One Assumption Too Many?

Today the MTA announced its budget proposal for 2012 and explained how it plans to fill a $9 billion gap in its capital construction program. Media reports were generally positive, but transit advocates were critical of the plan because it relies on the issuance of $7 billion in more debt and puts more of the burden of funding the system on transit riders and the next generation of New Yorkers. The agency says it has no choice since Governor Cuomo has no appetite for new revenue. The deficit in the New York State Department of Transportation’s capital program is reportedly the focus of the  Cuomo Administration.

The MTA's financing strategy for the remainder of its capital program relies primarily on new debt. "Other sources" include contributions from the Port Authority, increased funding from NYC, state aid, and real estate sales.

But the MTA’s plan includes an array of assumptions. If any of them don’t play out as the agency hopes, the whole plan could fall apart. Assumptions include:

- Continuation of the MTA payroll mobility tax. Any changes to this tax, as requested by suburban legislators, could blow the plan apart.

- Maintaining existing levels of support from the state. Over the past few years, the state has taken over $250 million in aid meant for the MTA.

- Receiving a $3 billion federal loan from the Federal Railroad Administration ($800 million of which would be used to refinance existing debt). This “RRIF” loan would pay for East Side Access and allow the agency to refinance debt. $35B is authorized for this program but the program has only awarded $1.5B total since 2002, the largest loan going to Amtrak for $563 million. The loan is dependent on approval by the FRA and USDOT Secretary Ray LaHood and continuation of existing state funding sources, including the payroll tax.

- $380 million from the Port Authority of NY and NJ, mainly to lease buses for the MTA. This requires approval from NJ Governor Chris Christie, who has  requested $1.2 billion from the Port Authority (in funds previously designated for ARC) to plug holes in his transportation capital program.

- An increase in support from NYC from $300M to $550M, mainly from promises of future revenues generated thanks to the construction of East Side Access and the 2nd Ave Subway. A similar financing scheme is allowing the No. 7 extension to be built.

- State approval of an increase in the MTA’s debt cap, required for the agency to issue new bonds.

- Maintaining existing levels of transportation funding from the federal government. Transportation proposals from House Republicans include cuts of up to 37%.

The budget will not be approved until the end of the year. For more perspectives on the proposal, see statements by the Citizens Budget Commission and Transportation Alternatives.

Image: Wall Street Journal.

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