The Massachusetts Bay Transportation Authority (MBTA) is expecting a major budget shortfall of $73 million in the coming fiscal year 2011 (FY 2011) but intends to avoid fare hikes for commuters.
MBTA officials and board members are currently restructuring available finances to limit any potential negative impacts of the shortfall on riders and taxpayers.
According to the MBTA FY 2011 Operating Budget Summary, the transportation agency's total revenue is expected to decline by $5.1 million from the current fiscal year, while operating expenses are projected to rise by $35.4 million.
The MBTA as of November 2009 consists of the rail and transit division of the Massachusetts Department of Transportation (MassDOT). This umbrella organization also encompasses highway and aeronautics divisions and the Registry of Motor Vehicles (RMV).
"It's difficult to identify one primary reason for the shortfall," MBTA spokesman Joe Pesaturo said. "But there are two key factors driving this: The T's annual sales tax revenue has not come anywhere close to what was expected, and almost a third of the T's budget goes to paying interest in debt."
Pesaturo noted that the T in 2000 reorganized its budget so that the bulk of funding would be derived from state sales tax revenue. This revenue, however, has remained stagnant over the past decade.
This has meant that the demand for funds to cover increasing maintenance costs and expenditures on new projects exceeds the provisions from tax revenues, according to Pesaturo. This has led the MBTA to amass a debt of nearly $5.5 billion.
"If you add interest payments to the principal, the T owes $8.6 billion," Pesaturo said. "That is the largest debt burden of any transportation agency in the country."
Much of this debt has been accumulated over the past 20 years as the agency borrowed funds to launch capital projects. Pesaturo cited the extension of the Red Line from Harvard to Alewife, the creation of the Greenbush Line and the purchase of an entirely new bus fleet as examples of such projects. All of the loans came from floated revenue bonds.
An anticipated drop in ridership rates due to the poor state of the economy is listed in the budget summary as another reason for the projected revenue drop.
The MBTA is currently developing a refinancing plan to compensate for the shortfall and to avoid accruing further debt.
Pesaturo explained that concerns about sustaining rider loyalty and recognition of the pressure of the economic climate on commuters prompted the MBTA to avoid placing a heavier ticket-price burden on the public.
"We're getting through the next fiscal year without increasing fares," Pesaturo said. "Our budget department developed a plan that avoids service cuts because we know that those are painful for riders."
To cope with the budget shortfall, the MBTA has chosen to consolidate some of the functions of the transportation system instead of hiking fares. The Orange and Blue Lines of the T network, for example, will switch from having two MBTA attendants on each train to just one, a measure most train systems have already implemented.
All planned operational reductions will lead to total savings of $6.6 million, which will help to counteract unavoidable operational expenses.
The City of Boston is closely watching the MBTA's budgetary woes and its ongoing struggle to ensure that city dwellers and all state citizens who depend on public transportation do not suffer from service cutbacks or severe fare hikes.
"Boston does not want a decrease in service for its residents, as many of our lower-income and immigrant residents are dependent on public transportation and don't have a car," Vineet Gupta, director of planning for the Boston Transportation Department, said. "We're fighting to keep this service for disadvantaged groups."
Gupta sees the budget shortfall as a trend that has over the past few years been persistently worsening. He agrees with the MBTA that it would not be fair to raise prices suddenly, and said that a price hike would have to wait at least until fiscal year 2012.
"There is a structural problem in the way that the T's budget is organized," Gupta said. "And this debt should be borne by the Commonwealth, not the riders."
According to MassDOT spokesman Adam Hurtubise, the other divisions under MassDOT, apart from the MBTA, are weathering the economic climate without comparable drastic budget woes.
Like the MBTA, other MassDOT divisions are keeping the public's interests in mind when making fiscal decisions for the coming year.
"The Highway Division has no plans to increase tolls," Hurtubise said in an e-mail. "It is moving forward on road and bridge projects … but these projects are funded by bonds, not as part of the operating budget."
