Growing debt could send MTA back to riders, taxpayers, audit warns
The MTA's debt has steadily climbed over the last 25 years, as its infrastructure has aged and it has invested in major system expansions, like Grand Central Madison. Credit: Ed Quinn
The MTA’s outstanding debt, which hit $42.3 billion last year, will grow by 34% in the next five years, reaching $56.7 billion in 2028 and potentially sending the financially beleaguered transit agency “back to riders, toll payers and taxpayers for more assistance,” according to the state watchdog’s report.
New revenue streams such as the recently passed payroll tax and planned congestion pricing plan for the Metropolitan Transportation Authority could provide opportunities “to ease the pressure that growing debt places on its operations and stabilize its future finances,” according to the report by State Comptroller Thomas DiNapoli.
But, if the MTA repeats its past practice of balancing budgets in the short-term by putting off paying principal on borrowed money by years or even decades, it could lead to "future periods of structural budget imbalance, requiring . . . greater-than-anticipated fare and toll hikes or new or increased taxes," the report said.
The report noted that 17.9% of the MTA’s revenue already goes to paying off debt. That’s expected to climb to 19.5% next year before the agency gets some relief from an increase in the state payroll tax revenue, which will raise $1.1 billion a year, and from the implementation of a congestion pricing plan that could generate more than $1 billion.
In a statement, DiNapoli said the MTA should use the new funding “to stop its recurring cycle of fiscal crises by paying down and managing its debt more appropriately.”
“Our regional economy needs the MTA to regain its strength and win back riders to a safe, reliable and on-time transit system,” DiNapoli said.
In a statement, MTA spokesman Michael Cortez credited DiNapoli with sounding "an early alarm about the MTA’s fiscal cliff," and state lawmakers with addressing the crisis in its latest budget.
Cortez also noted that the MTA's latest financial plan includes $400 million in cost cutting and plans to reduce debt over the next four years.
"The MTA’s commitment to significant operating efficiencies to ensure reliable, safe and frequent service on subways, buses, commuter railroads and paratransit continues," Cortez said.
The MTA's debt level has historically been driven by its five-year capital program, which funds major infrastructure investments. The report pointed out that the MTA's debt level has steadily climbed over the last 25 years, as its infrastructure has aged and it has invested in major system expansions, like Grand Central Madison and the Long Island Rail Road's Third Track. The COVID-19 pandemic put more pressure on the MTA to borrow, as low ridership devastated the agency's revenues.
Although the MTA typically does not borrow money to fund operating costs, including employee pay, DiNapoli has previously pointed out that high debt levels could put "a disproportionate burden on future budgets and the taxpayers, toll payers and riders that will fund them."
The MTA is already reducing its debt pressure a bit by using some of the $15 billion in federal COVID aid it received to pay down $1.4 billion in principal and interest on money it’s borrowed, according to the report.
Still, as the MTA continues borrowing — including for its next capital program, which begins in 2025 — it expects its debt service to grow by 3.2% annually over the next eight years, reaching $5 billion by 2031 — $1.8 billion more than in 2022.
The report commended the MTA for picking up the pace in spending money on infrastructure improvements, which are funded through the five-year capital program that relies heavily on borrowing. DiNapoli’s report pointed out that, in the past, “the MTA’s slow pace of capital commitments has delayed improvements and increased debt.”
From 2016 to 2019, the MTA, on average, spent $7.1 billion on capital projects. Last year it spent $11.4 billion, the most ever in a single year.
Alfonso Castillo has been reporting for Newsday since 1999 and covering the transportation beat since 2008. He grew up in the Bronx and Queens and now lives in Valley Stream with his wife and two sons.
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