Cuomo’s MTA Debt Bomb: How the Pieces Fit Together

If the governor experienced a typical New Yorker's transit commute, he might be more inclined to fund the MTA capital plan, advocates say. Photo: Azi Paybarah/Flickr
Photo: Azi Paybarah/Flickr

NY1’s Zack Fink reports that last week’s Albany budget deal raised the MTA’s debt ceiling to $55 billion (about one-third higher than the previous cap of $41 billion). That’s $14 billion more in potential borrowing that, in all likelihood, straphangers will pay off in the form of higher fares.

The increase in the debt ceiling wasn’t a surprise, since it was included in Andrew Cuomo’s draft budget, but it’s worth taking a quick look at how this fits with the governor’s broader strategy of saddling MTA riders with the burden of paying for the authority’s capital program.

Recall Cuomo’s original bait-and-switch. In October, he agreed to cover $8.3 billion of the MTA’s $26 billion, five-year capital program from “state sources.” Then a few months later he released a budget proposal with no additional state funds for transit, just a notional commitment to pay for the capital program once the MTA’s own resources “have been exhausted.”

With the increase in the MTA’s debt limit, the authority now has $14 billion in new borrowing capacity to exhaust. The point at which the state would have to commit its own resources has been pushed farther into the future. Cuomo will probably be out of office by then. Not his problem.

But for the people who ride MTA trains and buses, especially people whose budgets are stretched tight already, paying off that debt will be a serious problem.

  • I warned that this will happen: Now the businesses, the drivers, the
    riders and the taxpayers will be paying a major price for decades to
    come, especially for my millennial generation as well as future
    generations. As Larry Littlefield had said, Generation Apathy (Generation Y or younger), meet Generation Greed (Generation X or older).

  • JudenChino

    Why though? Is the state really that strapped that it cannot come up with a few extra billion? The NYC budget is $82 billion. NYS has got to be able to scrounge up a few on its own I get it he doesn’t want to “raise taxes,” but what he’s doing is worse since the financing costs and higher fares would ultimately be more expensive in the aggregate then just raising taxes. You don’t want to over lever yourself unnecessarily lest you’re unable to do so when you really truly need to.

    This isn’t the height of the recession (which is when you should really do debt financing since the financing, labor and other fixed costs are cheaper at such time + the benefit in putting people to work and thus putting money back into the economy) Like great, he’s giving us the $15 minimum wage, but what good is that if it’s offset by an increase in transit costs for the most vulnerable?

    God I hate this fucking guy. Does he really think he’s got a shot at the presidency? I just don’t understand. Is he really just that petty and wants to fuck with BdB. This is a good read too: http://www.villagevoice.com/news/cuomo-bares-fangs-at-cuny-puts-final-nail-in-the-coffin-of-his-own-progressivism-8367981

    It really sucks riding the train. I love it when weather/work allows me to bike to work. After taking the MTR (Hong Kong), taking the R makes me feel like i’m in a 3rd world country. Hell, even Guangzhou’s subway has articulated cars, highspeed data, platform doors, countdown timers etc . . . .

    Like, I do not want to live in some big sprawling suburb, with big lawns, where you hop into the car, sit on the LIE/I-95 for 45 mins, while your ass accumulates ass sweat just sitting there as you curse the car in front of you and try to eek out that extra bit of space on the highway.

    I want to live in the City or near it. But it’s just not affordable at all to pay market rent in the city. And the further out you go, the most miserable the commute and the more (in my case), one may be perceived as a “gentrifier” pricing out the long-time locals (or those locals just hold on and sell for a windfall). But what the fuck can we do. Honestly, I can’t think of any other word to describe AC then, frankly, what an asshole!

  • If Malliotakis is correct (not a guaranteed assumption, I realize), the MTA can now take on more debt that the state. I’m not sure that’s constitutional under accepted local government jurisprudence. Who is the guarantor of the debt if the MTA defaults if not New York State?

  • Joe R.

