Oversight Panel Flags MBTA Debt, Spending Plan As Concerns

BOSTON (State House News Service) — The MBTA's independent oversight panel warned on Tuesday that the transit agency may need to scale back plans on transforming fare collection, weekend pilot programs and other spending because of a dire revenue outlook brought on by the COVID-19 pandemic.

The MBTA Advisory Board, which represents the 176 cities and towns within the T's service area, said in an oversight report that the organization "cannot continue to grow expenses by greater than its revenue growth for long."

During a meeting where the board voted to approve its report, members raised concerns about debt levels in the T's budget and use one-time federal relief funds to cover costs of running a standard service schedule for most of fiscal year 2021.

According to the board's report, about 22 percent of T spending is dedicated to debt service, interest payments of $303.4 million, and principal payments of $220.1 million. "Serious questions must be asked if the MBTA can afford this level of indebtedness, regardless of what the policy may be," the board wrote.

"They're in a bad way," said Brian Kane, the advisory board's acting executive director. "The one thing they have done to enable them to operate is, for the first time, they have permission to issue paper to fund operations. This is a big red flag as well."

The T's Fiscal and Management Control Board (FMCB) originally approved a $2.33 billion draft operating budget for fiscal year 2021, but the outbreak of COVID-19 -- and the ensuing dropoff in public transit ridership -- prompted T budget-writers to revamp their plans.

Last week, the FMCB sent an updated $2.29 billion budget to the advisory board for review. The spending plan scaled down some proposals, but is still about $170 million larger than the $2.12 billion fiscal 2020 budget.

With ridership at only a fraction of what it was before the pandemic and the MBTA's portion of state sales tax revenue unlikely to exceed the baseline minimum, officials expect that the transit authority will bring in between half and three-quarters of a billion dollars less than they had originally anticipated for fiscal 2021.

One way to help ease the strain that the advisory board endorsed is granting the T legal authority to fund capital project salaries using bond dollars, something T officials themselves have projected could free up more funding and push next year's budget from the red to the black.

The advisory board also wants MBTA officials to "reconsider" how the agency handles debt and to consider trimming costs next year amid the unprecedented circumstances.

Board members described spending on safety and maintenance staff as a worthwhile goal, but in their report, they said the T should pause other plans to hire staff for weekend pilot programs, expanding income-based fare options, updating fare collection practices, and redesigning bus networks.

"There is a point where the MBTA cannot afford to do all the things it wants and must focus on the things it needs to do," the board wrote. "Safety and system maintenance and modernization are essential and must continue to happen. Many other projects/programs, however, need to be seriously reconsidered in light of current conditions, or may only move forward if other programs/projects are reduced or eliminated."

The advisory board called for a hiring freeze at the MBTA on all non-safety sensitive positions and all positions not deemed essential for delivering capital improvements and modernization.

"Now is the time to focus spending in a limited number of strategic initiatives and realize that the Authority cannot afford everything it would like to have," the advisory board wrote.

About $827 million in federal stimulus funding directed to the T from the CARES Act will help close gaps this fiscal year and next, but advisory board members said during a Zoom meeting Tuesday that they believe further spending cuts may be necessary.

"I know we're counting on the CARES Act and money from this federal government, but I don't think we can count on that," said Jon Berg, who represents Melrose on the board and who voted against the advisory board's report after citing concerns about the T's revenue outlook. "Until it's really in our hands and allocated and appropriated, we're flying by the seat of our pants."

The advisory board said it would be "prudent" for the MBTA to begin planning for employee layoffs or furloughs if ridership and revenues to not rebound in a timely manner, noting several cities and towns have implemented layoffs as well as many private employers.

After receiving the advisory board's feedback, the FMCB plans to take a final vote on the fiscal 2021 operating budget as soon as Thursday. Under a recent change to state law, a completed MBTA budget is due by June 15.

Kane, who took over as the advisory board's acting executive director in April following the retirement of longtime leader Paul Regan, said the pandemic also disrupted long-term efforts to transform how Massachusetts funds public transit.

The House approved legislation in early March -- about two weeks before public activity ground to a halt and the Legislature shifted its focus almost exclusively to COVID-19 response -- that elected Democrats said would generate up to $612 million per year in revenue through increases to the state's gas tax, corporate minimum excise tax, ride-hailing fees and applying sales tax to rental car purchases.

That bill has been pending in the Senate since then, but Senate President Karen Spilka has cast doubt on the idea of raising taxes in the current economic climate.

"From what we're hearing from our contacts on the Hill, that's dead in the water," Kane said during Tuesday's meeting. "There's just not an appetite for tax increases."

"We're going to have to work again in a year or two, I believe, to get back to this," he added.

By Chris Lisinski, State House News Service

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(Photo: Mario Jarjour/WBZ NewsRadio)

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