This Table 2 on Page A-92 is replaced in its entirety to ...web.mta.info/mta/investor/pdf/2009/2009_CCDF... · The final MTA 2009 Combined Continuing Disclosure Filing dated June

SUPPLEMENT TO FINAL MTA 2009 COMBINED CONTINUING DISCLOSURE FILING Dated June 22, 2009

The final MTA 2009 Combined Continuing Disclosure Filing dated June 22, 2009 is hereby supplemented and amended as indicated in this supplement. This Table 2 on Page A-92 is replaced in its entirety to read as follows:

TRB Table 2 Summary of Pledged Revenues (Calculated in Accordance with the Transportation Resolution) and Expenses

Historical Cash Basis (in millions)

Years Ended December 31,

2004 2005 2006

2007

2008

Revenues from Systems Operations

Fares from Transit System $2,567 $2,668 $2,778 $2,857 $3,054

Fares from Commuter System 819 881 911 956 1,010

Fares from MTA Bus N/A N/A 104 160 180

Other Income(1) 245 129 79 210 148

Subtotal – Operating Revenues 3,631 3,678 3,872 4,183 4,392

Revenues from MTA Bridges and Tunnels Surplus 377 477 435 406 359 MTA Bridges and Tunnels – Refund of Excess Debt Service Payments 0 0 0 0 0

Revenues from Governmental Sources

State and Local General Operating Subsidies 377 415 391 396 396

Special Tax-Supported Operating Subsidies

DTF Excess(2) 411 361 391 363 345

MMTOA Receipts 736 946 1,219 1,576 1,651

Urban Tax 344 551 669 883 523

Excess Mortgage Recording Taxes 163 193 249 27 214

Subtotal Special Tax-Supported Operating Subsidies 1,654 2,051 2,528 2,849 2,733

Station Maintenance and Service Reimbursements 311 349 376 410 404

City Subsidy for MTA Bus N/A N/A 162 187 285

Revenues from Investment of Capital Program Funds(3) 26 52 66 71 41

Subtotal – Non-Operating Revenues(4) 2,745 3,344 3,958 4,320 4,218

Total Transportation Resolution Pledged Revenues $6,376 $7,022 $7,830 $8,504 $8,610

Debt Service $389 $506 $629 $681 $729

Transit Operating Expenses $4,198 $4,483 $4,788 $5,454 $5,695

Commuter Operating Expenses $1,609 $1,632 $1,731 $1,954 $2,060

MTA Bus Operating Expenses N/A N/A

$315 $387 $413

Total Operating Expenses $5,807 $6,115 $6,834 $7,795 $8,168

Total Operating Expenses and Debt Service(5) $6,196 $6,621 $7,463 $8,476 $8,896

(1) Other income in the case of the Transit System includes advertising revenue, interest income on certain operating funds, station

concessions, Transit Adjudication Bureau collections, rental income and miscellaneous. Other income in the case of the Commuter System includes advertising revenues, interest income on certain operating funds, concession revenues (excluding Grand Central Terminal and Pennsylvania Station concessions), rental income and miscellaneous. In December 2004, MTA provided MTA New York City Transit with a $13 million subsidy from operating funds.

(2) Calculated by subtracting the debt service payments on the Dedicated Tax Fund Bonds from the MTTF Receipts described in Part 4 of this APPENDIX A under the caption “DEDICATED TAX FUND BONDS.”

(3) Represents investment income on capital program funds held for the benefit of the Transit and Commuter Systems on an accrual basis.

(4) Sum of (a) Revenues from MTA Bridges and Tunnels Surplus, (b) MTA Bridges and Tunnels – Refund of Excess Debt Service Payments, (c) Revenues from Governmental Sources (including State and Local General Operating Subsidies and Special Tax-Supported Operating Subsidies), (d) Station Maintenance and Service Reimbursements, (e) City Subsidy for MTA Bus and (f) Revenues from Investment of Capital Program Funds.

(5) Although the Total Operating Expenses and Debt Service is higher than Total Transportation Resolution Pledged Revenue a drawdown on prior year’s surplus was used to address the shortfall.

2009 Combined Continuing

disClosure Filings

COMBINED ANNUAL CONTINUING DISCLOSURE FILINGS PURSUANT TO SEC RULE 15c2-12

relating to

METROPOLITAN TRANSPORTATION AUTHORITY DEDICATED TAX FUND BONDS

TRANSPORTATION REVENUE BONDS STATE SERVICE CONTRACT BONDS

and

TRIBOROUGH BRIDGE AND TUNNEL AUTHORITY

GENERAL REVENUE BONDS SUBORDINATE REVENUE BONDS

and

2 BROADWAY CERTIFICATES OF PARTICIPATION

Dated: April 28, 2009

[THIS PAGE INTENTIONALLY LEFT BLANK]

i

This book contains the Annual Continuing Disclosure Filings prepared by Metropolitan Transportation Authority (“MTA”) and Triborough Bridge and Tunnel Authority (“TBTA”) pursuant to various written undertakings made to assist the underwriters in complying with their obligations in accordance with SEC Rule 15c2-12 in connection with the following credits:

� MTA Dedicated Tax Fund Bonds, � MTA Transportation Revenue Bonds, � TBTA General Revenue Bonds, � TBTA Subordinate Revenue Bonds, � MTA State Service Contract Bonds, and � 2 Broadway Certificates of Participation.

This booklet contains a separate section on each of the above-referenced credits, and each section is divided into five different parts, as follows:

� Part 1 lists, by designation, the various issues of securities outstanding within the credit, whether or not MTA or TBTA has contractually agreed to provide an annual report.

� Part 2 sets forth certain details of each of such issues listed in Part 1.

� Part 3 sets forth the information in the original official statement that MTA or TBTA has contractually agreed to update, together with an index of where such update can be located in this Annual Report.

� Part 4 lists any material events that have occurred.

� Part 5 describes whether audited or unaudited financial statements are attached, or whether they are included by specific reference herein.

Unless otherwise defined herein, all capitalized terms used herein shall have the meanings set forth in Appendix A attached hereto.

CUSIP numbers used herein have been assigned by an organization not affiliated with MTA or TBTA and are included solely for the convenience of the holders of the securities listed. Neither MTA nor TBTA is responsible for the selection or uses of these CUSIP numbers, nor is any representation made as to their correctness on the securities or as indicated herein.

ii

Table of Contents

Page

MTA DEDICATED TAX FUND BONDS ............................................................................................................. 1 PART 1. ISSUES COVERED BY THIS ANNUAL REPORT ............................................................................................. 1 PART 2. DETAILS OF EACH ISSUE OF BONDS .......................................................................................................... 1

Dedicated Tax Fund Bonds, Series 2001A ........................................................................................................ 2 Dedicated Tax Fund Bonds, Series 2002A ........................................................................................................ 3 Dedicated Tax Fund Variable Rate Bonds, Series 2002B ................................................................................. 5 Dedicated Tax Fund Bonds, Series 2004A ........................................................................................................ 6 Dedicated Tax Fund Variable Rate Bonds, Series 2004B ................................................................................. 7 Dedicated Tax Fund Bonds, Series 2004C ........................................................................................................ 8 Dedicated Tax Fund Bonds, Series 2006A ........................................................................................................ 9 Dedicated Tax Fund Bonds, Series 2006B ...................................................................................................... 10 Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A ............................................................. 11 Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008B .............................................................. 12 Dedicated Tax Fund Bonds, Series 2009A ...................................................................................................... 16 Dedicated Tax Fund Bonds, Series 2009B ...................................................................................................... 17 Dedicated Tax Fund Bonds, Series 2009C (Federally Taxable) ...................................................................... 18

PART 3. NATURE OF CONTINUING DISCLOSURE ................................................................................................... 19 PART 4. NOTICE OF MATERIAL EVENTS ............................................................................................................... 20 PART 5. AUDITED FINANCIAL STATEMENTS ......................................................................................................... 21

MTA TRANSPORTATION REVENUE BONDS .............................................................................................. 22 PART 1. ISSUES COVERED BY THIS ANNUAL REPORT ........................................................................................... 22 PART 2. DETAILS OF EACH ISSUE OF BONDS ........................................................................................................ 22

Transportation Revenue Refunding Bonds, Series 2002A .............................................................................. 23 Transportation Revenue Variable Rate Refunding Bonds, Series 2002B ........................................................ 25 Transportation Revenue Variable Rate Refunding Bonds, Series 2002D ....................................................... 26 Transportation Revenue Refunding Bonds, Series 2002E ............................................................................... 27 Transportation Revenue Refunding Bonds, Series 2002F ............................................................................... 28 Transportation Revenue Variable Rate Refunding Bonds, Series 2002G ....................................................... 29 Transportation Revenue Bonds, Series 2003A ................................................................................................ 30 Transportation Revenue Bonds, Series 2003B ................................................................................................ 31 Transportation Revenue Bonds, Series 2005A ................................................................................................ 33 Transportation Revenue Bonds, Series 2005B ................................................................................................ 35 Transportation Revenue Bonds, Series 2005C ................................................................................................ 37 Transportation Revenue Variable Rate Bonds, Series 2005D ......................................................................... 38 Transportation Revenue Variable Rate Bonds, Series 2005E .......................................................................... 40 Transportation Revenue Bonds, Series 2005F ................................................................................................. 42 Transportation Revenue Variable Rate Bonds, Series 2005G ......................................................................... 43 Transportation Revenue Refunding Bonds, Series 2005H .............................................................................. 44 Transportation Revenue Bonds, Series 2006A ................................................................................................ 45 Transportation Revenue Bonds, Series 2006B ................................................................................................ 46 Transportation Revenue Bonds, Series 2007A ................................................................................................ 47 Transportation Revenue Bonds, Series 2007B ................................................................................................ 49 Transportation Revenue Bonds, Series 2008A ................................................................................................ 50 Transportation Revenue Bonds, Series 2008B ................................................................................................ 51 Transportation Revenue Bonds, Series 2008C ................................................................................................ 52

PART 3. NATURE OF CONTINUING DISCLOSURE ................................................................................................... 53 PART 4. NOTICE OF MATERIAL EVENTS ............................................................................................................... 54 PART 5. AUDITED FINANCIAL STATEMENTS ......................................................................................................... 54

iii

TABLE OF CONTENTS, Continued

TBTA GENERAL REVENUE BONDS .............................................................................................................. 55

PART 1. ISSUES COVERED BY THIS ANNUAL REPORT ........................................................................................... 55PART 2. DETAILS OF EACH ISSUE OF BONDS ........................................................................................................ 55

TBTA General Revenue Bonds, Series EFC 1996A ....................................................................................... 56TBTA General Revenue Bonds, Series 2001A................................................................................................ 57TBTA General Revenue Variable Rate Bonds, Series 2001B and C............................................................... 58TBTA General Revenue Bonds, Series 2002A................................................................................................ 59TBTA General Revenue Refunding Bonds, Series 2002B .............................................................................. 60TBTA General Revenue Variable Rate Refunding Bonds, Series 2002F........................................................ 61TBTA General Revenue Variable Rate Bonds, Series 2003B......................................................................... 62TBTA General Revenue Variable Rate Bonds, Series 2005A......................................................................... 63TBTA General Revenue Variable Rate Refunding Bonds, Series 2005B ....................................................... 64TBTA General Revenue Bonds, Series 2006A................................................................................................ 65TBTA General Revenue Bonds, Series 2007A................................................................................................ 66TBTA General Revenue Bonds, Series 2008A................................................................................................ 67TBTA General Revenue Bonds, Series 2008B................................................................................................ 68TBTA General Revenue Bonds, Series 2008C................................................................................................ 69TBTA General Revenue Bonds, Series 2009A................................................................................................ 70

PART 3. NATURE OF CONTINUING DISCLOSURE ................................................................................................... 72PART 4. NOTICE OF MATERIAL EVENTS ............................................................................................................... 73PART 5. AUDITED FINANCIAL STATEMENTS ......................................................................................................... 73

TBTA SUBORDINATE REVENUE BONDS..................................................................................................... 74


TBTA Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB.............................................. 75TBTA Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD.............................................. 76TBTA Subordinate Revenue Refunding Bonds, Series 2002E........................................................................ 77TBTA Subordinate Revenue Bonds, Series 2003A......................................................................................... 78TBTA Subordinate Revenue Bonds, Series 2008D......................................................................................... 79


MTA STATE SERVICE CONTRACT BONDS................................................................................................. 83


State Service Contract Refunding Bonds, Series 2002A ................................................................................. 84State Service Contract Bonds, Series 2002B ................................................................................................... 86


2 BROADWAY CERTIFICATES OF PARTICIPATION................................................................................ 91

PART 1. ISSUES COVERED BY THIS ANNUAL REPORT ........................................................................................... 91PART 2. DETAILS OF EACH ISSUE OF CERTIFICATES ............................................................................................. 91

Certificates of Participation, Series 1999A...................................................................................................... 92Certificates of Participation, Series 2000A...................................................................................................... 93Variable Rate Certificates of Participation, Series 2004A............................................................................... 94REVISED AGGREGATE BASE RENT REQUIREMENTS ......................................................................................... 95GROUND LEASE NET RENTAL PROPORTIONATE SHARES.................................................................................. 96

PART 3. NATURE OF CONTINUING DISCLOSURE ................................................................................................... 97PART 4. NOTICE OF MATERIAL EVENTS ............................................................................................................. 100PART 5. AUDITED FINANCIAL STATEMENTS ....................................................................................................... 100

iv

Appendices APPENDIX A The Related Entities

APPENDIX B Audited Combined Financial Statements of Metropolitan Transportation Authority for the Years Ended December 2008 and 2007

APPENDIX C Audited Consolidated Financial Statements of the New York City Transit Authority for the Years Ended December 2008 and 2007

APPENDIX D Audited Financial Statements of Triborough Bridge and Tunnel Authority for the Years Ended December 2008 and 2007

APPENDIX E History and Projection of Traffic, Toll Revenues and Expenses and Review of Physical Conditions of the Facilities of Triborough Birdge and Tunnel Authority, dated June 8, 2009, prepared by URS Corporation – New York

Outstanding D

ebt

1

MTA DEDICATED TAX FUND BONDS

Part 1. Issues Covered by this Annual Report

Series Dated Date Par Issued Par Outstanding

(as of April 28, 2009) Interest Rate

Mode 2001A December 4, 2001 $ 554,105,000 $ 158,960,000 Fixed 2002A August 15, 2002 1,246,870,000 1,030,375,000 Fixed 2002B September 5, 2002 440,000,000 440,000,000 Synthetic Fixed 2004A February 26, 2004 250,000,000 191,800,000 Fixed 2004B March 9, 2004 500,000,000 300,000,000 Variable 2004C December 21, 2004 120,000,000 90,860,000 Fixed 2006A June 21, 2006 350,000,000 335,300,000 Fixed 2006B November 9, 2006 410,000,000 389,405,000 Fixed 2008A June 25, 2008 352,915,000 351,375,000 Synthetic Fixed 2008B August 7, 2008 348,175,000 348,175,000 Variable 2009A March 19, 2009 261,700,000 261,700,000 Fixed 2009B April 30, 2009* 500,000,000 500,000,000 Fixed 2009C April 30, 2009* 750,000,000 750,000,000 Fixed Total $6,083,765,000 $5,147,950,000

* Expected

Part 2. Details of Each Issue of Bonds

Uninsured RatingsFitch Ratings...............................................................................................................................................................A+ Moody’s Investors Services.....................................................................................................................................NAF Standard and Poor’s Ratings...................................................................................................................................... AA

Summary of State and City Redemption Provisions.Pursuant to the MTA Act, the State, upon providing sufficient funds, may require MTA to redeem any Series of Dedicated Tax Fund Bonds, prior to maturity, as a whole, on any interest payment date not less than twenty years after the date of issue of the series of Dedicated Tax Fund Bonds, at 105% of their face value and accrued interest or at such lower redemption price provided for the series of Dedicated Tax Fund Bonds in the case of redemption as a whole on the redemption date. The MTA Act further provides that the City, upon furnishing sufficient funds, may require MTA to redeem any Series of Dedicated Tax Fund Bonds, as a whole, but only in accordance with the terms upon which each Series of Dedicated Tax Fund Bonds are otherwise redeemable.

2

$554,105,000 Dedicated Tax Fund Bonds, Series 2001A

Date of Issue: December 4, 2001 Credit Enhancement: All remaining Series 2001A Bonds are insured by Financial Guaranty

Insurance Company.

Principal Amortization (1)

DueNovember 15 Maturity

Sinking Fund Redemption

InterestRate

Cusip No. (Base 59259N)

2009 $ 2,000,000 3.625% JJ3 2010 9,755,000 5.000 HM8 2010 2,395,000 3.750 JK0 2011 10,310,000 5.250 HN6 2011 2,420,000 3.800 JL8 2012 9,195,000 5.250 HP1 2012 4,165,000 4.000 JM6 2013 11,615,000 5.250 HQ9 2013 2,395,000 4.125 JN4 2014 12,915,000 5.250 HR7 2014 1,805,000 4.250 JP9 2015 14,380,000 5.250 HS5 2015 1,095,000 4.400 JQ7 2016 14,495,000 5.250 HT3 2016 1,780,000 4.500 JR5 2017 15,815,000 5.250 HU0 2017 1,300,000 4.600 JS3 2018 16,915,000 5.250 HV8 2018 1,090,000 4.625 JT1 2019 600,000 4.750 JU8 2020 19,350,000 5.000 HX4 2020 590,000 4.900 JV6 2021 2,580,000 4.900 JW4

(1) The Series 2001A Bonds maturing on or after November 15, 2012 are subject to redemption prior to maturity on any date on or after November 15, 2011, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Series 2001A Bonds were advance refunded and defeased by the Series 2005A Bonds on March 24, 2005 at the redemption prices and the redemption dates listed below.

Maturity (Nov. 15)

Principal Amount Redeemed

InterestRate

Redemption Date (Nov. 15)

RedemptionPrice

CUSIP Number (59259N)

2019 $18,345,000 5.25% 2011 100% HW6 2021 18,355,000 5.00 2011 100 HY2 2022 21,980,000 5.25 2011 100 JZ7 2023 23,130,000 5.25 2011 100 KA0 2025 43,705,000 5.00 2011 100 JX2 2031 188,785,000 5.00 2011 100 JY0

The following maturities and principal amounts of the Series 2001A were defeased on September 20, 2007 at the principal amounts listed below.

Maturity (November 15)

Principal Amount Outstanding

Principal AmountDefeased

InterestRate


2009 $ 9,645,000 $ 9,645,000 4.50% HL0

3

$1,246,870,000 Dedicated Tax Fund Bonds, Series 2002A

Date of Issue: August 15, 2002 Credit Enhancement: Some, but not all, of the maturities, as indicated below, are insured by

Financial Security Assurance Inc.

Uninsured Series 2002A Bonds – Principal Amortization (1)



Interest Rate


$167,370,000 Term Bond Due November 15, 20302029 $86,520,000 2030 80,850,000 5.000% LZ4

$10,000,000 Term Bond Due November 15, 2030 2030 $10,000,000 5.250% MC4

Insured Series 2002A Bonds – Principal Amortization (1)



Interest Rate


2010 $ 7,555,000 3.700% KW2 2010 8,375,000 5.000 KX0 2010 19,980,000 5.250 KY8 2011 5,850,000 3.800 KZ5 2011 31,805,000 5.000 LA9 2012 7,955,000 3.900 LB7 2012 22,500,000 5.250 LT8 2012 9,000,000 5.500 LC5 2013 26,240,000 4.000 LD3 2013 15,270,000 5.500 LE1 2014 2,705,000 4.000 LF8 2015 2,805,000 4.200 LG6 2016 2,885,000 4.300 LH4 2017 2,985,000 4.400 LJ0 2018 3,145,000 4.500 LK7 2019 885,000 4.600 LL5 2019 2,430,000 5.125 LM3 2020 765,000 4.700 LN1 2020 2,725,000 5.125 LP6 2021 3,590,000 4.800 LQ4 2022 3,780,000 4.900 LR2 2023 64,195,000 5.000 LS0 2024 67,405,000 5.250 LU5 2025 70,940,000 5.250 LV3 2026 50,000,000 5.500 LW1


The following maturities and principal amounts of the Series 2002A were defeased on September 20, 2007 at the principal amounts listed below.



PrincipalAmountDefeased

InterestRate


2009 $22,810,000 $22,810,000 3.50% KU6 2009 11,725,000 11,725,000 5.00 KV4

4

Dedicated Tax Fund Bonds, Series 2002A (continued)

Insured Series 2002A Bonds – Principal Amortization(1) (continued)

$70,250,000 Term Bond Due November 15, 20272026 $ 24,670,000 2027 45,580,000 4.750% LX9

$115,410,000 Term Bond Due November 15, 20282027 $ 33,010,000 2028 82,400,000 5.000% LY7

$231,575,000 Term Bond Due November 15, 20322031 $ 95,415,000 2032 136,160,000 5.000% MA8


5

$440,000,000 Dedicated Tax Fund Variable Rate Bonds, Series 2002B

Date of Issue: September 5, 2002 Credit Enhancement: All Series 2002B Bonds are insured by Financial Security Assurance Inc. Liquidity Facility: Standby Bond Purchase Agreement with Dexia Crédit Local (expires May 7, 2014) Current Mode: Weekly

Principal Amortization(1)

Current Mode: Weekly Due

November 1 MaturitySinking Fund Redemption

InterestRate


2014 $40,900,000 2015 42,700,000 2016 44,600,000 2017 46,600,000 2018 48,600,000 2019 50,700,000 2020 52,900,000 2021 55,300,000 2022 (final maturity) 57,700,000 Variable ML4(2)

(1) The Series 2002B Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

(2) The Series 2002B Bonds are swapped to a fixed rate of 4.06%. For more information, see Appendix A, part 4 – “Swap Agreements”.

6


Date of Issue: March 10, 2004 Credit Enhancement: The remaining maturities as indicated below, are insured by either MBIA

Insurance Corporation or Financial Guaranty Insurance Company.



InterestRate


MBIA Insured Serial Bonds 2009 $ 9,370,000 2.250% ND1 2009 6,315,000 5.000 NE9 2010 4,445,000 2.500 NF6 2010 11,765,000 5.000 NG4 2011 2,855,000 2.750 NH2 2011 14,055,000 5.000 NJ8 2012 6,505,000 3.000 NK5 2012 11,190,000 5.000 NL3 2013 4,255,000 3.200 NM1 2013 14,190,000 5.250 NN9

FGIC Insured Serial Bonds 2014 $ 5,955,000 3.375% NP4 2014 13,375,000 5.250 NQ2 2015 20,230,000 5.250 NR0 2016 21,295,000 5.250 NS8 2017 22,410,000 5.250 NT6 2018 23,590,000 5.250 NU3

(1) The Series 2004A Bonds are not subject to redemption prior to maturity.

7

$500,000,000 Dedicated Tax Fund Variable Rate Bonds, Series 2004B $100,000,000 Subseries 2004B-1 $100,000,000 Subseries 2004B-2 $100,000,000 Subseries 2004B-4 Date of Issue: March 10, 2004 Credit Enhancement: Subseries 2004B-1 Bonds and Subseries 2004B-4 Bonds are insured by

Ambac Assurance Corporation; and Subseries 2004B-2 Bonds are insured by MBIA Insurance Corporation

Current Mode: Auction

Subseries 2004B-1 Principal Amortization(1)

Current Mode: 7-day auction rate Due


InterestRate


2019 $ 8,250,000 2020 8,600,000 2021 8,925,000 2022 9,325,000 2023 9,700,000 2024 10,075,000 2025 10,500,000 2026 10,950,000 2027 11,375,000 2028 11,875,000 2029 (final maturity) 425,000 Variable NV1




InterestRate


2031 $14,600,000 2032 41,800,000 2033 (final maturity) 43,600,000 Variable NW 9




InterestRate


2019 $ 8,200,000 2020 8,600,000 2021 8,925,000 2022 9,325,000 2023 9,700,000 2024 10,075,000 2025 10,525,000 2026 10,950,000 2027 11,400,000 2028 11,875,000 2029 (final maturity) 425,000 Variable NY5

(1) Each subseries of Series 2004B Bonds shall be subject to optional redemption by MTA, in whole or in part, on any Interest Payment Date immediately following an Auction Period, at a Redemption Price equal to the principal amount thereof, plus accrued interest to the redemption date; provided, however, that in the event of a partial redemption of Series 2004B Bonds of a subseries, the aggregate principal amount of Series 2004B Bonds of such subseries which will remain outstanding shall be equal to or more than $10,000,000 unless otherwise consented to by the Broker-Dealers.

The principal amounts of the Series 2004B Bonds were redeemed in full with some of the proceeds from the Series 2008B Bonds on the redemption dates listed below.

SubseriesPrincipal Amount

RefundedCusip No.

(Base 59259N)

Date Redeemed

2004B-3 $100,000,000 NX7 August 11, 2008 2004B-5 100,000,000 NZ2 August 29, 2008

8

$120,000,000 Dedicated Tax Fund Bonds, Series 2004C

Date of Issue: December 21, 2004 Credit Enhancement: All remaining maturities are insured by Ambac Assurance Corporation.



InterestRate


2009 $ 4,755,000 5.000% PV9 2009 3,000,000 3.000 PW7 2010 5,610,000 5.000 PX5 2010 2,445,000 3.000 PY3 2011 6,460,000 5.000 PZ0 2011 1,920,000 3.125 QA4 2012 6,360,000 5.000 QB2 2012 2,460,000 3.250 QC0 2013 8,170,000 5.000 QD8 2013 955,000 3.375 QE6 2014 5,985,000 5.000 QF3 2014 3,675,000 3.500 QG1 2015 10,060,000 5.500 QH9 2016 10,640,000 5.500 QJ5 2017 11,195,000 5.500 QK2 2018 7,170,000 5.500 QL0

(1) The Series 2004C Bonds are not subject to redemption prior to maturity.

9


Date of Issue: June 21, 2006 Credit Enhancement: Certain maturities, as indicated below, are insured by MBIA Insurance Company.




InterestRate


Uninsured Serial Bonds2009 $ 6,535,000 4.000% RW5

MBIA Insured Serial Bonds2010 $ 4,450,000 4.000% RX3 2010 2,345,000 5.000 RY1 2011 7,090,000 4.000 RZ8 2012 7,375,000 4.000 SA2 2013 2,570,000 4.000 SB0 2013 5,100,000 5.000 SC8 2014 3,275,000 4.000 SD6 2014 4,750,000 5.000 SE4 2015 8,395,000 4.000 SF1 2016 8,730,000 4.000 SG9 2017 9,080,000 4.000 SH7 2018 9,440,000 5.000 SJ3 2019 9,915,000 5.000 SK0 2020 10,410,000 5.000 SL8 2021 10,930,000 5.000 SM6 2022 11,475,000 5.000 SN4 2023 12,050,000 5.000 SP9 2024 12,655,000 5.000 SQ7 2025 13,285,000 5.000 SR5 2026 235,000 4.375 SS3 2026 13,715,000 5.000 ST1 2027 14,645,000 5.000 SU8 2028 15,380,000 5.000 SV6

$50,905,000 Term Bond Due November 15, 20312029 $16,150,000 2030 16,955,000 2031 17,800,000 5.000% SW4

$1,635,000 Term Bond Due November 15, 20352035 $ 1,635,000 4.500% SX2

$78,930,000 Term Bond Due November 15, 20352032 $18,690,000 2033 19,625,000 2034 20,610,000 2035 20,005,000 5.000% SY0

(1) The Series 2006A Bonds maturing on or after November 15, 2017 are subject to redemption prior to maturity on any date on or after November 15, 2016, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper)at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

10

$410,000,000 Dedicated Tax Fund Bonds, Series 2006B

Date of Issue: November 9, 2006 Credit Enhancement: The remaining maturities are insured by MBIA Insurance Company.




InterestRate


2010 $ 7,485,000 3.600% TK9 2011 7,755,000 3.600 TL7 2012 8,035,000 5.000 TM5 2013 8,435,000 3.700 TN3 2014 3,895,000 3.750 TP8 2014 4,855,000 5.000 TQ6 2015 9,135,000 5.000 TR4 2016 4,020,000 3.875 TS2 2016 5,575,000 5.000 TT0 2017 10,030,000 5.000 TU7 2018 10,530,000 5.000 TV5 2019 11,055,000 5.000 TW3 2020 11,610,000 5.000 TX1 2021 1,900,000 4.125 TY9 2021 10,290,000 5.000 TZ6 2022 12,780,000 5.000 UA9 2023 13,420,000 5.000 UB7 2024 14,090,000 5.000 UC5 2025 14,795,000 5.000 UD3 2026 15,535,000 4.750 UE1

$89,930,000 Term Bond Due November 15, 20312027 $ 16,275,000 2028 17,090,000 2029 17,945,000 2030 18,840,000 2031 19,780,000 5.000% UF8

$ 50,000,000 Term Bond Due November 15, 20362032 $10,000,000 2033 10,000,000 2034 10,000,000 2035 10,000,000 2036 10,000,000 4.500% UG6

$64,250,000 Term Bond Due November 15, 20362032 $10,770,000 2033 11,760,000 2034 12,800,000 2035 13,890,000 2036 15,030,000 5.000% UH4

(1) The Series 2006B Bonds maturing on or after November 15, 2017 are subject to redemption prior to maturity on any date on or after November 15, 2016, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper)at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Series 2006B were defeased on September 20, 2007 at the principal amounts listed below.




InterestRate


2009 $7,235,000 $7,235,000 3.50% TJ2

11

$352,915,000 Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A

Date of Issue: June 25, 2008 Credit Enhancement: All Series 2005A Bonds are insured by Financial Securities Assurance Inc. Liquidity Support: Standby Bond Purchase Agreement with Dexia Crédit Local. (expires June 25, 2011) Current Mode: Weekly




InterestRate


2009 $ 1,825,000 2010 1,885,000 2011 1,950,000 2012 2,015,000 2013 2,100,000 2014 2,170,000 2015 2,245,000 2016 2,320,000 2017 2,415,000 2018 2,495,000 2019 20,990,000 2020 2,360,000 2021 20,865,000 2022 24,315,000 2023 25,170,000 2024 26,055,000 2025 26,990,000 2026 27,940,000 2027 28,930,000 2028 29,950,000 2029 31,020,000 2030 32,115,000 2031 (final maturity) 33,255,000 variable VZ3(2)

(1) The Series 2008A Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

(2) The Series 2008A Bonds are swapped to a fixed rate of 3.3156%. For more information, see Appendix A, Part 4 – “Swap Agreements”.

12

$348,175,000 Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008B $100,000,000 Subseries 2008B-1 $100,000,000 Subseries 2008B-2 $100,000,000 Subseries 2008B-3 $48,175,000 Subseries 2008B-4 Date of Issue: August 7, 2008 Credit Enhancement and Liquidity Support: Subseries 2008B-1 Bonds: irrevocable direct-pay letter of credit issued by The Bank

of Nova Scotia, acting through its New York Agency (Scotiabank); Subseries 2008B-2 Bonds: an irrevocable direct-pay letter of credit issued by BNP Paribas, acting through its New York Branch (BNP Paribas); Subseries 2008B-3 Bonds: an irrevocable direct-pay letter of credit issued by Lloyds TSB Bank plc, acting through its New York Branch (Lloyds); Subseries 2008B-4 Bonds: an irrevocable direct-pay letter of credit issued by KBC Bank N.V., acting through its New York Branch. Each initial credit facility is scheduled to expire on August 5, 2011



November 1

Maturity Sinking Fund Redemption

Interest Rate


2009 $ 590,000 2010 620,000 2011 650,000 2012 725,000 2013 710,000 2014 745,000 2015 780,000 2016 815,000 2017 900,000 2018 1,725,000 2019 5,405,000 2020 5,650,000 2021 5,570,000 2022 5,625,000 2023 5,745,000 2024 5,695,000 2025 5,775,000 2026 5,820,000 2027 2,865,000 2028 5,975,000 2029 12,790,000 2030 13,085,000 2031 8,965,000 2033 1,435,000 2034 (final maturity) 1,340,000 Variable WB5


13

Dedicated Tax Fund Bonds, Series 2008B (continued)




InterestRate


2009 $ 590,000 2010 620,000 2011 650,000 2012 725,000 2013 710,000 2014 745,000 2015 780,000 2016 815,000 2017 900,000 2018 1,725,000 2019 5,405,000 2020 5,650,000 2021 5,570,000 2022 5,625,000 2023 5,745,000 2024 5,695,000 2025 5,775,000 2026 5,820,000 2027 2,865,000 2028 5,975,000 2029 12,790,000 2030 13,085,000 2031 8,965,000 2033 1,435,000 2034 (final maturity) 1,340,000 Variable WC3


14





InterestRate


2009 $ 590,000 2010 620,000 2011 650,000 2012 725,000 2013 710,000 2014 745,000 2015 780,000 2016 815,000 2017 900,000 2018 1,725,000 2019 5,405,000 2020 5,650,000 2021 5,570,000 2022 5,625,000 2023 5,745,000 2024 5,695,000 2025 5,775,000 2026 5,820,000 2027 2,865,000 2028 5,975,000 2029 12,790,000 2030 13,085,000 2031 8,965,000 2033 1,435,000 2034 (final maturity) 1,340,000 Variable WD1


15





InterestRate


2009 $ 285,000 2010 295,000 2011 305,000 2012 345,000 2013 345,000 2014 355,000 2015 370,000 2016 395,000 2017 425,000 2018 825,000 2019 2,605,000 2020 2,725,000 2021 2,690,000 2022 2,710,000 2023 2,775,000 2024 2,740,000 2025 2,785,000 2026 2,810,000 2027 1,375,000 2028 2,885,000 2029 6,155,000 2030 6,305,000 2031 4,320,000 2033 695,000 2034 (final maturity) 655,000 Variable WE9


16


Date of Issue: March 19, 2009 Credit Enhancement: None

Series 2009A Principal Amortization(1)



InterestRate


2010 $ 4,340,000 2.000% WZ2 2011 4,425,000 3.000 XA6 2012 4,560,000 3.000 XB4 2013 4,695,000 3.000 XC2 2014 4,835,000 3.300 XD0 2015 4,995,000 3.500 XE8 2016 5,170,000 4.000 XF5 2017 5,375,000 5.000 XG3 2018 5,645,000 5.000 XH1 2019 5,930,000 5.000 XJ7 2020 6,225,000 5.000 XK4 2021 6,535,000 5.000 XL2 2022 6,860,000 5.000 XM0 2023 7,205,000 5.100 XN8 2024 7,575,000 5.125 XP3 2025 7,960,000 5.250 XQ1 2026 8,380,000 5.300 XR9 2027 8,820,000 5.375 XS7 2028 3,135,000 5.500 XT5 2028 6,160,000 5.250 XU2 2029 6,640,000 5.500 XV0 2029 3,150,000 5.375 XW8 2030 10,325,000 5.500 XX6

$25,790,000 Term Bond Due November 15, 20392031 $ 2,280,000 2032 2,410,000 2033 2,545,000 2034 2,685,000 2035 2,835,000 2036 2,995,000 2037 3,165,000 2038 3,345,000 2039 3,530,000 5.625% XY4

$96,970,000 Term Bond Due November 15, 20392031 $ 8,615,000 2032 9,085,000 2033 9,585,000 2034 10,115,000 2035 10,675,000 2036 11,260,000 2037 11,880,000 2038 12,530,000 2039 13,225,000 5.500% XZ1

(1) The Series 2009A Bonds maturing on or after November 15, 2019 are subject to redemption prior to maturity on any date on or after November 15, 2018, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper)at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

17

$500,000,000 Dedicated Tax Fund Bonds, Series 2009B

Date of Issue: April 30, 2009* Credit Enhancement: None

Series 2009B Principal Amortization(1)



InterestRate


2010 $ 7,105,000 3.000% YA5 2011 2,000,000 3.000 YB3 2011 5,320,000 5.000 YX5 2012 3,000,000 3.000 YC1 2012 4,645,000 5.000 YY3 2013 2,000,000 3.000 YD9 2013 5,970,000 5.000 YZ0 2014 2,000,000 3.000 YE7 2014 6,325,000 5.000 ZA4 2015 2,000,000 3.000 YF4 2015 6,705,000 5.000 ZB2 2016 2,000,000 3.250 YG2 2016 7,100,000 5.000 ZC0 2017 1,765,000 3.500 YH0 2017 7,755,000 5.000 ZD8 2018 2,000,000 3.750 YJ6 2018 7,965,000 5.000 ZE6 2019 2,000,000 4.000 YK3 2019 8,440,000 5.000 ZF3 2020 10,940,000 5.250 YL1 2021 11,515,000 5.250 YM9 2022 12,120,000 5.250 YN7 2023 12,755,000 5.250 YP2 2024 13,425,000 5.250 YQ0 2025 14,130,000 5.250 YR8 2026 14,875,000 5.250 YS6 2027 15,655,000 5.250 YT4 2028 16,475,000 5.250 YU1 2029 17,340,000 5.250 YV9 2030 18,250,000 5.250 YW7

$256,425,000 Term Bond Due November 15, 20342031 $ 19,210,000 2032 20,175,000 2033 167,040,000 2034 (final maturity) 50,000,000 5.00% ZG1

(1) The Series 2009B Bonds maturing on or after November 15, 2020 are subject to redemption prior to maturity on any date on or after November 15, 2019, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper)at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

* Expected

18

$750,000,000 Dedicated Tax Fund Bonds, Series 2009C (Federally Taxable)(1)

Date of Issue: April 30, 2009* Credit Enhancement: None

Series 2009C Principal Amortization (2)(3)



InterestRate


$750,000,000 Term Bond Due November 15, 20392037 $250,000,000 2038 250,000,000 2039 (final maturity) 250,000,000 7.336% ZH9

* Expected

(1) The MTA currently intends to elect to treat the Series 2009C Bonds as “Build America Bonds” for purposes of The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) and to receive a cash subsidy from the United States Treasury in connection therewith. Pursuant to the Recovery Act, the Authority will receive cash subsidy payments from the United States Treasury equal to 35% of the interest payable on the Series 2009C Bonds. Such cash subsidy payments received by the Authority will not constitute part of the trust estate for purposes of the DTF Resolution.

(2) The Series 2009C Bonds are subject to redemption prior to maturity by written direction of the Authority, in whole or in part, on any Business Day, at the “Make-Whole Redemption Price” (as defined herein). The Make-Whole Redemption Price is the greater of (i) 100% of the principal amount of the Series 2009C Bonds to be redeemed and (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series 2009C Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2009C Bonds are to be redeemed, discounted to the date on which the Series 2009C Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the adjusted “Treasury Rate” (as defined herein) plus 50 basis points, plus, in each case, accrued and unpaid interest on the Series 2009C Bonds to be redeemed on the redemption date. The “Treasury Rate” is, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (excluding inflation indexed securities) (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) mostnearly equal to the period from the redemption date to the maturity date of the Series 2009C Bonds to be redeemed; provided, however, that if the period from the redemption date to such maturity date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

(3) The Series 2009C Bonds are subject to redemption prior to their maturity at the option of the MTA, in whole or in part upon the occurrence of an Extraordinary Event, at a redemption price equal to the greater of: (i) 100% of the principal amount of theSeries 2009C Bonds to be redeemed; and (ii) the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of the Series 2009C Bonds to be redeemed, not including any portion of those payments of interest accrued and unpaid as of the date on which the Series 2009C Bonds are to be redeemed, discounted to the date on which the Series 2009C Bonds are to be redeemed on a semi-annual basis, assuming a 360-day year consisting of twelve 30-day months, at the Treasury Rate, plus 100 basis points; plus, in each case, accrued interest on the Series 2009C Bonds to be redeemed to the redemption date.

An "Extraordinary Event" will have occurred if MTA determines that a material adverse change has occurred to Section 54AA or 6431 of the Code (as such Sections were added by Section 1531 of the Recovery Act, pertaining to "Build America Bonds") or there is any guidance published by the Internal Revenue Service or the United States Treasury with respect to such Sections or any other determination by the Internal Revenue Service or the United States Treasury, which determination is not the resultof any act or omission by MTA to satisfy the requirements to qualify to receive the 35% cash subsidy payment from the United States Treasury, pursuant to which the Authority's 35% cash subsidy payment from the United States Treasury is reduced or eliminated.

19

Part 3. Nature of Continuing Disclosure

Where Located in Appendix A Undertaking Caption(s) Heading(s)

A. Description of the Transit and Commuter Systems operated by the MTA and its affiliates and subsidiaries and their operation.

1. THE RELATED ENTITIES 2. TRANSIT SYSTEM 3. COMMUTER SYSTEM

All headings

4. RIDERSHIP AND FACILITIES USE

1. Transit System (MTA New York City and MaBSTOA) Ridership 2. Commuter System Ridership

5. FEDERAL AND STATE LAWS

1. Transit System 2. Commuter System

6. EMPLOYEES, LABOR RELATIONS AND PENSION OBLIGATIONS

1. Transit System 2. Commuter System

B. Information regarding the Transit and Commuter Capital Programs.

1. FINANCIAL PLANS AND CAPITAL PROGRAMS

1. Capital Programs – Background and Development

2. 2005-2009 MTA Capital Program 3. 2000-2004 MTA Capital Program 4. 1992-1999 Transit Capital Program

Objectives 5. 1992-1999 Commuter Capital

Program Objectives C. Presentation of changes to indebtedness issued by MTA under the DTF Resolution, as well as information concerning changes to MTA’s debt service requirements on such indebtedness payable from DTF Revenues.

1. DEDICATED TAX FUND BONDS

1. DTF Table 1 2. DTF Table 2

D. Financial information and operating data, including information relating to the following:


1. 2009-2012 Financial Plan

Description of how the State allocates taxes to the MTA Dedicated Tax Fund. Description of the material taxes allocated to the MTA Dedicated Tax Fund, together with a description of the tax rate, the tax base and the composition and collection of such taxes by the State. For the material taxes then constituting a source of revenue for the MTA Dedicated Tax Fund, an historical summary of such revenue, if available, together with an explanation of the factors affecting collection levels, for a period of at least the five most recent completed fiscal years then available.

1. DEDICATED TAX FUND BONDS

1. MTTF Receipts – Dedicated Petroleum Business Tax 2. MTTF Receipts – Motor Fuel Tax 3. MTTF Receipts – Motor Vehicle Fees 4. MMTOA Account – Special Tax Supported Operating Subsidies

E. Information concerning the amounts, sources, material changes in and material factors affecting DTF Revenues and debt service incurred under the DTF Resolution.

See Undertakings C and D above.

F. Material litigation relating to any of the foregoing.

1. Litigation 1. MTA 2. Transit System 3. Commuter System

20

Part 4. Notice of Material Events

If any of the following events are checked, an explanation of each such event is set forth below.

Principal and interest payment delinquencies.

Non-payment related defaults.

Unscheduled draws on debt service reserves reflecting financial difficulties.

Unscheduled draws on credit enhancements reflecting financial difficulties.

Substitution of credit or liquidity providers, or their failure to perform.

Adverse tax opinions or events affecting the tax-exempt status of the securities.

Modifications to the rights of security holders.

X Bond calls (which do not include regularly scheduled or mandatory sinking fund redemptions effectuated in accordance with the resolution).

Defeasances.

Release, substitution or sale of property securing repayment of the securities.

Rating changes.

Explanation:

Refundings: The Series 2007A Bonds were redeemed in full prior to maturity with proceeds from the MTA Transportation Revenue Bonds Series 2008A and Series 2008B, issued on February 21, 2008 as described below.


Refunded Redemption DateCUSIP Number

(59259N)2007A-1 86,000,000 March 25, 2008 VE0 2007A-2 86,000,000 March 26, 2008 VF7 2007A-3 86,000,000 March 27, 2008 VG5 2007A-4 86,000,000 March 28, 2008 VH3 2007A-5 86,000,000 March 24, 2008 VJ9

Certain maturities and principal amounts of the Series 2004D Bonds were redeemed in full or in part prior to maturity with proceeds from the MTA Bridges and Tunnels Bonds Series 2008A and Series 2008B, issued on March 27, 2008 as described below.



(59259N)2004D-1 $ 23,000,000 May 1, 2008 QM8 2004D-2 112,000,000 May 1, 2008 QN6

The Series 2005A Bonds were redeemed in full prior to maturity with proceeds from the Series 2008A, issued on June 25, 2008 as described below.



(59259N)2005A 345,060,000 June 26, 2008 RR6

21

The remaining principal outstanding for the Series 2004D-1 Bonds was redeemed in full prior to maturity with proceeds from the Series 2008B, issued on August 7, 2008 as described below.



(59259N)2004D-1 145,000,000 August 11, 2008 QM8

Certain maturities and principal amounts of the Series 2004B Bonds were redeemed in full prior to maturity with proceeds from the Series 2008B, issued on August 7 as described below.



(59259N)2004B-3 100,000,000 August 11, 2008 NX7 2004B-5 100,000,000 August 29, 2008 NZ2

Part 5. Audited Financial Statements

Attached hereto are the audited financial statements of the Metropolitan Transportation Authority.

22

MTA TRANSPORTATION REVENUE BONDS

Part 1. Issues Covered by this Annual Report(1)


(as of April 28, 2009) Interest Rate Mode 2002A May 30, 2002 $2,894,185,000 $2,669,575,000 Fixed 2002B May 30, 2002 210,500,000 210,500,000 Auction 2002D May 30, 2002 400,000,000 400,000,000 Variable and Synthetic Fixed 2002E July 2, 2002 397,495,000 322,515,000 Fixed 2002F November 20, 2002 446,110,000 282,355,000 Fixed 2002G November 20, 2002 400,000,000 200,000,000 Variable 2003A May 14, 2003 475,340,000 385,455,000 Fixed 2003B August 13, 2003 751,765,000 456,915,000 Fixed 2005A February 15, 2005 650,000,000 611,330,000 Fixed 2005B July 1, 2005 750,000,000 699,125,000 Fixed 2005C November 2, 2005 150,000,000 114,540,000 Fixed 2005D November 2, 2005 250,000,000 250,000,000 Synthetic Fixed 2005E November 2, 2005 250,000,000 250,000,000 Synthetic Fixed 2005F December 7, 2005 468,760,000 431,610,000 Fixed 2005G December 7, 2005 250,000,000 250,000,000 Variable 2005H December 7, 2005 173,370,000 84,660,000 Fixed 2006A July 20, 2006 475,000,000 428,700,000 Fixed 2006B December 20, 2006 717,730,000 694,370,000 Fixed 2007A July 11, 2007 425,615,000 411,400,000 Fixed 2007B December 13, 2007 415,000,000 408,830,000 Fixed 2008A February 21, 2008 512,470,000 512,470,000 Fixed 2008B February 21, 2008 487,530,000 487,530,000 Variable 2008C October 23, 2008 550,000,000 550,000,000 Fixed

Total $12,500,870,000 $11,111,880,000

Part 2. Details of Each Issue of Bonds

Uninsured RatingsFitch Ratings.................................................................................................................................................................A Moody’s Investors Services........................................................................................................................................A2 Standard and Poor’s Ratings.........................................................................................................................................A

Summary of State and City Redemption ProvisionsPursuant to the MTA Act, the State, upon providing sufficient funds, may require MTA to redeem any Series of MTA Transportation Revenue Bonds, prior to maturity, as a whole, on any interest payment date not less than twenty years after the date of issue of that series of MTA Transportation Revenue Bonds, at 105% of their face value and accrued interest or at such lower redemption price provided for in that series of MTA Transportation Revenue Bonds in the case of redemption as a whole on the redemption date. The MTA Act further provides that the City, upon furnishing sufficient funds, may require MTA to redeem any Series of MTA Transportation Revenue Bonds, as a whole, but only in accordance with the terms upon which each Series of MTA Transportation Revenue Bonds are otherwise redeemable.

(1) In July 2008, MTA retired $650 million of commercial paper notes with some of the proceeds of the MTA Bridges and Tunnels Series 2008D Bonds. In September 2008, MTA issued $750 million aggregate principal amount of commercial paper notes in the form of bond anticipation notes under the Transportation Resolution.

23

$2,894,185,000 Transportation Revenue Refunding Bonds, Series 2002A

Date of Issue: May 30, 2002 Credit Enhancement: Some, but not all, of the maturities of the Series 2002A Bonds are insured by

Ambac Assurance Corporation, Financial Security Assurance Inc. (FSA), Financial Guaranty Insurance Company (FGIC) and MBIA Insurance Corporation, as set forth below.

Uninsured Series 2002A Bonds – Principal Amortization (1)



InterestRate

Cusip No. (Base 59259R)

2010 $ 4,100,000 4.125% BW3 2010 6,515,000 5.000 BX1 2011 1,820,000 4.250 BY9 2011 290,000 5.000 BZ6 2012 1,810,000 4.350 CA0 2012 635,000 5.000 CB8 2013 1,190,000 4.400 CC6 2014 1,490,000 4.600 CD4 2015 825,000 4.625 CE2 2016 1,075,000 4.750 CF9 2017 735,000 4.800 CG7 2018 1,260,000 4.900 CH5 2019 2,685,000 5.000 CJ1 2020 3,890,000 5.125 CK8 2021 3,535,000 5.125 CL6 2022 8,930,000 5.125 CM4

$300,000,000 Term Bond Due November 15, 2031 2027 $ 48,785,000 2028 51,230,000 2029 53,855,000 2030 56,615,000 2031 89,515,000 5.125% CN2

$70,000,000 Term Bond Due November 15, 2032 2032 $ 70,000,000 5.750% CP7

(1) The Series 2002A Bonds (except for the Insured Series 2002A Bonds maturing on November 15, 2013 and November 15, 2014), are subject to redemption prior to maturity on or after November 15, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2002A were defeased on September 20, 2007 at the principal amounts listed below.


Principal Amount

Outstanding

Principal Amount Defeased

Interest Rate

CUSIP Number (59259R)

2009 $18,955,000 $18,955,000 3.80% AG9 2009 2,090,000 2,090,000 3.90 BU7 2009 1,365,000 1,365,000 5.00 BV5 2009 15,795,000 15,795,000 5.00 AH7

24

Transportation Revenue Refunding Bonds, Series 2002A (continued)

Series 2002A Bonds insured by MBIA – Principal Amortization(1)



InterestRate


2010 $15,715,000 4.000% AJ3 2010 13,305,000 5.000 AK0 2011 18,950,000 4.000 AL8 2011 20,160,000 5.000 AM6

Series 2002A Bonds insured by Ambac – Principal Amortization(1)



InterestRate


2012 $25,740,000 4.200% AN4 2012 15,300,000 5.000 AP9 2013 60,365,000 5.500 AQ7 2013 20,395,000 4.300 AR5 2014 84,965,000 5.500 AS3 2015 90,380,000 5.500 AT1 2016 95,175,000 5.500 AU8 2017 100,620,000 5.500 AV6 2018 106,985,000 5.500 AW4 2019 102,315,000 5.500 AX2 2020 76,110,000 5.000 AY0

Series 2002A Bonds insured by FGIC – Principal Amortization(1)



InterestRate


2021 $63,270,000 5.125% AZ7 2021 13,195,000 5.000 BA1 2022 39,860,000 5.125 BB9 2022 31,210,000 5.000 BC7

$419,510,000 Term Bond Due November 15, 20252023 $133,090,000 2024 139,760,000 2025 146,660,000 5.000% BD5

$100,000,000 Term Bond Due November 15, 20312031 $100,000,000 5.250% BF0

Series 2002A Bonds insured by FSA – Principal Amortization(1)



InterestRate


$645,265,000 Term Bond Due November 15, 2030 2026 $154,615,000 2027 113,560,000 2028 119,315,000 2029 125,095,000 2030 132,680,000 5.000% BE3

$100,000,000 Term Bond Due November 15, 2032 2032 $100,000,000 5.750% BG8

(1) The Series 2002A Bonds (except for the Insured Series 2002A Bonds maturing on November 15, 2013 and November 15, 2014), are subject to redemption prior to maturity on or after November 15, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date.

25

$210,500,000 Transportation Revenue Variable Rate Refunding Bonds, Series 2002B $105,250,000 Subseries 2002B-1 $105,250,000 Subseries 2002B-2

Date of Issue: May 30, 2002 Credit Enhancement: All Series 2002B Bonds are insured by Financial Security Assurance Inc (FSA). Current Mode: Auction




InterestRate


2013 $4,500,000 2014 4,600,000 2015 4,900,000 2016 5,100,000 2017 5,600,000 2018 5,100,000 2019 9,300,000 2020 26,000,000 2021 29,150,000 2022 (final maturity) 11,000,000 Variable EE0




InterestRate


2013 $4,500,000 2014 4,600,000 2015 4,900,000 2016 5,100,000 2017 5,600,000 2018 5,100,000 2019 9,300,000 2020 26,000,000 2021 29,150,000 2022 (final maturity) 11,000,000 Variable EF7

(1) Each subseries of Series 2002B Bonds shall be subject to optional redemption by MTA, in whole or in part, on any Interest Payment Date immediately following an Auction Period, at a Redemption Price equal to the principal amount thereof, plus accrued interest to the redemption date; provided however, that in the event of a partial redemption of Series 2002B Bonds of asubseries, the aggregate principal amount of Series 2002B Bonds of such subseries which will remain outstanding shall be equal to or more than $10,000,000 unless otherwise consented to by the related Broker-Dealers.

26

$400,000,000 Transportation Revenue Variable Rate Refunding Bonds, Series 2002D $200,000,000 Subseries 2002D-1 $200,000,000 Subseries 2002D-2

Date of Issue: May 30, 2002 Credit Enhancement: All Series 2002D Bonds are insured by Financial Security Assurance Inc. Liquidity Facility: Series 2002D-1: Standby Bond Purchase Agreement with WestLB AG, New York

Branch (expires May 9, 2012) Series 2002D-2: Standby Bond Purchase Agreement with Dexia Crédit Local, New

York Branch, (expires May 27, 2011) Current Mode: Weekly

Subseries 2002D-1 Principal Amortization(1)



InterestRate


2022 $ 46,900,000 2023 21,400,000 2024 22,600,000 2025 24,000,000 2026 24,800,000 2027 26,200,000 2028 27,700,000 2029 (final maturity) 6,400,000 Variable EC4

Subseries 2002D-2 Principal Amortization(1)(2)



InterestRate


2029 $ 22,800,000 2030 31,400,000 2031 31,000,000 2032 (final maturity) 114,800,000 Variable ED2

(1) The Series 2002D Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

(2) Transportation Revenue Bonds Series 2002D-2 are swapped to a fixed rate of 4.45% effective January 1, 2007. For more information, see Appendix A, Part 4, "Swap Agreements."

27

$397,495,000 Transportation Revenue Refunding Bonds, Series 2002E

Date of Issue: July 2, 2002 Credit Enhancement: Some, but not all, of the maturities of the Series 2002E Bonds are insured by MBIA

Insurance Corporation

Uninsured Series 2002E Bonds – Principal Amortization(1)



InterestRate


$115,245,000 Term Bond Due November 15, 2031 2026 $15,725,000 2027 16,515,000 2028 17,300,000 2029 18,420,000 2030 17,465,000 2031 29,820,000 5.250% FX7

Insured Series 2002E Bonds – Principal Amortization(1)



InterestRate


2010 $ 1,690,000 3.900% FC3 2010 16,025,000 5.000 FD1 2011 4,480,000 4.000 FE9 2011 14,230,000 5.250 FF6 2012 3,110,000 4.100 FG4 2012 16,185,000 5.500 FH2 2013 8,510,000 5.500 FJ8 2014 9,015,000 5.500 FK5 2015 9,410,000 5.500 FL3 2016 10,030,000 5.500 FM1 2017 10,325,000 5.500 FN9 2018 11,185,000 5.500 FP4 2019 13,155,000 5.500 FQ2 2020 12,265,000 5.500 FR0 2021 13,500,000 5.500 FS8 2022 10,935,000 5.000 FT6 2023 13,740,000 5.100 FU3 2024 14,405,000 5.125 FV1 2025 15,075,000 5.000 FW9

(1) The Series 2002E Bonds maturing on or after November 15, 2016 are subject to redemption prior to maturity on or after November 15, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2002E were defeased on September 20, 2007 at the principal amounts listed below.


Principal Amount

Outstanding


Interest Rate


2009 $ 3,615,000 $ 3,615,000 3.70% FA7 2009 13,085,000 13,085,000 5.00 FB5

28

$446,110,000 Transportation Revenue Refunding Bonds, Series 2002F

Date of Issue: November 20, 2002 Credit Enhancement: The remaining maturities of the Series 2002F Bonds are insured by MBIA Insurance

Corporation

Insured Series 2002F Bonds – Principal Amortization(1)



InterestRate


2009 $13,610,000 5.000% LD4 2009 6,040,000 3.150 LE2 2010 14,115,000 5.000 LF9 2010 2,350,000 4.000 LG7 2010 4,055,000 3.400 LH5 2011 17,615,000 5.000 LJ1 2011 3,845,000 3.500 LK8 2012 8,000,000 5.000 LL6 2012 1,075,000 4.000 LM4 2012 2,740,000 3.600 LN2 2012 10,615,000 5.500 LP7 2013 11,800,000 4.000 LQ5

$186,495,000 Term Bond Due November 15, 2031 2028 $43,270,000 2029 45,430,000 2030 47,705,000 2031 50,090,000 5.000% LS1

(1) The Series 2002F Bonds maturing on or after November 15, 2013 are subject to redemption prior to maturity on any date on or after November 15, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper)at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Series 2002F Bonds were advance refunded and defeased by the Series 2006B Bonds on December 20, 2006 at the redemption prices and the redemption dates listed below.

Maturity (Nov. 15)

Principal Amount to be

RedeemedInterest

RateRedemption Date

(Nov. 15)Redemption

PriceCUSIP Number

(59259R)2027 $ 60,890,000 5.250% 2012 100% LR3

29

$400,000,000 Transportation Revenue Variable Rate Refunding Bonds, Series 2002G $200,000,000 Subseries 2002G-1

Date of Issue: November 20, 2002 Credit Enhancement and Liquidity Facility: Series 2002G-1: Irrevocable Letter of Credit with The Bank of Nova Scotia, acting

through its New York Agency, (expires October 7, 2011)Current Mode: Weekly

Principal Amortization (1)(2)



InterestRate


2013 $5,900,000 2014 12,270,000 2015 12,760,000 2016 13,255,000 2017 13,800,000 2018 14,355,000 2019 14,930,000 2020 15,515,000 2021 16,150,000 2022 16,795,000 2023 17,465,000 2024 18,160,000 2025 18,890,000 2026 (final maturity) 9,755,000 Variable 7S7(2)

(1) The Series 2002G Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

(2) On October 9, 2008, the MTA effected a mandatory tender of the Subseries 2002G-1 Bonds (CUSIP number 59259RLT9), cancelled the existing financial insurance policy with Ambac Assurance Corporation and the Standby Bond Purchase Agreement with the Bank of Nova Scotia related to the Subseries 2002G-1 Bonds and remarketed the Subseries 2002G-1 Bonds with credit enhancement and liquidity provided by an irrevocable Direct-Pay Letter of Credit with the Bank of Nova Scotia. The CUSIP for the remarketed Subseries 2002G-1 Bonds is 59259R7S7.

The principal amount of the Transportation Revenue Variable Rate Refunding Bonds, Subseries 2002G-2 were redeemed with certain proceeds from the Series 2008A and 2008B Bonds and MTA Bridges and Tunnels, Series 2008A and 2008B on the redemption date listed below.


RefundedCUSIP Number

(59259R)Date

Redeemed 2002G-2 $ 200,000,000 LU6 May 1, 2008

30

$475,340,000 Transportation Revenue Bonds, Series 2003A

Date of Issue: May 14, 2003 Credit Enhancement: Some, but not all, of the maturities of the Series 2003A Bonds are insured by Financial

Security Assurance Inc. (FSA), and Financial Guaranty Insurance Company (FGIC), as set forth below.

FSA Insured Series 2003A Bonds – Principal Amortization(1)



InterestRate


2020 $17,270,000 5.500% NT7 2021 17,440,000 5.500 NU4 2022 17,525,000 5.500 NV2 2023 17,460,000 5.500 NW0 2024 12,145,000 4.500 NX8 2024 5,950,000 5.000 NY6 2025 18,605,000 5.000 NZ3 2026 19,175,000 5.000 PA6 2027 19,760,000 5.000 PB4 2028 3,750,000 5.000 PC2

FGIC Insured Series 2003A Bonds – Principal Amortization(1)



InterestRate


2010 5,615,000 3.125 NC4 2010 7,940,000 5.000 ND2 2011 995,000 4.000 NE0 2011 12,455,000 5.000 NF7 2012 3,560,000 3.500 NG5 2012 9,820,000 5.000 NH3 2013 2,510,000 4.000 NJ9 2013 10,760,000 5.000 NK6 2014 6,435,000 3.625 NL4 2014 7,345,000 5.000 NM2 2015 14,245,000 5.000 NN0 2016 14,805,000 5.000 NP5 2017 15,395,000 5.000 NQ3 2018 15,995,000 5.000 NR1 2019 16,635,000 5.500 NS9

$91,865,000 Term Bond Due November 15, 2032 2028 $ 16,605,000 2029 20,960,000 2030 21,665,000 2031 22,425,000 2032 10,210,000 5.000% PD0

(1) The Series 2003A Bonds maturing on or after November 15, 2016 (except for the Series 2003A Bonds maturing on November 15, 2019 through November 15, 2023) are subject to redemption prior to maturity on any date on or after November 15, 2013, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2003A Bonds maturing on November 15, 2019 through November 15, 2023 are not subject to redemption prior to maturity.



Principal Amount

Outstanding


Interest Rate


2009 $5,975,000 $5,975,000 3.00% NA8 2009 7,650,000 7,650,000 5.00 NB6

31

$751,765,000 Transportation Revenue Bonds, Series 2003B

Date of Issue: August 13, 2003 Credit Enhancement: Some, but not all, of the maturities of the Series 2003B Bonds are insured by Financial

Guaranty Insurance Company (FGIC), and MBIA Insurance Corporation, as set forth below.

Uninsured Series 2003B Bonds – Principal Amortization(1)



InterestRate


2023 $30,490,000 5.000% RA4 2024 32,010,000 5.125 RB2 2025 33,655,000 5.250 RC0

FGIC Insured Series 2003B Bonds – Principal Amortization(1)



InterestRate


2010 $ 11,400,000 3.400% PZ1 2010 5,000,000 4.000 QA5 2011 11,990,000 3.750 QB3 2011 5,000,000 4.000 QC1 2012 1,570,000 3.900 QD9 2012 16,070,000 5.000 QE7 2013 3,425,000 4.000 QF4 2013 15,080,000 5.250 QG2 2014 11,690,000 4.200 QH0 2014 7,740,000 5.250 QJ6 2015 4,160,000 4.300 QK3 2015 16,170,000 5.250 QL1 2016 710,000 4.400 QM9 2016 20,645,000 5.250 QN7 2017 695,000 4.450 QP2 2017 21,775,000 5.250 QQ0 2018 990,000 4.500 QR8 2018 22,655,000 5.250 QS6 2019 1,390,000 4.600 QT4 2019 23,490,000 5.250 QU1 2020 715,000 4.700 QV9 2020 25,460,000 5.250 QW7 2021 5,420,000 4.750 QX5 2021 22,130,000 5.250 QY3

(1) The Series 2003B Bonds maturing on or after November 15, 2014 (except for the Series 2003B Bonds maturing on November 15, 2019 through November 15, 2021 and bearing interest at a rate of 5.25%) are subject to redemption prior to maturity on any date on or after November 15, 2013, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2003B Bonds maturing on November 15, 2019 through November 15, 2021 and bearing interest at a rate of 5.25% are not subject to optional redemption prior to maturity.

32

$751,765,000 Transportation Revenue Bonds, Series 2003B (continued)

MBIA Insured Series 2003B Bonds – Principal Amortization(1)



InterestRate


2022 $ 28,965,000 5.250% QZ0 $76,425,000 Term Bond Due November 15, 2028

2027 $ 37,280,000 2028 39,145,000 5.000% RE6

(1) The Series 2003B Bonds maturing on or after November 15, 2014 (except for the Series 2003B Bonds maturing on November 15, 2019 through November 15, 2021 and bearing interest at a rate of 5.25%) are subject to redemption prior to maturity on any date on or after November 15, 2013, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2003B Bonds maturing on November 15, 2019 through November 15, 2021 and bearing interest at a rate of 5.25% are not subject to optional redemption prior to maturity.

The following maturities and principal amounts of the Series 2003B Bonds were advance refunded and defeased by the Series 2006B Bonds on December 20, 2006 at the redemption prices and the redemption dates listed below.

Maturity (Nov. 15)


Redeemed Interest

RateRedemption Date

(Nov. 15) Redemption

PriceCUSIP Number

(59259R) 2026 $ 35,420,000 5.250% 2013 100% RD8 2032 171,455,000 5.250 2013 100% RF3

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2003B were defeased on September 20, 2007 at the principal amounts listed below.


Principal Amount

Outstanding


Interest Rate


2009 $10,845,000 $10,845,000 3.30% PX6 2009 5,000,000 5,000,000 4.00 PY4

33


Date of Issue: February 15, 2005 Credit Enhancement: The remaining maturities of the Series 2005A Bonds are insured by either the Ambac

Assurance Corporation (Ambac), or MBIA Insurance Corporation (MBIA), as set forth below.

Ambac Insured Series 2005A Bonds – Principal Amortization(1)



InterestRate


2016 $12,015,000 5.500% UD4 2017 12,675,000 5.500 UE2 2018 13,375,000 5.500 UF9 2019 14,110,000 5.000 UG7 2020 14,815,000 5.000 UH5 2021 14,840,000 5.000 UJ1 2022 15,585,000 5.000 UK8 2030 35,615,000 4.750 UV4

$117,610,000 Term Bond Due November 15, 20332031 $37,305,000 2032 39,175,000 2033 41,130,000 5.000% UW2

Ambac Insured Series 2005A Bonds, continued2034 $43,185,000 4.500% UX0

(1) The Series 2005A Bonds maturing on or after November 15, 2019 (other than the Series 2005A Bonds maturing on November 15, 2026 bearing interest at the initial rate of 3.40% per annum) are subject to redemption prior to maturity on any date on or after November 15, 2015, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.



Principal Amount

Outstanding


Interest Rate


2009 $10,100,000 $10,100,000 3.00% TS3

34

$650,000,000 Transportation Revenue Bonds, Series 2005A (continued)

MBIA Insured Series 2005A Bonds – Principal Amortization(1)



InterestRate


2010 10,405,000 3.000 TT1 2011 10,285,000 4.000 TU8 2012 5,220,000 3.200 TV6 2012 5,475,000 5.000 TW4 2013 3,670,000 3.300 TX2 2013 7,470,000 5.000 TY0 2014 2,695,000 4.500 TZ7 2014 8,940,000 5.000 UA0 2015 5,245,000 3.500 UB8 2015 6,955,000 5.000 UC6 2023 8,600,000 4.750 UL6 2024 9,005,000 4.750 UM4 2025 9,435,000 4.750 UN2 2026 9,885,000 4.750 UP7

$71,575,000 Term Bond Due November 15, 2026(2)

2023 $16,360,000 (2)

2024 17,345,000 (2)

2025 18,385,000 (2)

2026 19,485,000 (2) UQ5MBIA Insured Series 2005A Bonds, continued

2027 31,005,000 4.750% UR3 2028 32,485,000 4.750 US1 2029 6,845,000 4.375 UU6 2029 27,180,000 4.750 UT9 2035 45,130,000 4.500 UY8

(1) The Series 2005A Bonds maturing on or after November 15, 2019 (other than the Series 2005A Bonds maturing on November 15, 2026 bearing interest at the initial rate of 3.40% per annum) are subject to redemption prior to maturity on any date on or after November 15, 2015, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

(2) The term bond due November 15, 2026 insured by MBIA is a “Step Coupon” security that bears interest at 3.40% per annum to and including November 15, 2010, at 4.00% per annum from November 16, 2010 to and including November 15, 2015, at 5.00% per annum from November 16, 2015 to and including November 15, 2020, and thereafter through maturity at 6.00% per annum. Subject to optional redemption prior to maturity on any date on or after November 15, 2010 at 100% of the principal amount.

35


Date of Issue: July 1, 2005 Credit Enhancement: Some, but not all, of the maturities of the Series 2005B Bonds are insured by Ambac

Assurance Corp., and MBIA Insurance Corp., as set forth below.


Due(November 15) Maturity


InterestRate

CUSIP No (Base 59259R)

2010 $ 6,880,000 3.250% VU5 2010 7,000,000 5.000 VV3

$70,000,000 Term Bond Due November 15, 2031 2030 $31,755,000 2031 38,245,000 5.000% WW0

Ambac Insured Series 2005B Bonds – Principal Amortization(1)



InterestRate


2011 $ 5,095,000 3.250% VW1 2011 9,360,000 5.000 VX9 2012 5,090,000 3.375 VY7 2012 10,000,000 5.000 VZ4 2013 5,760,000 3.500 WA8 2013 10,000,000 5.000 WB6 2014 1,565,000 3.500 WC4 2014 14,895,000 5.000 WD2 2015 1,900,000 3.625 WE0 2015 15,360,000 5.000 WF7 2016 18,095,000 5.000 WG5 2022 24,485,000 5.250 WN0 2023 25,770,000 5.250 WP5 2024 27,120,000 5.250 WQ3 2025 925,000 4.125 WR1 2025 27,620,000 5.000 WS9 2026 29,965,000 5.000 WT7 2027 31,465,000 5.000 WU4

$72,390,000 Term Bond Due November 15, 2030 2028 $33,035,000 2029 34,690,000 2030 4,665,000 5.000% WV2

(1) The Series 2005B Bonds maturing on or after November 15, 2016, except the Series 2005B Bonds maturing on November 15, 2018 through November 15, 2024, inclusive, are subject to redemption prior to maturity on any date on or after November 15, 2015, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2005B Bonds maturing on November 15, 2018 through November 15, 2024, inclusive, are not subject to optional redemption prior to maturity.

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2005B were defeased on September 20, 2007 at the principal amounts listed below.


Principal Amount

Outstanding


Interest Rate


2009 $6,310,000 $6,310,000 3.50% VS0 2009 7,000,000 7,000,000 5.00 VT8

36

$750,000,000 Transportation Revenue Bonds, Series 2005B (continued)

MBIA Insured Series 2005B Bonds – Principal Amortization(1)



InterestRate


2017 $ 19,000,000 5.000% WH3 2018 19,950,000 5.250 WJ9 2019 21,000,000 5.250 WK6 2020 22,100,000 5.250 WL4 2021 23,260,000 5.250 WM2 2035 1,580,000 4.375 WX8

$171,495,000 Term Bond Due November 15, 20352032 $ 40,155,000 2033 42,165,000 2034 44,270,000 2035 44,905,000 5.000% WY6

(1) The Series 2005B Bonds maturing on or after November 15, 2016, except the Series 2005B Bonds maturing on November 15, 2018 through November 15, 2024, inclusive, are subject to redemption prior to maturity on any date on or after November 15, 2015, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2005B Bonds maturing on November 15, 2018 through November 15, 2024, inclusive, are not subject to optional redemption prior to maturity.

37

$150,000,000 Transportation Revenue Bonds, Series 2005C

Date of Issue: November 2, 2005 Credit Enhancement: None



InterestRate


2009 $ 5,055,000 3.500% YM0 2009 7,755,000 5.000 YN8 2010 5,720,000 3.625 YP3 2010 7,655,000 5.000 YQ1 2011 2,000,000 3.750 YR9 2011 11,965,000 5.000 YS7 2012 1,710,000 3.875 YT5 2012 12,930,000 5.000 YU2 2013 4,115,000 4.000 YV0 2013 11,240,000 5.000 YW8 2014 1,795,000 4.000 YX6 2014 14,285,000 5.250 YY4 2015 6,410,000 4.150 YZ1 2015 10,490,000 5.000 ZA5 2016 3,740,000 4.250 ZB3 2016 7,675,000 5.000 ZC1

(1) The Series 2005C Bonds are not subject to redemption prior to maturity.

38

$250,000,000 Transportation Revenue Variable Rate Bonds, Series 2005D $150,000,000 Subseries 2005D-1 $100,000,000 Subseries 2005D-2

Date of Issue: November 2, 2005 Credit Enhancement And Liquidity Facility: Series 2005D-1: Irrevocable Direct Pay Letter of Credit issued by Landesbank Hessen

Thüringen (Helaba), acting through its New York Branch (expires on November 7, 2011); Series 2005D-2: Irrevocable Direct Pay Letter of Credit issued by Landesbank Hessen Thüringen (Helaba), acting through its New York Branch (expires on November 10, 2011)

Current Mode: Subseries 2005D-1: Weekly Subseries 2005D-2: Daily




InterestRate

Cusip No. (Base 59259Y)

2016 $ 1,875,000 2017 5,375,000 2018 5,575,000 2019 5,800,000 2020 6,025,000 2021 6,250,000 2022 6,500,000 2023 6,775,000 2024 7,050,000 2025 7,325,000 2026 7,625,000 2027 7,925,000 2028 8,250,000 2029 8,575,000 2030 8,925,000 2031 9,250,000 2032 9,625,000 2033 10,025,000 2034 10,425,000 2035 (final maturity) 10,825,000 Variable AG4

(1) Each subseries of Series 2005D Bonds shall be subject to optional redemption by MTA, in whole or in part, on any Interest Payment Date immediately following an Auction Period, at a Redemption Price equal to the principal amount thereof, plus accrued interest to the redemption date; provided, however, that in the event of a partial redemption of Series 2005D Bonds of a subseries, the aggregate principal amount of Series 2005D Bonds of such subseries which will remain outstanding shall be equal to or more than $10,000,000 unless otherwise consented to by the related Broker-Dealers.

(2) On November 7, 2008, the MTA effected a mandatory tender of the Subseries 2005D-1 Auction Rate Securities (CUSIP number 59259RZK3) and the Subseries 2005D-2 Auction Rate Securities (CUSIP number 59259RZH0), cancelled the existing financial guaranty insurance policies with CIFG Assurance N.A., redesignated the Subseries 2005D-1 and Subseries 2005D-2 as the Subseries 2005D-1 Bonds and remarketed the Subseries 2005D-1 Bonds as Variable Interest Rate Obligations in the Weekly Mode with credit enhancement and liquidity support provided by an irrevocable Direct-Pay Letter of Credit with the Landesbank Hessen-Thüringen (Helaba), acting through its New York Branch. The CUSIP for the remarketed Subseries 2005D-1 Bonds is 59259YAG4.

39

$250,000,000 Transportation Revenue Variable Rate Bonds, Series 2005D (continued)


Current Mode: Daily Due


InterestRate

Cusip No. (Base 59259Y)

2016 $ 1,250,000 2017 3,575,000 2018 3,700,000 2019 3,875,000 2020 4,000,000 2021 4,175,000 2022 4,325,000 2023 4,500,000 2024 4,700,000 2025 4,875,000 2026 5,075,000 2027 5,275,000 2028 5,500,000 2029 5,700,000 2030 5,950,000 2031 6,175,000 2032 6,425,000 2033 6,675,000 2034 6,975,000 2035 (final maturity) 7,275,000 Variable AE9

(1) Each subseries of Series 2005D Bonds shall be subject to optional redemption by MTA, in whole or in part, on any Interest

Payment Date immediately following an Auction Period, at a Redemption Price equal to the principal amount thereof, plus accrued interest to the redemption date; provided, however, that in the event of a partial redemption of Series 2005D Bonds of a subseries, the aggregate principal amount of Series 2005D Bonds of such subseries which will remain outstanding shall be equal to or more than $10,000,000 unless otherwise consented to by the related Broker-Dealers.

(2) On November 10, 2008, the MTA effected a mandatory tender of the Subseries 2005D-3 Auction Rate Securities (CUSIP number 59259RZL1) and the Subseries 2005D-4 Auction Rate Securities (CUSIP number 59259RZJ6), cancelled the existing financial guaranty insurance policies with Financial Security Assurance, redesignated the Subseries 2005D-3 and Subseries 2005D-4 as the Subseries 2005D-2 Bonds and remarketed the Subseries 2005D-2 Bonds as Variable Interest Rate Obligations in the Daily Mode with credit enhancement and liquidity support provided by an irrevocable Direct-Pay Letter of Credit with the Landesbank Hessen-Thüringen (Helaba), acting through its New York Branch. The CUSIP for the remarketed Subseries 2005D-2 Bonds is 59259YAE9.

40

$250,000,000 Transportation Revenue Variable Rate Bonds, Series 2005E $125,000,000 Subseries 2005E-1 $125,000,000 Subseries 2005E-2

Date of Issue: November 2, 2005 Credit Enhancement andLiquidity Facility: Direct-pay Letter of Credit with Fortis Bank, S.A./N.V., (expires October 9, 2012) Current Mode: Weekly

Subseries 2005E-1 Principal Amortization(1)



InterestRate


2016 $ 1,570,000 2017 4,465,000 2018 4,640,000 2019 4,825,000 2020 5,020,000 2021 5,220,000 2022 5,425,000 2023 5,645,000 2024 5,870,000 2025 6,105,000 2026 6,350,000 2027 6,600,000 2028 6,870,000 2029 7,145,000 2030 7,425,000 2031 7,725,000 2032 8,030,000 2033 8,350,000 2034 8,685,000 2035 (final maturity) 9,035,000 Variable ZF4

(1) The Series 2005E Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

41

$250,000,000 Transportation Revenue Variable Rate Bonds, Series 2005E (continued)

Subseries 2005E-2 Principal Amortization(1)



InterestRate


2016 $ 1,580,000 2017 4,435,000 2018 4,635,000 2019 4,800,000 2020 5,030,000 2021 5,230,000 2022 5,450,000 2023 5,655,000 2024 5,855,000 2025 6,120,000 2026 6,350,000 2027 6,600,000 2028 6,855,000 2029 7,155,000 2030 7,400,000 2031 7,750,000 2032 8,045,000 2033 8,375,000 2034 8,665,000 2035 (final maturity) 9,015,000 Variable ZG2

(1) The Series 2005E Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

42

$468,760,000 Transportation Revenue Bonds, Series 2005F

Date of Issue: December 7, 2005 Credit Enhancement: None



Sinking Fund Redemption Interest Rate

CUSIP No.(Base 59259R)

2009 $ 4,750,000 3.500% ZW7 2009 8,860,000 5.000 ZX5 2010 4,675,000 3.700 ZY3 2010 9,540,000 5.000 ZZ0 2011 5,045,000 3.800 A20 2011 9,820,000 5.000 A38 2012 1,160,000 3.900 A46 2012 14,390,000 5.000 A53 2013 5,100,000 4.000 A61 2013 11,215,000 5.000 A79 2014 3,385,000 4.125 A87 2014 13,695,000 5.000 A95 2015 3,560,000 4.200 B29 2015 14,345,000 5.000 B37

$127,805,000 Term Bond Due November 15, 2030 2026 $ 3,130,000 2027 28,925,000 2028 30,375,000 2029 31,890,000 2030 33,485,000 5.000% B45

$4,215,000 Term Bond Due November 15, 2035 2031 $ 765,000 2032 805,000 2033 840,000 2034 880,000 2035 925,000 4.800% B52

$190,050,000 Term Bond Due November 15, 2035 2031 $34,395,000 2032 36,110,000 2033 37,920,000 2034 39,820,000 2035 41,805,000 5.000% B60

(1) All Series 2005F Term Bonds maturing on November 15, 2030 and November 15, 2035 are subject to redemption prior to maturity on any date on or after November 15, 2015, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

43

$250,000,000 Transportation Revenue Variable Rate Bonds, Series 2005G $125,000,000 Subseries 2005G-1 $125,000,000 Subseries 2005G-2

Date of Issue: December 7, 2005 Credit Enhancement andLiquidity Facility: Direct-pay Letter of Credit issued by BNP Paribas, acting through its San Francisco

Branch, (expires December 8, 2010) Current Mode: Daily

Subseries 2005G-1 Principal Amortization(1)

Current Mode: DailyDue

November 1 MaturitySinking Fund Redemption Interest Rate


2016 $ 9,385,000 2017 9,760,000 2018 10,150,000 2019 10,560,000 2020 10,975,000 2021 11,420,000 2022 11,875,000 2023 12,350,000 2024 12,840,000 2025 13,360,000 2026 (final maturity) 12,325,000 Variable ZQ0

Subseries 2005G-2 Principal Amortization(1)

Current Mode: DailyDue

November 1 MaturitySinking Fund Redemption Interest Rate


2016 $ 9,385,000 2017 9,760,000 2018 10,150,000 2019 10,555,000 2020 10,980,000 2021 11,415,000 2022 11,875,000 2023 12,350,000 2024 12,845,000 2025 13,355,000 2026 (final maturity) 12,330,000 Variable B78

(1) The Series 2005G Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, MTA will redeem Bank Bonds first.

44

$173,370,000 Transportation Revenue Refunding Bonds, Series 2005H




InterestRate


2010 $ 1,665,000 3.625% D35 2010 24,615,000 5.250 D43 2011 2,690,000 3.750 D50 2011 25,530,000 5.250 D68 2012 3,150,000 3.800 D76 2012 27,010,000 5.250 D84

(1) The Series 2005H Bonds are not subject to redemption prior to maturity.

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2005H were defeased on September 20, 2007 at the principal amounts listed below.


Principal Amount

Outstanding


Interest Rate


2009 $ 1,680,000 $ 1,680,000 3.50% C93 2009 22,855,000 22,855,000 5.25 D27

45


Date of Issue: July 20,2006 Credit Enhancement: None




InterestRate


2010 $ 2,685,000 4.000% H31 2010 5,940,000 5.000 H49 2011 9,030,000 4.000 H56 2012 4,270,000 4.000 H64 2012 5,125,000 5.000 H72 2013 2,750,000 4.125 H80 2013 7,070,000 5.000 H98 2014 3,260,000 4.250 J21 2014 7,025,000 5.000 J39 2015 8,345,000 4.250 J47 2015 2,430,000 5.000 J54 2016 3,600,000 4.500 J62 2016 7,655,000 5.000 J70 2017 4,455,000 4.400 J88 2017 7,340,000 5.000 J96 2018 12,360,000 5.000 K29 2019 12,980,000 5.000 K37 2020 13,625,000 5.000 K45 2021 14,310,000 5.000 K52 2022 15,025,000 5.000 K60 2023 15,775,000 5.000 K78 2024 16,565,000 5.000 K86 2025 17,390,000 5.000 K94 2026 18,260,000 5.000 L28

$105,950,000 Term Bond Due November 15, 20312027 $ 19,175,000 2028 20,135,000 2029 21,140,000 2030 22,195,000 2031 23,305,000 5.000% L36

$103,295,000 Term Bond Due November 15, 20352032 $ 24,475,000 2033 25,695,000 2034 26,980,000 2035 26,145,000 5.000% L51

Serial Bond, continued 2035 $ 2,185,000 4.750% L44

(1) The Series 2006A Bonds maturing on or after November 15, 2017 are subject to redemption prior to maturity on any date on or after November 15, 2016, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.



Principal Amount

Outstanding


Interest Rate


2009 $ 8,295,000 $ 8,295,000 4.00% H23

46


Date of Issue: December 20, 2006 Credit Enhancement: Some, but not all, of the maturities of the Series 2006B Bonds are insured by

Financial Security Assurance Inc., as set forth below.

Uninsured Series 2006B – Principal Amortization(1)



InterestRate


2010 $ 8,190,000 4.000% P99 2011 8,515,000 5.000 Q23 2012 8,945,000 4.000 Q31 2013 9,300,000 5.000 Q49 2014 2,955,000 4.000 Q56 2014 6,805,000 5.000 Q64 2015 10,225,000 5.000 Q72 2016 2,065,000 4.000 Q80 2016 8,665,000 5.000 Q98 2017 620,000 4.000 R22 2017 10,630,000 5.000 R30 2018 11,805,000 5.000 R48 2019 12,395,000 5.000 R55 2020 13,015,000 5.000 R63 2024 15,820,000 5.000 S21 2025 16,615,000 5.000 S39

$ 65,000,000 Term Bond Due November 15, 2031 2027 $ 13,000,000 2028 13,000,000 2029 13,000,000 2030 13,000,000 2031 13,000,000 4.750% S54

$119,955,000 Term Bond Due November 15, 2036 2032 $20,600,000 2033 23,225,000 2034 24,270,000 2035 25,360,000 2036 26,500,000 4.500% S70

Series 2006B insured by FSA – Principal Amortization(1)



InterestRate


2021 $13,665,000 5.000% R71 2022 14,350,000 5.000 R89 2023 15,065,000 5.000 R97 2026 72,645,000 5.250 S47

$ 247,125,000 Term Bond Due November 15, 2032 2027 $ 46,465,000 2028 5,910,000 2029 47,890,000 2030 50,665,000 2031 53,560,000 2032 42,635,000 4.500% S62

(1) Except for the Series 2006B Bonds maturing on November 15, 2026, the Series 2006B Bonds maturing on or after November 15, 2017 are subject to redemption prior to maturity on any date on or after November 15, 2016, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2006B Bonds maturing on November 15, 2026 are not subject to optional redemption.

The following maturities and principal amounts of the MTA Transportation Revenue Refunding Bonds, Series 2006B were defeased onSeptember 20, 2007 at the principal amounts listed below.


Principal AmountOutstanding


Interest Rate


2009 $7,875,000 $7,875,000 4.00% P81

47


Date of Issue: July 11, 2007 Credit Enhancement: Some, but not all, of the maturities of the Series 2007A Bonds are insured by

are insured by Financial Guaranty Insurance Company (FGIC), and Financial Security Assurance Inc. (FSA), as set forth below.

Uninsured Series 2007A – Principal Amortization(1)



InterestRate


2010 $ 7,535,000 4.000% W67 2011 4,840,000 4.000 W75 2011 3,000,000 5.000 W83

Series 2007A insured by FGIC – Principal Amortization(1)



InterestRate


2012 $ 8,180,000 4.000% W91 2013 8,510,000 4.000 X25 2014 5,350,000 4.000 X33 2014 3,500,000 5.000 X41 2015 9,240,000 4.125 X58 2016 9,620,000 4.125 X66 2017 8,850,000 4.125 X74 2017 1,165,000 5.000 X82 2018 6,245,000 4.250 X90 2018 4,195,000 5.000 Y24 2019 7,290,000 4.250 Y32 2019 3,625,000 5.000 Y40 2026 15,285,000 5.000 Z31 2027 3,950,000 4.500 Z49 2027 12,100,000 5.000 Z56

$96,855,000 Term Bond Due November 15, 2037 2034 $22,555,000 2035 23,625,000 2036 24,750,000 2037 25,925,000 4.750% Z72

(1) The Series 2007A Bonds maturing on or after November 15, 2018 are subject to optional redemption prior to maturity on

any date on or after November 15, 2017, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.



Principal Amount

Outstanding


Interest Rate


2009 $7,245,000 $7,245,000 4.00% W59

48

$425,615,000 Transportation Revenue Bonds, Series 2007A, continued

Series 2007A insured by FSA – Principal Amortization(1)



InterestRate


2020 $11,405,000 5.000% Y57 2021 11,975,000 5.000 Y65 2022 12,575,000 5.000 Y73 2023 13,205,000 5.000 Y81 2024 13,865,000 5.000 Y99 2025 14,555,000 5.000 Z23

$114,485,000 Term Bond Due November 15, 2033 2028 $16,830,000 2029 17,675,000 2030 18,555,000 2031 19,485,000 2032 20,460,000 2033 21,480,000 5.000% Z64

(1) The Series 2007A Bonds maturing on or after November 15, 2018 are subject to optional redemption prior to maturity on any date on or after November 15, 2017, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

49






InterestRate


2009 $ 6,940,000 4.000% 3R3 2010 7,215,000 4.000 3S1 2011 7,505,000 4.000 3T9 2012 7,805,000 4.000 3U6 2013 8,115,000 4.000 3V4 2014 8,440,000 5.000 3W2 2015 8,865,000 5.000 3X0 2016 9,305,000 5.000 3Y8 2017 9,770,000 5.000 3Z5 2018 10,260,000 4.000 4A9 2019 10,670,000 5.000 4B7 2020 11,205,000 5.000 4C5 2021 11,765,000 5.000 4D3 2022 12,355,000 5.000 4E1 2023 12,970,000 5.000 4F8 2024 13,620,000 5.000 4G6 2025 14,300,000 5.000 4H4 2026 15,015,000 5.000 4J0 2027 15,765,000 4.500 4K7 2028 16,475,000 5.000 4L5 2029 17,300,000 5.000 4M3

$ 78,290,000 Term Bond Due November 15, 2033 2030 $18,165,000 2031 19,075,000 2032 20,025,000 2033 21,025,000 5.000% 4N1

$55,000,000 Term Bond Due November 15, 2037 2034 $ 13,750,000 2035 13,750,000 2036 13,750,000 2037 13,750,000 5.000% 4Q4

$39,880,000 Term Bond Due November 15, 2037 2034 $8,330,000 2035 9,390,000 2036 10,500,000 2037 11,660,000 4.500% 4P6

(1) The Series 2007B Bonds maturing on or after November 15, 2018 are subject to optional redemption prior to maturity on any date on or after November 15, 2017, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

50


Date of Issue: February 21, 2008 Credit Enhancement: None




InterestRate


2009 $16,345,000 4.000% 5D2 2010 15,425,000 4.000 5E0 2016 1,710,000 5.000 5F7 2017 24,125,000 5.000 5G5 2018 25,335,000 5.000 5H3

$ 82,470,000 Term Bond Due November 15, 2036 2034 $37,470,000 2035 20,000,000 2036 25,000,000 5.25% 5J9

$200,000,000 Term Bond Due November 15, 2037 2030 $ 17,220,000 2031 43,180,000 2032 45,340,000 2033 47,610,000 2034 12,520,000 2035 10,000,000 2036 20,000,000 2037 4,130,000 5.00% 5K6

$147,060,000 Term Bond Due November 15, 2038 2035 $22,580,000 2036 10,150,000 2037 53,785,000 2038 60,545,000 4.500% 5L4

(1) The Series 2008A Bonds maturing on or after November 15, 2036 are subject to optional redemption prior to maturity on any date on or after November 15, 2017, at the option of MTA, in whole or in part at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

51

$487,530,000 Transportation Revenue Bonds, Series 2008B $ 93,500,000 Subseries 2008B-1 $134,030,000 Subseries 2008B-2 $130,000,000 Subseries 2008B-3 $130,000,000 Subseries 2008B-4

Date of Issue: February 21, 2008 Credit Enhancement: None Current Mode: Term Rate

Principal Amortization(1)(2)



Interest Rate

Reset Date November 15


$93,500,000 Subseries 2008B-1 Mandatory Tender Bond Due November 15, 20162012 $17,040,000 2013 18,725,000 2014 20,470,000 2015 22,290,000 2016 14,975,000 5.00% 2011 5M2

$134,030,000 Subseries 2008B-2 Mandatory Tender Bond Due November 15, 20232016 $ 6,500,000 2017 1,000,000 2018 1,000,000 2019 26,825,000 2020 27,900,000 2021 29,015,000 2022 30,180,000 2023 11,610,000 5.00% 2012 5N0

$130,000,000 Subseries 2008B-3 Mandatory Tender Bond Due November 15, 20272023 $19,780,000 2024 32,650,000 2025 33,960,000 2026 35,320,000 2027 8,290,000 5.00% 2013 5P5

$130,000,000 Subseries 2008B-4 Mandatory Tender Bond Due November 15, 20302027 $28,550,000 2028 38,315,000 2029 39,230,000 2030 23,905,000 5.00% 2014 5Q3

(1)The Series 2008B Bonds are not subject to optional redemption prior to their respective Reset Dates. The Series 2008B Bonds are subject to optional redemption on their respective Reset Dates at the option of MTA, in whole or in part, from available amounts, on the related Reset Date and on any Business Day during the Delayed Remarketing Period (as defined below), at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium.

(2)The interest rate on the 2008B Bonds will be reset on each Reset Date. The 2008B Bonds are subject to mandatory tender on each Reset Date. The 2008B Bonds will be purchased solely with the proceeds from the remarketing of the 2008B Bonds. The 2008B Bonds will not be purchased upon mandatory tender on any Reset Date if remarketing proceeds are insufficient for such purchase. The 2008B Bonds then will bear interest at the maximum rate of 11% per annum during the period of time from and including the applicable Reset Date to (but not including) the date in which all of such Series 2008B Bonds are successfully remarketed (the Delayed Remarketing Period).

52

$250,000,000 Transportation Revenue Bonds, Series 2008C

Date of Issue: October 23, 2008 Credit Enhancement: None




Interest Rate


2009 $50,000,000 3.500% 8F4 2010 3,000,000 4.000 8G2 2011 3,000,000 4.000 8H0 2012 6,000,000 4.200 8J6 2013 3,000,000 4.375 8K3

$85,000,000 Series 2008C Term Bond Due November 15, 20182014 $15,230,000 2015 16,070,000 2016 16,950,000 2017 17,885,000 2018 18,865,000 5.500% 8L1

$15,000,000 Series 2008C Term Bond Due November 15, 2018 2014 $2,675,000 2015 2,830,000 2016 2,990,000 2017 3,160,000 2018 3,345,000 5.750% 8M9

$120,000,000 Series 2008C Term Bond Due November 15, 2023 2019 $21,180,000 2020 22,505,000 2021 23,915,000 2022 25,405,000 2023 26,995,000 6.250% 8N7

$265,000,000 Series 2008C Term Bond Due November 15, 20282024 $46,545,000 2025 49,570,000 2026 52,790,000 2027 56,220,000 2028 59,875,000 6.500% 8P2

(1) The Series 2008C Bonds maturing on or after November 15, 2019 are subject to optional redemption prior to maturity on any date on or after November 15, 2018, at the option of MTA, in whole or in part (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

53

Part 3. Nature of Continuing Disclosure Where Located in Appendix A

Undertaking Caption(s) Heading(s) A. Description of the systems operated by the Related Transportation Entities and their operations.

Related Transportation Entities 1. THE RELATED ENTITIES

All headings

Transit System 1. TRANSIT SYSTEM All headings Commuter System 1. COMMUTER SYSTEM All headings MTA Bus 1. MTA BUS COMPANY All headings

B. Description of changes to the fares or fare structures charged to users of the systems operated by the Related Transportation Entities.

Transit System 1. REVENUES OF THE RELATED ENTITIES

1. Fares and Tolls – Transit System Fares

Commuter System 1. REVENUES OF THE RELATED ENTITIES

1. Fares and Tolls – Commuter System Fares

C. Operating Data of the Related Transportation Entities.

Transit System 1. TRANSIT SYSTEM All headings 2. RIDERSHIP AND

FACILITIES USE 1. Transit System (MTA New York City Transit and MaBSTOA) Ridership


1. Transit System

Commuter System 1. COMMUTER SYSTEM All headings 2. RIDERSHIP AND

FACILITIES USE 1. Commuter System Ridership


1. Commuter System

MTA Bus 1. EMPLOYEES, LABOR RELATIONS AND PENSION OBLIGATIONS

1. MTA Bus

D. Information regarding the Transit and Commuter Capital Programs.


1. Capital Programs – Background and Development 2. 2005-2009 MTA Capital Program 3. 2000-2004 MTA Capital Program 4. 1992-1999 Transit Capital Program Objectives 5. 1992-1999 Commuter Capital Program Objectives

E. Presentation of changes to indebtedness issued by MTA under the Transportation Resolution, as well as information concerning changes to MTA’s debt service requirements on such indebtedness payable from pledged revenues.

1. TRANSPORTATION REVENUE BONDS

1. TRB Table 1 2. TRB Table 2

F. Information concerning the amounts, sources, material changes in and material factors affecting pledged revenues and debt service incurred under the Transportation Resolution.

1. REVENUES OF THE RELATED ENTITIES

1. Fares and Tolls 2. State and Local General Operating Subsidies 3. State Special Tax Supported Operating Subsidies 4. MTA Bridges and Tunnels Surplus 5. Financial Assistance and Service Reimbursements from Local Municipalities 6. Miscellaneous Revenues

G. Additional financial information. See Undertakings E and F

above. H. Material litigation relating to any of the foregoing. 1. Litigation 1. MTA

2. Transit System 3. Commuter System 4. MTA Bus

54











Defeasances.


Rating changes.

Explanation:

Refundings:

The principal amount of the Subseries 2002G-2 was redeemed in full prior to maturity with certain proceeds from the Series 2008A and 2008B Bonds, issued on February 21, 2008, and with certain proceeds from the MTA Bridges and Tunnels, Series 2008A and 2008B Bonds, issued on March 27, 2008, as described below.



(59259R) Redemption Date 2002G-2 $ 200,000,000 LU6 May 1, 2008

The Series 2004A Bonds were redeemed in full prior to maturity with certain proceeds from the Series 2008A and 2008B, issued on February 21, 2008, as described below.



(59259R) Redemption Date2004A-1 $165,260,000 TD6 May 1, 2008 2004A-2 70,825,000 TE4 May 1, 2008 2004A-3 165,260,000 TF1 May 1, 2008 2004A-4 70,825,000 TG9 May 1, 2008


Attached hereto are the audited financial statements of the Metropolitan Transportation Authority and the New York City Transit Authority.

55

TBTA GENERAL REVENUE BONDS



(as of April 28, 2009) Interest Rate Mode EFC 1996A June 26, 1996 $ 28,445,000 $ 15,210,000 Fixed 2001A November 15, 2001 1,125,720,000 504,930,000 Fixed 2001B and C December 19, 2001 296,400,000 286,020,000 Synthetic Fixed 2002A March 14, 2002 268,300,000 171,765,000 Fixed 2002B October 8, 2002 2,157,065,000 1,764,555,000 Fixed 2002F November 13, 2002 246,480,000 235,155,000 Synthetic Fixed 2003B December 10, 2003 250,000,000 224,245,000 Synthetic Fixed and Variable 2005A May 11, 2005 150,000,000 141,920,000 Variable 2005B July 7, 2005 800,000,000 593,700,000 Synthetic Fixed 2006A June 22, 2006 200,000,000 187,725,000 Fixed 2007A June 20, 2007 223,355,000 215,930,000 Fixed 2008A March 27, 2008 822,770,000 822,770,000 Fixed 2008B March 27, 2008 252,230,000 252,230,000 Variable 2008C July 30, 2008 629,890,000 629,890,000 Fixed 2009A-1 February 18, 2009 150,000,000 150,000,000 Term 2009A-2 February 18, 2009 325,000,000 325,000,000 Fixed Total $7,925,655,000 $6,521,045,000

Part 2. Details of Each Issue of Bonds Uninsured Ratings Fitch Ratings .............................................................................................................................................................. AA Moody’s Investors Services ...................................................................................................................................... Aa2 Standard and Poor’s Ratings ..................................................................................................................................... AA- Summary of State and City Redemption Provisions Pursuant to the TBTA Act, the State or City, upon providing sufficient funds, may require TBTA to redeem any series of TBTA Bonds as a whole at any time and at a price and in accordance with the terms upon which each series of TBTA are otherwise redeemable.

56

$28,445,000 TBTA General Revenue Bonds, Series EFC 1996A

Date of Issue: June 26, 1996 Credit Enhancement: None


DueJanuary 1 Maturity


InterestRate

Cusip No.

2010 $ 1,455,000 5.600% 2011 1,535,000 5.650 CUSIP numbers 2012 1,630,000 5.700 were not assigned 2013 1,715,000 5.750 to these bonds 2014 1,820,000 5.800 2015 1,925,000 5.850

$5,130,000 Term Bond Due January 1, 20182016 $ 2,040,000 2017 1,500,000 2018 1,590,000 5.900%

(1) All subseries are subject to optional redemption at 102% of the principal amount prior to maturity on any date on or after 1/1/2006, 101% of the principal amount on any date on or after 1/1/2007, and 100% of the principal amount prior to maturity on any date on or after 1/1/2008.

57

$1,125,720,000 TBTA General Revenue Bonds, Series 2001A

Date of Issue: November 15, 2001 Credit Enhancement: None




InterestRate

Cusip No. (Base 896029)

2013 $ 8,745,000 4.100% 4S1 2014 9,105,000 5.250 4T9 2015 9,580,000 5.250 4U6 2016 10,085,000 5.250 4V4 2017 10,615,000 5.250 4W2 2018 11,170,000 5.250 4X0 2019 11,760,000 5.000 4Y8 2020 12,345,000 5.000 4Z5 2021 12,965,000 5.000 5A9 2022 13,610,000 5.000 5B7 2023 34,890,000 5.000 5C5

$256,165,000 Term Bond Due January 1, 2027 2025 $ 81,260,000 2026 85,315,000 2027 89,590,000 5.000% 5E1

$688,050,000 Term Bond Due January 1, 2032 2028 $103,895,000 5.000% 5F8

(1) The Series 2001A Bonds are subject to redemption prior to maturity on any date on or after January 1, 2012, at the option of TBTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Series 2001A General Revenue Bonds were advance refunded by the Series 2005B General Revenue Bonds on July 7, 2005 at the redemption prices and on the redemption dates listed below.

Maturity (January 1)

Principal Amount Redeemed

InterestRate

Redemption Date (January 1)

Redemption Price

CUSIP Number (896029)

2024 $ 36,635,000 5.500% 2012 100% 5D3 2032 584,155,000 5.000 2012 100 5F8

Of the outstanding $688,050,000 Series 2001A Term Bonds maturing on January 1, 2032, $584,155,000 are being redeemed on January 1, 2012, leaving a balance of $103,895,000 that will be paid as a sinking fund installment on January 1, 2028. The following sinking fund installments will be satisfied at the redemption date:

Sinking Fund Installment Date

(January 1)Sinking Fund

Installments RedeemedRemaining

Sinking Fund2028 $ 3,600,000 $103,895,000 2029 127,470,000 0 2030 133,845,000 0 2031 155,725,000 0 2032 163,515,000 0

Total: $584,155,000 $103,895,000

58

$296,400,000 TBTA General Revenue Variable Rate Bonds, Series 2001B and C $148,200,000 Series 2001B $148,200,000 Series 2001C

Date of Issue: December 19, 2001 Credit Enhancement and Liquidity Facility: Series 2001B: Irrevocable Direct-Pay Letter of Credit with State Street Bank

and Trust Company, (expires September 30, 2011) Series 2001C: Irrevocable Direct-Pay Letter of Credit with Bayerische

Landesbank, acting through its New York Branch, (expires September 30, 2010) Current Mode: Weekly



January 1 MaturitySinking Fund Redemption

InterestRate


2010 $ 5,725,000 2011 5,955,000 2012 6,200,000 2013 6,450,000 2014 7,635,000 2015 8,920,000 2016 9,530,000 2017 10,180,000 2018 10,870,000 2019 11,605,000 2020 12,205,000 2021 12,695,000 2022 13,200,000 2023 13,730,000 2024 14,280,000 2025 14,850,000 2026 15,445,000 2027 16,060,000 2028 16,705,000 2029 17,375,000 2030 18,070,000 2031 18,790,000 2032 (final maturity) 19,545,000 Variable SP0/SQ8(3)

(1) Unless otherwise directed by TBTA, the Series 2001B and Series 2001C Bonds shall be redeemed with the proceeds from the Sinking Fund Installments pro rata, subject to rounding in accordance with authorized denominations.

(2) The Series 2001B and C Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Holder, and otherwise by lot in such manner as the Trustee in its discretion deems proper), at any time, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date.

(3) The CUSIP Number for the Series 2001 Bonds are as follows: 2001B – 89602NSP0 2001C – 89602NSQ8 On October 1, 2008, the MTA effected a mandatory tender of the Series 2001B (CUSIP number 8960295U5) and the and Series 2001C (CUSIP number 8960295V3), terminated the existing financial guaranty insurance policy Ambac Assurance Corporation, terminated the Standby Bond Purchase Agreement with the State Street Bank and Trust Company relating to the Series 2001B Bonds and the Standby Bond Purchase Agreement with Bayerische Landesbank, acting through its New York branch. The Series 2001B were remarketed as Variable Interest Rate Obligations in the Weekly Mode with credit enhancement and liquidity provided by an irrevocable Direct-Pay Letter of Credit with the State Street Bank and Trust Company and the Series 2001C Bonds were remarketed as Variable Interest Rate Obligations in the Weekly Mode with credit enhancement and liquidity support provided by an irrevocable Direct-Pay Letter of Credit with Bayerische Landesbank, acting through its New York branch. The CUSIP for the remarketed Series 2001B Bonds is 89602NSP0, and the CUSIP for the remarketed Series 2001C Bonds is 89602NSQ8 .

59

$268,300,000 TBTA General Revenue Bonds, Series 2002A





InterestRate


2014 $ 8,695,000 5.000% 6G5 2015 9,130,000 5.000 6H3 2016 9,590,000 5.000 6J9 2017 10,070,000 5.250 6K6 2018 10,595,000 5.250 6L4 2019 11,155,000 5.250 6M2 2020 11,740,000 5.250 6N0 2021 12,355,000 5.125 6P5 2022 12,990,000 5.125 6Q3 2023 13,655,000 5.000 6R1

$61,790,000 Term Bond Due January 1, 2027 2024 $ 14,335,000 2025 15,055,000 2026 15,805,000 2027 16,595,000 5.000% 6S9

(1) The Series 2002A Bonds maturing January 1, 2014 through January 1, 2031 are subject to redemption prior to maturity on or after January 1, 2012, at the option of TBTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Series 2002A General Revenue Bonds were advance refunded by the Series 2005B General Revenue Bonds on July 7, 2005 at the redemption prices and on the redemption dates listed below.

Maturity (January 1)

Amount Outstanding

Interest Rate

Redemption Date (January 1)

Redemption Price


2031 $ 75,250,000 5.125% 2012 100% 6T7 2032 21,285,000 5.500 2009 100 6U4

60

$2,157,065,000 TBTA General Revenue Refunding Bonds, Series 2002B

Date of Issue: October 8, 2002 Credit Enhancement: None




InterestRate


2010 $67,480,000 5.000% 7X7 2010 8,485,000 3.375 7Y5 2011 51,330,000 5.000 7Z2 2011 3,285,000 3.400 8A6 2011 25,000,000 4.000 8B4 2012 4,305,000 5.000 8C2 2012 11,030,000 3.500 8D0 2012 59,220,000 5.250 8E8 2013 69,565,000 5.250 8F5 2014 71,720,000 5.250 8G3 2015 75,480,000 5.250 8H1 2016 80,100,000 5.250 8J7 2017 11,440,000 4.125 8K4 2017 72,870,000 5.250 8L2 2018 90,285,000 5.250 8M0 2019 95,025,000 5.250 8N8 2020 100,015,000 5.000 8P3 2021 105,015,000 5.000 8Q1 2022 20,750,000 4.600 8R9 2022 68,920,000 5.000 8S7 2023 95,570,000 4.750 8T5 2024 56,000,000 5.000 8U2 2025 58,810,000 5.000 8V0

$113,140,000 Term Bond Due November 15, 20272026 $ 61,740,000 2027 51,400,000 5.000% 8W8

$80,755,000 Term Bond Due November 15, 20292028 $ 39,370,000 2029 41,385,000 5.125% 8X6

$22,950,000 Term Bond Due November 15, 20322032 $ 22,950,000 4.750% 8Y4

$246,010,000 Term Bond Due November 15, 20322030 $ 28,320,000 2031 29,730,000 2032 187,960,000 5.000% 8Z1

(1) The Series 2002B Bonds maturing on and after November 15, 2016 are subject to redemption prior to maturity on any date on and after November 15, 2012, at the option of TBTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Triborough Bridge and Tunnel General Revenue Refunding Bonds, Series 2002B were defeased on September 20, 2007 at the principal amounts listed below.



PrincipalAmountDefeased

InterestRate


2009 $ 13,175,000 $ 13,175,000 3.125% 7W9 2009 59,405,000 59,405,000 5.00 7V1

61

$246,480,000 TBTA General Revenue Variable Rate Refunding Bonds, Series 2002F

Date of Issue: November 13, 2002 Credit Enhancement: None Liquidity Facility: Standby Bond Purchase Agreement with ABN AMRO Bank N.V.

(Expires November 8, 2012)Current Mode: Weekly




InterestRate


2009 $ 6,005,000 2010 6,250,000 2011 6,500,000 2012 6,760,000 2013 7,030,000 2014 7,310,000 2015 7,605,000 2016 7,910,000 2017 8,230,000 2018 8,560,000 2019 8,900,000 2020 9,260,000 2021 9,630,000 2022 10,020,000 2023 10,420,000 2024 10,840,000 2025 11,275,000 2026 11,725,000 2027 12,195,000 2028 12,685,000 2029 13,195,000 2030 13,725,000 2031 14,275,000 2032 (final maturity) 14,850,000 Variable CG7

(1) The Series 2002F Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, TBTA will redeem Bank Bonds first.

62

$250,000,000 TBTA General Revenue Variable Rate Bonds, Series 2003B

Date of Issue: December 10, 2003 Credit Enhancement: None Liquidity Facility: Standby Bond Purchase Agreement with Dexia Crédit Local,

(Expires July 7, 2012) Current Mode: Weekly




InterestRate


2010 $ 5,785,000 2011 6,015,000 2012 6,255,000 2013 6,505,000 2014 6,770,000 2015 7,040,000 2016 7,320,000 2017 7,610,000 2018 7,920,000 2019 8,235,000 2020 8,565,000 2021 8,905,000 2022 9,265,000 2023 9,630,000 2024 10,020,000 2025 10,415,000 2026 10,835,000 2027 11,270,000 2028 11,720,000 2029 12,185,000 2030 12,675,000 2031 13,180,000 2032 13,710,000 2033 (final maturity) 12,415,000 Variable FZ2

(1) The Series 2003B Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, TBTA will redeem Bank Bonds first.

63

$150,000,000 TBTA General Revenue Variable Rate Bonds, Series 2005A

Date of Issue: May 11, 2005 Credit Enhancement: None Liquidity Facility: Standby Bond Purchase Agreement with Dexia Crédit Local, New York Branch

(expires May 9, 2012) Current Mode: Weekly




InterestRate


2009 $ 2,925,000 2010 3,050,000 2011 3,175,000 2012 3,280,000 2013 3,465,000 2014 3,605,000 2015 3,745,000 2016 3,900,000 2017 4,065,000 2018 4,215,000 2019 4,425,000 2020 4,610,000 2021 4,795,000 2022 4,995,000 2023 5,205,000 2024 5,415,000 2025 5,660,000 2026 5,890,000 2027 6,140,000 2028 6,395,000 2029 6,655,000 2030 6,950,000 2031 7,240,000 2032 7,540,000 2033 7,860,000 2034 8,190,000 2035 (final maturity) 8,530,000 Variable GU2

(1) The Series 2005A Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, TBTA will redeem Bank Bonds first.

64

$800,000,000 TBTA General Revenue Variable Rate Refunding Bonds, Series 2005B Date of Issue: July 7, 2005 Credit Enhancement: None Liquidity Facility: Subseries 2005B-2: Standby Bond Purchase Agreement with Dexia Crédit

Local, (expires July 6, 2012); Subseries 2005B-3: Standby Bond Purchase Agreement with Bank of America, N.A., (expires July 6, 2012); and, Subseries 2005B-4: Standby Bond Purchase Agreement with Landesbank Baden-Württemberg, (expires December 29, 2015).

Current Mode: Weekly

Principal Amortization for each Subseries(1)(2) Current Mode: Weekly

Due January 1

Maturity


Interest Rate


2010 $ 700,000 2011 800,000 2012 800,000 2013 800,000 2014 800,000 2015 900,000 2016 900,000 2017 900,000 2018 1,000,000 2019 1,000,000 2020 1,000,000 2021 1,100,000 2022 1,100,000 2023 1,100,000 2024 10,300,000 2025 1,000,000 2026 1,000,000 2027 1,100,000 2028 6,400,000 2029 37,500,000 2030 38,700,000 2031 43,800,000 2032 (final maturity) 45,200,000 Variable GV0/GW8/GX6/GY4(3)

(1) The sinking fund installments are the same for each Subseries of the Series 2005B Bonds. (2) The Series 2005B Bonds are subject to redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper), on any Business Day, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date. If any such optional redemption shall occur, TBTA will redeem Bank Bonds first. (3) The CUSIP Numbers for Series 2005B Bonds are as follows: 2005B-1 – 89602NGV0; 2005B-2 – 89602NGW8 2005B-3 – 89602NGX6; 2005B-4 – 89602NGY4. The Series 2005B-1 Bonds were redeemed in full prior to maturity with certain proceeds from the TBTA General Resolution Bonds, Series 2009A, issued on February 18, 2009, as described below.

Subseries Principal Amount

Refunded CUSIP Number Redemption Date 2005B-1 $197,900,000 89602NGV0 February 19, 2009

65






InterestRate


2010 $ 3,930,000 4.000% HP2 2011 4,090,000 4.000 HQ0 2012 4,250,000 4.000 HR8 2013 4,420,000 4.000 HS6 2014 4,600,000 4.000 HT4 2015 4,785,000 4.000 HU1 2016 4,975,000 4.000 HV9 2017 5,175,000 4.125 HW7 2018 75,000 4.125 HX5 2018 5,310,000 5.000 HY3 2019 5,655,000 5.000 HZ0 2020 5,940,000 5.000 JA3 2021 6,235,000 5.000 JB1 2022 6,545,000 5.000 JC9 2023 6,875,000 5.000 JD7 2024 7,215,000 5.000 JE5 2025 7,580,000 5.000 JF2 2026 135,000 4.450 JG0 2026 7,820,000 5.000 JH8

$46,160,000 Term Bond Due November 15, 20312027 $ 8,355,000 2028 8,770,000 2029 9,210,000 2030 9,670,000 2031 10,155,000 5.000% JJ4

$44,155,000 Term Bond Due November 15, 20352032 $ 10,660,000 2033 11,195,000 2034 11,755,000 2035 10,545,000 5.000% JL9

$1,800,000 Term Bond Due November 15, 20352035 $ 1,800,000 4.500% JK1

(1) The Series 2006A Bonds maturing on and after November 15, 2017 are subject to redemption prior to maturity on any date on and after November 15, 2016, at the option of MTA Bridges and Tunnels, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Triborough Bridge and Tunnel General Revenue Bonds, Series 2006A were defeased on September 20, 2007 at the principal amounts listed below.




Interest Rate


2009 $3,780,000 $3,780,000 4.00% HN7

66






Interest Rate

Cusip No. (Base

89602N)2010 $ 3,940,000 4.000% KC7 2011 4,095,000 4.250 KD5 2012 4,270,000 4.000 KE3 2013 4,440,000 4.000 KF0 2014 4,620,000 5.000 KG8 2015 4,850,000 4.250 KH6 2016 5,055,000 4.125 KJ2 2017 5,265,000 4.250 KK9 2018 5,490,000 4.250 KL7 2019 5,720,000 5.000 KM5 2020 6,005,000 5.000 KN3 2021 6,305,000 5.000 KP8 2022 6,625,000 5.000 KQ6 2023 6,955,000 4.500 KR4 2024 7,265,000 5.000 KS2 2025 7,630,000 5.000 KT0 2026 8,010,000 5.000 KU7 2027 8,410,000 5.000 KV5 2028 2,575,000 4.600 KW3

$46,185,000 Term Bond Due November 15, 20322028 $ 6,255,000 2029 9,265,000 2030 9,725,000 2031 10,215,000 2032 10,725,000 5.000% KX1

$62,220,000 Term Bond Due November 15, 20372033 $11,260,000 2034 11,825,000 2035 12,415,000 2036 13,035,000 2037 13,685,000 5.000% KY9

(1) The Series 2007A Bonds maturing on and after November 15, 2018 are subject to redemption prior to maturity on any date on and after November 15, 2017, at the option of MTA Bridges and Tunnels, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

The following maturities and principal amounts of the Triborough Bridge and Tunnel General Revenue Bonds, Series 2007A were defeased on September 20, 2007 at the principal amounts listed below.




