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."