MTA, New York City, Nicole discussed on Second Avenue Sagas Podcast
I'm joined by Nicolaas that Hatton institute were talking. Mta finances amidst the ongoing corona virus crisis as. We've seen the last week MTA. Ridership has tanked precipitously amidst a slowdown in the city. In anticipation of more orders for people to stay home and just the general unexpected nature of this public health crisis. We've seen ridership dropped by sixty percent with the New York City. As of the most recent numbers other cities are reporting ridership drops of eighty percent to ninety percent or more and the MTA. Recently put out a call for four billion dollars in federal in federal bailout because their finances are simply in the garbage right now. Nicole is an expert on MTA finances. She's going to join me to walk us through what's happening what the future holds for the MTA and it's already precarious budget and what we can expect to see in the coming weeks and months Nicole. Thank you for joining me today. Good morning thank you for having me on. I'm honored to be on the podcast. Although sorry it's under such difficult circumstances will have to reschedule a session under better circumstances later on Can you give everybody an overview of what's happening what's going on with the MTA? How does this ridership drop impact them? Sure if we had been talking perhaps early last week or the week before what we would have been talking about is a crisis that causes them to have a higher budget deficit in other words if they had seen a little bit of a ridership dropped off and if we had gone into a recession you know sort of like a run of the mill recession. Although guests no recession is all that run of the mill maybe they would have seen a drop off in tax revenues and a drop off in the fare box in toll revenues that might have done something like give them a half a billion dollar annual budget deficit on their seventeen billion dollar annual budget. Maybe IN WORST CASE SCENARIO BILLION DOLLAR BUDGET DEFICIT. So that would have been significant. But it wouldn't have been out of the ordinary in that the answer would have been service cuts perhaps new state tax revenues. You know all the normal things. Mta does when it gets into trouble but by this point we're looking at what is essentially a cash flow crisis so you can just forget about the annual deficit for the moment. This is more. Can they manage to take in cash in order to meet their ongoing expenses and just today they made their second material impact statement to their bondholders. They made one last week. They made another one just this morning. Very serious signal to bondholders. Essentially saying they're in a material event that could potentially cause them to not be able to pay their bonds that's why they have to tell the bondholders and they're essentially conserving cash. You know they can't. They can't go on with maintaining schedule in maintaining their cost will essentially not taking in very much cash at all and they gave us some new statistics on ridership subway ridership. Yesterday was down. Sixty percents of the commuter rail ridership on Yesterday was down sixty seven percent. Metro-north ridership was down ninety percent. So they're seeing a significant cut in their cashflow. How long could they go on like this? I did a little thing for the month of March the other day if they were to have the situation continue for the whole month of March that would cost them a billion dollars. If it went through April that would be two billion dollars and then we have no idea what ridership is going to look like. May June July August. So short story is that they are in what they call a very severe situation so I didn't even notice that they put out this update today. I'm looking at it now. They're saying a sixty percent drop in subway ridership. A fifty percent drop in bus ridership a ninety percent drop in a m peak usage for metro. North these are stunning numbers right now. Yep IN IT. It shows they You know any sort of social sociological perspective. Who can work at home? Who can't I mean? The Metro North Workers. Obviously ninety percent drop office because these are mostly white collar jobs until there is a lot of flexibility to work from home. It looks like from this bond statement to that the MTA is projecting in agency-wide revenue loss in excess of four point. Five billion dollars. I can't recall a situation where the MTA's finances have gone so S- out so quickly and one of the questions I have is. How much cash reserved they have? How can they continue to operate the system at the levels? They need to before they start running out of money not for Very Long. I think even just based on the ridership numbers. They're going to have to think about cutting back metro north and long island all railroad service but they say that they have liquidity resources which means money to service debt in provide Services of a little bit less than four billion dollars. But this isn't this starts to become basically borrowing to pay for operating resources. So what would this mean Things like taking away their resources. They've put aside to pay for future healthcare benefits to future retirees. So that's money that would have to be repaid Then they have a commercial line of credit about a billion dollars which they're actually going to take down on by Friday so when the when they are going to draw down their bank line of credit. That's a very serious signed to bondholders. It means that you know starting Friday. They'll essentially be borrowing a billion dollars to