Interest Rate


2009 $3,785,000 $3,785,000 4.00% KB9

67






Interest Rate

Cusip No. (Base

89602N)2009 $13,715,000 5.000% LY8 2010 14,400,000 5.000 LZ5 2011 15,120,000 5.000 MA9 2012 15,875,000 5.000 MB7 2013 16,670,000 5.000 MC5 2014 18,340,000 5.000 MD3 2015 1,875,000 4.000 ME1 2015 18,020,000 5.000 MF8 2016 21,920,000 5.000 MG6 2017 23,015,000 5.000 MH4 2018 24,165,000 5.000 MJ0 2019 25,375,000 5.000 MK7 2020 26,645,000 5.000 ML5 2021 27,975,000 5.000 MM3 2023 30,550,000 4.500 MN1 2028 35,080,000 4.875 MP6 2029 39,145,000 4.750 MQ4 2030 41,005,000 4.750 MR2

$137,385,000 Term Bond Due November 15, 20332031 $42,955,000 2032 45,100,000 2033 (final maturity) 49,330,000 5.000% MS0

$186,495,000 Term Bond Due November 15, 20372033 $ 1,495,000 2034 36,110,000 2035 42,715,000 2036 56,250,000 2037 (final maturity) 49,925,000 5.000% MT8

$90,000,000 Term Bond Due November 15, 20382035 $ 5,000,000 2036 5,000,000 2037 10,000,000 2038 (final maturity) 70,000,000 5.250% MU5

(1) The Series 2008A Bonds maturing on or after November 15, 2019 are subject to optional redemption prior to maturity on any date on or after May 15, 2018, at the option of MTA Bridges and Tunnels, in whole or in part at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

68

$252,230,000 TBTA General Revenue Bonds, Series 2008B $ 83,500,000 Subseries 2008B-1 $63,650,000 Subseries 2008B-2 $105,080,000 Subseries 2008B-3

Date of Issue: March 27, 2008 Credit Enhancement: None Current Mode: Term Rate


Current Mode: Term Rate Due


Interest Rate

Reset Date November 15

CUSIP No (Base 89602N)

$83,500,000 Subseries 2008B-1 Mandatory Tender Bond Due November 15, 20252022 $29,375,000 2024 31,925,000 2025 (final maturity) 22,200,000 5.000% 2013 MV3

$63,650,000 Subseries 2008B-2 Mandatory Tender Bond Due November 15, 20272025 $11,000,000 2026 34,530,000 2027 (final maturity) 18,120,000 5.000% 2014 MW1

$105,080,000 Subseries 2008B-3 Mandatory Tender Bond Due November 15, 20382027 $17,790,000 2028 2,265,000 2033 1,790,000 2034 19,115,000 2035 10,080,000 2036 12,485,000 2037 17,385,000 2038 (final maturity) 24,170,000 5.000% 2015 MX9

(1) The Series 2008B Bonds are not subject to optional redemption prior to their respective Reset Dates. The Series 2008B Bonds are subject to optional redemption on their respective Reset Dates at the option of MTA Bridges and Tunnels, in whole or in part, from available amounts, on the related Reset Date and on any Business Day during the Delayed Remarketing Period (as defined below), at a redemption price equal to the principal amount thereof, plus accrued interest thereon to the date fixedfor redemption, without premium.

(2)The interest rate on the 2008B Bonds will be reset on each Reset Date. The 2008B Bonds are subject to mandatory tender on each Reset Date. The 2008B Bonds will be purchased solely with the proceeds from the remarketing of the 2008B Bonds. The 2008B Bonds will not be purchased upon mandatory tender on any Reset Date if remarketing proceeds are insufficient for such purchase. The 2008B Bonds then will bear interest at the maximum rate of 11% per annum during the period of time from and including the applicable Reset Date to (but not including) the date in which all of such Series 2008B Bonds are successfully remarketed (the Delayed Remarketing Period).

69

$629,890,000 TBTA General Revenue Bonds, Series 2008C

Date of Issue: July 30, 2008 Credit Enhancement: None




Interest Rate

Cusip No. (Base

89602N)2009 $ 9,725,000 4.00% NV2 2010 5,115,000 5.00 NW0 2010 5,000,000 3.50 NX8 2011 10,545,000 4.00 NY6 2012 10,965,000 5.00 NZ3 2013 11,515,000 5.00 PA62014 12,090,000 5.00 PB42015 12,695,000 5.00 PC22016 13,330,000 5.00 PD02017 13,995,000 5.00 PE82018 14,695,000 5.00 PF52019 15,430,000 5.00 PG32020 16,200,000 5.00 PH12021 17,010,000 5.00 PJ72022 17,865,000 5.00 PK42023 18,755,000 5.00 PL22024 19,695,000 5.00 PM02025 20,680,000 5.00 PN82026 21,710,000 5.00 PP32027 22,800,000 5.00 PQ12028 23,940,000 5.00 PR92029 25,135,000 5.00 PS72030 26,390,000 5.00 PT5

$87,355,000 Term Bond Due November 15, 20332031 $27,710,000 2032 29,095,000 2033 (final maturity) 30,550,000 5.00% PU2

$177,255,000 Term Bond Due November 15, 20382034 $32,080,000 2035 33,685,000 2036 35,365,000 2037 37,135,000 2038 (final maturity) 38,990,000 5.00% PV0

(1) The Series 2008C Bonds maturing on or after November 15, 2019 are subject to optional redemption prior to maturity on any date on or after November 15, 2018, at the option of MTA Bridges and Tunnels, in whole or in part (in accordance with procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

70

$475,000,000 TBTA General Revenue Bonds, Series 2009A $150,000,000 Subseries 2009A-1 $325,000,000 Subseries 2009A-2

Date of Issue: February 18, 2009 Credit Enhancement: None

Subseries 2009A-1 Principal AmortizationCurrent Mode: Term Rate(1)



Interest Rate(2)

Cusip No. (Base

89602N)2010 $ 3,935,000 2011 4,665,000 2012 5,405,000 2013 6,160,000 2014 6,385,000 2015 7,050,000 2016 10,840,000 2017 8,255,000 2018 8,985,000 2019 3,590,000 2020 2,525,000 2021 0 2022 480,000 2023 445,000 2024 4,515,000 2025 7,065,000 2026 7,490,000 2027 2,740,000 2028 3,975,000 2029 4,215,000 2030 4,450,000 2031 4,705,000 2032 4,980,000 2033 5,335,000 2034 5,640,000 2035 5,980,000 2036 6,350,000 2037 6,700,000 2038 (final maturity) 7,140,000 2.000% UJ1

(1) The Series 2009A-1 Bonds are not subject to optional redemption prior to the Mandatory Purchase Date. The Series 2009A-1 Bonds are subject to redemption at the option of MTA Bridges and Tunnels, in whole or in part, from available amounts, on the Mandatory Purchase Date at a Redemption Price equal to the principal amount thereof, plus accrued interest thereon to the date fixed for redemption, without premium.

(2) The Series 2009A-1 Bonds are subject to mandatory tender for purchase on January 20, 2010, the Mandatory Purchase Date. The Term Rate to the Mandatory Purchase Date is 2.00%.

71

$475,000,000 TBTA General Revenue Bonds, Series 2009A, continued

Subseries 2009A-2: Principal Amortization(1)



Interest Rate

Cusip No. (Base

89602N)2010 $ 3,615,000 2.500% TG9 2011 4,895,000 2.500 TH7 2012 4,630,000 2.500 TJ3 2013 4,420,000 3.000 TK0 2014 2,000,000 2.500 TM6 2014 2,895,000 3.000 TL8 2015 4,830,000 4.000 TN4 2016 1,765,000 3.000 TP9 2017 5,300,000 3.000 TQ7 2018 1,200,000 3.250 TR5 2019 2,880,000 3.500 TS3 2020 4,325,000 4.000 TT1 2021 7,120,000 4.000 TU8 2022 1,890,000 4.250 TV6 2022 5,000,000 5.000 TW4 2023 1,830,000 4.500 TX2 2023 14,610,000 5.000 TY0 2024 3,495,000 4.625 TZ7 2025 1,340,000 4.750 UA0 2026 1,460,000 4.875 UB8 2027 11,990,000 5.000 UC6 2028 42,360,000 5.000 UD4 2029 32,870,000 5.000 UF9 2029 11,305,000 5.125 UE2

$119,460,000 Term Bond Due November 15, 20342030 $49,965,000 2031 52,250,000 2032 5,490,000 2033 5,720,000 2034 (final maturity) 6,035,000 5.250% UG7

$27,515,000 Term Bond Due November 15, 20382035 6,350,000 2036 6,680,000 2037 7,070,000 2038 (final maturity) 7,415,000 5.375% UH5

(1) The Series 2009A-2 Bonds maturing on or after November 15, 2019 are subject to optional redemption prior to maturity on any date on or after November 15, 2018, at the option of MTA Bridges and Tunnels, in whole or in part (in accordance with procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

72



A. Certain financial and operating data. 1. TRIBOROUGH BRIDGE AND

TUNNEL AUTHORITY 1. MTA Bridges and Tunnels Facilities 2. Authorized Projects of MTA Bridges and Tunnels


1. MTA Bridge and Tunnels Total Revenue Vehicles 2. Toll Rates 3. Competing Facilities and Other Matters4. E-ZPass


1. MTA Bridges and Tunnels

B. Information regarding the TBTA, Transit and Commuter Capital Programs.

TBTA 1. FINANCIAL PLANS AND CAPITAL PROGRAMS

1. 2005-2009 MTA Bridges and Tunnels Capital Program


3. 1992-1999 MTA Bridges and Tunnels Capital Programs

Transit and Commuter Systems 1. FINANCIAL PLANS AND CAPITAL PROGRAMS



3. 2000-2004 MTA Capital Program 4. 1992-1999 Transit Capital Program


Program Objectives C. Presentation of changes to indebtedness issued by TBTA under the TBTA Senior Resolution, as well as information concerning changes to TBTA’s debt service requirements on such indebtedness payable from revenues.

1. MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS

1. MTA Bridges and Tunnels Senior Table 1 2. MTA Bridges and Tunnels Senior Table 2

D. Historical information concerning traffic, revenues, operating expenses, TBTA Senior Resolution debt service and debt service coverage


1. MTA Bridges and Tunnels Surplus


1. MTA Bridges and Tunnels Total Revenue Vehicles

3. TBTA SENIOR REVENUE BONDS 1. MTA Bridges and Tunnels Senior Table 2

E. Material litigation relating to any of the foregoing.

1. Litigation 1. MTA Bridges and Tunnels

73







X Substitution of credit or liquidity providers, or their failure to perform.




Defeasances.


Rating changes.

Explanation:Unscheduled draws on credit enhancements reflecting financial difficulties. Bank Bonds if applicable

Substitution of credit or liquidity providers, or their failure to perform. Triborough Bridge and Tunnel Authority (MTA Bridges and Tunnels) General Revenue Variable Rate Bonds, Series 2001B and Series 2001C – On October 1, 2008, the MTA effected a mandatory tender of the Series 2001B (CUSIP number 8960295U5) and the and Series 2001C (CUSIP number 8960295V3), terminated the existing financial guaranty insurance policy Ambac Assurance Corporation, terminated the Standby Bond Purchase Agreement with the State Street Bank and Trust Company relating to the Series 2001B Bonds and the Standby Bond Purchase Agreement with Bayerische Landebank, acting through its New York branch. The Series 2001B were remarketed as Variable Interest Rate Obligations in the Weekly Mode with liquidity provided by an irrevocable direct-pay letter of credit with the State Street Bank and Trust Company and the Series 2001C Bonds were remarketed as Variable Interest Rate Obligations in the Weekly Mode with liquidity provided by an irrevocable direct-pay letter of credit with Bayerische Landebank, acting through its New York branch. The CUSIP for the remarketed Series 2001B Bonds is 89602NSP0, and the CUSIP for the remarketed Series 2001C Bonds is 89602NSQ8 .

Refundings The Series 2002C Bonds were redeemed in full prior to maturity with certain proceeds from the MTA Transportation Revenue Bonds, Series 2008C, issued on October 17, 2008, as described below.

SeriesPrincipal Amount

Refunded CUSIP Number Redemption Date2002C $101,915,000 89602NAN4 December 12, 2008

The Series 2005B-1 Bonds were redeemed in full prior to maturity with certain proceeds from the TBTA General Resolution Bonds, Series 2009A-1, issued on February 18, 2009, as described below.

SeriesPrincipal Amount

Refunded CUSIP Number Redemption Date2005B-1 $197,900,000 89602NGV0 February 19, 2009


Attached hereto are the audited financial statements of the Triborough Bridge and Tunnel Authority.

74

TBTA SUBORDINATE REVENUE BONDS



(as of April 28, 2009) Interest Rate Mode 2000AB November 2, 2000 $ 263,000,000 $ 175,300,000 Synthetic Fixed 2000CD November 2, 2000 263,000,000 125,300,000 Synthetic Fixed 2002E November 13, 2002 756,095,000 756,095,000 Fixed 2003A March 5, 2003 500,170,000 432,545,000 Fixed 2008D July 30, 2008 491,110,000 481,860,000 Fixed Total $2,273,375,000 $1,971,100,000

Part 2. Details of Each Issue of Bonds Uninsured Ratings Fitch Ratings ............................................................................................................................................................. AA- Moody’s Investors Services ...................................................................................................................................... Aa3 Standard and Poor’s Ratings ....................................................................................................................................... A+ Summary of State and City Redemption Provisions Pursuant to the TBTA Act, the State or City, upon providing sufficient funds, may require TBTA to redeem any series of TBTA Bonds as a whole at any time and at a price and in accordance with the terms upon which each series of TBTA are otherwise redeemable.

75

$263,000,000 TBTA Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB

Date of Issue: November 2, 2000 Credit Enhancement: Series 2000AB Bonds are insured by Financial Security Assurance Inc. Liquidity Facility: Standby Bond Purchase Agreement with JPMorgan Chase Bank, (expires October 7,

2014). Current Mode: Weekly




InterestRate


2010 $ 14,100,000 2011 15,000,000 2012 15,950,000 2013 16,950,000 2014 18,000,000 2015 19,150,000 2016 20,350,000 2017 21,650,000 2018 23,000,000 2019 (final maturity) 11,150,000 Variable JY1

(1) The Series 2000AB Bonds are subject to optional redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Holder, and otherwise by lot in such manner as the Trustee in its discretion deems proper), at any time, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date.

76

$263,000,000 TBTA Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD

Date of Issue: November 2, 2000 Credit Enhancement: Series 2000CD Bonds are insured by Financial Security Assurance Inc. Liquidity Facility: Standby Bond Purchase Agreement with Lloyds TSB Bank plc, acting through its New

York Branch, (expires October 7, 2014). Current Mode: Weekly




InterestRate


2010 $ 14,100,000 2011 10,350,000 2012 11,000,000 2013 11,700,000 2014 12,400,000 2015 13,200,000 2016 14,050,000 2017 14,950,000 2018 15,850,000 2019 (final maturity) 7,700,000 Variable JZ8

(1) The Series 2000CD Bonds are subject to optional redemption prior to maturity as a whole or in part (in accordance with procedures of DTC, so long as DTC is the Holder, and otherwise by lot in such manner as the Trustee in its discretion deems proper), at any time, subject to applicable notice, at a Redemption Price equal to the principal amount thereof, without premium, plus accrued interest up to but not including the redemption date.

The following maturities and partial principal amounts of the Series 2000CD Bonds were redeemed by the Series 2009A-1 Bonds on April 9, 2009 at the redemption prices listed below.

Maturity (Nov. 15)


RedeemedRedemption

PriceCUSIP Number

(59259N)2011 $4,650,000 100% JZ82012 4,950,000 100 JZ82013 5,250,000 100 JZ82014 5,600,000 100 JZ82015 5,950,000 100 JZ82016 6,300,000 100 JZ82017 6,700,000 100 JZ82018 7,150,000 100 JZ82019 3,450,000 100 JZ8

77

$756,095,000 TBTA Subordinate Revenue Refunding Bonds, Series 2002E

Date of Issue: November 13, 2002 Credit Enhancement: All of the Series 2002E Bonds are insured by MBIA Insurance Corporation




InterestRate


2018 $31,645,000 5.500% AZ7 2019 56,490,000 5.500 BA1 2020 59,050,000 5.500 BB9 2021 61,745,000 5.500 BC7 2022 54,590,000 5.250 BD5 2023 57,455,000 5.250 BE3

$122,170,000 Term Bond Due November 15, 2026 2024 $38,515,000 2025 40,685,000 2026 42,970,000 5.000% BF0

$312,950,000 Term Bond Due November 15, 2032 2027 $45,370,000 2028 47,890,000 2029 50,535,000 2030 53,310,000 2031 56,225,000 2032 59,620,000 5.000% BG8

(1) The Series 2002E Bonds maturing on and after November 15, 2022 are subject to redemption prior to maturity on any date on and after November 15, 2012, at the option of TBTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

78

$500,170,000 TBTA Subordinate Revenue Bonds, Series 2003A

Date of Issue: March 5, 2003 Credit Enhancement: Some, but not all, of the maturities of the Series 2003A Bonds are insured by

Ambac Assurance Corporation and Financial Guaranty Insurance Company (FGIC) as set forth below.

Uninsured Series 2003A Bonds – Principal Amortization(1)



InterestRate


$64,595,000 Term Bond Due November 15, 2030 2029 $41,175,000 2030 23,420,000 5.250% ES9




InterestRate


2010 $9,495,000 3.250% DV3 2011 2,470,000 5.000 DX9 2011 6,865,000 4.000 DW1 2012 4,675,000 3.625 DY7 2012 5,770,000 5.000 DZ4 2013 5,650,000 3.750 EA8 2014 4,690,000 3.875 EB6 2015 4,495,000 5.250 EC4 2016 5,050,000 5.250 ED2 2017 5,060,000 5.250 EE0 2018 5,025,000 5.250 EF7 2019 5,320,000 5.250 EG5 2020 5,275,000 5.250 EH3 2021 5,865,000 5.250 EJ9 2022 5,935,000 4.500 EK6 2023 7,965,000 4.625 EL4 2024 32,220,000 4.750 EM2 2025 33,940,000 5.000 EN0 2026 35,465,000 5.125 EP5 2027 11,280,000 4.750 EQ3

$65,440,000 Term Bond Due November 15, 2028 2027 $26,135,000 2028 39,305,000 5.000% ER1




InterestRate


$100,000,000 Term Bond Due November 15, 2032 2030 $19,980,000 2031 45,650,000 2032 34,370,000 5.000% ET7

The following maturities and principal amounts were defeased on September 20, 2007.




InterestRate

CUSIP number (89602N)

2009 $9,520,000 $9,520,000 4.00% DU5 (1) The Series 2003A Bonds maturing on and after November 15, 2014 (except for the Series 2003A Bonds maturing on November 15, 2015and November 15, 2016) are subject to redemption prior to maturity on any date on and after November 15, 2013, at the option of TBTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date. The Series 2003A Bonds maturing on November 15, 2015 and November 15, 2016 are not subject to redemption prior to maturity.

79

$491,110,000 TBTA Subordinate Revenue Bonds, Series 2008D

Date of Issue: July 30, 2008 Credit Enhancement: None




InterestRate


2009 $ 11,020,000 4.000 PX6 2010 11,450,000 3.500 PY4 2011 11,845,000 4.000 PZ1 2012 12,295,000 4.000 QA5 2013 16,965,000 4.000 QB3 2014 19,820,000 5.000 QC1 2015 20,115,000 5.000 QD9 2016 5,330,000 4.000 QE7 2016 16,340,000 5.000 QF4 2017 8,535,000 4.000 QG2 2017 14,140,000 5.000 QH0 2018 12,220,000 5.000 QJ6 2019 12,355,000 4.000 QK3 2020 11,375,000 5.000 QL1 2020 1,465,000 4.000 QM9 2021 5,350,000 5.000 QN7 2021 9,260,000 4.000 QP2 2022 5,970,000 4.250 QQ0 2022 19,395,000 5.000 QR8 2023 20,000,000 5.000 QS6 2023 5,705,000 4.250 QT4 2024 20,000,000 5.000 QU1 2024 4,865,000 4.375 QV9 2025 25,575,000 5.000 QW7 2026 27,040,000 5.000 QX5 2027 27,990,000 5.000 QY3 2028 21,895,000 4.500 QZ0 2028 7,550,000 5.000 RA4

$95,995,000 Term Bond Due November 15, 2031 2029 $30,500,000 2030 32,070,000 2031 33,425,000 5.000% RB2

The Series 2008D Bonds maturing on and after November 15, 2019 are subject to redemption prior to maturity on any date on and after November 15, 2018 at the option of MTA Bridges and Tunnels, in whole or in part (in accordance with procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at 100% of the principal amount thereof, together with accrued interest thereon up to but not including the redemption date.

80


Where Located in Appendix A Undertaking Heading(s)

A. Certain financial and operating data. 1. TRIBOROUGH BRIDGE AND

TUNNEL AUTHORITY 1. MTA Bridges and Tunnels Facilities 2. Authorized Projects of MTA Bridges and Tunnels


1. MTA Bridges and Tunnels Total Revenue Vehicles 2. Toll Rates 3. Competing Facilities and Other Matters4. E-ZPass


1. MTA Bridges and Tunnels

B. Information regarding the TBTA, Transit and Commuter Capital Programs.








3. 2000-2004 MTA Capital Program 4. 1992-1999 Transit Capital Program


Program Objectives C. Presentation of changes to indebtedness issued by TBTA under the TBTA Senior and Subordinate Resolutions, as well as information concerning changes to TBTA’s debt service requirements on such indebtedness payable from revenues.

1. MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE BONDS

1. MTA Bridges and Tunnels Subordinate Table 1


D. Historical information concerning traffic, revenues, operating expenses, TBTA Subordinate Resolution debt service and debt service coverage





3. TBTA SUBORDINATE REVENUE BONDS




81











Defeasances.


Rating changes.

Explanation:

Refundings

Certain maturities and principal amounts of the Series 2004A Bonds were redeemed in full prior to maturity with proceeds from the MTA Bridges and Tunnels Bonds Series 2008A and 2008B, issued on March 27, 2008 as described below.



(89602N)2004A-1 $100,000,000 April 30, 2008 GK4 2004A-2 75,000,000 May 1, 2008 GL2

Certain maturities and principal amounts of the Series 2004A Bonds were redeemed in full prior to maturity with proceeds from the MTA Bridges and Tunnels Bonds Series 2008C and 2008D, issued on July 30, 2008 as described below.



(89602N)2004A-3 $61,250,000 August 22, 2008 GM0

The Series 2002D Bonds were redeemed in full prior to maturity with proceeds from the MTA Bridges and Tunnels Bonds Series 2008C and 2008D, issued on July 30, 2008 as described below.



(89602N)2002D-1 $ 63,525,000 August 21, 2008 AK0 2002D-2 63,525,000 August 22, 2008 AL8 2002D-3 128,700,000 September 17, 2008 AM6

82

The Series 2002G Bonds were redeemed in full prior to maturity with proceeds from the MTA Bridges and Tunnels Bonds Series 2008C and 2008D, issued on July 30, 2008 as described below.



(89602N)2002G-1 $ 90,500,000 September 10, 2008 CE2 2002G-2 90,525,000 September 17, 2008 CF9

On April 9, 2009, certain maturities and principal amounts of the Series 2000CD Bonds were redeemed by the Series 2009A-1 Bonds, issued on February 18, 2009 at the redemption prices and in the principal amounts listed below.

Maturity (Nov. 15)


RedeemedRedemption

PriceCUSIP Number

(59259N)2011 $4,650,000 100% JZ82012 4,950,000 100 JZ82013 5,250,000 100 JZ82014 5,600,000 100 JZ82015 5,950,000 100 JZ82016 6,300,000 100 JZ82017 6,700,000 100 JZ82018 7,150,000 100 JZ82019 3,450,000 100 JZ8


Attached hereto are the audited financial statements of the Triborough Bridge and Tunnel Authority.

83

MTA STATE SERVICE CONTRACT BONDS Part 1. Issues Covered by this Annual Report


(as of April 28, 2009) Interest Rate Mode 2002A June 27, 2002 $1,715,755,000 $1,636,835,000 Fixed 2002B July 2, 2002 679,450,000 532,490,000 Fixed Total $2,395,205,000 $2,169,325,000

Part 2. Details of Each Issue of Bonds Uninsured Ratings Fitch Ratings ............................................................................................................................................................... A+ Moody’s Investors Services ..................................................................................................................................... NAF Standard and Poor’s Ratings ..................................................................................................................................... AA- Summary of State and City Redemption Provisions Pursuant to the MTA Act, the State, upon providing sufficient funds, may require MTA to redeem any series of the MTA State Service Contract Bonds, prior to maturity, as a whole, on any interest payment date not less than twenty years after the date of issue of that series of the MTA State Service Contract Bonds, at 105% of their face value and accrued interest or at such lower redemption price provided for in that series of MTA State Service Contract Bonds in the case of redemption as a whole on the redemption date. The MTA Act further provides that the City, upon furnishing sufficient funds, may require MTA to redeem any series of MTA State Service Contract Bonds, as a whole, but only in accordance with the terms upon which each series of MTA State Service Contract Bonds are otherwise redeemable.

84

$1,715,755,000 State Service Contract Refunding Bonds, Series 2002A

Date of Issue: June 27, 2002 Credit Enhancement: Some, but not all, of the maturities of the Series 2002A Bonds are insured by

Ambac Assurance Corporation, Financial Guaranty Insurance Company (FGIC), and MBIA Insurance Corporation, as set forth below.

Uninsured Series 2002A Bonds – Principal Amortization(1)

Maturity Date MaturitySinking Fund Redemption

InterestRate


1/01/10 $ 7,500,000 4.000% S82 1/01/11 1,685,000 4.125 S90 1/01/12 7,500,000 5.000 T24 1/01/13 1,085,000 4.400 T32 1/01/14 1,490,000 4.500 T40 7/01/14 21,960,000 5.500 T57 1/01/15 28,385,000 5.500 T65 7/01/15 29,165,000 5.500 T73 1/01/16 29,970,000 5.750 T81 7/01/16 30,830,000 5.750 T99 1/01/17 31,715,000 5.750 U22 7/01/17 32,630,000 5.500 U30 1/01/18 33,525,000 5.750 U48 7/01/18 34,490,000 5.750 U55 1/01/21 10,000,000 5.100 U63 1/01/22 10,000,000 5.125 U71 1/01/23 43,665,000 5.250 U89

$90,770,000 Term Bond Due January 1, 2024 7/01/23 $ 44,810,000 1/01/24 45,960,000 5.125% U97

$399,900,000 Term Bond Due January 1, 2029 1/01/26 $ 52,900,000 7/01/26 54,330,000 1/01/27 55,675,000 7/01/27 57,045,000 1/01/28 58,450,000 7/01/28 59,890,000 1/01/29 61,610,000 5.125% V21

(1) The Series 2002A Bonds (except for the uninsured Series 2002A Bonds maturing on July 1, 2014 through July 1, 2018, inclusive) maturing on and after January 1, 2013, are subject to redemption prior to maturity on or after July 1, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date.

85

State Service Contract Refunding Bonds, Series 2002A (continued)



InterestRate


7/01/09 $ 3,985,000 4.000% V47 7/01/09 3,515,000 5.000 V54 7/01/10 11,345,000 4.000 V62 1/01/11 5,815,000 5.250 V70 7/01/11 7,500,000 4.000 V88 7/01/12 7,500,000 5.000 V96 7/01/13 7,500,000 4.300 W38 7/01/14 4,140,000 4.400 W53 1/01/21 29,550,000 5.000 X29 7/01/21 40,540,000 5.000 X37

$74,155,000 Term Bond Due July 1, 2022 1/01/22 $ 31,555,000 7/01/22 42,600,000 5.000% X45

$144,975,000 Term Bond Due July 1, 2025 7/01/24 $ 47,135,000 1/01/25 48,315,000 7/01/25 49,525,000 5.000% X52

Series 2002A Bonds insured by MBIA – Principal Amortization(1)


InterestRate


1/01/19 $ 35,480,000 5.500% W61 7/01/19 36,455,000 5.500 W79 1/01/20 37,460,000 5.500 W87 7/01/20 38,490,000 5.500 W95



InterestRate


$185,875,000 Term Bond Due July 1, 2030 7/01/29 $ 60,360,000 1/01/30 61,945,000 7/01/30 63,570,000 5.000% X60

$56,290,000 Term Bond Due July 1, 2031 1/01/31 $ 49,340,000 7/01/31 6,950,000 5.250% X78

$60,000,000 Term Bond Due July 1, 2031 7/01/31 $ 60,000,000 5.750% X86

(1) The Series 2002A Bonds (except for the uninsured Series 2002A Bonds maturing on July 1, 2014 through July 1, 2018, inclusive) maturing on and after January 1, 2013, are subject to redemption prior to maturity on or after July 1, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date.

86

$679,450,000 State Service Contract Bonds, Series 2002B

Date of Issue: July 2, 2002 Credit Enhancement: Some, but not all, of the maturities of the Series 2002B Bonds are insured by

Financial Guaranty Insurance Company (FGIC), and MBIA Insurance Corporation, as set forth below.



InterestRate


$11,310,000 Term Bond Due July 1, 2015 1/01/15 $5,580,000 7/01/15 5,730,000 5.500% 3G1

$11,935,000 Term Bond Due July 1, 2016 1/01/16 $5,885,000 7/01/16 6,050,000 5.500% 3H9

$12,605,000 Term Bond Due July 1, 2017 1/01/17 $6,220,000 7/01/17 6,385,000 5.500% 3J5

$50,000,000 Term Bond Due January 1, 2030 1/01/25 $4,605,000 7/01/25 4,715,000 1/01/26 3,810,000 7/01/26 3,870,000 1/01/27 3,990,000 7/01/27 4,120,000 1/01/28 4,250,000 7/01/28 4,385,000 1/01/29 4,405,000 7/01/29 5,870,000 1/01/30 5,980,000 5.375% 3R7

$45,235,000 Term Bond Due January 1, 2031 1/01/25 $2,290,000 7/01/25 2,360,000 1/01/26 1,895,000 7/01/26 1,930,000 1/01/27 2,000,000 7/01/27 2,075,000 1/01/28 2,150,000 7/01/28 2,230,000 1/01/29 2,250,000 7/01/29 3,020,000 1/01/30 3,095,000 7/01/30 6,090,000 1/01/31 13,850,000 5.250% 3S5

$13,285,000 Term Bond Due July 1, 2031 7/01/31 $13,285,000 5.350% 3U0

(1) The Series 2002B Bonds (except for the MBIA Insured Bonds maturing on January 1, 2013 through July 1, 2014, inclusive, and the uninsured Series 2002B Bonds issued as term bonds and maturing on July 1, 2015, July 1, 2016 and July 1, 2017) maturing on and after January 1, 2013, are subject to redemption prior to maturity on or after July 1, 2012, at the option of MTA, in whole or in part on any date (in accordance with the procedures of DTC, so long as DTC is the sole registered owner, and otherwise by lot in such manner as the Trustee in its discretion deems proper) at a Redemption Price of 100%, together with accrued interest thereon up to but not including the redemption date. The MBIA Insured Bonds maturing on January 1, 2013 through July 1, 2014, inclusive, and the uninsured Series 2002B Bonds issued as term bonds and maturing on July 1, 2015, July 1, 2016 and July 1, 2017 are not subject to optional redemption.

87

State Service Contract Bonds, Series 2002B (continued)

Series 2002B Bonds insured by FGIC – Principal Amortization(1)


InterestRate


7/01/09 $ 1,575,000 3.650% 2N7 7/01/09 16,600,000 5.250 2P2 1/01/10 535,000 4.000 2Q0 1/01/10 18,275,000 5.250 2R8 7/01/10 1,025,000 3.850 2S6 7/01/10 14,580,000 5.500 2T4 1/01/11 380,000 5.000 2U1 1/01/11 19,720,000 5.250 2V9 7/01/11 1,065,000 3.950 2W7 7/01/11 19,745,000 5.500 2X5 1/01/12 1,665,000 5.000 2Y3 1/01/12 19,860,000 5.250 2Z0 7/01/12 4,060,000 4.000 3A4 7/01/12 18,215,000 5.500 3B2


88

State Service Contract Bonds, Series 2002B (continued)

Series 2002B Bonds insured by MBIA – Principal Amortization(1)


InterestRate


1/01/13 $29,460,000 5.500% 3C0 7/01/13 23,880,000 5.500 3D8 1/01/14 30,710,000 5.500 3E6 7/01/14 6,975,000 5.500 3F3

$13,310,000 Term Bond Due July 1, 2018 1/01/18 $ 6,565,000 7/01/18 6,745,000 5.500% 3K2

$14,050,000 Term Bond Due July 1, 2019 1/01/19 $ 6,930,000 7/01/19 7,120,000 5.500% 3L0

$14,830,000 Term Bond Due July 1, 2020 1/01/20 $ 7,315,000 7/01/20 7,515,000 5.500% 3M8

$32,070,000 Term Bond Due July 1, 2022 1/01/21 $ 7,720,000 7/01/21 7,920,000 1/01/22 8,115,000 7/01/22 8,315,000 5.000% 3N6

$17,285,000 Term Bond Due July 1, 2023 1/01/23 $ 8,525,000 7/01/23 8,760,000 5.500% 3P1

$18,250,000 Term Bond Due July 1, 2024 1/01/24 $ 9,000,000 7/01/24 9,250,000 5.500% 3Q9

$50,000,000 Term Bond Due January 1, 2031 1/01/25 $ 2,610,000 7/01/25 2,675,000 1/01/26 2,165,000 7/01/26 2,200,000 1/01/27 2,265,000 7/01/27 2,335,000 1/01/28 2,410,000 7/01/28 2,485,000 1/01/29 2,500,000 7/01/29 3,330,000 1/01/30 3,390,000 7/01/30 6,625,000 1/01/31 15,010,000 5.000% 3T3


89



A. Operating Data of the Related Transportation Entities.

Transit System 1. TRANSIT SYSTEM All headings 2. RIDERSHIP AND FACILITIES

USE1. Transit System (MTA New York City and MaBSTOA) Ridership


1. Transit System

Commuter System 1. COMMUTER SYSTEM All headings 2. RIDERSHIP AND FACILITIES

USE1. Commuter System Ridership


1. Commuter System

B. Information regarding the Transit and Commuter Capital Programs.



2. 2005-2009 MTA Capital Programs 3. 2000-2004 MTA Capital Programs 4. 1992-1999 Transit Capital Program


Program Objectives

C. Presentation of changes to indebtedness issued by MTA under the State Service Contract Resolution, as well as information concerning changes to MTA’s debt service requirements on such indebtedness payable from the State Service Contract.

1. STATE SERVICE CONTRACT BONDS

1. SSC Table 1

D. Material litigation relating to any of the foregoing.

1. Litigation 1. MTA 2. Transit System 3. Commuter System

90










Bond calls (which do not include regularly scheduled or mandatory sinking fund redemptions effectuated in accordance with the resolution).

Defeasances.


Rating changes.

Explanation:


Attached hereto are the audited financial statements of the Metropolitan Transportation Authority and the New York City Transit Authority.

91

2 BROADWAY CERTIFICATES OF PARTICIPATION Part 1. Issues Covered by this Annual Report


(as of April 28, 2009) Interest Rate Mode 1999A June 15, 1999 $328,205,000 $ 33,830,000 Fixed 2000A June 1, 2000 121,200,000 13,740,000 Fixed 2004A September 22, 2004 357,925,000 353,050,000 Synthetic Fixed Total $807,330,000 $400,620,000

Part 2. Details of Each Issue of Certificates Insured Ratings(1): Fitch Ratings .............................................................................................................................................................. NR Moody’s Investor Service ......................................................................................................................................... Ba3 Standard & Poor’s ........................................................................................................................................................ A (1) All 2 Broadway Certificates of Participation are insured by Ambac Assurance Corporation and have the ratings listed above. On January 18, 2008, Fitch Ratings downgraded Ambac Assurance Corporation from “AAA” to “AA”. On June 26, 2008, Fitch withdrew its rating of Ambac Assurance Corporation. On June 19, 2008, Moody’s Investor Service downgraded Ambac Assurance Corporation from “Aaa” to “Aa3”. On November 5, 2008, Moody’s downgraded Ambac Assurance Corporation from “Aa3” to “Baa1”. On April 13, 2009, Moody’s downgraded Ambac Assurance Corporation from “Baa1” to “Ba3”. On June 5, 2008, Standard & Poor’s downgraded Ambac Assurance Corporation from “AAA” to “AA”. On November 19, 2008, Standard & Poor’s downgraded Ambac Assurance Corporation from “AA” to “A”.

92

$328,205,000 Certificates of Participation, Series 1999A

Date of Issue: July 14, 1999 Credit Enhancement: All of the Series 1999A Certificates are insured by Ambac Assurance

Corporation.


Due January 1 Maturity


InterestRate


2010 $ 7,775,000 5.625% AM6 2011 8,215,000 5.625 AN4 2012 8,675,000 5.625 AP9 2013 9,165,000 5.625 AQ7

(1) The Series 1999A Certificates maturing on and after January 1, 2011 are subject to prepayment at the option of the Authority, on any date on and after January 1, 2010, either as a whole or in part (in accordance with the procedures of DTC, solong as DTC is the Holder, and otherwise by lot in such manner as the Certificate Trustee in its discretion deems proper) at thefollowing Prepayment Prices (expressed as a percentage of principal amount) plus accrued interest up to but not including the date of prepayment:

PeriodBoth Dates Inclusive

Prepayment Prices

January 1, 2010 through December 31, 2010 101% January 1, 2011 and thereafter 100%

The following maturities and principal amounts of the Series 1999A Certificates were advance refunded and defeased by the Series 2004A Certificates on September 22, 2004 at the prepayment prices and on the prepayment dates listed below.

Maturity (January 1) Par Amount

InterestRate

Prepayment Date (January 1) Redemption Price


2014 $ 9,680,000 5.625% 2010 101% AR5 2015 10,225,000 5.625 2010 101 AS3 2019 46,825,000 5.400 2010 101 AT1 2029 169,620,000 5.250 2010 101 AU8

93

$121,200,000 Certificates of Participation, Series 2000A

Date of Issue: June 15, 2000 Credit Enhancement: All of the Series 2000A Certificates are insured by Ambac Assurance

Corporation.




InterestRate


2010 $ 2,475,000 5.200% BE3 2011 2,600,000 5.300 BF0 2012 2,740,000 5.300 BG8 2013 2,885,000 5.375 BH6 2014 3,040,000 5.400 BJ2

(1) The Series 2000A Certificates maturing on and after January 1, 2011 are subject to prepayment at the option of the Authority, on any date on and after January 1, 2010, either as a whole or in part (in accordance with the procedures of DTC, solong as DTC is the Holder, and otherwise by lot in such manner as the Certificate Trustee in its discretion deems proper) at thefollowing Prepayment Prices (expressed as a percentage of principal amount) plus accrued interest up to but not including the date of prepayment:

PeriodBoth Dates Inclusive

Prepayment Prices

January 1, 2010 through December 31, 2010 101% January 1, 2011 and thereafter 100%

The following maturities and principal amounts of the Series 2000A Certificates were advance refunded and defeased by the Series 2004A Certificates on September 22, 2004 at the prepayment prices and on the prepayment dates listed below.

Maturity (January 1) Par Amount

InterestRate

Prepayment Date (January 1)

RedemptionPrice


2015 $ 3,205,000 5.500% 2010 101% BK9 2020 18,965,000 5.750 2010 101 BL7 2030 58,595,000 5.875 2010 101 BM5

94

$357,925,000 Variable Rate Certificates of Participation, Series 2004A $75,000,000 Subseries 2004A-1 $72,925,000 Subseries 2004A-2 $70,000,000 Subseries 2004A-3 $70,000,000 Subseries 2004A-4 $70,000,000 Subseries 2004A-5

Date of Issue: September 22, 2004 Credit Enhancement: All Series 2004A Certificates are insured by Ambac Assurance Corporation. Current Mode: All Series 2004A Certificates are currently in an Auction mode as follows: Subseries 2004A-1: 7-day Subseries 2004A-2: 7-day Subseries 2004A-3: 7-day Subseries 2004A-4: 35-day Subseries 2004A-5: 35-day

Principal Amortization(1)(2)(3)

Current Mode: Auction Rate Due

January 1(3) MaturitySinking Fund Redemption

InterestRate


2010 $ 2,575,000 2011 2,675,000 2012 2,775,000 2013 2,875,000 2014 12,675,000 2015 16,375,000 2016 17,000,000 2017 17,625,000 2018 18,300,000 2019 19,000,000 2020 19,725,000 2021 20,475,000 2022 21,250,000 2023 22,075,000 2024 22,900,000 2025 23,775,000 2026 24,700,000 2027 25,625,000 2028 26,600,000 2029 27,625,000 2030 (final maturity) 6,425,000 Variable CF9/CG7/CH5/CJ1/CK8(4)

(1) Unless otherwise directed by an Authorized Officer, the Series 2004A Certificates shall be redeemed with the proceeds from the Sinking Fund Installments pro rata with respect to each subseries, subject to rounding in accordance with authorized denominations.(2) Each subseries of Series 2004A Certificates shall be subject to optional prepayment by MTA as agent, in whole or in part, on any Interest Payment Date immediately following an Auction Period, at a Prepayment Price equal to the principal amount thereof, plus accrued interest to the prepayment date; provided, however, that in the event of a partial prepayment of Series 2004A Certificates of a subseries, the aggregate principal amount of Series 2004A Certificates of such subseries that will remain outstanding shall be equal to or more than $10,000,000 unless otherwise consented to by the Broker-Dealer. (3) The date on which a sinking fund installment will be due when the Series 2004A Certificates of a subseries entitled to such sinking fund installment are in the Auction Mode will be either the dates set forth above, or if such date is not an Interest Payment Date, then the Interest Payment Date immediately preceding the date set forth above. (4) The CUSIP Number for the Series 2004A Certificates are as follows: 2004A-1 - 649713CF9 2004A-2 - 649713CG7 2004A-3 - 649713CH5 2004A-4 - 649713CJ1 2004A-5 - 649713CK8

95

REVISED AGGREGATE BASE RENT REQUIREMENTS(1)(2)

The following schedule sets forth the aggregate Base Rent payable with respect to the Certificates, as well as each entity’s proportionate share.

12 months ending

January 1

AggregateBase Rent

Requirements

TransitAuthority share

(68.7%)

MTA share

(21.0%)

TBTAShare

(10.3%)2010 $ 27,985,983 $ 19,226,370 $ 5,877,056 $ 2,882,556 2011 27,993,572 19,231,584 5,878,650 2,883,338 2012 27,998,762 19,235,150 5,879,740 2,883,873 2013 28,006,422 19,240,412 5,881,349 2,884,662 2014 28,019,497 19,249,395 5,884,094 2,886,008 2015 28,065,597 19,281,065 5,893,775 2,890,756 2016 28,109,571 19,311,275 5,903,010 2,895,286 2017 28,135,070 19,328,793 5,908,365 2,897,912 2018 28,180,989 19,360,340 5,918,008 2,902,642 2019 28,231,660 19,395,150 5,928,649 2,907,861 2020 28,282,492 19,430,072 5,939,323 2,913,097 2021 28,335,368 19,466,398 5,950,427 2,918,543 2022 28,381,095 19,497,813 5,960,030 2,923,253 2023 28,452,092 19,546,587 5,974,939 2,930,566 2024 28,493,816 19,575,252 5,983,701 2,934,863 2025 28,557,951 19,619,313 5,997,170 2,941,469 2026 28,637,670 19,674,080 6,013,911 2,949,680 2027 28,686,253 19,707,456 6,024,113 2,954,684 2028 28,752,014 19,752,633 6,037,923 2,961,457 2029 28,833,605 19,808,686 6,055,057 2,969,861 2030 6,652,975 4,570,594 1,397,125 685,256

Total $572,792,454 $393,508,418 $120,286,415 $58,997,623

(1) Totals may not add due to rounding. (2) The Transit Authority is obligated to pay 68.7% of the principal and interest components of Base Rent payments due with

respect to the Certificates and 68.7% of the Ground Lease Net Rental. MTA (solely on behalf of LIRR and MNCRC) is obligated to pay 21.0% of the principal and interest components of Base Rent payments due with respect to the Certificates and 21.0% of the Ground Lease Net Rental. TBTA is obligated to pay 10.3% of the principal and interest components of Base Rent payments due with respect to the Certificates and 10.3% of the Ground Lease Net Rental.

96

GROUND LEASE NET RENTAL PROPORTIONATE SHARES

The following schedule sets forth the aggregate Ground Lease Rental Payments based upon a settlement during 2003 with the building’s owner, as well as each entity’s proportionate share.

12 months ending

January 1

AggregateBase Rent

Requirements

TransitAuthority share

(68.7%)

MTA share

(21.0%)

TBTAShare

(10.3%)2010 $23,112,514 $15,878,297 $ 4,853,628 $ 2,380,589 2011 23,112,514 15,878,297 4,853,628 2,380,589 2012 23,112,514 15,878,297 4,853,628 2,380,589 2013 23,112,514 15,878,297 4,853,628 2,380,589 2014 23,112,514 15,878,297 4,853,628 2,380,589 2015 25,351,894 17,416,751 5,323,898 2,611,245 2016 25,351,894 17,416,751 5,323,898 2,611,245 2017 25,351,894 17,416,751 5,323,898 2,611,245 2018 25,351,894 17,416,751 5,323,898 2,611,245 2019 25,351,894 17,416,751 5,323,898 2,611,245 2020 27,770,425 19,078,282 5,831,789 2,860,354 2021 27,770,425 19,078,282 5,831,789 2,860,354 2022 27,770,425 19,078,282 5,831,789 2,860,354 2023 27,770,425 19,078,282 5,831,789 2,860,354 2024 27,770,425 19,078,282 5,831,789 2,860,354 2025 30,382,438 20,872,735 6,380,312 3,129,391 2026 30,382,438 20,872,735 6,380,312 3,129,391 2027 30,382,438 20,872,735 6,380,312 3,129,391 2028 30,382,438 20,872,735 6,380,312 3,129,391 2029 30,382,438 20,872,735 6,380,312 3,129,391 2030 35,815,017 24,604,917 7,521,154 3,688,947

Total(1) $568,901,372 $390,835,242 $119,469,289 $58,596,842

(1) Totals may not add due to rounding.

97


Where Located in Appendix A Transit Authority Undertaking Caption(s) Heading(s)

A. Description of the Transit System and its operations.

1. TRANSIT SYSTEM All headings

B. Description of changes to the fares or fare structures charged to users of the Transit System.


1. Fares and Tolls – Transit System Fares

C. Information concerning the amounts, sources, material changes in and material factors affecting Available Transit Authority Revenues and sublease payments incurred under the Leasehold Improvement Sublease.


1. Fares and Tolls 2. State and Local General Operating

Subsidies3. State Special Tax Supported

Operating Subsidies 4. MTA Bridges and Tunnels Surplus 5. Financial Assistance and Service

Reimbursements from Local Municipalities

6. Miscellaneous Revenues D. Information regarding the Transit Capital Program.





Program Objectives


1. Litigation 1. MTA 2. Transit System

98

Where Located in Appendix A MTA Undertaking Caption(s) Heading(s)

A. Description of the Commuter Systems and its operations.

1. COMMUTER SYSTEM All headings

B. Description of changes to the fares or fare structures charged to users of the Commuter System.


1. Fares and Tolls – Commuter System Fares

C. Information concerning the amounts, sources, material changes in and material factors affecting Available Authority Revenues and sublease payments incurred under the Leasehold Improvement Sublease.


1. Fares and Tolls 2. State and Local General Operating Subsidies3. State Special Tax Supported Operating Subsidies 4. MTA Bridges and Tunnels Surplus 5. Financial Assistance and Service Reimbursements from Local Municipalities6. Miscellaneous Revenues

D. Information regarding the Commuter Capital Program.





Program Objectives


1. Litigation 1. MTA 2. Commuter System

99

Where Located in Appendix A TBTA Undertaking Caption(s) Heading(s)

A. Description of TBTA Facilities and of the projects it is authorized to undertake or finance.

1. TRIBOROUGH BRIDGE AND TUNNEL AUTHORITY

1. MTA Bridges and Tunnels Facilities 2. Authorized Projects of MTA Bridges and Tunnels

B. Description of TBTA’s toll rates and toll structures.


1. Toll Rates

C. Historical information concerning traffic, revenues, operating expenses and payments on Senior TBTA Obligations.





3. MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS

1. MTA Bridges and Tunnels Senior Table 2

D. Description of the financing activities of TBTA.

1. MTA Bridges and Tunnels SENIOR REVENUE BONDS

1. MTA Bridges and Tunnels Senior Table 1 2. MTA Bridges and Tunnels Senior Table 2

E. Information regarding the TBTA, Transit and Commuter Capital Programs.








3. 2000-2004 MTA Capital Programs 4. 1992-1999 Transit Capital Program


Program Objectives F. Material litigation relating to any of the foregoing.


100










Bond calls (which do not include regularly scheduled or mandatory sinking fund redemptions effectuated in accordance with the resolution).

Defeasances.


X Rating changes.

Explanation:

On January 18, 2008, Fitch Ratings downgraded Ambac Assurance Corporation from “AAA” to “AA”. On June 26, 2008, Fitch withdrew its rating of Ambac Assurance Corporation.

On June 19, 2008, Moody’s Investor Service downgraded Ambac Assurance Corporation from “Aaa” to “Aa3”. On November 5, 2008, Moody’s downgraded Ambac Assurance Corporation from “Aa3” to “Baa1”. On April 13, 2009, Moody’s downgraded Ambac Assurance Corporation from “Baa1” to “Ba3”.

On June 5, 2008, Standard & Poor’s downgraded Ambac Assurance Corporation from “AAA” to “AA”. On November 19, 2008, Standard & Poor’s downgraded Ambac Assurance Corporation from “AA” to “A”.


Attached hereto are the audited financial statements of the Metropolitan Transportation Authority, the New York City Transit Authority and Triborough Bridge and Tunnel Authority.

Appendix A

APPENDIX A

THE RELATED ENTITIES

This revised and restated Appendix A is dated June 12, 2009 and contains information only through that date (or the specific earlier dates noted herein, such as year-end December 31, 2008 financial and statistical information). MTA intends to update and supplement specific information contained herein (1) through revised Continuing Disclosure Filings, (2) by additional information posted on its website at www.mta.info/mta/investor/index.html, (3) as part of its quarterly financial statement reports, and (4) in connection with its periodic issuance of bonds, notes and other obligations. MTA retains the right to update and supplement specific information contained herein as events warrant.

MTA has contracted with Digital Assurance Corporation (“DAC”), a dissemination agent recognized

as such by the SEC, to file certain information with the Nationally Recognized Municipal Securities Information Repositories and to post certain information on its website (www.dacbond.com). DAC has contracted to email copies of the information that the Related Entities file with DAC to any person who registers with DAC in the manner set forth on its website.

The Securities and Exchange Commission recently adopted certain amendments to Rule 15c2-12,

which amendments become effective July 1, 2009. Pursuant to such amendments, it is expected that MTA will be required to file or cause to be filed the Annual Information (as required and defined in Rule l5c2-12) and material event notices with the Municipal Securities Rulemaking Board and its Electronic Municipal Market Access system for municipal securities disclosures instead of with each Nationally Recognized Municipal Securities Information Repository.

All of the information (1) set forth in revised Continuing Disclosure Filings, (2) contained in

quarterly financial statement reports, and (3) filed with DAC is included herein by specific cross-reference. Such information is also posted on the MTA website at www.mta.info/mta/investor/index.html for convenience. Such information is accurate as of its respective date.

Certain statements included in this Appendix A constitute “forward-looking statements.” Such

statements generally are identifiable by the terminology used, such as “plan,” “expect,” “estimate,” “budget,” “project,” “forecast” or other similar words. Such forward-looking statements include, but are not limited to, certain statements contained in the information under the captions “STATISTICAL AND FINANCIAL INFORMATION – FINANCIAL PLANS AND CAPITAL PROGRAMS” in Part 3 and “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS” in Part 4. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Except as set forth in the preceding paragraphs, MTA does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.


i

APPENDIX A Table of Contents

Page

PART 1. BUSINESS ................................................................................................ 1 RECENT DEVELOPMENTS ............................................................................... 2

THE RELATED ENTITIES .................................................................................. 4 Legal Status and Public Purpose ....................................................................................... 4 Use of Popular Names ...................................................................................................... 5 Governance ....................................................................................................................... 5 Facilities and Operations ................................................................................................... 5 Financial Operations ......................................................................................................... 7 Management...................................................................................................................... 9

PART 2. OPERATIONS ....................................................................................... 11

TRANSIT SYSTEM ............................................................................................ 12 Legal Status and Public Purpose ..................................................................................... 12 Management.................................................................................................................... 12 History of the Transit System ......................................................................................... 13 Description of the Transit System ................................................................................... 14 Relationships with the State, the City and the Federal Government ............................... 14

COMMUTER SYSTEM ...................................................................................... 15 Legal Status and Public Purpose ..................................................................................... 15 Management.................................................................................................................... 16 Description of the Commuter System ............................................................................. 16 Relationships with the State, Certain Local Governments and the Federal Government 17

TRIBOROUGH BRIDGE AND TUNNEL AUTHORITY ................................ 17 Legal Status and Public Purpose ..................................................................................... 17 Management.................................................................................................................... 18 MTA Bridges and Tunnels Facilities .............................................................................. 19 Authorized Projects of MTA Bridges and Tunnels ......................................................... 20

MTA CAPITAL CONSTRUCTION COMPANY .............................................. 20 Legal Status and Public Purpose ..................................................................................... 20 Management.................................................................................................................... 20 East Side Access ............................................................................................................. 21 Second Avenue Subway ................................................................................................. 23 No. 7 Subway Line Extension ........................................................................................ 23 Lower Manhattan Projects: Fulton Street Transit Center and South Ferry Terminal...... 24

STATEN ISLAND RAPID TRANSIT OPERATING AUTHORITY ................ 26 Legal Status and Public Purpose ..................................................................................... 26 Management.................................................................................................................... 26

METROPOLITAN SUBURBAN BUS AUTHORITY ...................................... 27 Legal Status and Public Purpose ..................................................................................... 27 Management.................................................................................................................... 27

MTA BUS COMPANY ....................................................................................... 27 Legal Status and Public Purpose ..................................................................................... 27 Description of the MTA Bus System .............................................................................. 28 Management.................................................................................................................... 28

ii

PART 3. STATISTICAL AND FINANCIAL INFORMATION ...................... 29

RIDERSHIP AND FACILITIES USE ................................................................ 30 Transit System (MTA New York City Transit and MaBSTOA) Ridership .................... 30 Commuter System Ridership .......................................................................................... 37 MTA Bus Ridership ........................................................................................................ 40 MTA Bridges and Tunnels – Total Revenue Vehicles ................................................... 41 Toll Rates ........................................................................................................................ 42 Competing Facilities and Other Matters ......................................................................... 44 E-ZPass ........................................................................................................................... 45

REVENUES OF THE RELATED ENTITIES .................................................... 46 Fares and Tolls ................................................................................................................ 46 State and Local General Operating Subsidies ................................................................. 48 State Special Tax Supported Operating Subsidies .......................................................... 48 MTA Bridges and Tunnels Surplus ................................................................................ 50 Financial Assistance and Service Reimbursements from Local Municipalities .............. 53 Miscellaneous Revenues ................................................................................................. 53 Mortgage Recording Taxes ............................................................................................. 54 Operating Funding for the Transit and Commuter Systems ............................................ 56

METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS . 58 MetroCard ....................................................................................................................... 58 E-ZPass ........................................................................................................................... 58 Commuter Railroads ....................................................................................................... 59 General ............................................................................................................................ 59

FINANCIAL PLANS AND CAPITAL PROGRAMS ........................................ 60 2009-2012 Financial Plan ............................................................................................... 60 Capital Programs – Background and Development ........................................................ 61 2005-2009 MTA Capital Program .................................................................................. 62 Construction Cost Overruns ............................................................................................ 67 Amendments to the MTA Capital Programs ................................................................... 68 2005-2009 MTA Bridges and Tunnels Capital Program ................................................ 68 1992-2004 Transit Capital Program Objectives .............................................................. 68 1992-2004 Commuter Capital Program Objectives ........................................................ 69 1992-2004 MTA Bridges and Tunnels Capital Programs ............................................... 69 Oversight and Review of Administration of Capital Programs ...................................... 69 Non-Capital Program Projects ........................................................................................ 70

FUTURE CAPITAL NEEDS .............................................................................. 71

INVESTMENT POLICY ..................................................................................... 71

PART 4. PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS ................................................................................................ 72

GENERAL ........................................................................................................... 73 Financing of Capital Projects and Statutory Ceiling ....................................................... 73 MTA Capital Program Bonds ......................................................................................... 74 Non-Capital Program Securities ..................................................................................... 75 Interagency Loans ........................................................................................................... 76 Leasing ............................................................................................................................ 76 Types of Debt Outstanding ............................................................................................. 76 Swap Agreements Relating to Synthetic Fixed Rate Debt .............................................. 77

TRANSPORTATION REVENUE BONDS........................................................ 90 General ............................................................................................................................ 90 Pledged Transportation Revenues ................................................................................... 91 Description of Pledged Revenues ................................................................................... 93

iii

Factors Affecting Revenues ............................................................................................ 93 Security – General .......................................................................................................... 95 Pledge Effected by the Resolution .................................................................................. 95 Flow of Revenues ........................................................................................................... 95 Covenants ....................................................................................................................... 97

MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS .................... 98 Sources of Payment ........................................................................................................ 99 Security – General ........................................................................................................ 100 Pledge Effected by the MTA Bridges and Tunnels Senior Resolution ......................... 100 Revenues and Additional MTA Bridges and Tunnels Projects ..................................... 101 Flow of Revenues ......................................................................................................... 101 Rate Covenant ............................................................................................................... 102 Additional Bonds .......................................................................................................... 102 Refunding Bonds .......................................................................................................... 103 Subordinate Obligations ................................................................................................ 103

MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE BONDS .... 104 Sources of Payment ...................................................................................................... 105 Security – General ........................................................................................................ 106 Pledge Effected by the MTA Bridges and Tunnels Subordinate Resolution ................ 106 Revenues and Additional Subordinate MTA Bridges and Tunnels Projects................. 107 Flow of Revenues ......................................................................................................... 107 Rate Covenant ............................................................................................................... 107 Additional Subordinate Revenue Bonds ....................................................................... 108 Refunding Subordinate Revenue Bonds ....................................................................... 108

DEDICATED TAX FUND BONDS ................................................................. 109 Sources of Payment – Revenues from Dedicated Taxes ............................................... 110 Factors Affecting Revenues from Dedicated Taxes ...................................................... 113 Security – General ........................................................................................................ 113 Pledge Effected by the DTF Resolution ........................................................................ 114 Flow of Funds ............................................................................................................... 114 Debt Service Fund ........................................................................................................ 117 Covenants ..................................................................................................................... 117 Parity Debt .................................................................................................................... 117 Appropriation by the State Legislature ......................................................................... 118 Agreement of the State .................................................................................................. 118 MTTF Receipts – Dedicated Petroleum Business Tax ................................................. 119 MTTF Receipts – Motor Fuel Tax ................................................................................ 123 MTTF Receipts – Motor Vehicle Fees.......................................................................... 124 MMTOA Account – Special Tax Supported Operating Subsidies ............................... 125

STATE SERVICE CONTRACT BONDS ........................................................ 130 Sources of Payment – General ...................................................................................... 131 Conditions in the State Service Contract ...................................................................... 131 Nature of State’s Obligation to Make State Service Contract Payments ...................... 132 Pledge Effected by the State Service Contract Bond Resolution .................................. 132 Agreement with the State .............................................................................................. 133

iv

PART 5. REGULATORY, EMPLOYMENT, INSURANCE AND

LITIGATION MATTERS .............................................................................. 134 FEDERAL AND STATE LAWS ...................................................................... 135

General .......................................................................................................................... 135 Transit System .............................................................................................................. 135 Commuter System ......................................................................................................... 135 MTA Bridges and Tunnels ............................................................................................ 135

EMPLOYEES, LABOR RELATIONS AND PENSION AND OTHER POST-EMPLOYMENT OBLIGATIONS ........................................................ 137 General .......................................................................................................................... 137 MTA Headquarters ....................................................................................................... 137 Transit System .............................................................................................................. 137 MTA Bus ...................................................................................................................... 138 Commuter System ......................................................................................................... 138 MTA Bridges and Tunnels ............................................................................................ 138 MTA Staten Island Railway .......................................................................................... 138 MTA Long Island Bus .................................................................................................. 139 OPEBs ........................................................................................................................... 139

INSURANCE ..................................................................................................... 141 General .......................................................................................................................... 141 Property Insurance Program ......................................................................................... 141 Commuter Stations and Force Liability ........................................................................ 142 FMTAC Excess Loss Fund ........................................................................................... 142 All Agency Protective Liability .................................................................................... 145 Paratransit and Non-Revenue Vehicle Policies ............................................................. 145 Premises Liability ......................................................................................................... 145 Owner Controller Insurance Program ........................................................................... 145 Builder’s Risk ............................................................................................................... 146

LITIGATION ..................................................................................................... 147 General .......................................................................................................................... 147 MTA ............................................................................................................................. 147 Transit System .............................................................................................................. 148 MTA Bus ...................................................................................................................... 148 Commuter System ......................................................................................................... 148 MTA Bridges and Tunnels ............................................................................................ 148 MTA Long Island Bus .................................................................................................. 149

PART 1. BUSINESS

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RECENT DEVELOPMENTS

MTA Legislation

On May 7, 2009, legislation was enacted in New York State providing additional sources of revenues in the form of taxes, fees and surcharges to address the financial needs of the MTA (“MTA” and other capitalized terms not otherwise defined in this Recent Developments section are defined below). The new law (Chapter 25 of the Laws of 2009) among other things:

• imposes a payroll mobility tax of 0.34 percent on payroll expenses and net earnings from self-employment within the metropolitan commuter transportation district (“MCTD”) (effective as of March 1, 2009, except school districts, effective September 1, 2009);

• imposes a supplemental fee of one dollar for each six month period of validity of a learner’s permit or a driver’s license issued to a person residing in the MCTD (effective September 1, 2009);

• imposes a supplemental fee of twenty-five dollars per year on the registration and renewals of registrants of motor vehicles who reside within the MCTD (effective September 1, 2009);

• imposes on taxicab owners a tax of fifty cents per ride on taxicab rides originating in New York City and terminating within the MCTD (effective November 1, 2009);

• imposes a supplemental tax of five percent of the cost of rentals of automobiles rented within the MCTD (effective June 1, 2009).

The new law amends the Public Authorities Law in a number of ways, including by providing for the chair of

the MTA to serve as its chief executive officer, effective upon appointment by the Governor, with the advice and consent of the State Senate, of a Chairman to fill the new term of office created by the legislation.

The new sources of revenue noted above are preliminarily projected to provide an additional $1.1 billion to MTA for calendar year 2009 and an additional $1.9 billion to MTA in calendar year 2010.

The new payroll mobility tax revenues can be: (i) pledged by MTA to secure and be applied to the payment of bonds to be issued in the future, to fund capital projects of MTA, its subsidiaries, and NYCTA and its subsidiary and (ii) used by MTA to pay capital costs, including debt service of MTA, its subsidiaries and NYCTA and its subsidiary. Subject to the provisions of any such pledge, or in the event there is no such pledge, the payroll mobility tax revenues can be used by MTA to pay for costs, including operating costs of MTA, its subsidiaries and NYCTA and its subsidiary.

The other new revenues may be pledged by MTA or pledged to TBTA to secure debt of MTA or TBTA.

Subject to the provisions of such pledge, or in the event there is no such pledge, such new revenues can be used by MTA for the payment of operating and capital costs of MTA, its subsidiaries and NYCTA and its subsidiary as MTA shall determine.

It is anticipated that in 2009 all of the new revenues will be applied to pay operating expenses of MTA and

certain of its subsidiaries and affiliates. 2009 Fare and Toll Charge Adjustments

After passage of the new legislation providing for additional sources of revenue to the MTA, a special meeting of the MTA board was convened on May 11, 2009 to address 2009 fare and toll charge adjustments. At the May 11, 2009 meeting, the MTA board rescinded the fare and toll increases adopted on March 25, 2009, which had been structured to yield a 23% increase in passenger and toll revenues, and adopted revised fare and toll schedules that will increase existing fares and tolls by approximately 10%. Implementation of the newly adopted fare and toll schedules is anticipated in late June and early July, 2009. 2009 Scheduled Service Reductions

The MTA’s February Financial Plan included a number of significant deficit reduction measures in order to achieve a balanced 2009 budget and reduced budget gaps thereafter. These included certain proposed reductions to scheduled service and a variety of other deficit reducing actions. The additional revenues from taxes and fees that MTA expects to receive as a result of enacted legislation, combined with the revenues from fare increases adopted by the MTA board on May 11, 2009 and other revenues to be received and actions to be taken by the MTA, are

A-2

projected to enable MTA to meet its operating needs for 2009 and 2010 without implementing reductions in scheduled service. Accordingly, the MTA board, at its regularly scheduled meeting held on May 27, 2009, restored the planned reductions to scheduled service, while leaving in place other deficit reducing actions contained in the February Financial Plan. Adjustments to 2009-2012 Financial Plan and 2009 Budget

On April 27, 2009 the MTA issued an April Re-Forecast to address falling revenues in Real Estate Taxes, Passenger and Toll Revenue and State Dedicated Taxes (such forecast of diminished revenues having occurred subsequent to the issuance of the February Financial Plan). Expenses were not re-forecast at that time. The projection contained in the April Re-forecast anticipated revenues being reduced by as much as $670 million in 2009 and $732 million in 2010 as compared to the February Financial Plan.

On April 29, 2009 the MTA board approved, on a temporary basis, an amendment to revise the budget and reporting procedures applicable to the MTA and all of its operating agencies for the 2010 budget process. The MTA board rescinded the April action that authorized the temporary budgeting procedures at its regularly scheduled meeting in May following the enactment in early May of the above-noted legislation providing additional sources of revenues to address the financial needs of the MTA. The MTA staff accordingly will follow its ordinary budgeting and reporting procedures and schedule for making adjustments to the 2009-2012 Financial Plan and 2009 Budget, which contemplates adjustments to the 2009 Budget and the 2009-2012 Financial Plan to be presented to the MTA board at its July meeting.

The MTA will incorporate in its July Financial Plan, among other things, the amount and timing of receipt of

revenues MTA expects to receive as a result of the new legislation, updated projections for real estate related tax receipts, New York State subsidies, ridership/toll revenue based on the revised level of fare and toll increases adopted by the board on May 11, 2009, and the rescission of the scheduled service reductions addressed at the regularly scheduled board meeting held on May 27, 2009.

MTA will continue to closely monitor its finances, including the subsidies referenced above, and will continue to update all MTA receipts and expenditures and propose actions that are necessary to maintain budgetary balance.

MTA Capital Programs

Section 1269(b) of the Public Authorities Law requires MTA to submit capital plans to the Review Board. New

five-year MTA Capital Programs for the Transit and Commuter Systems for the 2010-2014 period are planned to be submitted by MTA to the Review Board on or before October 1, 2009. The size of the Programs, the elements to be included therein, and the funding sources have not yet been determined. The successful funding of the new Capital Programs, including issuance of bonds in connection therewith, would likely require that the MTA receive significant amounts of additional new financial support beyond the new revenue sources provided to the MTA in the legislation enacted on May 7, 2009.

MTA Executive Director/ chief executive officer

Mr. Elliot G. Sander, the Executive Director of the MTA, departed from this position in late May, 2009, whereupon, on May 27, 2009, the MTA board appointed Helena Williams as interim Executive Director of the MTA. The above-noted legislation enacted in early May, 2009, amends the Public Authorities Law to provide for the chair of the MTA to serve as its chief executive officer, effective upon appointment by the Governor, with the advice and consent of the State Senate, of a chairman to fill the new term of office created by the legislation.

Debt

On April 23, 2009 MTA issued Dedicated Tax Fund Bonds Series 2009B in the amount of $500,000,000 and Series 2009C Federally Taxable-Issuer Subsidy-Build America Bonds in the amount of $750,000,000.

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THE RELATED ENTITIES

Legal Status and Public Purpose

The Metropolitan Transportation Authority (“MTA”), a public benefit corporation of the State of New York (the “State”), has the responsibility for developing and implementing a unified mass transportation policy for The City of New York (the “City”) and Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester counties (collectively with the City, the “MTA Commuter Transportation District”).

MTA carries out these responsibilities directly and through its subsidiaries and affiliates, which are also public

benefit corporations. The following entities, listed by their legal names, are subsidiaries of MTA: • The Long Island Rail Road Company, • Metro-North Commuter Railroad Company, • Staten Island Rapid Transit Operating Authority, • Metropolitan Suburban Bus Authority, • MTA Bus Company, and • MTA Capital Construction Company. The following entities, listed by their legal names, are affiliates of MTA: • Triborough Bridge and Tunnel Authority, and • New York City Transit Authority, and its subsidiary, the Manhattan and Bronx Surface Transit Operating

Authority. MTA and the foregoing subsidiaries and affiliates, collectively referred to herein, from time to time, as the

“Related Entities.” Throughout this Appendix A, the Related Entities are referred to by their popular names, which are listed below under “Use of Popular Names.”

Certain insurance coverage for the Related Entities is provided by a New York State-licensed captive insurance

public benefit corporation subsidiary of MTA, First Mutual Transportation Assurance Company (“FMTAC”). See “INSURANCE” in Part 5.

MTA and its subsidiaries are generally governed by the Metropolitan Transportation Authority Act, being Title

11 of Article 5 of the New York Public Authorities Law, as from time to time amended (the “MTA Act”). Triborough Bridge and Tunnel Authority is generally governed by the Triborough Bridge and Tunnel Authority

Act, being Title 3 of Article 3 of the New York Public Authorities Law, as from time to time amended (the “MTA Bridges and Tunnels Act”).

The New York City Transit Authority and its subsidiary are generally governed by the New York City Transit

Authority Act, being Title 9 of Article 5 of the New York Public Authorities Law, as from time to time amended (the “MTA New York City Transit Act”).

Due to the continuing business interrelationship of the Related Entities and their common governance and

funding, there are provisions of each of these three acts (the MTA Act, the MTA Bridges and Tunnels Act and the MTA New York City Transit Act) that affect some or all of the other Related Entities in various ways.

A-4

Use of Popular Names

The following table sets forth the legal and popular names of the Related Entities. Throughout this Appendix A, reference to each agency will be made using its popular name.

Legal Name Popular Name Metropolitan Transportation Authority MTA New York City Transit Authority MTA New York City Transit Manhattan and Bronx Surface Transit Operating Authority MaBSTOA Staten Island Rapid Transit Operating Authority MTA Staten Island Railway MTA Bus Company MTA Bus Metropolitan Suburban Bus Authority MTA Long Island Bus The Long Island Rail Road Company MTA Long Island Rail Road Metro-North Commuter Railroad Company MTA Metro-North Railroad MTA Capital Construction Company MTA Capital Construction Triborough Bridge and Tunnel Authority MTA Bridges and Tunnels

Governance

MTA’s Board consists of a Chairman and 16 other voting Members, two non-voting Members and four alternate non-voting Members, all of whom are appointed by the Governor with the advice and consent of the State Senate. The four voting Members required to be residents of the counties of Dutchess, Orange, Putnam and Rockland, respectively, cast only one collective vote. The other voting Members, including the Chairman, cast one vote each (except that in the event of a tie vote, the Chairman shall cast one additional vote). Members of MTA are, ex officio, the Members or Directors of the other Related Entities and FMTAC.

Under State legislation enacted on May 7, 2009 (Chapter 25 of the Laws of 2009), the Chairman of the MTA is

to serve as its chief executive officer, effective upon appointment by the Governor, with the advice and consent of the State Senate, of a Chairman to fill the new term of office created by the legislation. Until such appointment, the Executive Director serves as the chief executive officer of MTA and is responsible for the discharge of the executive and administrative functions and powers of the Related Entities. The Executive Director of MTA, who is appointed by the Board on the recommendation of the Chairman, is, ex officio, Executive Director of the other Related Entities.

Facilities and Operations

The following is a summary of the facilities and operations presently conducted by the Related Entities. MTA Headquarters. MTA Headquarters includes the executive staff of MTA, as well as a number of

departments that perform largely all-agency functions, including audit, budget and financial management, capital programs management, finance, governmental relations, insurance and risk management, legal, planning, procurement, real estate and treasury. In addition, MTA maintains its own Police Department with non-exclusive jurisdiction over all facilities of the Related Entities, and MTA Headquarters is responsible for the costs and expenses of such police department.

Transit System. MTA New York City Transit and its subsidiary MaBSTOA operate all subway transportation

and substantially all of the public bus transportation within the City (the “Transit System”). Throughout this Appendix A, unless otherwise noted, the term “Transit System” includes only the operations of MTA New York City Transit and its subsidiary MaBSTOA, and does not include the operations of MTA Staten Island Railway (except for certain capital projects included in the Transit Capital Programs, as defined below under “—Capital Programs”), MTA Bus or MTA Long Island Bus.

Commuter System. MTA Long Island Rail Road and MTA Metro-North Railroad operate commuter rail

services in the MTA Commuter Transportation District (the “Commuter System”).

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• MTA Long Island Rail Road operates commuter rail service between the City and Long Island and within Long Island.

• MTA Metro-North Railroad operates commuter rail service between the City and the northern suburban

counties of Westchester, Putnam and Dutchess; from the City through the southern portion of the State of Connecticut; through an arrangement with New Jersey Transit, the Port Jervis and Pascack Valley commuter rail services to Orange and Rockland Counties; and within such counties and the State of Connecticut.

MTA Bus. MTA Bus operates certain bus routes in the City formerly served by seven private bus operators

pursuant to franchises granted by the City (the “MTA Bus System”). Under an agreement between the MTA and the City, the City is responsible for paying MTA Bus the difference between the actual cost of operation and all revenues and subsidies received by MTA Bus and allocable to the operation of the routes. Certain portions of the MTA Bus capital program are included in the capital programs approved by the Review Board as described below under “—Capital Programs.” The City is not currently responsible for paying debt service on bonds issued by MTA for the benefit of MTA Bus; the debt service on such bonds is being paid by MTA Bus and MTA. MTA Bus is an “Additional Related Transportation Entity” within the meaning of the Transportation Resolution (as hereinafter defined), which allows MTA Bus to finance its capital projects with Transportation Revenue Bonds. See “TRANSPORTATION REVENUE BONDS” in Part 4.

MTA Long Island Bus. MTA Long Island Bus operates bus service on Long Island, predominantly in Nassau County. MTA pays from unencumbered funds the operating expenses of MTA Long Island Bus not covered by fares, State and local subsidies and other amounts. Capital needs of MTA Long Island Bus are funded by Nassau County, which owns the MTA Long Island Bus facilities.

MTA Staten Island Railway. MTA Staten Island Railway operates a single rapid transit line extending from the Staten Island ferry terminal at St. George to the southern tip of Staten Island. MTA pays from unencumbered funds the operating expenses of MTA Staten Island Railway not covered by fares, State and local subsidies and other amounts. Capital needs of MTA Staten Island Railway are financed under Transit Capital Programs.

MTA Bridges and Tunnels. MTA Bridges and Tunnels operates all nine of the intra-State toll bridges and tunnels in the City.

• MTA Bridges and Tunnels is authorized to issue its own obligations to finance the cost of capital costs and

projects of its own facilities and the Transit and Commuter Systems. • MTA Bridges and Tunnels’ annual operating surplus, after meeting its own expenses and after payment of

debt service on its own obligations, is used to fund the operating expenses of the Transit System and the Commuter System and/or to finance the cost of certain capital costs and projects of the Transit System and the Commuter System, including payment of debt service on obligations of MTA issued to finance such costs and projects.

• MTA Bridges and Tunnels’ annual surplus investment income, after meeting its own expenses and after

payment of debt service on its own obligations, is used at the MTA Board’s discretion to fund the operating or capital expenses of any of the Related Entities.

MTA Capital Construction. MTA Capital Construction is responsible for the planning, design and construction

of current and future major MTA system expansion projects for the other Related Entities, including East Side Access (bringing MTA Long Island Rail Road into Grand Central Terminal), extension of the No. 7 subway line from Times Square south to 34th Street and Eleventh Avenue in Manhattan, the Lower Manhattan Fulton Street Transit Center, the new South Ferry station complex in lower Manhattan, system-wide capital security projects, and the Second Avenue Subway.

Capital Programs. MTA is required to prepare and submit for approval to the Metropolitan Transportation

Authority Capital Program Review Board (the “Review Board”) successive five-year capital programs for the (1) Transit System and MTA Staten Island Railway and the (2) Commuter System. MTA Bridges and Tunnels, MTA Bus and MTA Long Island Bus undertake their own capital planning that is not subject to Review Board approval;

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however, certain security projects of MTA Bridges and Tunnels and certain capital projects of MTA Bus have been included in Review Board-approved MTA Capital Programs (as defined below).

As used in this Appendix A, the following terms shall have the following definitions: • The term “Capital Program,” as used in connection with any five-year period, shall refer to the combined

“MTA Capital Program” and “MTA Bridges and Tunnels Capital Program” for that period. For example, the term “2005-2009 Capital Program” shall refer to the combined “2005-2009 MTA Capital Program” and the “2005-2009 MTA Bridges and Tunnels Capital Program.”

• The term “MTA Capital Program,” as used in connection with any five-year period, shall refer to the

combined “MTA Transit Capital Program” and “MTA Commuter Capital Program” for that period. For example, the term “2005-2009 MTA Capital Program” shall refer to the combined “2005-2009 Transit Capital Program” and the “2005-2009 Commuter Capital Program.”

• The term “Transit Capital Program,” as used in connection with any five-year period, shall refer to the

capital program for MTA New York City Transit, MaBSTOA and MTA Staten Island Railway that is approved by the Review Board for that five-year period.

• The term “Commuter Capital Program,” as used in connection with any five-year period, shall refer to the

capital program for MTA Long Island Rail Road and MTA Metro-North Railroad that is approved by the Review Board for that five-year period.

• The term “MTA Bridges and Tunnels Capital Program,” as used in connection with any five-year period,

shall refer to the capital program for MTA Bridges and Tunnels that is adopted by the Board, but that does not need the approval of the Review Board to become effective.

Financial Operations

The MTA Board has adopted financial planning and budgeting practices for the Related Entities that require the preparation of four-year financial plans covering the existing and three future fiscal (or calendar) years. The preparation of the financial plans of the Related Entities includes provision for capital spending (including debt service) authorized by the Capital Programs of the Related Entities, including those Capital Programs approved by the Review Board as described above.

The implementation of the financial plans, as adopted from time to time, and the Capital Programs, as submitted

and amended from time to time, are interrelated and complex. Any failure to implement an important component of one can adversely affect the implementation of the other. See generally “FINANCIAL PLANS AND CAPITAL PROGRAMS” in Part 3.

Financial Plans and Budgetary Practices.

• The MTA Board’s financial planning and budgeting practices for the Related Entities require the following in each year:

o In July of each year, the Executive Director will submit to the MTA Board a preliminary

budget for the next year and an update to the four-year financial plan (which includes the next year and the three years thereafter).

o In September and October, the MTA Board and the operating committees of the MTA Board

will include the July preliminary budget and financial plan on their agendas. Public comments will be solicited at the September meeting.

o In November, a proposed final budget for the next fiscal year, together with a revised four-

year financial plan, will be submitted to the MTA Board. o A final budget for the next fiscal year, following public comment, will be adopted by the

MTA Board by no later than December 31.

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o No later than February, the MTA Budget staff will issue a report containing the supporting

schedules for the current year budget as adopted by the MTA Board the preceding December, as well as an update to the four-year financial plan.

• Budget and financial plan documents are distributed to certain elected officials and posted on MTA’s

website for review by the public. • Each of the Related Entities (other than MTA Bridges and Tunnels) is required by law to adopt a

budget that is self-sustaining on a cash basis, including self-generated fares, tolls and other revenues, as well as operating subsidies of various types from numerous sources, including the State and local governments. MTA Bridges and Tunnels generates surplus funds to finance the Transit and Commuter Systems.

• MTA is required each year to update and submit to the Governor a five-year strategic operation plan

(that extends by one year the period covered by the four-year financial plan referenced above) that includes not only estimated operating and capital cost information, but also long-range goals and objectives, planned service and performance standards, and strategies to improve productivity.

• The State Comptroller has promulgated regulations that require the Related Entities to follow certain

guidelines in reporting certain budget and financial plan information.

• In an effort to present standardized financial reporting among all of the Related Entities, a common chart of accounts has been adopted and other financial reporting changes have been made.

• MTA prepares quarterly unaudited consolidated financial statements on behalf of the Related Entities

as described below under “—Quarterly Financial Statement Reports.” Five-Year Capital Programs.

• The MTA Act requires the preparation of five-year capital programs for the (1) Transit System and MTA Staten Island Railway and (2) Commuter System. MTA has included certain aspects of funding the MTA Bus capital program in approved Capital Programs and certain MTA Bridges and Tunnels security projects are included in a broader list of security projects in approved Capital Programs.

• Though not required by law, MTA Bridges and Tunnels prepares its own capital program that covers

the same time period as the MTA Capital Programs.

• MTA Bus annual capital program is prepared by MTA.

• MTA Long Island Bus annual capital program is prepared and funded by Nassau County after consultation with MTA.

• The capital programs of MTA Bridges and Tunnels, MTA Bus and MTA Long Island Bus are not

required to be approved by the Review Board.

• For information relating to the most recent Capital Programs, see “FINANCIAL PLANS AND CAPITAL PROGRAMS” in Part 3.

Quarterly Financial Statement Reports. MTA issues unaudited quarterly financial statement reports for the

Related Entities on a consolidated basis. The reports are filed with the Nationally Recognized Municipal Securities Information Repositories and are posted on MTA’s website. The review of the quarterly financial statements is conducted in accordance with the standards established by the American Institute of Certified Public Accountants.

The Securities and Exchange Commission recently adopted certain amendments to Rule 15c2-12, which

amendments become effective July 1, 2009. Pursuant to such amendments, it is expected that MTA will be required to file or cause to be filed the annual information and material event notices required by Rule15c2-12 with the

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Municipal Securities Rulemaking Board and its Electronic Municipal Market Access system for municipal securities disclosures instead of with each Nationally Recognized Municipal Securities Information Repository.

Interagency Loans. The Related Entities are authorized to transfer their revenues, subsidies and other moneys or securities to another Related Entity for use by such other Related Entity, provided at the time of such transfer it is reasonably anticipated that the moneys and securities so transferred will be reimbursed, repaid or otherwise provided for by the end of the next succeeding calendar year. The use of such interagency loans has allowed the Related Entities to meet their operating needs and other periodic financial commitments without the use of public or private cash flow borrowings. The last publicly-offered cash flow borrowing was in 1996.

Public Statements and Reports by Others. From time to time, the Governor, the State Comptroller, the Mayor of the City, the City Comptroller, County Executives, State legislators, City Council Members and other persons or groups may make public statements, issue reports, institute proceedings or take actions that contain predictions, projections or other information relating to the Related Entities or their financial condition, including potential operating results for the current fiscal year and projected baseline surpluses or gaps for future years, that may vary materially from, question or challenge the information provided herein or in budgets or financial plans prepared by MTA. While MTA may not directly respond to each such statement or action, MTA intends to keep its Continuing Disclosure Filings current and to prepare the quarterly financial statement reports described above. Investors and other market participants should, however, refer to MTA’s filings, from time to time, for information regarding the Related Entities and their financial condition.

Management

• The Chairman and Members of MTA, by statute, are also the Chairman and Members of the other Related Entities.

• Pursuant to State legislation enacted on May 7, 2009 (Chapter 25 of the Laws of 2009), the Chairman of the

MTA is to serve as its chief executive officer, effective upon appointment by the Governor, with the advice and consent of the State Senate, of a Chairman to fill the new term of office created by the legislation. Under this legislation, the newly-appointed Chairman shall serve, ex officio, as the chief executive officer of each of the other Related Entities, and any Executive Director of MTA as may be appointed by the Chairman of the MTA shall serve, ex officio, as Executive Director of each of the other Related Entities. Until an appointment to fill the new term of the Chairman, the Executive Director of the MTA remains its chief executive officer and is responsible for the discharge of the executive and administrative functions and powers of the MTA and the other Related Entities, serving, ex officio, as Executive Director of each of the other Related Entities.

• Each of the Related Entities has its own management structure that is responsible for its day-to-day operations.

The following are brief biographies of MTA’s senior officers. H. Dale Hemmerdinger, Chairman since October 2007. Mr. Hemmerdinger is president and director of the

Hemmerdinger Corporation, a commercial and residential real estate ownership and development company based in New York City. He also serves as president of Atco Properties & Management and Atco Properties Services Corporation. Within the industry he serves as president of the Realty Foundation of New York, is a member of the Real Estate Board of New York, and is a former commissioner of the City of New York Conciliation and Appeals Board. Mr. Hemmerdinger is active in civic and business affairs and is a trustee and secretary/treasurer of the NYC Police Foundation, a partner in the Partnership for New York City, and trustee and Chairman Emeritus of the Citizens Budget Commission. He is a 1967 graduate of New York University and is a trustee of the university, where he is on the budget/finance, alumni relations as Chairman, library, and executive committees.

Helena E. Williams, interim Executive Director of the Metropolitan Transportation Authority as of May 27, 2009 and President of MTA Long Island Rail Road since June 2007. Ms. Williams is the first woman to lead the nation’s busiest commuter railroad. Just prior to joining the LIRR, Ms. Williams worked briefly as Senior Counsel at Cablevision. Prior to that position, Ms. Williams served for five years in the administration of Nassau County Executive Tom Suozzi. Ms. Williams first served at the MTA beginning in 1985, where she rose from labor counsel to chief of staff of Long Island Bus before assuming the presidency of Long Island Bus in 1993. In 1999 Williams

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was inducted into the New York Public Transit Association’s Hall of Fame. Ms. Williams began her career in New York City, working for the Mayor’s Office of Municipal Labor Relations. She holds a J.D. from the St. John’s University School of Law and is admitted to practice law in New York. She has a B.A. with honors from the State University of New York at Oneonta.

Gary Dellaverson, Chief Financial Officer since March 2007. In this position, Mr. Dellaverson is responsible

for the Budgets and Financial Management, Finance and Treasury departments at the MTA. Prior to this position, Mr. Dellaverson served as MTA’s Director of Labor Relations and Chief Labor Negotiator since 1990. He was also responsible for the MTA’s Human Resource functions. Prior to joining MTA, Mr. Dellaverson served as Deputy Fire Commissioner for Administration for the New York City Fire Department, Assistant Director for the Mayor’s Office of Labor Relations, and as an attorney representing labor and management clients. Mr. Dellaverson is a graduate of Columbia College and New York University’s School of Law.

Gary M. Lanigan, Director of Budgets and Financial Management since March 2004 and Deputy Director of Budgets and Financial Management since June 2003. Prior to his position at the MTA, Mr. Lanigan served as the First Deputy Commissioner of the New York City Department of Correction where he was responsible for the administrative and operational workings of the largest detention system in the country. He also served as the Deputy Commissioner of Administration at the Department of Correction where he was directly responsible for the preparation and administration of the Department’s expense and capital budgets, personnel and payroll functions, management information systems and telecommunications. Before embarking on his 10-year career at the Correction Department, Mr. Lanigan held various positions in the New York City Police Department, including Assistant Commissioner of the Financial Management Division where he researched, prepared and analyzed the NYPD annual expense budget and ten-year capital program, as well as the ancillary revenue and contract budgets, and the four-year financial plan. Mr. Lanigan also held various positions at the New York City Office of Management and Budget. Mr. Lanigan received his MPA and BBA from Bernard M. Baruch College, School of Business & Public Administration. He has also completed executive training at Columbia University, Police Management Institute; Harvard University, John F. Kennedy School of Government; and the National Institute of Justice Executive Development for Deputy Directors.

James B. Henly, General Counsel since January 2007. Prior to joining MTA, Mr. Henly was Chief of the

Litigation Bureau at the Office of State Attorney General from 1999 to January 2007. Mr. Henly served as an Assistant Corporation Counsel in the New York City Law Department from 1991 to 1999, prior to which he worked as a law clerk to United States District Court Judge Robert W. Sweet, Southern District of New York and as a litigation associate at the firm of Debevoise & Plimpton. Mr. Henly is a graduate of Stanford University and of Yale Law School.

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PART 2. OPERATIONS

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TRANSIT SYSTEM (popular names – MTA New York City Transit and MaBSTOA)


MTA New York City Transit was created in 1953 pursuant to the MTA New York City Transit Act for the purposes of acquiring the transit facilities then operated by the City and operating them for the convenience and safety of the public.

MaBSTOA was created as a public benefit corporation in 1962 as a statutory subsidiary of MTA New York

City Transit to operate the bus routes that had been operated by Surface Transit, Inc. and Fifth Avenue Coach Lines, Inc. prior to their acquisition by the City.

Pursuant to the MTA New York City Transit Act, MTA New York City Transit and the City entered into an

agreement of lease dated June 1, 1953 providing for the lease to MTA New York City Transit of the transit facilities then owned or thereafter to be acquired or constructed by the City for use in the fulfillment of MTA New York City Transit’s corporate purposes. In connection with the creation of MaBSTOA, MTA New York City Transit agreed that bus lines acquired by the City would be leased to MaBSTOA by the City for operation and maintenance by MaBSTOA. Such lease with MaBSTOA was entered into on March 20, 1962.

MTA New York City Transit became an affiliate of MTA in 1968. The Chairman and Members of MTA, by

statute, are also the Chairman and Members of MTA New York City Transit and Directors of MaBSTOA. Pursuant to legislation enacted May 7, 2009 (Chapter 25 of the Laws of 2009), the Chairman of MTA shall be chief executive officer of MTA New York City Transit and be responsible for the discharge of the executive and administrative functions and powers of MTA New York City Transit, effective upon the appointment by the Governor, with the advice and consent of the State Senate, of a Chairman to fill the new term of office created by the legislation. Under this legislation, the newly-appointed Chairman may in his or her discretion appoint an Executive Director of MTA, in which case such Executive Director shall serve, ex officio, as Executive Director of MTA New York City Transit. Until an appointment is made to fill the new term of the Chairman created by the legislation, by statute the Executive Director of MTA remains responsible for the discharge of the executive and administrative functions and powers of MTA New York City Transit. The President of MTA New York City Transit is primarily responsible for the general management and operation of MTA New York City Transit. The executive personnel of MTA New York City Transit and MaBSTOA report to the President of MTA New York City Transit.

Management

The following are brief biographies of the MTA New York City Transit’s senior officers, who also serve as MaBSTOA’s senior officers.

Howard H. Roberts, Jr., President since April 2007. Mr. Roberts served in the U.S. Army from 1961 to 1981,

and served in positions of leadership at MTA New York City Transit from 1981 to 1986, first as Finance and Administration Vice President (June 1981 to April 1983) and then as Surface Transit Vice President and Chief Operating Officer (April 1983 to September 1986). Mr. Roberts joined the Southeastern Pennsylvania Transportation Authority (SEPTA) in 1989, where he served as Deputy General Manager until January 1997. In that role, Mr. Roberts was responsible for managing all operations and overseeing construction for the fourth largest regional transportation system in the country. Mr. Roberts graduated from the United States Military Academy at West Point and holds masters degrees in public affairs and engineering from Princeton University.

Michael P. Chubak, Executive Vice President since October 2007. Mr. Chubak is responsible for budget and

controller, procurement and distribution, revenue collection, information services, operations planning, and government and community relations functions. Prior to his appointment in 2007, Mr. Chubak was Director of MTA New York City Transit’s Office of Management and Budget, and his 26-year career with the agency also includes managerial positions in the Department of Capital Budget. He began his career with MTA in the Department of Subways. Mr. Chubak holds BA and MBA degrees, both from Columbia University.

Cosema E. Crawford, P.E., Senior Vice President and Chief Engineer since January 2004. Ms. Crawford is

responsible for Capital Program Management. Prior to joining MTA New York City Transit in May 2001, Ms.

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Crawford served as Chief Engineer for the NYC Department of Transportation, and was a senior manager at Parsons Transportation Group. Ms. Crawford holds bachelors and masters degrees in engineering from Princeton University.

Martin B. Schnabel, Vice President and General Counsel since November 1996. Mr. Schnabel joined MTA

New York City Transit in 1976. Prior to being appointed General Counsel, Mr. Schnabel served as Executive Assistant General Counsel. Mr. Schnabel is responsible for managing the various Law Department divisions. Mr. Schnabel received his BA from SUNY Binghamton and his Juris Doctor degree from Boston University.

Steven A. Feil, Senior Vice President, Subways since November 2007. Mr. Feil oversees the maintenance and

operation of the subway systems signals, track, power distribution, rolling stock, and station infrastructure. In addition, Mr. Feil is responsible for telecommunications and electronic maintenance. Mr. Feil returned to NYC Transit in August, 2007 as the Chief of Operations, Service Delivery, having served previously in the position of Superintendent /General Superintendent in the Track Division. Mr. Feil has held the position of Chief Operating Officer of Washington Metropolitan Area Transit Authority and also has held senior management positions with Bergen Light Rail and Amtrak. Mr. Feil holds a BA cum laude in political science from CUNY-Lehman College and a MS in transportation engineering from Brooklyn Polytechnic University.

Joseph J. Smith, Senior Vice President, Department of Buses, since July 2007. Mr. Smith is a thirty-year

veteran of the MTA’s bus operations. He first joined NYC Transit in 1977, and proceeded to hold a series of increasingly high-level positions in Transportation, Maintenance and Operations. From 2000 – 2004, Mr. Smith served as General Manager of the Manhattan Division, before being selected to lead the unprecedented effort to consolidate seven private bus companies into the MTA through the establishment of the MTA Bus Company. After serving as Senior Vice President of the MTA Bus Company from 2004 – 2007, Mr. Smith returned to NYC Transit as the Senior Vice President, Department of Buses. On May 7, 2008, Mr. Smith was named President of MTA Long Island Bus and President of MTA Bus, while continuing to serve as Senior Vice President, Department of Buses, for NYC Transit. Mr. Smith is the first individual to hold all three of these leadership positions in MTA bus operations simultaneously, and in these capacities, is leading the ongoing effort to consolidate the management of all three of the MTA’s bus operations.

History of the Transit System

General. Mass transit has played a vital role in the development of the City from its earliest days. It continues to be essential to the economic life of the metropolitan area and for a substantial portion of the population of the metropolitan area it represents the principal means of transportation within the City and to and from places of employment. The intense concentration of commercial, financial, cultural, industrial and residential development that exists in the 22 square miles comprising the Borough of Manhattan, particularly its central business district, would not be feasible without an extensive system of mass transit.

Subway System. Construction of the first subway in the City (the IRT) began in 1900 and was completed in

1904. Although built with City funds, it was leased to and operated by a private company. A major expansion of the subway system was completed in various stages between 1918 and 1922. A portion of the expanded system was incorporated into the IRT and the remainder, the BMT, was leased to another private company. In 1924, the City Board of Transportation was created to plan, construct and operate a third subway system (the IND). That system was completed in various stages between 1932 and 1940.

In 1940, the City acquired the franchise rights and properties of the IRT and BMT from the private companies

that had operated those lines and that were then in reorganization and the entire subway system was placed under the control of the City Board of Transportation. In 1953, the subway system was leased to the then newly-formed MTA New York City Transit.

Although a number of changes have been made to the fixed physical plant of the subway system since 1940,

such as the closing of the oldest elevated lines and the integration of the several systems, there were no significant alterations of the basic physical configuration of the subway network since that time until MTA New York City Transit opened the Archer Avenue Line extension and the 63rd Street Tunnel in 1988 and 1989, respectively, along with three new subway stations along each of these routes.

With the opening of the 63rd Street Connector in December 2001, MTA New York City Transit introduced the

first new subway line in more than two decades. The Connector links the Queens Boulevard subway line to the 63rd

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Street Tunnel into Manhattan. The new “V” train provided immediate benefits to riders who travel the Queens Boulevard line each day.

MTA is in the process of developing new expansions and improvements to the Transit System, including the

extension of the No. 7 subway line from Times Square south to 34th Street and Eleventh Avenue in Manhattan, the Lower Manhattan Fulton Street Transit Center, the new South Ferry station complex in lower Manhattan and the Second Avenue Subway. For more information about these projects, see “MTA CAPITAL CONSTRUCTION COMPANY” below in this Part 2.

Bus System. During the 1940’s and 1950’s, the City acquired the properties and franchises of a number of

private bus companies operating within the City, all of which were leased to MTA New York City Transit at the time of its creation. MaBSTOA was created in 1962 to operate the bus lines formerly operated by the Fifth Avenue Coach Lines, Inc. and Surface Transit, Inc. Both MTA New York City Transit and MaBSTOA have since assumed the operation of additional franchises and routes.

Although most bus service within the City is operated by MTA New York City Transit and MaBSTOA, private

bus companies continue to operate local service on certain routes within the City and provide certain bus services between the outer boroughs and the Manhattan central business district. MTA Bus is currently operating the bus routes formerly operated by seven of those franchise private bus companies. See “MTA BUS COMPANY” below.

Description of the Transit System

Subway System. The City’s rapid transit system is by far the largest in the nation. Only a few cities in the world have a subway system comparable in physical size and ridership. The subway system has over 659 miles of mainline track extending 231 route miles. It operates 24 hours a day, 365 days a year, although certain lines are not in service the entire day and frequency of service varies by route and time of day. In calendar year 2008, 1.6 billion revenue passengers used the subway. It currently has a fleet of 6,395 subway cars, two major subway car repair shops, 13 maintenance shops, 23 subway car storage yards and 466 active passenger stations. As of December 31, 2008, MTA New York City Transit employed 27,960 workers in rapid transit.

Bus System. MTA New York City Transit and MaBSTOA presently operate bus service on 244 local and

express routes throughout the City. The majority of bus routes are designed to serve passengers traveling within a particular borough or to serve as feeders to the subway system. In calendar year 2008, nearly 747 million revenue passengers used the bus system. The bus system operates on a continuous basis, although certain bus routes are not in service the entire day and frequency of service varies by route and time of day. As of December 31, 2008, the bus system employed 14,798 persons and operated 4,512 buses.

Paratransit. On July 1, 1993, MTA New York City Transit assumed responsibility from the City for the

Access-A-Ride paratransit service in order to increase the efficiency of providing such services by vesting responsibility in a single entity. Access-A-Ride service is provided by private vendors under contract with MTA New York City Transit. Paratransit fares are currently set at a level equivalent to the regular undiscounted passenger fare rate. Paratransit operations are also supported by six percent of the revenue from the Urban Tax (a portion of a mortgage recording tax and a portion of a property transfer tax imposed upon commercial property in the City). The City contributes an operating subsidy to support paratransit, equal to the lesser of (i) one third of the operating deficit, calculated after deducting paratransit passenger revenue, the above-described Urban Tax revenue, and MTA New York City Transit administrative expenses, or (ii) an amount that is twenty percent greater than the amount paid by the City for the preceding calendar year. Any remaining operating deficit is funded by MTA New York City Transit. Over the years, the costs of the paratransit program have risen substantially in excess of the City’s twenty percent additional funding contribution, so MTA New York City Transit has assumed, and expects to continue to assume, greater costs with respect to the paratransit service.

Relationships with the State, the City and the Federal Government

State and City. MTA New York City Transit and MaBSTOA receive substantial amounts of funding for the operating and capital costs of the Transit System from appropriations and subsidies provided by the State and the City. In calendar year 2008, State and City operating assistance, special tax supported subsidies and reimbursements for the Transit System constituted, on a cash basis, approximately 42.5% of the total pledged revenues of MTA New York City Transit and MaBSTOA, down from 47% in 2007. To the extent that future operating assistance and the

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funding of the capital costs of subsequent capital programs projected to be funded by the State and City are subject to their receipt of tax revenues and the making of annual appropriations, the level of such funding may be affected by the general economic conditions in, and the financial condition of, the State and City.

In addition to the operating and capital assistance received by MTA New York City Transit and MaBSTOA

from the City, MTA New York City Transit and MaBSTOA are dependent upon the City for the maintenance and repair of City-maintained bridges, streets and other infrastructure necessary for the operation of the Transit System. Water main breaks and other infrastructure problems, including problems on bridges, have in the past and may in the future cause service disruptions.

City infrastructure problems that restrict or preclude service on the Transit System could decrease ridership and

revenue levels of the Transit System. The materiality of any such decrease would depend on the nature, severity and duration of the service interruptions.

Federal. MTA New York City Transit and MaBSTOA also receive substantial amounts of funding for the

capital costs of the Transit System from grants provided by the Federal government. The Federal government also supplied substantial capital funds for prior Transit Capital Programs. Federal operating assistance is not currently authorized by Federal law for mass transit operations, including the Transit System.

Other. Officials of the State, City and Federal governments and the Inspector General of MTA periodically

conduct audits and reviews of the operations of MTA New York City Transit and MaBSTOA. Officers of MTA New York City Transit and MaBSTOA respond to these reports and adopt some of the recommendations made therein or take other appropriate remedial actions.

MTA New York City Transit and MaBSTOA are subject to regulation by Federal and State agencies with

responsibilities for safety. In general, they must maintain and equip their tracks and rolling stock in compliance with minimum standards, file reports with respect to certain accidents and incidents and respond to recommendations for improving transit system safety.

COMMUTER SYSTEM

(popular names – MTA Long Island Rail Road and MTA Metro-North Railroad) Legal Status and Public Purpose

MTA Long Island Rail Road. Through MTA Long Island Rail Road, MTA directly operates commuter railroad service between the City and Long Island and within Long Island (the “MTA Long Island Rail Road Commuter Service”).

MTA Long Island Rail Road was incorporated as a privately-held railroad company in 1834. In 1966, MTA

acquired all of the capital stock of MTA Long Island Rail Road from its parent, the Pennsylvania Railroad Company. In February 1980, MTA Long Island Rail Road’s Certificate of Incorporation was amended to convert it into a subsidiary public benefit corporation of MTA organized pursuant to the MTA Act. MTA Long Island Rail Road owns, leases or has easements or other rights to the rolling stock, physical plant and equipment material to its operations.

MTA Metro-North Railroad. Through MTA Metro-North Railroad, MTA directly operates the New Haven Line

(pursuant to a joint service agreement with the Connecticut Department of Transportation (“CDOT”)) and the Harlem and Hudson commuter rail services and subsidizes and performs certain other services relating to the State portion of the Port Jervis and Pascack Valley Lines operated, pursuant to a joint service agreement, by NJ Transit (collectively, the “Metro-North Commuter Services”). The Metro-North Commuter Services provide service between the City and the northern suburban counties of Westchester, Putnam and Dutchess and from the City through the southern portion of the State of Connecticut to New Haven, Connecticut and within such counties and such state. The Port Jervis and Pascack Valley Lines provide service from the northern New York suburban counties of Orange and Rockland to northern New Jersey and the City.

MTA Metro-North Railroad was incorporated by MTA on September 22, 1982 as a subsidiary public benefit

corporation. MTA or MTA Metro-North Railroad owns, leases or has easements or other rights to the rolling stock, physical plant and equipment material to the operation of the Harlem and Hudson Lines, and to the physical plant

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and equipment material to the operation of the State portion of the New Haven Line. With respect to the New Haven Line, MTA or MTA Metro-North Railroad owns approximately 55% of the rolling stock and CDOT owns the remainder.

The New Haven Line is operated by MTA Metro-North Railroad pursuant to the terms of an Amended and

Restated Service Agreement dated as of June 21, 1985, among the State of Connecticut, by CDOT, MTA and MTA Metro-North Railroad (the “ASA”). Under the provisions of the ASA, at the expiration of each term, it is automatically extended for five years, subject to the right of CDOT or MTA to terminate the ASA on 18 months’ written notice. The current term of the ASA expires on January 1, 2010.

The Port Jervis and Pascack Valley Lines are operated by NJ Transit Rail Operations, Inc. (“NJTRO”) pursuant

to the terms of an Agreement for Operation dated as of July 27, 2006, between NJTRO and MTA Metro-North Railroad (the “AFO”), the initial term of which expires on June 30, 2012. Under the provisions of the AFO, at the expiration of each term, it is automatically extended for an additional year, subject to the right of NJTRO or MTA Metro-North Railroad to terminate the AFO by no later than March 15, in which case the AFO will terminate on June 30 of that same year.

Management

The following are brief biographies of the chief operating officers of MTA Long Island Rail Road and MTA Metro-North Railroad.

Helena E. Williams, interim Executive Director of the Metropolitan Transportation Authority as of May 27,

2009 and President of MTA Long Island Rail Road since June 2007. Ms. Williams is the first woman to lead the nation’s busiest commuter railroad. Just prior to joining the LIRR, Ms. Williams worked briefly as Senior Counsel at Cablevision. Prior to that position, Ms. Williams served for five years in the administration of Nassau County Executive Tom Suozzi. Ms. Williams first served at the MTA beginning in 1985, where she rose from labor counsel to chief of staff of Long Island Bus before assuming the presidency of Long Island Bus in 1993. In 1999 Williams was inducted into the New York Public Transit Association’s Hall of Fame. Ms. Williams began her career in New York City, working for the Mayor’s Office of Municipal Labor Relations. She holds a J.D. from the St. John’s University School of Law and is admitted to practice law in New York. She has a B.A. with honors from the State University of New York at Oneonta.

Howard Permut, President of MTA Metro-North Railroad since July 2008. Mr. Permut is only the fourth

President in the railroad’s history and was part of the original team that created Metro-North out of the Conrail commuter operations in New York and Connecticut in 1983. Prior to his current role as President, Mr. Permut was the Senior Vice President of Planning, Procurement and Business Development. Before working for MTA/Metro-North, Mr. Permut worked at the Northeastern Illinois RTA during its formative years and the CTA. He is also a visiting scholar at New York University and has worked for a number of major transit agencies in London, Santo Domingo, Philadelphia, San Francisco and Los Angeles. He has taught the NTI Senior Leadership Course and has lectured at NYU, University of Pennsylvania, Northwestern, CUNY and Brooklyn Polytechnic Institute. Mr. Permut holds a Masters of Science in Transportation from Northwestern University and a B.A. in Geography from the State University of New York at Binghamton. Description of the Commuter System

MTA Long Island Rail Road Commuter Service and Metro-North Commuter Service are, respectively, the largest and second largest commuter railroad services in the nation. MTA Long Island Rail Road uses 29 yards and 4 major repair shops. MTA Metro-North Railroad uses 15 yards and 5 major repair shops. The commuter services operate every day of the year, although frequency of service varies by route, day of the week and time of day. The following table further details the MTA Long Island Rail Road Commuter Service and the Metro-North Commuter Services.

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MTA Long Island Rail Road and MTA Metro-North Railroad Commuter Services as of December 31, 2008(1)

Revenue Passengers

(in thousands)(2)

Stations

Actual Route Miles

Main Line Track Miles

Passenger

Cars MTA Long Island Rail Road 87,358 124 319.1 594.1 1,138 MTA Metro-North Railroad 81,466 109 272.9 701.2 1,058

Totals 168,824 233 592.0 1,295.3 2,196 (1) Certain of the stations, track and passenger cars are not owned by MTA, MTA Long Island Rail Road or MTA Metro-North Railroad. (2) The number of revenue passengers is determined in part by ascribing an assumed frequency of use to holders of weekly and monthly

commutation tickets.

Relationships with the State, Certain Local Governments and the Federal Government

State and Local Governments. MTA receives substantial amounts of funding for the operating and capital costs of the Commuter System from appropriations and subsidies provided by the State and certain local governments. In calendar year 2008, State and local operating assistance, special tax supported subsidies and reimbursements for the Commuter System constituted, on a cash basis, approximately 40.9% of the total pledged revenues of MTA relating to the Commuter System. To the extent that future operating assistance and the funding of the capital costs of subsequent capital programs projected to be funded by the State are subject to its receipt of tax revenues and the making of annual appropriations, the level of such funding may be affected by the current economic conditions in, and the financial condition of, the State.

Federal. MTA also receives substantial amounts of funding for the capital costs of the Commuter System from

grants provided by the Federal government. The Federal government supplied funds for prior Commuter Capital Programs. Federal operating assistance is not currently authorized by Federal law for mass transit operations, including the Commuter System.

Other. Officials of the State, City and Federal governments and the Inspector General of MTA periodically

conduct audits and reviews of the operations of MTA Long Island Rail Road and MTA Metro-North Railroad. Officers of MTA Long Island Rail Road and MTA Metro-North Railroad respond to these reports and adopt some of the recommendations made therein or take other appropriate remedial actions.

MTA Long Island Rail Road and MTA Metro-North Railroad are subject to regulation by Federal, State and,

with respect to MTA Metro-North Railroad, State of Connecticut agencies with responsibilities for railroad safety. In general, they must maintain and equip their roadbed and rolling stock in compliance with minimum standards, file reports with respect to certain accidents and incidents and respond to recommendations for improving Commuter System safety.


(popular name – MTA Bridges and Tunnels)


MTA Bridges and Tunnels, a public benefit corporation, became an affiliate of MTA effective March 1, 1968. MTA Bridges and Tunnels is empowered, among other things, to construct and operate certain vehicle bridges, tunnels and highways and other public facilities in the City. The following are the vehicular toll facilities (the “MTA Bridges and Tunnels Facilities”) operated by MTA Bridges and Tunnels:

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MTA Bridges and Tunnels Facilities 7 Bridges 2 Tunnels Robert F. Kennedy Bridge Brooklyn-Battery Tunnel Verrazano-Narrows Bridge Queens Midtown Tunnel Bronx-Whitestone Bridge Throgs Neck Bridge Henry Hudson Bridge Marine Parkway-Gil Hodges Memorial Bridge Cross Bay Veterans Memorial Bridge

A more detailed description of the MTA Bridges and Tunnels Facilities is set forth below. MTA Bridges and Tunnels also operates, pursuant to a management agreement with a private contractor, the

Battery Parking Garage located adjacent to the Manhattan plaza of the Brooklyn-Battery Tunnel. The garage was opened in 1950, was recently renovated, and has space for 2,100 vehicles.

Title to the MTA Bridges and Tunnels Facilities and the Battery Parking Garage is vested in the City, but MTA

Bridges and Tunnels has the use and occupancy of such facilities so long as its corporate existence continues.

Management

The following are brief biographies of certain senior operating officers of MTA Bridges and Tunnels. Susan Kupferman, President since January 2009. Prior to being appointed President, Ms. Kupferman was Chief

Operating Officer of the MTA since October 2007 and was Acting Chief Operating Officer from January 2007 through October 2007. Prior to that appointment, she had been President of MTA Bridges and Tunnels since March 27, 2006. Prior to then, Ms. Kupferman served as Director of the New York City Mayor’s Office of Operations for Mayor Michael R. Bloomberg where she was responsible for promoting the efficient and effective delivery of public services. During her tenure as the Director, Ms. Kupferman also served as the Mayor’s advisor and leading representative on the Board of MTA. Prior to her appointment in City government, Ms. Kupferman was the first full-time Co-Director of the Rudin Center for Transportation Policy and Management, a research and policy arm of New York University’s Robert F. Wagner Graduate School of Public Service. Ms. Kupferman guest lectured at graduate level courses, and today continues her affiliation with the Center as both a Visiting Scholar, and as a member of its Advisory Committee. Prior to her Rudin Center position, Ms. Kupferman enjoyed a 20-year career in New York State government, serving in senior positions in a variety of transportation and infrastructure organizations, including as Deputy Executive Director for Planning, Policy and Capital Programs at MTA, Director of the Department of Strategic Planning and External Affairs at the New York State Thruway Authority, Assistant Secretary for Transportation under Governor Mario M. Cuomo, and on the staff of the New York State Senate Finance Committee. She holds Master of Arts and Bachelor of Arts degrees from The State University of New York at Albany.

David Moretti, Executive Vice President since January 2009. Prior to being appointed Executive Vice President,

Mr. Moretti was Acting President since January 2007. Prior to being appointed Acting President, Mr. Moretti was Executive Vice President and Chief Financial Officer responsible for Labor Relations, Health and Safety, Technology, Planning and Budget and Finance. Mr. Moretti joined MTA Bridges and Tunnels in 1988 and has held the positions of Deputy CFO and Budget Director. Prior to joining MTA Bridges and Tunnels, Mr. Moretti served as Deputy Assistant Director for the New York City Office of Management and Budget and also participated in research on the privatization of municipal services for the Columbia University Graduate School of Business. Mr. Moretti earned his undergraduate degree in economics from Boston University and has attended the Program for Senior Executives in State and Local Government at Harvard University.

Thomas Bach, Vice President and Chief Engineer since December 2004. Mr. Bach directs a staff of 170

professionals responsible for the planning, design and construction of MTA Bridges and Tunnels’ capital and major maintenance programs. Prior to coming to MTA Bridges and Tunnels in 1990, Mr. Bach worked for Thomas Crimmins Contracting Company and later Namrod Construction Company. Mr. Bach was involved in numerous high profile projects in the City, including the Second Avenue Subway, 63rd Street Railroad Tunnels, 7 World Trade Center, and 60 Wall Street. Mr. Bach holds a Bachelor of Engineering in Civil Engineering (BECE) from The Cooper Union, 1973, and a Master of Science from Columbia University, 1979. Mr. Bach has been a registered professional engineer in the State of New York since 1978. He was elected to The Moles, a professional organization, in 1988 and is a member of the American Society of Civil Engineers.

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Robert M. O’Brien, General Counsel since May 1990. Prior to his present appointment, Mr. O’Brien served as

the Chief of Construction Litigation at MTA New York City Transit. He has been a law clerk in the United States Court of International Trade, an Assistant Corporation Counsel of the City of New York and a Senior Trial Attorney with the Criminal Division of the Legal Aid Society. Mr. O’Brien is a graduate of St. John’s Law School and Fordham College. He has completed a program for Senior Government Executives at the John F. Kennedy School of Government at Harvard University.

Donald Spero, Chief Financial Officer since March 2009. Prior to being appointed Chief Financial Officer, Mr.

Spero was Acting Chief Financial Officer since January 2007. Prior to then, Mr. Spero served as Deputy Chief Financial Officer for Planning and Budget. Since joining MTA Bridges and Tunnels in 1988, he has also served as Director of Capital and Strategic Planning and Director of Capital Budget. Before coming to MTA Bridges and Tunnels, he worked for the New York City Mayor’s Office of Operations as Chief of Staff and Deputy Assistant Director and for the New York City Comptroller’s Office. Mr. Spero holds degrees from Syracuse University and the George Washington University. MTA Bridges and Tunnels Facilities1

The following is a brief description of the MTA Bridges and Tunnels Facilities, listed in order of revenue generation:

Robert F. Kennedy Bridge - Crosses the East River and the Harlem River and connects the Boroughs of Queens,

The Bronx and Manhattan. Opened to traffic in 1936, it carries eight traffic lanes between Queens and The Bronx via Ward’s Island and Randall’s Island, and six traffic lanes between Randall’s Island and Manhattan. These three major crossings are interconnected by viaducts.

Verrazano-Narrows Bridge - Connects the Boroughs of Brooklyn and Staten Island. It is a double deck structure

with each deck carrying six traffic lanes. The upper deck was opened to traffic in 1964 and the lower deck in 1969. Throgs Neck Bridge - Crosses the upper East River between the Boroughs of Queens and The Bronx

approximately two miles east of the Bronx-Whitestone Bridge. Opened in 1961, it has two roadways, each carrying three traffic lanes.

