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Illustration: Sarah Grillo/Axios

Cities have been trying to persuade residents to return to buses and trains, as transit systems face a financial challenge of a lifetime in the middle of the pandemic. Now state officials are pleading for Washington to act on a stimulus that would help the biggest mass transit systems.

Why it matters: As more people stay put, transit systems are seeing lower levels of fares and tax revenues — blowing a hole in budgets across the country.

Driving the news: "The MTA desperately needs an influx of federal funds or unheard of service cuts and workforce reductions will happen," said New York state's comptroller Thomas DiNapoli said this week.

  • It's the latest renewed call for additional aid, as funds allocated to transit systems in the federal bill passed in March dry up. Congress remains deadlocked over another stimulus.
  • Massachusetts is threatening service cuts for its Boston-area transit system, while officials there nudged Congress last month to step-in to help.
  • The Washington, D.C. Metro system is mulling employee cuts and shortened hours "as hopes for a coronavirus relief bill dim," the Washington Post reported.

Between the lines: The MTA is the poster child for struggling transit systems. It's the largest in the country and saddled with the most debt: $35.4 billion, as of the end of last year.

  • That figure is projected to surge.

The state of play: Fares were already on the decline before the pandemic — a setback for transit systems in New York, San Francisco and Chicago, which are among the most reliant on ridership for funds, according to Moody’s.

  • Direct taxes make up the primary source of funding for other transit systems.

There is another option: a facility set up by the Federal Reserve that allows mass transit systems to borrow money. But they have largely resisted this route.

  • The MTA is the only transit agency that's taken advantage of it.
  • Fed officials have defended the facility as a last-resort option, particularly when it's cheaper to borrow from the public markets.
  • MTA officials have said that they will draw on the facility again before the program ends Dec. 31.

Yes, but: Transit analysts warn that borrowing money may help with cash now, but it will make transit's financial scenarios that much more dire down the line.

  • Baye Larson, a transit analyst at Moody's, compared it to "paying rent with your credit card."
  • The MTA is allowed by law to borrow up to $10 billion. If it did that, one quarter of every dollar the transit system gets would go toward paying down that debt.

What they're saying: "The pandemic has simply wiped out farebox revenue and that won't be replaced by future ridership,” Patrick Luby, a senior municipal strategist at CreditSights, tells Axios.

  • “Borrowing, whether it's from the Fed or anywhere else, to make up for revenues that will never come back just adds to the future debt burden."

Go deeper

Federal Reserve expands lending program for small businesses

Federal Reserve Chairman Jerome Powell at a news conference in 2019. Photo: Eric Baradat/AFP via Getty Images

The Federal Reserve said on Friday it would again lower the minimum loan size for its pandemic-era small business program.

Details: Businesses and nonprofits will be able to borrow a minimum of $100,000 from the facility, down from $250,000 — a move that might attract smaller businesses that don't need as hefty of a loan. Since the program launched earlier this year, the minimum loan size has been reduced twice.

Oct 30, 2020 - Politics & Policy

Transportation companies help voters get to the polls

Photo: Wang Ying/Xinhua via Getty Images

Ride-hailing companies and other tech mobility firms are trying to make sure all eligible citizens have an opportunity to vote.

Why it matters: A 2016 Harvard study found 14% of eligible voters cited transportation as a barrier to casting their ballot.

Dion Rabouin, author of Markets
47 mins ago - Economy & Business

Biden's inflation danger

Illustration: Sarah Grillo/Axios

President-elect Joe Biden's $1.9 trillion stimulus proposal has economists and bullish market analysts revising their U.S. growth expectations higher, predicting a reflation of the economy in 2021 and possibly more booming returns for risk assets.

Yes, but: Others are warning that what's expected to be reflation could actually show up as inflation, a much less welcome phenomenon.