BOSTON — Despite fare hikes and a financial bailout last year and an influx of new taxes set into law this summer, the MBTA is on course for another multi-million-dollar deficit this fiscal year, which a top T official blamed on an arbitration award for a T employees union.
“The projection does show us to have a deficit at the end of the year of approximately $25 million,” MBTA Chief Financial Officer Jonathan Davis told the Massachusetts Department of Transportation Finance and Audit Committee last week. “All of that relates to the arbitration award to Local 589. Now we are appealing that so it’s yet to be determined as to what that full impact would be.”
Under the award, the union that represents bus drivers, subway operators, maintenance workers and others would receive a 10.4 percent salary increase and retroactive raises going back to 2010 of between $10,000 to almost $14,000 per worker, MBTA spokesman Joe Pesaturo told the News Service.
The T’s appeal, which questions whether the arbitrator considered the authority’s ability to meet costs, is scheduled to be heard in Suffolk Superior Court on Dec. 16.
“There’s nothing they can do about it. It’s difficult to budget for that,” said MBTA Advisory Board Executive Director Paul Regan, who declined to say whether the union deserves the award. He said, “I’m working on the assumption that the Carmen are going to get everything.”
Davis noted the MBTA needs to have a balanced budget, and said the T could use the roughly $25 million in surplus revenue from last year’s budget or nearly the entirety of the $26.2 million deficiency fund.
“Certainly at this point in time we don’t have the ability to reduce expenses or to find other revenue sources that would cover that,” Davis said.
Regan said he believes the MBTA would use the surplus, which would likely otherwise go toward capital projects, to fund the award. He said the contract in the arbitrator’s award runs through fiscal year 2015 and the current fiscal year will experience the biggest financial impact because of the back-pay.
“They have the means to close that gap, so that shouldn’t be a part of any conversations around service levels or fares,” said Regan, who said the MBTA can appeal the award to a judge for “cause.”
The 110-page award was issued in August by Sarah Kerr Garraty. The last contract expired in 2010. An official at Local 589 did not respond to phone messages seeking comment.
The deficit did not deter the Patrick administration from launching a new service initiative this week.
On Tuesday morning, Gov. Deval Patrick announced the MBTA would run late-night weekend trains until 3 a.m. as part of a $20 million pilot program. The MBTA plans to secure corporate sponsors for the program and could increase late-night fares to help cover the cost if the pilot is successful.
“I think that’s a completely separate funding source,” Regan told the News Service. He said, “I know they’re going to pursue corporate sponsorship.”
Regan said the MBTA only has about 20 hours per week when the tracks are clear and repairs can be undertaken, and he said he believes running the late-night service will have an impact on reliability, which he said is the main concern among the transit service’s customers.
“It’s going to be expensive to do,” Regan said of the late-night pilot program that will begin in the spring.
The total contract would cost the agency between $62 million and $88 million, and the “delayed transition” of Local 589 workers into the Group Insurance Commission cost “upwards of $62 million in lost savings over the past 3 ½ years,” Pesaturo said.
The arbitration notes Local 589 represents 3,481 employees “spread over 37 job classifications.”
“Secretary of Transportation Richard Davey and MBTA General Manager Beverly Scott stress that this lawsuit is not about the employees, and they acknowledge the good work they do every day,” Pesaturo said.
With perennial calls for extended late-night service, the arbitrator kept intact premium pay for “night runs” that begin or end between 2 a.m. and 4 a.m., and eliminated a provision of the Local 589 contract that would have required night runs to run five days per week or not at all.
“The Authority seeks this modification in order to meet customer demand for late night service when the demand principally exists – on Friday and Saturday nights – while not having to provide the service on three additional nights when it might not be needed,” Garraty wrote. She wrote, “It seems that this flexibility to meet increased customer demand when the demand exists without being required to provide it when the demand is not there makes logistical sense and is precisely the type of change the Authority needs to be able to make as it seeks to expand ridership and increase fiscal stability.”
The MBTA raised fares an average of 23 percent in July 2012 and received a $49 million bailout from the Legislature. Last summer, the Legislature passed a law increasing the gas tax and shuttling sales tax revenues from motor vehicle sales to transportation, including the MBTA.
Mike Deehan contributed to this report.