Bronx-Whitestone Bridge - Crosses the East River and connects the Boroughs of Queens and The Bronx. The

roadways of the bridge, which was opened to traffic with four lanes in 1939, were widened so as to carry six traffic lanes commencing in 1946.

Queens Midtown Tunnel - Crosses under the East River and connects the Boroughs of Queens and Manhattan.

Opened to traffic in 1940, it consists of twin tubes, carrying an aggregate of four traffic lanes. Brooklyn-Battery Tunnel - Crosses under the East River at its mouth and connects the Boroughs of Brooklyn

and Manhattan. Opened to traffic in 1950, it consists of twin tubes, carrying an aggregate of four traffic lanes. Henry Hudson Bridge - Crosses the Harlem River between the Spuyten Duyvil section of The Bronx and the

northern end of Manhattan. It has two roadway levels, carrying an aggregate of seven traffic lanes, the lower level having been opened to traffic in 1936 and the upper level in 1938. The operation of this bridge includes the maintenance of a small part of the Henry Hudson Parkway.

Marine Parkway-Gil Hodges Memorial Bridge - Crosses Rockaway Inlet and connects Rockaway Peninsula, in

Queens, with Brooklyn. Opened in 1937, it carries four traffic lanes. The operation of this bridge includes the maintenance of the Marine Parkway from the toll plaza to Jacob Riis Park.

Cross Bay Veterans Memorial Bridge - Crosses Beach Channel in Jamaica Bay to Rockaway Peninsula, and is

located in Queens. Reconstructed and opened to traffic in May 1970, this bridge carries six traffic lanes. Its operation includes the maintenance of a small part of the Cross Bay Parkway.

1 For purposes of the bond resolutions, the MTA Bridges and Tunnels Facilities are referred to as the “TBTA Facilities.”

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MTA Bridges and Tunnels also operates the Battery Parking Garage. Only the bridges and tunnels constitute MTA Bridges and Tunnels Facilities under the MTA Bridges and Tunnels bond resolutions, though the net revenues derived from the operation of the Battery Parking Garage are included as net revenues that are pledged to the payment of such bonds.

MTA Bridges and Tunnels is a founding member of the E-ZPass Interagency Group (“IAG”), which is a

consortium of 24 agencies in 13 states that operate an interoperable electronic toll collection system.

Authorized Projects of MTA Bridges and Tunnels

• MTA Bridges and Tunnels’ powers have been broadened by the State Legislature beyond its traditional role as a vehicular toll facility authority within the City. MTA Bridges and Tunnels is also authorized to participate in the financing of the following two public benefit projects:

o the Transit and Commuter Project, and o the Convention Center Project (Jacob K. Javits Convention Center in Manhattan).

• The Transit and Commuter Project consists of certain capital projects for the benefit of the Commuter

System and the Transit System and MTA Staten Island Railway. The capital assets constructed or acquired by MTA Bridges and Tunnels as part of the Transit and Commuter Project are to be transferred or leased for a nominal consideration to MTA or MTA New York City Transit, and neither such conveyance nor any capital grants made as part of the Transit and Commuter Project will produce revenues for MTA Bridges and Tunnels. Alternatively, such capital assets may be sold to parties other than MTA or MTA New York City Transit and leased back by MTA Bridges and Tunnels for subleasing for a nominal consideration to MTA or MTA New York City Transit or leased directly to MTA or MTA New York City Transit at the expense of MTA Bridges and Tunnels.

• The Convention Center Project is not and cannot become a project for which MTA Bridges and Tunnels

can issue its Senior Revenue Bonds. In accordance with legislation enacted in 2004, it is expected that MTA Bridges and Tunnels’ outstanding convention center bonds will be defeased with the proceeds of bonds issued by another State-created entity in connection with the financing of the expansion of the Javits Convention Center.

• Under existing law, MTA Bridges and Tunnels has no obligation with respect to the operation and

maintenance of the equipment or facilities financed as the Transit and Commuter Project or the Convention Center Project.

MTA CAPITAL CONSTRUCTION COMPANY

(popular name – MTA Capital Construction)


MTA Capital Construction Company (“MTACC”) was created as an MTA subsidiary in 2003. MTACC is responsible for administration of the planning, design and construction of major MTA projects. Current projects include three major MTA system expansion projects—East Side Access, Second Avenue Subway, and extension of the No. 7 subway line; two Lower Manhattan Recovery Projects, Fulton Street Transit Center and the new South Ferry Terminal station; and the MTA-wide capital security projects.

Management

The following is a brief biography of the chief operating officer of MTA Capital Construction. Dr. Michael Horodniceanu, President of MTA Capital Construction since July 2008, brings more than 30 years

of leadership, vision and engineering and construction management expertise to the MTA, overseeing the largest network expansion and infrastructure improvement program in generations. He leads an experienced program management team in the execution of highly complex mega-projects, including implementation of cost, scheduling and quality control measures to meet established service goals, as well as development of a technical workforce that can apply best practices to deliver both ongoing and future capital construction projects. Prior to joining MTA Capital Construction, Dr. Horodniceanu was Chairman and CEO of the Urbitran Group, a New York City-based civil engineering firm, from 1980 to 1986, and again from 1990 until July 2008. Under his leadership, the company

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grew from its core expertise of transportation planning into a 250-person multi-disciplinary architectural, engineering, planning and construction management organization with annual revenues exceeding $36 million. Between 1986 and 1990, he served as New York City’s Traffic Commissioner, overseeing an agency program with a yearly operational budget of over $750 million, as well as a $4 billion capital constructions program.

East Side Access

The East Side Access project consists of construction of a 3.5 mile commuter rail connection between MTA Long Island Rail Road’s Main and Port Washington lines in Queens to a new terminal to be constructed beneath Grand Central Terminal. The new connection will increase MTA Long Island Rail Road’s capacity into Manhattan, dramatically shorten travel time for Long Island and eastern Queens commuters traveling to the east side of Manhattan, and provide for a new commuter rail station in Sunnyside, Queens. The project cost estimate at completion is $7.2 billion, excluding financing costs, and is scheduled for completion in 2015.

MTA Long Island Rail Road’s current daily passengers total almost 270,000, of which approximately 240,000

depart at Penn Station on the west side of Manhattan, accounting for more than three-quarters of the work trips to Manhattan’s central business district from Queens, Nassau and Suffolk counties. Many of these passengers then walk or take other forms of transportation (including subway, bus and cab) to their jobs on the east side of Manhattan. MTA Long Island Rail Road shares Penn Station, which is at or near its service limits, with trains and subways operated by Amtrak, New Jersey Transit and MTA New York City Transit. This project will allow MTA Long Island Rail Road not only to add service to the east side of Manhattan (the genesis of its name “East Side Access”), but also to provide capacity for new MTA services at Penn Station.

New tunnels will be constructed from the Mainline tracks in Queens, under Amtrak’s Sunnyside Yard and MTA

Long Island Rail Road’s existing rail yard, connecting to the existing 63rd Street Tunnel. In Manhattan, new tunnels will be bored from the existing bellmouth at Second Avenue and 63rd Street, west and south, under Park Avenue and MTA Metro-North Railroad’s four-track right-of-way. At Grand Central Terminal, a new passenger concourse will be constructed in space currently occupied by MTA Metro-North Railroad’s Madison Avenue yard. Eight tracks and four wide platforms will be constructed, along with mezzanines and concourses, beneath Park Avenue at an elevation below the existing lower level.

In 2006, MTA executed a Full Funding Grant Agreement (the “East Side Access FFGA”) with the U.S.

Department of Transportation, Federal Transit Administration (“FTA”), which will provide up to $2.6 billion in Federal funding to MTA for the East Side Access project. Under the East Side Access FFGA, MTA will be responsible for funding the local share of this project. To date, the FTA has awarded a total of $1.1 billion in Federal capital new starts financial assistance to the East Side Access project, with up to an additional $1.5 billion to be awarded subject to the availability of funding from Federal appropriations.

MTA began construction of certain portions of the East Side Access project in 2001. To date, the following

contracts or projects have been successfully completed: • Highbridge Yard – A new storage and maintenance facility in the Bronx, which makes room for the new

concourse at Grand Central Terminal’s lower level, was completed in December 2003. The facility provides six tracks for train storage for MTA Metro-North Railroad trains previously stored in Grand Central Terminal, as well as a maintenance facility.

• Environmental Remediation – Hazardous material abatement within the Grand Central Terminal’s East

Yard on the lower level was completed in September 2003 and the removal of asbestos-containing materials from the lower level of the 63rd Street Tunnel was completed in January 2004, in preparation for contracts that will lay new track work.

• Shaft Construction at Existing Bellmouth – Completed in November 2003, this Queens shaft sets the stage

for open-cut excavation between Northern Boulevard and the existing rail yard. It also makes the bellmouth of the 63rd Street Tunnel in Manhattan accessible to the hard-rock tunnel boring machine contractor.

• Demolition of Buildings and Existing Rail Yard Preparation – Completed in September 2003, three

buildings were demolished and tracks removed from the existing rail yard in Queens. To pave the way for future contracts, a construction access road was built and new track was installed to accommodate the New York & Atlantic Railway freight service.

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• Arch Street Yard and Shop – Completed in June 2005, the yard and shop are being used for the delivery, testing and acceptance of new M-7 train cars as part of the fleet replacement program. In the future, it will support mid-day inspection, maintenance and cleaning of trains that will be used in East Side Access service.

• Manhattan Approach Tunnel Utilities and Excavation – Completed in August 2004, this contract included

the removal of the existing bulkhead and installation of tunnel lighting and other utilities in the 63rd Street Tunnel. A limited amount of rock excavation has also been performed.

• Wood Interlocking – Completed in November 2008, this contract procured and installed high speed

switches, signal instrument houses and signal bridges for this important segment of the existing Long Island Rail Road right-of-way. The improvements will provide operational flexibility during the Harold Interlocking construction portion of this project.

The following contracts are currently underway or in the procurement stage: • Manhattan Approach Tunnels – This contract is active and the project of boring running tunnels from the

existing 63rd Street Tunnel and Second Avenue to the south end of Grand Central Terminal using two Tunnel Boring Machines (“TBMs”) has commenced. The work will include the excavation for cross passages between the tunnels and a central instrument room.

• Harold Structures (Part 1) – This active contract to construct various civil infrastructure elements in Harold

Interlocking in Queens and expand the existing MTA Long Island Rail Road/Amtrak right-of-way for the future TBM tunnels and Mainline track diversions is underway.

• Manhattan Structure Part 1 – This contract is active and the excavation and building of the structures for

the station caverns and escalator shafts at Grand Central Terminal is underway.

• Madison Yard Demolition – This contract is active and the work to clear Madison Yard within Grand Central Terminal for future construction of the Long Island Rail Road passenger station mezzanine has commenced.

• Harold Tower Supervisory Control System – Work has commenced on this contract let to design and

furnish a new track and switch control system for the Harold and Point Interlockings.

• Harold Central Instrument Locations – This contract has been let and work is in progress to design, manufacture, test, and deliver equipment for new central instrument locations (“CILs”), which house wayside circuitry to control signal and switching equipment at right -of-way interlockings.

• Queens Bored Tunnels and Structures – This contract, in procurement, will use soft-ground TBMs to

construct three revenue tunnels, one non-revenue tunnel, and supporting substation and ventilation structures in Sunnyside Yard and Harold Interlocking to connect the existing Long Island Rail Road right-of-way to future East Side Access service.

• Harold Structures (Part 2) – This contract, in procurement, continues the work under Harold Structures Part

1. A second quarter 2009 award is planned.

• 44th Street Fan Plant and 245 Park Entrance – This contract is in procurement and will perform demolition at 47 East 44th Street and 245 Park Avenue, followed by partial construction of a fan plant and entrance at the respective locations. A second quarter 2009 award is planned.

• Northern Boulevard Crossing – This contract, in procurement, will mine and build the structure for a

crossing under Northern Boulevard. In crossing Northern Boulevard, the new structure will also be passing under both an underground subway line and an elevated subway line that run along this route. The scope of work was taken from the Queens Open-Cut Excavation contract, in which MTA defaulted the contractor during 2008 for failure to complete this critical task. A second quarter 2009 award is planned.

• The Queens Open-Cut Excavation contract, as noted in the discussion on the Northern Boulevard Crossing

contract, was brought to a conclusion with the MTA defaulting the contractor for delays and non-

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performance on the work to tunnel under Northern Boulevard. Before default, the contractor completed most of the open-cut excavation south of Northern Boulevard. This open-cut structure will be decked over and serve as the TBM launch box for the Queens tunnels prior to its permanent use, which is to house an interlocking and an emergency exit/ventilation facility. The MTA secured the full $83 million value of the performance bond for use in completing the remaining work scope, which will be let out through several contracts.

Second Avenue Subway

MTA and MTA New York City Transit have undertaken the process of planning and designing a full-length Second Avenue Subway, which will be the City’s first major expansion of the subway system in over 50 years. When fully completed, the Second Avenue Subway will provide customers with a new service, now expected to be designated as the “T” Line, running approximately 8.5 miles along the length of Manhattan’s East Side, generally under Second Avenue, from 125th Street in Harlem to Hanover Square in Lower Manhattan. This new line will also connect at 63rd Street with the existing N/R/W Line, which runs south through Manhattan and into Brooklyn.

Sixteen new Americans with Disabilities Act (“ADA”) accessible stations will be built, serving communities in

Harlem, the Upper East Side, East Midtown, Gramercy Park, the East Village, the Lower East Side, Chinatown and Lower Manhattan. The Second Avenue Subway will reduce overcrowding and delays on the Lexington Avenue subway line, improving travel for both City and suburban commuters, and provide better access to mass transit for residents of the far East Side of Manhattan. Stations will have a combination of escalators, stairs and, in compliance with the ADA, elevator connections from street-level to station mezzanine and from mezzanine to platforms.

Under the current plan, the project is expected to be built in four phases.

• Phase One: Construction will include tunnels from 105th Street and Second Avenue to 63rd Street and

Third Avenue, with new stations along Second Avenue at 96th, 86th and 72nd Streets and new entrances to, and newly opened portions of, the existing Lexington Avenue/63rd Street Station. The new service will run from 96th Street and Second Avenue to the existing Lexington Avenue/63rd Street Station, where it will connect with the N/R/W Line. The first construction contract, which is underway, will construct a TBM launch box in advance of the excavation and construction of the running tunnels. MTACC awarded the second contract in May 2009 to construct the structure of the 96th Street Station. Subsequent contracts will provide for the construction of the finishes at the 96th Street Station; the structure and finishes at the 72nd and 86th Street Stations; and the expansion and new entrance to the existing Lexington Avenue/63rd Street Station. The cost for Phase One is estimated at $4.3 billion, excluding financing costs, and is expected to be completed in 2015. On November 19, 2007, MTA executed a Full Funding Grant Agreement (“Second Avenue Subway FFGA”) with the FTA, which will provide up to $1.3 billion in funding for the project, subject to the availability of funding from Federal appropriations. To date, the FTA has awarded a total of $229 million in Federal financial assistance to the project. When completed, Phase One subway service is projected to carry nearly 200,000 weekday riders.

• Phase Two: The new subway line will be extended north from 96th Street to 125th Street. Subway service

will run from 125th Street to the existing Lexington Avenue/63rd Street Station, where it will connect with the N/R/W Line.

• Phase Three: The new subway line will be extended south to Houston Street. Subway service will run from

125th Street to Houston Street and Second Avenue. Some service will continue to connect with the N/R/W Line at the existing Lexington Avenue/63rd Street Station.

• Phase Four: At the final phase the new subway line will be extended south to Hanover Square. Subway

service will run from 125th Street to Hanover Square in Lower Manhattan. Some service will continue to connect with the N/R/W Line at the existing Lexington Avenue/63rd Street Station.

No. 7 Subway Line Extension

MTA and the City are jointly working on the redevelopment of the Hudson Yards area of Manhattan (the “Hudson Yards Area”), which extends generally from West 28th Street on the south, Eighth Avenue on the east, West 43rd Street on the north and the Hudson River Park on the west. As a part of the redevelopment, the No. 7 subway line will be extended from its current terminal near Times Square on West 41st Street between Seventh and Eighth Avenues to a new terminal at West 34th Street and Eleventh Avenue. The extension will provide a transit

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link to the Javits Convention Center and is expected to help transform the surrounding manufacturing and industrial neighborhood into a mixed-use community. The scope of the project also includes the construction of subway tail tracks extending to West 25th Street and Eleventh Avenue to permit the storage of subway trains, which will enhance operational reliability.

On September 28, 2006, the MTA Board authorized the execution of a memorandum of understanding with the

City and two City-controlled corporations with respect to the design, construction and funding of the No. 7 subway line extension (the “No. 7 Line MOU”). The No. 7 Line MOU outlines the parameters for the participation of the City, the Hudson Yards Infrastructure Corporation (“HYIC”), the Hudson Yards Development Corporation (“HYDC”) and MTA. Pursuant to the MOU, HYIC is providing funding for the subway extension and the real estate acquisition needed for the project. MTACC, working with MTA New York City Transit, is currently managing the completion of the final design and construction of the project.

The budget for the No. 7 subway line extension is $2.1 billion, including $100 million in contingency funds for

any cost overruns or other agreed upon needs. On December 21, 2006, HYIC issued bonds, a portion of which is being used to fund design and engineering and initial construction. If additional work in excess of the budget is required by the City, HYDC or HYIC, for the No. 7 extension or for the redevelopment of the Hudson Yards Area being coordinated by the City and HYDC, MTA anticipates that those costs would be borne by the City/HYCD/HYIC, and the capital investment by the City/HYCD/HYIC in the subway line would be correspondingly increased. Neither MTA nor TBTA can issue bonds or notes to fund any cost overruns in excess of the $100 million contingency agreed to by the City, unless the additional costs are included in a capital program amendment or future capital program that is approved by the Review Board.

MTACC awarded the first construction contract for the structure of the running tunnels and the terminal station

structure at 34th Street and 11th Avenue in November 2007. Excavation is well underway at several points along the worksite. Substantial project completion is scheduled for January 1, 2014.

Lower Manhattan Projects: Fulton Street Transit Center and South Ferry Terminal

On December 3, 2003, $1.15 billion in Federal funding was approved for the Fulton Street Transit Center and new South Ferry Terminal projects. Subsequent agreements with the FTA (which are called Construction Agreements and are similar to full funding grant agreements) raised the Federal commitment to a total of $1.27 billion. In 2009, MTA allocated $424 million in American Recovery and Reinvestment funds, also known as stimulus funds, for the Fulton Street Transit Center Project.

Fulton Street Transit Center. The Fulton Street/Broadway-Nassau complex is the busiest in Lower Manhattan,

with over 275,000 passenger entries, exits and transfers daily. Many of these trips are made by commuters traveling to or from their homes in the metropolitan area or to or from commuter rail hubs at Penn Station, Grand Central Terminal, and Atlantic Terminal in Brooklyn. Subway connections are also available to the subway station at Howard Beach Station and the subway and commuter rail stations at Jamaica, both of which are served by the Port Authority’s AirTrain automated rail service to John F. Kennedy International Airport.

The Fulton Street Transit Center, a centerpiece of the plan to improve mobility in Lower Manhattan, will

greatly facilitate connections between 13 subway lines that serve the Fulton Street/Broadway-Nassau complex in Lower Manhattan and nearby stations, will link MTA New York City Transit facilities with Port Authority PATH train services, and will provide access to the redeveloped World Trade Center site and World Financial Center ferry services. The goal of the Fulton Street Transit Center project is to improve circulation and reduce crowding by reconfiguring the current maze of tunnels and stairways that now connect subway lines that were built years apart (between 1905 and 1932) by separate entities.

Another element of the project is a free transfer connector between the R/W and the E Lines. The link will run

through the World Trade Center site, so MTA is coordinating the design and construction plan with the Port Authority.

The current cost estimate for the project is $1.4 billion. To date the following portions of the project have been successfully completed: • 2/3 Fulton Street Station Rehabilitation and 4/5 Fulton Street Station Southern Entrances – This contract,

completed in 2007, involved the rehabilitation of the Fulton Street Station on the 2/3 line, including

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structural repairs, a new platform to mezzanine stairs, a new platform to mezzanine elevator, new wall and floor finishes, new electrical services, new lighting, and new communications systems, bringing the station to a state of good repair and improving overall functionality and customer convenience. Entrances and access stairways in the north and southbound directions at the south end of the 4/5 Line Fulton Street Station have also been constructed to help relieve severe passenger congestion currently experienced at existing entrances. Future construction work at the complex will also be facilitated by these new access points.

• Deconstruction of Buildings on Transit Center Site – This contract, completed in 2007, coordinated with

Hazmat removal efforts to deconstruct four of the five buildings on the site of the new Fulton Street Transit Center. The fifth building, at the northeast corner of John Street and Broadway, will be preserved as a recognized historic resource.

• Dey Street Concourse Structural Box – This design-build contract was completed in 2008. It involved

constructing a pedestrian concourse under Dey Street from Broadway to Church Street. The full-length of the excavation necessary for this project was approximately 400 feet at an average depth of 45 feet. The contract included the construction of underpasses under the R/W and 4/5 Lines at either end. Once finishes are completed, the Dey Street Concourse will link the Fulton Street Transit Center to the World Trade Center.

The following contracts are underway or in procurement:

• Transit Center Building Foundations – This contract will construct the foundation of the future Transit

Center structure at the southeast corner of Fulton Street and Broadway. The contract has been awarded and contract completion is expected at the end of 2010.

• Reconfiguration of the A/C Mezzanine and Vertical Circulation for the J/M/Z Station – This contract to

restructure the A/C Mezzanines to provide more fluid connections to and within the Transit Center is presently in procurement. Work will be phased over several years to minimize the impact on customer service.

The remaining scope of the Fulton Street Transit Center project includes the construction of the finishes on the

Dey Street Concourse (the product of the Dey Street Concourse Structural Box referenced above), rehabilitation of the 4/5 Fulton Street Station, installation of new elevators and escalators throughout the complex plus an aboveground Transit Center. The aboveground scope will include restoration of the facade of the historic building at the northeast corner of Broadway and John Street, including a new entrance into the complex.

South Ferry Terminal Station. The South Ferry station at the southern end of the No. 1 subway line is used by

more than six million people each year, including commuters transferring from the adjacent Staten Island Ferry Terminal, and tourists visiting such nearby sites as Battery Park, the Statue of Liberty and Ellis Island. The new station opened in early 2009 replaces a deficient station with a full-length, two-track terminal station with three station entrances, ADA accessibility, and a new free transfer between the No. 1 and R/W subway lines. Work continues on final elements of the work scope that do not affect customer service. The project cost estimate at completion is $527 million, with $420 million in Federal funding.

The investment is improving service along the entire West Side of Manhattan and into the Bronx by eliminating

end-of-the-line bottlenecks and other physical deficiencies that have long burdened operations on the Nos. 1, 2, and 3 subway lines. The new station is reducing customer travel times and improving the overall quality of service. The additional station entrances have reduced congestion, improved station safety and provided improved access to the Staten Island Ferry Terminal, Battery Park, the Statue of Liberty and the commercial and residential buildings nearby. In the long term, the new terminal will support future ridership growth and the redevelopment of Battery Park and Lower Manhattan.

The following contracts have been successfully completed: • Structural Box Design/Build Contract – This contract, largely complete in 2007, has constructed the

structural box for the project, including modifications to the existing No. 1 subway line tunnel under Battery Place along Greenwich Street. The scope of the contract included the new station, the approach tunnel, and the bellmouth connecting the existing right-of-way with the new approach tunnel. The full-length of the structural box was approximately 1,700 feet and the island platform is 600 feet in length,

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adequate to service a full-length train set on each side. Both cut-and-cover and tunneling excavation has been used to create the space for the box. Construction work included a significant amount of rock excavation. Tunneling excavated the new station’s section under the existing No. 1 subway line and No. 4/5 subway line tunnels, which required underpinning. Under the same contract, but funded with World Trade Center-related insurance proceeds, a ventilation facility structural box was constructed in the tunnel bellmouth section beneath Battery Place. The fan plant will serve the tunnel sections and the adjacent station to the north in emergency situations of fire and/or smoke.

The following contracts are currently underway:

• Signal Equipment Fabrication, Delivery, Testing Contract – The signal equipment fabrication, delivery, and

testing contract, which is nearing completion, furnished the signal equipment required to fit out the structural box of the station, approach tunnels, and bellmouth of the South Ferry Terminal station project. In addition to fabrication, the work included circuit design and in-place testing to put the equipment in service. The finishes/systems contractor installed all equipment and finishes necessary to turn the structural box into part of an operating railroad. The signal equipment was procured outside of the finishes/systems contract because of the long lead-time needed for design and fabrication.

• Finishes/Systems Contract – The finish work, which is nearing completion, turned the structural box into an

actual subway station, support facilities and subway right-of-way. The work outfitted the passenger spaces, including platforms, mezzanines, and station entrances. The work included staircases, two ADA-compliant elevators (one from street to concourse mezzanine level and one from mezzanine to platform level) and eight escalators and 13 staircases. Non-passenger spaces were fit out with major operational and support infrastructure and equipment, including track and switches, signal and train control systems, electrical power systems for lighting and train propulsion, communications systems, a water pumping system, and an air-tempering system. Fan plants in the station mezzanine will be used for station ventilation in fire or smoke emergencies. The finish contractor also installed MTA Arts for Transit commissioned artwork in the new station space. Under the same contract but funded with World Trade Center-related insurance proceeds, the finishes/systems contractor equipped the Battery Place fan plant structural box with the equipment and systems necessary to operate and benefit from the facility. Remaining work is confined to elements that do not affect customer service and are expected to be complete in September 2009, bringing the overall project to completion.

• Restoration of Peter Minuit Plaza – This contract covers street-level work for the South Ferry Terminal

Station project. The scope includes construction of an intermodal bus terminal transfer area in front of the Staten Island Ferry Terminal and above the newly constructed station. A portion of the contract is funded by New York City. Work is projected to be completed by the end of 2009.

STATEN ISLAND RAPID TRANSIT OPERATING AUTHORITY

(popular name – MTA Staten Island Railway)


MTA Staten Island Railway was created as a public benefit corporation subsidiary of MTA in 1970. MTA Staten Island Railway is responsible for the operation of a rapid transit railroad system on Staten Island pursuant to a lease and operating agreement with the City.

MTA Staten Island Railway service runs 24 hours daily between the St. George and Tottenville stations. At the

St. George station, customers can make connections with Staten Island Ferry service. MTA Staten Island Railway’s capital needs are funded as a part of the Transit Capital Program approved by the Review Board and its operating losses are funded by the City and/or MTA. Management

Howard H. Roberts, Jr., the President of MTA New York City Transit, is also the President of MTA Staten Island Railway.

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METROPOLITAN SUBURBAN BUS AUTHORITY (popular name – MTA Long Island Bus)


MTA Long Island Bus was created as a public benefit corporation subsidiary of MTA in 1972. MTA Long Island Bus is responsible for the operation of the public transit bus system and the paratransit system (Able-Ride) predominantly in Nassau County. Nassau County and MTA Long Island Bus entered into a Lease and Operating Agreement, dated as of January 15, 1973 (the “MTA Long Island Bus Lease”), that has since been amended a number of times. The MTA Long Island Bus Lease provides generally for the following:

• Service levels, route structure, maintenance and administration are the responsibility of MTA Long Island

Bus, with such financial assistance as may be provided by Nassau County and others, but is not the obligation of MTA. However, MTA provides operating assistance from mortgage recording tax collections.

• Providing of capital assets for MTA Long Island Bus is, in general, the responsibility of Nassau County,

with such State and Federal financial assistance as it may be successful in securing. MTA administers the MTA Long Island Bus capital program.

• Changes in the levels of fares and major service changes generally require public hearings, but are not

subject to approval by any governmental entity other than the MTA Long Island Bus Board. Management

Joseph J. Smith became President of MTA Long Island Bus on May 7, 2008. Mr. Smith is also the President of MTA Bus and the Senior Vice President of the Department of Buses for NTC Transit.

MTA BUS COMPANY

(popular name – MTA Bus)


MTA Bus was created as a public benefit corporation subsidiary of MTA in 2004. At its meeting in December 2004, the MTA Board approved a letter agreement with the City with respect to MTA Bus’ establishment and operation of certain bus routes (the “City Bus Routes”) in areas then served by seven private bus companies pursuant to franchises granted by the City. The letter agreement with the City provides for the following:

• A lease by the City to MTA Bus of the bus assets to operate the City Bus Routes. • The City agrees to pay MTA Bus the difference between the actual cost of operation of the City Bus Routes

(other than certain capital costs) and all revenues and subsidies received by MTA Bus and allocable to the operation of the City Bus Routes. The letter agreement permits the parties after a period of 18 months to negotiate an agreement to establish a formula-based approach for the payment of the City subsidy.

• If the City fails to timely pay any of the subsidy amounts due for a period of 30 days, MTA Bus has the

right, after an additional 10 days, to curtail, suspend or eliminate service and may elect to terminate the agreement. The City can terminate the agreement on one year’s notice.

• Certain portions of the MTA Bus capital program are included in the Capital Programs approved by the

Review Board. The City is not currently responsible for paying debt service on certain bonds issued by MTA for the benefit of MTA Bus; the debt service on such bonds is being paid by MTA Bus and MTA.

MTA Bus completed the consolidation of the seven bus lines in the first quarter of 2006. As discussed below

under “FINANCIAL PLANS AND CAPITAL PROGRAMS,” the Review Board has included certain capital funding for MTA Bus in the 2000-2004 MTA Capital Program, and in the 2005-2009 Capital Program, and MTA Bus is expected to be included in the 2010-2014 Capital Program..

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Effective as of April 1, 2006, MTA Bus pledged its operating revenues to the Trustee under the Transportation Resolution (as hereinafter defined) and became a signatory to the Interagency Agreement securing the Transportation Revenue Bonds. All or a portion of MTA Bus’ capital needs may be financed from the proceeds of the Transportation Revenue Bonds.

Description of the MTA Bus System

MTA Bus presently operates bus service on 46 local routes in The Bronx, Brooklyn and Queens and 35 express routes between Manhattan and The Bronx, Brooklyn and Queens. In calendar year 2008, nearly 121 million revenue passengers used the MTA Bus system. As of December 31, 2008, the MTA Bus system employed 3,322 persons and operated 1,323 buses. The MTA Bus system operates on a continuous basis, although certain bus routes are not in service the entire day and frequency of service varies by route and time of day.

Management

Joseph J. Smith became President of MTA Bus Company on May 7, 2008. Mr. Smith is also the President of MTA Long Island Bus and the Senior Vice President of Department of Buses for NTC Transit.

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PART 3. STATISTICAL AND FINANCIAL INFORMATION

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RIDERSHIP AND FACILITIES USE

Transit System (MTA New York City Transit and MaBSTOA) Ridership

General. Subway revenue passengers in 2008 totaled 1.6 billion, an increase of 3.9% over 2007. The strong local economy for the first half of 2008 contributed to this ridership growth. Bus ridership in 2008 was 747 million, 1.2% higher than in 2007.

To meet the overall growth in demand in recent years, MTA New York City Transit has been

expanding service since 1996, adding new capacity on 93% of its subway lines and 98% of its bus routes. Since 1996, subway service has increased by 15% and bus service has increased by 33%. MetroCard fare incentives were introduced beginning in 1997.

While some of the Transit System changes in use in the past few years have been attributable to the

changes in the economy, overall ridership changes are also attributable to other factors including successful efforts to reduce fare evasion and improve security. Significant factors which impact ridership, discussed more fully below, include fares and fare incentives, Transit System performance and levels of services, Transit System security and employment in the City generally as well as the relative level and cost of service provided by competing transportation modes such as taxis, licensed and unlicensed vanpools, private car and bus services and charter operators. Interruptions to service or temporary closures of lines resulting from major capital improvement projects to the Transit System by MTA New York City Transit or service disruptions caused by City infrastructure problems which are not under the control of MTA New York City Transit and MaBSTOA or from repairs to or rehabilitation of City infrastructure by the City or its agencies could adversely impact ridership and revenues. The effect would depend on the nature, severity and duration of the service interruptions.

Historical Ridership. The following table sets forth annual ridership on the Transit System since 1996

(the introduction of MetroCard fare incentives began in 1997) and the percentage increase/ (decrease) each year.

Revenue Passengers(1)

(in thousands)

Years

Subway

Subway Increase/

(Decrease)

Bus(2)

Bus Increase/

(Decrease)

Para-

Transit(3)

Paratransit Increase/

(Decrease)

Total Revenue

Passengers(4)

Total Increase/

(Decrease) 1996 1,110,026 1.6 480,049 (6.1) 740 9.1 1,590,815 (0.9) 1997 1,129,514 1.8 529,856 10.4 967 30.7 1,660,337 4.4 1998 1,199,419 6.2 607,593 14.7 1,240 28.2 1,808,252 8.9 1999 1,283,082 7.0 659,344 8.5 1,557 25.6 1,943,983 7.5 2000 1,381,079 7.6 691,822 4.9 2,295 47.4 2,075,196 6.7 2001 1,405,300 1.8 732,445 5.9 2,710 18.1 2,140,455 3.1 2002 1,413,178 0.6 754,718 3.0 3,030 11.8 2,170,926 1.4 2003 1,384,069 (2.1) 727,607 (3.6) 3,564 17.6 2,115,240 (2.6) 2004 1,426,040 3.0 740,586 1.8 3,983 11.8 2,170,609 2.6 2005 1,449,109 1.6 736,493 (0.6) 4,663 17.1 2,190,265 0.9 2006 1,498,916 3.4 741,420 0.7 5,202 11.6 2,245,538 2.5 2007 1,562,515 4.2 738,040 (0.5) 5,872 12.9 2,306,427 2.7 2008 1,623,881 3.9 746,977 1.2 7,244 23.4 2,378,102 3.1

(1) “ Revenue Passengers” are defined as all passengers for whom revenue is received, either through direct fare payment (cash, tokens,

MetroCards) or fare reimbursements (senior citizens, school children, the physically disabled). “Revenue Passengers” statistics count passengers that use a free intermodal or bus-to-bus transfer as an additional passenger though they are not paying an additional fare.

(2) Bus ridership is measured as unlinked trips, i.e., each bus boarding is counted as a trip, including bus-to-bus transfers. Bus ridership prior to July 1997 includes estimates for student ridership and bus-to-bus transfers.

(3) Paratransit ridership includes trips made by Personal Care Attendants and guests. (4) Includes subway, bus and paratransit.

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Fares. From September 1975 when the base fare was 50 cents to May 2003, the base fare charged for

use of the Transit System has been raised eight times.

Date of Increase

New Base Fare

Amount of Increase

Percent Increase

1980 – June $0.60 $0.10 20.0% 1981 – July 0.75 0.15 25.0 1984 – January 0.90 0.15 20.0 1986 – January 1.00 0.10 11.1 1990 – January 1.15 0.15 15.0 1992 – January 1.25 0.10 8.7 1995 – November 1.50 0.25 20.0 2003 – May 2.00 0.50 33.3

The period between the fare increases in 1995 and 2003 represented one of the longest periods of time

without an increase in the history of MTA New York City Transit. Each fare increase, except the 1986 increase, has been followed by an immediate decrease in ridership.

In addition to the above-referenced increases in the base fare, on February 27, 2005, MTA New York

City Transit increased the cost of a 30-day unlimited-ride MetroCard from $70 to $76, the cost of a 7-day unlimited-ride MetroCard from $21 to $24, and express bus fares from $4 to $5 without increasing the local base fare.

On March 2, 2008, MTA New York Transit increased the cost of a 1-Day unlimited-ride MetroCard

from $7.00 to $7.50, the cost of a 7-day unlimited-ride MetroCard from $24 to $25 and the cost of a 30-day unlimited-ride MetroCard from $76 to $81. A 14-day unlimited-ride MetroCard priced at $47 was introduced. The bonus on Pay-Per-Ride MetroCards was changed from 20% on purchases of $10 or more to 15% on purchases of $7 or more. The local base fare of $2.00, express bus fare and the price of the Express Bus Plus MetroCard were unchanged.

MTA New York City Transit offered the following MetroCard discount and bonus programs as of

December 31, 2008:

• free intermodal (subway-to-bus and bus-to-subway) transfers, • MetroCard Bonus Program, offering customers a 15% bonus on purchases of, or additions

to, a single MetroCard of $7 or more, • unlimited-ride 1-day, 7-day, 14-day and 30-day passes, • unlimited-ride 7-day combined express bus and regular bus pass, • free and half-fare student programs, • half-fare programs for senior citizens and persons with disabilities, and • free replacement of lost or stolen unlimited-ride 14-day, 30-day and 7-day express passes

(limit of 2 per calendar year per holder) if the holder paid by credit or debit card.

On May 11, 2009, the MTA New York City Transit Board approved a tariff change which is scheduled to become effective on June 28, 2009. Assuming the tariff change is implemented as scheduled, the local base fare will increase from $2.00 to $2.25, express bus fare will increase from $5.00 to $5.50, the cost of a 1-Day unlimited-ride MetroCard will increase from $7.50 to $8.25, the cost of a 7-day unlimited-ride MetroCard from $25 to $27, the cost of a 14 day unlimited-ride MetroCard from $47 to $51.50, and the cost of a 30-day unlimited-ride MetroCard from $81 to $89; the MetroCard Bonus Program will offer customers a 15% bonus on purchases of, or additions to, a single MetroCard of $8 or more.

Nevertheless, current fares and approved fare increases, without giving effect to any changes in

ridership patterns, remain, on average, low in real terms as compared to 1982 (the year in which MTA’s first capital program began) after adjusting for inflation based on increases in the Consumer Price Index (“CPI”). The following chart shows historical fare information since 1996.

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Historical Fare Information

Year

CPI-U(1)

Base Fare

Base Fare Real Fare 1982$(2)

Average Fares(3)

Non-Student Average Fares(4)

1996 166.9 1.50 0.857 1.284 1.378 1997 170.8 1.50 0.837 1.229 1.323 1998 173.6 1.50 0.824 1.084 1.160 1999(5) 177.0 1.50 0.808 1.028 1.093 2000 182.5 1.50 0.783 1.013 1.075 2001 187.1 1.50 0.764 1.001 1.058 2002 191.9 1.50 0.745 0.986 1.044 2003(6) 197.8 2.00 0.964 1.120 1.189 2004 204.8 2.00 0.931 1.174 1.244 2005 (7) 212.7 2.00 0.896 1.198 1.272 2006 220.7 2.00 0.864 1.215 1.294 2007 226.9 2.00 0.840 1.218 1.294 2008(8) 235.8 2.00 0.808 1.256 1.334 2009 (projected) (9) 231.4 2.25 0.927 1.326 1.411

(1) CPI All Urban Consumers, New York, N.Y. – Northeastern N.J.; 1982-84=100.0. The CPI levels listed are the annual average for each year. 2009 estimate based on Global Insight forecast of -1.87% increase in NY/NJ CPI-U.

(2) Base fare after adjusting for inflation since 1982 (1982 CPI = 95.3). (3) Total farebox revenue divided by revenue passenger trips (including students). Average fares in the table are for the full year. (4) Non-student revenue divided by revenue passenger trips (excluding students). Average fares in the table are for the full year. (5) 1999 is the first complete calendar year in which unlimited ride passes were available. (6) Base fare increased from $1.50 to $2.00 in May 2003. Average fares in the table are for the full year. (7) 30-day unlimited ride, 7-day unlimited ride and express bus fares increased effective February 27, 2005. Average fares in the table

are for the full year. (8) 30-day unlimited ride, 7-day unlimited ride, 1-day unlimited ride and express bus fares increased effective March 2, 2008; 14-day

unlimited ride MetroCard introduced. The bonus was reduced from 20% to 15%, and the threshold to receive the bonus was reduced from $10 to $7. Average fares in the table are for the full year.

(9) 2009 projection includes impact of base fare increase from $2.00 to $2.25, express bus fare increase from $5.00 to $5.50, and 1-day,7-day, 14-day and 30-day unlimited ride pass increases that go into effect on June 28, 2009. Average fares are for the full year.

Subway System Performance and Level of Service. Since implementation of the capital programs began

in early 1982, Transit System performance, on the whole, has improved. MTA New York City Transit has replaced or overhauled its entire fleet. The entire fleet is now free of painted graffiti, and subway cars now run an average of 134,795 miles between breakdowns, up from an average of 7,145 in 1982. Since the end of 1992, all of the Transit System’s 656 miles of mainline track has been maintained in a state of good repair, which has reduced track related mainline derailments and delays. Weekday on-time performance based upon terminal departures and arrivals was 90.2% in 2008, a reduction of 2.6% from the 2007 level of 92.8%. This decrease was due mostly to increases in construction activity, passenger-related delays and signal/track problems. MTA New York City Transit has also rehabilitated shops, depots, warehouses and stations, which has helped make operations more efficient.

Other aspects of the passenger environment have also experienced significant improvement. Almost all

cars have adequate climate control and are displaying the correct signage. MTA New York City Transit believes that these improvements are attributable to better management

and maintenance of the Transit System and implementation of capital projects pursuant to the capital programs. Further improvements, as well as the maintenance of these significant improvements since the inception of the capital programs in 1982 and the improvements in Transit System performance produced as a result thereof, are dependent upon the completion of final work under prior plans and of the 2005-2009 Transit Capital Program and subsequent capital programs.

The February Financial Plan contemplated the implementation of a variety of deficit-reduction actions

-Additional Actions for Budget Balance- approved by the MTA Board on March 25, 2009 that would have resulted in revisions in operations and maintenance procedures and service reductions. At MTA New York City Transit, these proposed actions were projected to result in a reduction in expenses by $154.5 million

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and 2,262 full-time equivalent positions in 2009 and a reduction in expenses by $279.8 million and 2,272 full-time equivalent positions in 2010.

On May 27, 2009, following the passage of legislation providing additional sources of revenue to

MTA, the MTA Board rescinded the planned reductions to scheduled service, leaving in place many other deficit reducing actions contained in the February Financial Plan. MTA New York City Transit’s implementation of such measures will result in the restoration of $58.1 million and 723 positions in 2009 and $96.9 million and 869 positions in 2010, leaving a savings balance of $58.4 million and 705 positions in 2009 and $96.6 million and 851 positions in 2010.

A number of measures are used to quantify Transit System performance and the level of Transit

System service, including total vehicle miles traveled (“VMT”), train abandonments and mean distance between failures (“MDBF”).

The following table shows the VMT for subways since 1996.

Vehicle Miles Traveled by Subways

Year Subway VMT (in millions)

Increase/ (Decrease)

1996 309 N/A 1997 314 1.6% 1998 315 0.3 1999 323 2.5 2000 333 3.1 2001 336 0.9 2002 344 2.4 2003 345 0.3 2004 350 1.4 2005 346 (1.1) 2006 350 1.2 2007 349 (0.3) 2008 358 2.6

The decline in subway VMT from 2004 to 2005 was due to the three day strike in December 2005,

reduced service during the recovery from the Chambers Street fire in the first quarter of 2005 and service diversions to support major construction projects such as the Fulton Street Transit Center, the new South Ferry station and implementation of communication-based equipment on the “L” line. The relatively minor decrease from 2006 was due primarily to weekend service diversion to support major construction projects.

An important factor affecting the quality of subway service is the frequency of train abandonments,

either in the form of terminal abandonments or en route abandonments. Terminal abandonments occur when trains scheduled for operation cannot be put into service. En route abandonments occur whenever a train misses one or more of its regularly scheduled station stops after the train has left its originating terminal. Of the two, en route abandonments have a potentially greater impact on service due to the compounding effect they may have on a portion of the Transit System. For example, if a train is abandoned en route, it may be immobilized in place for an extended period delaying other trains behind it or causing trains to be switched to another track.

The Transit Capital Program has necessitated and will continue to necessitate temporary service

disruptions that adversely affect certain aspects of Transit System performance such as on-time performance and train abandonments, because the skipping of a regularly scheduled station stop is counted as an en route train abandonment. These disruptions are required to facilitate work on certain capital projects. Such disruptions include the rerouting of subway trains, the closing of either part or all of certain passenger stations, cessation of either local or express service, train delays or reduction of train speeds. The increase in the level of terminal and en route abandonments that was occasioned by the major capital rebuilding program in progress throughout the Transit System has been reduced.

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Subway MDBF represents total revenue car miles divided by the number of car failures. A car failure is any incident, including delays, relating to equipment in revenue service that is attributable to that equipment and/or its maintenance. Since 1996, subway MDBF has increased by 97.5%.

The following table shows subway MDBF since 1996.

Subway MDBF

Year

(in miles) Increase/

(Decrease) 1996 68,238 N/A 1997 77,161 13.1% 1998 80,990 5.0 1999 86,884 7.3 2000 110,180 26.8 2001 109,914 (0.2) 2002 114,619 4.3 2003 139,960 22.1 2004 156,815 12.0 2005 178,085 13.6 2006 156,624 (12.1) 2007 149,646 (4.5) 2008 134,795 (9.9)

In general, there has been improvement in fleetwide MDBF since the beginning of the capital program.

These improvements are attributable to a number of factors, including: increased supervision and management control of the MTA New York City Transit work force, improved maintenance and inspection procedures, better training of employees, and the influx of replacement and overhauled subway cars funded through the capital program. The Scheduled Maintenance System (“SMS”) program is the agency’s primary means of maintaining fleet reliability. Under SMS, important car components and subsystems are overhauled or replaced at regular intervals – six years for most subsystems.

Fleet MDBF declined from 156,624 miles in 2006 to 149,646 miles in 2007 and to 134,795 miles in

2008, mainly due to the performance of the oldest cars in the fleet. The oldest cars – 1,572 cars purchased in the 1960s, all scheduled for retirement within the next five years – are experiencing some degradation in performance as they near the end of their lives, although they continue to perform well by historical standards.

Bus System Performance and Level of Service. Bus MDBF measures the average rate of bus failure in

terms of miles of operation. While declining bus MDBF affects the quality of bus service, it generally is not expected to have as significant an impact on bus ridership as MDBF has on subway ridership, since the breakdown of one bus generally does not affect the operations of other buses on the same route.

There has been an increase in bus MDBF since the beginning of the capital program process. Since

1996, the bus MDBF has increased by 125.4%. However, limited availability of standard and articulated buses from our manufacturers over the last several years has led to the increasing of average bus fleet age. Given the expected delivery of schedules of new vehicles, some fleets will continue to age for the next few years, which may negatively impact MDBF and could jeopardize the ability to improve performance.

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The following table shows bus MDBF since 1996.

Bus MDBF

Year

(in miles)

Increase/(Decrease) 1996 1,745 N/A 1997 2,033 16.5% 1998 2,084 2.5 1999 2,149 3.1 2000 2,608 21.4 2001 3,242 24.3 2002 3,478 7.3 2003 3,554 2.2 2004 3,564 0.3 2005 3,618 1.5 2006 4,059 12.2 2007 4,109 1.2 2008 3,933 (4.3)

Since 1996, bus VMT has increased by 26.3%. Numerous schedule and route adjustments have been

and continue to be made to better match bus availability to passenger demand. The following table shows the VMT for buses since 1996.

Vehicle Miles Traveled by Buses

Year (in millions) Increase/ (Decrease) 1996 95 N/A 1997 98 3.2% 1998 104 6.1 1999 109 4.8 2000 115 5.5 2001 118 2.6 2002 119 0.8 2003 121 1.7 2004 122 0.8 2005 119 (2.5) 2006 120 0.8 2007 120 0.0 2008 122 1.7

The decline in bus VMT from 2004 to 2005 was because of the three-day strike in December 2005,

conversion of two routes to articulated service in Spring 2004, cessation in 2004 of two temporary bus services related to September 11, 2001, and cessation in mid-2005 of bus service near Coney Island in mid-2005 that temporarily replaced subway service during construction of the new Stillwell Avenue station.

Transit System Security. Ridership is also affected by the public’s perception of security and order in

the Transit System. Security around the Transit System has been increased since the terrorist attacks on the World Trade Center (“WTC”).

The public’s perception of security and order is also affected by the presence of homeless people,

beggars, illegal vendors and fare evaders in the Transit System. MTA New York City Transit and the New York City Police Department have taken significant steps to address these problems. These include instituting an outreach program to transport the homeless from the Transit System, increasing the uniformed police presence throughout the Transit System and reducing fare evasion and serious crimes. In 2008, major felonies dropped, continuing a trend that has seen serious crime drop dramatically since 1990. Since 1990, major felonies were down 86.9%. Aggressive enforcement and fare control area modifications contributed to a drop in the fare evasion ratio to 0.32% in 2008 from 1.08% in 1997 and from 5.91% in the

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peak year of fare evasion in 1991. Police presence has been important to reductions in subway crime and fare evasion.

Employment. City employment levels generally have a significant impact on the level of subway

ridership. In the 1992 to 2000 period, employment grew by approximately 13.3%, and then declined 5.0% from 2000 to 2003. From 2003 to 2008, employment grew by 7.3%. Subway ridership gains, however, outpaced the upswing in the local economy between 1992 and 2000, and ridership increased slightly between 2000 and 2003. Subway ridership increased 17.3% from 2003 to 2008.

Average weekday subway passengers increased 41.8% from 1996 to 2008, including a 3.6% increase

in 2008, and average weekend subway passengers increased by 70.7% since 1996, including a 3.2% increase in 2008.

Recent economic trends have caused City employment levels to fall in the fourth quarter of 2008 and

the first quarter of 2009 resulting in a slight decrease in ridership year to date in 2009. Automated Fare Collection. MTA New York City Transit employs an automated fare collection

(“AFC”) system in all subway stations and on all MTA New York City Transit, MaBSTOA, MTA Long Island Bus, MTA Bus and Westchester County Bee-Line buses. AFC includes, among other elements, subway turnstiles and bus fare boxes that accept a magnetic farecard (“MetroCard”) in payment. AFC provided the technical capability to eliminate two-fare zones as well as to implement flexible intermodal and interagency fare structures. MetroCard enables passengers to purchase multiple rides and use the MetroCard to enter the Transit System through AFC turnstiles that automatically deduct the cost of each use. The subway turnstiles are designed to be tamper-resistant and to inhibit fare evasion by being more difficult to pass without payment. The bus fareboxes issue magnetically encoded transfers that are designed to reduce fare evasion resulting from the use of invalid transfers.

In 2008, 93.3% of non-student trips were made with MetroCard, up from 23.0% in June 1997, the

month before the introduction of free intermodal transfers. 43.6% of 2008 non-student trips were made with pay-per-ride MetroCards, and 49.7% were made on unlimited-ride MetroCards (31.8% with 30-day cards, 15.5% with 7-day cards, 1.5% with the 14-day cards and 0.9% with one-day cards). The market share of all non-MetroCard fare media (cash and single-ride tickets) was 6.7% in 2008.

Out-of-system sales outlets, including approximately 4,700 active retail locations, generated

approximately $562 million in MetroCard sales in 2008, a 2.5% increase over 2007. Market share for MetroCard out-of-system sales is approximately 18%. During 2008, sales of 2.7 million MetroCards valued at approximately $160 million were made to private employer-based providers of pre-tax transportation benefits, with unlimited ride products accounting for approximately 78% of sales. In addition, total TransitChek Premium MetroCard sales for the year were $83 million, with more than 90,700 employees enrolled in this annual card program at year’s end. Pre-tax benefit MetroCard sales are expected to continue growing due to Federal legislation that provides tax benefits to both employers and employees for these employer-based transportation programs.

MetroCard Vending Machines (“MVMs”) allow riders to purchase MetroCards using cash, credit or

debit cards. The MetroCard Express Machine (“MEM”) is a compact vending unit that accepts only credit or debit cards for payment. A total of 1,627 MVMs were servicing 466 active stations throughout MTA New York City Transit’s subway system in 2008, as well as the New York City Convention and Visitors Bureau, the Staten Island Ferry’s St. George terminal, Orchard Beach in the Bronx, the Long Island Bus Hempstead Terminal, Roosevelt Island Tramway and Grand Central Station. In addition, 524 MEMs were in service in 297 active stations by the end of the year. 54 MEMs were in service serving 29 active select Bus Service bus stops. Vending machine sales totaled $1.9 billion in 2008, accounting for 73% of total in-system sales.

Purchasers of a 14-day, 30-day or 7-day express unlimited ride MetroCard passes with a credit or debit

card through the MVMs and MEMs are the beneficiaries of a free replacement if their MetroCards are lost or stolen, subject to a limit of 2 per holder per calendar year.

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See generally “METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS” below in this Part 3.

Commuter System Ridership

From 1999 to 2008, ridership on MTA Metro-North Railroad increased by 21.5% and ridership on MTA Long Island Rail Road increased by 6.4%. In 2008, MTA Metro-North Railroad ridership increased to 81.5 million and MTA Long Island Rail Road ridership increased to 87.4 million. The following table details annual commuter services ridership over the last ten years and the percentage increase/ (decrease) each year.


(in thousands)

Year

MTA Long Island Rail

Road

MTA Long Island Rail Road Increase/

(Decrease)

MTA Metro-

North Railroad

MTA Metro-North Railroad Increase/

(Decrease) 1999 82,113 2.3 67,071 3.2 2000 84,731 3.2 70,246 4.7 2001 85,603 1.0 71,426 1.7 2002 83,918 (2.0) 71,637 0.3 2003 80,924 (3.6) 70,502 (1.6) 2004 79,744 (1.5) 70,757 0.4 2005 80,131 1.1 72,784 2.9 2006 82,037 2.4 75,044 3.1 2007 86,098 5.0 78,231 4.2 2008 87,358 1.5 81,466 4.1

(1) A single rider traveling to and from the same destination is counted as two revenue passengers. The number of revenue passengers is determined in part by ascribing an assumed frequency of use of holders of weekly and monthly commutation tickets. A variety of factors affect ridership on the Commuter System. Among the most important are level of

fares, Commuter System performance and regional employment discussed below. Other factors that may be important to Commuter System ridership include the amount and level of service provided and security.

Fares. Since 1982, the base fares charged for the use of the Commuter System within New York State

have been raised seven times.

Date of Increase

Approximate Increase in NYS Average Fares

1984 – January 20% 1986 – January 11 1990 – January 15 1995 – November 9 2003 – May 25 2005 – March 7.6/6.2 (1) 2008 – March 3.85

(1) Effective March 1, 2005, the average fare increased by 7.6% on the MTA Long Island Rail Road and by 6.2% on the MetroNorth Railroad for service between points in New York State, which resulted in approximately 5% increase in revenues over prior fare structures.

In addition, CDOT approved the implementation of changes in fare levels for travel to and from

Connecticut stations effective July 1, 1991 and January 1, 1992. CDOT also increased fares by approximately 5% to and from Connecticut on January 1 in the years 1993, 1994, 1996 and 1997, and by approximately 4.5% on January 1, 1998. Most recently, CDOT implemented a 15% average fare increase on July 1, 2003 and an additional 5.5% average fare increase on January 1, 2005.

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Fares on MTA Long Island Rail Road and MTA Metro-North Railroad increased effective March 1, 2008 for service between points in New York State. A discount is offered to Mail&Ride customers who purchase a combined monthly commuter ticket and MetroCard. MTA Long Island Rail Road and MTA Metro-North Railroad sell reduced-fare $3.25 weekend rides between points within the City.

On May 11, 2009 the Boards of the Long Island Rail Road and the MTA Metro-North Railroad

approved a tariff change which is scheduled to become effective on June 17, 2009. Assuming the tariff change is implemented as scheduled, as of June 17, 2009, fares will increase as follows: Full fare one-way, full fare ten-trip, weekly and monthly tickets fares to/from Manhattan/LIRR Zone 1stations/Hoboken will increase from 5.0% to 11.6%; intermediate full fares for LIRR and MNR East of Harlem service will increase from 7.1% to 20%; however, any increase of more than 11.75% is no more than $.75 per ride; intermediate full fares on MNR West of Hudson service will increase up to 33%; the increases for some child/senior/disabled fares may vary slightly from these percentages; New Haven Line fares for NY stations will increase in stages; the on board fare differential will increase up to $6.50 from $5.50; CityTickets fares will increase from $3.25 to $3.50; family fare prices are unchanged; the Mail&Ride fare discount on the railroad portion of the Monthly Commutation/Monthly Unlimited Ride MetroCard will be reduced from 5% to 4%. The 2% Mail&Ride discount remains unchanged. Senior citizen/disabled person/child fare discount policies and other Mail&Ride/WebTicket discounts remain unchanged

Nevertheless, current fares giving effect of the 2009 increase, but without giving effect to any changes

in average length of trip or other ridership patterns, remain, on average, low in real terms as compared to 1982 after adjusting for inflation based on increases in the CPI.

These tariff increases do not affect riders of CDOT. See “REVENUES OF RELATED ENTITIES”, Fares and Tolls, Commuter System Revenues below in this Part 3 for more details on the approval and implementation of CDOT tariffs.

MTA Long Island Rail Road

MTA Metro-North Railroad

______Harlem______ _______Hudson_____ _____New Haven____

Year

CPI(1)

Average Nominal Fare(2)

Real Fare

1982$

Average Nominal

Fare

Real Fare

1982$

Average Nominal

Fare

Real Fare

1982$

Average Nominal

Fare

Real Fare

1982$

1999 177.0 4.17 2.24 3.96 2.14 4.77 2.57 5.24 2.82 2000 182.5 4.16 2.17 4.00 2.09 4.83 2.52 5.26 2.75 2001 187.1 4.19 2.19 4.00 2.04 4.86 2.48 5.24 2.67 2002 191.9 4.19 2.08 3.99 1.98 4.85 2.41 5.23 2.60 2003 197.8 4.86 2.34 4.64 2.24 5.66 2.73 5.76 2.77 2004 204.8 5.18 2.41 4.91 2.29 6.00 2.79 6.12 2.85 2005 212.7 5.52 2.47 5.16 2.31 6.29 2.82 6.50 2.91 2006 220.7 5.58 2.41 5.19 2.24 6.40 2.76 6.51 2.81 2007 226.9 5.57 2.34 5.22 2.19 6.44 2.70 6.56 2.76 2008 235.8 5.80 2.34 5.35 2.16 6.64 2.68 6.54 2.64 2009Est(3) 231.4 6.14 2.53 5.68 2.34 6.96 2.87 6.70 2.76

(1) CPI All Urban Consumers, New York, N.Y. – Northeastern N.J.; 1982-84=100.0. The CPI levels listed are the annual average for

each year. 2009 estimate based on April 2009 Global Insight forecast of -1.87% in NY/NJ CPI-U. (2) Average Nominal Fare means the fare paid per ride, determined by dividing total passenger revenues by total revenue passengers. (3) 2009 estimate provided by MTA. Reflects fare increases approved on May 11, 2009.

Characteristics of Commuter System Performance. Characteristics of performance potentially affecting

ridership include on-time performance, the fleet’s average distance between failures, the number of standees and platform waiting time. Since implementation of the capital program began in early 1982, Commuter System performance as measured by those indicia has, on the whole, improved, although some of those indicia have shown declines during certain periods. Implementation of certain capital projects that are part of the Commuter Capital Programs may involve temporary disruptions of service as various portions of the Commuter System are refurbished or replaced. MTA Long Island Rail Road and MTA Metro-North Railroad schedule capital project work so as to minimize disruption of operations. In addition,

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as the Commuter Capital Program for rolling stock replacement progresses from achieving a state of good repair to normal system replacement and the rolling stock is retired at the end of its useful life, further fluctuations may appear in various measures of Commuter System performance.

The February Financial Plan contemplated the implementation of a variety of deficit-reduction actions

-Additional Actions for Budget Balance- approved by the MTA Board on March 25, 2009 which, for the Commuter System included reductions in administration, customer convenience and amenities, maintenance, safety and security, service and service support. The LIRR’s implementation of such measures would have resulted in $36.2 million in savings in 2009 and a reduction of 165 positions and $452.8 million in savings in 2010 and a reduction of 320 positions. The MTA Metro-North Railroad’s implementation of such measures would have resulted in savings of $35 million and a reduction of 88 positions in both 2009 and 2010.

On May 27, 2009, following the passage of legislation providing additional sources of revenue to

MTA, the MTA Board rescinded the planned reductions to scheduled service, leaving in place many other deficit reducing actions contained in the February Financial Plan. This allowed the LIRR to restore the proposed train service reductions, totaling $4.5 million and 40 positions in 2009 and $12.6 million and 85 positions in 2010. Most of the other proposed expense reductions will still be implemented resulting in savings of $31.7 million in 2009 and a reduction of 123 positions and savings of $40.2 million in 2010 and a reduction of 233 positions. The MTA Metro-North Railroad’s implementation of such measures will result in the restoration of $7.6 million and 16 positions in 2009 and $7.8 million and 16 positions in 2010 leaving a balance of $27.3 million in savings and a reduction of 72 positions in 2009 and 2010.

The following table shows on-time performance for MTA Long Island Rail Road and MTA Metro-North Railroad for the last ten years.

On-Time Performance (%) Year MTA Long Island Rail Road MTA Metro-North Railroad 1999 91.0 96.3 2000 92.7 96.7 2001 93.1 96.6 2002 94.0 97.3 2003 93.1 96.4 2004 92.7 96.1 2005 92.2 97.5 2006 93.3 97.8 2007 94.1 97.7 2008 95.1 97.5

The following table shows the fleet’s MDBF for MTA Long Island Rail Road and MTA Metro-North

Railroad for the last ten years. The substantial increase in MDBF during the last few years has been mainly due to the new fleet of cars.

MDBF MTA Long Island Rail Road MTA Metro-North Railroad

Year

MDBF (in miles)


MDBF (in miles)


1999 28,159 1.4 70,328 17.9 2000 28,405 0.9 54,355 (22.7) 2001 30,660 7.9 50,390 (7.3) 2002 37,139 21.1 70,288 39.5 2003 39,579 6.6 56,578 (19.5) 2004 44,760 13.1 52,324 (7.5) 2005 51,993 16.2 67,996 30.0 2006 78,597 51.2 103,377 52.0 2007 107,825 37.2 110,361 6.8 2008 132,203 22.6 104,865 (5.0)

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Regional Employment. Regional employment levels, primarily in the City, have a significant impact on commuter railroad ridership. See “RIDERSHIP AND FACILITIES USE – Transit System Ridership – Employment” above in this Part 3.

MTA Bus Ridership

General. MTA Bus was created as a public benefit corporation subsidiary of MTA in 2004 to integrate seven private bus companies into the MTA. The final MTA Bus company merger was completed in February 2006.

Since MTA Bus launched operations, bus performance, on the whole, has significantly improved.

MTA Bus has replaced more than 50% of its fleet with 475 new express buses and 284 low-floor hybrid electric local buses. The bus fleet age has decreased from 9.43 years on February 20, 2006, (the first day of complete consolidated operations) to 6.81 years at the end of 2008. However, recent limited availability of standard and articulated buses from manufacturers may result in an increase in the average bus fleet age in the future, which could negatively impact MDBF and jeopardize the ability to further bus fleet reliability.

Historical Ridership. MTA Bus revenue passengers in 2008 totaled 121 million, an increase of 9.8%

over 2007. The primary reason for the increase was improved service availability and reliability. To meet the overall growth in demand in recent years, MTA Bus has been enhancing service since 2006, incrementally increasing capacity on all of its bus routes.

The following table sets forth total annual ridership and the year-over-year percentage increase for

MTA Bus since 2006, when the merger was completed; however, it should be noted that only partial-year data is reported for 2006 because the merger at MTA Bus was completed during the first quarter.


(in thousands) Years Ridership Bus

Increase/(Decrease) 2006* 99.253 2007 110.269 11% 2008 121,028 9.8%

*2006 represents partial year data because the mergers at MTA Bus were completed during the first quarter. (1) “Revenue Passengers” are defined as all passengers for whom revenue is received, either through direct fare payment (cash, tokens, MetroCards) or fare reimbursements (senior citizens, school children, the physically disabled). “Revenue Passengers” statistics count passengers that use a free intermodal or bus-to-bus transfer as an additional passenger though they are not paying an additional fare.

Fares. Since March 2005, the base fare has been $2.00 for local bus service and $5.00 for express

service. The following changes took effect as of March 2, 2008: • The cost of unlimited-ride MetroCards rose to $25 from $24 for a 7-day card and to $81 from $76

for a 30-day card. • The 1-Day Fun Pass now costs $7.50, up from $7. • A new 14-day MetroCard is sold for $47. • The cost of a 7-day express bus pass remains $41.

MTA Bus offers the following discount and bonus programs as of December 31, 2008: • free intermodal (subway-to-bus and bus-to-subway) transfers, • MetroCard Bonus Program, offering customers a 15% bonus on purchases of, or additions to, a

single MetroCard of $7 or more, • unlimited-ride 1-day, 7-day, 14-day and 30-day passes, • unlimited-ride 7-day combined express bus and regular bus pass, • free and half-fare student programs, • half-fare programs for senior citizens and persons with disabilities, and • free replacement of lost or stolen unlimited-ride 14-day, 30-day and 7-day express passes (limit of

2 per calendar year per holder) if the holder paid by credit or debit card.

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As noted above in RIDERSHIP AND FACILITES USE, Transit System (MTA New York City Transit and MaBSTOA) Ridership, Fares; additional fare increases are scheduled to become effective on June 28, 2009.

Performance and Level of Service. Buses ran an average of 4,631 miles between breakdowns during 2008, a 37.4% improvement from an average of 3,369 MDBF at the end of 2007. Weekday pull-out performance based upon depot departures and arrivals was 99.8% in 2008, an increase of 0.5 percent from the 99.3% level in 2007. This increase was due mostly to improved reliability resulting from improved maintenance programs and the infusion of new vehicles. MTA Bus also began rehabilitation of depots, helping make operations more efficient.

The following table shows bus MDBF since 2006.

Bus MDBF

Year

(in miles)

Increase/(Decrease) 2006* 2,369 2007 3,369 42% 2008 4,631 37.5%

* 2006 represents partial-year data because the mergers at MTA Bus were completed during the first quarter. Since 2006, vehicle miles traveled increased by 14%. Numerous incremental schedule and route

adjustments have been and continue to be made to better address passenger demand patterns. The following table shows the VMT for buses since 2006.

Vehicle Miles Traveled by Buses

Year (in millions) Increase/ (Decrease) 2006* 29.3

2007 35.5 14%

2008 37.4 5.3% * 2006 represents partial-year data because the merger at MTA Bus was completed during the first quarter.

MTA Bridges and Tunnels – Total Revenue Vehicles

The following table shows the total number of revenue vehicles at the MTA Bridges and Tunnels Facilities for the past ten years.

MTA Bridges and Tunnels Facilities

Total Revenue Vehicles

Year

Revenue Vehicles

000’s

Increase/

(Decrease)

Year

Revenue Vehicles

000’s

Increase/

(Decrease) 1999 289,107 3.5 2004 302,995 1.9 2000 296,633 2.6 2005(3) 300,385 (0.9) 2001(1) 293,220 (1.2) 2006 302,059 0.6 2002 (1) 299,995 2.3 2007 304,364 0.8 2003(2) 297,465 (0.8)% 2008(4) 295,553 (2.9)

(1) The MTA Bridges and Tunnels Facilities and the Battery Parking Garage were not damaged in the terrorist attack at WTC on September 11, 2001. However, the Battery Parking Garage was closed temporarily following the attack and subject to clean-up thereafter. In addition, some of the bridges and tunnels were subject to closure and/or traffic restrictions for significant periods of time. There was no interruption in the use of the E-ZPass system.

(2) Toll increase became effective May 18, 2003. (3) Toll increase became effective March 13, 2005. (4) Toll increase became effective March 16, 2008.

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MTA Bridges and Tunnels’ independent engineers, URS Corporation – New York (“URS”), have conducted a study (the “URS Study”) to develop projections of traffic, revenues and expenses for the MTA Bridges and Tunnels Facilities entitled “History and Projection of Traffic, Toll Revenues and Expenses and Review of Physical Conditions of the Facilities of Triborough Bridge and Tunnel Authority,” dated June 8, 2009. The report also contains certain historical revenue, traffic and more detailed toll rate information not included herein. A copy of the URS Study is attached to the Continued Disclosure Filings as Appendix E and has also been posted on the MTA website at www.mta.info/mta/investor/index.html. The URS Study is included by specific cross-reference herein. Toll Rates

General Power to Establish Tolls.

• MTA Bridges and Tunnels’ power to establish toll rates is not subject to the approval of any governmental entity. However, prior to implementing proposed changes in its toll rates, MTA Bridges and Tunnels is required to comply with the State Environmental Quality Review Act, which generally requires an assessment of environmental impacts of the proposed action, if any.

• Tolls on the Verrazano-Narrows Bridge and the Throgs Neck Bridge, which were constructed

pursuant to the General Bridge Act of 1946, 33 U.S.C. 525 et seq., may be subject to the standard imposed by Section 135 of the Federal-Aid Highway Act of 1987, Pub.L. 100-17, that tolls on bridges constructed under the authority of certain Federal legislation, including the General Bridge Act of 1946, be “just and reasonable.” MTA Bridges and Tunnels believes that the tolls on all of its vehicular toll facilities are just and reasonable.

Resident Token, Discount and Rebate Programs.

• The MTA Bridges and Tunnels Act was amended in 1981 to require that residents of Broad

Channel and the Rockaway Peninsula be afforded the right to purchase tokens for the Cross Bay Veterans Memorial Bridge at a cost of 66-2/3% of the regular toll.

• The MTA Bridges and Tunnels Act was further amended in 1983 to:

o eliminate the residency requirement for the purchase of reduced rate tokens for the Cross Bay Veterans Memorial Bridge,

o require the offering of tokens for the Marine Parkway-Gil Hodges Memorial Bridge at a

cost of 66-2/3% of the regular toll, and

o require the offering of tokens to residents of Richmond County (Staten Island) for the Verrazano-Narrows Bridge at a cost of 80% of the regular toll.

• The MTA Bridges and Tunnels Act was amended in 1993 to provide that surcharges, in addition

to the regular toll, imposed by MTA Bridges and Tunnels on the Verrazano-Narrows, Marine Parkway-Gil Hodges Memorial and Cross Bay Veterans Memorial Bridges shall not be treated as part of the regular toll for the purpose of computing the reduced token cost discussed in this paragraph. The 1993 amendment also provided that residents of Staten Island, Broad Channel and the Rockaway Peninsula are entitled to a permanent exemption from any applicable surcharge imposed in 1993 on such bridges.

• MTA has a program to rebate the tolls of E-ZPass customers who are residents of Broad Channel

and the Rockaway Peninsula using the Cross Bay Veterans Memorial Bridge, effectively eliminating the only intra-borough toll for residents traveling to the principal part of their borough and returning. The 2008 rebate program is expected to cost approximately $4 million and a deposit to MTA Bridges and Tunnels or its designee in such amount has been funded from MTA’s unencumbered funds. In the event such amount is not sufficient, MTA Bridges and Tunnels will collect the tolls from the user’s E-ZPass account, unless additional moneys are deposited with MTA Bridges and Tunnels for such purpose from another source. This program is expected to be discontinued in the future.

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• A class action suit was filed in 2006 alleging unequal treatment by MTA Bridges and Tunnels on toll collection policies on certain bridges. See below under the caption “LITIGATION – MTA Bridges and Tunnels – Janes and Schwartz v. TBTA, MTA, Kalikow and Ascher” in Part 5.

One-Way Collection in Staten Island. On March 20, 1986, in accordance with Federal law, MTA

Bridges and Tunnels instituted one-way toll collection on the Verrazano-Narrows Bridge for all vehicles. Federal law now prohibits MTA Bridges and Tunnels from discontinuing one-way toll collection on vehicles exiting such bridge in Staten Island.

Current Toll Rates. Tolls were increased effective March 16, 2008. For the Verrazano-Narrows Bridge,

the two-axle passenger vehicle crossing charge (one-way collection) increased from $9 to $10, with a $1.70 discount for E-ZPass users. For the Bronx-Whitestone Bridge, Brooklyn-Battery Tunnel, Queens Midtown Tunnel, Robert F. Kennedy Bridge and Throgs Neck Bridge, the two-axle passenger vehicle crossing charge increased from $4.50 to $5.00, with a $0.85 discount for E-ZPass users. For the Henry Hudson Bridge, the two-axle passenger vehicle crossing charge increased from $2.25 to $2.75, with a $0.85 discount for E-ZPass users. And for the Marine Parkway-Gil Hodges Memorial Bridge and the Cross Bay Veterans Memorial Bridge, the two-axle passenger vehicle crossing charge increased from $2.25 to $2.50, with a $0.95 discount for E-ZPass users. Additional charges apply for additional axles and/or weight. Certain resident discounts apply to the Verrazano-Narrows Bridge, the Marine Parkway-Gil Hodges Memorial Bridge and the Cross Bay Veterans Memorial Bridge.

On May 11, 2009 the board of MTA Bridges and Tunnels authorized tolls to be increased on MTA

Bridges and Tunnels crossings. Assuming the tariff change is implemented as scheduled, the fares will increase as follows: for the Verrazano-Narrows Bridge, the two-axle passenger vehicle crossing charge (one-way collection) increased from $10 to $11, with a $1.86 discount for E-ZPass New York Service Center users. For the Bronx-Whitestone Bridge, Brooklyn-Battery Tunnel, Queens Midtown Tunnel, Robert F. Kennedy Bridge and Throgs Neck Bridge, the two-axle passenger vehicle crossing charge increased from $5.00 to $5.50, with a $0.93 discount for E-ZPass New York Service Center users. For the Henry Hudson Bridge, the two-axle passenger vehicle crossing charge increased from $2.75 to $3.00, with a $0.91 discount for E-ZPass New York Service Center users. And for the Marine Parkway-Gil Hodges Memorial Bridge and the Cross Bay Veterans Memorial Bridge, the two-axle passenger vehicle crossing charge increased from $2.50 to $2.75, with a $1.04 discount for E-ZPass New York Service Center users. Additional charges apply for additional axles and/or weight. Certain resident discounts apply to the Verrazano-Narrows Bridge, the Marine Parkway-Gil Hodges Memorial Bridge and the Cross Bay Veteran’s Memorial Bridge.

A more complete description of the current toll structure and toll increases authorized on May 11, 2009

is set forth in the URS Study under the caption “TOLL COLLECTION ON THE TBTA FACILITIES.” See “METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS” below for a

discussion of changes that have been implemented, and others that are possible, to the traditional pay-as-you-go cash, and pay-before-you-go, basis of payment. See also “E-ZPass” below.

Minimum Toll Covenants in MTA Bridges and Tunnels Bond Resolutions. The MTA Bridges and

Tunnels Senior Resolution and MTA Bridges and Tunnels Subordinate Resolution provide that:

• discounts to automobiles carrying not more than two persons may not exceed 20% of the regular crossing fare on any facilities other than the Henry Hudson Bridge, the Marine Parkway-Gil Hodges Memorial Bridge and the Cross Bay Veterans Memorial Bridge, on which latter facilities such discount may not exceed 33 1/3%,

• the minimum undiscounted toll rate for automobiles carrying not more than two persons be at least

$3.00 for each crossing over or through the Robert F. Kennedy Bridge, the Bronx-Whitestone Bridge, the Throgs Neck Bridge, the Brooklyn-Battery Tunnel or the Queens Midtown Tunnel, $2.50 for each crossing over the Verrazano-Narrows Bridge, at least $1.50 for each crossing over the Henry Hudson Bridge, and at least $1.25 for each crossing over the Marine Parkway-Gil Hodges Memorial Bridge or the Cross Bay Veterans Memorial Bridge,

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• in the event MTA Bridges and Tunnels shall impose a surcharge in addition to the regular toll rate, such surcharge shall not constitute part of the toll rate for purposes of computing the maximum discount described in the first bullet point above and MTA Bridges and Tunnels may provide exemptions from such surcharges without regard to the limits on maximum discounts,

• in the event MTA Bridges and Tunnels imposes different undiscounted toll rates for vehicles

utilizing an electronic toll collection system and based upon time of day, day of week or period of the year mode of pricing, the limits on the maximum discounts shall be measured against the undiscounted toll rate applicable to the particular crossing, and

• the minimum crossing charge, however denominated, and after giving effect to any exemption,

exclusion or discount, for automobiles carrying not more than two persons be at least $3.20 for each westbound crossing over the Verrazano-Narrows Bridge, at least $1.60 for each crossing over the Robert F. Kennedy Bridge, the Bronx-Whitestone Bridge or the Throgs Neck Bridge or through the Brooklyn-Battery Tunnel or the Queens Midtown Tunnel and at least 66.7 cents for each crossing over the Henry Hudson Bridge, the Marine Parkway-Gil Hodges Memorial Bridge or the Cross Bay Veterans Memorial Bridge.

Limitations on Free Crossings. The MTA Bridges and Tunnels Senior Resolution and MTA Bridges

and Tunnels Subordinate Resolution limit toll free crossings with respect to the MTA Bridges and Tunnels Facilities to (i) the vehicles of present and former MTA Bridges and Tunnels members, officers and employees, (ii) military, police, fire, ambulance and other emergency, service and maintenance vehicles, (iii) vehicles of persons employed on Ward’s Island or Randall’s Island traveling to and from such Islands over the Robert F. Kennedy Bridge and (iv) other vehicles by passes or permits, provided that there shall not be more than 500 passes or permits outstanding at any one time.

Legislative Proposals. From time to time bills have been introduced by various State legislators

seeking, among other things, to restrict the level of tolls on certain of the MTA Bridges and Tunnels Facilities, to require approval of future toll increases by the Governor, to eliminate minimum tolls or to require discounts or free passage to be accorded to certain users of MTA Bridges and Tunnels Facilities. Under the MTA Bridges and Tunnels Act, however, the State has covenanted to holders of MTA Bridges and Tunnels’ bonds that it will not limit or alter the rights vested in MTA Bridges and Tunnels to establish and collect such charges and tolls as may be convenient or necessary to produce sufficient revenue to fulfill the terms of any agreements made with the holders of such bonds or in any way to impair their rights and remedies.

Legislation enacted in connection with the State’s Fiscal Year 2006-07 budget prohibits all public

authorities, including MTA Bridges and Tunnels, from imposing, on and after June 1, 2006, a periodic administrative or other charge on electronic payment accounts, such as the E-ZPass toll collection system described below, for the privilege of using such electronic method of payment. The legislation does not prevent the authorities from making any charge for extra services requested by a holder of such electronic method of payment, any charge for lost or damaged equipment, or for defaults, such as charges for dishonored checks. Competing Facilities and Other Matters

In addition to the Robert F. Kennedy, Bronx-Whitestone and Throgs Neck Bridges and Brooklyn-Battery and Queens Midtown Tunnels, there are four vehicular bridges operated by the City crossing the East River which are toll-free at the present time, namely: the Queensborough, Williamsburg, Manhattan and Brooklyn Bridges. In addition to the Robert F. Kennedy and Henry Hudson Bridges, there are nine vehicular bridges crossing the Harlem River, which are toll-free at the present time. The City has explored, from time to time, the possibility of tolling some or all of these bridges to raise revenue for the City. The Ravitch Commission recommended the introduction of cashless tolling on the Harlem and East River Bridges. If any similar proposal should be adopted in the future, MTA Bridges and Tunnels cannot predict the effect that the tolling of such bridges would have on its revenues.

The State agrees in the MTA Bridges and Tunnels Act that while any bonds of MTA Bridges and

Tunnels are outstanding, there will not be constructed any vehicular connection competitive with the MTA Bridges and Tunnels Facilities and crossing (a) the East River north of 73rd Street or south of 59th Street in

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Manhattan, (b) New York Bay, or (c) Jamaica Bay or Rockaway Inlet to Rockaway Peninsula within a specified distance (approximately 2½ miles) east of the Cross Bay Veterans Memorial Bridge. There is no provision in the MTA Bridges and Tunnels Act regarding competitive vehicular crossings over the Harlem River.

Under the MTA Bridges and Tunnels Senior Resolution and MTA Bridges and Tunnels Subordinate

Resolution, the owners of the MTA Bridges and Tunnels bonds waive the foregoing agreement of the State with respect to the construction of any East River vehicular toll crossing to be operated by MTA Bridges and Tunnels.

A significant reduction in the availability of fuel to motorists would, or significant increases in the cost

thereof could, have an adverse effect on the revenues derived from the MTA Bridges and Tunnels Facilities. The use of automobiles in the New York City metropolitan area is subject to increased governmental concern and promulgation of governmental regulations relating to environmental and other concerns restricting the use of vehicles, which could also adversely affect revenues from the MTA Bridges and Tunnels Facilities. The Clean Air Act Amendments of 1990 (“Clean Air Amendments”) require the State to adopt transportation control strategies and measures to control emissions, and establish among other matters, specific measures the State may adopt to reduce air pollution. The impact on MTA Bridges and Tunnels and revenues from the MTA Bridges and Tunnels Facilities of the Clean Air Amendments and the State implementation plan that must be developed thereunder cannot be assessed at this time.

Revenues derived from the MTA Bridges and Tunnels Facilities could also be adversely affected by

the condition of arteries feeding and approach and access roads leading to and from such facilities over which MTA Bridges and Tunnels has no control. A number of those arteries and approach and access roads are in need of significant repairs. Major repairs to the Gowanus Expressway, the main arterial link between the Verrazano-Narrows Bridge and the Brooklyn-Battery Tunnel, will result in off-peak lane closures during the years over which these repairs are to be made and may impact traffic at these facilities. Revenues have been and may hereafter be affected by access to, and conditions and restrictions on use of, the toll-free facilities over which MTA Bridges and Tunnels has no control and which compete with MTA Bridges and Tunnels’ bridges and tunnels. In addition, construction relating to the Second Avenue Subway could materially affect the approach to the Queens Midtown Tunnel. The URS Study referenced in this Appendix A under the caption “MTA Bridges and Tunnels – Total Revenue Vehicles” also lists current and proposed construction projects that could adversely affect bridge and tunnel use.

E-ZPass

MTA Bridges and Tunnels’ electronic toll collection system (“E-ZPass”) can be used by motorists to pay tolls charged by various authorities (currently 24) in thirteen states. MTA Bridges and Tunnels’ E-ZPass program requires prepayment on behalf of the customers. More than 85% of the customers pay by credit card. For 2008: • overall E-ZPass market share was 74.0%; • average weekday E-ZPass market share was 76.2%; and

• average weekend E-ZPass market share was 68.8%.

See “METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS” below in this Part 3.

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REVENUES OF THE RELATED ENTITIES

The following is a general description of certain revenues generated by the Related Entities. While it is not a complete list of all revenues available, it does cover substantially all the revenues pledged to pay any one or more of the securities described under “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS” in Part 4. Each different MTA or MTA Bridges and Tunnels credit is supported by different revenue streams. Reference is made to the audited financial statements of the various entities for more information relating thereto. The information in the audited financial statements may differ with the information set forth below in certain respects due to the classification of revenues or timing of receipt thereof. For example, while the Related Entities use a calendar year as their fiscal year, the State has a fiscal year that begins on April 1. Some of the information set forth below and under the caption “DEDICATED TAX FUND BONDS” in Part 4 relating to the State subsidies reflects revenues received during the State’s fiscal year.

Fares and Tolls

Transit System Fares. Revenues are derived from fares charged to users of the Transit System. Fare revenues on an accrual basis (not including school, elderly and paratransit reimbursement described below) for the past eight years are as follows:

Year

Fare Revenues (in millions)

Year


2001 $2,137 2005 $2,643 2002 2,135 2006 2,759 2003 2,396 2007 2,855 2004 2,570 2008 3,029

The current fare schedule includes a basic bus and subway fare of $2.00 (as of June 28, 2009 the basic

bus and subway fare will increase to $2.25) as well as a variety of discounted fare arrangements (as described in the next paragraph) covering a significant and growing portion of passenger trips. Special fares are available for senior citizens, persons with disabilities and school children and on certain special services. For a description of historical fare levels and certain recently completed and ongoing changes in payment and collection methods and discount programs, see “RIDERSHIP AND FACILITIES USE – Transit System Ridership – Fares” and “RIDERSHIP AND FACILITIES USE – Transit System Ridership – Automated Fare Collection” above in this Part 3.

For MetroCard users only, MTA has continued the elimination of two-fare zones, as well as the

provision of volume bonuses, unlimited-ride 7-day, 14-day and 30-day and daily subway and bus passes and unlimited-ride 7-day combined express bus and regular bus passes. On March 2, 2008, MTA introduced a 14-day unlimited ride subway and local bus pass. MTA also offers a program for unlimited-ride 14-day, 30-day and 7-day express pass holders that enables the holder to replace his or her lost pass at no cost (limit of 2 per calendar year per holder) if the pass was paid for by credit or debit card. Although these programs decrease revenues per trip, MTA currently projects that, over the next few years, revenues derived from fares charged to users of the Transit System will increase. The MetroCard system and the addition of new means for the sale and payment of MetroCards have changed, and in the future will continue to change; the manner and timing of receipt of revenues derived from fares and can be expected to provide the basis for additional future incentive/discount programs. See “RIDERSHIP AND FACILITIES USE – Transit System Ridership – Automated Fare Collection” above in this Part 3 and “METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS” below in this Part 3.

MTA New York City Transit may fix and adjust Transit System fares without the approval or consent

of any other body or entity. However, as a recipient of Federal funding, MTA New York City Transit is obligated to receive public comment prior to raising fares.

Transit System Fare Reimbursements from the City. MTA New York City Transit and MaBSTOA are

required by law to permit, upon the request of the Mayor of the City, free or reduced fares for one or more classes of users of their facilities upon the agreement of the City to assume the burden of the resulting differential in fares and the associated administrative costs. Pursuant to an ongoing request of the Mayor,

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MTA New York City Transit and MaBSTOA have instituted free fare programs for certain school children and, as a requirement for obtaining grants from the Federal government, have continued a half-fare program for senior citizens and have instituted a half-fare program for eligible disabled persons.

The City no longer reimburses MTA New York City Transit and MaBSTOA for costs of the free fare

program for students; however, pursuant to an agreement with the State and the City, MTA, MTA New York City Transit and MaBSTOA continue the student program with the State and the City have each agreed to pay $45 million towards the program’s cost. MTA’s 2009-2012 Financial Plan assumes the continuation of the joint funding of the free fare program for students through 2012. The State Enacted Budget for State Fiscal Year 2009-2010 reduces the State contribution from $43.843 million to $25.252 million. It is unknown at this time whether this reduction, which stemmed from statewide budget cuts, will be recurring.

Commuter System Fares. Revenues, on an accrual basis, are derived from fares charged to users of the

Commuter System. Fare revenues on an accrual basis for the past eight years are as follows:

Year


Year


2001 $698 2005 $880 2002 691 2006 912 2003 771 2007 956 2004 814 2008 1009

Fares are set in accordance with complicated formulae and vary in relation to the distance traveled.

Discounts are generally available for travel during off-peak hours, for senior citizens, children and persons with disabilities, and for the purchase of weekly or monthly tickets by commuters. Monthly ticket purchasers can also receive an additional discount for purchasing a 30-day unlimited-ride MetroCard with their commuter ticket.

Currently, a 2% discount is offered on the rail fare to Mail&Ride customers who purchase a combined

monthly commuter ticket and either $0 or $40 ($46 value) MetroCard. Additionally, MTA Long Island Rail Road and MTA Metro-North Railroad offer a 5% discount on the rail fare with the $81 unlimited ride MetroCard option. As described in the next paragraph, MTA cannot increase fares in the State of Connecticut without the approval of CDOT.

MTA may fix and adjust Commuter System fares, except with respect to the New Haven Line, without

the approval or consent of any other body or entity. However, MTA is required to hold public hearings prior to the change in any fare. In the case of the New Haven Line, MTA’s ability to change fares is subject to the approval of CDOT pursuant to the terms of the joint service agreement among MTA, MTA Metro-North Railroad and CDOT. At the present time, MTA is exempt from all Federal requirements relating to fares charged on interstate travel on the New Haven Line.

MTA Bridges and Tunnels Toll Revenues. Revenues are derived from tolls at the MTA Bridges and

Tunnels Facilities. Toll revenues on an accrual basis for the past ten years are as follows:

Year Toll Revenues (in thousands)

Year

Toll Revenues (in thousands)

1999 $912,792 2004 $1,096,988 2000 940,607 2005 1,204,944 2001 914,856 2006 1,241,551 2002 933,134 2007 1,250,549 2003 1,021,938 2008 1,273,974

The average toll increased from $3.62 per vehicle in 2004 to $4.31 in 2008 due to the March 16, 2008

toll increase. For more information relating to MTA Bridges and Tunnels’ tolls, see “RIDERSHIP AND

FACILITIES USE – Toll Rates” above in this Part 3 and “METHODS OF PAYMENT AND

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COLLECTION OF FARES AND TOLLS” below in this Part 3. See also the URS Study under the captions “TOLL COLLECTION ON THE TBTA FACILITIES.”

State and Local General Operating Subsidies

Section 18-b Program. A statewide mass transportation operating assistance program (“Section 18-b Program”) is administered by the State Commissioner of Transportation. Section 18-b Program payments to MTA for the Transit System and Commuter System are made quarterly on the basis of specific annual appropriations by the Legislature rather than pursuant to the formula set forth in the statute that is applicable to other transportation systems throughout the State.

The State appropriates substantially all of such Section 18-b Program payments from a separate

account (the “Transportation District Account”) in a special State fund derived from the special taxes described below, the Metropolitan Mass Transportation Operating Assistance Fund (the “MTOA Fund”). The remainder of such payments is appropriated from the State’s General Fund. Appropriation from the Transportation District Account reduces the amount that would otherwise be available to be appropriated to (1) MTA New York City Transit and MaBSTOA, and (2) MTA for the Commuter System, from such Account, as described below under “State Special Tax Supported Operating Subsidies – MMTOA Receipts.”

Under the Section 18-b Program: • Whenever MTA New York City Transit or MaBSTOA receives a payment from the State, the City

is required to make a matching payment in accordance with amounts established by the Legislature. In the event the City fails to make any required payment, the State Comptroller is authorized to withhold an equivalent amount from certain State aid to the City and to pay such amount directly to MTA New York City Transit or MaBSTOA.

• Whenever MTA receives a payment from the State for the Commuter System, the City and

counties served by the Commuter System are required to make a matching payment in accordance with amounts established by the Legislature. In the event the City and counties fail to make any required payment, the State Comptroller is authorized to withhold an equivalent amount from certain State aid to the City and counties and to pay such amount directly to MTA for the Commuter System.

State Special Tax Supported Operating Subsidies

MTTF Receipts. Subject to annual appropriation, a specified share of the following (the “MTTF Receipts”) are deposited in the State’s dedicated mass transportation trust fund and paid to MTA by deposit into a dedicated tax fund (the “Dedicated Tax Fund”):

• a portion of the revenues derived from certain business privilege taxes imposed by the State on petroleum businesses (see “DEDICATED TAX FUND BONDS – MTTF Receipts – Dedicated Petroleum Business Tax” in Part 4),

• a portion of the motor fuel tax on gasoline and diesel fuel (see “DEDICATED TAX FUND

BONDS – MTTF Receipts – Motor Fuel Tax” in Part 4), and

• a portion of certain motor vehicle fees, including both registration and non-registration fees (see “DEDICATED TAX FUND BONDS – MTTF Receipts – Motor Vehicle Fees” in Part 4).

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MMTOA Receipts. Subject to annual appropriation, a specified share of the following (the “MMTOA

Receipts”) are deposited in the MMTOA Account and paid to MTA by deposit into the Dedicated Tax Fund:

• a 3/8 of one percent regional sales tax, • a temporary regional franchise tax surcharge,

• a portion of taxes on certain transportation and transmission companies, and

• an additional portion of the business privilege tax imposed on petroleum businesses.

See “DEDICATED TAX FUND BONDS – MMTOA Account – Special Tax Supported Operating

Subsidies” in Part 4 for a more detailed description of the MMTOA Receipts.

Use of MTTF Receipts and MMTOA Receipts. MTTF Receipts are used first to pay debt service on the Dedicated Tax Fund Bonds described under “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS” in Part 4. To the extent that MTTF Receipts are insufficient, MMTOA Receipts are used to pay the remainder of the debt service on the Dedicated Tax Fund Bonds. All remaining MTTF Receipts and MMTOA Receipts are then allocated to MTA New York City Transit and the Commuter System in accordance with the formula provided by statute (85% to the Transit System and 15% to the Commuter System in the case of MTTF Receipts; the relative percentage of that year’s State appropriation to the Transit System and the Commuter System, respectively, in the case of MMTOA Receipts; in each case reducing from their final payments the respective amounts used for debt service).

A table showing five-year historical MTTF Receipts and MMTOA Receipts is set forth under “DEDICATED TAX FUND BONDS – Sources of Payment – Revenues from Dedicated Taxes” in Part 4.

Urban Taxes for Transit System. In addition to the aforementioned special tax supported subsidies, a portion of the amounts collected by the City from certain mortgage recording and real property transfer taxes with respect to certain real property located within the City (collectively, the “Urban Taxes”) are, as required by State statute, paid by the City’s Commissioner of Finance directly to MTA New York City Transit on a monthly basis. As in the case of mortgage recording taxes described below, the Urban Taxes can change dramatically from year to year depending on the level of real estate activity.

The following table sets forth the amount of Urban Taxes received by MTA New York City Transit on

an accrual basis in each of the last eight years.

Year

Urban Taxes (in millions)

Year

Urban Taxes (in millions)

2001 $210.5 2005 $594.6 2002 178.7 2006 751.6 2003 173.1 2007 953.3 2004 360.2 2008 490.4

Mobility Tax. In May 2009, the Governor signed legislation imposing a new payroll mobility tax

within the MCTD. Pursuant to new Section 801 of the New York State Tax Law, a tax of 0.34 percent is imposed on the payroll expense of every employer who engages in business within the MCTD and the net self-employment earnings of individuals that are attributable to the MCTD. The tax is effective as of March 1, 2009 for employers other than public school districts; for public school districts the effective date is September 1, 2009. Initial revenue from the mobility tax, including all retroactive liability, is due coincident with an employer’s first withholding tax payment due on or after October 31, 2009. Revenue from the mobility tax will be deposited by MTA when received from the State into a newly created fund, the MTA Finance Fund. The mobility tax funds can be: (i) pledged by MTA to secure and be applied to the payment of bonds to be issued in the future to fund capital projects of MTA, its subsidiaries, and NYCTA and its subsidiary and (ii) used by MTA to pay capital costs, including debt service of MTA, its subsidiaries and NYCTA and its subsidiary. Subject to the provisions of any such pledge, or in the event there is no

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such pledge, the payroll mobility tax revenues can be used by MTA to pay for costs, including operating costs of MTA, its subsidiaries and NYCTA and its subsidiary.

Corporate Transportation Account. The May legislation also directed revenues from the following

four new taxes/fees to the Corporate Transportation Account of the MTA Special Assistance Fund: • A supplemental motor vehicle license fee of a dollar per six month interval in the MCTD; • In the MCTD, a supplemental motor vehicle registration fee of $25 for each year that the

registration is valid; • A tax of fifty cents per taxicab ride on every ride that originates in New York City and terminates

anywhere within the territorial boundaries of the MCTD; and • A supplemental tax of 5 percent on passenger car rentals in the MCTD.

The new revenues, to be deposited in the Corporate Transportation Account, may be pledged by MTA or pledged to TBTA to secure debt of MTA or TBTA. Subject to the provisions of such pledge, or in the event there is no such pledge, such new revenues can be used by MTA for the payment of operating and capital costs of MTA, its subsidiaries and NYCTA and its subsidiary as MTA shall determine.

MTA Bridges and Tunnels Surplus

General. MTA Bridges and Tunnels provides capital and operating assistance to the Transit and Commuter Systems in three important ways:

• it pays debt service on bonds that were issued to finance transit and commuter capital projects, • it generates an annual MTA Bridges and Tunnels Operating Surplus, as described below, that is

distributed to MTA New York City Transit and to MTA for the commuter railroads in accordance with a statutorily mandated formula, and

• it generates an annual MTA Bridges and Tunnels Surplus Investment Income, as described below,

that is distributed at the discretion of the MTA Board. From 2005-2007, MTA Bridges and Tunnels did not issue new money bonds to finance capital projects

for the benefit of the Transit and Commuter Systems. On March 27, 2008, MTA Bridges and Tunnels issued General Revenue Bonds, Series 2008A and Series 2008B (“Series 2008 Bonds”) in the aggregate amount of $1,075 million. The Series 2008 Bonds were issued to finance bridge and tunnel projects, and were used to refinance indebtedness issued by MTA or MTA Bridges and Tunnels and to finance Transit and Commuter projects. In July 2008, MTA Bridges and Tunnels issued General Revenue Bonds, Series 2008C and Series 2008D in the aggregate amount of $1,121 million. These bonds were used to refinance outstanding indebtedness issued by MTA and MTA Bridges and Tunnels. On February 18, 2009, MTA Bridges and Tunnels issued General Revenue Bonds, Series 2009A-2 in the aggregate amount of $325 million and General Revenue Mandatory Tender Bonds, Series 2009 A-1 in the aggregate amount of $150 million. These bonds were issued to finance bridge and tunnel projects, and to refinance outstanding indebtedness issued by MTA Bridges and Tunnels.

The following chart sets forth for the last four years MTA Bridges and Tunnels’ total support to the

Transit and Commuter Systems, consisting of the debt service paid on bonds issued for transit and commuter capital projects, the MTA Bridges and Tunnels Operating Surplus and the MTA Bridges and Tunnels Surplus Investment Income.

Year

Total Support to Transit and Commuter Systems

(in millions) 2005 $ 784 2006 759 2007 735 2008 708

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MTA Bridges and Tunnels Operating Surplus. Section 569-c of the MTA Bridges and Tunnels Act and Section 1219-a of the MTA New York City Transit Act require MTA Bridges and Tunnels to transfer its operating surplus (“MTA Bridges and Tunnels Operating Surplus”) to MTA New York City Transit and to MTA for the commuter railroads in accordance with a statutorily mandated formula hereinafter described.

For such purposes, the MTA Bridges and Tunnels Operating Surplus subject to such transfer is the

amount remaining from all tolls and other operating revenues derived from the MTA Bridges and Tunnels Facilities after (1) payment of (a) operating, administration and other expenses of MTA Bridges and Tunnels properly chargeable to such projects, and (b) principal of and sinking fund installments and interest on its bonds, including bonds issued under the MTA Bridges and Tunnels Senior Resolution and the MTA Bridges and Tunnels Subordinate Resolution (as defined under “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS” in Part 4) to the extent, if any, paid from such sources, and (2) provision for (x) reserves and for all contract provisions with respect to any such bonds and (y) other obligations, including MTA Bridges and Tunnels’ base rent payments in connection with the 2 Broadway Certificates of Participation, incurred in connection with any of its authorized projects. See “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS” in Part 4.

The first $24 million of MTA Bridges and Tunnels Operating Surplus must be allocated to MTA New

York City Transit, and any excess is divided equally between MTA New York City Transit and MTA for the benefit of LIRR and MNR; however, the cash payments are reduced by the proportional amounts of MTA Bridges and Tunnels’ debt service reasonably attributable to the bond proceeds used for their respective benefit.

The MTA Chairman is authorized in his discretion to advance to MTA and MTA New York City

Transit monthly, from available funds, an aggregate amount not to exceed 90% of the Chairman’s estimate of the sum which that month’s operations will contribute to the “operating surplus” of MTA Bridges and Tunnels that he anticipates will or may be certified and transferred for the fiscal year in which such month falls.

The MTA Bridges and Tunnels Operating Surplus declined in 2002 as shown below due primarily to

the fact that, before the debt restructuring, certain MTA Bridges and Tunnels bonds were secured in the first instance by mortgage recording taxes and, thereafter, by MTA Bridges and Tunnels revenues. Those bonds were eliminated and replaced by bonds paid solely from MTA Bridges and Tunnels revenues. Consequently, more MTA Bridges and Tunnels debt service was paid from MTA Bridges and Tunnels revenues without the set-off from the mortgage recording taxes.

The MTA Bridges and Tunnels Operating Surplus decreased in 2006, 2007 and 2008, as shown below,

due primarily to increased operating and debt service costs. MTA Bridges and Tunnels Surplus Investment Income. MTA Bridges and Tunnels generates

investment income on funds held by it (the “MTA Bridges and Tunnels Surplus Investment Income”). Prior to the debt restructuring in 2002, a large portion of this income was generated by the debt service reserve funds that secured the various MTA Bridges and Tunnels bond issues. With the elimination of the debt service reserve funds in 2002, the income is currently generated principally from the smaller debt service funds and operating and capital reserves held by MTA Bridges and Tunnels.

Combined Surplus Amounts. The MTA Bridges and Tunnels Operating Surplus and the MTA Bridges

and Tunnels Surplus Investment Income (together, the “MTA Bridges and Tunnels Combined Surplus”) are used to fund the operating expenses of the Transit System and the Commuter System and/or to finance the cost of certain capital costs and projects of the Transit System and the Commuter System, including payment of debt service on obligations of MTA issued to finance such costs and projects.

The MTA Bridges and Tunnels Combined Surplus amounts transferred for each of the last eight years

on an accrual basis are as follows. The amounts set forth as MTA Bridges and Tunnels Operating Surplus are net of amounts paid for debt service and other obligations described above.

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Fiscal Year

MTA New York

City Transit Share

MTA Share

MTA Bridges and Tunnels

Combined Surplus 2008 Operating Surplus $120,259,847 $226,854,510 $347,114,357 Investment Income -0- 4,490,753 4,490,753

Total $120,259,847 $231,345,263 $351,605,110 2007 Operating Surplus $156,474,331 $249,968,331 $406,442,662 Investment Income -0- 5,558,000 5,558,000



Total $179,985,259 $277,077,089 $457,062,348 2004 Operating Surplus $153,579,633 $241,938,839 $395,518,472 Investment Income -0- 1,368,407 1,368,407 Total $153,579,633 $243,307,246 $396,886,879 2003 (1) Operating Surplus $178,276,053 $251,871,472 $430,147,525 Investment Income -0- 2,333,684 2,333,684 Total $178,276,053 $254,205,156 $432,481,209 2002 Operating Surplus $103,961,853 $144,239,990 $248,201,843 Investment Income -0- 14,727,029 14,727,029 Total $103,961,853 $158,967,019 $262,928,872 2001 Operating Surplus $137,948,870 $173,255,462 $311,204,332 Investment Income -0- 23,777,588 23,777,588 Total $137,948,870 $197,033,050 $334,981,920

(1) Operating Surplus includes approximately $25 million from the settlement of insurance claims resulting from the terrorist attacks on

the WTC in 2001, the proceeds of which were received in 2004 but attributed, for accounting purposes, to 2003.

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Financial Assistance and Service Reimbursements from Local Municipalities

Commuter System Station Maintenance Payments. The City and each of the seven counties in the Transportation District outside the City are each billed an amount fixed by statute for the operation, maintenance and use of Commuter System passenger stations within the City and each such county as adjusted each year for increases or decreases in the consumer price index for wage earners and clerical workers in the New York, Northeastern-New Jersey Consolidated Metropolitan Statistical Area. The State Legislature has not made any changes in the base amounts since 2000. Further modifications may be recommended to the State Legislature every five years (the next such year being 2010) based upon changes made to commuter services.

The following table sets forth the station maintenance, operation and use assessments received by

MTA on an accrual basis in each of the last eight years:

Year

Payments (in millions)

Year

Payments (in millions)

2001 $120 2005 $134 2002 117 2006 137 2003 125 2007 142 2004 129 2008 148

Transit System Service Reimbursements from the City. Policing of the Transit System is being carried

out by the New York City Police Department at the City’s expense. MTA New York City Transit is responsible for certain capital costs and support services related to such police activities, a small portion of which is reimbursed by the City.

Under an agreement with MTA, the City contributes an operating subsidy to support paratransit, equal

to the lesser of (i) 33% of the operating deficit, calculated after taking into account paratransit passenger revenue, certain Urban Tax revenues and MTA New York City Transit administrative expenses, or (ii) an amount that is twenty percent greater than the amount paid by the City for the preceding calendar year. Any remaining operating deficit is funded by MTA New York City Transit. See “TRANSIT SYSTEM – Description of the Transit System – Paratransit” in Part 2.

Miscellaneous Revenues

Transit System. MTA New York City Transit and MaBSTOA receive revenues from concessions granted to vendors, revenues from advertising and other space rented in transit vehicles and facilities, and fines collected by the Transit Adjudication Bureau.

The following table sets forth the miscellaneous revenues received by MTA New York City Transit

and MaBSTOA on an accrual basis in each of the last eight years:

Year

Miscellaneous Revenues (in millions)

Year

Miscellaneous Revenues (in millions)

2001 $68.3 2005 $89.9 2002 72.3 2006 92.0 2003 77.9 2007 95.4 2004 85.5 2008 104.4

Commuter System. MTA Long Island Rail Road and MTA Metro-North Railroad receive revenues

from concessions granted to vendors, advertising and other space rented in Commuter System vehicles and facilities, the sale of power, the sale of food and beverage and other sundry revenues. The following table sets forth the miscellaneous revenues received by MTA Long Island Rail Road and MTA Metro-North Railroad (excluding concessions at Pennsylvania Station and Grand Central Terminal that are not pledged to the Transportation Revenue Bonds described under “PUBLIC DEBT SECURITIES AND OTHER

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FINANCIAL INSTRUMENTS” and “TRANSPORTATION REVENUE BONDS” in Part 4) on an accrual basis in each of the last eight years:

Year Miscellaneous Revenues

(in millions)

Year Miscellaneous Revenues

(in millions) 2001 $4.1 2005 $36.9 2002 31.4 2006 54.1 2003 32.3 2007 46.0 2004 35.8 2008 55.0

Mortgage Recording Taxes

General. Certain moneys paid to MTA by the City and counties in the Transportation District pursuant to certain mortgage recording taxes may be used for the operating and capital costs, including debt service and reserve requirements, of or for MTA, MTA New York City Transit and their subsidiaries. During 2002, MTA Bridges and Tunnels defeased all outstanding bonds that were secured by the mortgage recording taxes, and such taxes no longer secure any MTA or MTA Bridges and Tunnels bonds. Neither MTA Bridges and Tunnels nor MTA expects to secure future bonds with mortgage recording taxes.

MRT-1 Receipts. Pursuant to Section 253(2)(a) of the New York State Tax Law (the “Tax Law”), a tax

is imposed (the “MRT-1 Tax”) on recorded mortgages of real property situated within the State, subject to certain exclusions (such net MRT-1 Tax collections remitted to MTA are referred to as the “MRT-1 Receipts”). The tax was increased effective June 1, 2005 from 25 cents per $100 of mortgage recorded to 30 cents per $100. The MRT-1 Tax is paid by the property owner(s) taking out the mortgage loan.

MRT-1 Receipts must be applied by MTA,

• first, to meet MTA Headquarters Expenses (as hereinafter defined), and • second, to make deposits into the Transit Account (55% of the remaining amount) and the

Commuter Railroad Account (45% of the remaining amount) of the Special Assistance Fund.

Moneys in the Transit Account are required to be used to pay operating and capital costs of the MTA New York City Transit, its subsidiaries, and MTA Staten Island Railway, and moneys in the Commuter Railroad Account, after first making the transfers described below under “Transfers to State Suburban Transportation Fund,” are required to be used to pay operating and capital costs of the commuter railroad operations of MTA, other than MTA Staten Island Railway.

MRT-2 Receipts. Pursuant to Section 253(1-a) of the Tax Law, an additional tax is imposed (the

“MRT-2 Tax”) on recorded mortgages of real property situated within the State, subject to certain exclusions. The MRT-2 Tax is paid by the institution (or other persons) making the mortgage loan to the property owner(s). The State Tax Law requires that the portion of the MRT-2 Tax collected on certain residential dwelling units be remitted to MTA for deposit into the Corporate Transportation Account of the Special Assistance Fund (such net MRT-2 Tax collections remitted to MTA are referred to as the “MRT-2 Receipts”).

Moneys deposited into the Corporate Transportation Account are applied as follows: • first, to make deposits into the Dutchess, Orange and Rockland Payment Subaccount described

below under “Transfers to Counties,” and

• second, to make deposits into the Corporate Purposes Subaccount to be used to pay operating and capital costs, including debt service and debt service reserve requirements, if any, of, or incurred for the benefit of, MTA, MTA New York City Transit and their respective subsidiaries.

MRT-1 and MRT-2 Receipts. Under existing law, no further action on the part of the State Legislature

is necessary for MTA to continue to receive such moneys (i.e., the State is not required to appropriate the moneys to MTA, so the moneys continue to be paid to MTA whether or not the State budget has been

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adopted). However, the State is not obligated to impose, or to impose at current levels, the MRT-1 Tax or the MRT-2 Tax or to direct the proceeds to MTA as presently provided.

MRT-1 Receipts and MRT-2 Receipts (collectively, “MRT Receipts”) are subject to significant

volatility from year-to-year. This volatility reflects the discretionary nature of the transactions that lead to the collection of the tax. Such transactions are influenced by economic, social and demographic factors. For more information, see “BUSINESS – Recent Developments – Preliminary Results and Other Factors” above in Part 1.

The following charts show the historical annual MRT Receipts, on an accrual basis, available for

operations and capital costs for the last eight calendar years.

Year

MRT-1 Receipts (in millions)


Year



2001 $155.4 25% 2005* $443.5 26% 2002 204.2 31 2006 478.7 8 2003 248.7 22 2007 450.4 (6) 2004 353.4 42 2008 259.9 (42)

__________ *Reflects the increase in MRT-1 effective June 1, 2005. Source: Metropolitan Transportation Authority

Year



Year



2001 $115.9 28% 2005 $299.0 3% 2002 173.6 50 2006 282.0 (6) 2003 209.8 21 2007 236.5 (16) 2004 291.4 39 2008 135.6 (43)

__________ Source: Metropolitan Transportation Authority Deductions for Headquarters Expenses. The general, administrative and operating expenses of MTA,

net of reimbursements, recoveries and adjustments (“MTA Headquarters Expenses”), to the extent not paid from other sources, are required to be paid from MRT-1 Receipts prior to making any deposits to the Transit Account or the Commuter Railroad Account. MTA Headquarters Expenses do not include capital expenditures for headquarters operations. Among other uses, MTA pays the following annual amounts as MTA Headquarters Expenses:

• expenses of operating MTA Headquarters, including MTA Police,

• an amount paid to MTA Bridges and Tunnels to effectively eliminate the toll that residents of

Broad Channel and the Rockaway Peninsula pay when using E-ZPass on the Cross Bay Veterans Memorial Bridge (this rebate may be discontinued in the future) and

• the operating expenses of MTA Staten Island Railway and MTA Long Island Bus not covered by

fares, State and local subsidies and other amounts. The amount of MTA Headquarters Expenses in any year is neither contractually nor statutorily limited.

The amount of MTA Headquarters Expenses in future years may be affected by inflation, expansion or contraction of activities the expenses for which are not reimbursable, non-recurring expense items and other circumstances including changes in MTA’s reimbursement practices with respect to the other Related Entities. The amount of MRT-1 Receipts received by MTA each month that is required to be applied to MTA Headquarters Expenses may vary widely based on MTA’s cash flow requirements and the timing of reimbursements from the other Related Entities.

Transfers to State Suburban Transportation Fund from MRT-1 Receipts. State law requires MTA in

each year to transfer up to $20 million of MRT-1 Receipts (in equal quarterly installments of $5 million) deposited in the Commuter Railroad Account to the State Suburban Transportation Fund to pay for or finance certain types of highway capital projects in certain areas of the Transportation District. In the event the transfer would result in an operating deficit, the amount of the deficit is appropriated to MTA for

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commuter railroad operating purposes. Due to such a deficit, no transfers were made in 2001 and 2002; however, such transfers have been made since 2003.

Transfers to Counties from MRT-2 Receipts. MTA is required to transfer, in equal quarterly

installments, in each year from the MRT-2 Corporate Transportation Account to the Metropolitan Transportation Authority Dutchess, Orange and Rockland Fund an annual amount of $1.5 million for each of the counties of Dutchess and Orange, and $2.0 million for the county of Rockland. Additionally, MTA must transfer from that Account to such fund for each of these three counties, respectively, an amount equal to the product of (i) the percentage by which such county’s mortgage recording tax payment to MTA in the preceding calendar year (calculated as if the increase in the MRT-1 Tax from 25 cents per $100 to 30 cents per $100 did not occur) increased over such payment in calendar year 1989 and (ii) $1.5 million each for Dutchess and Orange Counties and $2.0 million for Rockland County. The following chart shows the amounts (in excess of the base amount of $5 million) transferred to the counties for the last four years:

Year County Additional Amounts 2005 Dutchess $ 5,882,857

Orange 5,526,762 Rockland 6,702,721 Total $18,112,340

2006 Dutchess $ 4,520,597 Orange 5,164,895 Rockland 5,450,369 Total $15,135,861

2007 Dutchess $ 3,569,316 Orange 3,945,482 Rockland 4,169,009 Total $11,683,807

2008 Dutchess $1,755,589 Orange 1,855,774 Rockland 2,069,597 Total $5,680,960

The decline in additional mortgage recording tax payments between 2005 and 2008 reflects a general

decline in residential mortgage activity. Operating Funding for the Transit and Commuter Systems

The chart on the following page shows the types of revenues and relative percentages of revenue streams that are currently available and required to be used to fund the Transit System (MTA New York City Transit and MaBSTOA) and the Commuter System (MTA Long Island Rail Road and MTA Metro-North Railroad). From time to time, MTA may, in its discretion, additionally subsidize the Transit and Commuter System operations, or the operations of the other Related Entities, from other available excess moneys, including mortgage recording taxes. All of the revenues listed on the following chart are revenues that are pledged for the payment of Transportation Revenue Bonds (as described in “TRANSPORTATION REVENUE BONDS” in Part 4), with the exception of (1) mortgage recording taxes that do not become pledged revenues until after the payment of MTA Headquarters Expenses, and (2) concession revenues at Penn Station and Grand Central Terminal.

The percentages of MMTOA Receipts reflected below for the Transit and Commuter Systems are

based upon the Enacted Budget for State Fiscal Year 2009-10.

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Operating Funding for the Transit and Commuter Systems

MTA New York City Transit

and Manhattan and


and MTA Metro-North Railroad

transit fares and reimbursements from the City and State

Section 18-b Program – State appropriation and

local match

MTTF Receipts – 85% (DTF Bonds debt service paid first)

MMTOA Receipts – 66.7%

(DTF Bonds debt

TBTA Surplus – $24 million plus 50% of

remainder

Miscellaneous – concessions,

advertising and other

Mortgage Recording Taxes (55% of MRT-1 after HQ Expenses) plus Urban

commuter fares and station maintenance payments

(inc. CDOT)

Section 18-b Program – State appropriation and

local match

MTTF Receipts – 15% (DTF Bonds debt service paid first)

MMTOA Receipts – 33.3%

(DTF Bonds debt

TBTA Surplus – 50% of remainder after paying

NYCTA share

Miscellaneous – concessions,

advertising and other

Mortgage Recording Taxes (45% of MRT-1 after HQ Expenses)

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METHODS OF PAYMENT AND COLLECTION OF FARES AND TOLLS

MetroCard

MTA New York City Transit employs an automated fare collection (“AFC”) system that utilizes MetroCard, as more fully described under “RIDERSHIP AND FACILITIES USE – Transit System Ridership – Automated Fare Collection” above in this Part 3. MTA New York City Transit has installed automated vending machines in almost all of its stations in order to sell, or add value to, MetroCards through cash, and credit and debit card transactions. In addition to in-system sales at station booths and through vending machines, MetroCards are presently sold through out-of-system vendors, by MTA Long Island Rail Road, MTA Metro-North Railroad, MTA Long Island Bus and MTA Bus, and directly to businesses. In connection with certain of these sales, a sales commission is netted out of the amounts paid to MTA New York City Transit.

