Bloomberg News

MTA Says Gaps to Widen Without Labor Savings, Higher Fares

July 25, 2012

The New York Metropolitan Transportation Authority projects deficits totaling $374 million through 2016, a gap that may widen if the agency can’t contain labor costs and force riders to pay more.

The MTA, operator of the biggest U.S. transit system, forecasts shortfalls of $129 million in 2014, $14 million the next year and $231 million in 2016, according to budget documents released at the agency’s monthly meeting today in Manhattan.

The $13.1 billion budget for next year counts on negotiating union contracts without increased costs and the approval of a 7.5 percent fare and toll increase, Chairman Joseph Lhota said. The extra charges would begin in March and net $450 million annually. They follow last year’s increase; a third is scheduled for 2015. Without those and other cost savings, the deficits would widen to $2.7 billion by 2016, the agency said.

Labor costs are “probably our No. 1 risk,” Lhota told reporters today. “Our budget is fragile.”

The 2013 preliminary budget and four-year financial plan that officials presented also include projected cash balances of a combined $93 million this year and in 2013.

‘Inching Forward’

MTA officials have been working to dig out of a fiscal hole exacerbated by the 18-month recession, which triggered $93 million in service cuts two years ago and stoked anger among riders and advocates. The budget restores about a third of those reductions, a move that mass-transit groups and union members hailed during the public-comment period at today’s meeting, even as they lobbied for more.

Contract talks with Transport Workers Union Local 100, the MTA’s largest bargaining unit, are “inching forward,” Lhota said. “I’m optimistic we will get it done some time this year.”

The budget is “a political document, not an economic one,” John Samuelsen, the union’s president, said in a telephone interview. “They’ve been known in the past to frequently skew the numbers while in the midst of the contract negotiations.”

The agency should renegotiate interest rates with banks to achieve cost savings rather than make riders and workers shoulder the burden, he said.

More Optimism

While saying he remained cautious, Lhota told reporters he’s more optimistic about the agency’s finances than when he took over as chairman about six months ago.

Lower property-tax revenue and higher-than-expected costs on labor, post-retirement benefits and pension payments have hurt the agency’s budget projections since the last update in February, said Chief Financial Officer Robert Foran.

Working in the agency’s favor have been higher fare revenue -- weekly subway trips reach their highest level in 45 years last month -- lower energy prices, debt-service savings and a better-than-projected surplus from last year, he said. The service restorations to almost 40 rail, subway and bus lines will also bring in additional revenue.

The MTA operates the New York City subway and bus system; the Metro-North and Long Island Rail Road commuter lines; and several intrastate bridges and tunnels. Board members will vote on the final budget, including the toll and fare increases, in December.

To contact the reporter on this story: Esme E. Deprez in New York at edeprez@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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