New York MTA plans its borrowing for the new year

New York’s Metropolitan Transportation Authority had a turbulent 2024. Now, although some uncertainties about its funding remain, the agency is readying its finances for 2025. 

The state agency that provides public transportation to New York City and beyond approved new bonds — some backed by new sources of revenue — at its December committee meetings this week. 

The MTA’s Triborough Bridge and Tunnel Authority is set to sell $186 million of second subordinate revenue bond anticipation Notes on Thursday.

The competitive sale features the Public Resources Advisory Group and Backstrom McCarley Berry & Co. as co-municipal advisors. Bryant Rabbino and Orrick Herrington & Sutcliffe are co-counsels. 

Thursday’s deal will be the MTA’s first deal backed by the “mansion tax,” a supplemental transfer tax on the sale of residential properties valued at $2 million or more in New York City.

The MTA has been receiving revenue from that tax since 2019; the MTA’s finance committee first authorized bonds from the tax earlier this year. 

The MTA expects to issue approximately $2.5 billion of bonds backed by the “mansion tax” next year, said Olga Chernat, deputy chief of financial services, at Monday’s finance committee meeting. 

At Monday’s meeting, the finance committee authorized borrowing for 2025, including $7 billion of bonds for New York City Transit and commuter rail projects, $550 million for bridges and tunnels, $506 million for congestion pricing and $1.2 billion for working capital obligations.

Proceeds from the sales will fund both the 2020-2024 capital plan and the 2025-2029 capital plan. The congestion pricing bonds will largely be used to refund bond anticipation notes, Chernat said. 

After a more than six-month delay triggered by Gov. Kathy Hochul, congestion pricing tolls in Lower Manhattan are set to begin on January 5th, and the agency hopes the tolls will generate up to $1 billion of revenue each year, though the toll rate has been cut from the original plan.

There are ten lawsuits related to congestion pricing working their way through federal and state courts, according to the offering statement for the TBTA bonds. 

Also on Monday, the authority approved a $1.3 billion purchase of 435 new railcars, an option available as part of its current capital plan. 

The finance committee also approved new criteria for banks that provide credit and liquidity to the MTA.

The agency will now only require two credit ratings, down from three, for financial institutions that provide credit facilities, liquidity facilities and lines of credit for working capital. The change is intended to draw a wider pool of potential institutional partners, Chernat said; it may also result in lower fees for the agency. 

“In the current market, investors generally only require that financial institutions carry two ratings, and as a result, we don’t anticipate any negative pricing consequences from potential investors in MTA bonds,” Chernat said. 

The MTA has issued very few of the bonds it budgeted for its 2020-2024 capital plan. Of the $55 billion plan, $15 billion of the funding was supposed to come from congestion pricing bonds, $3 billion was TBTA bonds, and $7 billion was MTA bonds and pay-as-you-go spending. 

The agency has allocated $24.5 billion of the plan, according to documents from the capital plan committee, but most of that money has been federal or city funding; the MTA has only used $1.5 billion of the capital plan’s bonding capacity. 

The MTA has more than $9 billion of bonding capacity remaining from this capital plan, plus $15 billion from congestion pricing. The next capital plan includes $10 billion of bonds from the MTA, $3 billion from TBTA and potentially more, depending on the type and amount of revenue the state contributes.