New York MTA puts 11 suppliers on notice that contracts are in jeopardy

Sept. 18, 2020
The U.S.’s largest transit agency says the financial fallout from the COVID-19 pandemic will force it to make “draconian cuts that will reverberate throughout the entire economy.”

New York Metropolitan Transportation Authority (MTA) sent letters to 11 of its largest suppliers, with whom it has spent a combined $39.08 billion since 2011, notifying them current and future contracts are at risk due to the financial impacts of the COVID-19 pandemic.

The suppliers operate facilities in 21 states and Washington, D.C., where, combined, nearly half a million workers are employed. MTA says its direct capital spending during the past nine years has created close to 100,000 jobs nationwide including at medium and smaller MWBE firms.

MTA is losing $200 million in revenues per week, which the authority says “eclipses even the Great Depression’s impact” on its ridership and finances. The MTA is facing a $16 billion projected deficit through 2024 when the revenue losses are combined with lost state and local taxes and other subsidies.

The loss of revenues is compounded with the declining credit rating, which makes it more expensive for MTA to borrow money. MTA reports the Transportation Revenue Bond, its core credit, has been downgraded five times since March and continues to carry a negative outlook from all four rating agencies.

The authority has joined a larger effort within the transit industry among transit agencies of various sizes, private business firms and associations to request at least $32 billion in federal aid for transit systems. MTA says it needs $12 billion.

"The COVID-19 pandemic has exacted a horrific toll in human, social and economic terms across the nation,” MTA Chairman Pat Foye wrote in the letters to suppliers. “I am writing to alert you that because of this financial devastation, many current and all future contracts are in jeopardy without an injection of $12 billion in emergency federal aid. Let me be clear: federal funding for mass transit isn’t a red or blue issue – it’s a jobs issue.”

Unfortunately, MTA has plenty of company in its plight.

Earlier this week, the American Public Transportation Association (APTA) released the results of membership surveys conducted early in September. Of the association’s transit agency members, 61 percent are considering service cuts, while eight in 10 large agencies are considering service cuts to bridge funding gaps.

APTA also surveyed its business members and found 86 percent of businesses have seen a reduction in their transit industry business due to the impacts of the pandemic and more than one-third of these businesses have already furloughed employees. More than one-third of business members surveyed feared their businesses would not survive the pandemic. 

MTA noted in its supplier letters that the authority has undertaken a review of new and planned expenditures, frozen most of its contracts and has paused its current $51.5-billion capital program to stem the loss.

However, the authority is prepared to implement additional steps to ensure its survival.

“In the face of federal inaction, the MTA is preparing for drastic and necessary reductions that include possible service cuts of up to 40 percent on subways and up to 50 percent on the Long Island and Metro-North railroads – measures that would have a profound negative impact on mobility in the New York Metropolitan region,” said the authority.

A fare hike and the potential to lay off more than 8,000 workers are also being considered.

“Without an immediate injection of $12 billion, the MTA will be forced to make draconian cuts that will reverberate throughout the entire economy,” said the authority. 

About the Author

Mischa Wanek-Libman | Editor in Chief

Mischa Wanek-Libman serves as editor in chief of Mass Transit magazine. She is responsible for developing and maintaining the magazine’s editorial direction and is based in the western suburbs of Chicago.

Wanek-Libman has spent more than 20 years covering transportation issues including construction projects and engineering challenges for various commuter railroads and transit agencies. She has been recognized for editorial excellence through her individual work, as well as for collaborative content. 

She is an active member of the American Public Transportation Association's Marketing and Communications Committee and serves as a Board Observer on the National Railroad Construction and Maintenance Association (NRC) Board of Directors.  

She is a graduate of Drake University, where she earned a Bachelor of Arts degree in Journalism and Mass Communication with a major in magazine journalism and a minor in business management.