The last time I blogged about MTA bonds was in February when a deal between Citigroup Global Markets & the MTA was questioned. Once again MTA bonds have made headlines as Moody’s Investors Services warned that the MTA’s bond rating could be downgraded. William Neuman of the New York Times has more:
Adding a new note of urgency to the debate over how to fix the fiscally troubled Metropolitan Transportation Authority, a financial rating service warned on Thursday that without a comprehensive rescue by the state, the authority was in danger of having its bond rating downgraded.
“This is a shot across our bow,” said Gary Dellaverson, the authority’s chief financial officer. “Moody’s is saying that the M.T.A. is in difficulty.”
He said that the warning, in a report by Moody’s Investors Services, could lead almost immediately to higher interest rates on some of the authority’s variable-rate debt. If Moody’s were to downgrade the authority, it would make it harder and costlier for it to borrow money, he said.
The warning applied to about $12 billion in what are known as Transportation Revenue bonds. The bonds are backed by the fares paid by bus, subway and commuter rail riders, as well as other sources, including taxes on real estate transactions, which have declined with the worsening economy.
The report cited the authority’s deepening financial crisis and the failure of the State Legislature to enact a rescue plan backed by Gov. David A. Paterson. In response to the lack of action in Albany, and to help close a $1.2 billion deficit, the authority’s board voted on Wednesday to move ahead with a steep increase in fares and tolls and deep cuts to service.
“In the absence of a long-term funding solution from the State Legislature,” the report said, further fare increases and service cuts were probable. Even so, the report said, the authority faces growing budget deficits in coming years. It warned that “stopgap measures will not stabilize the long-term fiscal health of the M.T.A.”
As a result, the report said, the authority’s financial projections “may not support” the current rating for its fare-backed bonds.
“It is making the very direct connection between the failure of Albany to act and the financial viability of the M.T.A.,” Mr. Dellaverson said.
Click here for the complete report.
As the old saying goes, “when it rains, it pours”. This has especially been the case for the MTA over the last year or so as it saw its finances rapidly decline faster than they had even anticipated. Yet with this knowledge known to lawmakers in Albany all this time, they have failed to enact any sort of solutions.
Will this latest report from an outside source help get it through to them just how real this financial crisis is? Will this help the majority of riders get it through their head that the MTA is in serious trouble? I am waiting to read some asinine response claiming Moody’s keeps two sets of books & is in on the charade of extracting more money to waste.
The news gets bleaker & bleaker by the day. The prospects of more fare hikes & service cuts for 2010 is very high. We clearly are at a crossroads between simultaneously maintaining/upgrading a system & one that falls into a state of disinvestment & disrepair. If the right choices are not made, our infrastructure & system will take a long time to recover.
In this day & age, our region can under no circumstances handle the latter scenario becoming a reality. What will Albany do to make sure this does not happen? We can only hope it is to make the right choices for long term stability.
xoxo Transit Blogger