Nearly a year after lawmakers and Gov. Deval Patrick agreed to a major sales-tax hike to support the cash-strapped MBTA, the public transit agency expects to face a $73 million shortfall in the next fiscal year.
But agency officials, who expect consolidation of state transportation functions to help save taxpayer and commuter dollars, said last week that fare hikes and service cuts would not be used to address the gap.
MBTA finance chief Jonathan Davis said the only option available to the agency to avoid burdening commuters is to refinance the agency's debt, extending the life of its outstanding payments to save $67.9 million.
With the refinancing, the agency would spend $387 million on debt costs out of its proposed $1.62 billion budget, as the agency grapples with a $5.5 billion long-term debt load. Without the refinancing, debt costs would've risen to $454.9 million, up $30.6 million from the current fiscal year.
Davis told the State House News Service that the budget shortfall was a result of cost increases "outside of our control."
He pointed to contractual increases in subsidies to the state's commuter rail service provider, and cost increases in "paratransit," transportation service for people with disabilities, as the main culprits.
He said the agency will look to refinance its debt by March 1, 2011 — and that, if the $67.9 million refinancing occurs, it will extend the timeframe to pay back the agency's $5.5 billion debt by 36 days.
During an MBTA meeting, Davis touted cost-saving measures, including the elimination of Orange Line train attendants, part of a reduction of 111 positions at the agency. He said the MBTA would also save $2 million in health costs by transferring its non-union employees and retirees to the state Group Insurance Commission, and he said commuter rail and bus fuel costs would decline next fiscal year by $300,000.
The agency is precluded by law from tapping into its $19 million reserve fund, Davis said during the monthly board meeting, and officials rejected the notion of drawing from a $15.4 million capital projects fund.
In addition, he said, job cuts and savings from moving employees into the state Group Insurance Commission will help balance the agency's budget.
On the revenue side, Davis said the MBTA faces challenges on many fronts, most notably that sales tax collections — the agency's primary source of funding — are projected to stay flat next fiscal year. The agency received $927 million in sales tax revenue this fiscal year, including a $160 million infusion resulting from the 25 percent state sales tax increase, which hiked the state's rate from 5 to 6.25 percent.
In addition, the MBTA expects fewer riders and parking pass sales, resulting in a $5.1 million decline in revenue, he said.
It was not clear which specific lines continue to show declining ridership and/or lagging parking revenues. The MBTA's commuter trains continue to be a major presence on Cape Ann, with stations and stops in Manchester, West Gloucester, Gloucester and Rockport.
MBTA board members approved the plan with the expectation that officials will use the next fiscal year to develop a long-term fiscal plan.
Board member Liz Levin said the anticipated decline in ridership — the agency did not specify the expected drop but said it was tied to the recession — should motivate T officials to redouble efforts to promote public transportation.
"It's fine to cut this year, we need to do it, but I want to grow something," she said. "We should ask our vendors to come in and ride public transportation. In addition, we should really encourage the business community to work with us."
Despite its grim financial picture, the MBTA has a number of capital plans in the works. Those include a $10 million overhaul of the MBTA station in Rockport, which is still in the planning and development process.
Levin said the MBTA should encourage other agencies to promote public transportation within their workforces.
The MBTA board's lone Republican, Ferdinand Alvaro, affirmed Davis's suggestion that debt refinancing is the only way to stave off service cuts or fare hikes.
"We still have some issues, we still have some fundamental funding issues in the current funding formula, which we're working to find creative solutions to," he said. He called the budget plan "the first time I've seen a real undertaking by management to absorb some pain to avoid putting the pain on the public."
The debt refinancing plan includes shortening the timeframe to pay back some of the state's highway debts and appealing to bond rating agencies to upgrade the agency's rating.
By refinancing the debt — exchanging current fixed-rate bonds for variable rate bonds — MassDOT officials say they hope Moody's, Fitch and Standard and Poor's will upgrade the rating on the bonds.
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