November 10, 2008
M.T.A. Faces $1.2 Billion Deficit
By Sewell Chan and William Neuman
The Metropolitan Transportation Authority faces a $1.2 billion budget deficit in 2009 — $300 million more than it had projected in July — that will very likely require new fare and toll increases or service reductions unless it gets new state and city aid or finds new sources of revenue, officials warned on Monday morning.
At a meeting of the finance committee of the authority’s board, the authority’s chief executive, Elliot G. Sander, said the authority faces a dire fiscal situation that could influence riders across the subway, bus and commuter-rail networks. The deficit was caused, he said, by the collapse of revenues from real estate and corporate taxes, which until just a few years ago had given the authority a string of healthy surpluses.
“The word draconian is not inappropriate,” Mr. Sander said at a news conference after the meeting. He was flanked by the authority’s chairman, H. Dale Hemmerdinger, and its chief financial officer, Gary J. Dellaverson, in describing the potential service reductions.
“They will be very, very significant,” Mr. Sander said. “Whatever that mix that we come up with, in terms of fare and toll increases and service reductions, there’s no question that they would have an impact, significantly, on our customer and on the functioning of that region.”
The magnitude of the fiscal challenges confronting the authority was evident in a PowerPoint presentation presented at the meeting and posted to the authority’s Web site.
Real estate transaction taxes, which represent an important share of M.T.A. revenue, provided the authority with more than $1.4 billion in 2006 and nearly $1.6 billion in 2007. This year, the authority is on track to collect only $995 million in such taxes — about $50 million less than had been projected in July.
And the situation is expected to get even worse. The authority now expects to collect $895 million in real estate taxes next year, and $877 million in 2010.
The authority is required to pass a balanced budget in December for the fiscal year that starts on Jan. 1. A final decision on the fare and toll increases, and service cuts, will most likely not be reached until after a state commission on M.T.A. finances, appointed by Gov. David A. Paterson and led by a former authority chairman, Richard Ravitch, delivers its report on Dec. 5 and after Mr. Paterson releases the state executive budget on Dec. 16.
The Ravitch commission is contemplating imposing tolls on the four East River bridges — the Brooklyn, Manhattan, Queensboro and Williamsburg Bridges — that are run by the city, unlike the authority’s bridges, like the Triborough, which already charge tolls.
Asked about the toll proposal, Mr. Sander, who was a city transportation commissioner in the Giuliani administration, replied: “I’m previously said that from a broader transportation-policy standpoint, I’m comfortable with that, but that should not be interpreted as my support for it in this context. We are looking at that suggestion, along with many, as we’ve said publicly.”
Mr. Sander attributed the authority’s financial condition to the heavy borrowing for capital projects that occurred in the early part of this decade, when the authority was under the control of Gov. George E. Pataki and the previous chairman, Peter S. Kalikow.
“The 2000-2004 capital program was essentially put on a credit card,” Mr. Sander said, and is “the largest contributor” to the current operating deficit. Already, the heavy borrowing now costs the hundreds of millions of dollars in interest payments each year — and the figure is projected to rise to $2 billion by 2012.
Mr. Paterson said in a statement on Monday:
The financial information provided this morning to the M.T.A. Finance Committee is another reminder of the dire fiscal situation facing all New Yorkers.
In April, I appointed Richard Ravitch to head a commission charged with recommending strategies to fund M.T.A. capital projects and operating needs over the next 10 years, a period when the Authority will be under unprecedented financial pressure as it expands and rebuilds its core infrastructure to provide the additional capacity needed to allow the region to grow. The Commission will report its recommendations in early December.
Addressing the fiscal challenges facing the M.T.A. and the state over the next several years will require shared sacrifice, difficult choices and cooperation from all funding partners. We should be open and transparent in facing these challenges and in discussing options. The M.T.A.’s subway system, buses and extensive regional commuter rail network are the lifelines of the greatest city in the world, and I will continue to work with Richard Ravitch, M.T.A. Chairman Dale Hemmerdinger, M.T.A. C.E.O. and Executive Director Lee Sander, Mayor Bloomberg and the legislative leaders to ensure our transit system continues to serve the 8.5 million people who depend on it each day.