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MTA Bond Rating Drops Amid Squabbles Over Subway Repair Funding

August 13, 2018 - 1:31 pm
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NEW YORK (WCBS 880) -- You wonder if Wall Street is trying to send us a message – the credit rating for the Metropolitan Transportation Authority is taking a hit as the mayor and the governor have been fighting over the age-old transit question of who pays for what and how much.

As Greg David of Crain’s told WCBS 880’s Paul Murnane Monday, mayors and governors have always argued about transit money – though not like Mayor Bill de Blasio and Gov. Andrew Cuomo have been doing. Wall Street has noticed.

“Wall Street’s sending a memo that this is bad and it’s going to cost us all,” David said.

Standard & Poor’s has downgraded the MTA bond rating from A-plus to A.

“A’s not terrible, but the next time the MTA goes to the market, the bonds will cost more, and we’ll pay higher interest rates, and you know, the MTA is already paying $1.5 billion a year in interest on its $75 billion worth of debt on its balance sheet,” David said.

The MTA is already in desperate need of money given how much work is required to repair and overhaul the subway system – and now, with the decreased bond rating – it will be more expensive for the agency to line up the money they need to keep the system running now.

“The figure is at least $20 billion, and that’s a huge sum,” David said. “Now, the MTA is getting a little more money this year – $350 (million) to $400 million – from the surcharge that was imposed on ride-hailing companies. But you know what? That’s actually a drop in the bucket compared with what we need, and until the governor and the mayor settle who’s going to pay, and actually come up with the money – you know, they’ve committed some money, but neither of them has actually provided it yet – the doubts about the system and the bonds are going to continue, and there’s a cost to all that.”

The lowering of the MTA bond rating from A-plus to A doesn’t indicate a dramatic change in risk for MTA bonds, David noted.

“But that’s what you do with bonds. You rate them according to the risk, and we just got a little riskier, and it’s going to cost a little bit more,” David said. “And yes, you know, the strong New York City economy – the fact that the region is so wealthy – does support these bonds, because if we can solve the political dysfunction, we can afford to pay for it.”

Cuomo has said the best way to fund the five-year plan to repair the subway system is congestion pricing. But de Blasio has called for a millionaires’ tax, and has said he expects the New York state Senate to flip to Democratic control in the elections this year and go on to approve the tax.