Mta 2010-2014 capital program offers reason for confidence and concern

Overview
The Metropolitan Transportation Authority’s $28 billion, Five Year Capital Plan was enacted after the MTA Capital Program Review Board allowed the Plan to proceed at the beginning of June. 

The first two years of the Plan are fully funded, in large part through federal assistance and new debt backed by the Payroll Mobility Tax.  Enough money is allocated in these years to complete East Side Access ($3 billion) and the first phase of the Second Avenue Subway ($1.5 billion).  Along with the #7 line extension, which is being funded by the City of New York, these projects represent the first major system expansions in almost 70 years. 

The five-year Plan also provides significant funding to maintain and upgrade New York City’s existing subway infrastructure.  Of the $12.8 billion committed to New York City Transit, $4.8 billion will go toward replacing aging track and subway cars, as well as modernizing major portions of the system’s antiquated signal system.

Finally, according to its budget documents, the MTA plans to modestly increase annual pay-as-you-go capital contributions to $200 million by 2013 in order to decrease reliance on debt financing. 

New York Building Congress Analysis
The MTA Capital Plan prudently addresses both the need to protect the system’s existing assets and add new capacity, which are separate but equally critical components of the transportation network that undergirds the region’s economy. 

Unfortunately, while the first two years of the Capital Plan appear secure, the final three remain largely unfunded.  The MTA’s own estimates show a gap in the final three years of $9.9 billion out of a total $14.7 billion, and even that may be a best-case scenario given that it relies on significant increases in government assistance that may not materialize. 

For example, the MTA counts on a 25 percent increase in federal contributions for the final three years of its Plan, worth nearly $1 billion, based on the reauthorization of federal surface transportation legislation.  However, the timing for passage of that bill and the new revenue streams it will produce are far from certain.  In addition, the MTA counts on $500 million over five years from the City when the City’s own recently approved budget commits only $160 million through June of 2013.

Also worth watching is the MTA’s operating budget, which shows deficits totaling more than $2 billion through 2013.  To date, the MTA has protected the capital program and closed gaps through service changes and administrative efficiencies.  Any further deterioration, however, will likely result in renewed calls to raid capital funds in order to keep fares down and prevent further service cuts.

Finally, as the MTA and legislative leaders face the issue of how to pay for the Plan’s final years, they will have to look at alternatives to debt financing.  Even without adding any bond financing in years 3 through 5, the MTA’s annual debt service costs will almost triple between 2004–2013, from $848 million to $2.2 billion.  Indeed, the MTA’s budget does not contemplate new debt in these years, as MTA officials recognize that the debt service costs associated with prior capital improvements are already very high.  These circumstances urgently require stakeholders to explore and support new sources of revenue for the capital program.

The new five year Capital Plan follows and builds upon a nearly 30-year, $78 billion campaign to rebuild the system after a period of sustained disinvestment during the prior economic crisis which resulted in decaying stations, train derailments, constant delays, and a huge decline in ridership. 

In discussions with public officials and key stakeholders, the Building Congress will continue to emphasize the need for sustained infrastructure investment in order to prevent a similar, devastating decline and prepare the City to take advantage of new investment and job growth when the economy rebounds.