NY MTA fiscal crisis due to high debt costs: report

NEW YORK (Reuters) - The New York public transit authority's budget crisis is the result of runaway debt service costs, and the state and city need to reinstate pre-1992 funding levels to resolve it, a report said on Thursday.

"A series of bad political decisions have left the Metropolitan Transportation Authority on the brink of financial collapse," said John Petro, urban policy analyst at the Drum Major Institute for Public Policy (DMI), a non-partisan think tank.

"The time has come for better political decision-making in the form of a public investment strategy that involves city, state, and federal leaders."

Since 1987, local and state governments have cut back sharply on capital funding contributions to the MTA, said Petro.

The state has gone from contributing 20 percent of the capital plan in 1982 to 1986 to zero funds for the last 15 years. In 1992, then Governor Mario Cuomo cut all direct funding to the authority, citing shortfalls in the state budget.

New York City, meanwhile, has cut its contribution to 3 percent of the capital plan from about 10 percent between 1982 and 1999, he said.

The MTA is now saddled with total debt of $25.5 billion.

"Excessive long-term borrowing to finance the capital budget has made it nearly impossible to balance the operating budget," said Petro.

Debt service payments grew 45 percent between 2003 and 2008, and are expected to jump another 51 percent by 2012.

At the same time, labor costs rose just 16 percent, mostly due to higher health care and pension costs, in line with the national trend.

"The rising costs of health care and pensions represent a failure of federal policy in these areas, not a failure of the MTA," said the analyst.

The New York MTA is the nation's biggest public transport system, serving about 8.5 million riders a day, and providing a key support for economic activity, he said.

"Disinvestment in the transit system amounts to huge potential costs that would far outweigh any savings," he said.

The MTA is bracing to implement sweeping service cuts this summer unless New York lawmakers come up with a bailout to help it close a $1.2 billion deficit.

Lawmakers are discussing a number of options, including imposing a state-wide tax on employers and introducing tolls on East River bridges as a way to plug the gap.

(Reporting by Ciara Linnane; Editing by Chizu Nomiyama)