MTA New York City Transit offers an Easy Pass Express pre-payment program wherein customers

pay for their rides automatically by linking their MetroCard to a credit card or debit card. MTA New York City Transit also has a program with senior citizens wherein their MetroCard usage is determined after the month and they are retroactively charged at the least cost based upon their usage.

MTA New York City Transit has integrated its MetroCard system with MTA Bus, MTA Long Island

Bus, PATH, JFK AirTrain, Westchester County Bee Line, and Roosevelt Island Tram. PATH, New Jersey Transit and MTA New York City Transit are separately engaged in piloting use of an approach to fare payment that utilizes a contactless smart card based on “open payments standards” of bank-issued credit and debit cards as a potential business and technical standard for the next generation fare payment system. This approach would enable transit fares to be paid as though customers were making payments at a retail store, while having the benefits of speed, accuracy, and security of contactless payments. The pilot will include testing of prepaid cards to assure that contactless technology is available to all customers. It is contemplated that this test will be expanded to MTA New York City buses during 2009.

The introduction and expansion of the use of MetroCards facilitated: • the ability of MTA New York City Transit and MaBSTOA to eliminate “two-fare zones” for

MetroCard users,

• certain discount bonuses, and

• the introduction of unlimited ride 30-day, 14-day, seven-day and daily passes.

MTA also offers a free replacement program for lost or stolen unlimited-ride 14-day, 30-day MetroCard and 7-day express passes (limit of 2 per calendar year per holder) for holders that purchased with credit or debit cards.

MTA currently has no plans to implement any additional discount or reduction proposals.

E-ZPass

MTA Bridges and Tunnels employs an electronic toll collection system (“E-ZPass”) at all of its bridges and tunnels, as more fully described under “RIDERSHIP AND FACILITIES USE – E-ZPass” above in this Part 3. MTA Bridges and Tunnels has integrated, and continues to integrate, its electronic toll payment media system with those of other governmental entities, whereby the integrated electronic toll payment media can be used on any entity’s facilities. Substantially all of the E-ZPass users prepay with credit cards or checks. MTA Bridges and Tunnels is a founding member of the E-ZPass IAG, which has grown to include toll authorities in Delaware, Pennsylvania, New Jersey, New York, Maryland, Massachusetts, Virginia, West Virginia, New Hampshire, Illinois, Maine, the Peace Bridge between Buffalo, New York and Fort Erie, Ontario and Rhode Island. Payments are settled among all such entities after use of the facilities. MTA Bridges and Tunnels transfers significantly more cash to IAG members than it receives from them, which at times could adversely affect MTA Bridges and Tunnels’ cash position.

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The following chart shows the amount of annual transfers to and from other IAG members during the last three years.

Year

Transfers to IAG Members (in millions)

Transfers from IAG Members (in millions)

2006 $366.3 $236.4 2007 370.5 246.3 2008 452.3 253.8

MTA Bridges and Tunnels has negotiated agreements with commercial entities (such as parking

facility operators) whereby the electronic media can be used to purchase goods and services. E-ZPass Plus is currently available to certain E-ZPass customers for use at Albany International Airport, John F. Kennedy International Airport, LaGuardia Airport and Newark International Airport. MTA Bridges and Tunnels may expand the use of agreements with commercial entities.

Commuter Railroads

Both MTA Long Island Rail Road and MTA Metro-North Railroad permit payment of certain fares by check and by credit and debit card at most sales venues except “On Board”. MTA Metro-North Railroad implemented the use of portable “On Board” ticket issuing machines to permit additional sales by credit and debit cards in the future. The MTA Long Island Railroad is closely following the use of “On Board” ticket issuing machines and will evaluate the progress for use on MTA Long Island Rail Road. MTA Long Island Rail Road and MTA Metro-North Railroad Mail&Ride customers can purchase a combined MetroCard-monthly commuter ticket through Mail&Ride or at ticket office or ticket vending machines. In addition, MTA has implemented a program offering reduced intra-City weekend commuter tickets.

General

Payment by means other than cash (1) creates a potential risk of actual collection of payments for goods and services and (2) could delay the timing of the actual receipt of payment by the goods and services providers. Following the standard industry practice for credit, debit and smart cards, fare and toll payments made by those means will produce cash receipts to the applicable authority and trustee which are net of standard discounts and transaction fees to the merchant processors, card associations and card issuers. Further, (1) the collection of fares and tolls by other governmental entities using an integrated payment system, such as MetroCard or E-ZPass, whereby a customer can purchase a card or pass from any of the entities for use on all of the systems, and (2) the use of the Related Entities’ electronic media at commercial establishments, may subject the amounts due to MTA New York City Transit, MTA Bus and MTA Bridges and Tunnels to multiple liens and claims prior to the time that the fares or tolls are actually earned through use of the applicable facilities. The payment of fares and tolls by non-cash methods, including checks and credit, debit and smart cards, is subject to, among other things, collection risk, including, without limitation, bankruptcy, insolvency and other creditor and debtor rights involving both the user of the facilities and the collection and processing entities.

Continued implementation of the MetroCard and E-ZPass systems may permit the implementation of

additional “discount or reduced fare or toll” proposals, such as time of day toll rates.

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FINANCIAL PLANS AND CAPITAL PROGRAMS

2009-2012 Financial Plan

General. MTA prepared a financial plan for the years 2009 through 2012 for itself and the other Related Entities (the “2009-2012 Financial Plan”). The 2009-2012 Financial Plan is designed to maintain the fiscal stability of the Related Entities and enable all those entities to maintain their respective operations on a self-sustaining basis. The 2009-2012 Financial Plan is also designed to continue a program of capital expenditures that would support the ongoing maintenance of MTA’s transportation network and provide needed improvements to enhance services to its customers.

The 2009-2012 Financial Plan includes a final budget that was adopted by the MTA Board for 2009

(the “2009 Budget”) and a financial plan for the years 2010–2012. A copy of the 2009-2012 Financial Plan, which includes the 2009 Budget, is posted on MTA’s website under “Financial Plan/Capital Program” and is included by specific cross-reference herein.

See “RECENT DEVELOPMENTS – Adjustments to 2009-2012 Financial Plan and 2009 Budget”

above concerning anticipated adjustments to the 2009-2012 Financial Plan and 2009 Budget. 2008 Actual Results. The 2008 year-end results appearing in the audited financial statements are

prepared on a GAAP basis, while the financial plan is prepared on a modified accrual basis. The modified accrual format allows the financial plan to show the MTA’s cash availability, which is the measurement for achieving operating budget balance. Differences occurring between the audited financial statements and the financial plan are caused by the use of these different reporting formats. The most notable difference is the treatment of debt service – the GAAP statements reflect long-term interest, while the financial plan reflects cash principal and interest payments paid out of operating funds. Moreover, cash transactions are reflected in the GAAP balance sheet, while the financial plan reflects completed cash transactions and does not include account receivables or payables.

MTA’s 2008 closing net cash balance at year-end was $269 million, which includes the use of the

$495 million prior-year carryover from 2007. The $269 million balance was net of certain favorable internal and additional actions for gap closing partially offset by updated real estate and NYS tax forecasts. When compared with the 2008 Final Estimate, that was included within the 2009-2010 Financial Plan, MTA’s cash balance was $4 million favorable.

2009-2012 Financial Plan. Subject to the 2008 actual results noted above, the MTA 2009-2012

Financial Plan projected the following, after taking into consideration the application of MTA Bridges and Tunnels’ operating surplus to mass transit:

• After policy and gap closing actions, the 2009 Budget projected a net cash balance of $49 million. • After policy and gap closing actions, the 2009-2012 Financial Plan projected net cash deficits of

$290 million, $457 million and $612 million in the years 2010 through 2012, respectively.

The 2009-2012 Financial Plan, in addition to normal growth in expenses due to inflation, anticipated substantial growth in debt service costs, additional pension contributions, and additional health and welfare benefit costs. Also contributing to the growth in expenses is an increase in service provided as well as significant improvements in facilities and fleet maintenance.

See “RECENT DEVELOPMENTS – Adjustments to 2009-2012 Financial Plan and 2009 Budget”

above for a discussion of the revised financial forecast reported on April 27, 2009 addressing falling revenues in Real Estate Taxes, Passenger and Toll Revenue and State Dedicated Taxes, and additional discussion concerning anticipated adjustments to the 2009-2012 Financial Plan and 2009 Budget. As noted therein, MTA will incorporate in its July Financial Plan, among other things, the amount and timing of receipt of revenues MTA expects to receive as a result of the new legislation, updated projections for real estate related tax receipts, New York State subsidies, ridership/toll revenue based on the revised level of fare and toll increases adopted by the board on May 11, 2009, and the rescission of the scheduled service reductions addressed at the regularly scheduled board meeting held May 27, 2009.

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Implementation of the 2009-2012 Financial Plan. MTA is required to balance its budget on a cash basis and, therefore, a plan which includes future cost reductions, fare and toll adjustments and additional subsidies was necessary to address deficits that began in 2009. The February Financial Plan includes a 23% fare and toll yield increase scheduled to take effect in June and July 2009, along with a series of service changes designed to reduce expenses. In December 2008 the Ravitch Commission Report made several recommendations designed to more securely fund the MTA capital plan and agency operations. The recommendations included a new regional mobility tax and cashless tolling of the East and Harlem River bridges, along with a more modest 8% increase in MTA fare and toll yields. On March 25, 2009 with no legislative enactment of the Ravitch Commission proposals or alternative funding plans attained, the MTA Board approved a series of fare and toll increases that would have been implemented by mid-year 2009 and that were designed to yield a 23% increase in fare and toll revenues, as well as approving service reductions outlined in the February Financial Plan.

The enactment of the legislation in early May providing additional revenue sources in the form of taxes,

fees and surcharges to address a portion of MTA’s financial needs resulted in the MTA board’s convening of a special meeting on May 11, 2009 to address the 2009 fare and toll charge adjustments. At the May 11, 2009 meeting the MTA board rescinded the fare and toll increases adopted on March 25, 2009 and adopted revised fare and toll increases that will increase existing fares and tolls by approximately 10%. Implementation of the newly adopted fare and toll schedules is anticipated in late June or early July, 2009. Moreover, the additional revenues from taxes and fees that MTA expects to receive as a result of enacted legislation, combined with the revenues from the fare increases adopted by the MTA board on May 11, 2009 and other revenues to be received and actions to be taken by MTA, are projected to enable MTA to meet its operating needs for 2009 and 2010 without implementing the major service changes outlined in the February Financial Plan. Accordingly, the MTA board, at its regularly scheduled meeting held on May 27, 2009, rescinded the planned reductions to scheduled service while leaving in place other deficit reducing actions contained in the February Financial Plan.

The implementation of the 2009-2012 Financial Plan and the capital programs described below are

interrelated and complex. Any failure to fully achieve each of the various proposals could have an adverse impact on one or more of the other proposals contained in the 2009-2012 Financial Plan, including those capital programs. Implementation will require, among other things, administrative approvals, stable or favorable economic, employment and market conditions, and cooperation of third parties. There is no assurance that each of those actions will occur or that all of the assumptions underlying the 2009-2012 Financial Plan or the various approved capital programs will be realized.

The 2009-2012 Financial Plan may be amended by MTA from time to time in response to changing

economic and operational factors as well as changes in the approved capital programs. Issuance of Bonds. The 2000-2004 Capital Program assumes the issuance of approximately $12.5

billion of new money bonds to finance a portion of the capital programs proposed for the Transit System, the Commuter System and MTA Bridges and Tunnels’ capital needs. To date, $12.5 billion of bonds has been issued to finance projects included in the 2000-2004 Capital Program.

The 2005-2009 Capital Program assumes the issuance by MTA and MTA Bridges and Tunnels of

approximately $4.3 billion of new money bonds, together with an issuance of $5.1billion in bonds backed by increased State taxes and fees as approved in the 2005-06 State budget. As of March 31, 2009, $2.45 billion of bonds has been issued to finance projects included in the 2005-2009 Capital Program.

In addition, the State expects to issue State general obligation bonds that were approved by the voters

in November 2005 in an amount sufficient to contribute $1.45 billion of proceeds for the benefit of the Transit and Commuter Systems. To date, $284 million of such proceeds have been received by MTA.

Capital Programs – Background and Development

Transit and Commuter Systems. The MTA Act requires MTA to submit to the Review Board for its approval successive five-year capital programs, one for the Transit System and MTA Staten Island Railway and another for the Commuter System. The Review Board previously approved capital programs for the Transit System and MTA Staten Island Railway and the Commuter System for the five-year periods beginning in the years 1982, 1987, 1992 and 1995. The last two years of the 1992-1996 MTA Capital

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Program were incorporated into the 1995-1999 MTA Capital Program. Substantially all of the projects included in the 1982-1999 MTA Capital Programs have been completed.

MTA and the Review Board have also approved separate five-year MTA Capital Programs covering

the periods 2000-2004 and 2005-2009 for (1) the commuter railroad operations conducted by MTA Long Island Rail Road and MTA Metro-North Railroad (the “2000-2004 Commuter Capital Program” and the “2005-2009 Commuter Capital Program,” respectively), and (2) the transit system operated by MTA New York City Transit and its subsidiary, MaBSTOA, and the rail system operated by MTA Staten Island Railway (the “2000-2004 Transit Capital Program” and the “2005-2009 Transit Capital Program,” respectively).

The 2005-2009 Capital Programs, as amended to date, are effective and are described in detail below

under “2005-2009 MTA Capital Program.” In addition, as more fully described below, with the creation of MTA Bus, certain portions of its capital program have been incorporated into the 2000-2004 MTA Capital Program and the 2005-2009 MTA Capital Program. References to the 2000-2004 Capital Program and the 2005-2009 Capital Program include all amendments through the date of this Appendix A.

Funding for the MTA Capital Programs comes from a variety of sources, including bonds, State, City

and MTA Bridges and Tunnels assistance, and Federal funds. The Federal government supplied approximately 31.5% of the funds required for the 1982-1999 Capital Programs. MTA estimates that the Federal government will supply approximately 24.8% of the funds required for the 2000-2004 MTA Capital Program, not including the lower Manhattan projects (Fulton Street and South Ferry) that are substantially 100% federally funded. MTA estimates that the Federal government will supply approximately 37.5% of the funds required for the 2005-2009 MTA Capital Program.

Section 1269(b) of the Public Authorities Law requires MTA to submit capital plans to the Review

Board. New five-year MTA Capital Programs for the Transit and Commuter Systems for the 2010-2014 period are planned to be submitted by MTA to the Review Board on or before October 1, 2009. The size of the Programs, the elements to be included therein, and the funding sources have not yet been determined. The successful funding of the new Capital Programs, including issuance of bonds, would likely require that the MTA receive significant amounts of additional new financial support beyond the new revenue sources provided to the MTA in the legislation enacted on May 7, 2009.

MTA Bridges and Tunnels Facilities. MTA Bridges and Tunnels undertook, beginning in 1989, its first

multi-year capital program totaling $160 million for the 3-year period 1989-1991. The funds for such program were raised from revenues deposited in its own capital reserve fund and the proceeds of MTA Bridges and Tunnels bonds.

Since then, while not required to do so by statute, MTA Bridges and Tunnels has developed its own

five-year capital programs covering the same periods as the MTA Capital Programs to enable MTA Bridges and Tunnels to keep its own facilities in good operating condition while also maintaining its role in MTA’s unified transportation policy. The MTA Bridges and Tunnels Capital Programs are not subject to approval by the Review Board and bonds issued to finance MTA Bridges and Tunnels Facilities are not subject to the statutory ceiling.

Although substantial annual investments in major maintenance and bridge painting have regularly been

made and additional expenditures are planned, MTA Bridges and Tunnels expects that capital investments in the rehabilitation or reconstruction of its facilities will become increasingly necessary as components approach the end of their current useful life and require normal replacement.

2005-2009 MTA Capital Program

General. The “2005-2009 MTA Capital Program” consists of the following components: • Transit Core Program, • Commuter Core Program, • MTA Bus Program, • MTA Capital Construction Program (the Network Expansion Program), • Security Program, and

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• Interagency Program.

The transit and commuter core programs consist mainly of state-of-good-repair, normal replacement and modernization projects.

There can be no assurance that all the necessary governmental actions to implement the 2005-2009

MTA Capital Program will be taken, that funding sources currently proposed or assumed will be available in the amounts or at the times projected, or that the projects included in the 2005-2009 MTA Capital Program, or parts thereof, will not be delayed or reduced. MTA regularly evaluates the status of all funding sources and projects and may, from time to time, submit amendments to the 2005-2009 MTA Capital Program needed to bring funding sources and expected project costs into balance. If the implementation of the 2005-2009 MTA Capital Program or any modification thereof is significantly delayed, MTA’s efforts to bring the entire Transit System and Commuter System to a state of good repair and to prevent deterioration of portions of the Transit System and Commuter System that have already reached a state of good repair may be impeded with potential negative effects on ridership and fare revenues.

Funding. The following table (which includes the proposed amendments described below under

“Amendments to the MTA Capital Programs,” even though, with respect to the Transit and Commuter Systems, they have not yet been approved by the Review Board) sets forth the expected sources for funding the 2005-2009 MTA Capital Program and the 2005-2009 MTA Bridges and Tunnels Capital Program.

Funding Source Program Amount

(in millions) Federal Formula and Flexible $5,252 Federal New Start 3,286 Federal Security 352 Federal - Other 2 City 407 City No. 7 Subway Line Funds 2,100 City Match for Buses (MTA Bus) 28 Operating to Capital 32 Asset Sales/Program Income/Carryover 1,133 LaGuardia Airport Funded Board Approved Projects 70 LaGuardia Airport Funded New Initiatives* 135 New York State Bond Act Proceeds 1,450 MTA Bonds (including MTA Bridges and Tunnels) 4,330 MTA Bonds – New Source** 5,100 Other 40

Total*** $23,717 __________ *Bond funds to be used for a variety of different capital projects agency wide. ** New Source revenues included the increase, in 2005, of the (1) District Sales Tax from one-quarter of 1% to three-eighths of 1%, (2) MRT-1 from 25 cents for each $100 of mortgage recorded to 30 cents, and (3) amount of Department of Motor Vehicle fees included in MTTF distribution. ***Total may not add due to rounding.

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2005-2009 Transit Core Program. The following table (which includes the proposed amendments

described below under “Amendments to the MTA Capital Programs,” even though, with respect to the Transit and Commuter Systems, they have not yet been approved by the Review Board) represents the capital program by category of work for the Transit System and MTA Staten Island Railway under the 2005-2009 Transit Capital Program (does not include MTA Network Expansion Projects related to the Transit System).

2005-2009 Transit

Core Program (in millions)

MTA New York City Transit Subway Cars $2,179 Buses 928 Passenger Stations 1,747 Track 1,190 Line Equipment 529 Line Structures 706 Signals & Communications 1,834 Power 469 Shops 45 Yards 258 Depots 517 Service Vehicles 114 Miscellaneous 578

MTA Staten Island Railway 60 Total* $11,154

*Total may not add due to rounding. Among the projects included in the 2005-2009 Transit Core Program are the following: For rolling stock, the plan includes normal replacement of 1,002 B Division cars, as well as fleet

growth for the A Division with the purchase of 23 cars. A total of 1,357 new buses (a decrease from the 1,360 in the last amendment) will be ordered, including 1,121 standard (all using clean fuel technology), 10 articulated and 226 express buses. Despite the nominal decrease in bus purchases noted above the overall NYCT bus fleet plan provides for the steady growth in fleet size and Standard Bus Equivalents (SBE) because planned purchases exceed scheduled retirements in order to provide for fleet growth. In addition, 1,387 new paratransit vehicles will be purchased.

The plan funds the rehabilitation of 25 stations, normal replacement of approximately 53 miles of

mainline track and 153 mainline switches, as well as installation of 18 track miles of continuous welded rail, which is expected to significantly lower occurrences of rail breaks and cracks.

For signals and communications, the MTA New York City Transit’s major improvements feature

expansion of new signal technology with the installation of communication based train control (CBTC) on the Flushing line, rehabilitation of interlocking on three other lines and completion of signal modernization on the White Plains Road line. Communications system improvements feature the continued extension of the existing fiber optic network to all passenger stations.

MTA New York City Transit’s line equipment investments include replacing approximately 48 track

miles of tunnel lighting, updating the 30th St. fan with a plan to replace three existing units and state of good repair work at 17 pump rooms. Various line structure repairs and related work are addressed, including 6 route miles of subway structure, 2 route miles of elevated structure, painting, and rehabilitation of 135 emergency exits throughout the subway system. The power category includes modernizing 10 substations, and replacing substation equipment at various locations. For shops, work includes new cranes at the 207th Street Overhaul Shop and the Pitkin Shop and rehabilitation of a support shop (38th Street Yard Shop). In yards, a major project is Corona Yard Phase 3. In addition, the program will replace approximately seven miles of yard and non-revenue track, replace 75 yard switches and address other yard equipment and security needs. Also planned are various safety and security improvements.

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For depots, major projects include improvements to the East New York Depot and reconstruction of

the Clara Hale Depot. Rehabilitation work also is planned at three other depots. Projects are planned to replace bus lifts, roofs, washers and heavy depot equipment, and secure property for parking needs

For service vehicles, the plan replaces 212 heavy-duty rubber-tire vehicles, such as heavy-duty trucks

and specialty vehicles, and 22 work trains, such as ballast regulators, diesel-electric locomotives and a track geometry/rail inspection car.

In miscellaneous, the plan provides funds to purchase the Tiffany St. Warehouse and to support the

program’s technical needs, including insurance, engineering, services, scope-development and the MTA independent engineer. In addition, improvements to employee facilities across the system are funded. Certain management information systems, such as PBX node sites and servers, will be addressed. Also, MTA New York City Transit will address various environmental and safety needs, such as asbestos monitoring and removal, installation of fire alarms at various facilities and environmental remediation.

For MTA Staten Island Railway, the Atlantic and Nassau stations, which are dilapidated and located

very close to each other, will be replaced with a single, new ADA-accessible “Arthur Kill” passenger station. Also planned are repair of six bridges/thru-spans and rehabilitation of four station houses and installation of fare collection equipment at the Tompkinsville station.

2005-2009 Commuter Core Program. The following table (which includes the proposed amendments

described below under “Proposed Amendments to the MTA Capital Programs,” even though, with respect to the Transit and Commuter Systems, they have not yet been approved by the Review Board) represents the capital program by agency and by category of work for the Commuter System under the 2005-2009 Commuter Core Program (does not include MTA Network Expansion Projects related to the Commuter System).

2005-2009 Commuter

Core Program (in millions) MTA Long Island Rail Road

Rolling Stock $385 Passenger Stations 127 Track 583 Line Structures 275 Communications & Signals 297 Shops & Yards 187 Power 150 Miscellaneous 203

Total* $2,207 MTA Metro-North Railroad

Rolling Stock $250 Passenger Stations 260 Track & Structures 244 Communications & Signals 75 Power 105 Shops & Yards 385 Miscellaneous 91

Total* $1,410 *Totals may not add due to rounding.

Among the projects included in the approved 2005-2009 Commuter Core Program are the following: The rolling stock investment for the MTA Long Island Rail Road electric fleet includes the purchase of

158 new M-7 electric cars, continuing the normal life cycle replacement of M-1 electric multiple units nearing the end of their useful lives. The M-7 electric fleet is also being outfitted with door threshold plates to enhance gap safety for customers entering and exiting the train, and a horn modification to lessen community impacts while maintaining compliance with FRA requirements. The MTA Metro-North Railroad investments in this area continue the modernization of the fleet with the continuation of the M-2

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overhaul. Also included are the purchase of 100 M-8 electric cars to begin the replacement of the New Haven Line’s M-2 fleet (with CDOT), purchase of 36 M-7 electric cars to complete the replacement and expansion of the M-1 fleet, and purchase and overhaul of 4 locomotives from New Jersey Transit per the renegotiated agreement to accommodate the growing West of Hudson service needs.

Station investments include platform rehabilitations, replacement of stairs, escalators, elevators and

overpasses at locations system-wide and the construction of new, and rehabilitation of existing, parking spaces. MTA Metro-North Railroad will continue the structural rehabilitation of Grand Central Terminal including the replacement of current employee facilities, as well as infrastructure and station improvements in the Bronx from Fordham to Wakefield on the Harlem Line. Also included is MTA Long Island Rail Road’s purchase and installation of up to 87 ticket vending machines for stations throughout the system, to expand the number of vending machines already in service, as well as elevator replacement/upgrades in Atlantic Terminal and the repair/upgrade of ramps at Forest Hills. Two new elevators, platform lighting, and station railing at the Flushing-Main Street and Queens Village will make both stations wheelchair accessible. The Customer Service Office within Penn Station is also being relocated to facilitate the expansion and renovation of the Ladies Restroom.

The ongoing track program consists of the normal replacement of track components and installation of concrete ties in selected segments of the right-of-way. For MTA Long Island Rail Road, also included is Phase 1 of design and construction of grade crossing eliminations and track capacity improvements on the Main Line from Queens Village to Hicksville. For MTA Metro-North Railroad, the plan includes interlocking/switch replacement throughout the entire MTA Metro-North Railroad territory in New York State. Investments in line structures consist of the rehabilitation of bridges and viaducts. For MTA Long Island Rail Road, the plan includes the Atlantic Avenue viaduct, a bridge painting program, and fire and life safety improvements in the East River Tunnels’ ventilation systems, bench walls, tunnel lining and floodgates. For MTA Metro-North Railroad, the plan includes work on welfare, storage and other facilities and West of Hudson track improvements.

MTA Long Island Rail Road’s communications investments include the continued expansion of the

fiber optic network and the redesign of the Communications Network Operations Center. MTA Long Island Rail Road’s VHF radio system will be modernized and audio/visual paging systems will be deployed at 80 additional stations, providing improved customer communications at stations. MTA Long Island Rail Road will also continue its normal replacement of deteriorated communications poles system-wide. The proposed signal projects begin the rehabilitation of several of MTA Long Island Rail Road’s busiest interlockings, invest in signals as far east as Speonk, begin work on the centralized train control system and continue cyclical normal replacement in an effort to maintain this infrastructure in a state of good repair. MTA Metro-North Railroad’s investments in communications and signals replace the aging signal system (wayside and operations control center) with the latest technology and provide for the optimization of train capacity at locations system-wide.

MTA Long Island Rail Road’s investments in shops and yards include the replacement of rolling stock

support equipment, infrastructure improvements to accommodate maintenance and repair of the new electric and diesel fleets, soil remediation at Long Island City yard, and reconfiguration of Babylon yard to increase lay-up storage capacity. The shops and yards investments for MTA Metro-North Railroad include upgrades to facilities to accommodate additions to the rolling stock fleet and support for the reliability centered maintenance philosophy. Also, additional funds were transferred to fund the ongoing Croton-Harmon Shop Master Plan.

The power category includes the replacement and upgrade of the systems necessary to support the

movement of electric trains. Power investments maintain the condition of existing assets and increase traction power capacity system-wide.

For miscellaneous purposes, the plan includes various program administrative costs, including program

contingency. Also included for MTA Long Island Rail Road is environmental remediation at 23 electric substations, Yaphank landfill, Long Island City car wash, Richmond Hill, Holban Yard, Morris Park and various other locations system-wide.

MTA Bus Program. As part of the transition of the private bus operations from the City to MTA, the

City and MTA have agreed to a reallocation of Federal urbanized formula funds that the City had received

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for the benefit of the private bus companies. This reallocation is expected to provide $138.2 million and is comprised of $110.6 million in Federal funds and $27.6 million in City and State matching funds. Pursuant to a supplemental agreement with the City, MTA Bus also received $6.3 million towards environmental remediation. The funding will support investments to bring bus maintenance facilities up to a state of good repair, thereby ensuring efficient and economical maintenance practices, as well as improving employee safety at the facilities. In addition, the need to replace heavy-duty, non-revenue vehicles will be addressed.

MTA Network Expansion Projects. MTA Capital Construction is in the process of designing and

constructing the following major projects: East Side Access, the Second Avenue Subway and the No. 7 subway line extension. Funding has been set aside for the Lower Manhattan rail link to JFK project.

The MTA Board has approved the addition of $267 million to East Side Access’ approved 2005-2009

budget of $2.405 billion. This is in addition to the $1.255 billion already approved by the Board reflecting the addition of a Federal Full Funding Grant Agreement (“FFGA”) for this project. The MTA Board also approved the addition of $764 million to the Second Avenue Subway project’s approved budget of $1.150 billion, reflecting the approval of a signed FFGA for such sum for this project. With these additions, subject to the approval of the Review Board, the total CPRB-approved budget in the 2005-2009 MTA Capital Program for expansion projects including East Side Access, Second Avenue Subway and JFK Rail Link is $4.713 billion. The No. 7 subway line extension project, currently estimated at $2.1 billion, is to be 100% funded by the City.

Full implementation of the Second Avenue Subway, East Side Access and JFK Rail Link projects will

require significant additional resources in future capital programs. Security Program. In the wake of the September 11, 2001 terrorist attacks on the World Trade Center,

MTA initiated an intense planning effort to determine how to best protect its customers and key assets from a terrorist incident. In late 2001, experts in this field defined critical vulnerabilities and determined appropriate protective or response strategies. The result of these efforts was the implementation of a multi-faceted plan. This plan included developing immediate near-term operating initiatives to protect vulnerable locations, developing a set of mid-term protective measures that included both operating and smaller-scale capital initiatives to protect vulnerable assets and enhance response capabilities; and finally, identifying 57 longer-term large-scale capital investments to harden vulnerable assets and implement the networks and equipment necessary to conduct targeted surveillance, control access, stop intrusion and provide the command and control systems to support incident response.

The 2005-2009 MTA Capital Program includes an allocation of $495 million to fund priority security

initiatives. MTA expects to secure funding from the Federal Department of Homeland Security and other Federal sources to help support these critical projects.

Interagency Program. The MTA Interagency Program is made up of four initiatives: Customer Service

Projects for $43.8 million; MTA Police Department capital investments for $67.6 million; an MTA-wide integrated computer systems initiative for $45 million; and the re-established Planning category for $42 million to continue Board approved investments initiated in the 2000-2004 plan.

Construction Cost Overruns

In 2007 and 2008, MTA had received bid prices for construction of portions of several of its major public works projects that are significantly in excess of MTA’s estimated and budgeted costs for such work. MTA believes that this inflation is due to a number of factors, including heavy demand for and a short supply of contractors for large scale public works projects regionally and nationally during 2007 and 2008. MTA conducted a review of the impact of such construction cost inflation on these major projects and a report was presented to the MTA Board in February 2008. The report presented updated project cost estimates to reflect current market conditions, standardized assumptions for factors such as contingency and profit, recent scope modifications, and the latest schedule forecasts. The report also recommended specific cost mitigations and strategies to protect projects against further market risk. It is not expected that construction cost inflation will have a material adverse effect on the MTA’s ability to complete the state of good repair and normal replacement projects included in the existing 2005-2009 MTA Capital Program.

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Amendments to the MTA Capital Programs

MTA submits amendments to the Capital Programs from time to time to balance capital costs with funding sources. On December 13, 2006, the MTA Board amended the Full 2000-2004 Capital Programs and on March 31, 2008, the MTA Board amended the Full 2005-2009 Capital Programs for the purposes of updating capital project budgets and recognizing changes in funding sources. The amendments relating to the MTA Bridges and Tunnels’ capital programs were effective upon adoption by the Board and are reflected in the information set forth below under “2005-2009 MTA Bridges and Tunnels Capital Program.”

The amendments to the 2000-2004 MTA Capital Program and the 2005-2009 MTA Capital Program,

insofar as they relate to the Transit and Commuter Systems, never become effective until they are submitted to, and approved by, the Review Board. The 2000-2004 amendment for the Transit and Commuter Systems was submitted for approval to the Review Board on April 9, 2007, withdrawn, resubmitted on May 8, 2007 and subsequently rejected by the Review Board. The 2005-2009 amendment for the Transit and Commuter Systems was submitted for approval to the Review Board on July 29, 2008 and subsequently withdrawn on August 29, 2008.

2005-2009 MTA Bridges and Tunnels Capital Program

The 2005-2009 MTA Bridges and Tunnels Capital Program, as amended in March 2008, provides for $1.209 billion in capital commitments, which is expected to be financed with MTA Bridges and Tunnels pay-as-you-go capital and MTA Bridges and Tunnels bonds. The following table represents the current scope of the program.

Category of Project

2005-2009 Capital Program

(in millions) Structures $167 Roadways & Decks 790 Toll Plazas 28 Utilities 24 Buildings & Sites 178 Miscellaneous 23

Total* $1,209 *Total may not add due to rounding.

Among the major projects included are the following:

• Triborough Bridge rehabilitation program – deck replacement at Randall’s Island and construction

of new ramps, • Bronx-Whitestone Bridge – replacement of the elevated and on-grade approaches in the Bronx, • Verrazano-Narrows Bridge – continuation of the rehabilitation of the elevated approaches, • Henry Hudson Bridge – replacement of lower level deck, • Throgs Neck Bridge – rehabilitation of the orthotropic deck, • Cross-Bay Bridge – deck and superstructure rehabilitation, • Marine Parkway-Gil Hodges Memorial Bridge – structural steel repairs, and • Throgs Neck Bridge – suspended span cable rewrapping.

1992-2004 Transit Capital Program Objectives

Highlights of the investments funded in the 1992-2004 Transit Capital Program include the purchase or remanufacture of 3,637 buses, rehabilitation and upgrade of 87 subway stations and three subway station complexes, including the addition of elevators and escalators at several of these stations, to make them accessible for the elderly and disabled; construction of a Rail Control Center; modernization of signal systems on four subway lines and the Williamsburg Bridge; development of communications-based train control; construction of two bus maintenance facilities; and the completion of the 63rd Street connector project designed to significantly relieve overcrowding on the Queens Boulevard line. The 1992-2004 Transit Capital Program also includes investments to modernize Transit’s electrical power system,

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reconstruct the Franklin Avenue shuttle, reconstruct a section of the Lenox Avenue Line, and replace signals on the Staten Island Railway.

The projects included in the 1992-1999 Transit Capital Programs have been substantially completed.

As of December 31, 2008, $10.331 billion of the $10.453 billion for MTA New York City Transit, MaBSTOA and MTA Staten Island Railway projects included in the 2000-2004 Transit Capital Program have been committed, $9.728 billion have been expended and $8.898 billion of projects have been completed.

1992-2004 Commuter Capital Program Objectives

Highlights of key investments funded under the 1992-2004 Commuter Capital Program for MTA Long Island Rail Road include replacement of MTA Long Island Rail Road’s diesel fleet of coaches and locomotives, the purchase of electric cars to replace a portion of its electric fleet, conversion of diesel territory station platforms to high level platforms, extension of platform 11 at Penn Station, start of preliminary engineering for the Network Expansion project East Side Access, and rehabilitation of stations system-wide. MTA Metro-North Railroad’s key investments include the purchase of diesel coaches and dual-mode locomotives for replacement of a portion of its electric fleet, extensive infrastructure renovations at Grand Central Terminal, station and platform improvements, installation of concrete ties, construction of a third track on the Mid-Harlem line, and the extension of service from Dover Plains to Wassaic.

The projects included in the 1992-1999 Commuter Capital Program have been substantially completed.

As of December 31, 2008, $3.970 billion for Commuter System projects of the $3.959 billion of projects included in the 2000-2004 Commuter Capital Program have been committed, $3.883 billion have been expended and $1.774 billion of projects have been completed.

1992-2004 MTA Bridges and Tunnels Capital Programs

Highlights of key investments funded under MTA Bridges and Tunnels’ 1992-2004 capital programs include rehabilitation of approaches, roadways and decks at the Bronx-Whitestone Bridge, the Triborough Bridge, the Throgs Neck Bridge, the Verrazano-Narrows Bridge and the Marine Parkway-Gil Hodges Memorial Bridge and rehabilitation of roadways and drainage systems at the Henry Hudson Bridge; rehabilitation of the Randall’s Island Junction Structure, the Harlem River lift span, anchorages and suspension cables at the Triborough Bridge and walls and ceilings at the Queens Midtown Tunnel; rehabilitation and upgrading of air conditioning at toll booths at all facilities, rehabilitation of fan housing at the Brooklyn-Battery Tunnel and rehabilitation of bridge electrical substations and power feeders at the Throgs Neck Bridge; expansion of the service building at the Bronx-Whitestone Bridge, structural rehabilitation and repairs at the ventilation building and overpasses of the Queens Midtown Tunnel; and rehabilitation of toll plazas, including electronic toll collection systems.

The projects included in the 1992-1999 MTA Bridges and Tunnels Capital Program have been

substantially completed. As of December 31, 2008, $975 million for MTA Bridges and Tunnels projects of the $999 million of projects included in the 2000-2004 MTA Bridges and Tunnels Capital Program have been committed, $908 million have been expended and $888 million of projects have been completed.

Oversight and Review of Administration of Capital Programs

A committee on capital program oversight was established within MTA that consists of at least three Members of MTA. The committee monitors various capital program actions and activities, including

• current and future funding availability, • contract awards, • program expenditures, and • timely progress of projects within the programs. The legislation establishing the committee also requires MTA to submit a five-year strategic operations

plan to the Governor and to amend such plan at least annually. Such plan must include, among other things, planned service and performance standards and the projected fare levels for each year covered by the plan

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and an analysis of the relationship between planned capital elements and the achievement of planned service and performance standards. MTA communicates with the State officials responsible for monitoring the strategic operations plan in order to keep them informed of such matters.

Non-Capital Program Projects

2 Broadway. MTA (on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), MTA New York City Transit and MTA Bridges and Tunnels each authorized and subsequently entered into lease and related agreements whereby as sublessees they will rent, for at least an initial stated term until June 30, 2048, an aggregate of approximately 1.6 million rentable square feet of space at 2 Broadway in lower Manhattan. A portion of the building houses the employees of MTA New York City Transit and MTA Bridges and Tunnels that formerly occupied space at the New York Coliseum that was sold in 2000. Other portions of the building are occupied by MTA Capital Construction and certain MTA Headquarters personnel, such as the audit department. MTA New York City Transit, MTA Bridges and Tunnels and/or MTA occupy substantially all of the remainder of 2 Broadway. See “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS – Non-Capital Program Securities – 2 Broadway Certificates of Participation” in Part 4 for a description of the source of funding certain improvements to 2 Broadway.

West Side Development. MTA Bridges and Tunnels currently owns the land (except for a small portion owned by MTA) in Manhattan generally bounded by West 30th Street on the south, West 33rd Street on the north, 10th Avenue on the east and 12th Avenue on the west (and including rights to operate under 11th Avenue), on which MTA Long Island Rail Road operates its layup and maintenance yard (the “West Side Yard”) for trains not in service pending travel from Penn Station, its Manhattan hub. The Eastern Rail Yard (“ERY”) portion of the West Side Yard, located between 10th and 11th Avenues, was rezoned by the City in 2005. The Western Rail Yard (“WRY”) portion of the West Side Yard, located between 11th and 12th Avenues, is currently zoned for low density industrial uses and must be rezoned by the City prior to more extensive development.

On September 28, 2006, the MTA Board authorized the execution of, and the MTA thereafter entered

into, a memorandum of understanding with the City (the “Rail Yards MOU”) with respect to the development of the West Side Yard and the sale of certain transferable development rights (“TDRs”) on the ERY created by the 2005 rezoning of the ERY by the City. The Rail Yards MOU provides, among other things, that the HYIC will purchase 50% of the TDRs on the ERY from MTA for $200 million. HYDC has the authority to market and negotiate the price and payment terms for all of the ERY TDRs, subject to the terms and conditions set forth in the Rail Yards MOU. Pursuant to the Rail Yards MOU, once the HYIC has realized from the TDRs sales its original $200 million plus interest, all remaining proceeds from the sale of the TDRs will be paid to MTA. MTA retains all on-site development rights on the ERY. MTA received the first $100 million in TDR payments in 2006 as well as the second of three equal annual installments of $33.3 million of the second $100 million in 2007 and 2008, respectively. The third installment of the second $100 million payable in $33.3 million installments is payable to the MTA in September 2009.

In July of 2007, pursuant to the Rail Yards MOU, MTA issued two separate Requests for Proposals for the sale of and/or long term leasing of air space and related real property interests for development at the ERY and the WRY, respectively. On October 11, 2007, MTA received proposals from five real estate development teams in response to the RFP. Following analysis of those proposals, MTA solicited supplemental proposals from all five teams in late January 2008. Four out of five of the firms submitted supplemental proposals in response to the follow-up request. MTA staff met with each of the four remaining developer teams and a recommendation was presented to the MTA Board which, at its March 26, 2008 meeting, authorized the MTA Executive Director and CEO, upon successful completion of negotiations, to enter into Conditional Designation Letters with Tishman Speyer Properties for the development of the ERY and the WRY, including the construction of a roof over the portion of the West Side Yard used for LIRR operations. Tishman Speyer Properties subsequently withdrew from the project and in May 2008, MTA executed a Conditional Designation Letter with the joint venture of Related Companies L.P. and Goldman Sachs Group Inc. The expiration date of that Conditional Designation Letter has been extended to January 31, 2010. The objective is that the final documentation for the transactions will be negotiated and the definitive contracts signed before such expiration date. If the Related Companies LLP/Goldman Sachs proposal comes to fruition, it is estimated that it would provide a net present value of approximately $1 billion to support the 2005-2009 MTA Capital Program.

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Substantial work, including negotiation of the detailed documentation and key governmental approvals, need to be completed before the development of the ERY and WRY can be commenced. Litigation in connection with the development of the ERY and/or the WRY is possible.

FUTURE CAPITAL NEEDS MTA periodically updates its 20-year capital needs assessment which revisits its asset inventory,

assesses the conditions of those assets and identifies the long-term investment schedules required to maintain a state of good repair. Long-term investments that improve and expand the system to meet operating goals and strategies are also identified. This long-term plan provides the basis for sizing and configuring the successive five-year capital plans and establishes the rationale for the funding levels that are requested to support the program.

No assurances can be given that MTA will be able to identify sufficient sources to fully pay for current

and those future capital needs or that, if identified, those funding sources will be received. Some of the prospective funding sources, such as Federal, City and State funds, are not within the control of MTA and the receipt of such funding is contingent, among other things, upon the ability and willingness of such entities to provide such funding. If MTA does not receive sufficient moneys to fund current and future capital needs, the improvements to the Transit System’s and MTA Staten Island Railway’s, the Commuter System’s and MTA Bridges and Tunnels’ state of good repair achieved through implementation of previous capital programs could erode.

INVESTMENT POLICY MTA’s Treasury Division is responsible for the investment management of the funds of the Related

Entities. The investment activity covers all operating and capital funds, including bond proceeds, and the activity is governed by State statutes, bond resolutions and the Board-adopted investment guidelines (the “Investment Guidelines”). The MTA Act currently permits the Related Entities to invest in the following general types of obligations:

• obligations of the State or the United States Government; • obligations the principal and interest of which are guaranteed by the State or the United States

government; • obligations issued or guaranteed by certain Federal agencies; • repurchase agreements fully collateralized by the obligations of the foregoing United States

Government and Federal agencies; • certain certificates of deposit of banks or trust companies in the State; • certain banker’s acceptances with a maturity of 90 days or less; • certain commercial paper; • certain municipal obligations; and • certain mutual funds up to $10 million in the aggregate. Investment obligations and collateral are held by one of MTA’s custodians or trustees.

As of December 31, 2008, $531 million market value non-bond capital funds consisted of

approximately 6% cash and repurchase agreements, 20% United States Treasury obligations, 66% agency obligations, and 8.0% in municipal obligations. The maturity of non-bond capital funds was greater than 2.5 years.

As of December 31, 2008, the operating and working capital of the Related Entities amounted to $247

million, and was invested with an average weighted days of approximately five months.

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PART 4. PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS

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GENERAL

Financing of Capital Projects and Statutory Ceiling

Financing of Capital Projects. Some of the Related Entities are authorized to issue bonds, notes and other obligations for the purpose of undertaking and financing capital projects as well as for other purposes. All bonds and notes are expected to be issued through either MTA or MTA Bridges and Tunnels. Such obligations are secured by and payable from the revenues and other receipts specified in the bond resolution, indenture or other document authorizing the issuance of such obligations. Bonds, notes and other obligations issued to finance capital projects included in the MTA Capital Programs have in the past been and are currently subject to a statutory limitation on the principal amount of such obligations referred to herein as the statutory ceiling. It is anticipated that obligations issued to finance future MTA Capital Programs will also be subject to a statutory ceiling expected to be imposed by the State Legislature. Obligations issued by MTA Bridges and Tunnels to fund capital projects relating to its seven bridges and two tunnels, the MTA Bridges and Tunnels Facilities, and obligations issued by the Related Entities for purposes other than financing projects in the MTA Capital Programs are not subject to the current statutory ceiling.

Current Statutory Ceiling. The MTA Act permits MTA, MTA Bridges and Tunnels and MTA New York City

Transit, collectively, to issue on or after January 1, 1993 an aggregate of $28.877 billion of bonds, notes and other obligations (net of certain statutory exclusions, including refunding bonds) for the MTA Capital Programs for the years 1992-2009. MTA and MTA Bridges and Tunnels have previously issued a substantial amount of such bonds pursuant to prior statutory ceilings. As of March 31, 2009 MTA, MTA Bridges and Tunnels and MTA New York City Transit have issued approximately $19.7 billion of bonds (not including $750 million of commercial paper) net of such statutory exclusions under the current statutory ceiling. MTA expects that the current statutory ceiling will allow it to fulfill the bonding requirements of all MTA Capital Programs approved by the Review Board to date, including the 2005-2009 MTA Capital Program.

Set forth below under “MTA Capital Program Bonds” is a brief summary of the types of obligations issued by

the Related Entities to finance or refinance the MTA Capital Programs that are governed by past and current statutory ceilings. Only a portion of the MTA Bridges and Tunnels Senior Revenue Bonds and MTA Bridges and Tunnels Subordinate Revenue Bonds (as each is defined below) were issued to finance or refinance items in such MTA Capital Programs and, consequently, were subject to the statutory ceiling; the remainder were issued to finance capital costs of the MTA Bridges and Tunnels Facilities that are not subject to the statutory ceiling.

The following pie chart shows, by percentages, the amount of debt MTA and MTA Bridges and Tunnels have outstanding as of March 31, 2009, under the resolutions relating to the MTA Transportation Revenue Bonds, MTA Dedicated Tax Fund Bonds, MTA Bridges and Tunnels Senior Revenue Bonds and MTA Bridges and Tunnels Subordinate Revenue Bonds, and the 2 Broadway Certificates of Participation Trust Agreement, all as described below.

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MTA Capital Program Bonds

MTA Transportation Revenue Bonds. Bonds are issued pursuant to the General Resolution Authorizing Transportation Revenue Obligations of MTA, adopted on March 26, 2002 (the “Transportation Resolution”), and are payable solely from and secured by a pledge of the items pledged under such bond resolution, which include amounts derived from fares received for the use of the subway and bus systems operated by MTA New York City Transit and MaBSTOA and the commuter railroads operated by MTA Long Island Rail Road and MTA Metro-North Railroad, certain concession revenues, and operating subsidies (not including Federal operating subsidies), including expense reimbursement payments, from the State, the City and MTA Bridges and Tunnels. The proceeds from the sale of such bonds are used solely to finance capital projects set forth in the MTA Capital Programs. For more information on the Transportation Revenue Bonds, see “TRANSPORTATION REVENUE BONDS” below in this Part 4.

MTA Dedicated Tax Fund Bonds. Bonds are issued pursuant to the Dedicated Tax Fund Obligation Resolution

of MTA, adopted on March 26, 2002 (the “DTF Resolution”), and are payable solely from and secured by the MTTF Receipts and the MMTOA Receipts described under “DEDICATED TAX FUND BONDS – Sources of Payment – Revenues from Dedicated Taxes,” subject to appropriation by the State Legislature. The proceeds from the sale of such bonds are used solely to finance capital projects of the MTA Capital Programs. For more information on the Dedicated Tax Fund Bonds, see “DEDICATED TAX FUND BONDS” below in this Part 4.

MTA Bridges and Tunnels Senior Revenue Bonds. Bonds are issued pursuant to the General Resolution

Authorizing General Revenue Obligations of MTA Bridges and Tunnels, adopted on March 26, 2002 (the “MTA Bridges and Tunnels Senior Resolution”), and are payable from the net revenues collected on the MTA Bridges and Tunnels Facilities described under “TBTA – MTA Bridges and Tunnels Facilities.” The proceeds from the sale of such bonds are used to finance capital projects relating to the MTA Bridges and Tunnels Facilities and the MTA Capital Programs (i.e., the Transit System, MTA Staten Island Railway and the Commuter System), as described herein under “TBTA – Authorized Projects of MTA Bridges and Tunnels” in Part 2. Only that portion of any such bonds issued to finance capital projects of the MTA Capital Programs is subject to the current statutory ceiling. For more information on the MTA Bridges and Tunnels Senior Revenue Bonds, see “MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS” below in this Part 4.

Debt Outstanding by Credit

Trans. Rev. 44%

Service Contract

8%

Dedicated Tax

Fund

15%

TBTA Senior 24%

MTA COPS

1% TBTA

Subordinate

8%

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MTA Bridges and Tunnels Subordinate Revenue Bonds. Bonds are issued pursuant to the 2001 Subordinate Revenue Resolution Authorizing Subordinate Revenue Obligations of MTA Bridges and Tunnels, adopted on March 26, 2002 (the “MTA Bridges and Tunnels Subordinate Resolution”), and are payable from the net revenues collected on the MTA Bridges and Tunnels Facilities after the payment of operating expenses and debt service as required by the MTA Bridges and Tunnels Senior Resolution. The proceeds from the sale of such bonds are used to finance capital projects relating to the MTA Bridges and Tunnels Facilities and the MTA Capital Programs. Only that portion of any such bonds issued to finance capital projects of the MTA Capital Programs is subject to the current statutory ceiling. For more information on the MTA Bridges and Tunnels Subordinate Revenue Bonds, see “MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE BONDS” below in this Part 4.

MTA Service Contract Bonds. Bonds are issued pursuant to the State Service Contract Obligation Resolution of

MTA adopted on March 26, 2002 (the “State Service Contract Resolution”). These bonds are payable solely from and secured by certain payments made by the State, subject to annual appropriations, under the service contract referred to in such bond resolution. The proceeds from the sale of such bonds are used solely to finance capital projects of the MTA Capital Programs. Other than refunding bonds, MTA does not expect to issue additional bonds under the State Service Contract Resolution, unless the State service contract is amended to permit the issuance of additional new money bonds. For more information on the State Service Contract Bonds, see “STATE SERVICE CONTRACT BONDS” below in this Part 4. Non-Capital Program Securities

The Related Entities have also issued other obligations that are not subject to the current or any prior statutory ceiling and that were issued for projects that are not part of the Capital Programs, as follows:

2 Broadway Certificates of Participation. The Certificates of Participation were executed and delivered

pursuant to a Certificate Trust Agreement, dated as of June 1, 1999, as amended and restated as of September 1, 2004, by and among MTA New York City Transit, MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), and MTA Bridges and Tunnels, as obligors with respect to their base rent proportionate shares (68.7% in the case of MTA New York City Transit, 21.0% in the case of MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), and 10.3% in the case of MTA Bridges and Tunnels), The Bank of New York, as Lessor-Trustee, and The Bank of New York, as Certificate Trustee. The Certificates are payable primarily from the respective base rent proportionate shares to be made by MTA New York City Transit, MTA and MTA Bridges and Tunnels pursuant to a Leasehold Improvement Sublease Agreement, dated as of June 1, 1999, as amended and restated as of September 1, 2004, by and among the same parties to the Certificate Trust Agreement. The obligation of MTA New York City Transit to pay its base rent proportionate share is treated as an operating and maintenance expense, subordinate to the payment of bonds, notes and other obligations currently outstanding and hereafter issued or incurred as described in the Certificate Trust Agreement. The obligation of MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad) to pay its base rent proportionate share is treated as an operating and maintenance expense of the commuter railroads, subordinate to the payment of bonds, notes and other obligations currently outstanding and hereafter issued or incurred as described in the Certificate Trust Agreement. The obligation of MTA Bridges and Tunnels to pay its base rent proportionate share is, by agreement, subordinate to MTA Bridges and Tunnels’ payment of other operating and maintenance expenses of MTA Bridges and Tunnels, as well as bonds, notes and other obligations currently outstanding and hereafter issued or incurred as described in the Certificate Trust Agreement.

The proceeds from the sale of the Certificates of Participation were used to finance certain building and

leasehold improvements to an office building occupied by MTA New York City Transit, MTA or its subsidiaries (MTA Long Island Rail Road and MTA Metro-North Railroad), and/or MTA Bridges and Tunnels at 2 Broadway in lower Manhattan. The office building is not a project within the Capital Programs. There are $400,620,000 aggregate principal amount of Certificates of Participation outstanding.

MTA Bridges and Tunnels Convention Center Project Bonds. Bonds issued pursuant to the Convention Center

Project Revenue Bond Resolution of MTA Bridges and Tunnels, adopted on July 23, 1980, are not payable from any MTA Bridges and Tunnels revenues, but are payable solely from and secured by payments to be made by the State to MTA Bridges and Tunnels pursuant to a sublease agreement. The proceeds from the sale of such bonds were used to refund certain outstanding bonds that were used to construct and develop the original Jacob K. Javits Convention Center in Manhattan. There are $118,125,000 aggregate principal amount of such Convention Center Project Bonds outstanding.

A-75

Revenue Anticipation Notes. MTA and MTA New York City Transit have in the past and may, from time to time, in the future issue revenue anticipation notes for their working capital needs and the needs of their respective affiliates and subsidiaries occasioned by delays in the receipt of subsidies or other irregularities in the timing of receipt of revenues. The ability of the Related Entities to engage in the interagency loans described below has lessened the need for the issuance of revenue anticipation notes. Neither MTA nor MTA New York City Transit has issued revenue anticipation notes since 1996. All those notes previously issued were paid on their due dates.

Interagency Loans

The Related Entities are authorized to transfer their revenues, subsidies and other moneys or securities to another Related Entity for use by that other Related Entity, provided at the time of the transfer it is reasonably anticipated that the moneys and securities so transferred will be reimbursed, repaid or otherwise provided for by the end of the next succeeding calendar year.

Leasing

The Related Entities lease real property, facilities, equipment and other personal property in the normal course of business. In addition, the Related Entities have entered into financing leases and other financial transactions, including sale-leaseback and lease-leaseback arrangements, pursuant to which existing assets are sold or leased to other parties and leased or subleased back by the Related Entities. In certain cases, the basic rent payment obligation of the Related Entities under such leases and subleases, together with a purchase option, is legally defeased and in other cases is economically defeased by a pledge of financial obligations and/or securities of other entities, including, in certain cases, United States government obligations. The expected economic result of such transactions is the receipt by the Related Entities of a net up-front payment, while pursuant to the agreement, the relevant operating agency retains full use of the facility or equipment. In those lease transactions where the applicable Related Entity’s obligations are economically, but not legally defeased, if a defeasance obligor were to default on its financial obligations under its respective defeasance instrument, it is possible that the applicable Related Entity would be required to pay the related rent obligations or purchase option amounts from other sources. In addition, the event of loss, default, indemnification, and guaranty provisions of these transactions could create substantial undefeased financial obligations of the Related Entities in the unlikely event that they were triggered; if those financial obligations were, in turn, not timely met, the relevant operating agency could lose use of the leased facilities or equipment. For all of the lease transactions entered into after 1996, MTA has covenanted that all rent and supplemental rent obligations under such lease transactions which are not paid by defeasance obligors shall be paid from those “Revenues” (as defined in Section 102 of the Transportation Resolution) available for release from the lien of the Transportation Resolution in accordance with Section 504(d) of the Transportation Resolution, immediately following all transfers pursuant to Section 504(a), (b) and (c) of the Transportation Resolution, on a pari passu basis among all such lease transactions and prior to the transfer or use of any such amounts for any other purpose, including the payment of operating and maintenance expenses. The payment obligations of the Related Entities under such leases and subleases is generally subordinate to the payment of debt service on the bonds of the agency obligated to make the payments, but to the extent the undefeased financial obligations were obligations (including guaranties) of MTA Bridges and Tunnels, a reduction in the amount of operating surplus transferred from MTA Bridges and Tunnels could result.

For more information with respect to certain of these leasing and other financial transactions, reference is made

to the footnotes in the financial statements of the Related Entities for a summary of certain capital lease obligations. See, in particular, Footnote 8 to the combined financial statements of MTA for the years ended December 31, 2008 and 2007, Footnote 8 to the consolidated financial statements of MTA New York City Transit for the years ended December 31, 2008 and 2007, and Footnotes 15 and 18 to the financial statements of MTA Bridges and Tunnels for the years ended December 31, 2008 and 2007.

Types of Debt Outstanding

The following pie chart shows, by percentages, the types of debt MTA and MTA Bridges and Tunnels have outstanding under the resolutions relating to the MTA Transportation Revenue Bonds, MTA Dedicated Tax Fund Bonds, MTA Bridges and Tunnels Senior Revenue Bonds and MTA Bridges and Tunnels Subordinate Revenue Bonds, and the 2 Broadway Certificates of Participation Trust Agreement as of March 31, 2009.

A-76

Swap Agreements Relating to Synthetic Fixed Rate Debt

Board-adopted Guidelines. The Related Entities adopted guidelines governing the use of swap contracts to manage the interest rate exposure of their debt. The Guidelines establish specific requirements that must be satisfied for a Related Entity to enter into a swap contract, such as suggested swap terms and objectives, credit ratings of the counterparties, collateralization requirements and reporting requirements.

Objectives of the Swaps. In order to protect against the potential of rising interest rates, to achieve a lower net

cost of borrowing, to reduce exposure to changing interest rates on a related bond issue, or, in some cases where Federal tax law prohibits an advance refunding, to achieve debt service savings through a synthetic fixed rate, MTA, MTA Bridges and Tunnels and MTA New York City Transit have entered into separate pay-fixed, receive-variable interest rate swaps at a cost anticipated to be less than what MTA, MTA Bridges and Tunnels and MTA New York City Transit would have paid to issue fixed-rate debt.

Fair Value. Relevant market interest rates on the valuation date (March 31, 2009) of the swaps reflected in the following charts in all cases were higher than market interest rates on the effective date of the swaps. Consequently, as of the valuation date, all of the swaps had negative fair values. A negative fair value means that MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would have to pay the counterparty that approximate amount to terminate the swap. In the event there is a positive fair value, MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would be entitled to receive a payment from the counterparty to terminate the swap; consequently, MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would be exposed to the credit risk of the counterparties in the amount of the swaps’ fair value should the swap be terminated.

The fair values listed in the following tables represent the theoretical cost to terminate the swap as of the date indicated, assuming that a termination event occurred on that date. The fair values were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bond due on the date of each future net settlement on the swap. See “Termination Risk” below.

Terms and Fair Values. The terms, fair values and counterparties of the outstanding swaps of MTA and MTA

Bridges and Tunnels, as well as the swaps entered into in connection with the 2 Broadway Certificates of Participation refunding, are reflected in the following tables. The MTA swaps are reflected in separate tables for the Transportation Revenue Bonds and Dedicated Tax Fund Bonds. The MTA Bridges and Tunnels swaps are reflected in separate tables for the senior lien and subordinate revenue bonds.

Fixed Rate Debt 73%

Variable Rate Debt

14%

Synthetic Fixed

Rate

13%

A-77

MT

A T

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Fi

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Rat

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of

03/3

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(U

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(in

mill

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Dat

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C

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Lehm

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nder

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A-78

M

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____

____

____

____

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A-79

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C

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33%

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For

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purp

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ting

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tiona

l am

ount

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s ent

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into

in c

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n w

ith th

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ries 2

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onds

, MTA

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ls w

ill p

ay 6

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f one

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th L

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s poi

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S SU

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E B

ON

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A

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Issu

e

Not

iona

l A

mou

nts

as o

f 03

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2009

(U

naud

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(in

mill

ions

)

Ef

fect

ive

Dat

e

Fi

xed

Rat

e Pa

id

V

aria

ble

Rat

e R

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ved

Fa

ir V

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s as

of

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09

(Una

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(in m

illio

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Sw

ap

Term

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ion

Dat

e

C

ount

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$1

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6.

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A

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$ (3

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A-81

2 Broadway Certificates of Participation Swaps In addition to the foregoing, MTA, MTA New York City Transit and MTA Bridges and Tunnels entered into

separate ISDA Master Agreements with UBS AG relating to the $357,925,000 Variable Rate Certificates of Participation, Series 2004A (Auction Rate Securities) in connection with the refunding of certain certificates of participation originally executed to fund certain improvements to the office building located at 2 Broadway in Manhattan. The 2 Broadway swaps have (1) an effective date of September 22, 2004, (2) a fixed rate paid of 3.092%, (3) a variable rate received of the lesser of (a) the actual bond rate, or (b) 67% of one-month LIBOR minus 45 basis points, and (4) a termination date of January 1, 2030. Based on the aggregate notional amount of $353,050,000 outstanding as of March 31, 2009, MTA New York City Transit is responsible for $242,550,000 aggregate notional amount of the swaps, MTA for $74,125,000 aggregate notional amount, and MTA Bridges and Tunnels for $36.375 aggregate notional amount. As of March 31, 2009, the aggregate unaudited fair value of the swaps was ($58,428,000).

Counterparty Ratings

The current ratings of the counterparties are as follows as of March 31, 2009:

Counterparty

Ratings of the Counterparty or its Credit Support Provider

S&P Moody’s Fitch AIG Financial Products Corp. A- A3 A Ambac Financial Services, L.P. A Baa1(1) NR Bear Stearns Capital Markets Inc. A+ Aa3(2) AA- BNP Paribas North America, Inc. AA Aa1 AA Citibank, N.A. A+ A1 A+ Citigroup Financial Products Inc. A A3 A+ JPMorgan Chase Bank A+ Aa3 AA- Lehman Brothers Special Financing Inc. NR WR NR Morgan Stanley Capital Services Inc. A A2 A UBS AG A+ Aa2 A+

(1) On April 13, 2009, Moody’s downgraded Ambac Financial Services, L.P. from Baa1 to Ba3.

(2) The ratings for Bear Stearns Capital Markets Inc. reflect the rating on JP Morgan Chase & Co., in connection with a guaranty being provided in connection with the transfer of the counterparty obligations under the related swap to JP Morgan Chase, N.A., as a result of the acquisition of The Bear Stearns Companies Inc. by JP Morgan Chase & Co.

Except as set forth below, the notional amounts of the swaps match the principal amounts of the associated bonds.

The following table sets forth the notional amount and the outstanding principal amount as of March 31, 2009 for the swap where the notional amount does not match the outstanding principal amount of the associated bonds.

Associated Bond Issue

Principal Amount of

Bonds (in millions) (Unaudited)

Notional Amount

(in millions) (Unaudited)

MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C

$291.520 $177.700

MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002F

$235.155 $235.155

MTA Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A

$351.375 $343.520

Except as discussed below under the heading “Rollover Risk,” the swap agreements contain scheduled reductions to

outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the principal amount of the associated bonds.

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Risks Associated with the Swap Agreements

From MTA’s, MTA Bridges and Tunnels’ and MTA New York City Transit’s perspective, the following risks are generally associated with swap agreements:

• Credit Risk – The counterparty becomes insolvent or is otherwise not be able to perform its financial obligations. In the event of deterioration in the credit ratings of the counterparty or MTA/MTA Bridges and Tunnels/MTA New York City Transit, the swap agreement may require that collateral be posted to secure the party’s obligations under the swap agreement. See “Collateralization” below. Further, ratings deterioration by either party below levels agreed to in each transaction could result in a termination event requiring a cash settlement of the future value of the transaction. See “Termination Risk” below.

• Basis Risk – The variable interest rate paid by the counterparty under the swap and the variable interest rate

paid by MTA, MTA Bridges and Tunnels or MTA New York City Transit on the associated bonds may not be the same. If the counterparty’s rate under the swap is lower than the bond interest rate, then the counterparty’s payment under the swap agreement does not fully reimburse MTA, MTA Bridges and Tunnels or MTA New York City Transit for its interest payment on the associated bonds. Conversely, if the bond interest rate is lower than the counterparty’s rate on the swap, there is a net benefit to MTA, MTA Bridges and Tunnels or MTA New York City Transit.

• Termination Risk – The swap agreement will be terminated and MTA, MTA Bridges and Tunnels or MTA

New York City Transit will be required to make a termination payment to the counterparty and, in the case of a swap agreement which was entered into for the purpose of creating a synthetic fixed rate for an advance refunding transaction may also be required to take action to protect the tax exempt status of the related refunding bonds.

• Rollover Risk – The notional amount under the swap agreement terminates prior to the final maturity of the

associated bonds on a variable rate bond issuance, and MTA, MTA Bridges and Tunnels or MTA New York City Transit may be exposed to then market rates and cease to receive the benefit of the synthetic fixed rate for the duration of the bond issue.

Credit Risk. The following table shows, as of March 31, 2009, the diversification, by percentage of notional amount,

among the various counterparties that have entered into ISDA Master Agreements with MTA and/or MTA Bridges and Tunnels, or in connection with the 2 Broadway Certificates of Participation refunding. The notional amount totals below include all five swaps (including the UBS basis risk swap) in connection with the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2005B. The counterparties have the ratings set forth above.

Counterparty Notional Amount

(in thousands) (Unaudited)

% of Total Notional Amount

UBS AG $1,642,550 36.19% Bear Stearns Capital Markets Inc. 734,750 16.19 Citigroup Financial Products Inc. 696,520 15.53 Morgan Stanley Capital Services Inc. 440,000 9.70 Lehman Brothers Special Financing Inc. 253,700 5.59 JPMorgan Chase Bank 197,900 4.36 BNP Paribas North America, Inc. 197,900 4.36 Citibank, N.A. 197,600 4.36 AIG Financial Products Corp. 100,000 2.20 Ambac Financial Services, L.P. 77,000 1.70

Total $4,538,220 100.00%

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The ISDA Master Agreements entered into with the following counterparties provide that the payments under one transaction will be netted against other transactions entered into under the same ISDA Master Agreement:

• Bear Stearns Capital Markets Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB,

• Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD,

• Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C, and

• Ambac Financial Services, L.P. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002F (currently only one transaction outstanding under that Master Agreement),

• Bear Stearns Capital Markets Inc. with respect to the MTA Transportation Revenue Variable Rate Refunding Bonds, Series 2002D-2 and Series 2012,

• Lehman Brothers Special Financing Inc. with respect to the MTA Transportation Revenue Variable Rate Refunding Bonds, Series 2005E and Series 2012.

Under the terms of these agreements, should one party become insolvent or otherwise default on its obligations,

close-out netting provisions permit the nondefaulting party to accelerate and terminate all outstanding transactions and net the transactions’ fair values so that a single sum will be owed by, or owed to, the nondefaulting party.

On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”) filed a petition under Chapter 11 of the U.S.

Bankruptcy Code. As a consequence LBHI was downgraded in September 2008 to B3/D/D by Moody’s, Standard & Poor’s and Fitch respectively. Standard & Poor’s and Fitch subsequently withdrew their ratings on September 25th and October 27, 2008, respectively. A subsidiary, Lehman Brothers Special Financing Inc (“LBSFI”), which operated with a credit guarantee from LBHI consequently was similarly downgraded and filed for bankruptcy on October 3, 2008.

As an active participant in the capital markets, MTA has business relationships with LBHI and its

subsidiaries. Among those relationships, LBSFI, is the counterparty (with an LBHI guarantee) on two interest rate swaps associated with MTA Transportation Revenue Bonds Series 2005E and Series 2012 (forward starting swap). The combined notional amount of the interest rate swaps is $253.7 million. In addition, MTA New York City Transit, MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), and MTA Bridges and Tunnels, are party to a forward purchase agreement for a debt service reserve fund investment related to the 2 Broadway Certificates of Participation transaction. MTA retains ownership of the security for this investment and is evaluating its options with respect to the bankruptcy filing by LBHI.

At March 31, 2009, the two interest rate swaps to which LBSFI was a counterparty had a combined recorded fair

market value of negative $46,918,000, which represented a theoretical payment that would be owed by MTA to LBSFI if the agreements were terminated on that date. As a result of the bankruptcy filing of LBHI, on September 19, 2008, MTA advised LBSFI that an event of default now exists in respect to the two interest rate swaps. As a result of the event of default, all cashflows arising out of these transactions have ceased and MTA is proceeding with a formal market quotation process as provided for in the ISDA Master Agreement with LBSFI to replace LBSFI. The market quotation process involves soliciting bids from interested parties to assume the obligations of LBSFI in the transactions. MTA has not recorded any change in its accounting treatment of the transactions and, pending a successful resolution of the market quotation process, does not expect to be required to make any such change in the future.

The fair market value of MTA's interest rate swaps changes daily primarily as a result of capital markets

changes. MTA's swaps with LBSFI use the one month London Interbank Offered Rate (“LIBOR”) as the variable rate received. Factors that influence LIBOR are local interest rates, banks expectations of future rate movements, liquidity in the capital markets or changes in the value of the dollar. The relative financial health of MTA’s counterparties, in this case LBSFI, is important in the transaction, but do not directly impact the fair market value of the transaction.

In addition to the interest rate swaps described above, MTA, through its Transportation Revenue Bond Resolution,

has an existing interest rate swap with AIG Financial Products Corp. (“AIG FPC”). The notional amount of the transaction is $100 million with an approximate fair market value on March 31, 2009 of negative $21,228,000. This value represents the amount owed by MTA if the transaction were to be terminated.

The ratings of AIG FPC, which is guaranteed by corporate parent American International Group, Inc. (“AIG”) were changed on September 15, 2008 as follows: downgraded by Moody's from Aa3 to A2; downgraded by Standard & Poor's from AA- to A-; downgraded from Fitch from AA- to A. Subsequently, on October 3, 2008 Moody’s further

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downgraded AIG FPC to A3. Although AIG FPC was downgraded, no event of default currently exists with respect to this transaction.

Collateralization. Generally, the Credit Support Annex attached to the ISDA Master Agreement requires that if the outstanding ratings of MTA, MTA Bridges and Tunnels or MTA New York City Transit, as the case may be, or the counterparty falls to a certain level, the party whose rating falls is required to post collateral with a third-party custodian to secure its termination payments above certain threshold amounts. Collateral must be cash or U.S. government or certain Federal agency securities.

The following tables set forth the ratings criteria and threshold amounts relating to the posting of collateral set forth

for MTA, MTA Bridges and Tunnels or MTA New York City Transit, as the case may be, and the counterparty for each swap agreement. In most cases, the Counterparty does not have a Fitch rating on its long-term unsecured debt, so that criteria would not be applicable in determining if the Counterparty is required to post collateral.

MTA Transportation Revenue Bonds


If the highest rating of the related MTA bonds or the counterparty’s long-term

unsecured debt falls to

Then the downgraded party must post collateral

if its estimated termination payments are

in excess of Series 2002D-2 Fitch – BBB+,

Moody’s – Baa1, or S&P – BBB+

$10,000,000

Fitch – BBB and below or unrated, Moody’s – Baa2 and below or unrated by S&P & Moody’s, or S&P – BBB and below or unrated

$0

Series 2005D and Series 2005E Fitch – BBB+, Moody’s – Baa1, or S&P – BBB+

$10,000,000

Fitch – below BBB+, Moody’s – below Baa1, or S&P – below BBB+

$0

Series 2012 Fitch – BBB+, Moody’s – Baa1, or S&P – BBB+

$10,000,000


$0

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MTA Dedicated Tax Fund Bonds


If the highest rating of the related MTA bonds or

the counterparty’s long-term unsecured debt falls to


if its estimated termination payments are in excess of

Series 2002B Fitch – BBB+, or S&P – BBB+

$10,000,000

Fitch – BBB and below or unrated, or S&P – BBB and below or unrated

$0

Series 2008A [Note: for this swap, MTA is not required to post collateral under any circumstances.]

Fitch – A-, or Moody’s – A3, or S&P – A-

$10,000,000

Fitch – BBB+ and below, or Moody’s – Baa1 and below, or S&P – BBB+ and below

$0

2 Broadway Certificates of Participation

Associated Agencies

If the highest rating of the MTA Transportation Revenue Bonds falls to

Then MTA, MTA Bridges and Tunnels and MTA New York City Transit must post

collateral if its estimated termination payments are in excess of

MTA MTA Bridges and Tunnels MTA New York City Transit

Fitch – BBB+, Moody’s – Baa1, or S&P – BBB+

$25,000,000


$0

If the highest rating of the Counterparty’s long-term


Then the Counterparty must post collateral if its

estimated termination payments

are in excess of Moody’s – Baa1 or lower, or

S&P – BBB+ or lower $0

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MTA Bridges and Tunnels Senior Lien Revenue Bonds


If the highest rating of the related MTA

Bridges and Tunnels bonds or the counterparty’s long-term unsecured debt falls to

Then the downgraded party must post

collateral if its estimated termination payments

are in excess of Series 2001B and 2001C N/A – Because MTA Bridges and Tunnels’ swap payments are insured,

MTA Bridges and Tunnels is not required to post collateral, but Citigroup is required to post collateral if its estimated termination payments are in excess of $1,000,000.

Series 2002F N/A – Because MTA Bridges and Tunnels’ swap payments are insured, MTA Bridges and Tunnels is not required to post collateral, but Ambac is required to post collateral if its estimated termination payments are in excess of $1,000,000.

Series 2005B interest rate swap and Series 2005B basis risk swap

For counterparty, Fitch – A-, or Moody’s – A3, or S&P – A- For MTA, Fitch – BBB+, or Moody’s – Baa1, or S&P – BBB+ For MTA, Fitch – BBB, or Moody’s – Baa2, or S&P – BBB

$10,000,000 $30,000,000 $15,000,000

For counterparty, Fitch – BBB+ and below, or Moody’s – Baa1 and below, or S&P – BBB+ and below For MTA, Fitch – BBB- and below, or Moody’s – Baa3 and below, or S&P – BBB- and below

$0 $0

MTA Bridges and Tunnels Subordinate Revenue Bonds






are in excess of Series 2000AB N/A – Because MTA Bridges and Tunnels’ swap payments are insured,

MTA Bridges and Tunnels is not required to post collateral, but Bear Stearns is required to post collateral if its estimated termination payments are in excess of $1,000,000.

Series 2000CD N/A – Because MTA Bridges and Tunnels’ swap payments are insured, MTA Bridges and Tunnels is not required to post collateral, but Citigroup is required to post collateral if its estimated termination payments are in excess of $1,000,000.

Notwithstanding the foregoing, in the event any downgraded party is responsible for an event of default or potential

event of default as defined in the ISDA Master Agreement, the downgraded party must immediately collateralize its obligations irrespective of the threshold amounts.

Under each MTA and MTA Bridges and Tunnels bond resolution, the payments relating to debt service on the

swaps are parity obligations with the associated bonds, as well as all other bonds issued under that bond resolution, but all other payments, including the termination payments, are subordinate to the payment of debt service on the swap and all bonds issued under that bond resolution. In addition, MTA and MTA Bridges and Tunnels have structured each of the swaps (other than the 2 Broadway swaps) in a manner that will permit MTA or MTA Bridges and Tunnels to bond the termination payments under any available bond resolution.

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The payments relating to debt service on the 2 Broadway swaps are parity obligations with respect to the sublease

payments under the 2 Broadway Certificates of Participation, payable solely from available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds. All other payments, including the termination payments, are payable from substantially the same pool of available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds.

The ISDA Master Agreement sets forth certain termination events applicable to all swaps entered into by the parties

to that ISDA Master Agreement. MTA, MTA Bridges and Tunnels and MTA New York City Transit have entered into separate ISDA Master Agreements with each counterparty that governs the terms of each swap with that counterparty, subject to individual terms negotiated in a confirmation.

The following table sets forth, for each swap, the additional termination events for the following associated bond

issues. In certain swaps, where the counterparty has a guarantor of its obligations, the ratings criteria apply to the guarantor and not to the counterparty.

MTA Transportation Revenue and Dedicated Tax Fund Bonds


Additional Termination Event(s)

Transportation Revenue Bonds Series 2002D-2, Series 2005D and Series 2005E

The ratings by S&P and Moody’s of the Counterparty or the MTA Transportation Revenue Bonds falls below “BBB-” and “Baa3,” respectively, or are withdrawn.

Series 2012 The ratings by S&P and Moody’s of the Counterparty or the MTA Transportation Revenue Bonds falls below “BBB-” and “Baa3,” respectively, or are withdrawn.

Dedicated Tax Fund Bonds Series 2002B The ratings by S&P and Fitch of the Counterparty or the MTA

Dedicated Tax Fund Bonds falls below “BBB-” or are withdrawn.

Series 2008A Bonds The ratings by S&P or Moody’s of the Counterparty fall below “BBB+” or “Baa1,” respectively, or the ratings of S&P or Fitch with respect to the MTA Dedicated Tax Fund Bonds falls below “BBB” or, in either case the ratings are withdrawn.

2 Broadway Associated Bond Issue

Counterparty


2 Broadway Certificates of Participation, Series 2004A

UBS AG Negative financial events relating to the swap insurer, Ambac Assurance Corporation.

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MTA Bridges and Tunnels Senior and Subordinate Revenue Bonds Associated Bond Issue

Additional Termination Events

Senior Lien Revenue Bonds Series 2001B and 2001C and Series 2002F

1. MTA Bridges and Tunnels can elect to terminate the swap relating to that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Ambac Assurance Corporation.

Series 2005B interest rate swap and basis risk swap

The ratings by S&P or Moody’s of the Counterparty fall below “BBB+” or “Baa1,” respectively, or the ratings of S&P or Moody’s with respect to the MTA Bridges and Tunnels Senior Lien Revenue Bonds falls below “BBB” or “Baa2,” respectively, or , in either case the ratings are withdrawn.

Subordinate Revenue Bonds

Series 2000AB and 2000CD 1. MTA Bridges and Tunnels can elect to terminate the swap relating to that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Financial Security Assurance Inc.

Rollover Risk. MTA and MTA Bridges and Tunnels are exposed to rollover risk on swaps that mature or may be

terminated prior to the maturity of the associated debt. When these swaps terminate, MTA or MTA Bridges and Tunnels may not realize the synthetic fixed rate offered by the swaps on the underlying debt issues. The following debt is exposed to rollover risk:


Bond Maturity

Date

Swap Termination

Date MTA Dedicated Tax Fund Variable Rate Bonds, Series 2002B 11/01/22 09/01/13 MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C

01/01/32 01/01/19


11/01/32 01/01/13

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TRANSPORTATION REVENUE BONDS

General

There are $11,111,880,000 aggregate principal amount of outstanding Transportation Revenue Bonds as of March 31, 2009. In addition, MTA issued $750 million aggregate principal amount of commercial paper notes in the form of bond anticipation notes under the Transportation Resolution in anticipation of the issuance of MTA Transportation Revenue Bonds. The following TRB Table 1 sets forth, on a cash basis for the bond year ending November 15, the debt service on outstanding MTA Transportation Revenue Bonds as of March 31, 2009.

TRB Table 1 -- Aggregate Debt Service

(in thousands) Year Ending November 15 Aggregate Debt Service (1) (2) 2009 (3) $713,145 2010 809,226 2011 792,910 2012 811,713 2013 809,430 2014 823,883 2015 823,597 2016 823,560 2017 823,944 2018 823,973 2019 820,992 2020 821,052 2021 821,128 2022 821,188 2023 829,871 2024 847,827 2025 847,953 2026 848,055 2027 848,253 2028 848,399 2029 784,142 2030 784,562 2031 784,937 2032 734,466 2033 381,359 2034 381,497 2035 352,740 2036 144,743 2037 117,045 2038 63,270 Total $20,938,860

(1) Total may not add due to rounding. (2) Includes the following variable rate assumptions for debt service: Series 2002D-2, Series 2005D and Series 2005E Bonds at their swap rates of

4.45%, 3.561% and 3.561%, respectively; Series 2002B, Series 2002D-1, Series 2002G-1, and Series 2005G Bonds at an assumed variable interest rate of 4% per annum; and Series 2008B at an assumed rate of 4.0% after their respective Reset Dates. Due to the effects of volatile conditions in the market affecting all auction rate securities and other variable rate bonds, the recent interest rates to the MTA for these variable rate securities have at times been higher than the assumed 4% rate. However, based on historical averages and mitigating actions taken or actions to be taken by the MTA, MTA continues to believe that its 4% variable rate assumption is reasonable for long term cost calculations.

(3) 2009 debt service is net of cash defeased debt service.

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Under New York law, the Transportation Revenue Bonds are MTA’s special obligations, which means that they are payable solely from the money pledged for payment under the Transportation Resolution. They are not MTA’s general obligations.

MTA has filed summaries of certain provisions of the Transportation Resolution, including certain defined terms

used therein, and the form of the Interagency Agreement relating thereto with the following Nationally Recognized Municipal Securities Information Repositories (“NRMSIRS”), all of which are incorporated by specific cross-reference herein:

Bloomberg Municipal Repository DPC Data Inc. FT Interactive Data Standard & Poor’s Securities Evaluations, Inc.

In addition, copies of the summaries and the Interagency Agreement can be obtained at no cost on MTA’s website at

www.mta.info/mta/investor/index.html or from the MTA Finance Department at 347 Madison Avenue, New York, New York 10017.

Capitalized terms used under this caption “TRANSPORTATION REVENUE BONDS” not otherwise defined

herein have the meanings set forth in the Transportation Resolution.

Pledged Transportation Revenues

MTA receives “transportation revenues,” directly and through certain subsidiaries (currently, MTA Long Island Rail Road, MTA Metro-North Railroad and, effective as of April 1, 2006, MTA Bus) and affiliates (currently, MTA New York City Transit and MaBSTOA), and its receipts from many of these sources are pledged for the payment of Transportation Revenue Bonds. The Transportation Resolution provides that bondholders are to be paid from pledged revenues prior to the payment of operating or other expenses, as described in more detail below. MTA has covenanted to impose fares and other charges so that pledged revenues, together with other available moneys, will be sufficient to cover all debt service and operating and capital costs of the systems. See “Factors Affecting Revenues—Ability to Comply with Rate Covenant and Pay Operating and Maintenance Expenses” below.

TRB Table 2 sets forth the following for the five years ended December 31, 2008:

• by general category, the amount of pledged revenues (calculated in accordance with the Transportation

Resolution). A general description of the pledged revenues in the general categories referenced in TRB Table 2 follows the table, and a more detailed description is set forth in this Appendix A in Part 3 under the heading “REVENUES OF THE RELATED ENTITIES,” and

• the amount of transit, commuter and MTA Bus operating expenses.

TRB Table 2 is based on the historical audited financial statements of MTA and its subsidiaries, MTA Long Island

Rail Road, MTA Metro-North Railroad and MTA Bus, and MTA New York City Transit and its subsidiary MaBSTOA. The audited financial statements for MTA and MTA New York City Transit for the last two years covered by TRB Table 2 are included herein by specific cross-reference and should be read in connection with this information. This information in TRB Table 2 may not be indicative of future results of operations and financial condition. TRB Table 2 does not include MTA Bus information prior to 2006 since MTA Bus signed the Interagency Agreement effective as of April 1, 2006. The information contained in the table has been prepared by MTA management based upon the historical financial statements and notes.

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TRB Table 2 Summary of Pledged Revenues (Calculated in Accordance with the Transportation Resolution) and Expenses

Historical Cash Basis (in millions)


2004 2005 2006

2007

2008

Revenues from Systems Operations

Fares from Transit System $2,567 $2,668 $2,778 $2,857 $3,054

Fares from Commuter System 819 881 911 956 1,010

Fares from MTA Bus N/A N/A 104 160 180

Other Income(1) 245 129 79 210 148

Subtotal – Operating Revenues 3,631 3,678 3,872 4,183 4,392

Revenues from MTA Bridges and Tunnels Surplus 377 477 435 406 359 MTA Bridges and Tunnels – Refund of Excess Debt Service Payments 0 0 0 0 0

Revenues from Governmental Sources

State and Local General Operating Subsidies 377 415 391 396 396

Special Tax-Supported Operating Subsidies

DTF Excess(2) 411 361 391 363 345

MMTOA Receipts 736 946 1,219 1,576 1,651

Urban Tax 344 551 669 883 523

Excess Mortgage Recording Taxes 163 193 249 27 214

Subtotal Special Tax-Supported Operating Subsidies 1,654 2,051 2,528 2,849 2,733

Station Maintenance and Service Reimbursements 311 349 376 410 404

City Subsidy for MTA Bus N/A N/A 162 187 285

Revenues from Investment of Capital Program Funds(3) 26 52 66 71 41

Subtotal – Non-Operating Revenues(4) 2,745 3,344 3,958 4,320 4,218

Total Transportation Resolution Pledged Revenues $6,376 $7,022 $7,830 $8,504 $8,610

Debt Service $389 $506 $629 $681 $528

Transit Operating Expenses $4,198 $4,483 $4,788 $5,454 $4,789

Commuter Operating Expenses $1,609 $1,632 $1,731 $1,954 $2,060

MTA Bus Operating Expenses N/A N/A

$315 $387 $413

Total Operating Expenses $5,807 $6,115 $6,834 $7,795 $7,262

Total Operating Expenses and Debt Service $6,196 $6,621 $7,463 $8,476 $7,790

(1) Other income in the case of the Transit System includes advertising revenue, interest income on certain operating funds, station concessions,

Transit Adjudication Bureau collections, rental income and miscellaneous. Other income in the case of the Commuter System includes advertising revenues, interest income on certain operating funds, concession revenues (excluding Grand Central Terminal and Pennsylvania Station concessions), rental income and miscellaneous. In December 2004, MTA provided MTA New York City Transit with a $13 million subsidy from operating funds.

(2) Calculated by subtracting the debt service payments on the Dedicated Tax Fund Bonds from the MTTF Receipts described in Part 4 of this APPENDIX A under the caption “DEDICATED TAX FUND BONDS.”

(3) Represents investment income on capital program funds held for the benefit of the Transit and Commuter Systems on an accrual basis. (4) Sum of (a) Revenues from MTA Bridges and Tunnels Surplus, (b) MTA Bridges and Tunnels – Refund of Excess Debt Service Payments, (c)

Revenues from Governmental Sources (including State and Local General Operating Subsidies and Special Tax-Supported Operating Subsidies), (d) Station Maintenance and Service Reimbursements, (e) City Subsidy for MTA Bus and (f) Revenues from Investment of Capital Program Funds.

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The following should be noted in TRB Table 2: • In 2005, the level of fares increased on February 27 for the Transit System and on March 1 for the Commuter

System. • Other Income in 2004 includes World Trade Center and other insurance settlement moneys. Other Income for

2006 and 2007 were affected by the timing of actual receipts by transit. • MTA Bridges and Tunnels Surplus increased in 2005 based upon the toll increases that became effective on

March 13, 2005.

• Beginning in 2003, MTA receives annually four quarters of MMTOA Receipts, with the first quarter of each succeeding year’s receipts similarly advanced. MTA continues to monitor the effect of not having MMTOA Receipts available during the first quarter of the calendar year on its cash flow needs to determine if future working capital borrowings may be necessary. The increased amount of MMTOA Receipts in 2005 reflects the imposition of an additional 1/8% regional sales tax commencing June 1, 2005. MMTOA receipts increased every year between 2005 and 2008 due to increased tax collections and additional appropriations to MTA. In 2009, however, these receipts are projected to decrease, largely the result of declining corporate surcharge tax collections.

• The “Urban Tax” collection reflects the activity level of certain residential and commercial real estate

transactions in the City. Mortgage recording tax and urban tax proceeds from 2004 through 2007 reflect the very high level of real estate sale and refinancing activity during those years. These collections slowed considerably in 2008 and are declining even further in 2009.

• Excess Mortgage Recording Taxes – Excess mortgage recording taxes were available for Transit and Commuter

Systems purposes after the payment of MTA Headquarters Expenses. However, due to declining mortgage recording taxes receipts and increasing MTA Headquarters Expenses, the current Financial Plan provides for no Excess Mortgage Recording Tax transfers to transit and commuter.

• Revenues from Investment of Capital Program Funds – substantially all of the investment income is generated

from bond proceeds, such as funds held in anticipation of expenditure on project costs.

• Operating Expenses – transit and commuter operating expenses increased from 2007 to 2008 due to additional costs for health and welfare, pensions, fringe benefits, energy, paratransit service contracts, and maintenance and other operating contracts.

Description of Pledged Revenues

Each of the following pledged revenues is described in more detail in this Appendix A in Part 3 under the caption “REVENUES OF THE RELATED ENTITIES”:

• Fares and Tolls – Transit System Fares, • Fares and Tolls – Transit System Fare Reimbursements from the City, • Fares and Tolls – Commuter System Fares, • State and Local General Operating Subsidies, • State Special Tax Supported Operating Subsidies, • MTA Bridges and Tunnels Surplus, • Financial Assistance and Service Reimbursements from Local Municipalities, and • Miscellaneous Revenues.

Pledged revenues also include payments made by the City under its agreement with MTA Bus to reimburse MTA

Bus the difference between the actual cost of operation of the City Bus Routes (other than certain capital costs) and all revenues and subsidies received by MTA Bus and allocable to the operation of the City Bus Routes, as further described under the caption “MTA BUS COMPANY” in Part 2. Factors Affecting Revenues

Ridership. The level of fare revenues depends to a large extent on MTA’s ability to maintain and/or increase ridership levels on the Transit, Commuter and MTA Bus Systems. Those ridership levels are affected by safety and the

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quality and efficiency of systems operations, as well as by financial and economic conditions in the New York metropolitan area.

Fare Policy. MTA determines the rate or rates of fares charged to users of the Commuter System and MTA Bus

system, and MTA New York City Transit and MaBSTOA, together with MTA, do the same for the Transit System. After adopting operating expense budgets and assessing the availability of governmental subsidies, each makes a determination of fares necessary to operate on a self-sustaining cash basis in compliance with State law and covenants in the Transportation Resolution. Considering the impact of increased fares on riders and on the regional economy, MTA’s policy is to attempt to reduce costs or obtain additional revenues from other sources, mainly governmental sources, before increasing fares. As a result, even though MTA does not generally need other governmental approvals before setting fares, the amount and timing of fare increases may be affected by the Federal, State and local government financial conditions, as well as by budgetary and legislative processes. MTA’s obligation to obtain approval of fare increases on the New Haven line from CDOT can also affect the amount and timing of fare increases.

Ability to Comply with Rate Covenant and Pay Operating and Maintenance Expenses. The Transit, Commuter and

MTA Bus Systems have depended, and are expected to continue to depend, upon government subsidies to meet capital and operating needs. Thus, even though MTA is legally obligated by the Transportation Resolution’s rate covenant to raise fares sufficiently to cover all capital and operating costs, there can be no assurance that there is any level at which Transit, Commuter and MTA Bus Systems fares would produce revenues sufficient to comply with the rate covenant, particularly if the current level (or the assumed level in the budget prepared in connection with 2009 and the forecasts prepared in connection with 2010, 2011 and 2012) of collection of dedicated taxes, operating subsidies, and expense reimbursements were to be discontinued or substantially reduced.

Operating Results and Projections. Based upon the adoption of the 2009-2012 Financial Plan, the budgets of the

Related Entities are expected to be substantially in balance through 2009, but there are expected to be substantial gaps thereafter. Any of the Transit System, the Commuter System or MTA Bus or all of them may be forced to institute additional cost reductions (which, in certain circumstances, could affect service which, in turn, could adversely affect revenues) or take other additional actions to close projected budget gaps, which could include raising fares.

2009-2012 Financial Plan. The 2009-2012 Financial Plan, the 2005-2009 Capital Program and prior and future

Capital Programs are interrelated, and any failure fully to achieve the various components of these plans could have an adverse impact on one or more of the other proposals contained in the 2009-2012 Financial Plan, the 2005-2009 Capital Program and prior and future Capital Programs, as well as on pledged revenues. See “FINANCIAL PLANS AND CAPITAL PROGRAMS” in Part 3.

MTA Bridges and Tunnels Operating Surplus. The amount of MTA Bridges and Tunnels operating surplus to be

used for the Transit and Commuter Systems is affected by a number of factors, including traffic volume, the timing and amount of toll increases, the operating and capital costs of MTA Bridges and Tunnels Facilities, and the amount of debt service payable from its operating revenues, including debt service on obligations issued for the benefit of MTA’s affiliates and subsidiaries and for MTA Bridges and Tunnels’ own capital needs.

Government Assistance. The level of government assistance to MTA may be affected by several different factors,

such as:

• Subsidy payments by the State may be made only if and to the extent that appropriations have been made by the Legislature, and money is available to fund those appropriations.

• The Legislature may not bind or obligate itself to appropriate revenues during a future legislative session, and

appropriations approved during a particular legislative session generally have no force or effect after the close of the State fiscal year for which the appropriations are made.

• The State is not bound or obligated to continue to pay operating subsidies to the Transit, Commuter or MTA

Bus Systems or to continue to impose any of the taxes currently funding those subsidies.

• The financial condition of the States of New York and Connecticut, and the City and counties in the Transportation District, could affect the ability or willingness of the States and local governments to continue to provide general operating subsidies, the City and local governments to continue to provide reimbursements and station maintenance payments, and the State to continue to make special appropriations.

• Successful court challenges to the State taxes that are the sources of various State and City operating subsidies

to MTA could adversely affect the amount of pledged revenues generated by such State taxes. A-94

Security – General

Transportation Revenue Bonds are MTA’s special obligations payable as to principal (including sinking fund installments), redemption premium, if any, and interest from the security, sources of payment, and funds specified in the Transportation Resolution.

The payment of principal (including sinking fund installments, if any), redemption premium, if any, and interest on

the Transportation Revenue Bonds is secured by, among other sources described below, the transportation revenues discussed in the preceding section which are, together with certain other revenues, referred to as “pledged revenues.”

Holders of Transportation Revenue Bonds are to be paid prior to the payment, from pledged revenues, of operating

or other expenses of MTA, MTA New York City Transit, MaBSTOA, MTA Long Island Rail Road, MTA Metro-North Railroad and MTA Bus. However, MTA’s ability to generate major portions of the pledged revenues depends upon its payment of operating and other expenses.

MTA Transportation Revenue Bonds are not a debt of the State or the City, or any other local governmental unit.

MTA has no taxing power.

Pledge Effected by the Resolution

The Transportation Resolution provides that there are pledged to the payment of principal and redemption premium of, interest on, and sinking fund installments for, the Transportation Revenue Bonds and Parity Debt, in accordance with their terms and the provisions of the Transportation Resolution the following, referred to as the “trust estate”:

• all pledged revenues as described above; • the net proceeds of certain agreements pledged by MTA to the payment of transit and commuter capital projects; • the proceeds from the sale of Transportation Revenue Bonds, until those proceeds are paid out for an authorized

purpose; • all funds, accounts and subaccounts established by the Transportation Resolution (except those established by a

supplemental obligation resolution for variable interest rate obligations, put obligations, parity debt, subordinated contract obligations or subordinated debt); and

• the Interagency Agreement dated as of April 1, 2006, among MTA, MTA Long Island Rail Road, MTA Metro-North Railroad, MTA Bus, MTA New York City Transit and MaBSTOA.

The Trustee may directly enforce an undertaking to operate the Transit System, the Commuter System or MTA Bus to ensure compliance with the Transportation Resolution.

Under the Transportation Resolution, the operators of the Transit, Commuter and MTA Bus Systems are obligated

to transfer to the Trustee for deposit into the Revenue Fund virtually all pledged revenues as soon as practicable following receipt, or with respect to revenues in the form of cash and coin, immediately after being counted and verified. The pledge of money located in the State of Connecticut may not be effective until that money is deposited under the Transportation Resolution. Flow of Revenues

The Transportation Resolution creates the following funds and accounts:

• Revenue Fund (held by the Trustee), • Debt Service Fund (held by the Trustee), and • Proceeds Fund (held by MTA). The Transportation Resolution requires the trustee promptly upon receipt of the pledged revenues in the Revenue

Fund, to deposit the revenues into the following funds and accounts, in the amounts and in the order of priority, as follows:

• to the debt service accounts, the net amount, if any, required to make the amount in the debt service accounts

equal to the accrued debt service for Transportation Revenue Bonds and Parity Debt to the last day of the current calendar month;

• to pay, or accrue to pay, principal of and interest on any Subordinated Indebtedness or for payment of amounts due under any Subordinated Contract Obligation;

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• to MTA for deposit in the Proceeds Fund, as directed by one of MTA’s authorized officers, to fund Capital Costs of the Transit and Commuter Systems; and

• to accounts held by MTA or any of the Related Transportation Entities for payment of operating expenses or any other authorized purpose.

All amounts paid out by MTA or the Trustee either for an authorized purpose (excluding transfers to any other

pledged fund or account) or under the last bullet point above are free and clear of the lien and pledge created by the Transportation Resolution.

TRANSPORTATION REVENUE OBLIGATIONS - FLOW OFPLEDGED REVENUES

PLEDGED REVENUES

REVENUE FUND(Held by the Trustee)

BOND AND PARITY DEBTDEBT SERVICE ACCOUNTS

(Held by the Trustee)

SUBORDINATED INDEBTEDNESS ANDSUBORDINATED CONTRACT

OBLIGATIONS

PROCEEDS FUND(Held by MTA)

OPERATING EXPENSES OR ANYOTHER AUTHORIZED PURPOSE

Normal Flow

Discretionary Flow

The following chart illustrates the basic elements of the flow of revenues described above:

TransportationResolution

Funds

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Covenants

Rate Covenants. MTA must fix the transit and commuter and MTA Bus fares and other charges and fees to be sufficient, together with other money legally available or expected to be available, including from government subsidies

• to pay the debt service on all the Transportation Revenue Bonds; • to pay any Parity Debt; • to pay any Subordinated Indebtedness and amounts due on any Subordinated Contract Obligations; and • to pay, when due, all operating and maintenance expenses and other obligations of its transit and commuter

affiliates and subsidiaries.

Operating and Maintenance Covenants. • MTA, MaBSTOA, MTA New York City Transit, MTA Bus, MTA Metro-North Railroad and MTA Long

Island Rail Road are required at all times to operate, or cause to be operated, the systems properly and in a sound and economical manner and maintain, preserve, reconstruct and keep the same or cause the same to be maintained, preserved, reconstructed and kept in good repair, working order and condition.

• Nothing in the Transportation Resolution prevents MTA from ceasing to operate or maintain, or from leasing or

disposing of, all or any portion of the systems if, in MTA’s judgment it is advisable to do so—if the operation is not essential to the maintenance and continued operation of the rest of the systems and this arrangement does not materially interfere with MTA’s ability to comply with MTA’s rate covenants.

Additional Bonds. The Transportation Resolution permits MTA to issue additional Transportation Revenue Bonds

and to issue or enter into Parity Debt, from time to time, to pay or provide for the payment of qualifying costs, without meeting any specific debt-service-coverage level, as long as MTA certifies to meeting the rate covenant described above for the year in which the additional debt is being issued. Under the Transportation Resolution, MTA may only issue additional Transportation Revenue Bonds for the Transit and Commuter Systems if those bonds are issued to fund projects pursuant to a Review Board-approved MTA Capital Program.

There is no covenant with bondholders limiting the aggregate principal amount of additional Transportation

Revenue Bonds or Parity Debt that MTA may issue. There is a limit under current New York law that covers the Transportation Revenue Bonds and certain other securities. See “PUBLIC DEBT SECURITIES AND OTHER FINANCIAL INSTRUMENTS—General—Current Statutory Ceiling” above in this Part 4 for a description of the current statutory cap.

Refunding Bonds. MTA may issue Transportation Revenue Bonds to refund all or any portion of the Transportation

Revenue Bonds or Parity Debt. Non-Impairment. Under New York law, the State has pledged to MTA that it will not limit or change MTA’s powers

or rights in such a way that would impair the fulfillment of MTA’s promises to holders of the Transportation Revenue Bonds.

No Bankruptcy. New York law specifically prohibits MTA or the other Related Entities from filing a bankruptcy

petition under Chapter 9 of the U.S. Federal Bankruptcy Code. As long as any Transportation Revenue Bonds are outstanding, the State has covenanted not to change the law to permit MTA or its affiliates or subsidiaries to file such a petition.

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MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS

There are $6,521,045,000 aggregate principal amount of outstanding MTA Bridges and Tunnels Senior Revenue Bonds. The following MTA Bridges and Tunnels Senior Table 1 sets forth, on a cash basis, the debt service thereon as of March 31, 2009.

MTA Bridges and Tunnels Senior Table 1 Aggregate Senior Lien Debt Service

(in thousands) Year

Ending Aggregate December

31 Debt Service (1)(3)(4)

2009(2) $353,864 2010 451,422 2011 450,675 2012 451,125 2013 450,813 2014 449,599 2015 449,473 2016 449,369 2017 449,705 2018 445,420 2019 440,998 2020 441,284 2021 441,117 2022 440,999 2023 442,526 2024 441,115 2025 441,017 2026 441,271 2027 441,321 2028 441,190 2029 441,061 2030 441,202 2031 441,062 2032 409,344 2033 164,965 2034 164,980 2035 164,992 2036 156,357 2037 156,358 2038 155,133 Total $11,509,757

(1) Total may not add due to rounding. Debt service payable on January 1 of each year is included in the prior year’s debt service. (2) Takes into account the effects during 2009 of the cash defeasance. (3) Includes the following variable rate assumptions for debt service:

Series 2001B, Series 2001C, Series 2002F Bonds, a portion of the Series 2003B Bonds: assumes net payments made by MTA Bridges and Tunnels under the respective swap agreements relating thereto and a variable interest rate of 4.0% per annum on the effective swap termination date through final maturity.

The remaining portion of the Series 2003B, Series 2005A and Series 2008B Bonds (after Reset Dates): assumes a variable interest rate of 4.0% per annum.

Series 2005B-2, B-3 and B-4 Bonds: assumes interest at a rate of 3.513% per annum based on the related interest rate swaps through January 1, 2012 and 3.076% per annum based on the related interest rate swaps from January 1, 2012 through final maturity.

Due to the effects of volatile conditions in the market affecting all auction rate securities and other variable rate bonds, the recent interest rates to the MTA Bridges and Tunnels for these variable rate securities have at times been higher than the assumed 4.0% rate. However, based on historical averages and mitigating actions taken as well as actions expected to be taken by the MTA Bridges and Tunnels, MTA Bridges and Tunnels continues to believe that its 4.0% variable rate assumption is reasonable for long-term cost calculations. (4) Interest calculated at a rate of 2.00% through the Mandatory Tender Date and 6.00% thereafter on the Series 2009A-1 Bonds.

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Sources of Payment

MTA Bridges and Tunnels receives its revenues from all tolls, rates, fees, charges, rents, proceeds of use and occupancy insurance on any portion of its tunnels, bridges and other facilities, including the net revenues of the Battery Parking Garage, and MTA Bridges and Tunnels’ receipts from those sources, after payment of MTA Bridges and Tunnels’ operating expenses, are pledged to the holders of the MTA Bridges and Tunnels Senior Revenue Bonds for payment, as described below.

MTA Bridges and Tunnels is required to fix and collect tolls for the MTA Bridges and Tunnels Facilities, and MTA

Bridges and Tunnels’ power to establish toll rates is not subject to the approval of any governmental entity. For more information relating to MTA Bridges and Tunnels’ power to establish tolls, see “RIDERSHIP AND FACILITIES USE – Toll Rates” in Part 3.

MTA Bridges and Tunnels Senior Table 2 sets forth, by MTA Bridges and Tunnels Facility, the amount of revenues for each of the last five years, as well as operating expenses.

MTA Bridges and Tunnels Senior Table 2

Historical Revenues, Operating Expenses and Senior Lien Debt Service

(in thousands)

Years Ended December 31, 2004 2005 2006 2007 2008 Bridge and Tunnel Revenues:

Robert F. Kennedy Bridge $247,937 $280,516 $288,301 $285,847 $287,877 Verrazano-Narrows Bridge 246,322 267,276 274,100 272,837 278,906 Bronx Whitestone Bridge 187,231 188,808 186,384 200,076 212,125 Throgs Neck Bridge 184,338 210,242 223,756 217,958 219,855 Henry Hudson Bridge 40,149 43,920 44,901 44,779 44,126 Marine Parkway Gil Hodges Memorial Bridge 10,102 11,234 11,536 11,635 12,019 Cross Bay Veterans’ Memorial Bridge 9,477 10,988 11,630 12,090 12,212 Queens Midtown Tunnel 107,067 121,666 127,075 129,347 131,264 Brooklyn-Battery Tunnel 64,365 70,294 73,868 75,980 75,590

Total Bridge and Tunnel Revenues: $1,096,988 $1,204,944 $1,241,551 $1,250,549 $1,273,974 Investment Income and Other(1) 38,376 60,102 31,603 23,885 23,911 Total Revenues $1,135,364 $1,265,046 $1,273,154 $1,274,434 $1,297,885 Operating Expenses(2)

Personnel Costs $158,403 $173,549 $183,268 $196,755 $207,305 Maintenance and Other Operating Expenses 160,812 170,123 169,642 172,270 200,686

Total Operating Expenses $319,215 $343,672 $352,910 $369,025 $407,991 Net Revenues Available for Debt Service $816,149 $921,374 $920,244 $905,409 $889,894 MTA Bridges and Tunnels Senior Lien Debt Service $251,139 $284,462 $300,450 $313,042 $354,688 Senior Lien Coverage 3.25x 3.24x 3.06x 2.89x 2.51x

(1) Includes the net revenues from the Battery Parking Garage, as well as E-ZPass administrative fees and miscellaneous other revenues. Investment

earnings include interest earned on bond funds, including debt service and debt service reserve funds that were applied to the payment of debt service as follows for the years 2004 through 2008, respectively: $4,048; $5,578; $5,044; $5,334 and $6,082. The amounts set forth in this footnote, as well as all of MTA Bridges and Tunnels Senior Table 2, are derived from MTA Bridges and Tunnels’ audited financial statements for the years 2004 through 2008.

(2) Excludes depreciation and other post-employment benefits other than pensions.

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The following should be noted in MTA Bridges and Tunnels Senior Table 2:

• Bridge and Tunnel Revenues – In 2003, crossing charges were increased effective May 18, 2003. In 2005, crossing charges were increased effective March 13, 2005 and in 2008 crossing charges were increased effective March 16, 2008.

• Investment Income and Other –For 2003, other income includes non-recurring revenues of $37 million in

security reimbursements and $24.6 million in World Trade Center insurance settlement proceeds allocable to MTA Bridges and Tunnels. For 2005, other income includes $25.9 million in security reimbursements and $9.5 million relating to the $1 per month account maintenance fee that MTA Bridges and Tunnels imposed on all E-ZPass subscribers effective July 1, 2005. Legislation enacted with the State’s budget for State Fiscal Year 2006-07 prevents MTA Bridges and Tunnels from charging that fee effective June 1, 2006. Prior to 2006, MTA Bridges and Tunnels was reimbursed for security expenses by MTA Headquarters. Since these are ongoing expenses, all security programs were included in MTA Bridges and Tunnels’ baseline Financial Plan beginning in 2006, thus eliminating the need for reimbursement.

• Operating Expenses—Personnel Costs – The 2003 increase in personnel costs was caused by additional

expenditures for security staff, worker’s compensation adjustments and health and welfare benefits rate increases. 2004 personnel costs were marginally lower. The 2005 increase in personnel costs was caused by worker’s compensation and pension cost adjustments. The 2006 increase in personnel costs was caused by increases in salaries and wages, health and welfare, and pension costs. The 2007 and 2008 increases in personnel costs were caused by increases in salaries and wages and pension costs.

• Operating Expenses—Maintenance and Other Operating Expenses – In 2003, the following major costs

were more than in 2002: major maintenance (consisting of additional roadway and standpipe repair on the Verrazano) – $9.1 million; and bridge painting – $6.3 million. In 2004, non-labor expenses were 4.5% lower than in 2003 due to a decrease in the required number of E-ZPass tag purchases. In 2005, major maintenance and bridge painting were more than in 2004. In 2008 the major increases were due to increases in major maintenance.


MTA Bridges and Tunnels Senior Revenue Bonds are general obligations of MTA Bridges and Tunnels payable solely from the trust estate (described below) pledged for the payment of the Bonds and Parity Debt pursuant to the terms of the MTA Bridges and Tunnels Senior Resolution, after the payment of Operating Expenses.

MTA Bridges and Tunnels has filed summaries of certain provisions of the MTA Bridges and Tunnels Senior

Resolution, including certain defined terms used therein, with the NRMSIRS identified under “TRANSPORTATION REVENUE BONDS – General,” all of which are incorporated by specific cross-reference herein. In addition, copies of the summaries can be obtained on MTA’s website at www.mta.info/mta/investor/index.html or from the MTA Finance Department at 347 Madison Avenue, New York, New York 10017.

Capitalized terms used under this caption “MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS” not

otherwise defined herein have the meanings set forth in the MTA Bridges and Tunnels Senior Resolution, except that the term “MTA Bridges and Tunnels” is used herein in place of the definition “TBTA.” So, for example, the term “MTA Bridges and Tunnels Facilities” as used herein is referred to in the MTA Bridges and Tunnels Senior Resolution and in the summaries thereof as “TBTA Facilities.”

MTA Bridges and Tunnels Senior Revenue Bonds are not a debt of the State or The City of New York, or any local

governmental unit. MTA Bridges and Tunnels has no taxing power. Pledge Effected by the MTA Bridges and Tunnels Senior Resolution

The Bonds and Parity Debt issued in accordance with the MTA Bridges and Tunnels Senior Resolution are secured by a net pledge of Revenues after the payment of Operating Expenses.

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Pursuant to, and in accordance with, the MTA Bridges and Tunnels Senior Resolution, MTA Bridges and Tunnels

has pledged to the holders of the MTA Bridges and Tunnels Senior Revenue Bonds a “trust estate,” which consists of

• Revenues, • the proceeds from the sale of the MTA Bridges and Tunnels Senior Revenue Bonds, and • all funds, accounts and subaccounts established by the MTA Bridges and Tunnels Senior Resolution (except

those established by a supplemental obligation resolution for variable interest rate obligations, put obligations, parity debt, subordinated contract obligations or subordinated debt).

Revenues and Additional MTA Bridges and Tunnels Projects

Revenues from MTA Bridges and Tunnels Facilities. MTA Bridges and Tunnels does not currently derive any significant recurring Revenues from any sources other than the MTA Bridges and Tunnels Facilities and investment income. Income from the MTA Bridges and Tunnels Transit and Commuter Project (the Transit and Commuter Systems) is not derived by or for the account of MTA Bridges and Tunnels; consequently, no revenues from any portion of the MTA Bridges and Tunnels Transit and Commuter Project are pledged to the payment of debt service on the MTA Bridges and Tunnels Senior Revenue Bonds.

Additional MTA Bridges and Tunnels Projects that can become MTA Bridges and Tunnels Facilities. If MTA

Bridges and Tunnels is authorized to undertake another project, whether or not a bridge or tunnel, that project can become an MTA Bridges and Tunnels Facility for purposes of the MTA Bridges and Tunnels Senior Resolution if it is designated as such by MTA Bridges and Tunnels and it satisfies certain conditions more fully described under “SUMMARY OF CERTAIN PROVISIONS OF THE TBTA RESOLUTION – Additional TBTA Facilities” in the summaries of documents.

The Convention Center Project is not and cannot become an Additional MTA Bridges and Tunnels Project, and no

MTA Bridges and Tunnels Senior Revenue Bonds may be issued under the MTA Bridges and Tunnels Senior Resolution to finance the Convention Center Project. The revenues and expenses of the Convention Center Project are also not included in MTA Bridges and Tunnels’ financial statements or projections.

Flow of Revenues

The MTA Bridges and Tunnels Senior Resolution establishes the following funds and accounts, each held by MTA Bridges and Tunnels:

• Revenue Fund, • Proceeds Fund, • Debt Service Fund, and • General Fund. Under the MTA Bridges and Tunnels Senior Resolution, MTA Bridges and Tunnels is required to pay into the

Revenue Fund all Revenues as and when received and available for deposit. MTA Bridges and Tunnels is required to pay out from the Revenue Fund, on or before the 25th day of each calendar

month, the following amounts in the following order of priority: • payment of reasonable and necessary Operating Expenses or accumulation in the Revenue Fund as a reserve (i)

for working capital, (ii) for such Operating Expenses the payment of which is not immediately required, including amounts determined by MTA Bridges and Tunnels to be required as an operating reserve, or (iii) deemed necessary or desirable by MTA Bridges and Tunnels to comply with orders or rulings of an agency or regulatory body having lawful jurisdiction;

• transfer to the Debt Service Fund, the amount, if any, required so that the balance in the fund is equal to

Accrued Debt Service to the last day of the current calendar month; provided, however, that in no event shall the amount to be so transferred be less than the amount required for all payment dates occurring prior to the 25th day of the next succeeding calendar month;

• transfer to another person for payment of, or accrual for payment of, principal of and interest on any

Subordinated Indebtedness or for payment of amounts due under any Subordinated Contract Obligations; and

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• transfer to the General Fund any remaining amount. All amounts paid out by MTA Bridges and Tunnels for an authorized purpose (excluding transfers to any other

pledged Fund or Account), or withdrawn from the General Fund in accordance with the MTA Bridges and Tunnels Senior Resolution, are free and clear of the lien and pledge created by the MTA Bridges and Tunnels Senior Resolution.

Under the MTA Bridges and Tunnels Senior Resolution, MTA Bridges and Tunnels is required to use amounts in

the General Fund to make up deficiencies in the Debt Service Fund and the Revenue Fund, in that order. Subject to the preceding sentence and any lien or pledge securing Subordinated Indebtedness, the MTA Bridges and Tunnels Senior Resolution authorizes MTA Bridges and Tunnels to release amounts in the General Fund to be paid to MTA Bridges and Tunnels free and clear of the lien and pledge created by the MTA Bridges and Tunnels Senior Resolution.

MTA Bridges and Tunnels is required by law to transfer amounts released from the General Fund to MTA, and a

statutory formula determines how MTA allocates that money between the Transit and Commuter Systems. Rate Covenant

Under the MTA Bridges and Tunnels Senior Resolution, MTA Bridges and Tunnels is required at all times to establish, levy, maintain and collect, or cause to be established, levied, maintained and collected, such tolls, rentals and other charges in connection with the MTA Bridges and Tunnels Facilities as shall always be sufficient, together with other money available therefor (including the anticipated receipt of proceeds of sale of Obligations or other bonds, notes or other obligations or evidences of indebtedness of MTA Bridges and Tunnels that will be used to pay the principal of Obligations issued in anticipation of such receipt, but not including any anticipated or actual proceeds from the sale of MTA Bridges and Tunnels Facilities), to equal or exceed in each calendar year the greater of

• an amount equal to the sum of amounts necessary in such calendar year

o to pay all Operating Expenses of MTA Bridges and Tunnels, plus o to pay Calculated Debt Service, as well as the debt service on all Subordinated Indebtedness and all

Subordinated Contract Obligations, plus o to maintain any reserve established by MTA Bridges and Tunnels pursuant to the MTA Bridges and

Tunnels Senior Resolution, in such amount as may be determined from time to time by MTA Bridges and Tunnels in its judgment, or

• an amount such that Revenues less Operating Expenses shall equal at least 1.25 times Calculated Debt Service

on all senior lien Bonds for such calendar year. For a more complete description of the rate covenant and a description of the minimum tolls that can be charged at

the MTA Bridges and Tunnels Facilities, see “SUMMARY OF CERTAIN PROVISIONS OF THE TBTA RESOLUTION – Rates and Fees” in the summaries of documents.