    I recall when I was younger state and federal transit aid used to be a regular thing. Why has it disappeared? NYC sends far more in taxes to both the federal government and NYS than it gets back in spending. We should demand a much larger amount of transit aid simply as a matter of fairness. Let’s remind people without NYC, upstate as we know it wouldn’t even exist. NYC is the economic engine which drives the state. The subway is the engine which makes NYC possible. Here’s a good allegory to the situation:

  • Thank you so much JudanChino. That sums it up perfectly for decades to come in NYS. BTW, based upon your picture on your profile, I we should pray that the state of our economy will survive in “One Piece,” NO PUN ATTENDED.

  • mushr00m

    Seems like low interest rates and weakly growing economy is a good time to borrow not raise taxes.

  • Joe R.

    It’s even worse in that the costs of borrowing now, paying later will hit those least able to afford it in the form of fare increases. It would be much fairer if you were to raise taxes now only on those making perhaps over $200K annually. Or perhaps just cut spending, starting with the ridiculous amount NYC and NYC spend on education for mediocre results.

  • JamesR

    Everything you wrote is true, I dread my 1.25 hour transit commute and it’s not going to get better without some major plot twists (like the enactment of the Move NY toll plan for one). While the rest of America is a giant zone of car-dependent fail, at least things are cleaner, more affordable, and not decrepit like they are here. And I could sit peacefully at home after a long workday without having to listen to honking horns constantly.

    We pay so dearly in time/sanity/money for the privilege of being immobilized in a subway car due to “train traffic ahead of us/we are being held by the dispatcher, etc” and then taking our lives into our hands in the crosswalk thanks to abusive motorists once we are above ground. This isn’t living. The combination of a deteriorating transit system and a Sisyphean failure to enforce traffic laws is burning me out big time.

    /rant off.

  • Larry Littlefield

    These are “moral obligation” bonds, not general obligation bonds authorized by the voters.

    How about everyone under age 55 agreeing that they have no moral obligation to pay any of them back?

  • Joe R.

    Totally agree. Same goes for the pension increases for public union workers which the legislature slithered through in the early 2000s. If it ever comes down to a tax increase or pension cut, the latter gets my vote. If a deal is made in bad faith, or is based on questionable economics, there is no moral obligation to honor it. It’ll most likely be members of your so-called generation greed who buy these bonds. It’ll be only fitting when they lose every dime. That will be the start of payback for this generation. The massive default in student loans, which as far as I’m concerned is justified because of predatory collection prices, will be the next great equalizer for generation greed.

  • Spot on Larry: I’m in that category. Even worse, I am a millennial, unemployed, in a lot of debt, on welfare, needing to rely on my own single mother, while living in the projects. In the next several decades, I need to pay a lot more taxes and fares than the previous generations.

  • Keep in mind that Governor Cuomo and the Senate Republicans don’t want to raise taxes or go forward with the MOVE NY plan because it will cause a lot of political and community opposition on all fronts.

  • And that makes NYC the most taxed city in the state, the nation, and the continent: The cost of living continues to go up as constantly as possible,mouth big fare and toll hikes will be on the horizon.

  • Absolutely: Without the financial capital of the world, then the entire state will be just like the 1970s all over again. Don’t forget that New Jersey and Connecticut will be economically impacted as well, maybe the entire Northeast Corridor as well.

  • As a member of the Riders Alliance, please make it Breaking News on your blog. I will be looking forward to it, as I am a reader and a commenter for a couple of years. This is the issue that we must take this seriously from now until the Capital Program Review Board approves it next month. It is like the past capital plan all over again.

  • chris

    So, why did you choose to take on that debt, and why do you choose to live here?

  • J_12

    That’s a good question. My understanding is that New York State does NOT have a contractual obligation to guarantee the debt of the MTA, but it has been a little while since I actually had to look at any of the bond indentures. It’s an important point, and one that deserves more attention.

  • Sean Kelliher

    All this makes me wonder – why isn’t deBlasio aggressively promoting the Move NY plan?

