MBTA Finishes FY16 with Lowest Expense Growth in 15 Years and a 50% Reduction in Forecast Operating Deficit

The Massachusetts Bay Transportation Authority (MBTA) made significant progress in improving its fiscal health and achieved several important financial milestones during its 2016 Fiscal Year, including significant savings in overtime spending and other operating costs, a reduction in the agency’s structural deficit, and achieving the lowest operating expense growth rate in 15 years.

Successfully lowering operating costs and realizing higher own-source revenues from sources like real estate and parking enabled the MBTA to reduce its forecast structural deficit by 50 percent, from an FY16 budgeted structural deficit of $169.6 million down to an actual FY16 structural deficit of $85.9 million. Revenue growth exceeded initial FY16 budget expectations, due to strong growth in advertising, parking and real estate revenues. At the same time, total expenses were $73 million less than first budgeted, reflecting a drop in overall operating expenses system-wide, and lower debt-service costs resulting from the implementation of a comprehensive debt strategy.

Among the highlights:

• Compared with FY15, the MBTA reduced operating expenses by 0.3 percent in FY16. This represented the lowest rate of MBTA operating expense growth in 15+ years.
• FY16 operating expense growth:  -0.3 percent compared to FY15
• FY00 – FY16 average operating expense growth:  4.7 percent
• The MBTA’s FY16 structural deficit was down 28 percent, when compared to FY15.
• Own-source revenue increased by $15.9 million; 37 percent compared to FY15
• Advertising revenue increased $5 million or 30 percent
•  Parking revenue increased $6 million or 44 percent

Recurring real estate revenue increased $5.2 million or 38 percent

• Total wage and benefit expense increased just 1 percent compared to FY15, driven by a 21 percent reduction in overtime spending
• Wages increased from $437 million to $453 million
• Overtime decreased from $53M to $42M

“We remain focused on our goal of putting the MBTA on track to financial sustainability through internal cost-controls and aggressive growth of advertising, parking and real estate revenues,” said MBTA General Manager Brian Shortsleeve. “We continue to work toward reducing the T’s structural deficit and putting the organization on a sound fiscal footing that will enable us to serve our riders and increase capital investment in the system.”

The MBTA remains committed to increasing customer performance and service while still striving to achieve lower cost-growth.