New York’s Subway System To Raise $1 Billion In New Debt

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The Metropolitan Transportation Authority approved issuing as much as $1 billion of bonds backed by sales taxes, a new borrowing vehicle for the agency, as it faces a potential delay in congestion-pricing receipts needed to support its ambitious capital plan.

Authorizing the debt advances the agency’s plan to borrow $7.3 billion through 2023 backed by new revenue to help fund the MTA’s $51.5 billion five-year plan – its largest ever. The undertaking aims to modernize subway signals, finance new buses and upgrade tracks for the nation’s biggest mass-transit provider. It also relies on $15 billion of proceeds from issuing debt backed by congestion-pricing fees, a new program to charge motorists coming into Manhattan that may not start in January as planned.

The federal government has been slow to approve the congestion-pricing plan and may delay it indefinitely, Governor Andrew Cuomo said last week. That puts at risk the MTA’s ability to upgrade its system, improve service and expand capacity.

“The reality is federal inaction will result in worsening congestion on city streets, delayed improvement to air quality in the region and put the MTA’s historic capital plan at risk,” Pat Foye, MTA’s chairman and chief executive officer, said during a board meeting Wednesday. “We all know the MTA is the lifeblood of New York City’s economy.”

The congestion-pricing delay and the capital plan’s funding were focal points of the MTA’s monthly board meeting. State lawmakers last year approved new revenue to help finance MTA’s capital program with congestion-pricing fees, Internet sales taxes and levies on high-end real estate.

A number of infrastructure projects in the New York City area rely on federal help. The Trump administration also has yet to support the Gateway project that would replace aging Hudson River rail tunnels and a new train to LaGuardia Airport. The U.S. Army Corps of Engineers has stopped a study aimed to protect the New York City area against storm surges and rising seas.

The board during Wednesday’s meeting approved using the sales-tax receipts to borrow up to $1 billion to help finance infrastructure needs. It will be a new type of security for the transit agency, which owes $44 billion, and may draw investors who are looking to diversify their holdings of New York municipal bonds.

“We think the bonds will be well received in the market given the strong nature of the economic activity in the state and local region generating the tax,” Pat McCoy, MTA’s director of finance, said Tuesday in a phone interview.

The agency anticipates selling the bonds this summer, McCoy said. They’ll be repaid from $320 million the MTA is set to receive in state and city sales-tax revenue in New York’s fiscal year that starts April 1. That allocation increases by 1% each following year, according to McCoy.

While the MTA would like congestion-pricing revenue as soon as possible, the agency is still able to sell $7.3 billion of debt through 2023 that’s backed by the new sales-tax receipts and mansion-tax revenue, Bob Foran, MTA’s chief financial officer, said during Wednesday’s meeting.

The approved borrowing comes as the MTA is undertaking an initiative to save $1.6 billion in part by reducing 2,700 positions in its workforce, including 2,000 from administration and 700 from operations. Those reductions will come through attrition, position cuts and management actions.

Without the anticipated $1.6 billion of savings and expected fare increases in 2021 and 2023, the MTA faces potential shortfalls, including an estimated $588 million deficit in 2022 followed by a projected $762 million shortfall in 2023, according to board documents.

(c) 2020, Bloomberg · Michelle Kaske

{Matzav.com}


3 COMMENTS

  1. when are we raising the rail price to the price of an average car service? Price keeps on going up “to improve the ageing infrastructure”, yet they always need more. Unions unions unions. Anybody could run up expences by allowing runaway costs such as higher pensions, more paid vacations, more frequent and higher wage increases, not bargain for better pricing but rather by the bidding procecess (where its common knowledge that “change of work order” after a contract has been approved is the vehicle for any sub to create and increase profits).

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