New York Public Transit on Verge of Bankruptcy

The New York Times reports:

During the past five years, transit spending grew by 7 percent annually, which was twice the rate of inflation. The union recently won an arbitration award granting an 11.5 percent pay increase over three years.

Over the last decade, the debt of the Metropolitan Transportation Authority has more than doubled: it was $13 billion in 2000. It now owes $30 billion in outstanding bonds, payable at interest rates of 4 percent to 5 percent.

Much of that money was borrowed in outright schemes to avert fare increases by refinancing old debt and kicking the costs into what used to be the future. By 2013, the riders will pay $2.2 billion a year just in interest, about 20 percent of every dollar in the authority’s budget.

At the time the money was borrowed, the bond deals were heavily criticized by fiscal monitors and riders’ advocates, although M.T.A. officials defended them as the best of bad choices. In any event, the authority recently hired a new chief financial officer to help it deal with the debt. He happens to be a former Bear Stearns banker who advised the agency on borrowing the money a decade ago.

Great long term planning by the government!