By Hank Russell
The Metropolitan Transportation Authority (MTA) has made substantial progress funding its capital programs and has tried to limit the strain on its operating budget from debt service costs, but potential federal actions threaten its financial future and debt profile, according to State Comptroller DiNapoli’s annual report on the MTA’s capital programs and debt.
“State funds and congestion pricing have helped the MTA shore up its capital programs and plans to bring the system into a state of good repair, but it could be forced to add debt or postpone projects if federal choices undermine recent progress,” DiNapoli said. “Given this uncertainty, it is imperative the MTA spends capital dollars efficiently to fund critical investments, maximize improvements, and bring riders back.”
The MTA is relying on congestion pricing, which had a delayed start beginning in January, to bring in $15 billion for the MTA’s 2020-2024 capital program. The MTA also anticipated $14 billion in federal funds for its 2025-2029 capital program. Ongoing efforts by the U.S. Department of Transportation to cancel federal approval of congestion pricing and possible cuts to anticipated federal capital funds could lead to difficult decisions about whether to defer investments, or find other resources to plug these potential gaps.
While the MTA makes efforts to avoid this outcome, issuing additional debt to address funding risks could pressure its operating budget, requiring difficult choices such as service cuts or fare and toll increases beyond what is already planned. For example, filling a $4 billion shortfall in federal funds using debt paid from the operating budget would increase debt service by $250 million by 2033, or the equivalent of a 2.5% increase in the subway fare.
While the MTA has said it intends to avoid using debt to fund a potential $3 billion gap in the 2025-2029 capital program, if it cannot find cost savings in its capital or operating budget, it may be faced with this choice as a last resort.
The enacted state budget provided $33 billion to help close gaps in the MTA’s $68.4 billion 2025-2029 capital program. Most of this, $31.5 billion, will come from the state’s expanded payroll mobility tax on larger employers in the region, which will provide dedicated revenue for the MTA’s capital lockbox to pay for $23.5 billion in debt and $8 billion in pay-as-you-go capital funds. Since 2022, the MTA has increasingly made use of capital lockbox debt, dedicating revenue from congestion pricing and other sources to the capital program and issuing debt against it directly. It issued $3.6 billion in capital lockbox debt through 2024.
As the MTA’s use of capital lockbox debt grows, it will help stabilize non-lockbox debt and protect the MTA’s operating budget. Capital lockbox debt, as a share of all debt outstanding, is expected to rise from 5% in 2023 to 45% in 2037. The timing of collections into the capital lockbox has also allowed the MTA to increase the amount of pay-as-you-go capital, which could reduce its reliance on long-term debt.
The MTA will still issue nearly $23 billion in debt outside of the lockbox to help fund both the 2020-2024 and 2025-2029 capital programs. This non-lockbox long-term debt is paid for out of the MTA’s operating budget and impacts the MTA’s ability to cover day-to-day costs. Non-lockbox debt outstanding is expected to decline from $40.9 billion in 2024 to $39.8 billion in 2027, and then rise to $49.5 billion in 2033 as the MTA issues non-lockbox debt to help cover the 2025-2029 capital program’s costs.
DiNapoli’s report forecasts that the MTA’s overall outstanding debt will rise from $44.5 billion in 2024 to $87.2 billion in 2034, with capital lockbox debt expected to grow from 5 percent of debt outstanding in 2023 to 45 percent by 2037.
Overall annual debt service, the amount the MTA spends to pay down debt each year, is projected to reach $6.6 billion in 2037, more than twice the amount in 2024. The MTA’s use of the capital lockbox for pay-as-you-go capital and for debt issuance is expected to keep debt service at or near an average of 15% of its budget. If capital lockbox debt service and revenue were not kept separate, debt service would account for 25.3% of the MTA’s operating budget in 2033, straining the operating budget.
In response to the report, MTA Co-Chief Financial Officer Jai Patel said in a statement, “We appreciate Comptroller DiNapoli’s recognition that the MTA has been successful in securing new dedicated revenue streams for the Authority’s 2020-2024 and 2025-2029 capital plans while managing its debt burden and protecting the operating budget, thanks to the capital lockbox and a substantial investment from the FY26 State budget. We are constantly exploring new ways to find efficiencies wherever possible, and reduce debt, while moving full speed ahead with improving the transit system and providing the best service possible for [our] customers.”