The Metropolitan Transportation Authority (MTA) released its preliminary 2023 budget and four-year financial plan, including a reforecast of ridership recovery conducted by McKinsey & Company. The documents project the MTA fiscal cliff presented in February 2022 will occur in 2025, one year earlier than previously forecasted, with federal COVID-19 relief aid largely exhausted by 2024.
While MTA Bridges and Tunnels toll revenues remain near the best-case scenario laid out in McKinsey’s previous forecast, a slower-than-expected return to the office for many employers, fewer non-work trips, and customer sentiment on issues including safety have seen transit and railroad ridership lag the 2020 forecast. The updated McKinsey forecast for New York City Transit and commuter railroads has been revised, with ridership projected to reach 80% of pre-pandemic levels by 2026. This revision represents a $500 million decline in anticipated annual farebox revenues in 2026 compared to the prior forecast and a $1.8 billion decline compared to pre-pandemic forecasts.
MTA Chief Financial Officer Kevin Willens presented to the Board an alternative scenario to lower the looming fiscal cliff by $1 billion. Rather than spending down the entirety of federal funds on the 2023 and 2024 deficits, those funds could be spread to decrease the medium-term cost structure and avoid costly borrowing. To do so, new revenue sources are required in 2023. The MTA is engaged with stakeholders to identify new sources of funding needed to avoid large future fare increases and service reductions. In addition, the Authority will continue to seek operating efficiencies.
The revised financial plan projects annual structural deficits of $2.5 billion within two years, rising to $2.75 billion in 2028. Based largely on the projected declines to farebox revenues, the five-year financial outlook (2022-2026) in the July Plan vs. the February Plan includes a cumulative net decline of $2.693 billion to the MTA’s bottom line.
The reforecast of ridership from McKinsey and Company created two models: a “high case” and a “low case” of future projected ridership for New York City Transit, Long Island Rail Road, and Metro-North Railroad. In developing these projections, major factors considered included the future of office work, a reduction in non-work trips, consumer sentiment on issues such as safety and reliability, fare evasion, the impact of Congestion Pricing on transit ridership, mode shifts to biking and walking, ridership changes resulting from network expansion, employment levels, and population growth. The two models were averaged to create a midpoint projection, which forecasts ridership to be at 69% of pre-pandemic levels in 2023, and 80% of pre-pandemic ridership by the end of 2026. This midpoint projection was used in developing the July Financial Plan’s farebox revenue assumptions.
-via Press Release