Standard & Poor’s has downgraded the credit rating for the New York Metropolitan Transportation Authority to A. It was two grades higher than that just five months ago. If it falls five more grades, it will be in junk bond territory.
S&P says that it based the downgrade on its assessment of MTA’s preliminary 2019 budget, which calls for spending $32.5 billion on rehabilitation efforts. Although $10 billion of that would come from bond sales, S&P says that MTA lacks the revenues to repay such bonds. If someone doesn’t find a new source of revenues, S&P warns, it will downgrade the agency’s credit rating still further. Lower credit ratings will mean that MTA will have to pay higher interest rates on future debt.
At the end of 2017, MTA’s long-term debt was $38.3 billion, most of which was incurred to address the last maintenance crisis. Since 2017 it has issued about half a billion dollars worth of additional bonds. This doesn’t count another $20 billion in unfunded health-care obligations. Add in $10 billion in planned bond issues for repair and the agency will owe nearly $70 billion. That’s a lot for a system that earns less than $7 billion in annual revenues and spends roughly twice that on operations.
To offset declining ridership, MTA’s board recently approved a 4 percent fare increase for 2019 to be followed by another 4 percent increase in 2021. While these increases are barely keeping up with inflation, they will probably lead some people to reduce their usage of the transit systems.
MTA is partly caught in a dispute between New York governor Cuomo and New York City mayor de Blasio over who should pay to repair the system. The subways are entirely within the city and are owned by the city, so Cuomo wants the city to pay for at least half. But they are run by the MTA, a state agency (which leases them from the city), so de Blasio wants the state to pay a higher share.
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S&P, along with others, suggested that the city fund the subways by imposing what people call congestion pricing, but which is really cordon pricing, on auto drivers. The purpose of true congestion pricing — that is, charges that vary by time of day or by the amount of traffic — is to prevent congestion. The purpose of cordon pricing — that is, a charge to cross a line into a city or center center — is simply to raise revenue. If auto users won’t truly benefit from reductions in congestion, they shouldn’t have to pay more. Auto drivers are already helping to fund the subways through bridge tolls, which account for 12 percent of MTA’s revenues.
The subways are probably vital to employers in midtown and downtown Manhattan, some of which would have to move if employees could only use surface travel to get to work. Yet keeping the subways in a state of good repair may be an economic black hole. As MTA’s David Henley stated in 2009, “there will never be ‘enough money’” to restore the subways to a state of good repair.
MTA would have been smart not to dump $11.1 billion into the East Side Access subway, whose sole goal was to save Long Island Railroad riders going to midtown Manhattan from having to change trains at Penn Station. Spending money on that line and the Second Avenue Subway, rather than maintenance of the existing system, is what got MTA in trouble in the first place. Yet MTA is determined to spend another $6 billion it doesn’t have on the next phase of the Second Avenue Subway.
At some point, the subways are going to have to pay for themselves or they should be abandoned. Until New York City residents figure that out, the system is going to continue to lurch from crisis to crisis.
Let me guess, according to the highwaymoron, S&P is anti rail?
The Antiplanner wrote:
S&P, along with others, suggested that the city fund the subways by imposing what people call congestion pricing, but which is really cordon pricing, on auto drivers. The purpose of true congestion pricing — that is, charges that vary by time of day or by the amount of traffic — is to prevent congestion. The purpose of cordon pricing — that is, a charge to cross a line into a city or center center — is simply to raise revenue. If auto users won’t truly benefit from reductions in congestion, they shouldn’t have to pay more. Auto drivers are already helping to fund the subways through bridge tolls, which account for 12 percent of MTA’s revenues.
I must respectfully express some degree of dissent here. The proposals I have seen for New York City congestion prices are indeed a cordon system, and much of that cordon already has tolls, including the the MTA Bridge and Tunnel crossings and the Port Authority of New York and New Jersey crossings. What is “free” are the bridges over the East River, and north-south movements crossing the east-west running street where the cordon would run across Manhattan, so the mostly residential park of the island would not be tolled (I have heard various proposed streets for that purpose, including 42nd, 59th and 124th).
Given how well-defined the area of interest for congestion pricing is, I think a cordon would be effective (this is also what Stockholm, London and Gothenburg are using). Also consider that there’s congestion at the bridge and tunnel crossings (including the tolled crossings) most days (including weekends and holidays), so congestion pricing here is likely appropriate seven days a week.
I also wonder what the market-clearing price to enter Manhattan might be – I could see it being much higher than the current tolls to enter Manhattan.
Port Authority tolls are $15 cash and out-of-state E-ZPass to cross from New Jersey to New York, the other direction is “free,” and the MTA Bridge and Tunnel tolls are $8.50 for out-of-state E-ZPass but are collected both ways currently.
What might that market-clearing price be? Perhaps to double the current toll rates? Maybe triple? Maybe even higher?