mta july 2011 financial plan vol 1

8/6/2019 MTA July 2011 Financial Plan Vol 1

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MTA 2012Preliminary Budget

July Financial Plan 2012-2015

Volume 1July 2011


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OVERVIEW

MTA 2012 PRELIMINARY BUDGETJULY FINANCIAL PLAN 2012-2015

VOLUME 1

The MTAs July Plan is divided into two volumes. Volume 1 consists of financialschedules supporting the complete MTA-Consolidated Financial Plan, includingan Executive Summary, baseline and below-the-line Fare/Toll Increases, MTAInitiatives, and MTA Re-estimates. Volume 1 also includes descriptions of thebelow-the-line actions as well as the required Certification by the Chairman andChief Executive Officer, a description of the MTA Budget Process, and theProposed 2012-2014 Capital Program Funding Strategy.

Volume 2 includes MTA-Consolidated financial and position schedules as well as

narratives that support the baseline projections included in the 2012 PreliminaryBudget and the Financial Plan for 2012 through 2015. Also included are theAgency sections which incorporate descriptions of Agency Programs withsupporting baseline tables and required information related to the MTA CapitalProgram.

Important Note on LI Bus:

Earlier this year, Nassau County announced that it would be proceeding with an award of a contract to privatize bus and paratransit services in the County of Nassau and that the bus and paratransit services currently furnished by LI Bus are to be furnished by a private operator by January 1, 2012. In June, 2011, the County Executive announced its selection of a private operator.

The MTA Board in April 2011 approved a resolution authorizing actions to facilitate Nassau Countys transition to provision of bus and paratransit services by a private operator on or before January 1, 2012. Consistent with the Boards authorization, LI Bus has given notice of the termination of the existing Lease &Operating Agreement between Nassau County and LI Bus effective as of December 31, 2011. The MTA has agreed to continue existing levels of service through 2011 due to additional one-time financial assistance that has been provided by the State Senate.

Consistent with these developments, this financial plan assumes the cessation of LI Bus operations on December 31, 2011. For 2012 and beyond, it assumes the exclusion of LI Bus as a separate operating entity from all budget forecasts for revenue, expenses, cash, subsidies, and headcount. Under the Lease &Operating Agreement, expenses that may be incurred post-December 31, 2011,in connection with the wind down of LI Bus will primarily be the financial responsibility of Nassau County.


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TABLE OF CONTENTSVOLUME 1

l. Introduction

Executive Summary 2011-2015 I-1

ll. MTA Consolidated 2011-2015 Financial Plan

2011-2015 Financial Plan: Statement of Operations by Category. II-12011-2014 Reconciliation to February Plan.......................................................... II-4

lII. Adjustments

Fare/Toll Increases III-1MTA Initiatives. III-3MTA Re-estimates.. III-4

IV. Appendix

Chairman and Chief Executive Officer Certification.. IV-1

V. Other

The MTA Budget Process....... V-1


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l. Introduction


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Introduction

This 2011 Mid-Year Forecast, 2012 Preliminary Budget and July Financial Plan 2012-2015 (the July Plan or Plan) reaffirms the MTAs commitment to making every dollar

count and to establishing fiscal stability for the MTAs finances. The Plan continues thecost cutting initiatives begun in 2010, which are projected to achieve $3.8 billion incumulative savings by 2014. When implemented, the Plan achieves stability movingforward without reducing service.

The MTAs Capital Program, which invests in renewing MTAs infrastructure andexpanding our transportation network for the future, is integral to MTAs ability to deliverservices. The lack of funding for the 2012-14 years of the program presents asignificant risk to the ongoing reliability of the system. The extraordinary expensereduction efforts undertaken to date and carried forward in the July Plan have enabledus to protect the pay-as-you-go capital dollars that were included in last years approved

financial plan, but it is still not enough to fund the shortfall. With no appetite for newtaxes, an innovative, pragmatic financing strategy is proposed to fully fund theAuthoritys critical capital program.

The July Financial Plan 2012-2015

Financial Plan Objectives

This Plan continues a strategy first charted last year when the MTA embarked on acomplete overhaul of the way it conducts business to make every dollar count. TheFinancial Plan builds upon the $525 million recurring MTA efficiency measures put inplace in 2010. Each year of the Plan increases these savings by spending our scarcedollars more efficiently without further service reductions. By 2015, these additionalMTA efficiencies grow to $266 million annually. The Plan also controls wage and salarygrowth. Finally, the Plan continues to rely upon regular biennial fare and toll increases

a pattern that was established in the 2009 funding package for the MTA.

Encountering Headwinds and Rebalancing 2011

As 2011 unfolded, the MTA was immediately impacted by a series of events which putstress on its tightly balanced budget.

Severe winter weather reduced toll and passenger revenue and increased costsfor overtime and materials to remove snow and repair damaged equipment. Thecombined revenue and expense impact was approximately $40 million.


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State reduction in subsidies to the MTA based on the faltering economy that, ona net basis, would result in a $100 million loss to the MTA in 2011.

Rising oil prices also had a dual impact: increased fuel costs to run our serviceand a reduction in traffic at B&T facilities that are on top of the losses from the

weather. Also impacting toll revenue is a lower yield from greater thananticipated usage of E-Z Pass.

Health & Welfare costs in 2012 and beyond are likely to increase more thanpreviously projected.

In response to these developments, the MTA established its 2011 Budget ReductionProgram (BRP) which, when combined with 2010 savings, resulted in an improvementto the 2011 bottom line of $90 million, with recurring savings of approximately $20million per year thereafter.