Additional Bonds

Under the provisions of the MTA Bridges and Tunnels Senior Resolution, MTA Bridges and Tunnels may issue one or more series of Additional Bonds on a parity with the outstanding MTA Bridges and Tunnels Senior Revenue Bonds to provide for Capital Costs.

Certain Additional Bonds for MTA Bridges and Tunnels Facilities. MTA Bridges and Tunnels may issue Additional

Bonds without satisfying any earnings or coverage test for the purpose of providing for Capital Costs relating to MTA Bridges and Tunnels Facilities for the purpose of keeping such MTA Bridges and Tunnels Facilities in good operating condition or preventing a loss of Revenues or Revenues after payment of Operating Expenses derived from such MTA Bridges and Tunnels Facilities.

Additional Bonds for Other Purposes. MTA Bridges and Tunnels may issue Additional Bonds to pay or provide for

the payment of all or part of Capital Costs relating to any of the following purposes: • MTA Bridges and Tunnels Transit and Commuter Project, • any Additional MTA Bridges and Tunnels Project (that does not become a MTA Bridges and Tunnels Facility),

or

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• any MTA Bridges and Tunnels Facilities other than for the purposes set forth in the preceding paragraph. In the case of Additional Bonds issued other than for the improvement, reconstruction or rehabilitation of MTA

Bridges and Tunnels Facilities as described under the preceding heading, in addition to meeting certain other conditions, all as more fully described in “SUMMARY OF CERTAIN PROVISIONS OF THE TBTA RESOLUTION – Special Provisions for Capital Cost Obligations” in the summaries of documents, an Authorized Officer must certify that the historical Twelve Month Period Net Revenues are at least equal to 1.40 times the Maximum Annual Calculated Debt Service on all senior lien Bonds, including debt service on the MTA Bridges and Tunnels Senior Revenue Bonds to be issued.

Refunding Bonds

MTA Bridges and Tunnels Senior Revenue Bonds may be issued for the purpose of refunding MTA Bridges and Tunnels Senior Revenue Bonds if (a) the Maximum Annual Calculated Debt Service (including the refunding MTA Bridges and Tunnels Senior Revenue Bonds then proposed to be issued but not including the MTA Bridges and Tunnels Senior Revenue Bonds to be refunded) is equal to or less than the Maximum Annual Calculated Debt Service on the MTA Bridges and Tunnels Senior Revenue Bonds as calculated immediately prior to the refunding (including the refunded MTA Bridges and Tunnels Senior Revenue Bonds but not including the refunding MTA Bridges and Tunnels Senior Revenue Bonds) or (b) the conditions referred to above under Additional Bonds for the category of MTA Bridges and Tunnels Senior Revenue Bonds being refunded are satisfied.

For a more complete description of the conditions that must be satisfied before issuing refunding Bonds, see

“SUMMARY OF CERTAIN PROVISIONS OF THE TBTA RESOLUTION – Refunding Obligations” in the summaries of documents.

Subordinate Obligations

The MTA Bridges and Tunnels Senior Resolution authorizes the issuance or incurrence of subordinate obligations. See “MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE BONDS” below.

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MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE BONDS

There are $2,021,100,000 aggregate principal amount of outstanding MTA Bridges and Tunnels Subordinate

Revenue Bonds. The following MTA Bridges and Tunnels Subordinate Table 1 sets forth, on a cash basis, the debt service thereon and on the MTA Bridges and Tunnels Senior Revenue Bonds March 31, 2009.

MTA Bridges and Tunnels Subordinate Table 1 -- Aggregate Senior and Subordinate Debt Service

(in thousands)

Year Ending December 31

MTA Bridges and Tunnels Senior Bond Debt Service (1) (2)

MTA Bridges and Tunnels Subordinate Debt Service (1) (4) (5)


Aggregate Debt Service (1)

(2) (4) (5) 2009(3) $353,864 $141,145 $495,009 2010 451,422 145,670 597,092 2011 450,675 145,256 595,931 2012 451,125 145,006 597,131 2013 450,813 144,941 595,754 2014 449,599 146,048 595,647 2015 449,473 145,060 594,533 2016 449,369 146,038 595,407 2017 449,705 145,784 595,489 2018 445,420 143,264 588,685 2019 440,998 145,929 586,926 2020 441,284 145,048 586,333 2021 441,117 145,951 587,068 2022 440,999 145,279 586,278 2023 442,526 146,158 588,683 2024 441,115 146,006 587,121 2025 441,017 145,937 586,953 2026 441,271 146,202 587,472 2027 441,321 146,184 587,505 2028 441,190 146,538 587,728 2029 441,061 146,385 587,447 2030 441,202 146,742 587,944 2031 441,062 146,765 587,827 2032 409,344 98,690 508,034 2033 164,965 0 164,965 2034 164,980 0 164,980 2035 164,992 0 164,992 2036 156,357 0 156,357 2037 156,358 0 156,358 2038 155,133 0 155,133 Total $11,509,757 $3,477,025 $14,956,782

(1) Totals may not add due to rounding. Debt service payable on January 1 of each year is included in the prior year’s debt service. (2) Includes assumptions set forth in connection with the MTA Bridges and Tunnels Senior Revenue Bonds. (3) Takes into account the effects during 2009 of the cash defeasance. (4) Includes the following variable rate assumptions for debt service: Series 2000AB and Series 2000CD at their respective swap rates. (5) Excludes debt service on $50 million of Series 2000CD redeemed on April 9, 2009.

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Sources of Payment

The revenues that are pledged to pay the MTA Bridges and Tunnels Subordinate Revenue Bonds are the same as the revenues that are pledged to pay the MTA Bridges and Tunnels Senior Revenue Bonds. See “MTA BRIDGES AND TUNNELS SENIOR REVENUE BONDS – Sources of Payment” above.

MTA Bridges and Tunnels Subordinate Table 2 sets forth, by MTA Bridges and Tunnels Facility, the amount of

revenues for each of the last five years, as well as operating expenses.

MTA Bridges and Tunnels Subordinate Table 2 Historical Revenues, Operating Expenses and Senior and Subordinate Debt Service

(in thousands) Years Ended December 31, 2004 2005 2006 2007 2008 Bridge and Tunnel Revenues:

Triborough Bridge $ 247,937 $280,516 $288,301 $285,847 $287,877 Verrazano-Narrows Bridge 246,322 267,276 274,100 272,837 278,906 Bronx-Whitestone Bridge 187,231 188,808 186,384 200,076 212,125 Throgs Neck Bridge 184,338 210,242 223,756 217,958 219,855 Henry Hudson Bridge 40,149 43,920 44,901 44,779 46,126 Marine Parkway Gil Hodges Memorial Bridge 10,102 11,234 11,536 11,635 12,019 Cross Bay Veterans’ Memorial Bridge 9,477 10,988 11,630 12,090 12,212 Queens Midtown Tunnel 107,067 121,666 127,075 129,347 131,264 Brooklyn-Battery Tunnel 64,365 70,294 73,868 75,980 73,590

Total Bridge and Tunnel Revenues: $1,096,988 $1,204,944 $1,241,551 $1,250,549 $1,273,974 Investment Income and Other(1) 38,376 60,102 31,603 23,885 23,911 Total Revenues $1,135,364 $1,265,046 $1,273,154 $1,274,434 $1,297,885 Operating Expenses(2)

Personnel Costs $158,403 $173,549 $183,268 $196,755 $207,305 Maintenance and Other Operating Expenses 160,812 170,123 169,642 172,270 200,686

Total Operating Expenses $319,215 $343,672 $352,910 $369,025 $407,991 Net Revenues Available for Debt Service $816,149 $921,374 $920,244 $905,409 $889,894 MTA Bridges and Tunnels Senior Lien Debt Service $251,139 $284,462 $300,450 $313,042 $354,688 Subordinate Bond Fund Investment Earnings $1,201 $1,384 $1,963 $1,949 $1,525 Net Revenues Available for Subordinate Debt Service(3) $566,211 $638,296 $621,757 $594,316 $536,731 Debt Service on Subordinate Revenue Bonds $138,257 $150,253 $154,114 $155,233 $154,839 Total Debt Service (Senior and Subordinate) $389,396 $434,715 $454,564 $468,275 $509.527 Combined Debt Service Coverage Ratio 2.10x 2.12x 2.02x 1.93x 1.75x

(1) Includes the net revenues from the Battery Parking Garage, as well as E-ZPass administrative fees and miscellaneous other revenues. Investment

earnings include interest earned on bond funds, including debt service and debt service reserve funds that were applied to the payment of debt service as follows for the years 2004 through 2008, respectively: $4,048; $5,578; $5,044; $5,334 and $6,082. The amounts set forth in this footnote, as well as all of MTA Bridges and Tunnels Subordinate Table 2, are derived from MTA Bridges and Tunnels’ audited financial statements for the years 2004 through 2008.

(2) Excludes depreciation and other post-employment benefits other than pensions.

(3) Does not include certain mortgage recording tax revenues that were pledged to the payment of MTA Bridges and Tunnels 1991 Mortgage Recording Tax Special Obligation Bonds that were refunded and defeased.

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The following should be noted in MTA Bridges and Tunnels Subordinate Table 2:

• Bridge and Tunnel Revenues – crossing charges were increased effective March 13, 2005 and in 2008 crossing charges were increased effective March 16, 2008.

• Investment Income and Other – For 2005, other income includes $25.9 million in security reimbursements and $9.5 million relating to the $1 per month account maintenance fee that MTA Bridges and Tunnels imposed on all E-ZPass subscribers effective July 1, 2005. Legislation enacted with the State’s budget for State Fiscal Year 2006-07 prevents MTA Bridges and Tunnels from charging that fee effective June 1, 2006. Prior to 2006, MTA Bridges and Tunnels was reimbursed for security expenses by MTA Headquarters. Since these are ongoing expenses, all security programs were included in MTA Bridges and Tunnels’ baseline Financial Plan beginning in 2006, thus eliminating the need for reimbursement.

• Operating Expenses – Personnel Costs – 2004 personnel costs were marginally lower than in 2002 and 2003. The 2005 increase in personnel costs was caused by worker’s compensation and pension cost adjustments. The 2006 increase in personnel costs was caused by increases in salaries and wages, health and welfare, and pension costs. The 2007 and 2008 increases in personnel costs were caused by increases in salaries and wages and pension costs.

• Operating Expenses – Maintenance and Other Operating Expenses – In 2004, non-labor expenses were 4.5% lower than in 2003 due to a decrease in the required number of E-ZPass tag purchases. In 2005, major maintenance and bridge painting were more than in 2004. In 2008 the major increases were due to increases in major maintenance.


MTA Bridges and Tunnels Subordinate Revenue Bonds are special obligations of MTA Bridges and Tunnels payable solely from the trust estate (described below) pledged for the payment of the MTA Bridges and Tunnels Subordinate Revenue Bonds and Parity Debt pursuant to the terms of the MTA Bridges and Tunnels Subordinate Resolution, after the payment of Operating Expenses and after payment of debt service as required by the MTA Bridges and Tunnels Senior Resolution.

MTA Bridges and Tunnels has filed summaries of certain provisions of the MTA Bridges and Tunnels Subordinate

Resolution, including certain defined terms used therein, with the NRMSIRS identified under “TRANSPORTATION REVENUE BONDS – GENERAL”, all of which are incorporated by specific cross-reference herein. In addition, copies of the summaries can be obtained on MTA’s website at www.mta.info/mta/investor/index.html or from the MTA Finance Department at 347 Madison Avenue, New York, New York 10017.

Capitalized terms used under this caption “MTA BRIDGES AND TUNNELS SUBORDINATE REVENUE

BONDS” not otherwise defined herein have the meanings set forth in the MTA Bridges and Tunnels Subordinate Resolution, except that the term “MTA Bridges and Tunnels” is used herein in place of the definition “TBTA.” So, for example, the term “MTA Bridges and Tunnels Facilities” as used herein is referred to in the MTA Bridges and Tunnels Subordinate Resolution and in the summaries thereof as “TBTA Facilities.”

MTA Bridges and Tunnels Subordinate Revenue Bonds are not a debt of the State or The City of New York, or any

local governmental unit. MTA Bridges and Tunnels has no taxing power.

Pledge Effected by the MTA Bridges and Tunnels Subordinate Resolution

The lien on the trust estate described below created by the MTA Bridges and Tunnels Subordinate Resolution is junior and subordinate to the lien created by the MTA Bridges and Tunnels Senior Resolution.

Pursuant to, and in accordance with, the MTA Bridges and Tunnels Subordinate Resolution, MTA Bridges and Tunnels has pledged to the holders of the MTA Bridges and Tunnels Subordinate Revenue Bonds a “trust estate,” which consists of

• Revenues (after the application of those Revenues as required by the MTA Bridges and Tunnels Senior Resolution, including the payment of Operating Expenses and MTA Bridges and Tunnels Senior Resolution debt service),

• the proceeds from the sale of the MTA Bridges and Tunnels Subordinate Revenue Bonds, and

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• all funds, accounts and subaccounts established by the MTA Bridges and Tunnels Subordinate Resolution (except those established by a supplemental obligation resolution for variable interest rate obligations, put obligations, parity debt, subordinated contract obligations or subordinated debt).

Revenues and Additional Subordinate MTA Bridges and Tunnels Projects

Revenues from MTA Bridges and Tunnels Facilities. MTA Bridges and Tunnels does not currently derive any significant recurring Revenues from any sources other than the MTA Bridges and Tunnels Facilities and investment income. Income from the MTA Bridges and Tunnels Transit and Commuter Project (the Transit and Commuter Systems) is not derived by or for the account of MTA Bridges and Tunnels; consequently, no revenues from any portion of the MTA Bridges and Tunnels Transit and Commuter Project are pledged to the payment of debt service on the MTA Bridges and Tunnels Subordinate Revenue Bonds.

For a discussion of other projects that MTA Bridges and Tunnels is authorized to undertake, see “MTA BRIDGES

AND TUNNELS – Authorized Projects of MTA Bridges and Tunnels” in Part 2. Additional Subordinate MTA Bridges and Tunnels Projects. One or more projects owned or to be owned by MTA

Bridges and Tunnels or another Related Entity may become an Additional Subordinate MTA Bridges and Tunnels Project without satisfying any earnings or coverage test if:

• MTA Bridges and Tunnels is authorized to undertake that project, and • the project is designated by MTA Bridges and Tunnels to be an Additional Subordinate MTA Bridges and

Tunnels Project.

Upon satisfaction of certain conditions, MTA Bridges and Tunnels is authorized to issue Subordinate Revenue Bonds to fund the Capital Costs of Additional Subordinate MTA Bridges and Tunnels Projects. See “Additional Subordinate Revenue Bonds” below.

Flow of Revenues

The MTA Bridges and Tunnels Subordinate Resolution establishes the following funds and accounts, each held by MTA Bridges and Tunnels:

• Proceeds Fund, and • Debt Service Fund MTA Bridges and Tunnels is required to transfer to the Debt Service Fund under the MTA Bridges and Tunnels

Subordinate Resolution, from time to time, but no less frequently than on or before the 25th day of each calendar month, from amounts as shall from time to time be available for transfer from the Revenue Fund under the MTA Bridges and Tunnels Senior Resolution, free and clear of the lien of the MTA Bridges and Tunnels Senior Resolution, the amount, if any, required so that the balance in the fund is equal to Accrued Debt Service to the last day of the current calendar month; provided, however, that in no event shall the amount to be so transferred be less than the amount required for all payment dates occurring prior to the 25th day of the next succeeding calendar month. Rate Covenant

MTA Bridges and Tunnels is required at all times to establish, levy, maintain and collect, or cause to be established, levied, maintained and collected, such tolls, rentals and other charges in connection with the MTA Bridges and Tunnels Facilities as shall always be sufficient, together with other money available therefor (including the anticipated receipt of proceeds of sale of Obligations or other bonds, notes or other obligations or evidences of indebtedness of MTA Bridges and Tunnels that will be used to pay the principal of Obligations issued in anticipation of such receipt, but not including any anticipated or actual proceeds from the sale of MTA Bridges and Tunnels Facilities), to equal or exceed in each calendar year the greater of

• an amount equal to the sum of amounts necessary in that calendar year o to pay all Operating Expenses of MTA Bridges and Tunnels, plus o to pay Calculated Debt Service on all senior lien and subordinate lien bonds and parity debt, plus o to maintain any reserve established by MTA Bridges and Tunnels pursuant to the MTA Bridges and

Tunnels Senior Resolution, in such amount as may be determined from time to time by MTA Bridges and Tunnels in its judgment, or

• an amount such that Revenues less Operating Expenses shall equal at least 1.10 times Calculated Debt Service on all senior lien and subordinate lien bonds and parity debt for such calendar year.

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For a more complete description of the rate covenant and a description of the minimum tolls that can be charged at the MTA Bridges and Tunnels Facilities, see “SUMMARY OF CERTAIN PROVISIONS OF THE TBTA RESOLUTION – Rates and Fees” and “SUMMARY OF CERTAIN PROVISIONS OF THE SUBORDINATE REVENUE RESOLUTION — Additional Provisions Relating to the Series 2002D and Series 2002E Bonds—Rate Covenant” in the summaries of documents.

Additional Subordinate Revenue Bonds

Under the provisions of the MTA Bridges and Tunnels Subordinate Resolution, MTA Bridges and Tunnels may issue one or more series of Additional Subordinate Revenue Bonds to pay or provide for the payment of all or part of Capital Costs relating to any of the following purposes:

• MTA Bridges and Tunnels Facilities, • MTA Bridges and Tunnels Transit and Commuter Project, or • any Additional Subordinate MTA Bridges and Tunnels Project. In addition to meeting certain other conditions, all as more fully described in “SUMMARY OF CERTAIN

PROVISIONS OF THE SUBORDINATE REVENUE RESOLUTION – Special Provisions for Capital Cost Obligations” in the summaries of documents, an Authorized Officer must certify that the historical Twelve Month Period Net Revenues are at least equal to 1.10 times the Combined Maximum Annual Calculated Debt Service for all MTA Bridges and Tunnels Subordinate Revenue Obligations, subordinate parity debt, MTA Bridges and Tunnels Senior Obligations and senior parity debt.

In addition, MTA Bridges and Tunnels covenants that, prior to the issuance of MTA Bridges and Tunnels Senior

Revenue Bonds, an Authorized Officer must certify that the historical Twelve Month Period Net Revenues are at least equal to 1.10 times the Combined Maximum Annual Calculated Debt Service for all MTA Bridges and Tunnels Subordinate Revenue Obligations, subordinate parity debt, MTA Bridges and Tunnels Senior Obligations and senior parity debt. See “SUMMARY OF CERTAIN PROVISIONS OF THE SUBORDINATE REVENUE RESOLUTION —Additional Provisions Relating to the Series 2002D and Series 2002E Bonds—Covenant Regarding Senior Resolution” in the summaries of documents.

Refunding Subordinate Revenue Bonds

MTA Bridges and Tunnels Subordinate Revenue Bonds may be issued for the purpose of refunding MTA Bridges and Tunnels Subordinate Revenue Bonds, subordinate parity debt, MTA Bridges and Tunnels Senior Revenue Bonds or senior parity debt if

• the Combined Maximum Annual Calculated Debt Service (including the refunding MTA Bridges and Tunnels Subordinate Revenue Bonds then proposed to be issued, but not including the MTA Bridges and Tunnels Subordinate Revenue Bonds, subordinate parity debt, MTA Bridges and Tunnels Senior Revenue Bonds or senior parity debt to be refunded) is equal to or less than the Combined Maximum Annual Calculated Debt Service as calculated immediately prior to the refunding (including the refunded MTA Bridges and Tunnels Subordinate Revenue Bonds, subordinate parity debt, MTA Bridges and Tunnels Senior Revenue Bonds or senior parity debt, but not including the refunding MTA Bridges and Tunnels Subordinate Revenue Bonds), or

• the conditions referred to above under “— Additional Subordinate Revenue Bonds” are satisfied. For a more complete description of the conditions that must be satisfied before issuing refunding MTA Bridges and

Tunnels Subordinate Revenue Bonds, see “SUMMARY OF CERTAIN PROVISIONS OF THE SUBORDINATE RESOLUTION – Refunding Subordinate Revenue Obligations” in the summaries of documents.

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DEDICATED TAX FUND BONDS

There are $3,636,250,000 aggregate principal amount of outstanding Dedicated Tax Fund Bonds. The following DTF Table 1 sets forth, on a cash basis, the debt service thereon as of March 31, 2009.

DTF Table 1 Aggregate Debt Service

(in thousands) Year Ending Aggregate March 31(1) Debt Service(2)(4)

2009(3) $247,131 2010 208,614 2011 270,771 2012 270,717 2013 270,853 2014 270,602 2015 270,325 2016 270,472 2017 270,505 2018 270,849 2019 269,046 2020 265,322 2021 265,721 2022 264,740 2023 264,315 2024 264,957 2025 263,976 2026 263,588 2027 262,970 2028 252,131 2029 262,404 2030 261,440 2031 259,856 2032 258,346 2033 254,598 2034 116,567 2035 71,411 2036 66,629 2037 43,909 2038 17,680 2039 17,678 2040 17,681 Total $6,905,802(5)

(1) Based on the State’s fiscal year ending March 31. (2) Total may not add due to rounding. (3) Takes into account affects during calendar year 2009 of the cash defeasance. (4) Assumes interest at a rate of 4.06% per annum on the Series 2002B Bonds until September 1, 2013 based on an interest rate swap relating thereto,

and 4.00% thereafter. Assumes interest at a rate of 4.00% per annum on the Series 2004B Bonds, and the Series 2008B Bonds. Assumes interest at a rate of 3.3156% per annum on the Series 2008A Bonds based on an interest rate swap relating thereto and an interest rate of 4.00% per annum for the unhedged portion or the Series 2008A Bonds. Due to the effects of the volatile conditions in the market affecting variable rate bonds, the recent interest rates to the MTA for these variable rate securities have at times been higher than the assumed 4% rate. However, based upon historical averages and mitigating actions taken or actions to be taken by the MTA, MTA continues to believe that its 4% variable rate assumption is reasonable for the long term cost calculations.

(5) MTA issued $1.25 billion additional DTF bonds on April 23, 2009. Please see “Recent Developments” for further information.

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Sources of Payment – Revenues from Dedicated Taxes

Under State law, MTA receives money from certain dedicated taxes and fees described in this section. This money is deposited into MTA’s Dedicated Tax Fund and is pledged by MTA for the payment of its Dedicated Tax Fund Bonds.

MTA Revenues from PBT, Motor Fuel Tax and Motor Vehicle Fees (“MTTF Receipts”). In 1991, as part of a

program to address the need for continued capital investment in the State’s transportation infrastructure, the State Legislature established a State fund, called the PBT Dedicated Tax Funds Pool, from which money is apportioned by statutory allocation under current State Tax Law to a State fund, called the Dedicated Mass Transportation Trust Fund (“MTTF”). Currently, portions of the following taxes and fees are deposited into the PBT Dedicated Tax Funds Pool, of which 34% is allocated to the MTTF for the benefit of MTA:

• A group of business privilege taxes imposed on petroleum businesses operating in the State (the “PBT Taxes”),

generally consisting of o a basic tax that varies based on product type, o a supplemental tax which, in general, is applied at a uniform rate, and o a petroleum business carrier tax.

A significant portion (currently, 80.3%) of net PBT receipts from the basic tax and all of the supplemental tax and the carrier tax are required by current law to be deposited in the PBT Dedicated Funds Pool.

• Motor fuel taxes on gasoline and diesel fuel. • Certain motor vehicle fees administered by the State Department of Motor Vehicles, including both registration

and non-registration fees. Effective October 1, 2005, certain registration and non-registration fees were increased. In the 2009-10 Enacted Budget, licenses and most registrations were increased by 25 percent. The revenues from this increase will be directed to the Dedicated Highway and Bridge Trust Fund. In addition, the fee for plate issuance was increased from $15 to $25. The revenues from this increase will be directed to the State’s General Fund.

Thirty-four percent (34%) of the PBT Dedicated Funds Pool is currently deposited in the MTTF for MTA’s benefit.

Subject to appropriation by the State Legislature, money in that account is required by law to be transferred to the MTA Dedicated Tax Fund, held by MTA. Amounts transferred from the MTTF Account to the MTA’s Dedicated Tax Fund constitute “MTTF Receipts.”

A more detailed description of the MTTF Receipts is set forth herein under the following headings herein:

• MTTF Receipts – Dedicated Petroleum Business Tax, • MTTF Receipts – Motor Fuel Tax, and • MTTF Receipts – Motor Vehicle Fees. MTA Revenues from Special Tax-Supported Operating Subsidies (“MMTOA Receipts”). Like other mass transit

systems in the nation, the Transit System and Commuter System have historically operated at a deficit and have been dependent upon substantial amounts of general operating subsidies from the State, as well as the City and Federal governments. Over time, the ongoing needs of State mass transportation systems led the State to supplement the general operating subsidies with additional operating subsidies supported by special State taxes.

Starting in 1980, in response to anticipated operating deficits of State mass transit systems, the State Legislature

enacted a series of taxes, portions of the proceeds of which have been and are to be deposited in a special State Fund – the Mass Transportation Operating Assistance Fund - to fund the operations of mass transportation systems. The Metropolitan Mass Transportation Operating Assistance Account, or MMTOA Account, was established in that State Fund to support operating expenses of transportation systems in the MTA Commuter Transportation District, including MTA New York City Transit, MaBSTOA and the commuter railroads operated by MTA’s subsidiaries, MTA Long Island Rail Road and MTA Metro-North Railroad. After payment of Section 18-b general operating assistance to the various transportation systems, MTA gets approximately 86% of the moneys deposited into the MMTOA Account, with the remaining 14% available to other transportation properties within the MTA Commuter Transportation District, such as MTA Long Island Bus and MTA Bus, which currently operates the routes formerly operated by the City private franchise bus lines.

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Since the creation of the MMTOA Account, MTA has requested and received in each year significant payments

from that Account in order to meet operating expenses of the Transit and Commuter Systems. It is expected that payments from the MMTOA Account will continue to be essential to the operations of the Transit and Commuter Systems. Although a variety of taxes have been used to fund the special tax-supported operating subsidies, the taxes levied for this purpose, which MTA refers to collectively as the “MMTOA Taxes,” currently include:

• MMTOA PBT. The products that are subject to the tax, the tax rates, and the transactions excluded from the tax are identical to those of the basic PBT tax dedicated to the PBT Dedicated Funds Pool and the MTTF Account in that Pool. Pursuant to State law, of the remaining 19.7% of the PBT Basic Tax that is not deposited into the PBT Dedicated Funds Pool, 55% (or 10.835% of the PBT Basic Tax collections) is deposited in the MMTOA Account.

• District Sales Tax. The District Sales Tax consists of a 0.375 percent sales and compensating use tax imposed

on sales and uses of certain tangible personal property and services applicable only within the MTA Commuter Transportation District.

• Franchise Taxes. Also deposited in the MMTOA Account is a legislatively-allocated portion of two taxes

imposed on certain transportation and transmission companies (such as trucking, telegraph and local telephone companies) —

o an annual franchise tax based on the amount of the taxpayer’s issued capital stock, and o an annual franchise tax on the taxpayer’s gross earnings from all sources calculated to be in the State

pursuant to statutory formulae.

• Temporary Franchise Surcharge. The Temporary Franchise Surcharge is imposed on the portion of the franchise and other taxes of certain corporations, banks and insurance, utility, transportation and transmission companies attributable (according to various complex formulae) to business activity carried on within the MTA Commuter Transportation District. In accordance with State Tax Law, the tax revenue generated under these provisions, after the deduction of administrative costs, is to be deposited to the MMTOA Account, as taxes are received.

In order to assist MTA in balancing its budgets for calendar year 2002, the State advanced the payment of a fifth

quarter of MMTOA Receipts scheduled for the first quarter of calendar year 2003 into the fourth quarter of calendar year 2002 (approximately $231.6 million). Since this time, the MTA has received the equivalent of four quarters of MMTOA Receipts each year, with the first quarter of each succeeding calendar year’s receipts similarly advanced. This results in little or no MMTOA Receipts being received during the first quarter of each calendar year; MTA has made other provisions to provide for cash liquidity during this period. The State has indicated that due to cash flow issues, a portion of the 2009-10 MMTOA payments may not occur until the MTA's first quarter of 2010. There has been no change in the timing of the State’s payment of, or MTA’s receipt of, MTTF Receipts, and MTA anticipates that such receipts will be sufficient to make required monthly principal and interest deposits into the Debt Service Fund.

A more detailed description of the MMTOA Taxes is set forth herein under the heading “– MMTOA Account –

Special Tax Supported Operating Subsidies.” Five-Year Summary of MTTF Receipts and MMTOA Receipts. DTF Table 2 sets forth a five-year summary (based

on the State’s fiscal year ending March 31) of the following:

• actual collections by the State of receipts for each of the sources of revenues that, subject to appropriation and allocation among MTA and other non-MTA transit agencies, could become receipts of the MTA Dedicated Tax Fund,

• amount of MTTF Receipts and MMTOA Receipts, and • debt service coverage ratio based upon MTTF Receipts, and MTTF Receipts plus MMTOA Receipts.

The information in the following DTF Table 2 relating to MTTF Receipts and MMTOA Receipts was provided by

the New York State Division of the Budget and the remaining information was provided by MTA.

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DTF Table 2 Summary of MTTF Receipts and MMTOA Receipts

Dedicated Taxes ($ millions) 2005 2006 2007 2008 2009 MTTF

PBT $ 323.1 $ 340.8 $ 325.9 $ 345.8 $ 331.0 Motor Fuel Tax 101.4 101.9 98.9 101.4 97.1 Motor Vehicle Fees(1) 126.6 145.9 170.6 164.5 167.0

Total Available MTTF Taxes(2) $ 551.1 $ 588.6 $ 595.4 $ 611.7 $ 595.1 MTTF Receipts(3) $ 559.7 $ 569.3 $ 608.9 $ 613.4 $ 601.6 MMTOA

PBT $ 74.2 $ 78.8 $ 72.5 $ 76.0 $ 73.1 District Sales Tax(4) 428.9 603.1 688.1 705.4 711.2 Franchise Taxes 64.5 73.6 68.4 60.3 71.8 Temporary Franchise Surcharges(5) 571.4 766.2 962.3 982.5 851.8

Total Available MMTOA Taxes(6) $1,139.0 $1,521.7 $1,791.3 $1,824.2 $1,707.9 MMTOA Receipts(7) $ 736.4 $1,146.7(8) $1,069.2(8) $1,525.9 $1,651.4 Total Pledged Revenues (MTTF Receipts plus MMTOA Receipts) $1,296.1 $1,516.0(8) $1,878.1(8) $2,139.3 $2,253.0 Debt Service $ 156.8 $ 195.4 $ 231.4 $ 263.8 $ 232.8 Debt Service Coverage Ratio – MTTF Receipts Only 3.57x 2.91x 2.63x 2.33x 2.58x Debt Service Coverage Ratio – MTTF Receipts plus MMTOA Receipts 8.27x 7.76x(8) 8.12x(8) 8.11x 9.68x (1) Beginning on April 1, 2005, all remaining General Fund revenues derived from motor vehicle fees were moved to the Dedicated Funds Pool. In

accordance with the 2005-06 Enacted Budget, additional motor vehicle fees were deposited into the Dedicated Funds Pool beginning on October 1, 2005.

(2) Represents the amount of MTTF taxes collected by the State that was deposited into the MTTF. (3) Represents the amount in the MTTF that was, subject to appropriation, paid to MTA by deposit into the MTA Dedicated Tax Fund, thereby

becoming MTTF Receipts. The amount of MTTF Receipts in any State fiscal year could be greater than the amount collected for deposit into the MTTF due to, among other things, investment earnings or surplus amounts retained in the MTTF that were not paid out in prior years.

(4) The district sales tax was increased from 1/4 % to 3/8% effective June 1, 2005. (5) For 2006, 2007 and 2008 and 2009, includes certain non-recurring amounts related to increased audit activities. (6) Represents the amount of MMTOA taxes collected by the State that was deposited into the MMTOA Account. Amounts in the MMTOA Account

are available, subject to appropriation, to pay operating expenses of the various public transportation systems throughout the MTA Commuter Transportation District, including MTA.

(7) Represents the amount in the MMTOA Account that was, subject to appropriation, requested by, and paid to, MTA for deposit into the MTA Dedicated Tax Fund, thereby becoming MMTOA Receipts. The difference between Total Available MMTOA Taxes and MMTOA Receipts generally represents the amount appropriated for operating expenses of the various non-MTA systems in the MTA Commuter Transportation District, as well as the amounts appropriated to MTA and other transportation agencies, primarily in accordance with the Section 18-b Program as described in this Appendix A under the caption “REVENUES OF THE RELATED ENTITIES – State and Local General Operating Subsidies.”

(8) At the end of the State’s 2005-06 fiscal year, the State accelerated the payment of $200 million of MMTOA Receipts to the MTA in the following manner: it increased appropriations from levels enacted in that fiscal year and upon payment within that fiscal year, required that appropriations that were recommended and subsequently enacted in the State’s 2006-07 fiscal year be commensurately reduced. This money is not additional money to MTA since it is received in the same calendar year as originally expected. Total Pledged Revenues for 2006 does not include this $200 million and, consequently, the Debt Service Coverage Ratios reflected above for 2006 also exclude the effect of this $200 million advance. Total Pledged Revenues for 2007 does include this $200 million and, consequently, the Debt Service Coverage Ratios reflected above for 2007 are calculated as if this $200 million advance had not occurred.

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Factors Affecting Revenues from Dedicated Taxes

Legislative Changes. The requirement that the State pay MTA Dedicated Tax Fund Revenues to the MTA Dedicated Tax Fund is subject to and dependent upon annual appropriations being made by the State Legislature for such purpose and the availability of moneys to fund such appropriations. The State Legislature is not obligated to make appropriations to fund the MTA Dedicated Tax Fund, and there can be no assurance that the State Legislature will make any such appropriation. The State is not restricted in its right to amend, repeal, modify or otherwise alter statutes imposing or relating to the MTA Dedicated Tax Fund Revenues or the taxes or appropriations that are the source of such Revenues.

In connection with the financing of the 2005-2009 MTA Capital Program or future capital programs, MTA may

propose legislation affecting components of the taxes currently securing MTA Dedicated Tax Fund Bonds.

Litigation. Aspects relating to the imposition and collection of the Dedicated Taxes have from time to time been and may continue to be the subject of administrative claims and litigation by taxpayers.

Economic Conditions. Many of the Dedicated Taxes are dependent upon economic and demographic conditions in

the State and in the MTA Commuter Transportation District, and therefore there can be no assurance that historical data with respect to collections of the Dedicated Taxes will be indicative of future receipts.

Government Assistance. The level of government assistance to MTA through Dedicated Taxes may be affected by

different factors, two of which are as follows:

• The State Legislature may not bind or obligate itself to appropriate revenues during a future legislative session, and appropriations approved during a particular legislative session generally have no force or effect after the close of the State fiscal year for which the appropriations are made. However, in the case of the PBT that is deposited as a portion of the MTTF Receipts, the State Legislature has expressed its intent in the State Finance Law to enact for each State fiscal year an appropriation for the current and the next year. See the heading “—Appropriation by the Legislature” below.

• The State is not bound or obligated to continue to pay operating subsidies to the Transit or Commuter System or

to continue to impose any of the taxes currently funding those subsidies. Security – General

The Dedicated Tax Fund Bonds are MTA’s special obligations payable as to principal, redemption premium, if any, and interest solely from the security, sources of payment and funds specified in the DTF Resolution. Payment of principal of or interest on the Dedicated Tax Fund Bonds may not be accelerated in the event of a default.

Dedicated Tax Fund Bonds are secured primarily by the SOURCES OF PAYMENT described above, and are not

secured by: • the general fund or other funds and revenues of the State, or • the other funds and revenues of MTA or any of its affiliates or subsidiaries.

The Bonds are not a debt of the State or The City of New York, or any other local governmental unit. MTA has no

taxing power. MTA has filed summaries of certain provisions of the DTF Resolution, including certain defined terms used therein,

with the NRMSIRS identified under “TRANSPORTATION REVENUE BONDS – General.” In addition, copies of the summaries can be obtained on MTA’s website at www.mta.info/mta/investor/index.html or from the MTA Finance Department at 347 Madison Avenue, New York, New York 10017.

Capitalized terms used under this caption “DEDICATED TAX FUND BONDS” not otherwise defined herein have

the meanings set forth in the DTF Resolution.

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Pledge Effected by the DTF Resolution

Trust Estate. The DTF Resolution provides that there are pledged to the payment of principal and redemption premium of, interest on, and sinking fund installments for, the Dedicated Tax Fund Bonds and Parity Debt, in accordance with their terms and the provisions of the DTF Resolution, subject only to the provisions permitting the application of that money for the purposes and on the terms and conditions permitted in the DTF Resolution, the following, referred to as the “trust estate”:

• the proceeds of the sale of the Dedicated Tax Fund Bonds, until those proceeds are paid out for an authorized purpose,

• the Pledged Amounts Account in the MTA Dedicated Tax Fund (which includes MTTF Receipts and MMTOA Receipts), any money on deposit in that Account and any money received and held by MTA and required to be deposited in that Account, and

• all funds, accounts and subaccounts established by the DTF Resolution (except funds, accounts and subaccounts established pursuant to Supplemental Resolution, and excluded by such Supplemental Resolution from the Trust Estate as security for all Dedicated Tax Fund Bonds, in connection with Variable Interest Rate Obligations, Put Obligations, Parity Debt, Subordinated Indebtedness or Subordinated Contract Obligations), including the investments, if any, thereof.

The DTF Resolution provides that the trust estate is and will be free and clear of any pledge, lien, charge or

encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge created by the DTF Resolution, and all corporate action on the part of MTA to that end has been duly and validly taken. Flow of Funds

The DTF Resolution establishes a Proceeds Fund held by MTA, and a Debt Service Fund held by the Trustee. See the summaries of documents for a description of the provisions of the DTF Resolution governing the deposits to and withdrawals from the Funds and Accounts. Amounts held by MTA or the Trustee in any of such Funds shall be held in trust separate and apart from all other funds and applied solely for the purposes specified in the DTF Resolution or any Supplemental Resolution thereto.

The following two charts summarize (i) the flow of taxes into the MTA Dedicated Tax Fund, and (ii) the flow of

MTA Dedicated Tax Fund Revenues through the MTA Dedicated Tax Fund and the Funds and Accounts established under the DTF Resolution.

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MTA DEDICATED TAX FUND BONDS – SOURCES OF REVENUE

(through March 31, 2010(1))

Dedicated Funds Pool • Petroleum Business Tax ° Carrier Tax (100%) ° Basic Tax ($7.5 million) ° Remaining Basic Tax (80.3%) ° Supplemental Tax (100%) • Motor Fuel Tax ° Gasoline Tax (4.00¢)

° Diesel Tax (8.00¢)

• Motor Vehicle Fees(2)

° Registration Fees (54.5%)

° Certain Non-Registration Fees

Metropolitan Mass Transportation Operating Assistance Account

(MMTOA) • Petroleum Business Tax ° Remaining Basic Tax (10.835%)(3)

• 3/8% District Sales Tax (100%) • Franchise Tax (80%) • Temporary Franchise Surcharge (100%)

Dedicated Mass Transportation Trust Fund (MTTF)

MTA Dedicated Tax Fund

MTTF Receipts

MMTOA Receipts

Available for Debt Service

37%

86.86%(5)34%(4)

Notes (1) Parenthetical amounts and percentages, as well as flow of fund percentages, indicate the amount or percent of that tax or fund

deposited for the year ending March 31, 2010 in the respective fund or account. The allocations shown may be changed at any time by the State Legislature.

(2) Includes the additional Motor Vehicle Fees deposited into the Dedicated Funds Pool from time to time. In the 2009-10 Enacted Budget, licenses and most registrations were increased by 25 percent. The revenues from this increase will be directed to the Dedicated Highway and Bridge Trust Fund. In addition, the fee for plate issuance was increased from $15 to $25. The revenues from this increase will be directed to the General Fund. This is not reflected in this chart. Further, within the MCTD, in 2009-10, registrations were increased by an additional $25 and licenses were increased by a dollar per six month intervals. These revenues will be directed to the Corporate Transportation Account of the MTA Special Assistance Fund and not to the MTTF or the MMTOA. Consequently these new revenues are not reflected in this chart.

(3) The foregoing percentage does not include the 8.865% share of the Basic Tax that is deposited in an account for certain upstate transportation entities.

(4) Percentage of Dedicated Funds Pool. (5) Percentage based upon appropriations in the Enacted Budget for State Fiscal Year 2009-10.

----Subject to appropriation---- by Legislature

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MTA DEDICATED TAX FUND BONDS – RESOLUTION FLOW OF FUNDS

Subordinated Indebtedness and Subordinated Contract Obligations

All amounts on deposit in the Pledged Amounts Account – MTTF Receipts Subaccount are paid out before any amounts on deposit in the Pledged Amounts Account – MMTOA Receipts Subaccount are paid out.

MTTF Receipts Debt Service Account

MMTOA Receipts Debt Service Account

MTA Dedicated Tax Fund Operating and Capital Costs

Account

Amounts paid out from any fund or account for an authorized purpose (excluding transfers to any other pledged fund or account) are free and clear of the lien and pledge created by the DTF Resolution.

Normal Contingent Flow

MMTOAReceipts

MTTF Receipts MMTOA Receipts

MTA Dedicated Tax Fund Pledged Amounts Account

MTTF Receipts

Debt Service Fund

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Debt Service Fund

Pursuant to the DTF Resolution, the Trustee holds the Debt Service Fund, consisting of the MTTF Receipts DS Account and the MMTOA Receipts DS Account. Moneys in the Debt Service Fund are applied by the Trustee to the payment of Debt Service on the Dedicated Tax Fund Bonds in the manner, and from the accounts and subaccounts, more fully described under “SUMMARY OF CERTAIN PROVISIONS OF THE DTF RESOLUTION – Debt Service Fund” in the summaries of documents.

MTA is required to make monthly deposits to the appropriate account of the Debt Service Fund of interest (1/5th

of the next semiannual payment) and principal (1/10th of the next annual payment), first from MTTF Receipts and then, to the extent of any deficiency, from MMTOA Receipts. Covenants

Additional Bonds. The DTF Resolution permits MTA to issue additional Dedicated Tax Fund Bonds from time to time to pay or provide for the payment of Capital Costs and to refund outstanding Dedicated Tax Fund Bonds.

Under the DTF Resolution, MTA may issue one or more Series of Dedicated Tax Fund Bonds for the payment

of Capital Costs, provided, in addition to satisfying certain other requirements, MTA delivers a certificate that evidences MTA’s compliance with the additional bonds test set forth in the DTF Resolution.

Such certificate must set forth:

(A) for any 12 consecutive calendar months ended not more than six months prior to the date of such certificate:

(i) MTTF Receipts, (ii) MMTOA Receipts, and (iii) investment income received during such period on amounts on deposit in the Pledged Amounts Account, the MTTF Receipts Subaccount, the MMTOA Receipts Subaccount and the Debt Service Fund; and

(B) the greatest amount for the then current or any future Debt Service Year of the sum of (a) Calculated Debt

Service on all Outstanding Dedicated Tax Fund Obligations, including the proposed Capital Cost Obligations and any proposed Refunding Obligations being treated as Capital Cost Obligations, but excluding any Obligations or Parity Debt to be refunded with the proceeds of such Refunding Obligations, plus (b) additional amounts, if any, payable with respect to Parity Debt; and then state:

(x) that the sum of the MTTF Receipts and investment income (other than investment income on the

MMTOA Receipts Subaccount) set forth in clause (A) above is not less than 1.35 times the amount set forth in accordance with clause (B) above and

(y) that the sum of the MTTF Receipts, MMTOA Receipts and investment income set forth in clause (A)

above is not less than 2.5 times the amount set forth in clause (B) above. See “SUMMARY OF CERTAIN PROVISIONS OF THE DTF RESOLUTION—Special Provisions for Capital

Cost Obligations” in the summaries of documents for a description of further provisions which apply to the additional bonds test if the percentage of available existing taxes deposited into the MTA Dedicated Tax Fund is increased or additional taxes are added to the amounts so deposited.

For a discussion of the requirements relating to the issuance of Refunding Dedicated Tax Fund Bonds, see

“SUMMARY OF CERTAIN PROVISIONS OF THE DTF RESOLUTION—Special Provisions for Refunding Obligations” in the summaries of documents.

Parity Debt

MTA may incur Parity Debt pursuant to the terms of the DTF Resolution that, subject to certain exceptions, would be secured by a pledge of, and a lien on, the Trust Estate on a parity with the lien created by the DTF Resolution with respect to Dedicated Tax Fund Bonds. Parity Debt may be incurred in the form of a Parity

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Reimbursement Obligation, a Parity Swap Obligation or any other contract, agreement or other obligation of MTA designated as constituting “Parity Debt” in a certificate of an Authorized Officer delivered to the Trustee. Appropriation by the State Legislature

The State Constitution provides that the State may not expend money without an appropriation, except for the payment of debt service on general obligation bonds or notes issued by the State. An appropriation is an authorization approved by the State Legislature to expend money. The State Constitution requires all appropriations of State funds, including funds in the MTTF and MMTOA Account, to be approved by the State Legislature at least every two years. In addition, the State Finance Law provides, except as described below, that appropriations shall cease to have force and effect, except as to liabilities incurred thereunder, at the close of the State Fiscal Year for which they were enacted and that to the extent of liabilities incurred thereunder, such appropriations shall lapse on the succeeding June 30th or September 15th, depending upon the nature of the appropriation. The State Legislature may not be bound in advance to make any appropriation, and there can be no assurances that the State Legislature will appropriate the necessary funds as anticipated. MTA expects that the State Legislature will make appropriations from amounts on deposit in the MTTF and MMTOA Account in order to make payments when due.

The State Legislature has expressed its intent in the State Finance Law to enact for each State Fiscal Year in the

future in an annual budget bill an appropriation from the MTTF (with respect to the PBT portion only) to the MTA Dedicated Tax Fund for the then current State Fiscal Year and an appropriation of the amounts projected by the Director of the Budget to be deposited in the MTA Dedicated Tax Fund from the MTTF (with respect to the PBT portion only) for the next succeeding State Fiscal Year. In any State Fiscal Year, if the Governor fails to submit or if the State Legislature fails to enact a current year appropriation from the MTTF (with respect to the PBT portion) to the MTA Dedicated Tax Fund, MTA is required to notify the State of amounts required to be disbursed from the appropriation made during the preceding State Fiscal Year for payment in the current State Fiscal Year. The State Comptroller may not make any payments from the MTTF to the MTA Dedicated Tax Fund from such prior year appropriation prior to May 1st of the current State Fiscal Year. Until such time as payments pursuant to such appropriation are made in full, revenues in the MTTF shall not be paid over to any entity other than MTA.

In order to reduce the risk that the State Legislature may fail to make an annual appropriation or that such

appropriation may be delayed to the MTA Dedicated Tax Fund, the adopted State budget for 2009-10 includes two appropriations from the MTTF to the MTA Dedicated Tax Fund. One such appropriation is for the State Fiscal Year that ends March 31, 2010 and the other such appropriation is for the succeeding State Fiscal Year that ends March 31, 2011. The appropriation for the 2009-10 State Fiscal Year took effect on April 1, 2009. MTA has periodically availed itself of such prior year’s appropriation to meet operating costs in response to delays in the adoption of the State budget in such years.

A budgetary imbalance in the present or any future State Fiscal Year could affect the ability and willingness of

the State Legislature to appropriate and the availability of moneys to make the payments from the MTTF and the MMTOA Account. However, MTA believes that any failure by the State Legislature to make appropriations as contemplated would have a serious impact on the ability of the State and its public benefit corporations to raise funds in the public credit markets. Agreement of the State

The MTA Act prohibits MTA from filing a petition in bankruptcy under Chapter 9 of the Federal Bankruptcy Code or such successor chapters or sections as may from time to time be in effect and the State has pledged that so long as any notes, bonds or lease obligations of the MTA are outstanding, it will not limit or alter the denial of authority to MTA to so file.

Under the MTA Act, the State pledges to and agrees with the holders of any notes, bonds or lease obligations

issued or incurred by the MTA, including the Dedicated Tax Fund Bonds, that the State will not limit or alter the rights vested in the MTA to fulfill the terms of any agreements made by the MTA with the holders of its notes, bonds and lease obligations, including the Dedicated Tax Fund Bonds, or in any way impair the rights and remedies of such holders. Notwithstanding the foregoing, in accordance with State law, nothing in the DTF Resolution shall be deemed to restrict the right of the State to amend, repeal, modify or otherwise alter statutes imposing or relating to the MTA Dedicated Tax Fund Revenues or the taxes or appropriations which are the source of such Revenues. No

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default under the DTF Resolution would occur solely as a result of the State exercising its right to amend, repeal, modify or otherwise alter such taxes or appropriations.

MTTF Receipts – Dedicated Petroleum Business Tax

General. The PBT is the business privilege tax, which includes both a base tax and a supplemental tax, imposed on petroleum businesses operating in the State. The base of the PBT is the quantity of various petroleum products refined or sold in the State or imported into the State for sale or use therein.

Tax Rates. The basic and supplemental PBT tax rates are subject to separately computed annual adjustments on

January 1 of each year, to reflect the change in the Producer Price Index (“PPI”) for refined petroleum products for the 12 months ended August 31 of the immediately preceding year. The tax rates, therefore, increase as prices rise and decrease as prices fall. Current legislation provides that the PBT rates would be adjusted annually subject to a maximum change of five percent of the current rate in any year. In addition to the five percent cap on rate changes, the statute also requires basic and supplemental rates to be rounded to the nearest tenth of one cent. Subsequent legislation provided that diesel rates be rounded to the nearest hundredth of one cent. As a result, the tax rates usually do not change by the full five percent allowed under the statutory formula.

The table below shows the changes in the PPI for refined petroleum products and the capped PBT index change

over the last ten years.

Petroleum Business Tax Index Change (percent) Year for PPI

Change (September 1 to August 31)

PPI for Refined Petroleum

Products Change Year for

PBT Index

PBT Index Change

(January 1) 1999-2000 55.84 2001 5.00 2000-01 13.08 2002 5.00 2001-02 -19.51 2003 -5.00 2002-03 27.01 2004 5.00 2003-04 12.94 2005 5.00 2004-05 35.10 2006 5.00 2005-06 36.01 2007 5.00 2006-07 -1.20 2008 -1.20 2007-08 24.70 2009 5.00 2008-09* -24.70 2010* -5.00

*Estimated. Source: New York State Division of the Budget.

The table below shows the rates per gallon for the PBT in effect for 2008 and 2009 and estimated rates for 2010,

respectively.

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PETROLEUM BUSINESS TAX RATES FOR 2008 AND 2009 AND ESTIMATED RATES FOR 2010

(cents per gallon) 2008 2009 2010 2 Petroleum Products Base Supp Total1 Base Supp Total1 Base Supp Total1 Automotive fuel Gasoline and other non diesel 9.90 6.50 16.40 10.30 6.80 17.10 9.90 6.50 16.40 Diesel 9.90 4.75 14.65 10.30 5.05 15.35 9.90 4.75 14.65 Aviation gasoline or Kero-Jet Fuel 6.50 0.00 6.50 6.80 0.00 6.80 6.50 0.00 6.50 Non-automotive diesel fuels Commercial gallonage 8.90 0.00 8.90 9.30 0.00 9.30 8.90 0.00 8.90 Nonresidential heating 4.80 0.00 4.80 5.00 0.00 5.00 4.80 0.00 4.80 Residual petroleum products Commercial gallonage 6.80 0.00 6.80 7.10 0.00 7.10 6.80 0.00 6.80 Nonresidential heating 3.70 0.00 3.70 3.80 0.00 3.80 3.70 0.00 3.70 Railroad diesel fuel 8.60 0.00 8.60 9.00 0.00 9.00 8.60 0.00 8.60

(1) The Tax rates represent the net tax rate after credits (2) Projected. A projected petroleum producer price index decrease of 24.7 percent through August 2009 will result in a

decrease of not more than 5.0 percent in the PBT tax rates on January 1, 2010. Source: New York State Division of the Budget.

Tax Base. Generally, transactions that are excluded from the basic PBT base are also excluded from the

supplemental tax base. Exemptions include sales for export from the State, sales of fuel oil for residential heating purposes and manufacturing use, and sales to government entities when such entities buy petroleum for their own use. Sales of kerosene (other than kero-jet fuel) and liquefied petroleum gas and sales of residual fuel oil used as bunker fuel also are exempted. Regulated electric utilities that use petroleum to generate electricity obtain credits or reimbursements to offset a portion of the basic tax. These utilities receive no credit or reimbursement with respect to the supplemental tax.

The State also imposes a petroleum business carrier tax under the PBT on fuel purchased by motor carriers

outside the State but consumed within the State. The carrier tax rates are the same as the PBT automotive gasoline and diesel rates listed above.

Legislative Changes. The Legislature has, from time to time, changed the percentage of the PBT basic tax

which is available for distribution to the Dedicated Funds Pool. The percentage of the Dedicated Funds Pool which is, subject to appropriation, deposited in the MTA Dedicated Tax Fund has remained constant at 34 percent. The changes in the percentage of the PBT basic tax which is available for distribution to the Dedicated Funds Pool have been designed to be, and were, revenue neutral to the Dedicated Funds Pool.

Legislation enacted in 1996, effective January 1, 1998, expanded the partial exemption provided for residual

and distillate fuels used in manufacturing to a full exemption. In addition, such legislation provided: (i) rate reductions for diesel motor fuel used by motor vehicles, phased in on January 1, 1998 and April 1, 1999; (ii) a full exemption from the supplemental tax imposed on residual and distillate fuels used by the commercial sector for heating, effective March 1, 1997; (iii) a partial reduction in the basic tax and a full exemption from the supplemental tax imposed on diesel motor fuel used by railroads, effective January 1, 1997; and (iv) an increase in the credit against the basic tax for residual and distillate fuels used by utilities, effective April 1, 1999. Where applicable, the new rate structure maintains indexing by allowing the rates to be adjusted by the index and then subsequently reducing such rate, or increasing such credit, by fixed cents per gallon rate. To preserve dedicated funds revenue flows, the 1996 legislation also increased the share of the basic tax going to the Dedicated Funds Pool from 63.3 percent to 66.2 percent, effective January 1, 1997; from 66.2 percent to 68.1 percent, effective January 1, 1998; and from 68.1 percent to 69.8 percent, effective April 1, 1999.

Legislation enacted in 1999 reduced the PBT rate on commercial heating oil by 20 percent and provided for

reimbursement of PBT tax imposed on fuels used for mining and extraction, effective April 1, 2001. To preserve dedicated funds revenue flows, the 1999 legislation increased the share of the basic tax going to the Dedicated Funds

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Pool from 69.8 percent to 70.5 percent, effective April 1, 2001. Like the aforementioned changes made in 1996, these changes were designed to be revenue-neutral to the Dedicated Funds Pool.

Legislation adopted with the 2000-01 State Enacted Budget eliminated the PBT minimum taxes, effective

March 1, 2001, and reduced the PBT rate on commercial heating oil by 33 percent, effective September 1, 2002. To save the Dedicated Funds Pool harmless from these tax cuts, the legislation earmarked certain motor vehicle registration fees to the Dedicated Funds Pool (see “MTTF Receipts – Motor Vehicle Fees” below). Legislation adopted with the 2000-01 State Enacted Budget and effective April 1, 2001, also increased revenues flowing to the Dedicated Funds Pool by earmarking $7.5 million of the PBT basic tax, which had been directed to the State General Fund, to the Dedicated Funds Pool; increasing the percentage of the remaining basic tax receipts earmarked to the Dedicated Tax Funds Pool from 70.5 percent to 80.3 percent; and depositing receipts from the PBT carrier tax to the Dedicated Tax Funds Pool.

Legislation enacted in 2004 eliminated the PBT on fuels used for aircraft overflight and landing, effective

November 1, 2004, and exempted fuel burned on takeoff by airlines operating non-stop flights between at least four cities in the State. The financial impact to the MTTF and MMTOA funds is minimal.

Legislation adopted with the 2005-06 State Enacted Budget required the collection of PBT on sales to non-

Native Americans on New York reservations. Legislation adopted with the 2006-07 State Enacted Budget exempted or partially exempted PBT on certain

alternative fuels. The financial impact to the MTTF and MMTOA funds is minimal. Tax Imposition and Payment. Imposition of the tax occurs at different points in the distribution chain,

depending upon the type of product. The tax is imposed on motor fuels at the same time as the eight-cent-per-gallon motor fuel tax. Gasoline, which represents the preponderance of automotive fuel sales in the State, is taxed upon importation into the State for sale or upon manufacture in the State. Other non-diesel automotive fuels such as compressed natural gas, methanol and ethanol become subject to the tax on their first sale as motor fuel in the State. Automotive diesel motor fuel becomes taxed upon its first non-exempt sale or use in the State. Nonautomotive diesel fuel (such as No. 2 fuel oil used for commercial heating) and residual fuel usually become taxable on the sale to the consumer or upon use of the product in the State.

Most petroleum businesses remit this tax on a monthly basis. Taxpayers with yearly motor fuel tax and PBT

liability totaling more than $5 million now remit tax for the first 22 days of the month by electronic funds transfer by the third business day thereafter. Tax for the balance of the month is paid with the monthly returns filed by the 20th of the following month. The Department of Taxation and Finance advises that, in State Fiscal Year 2007-08, 24 taxpayers, accounting for almost 77 percent of all PBT receipts, participated in the electronic funds transfer program.

Historical Summary of PBT Revenue The following table provides historical information for the last ten years on the basic PBT and the supplemental

PBT, the major funding source for the MTTF.

Basic and Supplemental PBT Collections (in millions)

State Fiscal Year Basic PBT Supplemental PBT

State Fiscal Year

Basic PBT

Supplemental PBT

1999-00 $587.2 $398.0 2004-05 $692.3 $370.9 2000-01 562.4 389.3 2005-06 735.0 389.3 2001-02 635.7 347.4 2006-07 676.2 391.9 2002-03 618.9 384.5 2007-08 709.0 423.2 2003-04 674.2 358.3 2008-09 682.5 403.5

Source: New York State Department of Taxation and Finance. Continued economic growth contributed to an increase in New York State motor gasoline and diesel

consumption in State Fiscal Year 1999-2000. Consumption growth would have likely been even greater, absent higher fuel prices. Collections also reflect the annual indexing provisions that reduced PBT tax rates by up to 5 percent on January 1, 1999 and January 1, 2000. PBT receipts in 1999-2000 also reflect the impact of legislation enacted in 1996 that reduced tax rates on diesel motor fuel and fuels used for utilities, effective April 1, 1999.

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Tax receipts in State Fiscal Year 2000-01 were $16.4 million less than State Fiscal Year 1999-2000 mainly due

to the economic slowdown and high fuel prices. However, tax receipts from residual fuel used by utilities were higher due to the decrease in the relative price of residual fuel compared to natural gas. Tax collections for State Fiscal Year 2000-01 also reflect the 5 percent decrease in PBT rates that took effect on January 1, 2000, and the 5 percent increase effective January 1, 2001.

Receipts for State Fiscal Year 2001-02 reflect about a two percent increase in gasoline consumption. Diesel

consumption declined about 9 percent due to the economic slowdown. Aviation fuel consumption dropped more than 23 percent in the second half of the year due to the terrorist attack on the World Trade Center in New York City on September 11, 2001. Receipts from residual fuel used by utilities declined due to the warm winter. Collections also reflect the 5 percent increase in PBT rates effective January 1, 2001, another 5 percent increase effective January 1, 2002 and $19.3 million from the carrier tax.

Receipts for State Fiscal Year 2002-03 reflect the more than two percent increase in gasoline consumption.

Diesel consumption increased about 7 percent. Collections reflect the 5 percent increase in PBT rates effective January 1, 2002, and 5 percent decline effective January 1, 2003. Collections also include $20.2 million from the carrier tax.

Receipts for State Fiscal Year 2003-04 reflect the 5 percent decline in PBT rates effective January 1, 2003, and

the 5 percent increase effective January 1, 2004. Receipts from residual fuels used by utilities increased due to the decrease in the relative price of residual fuel oil compared to natural gas. Collections also include $19.9 million from the carrier tax.

Receipts for State Fiscal Year 2004-05 reflect the 5 percent increase in PBT rates effective January 1, 2004 and

another 5 percent increase effective January 1, 2005. Collections also include $21.9 million from the carrier tax. Receipts for State Fiscal Year 2005-06 reflect the impact from the higher fuel price on fuel consumption.

Collections also reflect the 5 percent increase in PBT rates effective January 1 2005 and another 5 percent increase effective January 1, 2006. Collections also include $21.6 million from the carrier tax.

Receipts for State Fiscal Year 2006-07 reflect the 5 percent increase in PBT rates effective January 1, 2006 and

the 5 percent increase effective January 1, 2007. Collections also include $22.2 million from the carrier tax. Receipts for State Fiscal Year 2007-08 reflect the five percent increase on January 1, 2007 and the 1.2 percent

decrease in PBT rates effective January 1, 2008. Collections also include $23.1 million from the carrier tax. Receipts for State Fiscal Year 2008-09 reflect the 1.2 percent decrease in PBT rates effective January 1, 2008

and a five percent increase on January 1, 2009. Collections also include an estimated $23.1 million from the carrier tax.

Actual Revenues from Dedicated PBT. Receipts from the dedicated PBT for the last ten years are as set forth in the following table:

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MTTF Revenues from Petroleum Business Taxes

(in millions) State

Fiscal Year Dedicated Funds

Pool MTTF Total(1) Related Entities’ Share of MTTF(2)

1999-00 $ 802.7 $297.0 $ 272.9 2000-01 776.7 287.4 264.1 2001-02 878.7 325.1 298.8 2002-03 901.7 333.6 306.6 2003-04 921.1 340.8 313.2 2004-05 950.2 351.6 323.1 2005-06 1,002.4 370.9 340.8 2006-07 958.6 354.7 325.9 2007-08 1,017.1 376.3 345.8 2008-09 973.7 360.3 331.0

(1) Represents 37% of the Dedicated Funds Pool. (2) Represents 34% of the Dedicated Funds Pool. Source: New York State Division of the Budget. MTTF Receipts – Motor Fuel Tax

General. Motor fuel and diesel motor fuel taxes (“MFT”) are derived from an eight-cent-per-gallon excise tax levied with respect to gasoline and diesel motor fuels, generally for highway use. The aggregate rate of tax on gasoline was last changed on February 1, 1972, when it was increased from seven cents to eight cents per gallon. The aggregate rate of tax on diesel motor fuel was last changed on January 1, 1996, when it decreased from ten cents per gallon to eight cents per gallon.

Effective April 1, 2000, legislation enacted in 2000 earmarked 2.25 cents of the gasoline MFT and 4 cents of

the diesel MFT to the Dedicated Funds Pool, of which 34% is deposited in the MTA Dedicated Tax Fund. Effective April 1, 2001, legislation enacted in 2000 earmarked an additional 2.25 cents of the diesel MFT to the PBT Dedicated Funds Pool, of which 34% is deposited in the MTA Dedicated Tax Fund.

Effective April 1, 2003, legislation adopted with the 2000-01 State Enacted Budget earmarked an additional

1.75 cents tax on gasoline and diesel motor fuels to the Dedicated Funds Pool. Tax Imposition and Payment. The tax on motor fuel is payable by distributors registered with the State. The

gasoline motor fuel tax is imposed when gasoline is imported (or caused to be imported) into the State for sale or use in the State, or manufactured in the State. Generally, the tax on other nondiesel motor fuels earmarked to the Dedicated Funds Pool (such as compressed natural gas, propane, methanol and ethanol) is remitted by the dealer selling them as motor fuels. The tax on diesel motor fuel is imposed on the first non-exempt sale of diesel in the State.

Most petroleum businesses remit these taxes on a monthly basis. Businesses with yearly MFT and PBT liability

totaling more than $5 million remit the PBT and MFT for the first 22 days of the month by electronic funds transfer by the third business day thereafter. Tax for the balance of the month is paid with the monthly returns filed by the 20th of the following month. In State Fiscal Year 2007-08, almost 90 percent of the MFT was paid by 33 taxpayers that participated in the electronic funds transfer program.

Although the tax is remitted by distributors, the incidence of the tax falls primarily on final users of the fuel on

the highways and waterways of the State. Governmental purchases are exempt from the tax. Fuel purchased for certain road vehicles (such as fire trucks, buses used in local transit, taxicabs and ambulances), upon which the tax has been paid, may be eligible for full or partial reimbursement of the MFT. Reimbursement of the tax is also available for fuel not used on the highways (e.g., fuel used in farming).

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Actual Revenues from Dedicated Motor Fuel Taxes.

MTTF Revenues from Motor Fuel Tax ($ millions)

State

Fiscal Year MTTF Portion of

Gasoline MFT MTTF portion of

Diesel MFT MTTF Total(1) Related Entities’ Share of MTTF(2)

2001-02 $44.9 $16.9 $61.8 $56.7 2002-03 49.8 18.8 68.6 63.0 2003-04 85.6 19.5 105.1 96.6 2004-05 85.8 24.5 110.3 101.4 2005-06 85.4 25.5 110.9 101.9 2006-07 82.9 24.7 107.6 98.9 2007-08 84.0 26.3 110.3 101.4 2008-09 80.8 24.8 105.6 97.1

(1) Represents 37% of the Dedicated Funds Pool. (2) Represents 34% of the Dedicated Funds Pool. Source: New York State Division of the Budget. MTTF Receipts – Motor Vehicle Fees

General. Motor vehicle fees are derived from a variety of sources, but consist mainly of vehicle registration and driver license fees. A percentage of State motor vehicle registration fees is earmarked to the MTA Dedicated Tax Fund. These motor vehicle fees derive from the registration of passenger vehicles, trucks, vans, motorcycles, trailers, semitrailers, buses and other types of vehicles operating on the public highways of the State.

The State Department of Motor Vehicles administers motor vehicle registration provisions of the State Vehicle and Traffic Law. County clerks in most counties act as agents for the State in administering the issuance of most types of motor vehicle registration. Motor vehicle registration renewals generally are accomplished by mail.

With the exception of buses, which are charged according to seating capacity, and semitrailers, which are

registered at a flat fee, motor vehicle registration fees in the State are based on vehicle weight. Legislation enacted in 1989 mandated biennial registration of all motor vehicles weighing less than 18,000

pounds. Thus, most motor vehicle registrations are issued and renewed for two-year periods; registrations are staggered evenly throughout the months to ensure an even workload.

Pursuant to legislation enacted in 2000, effective April 1, 2001, 23.5 percent of certain motor vehicle

registration fees is deposited in the Dedicated Funds Pool. Effective April 1, 2002, that percentage increased to 54.5 percent. In addition, legislation enacted with the 2000-01 State Enacted Budget and effective April 1, 2003 directs the State Comptroller to deposit $67.9 million in motor vehicle fees other than registration fees to the Dedicated Funds Pool. Effective April 1, 2005, all remaining State General Fund revenues derived from motor vehicle fees were moved to the Dedicated Funds Pool. In accordance with legislation enacted with the 2005-06 State Enacted Budget, additional motor vehicle fees were deposited into the Dedicated Funds Pool beginning on October 1, 2005. The MTA Dedicated Tax Fund will receive 34 percent of such revenues. The following table provides information related to the amount of motor vehicle fees dedicated to the MTTF.

In the 2009-10 Enacted Budget, licenses and most registrations were increased by 25 percent. The revenues

from this increase will be directed to the Dedicated Highway and Bridge Trust Fund. In addition, the fee for plate issuance was increased from $15 to $25. The revenues from this increase will be directed to the General Fund.

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MTTF Revenues From Motor Vehicle Fees (in millions)

State Fiscal Year

Registration Fees(1) Other Fees

MTTF Total(2)

Related Entities’ Share

of MTTF(3) 2002-03 $67.4 $8.3 $75.7 $69.6 2003-04 79.3 25.1 104.6 96.1 2004-05 78.7 59.1 137.8 126.6 2005-06 83.7 75.1 158.8 145.9 2006-07 78.0 107.6 185.6 170.6 2007-08 78.0 101.0 179.0 164.5 2008-09 76.0 105.7 181.7 167.0

(1) 54.5% of registration fees are dedicated to the Dedicated Funds Pool, of which 37% is dedicated to the MTTF. (2) Represents 37% of the Dedicated Funds Pool. Does not include SRF Motor Vehicle Fees. (3) Represents 34% of the Dedicated Funds Pool. Does not include SRF Motor Vehicle Fees. Source: New York State Division of Budget MMTOA Account – Special Tax Supported Operating Subsidies

General. The Transit System and Commuter System have historically operated at a deficit and have been dependent upon substantial amounts of general operating subsidies from the State, as well as the City and Federal governments. Over time, the ongoing needs of State mass transportation systems led the State to supplement the general operating subsidies with additional operating subsidies supported by State special taxes.

Starting in 1980, in response to anticipated operating deficits of State mass transportation systems, the State

Legislature enacted a series of taxes, portions of the proceeds of which have been and are to be deposited in a special State fund, the MTOA Fund, to fund the operations of mass transportation systems. The MMTOA Account was established in the MTOA Fund to fund the operating expenses of transportation systems in the Transportation District, including MTA New York City Transit, MaBSTOA and the commuter railroads operated by MTA. Payments from this Account are made to MTA and its affiliates periodically to the extent that: (i) appropriations are made by the Legislature, (ii) the State Director of the Budget certifies that the Account contains sufficient funds to make such payments, and (iii) State officials determine that the funds are necessary to finance operations of MTA and its affiliates and subsidiaries. Such payments are allocated among the various public transportation systems within the Transportation District in accordance with schedules as specified by such appropriations. Such payments to MTA are first deposited in the Pledged Amounts Account of the MTA Dedicated Tax Fund to meet the requirements of the DTF Resolution and then any remaining amounts are transferred to the Operating and Capital Costs Account to be used to meet operating costs of the Transit System and MTA Staten Island Railway and the Commuter System.

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The table below summarizes the historical amounts appropriated and paid to MTA from the MMTOA Account

(including investment income) for the last ten years.

MMTOA Account (in millions)

State Fiscal Year

Appropriations to MTA(1)

Payments to MTA(2)

State Fiscal Year

Appropriations to MTA(1)

Payments to MTA(2)

1999-00 $907.2 $818.6 2004-05 $736.4 $736.4 2000-01 755.2 755.2 2005-06 946.7 1,146.7 2001-02 755.2 755.2 2006-07 1,269.2 1,069.2 2002-03 772.9 861.5 2007-08 1,525.9 1,525.9 2003-04 730.9 730.9 2008-09 1,651.3 1,651.3

(1) Does not include $155.1 million appropriated to MTA in each of the State Fiscal Years 1998-99 through 2003-04, $164.6 million in State Fiscal Year 2004-05, $170.2 million in each of the State Fiscal Years 2005-06 and 2006-07, $172.9 million in State Fiscal Year 2007-08 and $175.1 in State Fiscal Year 2008-09 through the Section 18-b program. (2) Payments to MTA in certain years may be in excess of the amount appropriated for that year due to the payment in that year of amounts appropriated, but not paid, in prior years. At the end of the State’s 2005-06 fiscal year, the State accelerated the payment of $200 million of MMTOA Receipts to the MTA in the following manner: it increased appropriations from levels enacted in that fiscal year and upon payment within that fiscal year, required that appropriations that were recommended and subsequently enacted in the State’s 2006-07 fiscal year be commensurately reduced. Source: New York State Division of the Budget.

Although a variety of taxes have been used to fund the special tax supported operating subsidies, the taxes

levied for this purpose currently include the MMTOA PBT, the District Sales Tax, the Franchise Taxes and the Temporary Franchise Surcharge (MMTOA Taxes), all described in more detail below. State law gives State officials the authority to disburse funds to MTA from the MMTOA Account to the extent such officials determine that the funds are necessary to finance operations of the Transit System and MTA Staten Island Railway and the Commuter System. Fluctuations in the economic and demographic conditions of the Transportation District are directly related to the growth of economically sensitive taxes, including the District Sales Tax and the Temporary Franchise Surcharge. Therefore, there can be no assurance that such taxes will generate tax receipts at current levels. If shortfalls are experienced in the collection of MMTOA Taxes, the Commissioner of Transportation is authorized to reduce each recipient’s payment from the MTOA Fund proportionately. MTA has historically received approximately 86 percent of such amounts deposited in the MMTOA Account.

MMTOA PBT General. The products that are subject to the tax, the tax rates and the transactions excluded from such tax are

identical to the basic PBT as described above under “MTTF Receipts – Dedicated Petroleum Business Tax” which is dedicated to the MTTF.

As described above in “MTTF Receipts.-.Dedicated Petroleum Business Tax,” legislation in 1996 and 1999

added new exemptions and credits and certain rate reductions with respect to the MMTOA PBT. To preserve dedicated funds revenue flow such legislation increased the share of the PBT basic tax earmarked to the MTOA Fund. As a result, the share of the PBT basic tax earmarked to the MMTOA Account increased to 10.615 percent, effective April 1, 1996; to 10.725 percent effective January 1, 1998; and to 10.835 percent effective April 1, 2001.

As described above in “MTTF Receipts--Dedicated Petroleum Business Tax,” aspects relating to the imposition

and collection of the MMTOA PBT have from time to time been and may continue to be the subject of administrative claims and litigation by taxpayers.

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Historical Summary of MMTOA PBT. The following table provides historical information relating to MMTOA PBT receipts deposited into the MMTOA Account for the last ten years.

MMTOA Petroleum Business Taxes

State Fiscal Year

Net Receipts (in millions)

State Fiscal Year

Net Receipts (in millions)

1999-00 $62.2 2004-05 $74.2 2000-01 60.4 2005-06 78.8 2001-02 68.1 2006-07 72.5 2002-03 66.3 2007-08 76.0 2003-04 72.2 2008-09 73.1

Source: New York State Division of the Budget.

District Sales Tax. General. The District Sales Tax consists of a 0.375 percent sales and compensating use tax imposed on sales

and uses of certain tangible personal property and services applicable only within the Transportation District. The rate was increased from 0.25 percent to 0.375 percent on June 1, 2005.

District Sales Tax receipts have been a significant source of tax receipts deposited in the MMTOA Account.

The level of District Sales Tax receipts is necessarily dependent upon economic and demographic conditions in the Transportation District, and therefore there can be no assurance that historical data with respect to collections of the District Sales Tax will be indicative of future receipts.

The base of the District Sales Tax is identical to the base of the State’s 4 percent sales and compensating use tax.

The tax now applies to (1) sales and use of most tangible personal property; (2) certain utility service billings; and (3) charges for restaurant meals, hotel and motel occupancy, and for specified admissions and services. The base of the tax has been amended periodically by the Legislature, with changes such as the following: temporary exemptions for certain clothing and footwear in 1997, 1998 and 1999 and the first quarter of 2000; exemptions for college textbooks and certain computer system hardware in 1998; and expanded exemptions for equipment used to provide telecommunications services for sale in 1999.

Legislation enacted in 1997 and modified in 1998 and 1999 exempts clothing and footwear costing less than

$110 from the State sales and use tax on a year-round basis. Legislation enacted in 2003, 2004 and 2005 suspended the year-round exemption through March 31, 2007 and temporarily replaced it with two exemption weeks annually at the same $110 threshold. Under these statutes, the District Sales Tax on such clothing and footwear is removed in those counties and cities that opt to exempt such items from local sales tax within their jurisdictions.

Clothing and footwear costing less than $110 were permanently exempted from State sales tax on April 1, 2006.

Localities have an option to also offer this exemption. Pursuant to Tax Law, localities opting to remove their tax must reimburse MTA for one-half of the foregone District Sales Tax revenue, while the State will provide the other half, but these reimbursements are paid to MTA and such reimbursements are not deposited into the MMTOA.

On June 1, 2006, the State placed a cap on the amount of State sales tax collected on motor fuel and diesel

motor fuel at eight cents per gallon. Localities have an option to continue to use the percentage rate method or to change to a cents-per-gallon method of computing sales tax. Pursuant to Tax Law, the State must reimburse MTA for the entire foregone District Sales Tax revenue, but these reimbursements are paid from the State General Fund to MTA and such reimbursements are not deposited into the MMTOA.

MTA is expected to be held harmless from the impact of the clothing and footwear exemption and the cap on

motor fuel and diesel motor fuel. This entire held harmless amount is reflected in the following table, but such amounts are not deposited into the MMTOA.

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Historical Summary of District Sales Tax. The following table provides historical information relating to District Sales Tax receipts deposited into the MMTOA Account for the last ten years.

District Sales Tax

(in millions)

State Fiscal Year

Net

Receipts

Held Harmless Amount(1)

Total

State Fiscal Year

Net

Receipts

Held Harmless Amount(1)

Total

1999-00 $345.6 $0.0 $ 345.6 2004-05 $428.9 $ 3.2 $432.1 2000-01 368.2 10.8 379.0 2005-06(2) 603.1 1.9 605.0 2001-02 364.7 13.9 378.6 2006-07 688.1 20.4(3) 708.5 2002-03 361.9 23.8 385.7 2007-08 705.4 39.3(4) 744.7 2003-04 399.3 $15.4 414.7 2008-09 711.2 49.1(5) 760.3

(1) This amount includes moneys paid by both the State and the localities. Such amounts are not deposited into the MMTOA. (2) The regional sales tax was increased from 0.25% to 0.375% effective June 1, 2005. (3) Includes $17.5 million from the State and localities for the clothing exemption and $2.9 million from the State for the cap on motor fuel and

diesel fuel. (4) Includes $31.8 million from the State and localities for the clothing exemption and $7.5 million from the State for the cap on motor fuel and

diesel fuel. (5) Includes $34.5 million from the State and localities for the clothing exemption and $14.6 million from the State for the cap on motor fuel

and diesel fuel.

Franchise Taxes. General. A legislatively allocated portion of two taxes imposed on certain transportation and transmission

companies (such as trucking, telegraph and local telephone companies), consisting of (a) an annual franchise tax based on the amount of the taxpayer’s issued capital stock, and (b) an annual franchise tax on the taxpayer’s gross earnings from all sources calculated to be in the State pursuant to statutory formulae are deposited in the MMTOA Account.

For State Fiscal Year 1996-97, 48 percent of such moneys were required to be deposited in the MMTOA

Account. The percentage of such deposit increased to 54 percent in calendar years 1998 and 1999, 64 percent in 2000, and to 80 percent thereafter. These changes were made to preserve the dedicated funds revenue flow subsequent to changes enacted in 1995 reducing the base of the gross earnings tax and enacted in 1996 and 1997 reducing the tax rates.

Historical Summary of the Franchise Taxes. The following table provides historical information relating to the

portion of Franchise Tax receipts deposited into the MMTOA Account for the last ten years. A one-time election to remain under the taxes imposed on trucking and railroad companies was enacted in 1996 for elections made before March 15, 1998. Companies not electing to remain under Sections 183 and 184 were taxed under the general corporate franchise tax. As part of the same legislation, the Section 184 rate was reduced from 0.75 percent to 0.6 percent on gross earnings. The MMTOA revenue distribution was held harmless. Additional rate reductions occurred beginning in 1998 that do not affect MMTOA.

Franchise Taxes (in millions)

State Fiscal Year Net Receipts State Fiscal Year Net Receipts 1999-00 $70.5 2004-05 $64.5 2000-01 70.1 2005-06 73.6 2001-02 82.9 2006-07 68.4 2002-03 71.1 2007-08 60.3 2003-04 57.4 2008-09 71.8


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Temporary Franchise Surcharge. General. The Temporary Franchise Surcharge is imposed on the portion of the franchise and other taxes of

certain corporations, banks and insurance, utility, transportation and transmission companies attributable (according to various complex formulae) to business activity carried on within the Transportation District. This surcharge, originally imposed in 1982, was extended by the State Legislature in April 2008 and is now scheduled to expire at the end of the last tax year of such entities ending prior to December 31, 2013; thus for calendar-year taxpayers no payments for 2013 will be due in the 2013-2014 State fiscal year unless the surcharge is further extended by the State Legislature. In accordance with Section 171-a of the State Tax Law, the tax revenue generated under these provisions, after the deduction of administrative costs, is to be deposited to the MMTOA Account, as such taxes are received.

Aspects relating to the imposition and collection of the Temporary Franchise Surcharge have from time to time

been, are currently and may continue to be the subject of administrative claims and litigation by taxpayers. The financial impact of such challenges commenced to date has not been and is not expected to be material.

Historical Summary of the Temporary Franchise Surcharge. The following table provides historical information

relating to the Temporary Franchise Surcharge receipts deposited into the MMTOA Account for the last ten years.

Temporary Franchise Surcharges (in millions)

State Fiscal Year Net Receipts State Fiscal Year Net Receipts 1999-00 $586.9 2004-05 $571.4 2000-01 563.2 2005-06 766.2 2001-02 483.4 2006-07 962.3 2002-03 509.5 2007-08 982.5 2003-04 484.2 2008-09 851.8


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STATE SERVICE CONTRACT BONDS

There are $2,169,325,000 aggregate principal amount of outstanding State Service Contract Bonds. The following SSC Table 1 sets forth, on a cash basis, the debt service thereon.

SSC Table 1 Aggregate Debt Service

Year Ending

January 1 Aggregate

Debt Service(1) 2010 $164,992,940 2011 164,997,453 2012 164,991,756 2013 164,992,223 2014 164,996,620 2015 164,995,778 2016 164,991,298 2017 164,996,998 2018 164,995,635 2019 164,996,885 2020 164,993,948 2021 164,992,873 2022 164,997,735 2023 164,992,360 2024 164,994,041 2025 164,996,685 2026 164,996,276 2027 164,992,085 2028 164,993,807 2029 164,997,894 2030 164,993,016 2031 164,993,335 2032(2) 82,497,811

Total $3,712,379,449

(1) Totals may not add due to rounding. (2) Includes final debt service payment on July 1, 2031.

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Sources of Payment – General

MTA has entered into a service contract, dated as of May 15, 2002, called the “State Service Contract,” with the State of New York, acting by and through the Director of the Budget of the State, pursuant to the State Service Contract Legislation, comprised of Section 16 of Chapter 314 of the Laws of 1981, Section 42 of Chapter 929 of the Laws of 1986, and Section 34 of Part O of Chapter 61 of the Laws of 2000.

MTA has filed a copy of the State Service Contract and summaries of certain provisions of the State Service

Contract Resolution, including certain defined terms used therein, with the NRMSIRS identified under “TRANSPORTATION REVENUE BONDS – General.” In addition, copies of the summaries and the State Service Contract can be obtained on MTA’s website at www.mta.info/mta/investor/index.html or from the MTA Finance Department at 347 Madison Avenue, New York, New York 10017.

Capitalized terms used under this caption “STATE SERVICE CONTRACT BONDS” not otherwise defined

herein have the meanings set forth in the State Service Contract Resolution. The State Service Contract Legislation authorizes the Director of the Budget, acting on behalf of the State, to

enter into a long-term service contract with MTA for the purposes of financing and refinancing transportation facilities, as defined in subdivision 14 of Section 1261 of the Public Authorities Law, as well as refunding obligations issued by MTA and its affiliates.

Under the State Service Contract, in consideration of MTA’s undertaking various transportation projects for the

benefit of the people of the State, the State agrees to make annual payments to MTA over a period of years, with the obligation of the State subject in each year to the making of annual appropriations by the State Legislature.

The State Service Contract Legislation authorizes MTA to pledge, and assign the annual payments to be made

by the State as security for obligations which have been designated “State Service Contract Bonds” issued for the following purposes:

• to finance and refinance transportation projects; • to refund obligations issued by MTA or any affiliate; and • to refund obligations secured in whole or in part by any or all of the prior State service contracts authorized

by the State Service Contract Legislation. Conditions in the State Service Contract

MTA may only issue State Service Contract Bonds subject to the following conditions and limitations:

• no State Service Contract Bond shall mature later than the Expiration Date of the State Service Contract, currently July 1, 2031;

• the aggregate amount of debt service on all State Service Contract Bonds (plus debt service amounts on all Old State Service Contract Bonds) shall not exceed, in any State fiscal year, $165,000,000; and

• no State Service Contract Bond (other than a refunding Bond) shall be issued after March 31, 2003.

The aggregate debt service on the outstanding State Service Contract Bonds has exhausted MTA’s current capacity under the State Service Contract to issue additional bonds (other than refunding bonds).

Concluding on the Expiration Date, the State is required to pay to MTA, on or before the Business Day next

preceding each January 1 and July 1 of each calendar year, an amount equal to the current year’s debt service on all State Service Contract Bonds in two substantially equal semi-annual installments.

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Nature of State’s Obligation to Make State Service Contract Payments

Notwithstanding anything in the State Service Contract to the contrary, • the obligation of the State to pay the amounts therein provided for is subject to annual appropriation by the

State Legislature, • the obligation of the State to pay the amounts therein provided for shall not constitute a debt of the State

within the meaning of any constitutional or statutory provision and shall be deemed executory only to the extent of moneys available and no liability shall be incurred by the State beyond the moneys available for the purpose, and

• the State Legislature is not obligated to make appropriations to satisfy the State’s obligations under the State Service Contract and there can be no assurance that the State Legislature will make any such appropriations.

Subject to the foregoing, the State’s obligation to make the payments provided for in the State Service Contract

is absolute and unconditional, without any rights of set-off, recoupment or counterclaim the State may have against MTA or any other person or entity having an interest in the State Service Contract or the payments made under the State Service Contract.

The State Legislature has appropriated and the State has made all of the payments required to date under

contracts relating to the Old State Service Contract Bonds. Pledge Effected by the State Service Contract Bond Resolution

The “Trust Estate” – which consists primarily of all payments made to MTA by the State under the State Service Contract and the proceeds of the State Service Contract Bonds – is pledged for the payment of the principal and Redemption Price of, interest on, and Sinking Fund Installments for, the State Service Contract Bonds, in accordance with their terms and the provisions of the State Service Contract Resolution, subject only to the provisions of that resolution permitting the application thereof for the purposes and on the terms and conditions set forth in that resolution.

The pledge of the Trust Estate in all respects secures on a pari passu basis all of the State Service Contract

Bonds, and the Trust Estate is and will be free and clear of any pledge, lien, charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge created by the State Service Contract Resolution, and all corporate action on the part of MTA to that end has been duly and validly taken.

The State Service Contract Bond Resolution establishes –

• the State Service Contract Proceeds Fund, which MTA holds and administers, and • the State Service Contract Debt Service Fund, which the Trustee holds and administers.

Amounts held at any time by MTA or the Trustee in either of those Funds shall be held in trust separate and

apart from all other funds. Proceeds Fund. MTA is required to deposit, upon receipt, into the State Service Contract Proceeds Fund, the

proceeds of the sale of State Service Contract Bonds as provided for in a supplemental resolution. Amounts in any account or sub-account of the State Service Contract Proceeds Fund are required to be applied to the payment of Capital Costs.

Debt Service Fund. MTA is required to deposit each State Service Contract Payment, upon receipt or on the

next succeeding business day, into the State Service Contract Debt Service Fund. In addition, amounts remaining in the State Service Contract Proceeds Fund after the payment of Capital Costs and not applied to pay such Capital Costs are required to be deposited in the State Service Contract Debt Service Fund. If, on the business day next preceding a Debt Service Payment Date, the amount in the State Service Contract Debt Service Fund is less than the Debt Service payable on that date, then MTA is required to apply amounts from the State Service Contract Proceeds

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Fund to the extent necessary to make up the deficiency. Amounts in the Debt Service Fund will be used to make debt service payments on the State Service Contract Bonds. Agreement with the State

The MTA Act prohibits MTA from filing a petition in bankruptcy under Chapter 9 of the Federal Bankruptcy Code or such successor chapters or sections as may from time to time be in effect and the State has pledged that so long as any notes, bonds or lease obligations of MTA are outstanding, it will not limit or alter the denial of authority to MTA to so file.

Under the MTA Act, the State pledges to and agrees with the holders of any notes, bonds or lease obligations

issued or incurred by MTA, including the State Service Contract Bonds, that the State will not limit or alter the rights vested in MTA (which do not include the right to an appropriation of debt service from the State) to fulfill the terms of any agreements made by MTA with the holders of its notes, bonds and lease obligations, including the State Service Contract Bonds, or in any way impair the rights and remedies of such holders.

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PART 5. REGULATORY, EMPLOYMENT, INSURANCE AND LITIGATION MATTERS

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FEDERAL AND STATE LAWS

General

Federal and State laws concerning, among other things, protection of the environment and access to transportation and non-transportation facilities by the physically disabled will require future operating and capital expenditures by the Related Entities. Those expenditures are material. Many of the capital projects are being funded through MTA Capital Programs.

Future Federal and State laws and regulations concerning the environment and access by the physically

disabled could subject the Related Entities to additional operating and capital costs, which costs may be material. Transit System

Environmental. MTA New York City Transit is currently the subject of a cleanup consent decree with a State governmental entity. Underground storage tanks have been replaced. Capital expenditures will continue for site remediation in accordance with the decree.

MTA New York City Transit has received approval from the Federal Transportation Administration to

meet the requirement to provide certain alterations for access by persons with disabilities over a twenty-year period. MTA New York City Transit is also subject to certain provisions of the State Public Buildings Law (the “Public Buildings Law”) relating to facilities for the physically disabled, under which its key station accessibility requirements under the Americans with Disabilities Act, or ADA, and the Public Buildings Law are extended to 2020. Commuter System

Environmental. MTA Long Island Rail Road and MTA Metro-North Railroad are required to file annual reports with the State Department of Environmental Conservation (“NYSDEC”) identifying areas of environmental concern. MTA Long Island Rail Road and MTA Metro-North Railroad have each incurred and will continue to incur costs of asbestos abatement and lead paint removal on their respective properties. The Commuter Capital Programs allocate funds for, among other matters, asbestos abatement, costs of fuel handling and storage, and wastewater treatment and other environmental remediation. MTA Long Island Rail Road and MTA Metro-North Railroad each are required to clean up various conditions on properties they own or operate, and each has established reserves for the clean-up costs. MTA Long Island Rail Road has completed interim remediation on up to 20 substations for mercury contamination due to the utilization of mercury rectifiers that were removed during the 1970’s. To date, one substation has been fully remediated as per NYSDEC requirements and five additional substations entered the NYSDEC’s final remediation process in 2008. Work continues to progress on all MTA Long Island Railroad substation remediation projects. State environmental agencies are monitoring the remediation of pollutants at certain MTA Long Island Rail Road and MTA Metro-North Railroad facilities. The extent of pollution, the cost of clean-up and MTA Long Island Rail Road’s and MTA Metro-North Railroad’s liability, if any, which may be material, cannot be determined at this time.

Access for Persons with Disabilities. MTA Long Island Rail Road is in substantial compliance and

MTA Metro-North Railroad is in full compliance with ADA requirements.


General. MTA Bridges and Tunnels regularly reviews its facility maintenance programs, both remedial and preventive, and believes the same to be of high quality. MTA Bridges and Tunnels intends to continue its comprehensive inspection and maintenance programs for the MTA Bridges and Tunnels Facilities and to continue to engage independent engineering firms to provide biennial inspections of its bridge and tunnel facilities. MTA Bridges and Tunnels’ independent engineers, URS Corporation – New York, have reviewed the inspection reports of the bridges and tunnels undertaken by MTA Bridges and Tunnels’ engineering consultants. Their report thereon entitled “History and Projection of Traffic, Toll Revenues and Expenses and Review of Physical Conditions of the Facilities of Triborough Bridge and Tunnel Authority,” dated June 8, 2009, is attached to the Continued Disclosure Filings as Appendix E and has also been posted

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on the MTA website at www.mta.info/mta/investor/index.html. The URS Study is included by specific cross-reference herein.

Environmental. MTA Bridges and Tunnels’ Capital Programs incorporate the removal and clean-up of

lead paint on its bridges and tunnels in compliance with Federal, State and local laws, codes and regulations.

Bridge Inspections. The New York State Department of Transportation (“NYSDOT”) maintains a program of comprehensive bridge management, maintenance and inspection applicable to MTA Bridges and Tunnels’ bridges. That program includes the uniform code of bridge inspection, which:

• meets or exceeds applicable Federal law, • requires that bridges be inspected at least every two years in accordance with the provisions

of that code, • prescribes qualifications for licensed professional engineers who inspect bridges, and • requires that all bridge inspections be performed or supervised by such persons.

Bridge inspection and maintenance reports must be filed with NYSDOT and NYSDOT may close

bridges found unsafe for public use. MTA Bridges and Tunnels is in compliance with the NYSDOT program.

Tunnel Inspections. In accordance with engineering and construction procedure, tunnel inspections are

required every two years with a comprehensive inspection every ten years. MTA Bridges and Tunnels has implemented a new schedule for tunnel inspections wherein they will be undergoing formal inspection on a regular basis every two years.

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EMPLOYEES, LABOR RELATIONS AND PENSION AND OTHER POST-EMPLOYMENT OBLIGATIONS

General

The transportation services provided by the Related Entities, as well as related maintenance and support services, are labor intensive. Consequently, the major portion of the Related Entities’ expenses consists of the costs of salaries, wages and fringe benefits for employees and retirees.

The employees of MTA and its affiliates and subsidiaries, other than MTA Long Island Rail Road and MTA Metro-North Railroad, are prohibited by the State’s Taylor Law from striking. Nevertheless, represented employees of MTA New York City Transit and MaBSTOA engaged in an illegal three-day strike during December 2005. There have been no labor stoppages at MTA Bridges and Tunnels since 1976. The Taylor Law also requires the TWU (and permits other unions) and MTA New York City Transit and MaBSTOA to submit a dispute preventing the voluntary resolution of contract negotiations to binding arbitration before a three-member public arbitration panel upon the occurrence of certain events. The three-member panel would be chosen as follows: one member appointed by MTA, one member by the affected union, and one member appointed jointly by the parties. Almost all of the unions covered by the Taylor Law have elected to be bound by the Taylor Law’s binding arbitration provisions.

The employees of MTA Long Island Rail Road and MTA Metro-North Railroad are not subject to the

same State prohibition, but are governed by Federal railroad employment statutes. MTA Headquarters

As of December 31, 2008, MTA Headquarters had 971 employees (full and part time), 57of whom were represented by one union. Included in the MTA Headquarters staff are 137 employees from MTA Capital Construction, 84 employees from the MTA Inspector General’s office and 25 Police Command staff employees (rank of Captain and higher). In addition, the MTA Police force (not including Command Staff) numbered 669, all of whom were represented by one union.

Most of the employees of MTA Headquarters, other than the MTA Police, are members of the New

York State and Local Employees’ Retirement System (“NYSLERS”). The MTA Police are members of the MTA Defined Benefit Pension Plan, which has a substantial unfunded accrued actuarial liability (“UAAL”). MTA is required to make significant annual contributions to the respective plans on a current basis. See Footnote 4 to the Combined Financial Statements of MTA for more information relating to the MTA Defined Benefit Pension Plan, as well as the Required Supplementary Information attached thereto that sets forth information relating to the UAAL.

Transit System

As of December 31, 2008, MTA New York City Transit had 40,783 employees (full and part time), 37,819 of whom were represented by 20 different unions. As of December 31, 2008, MaBSTOA had 8,389 employees (full and part time), 6,180 of whom were represented by 10 different unions. The collective bargaining agreement with Local 100 of the Transit Worker’s Union, which represents a substantial portion of the workforce of MTA New York City Transit and MaBSTOA, expired on January 15, 2009. The parties agreed to enter the Taylor Law’s impasse arbitration process. An arbitration panel was convened and arbitration is proceeding.

Employees of MTA New York City Transit are members of the New York City Employees Retirement

System (“NYCERS”). Employees of MaBSTOA have a separately funded pension plan that offers benefits similar to NYCERS. The MaBSTOA pension plan has an UAAL. MTA New York City Transit and MaBSTOA are required to make significant annual contributions to the respective plans on a current basis. See Footnote 6 to the Consolidated Financial Statements of MTA New York City Transit for more information. See also the Required Supplementary Information attached to the Combined Financial Statements of MTA that sets forth information relating to the UAAL.

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MTA Bus

As of December 31, 2008, MTA Bus had 3,322 employees (full and part time), 88% of whom were represented by three different unions. MTA Bus had contracts with 69% of its represented employees through March 31, 2006, and with the other 31% through December 31, 2005. MTA Bus is negotiating with all three unions at this time. The labor negotiations with the largest of the three unions had reached an impasse and entered into the Taylor Law arbitration process. On June 9, 2009 the arbitration panel reached a unanimous decision resolving all issues in the contract. The decision is within the expected budget parameters.

The companies that formerly operated the City Bus Routes had a number of different pension plans.

MTA, on behalf of MTA Bus, has amended the MTA Defined Benefit Pension Plan to include retirement programs which replicate the benefits provided by the prior plans. MTA Bus makes significant annual contributions to the plan on a current basis. See Footnote 4 to the Combined Financial Statements of MTA for more information relating to the MTA Defined Benefit Pension Plan, as well as the Required Supplementary Information attached thereto that sets forth information relating to the UAAL.

Commuter System

As of December 31, 2008, MTA Long Island Rail Road had approximately 6,812 employees, approximately 6,042 of whom were represented by 11 different unions. For the period January 1, 2007 – June 15, 2010, MTA Long Island Rail Road has reached collective bargaining agreements with all of the major unions.

As of December 31, 2008, MTA Metro-North Railroad had 5,961 employees, 4,927 of whom were

represented by 18 different unions with a total of 22 different bargaining units. For the period 2003-2007, MTA Metro-North Railroad and 18 unions representing approximately 4,927 employees reached agreement. All unions and bargaining units adopted collective bargaining agreements effective through June 15, 2010.

Both MTA Long Island Rail Road and MTA Metro-North Railroad supplement the Federal Railroad

Retirement Act benefits through other pension plans. Pre-1988 MTA Long Island Rail Road employees participated in the MTA Long Island Rail Road Company Pension Program within the MTA Defined Benefit Pension Plan and the MTA Long Island Rail Road Plan for Additional Pensions and significant portions of the estimated obligations for those Plans are currently unfunded. The post-1987 employees of MTA Long Island Rail Road and almost all the employees of MTA Metro-North Railroad participate in the MTA Defined Benefit Pension Plan, which also has an UAAL and the 2 railroads are required to make significant annual contributions on a current basis. See Footnote 4 to the Combined Financial Statements of MTA for more information on the pension plans, as well as the Required Supplementary Information attached thereto that sets forth information relating to the UAAL.


As of December 31, 2008, MTA Bridges and Tunnels had 1,776 employees, 1,340 of whom were represented by four different unions. The Local 1931 collective bargaining agreement covering 300 employees expires on October 14, 2009. The Bridge and Tunnel Officers Benevolent Association collective bargaining agreement covering 755 employees expires on May 17, 2009, the Local 1655 collective bargaining agreement covering 113 employees expired on March 2, 2008, and the Superior Officers Benevolent Association collective bargaining agreement covering the remaining 172 represented employees expired on March 14, 2009, but the terms of the agreements remain in effect by operation of law until a successor agreement is concluded or an award in arbitration has been rendered.

Substantially all of MTA Bridges and Tunnels’ employees are eligible to be members of NYCERS and

MTA Bridges and Tunnels is required to make significant annual contributions on a current basis. See Footnote 7 to MTA Bridges and Tunnels’ audited financial statements for more information. MTA Staten Island Railway

As of December 31, 2008, MTA Staten Island Railway had 267 employees, 238 of whom were represented by three different unions. The UTU (covering the majority of the represented employees), the TCU (covering all clerical staff, tower operators, station agents and janitors), and the ATDD (representing

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the train dispatchers) have signed contracts through December 31, 2006. Currently, all represented employees are working without a contract. The MTA Staten Island Railway Police were merged with the MTA Police effective June 1, 2005.

Employees of MTA Staten Island Railway are members of the MTA Defined Benefit Pension Plan

with benefits similar to what NYSLERS offers. MTA Staten Island Railway is required to make significant annual contributions to the plan on a current basis. See Footnote 4 to the Combined Financial Statements of MTA for more information relating to the MTA Defined Benefit Pension Plan, as well as the Required Supplementary Information attached thereto that sets forth information relating to the UAAL.

MTA Long Island Bus

As of December 31, 2008, MTA Long Island Bus had 1,162 employees, 812 of whom were represented by either TWU Local 252 or the Subway Surface Supervisors Association (“SSSA”). The current collective bargaining agreement with TWU Local 252 expired on April 15, 2009. Labor negotiations with TWU Local 252 are underway. The agreement with SSSA expires on September 1, 2009. There is also a small group of 164 paratransit workers that are represented by TWU Local 252 under a separate contract that expires on April 15, 2010.

Employees of MTA Long Island Bus hired on or before January 23, 1983 are members of the MTA

Defined Benefit Pension Plan. In 1999, the former MTA Long Island Bus retirement plan was merged with and into the MTA Defined Benefit Pension Plan. At the time of the merger, the MTA Long Island Bus Plan was fully funded and closed to new employees. In addition, the fund had a surplus that was also merged into the MTA Defined Benefit Pension Plan. Since the merger, the MTA Plan has not required MTA Long Island Bus to make any additional contributions.

Employees of MTA Long Island Bus hired after January 23, 1983 are members of the New York State

and Local Employees’ Retirement System. MTA Long Island Bus is required to make significant annual contributions to the plan on a current basis. OPEBs

In addition to pensions, many state and local governmental employers, including the Related Entities, provide other post-employment benefits (“OPEB”) as part of the total compensation offered to attract and retain the services of employees. OPEB includes post-employment healthcare, as well as other forms of post-employment benefits when provided separate from a pension plan. The Related Entities offer a variety of post-employment benefits that vary among the agencies. GASB Statement No. 45 applies to the MTA in its first quarter 2007 unaudited financial statements.

In general terms, the statement requires the MTA to determine each year (1) the present value of the

current year’s cost of providing an additional year of OPEB to its current employees (the “normal cost”), and (2) an amortization (over a period not to exceed 30 years) of the present value of OPEB costs accrued to date for past and current employees, including retirees (the “past service cost”). Among other decisions, the MTA must choose the amortization period of the past service cost, whether it is amortizing the past service cost using a level dollar or level percentage basis, and certain interest rate assumptions. In each year, the sum of the normal cost and the amortization of past service cost, after making certain technical adjustments, is referred to as the “Annual OPEB Cost,” which is recorded on the income statement.

The amount to be recorded on the balance sheet is the amount of the previous year’s liability (zero as

of January 1, 2007), plus the current year’s Annual OPEB Cost, less the amount funded by the MTA (either as pay-as-you-go or deposited into a trust fund dedicated to OPEB costs). This amount is referred to as the “Net OPEB Obligation.”

The Net OPEB Obligation will increase each year to the extent that the MTA’s funding of OPEB

through pay-as-you-go payments and trust fund deposits is less than the Annual OPEB Cost. Consequently, it is expected that the Net OPEB Obligation will increase each year (1) during the period of time that MTA has chosen to amortize the past service cost until fully amortized, and (2) MTA’s pay-as-you-go funding is less than that year’s normal cost. The principal way of reducing the Net OPEB Obligation is to fund a trust fund dedicated specifically to paying OPEB costs.

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The MTA has completed the process of evaluation and adopting GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. The Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers.

The MTA has received a report from an independent consultant and actuary firm that values, consistent with GASB Statement No. 45, the present value of OPEB costs for past and current employees, including retirees, of the Related Entities to be approximately $13.2 billion. The following chart allocates that value by agency:

Agency Frozen Accrued Liability (in millions) NYC Transit $10,119 Long Island Rail Road 1,155 Metro-North Railroad 476 Bridges & Tunnels 560 MTA Headquarters 370 Long Island Bus 76 Staten Island Railway 25 MTA Bus Company 460 Total $13,241

MTA has adopted certain methods and assumptions to determine the 2008 expense for OPEB and to

amortize the liability. See Footnote 5 to the Combined Financial Statements of MTA for more information relating to the methods and assumptions used those expenses and liabilities.

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INSURANCE

General

MTA’s Department of Risk and Insurance Management (“MTA RIM”) is responsible for administering the insurance programs for the Related Entities, including obtaining insurance. Marsh, USA serves as MTA’s master insurance broker and Marsh Management Services, Inc. acts as the captive manager for the MTA captive subsidiary, First Mutual Transportation Assurance Corporation (“FMTAC”).

The insurance needs of the Related Entities vary. One of the biggest differences relates to how

employees are covered for injuries on the job. The recovery by employees of the Related Entities other than the commuter railroads who get injured on the job is limited by the State workers compensation law. Recoveries by employees of the commuter railroads are governed by Federal law, and are not limited by State law, and, consequently, they can sue for damages if they are injured on the job.

The Related Entities maintain insurance coverage through MTA’s captive insurance company

subsidiary, FMTAC, and through the commercial marketplace. MTA RIM, which also serves as the staff of FMTAC, sets the insurance premiums for the Related Entities at levels that are expected to be sufficient to purchase the commercial insurance or reinsurance, or permit FMTAC to pay the claims and costs for claims administration. Since its creation, FMTAC, with funding from the Related Entities, has assumed greater responsibility for the direct insurance and reinsurance risk of the Related Entities.

FMTAC is licensed in New York State as both a direct insurer and as a reinsurer. When FMTAC is a

direct insurer, it may reinsure all or a portion of its potential liabilities with commercial reinsurers. FMTAC retains independent entities to handle the claims administration process. FMTAC may deposit certain of its assets in trust with third parties in order to secure its insurance or reinsurance obligations under some of the insurance policies.

New York State Department of Insurance Regulations require that every captive insurance company

licensed in the State be audited by State regulators every three to five years for compliance with State regulations and generally accepted accounting standards. FMTAC’s first and, to date, only audit covering the period from its creation to December 31, 2003 was completed during 2004 and a favorable sign-off from the State Insurance Department was received on March 21, 2006.

The following major insurance policies are maintained for the benefit of the Related Entities and the expiration dates of such policies are set forth in the following chart.

Insurance Program Expiration Date Property Insurance May 1, 2010 Commuter Stations and Force Liability December 14, 2009 FMTAC Excess Loss Fund October 30, 2009 Commercial Excess Liability Policy October 30, 2009 All Agency Protective Liability June 1, 2010 Paratransit and Non-Revenue Vehicle Policies March 1, 2010 Premises Liability December 6, 2009 Builder’s Risk various Owner Controlled Insurance Programs (“OCIPs”) various

Property Insurance Program

Effective October 31, 2007, FMTAC renewed the all-agency property insurance program. For the period October 31, 2007 through May 1, 2009, FMTAC directly insures property damage claims of the Related Entities in excess of a $25 million per occurrence self-insured retention (“SIR”), subject to an annual $75 million aggregate. Losses occurring after the retention aggregate is exceeded are subject to a deductible of $7.5 million per occurrence. The total program limit has been maintained at $1.25 billion per occurrence covering property of the Related Entities collectively. With the exception of acts of terrorism (both domestic and foreign), FMTAC is reinsured in the domestic, London, European and Bermuda marketplaces for this coverage. Given the absence of major catastrophes in 2006 and 2007, available capacity has emerged, along with pricing reductions. As a result, FMTAC was able to obtain additional

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reinsurance capacity over last year and has fully reinsured the all-risk component for the full $1.25 billion, subject to certain program sublimits.

The property insurance provides replacement cost coverage for all risks of direct physical loss or

damage to all real and personal property, with minor exceptions. The policy also provides extra expense and business interruption coverages.

With respect to acts of terrorism, FMTAC is reinsured by the United States Government for 85% of

“certified” losses, as covered by the Terrorism Risk Insurance Act of 2007 (originally introduced in 2002). Under the 2007 extension, terrorism acts sponsored by both foreign and domestic organizations are covered. Until 2007, the Act only provided coverage for acts sponsored by foreign organizations. The remaining 15% of MTA losses would be covered under an additional policy described below. Additionally, no federal compensation will be paid unless the aggregate industry insured losses exceed a $100 million (“trigger”).

To supplement the reinsurance to FMTAC through TRIA 2007, the MTA obtained an additional

commercial reinsurance policy with Lexington Insurance Co. (part of AIG). This policy provides coverage for (1) 15% of any “certified” act of terrorism - up to a maximum recovery of $183.75 million for any one occurrence, or (2) 100% of any “certified” terrorism loss which does not reach the $100 million trigger – up to a maximum recovery of $100 million for any occurrence. This coverage expires on May 1, 2010. Recovery under this policy is subject to a retention of $25 million per occurrence and $75 million in the annual aggregate – in the event of multiple losses during the policy year. Should the MTA’s retention in any one year exceed $75 million, future losses in that policy year are subject to a retention of just $7.5 million.

Commuter Stations and Force Liability

• Commuter Station Liability Insurance. FMTAC directly insures MTA Long Island Rail Road and MTA Metro-North Railroad under the stations policy, which covers third party liability, bodily injury and property damage and personal injury at passenger stations, including moving train hazards while confined to the station area, and includes elevators, escalators, platforms, appurtenances, land, approaches and parking lots, if they are owned by the Related Entities. These policies insure up to the Self-Insured Retention set forth in the table included under the caption “FMTAC Excess Loss Fund” per occurrence with no aggregate stop loss protection.

• Commuter Force Account Insurance. FMTAC directly insures MTA Long Island Rail Road and

MTA Metro-North Railroad under the force account policy, which covers third party liability, physical damage and medical payments on force account work (i.e., employees of the commuter railroads in the course of doing work for the benefit of the Related Entities) reimbursed by others. These policies insure up to the Self-Insured Retention set forth in the table included under the caption “FMTAC Excess Loss Fund” per occurrence with no aggregate stop loss protection.

• The cost of the Stations Insurance is factored into the level of station maintenance payments

required to be paid by the City and the Counties in the MTA Commuter Transportation District. See “REVENUES OF THE RELATED ENTITIES – Financial Assistance and Service Reimbursements from Local Municipalities – Commuter System Station Maintenance Payments” in Part 3.

On November 1, 2006, FMTAC increased the primary coverage on the Station Liability and Force

Account liability policies from $7 million to $8 million for MTA Metro-North Railroad and MTA Long Island Rail Road.

FMTAC Excess Loss Fund

FMTAC operates an excess liability insurance program (“ELF”) that insures certain claims in excess of the self-insured retention limits of the agencies on both a retrospective (claims arising from incidents that occurred before October 31, 2003) and prospective (claims arising from incidents that occurred on or after October 31, 2003) basis. For claims arising from incidents that occurred on or after November 1, 2001, but before November 1, 2006, the self-insured retention limits are: $7 million for MTA New York City

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Transit, MaBSTOA, MTA Bus, MTA Staten Island Railway, MTA Long Island Rail Road and MTA Metro-North Railroad; $2 million for MTA Long Island Bus; and $1.4 million for MTA and MTA Bridges and Tunnels. Effective November 1, 2006, the self-insured retention limits for ELF were increased to the following amounts: $8 million for MTA New York City Transit, MaBSTOA, MTA Bus, MTA Staten Island Railway, MTA Long Island Rail Road and MTA Metro-North Railroad; $2.3 million for MTA Long Island Bus; and $1.6 million for MTA and MTA Bridges and Tunnels. The maximum amount of claims arising out of any one occurrence is the total assets of the program available for claims, but in no event greater than $50 million. The retrospective portion contains the same insurance agreements, participant retentions, and limits as existed under the ELF program for occurrences happening on or before October 30, 2003. On a prospective basis, FMTAC issues insurance policies indemnifying the MTA, its subsidiaries and affiliates above their specifically assigned self-insured retention with a limit of $50 million per occurrence with a $50 million annual aggregate. FMTAC charges appropriate annual premiums based on loss experience and exposure analysis to maintain the fiscal viability of the program. On December 31, 2008, the balance of the assets in this program was $62.1 million.

Self-Insured Retention

Related Entity

Occurrence on or after November 1, 2001,

but before November 1, 2006

Occurrence on or after November 1, 2006

MTA New York City Transit, MaBSTOA, MTA Staten Island Railway, MTA Long Island Rail Road, MTA Metro-North Railroad and MTA Bus

$7,000,000

$8,000,000 MTA Long Island Bus 2,000,000 2,300,000 MTA Bridges and Tunnels and MTA Headquarters

1,400,000

1,600,000

MTA also maintains an All-Agency Excess Liability Insurance Policy that affords the MTA and its subsidiaries and affiliates additional coverage limits of $350 million, for a total limit of $400 million ($350 million in excess of $50 million). In certain circumstances, when the assets in the program described in the preceding paragraph are exhausted due to payment of claims, the All-Agency Excess Liability Insurance will assume the coverage position of $50 million.

Since January 1, 2008, a number of settlements have been provided from the Excess Loss Fund in an amount of approximately $6 million. The following includes pending cases and claims that could result in payments under this liability policy in excess of agency retentions, as well as certain closed claims:

LIRR

• Gutierrez v. LIRR and Amtrak – This is an action by a LIRR employee under the Federal Employers’ Liability Act, which was settled on February 26, 2008, prior to jury selection, for $3,500,000, from which LIRR will recover a Disability/Accident lien in the amount of $68,902.78. The plaintiff was a signal worker replacing rotted floorboards on the #16 signal bridge near the Harold Interlocking. Apparently, he fell from the bridge and his lifeline/harness kept him from falling to the ground, but was not shortened enough to keep him above the catenary wires, which were approximately five feet below the bridge. He came in contact with the high voltage catenary wires and sustained an electrical shock, although he was not severely injured. When he hit the wires, he caused the circuit to “trip” and the power was turned off. Employees of Amtrak, which owned and operated the wires, determined to turn the circuit back on, without ascertaining why it had “tripped” off. Gutierrez received another shock, and his clothes caught fire, resulting in his sustaining severe burns over more than 65% of his body. He underwent numerous operative procedures. In January 2009, the LIRR commenced arbitration against Amtrak, which owned and operated the catenary wires, to recover the settlement amount. FMTAC’s excess loss fund program was not required to contribute to the settlement amount, as the settlement was for a sum below LIRR’s retention of $7 million at the time of the event.

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Transit System

• Huang v. NYCTA – This was an action by a woman who became trapped between the platform and a train. The jury returned a verdict of $28.5 million. The verdict was appealed, and the Appellate Division sustained the liability finding. The Appellate Division ordered NYCT to pay $12,751,042.05 in satisfaction of the amended judgment. On October 20, 2008, FMTAC reimbursed NYCT $5,796,648.86, which amount included fees.

• Hernandez v. NYCTA – This is an action by a woman who was struck by a bus on October 29,

2003 and suffered severe injuries. Plaintiff was granted summary judgment on the issue of liability, and a jury verdict was returned in the amount of $12,477,529 on damages. The verdict was appealed and in June 2008 the Appellate Division ordered a new trial expected to begin in Spring of 2009. FMTAC’s excess loss fund program would be responsible for the portion, if any, of any final judgment or settlement in excess of the NYCTA’s retention of $7 million at the time of the event.

• Lopez v. NYCTA – This is an action brought by a man, who, while riding a bicycle on September

16, 2003, was struck by a bus, suffering a severe injury. The jury awarded damages in the gross amount of $11.0 million but also found the plaintiff to be thirty per cent at fault, resulting in a net in the amount of $7.2 million. All aspects of the case are currently on appeal. FMTAC’s excess loss fund program would be responsible for the portion, if any, of any final judgment or settlement in excess of the NYCTA’s retention of $7 million at the time of the event.

• De La Cruz v. NYCTA – This is an action by a woman who was struck by a bus on May 11, 2001.

The jury returned a verdict of $16.0 million in June 2005. The jury award in that case was reduced to $4 million by the trial court. The Appellate Division affirmed the reduced award. NYCTA moved the Appellate Division for leave to appeal to the Court of Appeals. The matter was settled on December 1, 2008 for $4,334,716. The FMTAC loss fund program accordingly did not have to contribute to the settlement.

