NEW YORK (Reuters) - New York’s Metropolitan Transportation Authority, the biggest transportation network in North America, said on Wednesday that it could hike short term borrowing and squeeze its already tight budget to pay for repairs after Superstorm Sandy.
In its first look at the storm’s financial impact, the MTA said it may have to borrow an extra $4.8 billion. It is planning to raise fares in March as it braces for a total deficit of $333 million projected through 2016.
In addition to storm-related losses, the agency is facing higher electricity, employee healthcare and overtime costs. But its chairman Joseph Lhota told reporters on Wednesday that he wanted to avoid cutting back on service.
“I really do not want to be involved in service reductions,” Lhota said.
The MTA, with a $12.6 billion budget, operates New York City’s subway and bus system, area bridges and tunnels, and commuter railroads that stretch into Long Island and the city’s northern suburbs.
After Sandy made landfall in neighboring New Jersey on October 29, the devastating storm temporarily blacked out power, flooded tunnels for trains and roadways, and damaged infrastructure and equipment across the region.
“We’re not back to normal. We’re still on limited service,” Lhota told reporters.
Altogether, New York and New Jersey say they need at least $78.8 billion to recover from Sandy and prevent similar damage from future storms, according to the most current estimates.
On Wednesday, New York City Mayor Michael Bloomberg lobbied Congress for relief funds. He said he was confident that lawmakers would agree to help pay for damage, even as they deal with a looming “fiscal cliff” of tax hikes and automatic spending cuts.
A leading issuer in America’s $3.7 trillion municipal bond market, the MTA has nearly $32 billion of outstanding debt. Moody’s Investors Service rates the MTA’s transportation revenue bonds A2.
The agency took a $5.02 billion hit from Sandy, with nearly $4.8 billion of damages to its infrastructure and $268 million in operating losses, officials said at a board meeting on Wednesday.
The agency expects insurance to cover up to $1.08 billion, with additional funds coming from the federal government.
The MTA could cover the operating losses, which will hit its fiscal 2012 budget, in part with money from its general reserve and from a temporary, $75 million internal loan from its fund for retiree healthcare benefits, the agency’s chief financial officer said at the meeting.
But to pay for the restoration of tunnels and equipment damaged in the storm, the MTA proposed the sale of $4.8 billion of new bond anticipation notes over the next two years.
The notes are a form of short-term borrowing, to be repaid with reimbursements that the MTA thinks it will get from insurance and the Federal Emergency Management Agency, officials said.
Under the plan, the MTA would sell $2.9 billion of the notes in 2013 and $1.9 billion in 2014, with the proceeds earmarked for repairing damaged infrastructure.
The borrowing would add an estimated $29 million of new debt service costs in 2013 and $48 million in 2014 until the notes are repaid. It could take up to three years to complete the reimbursement process, the MTA said.
To offset the increased borrowing costs, the MTA would cut spending by about $25 million in 2013. Spending reductions would continue escalating annually until the debt is paid off, the MTA said.
Even so, the agency may be left to cover $950 million on its own if FEMA only reimburses 75 percent of damages, it said.
Estimates of Sandy’s impact were “highly provisional” and were not expected to change the agency’s long-term financial strategy, according to budget documents.
The MTA’s fiscal year ends December 31. Board members will vote on the budget at their December meeting and will decide whether to approve the new short-term borrowing in January, a spokesman said.
Reporting by Hilary Russ; Editing by Leslie Adler and Eric Walsh