Building Blocks of Fiscal Stability

Cost-effective use of MTAs scarce dollars is the cornerstone of the Financial Plan. In2011, the MTA is implementing an additional $80 million of efficiencies on top of the$525 million identified last year. The Financial Plan continues these efficiency targetseach year establishing a process of systematic and continuous improvement to drivedown costs. In 2011, the MTA made progress in the following areas

Better IT management. The MTA will consolidate 34 data centers into 3 whileimproving disaster recovery; shrink the number of servers from 2,600 to less than

500, consolidate 2 wide-area networks into 1 and merge 7 email systems into 1.All told, through improved IT management the MTA will save $19 million in 2011and $65 million in total through 2015.

Strategic sourcing. By selecting capable and qualified vendors that satisfyrequirements at the lowest cost, the MTA will save $60 million by 2015. In 2011these efforts have focused on IT, telecommunications and the non-revenue fleetand will generate $14 million annually. As a result of this analysis of ouroperational needs, the MTA is eliminating 2,100 workstations, 3000 cellularphones and reducing the total cost of its non-revenue fleet operations by 20%.

Other MTA efficiencies. These include further consolidations ($5 million in 2011),right-sizing office space ($2.5 million in 2011) additional paratransit efficiencies($14 million in 2011 to 2015), and greater savings from health care re-bids ($27million from 2012 to 2015).

The July Plan increases the 2011 savings target from $80 million to $139 million in2012, $216 million in 2013, $241 million in 2014 and $266 million in 2015.


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While striving to further control expenses, the MTA continues to address the importantissues of reliability and service quality. New York City Transit is adding staff to improvesignals maintenance and repairs and to improve the reliability and safety of itsescalators and elevators. NYC Transit is also adding resources to extend the useful lifeof its R-32 subway car fleet until replacements are delivered in 2017, and is reinstating

its Work Experience Program, which will result in substantial improvements to stationand car cleanliness. Metro-North will rehabilitate its Harlem River Lift Bridge, which wasseverely damaged in a 2010 fire, and will be purchasing equipment to improve itsresponse to heavy snowfall and icing conditions. MNR will also overhaul several Westof Hudson locomotives to extend their reliability through 2020, and complete its doormodification program for its M-3 fleet. Finally, the Long Island Rail Road is rolling outsystems to improve the service and schedule status information it provides to itscustomers during major service disruptions.

With approximately 60% of the MTAs expenses driven by labor costs, it is essential thatgrowth in this area reflect the economic realities of this region and the State. Last year,

the MTA outlined a two year wage freeze initiative for both represented and non-represented employees, which was incorporated in the February Plan. However, thelabor environment is continuing to change as reflected in the tentative contractagreements reached by the State and its two largest unions, the CSEA and PEF. Inrecognition of this change, the July Plan adds a third year of zero wage growth for bothrepresented and non-represented employees that will increase savings by $33 million in2011, growing to $127 million by 2015.

Finally, consistent with the 2009 State agreement on MTA financing, the Plan includes7.5 % fare and toll increases in 2013 and 2015.

The Bottom Line

The February Plan was balanced in 2011 with a thin margin and significant deficits in2012 and the out-years, largely due to the impact of growth in uncontrollable costs,including pensions, health & welfare and paratransit.

$3

($247)

($37)

($482)

$170 $125

($54)

($178)

$4

2011 2013

February Plan Cash Balances/(Deficits)

July Plan Cash Balances/(Deficits)

2012 2014 2015

N/A


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By taking action, the July Plan shows improvement. A more favorable 2010 closingcash balance, due mainly to spending restrictions, helped to improve 2011. BRPs,additional MTA efficiencies, additional labor savings initiatives, improving revenues,debt service savings, and release of one-half of the 2011 general reserve result in aprojected cash balance for 2011 (which will be used to balance 2012) and reduce the

out-year deficits significantly. A reconciliation of the Plan-to-Plan changes can be foundin Section II of this book, with further detail provided in Volume 2.

Risks to the Plan

Despite an improved outlook, significant risks remain and the underpinnings of this Planare also its primary risks. The Plan assumes that State budget actions will reflect fullremittance to MTA of all resources collected on MTAs behalf. Additionally, the regionaleconomy remains weak, and should a recovery not emerge, the MTA has limitedfinancial reserves to offset lower-than-expected operating revenues and taxes and

subsidies. This Plan also assumes that labor settlements will include three years ofzero wage growth. There are also longer-term vulnerabilities, including inadequateworking capital, and rapidly rising employee and retiree healthcare costs and pensions.The MTA, like other public entities, will continue to seek increased contributions fromemployees for the cost of health insurance and will support legislation addressingpension reform.

A significant risk to the MTA is the underfunding of the 2010 - 2014 Capital Program.Failure to fund this program puts the MTA at risk of defaulting under the Full FundingGrant Agreements for the mega projects and/or deferring necessary investment toenhance state of good repair and maintain normal replacement cycles for its capitalassets. This outcome would undermine MTAs financial rating and its ability to deliveressential transportation services for the region.

2012-2014 Capital Program Funding Strategy

The MTA has developed a pragmatic approach to deliver the 2012-2014 capitalprogram while recognizing the current difficult economic environment. The program iscritical to delivering critical safety and reliability investments for core infrastructure

projects and to putting East Side Access and Second Avenue Subway into service.This proposed approach accomplishes these benefits without raising taxes or fares andtolls beyond what has been planned using a funding approach that utilizes appropriateand affordable debt.

