New York City’s transit system, the Metropolitan Transportation Authority, is staggering through the pandemic. Ridership has dropped by over 90%, and the authority expects to lose more than $14 billion through next year.
The MTA is turning to an unusual source for a little relief: the Federal Reserve, specifically, its Municipal Liquidity Facility, a loan program set up to help state and local governments through the COVID-19 crisis.
The authority has a hard time making ends meet even during normal times, said Nick Sifuentes, executive director of the Tri-State Transportation Campaign.
“There’s only so much that any public transit agency can rely on the farebox,” he said.
With barely any farebox revenues, the MTA’s putting together a patchwork of aid. The Coronavirus Aid, Relief and Economic Security Act provided about $4 billion. The agency’s asking for an additional $4 billion, but that bill is stuck in the Senate.
With a $10 billion shortfall that the MTA still needs to cover, Sifuentes said, the agency is looking for any port in a storm.
“For the MTA, when you’re drowning, any rope is an option, even a frayed one,” he said.
One of the MTA’s options is a $3 billion loan from the Fed’s Municipal Liquidity Facility.
“The MTA rolls over billions of dollars of short-term debt every year,” said John Kaehny of watchdog group Reinvent Albany. “So this would actually just be another short-term lending source.”
The Fed’s loans have to be paid back in no more than three years.
“Who the heck is going to be able to pay back this loan in three years, given the fact that the COVID revenue damage is expected to continue at least all the way through the end of 2021?” Kaehny asked.
The Fed loans aren’t cheap. Seth Lehman at the ratings agency Fitch Ratings analyzed how the Fed’s Municipal Liquidity Facility compared to more traditional forms of borrowing, e.g., government bonds. He found that the MLF was much more expensive.
The MTA is the first transit agency to consider borrowing from the Fed, according to the Reason Foundation’s Baruch Feigenbaum.
“The question is, is this the best way for them to borrow? Is this the cheapest rate?” Feigenbaum said. “And I don’t know that it is.”
Without additional funding, the MTA said it might have to scale back its $55 billion plan to modernize the subway. For now, all new projects are on hold.
COVID-19 Economy FAQs
With a slow vaccine rollout so far, how has the government changed its approach?
On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.
What kind of help can small businesses get right now?
A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.
What does the hiring situation in the U.S. look like as we enter the new year?
New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.
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