New York City’s public transit system carries two formidable debts.
The first is the traditional kind of financial liability that shows up on a balance sheet—some $47 billion, or more than what most U.S. states owe. The second has nothing to do with accounting but can be measured in aging subway cars, creaky old train sheds, outdated signal systems and stations vulnerable to flooding as climate change delivers more hazardous weather. The city’s rail network is more than 100 years old and needs to be modernized to attract more riders and keep revenue flowing into the system.
Just like with a financial debt, this obligation to riders only gets more expensive when investing in infrastructure is put off.
“The older something gets, the more it gets used, the more it gets worn out, and that creates more of an issue to keep it in a state of good repair,” says Maria Lehman, director of US infrastructure at GHD, a global engineering company, and a former president of the American Society of Civil Engineers. New York’s transit infrastructure, she says, isn’t just having a midlife crisis: “It’s in an old-age crisis.”
New York City’s transit infrastructure can make getting to work, school, medical appointments and nightlife venues challenging for residents and visitors. Brenda McClean, a home-care nurse who needs to travel to her patients, avoids her neighborhood subway station at 157th Street in Manhattan during heavy rain after multiple incidents of flooding, including one downpour in 2021 that had riders wading through waist-deep water. She relies on for-hire vehicles when the city gets hit with precipitation.
“Now if it’s raining, we don’t even bother to use this station, because it’s not safe,” says McClean, who’s seen her work commute almost double to an hour and a half when the subway is experiencing delays. “I don’t want it to affect my patients.”
So the Metropolitan Transportation Authority, which runs the city’s subways, buses and two commuter railroads, has to simultaneously service its existing financial debt while spending billions of dollars more on infrastructure. A new toll on drivers entering Manhattan’s central business district will help raise some money. But the MTA is a complex transit system with a debt structure that’s about to get even more complex.
MTA officials anticipate overall ridership will reach only 80% of pre-pandemic levels by 2027, but the system still serves roughly 6 million weekday riders on subways, commuter rail and buses. “The MTA system is essential for the functioning of New York’s economy, and where New York’s economy goes, so goes the country,” says Sarah Kaufman, director of New York University’s Rudin Center for Transportation. “So it’s not only an issue of local concern—it’s of national importance.”
The dollar figures are accordingly huge. The MTA’s current capital plan was the biggest to date when it was approved in 2020, laying out $51.5 billion in infrastructure investment over five years. Projects include making the system more accessible by adding more elevators and escalators, extending the Second Avenue subway farther uptown to 125th Street and incorporating electric buses into its fleet. That level of spending may continue: The next capital budget for 2025-29 could match or even exceed the size of the current plan because of inflation, Janno Lieber, the MTA’s chief executive officer, told reporters after a monthly board meeting in October.
“The scale of the investment that needs to take place is substantial,” Lieber said during a Bloomberg event on Oct. 23. “This is the lifeblood of New York. It’s the thing that makes New York possible. We couldn’t exist at this density otherwise.”
Mass-transit agencies across the nation are under similar pressure. Boston’s transit agency, the Massachusetts Bay Transportation Authority, plans to spend $9.7 billion through 2028 to upgrade its commuter rails, subway lines and buses. But the MBTA estimates it will cost $24.5 billion to update its infrastructure. The Chicago Transit Authority expects to spend $3.6 billion on its system through 2028, but officials estimate overall infrastructure needs total $37.8 billion, with only 20% of that amount funded. At the same time, ridership and thus fare revenue are still down as many people continue to work from home at least part of the week.
If the MTA’s 2025-29 spending plan equals the $51.5 billion current capital budget, it may have a projected $25 billion funding shortfall unless elected leaders and transit officials find new revenue sources, according to an October report on the MTA’s finances from Thomas DiNapoli, New York state’s comptroller. “They’re still going to be very constrained, because their capital needs far exceed the readily available resources,” says Ana Champeny, vice president for research at the Citizens Budget Commission, a fiscal watchdog. “And we’ll need to have serious discussions about prioritizing what goes into the capital plan, identifying the financing and ensuring that we have a stable operating budget.”
The MTA needs to keep costs in line and find savings, Champeny says. The agency has overspent on some capital projects in the past. A project to extend the Long Island Rail Road into Grand Central Terminal underwent years of delays and billions of dollars in cost overruns. New York University’s Marron Institute of Urban Management calculates that the first phase of the Second Avenue subway, which opened in January 2017, is the most expensive subway built in the world on a per-kilometer basis. That it serves one of the most densely populated neighborhoods in the US only partly offsets the expense.
The transit agency already pays $3 billion a year in principal and interest payments from its $19.2 billion annual operating budget. “The debt servicing to any layperson is staggering,” says Rachel Weinberger, director of research strategy at the Regional Plan Association, a nonprofit that promotes economic growth and improved quality of life in the New York City area. “On the other hand, sometimes you have to borrow.”
The MTA in 2020 started borrowing against revenue from a special payroll tax that it receives from New York City-area businesses. Debt funded by this tax carries higher credit ratings—and offers lower borrowing costs—than the MTA’s transportation revenue bonds, which are repaid from farebox and toll revenue.
The MTA also has a capital “lockbox” that goes directly to funding infrastructure needs instead of flowing through the agency’s operating budget. Those pledged funds include state and city sales taxes and a real estate transfer tax. The lockbox will get more funding from the new congestion pricing toll that drivers may start paying as soon as late spring of 2024 to enter the area south of 60th Street in Manhattan. It’s estimated to bring in $1 billion a year, which the agency will borrow against to raise $15 billion for its current capital program through 2024. But New Jersey Governor Phil Murphy, whose constituents will pay the tax when they drive to the city, is suing to delay or halt its implementation.
Bond investors accept the necessity of more capital investment, albeit cautiously.
“If they don’t maintain service, which means they have to invest in an antiquated system with a lot of deferred maintenance, they’re going to lose ridership,” says Howard Cure, director of municipal bond research at Evercore Wealth Management. “So it’s a very careful balancing act.”
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