T notes: Pension costs raise concerns

MBTA OFFICIALS say they expect to hold the line on expense growth this fiscal year, but they are worried about rising pension costs and a push in the Legislature to limit the transit authority’s control over above-ground digital advertising displays near stations.

Michael Abramo, the T’s chief administrator, said expenses (excluding debt costs) are expected to grow a little over $14 million, or about 0.9 percent, in the fiscal year ending June 30. He said higher-than-expected revenues will mean the agency’s operating deficit – the difference between own-source revenues and expenses – will come in at $28 million instead of the $30 million that had been forecast.  The T covers such deficits with money from an annual legislative appropriation.

Abramo warned that a House proposal to limit the authority’s control over digital advertising displays could cost the agency $600 million in revenue over the next 15 years. He also said rising pension service obligations – the T’s fastest escalating cost – could make it difficult to keep the budget in check in coming years.

In the first three months of 2018, Abramo said, the MBTA Retirement Board took in $34 million in revenue ($26.8 million in contributions and $7.2 million in investment income) and paid out $56 million in benefits, for a negative cash flow of $22 million. He said the pension fund currently has $2.73 billion in liabilities, of which 42 percent are unfunded. In his presentation, he noted that the retirement board’s estimated rate of return on its investments was recently cut from 7.75 percent to 7.5 percent.

Brian Lang, a member of the T’s Fiscal and Management Control Board, asked Abramo for a more complete report on the retirement board’s finances. He specifically wanted to know if the board’s financial challenges stem from a reduction in the number of T employees (in other words, too few active employees paying into the retirement fund) or something else.

Brian Shortsleeve, another control board member, wanted to know where the Retirement Board stood on letting the state’s Pension Reserves Investment Management board, which invests state and municipal pension funds, take charge of the T retirement board money.

Joseph Aiello, chairman of the control board, agreed with his colleagues that some sort of plan needs to be developed to address the T’s worsening pension problems. “Pensions are the one place where we’ve talked about it and talked about it and talked about it,” Aiello said.

Citizens Bank gets T business

Most of us earn next to nothing in interest on the money in our bank accounts, but the MBTA says it will earn an extra $1 million a year by consolidating all its cash with one company.

Michael Abramo, the T’s chief administrator, said Citizens Bank emerged as the winner in a crowded field of 10 firms bidding on the MBTA’s commercial banking business. Abramo said that by consolidating all its cash at one bank, the T should net an extra $3,000 a day in interest, or about $1 million over the course of a year. Citizens also agreed to waive all service fees on the T’s deposits.

Fare collection initiative gets program manager

The MBTA has hired David Sikorski, a veteran corporate manager of public private partnerships, to oversee the transit agency’s adoption of a new automated fare collection system.

Sikorski, who will be paid a base salary of $275,000 a year, will oversee contractors hired by the T to install and operate a new fare collection system. The new system will replace the existing Charlie Card in 2020 with a system capable of accepting payment by fare card, credit card, or smartphone on all modes of travel. The new system will also dispense with cash payments on board buses and Green Line trains, which is expected to speed up travel significantly.

Sikorski has extensive experience managing public private partnerships, mostly to build highways and bridges. According to his resume, he worked most recently as a vice president at Parsons Corp. in New York City, leaving there in March 2017. In his job at the T, Sikorski will oversee Cubic Corp. and the John Laing Group, firms that will be paid to build and operate the system.

The T has adopted a policy of hiring program managers to bird-dog major projects. John Dalton, for example, was hired to oversee the T’s Green Line extension into Somerville and Medford. Dalton was hired as an independent contractor, while Sikorski will be a T employee.