MTA Chairman Pat Foye told board members at the authority’s Wednesday monthly meeting that the agency is now facing a situation of “enfeeblement” at best case scenario to “extinction” at worst, and transit leaders made appeals to borrow $3 billion from the federal government.
Representing a bridge to the potential fulfillment of its refrained request of $4 billion in stimulus funding to carry them through the rest of 2020, chairman of the MTA finance committee Lawrence Schwartz said time was running out before $3 billion funding gab strikes before end of 2020.
According to Schwartz, the federal government, led by the Republican-controlled Senate that has refused to act since the CARES Act was passed, likely will further refuse support going forward.
“The sad reality is that we’re not going to know before the November election or maybe not until sometime in early 2021 whether we’re going to get any help from Washington and how much that’s going to be. Yet, the reality for this board and for the MTA is that we’re supposed [to have] the budget in December for 2021,” Schwartz said. “I’m asking [MTA Chief Financial Officer Robert Foran] and his team to begin the process of applying for the maximum amount of money under the Municipal Lending Facility Corporation (MLFC) of $2.9 billion.”
Foran, however, disagreed there would be any problems without further deficit financing, claiming that the agency has enough “liquidity” to last beyond December.
Foye said in a press conference following the meeting that the proposal, while valid, is not a sustainable solution, and advocacy for the $12 billion to close the gap until the end of 2021 will continue.
Reductions in service across all MTA systems would continue to be on the table as proposes in the August meeting and could be as high as 40%.
Schwartz’s proposal also included board approval of any kind of spending if they are awarded the loan in effort to seize control of the spiraling financial situation that will culminate in a $12 billion deficit by the end of 2021. Foye responded that the MTA had “accessed” the MLFC a month ago and has saved them $12 million in basis points thus far.
“If we pledge their PMT against the borrowing, the interest rate, I am told, would be approximately 1.8%. That is the cheapest money that the MTA will ever be able to get as a loan,” Schwartz continued. “The other thing is that by borrowing money through the Municipal Lending Facility, my understanding is if Washington does come through – whether it’s November or December or early next year – we’re allowed to pay back the money we borrowed under MLF early without any penalty… The reality is that we’re not going to get any help until after the November election.”
But Foran’s report, which preceded Schwartz’s comments, painted a picture of the MTA’s credit rating which has dropped over the course of the pandemic.
Under an August revision of the MLFC program, state and local governments as well as qualifying agencies could charge between 1% and 5% interest depending on the credit of the entity applying for the loan through the Federal Reserve.
The MLFC is a fund with $500 billion and can be repaid over a three-year period.