Metropolitan Transportation Authority
November Financial Plan 2013 - 2016
November 28, 2012
Since July 2010, our Plans have been
consistent, disciplined, and totally transparent
• Continuous, significant annually recurring cost cutting
• No budget-driven service reductions
• Three years of “net zero” union wage growth (already
achieved four years of non-union zero wage growth)
• Continue biennial fare and toll increases as planned
– We have not used the fare/toll option as a “plug” to address
unfavorable financial developments
• Increase liquidity while addressing long-term healthcare,
pension and debt service vulnerabilities
2
July Plan was balanced through 2013
with manageable out-year deficits
($ millions)
3
What has changed since the July Plan?
-
Favorable changes
Lower debt service expenses
Additional paratransit savings
Lower Agency spending (real and timing)/higher revenues
Higher net subsidies
-
Unfavorable changes
Higher health and welfare costs
Higher overtime expenses
Increase in electric power costs
Payroll cash flow adjustment in 2014
And then came Sandy . . .
4
Financial Impact of Sandy
• Calculation and estimation of Sandy-related losses is ongoing; too early to
have more than highly provisional estimates
• Early estimates of losses are $5 billion
– Infrastructure damage : $4.75 billion
– Operating losses (lost revenue and increased operating costs): $268 million
• Losses covered by combination of insurance, federal programs (including
FEMA) and MTA resources
– Infrastructure damage: After insurance ($1.075 billion maximum coverage) and
standard FEMA (75%) recoveries, an estimated $950 million of infrastructure
damage may need to be covered by MTA
– Operating losses: anticipate substantial recoveries from business
interruption/extra expense insurance coverage and FEMA
• While we expect to receive advances from insurers and the Federal
Government, final settlement could take 2 to 3 years
– Operating losses will hit 2012 budget
– Multi-year infrastructure expenditures will begin immediately and bridge loan
financing will be necessary until reimbursement is received
5
Impact on Financial Plan spans multiple years: 2012
•
2012 expected to be closed on a “self-sustaining basis”
July projected Y/E cash balance $ 47
2012 Sandy loss
(268)
Agency underspending (real and timing)/higher revenues
Debt service savings
36
Net subsidy increase
18
Other 4
($112)
Release remaining General Reserve
63
Internal OPEB Loan (to be repaid in 2015) 75
November projected Y/E cash balance $26
51
• Reimbursement expected 2013 to 2015
– FEMA to cover 100% of Sandy-related expenses incurred through
November 14
– Business interruption/extra expense insurance anticipated to cover
substantial portion of remaining losses
6
Impact on Financial Plan spans multiple years:
2013 and beyond
• Infrastructure losses will require external borrowing,
increasing annual debt service
– Assuming $2.9 billion of anticipation notes issued in 2013
and $1.9 billion issued in 2014
• $29 million in 2013 and $48 million in 2014 and 2015 until notes
are repaid from insurance or federal reimbursements or
proceeds of bonds
– Assuming $950 million of 30 year bonds issued in 2016 to
take out $950 million of anticipation notes not repaid from
insurance or federal reimbursements
• $62 million annually
• Additional cost cutting will be required to offset this in the
Financial Plan: annual recurring MTA efficiency targets
raised by $25 million in 2013 increasing to $75 million in
2015; unidentified at this time
7
Significant elements of the November Plan
•
Funds the operating and financing costs associated with Sandy through
additional unidentified cost reductions
•
Retains the MTA service investments announced in July that improve
coverage to existing markets and deliver service to new markets
•
Includes $250 million annually beginning in 2015 in support of the 20152019 Capital Program
– Funded with debt service savings from the 2012 refundings and
re-estimates of interest rates and cash flows from re-baselining of ESA
•
Increases General Reserve and OPEB deposits
•
Increases annual recurring savings targets, achieving $1.2 billion in 2016
•
Continues three years of net-zero wage growth for represented
employees
•
2013/2015 Fare/toll increases are consistent with the July Plan
8
November Plan relies on same key elements as the July 2010 Plan
Deficits totaling $333 million remain
($ millions)
9
Non-discretionary expenses are increasing faster
than inflation and discretionary spending
Compounded Annual Growth Rate (CAGR)
2011 Actual to 2012 Final Forecast
CPI
2011 Actual to 2016 Forecast
1.7%
Discretionary
PS/OTPS1
0.5%
Non-Discretionary
Pensions
6.7%
Employee and
Retiree Healthcare
Energy
Paratransit
Debt Service
9.1%
5.3%
7.2%
7.6%
1
Personnel Service / Other Than Personnel Service. This reflects adjustments to remove Service Investments, New Needs, Regulatory
Increases, Mega Projects and CPI Increases at the conclusion of 3 Net-Zeros. Without these adjustments, the increases are 0.3% from
2011 to 2012 and 2.1% from 2011 to 2016.
10
Proposed Fare & toll increases cover only
38% of non-discretionary expense growth
($ millions)
$4,570
$ increase in non-discretionary cost over 2011
1,203
$1,745
$1,722
$1,340
$985
Pensions
$523
$898
$465
$382
Healthcare
Energy
Paratransit
Debt Service
2012
2013
2013
Revenue
from 2013
Fare/Toll
Increase
2014
2014
Revenue
from 2013
Fare/Toll
Increase
2015
2015
Revenue
from
2013/2015
Fare/Toll
Increases
NonDiscretionary
Expenses
Revenue
from
2013/2015
Fare/Toll
Increases
|-------Cumulative-------|
Increase Over 2011
11
Increase in unidentified savings targets offset
the impact of Sandy
($ in millions)
July Plan
Surplus
Deficit
November Plan
Surplus
Deficit
12
The MTA is continuing to follow its Plan, but risks remain
• Federal support at expected levels
– Disaster relief
– On-going capital support in light of “fiscal cliff”
• Economic uncertainty
– Local economy as affected by Sandy
– National economy remains weak
• Continued receipt of PMT or comparable revenue
• Successful execution of Financial Plan strategy
– Achieve net-zero labor settlements
– Continued cost reductions
– Projected fare/toll increases in 2013 and 2015
• Long-term vulnerabilities
–
–
–
–
Casualty risks to the system; ability to fund mitigation investments
Employee and retiree healthcare costs
Pensions
Building and protecting critical financial reserves
13