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TA/ TSO Focus

MTA, New York: Making every dollar count [free access]

June 1, 2011

The current economic climate demands a comprehensive overhaul of US’ largest transit agency and the way it does business. Instead of merely buckling under pressure, the MTA is wisely using this opportunity to not only respond to an economic emergency but also to improve its efficiency and effectiveness.

 

MTA’s financial pressure is intense. According to the February Financial Plan 2011-14, cash deficits for the years 2012 through 2014 are projected to be USD247 million, USD37 million and USD482 million, respectively. This gaping budget deficit has compelled the agency to undertake drastic measures for revenue generation and cost savings, such as multiple fare increases, service cuts and workforce reductions.

 

A major problem for MTA is that the last three years of its ambitious five-year USD26.3 billion Capital Program has no viable financial support from the government. In fact, this problem has been exacerbated with the April 2011 proposed legislation aiming to eliminate the MTA payroll tax (0.33 cents tax on every USD100 paid by employers), which currently raises USD1.34 billion annually for the MTA. The tax was originally passed as part of a 2009 MTA bailout plan to close the agency's USD1.8 billion deficit. The proposed bill would repeal the tax in the counties of Dutchess, Orange, Putnam, Suffolk, Rockland, Nassau and Westchester, and give New York City (NYC) Council the ability to toll the Brooklyn, Manhattan, Queensboro and Williamsburg bridges, connecting Brooklyn and Queens to Manhattan.

 

Assets and Liabilities

 

In September 30, 2010, the agency’s total net capital assets were USD60.7 billion and its total liabilities were USD43.3 billion, comprising current liabilities of USD5.3 billion and long-term liabilities of USD38 billion.

 

MTA currently has USD29.6 billion of outstanding debt, of which USD23.27 billion (79 per cent) is fixed-rate, USD3.02 billion (10 per cent) is variable-rate attached to derivatives and offers a synthetic fixed rate, and USD2.4 billion (8 per cent) is un-hedged variable-rate debt.

 

Figure 1: Total net capital assets and liabilities of MTA as of September 2010

  tso_june2011_606

                            Net Assets                                                                                                       Total Liabilities        

 

Source: MTA Financial Statements

 

Financial performance

 

The key financial parameters for MTA as of Q3, 2010, are presented in Table 1.

 

Table 1: Key financial parameters (as of September 30, 2010) (USD million)

Operating Revenues

Fare revenue

3,410

Vehicle toll revenue

1,066

Rents, freight, and other operating revenue

292

Total operating revenues

4,768

Non-operating Revenues

Tax-supported subsidies — NYS 

1,840

Tax-supported subsidies — NYC and local

306

Operating subsidies — NYS

194

Operating subsidies — NYC and local

191

Build America Bond subsidy

58

Mobility tax

1,250

Total grants, appropriations, and taxes

3,839

Connecticut DoT and NYC

59

Subsidies paid to Dutchess, Orange and Rockland counties

(4)

Interest on long-term debt

(964)

Station O&M and use assessments

115

Operating subsidies recoverable from NYC for MTA Bus

234

Other non-operating revenue

3

Change in fair value of derivative financial instruments

(61)

Net non-operating revenues

3,221

Expenses

Salaries and wages

3,431

Retirement and other employee benefits

1,573

Postemployment benefits other than pensions

1,145

Traction and propulsion power

248

Fuel for buses and trains

143

Insurance and claims

239

Para-transit service contracts

287

O&M, professional service contracts

537

Pollution remediation projects

10

Materials and supplies

376

Depreciation and other

1,504

Total operating expense

9,493

 

 

Operating loss

(4,725)

 

 

Appropriations, grants, and other receipts for capital projects

1,421

Source: MTA financial statements Q3 2010

 

Capital Programmes

 

The MTA Group has ongoing capital programmes designed to improve public transportation infrastructure. Funds for these programmes are indicated in Table 2.

