METRO faces budgetary woes

Temporary shortfall of $49 mil

Jon Boyd, Aug 19, 10.

METRO is in a cash crunch to the tune of $49 million this year, and these budgetary issues are already slowing light rail construction, says the Houston Chronicle:

Facing a $49 million budget shortfall this fiscal year, the Metropolitan Transit Authority has begun to slow construction on two light rail lines and may embrace more drastic measures in the coming months as uncertainty grows over a $800 million grant from the Federal Transit Administration.

Senior Metro officials emphasized that they did not anticipate any cuts to services due to the financial pressures and expressed confidence the FTA grant needed to pay for an estimated 30 miles of additional rail in Houston is forthcoming. But they nevertheless have begun to weigh the impact of continued delays on construction plans that anticipated completion in 2013.

“There’s going to be some tough choices that we’ll be making here, no doubt,” Metro Chairman Gilbert Garcia said.

So far, officials said, the work that has been put off has been minimal on the North line, which is expected to run from north Houston to the Texas Medical Center and Reliant Park. Metro has delayed road reconstruction work on Fulton Street and has put off awarding a contract for the expansion and construction of a rail facility on Fannin at the south end of the line near Reliant Park and the 610 Loop.

Those delays could just mark the beginning, said Metro’s Acting President and CEO George Greanias.

Facing a $49 million budget shortfall this fiscal year, the Metropolitan Transit Authority has begun to slow construction on two light rail lines and may embrace more drastic measures in the coming months as uncertainty grows over a $800 million grant from the Federal Transit Administration.

Yesterday, the Chronicle mentioned “a $800 million grant,” while at least two previous reports from the same daily referred to a $900 million grant, one in May, and another in July.

An article yesterday in the West University Examiner corroborated the $49 million shortfall, but claimed that the expected light rail grant is $900 million. The article also cited METRO officials who foresee no service cuts.

In a story published on Wednesday, Michael Reed of the West University Examiner claims METRO was borrowing short term money while maintaining an investment portfolio that lost substantial value:

Today, the Metropolitan Transit Authority appears to be short of cash with its investment portfolio under water to its commercial paper debt.

The agency’s unaudited investment portfolio as of June 2010 shows only $98.2 million in unrestricted cash is available. And, according to figures discussed Monday by the finance committee, those funds had fallen to $76.3 million as of July 31.

Creating additional pressure for Metro’s business plan is that fiscal year 2010 calls for nearly $68 million to be on hand as the year-ending fund balance. That amount was down significantly from two years earlier when a minimum balance of $228.8 million was required.

Additionally, Metro’s monthly investment report for July 31 showed $97.05 million had been carried over from general mobility payments.

Metro had not responded to questions at press deadline Tuesday afternoon.

During the critical 2008 meeting, [ex-Metro Finance Committee Chairman Gerald] Smith suggested the board raise its limit on commercial paper borrowing to cover general mobility expenses and help to create a rosier picture for those looking at the balance sheet. The limit was raised to $300 million. Five months later, the global market crash occurred.

The funding and refinancing of Metro Solutions 2, however, was seen as a big challenge as the market changed, even before the big financial crash. Smith said future short-term borrowing would be needed to fund the project and probably for a longer period of time than anticipated.