• Aguilar v. NYCTA – This action was brought by a woman who, in November 2005, was struck by

a bus while crossing a street, as the bus was turning right. A jury returned a verdict in the amount of $27.5 million. NYCTA plans to appeal both the issue of liability and the amount of the award.

FMTAC’s excess loss fund program would be responsible for the portion, if any, of any final judgment or settlement in excess of NYCTA’s retention of $7.0 million at the time of the event.

MTA Bridges and Tunnels (“MTA B&T”)

• Kane v. TBTA – This case arises out of a collision of two non-B&T vehicles on the Marine Parkway Bridge. Plaintiff claimed that the surface of the bridge was defective and thus caused the accident despite the fact that it was raining and the plaintiff was speeding and under the influence of alcohol. The case was recently tried for a third time, and the jury returned a liability verdict for the plaintiff. The liability verdict has been appealed. The parties have stipulated that total damages in the case, in the event of a final judgment against the defendant, are in the amount of $3.5 million The liability verdict has been appealed. FMTAC’s excess loss fund program would be responsible for the amount of any final judgment or settlement in excess of MTA B&T’s retention of $1.2 million at the time of the event.

MTA Long Island Bus (“MTA LIB”)

• Sanoh v. LI Bus – Plaintiff, a young woman, alleges that in October 2007 she was in the middle of

a crosswalk when an MTA LI Bus attempted a turn, struck her and caused her to slip under the bus’s front wheel, running over her left leg. She thereafter underwent multiple hospitalizations and surgeries. This case was settled in January, 2009 for $5,000,000, with $2,300,000 to be paid by MTA LI Bus and $2,700,000 to be paid by FMTAC’s excess loss fund program.

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All Agency Protective Liability

• FMTAC All-Agency Protective Liability Program. Under the All-Agency Protective Liability Program (“AAPL”), FMTAC directly insures the Related Entities against claims arising out of work performed by independent contractors on capital projects. The policy provides coverage of $2 million per occurrence.

• Commercial All-Agency Protective Excess Liability Program. FMTAC obtained commercial

insurance to provide excess coverage for the Related Entities on top of the AAPL. The policy provides coverage of $6 million in excess of $2 million per occurrence, with a $12 million annual aggregate. Any excess is covered by the FMTAC Excess Loss Fund policy.

Paratransit and Non-Revenue Vehicle Policies

• MTA New York City Transit Paratransit Program. FMTAC maintains a commercial policy that provides automobile liability coverage for all vendors hired to perform services on behalf of MTA New York City Transit’s Paratransit Access-A-Ride program with policy limits of liability of $3 million per occurrence, subject to a $1 million deductible. On March 1, 2009, the “Access-A-Ride” automobile liability policy program was renewed.

• MTA Non-Revenue Auto Liability. This program covers non-revenue vehicles (i.e., administrative

and other vehicles not used for the generation of passenger revenues) of MTA Long Island Rail Road, MTA Metro-North Railroad, MTA Staten Island Railway, MTA Police, the MTA Inspector General, MTA Headquarters, MTA Bus and MTA Long Island Bus. FMTAC obtained a commercial policy that provides coverage to the above entities with a $8 million per occurrence combined single limit and a $500,000 deductible for each accident, with the exception of MTA Long Island Bus which is subject to a $2 million per occurrence combined single limit and a $500,000 deductible for each accident. On March 1, 2009, the “non-revenue fleet” automobile liability policy program was renewed. FMTAC also renewed its deductible buy back policy, where it assumes the liability of the agencies for their deductible.

• The paratransit program and non-revenue auto liability policies are currently issued by the same

commercial vendor.

• Claims and claims administration are funded out of the General Operating Account.

Premises Liability

Premises Liability insurance covers liability arising out of the ownership, maintenance and use of various MTA locations, including 341/345/347 Madison Avenue, the MTA Inspector General’s lease of 2 Penn Plaza and 2 Broadway. The program provides the Related Entities with coverage of up to $1 million per occurrence with a $1 million aggregate.

Owner Controller Insurance Program

In an owner controller insurance program (“OCIP”), MTA RIM arranges for the insurance coverage for all of the construction activity covered by the OCIP, rather than reimbursing the individual contractors and subcontractors for obtaining their own insurance. OCIPs have historically been more economical than requiring the contractors and subcontractors to obtain the insurance due to, among other things, the risk pooling nature of the program (i.e., the risks relating to insuring each individual project separately is generally considered greater than the risks associated with collectively insuring many projects) and the MTA, due to its financial strength and successful operation of safety management programs at the job sites, is generally better able to procure insurance at favorable rates than individual smaller contractors and subcontractors. In addition, an OCIP provides the same level of insurance coverage at each project, which was not always possible when the individual contractors and subcontractors were required to obtain the insurance.

Generally, commercial insurance policies are obtained for the OCIP, but FMTAC will typically retain

a significant portion of each insured loss which ranges from the first $250,000 or $500,000 of each insured

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workers compensation or general liability loss up to the first $50 million of a builders risk loss on a network expansion project. FMTAC holds deposit moneys and/or collateral in trust with a commercial bank as security for its reimbursement obligation to the commercial insurance carrier for any losses. Unexpended funds are returned to the Related Entities at the conclusion of the program. The following are active OCIPs:

o MTA New York City Transit Station, Escalators and Elevators (2000-2004 Program) o MTA New York City Transit Line Structures, Shops, Yards and Depots (2000-2004

Program) o MTA Long Island Rail Road East Side Access o MTA Long Island Rail Road and MTA Metro-North Railroad 2000-2004 MTA Capital

Programs o MTA New York City Transit 2005-2009 MTA Capital Program o MTA New York City Transit Second Avenue Subway o MTA Long Island Rail Road and MTA Metro-North Railroad 2005-2009 MTA Capital

Programs Builder’s Risk

• Builder’s Risk insurance is a type of property insurance that provides coverage for physical damage to the insured structure during the course of construction. Builder’s Risk insurance is not liability insurance.

• Builder’s Risk for the Capital Program OCIPs covers the projects for the full project value up to a

limit of either $50 million or $100 million depending upon the program and/or the value of the project. The East Side Access Project has a limit of $300 million and Second Avenue Subway has a limit of $500 million.

• Claims and claims administration are funded out of the General Operating Account.

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LITIGATION

General

The Related Entities maintain extensive property, liability, station liability, force account, construction and other insurance as generally described above in this Part 5 under “INSURANCE.” Many of the claims for money damages described below may be fully or substantially covered by insurance, subject to the individual agency retention set forth under “INSURANCE – FMTAC Excess Loss Fund.” Each of the Related Entities additionally annually budgets an amount that it projects will be sufficient to pay for judgments and claims during that year.

The Related Entities also provide accruals in their financial statements for their estimated liability for

claims by third parties for personal injury arising from, among other things, bodily injury (including death), false arrest, malicious prosecution, and libel and slander, for property damage for which they may be liable as a result of their operations, and advertising offense, including defamation, invasion of right of privacy, piracy, unfair competition and idea misappropriation. The estimated liabilities are based upon independent actuarial advice obtained by the Related Entities. However, except in special circumstances and except for the annual judgments and claims budgeted amounts, additional cash reserves are not generally established in an amount equal to the full amount of the accrual.

MTA

As of April 13, 2009: Janes and Schwartz v. TBTA et al. See description below under “MTA Bridges and Tunnels.” In the Matter of Nicholas Casale v. MTA, et al. In May 2003, MTA discharged petitioner, the then

Deputy Director of Security, as well as the Director of Security, Louis Anemone. Thereafter, each submitted notices of claim demanding damages of $10 million. On September 5, 2003, petitioner commenced an Article 78 proceeding in New York State Supreme Court against MTA, claiming that his dismissal was defamatory, that he was deprived of his liberty right to clear his name, and that his dismissal was arbitrary, capricious and contrary to law. He sought his attorney’s fees, back pay and other unspecified damages provided by law. The Court granted petitioner a “name-clearing hearing” and a hearing to determine if his termination was contrary to law. The Court also granted petitioner’s request to file an amended petition in order to include a claim for compensatory and other money damages, and petitioner did so. The name-clearing hearing was conducted in June 2007 before a jointly-selected independent hearing officer, who ruled that petitioner did not meet his burden of proof. On or about January 30, 2008, petitioner moved in New York State Supreme Court for an order vacating and reversing the independent hearing officer’s determinations, which petition MTA opposed. Oral argument was heard in June 2008. The motion remains pending. MTA cannot determine the outcome of this claim at this time.

In the Matter of Louis Anemone v. MTA, et al. In May 2003, MTA discharged plaintiff, the then

Director of Security, and his Deputy Director of Security, Nicholas Casale. Thereafter, each submitted notices of claim demanding damages of $10 million. In March 2005, plaintiff filed a civil rights action in the United States District Court for the Southern District of New York, alleging retaliation and due process violations, and seeking unspecified compensatory and punitive damages. Defendants have answered the complaint and set forth various factual and legal defenses to the allegations. The parties completed both fact and expert discovery. Defendants moved for summary judgment on all claims. By decision issued on May 2, 2008, defendants’ motion was granted in full. Plaintiff appealed the decision granting defendants’ motion. Briefing by all parties has been completed. Oral argument has yet not been scheduled. MTA cannot determine the outcome of this claim at this time.

Actions for Personal Injuries. There are numerous actions pending against MTA claiming personal injuries under the Federal Employers’ Liability Act (“FELA”) for injuries sustained while on duty, wrongful dismissal and other torts.

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Transit System

As of March 30, 2009: Actions for Personal Injuries. As of December 31, 2008, MTA New York City Transit and MaBSTOA

had an active inventory of approximately 7,800 personal injury cases and approximately 2,400 property damage claims arising out of the operation and administration of the Transit System.

Workers’ Compensation and No-Fault. As of December 31, 2008, MTA New York City Transit and

MaBSTOA had an active inventory of approximately 11,300 compensation cases and approximately 4,900 no-fault claims.

Actions Relating to the Transit Capital Program. MTA New York City Transit has received claims

from several contractors engaged in work on various capital program projects. The aggregate amount demanded by all such claimants, if recovered in full, could result in an increase in the cost of the capital projects that are the subject of such disputes. The capital program contemplates the payment of such claims from project-specific and general program contingency funds, as well as other available moneys pledged for capital purposes.

MTA Bus

As of December 31, 2008: MTA Bus had an active inventory of approximately 505 open personal injury claims, approximately

2,936 open property damage claims and 602 open no-fault claims arising out of the operation and administration of the MTA Bus System.

Commuter System

As of March 27, 2009 for MTA Metro-North Railroad and as of April 7, 2009 for MTA Long Island Railroad:

Actions for Personal Injuries. MTA Long Island Rail Road and MTA Metro-North Railroad are involved in numerous claims, lawsuits and administrative proceedings arising out of the operation and administration of the Commuter System. Most of these MTA Long Island Rail Road and MTA Metro-North Railroad lawsuits are personal injury claims.

Actions Relating to the Commuter Capital Program. From time to time, MTA Long Island Rail Road

and MTA Metro-North Railroad receive claims relating to various Capital Program projects. In general, the aggregate amount demanded by all such claimants, if recovered in full, could result in a material increase in the cost of the capital projects that are the subject of such disputes. The capital program contemplates the payment of such claims from project-specific and general program contingency funds, as well as other available moneys pledged for capital purposes.


As of January 27, 2009: Janes and Schwartz v. TBTA, et al. This putative class action suit was filed in the United States District

Court for the Southern District of New York on February 22, 2006, alleging unequal treatment by the MTA and MTA Bridges and Tunnels as a result of toll collection policy at the Verrazano-Narrows Bridge, Cross Bay Veterans Memorial Bridge, and Marine Parkway-Gil Hodges Memorial Bridge. The complaint alleges that the toll collection policy, which allows discounts for Staten Island and Rockaway peninsula residents, unfairly discriminates against out-of-state residents and New Yorkers who do not live in those geographic areas. The complaint alleges violations of the Commerce, Privileges and Immunities, and Equal Protection Clauses of the U.S. Constitution, as well as the Equal Protection clause of the New York State Constitution. The complaint seeks relief which includes: certification of the class of plaintiffs; a judgment declaring the toll collection policy unconstitutional; a preliminary and permanent injunction; restitution to the class of plaintiffs; and attorney’s fees. The authorities filed an answer on May 15, 2006. The authorities are vigorously defending this lawsuit, which is still in its early stages. The authorities have produced

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documents and depositions have been held of certain employees of MTA Bridges and Tunnels. Pursuant to the April 7 and November 17, 2008 orders of Magistrate Judge Pitman, proceedings in the action, including the making of plaintiffs’ motion for class certification, have been stayed pending the issuance of the Second Circuit’s decision in a similar case, Selevan v. New York Thruway Authority, in which the district court dismissed the complaint. A decision in Janes is dependent upon on the substance of the Selevan decision. A lower court decision in Janes is not expected before the end of 2009. An appeal could follow. The authorities believe that the challenged toll discounts are constitutional but cannot determine the outcome of this litigation at this time.

Actions for Personal Injuries. MTA Bridges and Tunnels is involved in numerous claims, lawsuits and

administrative proceedings arising out of the operation and administration of the MTA Bridges and Tunnels Facilities. Most of these are personal injuries claims.

Actions Relating to MTA Bridges and Tunnels’ Capital Program. From time to time, MTA Bridges

and Tunnels receives claims relating to various Capital Program projects. In general, the aggregate amount demanded by all such claimants, if recovered in full, could result in a material increase in the cost of the capital projects that are the subject of such disputes. The capital program contemplates the payment of such claims from project-specific and general program contingency funds, as well as other available moneys pledged for capital purposes. MTA Long Island Bus

As of December 31, 2008: LI Bus had an active inventory of approximately 896 personal injury claims, 684 auto property

damage claims and 628 open no-fault claims arising out of the operation and administration of the LI Bus System.

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MTA

Financials

Metropolitan Transportation Authority (A Component Unit of the State of New York)

Independent Auditors’ Report

Consolidated Financial Statements Years Ended December 31, 2008 and 2007

APPENDIX B

METROPOLITAN TRANSPORTATION AUTHORITY TABLE OF CONTENTS

Page

INDEPENDENT AUDITORS’ REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007: Consolidated Balance Sheets

Consolidated Statements of Revenues, Expenses and Changes in Net Assets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Required Supplementary Information – Schedule of Pension Funding Progress Required Supplementary Information – Schedule of Funding Progress for the MTA Postemployment Benefit Plan Supplementary Information – Schedule of Financial Plan to Financial Statements Reconciliation Supplementary Information – Consolidated Reconciliation Between Financial Plan and Financial Statements Supplementary Information – Consolidated Subsidy Accrual Reconciliation Between Financial Plan and Financial Statements

B-3 - B-23

B-1 - B-2

B-24 - B-25

B-26 - B-27

B-28 - B-29

B-30 - B-94

B-95

B-96

B-97

B-98

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To the Members of the Board of Metropolitan Transportation Authority

We have audited the accompanying consolidated balance sheets of the Metropolitan Transportation Authority (the “MTA”), a component unit of the State of New York, as of December 31, 2008 and 2007, and the consolidated statements of revenues, expenses and changes in net assets, and consolidated cash flows for the years then ended. These consolidated financial statements are the responsibility of the MTA's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements of the New York City Transit Authority (“MTA New York City Transit”), Staten Island Rapid Transit Operating Authority (“MTA Staten Island Railway”), and the Metropolitan Suburban Bus Authority (“MTA Long Island Bus”), which represent 56 percent and 56 percent, and 40 percent and 42 percent, of the assets and revenues of the MTA, respectively, as of and for the years ended December 31, 2008 and 2007. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for MTA New York City Transit, MTA Staten Island Railway and MTA Long Island Bus, is based solely on the reports of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the MTA's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the respective consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of the MTA, as of December 31, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 2 to the consolidated financial statements, in 2008, the MTA adopted Governmental Accounting Standards Board Statement (“GASB”) No. 49, Accounting and Financial Reporting for Pollution Remediation Obligation.

Deloitte & Touche LLP Two World Financial Center New York, NY 10281-1414 USA

Tel: +1 212 436 2000 Fax: +1 212 436 5000 www.deloitte.com

Member of Deloitte Touche Tohmatsu

The Management’s Discussion and Analysis on pages 3 through 23, the Schedule of Pension Funding Progress on page 95, and the Schedule of Funding Progress for the MTA Postemployment Benefit Plan on page 96 are not a required part of the basic consolidated financial statements, but are supplementary information required by the Governmental Accounting Standards Board. This supplementary information is the responsibility of the MTA’s management. We and the other auditors have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audits were conducted for the purpose of forming an opinion on the MTA’s consolidated basic financial statements. The schedule of financial plan to financial statements reconciliation, schedule of consolidated reconciliation between financial plan and financial statements, and schedule of consolidated subsidy accrual reconciliation between financial plan and financial statements are presented for purposes of additional analysis and are not a required part of the basic consolidated financial statements. This supplementary information is the responsibility of the MTA’s management. The schedule of financial plan to financial statements reconciliation, schedule of consolidated reconciliation between financial plan and financial statements, and schedule of consolidated subsidy accrual reconciliation between financial plan and financial statements have not been subjected to the auditing procedures applied in the audits of the basic consolidated financial statements and, accordingly, we express no opinion on them.

April 22, 2009

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METROPOLITAN TRANSPORTATION AUTHORITY

MANAGEMENT’S DISCUSSION AND ANALYSIS YEARS ENDED DECEMBER 31, 2008 AND 2007 ($ in Millions) 1. OVERVIEW OF THE FINANCIAL STATEMENTS

Introduction This report consists of four parts: Management’s Discussion and Analysis (“MD&A”), Consolidated Financial Statements, Notes to the Consolidated Financial Statements, and Supplementary Information.

Consolidated I Financial Statements include:

Consolidated Balance Sheets, which provide information about the nature and amounts of investments in resources (assets) and the obligations to Metropolitan Transportation Authority and its consolidated subsidiaries and affiliates (the “MTA Group”) creditors (liabilities), with the difference between the two reported as net assets.

Consolidated Statements of Revenues, Expenses, and Changes in Net Assets, which provide information about the MTA’s changes in net assets for the period then ended and accounts for all of the period’s revenues and expenses, measures the success of the MTA Group’s operations during the period, and can be used to determine how the MTA has funded its costs.

The Consolidated Statements of Cash Flows, which provide information about the MTA Group’s cash receipts, cash payments and net changes in cash resulting from operations, noncapital financing, capital and related financing, and investing activities.

Notes to the Consolidated Financial Statements provide information that is essential to understanding the consolidated financial statements, such as the MTA Group’s accounting methods and policies, details of cash and investments, employee benefits, long-term debt, lease transactions, future commitments and contingencies of the MTA Group, and information about other events or developing situations that could materially affect the MTA Group’s financial position.

Required Supplementary Information provides information concerning the MTA Group’s progress in funding its obligation to provide pension benefits and postemployment benefits to its employees.

Management’s Discussion and Analysis provides a narrative overview and analysis of the financial activities of the MTA Group for the years ended December 31, 2008 and 2007. This management discussion and analysis is intended to serve as an introduction to the MTA Group’s consolidated financial statements. It provides an assessment of how the MTA Group’s position has improved or deteriorated and identifies the factors that, in management’s view, significantly affected the MTA Group’s overall financial position. It may contain opinions, assumptions, or conclusions by the MTA Group’s management that must be read in conjunction with, and should not be considered a replacement for, the consolidated financial statements.

2. FINANCIAL REPORTING ENTITY

The Metropolitan Transportation Authority (“MTA”) was established under the New York Public Authorities Law and is a public benefit corporation and a component unit of the State of New York

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whose mission is to continue, develop, and improve public transportation and to develop and implement a unified public transportation policy in the New York metropolitan area.

MTA Related Groups

� Headquarters (“MTAHQ”) provides general oversight, planning and administration, including budget, cash management, finance, legal, real estate, treasury, risk management, and other functions to the related groups listed below.

� The Long Island Rail Road Company (“MTA Long Island Rail Road”) provides passenger transportation between New York City and Long Island.

� Metro-North Commuter Railroad Company (“MTA Metro-North Railroad”) provides passenger transportation between New York City and the suburban communities in Westchester, Dutchess, Putnam, Orange, and Rockland counties in New York State and New Haven and Fairfield counties in Connecticut.

� Staten Island Rapid Transit Operating Authority (“MTA Staten Island Railway”) provides passenger rail transportation on Staten Island.

� Metropolitan Suburban Bus Authority (“MTA Long Island Bus”) provides public bus service in Nassau and Queens counties.

� First Mutual Transportation Assurance Company (“FMTAC”) operates as a captive insurance company to provide insurance coverage for property and primary liability.

� New York City Transit Authority (“MTA New York City Transit”) and its subsidiary, the Manhattan and Bronx Surface Transit Operating Authority (“MaBSTOA”) provide subway and public bus service within the five boroughs of New York City.

� Triborough Bridge and Tunnel Authority (“MTA Bridges and Tunnels”) operates seven toll bridges, two tunnels, and the Battery Parking Garage.

� MTA Capital Construction Company (“MTA Capital Construction”) provides oversight for the planning, design, and construction of current and future major MTA system expansion projects.

� MTA Bus Company (“MTA Bus”) operates certain bus routes in areas previously served by private bus operators pursuant to franchises granted by the City of New York.

3. CONDENSED FINANCIAL INFORMATION

The following sections discuss the significant changes in the MTA Group’s financial position for the year ended December 31, 2008. An analysis of major economic factors and industry trends that have contributed to these changes is provided. It should be noted that for purposes of the MD&A, the information contained within the summaries of the consolidated financial statements and the various exhibits presented were derived from the MTA Group’s consolidated financial statements. All dollar amounts (except where otherwise expressly noted) are in millions.

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Total Assets, Distinguished Between Capital Assets, Net and Other Assets

2008 2007 2006

Capital assets, net (see Note 6) 43,323$ 40,611$ 38,307$ Other assets 10,134 11,158 11,778

Total assets 53,457$ 51,769$ 50,085$

Capital Assets, Net

December 31, 2008 versus December 31, 2007

� Net capital assets increased at December 31, 2008 by $2,712. The largest increase, $1,560, occurred in other capital assets (which includes work trains, service vehicles, passenger stations and other equipment, excluding passenger cars and locomotives and buses), cars and locomotives, $1,185; infrastructure, $1,075; passenger buildings and structures, $476; bridges and tunnels, $83; acquisition of buses increased by $67; construction in progress, $35; and the acquisition of land increased by $6. These increases were partially offset by additional accumulated depreciation of $1,775. Some of the more significant projects contributing to the increase included:


� Rehabilitation of the East River Tunnel, safety and substation improvements, ventilation projects and mainline corridor improvements.

� Improvements to MTA Long Island Rail Road’s infrastructure road assets providing replacement of various tracks and branches at a cost of $52.4 and upgrades to Queens interlocking which

December 31, 2008

Passenger cars and locomotives 18%

Bridges and Tunnels 3%

Buses 2%

Infrastructure 24%

Other 17% Land 0%

Construction work-in-progress 14%

Buildings and structures 22%

December 31, 2007

Passenger cars and locomotives 17%

Bridges and Tunnels 4%Buses 2%

Infrastructure 24%

Other 15%

Land 0%

Construction work-in-progress 15%

Buildings and structures 23%

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included the replacement of a relay-based signal system, reconfiguration of crossovers and modification of replacement of signal bridges for an additional cost of $58.9.

� Upgrading of shops and yards such as Babylon, Long Island City and Richmond Hills.

� Continued work on signals and communication assets, with a number of projects nearing completion, such as the fiber optic network and various microprocessor signal projects.

� Rehabilitation of passenger stations, including the Atlantic Terminal Complex, Broadway, Seaford and Valley Stream with a total cost of $28.

� Work on security projects, including hardening of Penn Station, Jamaica, and the 63rd Street Tunnel with an additional cost of $26.3.

MTA New York City Transit

� Design and installation of a pilot Communications Based Train Control system on the Canarsie Line.

� Station rehabilitation at various locations on various lines, and the Fulton Street Transit Center for a total cost of $963.

� Placement into service of 536 R160 subway cars and 113 buses during 2008 for a total cost of $1,070.

� Rehabilitation of line structures and subway tunnels.

� Design and construction of a new depot at the Grand Avenue Facility.

MTA Metro-North Railroad

– Parking and access improvement at Cortlandt.

– Hudson Line Station improvements in Cortlandt, Poughkeepsie, Ossining, Philipse Manor and Scarborough.

� Installation of chemical, biological, and radiological early detection equipment in Grand Central Terminal.

� On-going Yankee Stadium station construction.

� System-wide track replacement, train shed repairs and bridges rehabilitation.


– Rehabilitation of abutments, retaining walls and the replacement of the deck of the Throgs Neck Bridge.

� Rehabilitation of the electrical system on suspension spans at the Verrazzano-Narrows Bridge, the lower deck replacement at the Henry Hudson Bridge, the replacement of all fans at the Queens

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Midtown Tunnel and rehabilitation of the roadway and drainage system at the Brooklyn Battery Tunnel.

� Replacement of all exhaust fans at the Queens Midtown Tunnel.

� Other assets had a net decrease of $1,024. The items contributing to this change include, but are not limited to:

� Increase in cash by $76 primarily due to an increase of $36 by MTAHQ related to increases in operating and capital cash funds available. Also affecting the cash position were increases of $35 and $10 by FMTAC and LI Bus respectively. The decline of $5 by MTA Bridges and Tunnels offset the above increases.

� Decrease in current and noncurrent investments and investments held under capital leases of $778. The net decline of $631 in investment was due to the usage of bond proceeds for capital and operating expenditures and the redemption of bonds (See Note 3 and 7). The net decline in leases of $147 resulted from capital leases debt service payments and the termination of the QTE-1 lease with a termination loss of $14.6 (See Note 8).

� Increase in Capital Project receivable from Federal and State Government by $100 due to an increase of Federal and State Grants requisitions in the amount of $68, Nassau County of $18 and a CDOT receivable of $14 for M8 cars.

� MRT Receivable decreased by $23 due to a decline in revenues to be collected. This reflects the decline of the real estate market in New York City and the seven other counties within the MTA Group’s service area.

� Other subsidy receivable decreased by $63. The decrease was due to the collection of receipts by the MTA New York City Transit from NYC for paratransit expenses.

� Due from NYC declined by $38 due to a more efficient collection method.

� Increase in material and supplies $33. The increase is to insure availability of parts and supplies for emergency needs.

� Decrease in advances to defined benefit pension by $100 was due to amortization of prepaid

expenses and an unfunded liability.

� Decrease of prepaid expense and other current assets by $125. This resulted from a decrease at MTA New York City Transit in the amount of $102, MTAHQ in the amount to $32, offset by an increase of $9 at LIRR. The MTA New York City Transit decrease was due to amortization of pension prepayment incurred in 2007, while the MTAHQ decrease was due to the amortization of insurance premiums paid in prior years. The increase at MTA Long Island Rail Road resulted from higher insurance premiums incurred in 2008.

� Decrease in other noncurrent assets of by $6. This was due primarily to a decrease of unrequisitioned funds for MTA New York City Transit and MTA Bus capital expenditures.

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� Net capital assets increased at December 31, 2007 by $2,304. The largest increase, $1,035, occurred in other capital assets (which includes work trains, service vehicles, passenger stations, and other equipment, excluding passenger cars and locomotives and buses); infrastructure, $860; construction in progress, $700; passenger cars and locomotives, $658; and buildings and structures, $362. These increases were partially offset by additional accumulated depreciation of $1,637. Some of the more significant projects contributing to the increase included:

� Rehabilitation of the East River tunnel, including safety improvements and ventilation projects.

� Projects upgrading shops and yards and a new automated materials handling system in the Hillside Complex of MTA Long Island Rail Road.

� Milestone costs for construction, testing, and quality assurance of new electric passenger cars.

� MTA Long Island Rail Road signals and communication assets have continued to grow with a number of projects nearing completion, such as the fiber optic network and various microprocessor signal projects.

� Passenger station rehabilitations continue, including the Atlantic Terminal Phase II and Broadway station.

� MTA Long Island Rail Road security projects, including hardening of Penn Station, Jamaica, and the 63rd Street tunnel.

� MTA Long Island Rail Road placed into service an additional 34 new M-7 electric cars during the year and retired 8 M-1 electric cars.

� Improvements to MTA Long Island Rail Road’s infrastructure road-assets continued under the 2007 Track Program that provided the replacement of various track elements and branches.

� Design and installation of a pilot Communications Based Train Control system on Canarsie Line.

� MTA New York City Transit station rehabilitation at various locations on various lines, and the Fulton Street Transit Center.

� MTA New York City Transit placed the following in service during 2007, R160 subway cars (294) and passenger buses (150).

� Elevated line structural rehabilitation and subway tunnel rehabilitation.

� Design and construction of a new depot at the Grand Avenue facility.

� Installation of chemical, biological, and radiological early detection equipment in Grand Central Terminal.

� Replacement of the deck at the Robert F. Kennedy and Bronx-Whitestone Bridges, including span replacement on the Bronx-Whitestone Bridge and rehabilitation of the electrical and mechanical systems at the Robert F. Kennedy Bridge. Also, the rehabilitation of the lower level approaches

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and suspended deck at the Verrazano-Narrows Bridge and the lower deck replacement at the Henry Hudson bridge

� Other assets had a net decrease of $620. The items contributing to this change include but are not limited to:

� A net decrease in current and non-current investments and investments held under capital leases of $1,232 due to use of funds for capital expenditures, debt service payments on bonds lease obligations, and operating expense.

� A decrease of $59 in State and regional mass transit taxes receivable for NYS Petroleum Business Tax Funds accrued receivable being uncollected, not yet received due to timing differences between the recording of revenue and the collection of such funds.

� Cash decreased by a net $25 primarily due to a decrease of $40 by MTAHQ related to reductions in operating and capital cash funds available. Also affecting the cash position is MTA New York City Transit’s decrease of $3, FMTAC’s increase of $14, MTA Long Island Rail Road’s increase of $4, MTA Bridges and Tunnels’ increase of $4, and MTA Metro-North Railroad’s reduction in cash of $4.

� Amounts due from NYC increased by $73. This amount is due primarily to MTA Bus’s receivable.

� Station maintenance, operation, and use assessments increased by $3. This is due to the amount accrued in 2007 for the various counties which was based on the prior year’s bill.

� Other subsidies receivable decreased by $27 due to a decrease of $34 at MTA Bus for various advance payments and an increase at MTA New York City Transit of $7 for the urban tax subsidy receivable.

� Advances to defined benefit pension decreased $259 as a result of $325 transferred to non-current assets, $32 being amortized in the current year, and $2 miscellaneous adjustment. Offsetting these decreases is an $100 prepayment to the defined benefit pension plan.

� Material and supplies increased by $64. This increase is attributable primarily to increases at MTA New York City Transit of $20, MTA Long Island Rail Road of $19, and MTA Metro-North Railroad of $20. The increase is to insure availability of parts and supplies for emergency needs.

� Prepaid expense and other current assets increased by $144 due mainly to prepaid rent, NYSLERS

(defined below) and insurance premiums

� Other non-current assets increased by $604. This was due primarily to un-requisitioned funds for NYCT capital expenditures and for defined benefits pension assets that will be amortized over a future period. The increase was offset by miscellaneous decreases by other agencies.

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.

Total Liabilities, Distinguishing Between Long-Term Liabilities and Other Liabilities

December December December2008 2007 2006

Current liabilities 3,613$ 3,492$ 3,073$ Long-term liabilities 31,510 28,980 27,649

Total liabilities 35,123$ 32,472$ 30,722$

Total Liabilities

Significant Changes in Liabilities Include:


� Current liabilities increased by $121. This net increase is due to an increase in accounts payable and accrued expenses in the amount of $31, and an increase in other current liabilities by $90.

� Accounts payable and accrued expenses increase of $31 was derived from:

o An increase of $50 in accounts payable due to timing differences on invoices submitted for payment.

o A decrease of accrued expenses by $19. This decrease included:

� Increase on interest payable by $17 due to issuance of new bonds in 2008 by MTA and MTA Bridges and Tunnels (see Note 7) and due to increases in interest rates on MTA

December 31, 2008

Other long-term liabilities 12%

Other current liabilities 1%

Obligations under capital lease (Note 8) 4%

Accounts payable/Accrued

expenses 8%

Long-term debt (Note 7) 74%

December 31, 2007

Other long-term liabilities 9%

Other current liabilities 1%

Obligations under capital lease (Note 8) 5%

Accounts payable/Accrued

expenses 8%

Long-term debt (Note 7) 77%

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and MTA Bridges and Tunnels variable rate bonds (see Note 7).

� A reduction in salaries, wages and payroll taxes accrual by $18. This was the result of the reversal of 2007 accrued liability in anticipation of 2008 payments in the amount of $20 at LIRR; and $7 at Metro North and $11 at MTA Bridges and Tunnels and other agencies. This was offset by an increase of $20 at MTA Bus for retroactive wage accruals done in 2008.

� Vacation and sick benefit cost increased by $32.

� Current portion of retirement and death benefits increased by $31.

� An increase in current portion of estimated liabilities from injuries to persons (Note 8) in the amount of $6.

� A decrease in other accrued liabilities of $87 mainly due to the fact that no payment was required to the New York State Highway fund. In 2007, $20 was accrued. In addition, the MTAHQ capital and operating accrual decreased by $44 while NYCTA declined by $14 and FMTAC by $30.

� Other current liabilities had a net increase of $90. Major increases were derived from MTA New York City Transit, $25; Bridges and Tunnels, $12, and Metro North, $1. MTA New York City Transit’s increase of deferred revenue is mainly due to an increase in unredeemed fare cards and advance payments related to advertising revenue. There was also increase of $233 for obligations under capital leases while deferred revenues increased by $38. The increase in the current portion of pollution remediation by $19 was partly due to the implementation of GASB 49. These increases were offset by a reduction of $200 in the current portion of long-term debt.

� Noncurrent liabilities increased by $2,530. This net increase is primarily related to:

� Increase of $1,348 for other postemployment benefits other than pension (“OPEB”). The implementation of GASB 45 requires systemic accrual-based measurement and recognition of OPEB costs.

� Long-term debt increased by $1,421 with an increase of $1,399 and $22 by MTA Bridges and Tunnels and MTAHQ respectively. Refer to Note 7 for additional information on Long-Term Debt.

The increase in MTA Bridges and Tunnels bonds is due primarily to the issuance of several series: Series 2008A&B in March of 2008 for $1,075, Series 2008C in July of 2008 in the amount of $629.9 and Series 2008D for $491.1 in July of 2008. From those issuances, MTA Bridges and Tunnels redeemed in April and May of 2008 $175 of Series 2004A1-2 Subordinate Bonds. During August and September of 2008 bonds were redeemed for a total of $498.0 related to Series 2002 D1-3, Series 2002 G1-2 and Series 2004 A-3.

The small increase in long-term debt at MTA was derived from the issuance of new debt offset by the redemption of bonds. The following issuance took place:

� Transportation Revenue Bonds in February of 2008 Series A & B in the amount of $1,000 and in October of 2008 Series C in the amount of $550.

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� Dedicated Tax Fund Bonds in June of 2008 Series A for $352.9 and in August of 2008 Series B for $348.2.

These amounts were offset by the redemption of the following bonds:

� Transportation Revenues Bonds in May of 2008 Series 2004 A 1-4 in the amount of $472.2 and Series 2002G2 in the amount of $200.

� Dedicated Tax Fund Bonds in March of 2008 Series 2007 A 1-4 in the amount of $430, in May of 2008 Series 2004 D 1-2 in the amount of $135, in June of 2008 Series 2005 A in the amount of $345 and in August of 2008 Series 2004 B3 and B5 in the amount of $200 and series 2004 D1 in the amount of $145.

� Obligations under capital lease decreased by $427 due to principal payments done in January and July of 2008. On May 2, 2008, the termination of a QTE-Fleet capital lease transaction, originated in 2002, decreased the capital lease obligation by $200. For the termination of this lease MTA recognized a loss of $14 though the economic benefit was originally $40.5.

� Increase in pollution remediation projects costs, which are being recorded for the first time in 2008, resulting in a noncurrent liability of $86.

� Decrease in other long term liabilities of $25. This decrease is derived from New York City Transit in the amount of $23, MTA Bridges and Tunnels by $16; MTA Long Island Rail Road by $46 and FMTAC for $2. These decreases were partially offset by an increase in long term liability at MTAHQ in the amount of $62.

December 31, 2007 versus 2006

� Current liabilities increased by $419. This net increase is due primarily to:

� Accounts payable and accrued expenses having a net increase of $365. This increase is primarily due to:

o Account payable decreased by $29 due primarily to acceleration of invoices submitted for payments.

o $49 reduction to salaries, wages, and payroll taxes due to payment of retroactive wages on labor contract settlements as well as an increase of headcount at MTA Bus and LIRR.

o A $44 increase on current portion of retirement and death benefits derived mainly from NYCT.

o $343 increase on other current liabilities. This was due to the increase of the MTAHQ capital and operating accrual for work done on station, track and signal rehabilitation and improvement projects. Also contributing to this increase were increases at FMTAC and MTA Bus.

– The current portion of long-term debt increased $53 related to the impact of debt service payments for State Service Contract Bonds, Certificate of Participation (“COPS”) Bonds, and MTA Bridges and Tunnels General Revenue Bonds.

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� Non-current liabilities increased by $1,331. This net increase is primarily related to:

� Increase of $1,290 for other post-employment benefits other than pension (OPEB). This increase is due to the first-time implementation of GASB 45. This statement requires systematic accrual-based measurement and recognition of OPEB costs.

� Long-term debt increased by $971 due primarily to the issuance by MTA of Transportation Revenue Bond, Series 2007A in July of 2007 in the amount of $425.6, Series 2007B in December of 2007 in the amount of $415, Dedicated Tax Fund Bonds in November of 2007 in the amount of $430 and MTA Bridges and Tunnels General Revenue Bonds issue in June 2007 in the amount of $223. These increases were offset by a cash defeasance that took place in December 2007 for Transportation Revenue Bonds, DTF Bonds, and MTA Bridges and Tunnels General and Subordinate bonds for a total amount of $296.8. Other variances are due to amortization of premium and discount of prior issuances.

� Obligations under capital lease decreased by $989 due to principal payments in 2007 for various MTA leases

Total Net Assets, Distinguishing Among Amounts Invested in Capital Assets, Net of Related Debt, Restricted Amounts, and Unrestricted Amounts

December December December2008 2007 2006

Invested in capital assets, net of related debt 15,790$ 15,903$ 14,777$ Restricted for debt service 972 996 1,011 Restricted for claims 96 92 84 Unrestricted 1,476 2,306 3,491

Total 18,334$ 19,297$ 19,363$


At December 31, 2008, the total net assets decreased by $963 from December 31, 2007. This decrease includes net non-operating revenues of $2,978 and appropriations, grants, and other receipts externally restricted for capital projects of $2,450 offset by operating losses of $6,391. The investment in capital assets, net of related debt, decreased by $113. Funds restricted for debt service and claims decreased by $20 and unrestricted net assets decreased by $830. December 31, 2007 versus 2006

At December 31, 2007, the total net assets decreased by $66 from December 31, 2006. This decrease includes net non-operating revenues of $3,735 and appropriations, grants, and other receipts externally restricted for capital projects of $2,035 offset by operating losses of $5,836. The investment in capital assets, net of related debt increased by $1,126. Though the MTA increased its fixed assets, it also issued new debt.

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.

Funds restricted for debt service and claims decreased by $7 due to bond cash defeasance, and unrestricted decreased by $1,185.

Condensed Statements of Revenues, Expenses and Changes in Net Assets

December 31, December 31, December 31,2008 2007 2006

Operating Revenues Passenger and tolls 5,515$ 5,246$ 5,081$ Other 417 420 406 Total operating revenues 5,932 5,666 5,487

Nonoperating Revenues Grants, appropriations and taxes 3,949 4,504 4,119 Other 249 322 275 Total nonoperating revenues 4,198 4,826 4,394

Total Revenues 10,130 10,492 9,881

Operating Expenses Salaries and wages 4,560 4,339 4,123 Retirement and other employee benefits 1,876 1,690 1,623 Postemployment benefits other than pensions 1,656 1,575 - Depreciation and amortization 1,791 1,689 1,606 Other expenses 2,440 2,209 1,978 Total operating expense 12,323 11,502 9,330

Nonoperating Expense Interest on long-term debt 1,209 1,054 1,039 Other nonoperating expense 11 37 40 Total nonoperating expense 1,220 1,091 1,079

Total Expenses 13,543 12,593 10,409

Appropriations, grants and other receipts externally restricted for capital projects 2,450 2,035 1,898

Change in net assets (963) (66) 1,370 Net assets, beginning of year 19,297 19,363 17,993

Net assets, end of year 18,334$ 19,297$ 19,363$

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Revenues and Expenses, by Major Source:


� Total operating revenues for the year ended December 31, 2008 were $266 higher than for the year ended December 31, 2007.

– Fare and toll revenue increased by $246 primarily due to an increase in ridership and a fare

increase that took place in March 2008. Toll revenues increased by $23 despite a traffic decrease mainly due to a toll increase that went into effect in March of 2008.

– Other operating revenues decreased by $3 derived mainly from a reduction of paratransit

urban tax revenue and a decrease in City reimbursement of paratransit expenses.

� Total operating expenses for the year ended December 31, 2008 were higher than the year ended December 31, 2007 by $821.

– Labor costs, including retirement and other employee benefits, were higher by approximately

$488.

– Salaries and wages increases of $221 is primarily due to wage rate increases and headcount increases mostly for customer safety, maintenance programs, and operation of additional bus routes by MTA Bus.

– Retirement and employee benefits increased by $186 with a major increase in health and

welfare by $123, followed by pension expenses in the amount of $47 and other fringe benefits in the amount of $16. The increase in health and welfare arises mainly from increases in rates and headcount. Pension expenses increases are based on current actuarial valuations and are also due to an increase in headcount. Other fringe benefits increases are due primarily to increases in the workers’ compensation reserve.

– Postemployment benefits other than pensions increased by $81. Current cost is based on

actuarial calculations which include normal cost of retirees plus amortization and interest costs.

– Non-labor operating costs were higher by $333. Cost elements contributing to this increase

were traction, propulsion power, and fuel for buses and trains of $107 due to higher fuel costs. Depreciation costs increased $102 due to additional capital assets placed into service. Paratransit service contractors increased $66 due to increased trip volume. Maintenance and other operating contracts increased $64 due to increases in heating fuel, facility power and maintenance costs. Pollution remediation projects increased by $43. These costs were reported for the first time in 2008, as required by GASB 49. Other costs, professional services contracts and materials and supplies increased by $30, while insurance and claims decreased by $79.

� Total grants, appropriations, and taxes were lower by $555 for the year ended December 31, 2008

compared with the year ended December 31, 2007. The major components of the decrease are tax-supported subsidies-NYC and local related to the mortgage recording tax and urban tax which declined by $698. Tax supported subsidies-NYS offset the decrease was with an increase of $143.

� Suburban highway fund expenses decreased by $20 since no payment was due for the year 2008.

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� Interest Expense on long-term debt increased by $155 due to the issuance of new bonds in 2008. � Appropriations and grants increased by $415. The increase was derived mainly from Federal

funding, NY State Bond funding and FEMA, as well as fixed assets purchased with bond proceeds.

December 31, 2007 versus 2006

� Total operating revenues for the year ended December 31, 2007 were $179 higher than for the year ended December 31, 2006.

� Fare and toll revenue increased by $165. Passenger revenue increased by $155 due to ridership and toll revenues increased by $10 due to increased traffic and reduced E-Z pass fees.

� Total operating expenses for the year ended December 31, 2007 were higher than the year ended December 31, 2006 by $2,172.

� Labor costs, including retirement and other employee benefits, were higher by approximately $283. This is primarily due to payroll and overtime increases of $216 for wage rate increases and headcount increases mostly for customer safety, maintenance programs, and the MTA Bus Company’s acquisition and operation of additional bus routes. Retirement and other employee benefits increased $67 primarily for MTA New York City Transit pension expenses based on an actuarial valuation. Also, contributing to this increase are other fringe benefits costs for additional headcount.

� Post-employment benefits other than pensions increased by $1,575 due to the implementation of GASB 45 adopted in 2007.

� Non-labor operating costs were higher by approximately $314. Cost elements contributing to this increase were depreciation resulting in part from new capital assets being placed into service, $83; traction and propulsion power and fuel expense increases of $31 are due primarily to fuel price increases. Public liability claims expense increased $71 primarily due to actuarial review of current claims data. Materials and supplies costs increased by $70 due mainly to additional subway car body structure parts, bus electrical systems, heating/air conditioning equipment, and subway propulsion motors. Paratransit service contract costs increased $49 primarily due to increased trip volume and a decrease in productivity based on a line assigned to new vendors.

� Total grants, appropriations, and taxes were higher by approximately $385 for the year ended

December 31, 2007 compared to the year ended December 31, 2006. The major components of the increase are tax-supported subsidies-NYS, $237, and tax-supported subsidies-NYC and local, $143.

� The increase in tax-supported subsidies from New York State is due primarily to an increase of $260 in Metropolitan Mass Transportation Operating Assistance, a decrease of $12 from NYS for debt service payments, and a decrease of $11 in Petroleum Business Tax.

� The increase in tax-supported subsidies NYC and local is primarily due to an increase in the urban tax and other subsidies received by MTA New York City Transit of $189 and MTA Bus of $27; offset by a net decrease in the Mortgage Recording Taxes of $73.

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4. OVERALL FINANCIAL POSITION AND RESULTS OF OPERATIONS AND IMPORTANT ECONOMIC CONDITIONS

Economic Conditions - Metropolitan New York is the most transit-intensive region in the United States. A financially sound and reliable transportation system is critical to the region’s economic well-being. The MTA’s business consists of urban subway and bus systems, suburban rail and bus systems, and bridge and tunnel facilities, all of which are affected by many different economic forces. In order to achieve maximum efficiency and success in its operations, the MTA must identify economic trends and continually implement strategies to adapt to changing economic conditions.

Through December 2008, MTA system-wide utilization, including MTA Bus, was 3.3 percent higher (87.5 million more trips) than ridership through December 2007. At the same time, vehicle crossing levels at MTA Bridges and Tunnels facilities were 2.9 percent lower (8.9 million fewer crossings), having fallen in each month of the quarter despite falling gasoline prices. Between the fourth quarter of 2007 and the fourth quarter of 2008, non-agricultural employment survey results indicate that New York City lost twenty six thousand jobs. A regional economic slowdown was further evinced by the Federal Reserve Bank’s Coincident Economic Indicator, an index of broad economic activity. According to the CEI, the regional economy continued to contract in the fourth quarter of 2008. Compared with the fourth quarter of 2008, the CEI for New Jersey declined by 2%, New York State’s fell by 3 percent, and the CEI for New York City remained virtually unchanged. It should be borne in mind that this comparison of CEIs at two points in time—the fourth quarter of 2008 compared with the same quarter of 2007—does not reveal how the economies fared in the intervening months. Beginning in March 2008, New York State and New Jersey each experienced ten straight months of declining economic activity. New York City’s economy saw no significant growth through July, and began to contract thereafter, evidenced by five straight months of falling CEI’s. The stalling of the City’s economy in the fourth quarter was accompanied by a greater increase in consumer prices than the increase for the average of all U.S. cities: the consumer price index (CPI-U) in the New York metropolitan area increased by 2.6 percent in the fourth quarter of 2008 relative to the fourth quarter of 2007, while the U.S. city average consumer price index increased by 1.6 percent. As the national economy slid deeper into recession, falling demand for goods and services restrained prices, and this was especially true for energy. After having risen in the second and third quarters of 2008 beyond even the heights reached in the aftermath of Hurricane Katrina, energy prices began to reverse, falling precipitously for five straight months. At the end of the fourth quarter, energy turned out to be 4.7 percent cheaper than in the fourth quarter of 2007. Meanwhile, consumer prices excluding energy were 3.5 percent higher. The New York Harbor spot price for conventional gasoline averaged $1.38 per gallon in the fourth quarter, a pronounced decrease of 40.0 percent compared to the average spot price in the fourth quarter of 2007. Like energy prices overall, the price of gasoline had begun to fall in the third quarter, and gas prices declined in each of the last five months of 2008. High fuel prices, however, continued to influence travel mode choices, as suggested by greater than expected MTA system ridership levels.

The contraction of New York City’s economy in the fourth quarter of 2008 mirrored what was happening to the national economy. Real Gross Domestic Product (“GDP”) declined at an annual rate of 6.2 percent in the fourth quarter, following a 0.5 percent fall in the previous quarter. Facing the myriad challenges of this particularly pernicious downturn, the intention of the Federal Reserve Bank over the past fifteen months was first to forestall an impending recession and, having failed that, to mitigate its consequences by loosening the tight credit conditions that resulted from the national mortgage crisis. Consequently, the Federal Reserve Bank’s expansionary interventions since the third quarter of 2007 contrasted sharply with the measures it took to keep inflation under control as the

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economy emerged from the recession of 2001-2003. In the third quarter of 2007, the Federal Reserve Board elected to lower the Federal Funds Rate by a half point, from 5.25 to 4.75 percent, the first diminution since the end of June 2003. Confronting a deepening contraction in housing markets and mounting insecurity in financial markets, the bank further subjected the Federal Funds Rate to a series of downward adjustments throughout 2008: it was lowered by three-quarters of a point on January 22 and half a point on January 30; it was lowered again in March 2008 by another three-quarters of a point, in April by one quarter of a point, and twice again in October, each time by a half point. With inflationary concerns numbed by the decline in energy prices, the Federal Open Market Committee announced on December 16, 2008 that it would target a Federal Funds rate of between zero and one quarter per cent. There obviously remains little scope for the Bank to lower the rate through further open market operations.

The influence of Federal Reserve monetary policy on the mortgage market is a matter of interest to the MTA, since variability of mortgage rates can affect the number of real estate transactions and can thereby impact receipts from the Mortgage Recording Tax and Urban Tax, two important sources of MTA revenue. In spite of the aggressiveness of the Federal Reserve Bank, its Beige Books - published in October and December - reported little that augured well for regional real estate markets. The December Beige Book described the ongoing deterioration of New York City’s housing market, where there was a notable decline in transaction activity and an accumulation of new property listings; an increase in the availability of rental vacancies, with rents down between one and four percent; and a reported fall of between 15 and 20 percent in the price of co-ops and condos. The city’s commercial real estate market also weakened noticeably, with high vacancy rates, slowing lease activity and a decline in both actual and asking rents compared with the previous year.

The tidings of the Beige Books were in fact borne out by the continuation of sharply lower receipts of real estate taxes in the fourth quarter of 2008. Urban tax receipts through the fourth quarter fell by 40.7 percent compared with their 2007 level, while total MRT receipts fell by 40.5 percent. Both MRT-1 and MRT-2 receipts declined in the MTA region as a whole. Through December, revenues from MRT-1 dropped 42 percent and MRT-2 revenues fell by 43 percent. MRT-1 is paid on all mortgages, while MRT-2 is paid only on residential mortgages where the structure contains one to six individual dwelling units. The steady decline in both MRT-1 and MRT-2, which occurred in all four quarters of 2008, clearly indicates that regional real estate markets are suffering the most severe downturn in some time. Results of Operations –MTA Bridges and Tunnels’ paid traffic totaled 295.6 million in 2008, which was 2.9 percent less than 2007’s record level. Daily traffic was down 1.2 percent on average from January through April primarily due to high regional gas prices that ranged from $3.16 to $3.48 per gallon. From May through August, gas prices were near or above $4.00 per gallon, and subsequently, traffic was down 4.0 percent on average. Although gas prices dropped significantly from September through the end of the year, recessionary economic conditions kept traffic levels down by 4.1 percent on average. Despite the lower traffic trends, toll revenues in 2008 reached $1.274 billion, which was $23.4 greater than in 2007. The higher revenues were generated from a toll increase implemented on March 16th, 2008, and from an additional day of collections in February 2008 due to the leap year. In addition, gas prices were higher in November and December of 2007, with regional prices exceeding $3.00 per gallon.

The E-ZPass electronic toll collection system continued to facilitate the management of heavy traffic volumes. Total average market share during the year 2008 was 74.0 percent compared to 73.5 percent in 2007. The average weekday market shares were 76.2 percent and 75.5 percent for the twelve months of 2008 and 2007, respectively. Average weekend market shares for the same periods were 68.8 percent and 68.1 percent, respectively.

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MTA New York City Transit’s fare revenues for the year ended December 31, 2008 were higher than in 2007 by $174.0 or 6.1 percent due to increased subway ridership, the March 2008 fare increase and the effect of one additional day for the leap year.

MTA Long Island Rail Road’s ridership for the year ended December 31, 2008 was at 87.4 million on passenger revenues of $506.8, or 93 percent of total revenue. Revenues increased by approximately $22 or 5 percent for the year ended December 31, 2008 over the prior year ended December 31, 2007. The average fare increase of 4 percent effective March 1, 2008 contributed to the revenue increase. Additionally, ridership continues to increase in all ticket types attributed to the rising gasoline prices, changes in travel patterns for commuters and increases in noncommutation travel on MTA Long Island Rail Road.

MTA Metro-North Railroad’s operating revenue increased by $27.5 or approximately 5.4 percent for the year ended December 31, 2008 over the prior year ended December 31, 2007. Year to date 2008 fare revenue and ridership increased by 5.5 percent and 3.8 percent respectively, over the same period in 2007. The increases occurred on the Hudson, Harlem and New Haven lines for monthly and weekly commutation as well as noncommutation ridership.

The MTA receives the equivalent of four quarters of Metropolitan Mass Transportation Operating Assistance (“MMTOA”)receipts each year, with the state advancing the first quarter of each succeeding calendar year’s receipts in the fourth quarter of the current year. This results in little or no Metropolitan Mass Transportation Operating Assistance receipts being received during the first quarter of each calendar year. The MTA has made other provisions to provide for cash liquidity during this period. During the first quarter of 2008, the state did not advance any payments of MMTOA assistance to the MTA from MTA’s 2008 appropriation. There has been no change in the timing of the state’s payment of, or MTA’s receipt of, Dedicated Mass Transportation Trust Fund (“MTTF”) receipts, which MTA anticipates will be sufficient to make monthly principal and interest deposits into the Debt Service Fund for the Dedicated Tax Fund Bonds.

Over the last few years, the mortgage recording taxes payable to the MTA generally exceeded expectations, due primarily to the high level of home buying and refinancing encouraged by historically low interest rates. In the last quarter of 2007, however, the national downturn in housing markets began to impact the frequency of local real estate transactions, and the collection of mortgage recording taxes fell. In spite of the Federal Reserve Bank’s determination to forestall a recession by successively lowering interest rates. The total amount collected in 2008 was reduced by 42.4 percent from $686.9 to $395.5. In 2009 Mortgage recording taxes continues to decline at an even higher rate.

Capital Programs – At December 31, 2008, $14,512 had been committed and $6,576 had been expended for the combined 2005-2009 MTA Capital Programs and the 2005-2009 MTA Bridges and Tunnels Capital Program, and $20,443 had been committed and $18,474 had been expended for the combined 2000-2004 MTA Capital Programs and the 2000-2004 MTA Bridges and Tunnels Capital Program.

MTA’s and MTA Bridges and Tunnels’ Capital Programs are described in Note 1 to the consolidated financial statements.

5. CURRENTLY KNOWN FACTS, DECISIONS, OR CONDITIONS

Throughout 2008, ratings of municipal bond insurers were lowered by the three rating agencies, thereby lowering the ratings of certain MTA and MTA Bridges and Tunnels bonds insured by such insurers. The bond insurer downgrades have affected municipal issuers nationwide, including all major New

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York State issuers, in terms of market volatility and increased interest costs on variable rate bonds. These downgrades have not affected the underlying MTA and MTA Bridges and Tunnels bond ratings. Additionally many regularly scheduled auctions of variable rate bonds currently in the auction mode have been failing since there are not enough buy orders to cover sell orders. In the event of a “failed” auction, certain auctions provide for the periodic rate for such bonds to be set at a stated percentage of one month LIBOR (London Interbank Offered Rate) index, while others have a high maximum rate, ranging from 12% to 15%. Beginning in February 2008, MTA and MTA Bridges and Tunnels auctions began to fail periodically at their respective defined maximum rates. As a result, throughout 2008, MTA has refunded $1,303 of auction rate bonds, and converted $250 to variable rate demand bonds using bank letters of credit. MTA continues to have $863.5 of auction rate bonds outstanding. On April 10, 2009, Moodys Investors Service Inc. placed the MTAs Transportation Revenue Bonds rating on Watchlist for possible downgrade from their current A2 rating. Moodys explained that this action was prompted by the MTAs projected budget shortfalls and the absence of a long term funding solution to finance future debt service costs on the Transportation Revenue Bonds. The review is expected to be completed within 90 days. The Triborough and Tunnel Authority (TBTA) bonds and MTAs Dedicated Tax Fund bonds are supported by different revenue streams from MTAs Transportation Revenue Bonds and are not affected by the Watchlist action. Developments Affecting MTA’s Financial Condition

The MTA’s February Financial Plan (current plan) includes a number of significant deficit reduction measures, in order to achieve a balanced 2009 budget and reduced budget gaps thereafter. These include reductions to service, large fare and toll increases and other deficit reducing actions. Discussions are on-going with the State (described below) in an attempt to secure additional funding that would eliminate the need for service reductions and to reduce the level of fare and toll increase that would be required. As of this date, these efforts have not proven successful; therefore, MTA will proceed with the planned service reductions and fare/toll increases. Should this funding materialize, the MTA and its Board would make the necessary adjustments to the plan. The following describes those deficit-reduction measures that are included in the current plan:

� Internal Actions The gap-closing internal actions proposed in previous plans remain in place. These include 6 percent cost reductions over the plan period and continuing the 1.5 percent annual reduction begun last year. In addition to these measures, the MTA implemented a series of administrative reductions in hiring, travel and food, and telecommunications in 2008, which continue in 2009 at all of the Related Entities.

The February Financial Plan continues to contain assumptions that MTA employees will make a modest contribution to the deficit reduction plan when final collective bargaining agreements are executed. In addition, MTA expects efficiency measures to save money, especially the efficiencies that will be achieved by the new Business Service Center (“BSC”). BSC will consolidate back-office operations for all MTA affiliates and subsidiaries. This will result in a downsizing of the workforce and this plan, like previous plans, provides funds to cover the expected cost of downsizing. The MTA is expected to begin realizing the savings from these BSC initiatives in 2012. Savings are also assumed from other reorganization initiatives.

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In addition, the MTA will utilize an inter-agency loan of $135 to reduce the budget gaps forecasted in both 2009 and 2010, which will be paid back in 2011 and 2012. MTA will also use $120, which had been allocated from the 2006 surplus but not yet committed or spent to date, for capital security and other short-term projects that were transferred back to the operating budget in 2008. In 2009, $80 of such money will be used for budget balancing, and $40 will be redirected to priority unfunded capital security projects. Less critical projects that would have used these funds may be included in the next capital program. MTA will also reduce its subsidy to MTA Long Island Bus by $4 to $10 annually. In addition, in the absence of increased subsidy from Nassau County, it may be necessary for MTA Long Island Bus to reduce expenses or raise revenue by $5 in 2009 in order to balance its budget. Finally, with the approval of the Board, MTA eliminated E-Z Pass forgiveness of official City, State and county vehicles, which is anticipated to generate $10 annually.

These internal actions generated an estimated $137 in savings in 2008, and are projected to result in savings of up to $242 in 2009, $404 in 2010, $217 in 2011 and $354 in 2012.

� Additional Actions for Budget Balance

Significant additional agency reductions are required to further reduce the deficit and balance the budget as required by law. The February Plan includes proposals for each of the Related Entities to reduce its budget by an additional 4.7 percent, for an MTA-wide savings of $1,453 over the plan period (this excludes MTA Bus actions of $82 that are targeted to enable the City to reduce its subsidy to MTA Bus).

� Changes in Service

Included in agency actions for budget balance are service changes that would have the least possible impact on riders. The Related Entities, including MTA Bus, identified savings from service changes of $82 in 2009, $156 in 2010, $154 in 2011 and $155 in 2012 that will be implemented if the MTA does not receive financial assistance from the Ravitch Plan (see below - Commission on MTA Financing) or alternative funding. MTA New York City Transit accounted for most of these proposals with projected savings of $56 in 2009, and $114 in each year from 2010-2012. Implementation of these measures is expected to result in employment reductions that total 1.169 thousand in 2009, 1.245 thousand in 2010 and 1.225 thousand in each year from 2011-2012.

� Fare/Toll Yield Changes

The changes, to become effective June 1, 2009, assume that transit and commuter riders and Bridge and Tunnel drivers will contribute to closing the deficit by paying increased fares and tolls which would increase the revenue yields by an annualized 23 percent beginning in 2009. If the MTA does receives financial assistance from the Ravitch Plan (see below) or alternative funding, the amount of these increases could be decreased. The proposal including MTA Bus is projected to result in increased revenues of $685 in 2009, $1,171 in 2010, $1,197 in 2011 and $1,213 in 2012. The February Financial Plan assumes that MTA will resume biennial fare/toll increases as of January 1, 2011 to increase revenue yields by 5 percent, commensurate with inflationary increases; additional revenues of $316 in 2011 and $328 in 2012 are estimated to be generated from such increase.

� Proposed External Actions from Governmental Partners

The February Financial Plan proposes legislative changes to federal mandates for commuter railroad employees that, beginning in late 2009, are projected to save $15 and, in subsequent years, roughly $62 annually without affecting employee benefits. The plan also continues to propose State elimination of

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tax loopholes affecting real estate transactions, which is expected to generate $50 annually beginning in 2009.

� Commission on MTA Financing

A Commission on MTA Financing (the Ravitch Commission) was formed, and its members appointed by the Governor in June 2008, to develop strategies to fund MTA essential projects and operating needs. The Ravitch Commission issued its report on December 4, 2008 (“the Report”). The Report makes several recommendations designed to more securely fund the MTA capital plan and agency operations, enhance governance and transparency, and promote mass transportation in the MTA service area.

The recommendations include a new regional mobility tax, which, if enacted as and when proposed in the Report, is expected to generate $1.5 billion on an annual basis, with revenues from such tax to pay for new borrowings and direct expenses associated with funding MTA capital improvements and debt service associated with the MTA’s current portfolio of system expansion projects; creation of a new MTA subsidiary, the MTA Capital Finance Authority, to manage the budgetary impact of expenditures paid for and revenues generated by the new regional mobility tax; and cashless tolling on the Harlem and East River Bridges, estimated in the Report to generate $600 in net revenue on an annual basis, after payment of costs relating to the upkeep of the bridges, to be used to pay for the costs of installing the electronic toll system as well as to support additional mass transit improvements.

Other recommendations in the Report include establishing a Board fare-approval process permitting regular, predictable, inflation-indexed fare and toll increases without extensive public hearings; amending the MTA governance statute to vest full executive authority in the office of the Chairman of the MTA Board, with authority to delegate powers to a Board-appointed Executive Director, changing MTA project management practices to streamline project execution and developing a reporting methodology consistent with those set forth in the Guidelines of the Government Finance Officers Association; improving bus service system-wide through the implementation of the Bus Rapid Transit strategy; and creating a new MTA subsidiary, the Regional Bus Authority, to be the single entity responsible for bus service in the MTA Commuter Transportation District.

On March 25, with the State legislature and Governor unable to reach agreement on the Ravitch Commission proposals or alternative funding plans, the MTA Board approved a series of fare and toll increases to be implemented by mid-year 2009 that are designed to yield the 23 percent increase in fare and toll revenues, as well as approving service reductions outlined in the February Financial Plan. However, discussions are on-going and it is hoped that a funding solution can be reached.

� Preliminary Financial Results and Other Factors

The ability of MTA to achieve the 2009 balanced budget and reduced projected budget gaps in 2010 through 2012 reflected in the February Financial Plan for 2009-2012 is dependent upon a number of factors including general economic, market and employment conditions in the State, the City and the MTA Commuter Transportation District and future actions by third parties, including MTA’s governmental partners. Fuel and energy costs and other expenses beyond MTA’s control are likely to remain volatile. Worsening economic conditions could also adversely affect projected fare receipts from the Transit and Commuter Systems and toll revenues from MTA Bridges and Tunnels, in particular, if unemployment in the core business district erodes further.

Information on certain real estate-related subsidy cash receipts is available through March 2009 and shows such receipts to be significantly below budgeted levels for the first three months of the year.

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Through March 2009, real estate-related taxes and subsidies were $123 or 56 percent below budget. Regional mortgage recording tax (“MRT”) receipts were $40 or 42 percent below budget, while New York City Urban Tax receipts were $84 or 67 percent below budget.

The State has advised MTA that projections of dedicated tax collections for MTA’s current fiscal year are now estimated to be up to $200 lower than amounts appropriated in the State’s enacted Budget and as assumed in the February Financial Plan. The State has also advised MTA that portions of the monthly cash receipts from the dedicated tax collections may be paid to MTA at times later than those assumed by MTA in its February Financial Plan. Notwithstanding the forgoing, MTA expects to receive its portion of the dedicated tax collections in 2009 by calendar year-end.

MTA will continue to closely monitor its finances, including the subsidies referenced above. The July Financial Plan will include re-estimates of all MTA receipts and expenditures and will also include proposals for actions that are necessary to maintain budgetary balance.

* * * * * *

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CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2008 AND 2007($ in Millions)

2008 2007ASSETS

CURRENT ASSETS:Cash (Note 3) 206$ 130$ Restricted investment (Notes 3) 1,083 1,682 Unrestricted investments (Note 3) 246 21 Investments held under captial leases current 245 8 Receivables:

Station maintenance, operation, and use assessments 108 104 State and regional mass transit taxes 50 47 Mortgage Recording Tax receivable 20 43 State and local operating assistance 7 8 Other subsidies 18 81 Connecticut Department of Transportation 14 20 New York City 63 101

Due from Hudson Yards Infrastructure Corporation 33 67 Capital project receivable from federal and state government 309 209

Other 208 222 Less allowance for doubtful accounts (23) (23)

Total receivables - net 807 879

Materials and supplies 414 381 Advance to defined benefit pension trust 66 166 Prepaid expenses and other current assets (Note 2) 133 258

Total current assets 3,200 3,525

NONCURRENT ASSETS:

Capital assets - net (Note 6) 43,323 40,611 Restricted investment held under capital lease obligations (Notes 3 and 8) 1,099 1,483 Restricted investments (Notes 3) 1,890 1,911 Unrestricted investments (Note 3) 77 313 Receivable from New York State 2,145 2,197 Other noncurrent assets 1,723 1,729

50,257 48,244 Total noncurrent assets

53,457$ 51,769$ TOTAL ASSETS

(Continued)See notes to consolidated financial statements.

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CONSOLIDATED BALANCE SHEETSAS OF DECEMBER 31, 2008 AND 2007($ in millions)

2008 2007LIABILITIES AND NET ASSETS

CURRENT LIABILITIES: Accounts payable 497$ 447$

Accrued expenses: Interest 218 201 Salaries, wages and payroll taxes 213 231 Vacation and sick pay benefits 716 684 Current portion — retirement and death benefits 259 228 Current portion — estimated liability from injuries to persons (Note 9) 205 199 Other 664 751

Total accrued expenses 2,275 2,294

Current portion — long-term debt (Note 7) 191 391 Current portion — obligations under capital lease (Note 8) 240 7 Current portion of pollution remediation projects (Note 11) 19 - Deferred revenue 391 353

Total current liabilities 3,613 3,492

NONCURRENT LIABILITIES: Retirement and death benefits 40 42 Estimated liability arising from injuries to persons (Note 9) 1,125 1,033 Post employment benefits other than pensions (Note 5) 2,638 1,290 Long-term debt (Note 7) 25,936 24,515 Obligations under capital leases (Note 8) 1,192 1,619 Pollution remediation projects (Note 11) 86 - Contract retainage payable 214 177 Other long-term liabilities 279 304

Total noncurrent liabilities 31,510 28,980

Total liabilities 35,123 32,472

NET ASSETS: Invested in capital assets — net of related debt 15,790 15,903 Restricted for debt service 972 996 Restricted for claims 96 92 Unrestricted 1,476 2,306

Total net assets 18,334 19,297

TOTAL LIABILITIES AND NET ASSETS 53,457$ 51,769$

(Concluded)See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES,AND CHANGES IN NET ASSETSYEARS ENDED DECEMBER 31, 2008 AND 2007($ in millions)

2008 2007

OPERATING REVENUES: Fare revenue 4,241$ 3,995$ Vehicle toll revenue 1,274 1,251 Rents, freight, and other revenue 417 420

Total operating revenues 5,932 5,666

OPERATING EXPENSES: Salaries and wages 4,560 4,339 Retirement and other employee benefits 1,876 1,690 Postemployment benefits other than pensions 1,656 1,575 Traction and propulsion power 307 294 Fuel for buses and trains 287 193 Insurance (1) 66 Claims 152 164 Paratransit service contracts 299 233 Maintenance and other operating contracts 584 520 Professional service contracts 204 181 Pollution remediation projects (Note 11) 43 - Materials and supplies 532 518 Depreciation 1,791 1,689 Other 33 40

Total operating expenses 12,323 11,502

OPERATING LOSS (6,391) (5,836)

NON-OPERATING REVENUES (EXPENSES): Grants, appropriations, and taxes: Tax-supported subsidies — NYS 2,434 2,291 Tax-supported subsidies — NYC and local 1,116 1,814 Operating subsidies — NYS 208 211 Operating subsidies — NYC and local 191 188

Total grants, appropriations, and taxes 3,949$ 4,504$

(Continued)

See notes to consilidated financial statements.

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CONSOLIDATED STATEMENTS OF REVENUES, EXPENSES,AND CHANGES IN NET ASSETSYEARS ENDED DECEMBER 31, 2008 AND 2007($ in millions)

2008 2007

Operating subsidies recoverable from Connecticut Department on NYC 64$ 64$ Subsidies paid to Dutchess, Orange, and Rockland Counties (11) (17) Suburban Highway Transporation Fund Subsidy - (20) Interest on long-term debt (1,209) (1,054) Station maintenance, operation and use assessments 148 142 Other non-operating revenue 37 116

Net non operating revenues 2,978 3,735

LOSS BEFORE APPROPRIATIONS (3,413) (2,101)

APPROPRIATIONS, GRANTS, AND OTHER RECEIPTS EXTERNALLY RESTRICTED FOR CAPITAL PROJECTS 2,450 2,035

CHANGE IN NET ASSETS (963) (66)

NET ASSETS — Beginning of period 19,297 19,363

NET ASSETS — End of period 18,334$ 19,297$

(Concluded)

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2008 AND 2007($ in millions)

2008 2007

CASH FLOWS PROVIDED BY (USED) IN OPERATING ACTIVITIES: Passenger receipts/tolls 5,750$ 5,472$ Rents and other receipts 283 326 Payroll and related fringe benefits (6,472) (6,376) Other operating expenses (2,444) (2,406)

Net cash used in operating activities (2,883) (2,984)

CASH FLOWS PROVIDED BY (USED IN) NONCAPITAL FINANCING ACTIVITIES: Grants, appropriations, and taxes 4,117 4,512 Operating subsidies from CDOT 66 60 Suburban Transportation Fund Subsidy (20) (20) Subsidies paid to Dutchess, Orange, and Rockland counties (17) (20)

Net cash provided by noncapital financing activities 4,146 4,532

CASH FLOWS PROVIDED BY (USED IN) CAPITAL AND RELATED FINANCING ACTIVITIES: MTA bond proceeds 2,703 1,290 MTA Bridges and Tunnels bond proceeds 2,271 228 MTA bonds refunded (2,630) (211) MTA Bridges and Tunnels bonds refunded (673) (91) MTA anticipation notes proceeds 630 750 MTA anticipation notes redeemed (711) (439) Capital lease payments (17) (158) Grants and appropriations 2,478 2,017 CDOT capital contributions 1 1 Capital expenditures (4,528) (4,197) Debt service payments (1,534) (1,608)

Net cash used in capital and related financing activities (2,010) (2,418)

CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Purchase of long-term securities (7,179) (5,015) Sales or maturities of securities — long-term 8,863 4,938 (Purchase)/sale of short-term securities (1,005) 682 Earnings on investments 144 240

Net cash provided by in investing activities 823 845

NET INCREASE (DECREASE) IN CASH 76 (25)

CASH — Beginning of period 130 155

CASH — End of period 206$ 130$

(Continued)See notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2008 AND 2007($ in millions)

2008 2007

RECONCILIATION OF OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES: Operating loss (6,391)$ (5,836)$ Adjustments to reconcile to net cash used in operating activities: Depreciation and amortization 1,791 1,689 Net increase in payables, accrued expenses, and other liabilities 1,544 1,390 Net decrease (increase) in receivables 18 (32) Net decrease (increase) in materials and supplies and prepaid expenses 155 (195)

NET CASH USED IN OPERATING ACTIVITIES (2,883)$ (2,984)$

See notes to consolidated financial statements. (Concluded)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2008 AND 2007 ($ in millions)

1. BASIS OF PRESENTATION

The Metropolitan Transportation Authority (“MTA”) was established in 1965, under Section 1263 of the New York Public Authorities Law, and is a public benefit corporation and a component unit of the State of New York (“NYS”) whose mission is to continue, develop and improve public transportation and to develop and implement a unified public transportation policy in the New York metropolitan area.

These consolidated financial statements are of the Metropolitan Transportation Authority (“MTA”), including its related groups (collectively, the “MTA Group”) as follows:

Metropolitan Transportation Authority and Related Groups —

� Metropolitan Transportation Authority Headquarters (“MTAHQ”) provides support in budget, cash management, finance, legal, real estate, treasury, risk and insurance management, and other services to the related groups listed below.

� The Long Island Rail Road Company (“MTA Long Island Rail Road”) provides passenger transportation between New York City (“NYC”) and Long Island.

� Metro-North Commuter Railroad Company (“MTA Metro-North Railroad”) provides passenger transportation between NYC and the suburban communities in Westchester, Dutchess, Putnam, Orange, and Rockland counties in NYS and New Haven and Fairfield counties in Connecticut.

� Staten Island Rapid Transit Operating Authority (“MTA Staten Island Railway”) provides passenger transportation on Staten Island.

� Metropolitan Suburban Bus Authority (“MTA Long Island Bus”) provides public bus service in NYC and Nassau County, New York.

� First Mutual Transportation Assurance Company (“FMTAC”) provides primary insurance coverage for certain losses, some of which are reinsured, and assumes reinsurance coverage for certain other losses.

� MTA Capital Construction Company (“MTA Capital Construction”) provides oversight for the planning, design and construction of current and future major MTA system-wide expansion projects.

� MTA Bus Company (“MTA Bus”) operates certain bus routes in areas previously served by private bus operators pursuant to franchises granted by the City of New York.

� MTAHQ, MTA Long Island Rail Road, MTA Metro-North Railroad, MTA Staten Island Railway, MTA Long Island Bus, FMTAC, MTA Capital Construction, and MTA Bus,

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collectively are referred to herein as MTA. MTA Long Island Rail Road and MTA Metro-North Railroad are referred to collectively as the Commuter Railroads.

� New York City Transit Authority (“MTA New York City Transit”) and its subsidiary, Manhattan and Bronx Surface Transit Operating Authority (“MaBSTOA”), provide subway and public bus service within the five boroughs of New York City.

� Triborough Bridge and Tunnel Authority (“MTA Bridges and Tunnels”) operates seven toll bridges, two tunnels, and the Battery Parking Garage, all within the five boroughs of New York City.

MTA New York City Transit and MTA Bridges and Tunnels are operationally and legally independent of the MTA. These related groups enjoy certain rights typically associated with separate legal status including, in some cases, the ability to issue debt. However, they are included in the MTA’s consolidated financial statements because of the MTA’s financial accountability for these entities and they are under the direction of the MTA Board (a reference to “MTA Board” means the board of MTAHQ and/or the boards of the other MTA Group entities that apply in the specific context, all of which are comprised of the same persons). Under accounting principles generally accepted in the United States of America (“GAAP”), the MTA is required to include these related groups in its financial statements. While certain units are separate legal entities, they do have legal capital requirements and the revenues of all of the related groups of the MTA are used to support the organization as a whole. The components do not constitute a separate accounting entity (fund) since there is no legal requirement to account for the activities of the components as discrete accounting entities. Therefore, the MTA financial statements are presented on a consolidated basis with segment disclosure for each distinct operating activity.

Although the MTA Group collect fares for the transit and commuter service they provide and receive revenues from other sources such as the leasing out of real property assets and the licensing of advertising, such revenues, including forecast increased revenues from fare increases, are not sufficient to cover all operating expenses associated with such service. Therefore, to maintain a balanced budget, the members of the MTA Group providing transit and commuter service rely on operating surpluses transferred from MTA Bridges and Tunnels, operating subsidies provided by NYS and certain local governmental entities in the MTA commuter district, and service reimbursements from certain local governmental entities in the MTA commuter district and from the State of Connecticut. Operating subsidies to the MTA Group for transit and commuter service in the current year total $ 3.9 billion. Capital Program - The MTA Group has ongoing capital programs, which except for MTA Bridges and Tunnels, MTA Long Island Bus and MTA Bus are subject to the approval of the Metropolitan Transportation Authority Capital Program Review Board (“CPRB”), and are designed to improve public transportation in the New York Metropolitan area.

2005-2009 Capital Program – Capital programs covering the years 2005-2009 were originally approved by the MTA Board in April 2005 and subsequently by the CPRB in July 2005 for (1) the commuter railroad operations of the MTA conducted by MTA Long Island Rail Road and MTA Metro-North Railroad (the “2005–2009 Commuter Capital Program”), (2) the transit system operated by MTA New York City Transit and its subsidiary, MaBSTOA, and the rail system operated by MTA Staten Island Railway (the “2005–2009 Transit Capital Program”), and (3) the toll bridges and tunnels operated by MTA Bridges and Tunnels (the “2005–2009 MTA Bridges and Tunnels Capital Program”). The 2005–2009 MTA Bridges and Tunnels Capital

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Program was effective upon adoption by the MTA Board in April 2005. The 2005–2009 amended Commuter Capital Program and the 2005–2009 Transit Capital program (collectively, the “2005–2009 MTA Capital Programs”) were last amended by the MTA Board in July 2008. This latest 2005-2009 MTA Capital Program amendment was submitted to the CPRB for approval in July 2008, but was subsequently withdrawn.

As last amended by the MTA Board, the 2005–2009 MTA Capital Programs and the 2005–2009 MTA Bridges and Tunnels Capital Program, provide for $23,717 in capital expenditures, of which $11,154 relates to ongoing repairs of, and replacements to, the transit system operated by MTA New York City Transit and MaBSTOA and the rail system operated by MTA Staten Island Railway; $3,617 relates to ongoing repairs of, and replacements to, the commuter system operated by MTA Long Island Rail Road and MTA Metro-North Railroad; $6,899 relates to the expansion of existing rail networks for both the transit and commuter systems to be managed by MTA Capital Construction; $495 relates to a multi-faceted security program; $198 relates to MTA interagency initiatives including MTA Police Department plus an MTA-wide integrated computer systems initiative, $145 relates to MTA Bus company initiatives; and $1,209 relates to the ongoing repairs of, and replacements to, MTA Bridges and Tunnels facilities.

The combined funding sources for the MTA Board-approved 2005–2009 MTA Capital Programs and 2005–2009 MTA Bridges and Tunnels Capital Program include $9,430 in MTA and MTA Bridges and Tunnels Bonds, $1,450 in New York State general obligation bonds approved by the voters in the November 2005 election, $8,892 in Federal Funds, and $3,945 from other sources. At December 31, 2008, $14,512 had been committed and $6,576 had been expended for the combined 2005-2009 MTA Capital Programs and the 2005-2009 MTA Bridges and Tunnels Capital Program. 2000-2004 Capital Program – Capital programs covering the years 2000-2004 were originally approved by the MTA Board in April 2000 and subsequently by the CPRB in May 2000 for (1) the commuter railroad operations of the MTA conducted by MTA Long Island Rail Road and MTA Metro-North Railroad (the “2000-2004 Commuter Capital Program”), (2) the transit system operated by the MTA New York City Transit and its subsidiary, MaBSTOA, and the rail system operated by MTA Staten Island Railway (the “2000-2004 Transit Capital Program”), and (3) the toll bridges and tunnels operated by MTA Bridges and Tunnels (the 2000-2004 MTA Bridges and Tunnels Capital Program”). The 2000-2004 MTA Bridges and Tunnels Capital Program was effective upon adoption by the MTA Board in April 2000. The 2000-2004 amended Commuter Capital Program and the 2000-2004 amended Transit Capital Program (collectively, the “2000-2004 MTA Capital Programs”) were most recently amended by the MTA Board in December 2006. This latest 2000-2004 MTA Capital Program amendment was submitted to the CPRB for approval in April 2007, but was subsequently vetoed.

As last amended by the MTA Board, the 2000-2004 MTA Capital Programs and the 2000-2004 MTA Bridges and Tunnels Capital Program, provide for $21,147 in capital expenditures, of which $10,295 relates to ongoing repairs of, and replacements to, the Transit System operated by MTA New York City Transit and MaBSTOA and the rail system operated by MTA Staten Island Railway; $3,959 relates to ongoing repairs of, and replacements to, the Commuter System operated by MTA Long Island Rail Road and MTA Metro-North Railroad; $4,689 relates to the expansion of existing rail networks for both the transit and commuter systems to be managed by MTA Capital Construction; $450 relates to planning and design and customer service projects; $249 relates to World Trade Center repair projects; $1,003 relates to the ongoing repairs and replacements to MTA Bridges and Tunnels facilities; and $502 relates to MTA Bus.

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The combined funding sources for the MTA Board-approved 2000–2004 MTA Capital Programs and 2000–2004 MTA Bridges and Tunnels Capital Program include $7,919 in bonds, $6,522 in Federal funds, $4,575 from the proceeds of the MTA/MTA Bridges and Tunnels debt restructuring in 2002, and $2,131 from other sources.

At December 31, 2008, $20,443 had been committed and $18,474 had been expended for the combined 2000-2004 MTA Capital Programs and the 2000-2004 MTA Bridges and Tunnels Capital Program.

The federal government has a contingent equity interest in assets acquired by the MTA with federal funds, and upon disposal of such assets, the federal government may have a right to its share of the proceeds from the sale. This provision has not been a substantial impediment to the MTA’s operation.

2. SIGNIFICANT ACCOUNTING POLICIES

In accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Fund Accounting, the MTA applies all applicable GASB pronouncements as well as Financial Accounting Standards Board (“FASB”) Statements and Interpretations issued on or before November 30, 1989, that do not conflict with GASB pronouncements. The MTA has elected not to apply FASB Standards issued after November 30, 1989.

Estimates — Financial statements prepared in accordance with GAAP require the use of estimates made by management for certain account balances and transactions. Actual results may differ from these estimates.

Principles of Consolidation — The consolidated financial statements consist of MTAHQ, MTA Long Island Rail Road, MTA Metro-North Railroad, MTA Staten Island Railway, MTA Long Island Bus, FMTAC, MTA Bus, MTA Capital Construction, MTA New York City Transit (including its subsidiary MaBSTOA), and MTA Bridges and Tunnels. All significant related group transactions have been eliminated for consolidation purposes.

Basis of Accounting — The MTA follows enterprise fund and accrual basis of accounting, which is similar in presentation to private business enterprises.

Investments — The MTA Group’s investment policies comply with the New York State Comptroller’s guidelines for such operating and capital policies. Those policies permit investments in, among others, obligations of the U.S. Treasury, its agencies and instrumentalities, and repurchase agreements secured by such obligations. FMTAC’s investment policies comply with New York State Comptroller guidelines and New York State Department of Insurance guidelines.

Investments expected to be utilized within a year of December 31 have been classified as current assets in the financial statements.

All investments are recorded on the balance sheets at fair value and all investment income, including changes in the fair value of investments, is reported as revenue on the statement of revenues, expenses and changes in net assets. Fair values have been determined using quoted market values at December 31, 2008 and December 31, 2007.

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Materials and Supplies — Materials and supplies are valued principally at the lower of average cost or market value, net of obsolescence reserve.

Prepaid Expenses and Other Current Assets — Prepaid expenses and other current assets reflect advance payment of insurance premiums as well as farecard media related with ticket machines, WebTickets and AirTrain tickets.

Capital Assets — Properties and equipment are carried at cost and are depreciated on a straight-line basis over estimated useful lives. Expenditures for maintenance and repairs are charged to operations as incurred.

Liability Insurance — FMTAC, an insurance captive subsidiary of MTA, operates a liability insurance program (“ELF”) that insures certain claims in excess of the self-insured retention limits of the agencies on both a retrospective (claims arising from incidents that occurred before October 31, 2003) and prospective (claims arising from incidents that occurred on or after October 31, 2003) basis. For claims arising from incidents that occurred on or after November 1, 2001, but before November 1, 2006, the self-insured retention limits are: $7 million for MTA New York City Transit, MaBSTOA, MTA Bus, MTA Staten Island Railway, MTA Long Island Rail Road, and MTA Metro-North Railroad; $2 million for MTA Long Island Bus; and $1.4 million for MTAHQ and MTA Bridges and Tunnels. Effective November 1, 2006, the self-insured retention limits for ELF were increased to the following amounts: $8 million for MTA New York City Transit, MaBSTOA, MTA Bus, MTA Staten Island Railway, MTA Long Island Rail Road and MTA Metro-North Railroad; $2.3 million for MTA Long Island Bus; and $1.6 million for MTAHQ and MTA Bridges and Tunnels. The maximum amount of claims arising out of any one occurrence is the total assets of the program available for claims, but in no event greater than $50 million. The retrospective portion contains the same insurance agreements, participant retentions, and limits as existed under the ELF program for occurrences happening on or before October 30, 2003. On a prospective basis, FMTAC issues insurance policies indemnifying the other MTA Group entities above their specifically assigned self-insured retention with a limit of $50 million per occurrence with a $50 million annual aggregate. FMTAC charges appropriate annual premiums based on loss experience and exposure analysis to maintain the fiscal viability of the program. On December 31, 2008, the balance of the assets in this program was $62.1 million.

MTA also maintains an All-Agency Excess Liability Insurance Policy that affords the MTA Group additional coverage limits of $350 million, for a total limit of $400 million ($350 excess of $50). In certain circumstances, when the assets in the program described in the preceding paragraph are exhausted due to payment of claims, the All-Agency Excess Liability Insurance will assume the coverage position of $50 million.

On March 1, 2008, the “nonrevenue fleet” automobile liability policy program was renewed. This program provides third-party auto liability insurance protection for the MTA Group with the exception of MTA New York City Transit and MTA Bridges and Tunnels. The policy provides $8 million per occurrence limit with a $0.5 million per occurrence deductible. FMTAC renewed its deductible buy back policy, where it assumes the liability of the agencies for their deductible.

On March 1, 2008, the “Access-A-Ride” automobile liability policy program was renewed. This program provides third-party auto liability insurance protection for the MTA New York City Transit’s Access-A-Ride program, including the contracted operators. This policy provides a $3 million per occurrence limit with a $1 million per occurrence deductible.

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On December 15, 2008, FMTAC renewed the primary coverage on the Station Liability and Force Account liability policies $8 million per occurrence loss for MTA Metro-North Railroad and MTA Long Island Rail Road.

Property Insurance – Effective October 31, 2007, FMTAC renewed the all-agency property insurance program. For the period October 31, 2007 through May 1, 2009, FMTAC directly insures property damage claims of the other MTA Group entities in excess of a $25 million per occurrence self-insured retention (“SIR”), subject to an annual $75 million aggregate. Losses occurring after the retention aggregate is exceeded are subject to a deductible of $7.5 million per occurrence. The total program limit has been maintained at $1.25 billion per occurrence covering property of the related entities collectively. With the exception of acts of terrorism (both domestic and foreign), FMTAC is reinsured in the domestic, London, European, and Bermuda marketplaces for this coverage. Given the absence of major catastrophes in 2006 and 2007, available capacity has emerged, along with pricing reductions. As a result, FMTAC was able to obtain additional reinsurance capacity over last year and has fully reinsured the all-risk component for the full $1.25 billion, subject to certain program sublimits.

The property insurance, which was subject to a renewal on October 31, 2007, provides replacement cost coverage for all risks of direct physical loss or damage to all real and personal property, with minor exceptions. The policy also provides extra expense and business interruption coverages.

With respect to acts of terrorism, FMTAC is reinsured by the United States Government for 85 percent of “certified” losses, as covered by the Terrorism Risk Insurance Act (TRIA) of 2007 (originally introduced in 2002). Under the 2007 extension, terrorism acts sponsored by both foreign and domestic organizations are covered. Until 2007, the Act only provided coverage for acts sponsored by foreign organizations. The remaining 15 percent of MTA Group losses would be covered under an additional policy described below. Additionally, no federal compensation will be paid unless the aggregate industry insured losses exceed $100 million (“trigger”).

To supplement the reinsurance to FMTAC through TRIA of 2007, the MTA obtained an additional commercial reinsurance policy with Lexington Insurance Co. Lexington Insurance Company is part of the AIG Property and Casualty Group (the Insurance Group). The 16 companies comprising the Insurance Group were all profitable in 2008. The various companies comprising the Insurance Group, which are incorporated in four states, New York, Pennsylvania, Delaware and Illinois, are protected from weaknesses in the financial position of American International Group, Inc. by insurance regulations in each of the above-referenced states. These statutory protections are designed to protect policyholders from the financial weaknesses at American International Group, Inc. That policy provides coverage for (1) 15 percent of any “certified” act of terrorism - up to a maximum recovery of $183.75 million for any one occurrence, or (2) 100 percent of any “certified” terrorism loss which does not reach the $100 million trigger – up to a maximum recovery of $100 million for any occurrence. This coverage expires on April 30, 2009. Recovery under this policy is subject to a retention of $25 million per occurrence and $75 million in the annual aggregate – in the event of multiple losses during the policy year. Should the MTA Group’s retention in any one year exceed $75 million, future losses in that policy year are subject to a retention of just $7.5 million.

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Operating Revenues

Passenger Revenue and Tolls — Revenues from the sale of tickets, tokens, electronic toll collection system, and farecards are recognized as income as they are used. Deferred revenue is recorded for the estimated amount of unused tickets, tokens, and farecards.

Nonoperating Revenues

Operating Assistance — The MTA Group receives, subject to annual appropriation, NYS operating assistance funds that are generally recognized as revenue when all applicable eligibility requirements are met. Generally, funds received under the NYS operating assistance program are fully matched by contributions from NYC and the seven other counties within the MTA’s service area.

Mortgage Recording Taxes (“MRT”) — Under NYS law, the MTA receives capital and operating assistance through a Mortgage Recording Tax (MRT-1), which is collected by NYC and the seven other counties within the MTA’s service area, at the rate of .25 of one percent of the debt secured by certain real estate mortgages. Effective June, 2005, the rate was increased from 25 cents per 100 dollars of recorded mortgage to 30 cents per 100 dollars of recorded mortgage. The MTA also receives an additional Mortgage Recording Tax (MRT-2) of .25 of one percent of certain mortgages secured by real estate improved or to be improved by structures containing one to six dwelling units in the MTA’s service area. MRT-1 and MRT-2 taxes are recognized as revenue based upon reported amounts of taxes collected.

� MRT-1 proceeds are initially used to pay MTAHQ’s operating expenses. Remaining funds, if any, are allocated 55 percent to certain transit operations and 45 percent to the commuter railroads operations. The commuter railroad portion is first used to fund the NYS Suburban Highway Transportation Fund in an amount not to exceed $20 annually (subject to the moneys being returned under the conditions set forth in the governing statute if the Commuter Railroads are operating at a deficit). As of December 31, 2008 and December 31, 2007, the amount allocated to NYS Suburban Highway Transportation Fund was $0 and $20 respectively. Of the New York City Transit portion, the MTA distributed $115.3 and $0 as of December 31, 2008 and December 31, 2007, respectively.

� The first $5 of the MRT-2 proceeds is transferred to the MTA Dutchess, Orange, and Rockland Fund ($1.5 each for Dutchess and Orange Counties and $2 for Rockland County). Additionally, the MTA must transfer to each County’s fund an amount equal to the product of (i) the percentage by which each respective County’s mortgage recording tax payments (both MRT-1 and MRT-2) to the MTA increased over such payments in 1989 and (ii) the base amount received by each county as described above. The counties do not receive any portion of the June 1, 2005 increase in MRT-1 from 25 cents per $100 of recorded mortgage to 30 cents. Excess amounts transferable to the counties as of December 31, 2008 and 2007, were $5.7 and $11.7, respectively. In 2008, the MTA distributed $24.6 to MTA Bus and paid to Dutchess, Orange and Rockland Counties the 2007 excess amounts of MRT1 and MRT-2 totaling $11.7. The amount due to the counties for the period ended December 31, 2008 was paid in February of 2009.

� In addition, MTA New York City Transit receives operating assistance directly from NYC through a mortgage recording tax at the rate of .625 of one percent of the debt secured by certain real estate mortgages and through a property transfer tax at the rate of one percent of the assessed value (collectively referred to as “Urban Tax Subsidies”) of certain properties.

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Dedicated Taxes — Under NYS law, subject to annual appropriation, the MTA receives operating assistance through a portion of the Dedicated Mass Transportation Trust Fund (“MTTF”) and Metropolitan Mass Transportation Operating Assistance Fund (“MMTOA”). The MTTF receipts consist of a portion of the revenues derived from certain business privilege taxes imposed by the State on petroleum businesses, a portion of the motor fuel tax on gasoline and diesel fuel, and a portion of certain motor vehicle fees, including registration and nonregistration fees. Effective October 1, 2005, the State increased the amount of motor vehicle fees deposited into the MTTF for the benefit of the MTA. MTTF receipts are applied first to meet certain debt service requirements or obligations and second to pay operating and capital costs. The MMTOA receipts are comprised of .375 of one percent regional sales tax (which was increased effective June 1, 2005 from .25 of one percent), a temporary regional franchise tax surcharge, a portion of taxes on certain transportation and transmission companies, and an additional portion of the business privilege tax imposed on petroleum businesses. MMTOA receipts, to the extent that MTTF receipts are not sufficient to meet debt service requirements, will also be applied to certain debt service obligations, and secondly to operating and capital costs of the Transit System, and the Commuter Railroads.

The State Legislature enacts in an annual budget bill for each state fiscal year an appropriation to the MTA Dedicated Tax Fund for the then-current state fiscal year and an appropriation of the amounts projected by the Director of the Budget of the State to be deposited in the MTA Dedicated Tax Fund for the next succeeding state fiscal year. The assistance deposited into the MTTF is required by law to be allocated, after provision for debt service on Dedicated Tax Fund Bonds (see Note 7), 85 percent to certain transit operations (not including MTA Bus) and 15 percent to the commuter railroads operations. Revenues from this funding source are recognized based upon amounts of tax reported collected by NYS, to the extent of the appropriation.

Operating Subsidies Recoverable from Connecticut Department of Transportation (“CDOT”) — The portion of the deficit from operations relating to MTA Metro-North Railroad’s New Haven line is recoverable from CDOT. Under the terms of a renewed Service Agreement, which began on January 1, 2000, and the 1998 resolution of an arbitration proceeding initiated by the State of Connecticut, CDOT pays 100 percent of the net operating deficit of MTA Metro-North Railroad’s branch lines in Connecticut (New Canaan, Danbury, and Waterbury), 65 percent of the New Haven mainline operating deficit, and a fixed fee for the New Haven line’s share of the net operating deficit of Grand Central Terminal (“GCT”) calculated using several years as a base, with annual increases for inflation and a one-time increase for the cost of operating GCT’s North End Access beginning in 1999. The Service Agreement also provides that CDOT pay 100 percent of the cost of nonmovable capital assets located in Connecticut, 100 percent of movable capital assets to be used primarily on the branch lines and 65 percent of the cost of other movable capital assets allocated to the New Haven line. Remaining funding for New Haven line capital assets is provided by the MTA. The Service Agreement provides for automatic five-year renewals unless a notice of termination has been provided. The Service Agreement has been automatically renewed for an additional five years beginning January 1, 2005. Capital assets completely funded by CDOT are not reflected in these financial statements, as ownership is retained by CDOT. The Service Agreement provides that final billings for each year are subject to audit by CDOT. Years subsequent to 2000 remain subject to final audit.

Reimbursement of Expenses — The cost of operating and maintaining the passenger stations of the Commuter Railroads in NYS is assessable by the MTA to NYC and the other counties in which such stations are located for each NYS fiscal year ending June 30, under provisions of the NYS Public Authorities Law. This funding is recognized as revenue based upon an amount, fixed

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by statute, for the costs to operate and maintain passenger stations and is revised annually by the increase or decrease of the regional Consumer Price Index.

� Pursuant to an agreement NYS and NYC each pays to MTA $44.2 and $45 respectively annually to cover a portion of the cost of the free-fare student program. The State, however, reduced its $45 contribution for the 2007 – 2008 school year by approximately $2.0 to $43, which was received in 2008. The estimated cost of this program is approximately $179 for the 2008-2009 school year. It is believed the City will continue to provide for the continuation of the City’s $45 contribution for the 2008-2009 school year, of which $15 was received in December 2008. The Authority’s approved 2009 Adopted Budget assumes that the remaining $30 from the City will be received in 2009. It also assumes that the State’s full $45 for the 2008-2009 school year will be received in 2009. The Authority’s 2010-2012 Financial Plan assumes the continuation of the joint funding of the free fare program for students.

� Policing of the transit system is carried out by the NYC Police Department at NYC’s expense. The MTA, however, continues to be responsible for certain capital costs and support services related to such police activities, a portion of which is reimbursed by NYC. The MTA received approximately $3.8 in the twelve months ended December 31, 2008, and $4.2 in the twelve months ended December 31, 2007 for the reimbursement of Transit police costs. In addition, $0.9 was received in January of 2009 for the period ending December 31, 2008.

� Federal law and regulations require a paratransit system for passengers who are not able to ride the buses and trains because of their disabilities. Pursuant to an agreement between NYC and the MTA, MTA New York City Transit had assumed operating responsibility for all paratransit service required in NYC by the Americans with Disabilities Act of 1990. The services are provided by private vendors under contract with MTA New York City Transit. NYC reimburses the MTA for the lesser of 33 percent of net paratransit operating expenses defined as labor, transportation, and administrative costs less fare revenues and 6.0 percent of gross Urban Tax Subsidies, or an amount that is 20.0 percent greater than the amount paid by the NYC for the preceding calendar year. Fare revenue and reimbursements aggregated approximately $93.5 for the twelve months ended December 31, 2008 and $111.8 in the twelve months ended December 31, 2007. Total paratransit expenses including paratransit service contract were $366.2 and $282.3 in 2008 and 2007 respectively.

Grants and Appropriations — Grants and appropriations for capital projects are recorded when requests are submitted to the funding agencies for reimbursement of capital expenditures and beginning in 2001 were recorded as nonoperating revenues in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. These amounts are reported separately after Total Nonoperating Revenues in the Statements of Revenues, Expenses, and Changes in Net Assets.

Operating and Non-operating Expenses - Operating and non-operating expenses are recognized in the accounting period in which the liability is incurred. All expenses related to operating the Authority (e.g. salaries, insurance, depreciation, etc.) are reported as operating expenses. All other expenses (e.g. interest on long-term debt, subsidies paid to counties, etc.) are reported as non-operating expenses. Recent Accounting Pronouncements — The MTA has completed the process of evaluating the impact that will result from adopting GASB Statement No. 45, Accounting and Financial

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Reporting by Employers for Postemployment Benefits Other Than Pensions and has disclosed the required information as per this statement in Note 5. The Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. The Statement was effective for financial statement periods beginning after December 15, 2006. The MTA has completed the process of evaluating the impact that will result from adopting GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of assets and Future Revenues. The MTA has concluded that GASB Statement No. 48 had no impact on its financial position, results from operations, and cash flows. The Statement establishes criteria that governments will use to ascertain whether proceeds received should be reported as revenues or as a liability. The Statement is effective for fiscal periods beginning after December 15, 2006.

The MTA has implemented GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This Statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations. The Statement is effective for fiscal periods beginning after December 15, 2007. For the year ended December 31, 2008 the MTA recorded expenses of $43.1 as a result of adopting GASB Statement No. 49. (See Note 11)

The MTA has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets. The MTA is therefore unable to disclose the impact GASB Statement No. 51 will have on its financial position results of operations, and cash flows when such statement is adopted. This statement amends GASB Statement No. 34, paragraphs 19–21, and GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, paragraphs 9e, 16, and 18 and relates to the recognition and recording of intangible assets as capital assets in the statement of net assets. The requirements of this Statement are for financial statements for periods beginning after June 15, 2009.

The MTA has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The MTA is therefore unable to disclose the impact GASB Statement No. 53 will have on its financial position results of operations, and cash flows when such statement is adopted. This Statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments, and addresses hedge accounting requirements. This statement is effective for financial statements for periods beginning after June 15, 2009.

The MTA has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement establishes accounting and financial reporting standards for all governments that report governmental funds. It establishes criteria for classifying fund balances into specifically defined classifications and clarifies definitions for governmental fund types. This statement is effective for financial statements for periods beginning after June 15, 2010.

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3. CASH AND INVESTMENTS

Cash, including deposits in transit, consists of the following at December 31, 2008 and 2007:

Carrying Bank Carrying BankAmount Balance Amount Balance

FDIC insured or collateralized deposits 130$ 127$ 69$ 69$ Uninsured and not collateralized 76 37 61 79

206$ 164$ 130$ 148$

December20072008

December

All collateralized deposits are held by the MTA or its agent in the MTA’s name.

The MTA, on behalf of the Transit operations, MTA Bridges and Tunnels, MTA Long Island Bus, and MTA Bus operations, invests funds which are not immediately required for the MTA’s operations in securities permitted by the New York State Public Authorities Law, including repurchase agreements collateralized by U.S. Treasury securities, U.S. Treasury notes, and U.S. Treasury zero coupon bonds.

The MTA’s uninsured and uncollateralized deposits are primarily held by commercial banks in the metropolitan New York area and are subject to the credit risks of those institutions.

MTA holds most of its investments at a custodian bank. The custodian must meet certain banking institution criteria enumerated in MTA's Investment Guidelines. The Investment Guidelines also require the Treasury Division to hold at least $100 of its portfolio with a separate emergency custodian bank. The purpose of this deposit is in the event that the MTA's main custodian cannot execute transactions due to an emergency outside of the custodian's control, the MTA has an immediate alternate source of liquidity.

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Investments, at fair value, consist of the following at December 31, 2008 and 2007:

Repurchase agreements 780$ 585$ U.S. Treasuries due 2008 - 2022 1,071 1,967 Investments restricted for capital lease obligations: US Treasury Notes - 8 Treasury Strips 153 112 Other Agencies 1,191 1,371 Sub-total 1,344 1,491 Other Agencies due 2008 - 2021 1,264 1,055 Commercial Paper due 2008 - 99 * Asset & Mortgage Back Securities 16 57 * Commercial Mortgage Backed Securities 35 26 * Corporate Bonds 88 120 * Foreign Bonds 31 * Equities 11 18

Total 1,344$ 4,640$ 1,491$ 5,418$

*FMTAC Investment

December December2008 2007

Fair values include accrued interest to the extent that interest is included in the carrying amounts. Accrued interest on investments other than Treasury bills and coupons is included in other receivables on the balance sheet. The MTA’s investment policy states that securities underlying repurchase agreements must have a market value at least equal to the cost of the investment.

In connection with certain lease transactions described in Note 8, the MTA has purchased securities or entered into payment undertaking, letter of credit, or similar type agreements or instruments (guaranteed investment contracts) with financial institutions, which generate sufficient proceeds to make basic rent and purchase option payments under the terms of the leases. If the obligors do not perform, the MTA may have an obligation to make the related rent payments.

All investments, other than the investments restricted for capital lease obligations, are either insured or registered and held by the MTA or its agent in the MTA’s name. Investments restricted for capital lease obligations are either held by MTA or its agent in the MTA’s name or held by a custodian as collateral for MTA’s obligation to make rent payments under capital lease obligation. Investments had weighted average yields of 2.8 percent and 4.1 percent at year end for the years, 2008 and 2007, respectively.

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Of the above cash and investments, amounts designated for internal purposes by management were as follows at December 31, 2008 and 2007:

December December2008 2007

Construction or acquisition of capital assets 956$ 1,975$ Funds received from affiliated agencies for investment 688 830 Debt service 353 230 Payment of claims 363 296 Restricted for capital leases 1,387 1,491 Other 693 306

Total 4,440$ 5,128$

Credit Risk — At December 31, 2008 and 2007, the following credit quality rating has been assigned to MTA investments by a nationally recognized rating organization:

Quality Rating 2008 Percent of 2007 Percent ofMoody’s Total Portfolio Total Portfolio

A-1+ 890$ 24.43 % 181$ 3.94 % A-1 - - 63 1.36 AAA 570 15.66 1,122 24.43 AA 17 0.49 23 0.50 A 66 1.84 64 1.39 BBB 33 0.90 30 0.65 Not Rated 828 22.70 505 11.01 Government 1,239 33.98 2,604 56.72

Total 3,643 100.00 % 4,592 100.00%

Investments not rated 997 826

Total Investment 4,640$ 5,418$

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Interest Rate Risk — Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of the investment. Duration is a measure of interest rate risk. The greater the duration of a bond or portfolio of bonds, the greater its price volatility will be in response to a change in interest rate risk and vice versa. Duration is an indicator of bond price’s sensitivity to a 100 basis point change in interest rates.

Securities Fair Value Duration Fair Value Duration

U.S. Treasuries 1,071$ 0.32 2,293$ 0.13 U.S. Agencies 1,252 0.72 1,070 0.25 Tax Benefits Lease Investments 347 16.50 311 15.91 Repurchase Agreement 780 0.00 620 0.00 Certificate of Deposits 11 0.00 11 0.16 Asset-Backed Securities (1) 16 1.94 99 0.07 Commercial Mortgage-Backed Securities (1) 35 4.10 27 1.15 Foreign Bonds (1) 31 4.06 22 5.47 Corporates (1) 89 2.44 121 5.03

Total fair value 3,632 4,574

Modified duration 2.07 1.37 Equities (1) 11 18

Total 3,643 4,592

Investments with no duration reported 997 826

Total Investments 4,640$ 5,418$

(1) These securities are only included in the FMTAC portfolio

2008 2007

MTA is a public benefit corporation established under the New York Public Authorities Law. MTA’s Treasury Division is responsible for the investment management of the funds of the Related Entities. The investment activity covers all operating and capital funds, including bond proceeds, and the activity is governed by State statutes, bond resolutions and the Board-adopted investment guidelines (the “Investment Guidelines”). The MTA Act currently permits the Related Entities to invest in the following general types of obligations:

� obligations of the State or the United States Government;

� obligations the principal and interest of which are guaranteed by the State or the United States government;

� obligations issued or guaranteed by certain Federal agencies;

� repurchase agreements fully collateralized by the obligations of the foregoing United States Government and Federal agencies;

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� certain certificates of deposit of banks or trust companies in the State;

� certain banker’s acceptances with a maturity of 90 days or less;

� certain commercial paper;

� certain municipal obligations; and

� certain mutual funds up to $10 in the aggregate.

MTA Investment Guidelines limit the dollar amount invested in banker acceptances, commercial paper, and obligations issued or guaranteed by certain Federal agencies to $250 at cost. There are no dollar limits on the purchase of obligations of the United States government, the State or obligations the principal and interest of which are guaranteed by the State or the United States government. Investments in collateralized repurchase agreements are limited by dealer’s or banks capital. MTA can invest no greater than $300 with a bank or dealer rated in Tier 1 (i.e. $1 billion or more of capital). FMTAC is created as a MTA subsidiary and is licensed as a captive direct insurer and reinsurer by the New York State Department of Insurance. As such FMTAC is responsible for the investment management of its funds. The investment activity is governed by State statutes and the FMTAC Board-adopted investment guidelines. The minimum surplus to policyholders and reserve instruments are invested in the following investments: � obligations of the United States or any agency thereof provided such agency obligations are

guaranteed as to principal and interest by the United States;

� direct obligations of the State or of any county, district or municipality thereof.

� any state, territory, possession or any other governmental unit of the United States;

� certain bonds of agencies or instrumentalities of any state, territory, possession or any other governmental unit of the United States;

� the obligations of a solvent American institution which are rated investment grade or higher (or the equivalent thereto) by a securities rating agency;

� certain mortgage backed securities in amounts no greater than five percent of FMTAC’s admitted assets.

FMTAC may also invest nonreserve instruments in a broader range of investments including the following general types of obligations:

� certain equities; and � certain mutual funds.

FMTAC is prohibited from making the following investments:

� Investment in an insolvent entity; � Any investment as a general partner; and

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� Any investment found to be against public policy.

FMTAC investment guidelines do include other investments, but FMTAC has limited itself to the above permissible investments at this time.

4. EMPLOYEE BENEFITS

Substantially all of the MTA Group entities related groups and pension plans have separately issued financial statements that are publicly available and contain descriptions and supplemental information regarding employee benefit plans. These statements may be obtained by calling the administrative office of the respective related group.

Pension Plans - The MTA Group entities sponsor and participate in a number of pension plans for their employees. These plans are not component units of the MTA and are not included in the combined financial statements.

Defined Benefit Pension Plans

Single-Employer Pension Plans

MTA Long Island Rail Road Plan for Additional Pensions

Plan Description - The Long Island Rail Road Plan for Additional Pensions (“the LIRR Plan”) is a single-employer pension defined benefit plan that provides retirement, disability and death benefits to plan members and beneficiaries. The LIRR Plan is administered by the MTA Defined Benefit Pension Board which has the authority to establish or amend obligations to the LIRR Plan. The LIRR Plan is a governmental plan and accordingly, is not subject to the funding and other requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). The pension plan has a separately issued financial statement that is publicly available and contains required descriptions and supplemental information regarding the employee benefit plan. The statements may be obtained by writing to Metropolitan Transportation Authority, comptroller, 345 Madison Avenue, New York, New York 10017-3739. Funding Policy - The LIRR Plan has both non-contributory and contributory requirements. Participants who entered qualifying service before July 1, 1978 are not required to contribute. Participants who entered qualifying service on or after July 1, 1978 contribute 3 percent of their wages. The MTA Long Island Rail Road contributes additional amounts based on actuarially determined amounts that are designed to accumulate sufficient assets to pay benefits when due. The current rate is 123.98 percent of annual covered annual payroll.

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The funded status of the LIRR Plan as of January 1, 2008 the most recent actuarial valuation date, is as follows:

Three-Year Trend Information

The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. Funded Status and Funding Progress - As January 1, 2008, the most recent actuarial valuation date, the LIRR Plan was 34.5 percent funded. The actuarial accrued liability for benefits was $1,560.1, and the actuarial value of assets $537.6, resulting in an unfunded actuarial accrued liability (“UAAL”) of $1,022.5. The covered payroll (annual payroll of active employees covered by the LIRR plan) was $80.9, and the ratio of the UUAL to the covered payroll was 1,263.5 percent.

Actuarial Methods and Assumptions- Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The significant actuarial methods and assumptions used in the LIRR Plan actuarial valuation at January 1, 2008 were not changed from those used for the LIRR Plan at January 1, 2006 with the exception of the mortality assumption which was revised to reflect the RP-2000 Disabled Annuitant mortality table for males and females and used beginning with the January 1, 2007 Valuation. The significant actuarial methods and assumptions used in the LIRR Plan at January 1, 2006 were as follows: the actuarial cost method and amortization method used was the entry age normal cost for all periods. For January 1, 2006 the amortization period for unfunded accrued liability was 27 years, with payments a level dollar amount. The asset valuation method utilized was a 5-year smoothing method for all periods. The investment

2008

Annual required contribution ("ARC") 100.3$ Interest on net pension obligation 3.2 Adjustment to ARC (3.8) Annual pension cost 99.7 Actual contributions made (100.0) Decrease in net pension obilgation (0.3) Net pension obligation beginning of year 40.4 Net pension obligation end of year 40.1$

Annual % of Annual NetYear Pension Pension Cost Pension

Ended Cost Contributed Obligation

12/31/2008 99.7$ 100.23 % 40.1$ 12/31/2007 100.4 100.50 40.4 12/31/2006 106.5 101.91 175.6

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rate of return was 8.0 percent for all periods. Investments and administrative expenses are paid from plan assets of the LIRR Plan. The remaining amortization period at December 31, 2008 was 25 years.

Metro North Cash Balance Plan

Plan Description - The Metro-North Commuter Railroad Company Cash Balance Plan (the “MNR Plan” is a single employer, defined benefit pension plan. The MNR Plan covers non-collectively bargained employees, formerly employed by Conrail, who joined MTA Metro-North Railroad as management employees between January 1 and June 30, 1983, and were still employed as of December 31, 1988. Effective January 1, 1989, these employees were covered under the Metro-North Commuter Railroad Defined Contribution Plan for Management Employees (the “Management Plan”) and the MNR Plan was closed to new participants. The assets of the Management Plan have been merged with the Metropolitan Transportation Authority Defined Benefit Plan for Non-Represented Employees as of the asset transfer date of July 14, 1995. The MNR Plan is designed to satisfy the applicable requirements for governmental plans under Section 401(a) and 501(a) of the Internal Revenue Code. Accordingly, the MNR Plan is tax-exempt and is not subject to the provisions of the Employee Retirement Income Security Act (ERISA) of 1974. This plan provides retirement and death benefits to plan members and beneficiaries.

Funding Policy - Funding for the MNR Plan is provided by MTA Metro-North Railroad which is a public benefit corporation that receives funding for its operations and capital needs from the MTA and the Connecticut Department of Transportation (“CDOT”). Certain funding by MTA is made to MTA Metro-North Railroad on a discretionary basis. The continuance of funding for the MNR Plan has been, and will continue to be, dependent upon the receipt of adequate funds.

MTA Metro-North Railroad’s funding policy with respect to the MNR Plan was to contribute the full amount of the pension benefit obligation (PBO) of approximately $2.9 to the trust fund in 1989. As participants retire, distributions from the MNR Plan have been made by the Trustee. MTA Metro-North Railroad anticipated that no further payments would be made to the MNR Plan. However, the January 1, 2005 actuarial valuation resulted in an unfunded accrued liability of $110 and the $0.7 annual required contribution was paid to the MNR Plan in 2005. The January 1, 2007 actuarial valuation resulted in an unfunded accrued liability of $.075 and the $.01 annual required contribution was paid to the MNR Plan in 2007. The January 1, 2008 actuarial valuation resulted in an unfunded accrued liability of $.065 and the $.014 annual required contribution was paid to the MNR Plan in 2008. The market value of net assets available for benefits in the trust fund at December 31, 2008 was $1.2, which is less than the current PBO of $1.3. The MTA Metro-North Railroad has accrued this unfunded liability.

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The funded status of the MNR Plan as of January 1, 2008 the most recent actuarial valuation date is as follows:


The schedule of funding progress, presented as RSI following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Funded Status and Funding Progress - As of January 1, 2008, the most recent actuarial valuation date, the MNR Plan was 95.4 percent funded. The actuarial accrued liability for benefits was $1.4, and the actuarial value of assets was $1.3, resulting in an unfunded actuarial accrued liability (UAAL) of $0.065. The covered payroll (annual payroll of active employees covered by the plan) was $6.8, and the ratio of the UAAL to the covered payroll was 1.0 percent.

Further information about the MNR Plan is more fully described in the separately issued financial statements which can be obtained by writing to the MTA Metro-North Railroad Chief Financial Officer, 347 Madison Avenue, New York, New York 10017-3739.

