The MTA’s soaring debt burden — which has more than tripled over the last 20 years, and could reach nearly $47 billion in two years — could force service cuts, scaled-back infrastructure investments, and higher-than-anticipated fare and toll increases, according to a new state report.
The report from the office of State Comptroller Thomas DiNapoli cites the Metropolitan Transportation Authority’s debt profile as "a cause for increasing concern" as the transit agency wrestles with uncertainty over the future of fares and ridership, which have plummeted because of the COVID-19 pandemic. Long Island Rail Road weekday ridership remains at around 29% of pre-pandemic levels.
The MTA has predicted that more than 90% of its riders could be back by 2025.
"If that does not happen, its debt service will still have to be paid, potentially tying up funds that could be used for operations," the report said. "If revenues do not return, very high debt burdens could lead to service cuts, higher-than-planned fare and toll increases, and/or disinvestment in the MTA’s capital assets."
The MTA’s debt burden has steadily increased over the years, from $11.4 billion in 2000 to $38.4 billion last year. The pandemic hastened the debt increase, as the MTA borrowed $2.9 billion from the federal government to remain afloat, backing the debt with funds for long-term infrastructure improvement.
Because the MTA originally committed to fund $9.8 billion of its current $55 billion Capital Program through borrowing, the report said now "the MTA is faced with the choice of cutting the program … or issuing even more debt."
MTA spokesman Aaron Donovan on Tuesday suggested it was premature to speculate on how much, if any, new debt the authority would have to issue to pay back the federal loan, which comes due in December 2023. He said the MTA already has found ways to get capital projects done "faster and less expensively."
The report also found that the amount of debt service paid by the MTA as a percentage of its annual budget also could increase significantly in the coming years, from an average of 16% over the last decade to 23% in 2024.
Andrew Rein, president of the Citizens Budget Commission, a nonpartisan fiscal watchdog group, applauded DiNapoli's report for bringing attention to the MTA's debt problem, which he said could be worsened by the $14.5 billion in federal COVID-19 stimulus funds the agency has received.
Because the money is expected to fill the MTA's operating budget deficits for the next couple years, it could lead to the MTA putting off "hard choices" that reduce the need for borrowing, like shrinking the size of its capital budget, and adjusting service levels to reduced ridership demand.
"The MTA has the runway right now, with the federal aid, to take a little bit of time to reduce its recurring expenses. But if it doesn’t do that, it’s not sustainable," Rein said. "The federal money could either be a blessing, or a curse that takes their foot off the gas. And that shouldn’t happen."