Accounting maneuvers, one-time gains helped balance T budget

WITH GOV. CHARLIE BAKER running for reelection, the MBTA balanced its budget for the first time in a decade by using a series of accounting maneuvers and one-time revenue gains.

The T had expected to tap a legislative appropriation for $30 million to cover its fiscal 2018 costs, but the transit agency announced earlier this month that it was able to balance spending and revenues without touching the extra money. The balanced budget was hailed by T officials and Baker as a strong signal that the T is getting back on track.

Chris Dempsey, the director of  the advocacy group Transportation for Massachusetts, said some of the budget numbers have attracted his attention, in part because reliance on one-time revenue sources can lead to structural deficits.

“The T’s budget is complicated, but when you dig in on the numbers presented to the Fiscal and Management Control Board, it doesn’t pencil out,” Dempsey said in an emailed statement. “The problem with this kind of accounting is it gives riders and taxpayers unrealistic expectations about the MBTA’s financial health and need for future support.”

Joe Pesaturo, a spokesman for the T, said any suggestion that the T balanced its budget using gimmicks is false. “The MBTA achieved its first balanced budget in a decade by implementing cost controls, increasing own-source revenues, and holding operating growth flat for three years in a row, which allowed the T to award over $600 million in new capital contracts to address state of good repair projects in fiscal year 2018, exceeding its goal by over $200 million,” he said in a statement. “Over the next five years that began July 1, the T will be spending over $8 billion on capital investments, including completely replacing the fleets of the Orange and Red Lines, and making system and track upgrades throughout the system.”

The debate centers on a relatively small amount of money in a total budget of more than $2 billion. One key reason the T was able to balance its budget was a $40 million increase in what it called “other income,” which consisted mostly of accounting maneuvers and one-time revenue gains.

One of the strangest accounting maneuvers was related to penalties assessed on Keolis, the MBTA’s commuter rail operator. In a recent presentation on the budget, the T said it collected $10 million in penalties on Keolis. Actually, the T assessed $8.2 million in penalties on Keolis in fiscal 2018 but plowed $4 million back into commuter rail operations to improve service.  That left approximately $4 million in revenue from Keolis penalties, an amount that increased to $10 million with the elimination of a $6 million Keolis liability that had been sitting on the transit agency’s books since fiscal 2015.

T officials said the $6 million represented fines assessed in fiscal 2015 on Keolis. The officials said the fines were deducted from payments to Keolis in fiscal 2015, but a $6 million liability was kept on the transit agency’s books in case the T decided to reinvest a portion of the penalty money in the commuter rail system to improve service. The reinvestment of that $6 million never occurred, so the T, at the urging of its audit firm, decided to erase the liability in fiscal 2018 and show the $6 million as “other income” on its books.

The T reported another $10 million in “other income” from two properties sold in 2014 and 2015. Officials said the income was deferred at the time of the land sales and held for a rainy day, which turned out to be fiscal 2018.

Under other income, the MBTA also reported one-time gains from a state appropriation for Green Line extension mitigation ($4 million), a land sale ($7 million), and an insurance rebate from Blue Cross Blue Shield ($4 million).