Brooklyn Boro

MTA, in its new budget, admits that agency is in dire straits

New revenue sources needed, but from where?

July 27, 2022 Brooklyn Eagle Staff
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The Metropolitan Transportation Authority (MTA) on Wednesday released its preliminary 2023 budget and four-year financial plan, including a reforecast of ridership recovery conducted by McKinsey & Company.

The documents project the MTA fiscal cliff presented in February 2022 will occur in 2025, one year earlier than previously forecasted, with federal COVID-19 relief aid largely exhausted by 2024.

While MTA bridges and tunnels toll revenues remain near the best-case scenario laid out in McKinsey’s previous forecast, a slower-than-expected return to the office for many employers, fewer non-work trips, and customer sentiment on issues including safety have seen transit and railroad ridership lag the 2020 forecast.

The updated McKinsey forecast for New York City transit and commuter railroads has been revised, with ridership projected to reach 80 percent of pre-pandemic levels by 2026. This revision represents a $500 million decline in anticipated annual farebox revenues in 2026 compared to the prior forecast and a $1.8 billion decline compared to pre-pandemic forecasts.

A handful of subway riders walk through a near-empty passageway in Brooklyn on March 16, 2020, at the beginning of the COVID pandemic. The drop-off in ridership at that time is still making waves today.
Photo: Mark Lennihan/AP

MTA Chief Financial Officer Kevin Willens presented to the board an alternative scenario to lower the looming fiscal cliff by $1 billion. Rather than spending down the entirety of federal funds on the 2023 and 2024 deficits, those funds could be spread to decrease the medium-term cost structure and avoid costly borrowing.

To do so, new revenue sources are required in 2023. The MTA is engaged with stakeholders to identify new sources of funding needed to avoid large future fare increases and service reductions. In addition, the authority will continue to seek operating efficiencies.

“Identifying new, dedicated revenues to fund mass transit is imperative as we seek to address our fiscal cliff,” said MTA Chair and CEO Janno Lieber. “Transit is essential to the economic future of New York as we continue to recover from the pandemic, and it should be treated as an essential service, with strategies that don’t just put the problem on the backs of our riders through painful service cuts and fare increases.”

The revised financial plan projects annual structural deficits of $2.5 billion within two years, rising to $2.75 billion in 2028. Based largely on the projected declines to farebox revenues, the five-year financial outlook (2022-2026) in the July Plan vs. the February Plan includes a cumulative net decline of $2.693 billion to the MTA’s bottom line.

As the subway drastically lost ridership in early 2020, the underground became a haven for the homeless, as seen in this April 23, 2020 photo.
Photo: John Minchillo/AP

“The reforecast of ridership projections has created a new higher and earlier fiscal cliff for the MTA,” said MTA Chief Financial Officer Kevin Willens. “While there is sufficient federal aid to cover structural deficits through 2024, state and city action by 2023 to create new, dedicated revenue streams to the MTA can lower the fiscal cliff to $1.6 billion and save billions in costly debt service expense.”

The reforecast of ridership from McKinsey and Company created two models: a “high case” and a “low case” of future projected ridership for New York City Transit, Long Island Rail Road, and Metro-North Railroad.

In developing these projections, major factors considered included the future of office work, a reduction in non-work trips, consumer sentiment on issues such as safety and reliability, fare evasion, the impact of congestion pricing on transit ridership, mode shifts to biking and walking, ridership changes resulting from network expansion, employment levels, and population growth.

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