There are three key elements to this approach:

Delivering projects more efficiently and reforming processes to assure betterbids,


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service is a laudable goal, in the current environment it is clearly not the best andhighest use of these resources.

Although this increases the debt outstanding, the debt load remains manageable; $6.2billion of debt will be repaid during the period that the new debt is issued. Furthermore,

because we are simply reallocating the capital funds included in the Financial Plan, theburden on the operating budget does not increase; Debt Service and PAYGO as apercentage of Non-Reimbursable Expenses in the Financial Plan is exactly the samewith or without this proposal: 16.4% in 2012 rising to 17.9% in 2018. Finally, we are notover leveraging the revenue stream; with this proposal the Financial Plan still includesapproximately $650 million in PAYGO.

Additionally, underutilized real estate assets are being sold to fund capital needs. Wehave undertaken a top-to-bottom review of assets to identify opportunities to redeployvalue. The MTA has announced the sale of our Madison Avenue headquarters andcontinues to look at other opportunities.

Re-establishing Historic Partnerships .

In addition to this innovative financing approach, the MTA must enhance its historicpartnerships to fund all of the critical projects included in the last three years of theprogram.

In the 1980s, NYS provided significant support through Service Contracts whichrepresented a 30 year commitment to provide annual fixed payments against which theMTA issued bonds. In 2002 the State extended the contracts for another 10 years atthe same annual amount ($165 million) to generate additional bond proceeds.Maintenance of effort at this same level of State commitment could generate an addition$770 million in funding. MTA will work with the State to evaluate this or otheralternatives to see if they can be accomplished within the States policies or fiscalconstraints.

NYC will continue to support the program by maintenance of its $100 million annualcontribution. There are also opportunities for the City to partner with MTA. Forexample, the City could contribute proceeds from sale of real estate assets jointlyowned or covered by the Master lease, similar to the mid-1990s Coliseum Deal, andby enhancing the value of select assets by rezoning. Finally, the MTA and City couldwork together to apply the model for financing the #7 Line Extension, sharing in thevalue capture relating to real estate appreciation in the Second Avenue Subwaycorridor and around Grand Central Terminal attributable to East Side Access.

In the earlier years of the capital program, the Port Authority supported the MTA throughbus and commuter railcar procurement programs. Re-igniting such a partnershipcould fund $377 million for the 496 new standard buses included in the Program.


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These local partner funds are complemented by essential funding from the federalgovernment, including ongoing formula, CMAQ and discretionary funds and the recentlyawarded High Speed Rail Grant for work being done as part of East Side Access.

Proposed MTA Funding Strategy

These proposed sources provide $9.49 billion of local funding, which when combinedwith projected $4.1 billion in Federal funding, fully funds the 2012-2014 CapitalProgram.

Source $ Billion

Federal Formula, CMAQ and Discretionary Funds 3.80

High Speed Rail Grant (Awarded) 0.30

RRIF Loan (Excluding $800 Refunding Loan) 2.20

Revenue Bonds (Supported by Dedicated Taxes) 4.70

PAYGO 0.64

State Maintenance of Effort 0.77

City of New York 0.55

Port Authority of New York and New Jersey 0.38

MTA Real Estate Sales Proceeds 0.25

2012-2014 Funding 13.59


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Il. MTA Consolidated 2011-2015 Financial Plan


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LineNo.7 Non-Reimbursable 2011 20128 2010 Mid-Year Preliminary9 Actual Forecast Budget 2013 2014 2015

10 Operating Revenue 11 Farebox Revenue $4,586 $4,982 $5,033 $5,095 $5,177 $5,25012 Toll Revenue 1,417 1,503 1,510 1,509 1,516 1,523 13 Other Revenue 491 507 536 566 601 642 14 Capital and Other Reimbursements 0 0 0 0 0 015 Total Operating Revenue $6,495 $6,991 $7,079 $7,170 $7,294 $7,4151617 Operating Expense 18 Labor Expenses:19 Payroll $4,171 $4,211 $4,220 $4,243 $4,350 $4,45220 Overtime 443 496 459 459 465 47421 Health & Welfare 738 792 876 968 1,069 1,17722 OPEB Current Payment 356 377 432 482 531 58423 Pensions 1,030 1,088 1,299 1,314 1,378 1,43524 Other-Fringe Benefits 540 479 482 495 511 52825 Reimbursable Overhead (345) (349) (336) (324) (328) (322)26 Sub-total Labor Expenses $6,933 $7,093 $7,432 $7,636 $7,977 $8,3282728 Non-Labor Expenses:29 Traction and Propulsion Power $325 $346 $374 $412 $457 $52230 Fuel for Buses and Trains 190 248 258 270 276 29131 Insurance 10 16 25 35 48 5832 Claims 285 204 211 221 230 23833 Paratransit Service Contracts 380 384 462 553 660 77334 Maintenance and Other Operating Contracts 542 627 626 642 674 72335 Professional Service Contracts 203 212 221 225 233 23736 Materials & Supplies 511 574 590 626 652 67937 Other Business Expenses 190 177 165 173 175 17938 Sub-total Non-Labor Expenses $2,636 $2,787 $2,932 $3,158 $3,405 $3,7013940 Other Expense Adjustments:41 Other ($18) $16 $37 $35 $35 $3642 General Reserve 0 50 100 100 100 10043 Sub-total Other Expense Adjustments ($18) $66 $137 $135 $135 $13644

