Congestion pricing pause adds to LIRR maintenance as MTA projects future deficit

Gov. Kathy Hochul’s abrupt pause on congestion pricing, which has already blown a $16.5 billion hole in the MTA’s capital budget, will cost the transit authority hundreds of millions more in operating dollars, including $20 million more in annual maintenance costs for old Long Island Rail Road trains that won’t be replaced.

The loss of the tolling plan is compounding an increasingly bleak financial picture for the Metropolitan Transportation Authority, which is now forecasting deficits of more than $400 million three years from now, driven by disappointing tax revenues and worsening fare evasion on buses and subways.

While MTA officials suggested it was premature to discuss the potential impact from the future budget gaps, Lisa Daglian, executive director of the MTA’s Permanent Citizens Advisory Committee, warned that losing the toll revenue “could lead to service cuts, layoffs and drastic fare increases.”

The latest fallout from Hochul’s decision to pull the plug on the Central Business District Tolling Program was detailed in the MTA’s update to its financial plan, released Wednesday.

In addition to the $1 billion in annual toll revenue the MTA was expecting from congestion pricing, nixing the effort comes with several other consequences for its operating budget, MTA officials said at their monthly board meeting.

Different than the capital budget, which is largely funded by borrowing and government aid that goes toward long-term infrastructure investments, the MTA's operating budget is largely paid for through tax revenue and fare and toll dollars that goes toward keeping the daily transit system running, including employee wages and fuel costs.

Among the impacts on the MTA's operating budget from losing congestion pricing: Adding up to $200 million in payroll for employees who would have been paid out of the capital budget; $90 million in infrastructure repair and emergency response calls that are expected because of deferred maintenance; and having to take on $300 million in new debt three years earlier than planned.

The loss of capital funding also means the LIRR will have to put off plans to purchase some new train cars and extend the life of its oldest fleet of trains, which are approaching their 40th birthday. Continuing to maintain those trains beyond this year will cost the railroad an extra $20 million annually, MTA officials said.

That news came days after LIRR President Robert Free on Monday laid out an "unprecedented" plan to improve service on the railroad, including reducing the need for transfers and boosting punctuality at Jamaica Station. Asked Wednesday whether the Reagan-era trains could hamstring his plan, Free acknowledged that "the reliability of our equipment" was a factor.

According to LIRR statistics, the railroad's 100 antiquated M3 train cars are the least reliable in the fleet, breaking down about once every 40,000 miles. In comparison, the LIRR's newest cars, the M9s, travel about 350,000 miles between breakdowns.

"If we were not able to continue buying new cars, which is a downside risk of the 'no congestion pricing, no substitute financing' scenario, then that could actually could impact performance and impact operating costs, because we'd have to do more to maintain those old cars," MTA Chairman Janno Lieber said Wednesday.

The MTA will similarly take on an additional $50 million to $150 million in recurring annual costs from keeping some old buses around longer than planned, officials said.

There was other bad news in the MTA’s midyear financial update, including bus and subway fare revenue coming in $98 million below budget, largely because of fare evasion, according to MTA Chief Financial Officer Kevin Willens. Dedicated taxes, which the MTA counted on to cover nearly half its $19.3 billion 2024 operating budget, are also well below projections, Willens said.

In a statement, Hochul spokesperson John Lindsay said the governor “remains committed to funding the MTA Capital Plan, and she is working with partners in government on funding mechanisms while congestion pricing is paused.”

Hochul’s office also pointed out that the MTA financial plan shows what could happen, not what will happen, and noted the transit agency’s multiple years of projected balanced budgets are due to Hochul last year saving the MTA from a “fiscal cliff” caused by ridership drops during the pandemic.

Lieber and other MTA leaders said Wednesday they would take Hochul at her word that she would find an alternative revenue source to make up for the lost toll revenue. Doing so would stave off most of the expected impacts on the MTA’s operating budget, but not all of them. The MTA would still lose $70 million in additional fare revenue that would have come from a boost in transit ridership caused by the new tolls, and $10 million in efficiencies the MTA was expecting from city buses being able to move faster through less-congested Manhattan streets.

On the plus side, fare revenue on the MTA’s commuter railroads, including the LIRR, is stronger than expected, as ridership has rebounded to around 80% of pre-COVID levels.

But that’s not enough to make up for other losses, which are predicted to result in the transit agency facing a $428 million annual operating deficit in 2027, growing to $469 million in 2028.

Buoyed by a $1 billion state bailout last year paid for by a state increase in payroll taxes, the MTA had previously predicted a balanced budget through at least 2027.

Trying to dissuade panic over the projections, Lieber said the MTA still has "a couple years to resolve" its fiscal challenges and is already taking steps to do so. The New York City Transit bus and subway system is on pace to hit its goal of $300 million in cost cutting this year, and the LIRR should achieve $60 million in savings, officials said.

Pushing back on that optimism, state Comptroller Thomas DiNapoli said the agency's looming financial problems are "likely understated."

“There is a lot at stake for riders and toll payers," DiNapoli said in a statement. "The MTA must be transparent and communicate how its budget and capital plan choices will prioritize safety, frequency and reliability of the system to bring riders back and stabilize its finances.”