    When I read the plan outline, I think the projected annual revenue from tolls, increased ridership, etc. was a little under $2 billion dollars. The plan would supposedly stimulate economic activity too, bringing in another $168 million in sales and income tax revenue. This would be a big help to the MTA. They could, theoretically at least, improve service and attract new customers and avoid taking on a debilitating amount of debt.

    There are also the plan’s presumed health benefits: fewer vehicles and less gridlock means a population less exposed to horn honking and exhaust, and their harmful effects.

    Maybe when he’s done with his signature issue, horses in the park, he could work on something that’s killing us all (horses included).

  • Joe R.

    A lot of these local leaders are busy spreading the same FUD that they spread about previous similar plans. That includes things like the plan is a tax on low/middle income people who have to drive into Manhattan (do such people even exist?), it’ll increase the cost of goods/services in NYC, it’s unfair because it makes drivers pay for mass transit they don’t use, and so forth. Then you have the fact Cuomo still seems to consider Move NY a nonstarter, perhaps because it will increase costs for suburban car commuters driving into NYC. In a nutshell, the best answer to your question is that far too many local leaders still have windshield perspective. All they know is Move NY will make their transportation costs and those of their friends higher but not provide them with any benefit since they never use mass transit.

    It amazes me how the one place in the country which should be a mecca for those who want to ditch their cars ends up being controlled by people who can’t fathom any way of traveling except by private automobile. Replace these people with some who actually don’t own cars and you’ll see Move NY pass in a heartbeat.

  • Larry Littlefield

    Based on when taxes actually got raised in the past, is a recession a good time to raise taxes? Because

    1) The political/union class gets to really kick the serfs when they are hurting, with tax increases and service cuts, while all its guarantees to itself are kept.

    2) The executive/financial class has lots of capital gains losses on its investments. They can arrange to realize those losses to avoid paying taxes at the higher rates, and postpone gains until later when taxes at the top are cut again.

  • Larry Littlefield

    Your comment implies that there are real elections for state legislature.

    I certainly didn’t choose to take on that debt. Whether those who haven’t been paying attention deserve to be ripped off by those working the system for the rest of their lives or not, that’s something you can debate.

  • It’s because I’m unemployed and living on welfare, and I need to take on debt to further my education and buy necessities for my family Chris. In addition, I lived in NYC all of my life because my mother is unemployed and on welfare as well and living in a rent controlled apartment.

  • neroden

    So, look, who are we running in the Democratic Primary against Cuomo in 2018? Basically any random person picked off the street would be an improvement.

    Also, who are we running for the five DA jobs in NYC. Since the current five DAs let killers roam free to kill again, because the current DAs think killing innocent people is totally fine, I think almost anyone could run a successful campaign to oust them.

  • neroden

    Make no mistake, Cuomo is screwing upstate transit too. Look up the horrible thing he did with Medicaid transportation funding, which was a lose-lose-lose change which hurt everyone.

    Andrew Cuomo is just an awful awful governor. Pataki was better, and that’s saying something.

  • neroden

    Hey, Generation Greed ended with the generation before Generation X. Pay attention to where the demographic and voting turning point is; it’s actually around age *45* at this point…

  • neroden

    I’m pointing out that this isn’t upstate vs. NYC. Cuomo is comprehensively screwing upstate too. It’s Cuomo and some self-dealing criminals in the State legislature vs. everyone.

  • JK

    There is no legal guarantor if the MTA defaults. Legally, bond holders lose their money. But, does anyone really believe the state would let MTA default? I don’t, but the bond rating agencies rate authority debt as if the authority is completely self-encapsulated. This fiction that the authorities are completely separate from each other, and the state, seems a lot like the delusion that the various mortgage backed securities were all completely separate from each other, which led to the collapse of 2009. It’s also hard to find credible given the recent default of Puerto Rico and its Power Authority.

  • However neroden, it will be all riders, drivers and taxpers that are not senior citizens will need to pick uo the tab to pay off all of this debt with interest, with future generations will be paying off the most because this causes much faster than the rate of inflation.

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