While delaying New York City’s congestion pricing initiative blew a $15 billion hole in the Metropolitan Transportation Authority’s capital program, it also may strain the transit agency’s operating budget.

The MTA, which runs the city’s subways, buses and commuter rail lines, was counting on $1 billion of new revenue each year from motorists paying a new toll to drive into Manhattan’s central business district. The MTA would then issue new congestion pricing bonds to provide $15 billion to modernize the more than 100-year-old system.

Selling the congestion pricing bonds would have allowed the MTA to postpone issuing debt that’s repaid from its operating budget, giving that spending plan some breathing room as it works to increase ridership before taking on more debt. But without congestion pricing bonds or an alternative revenue source, the MTA says it will need to sell such debt earlier than planned. That means debt-service costs would increase sooner than anticipated by as much as $300 million a year, the MTA has warned.

“If we have to activate our borrowing earlier, it adds to the operating budget,” Janno Lieber, the MTA’s chief executive officer, said during a press conference Monday. “The debt service goes on the operating budget.”

New York Governor Kathy Hochul last week abruptly suspended the congestion pricing plan that was set to begin June 30, citing concerns for the cost to small businesses and working families. Hochul and state legislators have yet to come up with alternative funding.

The MTA must now shrink its capital program and reprioritize key infrastructure projects, including state-of-good-repair work that keeps the transit network operating efficiently. Subway signal upgrades, elevator installations, purchases of electric buses and extending the Second Avenue subway to Harem, are all at risk.

The MTA had $47 billion of debt outstanding as of May 20, including $18.3 billion of transportation revenue bonds that are repaid with farebox collections and also $11.7 billion of payroll mobility tax bonds. The transit agency’s debt service this year totals $2.8 billion, taking up a sizable chunk of its $19.3 billion operating budget. Increasing principal and interest payments takes money away from other operating needs, including service, Moody’s Ratings analysts led by Baye Larsen wrote in a June 7 report.

“New MTA PMT- or fare-backed debt would increase leverage and new debt service would crowd out spending on transit service,” according to the Moody’s report.

With ridership still below pre-pandemic usage, the MTA depends even more on state and city funding. Transit officials estimate system-wide ridership may only reach 80% in 2026. Current weekday subway ridership is about 70% of 2019 levels, according to MTA data. 

While the state’s legislative session ended last week without a funding solution for the MTA, state and city lawmakers have supported the transit system in the past as it is the backbone of the economic activity in the region, Vikram Rai, head of municipal markets strategy at Wells Fargo & Co., said in a phone interview. 

“The MTA has witnessed some dark episodes before and they have always come out on the other side,” Rai said.