Actuarial Methods and Assumption- Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future.


Ended Cost Contributed Obligation

Amounts in thousands

12/31/2008 20.0$ 68.73 % (72.0)$ 12/31/2007 16.0 58.83 (78.0)12/31/2006 20.0 63.91 (85.0)

Amounts in thousands 2008

Annual required contribution 14.0$ Interest on net pension obligation (4.0) Adjust to annual required contribution 10.0 Annual pension cost 20.0 Actual contributions (14.0) Increase in net obilgation 6.0 Net pension obligation beginning of year (78.0) Net pension obligation end of year (72.0)$

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Manhattan and Bronx Surface Transit Operating Authority

Plan Description – MTA New York City Transit contributes to the Manhattan and Bronx Surface Transit Operating Authority (MaBSTOA) Plan (the “MaBSTOA Plan”), a single employer governmental retirement plan. MaBSTOA provides retirement, disability, and death benefits to plan members and beneficiaries which are similar to those benefits provided by NYCERS to similarly situated MTA New York City Transit employees. Article 12.08 of the MaBSTOA Plan assigns the authority to establish and amend the benefit provisions to the MaBSTOA Board. MaBSTOA issues a publicly available financial report that includes financial statements and required supplementary information for the MaBSTOA Plan. That report may be obtained by writing to MaBSTOA Pension Plan, New York City Transit Authority, Operations Accounting, 2 Broadway, 15th Floor, New York, NY 10004.

Funding Policy – The contribution requirements of plan members are established and may be amended only by the MaBSTOA Board in accordance with Article 10.01 of the MaBSTOA’s Plan. MaBSTOA’s funding policy for periodic employer contributions is to provide for actuarially determined amounts that are designed to accumulate sufficient assets to pay benefits when due. It is MaBSTOA’s policy to fund, at a minimum, the current year’s normal pension cost plus amortization of the unfunded actuarial accrued liability. For employees, the Plan has both contributory and noncontributory requirements depending on the date of entry into service. Employees entering qualifying service on or before July 26, 1976 are non-contributing. Certain employee entering qualifying service on or after July 27, 1976 are required to contribute 3% of their salary (See 2000 Plan Amendments). MaBSTOA’s contribution rate is 35.9 percent of annual covered payroll.

MTA New York City Transit’s contributions to the MaBSTOA Plan for the years ended December 31, 2008, 2007 and 2006 were $201.9, $179.2 and 159.6, respectively, equal to the annual required contributions for each year.

The funded status of the MaBSTOA Plan as of January 1, 2008 the most recent actuarial valuation date is as follows:

Amounts in thousands 2008

Annual required contribution 201.9$ Interest on net pension obligation (3.7) Adjust to annual required contribution 5.1 Annual pension cost 203.3 Actual contributions (201.9) Increase in net obilgation 1.4 Net pension obligation beginning of year (46.0) Net pension obligation end of year (44.6)$

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The schedule of funding progress, presented as RSI following the notes to the consolidated financial statements, present multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Funded Status and Funding Progress – As of January 1, 2008, the most recent actuarial valuation date, the MaBSTOA Plan was 58.2 percent funded. The actuarial accrued liability for benefits was $2,045.0, and the actuarial value of assets $1,190.8, resulting in an unfunded actuarial accrued liability (UAAL) of $854.1. The covered payroll (annual payroll of active employees covered by the MaBSTOA Plan) was $562.2, and the ratio of the UUAL to the covered payroll was 151.9 percent.

Actuarial Methods and Assumptions – Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The January 1, 2008 valuation reflects the actuarial assumptions adopted by the MTA New York City Transit based on the 2001 – 2005 Experience Study effective with the valuation. These changes increased the life expectancy for members included in the valuation, incorporated future anticipated mortality improvements, decreased rates of turnover and modified rates of retirement, so fewer retirements are expected for members with less than 20 years of service and more retirements are expected for members with at least 20 years of service. These changes increased the unfunded accrued liability by $135.5, which is being amortized over 10 years, and increased the total employer contribution by $24.4. The assumptions included an 8.0 percent investment rate of return and assumed general wage increases 3.5 percent to 18.0 percent for operating employees and 4.5 percent and 7.0 percent for non-operating employees per year, depending on years of service. This also includes an inflation component of 2.5 percent per year.

Annual pension costs and related information about each plan follows:


Ending Cost Contributed Obligation

12/31/2008 203.3$ 99.3 % (44.6)$ 12/31/2007 180.7 99.2 (46.0) 12/31/2006 157.6 165.0 (47.5)

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LIRR MaBSTOA MNR Cash Balance Plan

Date of valuation 1/1/2008 1/1/2008 1/1/2008Required contribution rates: ($ in Thousands) Plan members Employer: variable variable variable

actuarially actuarially actuariallydetermined determined determined

Employer contributions made in 2008 100.0$ 201.9$ 14.0$ Three-year trend information: Annual Required Contribution 2008 100.3$ 201.9$ 14.0$ 2007 100.9 179.2 10.0 2006 108.5 159.6 13.0

Percentage of ARC contributed: 2008 100% 100% 100% 2007 100% 100% 100% 2006 100% 163% 100%

Annual Pension Cost (APC): 2008 99.7$ 203.3$ 20.0$ 2007 100.4 180.7 16.0 2006 106.5 157.6 20.0 Net Pension Obligation (NPO) (assets) at end of year: 2008 40.1$ (44.6)$ (72.0)$ 2007 40.4 (46.0) (78.0) 2006 175.6 (47.5) (85.0)

Percentage of APC contributed: 2008 100% 99% 69% 2007 101% 99% 59% 2006 102% 165% 64%Components of APC Annual required contribution (ARC) 100.3$ 201.9$ 14.0$ Interest on NPO 3.2 (3.7) (4.0) Adjustment of ARC (3.8) 5.1 10.0 APC 99.7 203.3 20.0

Contributions made (100.0) (201.9) (14.0)

Change in NPO (assets) (0.3) 1.4 6.0 NPO (assets) beginning of year 40.4 (46.0) (78.0)

NPO (assets) end of year 40.1$ (44.6)$ (72.0)$

Single-Employer Plans

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Cost-Sharing Multiple-Employer Plans

MTA Defined Benefit Plan

Plan Description - The MTA Defined Benefit Pension Plan (“MTA Plan”) is a cost sharing multiple-employer pension plan. The Plan includes certain MTA Long Island Rail Road nonrepresented employees hired after December 31, 1987, and MTA Metro-North Railroad nonrepresented employees, certain MTA Long Island Bus employees hired prior to January 23, 1983, MTA Police, certain MTA Long Island Rail Road represented employees hired after December 31, 1987, certain MTA Metro-North Railroad represented employees, employees of MTA Staten Island Railway and certain employees of the MTA Bus Company (“MTA Bus”). MTA Long Island Rail Road, MTA Metro-North Railroad, MTA, MTA Staten Island Railway and MTA Bus contribute to the MTA Plan, which offers distinct retirement, disability, and death benefits for covered MTA Metro-North Railroad and MTA Long Island Rail Road employees, covered MTA Bus employees, and participants of the MTA 20-Year Police Retirement Program, MTA Long Island Bus Employees’ Pension Plan, and the Staten Island Railway Pension Program. Participants of the MTA Police Program contribute to that program at various rates. Annual pension costs and related information about this plan are presented in the following table for all years presented as if the plan was a single-employer plan at the MTA level The MTA Plan may be amended by action of the MTA Board.

A stand-alone financial report may be obtained by writing to the MTA Comptroller, 347 Madison Avenue, New York, New York, 10017. The current rate is 89.1 percent of annual covered payroll. The contribution requirements of the plan members and the MTA are established and may be amended by the MTA Board.

Funding policy - Employer contributions are actuarially determined on an annual basis and are recognized when due. Employee contributions to the Plan are recognized in the period in which the contributions are due. There are no contributions required under the MSBA

LIRR MaBSTOA MNR Cash Balance Plan

Actuarial cost method Entry age Entry age Entry age normal normal normal

frozen initial frozen initial liability liability

Method to determine actuarial value of plan assets 5-year 5-year 5-year

smoothing smoothing smoothing

Investment return 8.00% 8.00% 6.49%

Projected salary increases 3.5% 3.5% - 18.0% 3.5% - 36.2%

Consumer price inflation 2.50% 2.50% 2.50%

Amortization method and period level dollar / level dollar / level dollar /25 years 16 years 10 years

Period closed or open closed closed closed

Single-Employer Plans

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Employee’s Pension Plan. The current rate is 89.1 percent of annual covered payroll. The contribution requirements of the plan members and the MTA are established and may be amended by the MTA Board. The MTA’s contributions to the Plan for the years ending December 31, 2008, 2007 and 2006 were $107.8, $106.6 and $72.6, respectively, equal to the required contributions for each year.

The following summarizes the types of employee contributions made to the Plan:

Effective January 1, 1995, covered MTA Metro-North Railroad and MTA Long Island Rail Road non-represented employees are required to contribute to the Plan to the extent that their Railroad Retirement Tier II employee contribution is less than the pre-tax cost of the 3% employee contributions. Effective October 1, 2000, employee contributions, if any, were eliminated after ten years of making contributions to the Plan. MTA Metro-North Railroad employees may purchase prior service from January 1, 1983 through December 31, 1995 and MTA Long Island Rail Road employees may purchase prior service from January 1, 1988 through December 31, 1995 by paying the contributions that would have been required of that employee for the years in question, calculated as described in the first sentence, had the Plan been in effect for those years.

Covered MTA Metro-North Railroad and MTA Long Island Rail Road represented employees who first became eligible to be Plan participants on or after January 1, 2004 and MTA Staten Island Railway employees contribute 3 percent of salary. For these MTA Long Island Rail Road and MTA Staten Island Railway employees, contributions are not required after the completion of ten years of credited service. For certain Metro-North represented employees, the 3 percent contributions are required until January 1, 2017 and for others, June 30, 2017.

Covered MTA Bus employees contribute a fixed dollar amount which varies by depot. Currently, at Yonkers Depot, the employees contribute $21.50 per week, at College Point, Baisley Park and LaGuardia Depots, represented employees contribute $29.06 per week, at Eastchester, $25.00 per week at Spring Creek, cleaners contribute $23.15 per week and bus drivers and other titles $32.00 per week. The plans covering the non-represented employees at Yonkers, Spring Creek, Baisley Park and LaGuardia and all employees at JFK and Far Rockaway are non-contributory. (Note: the dollar figures in this paragraph are in dollars, not millions of dollars).

New York City Employees’ Retirement System (“NYCERS”)

Plan Description - MTA New York City Transit and MTA Bridges and Tunnels contribute to the New York City Employees’ Retirement System, a cost-sharing multiple-employer retirement system for employees of NYC and certain other governmental units. NYCERS combines features of a defined-benefit pension plan with those of a defined-contribution pension plan. NYCERS provides pension benefits to retired employees based on salary and length of service. In addition, NYCERS provides disability benefits, cost-of-living adjustments, and death benefits subject to satisfaction of certain service requirements and other provisions. The NYCERS plan functions in accordance with existing NYS statutes and NYC laws and may be amended by action of the State Legislature. NYCERS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information. That report may be obtained by writing to the New York City Employees’ Retirement System, 340 Jay Street,, Brooklyn, New York 11201.

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Funding Policy - NYCERS is a contributory plan, except for certain employees who entered prior to July 27, 1976 who make no contribution. Employees who entered qualifying service after July 1976, contribute 3 percent of their salary. The State legislature passed legislation in 2000 that suspended the 3 percent contribution for most employees who have 10 years or more membership. MTA New York City Transit and MTA Bridges and Tunnels are required to contribute at an actuarially determined rate. The rates are 18.0 percent and 14.3 percent, respectively, of covered payroll. The contribution requirements of plan members and MTA New York City Transit and MTA Bridges and Tunnels are established and amended by law. MTA New York City Transit’s required contributions for NYCERS fiscal years ended December 31, 2008, 2007 and 2006 were $480.9, $443.3 and $333.2 respectively. MTA Bridges and Tunnels’ contributions to NYCERS for the years ended December 31, 2008, 2007 and 2006 were $20.4, $18.5. and $12.9 respectively. All contributions were equal to or in excess of the actuary’s recommendation, plus interest.

New York State and Local Employees’ Retirement System (“NYSLERS”)

Plan Description - MTAHQ and MTA Long Island Bus employees who were hired after January 23, 1983, are members of NYSLERS. In addition, employees of the Capital Company who are on its payroll are also members of NYSLERS. NYSLERS is a cost-sharing multiple-employer plan and offers a broad spectrum of benefits, including retirement, death and disability benefits, and cost of living adjustments. Further information about the plan is more fully described in the publicly available statement of NYSLERS and may be obtained by writing to New York State and Local Retirement System, Office of the State Comptroller, 110 State Street, Albany, New York, 12244-0001.

Funding Policy - Employees who became members prior to July 27, 1976 make no contributions. Employees who became members after that date contribute 3 percent of salary. In 2000, the State Legislature passed legislation that suspends the 3 percent contribution for employees who have 10 years or more of credited service. MTAHQ and MTA Long Island Bus are required to contribute at an actuarially determined rate. The current rate of annual covered payroll for MTAHQ and MTA Long Island Bus respectively is 8.3 percent and 8.0 percent. The MTAHQ NYSLERS contributions for the years ended December 31, 2008, 2007 and 2006 was approximately 5.7 percent, 5.5 percent, and 5.7 percent respectively. The MTA Long Island Bus NYSLERS contributions for the years ended December 31, 2008, 2007 and 2006 was approximately $5.2, $5.1, and 5.4 respectively.

Defined Contribution Plans

Single-Employer

The Long Island Rail Road Company Money Purchase Plan (the “Money Purchase Plan”) is a defined contribution plan that covers certain represented employees who began service with MTA Long Island Rail Road after December 31, 1987. Beginning January 1, 2004, employees who were participants in the Money Purchase Plan have become participants in a New Program in the MTA Plan (the “New Program”) and have similar benefits as those applicable to non-represented employees of MTA Long Island Rail Road in the MTA Plan. The MTA Board has voted to terminate the Money Purchase Plan and the Money Purchase Plan was terminated effective March 31, 2008. The Money Purchase Plan is currently making distributions of all participant accounts.

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The Metro-North Commuter Railroad Company Defined Contribution Pension Plan for Agreement Employees (the “Agreement Plan”), established January 1, 1988, covers represented employees in accordance with applicable collective bargaining agreements. Under this plan, MTA Metro-North Railroad contributed an amount equal to 4 percent of each eligible employee’s gross compensation to the Agreement Plan on that employee’s behalf. For employees who have 19 or more years of service MTA Metro-North Railroad contributes 7 percent. In addition, employees may voluntarily contribute up to the amount of MTA Metro-North Railroad’s contribution to the Agreement Plan, on an after-tax basis. The Agreement Plan is administered by MTA Metro-North Railroad and the Agreement Plan’s Board of Managers of Pension. Effective January 1, 2004, certain employees who were participants of the Agreement Plan became participants in the New Program in the MTA Plan and have similar benefits as those applicable to nonrepresented employees of MTA Metro-North Railroad in the MTA Plan. In 2007, the remaining represented employees also became participants in the New Program, unless they opted-out of the New Program. The “opt-out” employees became participants of the MTA 401(k) plan with the same employer contributions as the Agreement Plan. The MTA Board has voted to terminate this Agreement Plan and the Agreement Plan was terminated effective December 16, 2008. The Agreement Plan is currently making distributions of all participant accounts.

LIRR LIRR MNR Money MNR Money

Agreement Purchase Agreement PurchasePlan Plan Plan Plan

Employer contributions - - 5.1$ $ -Employee contributions - - 0.3$ $ -

December 31, 2008 December 31, 2007

Deferred Compensation Plans

As permitted by Internal Revenue Code Section 457, the MTA has established a trust or custodial account to hold plan assets for the exclusive use of the participants and their beneficiaries. Plan assets and liabilities are not reflected on the MTA’s combined balance sheets.

Certain MTA Group employees are also eligible to participate in a second deferred compensation plan established in accordance with Internal Revenue Code Section 401(k) (the “401(k) Plan”). Participation in the 401(k) Plan is available to most represented and nonrepresented employees. MTA Bus on behalf of certain MTA Bus employees and MTA Metro-North Railroad on behalf of those employees who opted-out of participation in the MTA Plan make contributions to the 401(k) Plan. The rate for the employer contribution varies. All amounts of compensation deferred under the 401(k) Plan, and all income attributable to such compensation, are in trust for the exclusive use of the participants and their beneficiaries. Accordingly, 401(k) Plan is not reflected in the accompanying combined balance sheets.

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5. OTHER POSTEMPLOYMENT BENEFITS

The MTA has implemented GASB Statement No. 45, “Accounting and Financial Reporting for Employers for Postemployment Benefits Other Than Pensions” (“GASB 45”). This Statement establishes the standards for the measurement, recognition, and display of Other Postemployment Benefits (“OPEB”) expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (“RSI”) in the financial reports of state and local governmental employers.

Postemployment benefits are part of an exchange of salaries and benefits for employee services rendered. Most OPEB have been funded on a pay-as-you-go basis and have been reported in financial statements when the promised benefits are paid. GASB 45 requires state and local government’s financial reports to reflect systematic, accrual-basis measurement and recognition of OPEB cost (expense) over a period that approximates employees’ years of service and provides information about actuarial accrued liabilities associated with the OPEB and whether and to what extent progress is being made in funding the plan.

The MTA elected not to record the entire amount of the Unfunded Accrued Liability (“UAAL”) in the year ended December 31, 2007, and record the net annual OPEB cost. The MTA also elected not to fund the UAAL more rapidly than on a pay as go basis. The UAAL relating to post-employment benefits decreased from $13.6 billion as of December 31, 2007 to $13.2 billion as of December 31, 2008. The end of the year liability equals the amount as of the beginning of the year plus interest at 4.2% less amortization amount included in the Annual Required Contribution for the prior year less or plus assumption changes and plan changes.

Plan Description — The benefits provided by the MTA Group include medical, pharmacy, dental, vision, and life insurance, plus monthly supplements for Medicare Part B or Medicare supplemental plan reimbursements and welfare fund contributions. The different types of benefits provided vary by agency and employee type (represented employees versus management). All benefits are provided upon retirement as stated in the applicable pension plan, although some agencies provide benefits to some members if terminate within 5 years of attaining retirement eligibility. Employees of the MTA Group are members of the following pension plans: the MTA Plan, the LIRR Plan, the MNR Plan, the MaBSTOA Plan, NYCERS and NYSLERS.

The MTA Group participates in the New York State Health Insurance Program (“NYSHIP”) to provide medical and prescription drug benefits, including Medicare Part B reimbursements, to many of its members. NYSHIP provides a PPO plan and several HMO plans. Represented MTA New York City Transit, other MTA New York City Transit employees who retired prior to January 1, 1996 or January 1, 2001, and MTA Bus retirees do not participate in NYSHIP. These benefits are either provided through a self-insured health plan, a fully insured or an HMO.

GASB Statement No. 45 requires the valuation must be performed at least biennially. The most recent biennial valuation was performed for the year ended December 31, 2007 and was performed with a valuation date of January 1, 2006. The total number of plan participants as of December 31, 2008 and December 31, 2007 receiving retirement benefits is 45 thousand and 38 thousand respectively.

Since the MTA is a participating employer in NYSHIP, it does not issue a stand-alone financial report regarding post-employment benefits. The NYSHIP financial report can be obtained by writing to NYS Department of Civil Service, Employee Benefits Division, Alfred E. Smith Office Building, 805 Swan Street, Albany, NY 12239.

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Annual OPEB Cost and Net OPEB Obligation — The MTA’s annual OPEB cost (expense) represents the accrued cost for postemployment benefits under GASB 45. The cumulative difference between the annual OPEB cost and the benefits paid during a year will result in a net OPEB obligation (the “Net OPEB Obligation”), included on the balance sheet. The annual OPEB cost is equal to the annual required contribution (the “ARC”) less adjustments if a Net OPEB Obligation exists and plus the interest on Net OPEB Obligations. The ARC is equal to the normal cost plus an amortization of the unfunded frozen actuarial accrued liability.

For determining the ARC, the MTA has chosen to use Frozen Initial Liability (the “FIL Cost Method”) cost method, one of the cost methods in accordance with the parameters of GASB Statement No. 45. The initial liability is amortized over a 22 year period.

In order to recognize the liability over an employee’s career, an actuarial cost method divides the present value into three pieces: the part that is attributed to past years (the “Accrued Liability” or “Past Service Liability”), the part that is being earned this year (the “Normal Cost”), and the part that will be earned in future years (the “Future Service Liability”). Under the FIL Cost Method, an initial past service liability is determined based on the Entry Age Normal (“EAN”) Cost Method and is amortized separately. This method determines the past service liability for each individual based on a level percent of pay. The Future Service Liability is allocated based on the present value of future compensation for all members combined to determine the Normal Cost. In future years, actuarial gains/losses will be incorporated into the Future Service Liability and amortized through the Normal Cost.

Actuarial Methods and Assumptions — The FIL Cost Method was used for determining the Normal Cost. The Entry Age Normal (“EAN”) Cost Method was used to determine the Frozen Accrued Liability and will be used to determine the unfunded actuarial accrued liability in the GASB 45 supplementary schedules. This method determines the Frozen Accrued Liability for each individual based on a level percent of pay for service accrued through the initial valuation date. The difference between the Actuarial Present Value of Benefits and the Frozen Accrued Liability equals the Present Value of Future Normal Cost. The Normal Cost equals the Present Value of Future Normal Cost divided by the present value of future compensation and multiplied by the total of current compensation for members less than certain retirement age.

The OPEB-specific actuarial assumptions used in the twelve months ended December 31, 2008, OPEB actuarial valuations are as follows:

Valuation date January 1, 2006

Actuarial cost method Frozen Initial LiabilityDiscount rate 4.2%Per-Capita retiree contributions *

surviving spouses pay a portion of the premium (10% for single coverage, 25% for dependent coverage) and MTA Headquarters where members retired prior to 1997 pay a portion of the premium, depending onthe year they retired.

* In general, all coverages are paid for by the MTA. The exceptions are for Bridges and Tunnels, where

Actuarial valuation involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and that actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future.

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Valuation Date — January 1, 2006 (January 1, 2007 for MTA)

Discount Rate — 4.2%

Per Capita Claim Costs — For members of NYSHIP and certain MTA Staten Island Railway and MTA New York City Transit members who retired prior to NYSHIP availability, unadjusted premiums were used.

For (1) some of the self-insured benefits provided to pre-NYSHIP MTA New York City Transit members, (2) TWU Local 100, ATU 1056, and ATU 726 represented employees, and (3) MTA Bus employees, per capita claim costs adjusted by age were used. A sample of these claim costs are shown below:

TWU TWU Pre-NYSHIP Pre-NYSHIP Pre-NYSHIPLocal 100 Local 100 Group 1 Retirees Group 2

Age GHI Medical Pharmacy Hospital Pharmacy Hospital

Male Employees

30–34 132.40 41.43 79.28 46.79 69.79 35–39 157.83 59.00 98.72 66.64 86.91 40–44 199.16 75.24 131.16 84.97 115.47 45–49 256.98 100.57 178.35 113.59 157.01 50–54 320.34 121.05 234.54 136.72 206.48 55–59 364.78 126.36 277.66 142.71 244.44 60–64 473.09 149.15 372.58 168.45 328.00



Female Employees

30–34 259.97 69.63 173.83 78.64 153.03 35–39 257.28 82.61 167.05 93.30 147.07 40–44 261.23 101.58 162.14 114.73 142.74 45–49 294.56 127.90 181.72 144.45 159.97 50–54 330.81 150.66 210.21 170.16 185.06 55–59 352.73 164.37 233.16 185.64 205.27 60–64 432.35 181.08 304.58 204.52 268.14

Medicare Part B Premiums — The Medicare Part B premium reimbursement was included in the 2006 premium for those members covered by NYSHIP. Recently NYSHIP issued revised premiums for 2007 removing this reimbursement. Assuming the adjustment to the 2006 premium rate would be similar to that announced for 2007, the impact of using the revised premium rates (including the percentage increase in the premium rates from 2006 to 2007) on the ARC for the MTA was estimated. For other members, where applicable, the reimbursement was determined using the 2006 premium level and increasing this amount by the Health Care Cost Trend rates.

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Health Care Cost Trend Rates —

Fiscal Year Trend Fiscal Year Trend

2008 10.5 2015 7.0 2009 10.0 2016 6.5 2010 9.5 2017 6.0 2011 9.0 2018 5.5 2012 8.5 2019+ 5.0 2013 8.0

In addition, 2006 premiums and claim costs were trended 11 percent to 2007.

Participation — For members that participate in NYSHIP, 100 percent of eligible members, including current retirees and surviving spouses, are assumed to elect the Empire PPO Plan. For groups that do not participate in NYSHIP, various coverage election rates are used. The following table displays the election rates used for future union retirees in MTA New York City Transit:

TWU 100 ATU 1056 ATU 726

Future Retiree Plan Election Percentage

GHI 65 % 65 % 35 % HIP 35 35 49 Aetna 0 0 16

Medicare HIP/Aetna HMO Elections

VIP 1 80 % 100 % 75 % VIP 2 20 0 0 Aetna 0 0 25

Dependent Coverage — Current retirees are valued using coverage reported by the MTA. Based on an analysis of members who retired within the last 5 years, we have assumed that, for future retirees, 85 percent of male members and 55 percent of female members elect family coverage with a spouse.

Demographic Assumptions:

Mortality — Preretirement and postretirement healthy annuitant rates are projected on a generational basis using Scale AA, as recommended by the Society of Actuaries Retirement Plans Experience Committee.

Preretirement — RP-2000 Employee Mortality Table for Males and Females with blue collar adjustments. No blue collar adjustments were used for management members of MTAHQ.

Postretirement Healthy Lives — RP-2000 Healthy Annuitant mortality table for males with Blue Collar adjustments and 133 percent of the rates from the RP-2000 Healthy Annuitant mortality table for females. No blue collar adjustments were used for management members of MTAHQ.

Postretirement Disabled Lives — 75 percent of the rates from the RP-2000 Disabled Annuitant mortality table for males and females. At age 85 and later for males and age 77 and later for females, the disability rates are set to the male and female healthy rates, respectively.

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Turnover and retirement rates — All demographic assumptions were based on assumptions utilized in the 2006 actuarial valuations for the pension plans, with the exception of the mortality assumption. The following is a table displaying the various sources of the assumptions utilized by group.

Group Pension Plan

MaBSTOA MaBSTOANew York City Transit NYCERS — NYCTMTA Bridges and Tunnels NYCERS — MTA Bridges and TunnelsLIRR Pre-1988 LIRR PlanLIRR Post-1987 MTA DB Plan Metro-North Mgrs and ACRE MTA DB PlanMetro-North Other Unions DC Plan — used same as ACREMTA Police MTA DB Plan Headquarters Mgrs and IBT NYSLERSLong Island Bus Pre-1983 MTA DB Plan Long Island Bus Post-1982 NYSLERSStaten Island Railway MTA DB Plan Yonkers, Eastchester, College Point MTA DB PlanBaisley Park, LaGuardia TWU — NYC Private Bus Lines Pension PlanJFK Green Bus Lines Pension PlanSpring Creek Command — Local 1181 Pension Plan

Vestee Coverage — For members that participate in NYSHIP, certain vestees (members who have terminated employment with 10 or more years of retirement service credit, but not yet eligible to retire) are eligible for NYSHIP benefits provided by the applicable agency upon retirement, but must maintain NYSHIP coverage at their own expense from termination to retirement. Vestees are assumed to retire at first eligibility and would continue to maintain NYSHIP coverage based on the following percentages. This assumption is based on the Development of Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation report provided to Participating Employers of NYSHIP. These percentages were also applied to current vestees, which were only provided by Headquarters.

Age at Termination Percent Electing

<40 0 % 40–43 5 44 20 45–46 30 47–48 40 49 50 50–51 80 52+ 100

The following table shows the elements of the MTA’s annual OPEB cost for the year, the amount actually paid, and changes in the MTA’s net OPEB obligation to the plan for the year ended December 31, 2008 and 2007. The portion of this actuarial present value allocated to a valuation year is called the Normal Cost. Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing costs between the employer and plan members to that point. Calculations reflect a long-term perspective.

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2008 2007

Annual required contribution ("ARC") 1,727.6$ 1,575.5$ Interest on net OPEB obligation 54.1 0.0 Adjustment to ("ARC") (113.0) 0.0

Annual OPEB cost 1,668.7 1,575.5

Payments made (320.5) (285.5)

Increase in net OPEB obligation 1,348.2 1,290.0

Net OPEB obligation — beginning of year 1,290.0 0.0

Net OPEB obligation — end of year 2,638.2$ 1,290.0$

The MTA’s annual OPEB cost, the percentage of annual OPEB cost contributed to, and the net OPEB obligation for the twelve months ended December 31, 2008 and the year ended December 31, 2007 is as follows:

Percentage ofYear Annual Annual OPEB Net OPEBEnded OPEB Cost Cost Obligation

December 31, 2008 1,668.7$ 19.2 % 2,638.2$ December 31, 2007 1,575.5 18.1 1,290.0

The Authorities funded status of the Plan is as follows:

UnfundedActuarial Actuarial Actuarial Ratio of

Value Accrued Accrued UAAL toYear Valuation of Liability Liability Funded Covered CoveredEnded Date Assets (AAL) (UAAL) Ratio Payroll Payroll

{a} {b} {c}={b}-{a} {a}/{c} {d} {c}/{d}

December 31, 2008 January 1, 2006 - 13,241$ 13,241$ - 4,557.1$ 290.6 %December 31, 2007 January 1, 2006 - 13,623 13,623 - 4,381.9 310.9 %

The required schedule of funding progress immediately following the notes to the financial statements presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

6. CAPITAL ASSETS

Capital assets and improvements include all land, buildings, equipment, and infrastructure of the MTA having a minimum useful life of two years and having a cost of more than 25 thousand.

Capital assets are stated at historical cost, or at estimated historical cost based on appraisals, or on other acceptable methods when historical cost is not available. Capital leases are classified as capital

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assets in amounts equal to the lesser of the fair market value or the present value of net minimum lease payments at the inception of the lease.

Accumulated depreciation and amortization are reported as reductions of fixed assets. Depreciation is computed using the straight-line method based upon estimated useful lives of 25 to 50 years for buildings, 2 to 40 years for equipment, and 25 to 100 years for infrastructure. Capital lease assets and leasehold improvements are amortized over the term of the lease or the life of the asset whichever is less. Capital assets consist of the following at December 31, 2008 and 2007:

Balance Balance BalanceDecember 31, December 31, December 31,

2006 Additions Deletions 2007 Additions Deletions 2008

Capital assets — not being depreciated: Land 137$ 9$ - $ 146$ 6$ - $ 152$ Construction work-in-progress 5,255 1,655 955 5,955 1,521 1,486 5,990

Total capital assets — not being depreciated 5,392 1,664 955 6,101 1,527 1,486 6,142

Capital assets, being depreciated: Buildings and structures 12,867 424 62 13,229 502 26 13,705 Bridges and tunnels 1,712 102 - 1,814 83 - 1,897 Equipment: - - - - - - - Passenger cars and locomotives 9,634 661 3 10,292 1,191 6 11,477 Buses 2,238 215 - 2,453 67 - 2,520 Infrastructure 12,764 890 30 13,624 1,097 22 14,699 Other 8,841 1,044 9 9,876 1,565 5 11,436

Total capital assets — being depreciated 48,056 3,336 104 51,288 4,505 59 55,734

Less accumulated depreciation: Buildings and structures 3,530 376 17 3,889 374 - 4,263 Bridges and tunnels 368 16 - 384 17 - 401 Equipment: - - - - - - - Passenger cars and locomotives 3,001 336 3 3,334 376 2 3,708 Buses 1,368 145 - 1,513 147 - 1,660 Infrastructure 3,615 430 16 4,029 459 11 4,477 Other 3,259 386 16 3,629 418 3 4,044

Total accumulated depreciation 15,141 1,689 52 16,778 1,791 16 18,553

Total capital assets — being depreciated — net 32,915 1,647 52 34,510 2,714 43 37,181

Capital assets — net 38,307$ 3,311$ 1,007$ 40,611$ 4,241$ 1,529$ 43,323$

Interest capitalized in conjunction with the construction of capital assets at December 31, 2008 and 2007 was $79.3 and $62.8, respectively.

Capital assets acquired prior to April 1982 for MTA New York City Transit were funded primarily by NYC with capital grants made available to MTA New York City Transit. NYC has title to a substantial portion of such assets and, accordingly, these assets are not recorded on the books of the MTA. Subsequent acquisitions, which are part of the MTA Capital Program, are recorded at cost by MTA New York City Transit. In certain instances, title to MTA Bridges and Tunnels’ real property may revert to NYC in the event the MTA determines such property is unnecessary for its corporate purpose.

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For certain construction projects, the MTA holds in a trust account marketable securities pledged by third-party contractors in lieu of cash retainages. At December 31, 2008 and 2007 these securities totaled $112.3 and $82.4, respectively, and had a market value of $120.9 and $89.7, respectively, and are not included in these financial statements.

7. LONG -TERM DEBT

Original December 31, December 31,Issuance 2007 Issued Retired Refunded 2008

MTA: Transportation Revenue Bonds 2.25%–5.752% due through 2036 12,501$ 10,434$ 1,550$ 872$ - $ 11,112$ Transportation Revenue Bond Anticipation Notes Commercial Paper 750 750 655 737 - 668 State Service Contract Bonds 3.00%–5.50% due through 2031 2,395 2,243 - 49 - 2,194 Dedicated Tax Fund Bonds 3.00%–6.25% due through 2037 4,572 4,272 701 1,337 - 3,636 Certificates of Participation 4.40%–5.625% due through 2030 807 422 - 11 - 411

21,025$ 18,121 2,906 3,006 - 18,021

Less net unamortized bond discount and premium (328) 31 50 - (347)

17,793 2,937 3,056 - 17,674

TBTA: General Revenue Bonds 4.00%–5.77% due through 2033 6,920$ 4,757 1,705 203 - 6,259 Subordinate Revenue Bonds 4.00%–5.77% due through 2032 2,858 2,272 491 715 - 2,048

9,778$ 7,029 2,196 918 - 8,307

Less net unamortized bond discount and premium 84 62 - 146

7,113 2,258 918 - 8,453

Total 24,906 5,195$ 3,974$ - 26,127

Current portion (391) (191)

Long-term portion 24,515$ 25,936$

MTA Transportation Revenue Bonds – Prior to 2008, MTAHQ issued twenty two series of Transportation Revenue Bonds secured under its General Resolution Authorizing Transportation Revenue Obligations adopted on March 26, 2002 in the aggregate principal amount of $11,670.3. The Transportation Revenue Bonds are MTAHQ’s special obligations payable solely from transit and commuter systems revenues and certain state and local operating subsidies.

During 2008, MTA issued three series of Transportation Revenue Bonds. On February 21, 2008, MTA issued the Transportation Revenue Bonds Series 2008A in the amount of $512.5 and the Series 2008B Bonds in the amount of $487.5. The combined proceeds of the Transportation Revenue 2008A and B Bonds were used to refund the following series of bonds: Dedicated Tax Fund Variable Rate Bonds Series 2007A1-5 with a combined par outstanding of $430, the Transportation Revenue Variable Rate Refunding Bonds Series 2002G-2 with a par of $127.8, and the Transportation Revenue Bonds Series 2004A1-4 with a combined par outstanding of $472.2. The Dedicated Tax Fund Bonds Series 2007A1-5 were issued as insured auction rate securities and the market for such

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bonds had ceased to operate efficiently. The Transportation Revenue Variable Rate Refunding Bonds Series 2002G-2 were refunded due to rating downgrades of the insurer, Ambac Assurance Corporation. The Transportation Revenue Bonds Series 2004A1-4 were refunded due to rating downgrades of the insurers, CDC IXIS Financial Guaranty North America Inc. (CIFG NA) and XL Capital Assurance Inc.

On October 9, 2008, MTA completed a conversion and remarketing of the Transportation Revenue Variable Rate Refunding Bonds, Series 2002G-1. The 2002G-1 Bonds totaling $200 are supported by an irrevocable direct-pay letter of credit from the Bank of Nova Scotia. Bond insurance and standby bond purchase agreement previously provided by Ambac Assurance Corporation and the Bank of Nova Scotia, respectively, for the 2002G-1 Bonds were terminated. On October 17, 2008, MTA issued the Transportation Revenue Bonds Series 2008C in the amount of $550. $428.8 of Series 2008C proceeds was used to finance existing approved capital projects of the subway, bus and commuter rail systems of the MTA Group. On December 12, 2008, $101.9 of Series 2008C proceeds was applied to redeem in full outstanding MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002C, which was originally issued to finance transit and commuter projects, due to rating downgrades of the insurer, Ambac Assurance Corporation. MTA completed a conversion and remarketing of the Transportation Revenue Variable Rate Bonds Series 2005D1-4. The 2005D-1 Bonds totaling $90, and the 2005D-2 Bonds totaling $60 were combined to create the 2005D-1 Bonds in the amount of $150; this conversion was effected on November 7, 2008 with credit and liquidity support in the form of an irrevocable direct-pay letter of credit from Helaba Bank. The 2005D-3 Bonds totaling $60 and the 2005D-4 Bonds totaling $40 were combined to create the 2005D-2 Bonds in the amount of $100; this conversion was effected on November 11, 2008 with liquidity support in the form of an irrevocable direct-pay letter of credit from Helaba Bank. Bond insurance previously provided by CIFG NA for the 2005D-1 and 2 Bonds was terminated. Bond insurance previously provided by FSA, Inc. for the 2005D-3 and 4 Bonds was terminated. MTA Bond Anticipation Notes (commercial paper program) – From time to time, MTA issues Transportation Revenue Bond Anticipation Notes in accordance with the terms and provisions of the General Resolution described in the preceding paragraph in the form of commercial paper to fund its transit and commuter capital needs. The interest rate payable on the notes depends on the maturity and market conditions at the time of issuance. Payment of principal and interest on the notes are additionally secured by a letter of credit issued by ABN AMRO Bank N.V. The MTA Act requires MTAHQ to periodically (at least each five years) refund its commercial paper notes with bonds. MTA State Service Contract Bonds – Prior to 2008, MTA issued two series of State Service Contract Bonds secured under its State Service Contract Obligation Resolution adopted on March 26, 2002, in the aggregate principal amount of $2,395. The State Service Contract Bonds are MTAHQ’s special obligations payable solely from certain payments from the State of New York under a service contract. MTA Dedicated Tax Fund Bonds – Prior to 2008, MTA issued eleven series of Dedicated Tax Fund Bonds secured under its Dedicated Tax Fund Obligation Resolution adopted on March 26, 2002, in the aggregate principal amount of $4,931. The Dedicated Tax Fund Bonds are MTA’s special obligations payable solely from monies held in the Pledged Amounts Account of the MTA Dedicated Tax Fund. State law requires that the MTTF revenues and MMTOA revenues (described

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above in footnote 2 under “Nonoperating Revenues”) be deposited, subject to appropriation by the State Legislature, into the MTA Dedicated Tax Fund. During 2008, the MTAHQ issued two series of Dedicated Tax Fund Bonds. On June 25, MTAHQ issued the Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A in the amount of $352.9 to refund the Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2005A. The refunding was precipitated by rating downgrades of the insurer on the 2005A bonds, XL Capital Assurance, Inc. The 2008A Bonds are insured by Financial Security Assurance, Inc.

On August 7, MTA issued the Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008B in the amount of $348.2. The refunded bonds included the $100 Dedicated Tax Fund Bonds Series 2004B-3, the $100 Dedicated Tax Fund Bonds Series 2004B-5, and the $145 Dedicated Tax Fund Bonds Series 2004D-1. The refunding was precipitated by rating downgrades of the following insurers: Financial Guaranty Insurance Company (“FGIC”), CDC IXIS Financial Guaranty North America, Inc. (CIFG NA), and Ambac Assurance Corporation, which insured Series 2004B-3, 2004B-5 and 2004D-1, respectively.

MTA Certificates of Participation – Prior to 2008, MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), MTA New York City Transit and MTA Bridges and Tunnels executed and delivered three series of Certificates of Participation in the aggregate principal amount of $807.3 to finance certain building and leasehold improvements to an office building at Two Broadway in Manhattan occupied principally by MTA New York City Transit, MTA Bridges and Tunnels, MTA Capital Construction, and MTAHQ. The aggregate principal amount of $807.3 includes approximately $357.9 of refunding bonds. The Certificates of Participation represent proportionate interests in the principal and interest components of Base Rent paid severally, but not jointly, in their respective proportionate shares by MTA New York City Transit, MTA, and MTA Bridges and Tunnels, pursuant to a Leasehold Improvement Sublease Agreement.

MTA Bridges and Tunnels General Revenue Bonds – Prior to 2008, MTA Bridges and Tunnels issued twelve series of General Revenue Bonds secured under its General Resolution Authorizing General Revenue Obligations adopted on March 26, 2002, in the aggregate principal amount of $5,820.4. The General Revenue Bonds are MTA Bridges and Tunnels’ general obligations payable generally from the net revenues collected on the bridges and tunnels operated by MTA Bridges and Tunnels.

During 2008, MTA Bridges and Tunnels issued three series of General Revenue Bonds to finance bridge and tunnel projects and to refund outstanding indebtedness. Series 2008A in the amount of $822.8 and Series 2008B in the amount of $252.2 were issued on March 27, 2008. Proceeds of these two series of bonds were used to finance existing approved MTA Bridges and Tunnels, transit, and commuter railroad projects as well as to refinance $72.1 of the Transportation Revenue Variable Rate Bonds, Series 2002G-2, $23 and $112 of the Dedicated Tax Fund Bonds Series 2004D-1 and 2004D-2, respectively, and $100 and $75 of the MTA Bridges and Tunnels Subordinate Revenue Variable Rate, Subseries 2004A-1 and 2004A-2, respectively. MTA Bridges and Tunnels General Revenue Bonds Series 2008C in the amount of $629.9 was issued on July 30, 2008. The proceeds of this issue were used to finance transit and commuter railroad projects.

On October 1, 2008, MTA Bridges & Tunnels completed a conversion and remarketing of the Series 2001B and C Bonds. The 2001B bonds totaling $145.8 are supported by an irrevocable, direct-pay letter of credit from State Street Bank and Trust Company. The 2001C bonds totaling $145.8 are supported by an irrevocable, direct pay letter of credit from Bayerische Landesbank (NY Branch). Bond insurance previously provided by Ambac Assurance Corporation for the 2001B and C Bonds

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was terminated. MTA also terminated the State Street Bank and Trust Company Standby Bond Purchase Agreement related to Series 2001B and the Bayerische Landesbank Standby Bond Purchase Agreement related to Series 2001C. MTA Bridges and Tunnels Subordinate Revenue Bonds – Prior to 2008, MTA Bridges and Tunnels issued nine series of Subordinate Revenue Bonds secured under its 2001 Subordinate Revenue Resolution Authorizing Subordinate Revenue Obligations adopted on March 26, 2002, in the aggregate principal amount of $2,412. The Subordinate Revenue Bonds are MTA Bridges and Tunnels’ special obligations payable generally from the net revenues collected on the bridges and tunnels operated by MTA Bridges and Tunnels after the payment of debt service on the MTA Bridges and Tunnels General Revenue Bonds described in the preceding paragraph.

On July 30, 2008, MTA Bridges and Tunnels issued $491.1 of Subordinate Revenue Bonds, Series D. Its proceeds were used to refinance $255.8 of MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2002D, $181 of Subordinate Revenue Variable Rate Refunding Bonds, Series 2002G and $61.3 of Subordinate Revenue Variable Rate Refunding Bonds, Subseries 2004A-3.

Debt Limitation - The New York State Legislature has imposed limitations on the aggregate amount of debt that the MTA and MTA Bridges and Tunnels can issue to fund the approved transit and commuter capital programs. The current aggregate ceiling, subject to certain exclusions, is $28,877 compared with issuances totaling approximately $19,463 at December 31, 2008. The MTA expects that the current statutory ceiling will allow it to fulfill the bonding requirements of the 2000-2004 MTA Capital Program and the 2005-2009 MTA Capital program.

Bond Refundings - From time to time, the MTA and MTA Bridges and Tunnels issue refunding bonds to achieve debt service savings or other benefits. The proceeds of refunding bonds are generally used to purchase U.S. Treasury obligations that are placed in irrevocable trusts. The principal and interest within the trusts will be used to repay the refunded debt. The trust account assets and the refunded debt are excluded from the consolidated balance sheets.

In accordance with GASB Statement No. 23, Accounting and Financial Reporting for Refundings of Debt Reported by Proprietary Activities, gains or losses resulting from debt refundings have been deferred and will be amortized over the lesser of the remaining life of the old debt or the life of the new debt.

During 2008, MTA issued its Transportation Revenue Bonds, Series 2008A and Series 2008B in the aggregate principal amount of $1,000 to refund certain outstanding Transportation Revenue and Dedicated Tax Fund bonds; MTA issued its Transportation Revenue Bonds, Series 2008C in the aggregate principal amount of $550 to refund certain MTA Bridges and Tunnels General Revenue bonds; MTA issued its Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A in the aggregate principal amount of $353 to refund certain outstanding Dedicated Tax Fund bonds; and MTA issued its Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008B in the aggregate principal amount of $348 to refund certain outstanding Dedicated Tax Fund bonds.

Additionally, during 2008, MTA Bridges and Tunnels issued its General Revenue Bonds, Series 2008A and Series 2008B in the aggregate principal amount of $1,075 to refund certain outstanding MTA Transportation Revenue, MTA Dedicated Tax Fund bonds and MTA Bridges and Tunnels Subordinate Revenue bonds; MTA Bridges and Tunnels issued its General Revenue Bonds, Series 2008C and Subordinate Series 2008D in the aggregate principal amount of $1,121 to refund certain outstanding MTA Bridges and Tunnels Subordinate Revenue and MTA Transportation Revenue

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Bond Anticipation Notes.

During 2008, the MTA issued $2,679.85 of bonds to refund $2,702.17 of outstanding bonds. While the MTA in effect changed its aggregate debt service, the purpose of these refundings were to mitigate the credit and liquidity risks of bonds associated with the lowered ratings of municipal bond insurers on variable rate bonds, and thus economic gain or loss on these transactions were not a primary consideration.

At December 31, 2008 and December 31, 2007, the following amounts of MTA bonds, which have been refunded, remain valid debt instruments and are secured solely by and payable solely from their respective irrevocable trusts.

December 31, December 31,2008 2007

MTA Transit and Commuter Facilities: Transit Facilities Revenue Bonds 1,004$ 1,285$ Commuter Facilities Revenue Bonds 1,145 1,419 Commuter Facilities Subordinate Revenue Bonds 13 16 Transit and Commuter Facilities Service Contract Bonds 772 835 Dedicated Tax Fund Bonds 1,346 1,330 Excess Loss Trust Fund 7 13

MTA Transportation Revenue Bonds 156 -

MTA New York City Transit — Transit Facilities Revenue Bonds (Livingston Plaza Project) 102 113

MTA Bridges and Tunnels: General Purpose Revenue Bonds 2,079 2,135 Special Obligation Subordinate Bonds 208 219 Mortgage Recording Tax Bonds 201 207

Total 7,033$ 7,572$

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Debt Service Payments — Principal and interest debt service payments at December 31, 2008 are as follows:

Principal Interest Principal Interest Principal Interest Principal Interest

2009 218 817 48 295 38 105 304 1,217 2010 393 805 133 285 49 102 575 1,192 2011 394 787 140 278 51 100 585 1,165 2012 432 769 137 281 55 97 624 1,147 2013 717 1,086 144 274 57 94 918 1,454 2014–2018 2,490 3,327 895 1,187 357 418 3,742 4,932 2019–2023 3,585 2,624 1,122 952 433 318 5,140 3,894 2024–2028 4,491 1,714 1,350 693 435 202 6,276 2,609 2029–2033 3,700 654 1,663 14 573 58 5,936 726 2034–2038 933 90 627 94 - - 1,560 184 Thereafter - - - - - - - -

17,353$ 12,673$ 6,259$ 4,353$ 2,048$ 1,494$ 25,660$ 18,520$

MTA BRIDGES AND TUNNELSMTA Senior Revenue Subordinate Revenue Debt Service

The above interest amounts include both fixed- and variable-rate calculations. The interest rate assumptions for variable rate bonds are as follows: � Transportation Revenue Refunding Bonds, Series 2002B – 4.00% per annum � Transportation Revenue Refunding Bonds, Series 2002D – 4.00% per annum on Subseries

2002D-1 and 4.45% per annum on subseries 2002D-2 taking into account the interest rate swap � Transportation Revenue Refunding Bonds, Series 2002G – 4.00% per annum � Transportation Revenue Bonds, Series 2005D – 3.561% per annum taking into account the

interest rate swaps � Transportation Revenue Bonds, Series 2005E – 3.561% per annum taking into account the

interest rate swaps � Transportation Revenue Bonds, Series 2005G – 4.00% per annum � Transportation Revenue Bonds, Series 2008B – 4.00% per annum, after the mandatory tender

date � Dedicated Tax Fund Bonds, Series 2002B – 4.06% per annum until September 1, 2013 based on

the interest rate swap and 4.00% per annum thereafter � Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A – 3.3156% per annum on the

hedged portion related to the interest rate swaps, and 4.00% per annum on the unhedged portion � MTA Bridges and Tunnels Subordinate Refunding Bonds, Series 2000A B – 6.08% per annum

taking into account the interest rate swap � MTA Bridges and Tunnels Subordinate Refunding Bonds, Series 2000CD – 6.07% per annum

taking into account the interest rate swap � MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2001B and Series 2001C –

5.777% per annum taking into account the interest rate swap and 4.00% per annum on portions not covered by the interest rate swap

� MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2002C – 5.634% per annum taking into account the interest rate swap and 4.00% per annum on portions not covered by the interest rate swap

� MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2002F – 4.00% per annum � MTA Bridges and Tunnels General Revenue Bonds, Series 2003B – 4.00% per annum

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� MTA Bridges and Tunnels General Revenue Bonds, Series 2005A – 4.00% per annum � MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2005B – 3.513% per annum

based on the Basis Risk Interest Rate Swap through January 1, 2012 and 3.076% per annum based on the Initial Interest Rate Swaps thereafter.

� MTA Bridges and Tunnels General Revenue Bonds, Series 2008B – 4.00% per annum, after the mandatory tender date

� Certificates of Participation, Series 2004A – 3.542% per annum taking into account the interest rate swaps

� Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008B - 4% per annum.

Tax Rebate Liability - Under the Internal Revenue Code of 1986, the MTA accrues a liability for an amount of rebateable arbitrage resulting from investing low-yielding, tax-exempt bond proceeds in higher-yielding, taxable securities. The arbitrage liability is payable to the federal government every five years and is reported as part of other long-term liabilities. MTA made an arbitrage payment of $1.9 in 2007. No payment was incurred in 2008.

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MTA and MTA Bridges and Tunnels have entered into several Standby Bond Purchase Agreements (SBPA) and Letter of Credit Agreements (LOC) as listed on the table below:

Resolution Series Swap Provider (Insurer)

Type of

Facility Exp. Date Transportation Revenue 2002D-1 N West LB (FSA) SBPA 5/9/2012 Transportation Revenue 2002D-2 Y Dexia (FSA) SBPA 5/27/2011

Transportation Revenue 2002G-1 N Bank of Nova Scotia (Ambac) LOC 10/7/2011

Transportation Revenue 2005D-1 Y Helaba LOC 11/7/2011 Transportation Revenue 2005D-2 Y Helaba LOC 11/10/2010 Transportation Revenue 2005E Y Fortis LOC 10/9/2012 Transportation Revenue 2005G N BNP Paribas LOC 12/8/2010

Transportation Revenue Commercial Paper N ABN AMRO LOC 12/8/2010

Dedicated Tax Fund 2002B Y Dexia (FSA) SBPA 5/7/2014 Dedicated Tax Fund 2008A Y Dexia (FSA) SBPA 6/25/2011 Dedicated Tax Fund 2008B-1 N Bank of Nova Scotia LOC 8/5/2011 Dedicated Tax Fund 2008B-2 N BNP Paribas (NY Branch) LOC 8/5/2011

Dedicated Tax Fund 2008B-3 N Lloyds TSB Bank plc (NY Branch) LOC 8/5/2011

Dedicated Tax Fund 2008B-4 N KBC Bank N.V. LOC 8/5/2011 MTA Bridges and Tunnels Subordinate 2000AB Y JPMorgan (FSA) SBPA 10/7/2014

MTA Bridges and Tunnels Subordinate 2000CD Y Lloyds TSB Bank (NY)

(FSA) SBPA 10/7/2014

MTA Bridges and Tunnels General Revenue 2001B Y State Street (Ambac) LOC 9/30/2011

MTA Bridges and Tunnels General Revenue 2001C Y Bayerische LB (Ambac) LOC 9/30/2010

MTA Bridges and Tunnels General Revenue 2002F Y ABN AMRO SBPA 11/8/2012

MTA Bridges and Tunnels General Revenue 2003B N Dexia SBPA 7/7/2012

MTA Bridges and Tunnels General Revenue 2005A N Dexia SBPA 5/9/2012

MTA Bridges and Tunnels General Revenue 2005B-1 Y Depfa Bank SBPA 7/7/2015

MTA Bridges and Tunnels General Revenue 2005B-2 Y Dexia SBPA 7/6/2012

MTA Bridges and Tunnels General Revenue 2005B-3 Y Bank of America SBPA 7/6/2012

MTA Bridges and Tunnels General Revenue 2005B-4 Y Landesbank Baden-

Wurttemberg (NY) SBPA 12/29/2015

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Swap Agreements Relating to Synthetic Fixed Rate Debt

Board-adopted Guidelines. The Related Entities adopted guidelines governing the use of swap contracts to manage the interest rate exposure of their debt. The Guidelines establish specific requirements that must be satisfied for a Related Entity to enter into a swap contract, such as suggested swap terms and objectives, credit ratings of the counterparties, collateralization requirements and reporting requirements.

Objectives of the Swaps. In order to protect against the potential of rising interest rates, to achieve a lower net

cost of borrowing, to reduce exposure to changing interest rates on a related bond issue, or, in some cases where Federal tax law prohibits an advance refunding, to achieve debt service savings through a synthetic fixed rate, MTA, MTA Bridges and Tunnels and MTA New York City Transit have entered into separate pay-fixed, receive-variable interest rate swaps at a cost anticipated to be less than what MTA, MTA Bridges and Tunnels and MTA New York City Transit would have paid to issue fixed-rate debt.

Fair Value. Relevant market interest rates on the valuation date (December 31, 2008) of the swaps reflected in the following charts in all cases were higher than market interest rates on the effective date of the swaps. Consequently, as of the valuation date, all of the swaps had negative fair values. A negative fair value means that MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would have to pay the counterparty that approximate amount to terminate the swap. In the event there is a positive fair value, MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would be entitled to receive a payment from the counterparty to terminate the swap; consequently, MTA, MTA Bridges and Tunnels and/or MTA New York City Transit would be exposed to the credit risk of the counterparties in the amount of the swaps’ fair value should the swap be terminated.

The fair values listed in the following tables represent the theoretical cost to terminate the swap as of the date indicated, assuming that a termination event occurred on that date. The fair values were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bond due on the date of each future net settlement on the swap. See “Termination Risk” below.

Terms and Fair Values. The terms, fair values and counterparties of the outstanding swaps of MTA and MTA

Bridges and Tunnels, as well as the swaps entered into in connection with the 2 Broadway Certificates of Participation refunding, are reflected in the following tables. The MTA swaps are reflected in separate tables for the Transportation Revenue Bonds and Dedicated Tax Fund Bonds. The MTA Bridges and Tunnels swaps are reflected in separate tables for the senior lien and subordinate revenue bonds.

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) On

June

25,

200

8, th

e Co

nfirm

atio

n da

ted

as o

f Mar

ch 8

, 200

5 be

twee

n th

e C

ount

erpa

rty a

nd M

TA w

as a

men

ded

to d

efin

e R

elat

ed B

onds

as

MTA

Ded

icat

ed T

ax F

und

Var

iabl

e R

ate

Ref

undi

ng B

onds

, Se

ries

2008

A.

On

June

26,

200

8, M

TA D

edic

ated

Tax

Fun

d V

aria

ble

Rat

e R

efun

ding

B

onds

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ries

2005

A

asso

ciat

ed

with

th

e sw

ap

prio

r to

th

e am

endm

ent

desc

ribed

ab

ove,

w

ere

refu

nded

.

B-73

MT

A B

RID

GE

S A

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IEN

RE

VE

NU

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ON

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iate

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ond

Issu

e

N

otio

nal

Am

ount

s as

of

12/3

1/08

(in

mill

ions

)

Ef

fect

ive

Dat

e

Fi

xed

Rat

e Pa

id

V

aria

ble

Rat

e R

ecei

ved

Fa

ir V

alue

s as

of

12

/31/

08

(in m

illio

ns)

Sw

ap

Term

inat

ion

Dat

e

C

ount

erpa

rty

Serie

s 200

1B a

nd

2001

C(4

) $1

77.9

00

01/0

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5.

777%

A

ctua

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te

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8.07

2)

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oup

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ncia

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ts In

c.

Serie

s 200

2F(5

) (6)

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01

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00

5.63

4 A

ctua

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d ra

te

(9.0

34)

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mba

c Fi

nanc

ial

Serv

ices

, L.P

. Se

ries 2

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4.40

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3.07

6 67

% o

f one

-mon

th

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OR

(160

.405

) 01

/01/

32

25%

eac

h –

Citi

bank

, N

.A.,

JPM

orga

n C

hase

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ank,

BN

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ribas

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orth

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eric

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c. a

nd

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G

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400

07/0

7/05

67

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f one

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onth

LIB

OR

pl

us 4

3.7

basi

s po

ints

(7)

SIFM

A m

inus

10

basi

s poi

nts

(1.7

32)

01/0

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U

BS

AG

Tota

l $1

,843

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$ (

209.

243)

(4) I

n ac

cord

ance

with

a sw

aptio

n en

tere

d in

to o

n Fe

brua

ry 2

4, 1

999

with

the

Cou

nter

party

pay

ing

to M

TA B

ridge

s and

Tun

nels

a p

rem

ium

of

$19.

2.

(5) I

n ac

cord

ance

with

a sw

aptio

n en

tere

d in

to o

n Fe

brua

ry 2

4, 1

999

with

the

Cou

nter

party

pay

ing

to M

TA B

ridge

s and

Tun

nels

a p

rem

ium

of

$8.4

.

(6) O

n D

ecem

ber 3

, 200

8, th

e C

onfir

mat

ion,

dat

ed a

s of

Feb

ruar

y 24

, 199

9, a

nd a

s am

ende

d on

Oct

ober

8, 2

002,

bet

wee

n th

e C

ount

erpa

rty a

nd

MTA

Brid

ges

and

Tunn

els

was

am

ende

d to

def

ine

Bond

s, af

ter

Dec

embe

r 4,

200

8, a

s M

TA B

ridge

s an

d Tu

nnel

s G

ener

al R

even

ue V

aria

ble

Rat

e R

efun

ding

Bon

ds S

erie

s 20

02F.

O

n D

ecem

ber

12, 2

008,

MTA

Brid

ges

and

Tunn

els

Gen

eral

Rev

enue

Var

iabl

e R

ate

Ref

undi

ng B

onds

Se

ries 2

002C

ass

ocia

ted

with

the

swap

prio

r to

the

amen

dmen

t des

crib

ed a

bove

, wer

e re

fund

ed.

(7)

For

the

purp

ose

of m

itiga

ting

the

basi

s ris

k du

ring

the

escr

ow p

erio

d w

ith r

espe

ct t

o th

e $7

97.2

not

iona

l am

ount

sw

aps

ente

red

into

in

conn

ectio

n w

ith th

e Se

ries

2005

B B

onds

, MTA

Brid

ges

and

Tunn

els

will

pay

67%

of o

ne-m

onth

LIB

OR

plu

s 43

.7 b

asis

poi

nts

to th

e U

BS

AG

an

d re

ceiv

e a

varia

ble

rate

equ

al to

the

SIFM

A In

dex

min

us 1

0 ba

sis p

oint

s.

B-74

M

TA

BR

IDG

ES

AN

D T

UN

NE

LS

SUB

OR

DIN

AT

E R

EV

EN

UE

BO

ND

S

Ass

ocia

ted

Bon

d Is

sue

N

otio

nal

Am

ount

s as

of

12/3

1/20

08

(in m

illio

ns)

Ef

fect

ive

Dat

e

Fi

xed

Rat

e Pa

id

V

aria

ble

Rat

e R

ecei

ved

Fa

ir V

alue

s as

of

12/3

1/20

08

(in

mill

ions

)

Sw

ap

Term

inat

ion

Dat

e

C

ount

erpa

rty

Serie

s 200

0AB

(8)

$188

.600

01

/01/

01

6.08

%

Act

ual b

ond

rate

$

(39.

595)

01

/01/

19

Bea

r Ste

arns

Cap

ital

Mar

kets

Inc.

Se

ries 2

000C

D(8

) 18

8.60

0 01

/01/

01

6.07

S

IFM

A m

inus

15

basi

s poi

nts (9

)

(41.

026)

01

/01/

19

Citi

grou

p Fi

nanc

ial

Prod

ucts

Inc.

To

tal

$37

7.20

0

$ (8

0.62

1)

(8

) In

acco

rdan

ce w

ith a

swap

tion

ente

red

into

on

Aug

ust 1

2, 1

998

with

eac

h C

ount

erpa

rty p

ayin

g to

MTA

Brid

ges a

nd T

unne

ls a

pre

miu

m o

f $22

.74.

(9

) In

acc

orda

nce

with

the

swap

tion

ente

red

into

on

Aug

ust 1

2, 1

998,

Citi

grou

p Fi

nanc

ial d

ecla

red

that

an

Alte

rnat

ive

Floa

ting

Rat

e Ev

ent o

ccur

red

on

Nov

embe

r 5, 2

008

and

as a

resu

lt, th

e ca

lcul

atio

n fo

r the

Var

iabl

e R

ate

MTA

Brid

ges

and

Tunn

els

is to

rece

ive

was

cha

nged

from

the

Act

ual B

ond

Rat

e to

SI

FMA

Mun

icip

al S

wap

Inde

x m

inus

15

basi

s poi

nts.

The

Alte

rnat

e Fl

oatin

g R

ate

Even

t was

trig

gere

d du

e to

the

purc

hase

with

out r

esal

e of

Ser

ies 2

000C

D

bond

s by

the

liqui

dity

pro

vide

r, Ll

oyds

TSB

.

B-75

2 Broadway Certificates of Participation Swaps In addition to the foregoing, MTA, MTA New York City Transit and MTA Bridges and Tunnels entered into

separate ISDA Master Agreements with UBS AG relating to the $357.925 Variable Rate Certificates of Participation, Series 2004A (Auction Rate Securities) in connection with the refunding of certain certificates of participation originally executed to fund certain improvements to the office building located at 2 Broadway in Manhattan. The 2 Broadway swaps have (1) an effective date of September 22, 2004, (2) a fixed rate paid of 3.092%, (3) a variable rate received of the lesser of (a) the actual bond rate, or (b) 67% of one-month LIBOR minus 45 basis points, and (4) a termination date of January 1, 2030. Based on the aggregate notional amount of $355.525 outstanding as of December 31, 2008, MTA New York City Transit is responsible for $244.250 aggregate notional amount of the swaps, MTAHQ for $74.650 aggregate notional amount, and MTA Bridges and Tunnels for $36.625 aggregate notional amount. As of December 31, 2008, the aggregate fair value of the swaps was ($70.100). Counterparty Ratings

The ratings of the counterparties are as follows as of December 31, 2008:

Counterparty


S&P Moody’s Fitch AIG Financial Products Corp. A- A3 A Ambac Financial Services, L.P. A Baa1 NR Bear Stearns Capital Markets Inc. A+ Aa2 AA- BNP Paribas North America, Inc. AA+ Aa1 AA Citibank, N.A. A+ Aa3 A+ Citigroup Financial Products Inc. A A2 A+ JPMorgan Chase Bank A+ Aa2 AA- Lehman Brothers Special Financing Inc. NR Ca NR Morgan Stanley Capital Services Inc. A A2 A UBS AG A+ Aa2 A+

Except as set forth below, the notional amounts of the swaps match the principal amounts of the associated bonds.

The following table sets forth the notional amount and the outstanding principal amount as of December 31, 2008 for the swap where the notional amount does not match the outstanding principal amount of the associated bonds.


Principal Amount of

Bonds (in millions)

Notional Amount

(in millions)


$291.520 $177.900


$235.155 $77.100

MTA Dedicated Tax Fund Variable Rate Refunding Bonds, Series 2008A

$351.357 $343.520

Except as discussed below under the heading “Rollover Risk,” the swap agreements contain scheduled reductions to

outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the principal amount of the associated bonds.

B-76

Risks Associated with the Swap Agreements

From MTA’s, MTA Bridges and Tunnels’ and MTA New York City Transit’s perspective, the following risks are generally associated with swap agreements:

� Credit Risk – The counterparty becomes insolvent or is otherwise unable to perform its financial obligations. In the event of a deterioration in the credit ratings of the counterparty or MTAHQ/MTA Bridges and Tunnels/MTA New York City Transit, the swap agreement may require that collateral be posted to secure the party’s obligations under the swap agreement. See “Collateralization” below. Further, ratings deterioration by either party below levels agreed to in each transaction could result in a termination event requiring a cash settlement of the future value of the transaction. See “Termination Risk” below.

� Basis Risk – The variable interest rate paid by the counterparty under the swap and the variable interest rate

paid by MTAHQ, MTA Bridges and Tunnels or MTA New York City Transit on the associated bonds may not be the same. If the counterparty’s rate under the swap is lower than the bond interest rate, then the counterparty’s payment under the swap agreement does not fully reimburse MTAHQ, MTA Bridges and Tunnels or MTA New York City Transit for its interest payment on the associated bonds. Conversely, if the bond interest rate is lower than the counterparty’s rate on the swap, there is a net benefit to MTAHQ, MTA Bridges and Tunnels or MTA New York City Transit.

� Termination Risk – The swap agreement could be terminated and MTAHQ, MTA Bridges and Tunnels or

MTA New York City Transit could be required to make a termination payment to the counterparty and, in the case of a swap agreement which was entered into for the purpose of creating a synthetic fixed rate for an advance refunding transaction may also be required to take action to protect the tax exempt status of the related refunding bonds.

� Rollover Risk – The notional amount under the swap agreement terminates prior to the final maturity of the

associated bonds on a variable rate bond issuance, and MTAHQ, MTA Bridges and Tunnels or MTA New York City Transit may be exposed to then market rates and cease to receive the benefit of the synthetic fixed rate for the duration of the bond issue.

Credit Risk. The following table shows, as of December 31, 2008, the diversification, by percentage of notional

amount, among the various counterparties that have entered into ISDA Master Agreements with MTAHQ and/or MTA Bridges and Tunnels, or in connection with the 2 Broadway Certificates of Participation refunding. The counterparties have the ratings set forth above.


(in thousands)


UBS AG $1,648,525 36.05% Bear Stearns Capital Markets Inc. 748,050 16.36 Citigroup Financial Products Inc. 710,020 15.53 Morgan Stanley Capital Services Inc. 440,000 9.62 Lehman Brothers Special Financing Inc. 253,700 5.55 JPMorgan Chase Bank 198,600 4.34 BNP Paribas North America, Inc. 198,600 4.34 Citibank, N.A. 198,600 4.34 AIG Financial Products Corp. 100,000 2.19 Ambac Financial Services, L.P. 77,100 1.69

Total $4,573,195 100.00%

B-77


� Bear Stearns Capital Markets Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB,

� Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD,

� Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C,

� Ambac Financial Services, L.P. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002F (currently only one transaction outstanding under that Master Agreement),

� Bear Stearns Capital Markets Inc. with respect to the MTA Transportation Revenue Variable Rate Refunding Bonds, Series 2002D-2 and Series 2012,

� Lehman Brothers Special Financing Inc. with respect to the MTA Transportation Revenue Variable Rate Refunding Bonds, Series 2005E and Series 2012.

Under the terms of these agreements, should one party become insolvent or otherwise default on its obligations,

close-out netting provisions permit the nondefaulting party to accelerate and terminate all outstanding transactions and net the transactions’ fair values so that a single sum will be owed by, or owed to, the nondefaulting party.

On September 15, 2008, Lehman Brothers Holdings, Inc. (“LBHI”) filed a petition under Chapter 11 of the U.S.

Bankruptcy Code. As a consequence LBHI was downgraded in September 2008 to B3/D/D by Moody’s, Standard & Poor’s and Fitch respectively. Standard & Poor’s and Fitch subsequently withdrew their ratings on September 25th and October 27, 2008, respectively. A subsidiary, Lehman Brothers Special Financing Inc (“LBSFI”) which operated with a credit guarantee from LBHI consequently was similarly downgraded and filed for bankruptcy on October 3, 2008.

As an active participant in the capital markets, MTA, has business relationships with LBHI and its

subsidiaries. Among those relationships, LBSFI, is the counterparty (with an LBHI guarantee) on two interest rate swaps associated with MTA Transportation Revenue Bonds Series 2005E and Series 2012 (forward starting swap). The combined notional amount of the interest rate swaps is $253.7. In addition, MTA New York City Transit, MTA (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad), and MTA Bridges and Tunnels, are party to a forward purchase agreement for a debt service reserve fund investment related to the 2 Broadway Certificates of Participation transaction. MTA retains ownership of the security for this investment and is evaluating its options with respect to the bankruptcy filing by LBHI.

At December 31, 2008, the two interest rate swaps to which LBSFI was a counterparty had a combined recorded

fair market value of negative $61.808, which represented a theoretical payment that would be owed by MTA to LBSFI if the agreements were terminated on that date. As a result of the bankruptcy filing of LBHI, on September 19, 2008, MTA advised LBSFI that an event of default now exists in respect to the two interest rate swaps. As a result of the event of default, all cashflows arising out of these transactions have ceased and MTA is proceeding with a formal market quotation process as provided for in the ISDA Master Agreement with LBSFI to replace LBSFI. The market quotation process involves soliciting bids from interested parties to assume the obligations of LBSFI in the transactions. MTA has not recorded any change in its accounting treatment of the transactions and pending a successful resolution of the market quotation process, does not expect to be required to make any such change in the future.

The fair market value of MTA's interest rate swaps changes daily primarily as a result of capital markets changes.

MTA's swaps with LBSFI use the one month London Interbank Offered Rate (LIBOR) as the variable rate received. Factors that influence LIBOR are local interest rates, banks expectations of future rate movements, liquidity in the capital markets or changes in the value of the dollar. The relative financial health of MTA's counterparties, in this case LBSFI are important in the transaction, but do not directly impact the fair market value of the transaction.

In addition to the interest rate swaps described above, MTA, through its Transportation Revenue Bond Resolution,

has an existing interest rate swap with AIG Financial Products Corp. (“AIG FPC”). The notional amount of the

B-78

transaction is $100 with an approximate fair market value on December 31, 2008 of negative $26.438. This value represents the amount owed by MTA if the transaction were to be terminated.

The ratings of AIG FPC, which is guaranteed by corporate parent American International Group, Inc. (“AIG”) were changed on September 15, 2008 as follows: downgraded by Moody's from Aa3 to A2; downgraded by Standard & Poor's from AA- to A-; downgraded from Fitch from AA- to A. Subsequently, on October 3, 2008 Moody’s further downgraded AIG FPC to A3. Although AIG FPC was recently downgraded, no event of default currently exists with respect to this transaction.

Collateralization. Generally, the Credit Support Annex attached to the ISDA Master Agreement requires that if the outstanding ratings of MTA, MTA Bridges and Tunnels or MTA New York City Transit, as the case may be, or the counterparty falls to a certain level, the party whose rating falls is required to post collateral with a third-party custodian to secure its termination payments above certain threshold amounts. Collateral must be cash or U.S. government or certain Federal agency securities.

The following tables set forth the ratings criteria and threshold amounts relating to the posting of collateral set forth

for MTA, MTA Bridges and Tunnels or MTA New York City Transit, as the case may be, and the counterparty for each swap agreement. In most cases, the Counterparty does not have a Fitch rating on its long-term unsecured debt, so that criteria would not be applicable in determining if the Counterparty is required to post collateral.

MTA Transportation Revenue Bonds


If the highest rating of the related MTA bonds or the counterparty’s long-term



if its estimated termination payments are

in excess of Series 2002D-2 Fitch – BBB+,

Moody’s – Baa1, or S&P – BBB+

$10,000,000


$0

Series 2005D and Series 2005E Fitch – BBB+, Moody’s – Baa1, or S&P – BBB+

$10,000,000

Fitch – below BBB+, Moody’s – below Baa1, or S&P – below BBB+

$0

Series 2012 Fitch – BBB+, Moody’s – Baa1, or S&P – BBB+

$10,000,000


$0

B-79

MTA Dedicated Tax Fund Bonds


If the highest rating of the related MTA bonds or

the counterparty’s long-term unsecured debt falls to


if its estimated termination payments are in excess of

Series 2002B Fitch – BBB+, or S&P – BBB+

$10,000,000

Fitch – BBB and below or unrated, or S&P – BBB and below or unrated

$0

Series 2008A [Note: for this swap, MTA is not required to post collateral under any circumstances.]

Fitch – A-, or Moody’s – A3, or S&P – A-

$10,000,000

Fitch – BBB+ and below, or Moody’s – Baa1 and below, or S&P – BBB+ and below

$0


Associated Agencies






$25,000,000


$0



Then the Counterparty must post collateral if its

estimated termination payments

are in excess of Moody’s – Baa1 or lower, or

S&P – BBB+ or lower $0

B-80












$10,000,000 $30,000,000 $15,000,000


$0 $0










Notwithstanding the foregoing, in the event any downgraded party is responsible for an event of default or potential

event of default as defined in the ISDA Master Agreement, the downgraded party must immediately collateralize its obligations irrespective of the threshold amounts.

B-81

Under each MTA and MTA Bridges and Tunnels bond resolution, the payments relating to debt service on the swaps are parity obligations with the associated bonds, as well as all other bonds issued under that bond resolution, but all other payments, including the termination payments, are subordinate to the payment of debt service on the swap and all bonds issued under that bond resolution. In addition, MTA and MTA Bridges and Tunnels have structured each of the swaps (other than the 2 Broadway swaps) in a manner that will permit MTA or MTA Bridges and Tunnels to bond the termination payments under any available bond resolution.

The payments relating to debt service on the 2 Broadway swaps are parity obligations with respect to the sublease

payments under the 2 Broadway Certificates of Participation, payable solely from available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds. All other payments, including the termination payments, are payable from substantially the same pool of available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds.

The ISDA Master Agreement sets forth certain termination events applicable to all swaps entered into by the parties

to that ISDA Master Agreement. MTA, MTA Bridges and Tunnels and MTA New York City Transit have entered into separate ISDA Master Agreements with each counterparty that governs the terms of each swap with that counterparty, subject to individual terms negotiated in a confirmation.

The following table sets forth, for each swap, the additional termination events for the following associated bond

issues. In certain swaps, where the counterparty has a guarantor of its obligations, the ratings criteria applies to the guarantor and not to the counterparty.

MTA Transportation Revenue and Dedicated Tax Fund Bonds



Transportation Revenue Bonds Series 2002D-2, Series 2005D and Series 2005E

The ratings by S&P and Moody’s of the Counterparty or the MTA Transportation Revenue Bonds falls below “BBB-” and “Baa3,” respectively, or are withdrawn.

Series 2012 The ratings by S&P and Moody’s of the Counterparty or the MTA Transportation Revenue Bonds falls below “BBB-” and “Baa3,” respectively, or are withdrawn.

Dedicated Tax Fund Bonds Series 2002B The ratings by S&P and Fitch of the Counterparty or the MTA

Dedicated Tax Fund Bonds falls below “BBB-” or are withdrawn.

Series 2008A Bonds The ratings by S&P or Moody’s of the Counterparty fall below “BBB+” or “Baa1,” respectively, or the ratings of S&P or Fitch with respect to the MTA Dedicated Tax Fund Bonds falls below “BBB” or, in either case the ratings are withdrawn.


Counterparty






Senior Lien Revenue Bonds Series 2001B and 2001C and Series 1. MTA Bridges and Tunnels can elect to terminate the swap relating to

B-82

2002F that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Ambac Assurance Corporation.



Subordinate Revenue Bonds

Series 2000AB and 2000CD 1. MTA Bridges and Tunnels can elect to terminate the swap relating to that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Financial Security Assurance Inc.

Rollover Risk. MTA and MTA Bridges and Tunnels are exposed to rollover risk on swaps that mature or may be

terminated prior to the maturity of the associated debt. When these swaps terminate, MTA or MTA Bridges and Tunnels may not realize the synthetic fixed rate offered by the swaps on the underlying debt issues. The following debt is exposed to rollover risk:


Bond Maturity

Date

Swap Termination

Date MTA Dedicated Tax Fund Variable Rate Bonds, Series 2002B 11/01/22 09/01/13 MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C

01/01/32 01/01/19


11/01/32 01/01/13

Swap payments and Associated Debt. The following tables contain the aggregate amount of estimated variable-

rate bond debt service and net swap payments during certain years that such swaps were entered into in order to: protect against the potential of rising interest rates; achieve a lower net cost of borrowing; reduce exposure to changing interest rates on a related bond issue; or, in some cases where Federal tax law prohibits an advance refunding, achieve debt service savings through a synthetic fixed rate. As rates vary, variable-rate bond interest payments and net swap payments will also vary. Using the following assumptions, debt service requirements of MTA’s and MTA Bridges and Tunnel’s outstanding variable-rate debt and net swap payments are estimated to be as follows:

� It is assumed that the variable-rate bonds would bear interest at a rate of 4.0% per annum. � The net swap payments were calculated using the actual fixed interest rate on the swap agreements.

B-83

MTA (in millions)

Variable-Rate Bonds Year Ending December 31

Principal

Interest

Net Swap Payments

Total

2008 $ 1.5 $ 59.7 $ (3.4) $ 57.9 2009 1.8 59.6 (3.4) 58.1 2010 1.9 59.6 (3.4) 58.1 2011 2.0 59.5 (3.4) 58.1 2012 2.0 59.4 (3.3) 58.1

2013-2017 210.2 284.1 (17.6) 476.7 2018-2022 436.7 219.8 (15.5) 641.1 2023-2027 257.4 145.8 (9.5) 393.7 2028-2032 475.1 82.4 (2.6) 554.9 2033-2036 104.3 7.8 - 112.1

MTA Bridges and Tunnels (in millions)

Variable-Rate Bonds Year Ending December 31

Principal

Interest

Net Swap Payments

Total

2008 $ 38.5 $ 68.1 $ 4.9 111.5 2009 40.9 66.5 4.4 111.8 2010 43.0 64.8 3.5 111.3 2011 45.8 63.0 2.6 111.3 2012 48.0 61.1 1.7 110.7

2013-2017 290.2 272.1 (14.5) 547.7 2018-2022 196.0 220.0 (34.2) 381.8 2023-2027 188.8 185.0 (32.4) 341.4 2028-2032 845.6 83.9 (15.8) 913.7

8. LEASE TRANSACTIONS

Leveraged Lease Transactions: Subway Cars — During 1995, MTA Bridges and Tunnels entered into a sale/leaseback transaction with a third party whereby MTA Bridges and Tunnels sold certain subway cars, which were contributed by MTA New York City Transit, for net proceeds of $84.2. These cars were subsequently leased back by MTA Bridges and Tunnels under a capital lease. The deferred credit of $34.2 was netted against the carrying value of the leased assets, and the assets were recontributed to the MTA New York City Transit. MTA Bridges and Tunnels transferred $5.5 to the MTA, representing the net economic benefit of the transaction. The remaining proceeds, equal to the net present value of the lease obligation, of which $71.3 was placed in an irrevocable deposit account at ABN AMRO Bank N.V. and $7.5 was invested in U.S. Treasury Strips. The estimated yields and maturities of the deposit account and the Treasury Strips are expected to be sufficient to meet all of the regularly scheduled obligations under the lease as they become due, including the purchase option, if exercised. The capital lease obligation is included in other long-term liabilities. At the end of the lease term MTA Bridges and Tunnels has the option to purchase the subway cars for approximately $106, which amount has been reflected in the net present value of the lease obligation, or to make a lease termination payment of approximately $89.

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Leveraged Lease Transactions: Hillside Facility — On March 31, 1997, the MTA entered into a lease/leaseback transaction with a third party whereby the MTA leased MTA Long Island Rail Road’s Hillside maintenance facility to the third party. The term of the lease is 22 years, and the third party has the right to renew for a further 21.5 year term. The facility was subsequently subleased back to the MTA as a capital lease, and sub-subleased by the MTA to MTA Long Island Rail Road.

Under the terms of the lease/leaseback agreement, the MTA initially received $314, which was utilized as follows. The MTA paid $266 to Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland), an affiliate of the third party’s lender, which has the obligation to pay to the MTA an amount equal to the rent obligations under the sublease attributable to the debt service on the loan from the third party’s lender. The MTA used $21 to purchase Treasury securities, which are pledged as collateral to the third party. The value at maturity of these Treasury securities, together with the proceeds from the aforementioned obligation of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., is sufficient to pay all of the regularly scheduled rent obligations, including the cost of purchasing the third party’s remaining rights at the end of the 22 year sublease period, if the related purchase option is exercised. A further $0.6 was used to pay for legal and other costs of the transaction, and $3 was used to pay the first rental payment under the sublease. A further $23 is the MTA’s net benefit from the transaction, representing consideration for the tax benefits. MTA Bridges and Tunnels has entered into a guarantee with the third party that the sublease payments will be made. At December 31, 2008, the MTA has recorded a long-term capital obligation and capital asset of $272 arising from the transaction.

Leveraged Lease Transactions: Subway and Rail Cars — On December 12, 1997, the MTA entered into two lease/leaseback transactions whereby the MTA leased certain of MTA Metro-North Railroad’s rail cars to a third party and MTA New York City Transit leased certain subway maintenance cars to the same third party. The lease periods for MTA Metro-North Railroad’s rail cars expire between 2009 and 2014, depending on the asset, and the lease period for MTA New York City Transit’s subway maintenance cars expires in 2013. The third party has the right to renew the lease for an additional period of 12 years for MTA Metro-North Railroad cars, and a further 12 years for MTA New York City Transit’s subway maintenance cars. The cars were subsequently subleased back to the MTA as a capital lease, and sub-subleased by the MTA to MTA Metro-North Railroad and MTA New York City Transit, respectively.

Under the terms of these lease/leaseback agreements, the MTA initially received $76.6, which was utilized as follows: The MTA paid $59.8 to an affiliate of the third party’s lender, which has the obligation to pay to the MTA an amount equal to the rent obligations under the sublease attributable to the debt service on the loan from the third party’s lender. The obligations of the affiliate of the third party’s lender are guaranteed by American International Group, Inc. In connection with all of the obligations of American International Group, Inc. and its affiliates described in this Footnote 8, MTA continues to monitor the support being provided to American International Group, Inc. by the Federal Reserve and the publicly available information on the financial condition of American International Group, Inc. The MTA used $12.5 to purchase a Letter of Credit from an affiliate of the third-party’s lender, guaranteed by American International Group, Inc. The payments to the MTA under the Letter of Credit, together with the aforementioned payments from the affiliate of the third-party’s lender, are sufficient to pay all of the regularly scheduled rent obligations, including the cost of purchasing the third party’s remaining rights at the end of the sublease period if the related purchase options are exercised. At December 31, 2008, the MTA has recorded a long-term capital obligation and capital asset of $41 arising from the transaction.

As a result of the downgrade of American International Group, Inc., the guarantor of the Letter of Credit, the provider of the Letter of Credit was required to pledge, and has pledged, collateral in the form of securities issued or guaranteed by the U.S. Government, including U.S. Treasury obligations and

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any other obligations the timely payment of principal of, and interest on, which are guaranteed by the U.S. Government and bonds, notes, debentures, obligations or other evidence of indebtedness issued and/or guaranteed by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Government National Mortgage Association or any other agency or instrumentality of the United States of America which are rated AAA by Standard & Poor’s, which collateral has a market value in excess of the accreted value of its obligations. In the event of a failure of the obligor under the Letter of Credit and American International Group, Inc., as guarantor of such obligations, to perform, the transaction documents are structured to provide recourse to the securities that have been pledged as collateral for such obligations.

MTA has pledged additional collateral to cover the difference between the market value of the collateral provided by American International Group, Inc. and the nominal amount of the sum of MTA’s rent payments plus the optional purchase option payments. The market value of the securities pledged as collateral by MTA was approximately $8 as of February 10, 2009. As American International Group, Inc. increases the value of its collateral during the period through the remaining purchase option dates in 2013 and 2014, the MTA collateral will be released to MTA in an equivalent amount until MTA has no further collateralization obligation.

MTA exercised the purchase option on the first tranche of the lease related to MTA Metro-North Railroad assets and paid the first installment thereof on January 5, 2009. The final installment is due in December, 2009.

Leveraged Lease Transactions: Subway Cars — On September 25, 2002 and December 17, 2002 the MTA entered into four sale/leaseback transactions whereby MTA New York City Transit transferred ownership of certain MTA New York City Transit subway cars to the MTA, the MTA sold those cars to third parties, and the MTA leased those cars back from such third parties. The MTA subleased the cars to MTA New York City Transit. The four leases expire in 2032, 2034, 2033, and 2033, respectively. At the lease expiration, the MTA has the option of either exercising a fixed price purchase option for the cars or returning the cars to the third party owner.

Under the terms of the sale/leaseback agreements, the MTA initially received $1,514.9, which was utilized as follows: The MTA paid $1,058.6 to affiliates of certain of the lenders to the third parties, which affiliates have the obligation to pay to the MTA an amount equal to the rent obligations under the leases attributable to the debt service on the related loans.. The obligations of the affiliate of the third parties’ lenders are guaranteed by Financial Security Assurance, Inc. The MTA also purchased Freddie Mac, FNMA, and U.S. Treasury debt securities in amounts and with maturities which are sufficient to make the lease rent payments equal to the debt service on the loans from the other lenders to the third parties. In the case of one of the four leases, MTAHQ also purchased Freddie Mac debt securities, the value of which at maturity, together with the aforementioned payment from the affiliate of the third party lender and the value at maturity of the Freddie Mac securities that were purchased to provide sufficient funds to make the lease rent payments equal to the debt service on the loan from the other lender to the third party, are sufficient to pay all regularly scheduled rent obligations, including the cost of purchasing the third party’s remaining rights at the end of the sublease period if the related purchase options are exercised. In the case of the other three leases, the MTA entered into Equity Payment Agreements with Premier International Funding Co. (which are guaranteed by Financial Security Assurance, Inc.) whereby that entity has the obligation to provide to the MTA the amounts necessary, together with the aforementioned payments from the affiliate of the third parties’ lender and the value at maturity of the Freddie Mac, FNMA, and U.S. Treasury debt securities that were purchased to provide sufficient funds to make the lease rent payments equal to the debt service on the loan from the other lenders to the third parties, are sufficient to pay all regularly scheduled rent obligations, including the cost of exercising the respective fixed price purchase options, if such purchase options are exercised. In

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two of the three leases in which Premier International Funding Co. is the obligor under the Equity Payment Agreements, Premier International Funding Co. is required to pledge, and has pledged, collateral in the form of securities issued or guaranteed by the United States Government, including United States Treasury obligations, publicly traded U.S. Treasury Strips, Government National Mortgage Association obligations and any other obligations the timely payment of principal and interest of which are guaranteed by the United States Government, and bonds, notes, debentures, obligations or other evidence of indebtedness issued and/or guaranteed by Federal National Mortgage Association, Federal Home Loan Mortgage Corporation or any agency or instrumentality of the United States of America, which collateral has a market value in excess of the accreted value of its obligations.

In the event of a failure to perform by Premier International Funding Co., as obligor under the Equity Payment Agreements in the three leases, and Financial Security Assurance, Inc., as guarantor of such obligations, the transaction documents for the two leases in which such obligations are collateralized are structured to provide recourse to the securities that have been pledged as collateral for such obligations. The accreted value of the Equity Payment Agreement in the transaction in which the obligation of Premier International Funding Co., as obligor, and Financial Security Assurance, Inc., as guarantor, is uncollateralized was $10.4 at December 31, 2008.

The amount remaining after payment of transaction expenses, $96.2, was the MTA’s net benefit from these four transactions.

Leveraged Lease Transactions: Qualified Technological Equipment — On December 19, 2002, the MTA entered into four sale/leaseback transactions whereby MTA New York City Transit transferred ownership of certain MTA New York City Transit qualified technological equipment (QTE) relating to the MTA New York City Transit automated fare collection system to the MTA. The MTA sold that equipment to third parties and the MTA leased that equipment back from such third parties. The MTA subleased the equipment to MTA New York City Transit. The four leases expire in 2022, 2020, 2022, and 2020, respectively. At the lease expiration the MTA has the option of either exercising a fixed-price purchase option for the equipment or returning the equipment to the third-party owner.

Under the terms of the sale/leaseback agreements the MTA initially received $507.4, which was utilized as follows: The MTA paid $316.2 to affiliates of certain of the lenders to the third parties, which affiliates have the obligation to pay to MTA an amount equal to the rent obligations under the leases attributable to the debt service on the loan from certain of the third parties’ lenders. The MTA also purchased FNMA and U.S. Treasury debt securities in amounts and with maturities which are sufficient to make the lease rent payments equal to the debt service on the loans from the other lenders to the third parties. In the case of three of the four leases the MTA also purchased U.S. Treasury debt securities in amounts and with maturities which are expected to be sufficient to pay the remainder of the regularly scheduled lease rent payments under those leases and the purchase price due upon exercise by the MTA of the related purchase options if exercised. In the case of the other lease, the MTA entered into an Equity Payment Undertaking Agreement with XL Insurance (Bermuda) Ltd. (which was guaranteed by XL Financial Assurance Ltd.) whereby that entity had the obligation to provide to the MTA the amounts necessary to make the remainder of the equity portion of the basic lease rent payments under that lease and to pay the equity portion of the purchase price due upon exercise by the MTA of the purchase option if exercised. The amount remaining after payment of transaction expenses, $57.6, was the MTA’s net benefit from these four transactions. As consideration for the cooperation of the City of New York in these transactions, including the transfer of any property interests held by the City on such equipment to MTA New York City Transit and the MTA, the MTA is obligated to pay to the City 24.11 percent of the net benefit received from these four QTE transactions. At December 31, 2008, the MTA had paid the City of New York $13.7.

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On February 7, 2008, the MTA learned that XL Insurance (Bermuda) Ltd. was downgraded to a level that under the applicable transaction documents required the MTA to replace the Equity Payment Undertaking Agreement with other permitted collateral. On May 2, 2008, the MTA entered into a termination agreement that terminated the QTE transaction in which the XL Insurance (Bermuda) Ltd. Equity Payment Undertaking Agreement served as equity collateral. In connection with such termination, the MTA transferred to the lessor in that transaction U.S. Treasury debt obligations, having a cost of approximately $75, which obligations were substantially similar in amount and payment terms to the XL Insurance (Bermuda) Ltd. Equity Payment Undertaking Agreement. The MTA subsequently entered into an agreement with XL Insurance (Bermuda) Ltd. to terminate the XL Insurance (Bermuda) Ltd. Equity Payment Undertaking Agreement and XL Insurance (Bermuda) Ltd. paid the MTA $61.

On September 16, 2008, the MTA learned that American International Group, Inc. was downgraded to a level that under the transaction documents for two of the remaining three QTE leases required the MTA to replace the applicable Equity Credit Default Option Agreement provided by AIG Financial Products Corp. and guaranteed by American International Group, Inc. MTA terminated those two leases in January, 2009 pursuant to early termination agreements with the equity investor. The MTA achieved a net gain of approximately $3 as a result of such terminations.

Leveraged Lease Transaction: Subway Cars — On June 3, 2003, the MTA entered into a sale/leaseback transaction whereby MTA New York City Transit transferred ownership of certain MTA New York City Transit subway cars to the MTA, the MTA sold those cars to a third party, and the MTA leased those cars back from such third party. The MTA subleased the cars to MTA New York City Transit. The lease expires in 2033. At the lease expiration, the MTA has the option of either exercising a fixed-price purchase option for the cars or returning the cars to the third-party owner.

Under the terms of the sale/leaseback agreement, the MTA initially received $168.1, which was utilized as follows: The MTA paid $126.3 to an affiliate of one of the lenders to the third party, which affiliate has the obligation to pay to the MTA an amount equal to the rent obligations under the lease attributable to the debt service on such loan from such third party’s lender. The obligations of the affiliate of the third party’s lender are guaranteed by American International Group, Inc. The MTA also purchased FNMA and U.S. Treasury securities in amounts and with maturities which are sufficient to make the lease rent payments equal to the debt service on the loans from the other lender to the third party and to pay the remainder of the regularly scheduled rent due under that lease and the purchase price due upon exercise by the MTA of the fixed price purchase option if exercised. The amount remaining after payment of transaction expenses, $7.4, was the MTA’s benefit from the transaction.

Leveraged Lease Transactions: Subway Cars - On September 25, 2003 and September 29, 2003, the MTA entered into two sale/leaseback transactions whereby MTA New York City Transit transferred ownership of certain MTA New York City Transit subway cars to the MTA, the MTA sold those cars to third parties, and the MTA leased those cars back from such third parties. The MTA subleased the cars to MTA New York City Transit. Both leases expire in 2033. At the lease expiration, MTAHQ has the option of either exercising a fixed-price purchase option for the cars or returning the cars to the third-party owner.

Under the terms of the sale/leaseback agreements, the MTA initially received $294, which was utilized as follows: In the case of one of the leases, the MTA paid $97 to an affiliate of one of the lenders to the third party, which affiliate has the obligation to pay to the MTA an amount equal to the rent obligations under the lease attributable to the debt service on the loan from such third party’s lender. The obligations of the affiliate of such third party’s lender are guaranteed by American International Group, Inc. In the case of the other lease, the MTA purchased U.S. Treasury debt securities in amounts and with maturities

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which are sufficient for the MTA to make the lease rent payments equal to the debt service on the loan from the lender to that third party. In the case of both of the leases, the MTA also purchased Resolution Funding Corporation (REFCO) debt securities that mature in 2030. Under an agreement with AIG Matched Funding Corp. (guaranteed by American International Group, Inc.), AIG Matched Funding Corp. receives the proceeds from the REFCO debt securities at maturity and is obligated to pay to the MTA amounts sufficient for the MTA to pay the remainder of the regularly scheduled lease rent payments under those leases and the purchase price due upon exercise by the MTA of the purchase options if exercised. The amount remaining after payment of transaction expenses, $24, was the MTA’s net benefit from these two transactions.

On September 16, 2008, the MTA learned that American International Group, Inc. was downgraded to a level that under the terms of the transaction documents for the sale/leaseback transaction that closed on September 29, 2003, the MTA is required to replace or restructure the applicable Equity Payment Undertaking Agreement provided by AIG Financial Products Corp. and guaranteed by American International Group, Inc. On December 17, 2008, MTA terminated the Equity Payment Undertaking Agreement provided by AIG Financial Products Corp. and guaranteed by American International Group, Inc. and provided replacement collateral in the form of U.S. Treasury strips. The Resolution Funding Corporation (REFCO) debt security that was being held in pledge was released to MTA. On November 6, 2008, the MTA learned that Ambac Assurance Corp., the provider of the credit enhancement that insures the MTA’s contingent obligation to pay a portion of the termination values upon an early termination in both the September 25, 2003 and September 29, 2003 transactions, was downgraded to a level that requires the provision of new credit enhancement facilities for each lease by December 21, 2008. On December 17, 2008, MTA terminated the Ambac Assurance Corp. surety bond for the lease transaction that closed on December 29, 2003 and provided a short term U.S. Treasury debt obligation as replacement collateral. The cost of the replacement collateral was $32. As a result of a mark-to-market of the securities provided as collateral as of January 31, 2009, $8 of such $32 in collateral value was released back to MTA. It is anticipated that during 2009, MTA will acquire a letter of credit or financial insurance to replace the U.S. Treasury security as collateral in that transaction at which point such U.S. Treasury security will be released back to MTA.

On January 12, 2009, following an extension of the due date for such action, MTA provided a short term U.S. Treasury debt obligation as additional collateral in addition to the Ambac Assurance Corp surety bond for the lease transaction that closed on December 29, 2003. The cost of the additional collateral was $37. It is anticipated that during 2009, MTA will acquire a letter of credit or financial insurance to replace the U.S. Treasury security as collateral in that transaction at which point such U.S. treasury security will be released back to MTA.

Other Lease Transactions - On July 29, 1998, the MTA, (solely on behalf of MTA Long Island Rail Road and MTA Metro-North Railroad, MTA New York City Transit, and MTA Bridges & Tunnels entered into a lease and related agreements whereby each agency, as subleesees, will rent, for an initial stated term of approximately 50 years, an office building at Two Broadway in lower Manhattan. The lease term expires on July 30, 2048, and, pursuant to certain provisions, is renewable for two additional 15-year terms. The lease comprises both operating (for the lease of land) and capital (for the lease of the building) elements. The total annual rental payments over the initial lease term are $1,602 with rent being abated from the commencement date through June 30, 1999. During 2002 and 2001 the MTA made rent payments of $21. In connection with the renovation of the building and for tenant improvements, the MTA issued $121 and $328 in 2000 and 1999, respectively, of long-term obligations (see Note 7). The office building is principally occupied by MTA New York City Transit and MTA Bridges & Tunnels.

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On April 8, 1994, the MTA amended its lease for the Harlem/Hudson line properties, including Grand Central Terminal. This amendment initially extends the lease term, previously expiring in 2031, an additional 110 years and, pursuant to several other provisions, an additional 133 years. In addition, the amendment grants the MTA an option to purchase the leased property after the 25th anniversary of the amended lease. The amended lease comprises both operating (for the lease of land) and capital (for the lease of buildings and track structure) elements.

In August 1988, the MTA entered into a 99-year lease agreement with Amtrak for Pennsylvania Station. This agreement, with an option to renew, is for rights to the lower concourse level and certain platforms. The $45 paid to Amtrak by the MTA under this agreement is included in other assets. This amount is being amortized over 30 years. In addition to the 99-year lease, MTA Long Island Rail Road entered into an agreement with Amtrak to share equally the cost of the design and construction of certain facilities at Pennsylvania Station. Under this agreement, the MTA may be required to contribute up to $60 for its share of the cost. As of December 31, 2000 the project was closed and $50 was included in property and equipment.

Total rent expense under operating leases approximated $41.9 and $25.8 for the years ended December 31, 2008 and 2007 respectively.

At December 31, 2008, the future minimum lease payments under noncancelable leases are as follows:

Years Operating Capital

2009 53 305 2010 50 174 2011 47 70 2012 45 170 2013 45 76 2014–2018 213 400 2019–2023 207 705 2024–2028 213 274 2029–2033 227 1,075 2034–2038 251 701 Thereafter 854 521

2,205$ 4,471

Amount representing interest (3,039)

Present value of capital lease obligations 1,432$

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9. ESTIMATED LIABILITY ARISING FROM INJURIES TO PERSONS

A summary of activity in estimated liability as computed by actuaries arising from injuries to persons, including employees, and damage to third-party property, for the years ended December 31, 2008 and 2007 is presented below:

December 31, December 31,2008 2007

Balance - beginning of year 1,232$ 1,160$ Activity during the year: Current year claims and changes in estimates 284 260 Claims paid (186) (188) Balance - end of year 1,330 1,232

Less current portion (205) (199)

Long-term liability 1,125$ 1,033$

10. COMMITMENTS AND CONTINGENCIES

The MTA Group actively monitors its properties for the presence of pollutants and/or hazardous wastes and evaluates its exposure with respect to such matters. When the expense, if any, to clean up pollutants and/or hazardous wastes is estimable it is accrued by the MTA.

Management has reviewed with counsel all actions and proceedings pending against or involving the MTA Group, including personal injury claims. Although the ultimate outcome of such actions and proceedings cannot be predicted with certainty at this time, management believes that losses, if any, in excess of amounts accrued resulting from those actions will not be material to the financial position, results of operations, or cash flows of the MTA.

11. POLLUTION REMEDIATION COST

Effective 2008, pollution remediation costs are being charged in accordance with the provision of GASB Statement No 49. The Statement establishes standards for determining when expected pollution remediation outlays should be accrued as a liability or, if appropriate, capitalized. An operating expense and corresponding liability, measured at its current value using the expected cash flow method, have been recognized for certain pollution remediation obligations that are no longer able to be capitalized as a component of a capital project. Pollution remediation obligations, which are estimates and subject to changes resulting from price increases or reductions, technology, or changes in applicable laws or regulations, occur when any one of the following obligating events takes place:

� An imminent threat to public health due to pollution exists � MTA is in violation of a pollution prevention-related permit or license � MTA is named by a regulator as a responsible or potentially responsible party to participate in

remediation � MTA is named or there is evidence to indicate that it will be named in a lawsuit that compels

participation in remediation activities, or

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� MTA voluntarily commences or legally obligates itself to commence remediation efforts

Operating expense provision and corresponding liability measured at its current value using the expected cash flow method have been recognized for certain pollution remediation obligation that previously may not have been required to be recognized, or are not longer able to be capitalized as a component of a capital project. As of December 31, 2008, the MTA has recognized a total cost of $ 43 and a pollution remediation liability of $ 105. The pollution remediation liability consists of future and present activities associated with asbestos removal and contamination of the soil at different facilities.

12. OPERATING ACTIVITY INFORMATION

Bridgesand Consolidated

MTA Commuters Transit Tunnels Eliminations Total

December 31, 2008

Operating revenue 283$ 1,083$ 3,321$ 1,287$ (42)$ 5,932$ Depreciation and amortization 75 517 1,122 77 - 1,791 Subsidies and grants 2,076 - 1,415 - (1,260) 2,231 Tax revenue 1,263 - 793 - (338) 1,718 Interagency subsidy 347 - 120 (347) (120) - Operating (deficit) surplus (851) (1,584) (4,725) 736 33 (6,391) Net (deficit) surplus 1,808 (1,520) (38) (1,228) 15 (963) Capital expenditures 4,503 312 782 771 (1,840) 4,528

December 31, 2008

Total assets 10,882 10,306 29,885 4,263 (1,879) 53,457 Net working capital 988 37 (393) (359) (686) (413) Long-term debt — (including - - - - - - current portion) 17,673 - - 8,496 (42) 26,127 Net assets (10,852) 9,125 25,081 (5,020) - 18,334

December 31, 2008

Net cash (used in)/provided by operating activities (506) (903) (2,365) 873 18 (2,883) Net cash provided by/(used in) noncapital financing activities 3,565 948 2,536 (365) (2,538) 4,146 Net cash (used in)/provided by capital and related financing activities (3,468) (42) (478) (581) 2,559 (2,010) Net cash provided by/(used in) investing activities 516 (3) 306 68 (64) 823 Cash at beginning of year 53 25 35 17 - 130 Cash at end of period 160 25 34 12 (25) 206

NOTE: Only MTA and MTA Bridges and Tunnels agencies are issuing debt. (Continued)

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Bridgesand Consolidated

MTA Commuters Transit Tunnels Eliminations Total

December 31, 2007Operating revenue 254$ 1,024$ 3,159$ 1,263$ (34)$ 5,666$ Depreciation and amortization 68 490 1,061 70 - 1,689 Subsidies and grants 1,939 - 1,330 - (1,170) 2,099 Tax revenue 1,459 - 1,247 - (301) 2,405 Interagency subsidy 406 - 156 (401) (161) - Operating (deficit) surplus (833) (1,475) (4,291) 763 - (5,836) Net (deficit) surplus 828 (1,411) 452 80 (15) (66) Capital expenditures 4,042 285 898 297 (1,325) 4,197

December 31, 2007Total assets 11,435 9,884 28,747 4,062 (2,359) 51,769 Net working capital 1,274 (31) 261 (363) (1,108) 33 Long-term debt - (including current portion) 17,793 - - 7,156 (43) 24,906 Net assets (10,835) 8,820 25,119 (3,792) (15) 19,297

December 31, 2007Net cash (used in)/provided by operating activities (690) (931) (2,297) 893 41 (2,984) Net cash provided by/(used in) noncapital financing activities 4,121 939 2,718 (414) (2,832) 4,532 Net cash provided by/(used in)capital and related financing activities (3,992) (22) (638) (557) 2,791 (2,418) Net cash provided by/(used in) Investing activities 536 13 214 82 - 845 Cash at beginning of year 78 26 38 13 - 155 Cash at end of period 53 25 35 17 - 130

NOTE: Only MTA and MTA Bridges and Tunnels agencies are issuing debt. (Concluded)

13. SETTLEMENT OF CLAIMS

The claim of Madiana Sanoh was settled in January 2009 for $5. FMTAC’s Excess Loss Fund Program was responsible for $2.7, the amount in excess of the MTA LI Bus’s retention of $2.3 at the time of the event.

14. SUBSEQUENT EVENTS

On February 19, 2009, MTA Bridges and Tunnels issued $150 Triborough Bridge and Tunnel General Revenue Mandatory Tender Bonds, Series 2009A-1 and $325 General Revenue Bonds, Series 2009A-2. In addition to financing projects for MTA Bridges and Tunnels, Series 2009A-1 proceeds could be used to refinance certain MTA Bridges and Tunnels Senior or Subordinate Revenue bonds. Series 2009A-2 proceeds were used for new money purposes as well as to refund $197.9 of Triborough Bridge and Tunnel General Revenue Variable Rate Refunding Bonds, Series 2005B-1. A portion of the swap associated with Series 2005B-1, has been reassigned to MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002F, MTA Bridges and Tunnels General Revenue Variable Rate Bonds, Series 2003B and MTA Bridges and Tunnels General Revenue Variable Rate Bonds, Series 2005A.

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MTA sold $261.7 of Dedicated Tax Fund (DTF) Bonds on March 12, 2009. Proceeds of the issue will be used to finance capital projects of the subway, bus and commuter rail systems of the MTA and its affiliates and subsidiaries. On April 9, 2009, $50 of MTA Bridges and Tunnels Subordinate Revenue Bonds, Series 2000CD has been refunded from the proceeds of MTA Bridges and Tunnels General Revenue Mandatory Tender Bonds, Series 2009A-1. A portion of the swap associated the aforementioned bonds has been reassigned to MTA Bridges and Tunnels General Revenue Variable Rate Bonds, Series 2003B. On April 10, 2009, Moodys Investors Service Inc. placed the MTAs Transportation Revenue Bonds rating on Watchlist for possible downgrade from their current A2 rating. Moodys explained that this action was prompted by the MTAs projected budget shortfalls and the absence of a long term funding solution to finance future debt service costs on the Transportation Revenue Bonds. The review is expected to be completed within 90 days. The Triborough and Tunnel Authority (TBTA) bonds and MTAs Dedicated Tax Fund bonds are supported by different revenue streams from MTAs Transportation Revenue Bonds and are not affected by the Watchlist action.

* * * * * *

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)SCHEDULE OF PENSION FUNDING PROGRESS ($ in millions)

January 1, January 1, January 1,2008 2007 2006

LIRR [1]:a. Actuarial value of plan assets 537.6$ 509.1$ 625.0$ b. Actuarial accrued liability (AAL) 1,560.1 1,543.5 1,898.6 c. Total unfunded AAL (UAAL) [b-a] 1,022.5 1,034.4 1,273.6 d. Funded ratio [a/b] 34.5 % 33.0 % 32.9 %e. Covered payroll 80.9$ 94.0$ 117.3$ f. UAAL as a percentage of covered payroll [c/e] 1263.5 % 1100.4 % 1085.8 %

MaBSTOA [2]:a. Actuarial value of plan assets 1,190.8$ 1,057.9$ 841.0$ b. Actuarial accrued liability (AAL) 2,045.0 1,938.3 1,725.2 c. Total unfunded AAL (UAAL) [b-a] 854.1 880.5 884.2 d. Funded ratio [a/b] 58.2 % 54.6 % 48.7 %e. Covered payroll 562.2$ 519.7$ 498.0$ f. UAAL as a percentage of covered payroll [c/e] 151.9 % 169.4 % 177.5 %

MNR Cash Balance Plan [3]:a. Actuarial value of plan assets 1.3$ 1.4$ 1.5$ b. Actuarial accrued liability (AAL) 1.4 1.4 1.6 c. Total unfunded AAL (UAAL) [b-a] 0.065 0.074 0.100 d. Funded ratio [a/b] 95.4 % 94.8 % 94.0 %e. Covered payroll 6.8$ 6.8$ 7.9$ f. UAAL as a percentage of covered payroll [c/e] 1.0 % 1.1 % 1.3 %

[1]

[2]

[3]

MaBSTOA issues a publicly available financial report that includes financial statements and required supplementary information for the MaBSTOA Plan. That report may be obtained by writing to MaBSTOA Pension Plan, New York City Transit Authority, Operations Accounting, 2 Broadway, 15th Floor, New York, NY 10004.

The LIRR pension plan has a separately issued financial statement that is publicly available and contains required descriptions and supplemental information regarding the employee benefit plan. The statements may be obtained by writing to Metropolitan Transportation Authority, comptroller, 345 Madison Avenue, New York, New York 10017-3739.

Further information about the MNR Plan is more fully described in the separately issued financial statements which can be obtained by writing to the MTA Metro-North Railroad Chief Financial Officer, 347 Madison Avenue, New York, New York 10017-3739.

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)SCHEDULE OF FUNDING PROGRESS FOR THE MTA POSTEMPLOYMENT BENEFIT PLANYEAR ENDED DECEMBER 31, 2008 AND 2007($ in millions)

UnfundedActuarial Actuarial Ratio of

Actuarial Accrual Accrual UAAL to Actuarial Value of Liability Liability Funded Covered Covered Valuation Assets (AAL) (UAAL) Ratio Payroll Payroll

Date {a} {b} {c} = {b} - {a} {a} / {c} {d} {c} / {d}

January 1, 2006 -$ 13,241$ 13,241$ -$ 4,557.1$ 290.6 %January 1, 2006 - 13,623 13,623 - 4,381.9 310.9 %

B-96


SUPPLEMENTARY INFORMATION (UNAUDITED)SCHEDULE OF FINANCIAL PLAN TO UNAUDITED FINANCIAL STATEMENTS RECONCILIATIONFOR THE YEAR ENDED DECEMBER 31, 2008($ in millions)

FINANCIAL PLAN ACTUAL — OPERATING LOSS (6,426.7)$

Reconciling items:

FMTAC revenues are recorded as operating on the Financial Plan and recorded as non-operating on the Financial Statements (4.6)

Various agencies recorded adjustments to the Financial Statements after the Financial Plan was completed 41.7

The Financial Plan excluded Capital Construction and East Side Access (0.7)

FINANCIAL STATEMENT — OPERATING LOSS (6,390.3)$

B-97


SUPPLEMENTARY INFORMATION (UNAUDITED)CONSOLIDATED RECONCILIATION BETWEEN FINANCIAL PLAN AND FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2008($ in millions)

FinancialFinancial Plan Statement

Category Actual GAAP Actual Variance

REVENUE: Farebox revenue 4,240.9$ 4,240.9$ - $ Vehicle toll revenue 1,270.0 1,274.0 4 Other operating revenue 448.6 417.3 (31.3) Total revenue 5,959.5 5,932.2 (27.3)

EXPENSES: Labor: Payroll 4,087.4 4,126.0 (38.6) Overtime 471.7 434.0 37.7 Health and welfare 684.9 715.7 (30.8) Pensions 318.5 898.8 (580.3) Other fringe benefits 502.7 524.9 (22.2) Postemployment benefits 2,245.3 1,656.4 588.9 Reimbursable overhead (310.6) (264.2) (46.4) Total labor expenses 7,999.9 8,091.6 (91.7)

Non-labor: Traction and propulsion power 306.5 306.5 - Fuel for buses and trains 287.0 287.0 - Insurance 28.9 (1.2) 30.1 Claims 152.1 152.1 - Paratransit service contracts 299.0 299.0 - Maintenance and other 594.2 583.5 10.7 Professional service contract 196.9 204.4 (7.5) Pollution remediation project costs 42.2 43.1 (0.9) Materials and supplies 532.5 532.4 0.1 Other business expenses 156.0 32.8 123.2

2,595.3 2,439.6 155.7 p

Other expenses adjustments: - - - TBTA transfer - - - GASB general reserve - - - Interagency subsidy - - - Total other expense adjustments 0.0 - -

Total expenses before depreciation 10,595.2 10,531.2 64.0 Depreciation 1,791.0 1,791.3 (0.3) Total expenses 12,386.2 12,322.5 63.7

0.0 NET OPERATING SURPLUS/(DEFICIT) (6,426.7)$ (6,390.3)$ (36.4)$ EXCLUDING SUBSIDIES AND DEBT SERVICES

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SUPPLEMENTARY INFORMATION (UNAUDITED)CONSOLIDATED SUBSIDY ACCRUAL RECONCILIATION BETWEEN FINANCIAL PLAN AND FINANCIAL STATEMENTSFOR THE YEAR ENDED DECEMBER 31, 2008($ in millions)

Financial Plan Financial StatementAccrued Subsidies Actual GAAP Actual Variance

Mass transportation operating assistance 1,706.2$ 1,706.2$ - $ Petroleum business tax 612.7 612.7 -Mortgage recording tax 1 and 2 395.5 395.5 -MRT transfer (10.7) (10.7) -Urban tax 459.8 459.8 -State and local operating assistance 378.8 378.8 -Additional mass transportation assistance program 19.6 19.6 -Nassau county subsidy to long island bus 10.5 10.5 -Station maintenance 147.8 147.8 -Connecticut department of transportation (CDOT) 309.6 312.8 3.2 {1}NYS Grant for debt service - 115.4 115.4 {2}Investment income 14.9 22.9 8.0 {3}

Total accrued subsidies 4,044.7 4,171.3 126.6

Net operating surplus/(deficit) excluding accrued subsidies and debt service (6,426.7) (6,390.3) 36.4

Total net operating surplus/(deficit) (2,382.0)$ (2,219.0)$ 163.0$

Interest on long-term debt - $ 1,209.0$ - $

Debt service 1,515.7$ - $ - $

{1} Timing difference.{2} In the Financial Statement, funds received from NYS to cover debt service payments for Service Contract Bonds are included in the subsidies. The Financial Plan does not include either the funds received or disbursed.{3}The Financial Plan excludes certain pool and capital income.

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NY

C Transit Financials

New York City TransitAuthorityConsolidated Financial StatementsManagement’s Discussion and AnalysisDecember 31, 2008 and 2007

APPENDIX C

New York City Transit AuthorityIndexDecember 31, 2008 and 2007

Page(s)

Report of Independent Auditors ...........................................................................................................

Management’s Discussion and Analysis....................................................................................

Consolidated Financial Statements

Consolidated Balance Sheets ......................................................................................................

Consolidated Statements of Revenues, Expenses and Change in Net Assets...........................

Consolidated Statements of Cash Flows .....................................................................................

Notes to Consolidated Financial Statements ...............................................................................

Required Supplementary Information

Schedule of Funding Progress.....................................................................................................

C-1

C-2 - C-11

C-12 - C-13

C-14 - C-15

C-16 - C-17

C-18 - C-47

C-48 - C-49

..

