(Adds more details from statement)
NEW YORK, March 27 (Reuters) - Moody’s Investors Service said the deepening financial crisis facing the New York Metropolitan Transportation Authority may threaten its credit rating.
“The lack of new recurring revenues, beyond sizable fare and toll increases coupled with deep service cuts, puts the MTA on an operating path that may not support the current A2 rating on the system’s transportation revenue bonds,” the agency said in a special comment.
The authority, the biggest mass transit system in the United States, has about $12 billion in transportation revenue bonds. An A2 rating is sixth-highest investment grade on Moody’s scale.
The action comes just days after the MTA board approved subway and bus fare rises and announced deep service cuts as it struggles to address a $1.2 billion deficit.
Officials are hopeful the state will respond to its lobbying for funds that will allow it to roll back the measures.
New York Mayor Michael Bloomberg on Friday blamed the Senate’s rejection of the proposals to raise MTA revenue supported by Governor David Paterson and Speaker Sheldon Silver.
The mayor, an independent running for a third term, said on his radio show that the senate is “unwilling to come up with any plan that makes sense.”
The senate wants to rescue the MTA by raising income taxes on the wealthy; the governor and speaker instead want to add tolls to now free East and Harlem River bridges and create a payroll tax for local employers of about 34 cents per $100.
Moody’s said that the global recession and housing market decline have driven the MTA’s budget gaps, which are expected to occur at the beginning of 2010.
The MTA benefited from the real estate bubble on a combination of different kinds of mortgage taxes, but has seen those tax revenues decline due to the sharp downturn in the housing market.
“The MTA’s net cash surplus approached $1 billion at the end of fiscal year 2006 as the housing market boomed and pushed up real estate related revenues”, Moody’s said.
“Since then, the MTA’s operating results have narrowed considerably in line with the housing market deterioration and economic weakening”.
Meanwhile, as job losses mount in a region that is largely employed by embattled Wall Street institutions, ridership is expected to fall by 2.7 percent in 2009 and see only modest growth from 2010 through 2012, the report said.
But if the MTA fails to get a long term funding solution from the New York state legislature and is forced to hike fares ridership could suffer even further.
“As past history shows, system utilization is somewhat sensitive to rate increases and service changes,” Moody’s said.
“Given the compounding effects of the current recession, 23 percent fare and toll yield increases, and major service cuts, there could be downside risk to the ridership and vehicle crossing forecasts.” said the report.
Earlier this month, Fitch Ratings assigned an A rating to the MTA’s transportation revenue bonds, also sixth-highest investment grade on its scale.
Reporting by Tom Ryan and Ciara Linnane; Additional reporting by Joan Gralla