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Metropolitan Transportation Authority November Financial Plan 2013 - 2016

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

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Metropolitan Transportation Authority November Financial Plan 2013 - 2016

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  1. Metropolitan Transportation AuthorityNovember Financial Plan 2013 - 2016 November 28, 2012

  2. 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) • Continuebiennial 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 2

  3. July Plan was balanced through 2013with manageable out-year deficits($ millions)

  4. What has changed since the July Plan? 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 . . .

  5. 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 5

  6. Impact on Financial Plan spans multiple years: 2012 • 2012 expected to be closed on a “self-sustaining basis” July projected Y/E cash balance $ 47 2012 Sandy loss (268) Agency underspending (real and timing)/higher revenues 51 Debt service savings 36 Net subsidy increase 18 Other 4 ($112) Release remaining General Reserve 63 Internal OPEB Loan (to be repaid in 2015) 75 November 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 6

  7. 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

  8. 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 8

  9. November Plan relies on same key elements as the July 2010Plan Deficits totaling $333 million remain ($ millions)

  10. Non-discretionary expenses are increasing faster than inflation and discretionary spending Compounded Annual Growth Rate (CAGR) 2011 Actual to 2012 Final Forecast 2011 Actual to 2016 Forecast CPI 1.7% Discretionary PS/OTPS1 0.5% Non-Discretionary Pensions 6.7% Employee and Retiree Healthcare 9.1% Energy 5.3% 7.2% Paratransit Debt Service 7.6% 1Personnel 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.

  11. Proposed Fare & toll increases cover only 38% of non-discretionary expense growth ($ millions) $4,570 $ increase in non-discretionary cost over 2011 1,203 $1,745 $1,722 $1,340 $985 $898 Pensions Healthcare $523 Energy $465 $382 Paratransit Debt Service 2012 2013 2013 Revenue from 2013 Fare/Toll Increase 2014 2014 Revenue from 2013 Fare/Toll Increase 2015 2015 Revenue from 2013/2015 Fare/Toll Increases Non- Discretionary Expenses Revenue from 2013/2015 Fare/Toll Increases |-------Cumulative-------| Increase Over 2011

  12. Increase in unidentified savings targets offsetthe impact of Sandy($ in millions) July Plan Surplus Deficit November Plan Surplus Deficit

  13. 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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