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* Long-time NYC public figure Ferrer temporary chairman
* Board approves fare hikes, budget
* Agency to borrow up to $2.5 bln for Sandy repairs
By Hilary Russ
NEW YORK, Dec 19 (Reuters) - The chairman of New York's Metropolitan Transportation Authority, Joseph Lhota, will step down at the end of the year as he considers to run for mayor of New York City.
His announcement came as MTA's board approved a 2013 budget, including fare and toll hikes expected to raise $450 million annually for the struggling agency. The MTA, the biggest transportation system in the United States, is facing a total long-term deficit of more than $330 million by 2016.
Lhota, 58, has been chairman and chief executive of the MTA since last January, and his term was scheduled to end in 2015. After Superstorm Sandy, he led a quick recovery of the city's transportation network where numerous subway lines and the tunnels leading to Manhattan were flooded.
New Yorkers will elect a successor to three-term Mayor Michael Bloomberg next November. Lhota, who had been deputy mayor for operations under former Mayor Rudy Giuliani, is expected to run on the Republican ticket, according to a source.
"I will be exploring a potential candidacy for the mayor of New York. This will be a life-defining decision," he said. "I never expected this to happen".
Fernando Ferrer - the MTA's vice chairman and a former Democratic Mayoral candidate - will temporary replace Lhota at the MTA, which operates New York City's subway and bus system, major bridges and tunnels and commuter railroads.
The MTA voted on Wednesday to borrow up to $2.5 billion in short-term bond anticipation notes to help cover emergency costs from Sandy. The MTA said previously it needed to borrow up to $4.8 billion to cover the cost of repairs and upgrades.
The notes, which the MTA expects to repay with federal government aid, would not all be issued at once but rather "as spending dictates," said spokesman Aaron Donovan. The notes will have a top maturity of five years, he said.
The board also signed off on fare hikes that will raise the base price of a subway or bus ride to $2.50 from $2.25. The price of a 30-day unlimited ride MetroCard will also rise to $112 from $104.
Tolls for most bridges and tunnels leading to the city will also be increased, as will the price of a railroad ticket for travelers to Long Island and the city's northern suburbs.
The hikes will go into effect on March 1. Another hike is planned for 2015.
"This is another sad day, but ... it's the only option we have," said board member Mitchell Pally at the meeting.
The MTA's budget will also trim costs by $25 million in 2013 without any plan to cut service. There will be no wage increases for three years.
The MTA needs other sources of funding to take the weight off of riders themselves, board members said, adding that the state and federal government should contribute more.
Subway riders in New York pay a higher percentage of system costs per ride than people who use any other system in the United States, Lhota said.
The agency has also appealed an August court decision striking down a payroll tax that would add $1.5 billion in yearly revenue.