NEW YORK (S&P Global Ratings) June 7, 2024--S&P Global Ratings said today that the likely indefinite postponement of the Metropolitan Transportation Authority, N.Y.'s (MTA) central business district tolling program (CBDTP) increases uncertainty regarding funding sources for MTA's current and next multiyear capital plan. At the same time, the postponement could eliminate the risk of lower traffic on MTA's bridges and tunnels.
As a result of these two developments, we don't anticipate revising the MTA's transportation revenue bonds (TRB) rating or outlook (A-/Positive) at this time. However, we are expecting MTA's upcoming July and November financial plans to provide clarity on this funding shortfall. We also anticipate the MTA will release the cost and funding plan for its next multiyear capital program this fall.
We also do not expect to change our rating on MTA's payroll mobility tax bonds (AA+/Stable), given that the pledge of revenues consists mainly of employer mobility tax collected from private- and public-sector employers within the Metropolitan Commuter Transportation District and is not dependent on MTA's operation or ridership levels.
On June 5, 2024, the Governor of New York directed the MTA to indefinitely postpone the implementation of its CBDTP, which was scheduled to start June 30, 2024, after years of study, planning, and multiple delays. In our view, this development adds to the uncertainty regarding where the MTA's post-pandemic ridership will ultimately settle, and could potentially constrain the MTA TRB rating.
Our positive outlook on the MTA TRBs rating reflects the potential for the authority's overall creditworthiness to improve over the two-year outlook period if we believe it can sustain financial metrics consistent with a higher rating. Additional enhancements to recurring revenue streams or establishing new recurring revenue streams are examples of management actions that would provide assurance of the MTA's ability to sustain all-in coverage close to 1.0x, per our calculations, should ridership levels and toll traffic volumes trend lower than expected. One-time or temporary actions to achieve a balanced budget would be less supportive of a higher rating.
Collection of the new CBDTP tolls would have imposed a $15 charge on cars entering Midtown below 60th Street, with the objective of reducing traffic and emissions in New York City while providing a critical funding source for the MTA's capital program. Revenues from the program were expected to provide $15 billion in funding for MTA's approved capital programs for its transit system. The governor said the state has set aside funding to backstop the MTA's capital plan and stakeholders are exploring other funding sources. Although we believe the MTA's operations are a key priority of the state, the nature and level of state support to replace congestion pricing, if delayed, introduce additional uncertainty to the outlook for the authority.
We understand the MTA is evaluating the situation, given the governor's direction, and the MTA is in communication internally and with Albany. The next regular MTA board meeting is scheduled for June 26, but any specific actions are not yet known. We expect the MTA's July financial plan, which will be available the week of July 29, will include recent developments, such as this announcement, and is anticipated to provide an update to MTA's funding options if congestion pricing revenues will not be available to support MTA's approved capital programs. Prior to the governor's direction to halt the CBDTP, and due to the uncertainty regarding when the related ongoing lawsuits would be resolved, in February 2024, the MTA announced it would not issue any new construction contract solicitations for the 2020-2024 capital program, except for emergency work, small business mentoring contracts, and certain projects that have dedicated federal funding.
This report does not constitute a rating action.
Primary Credit Analyst: | Joseph J Pezzimenti, New York + 1 (212) 438 2038; joseph.pezzimenti@spglobal.com |
Secondary Contacts: | Paul J Dyson, Austin + 1 (415) 371 5079; paul.dyson@spglobal.com |
Ladunni M Okolo, Dallas + 1 (212) 438 1208; ladunni.okolo@spglobal.com |
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