T will dip into reserves for $20m

Rainy day fund will fall to $35m; No fare increase seen for 2009

Email|Print| Text size + By Noah Bierman
Globe Staff / March 6, 2008

The MBTA board is expected to approve a spending plan today that will depend heavily on money from its rainy day fund and on refinancing its current debts to cover a $75 million gap. There will be no fare increase in 2009, but the head of the T refused to rule out a 2010 hike.

"You can't keep doing this," Daniel A. Grabauskas, general manager of the Massachusetts Bay Transportation Authority, said of the plan to plug the deficit for 2009.

The proposed budget, which would take affect July 1, takes $20 million from the T's $55 million rainy day fund. In addition, the T would restructure $50 million in debt under the plan, adding to the cost of future payments, and find $5 million in savings in the coming budget year, partly by hiring fewer administrators.

"We're concerned," said Lee Matsueda, program director for the T Riders Union, a community group. "There's no way that the system can sustain itself the way it is set up now."

The Riders Union and other consumer groups have been lobbying state legislators to bail out the T, arguing that riders cannot afford more hikes. So far, Governor Deval Patrick's administration has talked about restructuring the state's transportation agencies and raising money from proposed casinos, but he has not laid out a specific plan to plug all the financial gaps.

Grabauskas has also been lobbying state and federal government leaders to put more money into the system. In an interview yesterday, he declined to comment on fare hikes beyond the coming year.

"I don't think you can predict that far ahead," he said. ". . . Everybody knows there's a problem. We're trying to find a solution."

Spokesman Joe Pesaturo added later that "the MBTA is not developing plans for a fare increase."

Grabauskas called the latest spending plan "the lesser of two evils." Last month, in an interview, he called the MBTA "broke."

The depletion of the rainy day fund could have serious consequences. The T's own budget standard calls for $100 million to be kept in the fund, which is supposed to be used in emergencies. The 2009 plan will take it down to $35 million. The T has dipped into the fund to balance its budget two of the last three years.

In 1996, the T had an actual rainy day, when it needed $50 million to repair radio, signaling, and power equipment on the Green Line after a flood, said Jonathan Davis, chief financial officer of the authority. Some of the costs were reimbursed by the Federal Emergency Management Agency. But a similar event or another unpredictable disaster could put the transit system at risk.

"That really is the only fund that we have to draw upon in the case of unforeseen circumstances," Davis said.

The T has been struggling financially for several years, despite fare hikes.

The agency owes $8.2 billion in debt and interest payments, a constant drag on its budget. In 2000, the state stopped giving the agency a blank check every year to cover its expenses and required that it live off a subsidy from the state sales tax. But the sales tax has grown much more slowly than projected, generating $200 million less than even the most conservative estimates projected in 2000, Davis said.

In addition, the T is the state's largest power customer. As the cost of oil has gone up and the T's old contract expired, its annual power expenses have grown from $41 million to $110 million.

The T hiked fares twice since 2004, most recently in January 2007.

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