Why can't the MTA just file for bankruptcy if they're so cash-strapped?

[Armandito]

With the MTA so broke and without alternative sources of revenue apart from (controversial) congestion pricing, I say it would be ideal for them to just file for bankruptcy. But now this leaves me asking, why hasn't the MTA done that (yet) if it's the better way out of their eternal financial crisis? What's preventing them from resorting to bankruptcy?

Edited May 30, 2019 by lara8710

[Mtatransit]

Ummm.... maybe because they get a endless amount of taxpayers money, and the fact that public transportation alone will never make a profit?

[Kamen Rider]

The OP is assuming they even can.

 

bankruptcy doesn’t solve the MTA’s problem anyway. It wouldn’t make thier funding consistent. What they need is a dedicated funding lockbox, money that can’t be taken away by the state.

 

did that ski place ever pay the MTA back for those snow makers?

[B35 via Church]

The premise assumes the MTA is as broke as they're letting on....

[Via Garibaldi 8]

LOL... The  is NOT a private company. It is a PUBLIC agency, and it cannot declare bankruptcy. NY State law prohibits that.

http://secondavenuesagas.com/2011/01/25/why-the-mtas-debt-problem-matters/

Any sort of allowancd would mean a financial disaster for our local and regional economy. Too much on the line...

[LTA1992]

Public transit isn't supposed to profit. It's supposed to provide a service. Systems like MTR make profits because they have other revenue streams (i.e.: Owning real estate around stations).

It costs so much to run transit that running such a system with the goal of profit could cause more harm than good, ultimately rendering such a system useless to most.

I will always be a fan of a one or two cent sales tax increase for the entire MTA service area. We could easily pay for what we need while keeping the fare mostly stable for a few decades. Also, how much you pay depends on your own spending habits.

But this is just the rambling of a poor individual early in the morning.

[Around the Horn]

I juts love how everyone expects public transit to create profits while highway systems routinely have huge subsidies to avoid even bigger losses.

[Yankees4life]

[bobtehpanda]

1. Bankruptcy doesn't really work for public entities

2. Bankruptcy is actually pretty painful, and among other things it makes issuing debts extremely expensive since you're basically saying you can't pay off your existing debts; who's going to want to loan to you after that? The MTA still has to fund a substantial amount of its Capital Plan through debt, bankruptcy or default is going to torpedo that.

[CenSin]

Bankruptcy isn’t a get-out-of-jail-free card, folks. If used, it has severe consequences.

[Armandito]

11 minutes ago, CenSin said:

Bankruptcy isn’t a get-out-of-jail-free card, folks. If used, it has severe consequences.

What kinds of consequences could happen?

[B35 via Church]

On 5/30/2019 at 12:29 PM, Around the Horn said:

I just love how everyone expects public transit to create profits while highway systems routinely have huge subsidies to avoid even bigger losses.

On 5/30/2019 at 12:54 AM, Mtatransit said:

Ummm.... maybe because they get a endless amount of taxpayers money, and the fact that public transportation alone will never make a profit?

That very thinking is a large part of the problem as to why a solution (or should I say, a "solution") like this even gets posed....

-----------------------------------

Something else I wanted to add to this thread is that the MTA actually has a spending problem... They GROSSLY misallocate funds.... No way can you still remain sustainable with all that damn middle mgmt. within the agency (and making high salaries at that) & any one employee having made 6 figures in OT alone....

Edited June 1, 2019 by B35 via Church

[bobtehpanda]

5 hours ago, lara8710 said:

What kinds of consequences could happen?

An inability to get credit. You just declared bankruptcy; what lender is going to expect to get paid back after loaning to a bankrupt company? The MTA is continually issuing debt, they aren't net-positive even after you take out debt interest. An inability to get debt would cripple MTA operations and stop the Capital Plan in its tracks; goodbye Fast Forward, goodbye R211s, goodbye any future plans. Heck, goodbye current services.

Also, during bankruptcy the court appoints people to run the agency. These appointees don't give a shit about running trains and buses, they're here to make sure debt gets paid. The service hours cut would make the NICE transition look like a goddamn cakewalk.

Also bankruptcy is not possible under NYS law but I guess that's convenient to ignore.

[TheNewYorkElevated]

If the MTA ever filed for bankruptcy, we'd be basically having both the city and state government declaring a state of emergency because of the transit system's importance to the city. It would not be surprising if the subway was put under a federal monitor to make sure things don't escalate quickly. There'd also be a huge emergency meeting over what agency would replace the MTA and who would fund it. In terms of media coverage, it would be regarded as one of the biggest events of NYC in the early-21st century. 

