Lower ridership pinches T
Agency must dip into reserves
The MBTA will have to dip further into its reserves to balance its fiscal year 2024 budget, to account for a significant dip in ridership that agency leadership says will likely never recover to anywhere near pre-pandemic levels.
Citing the lack of growth in ridership since March 2022, Chief Financial Officer Mary O’Hara recommended an approach that would allow the T to assume $418 million in fare revenue, far lower than what was initially considered for next year’s budget planning.
“The ‘24 update is the recommended approach because it is an updated model that uses recent actual results and trends by mode to inform our future projections,” O’Hara said at Thursday’s Audit & Finance subcommittee meeting.
O’Hara said this alternative approach of predicting fare revenue is based on the “trends we saw in the last six months,” and the expectation that “this new normal” of lower ridership will continue for a period of time.
The MBTA had initially been assuming that fare revenue would fall between two of three ridership scenarios, covering $444 million to $500 million of operating expenses for FY24, O’Hara said.
“It is important to note that the ‘24 update would be below each of the established revenue ridership scenarios, but above the current actuals today,” she said.
“This is notable, because if this is selected, it would necessitate for our transfer on the reserve funds greater than what was contemplated in the November pro forma.”
Last month, O’Hara told the T board fare revenue was 22% lower than budgeted for the first two quarters of fiscal year 2023, $183.6 million compared to the $234.7 million benchmark.
In pre-pandemic years, fare revenue covered about 42% of operating expenses. But lower ridership, which has ranged from 49% to 55% since March 2022, means fare revenue is accounting for less than a quarter of that today.
Prior to COVID-19, the T was taking in roughly $60 million in monthly fare revenue, compared to the $30 million it is making today, O’Hara said.
Subcommittee member Mary Beth Mello said she would like to see analytical work that also considers future years, rather than actual ridership numbers from the past couple of years or six months, before she casts her vote on O’Hara’s recommendation.
“I do love the effort to move on and look at the new normal as you’re calling it,” Mello said. “I think that’s critical.”
Betsy Taylor, who chairs both the subcommittee and full MBTA board, indicated that she would vote for the recommendation at a future meeting,
“I personally think that where we are is the new normal so I am comfortable with the recommendation, but I am happy to see additional information, as my fellow directors call for,” Taylor said.
One-time reserves are expected to bail out the T in FY24 and ‘25, in terms of its projected budget gaps of $105-$270 million and $218-$390 million, respectively, O’Hara said.
But the agency will have to scramble in future years, when budget gaps are projected to grow beyond $400 million in fiscal year 2026, and hit as high as $543 million by 2028.