How the MTA Managed to Afford Service Restorations

The MTA has closed its deficits primarily through administrative cost savings and wage freezes (dark blue), a proposed net zero contract with unionized workers (yellow) and fare and toll hikes (light blue and green). Image: ##

Wondering how the MTA could afford to restore service on 24 bus lines and postpone next year’s fare hikes? New budget documents show where the transit system’s revenues and costs beat expectations, leaving the small and fragile surplus. The biggest savings came from cheap energy. Revenues from riders were up, but the important yet volatile real estate transaction tax came in under expectations.

Here’s how the MTA broke down the evolution of its finances since February:

The July Plan includes some significant favorable changes that have resulted in a net favorable re-estimate:

  • Favorable 2011 results increased the cash carry-over;
  • Higher ridership related revenues;
  • Lower energy prices;
  • Debt service savings; and
  • Mid-year release of a portion of the general reserve.

Offsetting those results were some adverse changes:

  • 2012 real estate transaction tax receipts running under budget;
  • Unfavorable arbitration ruling with the Amalgamated Transit Union;
  • Higher OPEB estimates will result in increased contributions to the GASB fund;
  • Higher pension costs (lower rate of return assumption); and
  • Higher worker’s compensation costs (increased number of claims).

The reduced energy costs alone saved the MTA $50 million for 2013, while soaring transit ridership meant fare revenues $29 million above expectations. Continued attempts to reduce paratransit costs by encouraging some disabled riders to use the subway, bus, or a taxi are expected to save $40 million next year, with far more significant savings in years to come.

Those savings are partially offset by the MTA needing to contribute more to a fund for retiree health care ($22 million more than expected) and by disappointing returns from the real estate tax ($26.5 million under expectations).

These revisions aren’t indicative of the most important trends driving the MTA budget overall — debt service is the fastest-growing piece of the MTA’s budget — just the short-term changes that freed up a little bit of room for service restorations. For a real return to fiscal health, the MTA needs stable, dedicated revenue streams and a capital plan that doesn’t overload the transit system with debt.

  • Larry Littlefield

    “Those savings are partially offset by the MTA needing to contribute more to a fund for retiree health care ($22 million more than expected) and by disappointing returns from the real estate tax ($26.5 million under expectations).”

    The unexpected good news is the MTA is still contributing to a retiree health care fund.  The City of New York cashed theirs out, leaving future taxpayers entirely on the hook for benefits earned in the past.

    If the MTA keeps contributing to that fund and build it up, in a decade or two its earnings might be able to carry a good bit of the load for retiree health insurance.   The TWU should be happy — I expect retiree health insurance to disappear from most places in the next 20 years.

  • It’s partially covered here, but prices for CNG (which is used at 4 of the MTA’s 28 garages) has crashed through the cellar. Given that CNG tanks are certified for 25 years now, it should be really considered as to whether or not CNG over-the-road motorcoaches should be purchased for express service to further reduce their costs (the diesel MCI coaches there could then be reassigned to Staten Island to replace worn-out coaches there).

    You don’t need standee capacity on express routes to Brooklyn or Queens, and that would be 220 buses using fuel that costs less. CNG will be less than diesel going forward because any CNG mined for can only be used in the USA and Canada.

  • Ben Kintisch

    It’s nice that the service is being restored, at least temporarily. But since debt service is still a huge part of the MTA budget, and the Capital Program charges on (paid for with enormous debt), MTA is going to be in a perilous budget situation for years to come as long as raids from Albany are the norm.


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