[Armandito]

Now that leaves me wondering, how the f*ck are some LIRR employees milking for so much overtime hours they realistically wouldn't be able to work? I have no clue as to what methods they use to cheat the system 🙄

[bulk88]

Things of bankruptcy that can be done. Changing labor contracts, specifically things like maturity/liquidity (balloon payment as lum sum of pension if condition X is met) which affects how long into future pension assets can be locked up can be done in bankruptcy. Layoffs/seniority/payscale can be changed in bankruptcy. Early terminate managerial staff yearly contracts. Rebid maintenance contracts (assuming no vendor lockin hahahaha) before they expire naturally. Terminate a material supply contract that supplies obsolete parts that will be dumpstered on arrival. Defaulting on property leases. Void a vehicle mortgage without paying remaining interested or principal as a penalty for default/repo (probably limited to 4 wheel off the shelf MTA non truck non bus vehicles).

Typical recipe of bankruptcy is if bonds are tiers/category/priority, lowest tranche is defaulted or interest cancelled.

[bobtehpanda]

On 6/3/2019 at 5:28 PM, bulk88 said:

Things of bankruptcy that can be done. Changing labor contracts, specifically things like maturity/liquidity (balloon payment as lum sum of pension if condition X is met) which affects how long into future pension assets can be locked up can be done in bankruptcy. Layoffs/seniority/payscale can be changed in bankruptcy.

Throw this all out the window, because even if the MTA could declare bankruptcy (it can't) the New York State Constitution specifically locks pension benefits forever.

[Trainmaster5]

3 hours ago, bobtehpanda said:

Throw this all out the window, because even if the MTA could declare bankruptcy (it can't) the New York State Constitution specifically locks pension benefits forever.

Glad you pointed that fact out.  As to the bigger factor how would a state agency go bankrupt without taking the state,  it's parent,  with it. This ain't Pathmark or Toys R Us shedding contracts. 

[itmaybeokay]

As has been mentioned 

1. The MTA can't declare bankruptcy 
2. If they could, it would cause more problems than it would solve. 

Specifically, Corporate bankruptcy has two types, lets take a look at how badly either would go if they could: 

Chapter 7 Bankruptcy: 

The corporation is dissolved, the organization ceases to be, and assets are liquidated to repay creditors. 

Just let yourself marinate in the regional implications of that one. 

Chapter 11 Bankruptcy: 

The corporation remains, and either assets liquidated or the company is reorganized to repay creditors according to terms specified in court. 

This one might seem like a good option, but the result here is still being on the hook for all outstanding debt, and the inability to take on additional debts. Reorganization in the case of the MTA would in some cases have to be done legislatively and options available to businesses may not be available. 

Liquidation of assets, even partially, would be problematic as this consists primarily of property and rolling stock which are operationally fundamental to service. 

The best-case-scenario would still be awful, liquidation of the MTA en-masse to a private company to operate the service. I know we have some proponents of privatization here, but mass heavy-rail transit privatization does not have a successful stateside equivalent. You do have some functional models in asia, but that's a very different market. If you look at the UK, you have rail privatization ultimately raising fares 20-30% while *still* receiving public subsidy. 

So, no, I don't think privatization would help overall,  and it being the best outcome of a bankruptcy that isn't a valid legal maneuver anyway - even if bankruptcy were an option, it's not a good one.   

 

[Deucey]

The overall problem with  is that the people who decide its priorities politically aren’t (necessarily) NYCers, so all they see is a pit that “their money” is being thrown into when Buffalo and Rochester have their own priorities that aren’t being funded.

But that’s a legislative fault - since  was set up as an exception while transit in the rest of the state isn’t given the same level of legislative attention. (Notwithstanding that  success downstate enables economic opportunities upstate.)

 debt and statewide transportation funding could be solved in one fell swoop if legislators actually wanted to solve problems. The simplest one is a mandated appropriation from the state that does basic transport funding prorated based on agency size in each budget, alongside local taxation funding mechanisms that can’t be raided by Albany, and coupled with local political accountability - ie like city and county pols on the transit boards - with minimal state representation on it just to report back on good stewardship of state funds (the California model), or the Chicago model of a state agency overseeing funds and coordinating strategy while local systems operate independently (CTA, METRA, et al)...

But that’d require trusting the people instead of being devoted to the big boss.