(Bloomberg) -- New York City’s transit system is facing a projected $900 million combined deficit in 2027 and 2028 as persistent fare evasion dampens the agency’s revenue collections and real estate taxes fall short.
The Metropolitan Transportation Authority, which runs the city’s subway, bus and commuter rail lines, is now expecting $811 million less in farebox revenue this year through 2027 — even after earlier budget revisions — as fare beating continues to plague the system, according to a presentation Wednesday during the agency’s monthly board meeting. About half of bus riders skip paying and 14% of subway users scurry through open emergency exits or manipulate turnstiles to avoid the fare.
The MTA also said it now anticipates $790 million less this year through 2027 from mortgage recording taxes and property transfer taxes on commercial real estate sales.
The shortfall estimate is an abrupt change from last year, when state lawmakers directed more revenue to the MTA to help balance the largest US mass-transit provider’s operating budgets through 2027. Transit officials say they’re on track to meet operating efficiencies that will cut expenses by $400 million this year and $500 million annually starting in 2025.
“We still need to get more riders to the system and do better on fare evasion,” Kevin Willens, the MTA’s chief financial officer said Tuesday during a press briefing on the new budget forecast. “If we don’t get continued ridership growth and we don’t do better on fare evasion, the revenues might have to come down even more.”
The budget forecasts includes anticipated farebox and toll increases of 4% in 2025 and 2027. While subway and bus revenue and real estate tax receipts are expected to underperform — conversely — commuter rail revenue and bridge and tunnel toll money is anticipated to increase and potential debt service savings in 2024 and 2025 will help to offset the budget challenges.
The MTA is revising its multi-year operating budget forecast as it must also wait for state lawmakers to resolve a shortfall in its 2020 — 2024 capital plan, which funds infrastructure upgrades for a more than 100-year-old system. The transit agency was forced to defer $16.5 billion worth of capital improvements after Governor Kathy Hochul in June paused a congestion pricing plan that was set to begin June 30 and would have provided $15 billion for MTA’s infrastructure needs.
Janno Lieber, the MTA’s chief executive officer, is determined to maintain the necessary infrastructure investments to avoid returning to years past when the system suffered from excessive delays.
“I’d be damned if I’m going to personally let it go down, let the system go backwards without a fight,” Lieber said during the board meeting about the capital program. “That’s what we got. That’s what we’ve got on our agenda for the Fall.”
While the governor has pledged to resolve MTA’s funding gaps, its financial outlook could darken even more because the forecast doesn’t include the impact of Hochul and the legislature either not restarting the tolling initiative or failing to provide an alternative funding source.
If that happens, the MTA’s operating budget would need to take on debt-service costs earlier than anticipated because it would have to borrow from revenue that flows through that spending plan rather than selling congestion pricing bonds that would be repaid with the new toll. Instead of principal and interest expenses rising in 2030, they would increase by $150 million in 2027 and $300 million in 2028, according to the updated budget forecast.
Next year’s spending plan would need to absorb as much as $200 million of one-time labor expenses as the cost of some employees would shift to the operating budget from the capital plan. Recurring maintenance expenses would increase by as much as $260 million.
There would also be $70 million less in farebox revenue as the system wouldn’t get the expected ridership jolt from commuters ditching their cars for public transportation to avoid a congestion toll.
The MTA’s finances also face risks aside from the pause on congestion pricing. A 5% lower recovery in paid ridership would mean $325 million of less farebox revenue, a slower economy or sluggish real estate recovery could reduce dedicated tax collections by as much as $750 million. MTA’s future budgets also depend on $500 million of revenue beginning in 2026 from casinos that have yet to be developed.
“I’m optimistic that the decision makers in Albany, all of them, understand the need and that they will respond,” Lieber said. “We can’t let the system slide back to where it was in the 1970s or even back to 2017, the ‘Summer of Hell’.”
(Updates with comment from MTA’s chief executive officer in the ninth paragraph.)
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