New York subway, facing a $16 billion deficit, plans for deep cuts
By Christina Goldbaum
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 workforce, 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 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 two year 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 MTA 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% 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 resort to severe cuts only 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 help as part of the $3 trillion relief package being debated in Congress this week.
Officials say it is not yet clear how the authority will fare this time. In March, the agency received $3.8 billion — nearly its full initial request — in the first federal emergency aid package.
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.
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%.
“The MTA 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 New York University. “This is the most severe crisis the MTA 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 Wednesday, paints a bleaker picture for public transit than in past crises.
After the great recession in 2008, the MTA 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% 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 MTA’s operating deficit through the end of the year.
“Without federal funding, the MTA 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.
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 MTA board is expected Wednesday to review initial cost-cutting measures that will provide $1 billion in savings in 2021 by trimming nonessential services, including reducing overtime and eliminating consulting contracts.
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 MTA 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.