.

  • Niccolo Machiavelli

    Since when does capitalism work with “real money”? Its not so much the debt as what it bought. Larry is correct to point out that it bought a lot of short term things, especially routine maintenance.

  • Larry Littlefield

    What really kills me is that with fixed-rate debt at all time lows, the MTA shifted to floating rate debt to save a few nickels for Pataki to give a way.

    That could potentially kill us right there. I’m glad Bear Stearns folded, and wish they had gotten the original $2 per share instead of $10.

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