MTA Facing Renewed Shortfalls After Tax Revenues Drop

Once again, it is the failure to adequately anticipate lower tax revenues that is pushing the MTA to contemplate new fare increases and or service reductions. This is a problem not unique to the MTA. It's the same mistake made by the federal government, states, and localities all around the country and has left many in deficit situations.

For the MTA, this means a possible fare hike even though they are having trouble getting the transit workers union to make concessions on pensions and benefits so as to keep workers in the system:

Real-estate tax revenue for the first six months of the year is far below expectations. The MTA in its budget forecast had projected real estate tax revenue, which came in at $393.5 million in 2009, to jump to $536.5 million in 2010 and $593.2 in 2011. But receipts are now projected to be closer to $430 million—meaning that the authority must find about $105 million elsewhere to balance its budget. That's on top of about $144 million the MTA must find to cover lost revenue from student MetroCards that the MTA will continue to provide for free.

The MTA, which had already projected a sharp drop in its payroll mobility tax, is trying to close an $800 million budget deficit announced earlier this year. Half the savings will come from service cuts; the other half from reducing operational expenses.

MTA authorities said on Wednesday that they were on track to close the budget gap through a series of measures—including managerial buyouts and layoffs and stricter controls on overtime costs—that they've unveiled since the start of the year. Revenue from riders has also been higher than expected, officials said.

Higher tax revenues should not be expected for the foreseeable future, and the budgets should be based on flat to negative cash flow situations so as to get the budget situation under control. This way, if revenues come in ahead of projections, such revenues go to capital expenses such as infrastructure improvements instead of operating budgets.