State to fund MTA capital plan, but find the funding later

State to fund MTA capital plan, but find the funding later

State to fund MTA capital plan, but find the funding later
January 14, 2016

When Gov. Andrew Cuomo and New York City Mayor Bill de Blasio reached a groundbreaking deal to fund the Metropolitan Transportation Authority’s five-year capital plan this past October, one unanswered question was how the state would actually pay for its $8.3 billion share.

Now that Cuomo has rolled out his executive budget proposal for the upcoming year, that fundamental question on MTA funding has still not been answered.

Nicole Gelinas, a fellow at the Manhattan Institute who monitors transportation spending, noted that the state did appropriate $1 billion of its $8.3 billion obligation this year.

“But the state hasn't identified specific ways to pay for the remainder of the obligations,” Gelinas said in an email. “So the governor is depending on future budget surpluses to cover these costs. If we have a recession or otherwise run into budget deficits, the governor will have to identify another way to pay.”

State budget documents released this week include a key piece of legislation – the Metropolitan Transportation Authority Capital Financing Act of 2016 – that would authorize the remaining $7.3 billion of the state’s commitment toward the $26.1 billion capital plan, which covers 2015 through 2019.

However, the state legislation leaves some wiggle room in how the state covers the cost, including the option of increased borrowing. That possibility has surprised some observers, who took Cuomo’s October announcement to mean that the state would identify and dedicate actual dollars for maintenance, upgrades and expansion projects at the MTA.

The proposed legislation also specifies that the state will provide the funds only when the MTA’s capital resources have been spent down. Budget documents project that the first year that happens the state would contribute $1.5 billion, then between $1.4 billion and $2.6 billion in following years.

But Carol Kellermann, the president of the Citizens Budget Commission, said in an interview that she was concerned that the MTA could still end up on the hook for capital expenditures that many believed would now be covered by the state.

“He’s not really going to add any money to the MTA,” she suggested, referring to the governor. “Apparently it’s really just that the MTA is going to borrow the money, which doesn’t surprise me, because it’s what I thought all along. There was some conveyance of the idea that the state was going to contribute money to the MTA capital plan, which probably turns out not to be the case.”

Kellermann did acknowledge that Cuomo is committing to covering its share of the MTA's capital expenditures "if they can’t pay it themselves."

“But I don’t know what that means, when they have no resources," she said. "That becomes sort of a subjective judgement.”

In the fall, Cuomo made headlines for badgering de Blasio into paying more into the MTA capital plan, which he ultimately agreed to do, increasing the city’s share substantially to $2.5 billion. The governor also slashed several billion dollars from the plan.

Going forward, the state’s position is that its wait-and-see approach to identifying funds for the MTA capital plan will allow it to take into account market conditions over the years as money is actually spent and to determine the best option, whether it’s cash or borrowing.

“We are committed to $8.3 billion,” said Morris Peters, a spokesman for the state Division of Budget, “and as you work through the capital planning period and as the MTA continues to actually deliver on projects, we will fund our $8.3 billion commitment based on the conditions of the time and the bill includes flexibility for us to give cash or a revenue stream.”

The funding legislation also gives the state the option of using the MTA’s borrowing authority while agreeing to pay the debt service. However, there is concern that the MTA’s debt service, which is 18 percent of its operating budget this year, is at risk of rising too high and consuming too many dollars that would be better spent elsewhere.

A spokesman for the MTA said the authority was still reviewing the budget documents and had no comment. 

Jon Lentz
is City & State’s editor-in-chief.