45 Total Operating Expense before Non-Cash Liability Adjs. $9,550 $9,946 $10,501 $10,929 $11,518 $12,1654647 Depreciation $1,981 $2,114 $2,195 $2,265 $2,351 $2,45548 OPEB Obligation 1,167 1,241 1,256 1,284 1,312 1,34749 Environmental Remediation 19 9 9 9 9 950

51 Total Operating Expense $12,717 $13,310 $13,961 $14,487 $15,190 $15,9765253 Dedicated Taxes and State/Local Subsidies $4,841 $5,154 $5,545 $5,806 $6,066 $6,24854 Debt Service (excludes Service Contract Bonds) (1,781) (1,987) (2,168) (2,305) (2,448) (2,570)55

56 Net Deficit After Subsidies and Debt Service ($3,163) ($3,151) ($3,504) ($3,816) ($4,278) ($4,882)57

58 Conversion to Cash Basis: Non-Cash Liability Adjs. $3,166 $3,363 $3,460 $3,558 $3,672 $3,81159 Conversion to Cash Basis: GASB Account (67) (38) (59) (63) (66) (68)60 Conversion to Cash Basis: All Other 93 (252) (245) (283) (357) (415)61

62 CASH BALANCE BEFORE PRIOR-YEAR CARRY-OVER $30 ($78) ($347) ($604) ($1,029) ($1,555)63 ADJUSTMENTS 0 88 181 725 849 1,377

64 PRIOR-YEAR CARRY-OVER 130 160 170 4 125 0

65 NET CASH BALANCE $160 $170 $4 $125 ($54) ($178)

($ in millions)

METROPOLITAN TRANSPORTATION AUTHORITY

MTA Consolidated Statement Of Operations By CategoryJuly Financial Plan 2012-2015


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Line

No. 2011 20127 Mid-Year Prel iminary8 Forecast Budget 2013 2014 20159

10 February Cash Balance Before Prior-Year Carry-Over ($78) ($347) ($604) ($1,029) ($1,555)1112 Fare/Toll Increases:13 Fare/Toll Yields on 1/1/13: 7.5% 0 0 448 465 470 14 Fare/Toll Yields on 1/1/15: 7.5% 0 0 0 0 493 15 Sub-Total 0 0 448 465 96316

17 MTA Initiatives:18 New MTA Efficiencies 27 105 181 206 23119 3 Zeroes Salary/Wage Initiative 15 26 35 84 96 20 Accelerate 3 Zeroes 18 41 43 39 3121 MetroCard Green Fee and Cost Savings 0 0 20 20 20 22 Sub-Total 60 172 278 349 3782324 MTA Re-Estimates:25 Additional Real Estate Tax Receipts 35 0 0 0 0 26 Farebox Revenue Receipts 33 34 34 35 36 27 Capital Reimbursement Timing (40) 40 0 0 0 28 Energy Hedges 0 (65) (35) 0 0

29 Sub-Total 28 9 (1) 35 363031 TOTAL ADJUSTMENTS 88 181 725 849 1,3773233 Prior-Year Carry-Over 160 170 4 125 0 34

35 Net Cash Surplus/(Deficit) $170 $4 $125 ($54) ($178)

METROPOLITAN TRANSPORTATION AUTHORITYJuly Financial Plan 2012-2015

Plan Adjustments($ in millions)


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Line

No7 Cash Receipts and Expenditures 2011 20128 2010 Mid-Year Preliminary

9 Actual Forecast Budget 2013 2014 201510 Receipts11 Farebox Revenue $4,613 $5,032 $5,069 $5,143 $5,219 $5,29312 Other Operating Revenue 505 561 559 590 626 66713 Capital and Other Reimbursements 1,427 1,527 1,440 1,413 1,429 1,44314 Total Receipts $6,544 $7,120 $7,068 $7,147 $7,273 $7,403

15

16 Expenditures17 Labor: 18 Payroll $4,567 $4,663 $4,578 $4,595 $4,708 $4,80519 Overtime 543 578 532 531 540 54820 Health and Welfare 752 841 904 999 1,102 1,21221 OPEB Current Payment 347 364 415 464 511 56322 Pensions 1,170 1,090 1,305 1,319 1,363 1,42523 Other Fringe Benefits 579 587 580 589 608 62625 Contribution to GASB Fund 67 38 59 63 66 6826 Reimbursable Overhead 0 0 0 0 1 127 Total Labor Expenditures $8,026 $8,162 $8,372 $8,559 $8,900 $9,24728

29 Non-Labor: 30 Traction and Propulsion Power $327 $379 $377 $414 $460 $52631 Fuel for Buses and Trains 195 246 258 270 276 29132 Insurance 10 35 31 39 54 6533 Claims 210 191 184 199 210 21634 Paratransit Service Contracts 386 381 457 548 655 76835 Maintenance and Other Operating Contracts 551 624 603 613 631 65836 Professional Service Contracts 202 232 225 237 249 25237 Materials & Supplies 566 651 680 714 761 79038 Other Business Expenditures 208 181 167 174 177 18039 Total Non-Labor Expenditures $2,656 $2,920 $2,983 $3,209 $3,472 $3,746

40

41 Other Expenditure Adjustments: 42 Other $56 $88 $109 $115 $122 $13343 General Reserve 0 50 100 100 100 10044 Total Other Expenditure Adjustments $56 $138 $209 $215 $222 $233

4546 Total Expenditures $10,738 $11,220 $11,564 $11,982 $12,594 $13,22647

48 Net Cash Deficit Before Subsidies and Debt Service ($4,194) ($4,100) ($4,497) ($4,835) ($5,321) (5,823)49

50 Dedicated Taxes and State/Local Subsidies $5,396 $5,377 $5,669 $5,872 $6,053 $6,12151 Debt Service (excludes Service Contract Bonds) (1,172) (1,354) (1,520) (1,641) (1,761) (1,853)52

