THE MTA'S CONSTRUCTION CRISIS
May 15, 2008
THE MTA-Tishman Speyer deal is dead.The real-estate devel oper Tishman Speyer won't be paying the MTA $1 billion to build a bunch of big buildings atop the West Side railyards. This collapse is a signal for Gov. Paterson and Mayor Bloomberg to act now to make mass transit a priority and find a way to pay for it.
The MTA had planned to use that $1 billion to help fund its capital plan - its menu of investments in maintaining/upgrading signals and tracks, buying new trains and buses and continuing such expansion projects as the Second Avenue Subway and the transit hub near Ground Zero.
Even if the agency cobbles together a new deal, it probably won't scare up $1 billion. And this probably won't be the last money to vanish from what the MTA has counted on from "asset sales."
But the worst news is that a billion-dollar loss makes the MTA's woes only a bit worse. Even before the West Side deal faltered, the authority faced a $10-to-$15 billion budget gap in its next six-year, $29 billion capital program, which starts next year. Plus, with construction costs rising sharply, it's likely that $29 billion won't get the job done.
The MTA can't borrow much to plug its gap. It's just starting to pay the bill from the heavy debt it's picked up since 2000. MTA chief Elliot Sander recently called the agency's coming debt payments "the mother of all balloon mortgages . . . it's the Hindenburg."
Consider one measure bond-raters use to gauge an investment's creditworthiness, a wonky thing called a "debt-service-coverage ratio." The MTA's revenues (from fares and tax dollars) now cover its yearly payments on bonds about 12 times over. But in two years, that measure could fall to eight times over - still strong, but a worrisome drop, and a more worrisome trend.
The ratings agency Fitch noted that there are "practical limits on the amount of new-money bonds that the MTA can issue." It warns that "given the resources allocated to [capital] expansion projects, . . . the MTA will need to prioritize and/or slow progress on some of these initiatives" unless it can find a huge new source of cash.
