After warning that draconian cuts to public transit could be on the way, including a 40 percent decrease in subway service, New York transit officials on Thursday were expected to announce that they had avoided major reductions for the next two years after a new infusion of federal aid and better than expected tax revenues helped steady the system’s finances.
The improved financial outlook is a major dose of good news for the Metropolitan Transportation Authority, which operates the subway, buses and two commuter lines and has seen fare revenues plunge after the pandemic emptied public transit of riders.
The agency had been warning of drastic reductions, not just to the subway but also to buses, in part to pressure Congress into providing more help. The $1.9 trillion stimulus package President Biden is pushing Congress to approve includes as much as $30 billion for transit.
While the agency said it would avoid major cuts in 2021 and 2022, it still faces an $8 billion deficit over the next four years and the possibility of cuts in the near future without additional federal aid.
“In the short and midterm there is significant relief, but we still have a long-term structural, fiscal problem that we have not dealt with” said Andrew Rein, the president of the Citizens Budget Commission, a financial watchdog. “The bottom line is we are not out of the woods, but we can see the light through the trees.”
Still hanging in the balance is the agency’s sweeping $54 billion plan to modernize the system, including replacing an antiquated signal system that is a major cause of delays and disruptions. That plan was suspended after the pandemic hit but parts of it will be revived this year, according to transit officials.
Making the system more reliable is a crucial step to luring back riders as New York struggles to recover from the financial crisis set off by the outbreak.
“The reality is they won’t have the money to do everything, so they need to prioritize state of good repair and critical replacements first,” Mr. Rein said.
The latest round of federal aid, which directed around $4 billion to the M.T.A., provided more money for day-to-day operations and freed the agency to commit more toward its capital plan for major upgrades. The agency also received around $4 billion from the first federal emergency relief package last year.
The agency expects to commit at least $6.2 billion to improvements this year, which could grow to around $10 billion depending on the next round of federal aid, according to transit officials.
Those funds will be invested in maintenance, new signals and accessibility projects at some major stations.
The agency also plans to buy 90 buses, including 45 electric vehicles, and new trains for the commuter railroads, as well as complete repairs on the tunnel that carries the F line under the East River between Manhattan and Brooklyn and that was damaged during Hurricane Sandy.
The agency’s finances have been buoyed by higher state and local subsidies and higher revenues from taxes that contribute money to transit — like those on payrolls and internet sales — than officials expected last year. In January, the state comptroller announced that New York’s December tax receipts had come in $1.4 billion above projections, a trend noted across a number of states with progressive tax structures at the end of last year.
The federal government also recently signaled that it would prioritize making a decision on New York’s congestion pricing plan, which would charge drivers to enter Manhattan’s central business districts and could generate $1 billion for the transit agency. The plan had stalled under the Trump administration.
On Thursday, the M.T.A. board is also expected to approve a plan to raise tolls at agency-controlled bridges and tunnels by around 7 percent and use that money for public transit, according to transit officials.
Last month, the agency postponed plans to raise subway and bus fares by 4 percent for several months following criticism from transit advocates, who said the increase would strain the essential workers who rely on public transit and would do little to raise revenue with ridership so low.
Despite the short-term financial relief, transit officials and financial watchdogs warn that the full extent of the pandemic’s impact on the transit agency remains unclear.
It is unclear when or if ridership — and fare revenues — will return to pre-pandemic levels, especially as some companies allow employees to work remotely indefinitely. Before the outbreak the subway handled about five million riders on weekdays. Now, only about 1.6 million riders are using the subway every weekday.
Ridership may only reach 80 to 92 percent of pre-pandemic levels by the end of 2024, according to an analysis by McKinsey & Company that was commissioned by the transit agency.
The agency also borrowed nearly $3 billion last year from an emergency lending program provided by the Federal Reserve, adding to its already high debt.
With New York State facing its own financial crisis, Gov. Andrew M. Cuomo unveiled a budget last month that included the possibility of shifting $138 million from the M.T.A. to the state’s general fund unless there is a significant influx of new federal aid, state officials said.
“This is not our desire and we would like this reduction to go away,” Robert Mujica, the governor’s budget director, said in an interview last week. “That is why we’re advocating so much for the federal funding.”
The possible cut has drawn a sharp rebuke from watchdog groups, transit advocates and some legislators who argue that taking away funds from the M.T.A. could undercut the agency’s own push for federal aid.
“It’s a bad precedent to set,” said Nicole Gelinas, a senior fellow at the Manhattan Institute, a conservative research group. “Over time, if the M.T.A. has to go back again to ask for more federal money, lawmakers may think that any aid is really just going to the New York state budget.”
The state has made similar moves after past economic crises, including the Great Recession, which critics say helped contribute to a deterioration in service.
“The intent of the legislature in passing those dedicated tax revenues was to give the M.T.A. stable revenue in good times and bad,” said Rachael Fauss, a senior research analyst at Reinvent Albany, a watchdog group. “This is exactly when the M.T.A. needs that money the most.”
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