53 CASH BALANCE BEFORE PRIOR-YEAR CARRY-OVER $30 ($78) ($347) ($604) ($1,029) ($1,555)

55 ADJUSTMENTS 0 88 181 725 849 1,377

56 PRIOR-YEAR CARRY-OVER 130 160 170 4 125 0

57 NET CASH BALANCE $160 $170 $4 $125 ($54) ($178)

($ in millions)


MTA Consolidated Cash Receipts and ExpendituresJuly Financial Plan 2012-2015


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2011 2012 2013 2014

FEBRUARY FINANCIAL PLAN 2011-2014 NET CASH SURPLUS/(DEFICIT) $3 ($247) ($37) ($482)

MTA Savings Initiatives: $102 $50 $77 $792011 BRP Program 1 97 36 36 38 Additional MTA Efficiencies 5 14 41 41

New Needs/ Investments: ($23) ($41) ($35) ($35)Maintenance (16) (36) (30) (30)All Other (7) (6) (5) (5)

Agency Baseline Adjustments: ($114) ($48) ($82) ($93)Farebox/Toll & Other Revenue 2 (8) (18) (41) (24)Traction and Propulsion Power 14 21 19 5 Fuel for Buses and Trains (48) (54) (55) (50)Health & Welfare (includes OPEB) 14 (29) (38) (55)Pensions 16 (39) (1) 312011 Winter Weather (Overtime) (18) - - - Baseline Re-estimates and Timing from Prior Year 3 (79) 70 31 (5)LI Bus (Baseline and Subsidies) 4 (5) 0 3 3

General Reserve $50 $0 $0 $0

Subsidies: ($30) $33 $45 $110NY State Net Reduction in MMTOA Revenues (104) 0 0 0 Real Estate Tax Receipts 53 34 41 46 B&T Operating Surplus Transfer 0 (28) (26) (17)Other Subsidies 5 74 47 52 67 Other Subsidy Adjustments 6 (53) (20) (22) 14

Debt Service Adjustments $50 $44 $77 $117

MTA Initiatives: $33 $46 $78 $1233 Zeroes Salary/Wage Initiative 15 26 35 84 Accelerate 3 Zeroes 18 41 43 39 MetroCard Green Fee and Cost Savings - (20) - -

Prior-Year Carry-Over (Adjusted) 7 $99 $167 $4 $125

JULY FINANCIAL PLAN 2012-2015 NET CASH SURPLUS/(DEFICIT) $170 $4 $125 ($54)

Note:

Whereas the volume II reconciliation captures only baseline adjustments between the February and July Plans, this reconciliationalso includes "below-the-line" changes consistent with the Volume I bottom line. The blending of "below-the-line" changes withVolume II baseline changes produces adjustments that differ, in some cases, from the Volume II reconciliation. These adjustmentsare footnoted below.1 The 2011 BRP Program includes $45 million in carryover savings from 2010.2 Includes a below-the-line adjustment for revenue that was understated in the Volume II baseline and a slight re-estimate of the

2013 fare/toll increase.3 Includes B&T Adjustments and a $40 million below-the-line adjustment for a delay of planned capital reimbursements from 2011 to 2012 .4 Reflects the net impact of lower expenses, lower subsidies, 2010 carryover and a reduced commitment to capital requirement.

Those items cancel out, with the exception of a $4.5 million reduction in Nassau subsidy.5 Includes increased NYC Subsidies.6 Includes energy hedge adjustments to reflect the use of available revenues up to the $100 million Board authorization.7 Adjusted for BRP (see Note 1) and LI Bus (see Note 4).

Favorable/(Unfavorable)


MTA Consolidated July Financial Plan Compared with February Financial PlanCash Reconciliation

($ in millions)


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2011 20122010 Mid-Year PreliminaryActual Forecast Budget 2013 2014 2015

Subsidies

Dedicated Taxes Metropolitan Mass Transportation Operating Assist (MMTOA) $1,359 $1,306 $1,520 $1,587 $1,673 $1,757Petroleum Business Tax (PBT) Receipts 604 620 631 634 636 637Mortgage Recording Tax (MRT) 239 242 300 353 415 381

MRT Transfer to Suburban Counties (3) (3) (2) (4) (5) (7)Reimburse Agency Security Costs (10) (10) (10) (10) (10) (10)Enhanced Security Training (3) 0 0 0 0 0MTA Bus Debt Service (25) (25) (25) (25) (25) (25)Interest 2 4 4 4 5 5

Urban Tax 174 260 318 349 368 391Investment Income 0 1 1 1 1 1

$2,338 $2,396 $2,736 $2,890 $3,058 $3,130

New State Taxes and Fees Payroll Mobility Tax $1,352 $1,415 $1,484 $1,551 $1,618 $1,687MTA Aid 275 290 295 299 304 308

$1,626 $1,706 $1,779 $1,850 $1,921 $1,995

State and Local Subsidies State Operating Assistance $190 $191 $188 $188 $188 $188Local Operating Assistance 153 250 218 217 219 220Nassau County Subsidy 9 5 0 0 0 0CDOT Subsidy 78 95 109 125 135 139Station Maintenance 149 153 156 159 162 165AMTAP 5 6 0 0 0 0

