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New Funding Sources Needed to Prevent MTA Fare Hikes

New York State Comptroller Thomas DiNapoli New York State Comptroller Thomas DiNapoli

NEW YORK CITY—Unless the Metropolitan Transportation Authority finds new funding sources and fast, the authority may have to raise fares and tolls earlier than originally planned, according to an analysis of the MTA’s financial plan by New York State Comptroller Thomas DiNapoli.

The report, which notes the MTA’s system has deteriorated sharply in recent years, notes the performance of the Long Island Rail Road and the subway system has recently worsened. On-time performance on the LIRR fell sharply during the first half of 2017 and was on pace for the worst year in 17 years, largely as a result of an increase in delays related to Amtrak-owned tracks, signals and switches, as well as the LIRR itself.

By 2016, the average distance that subway trains travel before breaking down fell by one-third to 112,000 miles, the shortest distance since 2001, and on-time performance had fallen sharply. Almost one-third of the subway fleet is now more than 30 years old and about 40% of the signals in the system are more than 50 years old, the report states. The analysis released last week also points to the sharp growth in subway ridership over the past 15 years as an additional strain on the mass transit system.

“Maintaining, modernizing and expanding the largest mass transit agency in the nation is critically important to the future of the New York metropolitan region,” DiNapoli says. “In the absence of adequate funding, the system could fall into further disrepair and riders could face unplanned fare hikes. The state and city need to find solutions to prevent these possibilities from becoming reality, and the MTA must make the best use of its resources.”

The MTA has invested more than $120 billion in capital improvements since its first capital program began in 1982, but the pace of investment has not kept up with the need, the State Comptroller charges.

The report lists some of the MTA’s largest funding needs remain in the subway system, where signals, power, stations, repair shops, pumps and emergency ventilation equipment have not been restored to a state of good repair, and subway car purchases have been delayed. More than one-third of the 201 emergency ventilation plants in the subway system are more than 50 years old and have never been rehabilitated, including five that are more than 100 years old. Over half of the system’s tunnel segments are not protected by ventilation plants, according to the State Comptroller.

This past summer the MTA announced a two-phase Subway Action Plan to address the deterioration of the system. The $836-million phase 1 will focus on stabilizing and improving the subway system. The MTA has suggested that the state and the city split the cost of Phase 1, but an agreement has not yet been reached. In the absence of a funding agreement, the MTA has been drawing on its reserves to begin phase 1.

The MTA had projected that phase 1 would be completed in 2019, but it now hopes to complete phase 1 by the end of 2018. The MTA still has not explained how the cost of increased subway maintenance will be funded after state and city funds are exhausted, the State Comptroller’s report notes. After the completion of phase 1, recurring costs could exceed $300 million annually, the equivalent of an unscheduled fare and toll increase of about 4%.

The much more costlier phase 2 of the subway improvement program will cost approximately $8 billion and looks to modernize the system and is to be included in the 2020-2024 capital program. The MTA has not yet indicated how these costs would be funded.

The MTA is contributing 43% of the funds for the 2015-2019 capital program. The cumulative impact of the 2015-2019 program and prior capital programs has placed a heavy burden on its operating budget. Debt service and other operating resources that support the capital program are projected to increase by 22% over the next five years to $3.5 billion, accounting for one-fifth of all MTA revenues. Even before taking into consideration the 2020-2024 capital program, debt outstanding is projected to reach $42.6 billion by 2022, $7 billion more than five years earlier, according to the State Comptroller’s fiscal analysis.

There is also uncertainty when it comes to financial aid from the federal government, which the MTA hopes will contribute nearly 25% of the funding for its capital program. President Donald Trump has proposed eliminating the New Starts program, which the MTA assumes will fund one-third or $2 billion of the estimated cost of phase 2 of the Second Avenue Subway.

New York State has committed to contributing $8.5 billion to the 2015-2019 capital program, however, the state has not yet identified the source of $7.3 billion of its commitment. The state commitment could be met through MTA bonds backed by an existing or new state revenue source. The governor recently announced the state’s intention to contribute an additional $1 billion to the current capital program, but the source of that funding has also not been identified, the report notes. The city has committed to fund $2.5 billion to the MTA but has yet to identify the source of $1.8 billion in those funds.

The 2015-2019 capital program had a funding gap of $15 billion when it was first proposed before the state, the city and the MTA eventually agreed on a funding formula to close the gap, which involved delaying a number of projects. The 2020-2024 capital program could have an even larger gap in the absence of solid commitments from the state and the city, or new funding sources, the report warns.



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