The Shutdown's Next Victims Could Be Public Transit Systems


Photograph by Kevin Hagen/Getty Images

Watch out, New Jersey commuters: NJ Transit's budget could be one of several public-transportation credit casualties if the standoff in Washington, D.C., drags into the spring.

The federal government shutdown is now in its 20th day, with still no end in sight. If it extends long enough, it could cause a budget crunch for the public transportation systems that get support from the Federal Transit Administration. Most of the FTA's programs are now closed, and 90% of its staff is furloughed, because of the shutdown, according to a note from credit-ratings firm Moody's.

"US mass transit systems have temporarily lost financial aid that supports a wide range of needs, from daily maintenance and service to ongoing repair and expansion projects," the firm's analysts write.

Read more:What the Shutdown Means for the Housing Market

Most public-transportation systems receive yearly grants from the FTA in the early spring, so the shutdown's damage hasn't been too severe yet, according to Moody's. But if it continues for months-which many analysts expect-the transit systems that rely on federal funding could be forced to seek extra support from bond markets and local taxpayers.

NJ Transit, for example, is counting on federal grants to pay for 20% of its operating costs in fiscal 2019, according to the credit-ratings firm. NJ Transit expects to receive more than $2 billion of federal grants, which will also finance all of its debt-service costs and 43% of its capital-improvement costs.

"It will be difficult to replace these revenues," the analysts write. "NJ Transit's internal resources are modest and it has minimal flexibility to raise revenue or lower spending."

While New Jersey is an extreme case, it isn't the only transit system that could be forced to issue bonds or seek state help to cover for the loss of federal funding.

New York's Metropolitan Transportation Authority, for example, counts on federal help for 25% of its continuing $33 billion capital-improvement plan, the analysts write. And federal financing has been disrupted for a continuing metro-expansion project in Los Angeles (which happens to be the target of a bond-financed Nimby campaign).

Future transportation projects will be affected, too. Moody's found more than 50 U.S. transit projects that have applications in for federal grants, all of which will be delayed by the shutdown.

And finally, Washington's Metropolitan Area Transit Authority will see lower ridership, the analysts write-27% of its average weekday commuters are federal government employees.

Write to Alexandra Scaggs at

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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