$585 $699 $671 $689 $703 $712

Other Subsidy Adjustments Interagency Loan $135 ($135) ($135) $0 $0 $0NYCT Charge Back of MTA Bus Debt Service (11) (12) (12) (12) (12) (12)Forward Energy Contracts - 2009 (12 mth Contract) 76 0 0 0 0 0Forward Energy Contracts - 2011 (12 mth Contract) 0 (100) 100 0 0 0MNR Repayment for 525 North Broadway 0 (7) (2) (2) (2) (2)Repayment of Loan to Capital Financing Fund 0 0 (100) (100) (100) (100)Committed to Capital (47) (21) (150) (200) (250) (300)

$153 ($275) ($298) ($314) ($364) ($414)

$4,701 $4,526 $4,887 $5,115 $5,318 $5,423

City Subsidy for MTA Bus $242 $354 $333 $341 $356 $376

$4,943 $4,880 $5,221 $5,457 $5,675 $5,799

Inter-agency Subsidy Transactions

B&T Operating Surplus Transfer $406 $484 $449 $415 $378 $322MTA Subsidy to Subsidiaries 47 13 0 0 0 0

$453 $497 $449 $415 $378 $322

GROSS SUBSIDIES $5,396 $5,377 $5,669 $5,872 $6,053 $6,121

Total Dedicated Taxes & State and Local Subsidies

Sub-total Dedicated Taxes & State and Local Subsidies


Cash Basis($ in millions)

Consolidated Subsidies


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2010 2011 2012 2013 2014Subsidies

Dedicated Taxes Metropolitan Mass Transportation Operating Assist (MMTOA) ($1) ($174) ($56) ($60) ($52)Petroleum Business Tax (PBT) Receipts (2) 8 15 23 26Mortgage Recording Tax (MRT) 11 3 22 26 30

MRT Transfer to Suburban Counties 1 (0) 0 (0) (1)Interest (2) 0 0 0 0

Urban Tax (4) 16 12 15 16Investment Income (0) 0 0 0 0

$2 ($148) ($6) $4 $20

New State Taxes and Fees Payroll Mobility Tax $4 $0 $0 $0 $0MTA Aid 6 0 0 0 0

$10 $0 $0 $0 $0

State and Local Subsidies State Operating Assistance ($0) $0 ($3) ($3) ($3)Local Operating Assistance (18-b) (35) 62 30 29 31Nassau County Subsidy (includes 18-b local match) (0) (5) (9) (9) (9)CDOT Subsidy 0 1 4 4 4Station Maintenance 0 3 3 3 3AMTAP 0 6 0 0 0

($35) $67 $25 $24 $26

Other Subsidy Adjustments Inter-Agency Loan $0 $0 $0 $0 $0NYCT Charge Back of MTA Bus Debt Service 0 0 0 0 0Forward Energy Contracts - 2009 (12 mth Contract) 3 0 0 0 0Forward Energy Contracts - 2011 (12 mth Contract) 0 (100) 100 0 0MNR Repayment for 525 North Broadway 0 (7) (2) (2) (2)Repayment of Loan to Capital Financing Fund 0 0 (100) (100) (100)Committed to Capital 0 79 0 0 0

$3 ($29) ($2) ($102) ($102)

($19) ($110) $16 ($75) ($56)

City Subsidy for MTA Bus ($90) $45 $22 $15 $17

($109) ($65) $38 ($59) ($39)

Inter-agency Subsidy Transactions B&T Operating Surplus Transfer $9 $0 ($28) ($26) ($17)MTA Subsidy to Subsidiaries (6) (42) (57) (57) (59)

$3 ($42) ($85) ($82) ($76)

GROSS SUBSIDIES ($105) ($107) ($46) ($142) ($115)

Total Dedicated Taxes & State and Local Subsidies

Sub-total Dedicated Taxes & State and Local Subsidies


($ in millions)Cash Basis

Summary of Changes Between the February and July Financial PlansConsolidated Subsidies


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lII. Adjustments


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III. ADJUSTMENTS

The discussion below reflects proposed Fare/Toll Revenue increases, MTA Initiatives,and MTA Re-estimates that are not included in the Baseline (as shown in Volume II ofthe July Plan).

Fare/Toll:

2013 Increased Fare and Toll Yields A 7.5% increase in MTA consolidated fareboxand toll revenue yields has been proposed for implementation on January 1, 2013. Theproposed changes in fares and toll revenues excluding MTA Bus, are expected to yieldan additional $448 million in 2013, $465 million in 2014, and $470 million in 2015. MTABus revenue is expected to generate additional revenue of $14 million a year from 2013to 2015. These additional revenues will hold down the NYC subsidy used to cover thecosts associated with MTA Bus operations.

Compared with the February Plan, consolidated fare and toll revenues from the 7.5%yield increase are slightly lower by $6 million in 2013 and 2014 due to baseline and tollrevenue forecasts that are lower in the July Plan. For MTA Bus, there were no changesin farebox revenue from this action compared with projections in the February Plan.

2015 Increased Fare and Toll Yields Another 7.5% consolidated farebox and tollrevenue yield increase is also proposed for implementation on January 1, 2015, and isestimated to yield an additional $493 million in 2015, excluding yield increases for MTABus. The 7.5% farebox yield increase at MTA Bus is expected to generate additionalrevenue of $15 million in 2015, and will be used to hold down the NYC subsidy used tocover costs associated with MTA Bus.


