The MTA could fall $25 billion short in funding for its next capital program. NewsdayTV's Ken Buffa and Newsday transportation reporter Alfonso A. Castillo report. Credit: NewsdayTV

The MTA could fall $25 billion short in its next capital spending plan — expected to cost more than $55 billion — and look to fare hikes and service cuts to help make up the difference, if the transit authority doesn’t get the revenue it is counting on from its embattled congestion pricing program, a new state report found.

State Comptroller Thomas DiNapoli’s annual report on the Metropolitan Transportation Authority’s debt also raised concerns about declining investments in infrastructure and about the potential for funding shortfalls to lead to excessive borrowing.

The report focused on the MTA’s next five-year capital program, which is expected to be released later this year and include infrastructure investments through 2029. The current capital plan, which cost a record $54.8 billion, set aside nearly $6 billion in investments at the Long Island Rail Road, including funding for maintaining existing infrastructure and for megaprojects like Grand Central Madison and the Third Track between Floral Park and Hicksville.

MTA officials have signaled their next capital program will be even larger, and include money for accessibility upgrades at LIRR stations, new train cars and for renewing aging infrastructure, like tracks and bridges.

WHAT TO KNOW

  • Without the $1 billion in annual toll revenue the MTA is counting on from its congestion pricing plan, it could be faced with a $25 billion capital funding shortfall and look to service cuts and fare hikes to help fill it, according to a report from the state Comptroller's office.

  • The report notes the uncertainty over congestion pricing, which is facing several lawsuits, has already impacted capital investments, with the MTA expected to spend just $3 billion this year, instead of the $12 billion that was once planned.

  • MTA officials said the report highlights “how important capital investments are to the MTA’s future.”

But the MTA is relying heavily on its forthcoming Central Business District Tolling Program to pay for much of the capital plan. The first-in-the-nation congestion pricing plan, scheduled to take effect June 30, will charge most vehicles $15 for driving below 60th Street in Manhattan during peak hours. The MTA expects to raise about $1 billion annually in tolls, which would be used to finance $15 billion in bonds that would fund the capital investments.

But DiNapoli’s report noted congestion pricing “still faces some implementation uncertainty,” including several lawsuits challenging its legality — the most recent of which was filed by the Town of Hempstead last week.

Without the congestion pricing toll revenue, the MTA could be left with a $25 billion hole in its next capital program and look to some painful options to fill it, according to the report.

“Unless alternative operating revenues are identified to fill these gaps, the MTA may again turn to additional fare and toll increases, as it has done in the past,” the report said.

Although fares revenue is primarily used to fund the MTA’s operating budget — and not its capital budget — a capital funding shortfall could put pressure on the MTA to borrow more money and have a ripple effect that could drive up the cost of an LIRR ticket or subway ride.

If the MTA looked to borrow money to cover the $25 billion shortfall, its debt service would rise $1.6 billion to reach $4.9 billion by 2037. Debt service would be 84% higher than in 2023, “or the equivalent of raising the subway fare by 13% in 2037.”

The increased borrowing could result in “operating budget stress that could hurt service or necessitate additional fare, toll or tax increases,” according to the report.

Responding to the report, MTA spokesperson Michael Cortez said the transit authority is “pleased the State Comptroller recognizes how important capital investments are to the MTA’s future.”

“As we’ve said for some time, it is critical that the capital budget is sufficiently funded with dedicated resources so the MTA can continue to provide frequent and reliable service, while also delivering on projects to modernize the transit system,” Cortez said in a statement.

Jack Nierenberg, vice president of Passengers United, a transit advocacy group, said DiNapoli's projections show the MTA is taking an “irresponsible” gamble in relying so heavily on congestion pricing to fund its capital needs. In addition to lawsuits that “might end up being decided against the MTA,” Nierenberg said there remains uncertainty over how many people will continue driving into Manhattan once the new tolls are in place.

“The fact that they’re even relying on congestion pricing alone for the capital program, I think is absurd. They have so many other opportunities to raise that revenue,” said Nierenberg, who pointed to the MTA’s record-high $1.42 billion overtime bill last year and $700 million in annual losses from fare evasion as targets for savings.

Rachael Fauss, senior policy adviser for Reinvent Albany, a policy think tank, said, far from irresponsible, the MTA’s plan to fund its capital program through congestion pricing is designed to remove the uncertainty that has loomed over past capital programs, which have relied on the strength of the finances of the MTA and of the state.

While Fauss expressed optimism the MTA will prevail in the many court cases challenging congestion pricing, if it doesn’t, she believes the prospect of fare increases and service cuts raised in DiNapoli’s report “is real.”

“There’s no plan B,” Fauss said. “There is no replacement for that revenue. The MTA can’t afford to do it on their own, because if they borrow more money themselves, they have to pay it back somehow.”

DiNapoli's report pointed out how the uncertainty over the future of congestion pricing has already impacted the MTA's capital spending plans. After averaging $7 billion in capital spending each year from 2016-2019, and as much as $11.4 billion in 2022, the MTA spent just $8 billion last year, and plans to spend only around $3 billion this year — far less than its original $12 billion goal.

The MTA has acknowledged it has put much of its capital spending on hold because of the uncertainty surrounding congestion pricing.

“When capital projects are delayed, repairs and upgrades are put off, causing parts of the system to deteriorate further,” DiNapoli said in a statement. “There’s more at stake than just delayed projects. If the MTA covers the shortfall in capital funds by using its operating budget to pay for more borrowing, less money would be available for day-to-day operations and goals, like increasing service.”

Latest videos

SUBSCRIBE

Unlimited Digital AccessOnly 25¢for 5 months

ACT NOWSALE ENDS SOON | CANCEL ANYTIME