New York City’s transit system, the Metropolitan Transportation Authority, is going through the pandemic. Ridership has fallen by more than 90% and the authority expects to lose more than $ 14 billion next year.
The MTA turns to an unusual source for some relief: the Federal Reserve, in particular, its Municipal Liquidity Facility, a loan program put in place to help state and local governments weather the COVID-19 crisis .
The authority is struggling to make ends meet, even in normal times, said Nick Sifuentes, executive director of the Tri-State Transportation Campaign.
“There isn’t much for a transit agency to trust in the fare,” he said.
With barely any ticketing revenue, the MTA sets up a patchwork of aid. The Coronavirus Aid, Relief and Economic Security Act provided around $ 4 billion. The agency is asking for an additional $ 4 billion, but this bill is blocked in the Senate.
With a $ 10 billion shortfall that the MTA has yet to cover, Sifuentes said, the agency is looking for any port in the midst of a storm.
“For the MTA, when you’re drowning, any rope is an option, even a frayed rope,” he said.
One of the MTA’s options is a $ 3 billion loan from the Fed’s municipal liquidity facility.
“The MTA renews billions of dollars in short-term debt each year,” said John Kaehny of the Reinvent Albany watchdog group. “So that would actually just be another source of short-term lending. “
Fed loans must be repaid in a maximum of three years.
“Who the hell is going to be able to repay this loan in three years, given that the damage to COVID revenues is expected to continue at least until the end of 2021?” Kaehny asked.
Fed loans are not cheap. Seth Lehman at the rating agency Fitch Ratings to analyse how the Fed’s municipal liquidity facility compared to more traditional forms of borrowing, such as government bonds. He found the MLF to be much more expensive.
The MTA is the first transportation agency to consider borrowing from the Fed, according to Baruch Feigenbaum of the Reason Foundation.
“The question is, is this the best way for them to borrow? Is this the cheapest rate? Said Feigenbaum. “And I don’t know if it is.”
Without additional funding, the MTA said it may have to cut its $ 55 billion plan to upgrade the metro. For now, all new projects are on hold.