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2011 2012Mid-Year PreliminaryForecast Budget 2013 2014 2015

Fare Revenue

Long Island Bus1

- Baseline $45.291 $0.000 $0.000 $0.000 $0.000- 1/1/13 Fare Yield 0.000 0.000 0.000 0.000 0.000- 1/1/15 Fare Yield 0.000 0.000 0.000 0.000 0.000

$45.291 $0.000 $0.000 $0.000 $0.000

Long Island Rail Road - Baseline $569.039 $575.494 $579.957 $584.699 $589.065- 1/1/13 Fare Yield 0.000 0.000 43.497 43.852 44.180- 1/1/15 Fare Yield 0.000 0.000 0.000 0.000 47.493

$569.039 $575.494 $623.454 $628.552 $680.739

Metro-North Railroad 2 - Baseline $566.970 $579.793 $593.042 $607.344 $620.908- 1/1/13 Fare Yield 3 0.000 0.000 27.722 28.528 29.289- 1/1/15 Fare Yield 3 0.000 0.000 0.000 0.000 30.742

$566.970 $579.793 $620.765 $635.872 $680.939

MTA Bus Company - Baseline $181.232 $183.332 $184.587 $186.308 $187.804- 1/1/13 Fare Yield 4 0.000 0.000 13.844 13.973 14.085- 1/1/15 Fare Yield 4 0.000 0.000 0.000 0.000 15.142

$181.232 $183.332 $198.431 $200.281 $217.031

New York City Transit 1 - Baseline $3,539.061 $3,612.340 $3,656.438 $3,713.010 $3,763.171- 1/1/13 Fare Yield 0.000 0.000 274.233 278.476 282.238- 1/1/15 Fare Yield 0.000 0.000 0.000 0.000 303.406

$3,539.061 $3,612.340 $3,930.671 $3,991.486 $4,348.814

Staten Island Railway - Baseline $5.302 $5.406 $5.484 $5.578 $5.663- 1/1/13 Fare Yield 0.000 0.000 0.411 0.418 0.425- 1/1/15 Fare Yield 0.000 0.000 0.000 0.000 0.457

$5.302 $5.406 $5.895 $5.996 $6.544

Total Farebox Revenue - Baseline $4,906.895 $4,956.364 $5,019.509 $5,096.939 $5,166.611- 1/1/13 Fare Yield 0.000 0.000 359.707 365.248 370.217 - 1/1/15 Fare Yield 0.000 0.000 0.000 0.000 397.240

$4,906.895 $4,956.364 $5,379.216 $5,462.187 $5,934.068

Toll RevenueBridges & Tunnels - Baseline $1,502.580 $1,509.731 $1,508.757 $1,516.296 $1,522.593

- 1/1/13 Toll Yield 5 0.000 0.000 101.841 113.666 114.147- 1/1/15 Toll Yield 5 0.000 0.000 0.000 0.000 110.483

$1,502.580 $1,509.731 $1,610.598 $1,629.962 $1,747.223

TOTAL FARE & TOLL REVENUE2

- Baseline $6,409.475 $6,466.095 $6,528.266 $6,613.235 $6,689.204- 1/1/13 Fare/Toll Yield 0.000 0.000 461.548 478.913 484.364 - 1/1/15 Fare/Toll Yield 0.000 0.000 0.000 0.000 507.723

$6,409.475 $6,466.095 $6,989.814 $7,092.149 $7,681.291

1

2

3

4

5

MNR baseline utilization figures are for East-of-Hudson service (Hudson, Harlem and New Haven Lines) only.

MNR utilization changes from the fare yield increases reflect impacts to both East-of-Hudson and West-of-Hudson utilization.

Excludes Paratransit Operations.

MTA Bus revenue from Fare Yield will be used to reduce NYC subsidy to MTA Bus.

Reflects 10% delay in the distribution of surplus toll revenues per MTA Board resolution. This has no impact on traffic.

M TA Co n s o l i d a t e d U t i l i z at i o nMTA Agency Fare and Toll Revenue Projections, in millions

Including the Impact of 2013 & 2015 Fare & Toll Yield Increases


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MTA Initiatives:

New MTA Efficiencies Last year, the MTA introduced new efficiencies to improvebusiness operations, better manage its IT systems, reduce inventory, and consolidateadditional operations, with projected savings of $75 million in 2011, $125 million in2012, $175 million in 2013 and $200 million in 2014. These savings were subsequentlyincorporated into the February Financial Plan, with $53 million integrated into Agencybaselines in 2011 and $35 million from 2012 to 2014. Remaining below the line wereefficiencies totaling $22 million in 2011, $91 million in 2012, $140 million in 2013 and$165 million in 2014 coming from the following sources:

Consolidation of IT functions resulting in more efficient operations and costsavings

Strategic Sourcing is the business practice of selecting capable and qualifiedsuppliers for the provision of goods and services required to satisfy user needs at

the lowest cost. This is achieved through specification standardization andoptimization, procurement process improvements and inter-agency collaboration.

Strategic Initiatives consists of various efficiencies that will reduce operatingcosts. Examples include: right-sizing office space, efficiencies in hiring andseverance, benefit administration savings, and health benefit premiumreductions.

In the current July Plan, additional MTA efficiencies have been proposed and include:

Additional Consolidations ($5 million) Further review of MTA departments willresult in additional consolidations

Additional Paratransit Savings ($14 million) NYCT has identified additionalefficiencies in Paratransit, resulting in savings of $14 million per year from 2012through 2015.

Additional Health Care Re-Bid Savings ($27 million) - NYCT negotiated a newmedical benefits contract to provide medical health services to approximately150,000 NYC Transit and MTA Bus employees, retirees and their dependents.The additional health care re-bid is estimated to provide the MTA with estimatedsavings of additional $27 million per year beginning in 2013.

