MTA leaders and Treasury Secretary Steven Mnuchin are in disagreement not about the agency’s financial crisis, but how they are going to recover from the dire straits incurred by COVID-19.
On Nov. 20, Mnuchin was a guest on CNBC’s “Squawk on the Street” with Jim Cramer to discuss the viability of another stimulus bill and how it could benefit agencies such as the MTA, which has been asking for a $12 billion grant from the federal government to fund their operations through the end 2021.
These comments came just after Mnuchin announced programs for lending through the federal reserve would no longer be available and these loans would have to be sought in commercial banking market.
MTA leaders and state Comptroller Thomas DiNapoli have established that not only has their credit rating been downgraded since the pandemic but further borrowing would put them in $50 billion worth of debt by 2024. Mnuchin, however, recommended that the agency take out loans from the Federal Reserve to carry them through the financial crisis.
“Well the MTA has a real revenue problem, obviously. And you know, the MTA would like to get grants from the government. They really don’t want more debt,” Mnuchin said. “But again, the MTA can borrow in the market, they’ve borrowed some money from the facilities, they’ve borrowed money outside of the facilities. The markets are open for them. And again, I don’t expect that to be a problem. But again, let me just say, there is a big difference between grants and loans. And the areas of the economy right now that are really hard hit, like the MTA, you know, they need to work with the state and federal government on how they’re going to get grants to go forward.”
The MTA, in their financial plan for 2021, already includes plans for a $2.9 billion municipal facilities loan, but agency Chairman Pat Foye explained once again that much of the funding needed will also be designed to avoid major service cuts – 40% on subways and buses as well as 50% on commuter lines.
“We’re glad Secretary Mnuchin has acknowledged the MTA has a serious and substantial revenue problem, that we have been devastated by the pandemic and that we are the economic lifeblood of New York and the nation,” Foye said. “The MTA needs $12 billion in federal relief to avoid the deep cuts we have been talking about that will devastate our customers and cripple our economy. We have been clear since the beginning of the crisis: Borrowing or cutting our way out of this is not an option. We need federal relief and we simply can’t afford to wait any longer.”
Mnuchin’s comments come down to the wire for the MTA as the board plans to vote on the 2021 financial plan at the December meeting, a worst-case scenario proposal while officials hold out hope that a Biden-Harris administration can deliver funds.
The hurdle remains of getting a stimulus on the floor of the U.S. Senate under the leadership of Majority Leader Mitch McConnell who has refused to pass the COVID-19 relief bill since the CARES Act in April.