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The Daily Q: What does MTA budget deal mean for riders and taxpayers?

The Metropolitan Transportation Authority, the behemoth that runs not only the city’s subways and buses but also commuter rail and many of the region’s bridges and tunnels, sure looks like a winner this week. Under a state budget deal it will receive $13.1 billion to fully fund its capital plan, which pays for projects like…

The Metropolitan Transportation Authority, the behemoth that runs not only the city’s subways and buses but also commuter rail and many of the region’s bridges and tunnels, sure looks like a winner this week. Under a state budget deal it will receive $13.1 billion to fully fund its capital plan, which pays for projects like the Second Avenue subway, extension of subway service to the far West Side of Manhattan, Fulton Street Transit Center and East Side Access Project for the Long Island Rail Road.

Much of the new money will be borrowed, via bonds to be issued by the authority. The MTA’s borrowing limit will rise to $41 billion, a $7 billion increase from its current limit.

At the New York World we wanted to know: What does this big new commitment mean for the future of the MTA and taxpayers’ obligations?

We asked Amy Lavine, Senior Staff Attorney at the Government Law Center at Albany Law School and chief contributor to Public Authorities Blog, to explain. 

Was there any worry that current capital construction projects would not be funded?

The MTA is one of the most gigantic entities in the state and it runs this entire transit system that is completely necessary to the everyday functioning of New York City and by extension the rest of the state. You can’t just, like, shut it down.

How good of a deal is this for the MTA and how do public authorities use bonds to get funding?

I think that the $7 billion increase in the bonding cap is pretty standard. I don’t understand why the Republicans would have been so against that — except for the general anti-debt thing that people right now. But the MTA already has tons of debt and New York State already has tons of debt. The MTA’s bonds are fairly well rated.

The state constitution requires that for the state to take on long-term debt they have to get it approved by voters — that’s like you and me and everybody else in the state. This historically has not been a really surefire way to issue debt because if you put a $10 million bond issue on the general vote, a lot of people are just going to say ‘No.’

To get around this, the state will use public authorities because they can issue bonds. There are procedures for doing that and they have to get approval for a lot of them — for the bigger ones certainly — but it’s a lot easier for public authorities to do it.

So the legislature makes annual appropriations to the MTA. And to get around provisions on borrowing it’s always an annual appropriation. So the legislature gives money to the MTA for longer than a year. So even though [news] articles talk about financing the rest of the five-year plan at the MTA, there’s language in there somewhere that makes it an annual appropriation, which keeps it short-term debt.

When I talk about backdoor borrowing with people and the legality of it, pretty much everybody recognizes that it’s skirting the state constitution. But the courts are going to uphold it. It’s not going anywhere because we need these things; we need this money and this is how it’s happening.

Are some people worried the MTA is taking on too much?

Yes, it’s been a general concern for a long time, that the MTA’s entire fiscal situation has a lot of problems in terms of figuring out where they’re going to get their money for these projects — like the Second Avenue subway, which is just going to keep going and getting more expensive. These are difficult things for an authority to manage. It’s got all sort of financial problems.

Were there any other means of funding that were possible this year for the MTA?

Yes, the Senate Republicans are very against the payroll mobility tax. It’s assessed on employers in New York City and in the metro area that MTA serves. It’s one of those things that really have a much larger effect on the gigantic big corporation employers and not so much small businesses. That money goes to fund the MTA. So that was another funding source that Senate Republicans were trying to get rid of even though it seemed like a good idea, especially if your employees or your customers are using public transit. [The tax] still exists but last year Republicans got it lowered and they would like to get rid of it completely.

[Another way is to raise] fares to make more money but people don’t like it obviously, especially when you’re the MTA and there’s so much pressure not to decrease services. The other funding source people are still talking about is congestion pricing. I don’t know that the chances of it happening are really great but that’s still a possibility that transit advocates are talking about. If you implemented congestion pricing you would be increasing the fares for the city bridges and tunnels and a good chunk of that money would be going towards the MTA so it could be used to make transit improvements to be in this feedback loop of trying to get people not to drive.

Is it smooth sailing from here for these projects like the Long Island Rail Road East Side Access plan and the Second Avenue subway or are there still hurdles?

I think you’re going to hear about funding, just because. The MTA, like I said, has a lot of fiscal issues. Yes they have funding right now but the Second Avenue project is gigantic. Costs could increase very quickly. So funding will continue to be an issue.