These new initiatives, together with the existing program, increase the total targetedsavings to $80 million in 2011, $139 million in 2012, $216 million in 2013, $241 million in2014, and $266 million in 2015. After accounting for those items that have beenincorporated in the baseline, savings of $27 million in 2011, $105 million in 2012, $181million in 2013, $206 million in 2014, and $231 million in 2015 remain below the line.

3 Zeroes Salary/Wage Initiative The February Plan incorporated a two year wagefreeze approach for both its represented and non-represented employees. The laborenvironment, however, is continuing to change based on the economic realities of this


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region. This is evident in the tentative contract agreements reached by the State, theCSEA and PEF. The MTA, therefore, intends to modify its labor strategy to be moreconsistent with NYS, our largest funding partner. The July Plan, therefore, adds a thirdyear of zero wage growth for both represented and non-represented employees that willincrease savings by $15 million in 2011, growing to $96 million by 2015.

Accelerate 3 Zeroes In the February Plan, it was assumed that employees of certainunions, that have historically followed the TWU wage growth pattern, would receive thethree-year TWU pattern followed by two years of zeroes. This initiative assumes thatthe zero-growth pattern (now expanded to three years as explained in the priorparagraph) begins one year early, with savings of $18 million in 2011, $41 million in2012, $43 million in 2013, $39 million in 2014, and $31 million in 2015.

MetroCard Green Fee and Cost Savings As described in the previous Plan, MTA isimplementing a $1.00 green fee for each new MetroCard bought in the subway systemin an effort to reduce the cost attributable to the high volume of MetroCards producedand discarded. The implementation of the green fee will be delayed from 2012 to2013, at which time it will result in annual savings of $20 million.

MTA Re-Estimates:

Additional Real Estate Tax Receipts - The Plan recognizes $35 million in unanticipatedReal Estate Transaction Tax revenue that was generated by unusually strong realestate activity, mostly in July and primarily in the NYC commercial real estate market.Real estate and economic conditions do not indicate that the level of activity beyondthat underlying the baseline forecast will be sustained; therefore, this adjustment onlyrecognizes revenues realized beyond the baseline forecast and does not projectcontinued improvements.

Farebox Revenue Revision - After finalization of agency baseline forecasts, NYCTdiscovered a small understatement in its farebox revenue results. Through May 2011,this amounted to $11.4 million or 0.8% of the total. The incorporation of this additionalrevenue into the 2011 forecast, when carried forward for the balance of the year, hasthe effect of increasing the NYCT full-year revenue forecast by $33 million. The impacton the out years is additional revenue of $34 million in 2012, $35 million in 2013, $35million in 2014, and $36 million in 2015.

Capital Reimbursement Timing - Through May 2011, NYCT capital reimbursements

have fallen short of capital expenses by approximately $100 million. This shortfall ispartly due to lags in funding capital project overruns and partly due to delays in gettingall parts of a new accounts receivable system that came online January 1, 2011 fullyoperational. While it is expected that the bulk of this shortfall will be eliminated duringthe balance of 2011, this reforecast assumes that $40 million of plannedreimbursements will be delayed from 2011 to 2012.


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Continuing Energy Hedge Program - The Plan assumes that the MTA will continue itsenergy hedge strategy and will set-aside $65 million in 2012 and $100 million in eachyear thereafter to hedge a portion of its costs for diesel fuel and natural gas. This willgive the MTA the opportunity to lock-in favorable pricing and will provide a measure ofprice protection should prices rise significantly above projections.


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IV. Appendix


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V. Other


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The MTA Budget Process

MTA budgeting is a rigorous and thorough process that begins in the spring andculminates with the passage of the Budget in December. In the course of a year,MTA prepares a February, July and November Financial Plan, and Adoption

Materials in December. In addition to the existing year, each Plan requiresAgencies to prepare four-year projections which include the upcoming and threefuture calendar years.

Both the July and November Financial Plans are divided into two distinctvolumes:

Volume I supports the complete financial plan, including the baseline aswell as below-the-line Plan Adjustments, which may include Fare/TollIncreases, MTA Initiatives, MTA Re-estimates and other adjustments;

Volume II includes detailed Agency information supporting baselinerevenue, expense, cash and headcount projections. Also included isdetailed information supporting MTA actions taken to increase savings aswell as individual Agency Budget Reduction Programs.

July PlanThe July Financial Plan provides the opportunity for the MTA to present a revisedforecast of the current years finances, a preliminary presentation of the followingyears proposed budget, and a three-year reforecast of out-year finances.This Plan may include a series of gap-closing proposals necessary to maintain abalanced budget and actions requiring public hearings. The Mid-Year Forecast is

allocated over the period of 12 months and becomes the basis in which monthlyresults are compared for the remainder of the year.

November PlanAfter stakeholders weigh in and the impact of new developments and risks arequantified, a November Plan is prepared, which is an update to the July FinancialPlan. The November Plan includes a revised current year, the finalization of theproposed budget for the upcoming year, and projections for the three out-years.

December Adopted BudgetIn December, the November Plan is updated to capture further developments,

risks and actions that are necessary to ensure budget balance, which isultimately presented to the MTA Board for review and approval.

February PlanFinally, in the Adopted Budget below-the-line policy issues are moved into thebaseline and technical adjustments are made. This results in what is called theFebruary Plan. The current year (the Adopted Budget) is allocated over theperiod of 12 months and becomes the basis in which monthly results arecompared until it is replaced by the 12-month allocation of the Mid-YearForecast.


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mta july 2011 financial plan vol 1

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