pay for operating expenses which is usually a very good idea so yes they have some cash that can get them through a couple of months but the It if this were to go on past you know mid April they would have to be thinking very seriously. About how much money do we want to send to the bondholders? In how much do we wanted to keep to provide essential services In now of course remember right off the top of their revenues. They are supposed to take the first twenty percent of that in in pay off their their bonds. Roughly Twenty Thousand Right. So what happens? After they draw down this line of credit they access their billion dollars. That really only takes them through about three or four weeks at most at current service levels. They can't really reduce service in a way that saves them money without a significant lead time based on the way their work shift picks or surreal. You're looking at a need to sustain levels spending for the next few months that they can't support with the money they have on hand. Yes in I think. Also the what happens after this crisis over has to be something that they they're thinking about in terms of revenue on the tax side and ridership because okay say everything works out in the best case scenario and everyone is back to work toward end of April and we can all move around freely in Hopefully not seen Terrible death toll from all of this. What is ridership look like over the summer? I mean our tourism is tourism. Going to come back. Are we going to have our global tourists in our domestic tourists back over the summer months? How many people will have lost their jobs? Unfortunately in so they will be taking subway. Bus and commuter rail how many people are going to have to save money so they won't be driving on the bridges tolls and paying into the toll. Revenue that subsidizes transit What are we gonNA do about congestion? Pricing may not an unclear thing so I think in asking for four Billion Dollars Pat. Foy IS SORT OF UNDERSTANDING. This may be the the. Mta's only chance to go to Congress if everybody has forgotten about this by summer in the MTA is left with significant cash crunch because of this and then they have to cut service even when things are recovered from the perspective of the coveted then that really harms regions recovery new worst case scenario. If they're running a Saturday service in the middle of the summer that really hampers the city's ability to get get its economy back up and running it certainly alarming to hear. The governor yesterday predicted that the peak of this was still forty five days away. I think that takes us well outside of the window the MTA is anticipating right now and that could lead to billions more losses On the bright side it does seem that the countries that have emerged from the other side of this are reporting fairly rapid economic recovery and somewhat of a return to normal. I guess there's a question with a New York. As to whether a lot of these businesses the bars and restaurants and the hotels have closed for. Now we're going to be able to reopen without so massive infusion of cash so we don't bring pictures very unsettled right now break in that goes to their tax side You know we we think about when we pay our subway fare or bus fare. Where paying for services. If this were a normal Martian this had never happened. They would've taken in about seven hundred fifty million dollars from fair in toll revenue. They would've taken in about nine hundred million dollars from taxes and from subsidies that city and state provide for various services like the city providing public. School Service So that would let them than they pay their expenses. They would had about one hundred million dollar cash balance leftover and that that sort of like these cash reserves that they they sort of keep an spend a little save a little bit on an ongoing basis but with a sixty percent drop in these revenues that would cause them a billion dollar deficit for the month in in a good deal. That attack side. In if if you think about what will the tax side? Revenues look like by summer. If you think about walking around Manhattan in all the bars and restaurants closed a lot of retail stores closed. The these are sales taxes payroll taxes because they get a little bit of the payroll tax from downstate every year Petroleum business taxes a lot of activity down probably lower tax revenue their mortgage related taxes if nobody is buying or selling property taxes really plummet until their tax bases obviously highly dependent on the downstate economy. It's interesting to see the statement. Say THAT PART OF THE MONEY. Requesting is three hundred million dollars for increased cleaning so it sounds like they're anticipating the need to maintain the level of cleaning. They've currently implemented to address the health crisis for the foreseeable future. Yeah I mean. They're they're workers have been out there doing heroic job in I'm not going to call it sanitizing. But they are. They're they're cleaning the system on a deep cleans on a regular basis now But yes I think you know for even if some of that is more like psychological than than really health-based if you if the purpose is to encourage people to get back on the subway buses and commuter rail starting four weeks from now six weeks from now eight weeks from now who knows. Then they're going to have to maintain doing that so that people feel comfortable using service. I know that there's a big concern to that if the MTA can't get this money so it looks like I've I've been reading through the the bond.