(Bloomberg) -- How much debt should the nation’s largest mass-transit system take on over the next five years? New York’s Metropolitan Transportation Authority says $13 billion is just right.
But not everyone agrees. The state’s comptroller calculates the MTA could add on $21 billion of debt through 2029 while an outside fiscal watchdog group says the transit provider should curb its new debt issuance at $2 billion during that time. The MTA, which runs New York City’s transit network, is taking the Goldilocks approach: borrow enough to make needed capital investments, but not so much that yearly debt payments strain the operating budget.
The transit agency on Wednesday is set to approve a $68.4 billion capital plan for 2025—2029 and send it to the state legislature for its authorization. Nearly half of the proposal is unfunded and that deficit shouldn’t be financed with even more MTA borrowing, Janno Lieber, the transit provider’s chief executive officer, said Monday.
“Asking the MTA to borrow a ton more money obviously puts pressure on the operating budget, which inevitably puts pressure on service and staffing,” Lieber said Monday during a meeting of the agency’s capital program committee.
The bulk of the capital plan — $65.4 billion — will cover infrastructure upgrades across its subway, bus and commuter rail lines, with $10 billion of MTA bonds funding those projects. The agency will also issue $3 billion of debt repaid with bridge and tunnel toll revenue to support work on those structures. Much of the capital plan will replace aging subway and rail cars and renovate existing structures and assets to improve service on a more than 100-year-old system.
State lawmakers will need to resolve the projected deficit. Governor Kathy Hochul last week said she would “fight to secure as much funding as possible,” including pressuring federal lawmakers to help support the transit system’s infrastructure needs.
The MTA already owes $47 billion, as of Sept. 13, according to MTA documents. It wants to keep annual principal and interest costs to about 15% of its operating budget, although MTA anticipates those expenses will take up about 16% in 2031 and 2032 when including the $13 billion of anticipated debt from the next capital plan, Kevin Willens, the MTA’s chief financial officer, said Monday.
The transit provider is looking for a balance between keeping expenses at a manageable level while supporting improvements and renovations that will maintain its assets, boost service and attract more riders. Delaying necessary work will only the increase the cost of those upgrades, he said.
“On the expense side, you’d like as little debt service as possible, but you also need to invest in capital — investing early to keep costs down,” Willens said during the finance committee meeting Monday. “Reliability and safety and performance drives the revenue side of the equation, which is also needed for financial health.”
The MTA could issue $21 billion of debt to help fund its next capital plan, although that level of borrowing would result in debt-service costs taking up 18% of its budget, Thomas DiNapoli, the state’s comptroller, said in a report earlier this month. The Citizens Budget Commission, a nonprofit group that analyzes New York City and state finances, recommends the MTA limit its borrowing to $2 billion for the 2025—2029 capital plan, according to a report released last week.
©2024 Bloomberg L.P.
