New York’s Metropolitan Transit Authority (MTA) is seeking permission to borrow from the Federal Reserve’s $500 billion Municipal Liquidity Facility (MLF) due to coronavirus-related troubles, Bloomberg reported.
The agency’s idea is that more funding will help to restore transportation services to normal, thus spurring on the economy, MTA CEO Patrick Foye wrote in a letter to the Fed.
“The New York metropolitan region represents over 8 percent of the nation’s total gross domestic product, and the MTA’s operations are critical to the economic health of the New York region and the country,” Foye said, according to Bloomberg.
The MLF, newly created since March, allows businesses to borrow money due to the impact of the pandemic. The reason for its creation was the heavy damage being done to the $3.9 trillion municipal bond market in March as the virus began doing its damage. Prices have recovered since then, lifted by the intervention from the central bank, saving prices from their lowest rates since the 1980s.
And the MTA has seen damage, too, with an expected shortfall of $8.5 billion in deficit this year, and ridership plummeting due to social distancing and virus fears. So, the MTA is seeking another $3.9 billion of federal funds to help make up for the difference.
In his letter, Foye explained that the agency is having particular trouble getting investors to chip in on short-term needs.
Bob Foran, MTA chief financial officer, further explained that for right now, the cost of short-term loans was equal to that of long-term ones.
“There’s been a disruption in the short-term market,” he said, according to Bloomberg.
The MTA has been able to raise some money from sales of long-term debt, and investors have been lending it money for the time being, with the MTA boosting its bond sale by $125 million, up to $525 million total on Thursday, with that money to go toward infrastructure needs for bridges and tunnels.