September 20, 2020

Facing Financial Crisis, New York’s MTA Subway Braces For Deep Cuts

Facing one of the biggest financial crises in the history of the subway, New York’s public transportation agency is preparing drastic measures to restore its finances that are likely to affect riders for years to come.

The measures the agency is drafting include reducing service, slashing the transit work force, scrapping planned infrastructure improvements, raising tolls beyond scheduled increases and adding to its already record-high debt, according to officials at the Metropolitan Transportation Authority, which runs the city’s subway, buses and two commuter rails.

With forecasts showing a staggering budget shortfall of $16.2 billion through 2024, transit leaders now say that at least some of these cuts are unavoidable as the system copes with the devastating impact of the coronavirus pandemic. The agency’s adopted budget for 2020-21 totaled $34.5 billion.

“There have been financial crises before, but never one where the deficits were measured in billions on top of billions on top of billions of dollars,” Patrick J. Foye, the M.T.A. chairman, said in an interview. “That’s why these unpalatable, unacceptable alternatives have to be considered.”

He added: “We are going to have to make hard choices no matter what happens here.”

Across the country, transit systems have been hit particularly hard by the pandemic: Lockdowns led to an over 90 percent drop in ridership while the cost of running service for essential workers increased because of stringent disinfection protocols.

In New York, transit officials said that they would only resort to severe cuts if they have no other options.

They stressed that additional emergency federal assistance would help stave off some of these reductions — part of a broader political strategy to pressure Washington to provide assistance in the $3 trillion relief package being debated in Congress this week.

Officials say it is not yet clear how the authority will fare in the stimulus package negotiations. In March, the agency received $3.8 billion — nearly its full initial request — in the first federal stimulus.

But even with more federal aid, cost-saving efforts and cuts that have already been made, the authority still faces a multibillion-dollar budget hole.

The agency’s increasingly acute financial emergency marks a sharp reversal of the system’s recent strides toward reliability after years of disinvestment plunged the subway into a state of emergency in 2017.

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Updated 2020-07-21T10:52:26.359Z

Now the likelihood that the system will be cut back risks undermining New York City’s chance of an economic recovery at a time when its unemployment rate has climbed to over 20 percent.

“The M.T.A. is both a source of the region’s economy and a reflection of the region’s economy,” said Mitchell Moss, a professor of urban policy and planning at N.Y.U. “This is the most severe crisis the M.T.A. has ever faced because the state is facing a crisis, the city is facing a crisis.”

The grim financial forecast, which transit officials are expected to present to the authority’s board on Wednesday, paints a bleaker picture for public transit than in past crises.

After the great recession in 2008, the M.T.A. eliminated two subway lines and dozens of bus routes to close a major budget gap. And with the city on the brink of bankruptcy in the 1970s, the subway became a global symbol of urban decay with rampant crime, graffiti-covered trains and constant mechanical breakdowns.

When the pandemic enveloped New York and the city shut down, nearly all of the system’s operating revenue — which comes from fares and tolls, taxes and subsidies — vanished.

Even as New York has started to slowly reopen, daily subway ridership has plateaued at around 20 percent of its usual 5.5 million passengers in recent weeks.

This year, the agency projects that it will face $5.1 billion in lost fare and toll revenues and $2.1 billion in losses from dedicated taxes and subsidies. In 2021, it estimates those losses at $3.9 billion from fares and tolls and $1.9 billion for subsidies.

To fill the immediate operating budget shortfall, transit officials are lobbying for another $3.9 billion to be included in the next coronavirus relief package. That additional funding would cover the M.T.A.’s operating deficit through the end of the year.

“Without federal funding, the M.T.A. can’t possibly get out of this by being lean without reducing service in a way that would be devastating for riders,” said Rachael Fauss, a senior research analyst at Reinvent Albany, a watchdog group.

ImageEven with federal aids, transit leaders say they will need to reduce spending to operate the subway.  
Credit…Hilary Swift for The New York Times

But even if the public transit system does receive additional federal assistance this year, the agency will still have to slash spending because of declines in ridership and in dedicated tax revenues, which are expected to drop because of the weakness of the city economy.

The M.T.A. board is expected on Wednesday to approve initial cost-cutting measures that will provide $1 billion in savings in 2021 by trimming nonessential services, including reducing overtime and eliminating consulting contracts.

But these steps will only begin to offset the pandemic’s financial fallout. The authority’s board, controlled by Gov. Andrew M. Cuomo, will find deeper budget cuts in the coming months — worrying advocates who warn that riders may have to shoulder the burden for years.

“Turning to the old levers of fare hikes and service cuts would send the transit system into a death spiral,” said Danny Pearlstein, a spokesman for the Riders Alliance, a grass-roots organization of transit riders. “When a system becomes less functional because of service cuts or less accessible because of fare hikes, people leave it.”

To start, transit officials say the authority will probably have to take on more long-term debt and shift funds to cover operating expenses that had been set aside for its $51 billion plan to modernize the antiquated subway system.

The state has already given the M.T.A. permission to divert funds set aside for capital improvements to operating costs over the next two years and to issue bonds so it can borrow up to $10 billion in long-term debt and also borrow up to $3.4 billion as part of a short-term lending program set up by the Federal Reserve.

If the financial situation deteriorates further, transit leaders may have to consider furloughs or layoffs.

In a modest silver lining for riders, the precipitous decline in ridership means that fare hikes that have not already been scheduled in the next two years are unlikely since they would not produce significant new revenue.

But as funds set aside for the agency’s capital program are plundered, the system will continue to be hobbled by aging equipment — making it hard to improve service and entice riders back onto trains.

“Without constantly investing in capital improvements and expansions, they will never rebuild the ridership they lost or attract new ridership through growth,” said Nicole Gelinas, a senior fellow at the Manhattan Institute. “Five years from now, there is a good chance they will have still crippled finances and lower ridership but will have increased their debt burden enormously.”

Still, transit leaders argue that there are few alternatives — beyond increased federal assistance — to stabilize the system in the face of a catastrophic financial crisis.

“The deficit the M.T.A. faces is not one we can just cut our way out of,” Mr. Foye said.