 

Table 2: Funds for MTA’s Capital Programs (as of September 30, 2010) (USD million)

Programmes

Funds committed

Funds expended

2010-2014 MTA Capital Program and 2010-2014 MTA Bridges and Tunnels Capital Program

711

47

2005-2009 MTA Capital Program and 2005-2009 MTA Bridges and Tunnels Capital Program

20,077

13,799

2000-2004 MTA Capital Program and 2000-2004 MTA Bridges and Tunnels Capital Program

21,261

19,716

Source: MTA financial statements Q3 2010

 

The 2010–2014 MTA Capital Program and the 2010–2014 MTA Bridges and Tunnels Capital Program provide USD26,265 million in capital expenditures to be distributed as follows:

 

Source of funds

 

The combined funding sources for the MTA Board-approved 2010–2014 MTA Capital Program and 2010–2014 MTA Bridges and Tunnels Capital Program include USD6 billion in MTA Bonds, USD2.5 billion in the MTA Bridges and Tunnels dedicated funds, USD6.6 billion in Federal Funds, USD160 million in MTA Bus Federal and City Match, USD1.1 billion from other sources, and USD9.9 billion from future state and local funding.

 

Austerity measures

 

In 2010, MTA achieved significant savings by reducing operating expenses and improving efficiency. Some of its measures were as follows:

 

As a part of the new MTA Efficiency Initiative, administrative, para-transit and overtime expenses will be further reduced in 2011. Under the New Labor Initiative, MTA will seek to control wage and benefit costs. These initiatives are part of the Budget Reduction Program which includes:

 

All together, these measures are projected to provide savings of USD113 million in 2011 and up to USD403 million in 2014.

 

Recent initiatives

 

Streamlining procurement - In April 2011, MTA solicited cost-saving proposals from the construction industry to lower construction costs by 20 per cent.  

 

Sale of prime real-estate - In April 2011, MTA issued a proposal to sell three buildings on Madison Avenue, a prime business district in midtown Manhattan, which currently serves as the agency’s headquarters. The agency had already reduced headquarter positions by 20 per cent and the remaining employees will now move to other MTA facilities in lower Manhattan and North White Plains. The sale is expected to bring in USD150 million and save USD100 million in renovations. The buildings are to be vacated in two to three years.

 

Restructure of debt - MTA is replacing USD750 million of liquidity facilities that are to expire in 2011. The alternatives include conversions to fixed-rate or indexed variable-rate debt that does not require liquidity support. For 2012, the agency will need to address expiring liquidity facilities on USD1.84 billion of debt.

 

Fare system improvements - In April 2011, MTA issued a Concept of Operations to design, procure, and implement a new contactless fare payment system based on open standards for the subway and bus networks. In May 2011, it announced that by 2015 subway and bus riders will be able to use their credit cards to pay for fares by tapping their card at the turnstile with fare being deducted from the rider’s account. People without credit cards could still buy MTA cards that would also work by tapping. Commuter rail lines would also be switched over to the new contactless system in future.

 

MTA currently uses a stored-value card called the MetroCard manufactured by US-based Cubic Transportation Systems Incorporated for bus and subway fares. The agency currently spends 15 cents on collection for every USD1 in fares. The new system, which would eliminate the need for riders to buy a special card just for transit, will save the agency USD40 million per year and enable a 10 per cent savings in travel time for commuters by shortening the boarding process. The existing MetroCard option would be available until the new system is fully operational.

 

Conclusion

 

Going forward, the MTA’s bold strategies and smart thinking are its only hope to transition into a lean and agile organisation – a necessity for survival in these intensely difficult economic times. By carefully using its limited resources to focus on the most cost-effective upgrades and pilot projects, the agency can demonstrate better service models and gain the credibility and experience to effectively utilise funds when its measures for cost efficiencies or revenue increases start showing results.

 

(This is the second and final part of the TA/TSO Focus, Metropolitan Transportation Authority (MTA), New York: A giant gaining agility, published in the May 2011 issue of the Global Mass Transit Monthly newsletter.)