UPDATE 1-NYC's cash-poor MTA needs shake-up, new chief says

(Updates with MTA's response to state comptroller's allegation)

By Joan Gralla

NEW YORK Nov 18 (Reuters) - New York's cash-poor Metropolitan Transportation Authority needs a top-to-bottom shake-up and must restore its credibility with the deficit-stricken state government before it can expect any more dollars, the agency's new chief said on Wednesday.

Although this year's budget is balanced, the nation's biggest mass transit agency's finances are "fragile," MTA officials said. The MTA's fiscal balance faces risks such as generous pay hikes that union workers won in arbitration and another surprising slide in real estate-linked tax revenues, the transit agency's officials noted.

Ridership has fallen approximately 4 percent in recent months, though it seems to be stabilizing, they said.

The board of the MTA, in a Webcast meeting, reviewed an updated financial plan that must be enacted in December. A $34 million gap was forecast in 2011, a $352 million deficit in 2012 and a $223 million gap in the following year.

Straphangers and commuters can expect their fares to go up 7.5 percent in 2011 and 2013 -- if not before. Drivers will be hit with the same hikes for the agency's bridges and tunnels.

Asked about plans to lay off as many as 375 workers, MTA Chairman Jay Walder told reporters there would be additional reductions in head count because the budget-saving steps planned so far are unlikely to be sufficient.

The top-to-bottom examination of how the agency does business includes whether services are being provided efficiently and effectively, Walder said, when asked if riders and drivers would have to suffer through more service cuts.

GETTING A FISCAL MAKEOVER

In a statement, the governor's new appointee said: "This fiscal reality demands that we permanently overhaul the way the MTA does business."

"The bottom line is that there is no more money for us in Albany, and we will learn to do more with the funding we have," he said, showing he wanted a clear break with the agency's historical way of seeking help from the state.

A few months ago, New York's Legislature cobbled together a bailout plan for the agency but it only provides enough cash for two years, instead of the five years that is customary.

Chief Financial Officer Gary Dellaverson said there was zero chance the MTA would not have to tap $150 million of reserves because collections from an urban real-estate tax have fallen so much more steeply than forecast.

So far the agency has gotten about $600 million of the new tax revenue the state granted it, he said, but it is too soon to say if it will get an expected $1 billion by year end.

Wall Street pays one out of every five tax dollars the state collects, and this industry's brutal era of bankruptcies and mergers has cost the state dearly.

The MTA is still living down a reputation for arrogance and overstating its financial perils that dates back to the former state comptroller's charge that it kept two set of books.

MTA officials denied the former state comptroller's charge.

Though transit advocates won the first round in a lawsuit they filed over whether the agency had misled the public about its finances, a state appeals court in 2003 dismissed the challenge to the MTA's bookkeeping and practice of reserving funds for future years.

A court now is deciding whether the labor arbitrator awarded transit workers overly high pay hikes -- and if the agency loses this fight -- it could cost $250 million to give the rest of its workforce similar raises, Dellaverson said.

The board approved a $200 million debt issue, but a spokesman said the offering's details had not been decided. (Reporting by Joan Gralla; Editing by Jan Paschal)