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
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy continues reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
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