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

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July Plan was balanced through 2013with manageable out-year deficits

($ millions)

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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 . . .

What has changed since the July Plan?

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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

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Impact on Financial Plan spans multiple years: 2012

• 2012 expected to be closed on a “self-sustaining basis”

July projected Y/E cash balance $ 472012 Sandy loss (268)Agency underspending (real and timing)/higher revenues 51Debt service savings 36Net subsidy increase 18Other 4

($112)Release remaining General Reserve 63Internal OPEB Loan (to be repaid in 2015) 75November projected Y/E cash balance $26

• 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

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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

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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 2015-

2019 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

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November Plan relies on same key elements as the July 2010 PlanDeficits totaling $333 million remain

($ millions)

Compounded Annual Growth Rate (CAGR)

Non-discretionary expenses are increasing fasterthan inflation and discretionary spending

2011 Actual to 2016 Forecast2011 Actual to 2012 Final Forecast

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.

7.2%

6.7%

7.6%

5.3%

9.1%

1.7%

0.5%

Debt Service

Paratransit

Energy

Employee andRetiree Healthcare

Pensions

PS/OTPS1

CPI

Non-Discretionary

Discretionary

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Revenue from

2013/2015 Fare/Toll Increases

$1,745

Non-Discretionary

Expenses

$4,570

1,203

2015 Revenue

from 2013/2015Fare/Toll Increases

$898

2015

$1,722

2014 Revenue from 2013Fare/Toll Increase

$465

2014

$1,340

2013 Revenue from 2013Fare/Toll Increase

$382

2013

$985

2012

$523

Proposed Fare & toll increases cover only38% of non-discretionary expense growth

|-------Cumulative-------|Increase Over 2011

Debt Service

Paratransit

Energy

Healthcare

Pensions

($ millions)

$ increase in non-discretionary cost over 2011

Increase in unidentified savings targets offsetthe impact of Sandy

($ in millions)

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July PlanSurplusDeficit

November PlanSurplusDeficit

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

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