Metropolitan Transportation Authority officials are considering borrowing nearly $3 billion from the federal government in order to stay afloat due to the difficulties caused by the coronavirus pandemic.
The proposal was made by Lawrence Schwartz, chairman of the authority’s Finance Committee, during the agency’s Sept. 23 board meeting. The announcement came more than two weeks after a state audit conducted by the office of New York’s comptroller, Thomas DiNapoli, outlined the transportation authority’s grim future if federal aid was not provided.
Schwartz advised against the agency holding out hope for the federal government to come to an agreement on a second federal relief package in response to the coronavirus. The deadline for the government to submit another bailout package would be November, which is also when the agency is required to propose a budget for 2021.
“We cannot wait any longer for Washington to act, because the reality is they’re not going to act,” Schwartz said. “We have to be realistic. We need to be responsible.”
Schwartz proposed that the agency apply for a $2.9 billion loan with a 1.8 percent interest rate, which he said was the “cheapest money the MTA will ever be able to get as a loan.”
The agency has already received just under $4 billion in coronavirus relief aid from the federal government but said an additional $12 billion was needed to offset the loss of fares and tax revenues.
Agency Chairman Patrick Foye said he was open to the idea, but did not see the proposal as a long-term solution for “an agency that spends $300 million a week.”
Schwartz said the agency could return the money to the federal government if a bailout was implemented next year. The agency would have three years to repay the loan, according to officials.
Maria Doulis, vice president of the Citizens Budget Commission, a nonpartisan civic organization that monitors the finances of state and city government agencies, said the MTA could be digging itself into a bigger financial hole by borrowing money from the federal government and potentially not being able to repay it.
“It’s not like the prospects right now appear to be so much brighter in three years. The budget gaps are there. They’re growing. And there’s still a lot of uncertainty about the return of ridership to the system,” Doulis said.
Without the $12 billion in federal aid, officials said, the initial budget cuts will total $2.4 billion over the next two years. Officials said expenses cannot be reduced quickly and significantly enough to offset a 40 percent revenue reduction the organization has experienced and will continue to expect.
“The MTA needs federal support to manage this crisis,” DiNapoli said in a statement. “The alternative is unthinkable. Without additional federal aid, the MTA is considering drastic cuts and fare hikes that won’t come near what it needs, and in fact will extend the problems we face, not solve them.”
Transit authority officials discussed potential measures that they would take if no federal aid was provided such as eliminating more than 800 Long Island Rail Road jobs, raising fares by 10 percent in three years, and delaying the East Side Access Project, which allows for a second railroad terminal in Manhattan.
The organization received $3.9 billion in federal aid in the previously passed CARES Act, but ran through the funding by July, officials said.
“We’re about to see the worst train wreck in the system’s history,” MTA board member Kevin Law said. “The potential cuts to the Long Island Rail Road are terrifying.”