PCAC has just released its latest report, The Road Back — A Historic Review of the MTA Capital Program. This research commemorates the thirty-year anniversary of the MTA capital program, describing the difficult process of rebuilding the largest public transportation provider in the western hemisphere. There is an additional motivation for noting this milestone: the PCAC rider councils– LIRRCC, MNRCC, and the NYCTRC–were born in 1981 out of the first capital program because legislators wanted the riders’ interests represented, given the large commitment of funds that were being approved.
The review highlights the political, financial, and infrastructure challenges that have comprised the last thirty years’ struggle to resurrect the region’s most important transportation asset. Issues featured are the amount of funds that were needed; where the money went; how the funds were raised; and, most importantly, the benefits to the riders that resulted. Also discussed is the watchdog role that PCAC has played throughout this period. The report concludes with cautionary remarks and recommendations as the MTA continues its efforts to restore and expand this vital system.
In 2011 dollars, MTA Capital Program funding since 1982 has been $116.7 billion. Unfortunately, over these thirty years the MTA has been forced to incur an increasing level of debt in order to finance the continued rehabilitation of the transit system. Today, the MTA has $32 billion in long-term debt on its balance sheet. This debt is supported by farebox revenues and tolls and a bevy of dedicated taxes, all subject to economic cycles. These bonds currently require a $2.3 billion annual debt service, which must come out of operating revenues. The recently approved funding for the remaining three years of the current capital program also places a heavy emphasis on debt, including a $2.2 billion low-interest loan from the Federal Railroad Administration in order to finish the East Side Access mega project.
The MTA’s staggering ongoing annual debt obligation presents a major challenge for the new MTA leadership. While the MTA Finance Department does an admirable job of timely bond management to take advantage of interest rate changes, it is a daunting and complicated task to juggle the various facets of the debt and cash flow.
The PCAC offers the following recommendations for the pursuit of financial solutions:
1. Other sources of direct subsidies must be found. Public-private partnerships need to be pursued, such as value capture from new developments around train and subway stations.
2. A strong push needs to be made in Washington for more federal dollars to be available to the MTA in the next transportation funding reauthorization.
3. The dedicated tax fund must be protected for the exclusive use of the MTA.
4. New York City must give a larger sustained amount of financial support for the capital program.
5. While not part of the capital program, adequate maintenance, funded by the operating budget, has a direct impact on capital replacement: the better the maintenance, the more capital investment can be delayed. Further, the operating budget must support debt service and Pay-As-You-Go capital costs as well. New York State and New York City should match expected fare increases by directly funding operations by a similar amount.
6. It may be necessary to increase the state gas tax, implement tolling on the East River Bridges, or enact some form of congestion pricing. There are few new funding sources left to tap.
7. Related to the above recommendation is the gloomy outlook for the next capital program: sources for additional funds are nowhere in sight. Planning for the financial support of the 2015-2019 capital program must start now.
For the full report click here.