New York's MTA Mulls Borrowing Billions From Federal Reserve
September 23 2020 - 12:06PM
Dow Jones News
By Paul Berger
New York's Metropolitan Transportation Authority is considering
turning for a second time to the Federal Reserve to borrow billions
of dollars from a short-term lending program, as it faces an
unprecedented financial crisis.
Lawrence Schwartz, chairman of the MTA's finance committee, told
board members at a meeting Wednesday that the authority is on track
to run out of money before the end of this year. He said that in
the absence of a new federal coronavirus bailout, which has stalled
in Congress, the MTA should seek the maximum amount possible from
the Fed of $2.9 billion.
MTA officials have said they might have to slash subway and bus
service in New York City by up to 40% and lay off thousands of
workers if they don't receive federal aid soon. The
state-controlled authority projects a deficit of about $12 billion
through the end of 2021.
The MTA and the state of Illinois are the only two borrowers to
have tapped the Fed's municipal-lending program so far. In August,
the MTA sold $450 million in bonds to the Fed at a yield of 1.9%,
rejecting offers from the private market at yields of about
2.8%.
Based on the Fed program criteria, the MTA could be eligible to
borrow an additional almost $3 billion. But budget watchdogs and
even some MTA board members have raised concerns that the
authority, which already owes more than $45 billion, shouldn't take
on more debt.
Mr. Schwartz told board members that he believes the MTA could
borrow the $2.9 billion at a rate of about 1.8%. "That is the
cheapest money the MTA will ever be able to get as a loan," he
said.
The Fed program is scheduled to close at the end of the year.
Patrick McCoy, the MTA's director of finance, said at a
congressional hearing last week that the Fed should extend the
borrowing deadline beyond the end of 2020 and increase the maximum
maturity for facility debt beyond three years.
Write to Paul Berger at Paul.Berger@wsj.com
(END) Dow Jones Newswires
September 23, 2020 11:51 ET (15:51 GMT)
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