Report of Independent Auditors

Members of the BoardMetropolitan Transportation Authority

In our opinion, the accompanying consolidated balance sheets and the related consolidated statementsof revenues, expenses and changes in net assets, and cash flows present fairly, in all materialrespects, the financial position of the New York City Transit Authority (the Authority) at December 31,2008 and 2007, and the changes in their financial position and their cash flows for the years thenended in conformity with accounting principles generally accepted in the United States of America.These consolidated financial statements are the responsibility of the Authority’s management. Ourresponsibility is to express an opinion on these consolidated financial statements based on our audits.We conducted our audits of these statements in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

As described in the notes to the consolidated financial statements, the Authority is a public benefitcorporation that receives a significant portion of its operating and capital financing requirements fromThe City of New York, the State of New York, federal and regional governmental entities and from thesale of bonds to the public. Also, the Authority has material transactions with affiliated agencies andother public transportation agencies.

Our audit was conducted for the purpose of forming an opinion on the consolidated financialstatements taken as a whole. The Management’s Discussion and Analysis for the years endedDecember 31, 2008 and 2007 on pages 2 through 11 and the required supplementary information onpages 48 and 49 are not required parts of the basic consolidated financial statements, but aresupplementary information required by the accounting principles generally accepted in the UnitedStates of America. We have applied certain limited procedures, which consisted principally of inquiriesof management regarding the methods of measurement and presentation of the requiredsupplementary information. However, we did not audit the information and express no opinion on it.

April 22, 2009

PricewaterhouseCoopers LLP300 Atlantic St.Stamford CT 06901Telephone (203) 539 3000Facsimile (813) 207 3999

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NEW YORK CITY TRANSIT AUTHORITYMANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)For the Years Ended December 31, 2008 and 2007OVERVIEW OF THE CONSOLIDATED FINANCIAL STATEMENTS

Introduction to the Annual Report

This annual report consists of three parts: Management’s Discussion and Analysis, ConsolidatedFinancial Statements and Notes to the Consolidated Financial Statements and SupplementaryInformation.

The Consolidated Financial Statements Include:

The Consolidated Balance Sheets provide information about the nature and amounts of investments inresources (assets) and the obligations (liabilities) to New York City Transit Authority’s (the Authority’s)creditors, with the difference between the two reported as net assets.

The Consolidated Statements of Revenues, Expenses and Changes in Net Assets show how theAuthority’s net assets changed during each year. They account for all of the current year’s revenues andexpenses, measures the financial results of the Authority’s operations over the past year and can be usedto determine how the Authority has funded its costs.

The Consolidated Statements of Cash Flows provide information about the Authority’s cash receipts,cash payments and net changes in cash resulting from operations, non-capital financing, capital andrelated financing and investing activities.

The Notes to the Consolidated Financial Statements and Supplementary Information Provide:

Information that is essential to understanding the basic financial statements, such as the Authority'saccounting methods and policies.

Details of cash and investments, capital assets, employee benefits, long-term debt, lease transactionsand future commitments and contingencies of the Authority.

Any other events or developing situations that could materially affect the Authority’s financial position,results of operations and cash flows.

The Required Supplementary Information provides information concerning the Authority’s progress infunding its obligation to provide pension benefits and other postemployment benefits to its employees.

Management’s Discussion and Analysis:

The following is a narrative overview and analysis of the financial activities of the Authority for the yearsended December 31, 2008 and 2007. This management discussion and analysis (MD&A) is intended toserve as an introduction to the Authority’s basic consolidated financial statements. It provides anassessment of how the Authority’s position has improved or deteriorated and identifies the factors that, inmanagement’s view, significantly affected the Authority’s overall financial position. It may containopinions, assumptions or conclusions by the Authority’s management that should not be considered areplacement for, and must be read in conjunction with, the consolidated financial statements describedabove.

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Financial Reporting Entity

The New York City Transit Authority and its subsidiary, Manhattan and Bronx Surface Transit OperatingAuthority (MaBSTOA) (collectively, the Authority) are public benefit corporations established pursuant tothe New York State (the State) Public Authorities Law, to operate public subway, bus and paratransitservices within the City of New York (the City). The Authority is a part of the financial reporting group ofthe Metropolitan Transportation Authority (MTA), which is a component unit of the State and whosemission is to continue, develop and improve public transportation and to develop and implement a unifiedpublic transportation policy in the New York Metropolitan area.

CONDENSED FINANCIAL INFORMATION

All amounts are in millions, except as noted.

The following sections will discuss the significant changes in the Authority’s financial position for the yearsended December 31, 2008 and 2007. Additionally, an examination of major economic factors andindustry trends that have contributed to these changes is provided. It should be noted that for purposesof the MD&A, summaries of the financial statements and the various exhibits presented conform to theAuthority’s consolidated financial statements, which are presented in accordance with accountingprinciples generally accepted in the United States of America.

Total Assets, Distinguishing Between Capital and Other Assets

Increase/(Decrease)2008 2007 2006 2008-2007 2007-2006

Gross Capital Assets 40,542$ 37,559$ 34,983$ 2,983$ 2,576$Allowance For Depreciation (12,255) (11,135) (10,087) (1,120) (1,048)Net Capital Assets 28,287 26,424 24,896 1,863 1,528

Other Assets 1,598 2,323 2,392 (725) (69)Total Assets 29,885$ 28,747$ 27,288$ 1,138$ 1,459$

The Authority’s Gross Capital Assets totaled $40.5 billion at year-end 2008. Of the total,depots/yards/signals and stations were 38%, subway cars and buses accounted for 23%and track/structures were 22%. These gross capital assets exclude significantinfrastructure assets such as tunnels and elevated structures which are on the books ofNew York City.

Significant changes in assets include:

December 31, 2008 versus 2007Gross Capital Assets increased from December 31, 2007 to December 31, 2008 by $2,983, or 7.9%.Significant additions included station rehabilitations ($1,345), subway cars ($1,006), track & structures($695) and signals ($408). These additions are partly offset by incremental annual depreciation expenseof $1,122 and by a net reduction in assets under construction as major projects reached completion.

Other Assets decreased by $725, or 31.2%, compared with the prior year. This decrease was mostly dueto reductions in funds held in the MTA investment pool of $290, net receivables of $177, receivable fromthe MTA for the purchase of capital assets of $164 and prepaid pension expenses of $100.

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CONDENSED FINANCIAL INFORMATION (CONTINUED)

December 31, 2007 versus 2006Gross Capital Assets increased from December 31, 2006 to December 31, 2007 by $2,576, or 7.4%.Significant additions included station rehabilitations ($963), subway cars ($532), track & structures ($353)and signals ($216). These additions are partly offset by incremental annual depreciation of $1,061.

Other Assets decreased by $69, or 2.9%, compared with the prior year. This decrease was due mostly toa reduction in funds held in the MTA investment pool of $181, partly offset by an increase in prepaidpension expenses of $87, primarily due to a 2007 pension prepayment of $100.

Total Liabilities, Distinguishing Between Long-Term Liabilities and Current Liabilities


Current Liabilities 1,575$ 1,482$ 1,505$ 93$ (23)$Long-Term Liabilities 3,229 2,147 1,117 1,082 1,030Total Liabilities 4,804$ 3,629$ 2,622$ 1,175$ 1,007$

At the end of 2008, the Authority’s liabilities consisted primarily of employee fringe benefit-relatedliabilities (for pensions, health and other benefits), 58%, and injuries to persons (public liability andworkers’ compensation), 19%. Included in the employee fringe benefit-related liabilities was $2,018 ofpostemployment benefits other than pensions based upon adoption of GASB Statement No. 45 in 2007.

Significant changes in liabilities include:

December 31, 2008 versus 2007Total Liabilities increased from December 31, 2007 to December 31, 2008 by $1,175, or 32.4%. CurrentLiabilities increased by $93, or 6.3% and Long-Term Liabilities increased by $1,082, or 50.4%.

The increase in Current Liabilities was mainly due to additional accrued retirement and death benefits of$28, due to higher pension costs, unredeemed fare cards of $25, incremental accounts payable of $14,increased bank overdraft payables of $11 and an increase in accrued vacation and sick leave of $13 dueto increased wage rates.

The increase in Long-Term Liabilities was primarily caused by the addition of $1,026 of post employmentbenefits other than pensions based upon the adoption of GASB Statement No. 45 in 2007, $51 ofincreased liability arising from injuries to persons, and an increase in pollution remediation reserves of$12 pursuant to the adoption of GASB Statement No. 49 in 2008. These additions are partly offset by thedecrease in Certificates of Participation debt due to the MTA of $11.

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December 31, 2007 versus 2006Total Liabilities increased from December 31, 2006 to December 31, 2007 by $1,007, or 38.4%. CurrentLiabilities decreased by $23, or 1.5%, while Long-Term Liabilities increased by $1,030, or 92.2%.

The decrease in Current Liabilities was due primarily to lower salary & wage accrued expenses of $46,due to the timing of labor contract settlements and payrolls, and reduced bank overdraft payables of $39.Accrued retirement benefits increased by $47, due to higher pension costs, and accrued vacation andsick leave increased by $22, due to increased wage rates, both of which partly offset the liabilityreductions.

The increase in Long-Term Liabilities was due largely to the recording of $991 of postemploymentbenefits other than pensions based upon the adoption of GASB Statement No. 45 in 2007.

Total Net Assets, Distinguishing Among Amounts Invested in Capital Assets, Net of Related Debt;Restricted Amounts and Unrestricted Amounts


Investment in Capital Assets,Net of Related Debt 27,900$ 26,031$ 24,505$ 1,869$ 1,526$

Restricted - - - -Unrestricted (2,819) (912) 162 (1,907) (1,074)Total Net Assets 25,081$ 25,119$ 24,667$ (38)$ 452$

Net assets represent the residual interest in the Authority’s assets after liabilities are deducted andconsist of three components: Invested in capital assets, net of related debt, restricted and unrestricted.Net assets invested in capital assets, net of related debt include capital assets, net of accumulateddepreciation and outstanding principal balances of debt attributable to the acquisition, construction orimprovement of those assets. Net assets are reported as restricted when constraints are imposed bythird parties or enabling legislation. All other net assets are unrestricted.

December 31, 2008 versus 2007Total net assets were $25,081 at the end of 2008, a net decrease of $38, or 0.2% from the end of 2007.The net reduction reflects an operating loss of $4,725, mostly offset by capital contributions from the MTAof $2,374 and nonoperating income of $2,313.

December 31, 2007 versus 2006Total net assets were $25,119 at the end of 2007, a net increase of $452, or 1.8% from the end of 2006.The net increase was comprised of capital contributions from the MTA of $2,003, net nonoperatingincome of $2,740, partially offset by operating losses of $4,291.

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Condensed Statements of Revenues, Expenses, and Changes in Net Assets

Year Ended December 31,2008 2007 2006

Operating Revenues 3,321$ 3,159$ 3,041$Operating Expenses (8,046) (7,450) (5,871)

Operating Loss (4,725) (4,291) (2,830)

Nonoperating Revenues (Expenses)Subsidies-New York State & City 2,209 2,578 2,425Triborough Bridge & Tunnel Authority 120 156 167Interest Expense (25) (29) (24)Other Nonoperating Revenue/Expenses 9 35 23

Total Nonoperating Revenues (Expenses) 2,313 2,740 2,591

Loss before Capital Contributions (2,412) (1,551) (239)

Capital Contributions 2,374 2,003 2,020

Change in Net Assets (38) 452 1,781

Total Net Assets - Beginning of Year 25,119 24,667 22,886

Total Net Assets - End of Year 25,081$ 25,119$ 24,667$

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Revenue from Fares/Ridership


Subway Revenue 2,176$ 2,030$ 1,947$ 146$ 83$Bus Revenue 802 772 775 30 (3)Expired Fare Media Revenue 39 44 29 (5) 15Paratransit Revenue 12 9 8 3 1Total Revenue from Fares 3,029$ 2,855$ 2,759$ 174$ 96$Total Ridership (millions) 2,378 2,306 2,245 72 61Non-Student Average Fare 1.33$ 1.29$ 1.29$ 0.04$ -$

2008 versus 2007Total revenue from fares was $3,029 in 2008, an increase of $174, or 6.1%. This increase reflectsincreased fares (effective March 2, 2008) and additional ridership (mostly subways), due to a strong localeconomy during early 2008. Total ridership from fares was 2,378, the highest annual ridership since1965, and an increase of 72 or 3.1% above 2007. Subway ridership was 1,624, an increase of 61 or3.9% above 2007, and the highest subway ridership since 1950.

Fare evasion (turnstile/gate evasion) was estimated to be 0.32% in 2008, 0.32% in 2007 and 0.33% in2006. This is an improvement from 1996, when fare evasion was estimated to be 1.45% and from the1991 high of 5.91%.

2007 versus 2006Total revenue from fares was $2,855 in 2007, an increase of $96, or 3.5%. This increase was primarilydue to subway ridership growth, mostly caused by a strong local economy. Additionally, expired faremedia revenue increased due mostly to reduced MetroCard fare evasion losses and increased MetroCardusage from NYCT and other transit system ridership increases. Total ridership from fares was 2,306, thehighest annual ridership since 1969, and an increase of 61 or 2.7% above 2006. Subway ridership was1,563, an increase of 64 or 4.2% above 2006, and the highest subway ridership since 1951.

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Operating Expenses, by Major Function


Salaries and Wages 3,001$ 2,894$ 2,758$ 107$ 136$Health and Welfare 455 398 368 57 30Pensions 686 596 393 90 203Other Fringe Benefits 277 242 195 35 47Postemployment Benefits other than Pensions 1,261 1,202 213 59 989Traction and Propulsion Power 165 161 147 4 14Fuel for Buses and Trains 183 124 120 59 4Fuel & Power for Support Services 91 79 72 12 7Insurance 42 37 34 5 3Public Liability Claims 63 71 24 (8) 47Paratransit Service Contracts 299 233 184 66 49Maint. & Other Oper. Expenses 131 107 122 24 (15)Professional Service Contracts 95 81 85 14 (4)Pollution Remediation Projects 16 - - 16 -Materials and Supplies 302 291 275 11 16Depreciation 1,122 1,061 1,012 61 49Other Expenses 42 41 37 1 4Reimbursed Overhead Expenses (185) (168) (168) (17) -

Total Operating Expenses 8,046$ 7,450$ 5,871$ 596$ 1,579$

2008 versus 2007Total operating expenses increased by $596, or 8.0% compared to 2007 as follows:

Salaries & wages exceeded 2007 by $107, or 3.7%, mostly due to wage increases averaging between3.0% and 3.5%, and increased headcount.

Health & welfare expenses increased by $57, or 14.3%, primarily due to increased rates for health &welfare plans and increased headcount.

Pension expenses increased by $90, or 15.1%, primarily due to higher costs based upon current actuarialvaluations.

Other fringe benefit expenses increased by $35, or 14.5%, mostly due to Workers’ Compensation reserveadjustments based upon significant medical cost increases and legislative changes affecting pay-outrates and NY State reimbursements.

Post Employment Benefits Other than Pension expenses increased by $59, or 4.9% consistent withactuarial requirements.

Total energy costs (power and fuel) increased by $75, or 20.6%, mostly due to higher prices.

Paratransit service contract expenses increased by $66, or 28.3%. This result was mainly due to highertransportation costs, which were affected by contractual CPI rate adjustments, increased trip volume andthe impact of new contract costs.

Maintenance & other operating expenses increased by $24 or 22.4%, largely due to increased chargesfor painting contracts, operating/facility maintenance and repair services, water and sewage and refuseand recycling.

Depreciation expenses increased by $61 or 5.7%, due to the capitalization of capital projects reachingbeneficial use in 2008 including projects for station rehabilitations, subway cars, track and structures andsignals/communications.

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2007 versus 2006Total operating expenses increased by $1,579, or 26.9% versus the prior year, including in 2007 $991 ofpost-employment benefits other than pensions (post-2007 retiree health & welfare accrued expenses)based upon adoption of GASB Statement No. 45 in 2007. Excluding this amount, total operatingexpenses increased by $588, or 10.0% as follows:

Salaries & wages exceeded 2006 by $136, or 4.9%, largely due to wage increases averaging between3.0% and 4.0%, additional overtime requirements, and increased headcount levels mostly in support ofcustomer safety and satisfaction pilot programs and subway car maintenance programs.

Health & welfare expenses increased by $30, or 8.2%, primarily due to increased rates for health &welfare plans, partly offset by employee health & welfare contributions established in recent laborcontracts, which totaled $33 in 2007.

Pension expenses increased by $203, or 51.7%, due primarily to higher costs based upon currentactuarial valuations and a favorable 2006 non-recurring NYCERS pension adjustment of $120.

Other fringe benefit expenses increased by $47, or 24.1%, due mostly to a Workers’ Compensationreserve adjustment based upon current actuarial information and increased medical costs.

Total energy costs (power and fuel) increased by $25, or 7.4%, due mainly to higher prices.

Public liability claims expenses of $71 in 2007 were based upon the yearly actuarial review of currentclaims data. The increase of $47, year over year, is attributable to a $35 reduction in reserve amountsrequired at the end of 2006.

Paratransit service contract expenses increased by $49, or 26.6%, driven mainly by higher trip volumeand a decrease in productivity. The productivity decrease resulted from the addition of six new vendorsto help meet increased capacity requirements. For control purposes, these new vendors were onlyassigned trips within given boroughs, leaving the longer and more time-consuming inter-borough trips tothe eight primary vendors. It is anticipated that new carrier awards to be made in August, 2008 willprovide for more balanced and productive trip assignments.

Maintenance & other operating expenses decreased by $15 or 12.3%, due largely to lower expenses forfacility and operating maintenance/repairs, refuse and recycling, and real estate rental costs.

Materials & supplies increased by $16 or 5.8%, due mostly to additional requirements for subway/busfleet maintenance and safety and elevator & escalator equipment.

Depreciation expenses increased by $49 or 4.8%, due to the capitalization of capital projects reachingbeneficial use in 2007, including mainly projects for signals/communications, station rehabilitations andsubway cars.

Nonoperating Revenues and Expenses

The Authority receives a variety of tax-supported subsidies from New York State and New York City.These subsidies represent corporate franchise, sales, energy, mortgage recording and real estate taxesand are impacted by the strength of the State and City economies and prevailing interest rates.

Operating assistance subsidies from New York State and New York City have been maintained at thesame level each year.

The Triborough Bridge & Tunnel Authority, another affiliate of the MTA, distributes to the Authority eachyear funds that vary based upon its operating surplus.

Capital contributions from the MTA of $2,374 in 2008 and $2,003 in 2007 represent capital programfunding from several sources including bonds, Federal, State and City funding.

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Changes in Net Assets

The change in net assets represents the net total of capital contributions, operating losses andnonoperating income. Net assets decreased by $38 in 2008, due to operating losses, mostly offset bycapital contributions and nonoperating income. The net assets increased by $452 in 2007, due to capitalcontributions, mostly offset by increased operating losses primarily from the recording of post-employment benefits other than pensions based upon adoption of GASB Statement No. 45.

Budget Highlights

Total farebox revenue in 2008 was $3,029, $46, or 1.5% over budget, primarily due to increased subwayrevenue of $48, or 2.3%. This increase was largely due to increased ridership driven by a strong localeconomy during early 2008.

Total Operating expenses in 2008 were $8,046, over budget by $148, or 1.9%. Labor-related expenseswere $5,494, an overrun of $98, or 1.8%. This result was largely due to increased Workers’Compensation reserve adjustments, based upon the most recent actuarial evaluation of outstandingclaims, and additional MaBSTOA pension expenses, consistent with recent actuarial assumptions. Non-labor expenses of $2,553 exceeded budget by $50, or 2.0%, primarily due to increased bus fuel pricesand paratransit overruns, primarily due to higher contractual CPI rate adjustments, increased trip volumeand the impact of new contract costs.

GOVERNMENT’S OVERALL FINANCIAL POSITION, RESULTS OF OPERATIONS AND IMPORTANTECONOMIC CONDITIONS

Important Economic Conditions

Metropolitan New York is the most transit-intensive region in the United States. A financially sound andreliable transportation system is critical to the region’s economic well-being.

The continued contraction of the economy in Metropolitan New York and the nation has causedsignificant deterioration in MTA/New York City Transit’s finances. Primary areas of deterioration includestate tax revenues, real estate taxes, escalating debt service costs, falling ridership and the need toincrease pension contributions to address losses in pension funds.

Results of Operations and Overall Financial Position

The year 2008 ended in a difficult cash position.

The Authority’s 2009 Adopted Budget and the February 2009 Financial Plan project significant budgetgaps due mostly to the economic-driven deteriorations outlined above in “Important EconomicConditions”. In order for the Authority to balance the 2009 Adopted Budget as required by law, theAdopted Budget also includes significant fare increases and Additional Actions for Budget Balance(AABB), including several service reductions. While these gap closing actions were adopted by the MTABoard in December, it is hoped that external actions can obviate the need for some portion of the fareincrease and potentially reduce the level of AABB. A New York State-sponsored commission, chaired byformer MTA Chairman Richard Ravitch, has recommended new revenue sources (a regional payroll taxand a toll on bridge crossings within New York City) dedicated to MTA. However, implementation of theRavitch Commission’s recommendations requires action by the State Legislature. As of this writing, itremains uncertain what combination of new revenue sources, fare increases and expense reductions willbe adopted.

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SIGNIFICANT CAPITAL ASSET ACTIVITY

Capital Program

The Authority's portion of the current MTA Capital Program for 2005-2009 totals $11.2 billion. As ofDecember 31, 2008, $8.0 billion has been committed under the five-year plan, of which $3.5 billion hasbeen expended. Funding for the Capital Program comes mostly from new money bonds, federal grants,the New York State voter approved State-Wide Transportation Bond Act, bonds supported by new Statetaxes and fees, City capital funding and other sources.

Among the projects in the 2005-2009 Transit Capital Program are the following: normal replacement of1,002 B Division Subway Cars; fleet growth of 23 A Division Cars; the purchase of 1,357 new buses,including 1,121 standard, 10 articulated and 226 express buses; the purchase of 1,387 new paratransitvehicles; rehabilitation of 25 stations; replacement of 23 escalators; replacement of 53.4 miles of mainlinetrack and 153 mainline switches; signal modernization; communications improvements and improvementsto shops, yards, and depots.

CURRENTLY KNOWN FACTS, DECISIONS, OR CONDITIONS

Final identification and implementation of the actions necessary to balance the 2009 Adopted Budget isan immediate priority.

Funding of the capital program is dependant on the MTA’s ability to secure funding from the Federal,State and City governments as well as the municipal bond market, in light of current credit marketdifficulties.

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New York City Transit AuthorityConsolidated Balance SheetsDecember 31, 2008 and 2007(in thousands)

See accompanying notes to consolidated financial statements.

2008 2007

Assets

Current assets:Cash (note 3) 33,435$ 34,281$MTA Investment Pool (note 4) 450,159 740,336Receivables:

Billed and unbilled charges due from New York City 23,944 28,017Accrued subsidies 17,692 81,075Due from MTA and constituent Authorities 347,761 458,494Other 57,417 56,340Less allowance for doubtful accounts (17,422) (18,179)

Net receivables 429,392 605,747

Materials and supplies 201,602 190,778Deferred pension asset 44,570 46,003Prepaid pension expense (note 6) - 100,000Prepaid expenses and other current assets 23,170 25,741

Total current assets 1,182,328 1,742,886

Due from MTA for purchase of capital assets 394,697 558,191Capital assets, net of accumulated depreciation (note 5) 28,040,711 26,157,964Leased property under capital lease, net of accumulated

amortization (note 5) 90,778 93,190Leasehold improvements on property, net of accumulated

depreciation (note 5) 155,811 172,593Deferred expenses related to issuance of debt 19,655 21,506Restricted deposits and other escrow funds 995 902

Total assets 29,884,975$ 28,747,232$

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New York City Transit AuthorityConsolidated Balance SheetsDecember 31, 2008 and 2007(In thousands)


2008 2007

Liabilities and Net Assets

Current liabilities:Bank overdrafts payable 62,022$ 51,059$Accounts payable 131,554 117,744Accrued expenses:

Salaries, wages, and payroll taxes 122,896 124,235Vacation, sick pay and other benefits 530,321 517,240Retirement and death benefits (note 6) 250,871 223,325Estimated liability arising from injuries to persons (note 12) 129,871 121,448Pollution remediation projects (note 13) 8,672 5,068Other 96,959 106,454

Total accrued expenses 1,139,590 1,097,770

Due to MTA for repayment of debt, current portion (note 8) 8,405 6,368Unredeemed farecards and tokens 226,555 201,743Deferred subsidy revenue 6,885 6,885

Total current liabilities 1,575,011 1,481,569

Due to MTA for repayment of Certificates of Participation (note 8) 236,222 247,627Obligations under capital lease, long-term (note 5) 142,962 138,572Postemployment benefits other than pensions (note 7) 2,017,801 991,330Estimated liability arising from injuries to persons (note 12) 787,810 736,715Pollution remediation projects (note 13) 34,687 22,515Other long-term liabilities 8,804 9,319Restricted deposits and other escrow funds 995 902

Total liabilities 4,804,292 3,628,549

Net assets:Invested in capital assets, net of related debt 27,899,711 26,031,180Restricted - -Unrestricted (2,819,028) (912,497)

Total net assets 25,080,683 25,118,683

Commitments and contingencies - -

Total liabilities and net assets 29,884,975$ 28,747,232$

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New York City Transit AuthorityConsolidated Statements of Revenues, Expenses and Changes in Net AssetsYears Ended December 31, 2008 and 2007(In thousands)


2008 2007Revenues:Operating revenues:

Rapid transit 2,176,131$ 2,030,025$Surface transit 802,282 772,260Expired fare media 39,364 43,580Paratransit fares 11,618 9,494School, elderly, and paratransit reimbursement 183,704 206,039Advertising and other 107,797 97,896

Total operating revenues 3,320,896 3,159,294

Expenses:Operating expenses:

Salaries and wages 3,000,606 2,894,315Health and welfare 454,957 398,530Pensions 685,758 595,729Other fringe benefits 276,606 241,471Postemployment benefits other than pensions 1,261,000 1,201,677Traction and propulsion power 165,465 160,554Fuel for buses and trains 183,398 124,378Fuel and power for support services 91,108 79,016Insurance 42,382 37,252Public liability claims 63,411 71,357Paratransit service contracts 299,013 233,170Maintenance and other operating expenses 130,899 107,284Professional service contracts 94,834 80,527Environmental remediation 15,802 -Materials and supplies 302,838 291,480Depreciation 1,121,757 1,061,085Other expenses 41,567 40,691Reimbursed overhead expenses (185,158) (168,620)

Total operating expenses 8,046,243 7,449,896

Operating loss (4,725,347) (4,290,602)

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New York City Transit AuthorityConsolidated Statements of Revenues, Expenses and Changes in Net AssetsYears Ended December 31, 2008 and 2007(In thousands)


2008 2007Nonoperating revenues:Tax-supported subsidies:

New York State 1,435,848 1,369,915New York City 459,796 893,697

Operating Assistance subsidies:New York State 158,672 158,672New York City 158,672 158,672

Triborough Bridge and Tunnel Authority 120,260 156,474Less: Amounts provided to Staten Island Rapid Transit

Operating Authority (4,542) (4,244)

Total nonoperating revenues 2,328,706 2,733,186

Interest expense (24,733) (28,760)Interest income and other nonoperating revenues 9,087 35,099

Total nonoperating income 2,313,060 2,739,525

Loss before capital contributions (2,412,287) (1,551,077)

Capital contributions 2,374,287 2,003,224

Change in net assets (38,000) 452,147

Net assets:Beginning of year 25,118,683 24,666,536

End of year 25,080,683$ 25,118,683$

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New York City Transit AuthorityConsolidated Statements of Cash FlowsYears Ended December 31, 2008 and 2007(In thousands)


2008 2007

Cash flows from operating activities:Cash received from passengers, tenants, advertisers,

and others 3,334,566$ 3,217,748$Cash payments for payroll and related employee costs (4,262,182) (4,200,368)Cash payments to suppliers for goods and services (1,429,211) (1,249,291)

Net cash used in operating activities (2,356,827) (2,231,911)

Cash flows from noncapital financing activities:Subsidies received 2,475,962 2,717,830Working Capital Loan from MTA 60,000 -Cash transferred to refund employee pension contributions (18,829) -Cash transferred to GASB OPEB fund - (26,832)Increase (decrease) in bank overdraft 10,963 (38,553)

Net cash provided by noncapital financing activities 2,528,096 2,652,445

Cash flows from capital and related financing activities:Cash paid for MTA bond defeasance - (135,870)Principal payments (8,405) (6,368)Interest paid (10,444) (14,837)Payments on MTA Transportation bonds issued to fund

capital assets (691,715) (543,531)Subsidies designated for debt service payments 222,791 207,226Capital project costs incurred for capital program (805,999) (773,348)Cash transferred from / to capital program fund 24,016 (124,682)Reimbursement of capital project costs from MTA 791,392 754,111

Net cash used in capital and related financingactivities (478,364) (637,299)

Cash flows from investing activities:Decrease in MTA Investment Pool 290,177 180,661Interest on investments 16,072 32,876

Net cash provided by investing activities 306,249 213,537

Net decrease in cash (846) (3,228)

Cash at:Beginning of year 34,281 37,509

End of year 33,435$ 34,281$

(Continued)

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New York City Transit AuthorityConsolidated Statements of Cash FlowsYears Ended December 31, 2008 and 2007(In thousands)


2008 2007

Reconciliation of cash flows from operating activities:Operating loss (4,725,347)$ (4,290,602)$Adjustments to reconcile operating loss

to net cash used in operating activitiesDepreciation 1,121,757 1,061,085

Changes in operating assets and liabilities:(Increase) decrease in operating receivables (11,142) 56,845Decrease in prepaid expenses and other current assets 2,571 2,500Decrease (increase) in prepaid/deferred pension expense/asset 101,433 (86,036)Increase in materials and supplies (10,824) (20,134)Increase in farecard and token liability 24,812 1,609Decrease in accrued salaries, wages and payroll taxes (1,339) (45,783)Decrease in accounts payable and other accrued liabilities (1,140) (17,726)Increase in accrued vacation, sick pay and other benefits 13,081 21,909Increase in accrued retirement and death benefits 27,546 47,400Increase in postemployment benefits other than pensions 1,026,471 991,330Increase in estimated liability arising from injuries to persons 59,518 45,692Increase in liability for environmental pollution remediation 15,776 -

Net cash used in operating activities (2,356,827)$ (2,231,911)$

Supplemental schedule of noncash capital and relatedfinancing activities:

Fair value of assets contributed 1,851,247$ 1,459,714$

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New York City Transit AuthorityNotes to Consolidated Financial StatementsDecember 31, 2008 and 2007

1. Financial Statements

Reporting Entity

The accompanying consolidated financial statements include the accounts of the New York CityTransit Authority (Transit Authority), and its subsidiary, the Manhattan and Bronx Surface TransitOperating Authority (MaBSTOA) (collectively, the Authority), which are public benefit corporationscreated pursuant to the Public Authorities Law (the Act) of the State of New York (the State) tooperate public subway and bus services within The City of New York (the City).

MaBSTOA is a subsidiary of the Transit Authority and, therefore, the financial results of MaBSTOAare combined with those of the Transit Authority in the consolidated financial statements. TheMaBSTOA Pension Plan (the Plan) is not a component unit of the Transit Authority, in accordancewith Governmental Accounting Standards Board (GASB) Statement No. 14, The FinancialReporting Entity, and, therefore, the financial results of the Plan are not included in the Authority’sconsolidated financial statements.

The Authority has material transactions with affiliated agencies included in the MetropolitanTransportation Authority (MTA) financial reporting group. Such agencies include the MTA,Triborough Bridge and Tunnel Authority (TBTA), Metro North Commuter Railroad (MNCR), LongIsland Rail Road (LIRR), Metropolitan Suburban Bus Authority (MSBA or LIB), and the StatenIsland Rapid Transit Operating Authority (SIRTOA).

The Authority is a part of the financial reporting group of the MTA and is included in the combinedfinancial statements of the MTA in accordance with GASB Statement No. 14. The MTA is acomponent unit of the State and is included in the State of New York Comprehensive AnnualFinancial Report of the State Comptroller as a public benefit corporation.

In July 2003, the MTA Capital Construction Company was created by action of the MTA Board ofDirectors as a public benefit corporation subsidiary of the MTA under section 1266(s) of the PublicAuthorities Law. The mission of this new subsidiary company is to plan, design and constructcurrent and future major MTA system expansion projects. Projects currently underway, include allactivities associated with the Long Island Rail Road East Side access, the Number 7 LineExtension, the Lower Manhattan Fulton Transit Center, the new South Ferry station complex,system-wide capital Security Projects, and the Second Avenue Subway, which are consolidatedunder the management of the MTA Capital Construction Company.

In December of 2004, MTA Bus Company (“MTA Bus”) was created as a public benefit corporationsubsidiary of the MTA specifically to operate certain City bus routes. These routes are currentlyoperated by MTA Bus and not by the Authority. All material transactions between MTA Bus andthe Authority have been properly recorded as of December 31, 2008.

Operations

Operations are conducted pursuant to leases with the City which expired on November 1, 1989,except that the terms of the leases continue so long as any financing agreement between theAuthority and the MTA and any MTA Transportation Revenue Bonds remain outstanding (seenote 8). The City has the option to terminate the leases at any time. In the event of termination,the City is required to assume the assets and liabilities of the Authority and must pay or makeprovision for the payment of any debt incurred pursuant to financing agreements of the Authority.

Substantial operating losses (the difference between operating revenues and expenses) result fromthe essential services that the Authority provides; such operating losses will continue in the

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foreseeable future. To meet the funding requirements of these operating losses, the Authorityreceives subsidies from:

a. The State, in the form of annual subsidies of special State and regional tax revenues,operating assistance, and reimbursement of certain expenses;

b. The City, in the form of operating assistance, tax revenues, and reimbursement of certainexpenses; and

c. An affiliated agency (TBTA), in the form of a portion of its operating surplus.

The New York State Public Authorities Law and the financing agreement between the Authority andthe MTA provide that the Authority shall establish fares, tolls, and other fees for the use of itsfacilities as may be necessary to maintain its combined operations on a self-sustaining basis asdefined in such law. It is the opinion of management that the Authority is in compliance with theserequirements. The Authority is not liable for real estate taxes, franchise taxes, or sales taxes onsubstantially all of its purchases or other excise taxes on its properties.

Capital Financing


The MTA has ongoing programs on behalf of the Authority and other affiliated agencies, subject toapproval by the New York State Metropolitan Transportation Authority Capital Program ReviewBoard (the State Review Board), which are intended to improve public transportation in the NewYork Metropolitan area. The 1992-1999 Capital Program (the Capital Program) totaled $18.1billion, of which the Authority’s portion amounted to $12.7 billion. The Capital Program is, and isexpected to continue to be, funded by federal capital grants, City capital funds, MTA bonds securedby system revenues and other sources, bonds issued and to be issued by the TBTA, proceedsfrom the sale of tax benefits on leasing transactions, and by direct transfers of operating budgetrevenues raised expressly for the purpose of supporting the Capital Program.

At December 31, 2008, $12.7 billion has been committed to Authority projects from the 1992-1999approved plan, of which approximately $12.6 billion has been expended.


The 2000-2004 Capital Program, which was approved by the State Review Board in May 2000,provided for $17.1 billion in capital expenditures, of which the Authority’s portion was $10.3 billion.In May and December of 2002, the MTA Board approved amendments to the program reflectingchanges to budgets, schedules, funding and added to the infrastructure and facilities securityprograms. In December 2003, the MTA Board approved a general update to the plan toincorporate changes and authorized its submission to the MTA Capital Program Review Board(CPRB). In January 2004, the MTA Board approved a further modification to that program tosupport the accelerated purchase of additional commuter railcars. In December 2004, the MTABoard approved an amendment that incorporated the creation of the MTA Bus Company, andincluded additional funding from the City for the #7 Extension design work, as well as additionalsecurity grant funding. In December 2005, the MTA Board approved an amendment that increasedthe overall capital program total to $19.9 billion, of which the Authority’s share was $10.2 billion.This amendment included additional federal funds for the Fulton Street Transit Center, South FerryStation, a new Bus Depot on Staten Island and CCTV installation in NYCT stations. InDecember 2006, the MTA Board approved an amendment that increased the overall capitalprogram total to $21.2 billion, of which the Authority’s share was increased to $10.5 billion. Among

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the projects included in the 2000-2004 Transit Capital Program and subsequent amendments arethe following: rebuilding the 1/9 line track and structures destroyed by the September 11, 2001attacks on the World Trade Center, design and initiation of construction of the full-length SecondAvenue Subway, acquisition of 1,210 new subway cars, replacing 927 existing cars and expandingthe fleet by 283 cars, acquisition of 1,005 new buses, including 135 CNG buses, rehabilitation of 70stations, provision of full Americans with Disability Act (ADA) accessibility at 23 stations,replacement of 20 escalators at various stations, replacement of approximately 42 miles ofmainline track, signal modernization, communications improvements, and improvements to shops,yards, and depots.

The combined funding sources for the 2000-2004 Capital Program are comprised of $7.9 billion innew money bonds, $6.5 billion in federal funds, $4.6 billion from debt restructuring, $0.5 billion inCity capital funding, $0.2 billion from sale and leasing of assets and $1.5 billion from other sources.

As part of the 2000-2004 Capital Program, the MTA, the TBTA and the Authority have refundedand defeased substantially all of their outstanding debt and consolidated most of their existingcredits.



The MTA Capital Program for 2005-2009 was approved by the CPRB in July 2005 and amended inJuly 2006. The 2005-2009 Program, as approved, provided for $20.1 billion in capitalexpenditures, of which the Authority’s share is $11.2 billion. In February 2007, the MTA Boardfurther amended the Program to add $1.2 billion of Federal East Side Access Full Funding GrantAgreement (FFGA) funds to the East Side Access project, which relates to the Capital ConstructionCompany’s capital program. In July 2008, the MTA Board further amended the Program to add anadditional $267 million of Federal East Side Access FFGA funds and $764 million in FederalSecond Avenue Subway FFGA funds relating to the Capital Construction Company’s capitalprogram. Also included in this amendment were the rollover of unused LaGuardia Airport Projectfunds from the 2000-2004 Capital Program and other miscellaneous funding adjustments.

The 2005-2009 Capital Program is designed to continue a program of capital expenditures thatwould support on-going maintenance and provide needed improvements to enhance services to itscustomers. The 2005-2009 Capital Program, including the July 2008 amendment noted above,totals $23.7 billion, of which the Authority’s share remains at $11.2 billion. The Authority’s portionof the capital program excludes $7.4 billion of approved capital projects managed by the MTACapital Construction Company on behalf of the Transit Authority and the Long Island Rail Road.Among the projects in the 2005-2009 Transit Capital Program are the following: normalreplacement of 1,002 B Division Cars, fleet growth of 23 A Division Cars, the purchase of 1,357new buses including 1,121 standard, 10 articulated and 226 express buses, the purchase of 1,387new paratransit vehicles, rehabilitation of 25 stations, replacement of 23 escalators, replacement of53.4 miles of mainline track and 153 mainline switches, signal modernization, communicationsimprovements, and improvements to shops, yards, and depots.

The combined funding sources for the 2005-2009 Capital Program are comprised of $4.3 billion innew money bonds, $8.9 billion in federal funds, $1.5 billion from the New York State voterapproved State-Wide Transportation Bond Act, $5.1 billion of Bonds supported by $350 million peryear in new State taxes and fees, $2.5 billion in City capital funding, and $1.4 billion from othersources.

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2. Accounting Policies

Basis of Accounting

In accordance with GASB Statement No. 20, Accounting and Financial Reporting for ProprietaryFunds and Other Governmental Entities That Use Proprietary Fund Accounting, the Authorityapplies all applicable GASB pronouncements, as well as all Financial Accounting Standards Board(FASB) Statements and Interpretations issued on or before November 30, 1989 that do not conflictwith GASB pronouncements. Subsequent to November 30, 1989, the Authority exclusively appliesall applicable GASB pronouncements.

These financial statements have been prepared on the accrual basis of accounting in accordancewith accounting principles generally accepted in the United States of America.

Recent Accounting Pronouncements

Effective January 1, 2008, pollution remediation costs are being expensed in accordance with theprovision of GASB Statement No. 49, Accounting and Financial Reporting for PollutionRemediation Obligations (see note 13). An operating expense provision and corresponding liabilitymeasured at current value using the expected cash flow method has been recognized for certainpollution remediation obligations, which previously may not have been required to be recognized,have been recognized earlier than in the past or are no longer able to be capitalized as acomponent of a capital project. Pollution remediation obligations occur when any one of thefollowing obligation events takes place: the Authority is in violation of a pollution prevention-relatedpermit or license; an imminent threat to public health due to pollution exists; the Authority is namedby a regulator as a responsible or potentially responsible party to participate in remediation; theAuthority voluntarily commences or legally obligates itself to commence remediation efforts; or theAuthority is named or there is evidence to indicate that it will be named in a lawsuit that compelsparticipation in remediation activities.

GASB Statement No. 50, Pension Disclosures, an amendment to GASB Statement No. 25 andNo. 27, which more closely aligns financial reporting requirements for pensions with that of otherpostemployment benefits (OPEB) has been adopted by the Authority for the fiscal year endedDecember 31, 2008. See note 6 for detailed information.

Net Assets

The Authority follows the “business type” activity requirements of GASB 34, Basic FinancialStatements and Management’s Discussion and Analysis for State and Local Governments whichrequires that resources be classified for accounting and reporting purposes into the following threenet asset categories:

� Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciationand outstanding principal balances of debt attributable to the acquisition, construction orimprovement of those assets.

� Restricted:

Nonexpendable – Net assets subject to externally imposed stipulations such that the Authoritymaintains them permanently. For the years ended December 31, 2008 and 2007, theAuthority did not have nonexpendable net assets.

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Expendable – Net assets whose use by the Authority is subject to externally imposedstipulations that can be fulfilled by actions of the Authority pursuant to those stipulations or thatexpire with the passage of time.

� Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestrictednet assets may be designated for specific purposes by actions of management or the Board ofDirectors or may otherwise be limited by contractual agreements with outside parties.

Subsidies

The Authority receives subsidies from various sources, including the State and the City. In general,these subsidies are subject to annual appropriations by the governmental units and periodicapproval of the continuation of the taxes supporting the subsidies.

The principal funding sources for the Authority are as follows:

Operating Assistance Appropriations and Grants

The Authority receives, subject to annual appropriations, State and City operating assistancefunds. The funds received under the State transit operating assistance program are fully matchedby contributions from the City. State and City operating assistance subsidies are recognized asnon-operating revenue in the amount of the respective annual appropriation when suchappropriation becomes effective.

Triborough Bridge and Tunnel Authority

The New York State Public Authorities law requires the TBTA to transfer its annual operatingsurplus, as defined, to the Authority and the MTA. The initial $24 million of the operating surplus isprovided to the Authority and the balance is divided equally between the Authority and the MTA.However, the amounts transferred to the Authority and the MTA are net of a provision for debtservice on TBTA bonds issued to finance the acquisition of facilities under their respective portionsof the Capital Program. For the years ended December 31, 2008 and 2007, $243.7 million and$220.3 million, respectively, were paid from the operating surplus of the TBTA to satisfy theAuthority’s portion of debt service requirements.

Mortgage Recording Taxes

Under New York State law, the MTA receives operating and capital assistance from the StateMortgage Recording Tax, which is collected by the City and the seven counties within the MTAtransportation region, at the rate of three-tenth of 1% of the debt secured by certain real estatemortgages. Such legislation governs the use of the funds from this revenue source whereby theproceeds of this tax are first used by the MTA to meet the operating costs of the MTAheadquarters, with the remaining funds allocated 55% to the Authority and 45% to the commuterrailroads for their capital and operating needs. The Authority recognizes such sources of fundswhen designated by the MTA for the Authority’s use. The portion of this subsidy attributable to theAuthority is reported in “tax-supported subsidies: New York State” in the accompanyingconsolidated statements of revenues, expenses and changes in net assets. The Authority recordsthe portion of its State Mortgage Recording Tax subsidy which funds principal and interestpayments on long-term debt, net of investment earnings on unexpended proceeds, used toconstruct capital assets as capital contributions.

In addition, the State designated for the MTA’s use an additional mortgage recording tax (theAdditional Mortgage Recording Tax) of one-quarter of 1% of mortgages secured by real estateimproved or to be improved by structures containing one to six dwelling units in the MTA

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transportation region. The funds from this additional tax are available, after satisfying debt servicerequirements, to meet the capital and operating needs of the Authority and the commuter railroadsto be disbursed at MTA’s discretion.

No funds from the Additional Mortgage Recording Tax were disbursed to the Authority in 2008 and2007.

The Authority receives operating assistance directly from the City through the City MortgageRecording Tax at the rate of five-eighths of 1% of the debt secured by certain real estatemortgages and through the Real Property Transfer Tax at the rate of 1% of certain properties’assessed value (collectively referred to as Urban Tax Subsidies). These Urban Tax Subsidies arereflected in tax supported subsidies: New York City, in the accompanying consolidated statementsof revenues, expenses and changes in net assets. These funds are recognized as revenue, basedupon the reported amount of taxes collected by the City from underlying transactions, within theAuthority’s fiscal year.

New York State Regional Mass Transit Taxes

The Authority receives, subject to annual appropriations, revenues from taxes enacted by the Statelegislature from various taxing sources.

In 1980, the State enacted a series of taxes, portions of which are deposited in the Metro MassTransportation Operating Account (MMTOA), to fund the operating deficits of State masstransportation systems. MMTOA taxes currently include a business privilege tax imposed onpetroleum business in the State, a one-quarter of 1% sales and use tax on certain personalproperty and services, a corporate franchise tax imposed on transportation and transmissioncompanies, and a temporary franchise tax surcharge on certain corporations, banks, insurance,utility, and transportation companies attributable to business activity carried on in the State.MMTOA taxes are subject to annual appropriation, availability of sufficient tax collections, anddetermination of operating need by the State for the MTA. They are recognized as revenue in theamount of the annual appropriation when such appropriation becomes effective.

Under New York State law, subject to annual appropriation, the MTA receives operating and capitalassistance through a portion of petroleum business tax receipts, certain motor fuel taxes, andcertain motor vehicle fees, which are collected by the State. Such assistance is required by law tobe allocated, after provision for debt service on any bonds secured by such taxes, 85% to theAuthority and 15% to the commuter railroads for their operating and capital needs. MTA DedicatedTax Fund Bonds (DFT Bonds) are secured by certain petroleum business tax receipts. TheAuthority recognizes such sources of funds when designated by the MTA for the Authority’s use. Aportion of the petroleum business tax receipts collected by the MTA is used to satisfy the debtservice requirements for the DTF Bonds and is recorded as capital contributions.

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The composition of New York State tax-supported subsidies for 2008 and 2007 is as follows:

2008 2007Accrued AccruedRevenue Revenue

Petroleum business tax* 305,728$ 300,331$Metro mass tax 1,102,167 1,016,602Mortgage recording taxes 27,953 52,982

1,435,848$ 1,369,915$

(In thousands)

*Net of $222,791 and $207,226 for debt service payments in 2008 and 2007, respectively.

Paratransit

Pursuant to an agreement between the City and the MTA, the Authority, effective July 1, 1993,assumed operating responsibility for all paratransit service required by the Americans withDisability Act of 1990. Services are provided by private vendors under contract with the Authority.The City reimburses the Authority for the lesser of 33% of net paratransit operating expensesdefined as labor, transportation, and administrative costs less fare revenues and 6% of gross urbantax proceeds as described above, or an amount that is 20% greater than the amount paid by theCity for the preceding calendar year. Fare revenues and the City reimbursement aggregatedapproximately $93.5 million in 2008 and $111.8 million in 2007. Total paratransit expenses,including paratransit service contracts, were $366.2 million and $282.3 million in 2008 and 2007,respectively.

Reimbursement of Expenditures

Engineering and labor costs incurred by the Authority for capital projects are reimbursed under thecapital program by the MTA to the extent that they relate to approved expenditures applicable tocapital projects primarily initiated after April 1, 1982. They are reimbursed by the City to the extentthey relate to amounts approved for prior projects. In 2008 and 2007, reimbursements were nettedagainst gross operating expenses on the consolidated statements of revenues, expenses andchanges in net assets.

Fare and Service Reimbursement from the State and City

The City no longer fully reimburses the Authority for costs of the free fare program for students;however, pursuant to a 1995 agreement with the State and the City, the Authority continued thestudent program beginning with the 1995-1996 school year, with the State and the City eachagreeing to pay $45 million per annum. The State, however, reduced its $45 million contribution forthe 2007-2008 school year by approximately $2.0 million to $43 million, which was received in2008. The estimated cost of this program is approximately $179 million for the 2008-2009 schoolyear. It is believed the City will continue to provide for the continuation of the City’s $45 millioncontribution for the 2008-2009 school year, of which $15 million was received in December 2008.The Authority’s approved 2009 Adopted Budget assumes that the remaining $30 million from theCity will be received in 2009. It also assumes that the State’s full $45 million for the 2008-2009school year will be received in 2009. The Authority’s 2010-2012 Financial Plan assumes thecontinuation of the joint funding of the free fare program for students.

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Prior to April 1995, the City was obligated to reimburse the Authority for the transit police force. Asa result of the April 1995 merger of the transit police force into the New York City PoliceDepartment, the City no longer reimburses the Authority for the costs of policing the Transit Systemon an ongoing basis since policing of the Transit System is being carried out by the New York CityPolice Department at the City’s expense. The Authority continues to be responsible for certaincapital costs and support services related to such police activities, a portion of which is reimbursedby the City. The Authority received approximately $3.8 million in 2008 and $4.2 million in 2007 forthe reimbursement of transit police costs. In addition, $0.9 million was received in January 2009for calendar 2008.

Due from MTA and Constituent Authorities

Due from MTA and constituent Authorities consists of reimbursements due from the MTA CapitalProgram for billed and unbilled charges relating to capital projects, farecards and intercompanyoperating receivables, payables, and inter-agency loan transactions.

Prepaid Expenses and Other Current Assets

The Authority prepaid $12.4 million to the New York State Health Insurance Plan (NYSHIP) and$10.5 million for insurance coverage during 2008. The Authority prepaid $11.0 million to NYSHIPand $14.3 million for insurance coverage during 2007.

Due from MTA for Purchase of Capital Assets

Due from MTA for purchase of capital assets consists of funds held by the MTA which arerestricted for capital asset acquisitions by the Authority pursuant to the 2002 TransportationRevenue Bond Resolution. This capital program pool is comprised of non-bond proceed fundsderived from safe harbor and sale/leaseback transactions, operating fund transfers, legalsettlements, TBTA bond purchase rights and swap option agreements, and interest earnings onthese pooled funds.

Capital Assets

Capital assets acquired prior to April 1982 were funded primarily by the City, with capital grantsmade available to the Authority. The City has title to a substantial portion of such assets and,accordingly, these assets are not recorded on the books of the Authority. Subsequent acquisitions,which are part of the capital program, are recorded at cost by the Authority. Funding sources forthe acquisition of these capital assets include Federal, State, and City capital grants, grants fromthe Port Authority of New York and New Jersey, the proceeds from the issuance of TransportationRevenue Bonds, and various TBTA bonding and other sources. Capital assets are recorded atcost and are depreciated on a straight-line basis over 25 or 35 years for subway cars, 12 years forbuses, and lives generally ranging from 10 years to 60 years for the other capital assets. Costincludes capitalized interest apportioned to assets during construction. For the purposes of thiscalculation, interest expense is reported net of investment income.

Contributed Capital

Capital assets contributed by the MTA and restricted funds due from the MTA for the purchase ofcapital assets are recorded as capital contributions on the consolidated statements of revenues,expenses and changes in net assets. Contributed capital is recognized upon identification ofcapital costs to be funded by the MTA. Capital contributions for the years ended December 31,2008 and 2007 consist of the following:

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2008 2007

Capital assets contributed by MTA from:

Federal grants 1,585,715$ 996,694$Other than federal grants 1,142,537 1,331,699Capital assets contributed by MTA for WTC disaster

replacement 2,277 11,837Petroleum business taxes received for principal and

interest payments on debt 222,792 207,226Principal and interest payments on MTA Transportation

bonds issued to fund capital assets (410,384) (299,947)Decrease in funds due from MTA for

purchase of capital assets (168,650) (108,415)Extinguishment of debt issued to fund capital assets - (135,870)

Total capital contributions 2,374,287$ 2,003,224$

(In thousands)

Passenger Revenue

Revenues from the sale of farecards are recognized as income as the farecards are used and arereported as operating income.

Materials and Supplies

Materials and supplies are recorded at weighted average cost, net of a reserve for obsolescence.

Staten Island Rapid Transit Operating Authority

The Staten Island Rapid Transit Operating Authority (SIRTOA) is a wholly owned subsidiary of theMTA and provides transportation service on Staten Island. SIRTOA is managed by the Authorityon behalf of the City. The Authority has no responsibility for the operating deficit of SIRTOA. TheAuthority collects, on SIRTOA’s behalf, its share of certain operating assistance subsidiesdetermined by formula, and transfers such subsidies to SIRTOA. The amount of subsidy funds towhich SIRTOA is entitled is recorded as a reduction of the subsidy revenues of the Authority.

Employee Benefits

Pension cost is required to be measured and disclosed using the accrual basis of accounting.Annual pension cost should be equal to the annual required contributions (ARC) to the pensionplan, calculated in accordance with certain parameters.

In 2003, and as a result of the most recent collective bargaining agreement, the Authority assumedresponsibility for providing health benefits to its employees who are members of the TWU Local100, as well as to retirees who were members of the TWU Local 100 and reach normal retirementage while working for the Authority. During 2005, the Authority also began providing healthbenefits for active and retired members of the ATU Local 1056 and Local 726. Previously, thesebenefits were being provided by the TWU and ATU Health Benefits Trusts (the Trusts) with theAuthority required to make monthly contributions to the Trusts on behalf of the participants on a‘pay as you go’ basis. The majority of the benefits provided under the plan are self insured withadministrative services provided by various health insurance companies.

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The Authority has recorded a liability for claims incurred but not reported (IBNR). The liabilityrepresents those estimated future payments that are attributable, under the plan’s provisions, toservices rendered to participants prior to year end. The estimated liability of claims includesbenefits expected to be paid to retired or terminated employees or their beneficiaries and presentemployees or their beneficiaries, as applicable. The estimated liability for claims incurred but notreported or paid is $53.5 million and $46.6 million as of December 31, 2008 and 2007, respectively.

In June 2004, the GASB issued Statement No. 45, Accounting and Financial Reporting byEmployers for Postemployment Benefits Other Than Pensions. This Statement establishesstandards for the measurement, recognition, and display of OPEB expense / expenditures andrelated liabilities (assets), note disclosures, and if applicable required supplementary information(RSI) in the financial reports of state and local governmental employers. In June 2005, GASBissued Statement No. 47, Accounting for Termination Benefits. This Statement establishesaccounting standards for termination benefits. For termination benefits provided through anexisting defined benefit OPEB plan, the provisions of this Statement should be implementedsimultaneously with the requirements of Statement No. 45. The Authority has adopted thesestandards for its Postemployment Benefits Other Than Pensions.

Receivables

Receivables are recorded as amounts due to the Authority, reduced by an allowance for doubtfulaccounts, to report the receivables at their net realizable value.

Reclassifications

Liabilities of $5.1 million and $22.5 million included in other current liabilities and other long-termliabilities in 2007, respectively, were reclassed to pollution remediation projects to be consistentwith 2008 classification.

Accounting Estimates

The preparation of financial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the consolidated financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ from those estimates.

3. Cash

Cash consists of the following at December 31:2008 2007Book Book

Balance Balance

Insured andcollateralized deposits* 4,492$ 4,439$

Less escrow and otherrestricted deposits (1,240) (1,163)

Commercially insured fundson-hand and in-transit 30,183 31,005

33,435$ 34,281$

(In thousands)

*Deposits are insured up to FDIC limits of $250,000 at December 31, 2008.

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The on-hand and in-transit funds consist primarily of passenger revenue funds collected, but notyet deposited.

4. MTA Investment Pool

The MTA, on behalf of the Authority, invests funds which are not immediately required for theAuthority’s operations, in securities permitted by the State Public Authorities Law, includingrepurchase agreements collateralized by U.S. Treasury securities, U.S. Treasury notes, and U.S.Treasury zero coupon bonds. All investments are held by the MTA’s agent, in custody accounts, inthe name of the MTA. The Authority records its position in the Pool based upon a net asset valuederived on assets invested in the Pool plus all realized income and losses earned. Unrealizedappreciation, which is not significant to the Authority, is retained on the MTA’s books and notincluded in the Authority’s financial statements. The Authority’s earnings from short-terminvestments approximated $14.0 million and $33.2 million for the years ended December 31, 2008and 2007, respectively. Approximately $450.2 million and $740.3 million of funds are included inthe MTA investment pool in the consolidated balance sheets for the years ended December 31,2008 and 2007, respectively.

5. Capital Assets

Capital assets, at December 31, consist of the following:

December December2007 Additions 2008

(In thousands)

Subway cars 6,328,053$ 1,006,413$ 7,334,466$Buses 2,068,338 64,026 2,132,364Track and structures 8,281,460 695,048 8,976,508Depots and yards 3,762,714 93,232 3,855,946Stations 6,688,515 1,344,951 8,033,466Signals 3,257,078 407,735 3,664,813Service vehicles 233,413 14,499 247,912Building 169,584 - 169,584Other 2,892,091 214,758 3,106,849Under construction 3,457,586 (858,362) 2,599,224

37,138,833 2,982,300 40,121,132

Less: Accumulated depreciation (10,980,869) (1,099,552) (12,080,421)

26,157,964$ 1,882,748$ 28,040,711$

Capitalized interest totaled $47.1 million and $36.4 million in 2008 and 2007, respectively.

In 1990, the Authority issued approximately $202.8 million of Transit Facility Revenue Bonds,Series 1990 to fund the acquisition of an office building located in Brooklyn, New York. The bondswere subsequently defeased in May 2002 by the MTA Transportation bonds. The property islocated on land owned by the New York City Economic Development Corporation, as trustee forthe City, with whom the Authority has entered into a 99-year ground lease. Rent expense, on acash basis, under the lease for 2008 and 2007, was approximately $566,000 each year.

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Lease Transaction

In July 1998, the MTA, the Authority and TBTA authorized and entered into a lease and relatedagreements whereby each agency, as a subleasee, rents office space at Two Broadway in lowerManhattan. The triple-net-lease has an initial stated term of approximately 50 years, with the rightto extend the lease for two successive 15-year periods at a rental of at least 95% of fair marketrent. Remaining payments under the lease approximate $1.35 billion. Under the subleases, thelease is apportioned as follows: the Authority, 68.7%, MTA, 21%; and TBTA, 10.3%. However, theinvolved agencies have agreed to sub-sublease space from one another as necessary to satisfyactual occupancy needs. The agencies will be responsible for obligations under the lease basedon such actual occupancy percentages. Actual occupancy percentages at December 31, 2008 forthe Authority, TBTA and MTA were 80.6%, 11.3% and 7.9%, respectively. The Authority’ssublease is for a year-to-year term, automatically extended, except upon the giving of anonextension notice by the Authority.

The lease is comprised of both operating and capital elements, with the portion of the leaseattributable to the land recorded as an operating lease, and the portion of the lease attributable tothe building recorded as a capital lease. Operating rent expenses under the Authority’s subleaseamounted to $7.9 million in 2008 and 2007.

Assuming the occupancy percentage at December 31, 2008 will continue, the future minimumlease payments under the Authority’s sublease are as follows:

Year Ending December 31: Operating Capital

2009 7,945$ 10,684$7,945 10,6847,945 10,684

2012 7,945 10,6847,945 10,684

39,724 62,44439,724 72,19139,724 82,71739,724 104,61139,724 124,14139,724 137,40135,751 136,550

Total minimum lease payments 313,820$ 773,475Less imputed interest (630,513)

Present value of net minimum lease payments 142,962$

2044-20482039-2043

20132014-20182019-20232024-2028

2034-2038

(In thousands)

2029-2033

20102011

The adjusted capital lease for the aforementioned building is being amortized over the remaininglife of the lease. The cost of the building and related accumulated amortization at December 31,2008 and 2007 is as follows:

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2008 2007

Capital lease - building 114,489$ 114,489$Less accumulated amortization (23,711) (21,299)

Capital lease - building, net 90,778$ 93,190$

(In thousands)

In July 1999 and 2000, the MTA issued Certificates of Participation in the amount of $328.2 millionand $121.2 million, respectively, to finance the renovation of the building and certain other tenantimprovements (see note 8).

The amount of such improvements apportioned to the Authority as of December 31, 2008 and 2007are as follows:

2008 2007

Base building improvements 132,883$ 132,883$Tenant improvements 130,792 130,792Furniture and fixtures 11,434 11,434Computers and equipment 10,781 10,781Development fees 6,893 6,893Capitalized interest 13,702 13,702

306,485 306,485

Less: Accumulated depreciation (150,674) (133,892)

Total leasehold improvements 155,811$ 172,593$

(In thousands)

6. Employee Benefits

New York City Employee’s Retirement System

Plan Description

The Authority contributes to the New York City Employees’ Retirement System (NYCERS), a cost-sharing, multiple-employer public employee retirement system (PERS) for employees of the Cityand certain other governmental units whose employees are not otherwise members of the City’sfour other main pension systems. The NYCERS plan combines features of a defined benefitpension plan with those of a defined contribution pension plan. NYCERS provides pensionbenefits to retired employees based on salary and length of service. In addition, NYCERS providesdisability benefits, accident benefits, cost-of-living adjustments, and death benefits subject tosatisfaction of certain service requirements and other provisions. The NYCERS plan functions inaccordance with existing New York State statutes and New York City laws and may be amendedby action of the State legislature. NYCERS issues a publicly available comprehensive annualfinancial report that includes financial statements and required supplementary information. Thatreport may be obtained by writing to the New York City Employees’ Retirement System, 335Adams Street, Suite 2300, Brooklyn, NY 11201-3751.

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Funding Policy

The contribution requirements of Plan members and the Authority are established and amended bylaw. The Authority’s contribution to NYCERS is actuarially determined. The current rate is 18.0%of annual covered payroll. The Authority’s required contributions for NYCERS’s fiscal years endingJune 30, 2009, 2008, and 2007 were $480.9, $443.3 and $333.2 million, respectively.

For most Transit Authority employees hired prior to July 27, 1976, NYCERS is noncontributory.Certain employees who entered qualifying service after July 27, 1976, commonly referred to as Tier4, contribute 3% of their salary (see chapter 10 and 126 of the laws of 2000 below).

55/25 and Age 57 Pension Elections

In 1994, hourly employees and certain operating supervisors participating in the NYCERS planwere given the opportunity to elect the Transit 55/25 option, which enabled such employees tobecome eligible for pension benefits upon reaching 25 years of service and at least 55 years ofage. Employees hired after July 26, 1994 in the above titles are mandated into the Transit 55/25option. All participants were required to make an additional employee contribution of 2.3%.

In 1995, managerial employees and certain other employees participating in the NYCERS planwere given the opportunity to elect a 25 Year Early Retirement plan, which enabled suchemployees to become eligible for pension benefits upon reaching 25 years of service and at least55 years of age. Managerial and certain other employees entering after June 28, 1995 weremandated into the Age 57 option. Legislation finalized in 2000 changed the 57/10 plan to allowservice retirement after age 57 and completion of five years of service (five-year vesting).Employees electing these options must contribute an additional 2.85% of their gross salary.

Legislation passed in 1999 enabled elective participants in the Transit 55/25 and the 25 Year EarlyRetirement plans who, by age 62 would not have 25 years of allowable service with the Authority,to withdraw from the applicable plan and revert back to their previous plan.

Amendments enacted by State legislation in 2000 reflect the most recent significant changes to theplan and are summarized as follows:

For operating employees (Chapter 10 of the Laws of 2000)

� All operating employees are automatically included in the Transit 55/25 plan, except thosewho are in the Age 57 plan who elect to remain in that plan.

� Elimination of the 2.3% additional employees contributions applicable to members of theTransit 55/25 plan.

� Reduction in the Tier 3 and 4 employee contribution rate from 3.0% to 2.0%.

For nonoperating employees (Chapter 126 of the Laws of 2000):

� Vesting under the Age 57 plan requires only five years of service.

� As of October 1, 2000, regular Tier 3 and 4 employee contributions cease after the completionof ten years of credited service.

For retired members (Chapter 125 of the Laws of 2000):

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� Automatic COLAs. The COLAs apply to retired members as follows:

Retired orReceivingBenefits

for at least

62 5 years65 10

Disabled retirees 5Accidental death beneficiaries 5

Retirees at Least Age

� Initial COLA payable September 30, 2000 based on the first $18,000 of the maximumretirement allowance.

� Thereafter, annual COLAs of 50% of the increase in the consumer price index (CPI), but notless than 1% or more than 3% of the first $18,000 of maximum retirement allowance will bepayable.

These benefit enhancements, as well as the automatic COLA for retirees, were reflected in theactuarial valuation beginning with the June 30, 2000 valuation.

The Plan adopted several amendments during 2002 as a result of State legislation. Amendmentsinclude changes to the definition of active service for Tier 1 and Tier 2 members, extension of thephase in period from five years to ten years for funding liabilities created by the benefits providedby Chapter 125 of the Laws of 2000 and increases in accidental disability benefits for Tier 3 andTier 4 members.

During 2006, pursuant to legislative amendment, the NYCERS Plan enacted significant changes inactuarial assumptions used to determine employer contributions. The more salient changes werethe adoption of new demographic assumptions, the actuarial asset valuation method changed froma five-year moving average to six-year, which had the effect of smoothing 2001-2003 investmentlosses, and the shortening of the amortization period for the 2000 COLA. In addition, the One-YearLag Methodology was adopted, which used June 30, 2004 payroll data to determine the June 30,2006 employer contribution.

In September 2006 and June 2007, pursuant to legislation (Chapter 734 of the Laws of 2006 andChapter 379 of the Laws of 2007), current and former members of the ATU 726/1056 and the TWULocal 100, respectively, who had an accumulated balance of additional member contributions(AMC) made in accordance with the NYC Transit 55/25 Plan enacted in 1994, were allowed toapply for a refund of such contributions. Beginning in the first quarter of 2008, current and formermembers of the TSO Local 106 were also allowed to receive a refund of their additional membercontributions. Refunds of employee contributions from the Transit 55/25 Plan amounted toapproximately $107.2 million through December 31, 2008.

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Actuarial Assumptions

The more significant actuarial assumptions and methods used in the calculation of employercontributions to NYCERS for the plan’s fiscal years ended June 30, 2008 and 2007 are as follows:

Valuation dates

Actuarial cost methodAmortization method for

Unfunded Actuarial Accrued attributable to 2002 Early attributable to 2002 EarlyLiabilities (UAAL) Retirement Incentive (ERI). Retirement Incentive (ERI).

All outstanding All outstandingcomponents of UAAL are components of UAAL arebeing amortized over closed being amortized over closedperiods. periods.

Remaining amortization period

Actuarial Asset Valuation Method(AAVM) average of market values average of market values

with Market Value Restart with Market Value Restartas of June 30, 1999. As of as of June 30, 1999. As ofJune 30 thereafter, the AAVM June 30 thereafter, the AAVMrecognizes investment recognizes investmentreturns greater or less than returns greater or less thanexpected over a period of expected over a period of6 years. 6 years.

Assumed rate of return oninvestments

Postretirement mortality Tables based on recent Tables based on recentexperience experience

Active service, withdrawal, death, Tables based on recent Tables based on recentdisability, service retirement experience experience

Salary increases In general, merit and promotion In general, merit and promotionincrease including an increase including anassumed general wage assumed general wageincrease of 3.0% per year(3) increase of 3.0% per year(3)

Cost-of-living adjustments

1 year for 2002 ERI.

June 30, 2005 (Lag) (1)

Frozen initial liability(2)

Level dollar for UAAL

2 years for 2002 ERI.

June 30, 2006 (Lag) (1)

Frozen initial liability(2)

Level dollar for UAAL

1.3% per annum(3) 1.3% per annum(3)

Modified six-year moving Modified six-year moving


(1) Under the One-Year Lag Methodology, the actuarial valuation determines the employercontribution for the second following fiscal year (June 30, 2006 valuation data used forfiscal year June 30, 2008 contribution).

(2) Under this actuarial cost method, the initial liability has been established by the Entry AgeActuarial Cost Method, but with the UAAL not less than zero.

(3) Developed assuming a long-term consumer price inflation assumption of 2.5% per year.

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Manhattan and Bronx Surface Transit Operating Authority

Plan Description

The Authority contributes to the Manhattan and Bronx Surface Transit Operating Authority(MaBSTOA) Plan, a single employer governmental retirement plan. MaBSTOA providesretirement, disability, and death benefits to plan members and beneficiaries which are similar tothose benefits provided by NYCERS to similarly situated Transit Authority employees. Article12.08 of the MaBSTOA Plan assigns the authority to establish and amend the benefit provisions tothe MaBSTOA Board. MaBSTOA issues a publicly available financial report that includes financialstatements and required supplementary information for the plan. That report may be obtained bywriting to MaBSTOA Pension Plan, New York City Transit Authority, Operations Accounting, 2Broadway, 15th Floor, New York, NY 10004.

Funding Policy

The contribution requirements of plan members are established and may be amended only by theMaBSTOA Board in accordance with Article 10.01 of the MaBSTOA Plan. MaBSTOA’s fundingpolicy for periodic employer contributions is to provide for actuarially determined amounts that aredesigned to accumulate sufficient assets to pay benefits when due. It is MaBSTOA’s policy tofund, at a minimum, the current year’s normal pension cost plus amortization of the unfundedactuarial accrued liability.

The Authority’s contributions to the MaBSTOA Plan for the years ended December 31, 2008, 2007,and 2006 were $201.9 million, $179.2 million and $159.6 million, respectively, equal to the annualrequired contributions for each year. In calendar year 2007, the Authority made advance paymentsof $100.0 million, resulting in the recognition of a prepaid pension expense in the accompanyingconsolidated balance sheets. During 2006, the Authority made additional contributions totaling$100.3 million to the Plan. The $100.3 million in contributions had the effect of reducing the netpension obligation of $54.9 million at December 31, 2005 to zero and recognizing a deferredpension asset of $47.5 million at December 31, 2006. The amortized value of this deferredpension asset was $44.6 million at December 31, 2008.

For employees, the Plan has both contributory and noncontributory requirements depending on thedate of entry into service. Employees entering qualifying service on or before July 26, 1976 arenon-contributing. Certain employees entering qualifying service on or after July 27, 1976 arerequired to contribute 3% of their salary (see 2000 Plan Amendments).

The MaBSTOA Pension Plan includes the Transit 55/25 Plan, the 25 Year Early Retirement Plan,the Age 57 Plan, and the 2000 amendments under the same terms and conditions as NYCERS.

The MaBSTOA Plan also adopted the legislative provisions of Chapter 379 regarding the refundingof additional member contributions for certain TWU Local 100 and TSO Local 106 employees.Refunds of employee contributions from Plan assets amounted to approximately $6.4 million and$12.9 million in 2008 and 2007, respectively. The AMC refund increased the Plan’s unfundedaccrual liability by $18.8 million, which was completely amortized during 2008, and increased thetotal employer contribution by $20.3 million.

In a recent development, NYCERS had determined that the tier 4 segment of operating employeesare and have been eligible for a post retirement death benefit retroactive to 1986. This issue iscurrently being researched by MTA counsel.

The cost of additional benefit enhancements to the Plan will be funded by an increase in theemployer’s normal contribution rate.

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Annual Pension Cost and Net Pension (Asset) Obligation

The Authority’s annual pension cost and net pension (asset) obligation for MaBSTOA for the yearsended December 31, 2008 and 2007 were as follows:

2008 2007

Annual required contribution 201,919$ 179,228$Interest on net pension asset (3,681) (3,797)Adjustment to annual required contribution 5,114 5,261

Annual pension cost 203,352 180,692

Contributions made (201,919) (179,228)

Decrease in net pension asset 1,433 1,464

Net pension asset at beginning of year (46,003) (47,467)

Net pension asset at end of year (44,570)$ (46,003)$

(In thousands)

The Authority's annual pension cost, the percentage of annual pension cost contributed, and thenet pension asset for the current year and each of the two preceding years:

YearEnding

AnnualPension Cost

(APC)

Percentage ofAPC

ContributedNet Pension

Asset(in thousands) (in thousands)

12/31/2006 $ 157,575 165.0% $ (47,467)12/31/2007 180,692 99.2 (46,003)12/31/2008 203,352 99.3 (44,570)

The Authority's funding progress information as of December 31, 2008 is as follows:

(In millions)ActuarialAccrued (UAAL)Liability As a

Actuarial Actuarial (AAL) Unfunded PercentageValuation Value of Initial Entry (AAL) Funded Covered of Covered

Date Assets Age (UAAL) Ratio Payroll Payroll(a) (b) (b-a) (a/b) (c) ((b-a)/c)

1/1/08 1,190.8$ 2,045.0$ 854.1$ 58.22% 562.2$ 151.9%

The schedule of funding progress, presented as Required Supplementary Information (RSI)following the notes to the consolidated financial statements, present multiyear trend informationabout whether the actuarial value of plan assets are increasing or decreasing over time relative tothe actuarial accrued liability for benefits.

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Actuarial Assumptions

The January 1, 2008 valuation reflects the actuarial assumptions adopted by the Authority basedon the 2001 – 2005 Experience Study effective with this valuation. These changes increased thelife expectancy for members included in the valuation, incorporated future anticipated mortalityimprovements, decreased rates of turnover and modified rates of retirement, so fewer retirementsare expected for members with less than 20 years of service and more retirements are expectedfor members with at least 20 years of service. These changes increased the unfunded accruedliability by $135.5 million, which is being amortized over 10 years, and increased the total employercontribution by $24.4 million.

The more significant actuarial assumptions and methods used in the calculation of employercontributions to the MaBSTOA Plan for the years ended December 31, 2008 and 2007 are asfollows:

Valuation dates January 1, 2008 January 1, 2007

Actuarial cost method Frozen initial liability(1) Frozen initial liability(1)

Amortization method forUAAL

30-year level dollar 30-year level dollar

Actuarial assetvaluation method

Market value restart as of1/1/96, then five-year movingaverage of market values

Market value restart as of1/1/96, then five-year movingaverage of market values

Interest rate 8.00% per annum(2), prior toexpenses

8.00% per annum(2), prior toexpenses

Provision for expenses 0.80% of market value ofassets for investmentexpenses plus two-yearaverage of administrativecharges

0.50% of market value ofassets for investmentexpenses plus two-yearaverage of administrativecharges

Deaths after retirement Tables based on recentexperience

Tables based on recentexperience

Separations other thanfor normal retirement



Rates of normalretirement



Salary increases In general, merit andpromotion increases plusassumed general wageincreases of 3.5% to 18.0%for operating employees and4.5% to 7.0% fornonoperating employees peryear, depending on years ofservice

In general, merit andpromotion increases plusassumed general wageincreases of 3.5% to 18.0%for operating employees and4.5% to 7.0% fornonoperating employees peryear, depending on years ofservice

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Valuation dates January 1, 2008 January 1, 2007

Overtime Except for managerialemployees, 8.5% of basesalary for operatingemployees and 3.0% of basesalary for nonoperatingemployees, with differentassumptions used in the yearbefore retirement

Except for managerialemployees, 8.5% of basesalary for operatingemployees and 3.0% of basesalary for nonoperatingemployees, with differentassumptions used in the yearbefore retirement

Cost-of-livingadjustments


(1) Under this actuarial method, the initial liability has been established by the Entry AgeActuarial Cost Method, but with the UAAL not less than zero.

(2) Assumes a long-term consumer price inflation assumption of 2.5% per annum.

Deferred Compensation Plans

As permitted by Internal Revenue Code Section 457, the Authority has established a trust orcustodial account to hold plan assets for the exclusive use of the participants and theirbeneficiaries. Plan assets and liabilities are not reflected on the Authority’s consolidated balancesheets.

Certain Authority employees are participants in a second deferred compensation plan establishedin accordance with Internal Revenue Code Section 401(k). Participation in the plan is available toall nonunion and certain other employees. All amounts of compensation deferred under the plan,and all income attributable to such compensation, are solely the property of the participants;accordingly, this plan is not reflected in the accompanying consolidated balance sheets.

7. Other Postemployment Benefits

The Authority has implemented GASB Statement No. 45, Accounting and Financial Reporting forEmployers for Postemployment Benefits Other Than Pensions (“GASB 45”). This Statementestablishes the standards for the measurement, recognition, and display of Other PostemploymentBenefits (“OPEB”) expense/expenditures and related liabilities (assets), note disclosures, and, ifapplicable, required supplementary information (“RSI”) in the financial reports of state and localgovernmental employers.

Postemployment benefits are part of an exchange of salaries and benefits for employee servicesrendered. Most OPEB have been funded on a pay-as-you-go basis and have been reported infinancial statements when the promised benefits are paid. GASB 45 requires state and localgovernment’s financial reports to reflect systematic, accrual-basis measurement and recognition ofOPEB cost (expense) over a period that approximates employees’ years of service and providesinformation about actuarial accrued liabilities associated with the OPEB and whether and to whatextent progress is being made in funding the plan. The Authority is not required by law orcontractual agreement to provide funding for postemployment benefits other than on a pay-as-you-go basis to retirees and their beneficiaries. GASB 45 requires that an actuarially determinedvaluation of these benefits be performed at least biennially. The Authority’s initial valuation wasperformed for the year ended December 31, 2007, and with a valuation date of January 1, 2006.

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Plan Description

The benefits provided by the Authority include medical, pharmacy, dental, vision and life insurance,plus monthly supplements for Medicare Part B or Medicare supplemental plan reimbursement andwelfare fund contributions.

In 2003 and as a result of collective bargaining agreements, the Authority assumed responsibilityfor directly providing health care benefits to TWU retirees or their beneficiaries, rather than via theTWU Health & Welfare Trust Fund. In 2005, the Authority also began to administer health carebenefits for ATU Local 1056 and Local 726 retirees or their beneficiaries as their respective healthand welfare trust funds were dissolved. At December 31, 2008 and 2007, there were 29,700 and29,447 retired employees, respectively.

Annual OPEB Cost and Net OPEB Obligation

The Authority’s annual OPEB cost (expense) represents the accrued cost for postemploymentbenefits under GASB 45. The cumulative difference between the annual OPEB cost and thebenefits paid during a year will result in a net OPEB obligation, included on the consolidatedbalance sheets. The annual OPEB cost is equal to the annual required contribution (ARC) lessadjustments, if a net OPEB obligation exists. The ARC is equal to the normal cost plus anamortization of the unfunded frozen actuarial accrued liability.

For determining the ARC, the Authority has chosen to use the Frozen Initial Liability (“FIL”) costmethod with the initial liability amortized over a 22 year period.

In order to recognize the liability over an employee’s career, an actuarial cost method divides thepresent value into three pieces: the part that is attributed to past years (the “Accrued Liability” or“Past Service Liability”), the part that is being earned this year (the “Normal Cost”), and the partthat will be earned in future years (the “Future Service Liability”). Under FIL, an initial past serviceliability is determined based on the Entry Age Normal (“EAN”) Cost Method and is amortizedseparately. This method determines the past service liability for each individual based on a levelpercent of pay. The members combined to determine the Normal Cost. In future years, actuarialgains/losses will be incorporated into the Future Service Liability and amortized through the NormalCost.

Actuarial Methods and Assumptions

The Frozen Initial Liability (“FIL”) Cost Method was used for determining the Normal Cost. TheEntry Age Normal (“EAN”) Cost Method was used to determine the Frozen Accrued Liability andwill be used to determine the unfunded actuarial accrued liability in the GASB 45 supplementaryschedules. This method determines the Frozen Accrued liability for each individual based on alevel percent of pay for service accrued through the initial valuation date. The difference betweenthe Actuarial Present Value of Benefits and the Frozen Accrued Liability equals the Present Valueof Future Normal Cost. The Normal Cost equals the Present Value of Future Normal Cost dividedby the present value of future compensation and multiplied by the total of current compensation formembers less than certain retirement age.

Valuation DateJanuary 1, 2006

Discount Rate4.2%

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Per Capita Claim CostsFor members of NYSHIP and members who retired prior to NYSHIP availability, unadjustedpremiums were used.

For some of the self-insured benefits provided to Pre-NYSHIP members and TWU Local 100, ATU1056 and ATU 726 represented employees, per capita claim costs adjusted by age were used. Asample of these claim costs are shown below:



30-34 132.40 41.43 79.28 46.79 69.7935-39 157.83 59.00 98.72 66.64 86.9140-44 199.16 75.24 131.16 84.97 115.4745-49 256.98 100.57 178.35 113.59 157.0150-54 320.34 121.05 234.54 136.72 206.4855-59 364.78 126.36 277.66 142.71 244.4460-64 473.09 149.15 372.58 168.45 328.00

Male Employees



30-34 259.97 69.63 173.83 78.64 153.0335-39 257.28 82.61 167.05 93.30 147.0740-44 261.23 101.58 162.14 114.73 142.7445-49 294.56 127.90 181.72 144.45 159.9750-54 330.81 150.66 210.21 170.16 185.0655-59 352.73 164.37 233.16 185.64 205.2760-64 432.35 181.08 304.58 204.52 268.14

Female Employees

Medicare Part B PremiumsThe Medicare Part B premium reimbursement was included in the 2006 premium for thosemembers covered by NYSHIP. Recently NYSHIP issued revised premiums for 2007 removing thisreimbursement. Assuming the adjustment to the 2006 premium rate would be similar to thatannounced for 2007, the impact of using the revised premium rates (including the percentageincrease in the premium rates from 2006 to 2007) on the Annual Required Contribution (ARC) forthe Authority was estimated. For other members, where applicable, the reimbursement wasdetermined using the 2006 premium level and increasing this amount by the Health Care CostTrend rates.

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Health Care Cost Trend Rates

Fiscal Year Trend Fiscal Year Trend2007 11.0% 2014 7.5%2008 10.5 2015 7.02009 10.0 2016 6.52010 9.5 2017 6.02011 9.0 2018 5.52012 8.5 2019+ 5.02013 8.0

In addition, 2006 premiums and claim costs were trended 11% to 2007.

ParticipationFor members that participate in NYSHIP, 100% of eligible members, including current retirees andsurviving spouses, are assumed to elect the Empire PPO Plan. For groups that do not participateinNYSHIP, various coverage election rates are used. The following table displays the election ratesused for future union retirees:

TWU 100 ATU 1056 ATU 726

Future Retiree Plan Election Percentages

GHI 65% 65% 35%HIP 35 35 49Aetna 0 0 16

Medicare HIP/Aetna HMO Elections

VIP 1 80% 100% 75%VIP 2 20 0 0Aetna 0 0 25

Dependent CoverageCurrent retirees are valued using coverage reported by the MTA. Based on an analysis ofmembers who retired within the last 5 years, we have assumed that, for future retirees, 85% ofmale members and 55% of female members elect family coverage with a spouse.

Demographic AssumptionsMortality: Preretirement and postretirement healthy annuitant rates are projected on a generationalbasis using Scale AA, as recommended by the Society of Actuaries Retirement Plans ExperienceCommittee.

Preretirement: RP-2000 Employee Mortality Table for Males and Females with blue collaradjustments. No blue collar adjustments were used for management members of theAuthority.

Postretirement Healthy Lives: RP-2000 Healthy Annuitant mortality table for males with BlueCollar adjustments and 133% of the rates from the RP-2000 Healthy Annuitant mortalitytable for females. No blue collar adjustments were used for management members of theAuthority.

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Postretirement Disabled Lives: 75% of the rates from the RP-2000 Disabled Annuitantmortality table for males and females. At age 85 and later for males and age 77 and later forfemales, the disability rates are set to the male and female healthy rates, respectively.

Turnover and retirement rates:All demographic assumptions were based on assumptions utilized in the 2006 actuarial valuationsfor the pension plans, with the exception of the mortality assumption. The following is a tabledisplaying the various sources of the assumptions utilized.

Group Pension PlanMaBSTOA MaBSTOA

New York City Transit Authority NYCERS - TA

Vestee CoverageFor members that participate in NYSHIP, Vestees (members who have terminated, but not yeteligible to retire) are eligible for NYSHIP benefits provided by the Authority upon retirement, butmust maintain NYSHIP coverage at their own expense from termination to retirement. Vestees areassumed to retire at first eligibility and would continue to maintain NYSHIP coverage based on thefollowing percentages. This assumption is based on the Development of Recommended ActuarialAssumptions for New York State/SUNY GASB 45 Valuation report provided to ParticipatingEmployers of NYSHIP. These percentages were also applied to current vestees.

Age at PercentTermination Electing

<40 0%40-43 5

44 2045-46 3047-48 40

49 5050-51 8052+ 100

The following table shows the elements of the Authority’s annual OPEB cost, the amountcontributed, and changes in the Authority’s net OPEB for the years ending December 31, 2008 and2007:

2008 2007

Annual required contribution 1,307,700$ 1,201,677$Interest on net OPEB obligation 41,636 -Adjustment to annual required contribution (88,336) -

Annual OPEB cost/expense 1,261,000 1,201,677

Contributions made (234,529) (210,347)

Increase in net OPEB obligation 1,026,471 991,330

Net OPEB obligation - beginning of year 991,330 -

Net OPEB obligation - end of year 2,017,801$ 991,330$

(in thousands)

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The Authority’s annual OPEB cost, the percentage of annual OPEB cost contributed, and the netOPEB obligation for the years ending December 31, 2008 and 2007 were as follows:

Percentage ofAnnual OPEB

YearEnding

AnnualOPEB Cost

CostContributed

Net OPEBObligation

(in thousands) (in thousands)

12/31/2007 $ 1,201,677 17.5% $ 991,33012/31/2008 1,261,000 18.6 2,017,801

The Authority's funding progress information as of December 31, 2008 is as follows:

(In millions)ActuarialAccrued (UAAL)Liability As a

Actuarial Actuarial (AAL) Unfunded PercentageValuation Value of Initial Entry (AAL) Funded Covered of Covered

Date Assets Age (UAAL) Ratio Payroll Payroll(a) (b) (b-a) (a/b) (c) ((b-a)/c)

1/1/06 - 10,118.8$ 10,118.8$ - 3,213.0$ 314.9%

The schedule of funding progress, presented as RSI following the notes to the consolidatedfinancial statements, present multiyear trend information about whether the actuarial value of planassets are increasing or decreasing over time relative to the actuarial accrued liability for benefits.

8. Due to MTA for Repayment of Debt

Transit Facilities Revenue Bonds

Prior to December 31, 2002, the Authority recognized as a liability in the accompanyingconsolidated balance sheets the portion of the bond proceeds pledged to the Authority by the MTAfor the acquisition of capital assets to the extent of the Authority’s expenditure of such bondproceeds. As a result of the MTA’s bond restructuring during fiscal year 2002, except for theAuthority’s portion of the Certificates of Participation, the Authority no longer records a liability tothe MTA for the portion of the bonds utilized to fund the Authority’s Capital Program.

The Authority is required to deposit all of its pledged revenues with a trustee for the bondholders.Such funds are first applied to meet all obligations under the revenue bonds, and the remainder isreturned to the Authority for its operating needs.

The MTA is responsible for all payments from these bond proceeds and for administering the debtservice reserve funds and the unexpended bond funds and has recorded the liability for thesebonds. Prior to the debt restructuring, the Authority had recorded a liability to the MTA to the extentof the Authority’s expenditure of such bond proceeds. Debt service paid by the Authority is net ofthe amount provided from the MTA’s investment of the unexpended bond funds.

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Certificates of Participation

In June 1999 and 2000, the MTA issued approximately $328.2 million and $121.2 million,respectively, of its Series 1999A and Series 2000A Certificates of Participation, which weresubstantially defeased with the issuance of the Series 2004A variable rate Certificates ofParticipation totaling $357.9 million in September 2004. The proceeds from these issuances wereused to finance certain building and leasehold improvements to an office building at Two Broadwayto be occupied by the Authority, the MTA or its subsidiaries, and the TBTA. The 1999A, 2000A,and 2004A series represent proportionate interests in the principal and interest components ofbase rent paid severally, but not jointly, by the Authority, the MTA, and the TBTA pursuant to aLeasehold Improvement Sublease Agreement dated as of June 1, 1999. The Authority, the MTA,and the TBTA are obligated to pay 68.7%, 21.0%, and 10.3%, respectively, of the base rent underthe Leasehold Improvement Sublease. The Authority’s payable to the MTA for its portion of theCertificates of Participation is $244.6 million as of December 31, 2008. Transit’s share of futuredebt service payments to the MTA for the Certificates of Participation totals approximately $403.3million at year-end 2008.

Interest paid on the Certificates of Participation amounted to $10.4 million and $14.8 million in 2008and 2007, respectively.

9. Advertising and Other Income

Advertising and other income for the years ended December 31, 2008 and 2007 consist of:

2008 2007

Advertising revenue 81,615$ 72,470$Transit Adjudication Bureau collections 10,603 11,885Station income 7,207 6,451Rental income 3,430 3,812Fare media transaction fees 4,233 3,868All other 709 (590)

107,797$ 97,896$

(In thousands)

10. Other Expenses

Other expenses for the years ended December 31, 2008 and 2007 consist of:

2008 2007

Credit and debit card fees for fare media sales 23,543$ 19,737$Fare media sales commissions 11,881 11,986Training courses and programs 2,766 6,267Allowance for uncollectible accounts (309) (2,045)Business travel, meetings and conventions 1,088 1,402Dues and subscriptions 873 950Other miscellaneous expenses 1,725 2,394

41,567$ 40,691$

(In thousands)

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11. Maintenance and Other Operating Expenses

Maintenance and other operating expenses for the years ended December 31, 2008 and 2007consist of:

2008 2007

Operating maintenance and repair services 29,547$ 24,400$Facility maintenance and repairs 16,991 12,9582 Broadway operating expenses 14,328 13,695Security services 8,996 9,000Refuse and recycling 9,928 8,761Telephone services 9,527 8,844Tire and tube rentals 7,295 6,714Janitorial and custodial services 6,204 5,374Water and sewage 7,397 5,506Real estate rentals 1,920 3,220Data communications 3,648 3,975Specialized equipment 4,997 1,193Painting contracts 6,088 -Other miscellaneous expenses 4,033 3,644

130,899$ 107,284$

(In thousands)

12. Risk Management

The Authority is exposed to various risks of loss related to torts; theft of, damage to, anddestruction of its assets; injuries to persons, including employees; and natural disasters.

The Authority is self-insured up to certain per occurrence limits for liability claims arising frominjuries to persons, excluding employees. Claims arising between November 1, 2001 andOctober 31, 2006 are subject to a $7 million per occurrence limit; and claims arising afterOctober 31, 2006 are subject to an $8 million per occurrence limit. Lower limits applied for claimsarising prior to November 1, 2001. The Authority is self-insured for work-related injuries toemployees. The annual cost associated with injuries to persons, other than employees, anddamage to third-party property, is reflected in expenses as public liability claims in theaccompanying consolidated statements of revenues, expenses and change in net assets.

The Authority establishes its liability for injuries to employees and to the general public on the basisof independent actuarial estimates of future liability.

A summary of activity in estimated liability arising from injuries to persons, including employees,and damage to third-party property, for the years ended December 31, 2008 and 2007, is asfollows:

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2008 2007

Balance at beginning of year 858,163$ 812,471$

Activity during the year:Current year claims and changes in estimates 182,484 155,960Claims paid (122,966) (110,268)

Balance at end of year 917,681 858,163

Less: Current portion (129,871) (121,448)


(In thousands)

First Mutual Transportation Assurance Company

First Mutual Transportation Assurance Company (“FMTAC”), a captive insurance companysubsidiary of MTA, insures certain claims in excess of the self-insured retention limits of the MTAagencies. The maximum amount of claims arising out of any one occurrence is the total assets ofthe program available for claims, but in no event greater than $50 million. Since October 31, 2003,FMTAC issues insurance policies indemnifying the MTA, its subsidiaries and affiliates above theirspecifically assigned Self-Insured Retention with a limit of $50 million per occurrence with $50million annual aggregate. FMTAC will charge appropriate annual premiums based on lossexperience and exposure analysis to maintain the fiscal viability of the program.

Effective October 31, 2008, an All-Agency Excess Liability Insurance Policy was renewed. Thiscoverage affords the MTA and its subsidiaries and affiliates an additional limit of $350 million, for atotal limit of $400 million ($350 million in excess of $50 million). In certain circumstances, whenFMTAC’s assets are exhausted due to payment of claims, the All-Agency Excess LiabilityInsurance will assume FMTAC’s coverage position of $50 million.

Effective October 31, 2007, FMTAC renewed the all-agency property insurance program. For theperiod October 31, 2007 through May 1, 2009, FMTAC directly insures property damage claims ofthe related entities in excess of a $25 million per occurrence self-insured retention (“SIR”), subjectto an annual $75 million aggregate. Losses occurring after the retention aggregate is exceededare subject to a deductible of $7.5 million per occurrence. The total program limit has beenmaintained at $1.25 billion per occurrence covering property of the related entities, collectively.With the exception of acts of terrorism (both domestic and foreign), and subject to certain parts ofthe program limit that have been retained by FMTAC, as discussed in the next paragraph, FMTACis reinsured in the domestic, London, European and Bermuda marketplaces for this coverage.Given the absence of major catastrophes in 2006 and 2007, available capacity has emerged, alongwith pricing reductions. As a result, FMTAC was able to obtain additional reinsurance capacityover last year and has fully reinsured the all-risk component for the full 1.25 billion, subject tocertain program sublimits.

The property insurance provides replacement cost coverage for all risks of direct physical loss ordamage to all real and personal property, with minor exceptions. The policy also provides extraexpense and business interruption coverage.

With respect to acts of terrorism, FMTAC is reinsured by the United States Government for 85% of“certified” losses as covered by the Terrorism Risk Insurance Act of 2007 (originally introduced in2002). Under the 2007 extension, terrorism acts sponsored by both foreign and domesticorganizations are covered. Until 2007, the Act only provided coverage for acts sponsored by

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foreign organizations. The remaining 15% of MTA losses would be covered under an additionalpolicy described below. Additionally, no federal compensation will be paid unless the aggregateindustry insured losses exceed a $100 million “trigger”.

To supplement the reinsurance to FMTAC through TRIA 2007, the MTA obtained an additionalcommercial reinsurance policy with Lexington Insurance Co. (part of AIG). That policy providescoverage for (1) 15% of any “certified” act of terrorism – up to a maximum recovery of $183.75million for any one occurrence, or (2) 100% of any “certified” terrorism loss which does not reachthe $100 million trigger – up to a maximum recovery of $100 million for any occurrence. Thiscoverage expires on April 30, 2009. Recovery under this policy is subject to a retention of $25million per occurrence and $75 million in the annual aggregate – in the event of multiple lossesduring the policy year. Should the MTA’s retention in any one year exceed $75 million, then futurelosses in that policy year are subject to a retention of just $7.5 million.

During 2008, FMTAC reimbursed the Authority $5.8 million for a passenger struck by a train in2001. At December 31, 2008, the Authority had two outstanding claims covered by FMTAC forapproximately $1.0 million, which were related to a train derailment in 2000. At December 31,2008, FMTAC had $532.0 million of assets to insure current and future claims.

13. Contingencies

The Authority is involved in various litigations and claims involving personal liability claims andcertain other matters. The ultimate outcome of these claims and suits cannot be predicted at thistime. Nevertheless, management does not believe that the ultimate outcome of these matters willhave a material effect on the consolidated financial position of the Authority.

The Authority implemented GASB Statement No. 49, Accounting and Financial Reporting forPollution Remediation Obligations in 2008. In accordance with GASB Statement No. 49, anadditional pollution remediation expense provision totaling $15.8 million and a correspondingincrease in the remediation liability was recorded on the consolidated balance sheets and theconsolidated statements of revenues, expenses and changes in net assets. The expense provisionwas measured at its current value utilizing the prescribed expected cash flow method (see note 2).

At December 31, 2008, the Authority’s pollution remediation liability totaled $43.4 million, primarilyconsisting of future remediation activities associated with asbestos removal, lead abatement,ground water contamination, and soil contamination.

The Authority was cited in 1991 by the New York State Department of Environmental Conservation(NYSDEC) for not complying with a State requirement for tightness testing of underground storagetanks and for failure to notify NYSDEC of leaking tanks. Prior to 2008 and the implementation ofGASB Statement No. 49, the Authority had recorded a liability related to the above consent decreefor the remediation of contaminated soil and groundwater. At December 31, 2007, the remediationliability totaled $27.6 million to cover future cost associated with this clean up.

14. Recent Developments

The continued contraction of the economy in Metropolitan New York and the nation has causedsignificant deterioration in MTA/New York City Transit’s finances. Primary areas of deteriorationinclude state tax revenues, real estate taxes, escalating debt service costs, falling ridership and theneed to increase pension contributions to address losses in pension funds.

On March 25, 2009, the MTA Board voted to increase the Authority’s Subway and Bus fareseffective May 31, 2009. MetroCard seven-day passes increase from $25 to $31 and MetroCard

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thirty-day passes increase from $81 to $103. The basic fare, cash or single-ride-ticket, changesfrom $2.00 to $2.50. The bonus value remains at 15%. The estimated increase in passengerrevenue from the fare increase is $396 million for 2009 (partial year, June-December) and $670million for 2010.

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New York City Transit AuthorityRequired Supplementary InformationSchedule of Funding Progress for the MaBSTOA Pension Plan (Unaudited)December 31, 2008 and 2007(in millions)

ActuarialAccruedLiability (UAAL) As a

Actuarial (AAL) Unfunded PercentageValue of Initial Entry (AAL) Funded Covered of CoveredAssets Age (UAAL) Ratio Payroll Payroll

(a) (b) (b-a) (a/b) (c) ((b-a)/c)

1/1/98 (1) 404.5$ 1,286.2$ 881.7$ 31.45% 343.3$ 258.8%1/1/99 467.6 1,342.0 874.4 34.84 362.0 241.51/1/00 (2) 540.1 1,471.8 931.7 36.70 378.9 245.91/1/01 (3) 611.5 1,592.5 981.0 38.40 400.5 244.91/1/02 656.4 1,614.9 958.6 40.60 432.7 221.51/1/03 (4) 629.8 1,564.6 934.8 40.30 450.6 207.51/1/04 (5) 713.2 1,663.3 950.1 42.87 460.9 206.11/1/05 762.0 1,680.5 918.4 45.34 479.5 191.61/1/06 841.0 1,725.2 884.2 48.74 498.0 177.51/1/07 (6) 1,057.9 1,938.3 880.5 54.58 519.7 169.41/1/08 (7) 1,190.8 2,045.0 854.1 58.22 562.2 151.9

(1) The method for determining valuation compensation and the use of the overtime assumption werechanged.

(2) Pension supplementation payable on September 30, 2000 increased the Plan's UAAL by$67.9 million.

(3) Automatic COLA adjustment for 2001 increased the Plan's UAAL by $75.2 million. This increasewas offset, in part, by changes in certain actuarial assumptions, which decreased the Plan's UAALby $16.9 million.

(4) Increased employer contributions in 2003 have resulted in a decrease in the Plan's UAAL.(5) Lowering of the valuation interest rate from 8.25% to 8.0% increased the Plan's UAAL by $41.4 million.(6) Assumption changes in life expectancy, mortality turnover, and retirement rates increased the Plan's

UAAL by $135.5 million.(7) The AMC 55/25 refund increased the UAAL by $18.8 million.

ActuarialValuation

Date

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New York City Transit AuthorityRequired Supplementary InformationSchedule of Funding for the New York City Transit Postemployment Benefit Plan(Unaudited)December 31, 2008 and 2007(in millions)

ActuarialAccruedLiability (UAAL) As a

Actuarial Actuarial (AAL) Unfunded PercentageYear Valuation Value of Initial Entry (AAL) Funded Covered of Covered

Ended Date Assets Age (UAAL) Ratio Payroll Payroll(a) (b) (b-a) ((a/b) (c) ((b-a)/c)

12/31/07 1/1/06 - 10,465.3$ 10,465.3$ - 3,077.8$ 340.1%12/31/08 1/1/06 - 10,118.8 10,118.8 - 3,213.0 314.9

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TB

TA Financials

Triborough Bridge and Tunnel Authority Independent Auditors’ Report

Financial Statements Years Ended December 31, 2008 and 2007

APPENDIX D


TABLE OF CONTENTS

Page


MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007:

Balance Sheets

Statements of Revenues, Expenses, and Changes in Excess of Liabilities Over Assets

Statements of Cash Flows

Notes to Financial Statements

REQUIRED SUPPLEMENTATRY INFORMATION: Schedule of Funding Progress- Postretirement Healthcare Plan

D-1

D-2 - D-8

D-9 - D-10

D-11

D-12 - D-13

D-14 - D-50

D-51


To the Members of the Board of Metropolitan Transportation Authority:

We have audited the accompanying balance sheets of Triborough Bridge and Tunnel Authority (the “MTA Bridges and Tunnels”), a public benefit corporation which is part of the related financial reporting group of Metropolitan Transportation Authority (“MTA”), as of December 31, 2008 and 2007, and the statements of revenues, expenses and changes in excess of liabilities over assets, and cash flows for the years then ended. These financial statements are the responsibility of MTA Bridges and Tunnels’ management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of MTA Bridges and Tunnels’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the respective financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of MTA Bridges and Tunnels, as of December 31, 2008 and 2007, and the respective changes in revenues, expenses and changes in excess of liabilities over assets, and cash flows, for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As described in Note 10 to the financial statements, in 2008, the MTA Bridges and Tunnels adopted Governmental Accounting Standards Board Statement (“GASB”) No. 49, Accounting and Financial Reporting for Pollution Remediation Obligation.

The Management’s Discussion and Analysis on pages 2 through 8 and the Schedule of Funding Progress-Postretirement Healthcare Plan on page 51 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. This supplementary information is the responsibility of MTA Bridges and Tunnels’ management. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and we do not express an opinion on it.

April 10, 2009

Deloitte & Touche LLP Two World Financial Center New York, NY 10281-1414 USA

Tel: +1 212 436 2000 Fax: +1 212 436 5000 www.deloitte.com

Member of Deloitte Touche Tohmatsu

TRIBOROUGH BRIDGE AND TUNNEL AUTHORITY MANAGEMENT’S DISCUSSION AND ANALYSIS YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands)

1. OVERVIEW OF THE FINANCIAL STATEMENTS

The following is a narrative overview and analysis of the financial activities of Triborough Bridge and Tunnel Authority (“MTA Bridges and Tunnels”) for the years ended December 31, 2008 and 2007. This discussion and analysis is intended to serve as an introduction to MTA Bridges and Tunnels’ financial statements which have the following components: (1) Management’s Discussion and Analysis (“MD&A”), (2) Financial Statements and (3) Notes to the Financial Statements.

The Financial Statements Include

The Balance Sheets provide information about the nature and amounts of investments in resources (assets) and the obligations to MTA Bridges and Tunnels creditors (liabilities), with the difference between the two reported as excess of liabilities over assets. The Statements of Revenues, Expenses and Changes in Excess of Liabilities Over Assets show how MTA Bridges and Tunnels’ excess of liabilities over assets changed during each year and accounts for all of the current and prior year’s revenues and expenses, measure the success of MTA Bridges and Tunnels’ operations over the twelve months and can be used to determine how MTA Bridges and Tunnels has funded its costs. The Statements of Cash Flows provide information about MTA Bridges and Tunnels’ cash receipts, cash payments, and net changes in cash resulting from operations, noncapital financing, capital and related financing, and investing activities. The Notes to the Financial Statements Provide Information that is essential to understanding the financial statements, such as MTA Bridges and Tunnels’ basis of presentation, and significant accounting policies, details of cash and investments, capital assets, employee benefits, long-term debt, lease transactions, future commitments and contingencies, and subsequent events of MTA Bridges and Tunnels.

The notes to the financial statements also describe any other events or developing situations that could materially affect MTA Bridges and Tunnels’ financial position. Management’s Discussion and Analysis This MD&A provides an assessment of how MTA Bridges and Tunnels’ position has improved or deteriorated and identifies the factors that, in management’s view, significantly affected MTA Bridges and Tunnels’ overall financial position. It may contain opinions, assumptions, or conclusions by MTA Bridges and Tunnels’ management that should not be considered a replacement for and must be read in conjunction with the financial statements.

D-2

2. FINANCIAL REPORTING ENTITY

Triborough Bridge and Tunnel Authority is a public benefit corporation, separate and apart from the State of New York, without any power of taxation. Triborough Bridge and Tunnel Authority is empowered to operate and maintain nine toll bridges and tunnels and the Battery-Parking Garage, all located in New York City. The board members of the Metropolitan Transportation Authority (“MTA”) also serve as the board of Triborough Bridge and Tunnel Authority. Triborough Bridge and Tunnel Authority operates under the name of MTA Bridges and Tunnels. The MTA is a component unit of the State of New York.

MTA Bridges and Tunnels’ operations and capital costs (debt obligations) for its bridges and tunnels are paid by the revenues it generates from its facilities. MTA Bridges and Tunnels’ surplus amounts are used to fund transit and commuter operations and finance capital projects for the transit and commuter systems operated by other affiliates and subsidiaries of the MTA.

3. CONDENSED FINANCIAL INFORMATION

The following sections will discuss the significant changes in MTA Bridges and Tunnels’ financial position for the years ended December 31, 2008 and 2007. Additionally, an examination of major economic factors and industry trends that have contributed to these changes is provided. It should be noted that for purposes of the MD&A, summaries of the financial statements and the various exhibits presented are in conformity with MTA Bridges and Tunnels’ financial statements, which are presented in accordance with accounting principles generally accepted in the United States of America. All amounts are in the thousands.

ASSETS 2008 2007 2006

Current Assets 249,706$ 279,638$ 350,376$

Noncurrent Assets 4,013,662 3,782,741 3,482,935

Total Assets 4,263,368$ 4,062,379$ 3,833,311$

As of December 31,

Significant Changes in Assets: Current assets decreased by $29,932 for the year ended December 31, 2008. The decrease was primarily due to a decrease in short term investments. Current assets decreased by $70,738 for the year ended December 31, 2007. The decrease was primarily due to a decrease in short term investments. Noncurrent assets increased by $230,921 for the year ended December 31, 2008. The increase was primarily due to an increase in capital assets, net of accumulated depreciation of $246,155. This increase is attributed to capitalization of construction in progress costs relating to the deck replacements at the Robert F. Kennedy Bridge, rehabilitation of lower level approaches at the Verrazano-Narrows Bridge, deck and structural rehabilitation at the Cross Bay Bridge and lower level deck replacement at the Henry Hudson Bridge. The increase in capital assets, net of related depreciation was offset by a decrease in bond issuance costs of $19,254.

D-3

Noncurrent assets increased by $299,806 for the year ended December 31, 2007. Two factors were primarily responsible for this change. First, capital assets, net of accumulated depreciation increased by $272,989. This increase is attributed to capitalization of construction in progress costs relating to the span and deck replacement at the Bronx Whitestone Bridge, deck replacement and rehabilitation of the electrical and mechanical systems at the Robert F. Kennedy Bridge, rehabilitation of lower level approaches and suspended deck at the Verrazano-Narrows Bridge and lower deck replacement at the Henry Hudson Bridge. Second, there was an increase in long-term investments of $40,450.

TOTAL LIABILITIES 2008 2007 2006

Current Liabilities 608,525$ 642,589$ 527,912$

Noncurrent Liabilities 8,675,333 7,211,953 7,177,051

Total Liabilities 9,283,858$ 7,854,542$ 7,704,963$

As of December 31,

Significant Changes in Liabilities: Current liabilities decreased by $34,064 for the year ended December 31, 2008. This decrease is primarily due to a decrease in the current portion of long term debt of $59,509, a decrease in accounts payable of $14,308, offset by an increase in amounts due the MTA of $38,084. Current liabilities increased by $114,677 for the year ended December 31, 2007. This increase is primarily due to an increase in the net amount due the MTA of $71,211 principally due to the recording of an interagency loan of $90,844 offset by a reduction in the amount due for operating and capital purposes of $16,578. In addition, accounts payable increased by $25,621 and the current portion of long-term debt increased by $14,565. Noncurrent liabilities for the twelve months ended December 31, 2008 increased by $1,463,380. This was primarily due to an increase in long-term debt of $1,399,052 and an increase in the liability for other postemployment benefits other than pensions of $66,323. See long term debt footnotes for further details. Noncurrent liabilities for the twelve months ended December 31, 2007 increased by $34,902. This was primarily due the recognition of the liability for post employment benefits other than pensions of $61,283. This was partially offset by a decrease in long-term debt of $27,524.

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Condensed Statements of Revenues, Expenses, and Changes in Excess of Liabilities Over Assets

2008 2007 2006

OPERATING REVENUES 1,287,290$ 1,263,356$ 1,259,350$ OPERATING EXPENSES (551,527) (500,101) (411,226)

OPERATING INCOME 735,763 763,255 848,124

TOTAL NET NONOPERATING EXPENSES: (365,194) (290,008) (277,788)

INCOME BEFORE CONTRIBUTIONS AND TRANSFERS 370,569 473,247 570,336

TRANSFERS (OUT) IN (1,251,781) 12,685 19,645

TRANSFERS OUT (347,115) (406,443) (426,034)

CHANGES IN EXCESS OF LIABILITIES OVER ASSETS (1,228,327) 79,489 163,947

TOTAL EXCESS OF LIABILITIES OVER ASSETS - BEGINNING (3,792,163) (3,871,652) (4,035,599)

TOTAL EXCESS OF LIABILITIES OVER ASSETS - ENDING (5,020,490)$ (3,792,163)$ (3,871,652)$


Operating Revenues For the year ended December 31, 2008, the Operating Revenues increased by $23,934 as compared to December 31, 2007. This increase can be primarily attributed to an increase in toll revenue of $23,425. See “Results of Operations” below. For the year ended December 31, 2007, the Operating Revenues increased by approximately $4,006 as compared to December 31, 2006. This increase can be primarily attributed to an increase in toll revenue of $8,998 due to increased traffic, an increase in fees received from the Battery Parking Garage of $3,263, offset by the elimination of the $1 E-ZPass maintenance fee of $7,888, which was discontinued, effective June 1, 2006. Revenue by Major Source Bridge and Tunnel tolls accounted for 99.0% of operating revenue in 2008 and 2007 respectively. The remaining revenue primarily represented income from parking fees (net of operating expenses) collected at the Battery Parking Garage and fees collected from E-ZPass customers. Toll revenues were $1,273,974 for the year ended December 31, 2008. This was $23,425 more than in 2007. Toll revenues were $1,250,549 for the year ended December 31, 2007. This was $8,998 more than in 2006 and was due to increased traffic. Operating Expenses Operating expenses, including depreciation, increased for the year ended December 31, 2008 as compared to the prior year by $51,426. The increase was principally due to maintenance and other operating contracts, $25,955, salaries and wages $7,850, retirement and other employee benefits, $7,740 principally postemployment benefits other than pensions and depreciation expense, $7,420.

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Operating expenses, including depreciation, increased for the year ended December 31, 2007 as compared to the prior year by $88,875. The increase was principally due to the implementation of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, of $61,283, increased pension costs of $5,611, and increased depreciation expense of $11,477. Nonoperating Expenses Nonoperating expenses increased by $75,186 for the year ended December 31, 2008 primarily due to increased interest on a significantly larger debt base and increased interest costs on variable rate bonds. Nonoperating expenses increased by $12,220 for the year ended December 31, 2007. During 2007, interest expense increased by $9,204 as compared to the prior year due to increased rates. Investment income decreased in 2007 by $3,016.

4. OVERALL FINANCIAL POSITION AND RESULTS OF OPERATIONS AND IMPORTANT ECONOMIC CONDITIONS

Economic Conditions

Two key economic factors that have statistically significant relationships to changes in traffic volumes are regional non-farm employment and inflation (“CPI-U”). Based on preliminary data from the U.S. Bureau of Labor Statistics, regional employment grew by 0.5% in 2008 and 1.9% in 2007. The CPI-U increased by 3.9% in 2008 and by 2.8% in 2007. Results of Operations Paid traffic totaled 295.6 million in 2008, which was 2.9% less than 2007’s record level. Daily traffic was down 1.2% on average from January through April primarily due to high regional gas prices that ranged from $3.16 to $3.48 per gallon. From May through August, gas prices were near or above $4.00 per gallon, and subsequently, traffic was down 4.0% on average. Although gas prices dropped significantly from September through the end of the year, recessionary economic conditions kept traffic levels down by 4.1% on average. Despite the lower traffic trends, toll revenues in 2008 reached $1,274 million, which was $23.4 million greater than in 2007. The higher revenues were generated from a toll increase implemented on March 16, 2008, and from an additional day of collections in February 2008 due to the leap year. Paid traffic reached a record high of 304.2 million vehicles in 2007. Total volume was 0.7% greater in 2007 compared to 2006. Through October 2007, traffic was up by 1.4% primarily due to relatively favorable weather. The largest increases occurred in May and June, with volumes growing 2.9% each month due to considerably less rain in 2007 vs. 2006. The traffic gains through October were partially offset by declines of 1.2% in November and 4.6% in December. Weather conditions were not as favorable in November and December of 2007 as compared to 2006. In addition, gas prices were higher in November and December of 2007, with regional prices exceeding $3.00 per gallon.

E-ZPass electronic collection system continued to facilitate the management of high traffic volumes. Average market shares were up for the year as the following table illustrates:

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2008 2007 2006

Total 74.0% 73.5% 72.6% Average Weekday 76.2% 75.7% 74.9% Passenger Vehicles 75.0% 74.7% 73.9% Commercial Vehicles 87.8% 86.6% 85.6% Average Weekend 68.8% 68.1% 67.1% 5. SIGNIFICANT CAPITAL ASSET ACTIVITY

Capital Program MTA Bridge and Tunnels’ facilities are all in a state of good repair. MTA Bridge and Tunnels’ portion of the MTA’s Capital Program for 2005-2009 totals $1,209,112 for normal replacement and system improvement projects. The commitments made during 2008 were $341,534 bringing the total commitments under the five-year plan to $1,065,841. MTA Bridge and Tunnels’ portion of the MTA Capital Program for 2000-2004 totals $999,067. The commitments made during 2008 were $5,841, bringing the total commitments under the five-year plan to $974,883. Approximately 60% of the projected 2005-2009 expenditures in the current capital program will be incurred at three facilities: the Robert F. Kennedy Bridge, the Bronx-Whitestone Bridge, and the Verrazano-Narrows Bridge. Other major projects in the 2005-2009 Plan include lower level deck replacement at the Henry Hudson Bridge, replacement of the concrete deck and rehabilitation of the abutments and retaining walls at the Throgs Neck Bridge, deck/structural rehabilitation at the Cross Bay Bridge, and rehabilitation of the ventilation system at the Brooklyn-Battery Tunnel. Approximately 50% of the projected expenditures in the 2000-2004 capital program have been incurred at two facilities: the Triborough Bridge and the Bronx-Whitestone Bridge. Other major projects include roadway and drainage system rehabilitation at the Brooklyn-Battery Tunnel, rehabilitation of electrical system on suspension spans at the Verrazano-Narrows Bridge, and the replacement of all exhaust fans at the Queens Midtown Tunnel. Variable message signs will be installed on all approach roads/spans to facility toll plazas. See Transportation Project footnote for further details.

6. CURRENTLY KNOWN FACTS, DECISIONS, OR CONDITIONS The MTA Board passed an increase in the Crossing Charge Schedule on December 19, 2007. The new Crossing Charge Schedule went into effect at 3:00 AM., March 16, 2008. The MTA Board, on December 17, 2008, adopted the 2009 Budget which included, effective June 1, 2009, increased tolls which would increase revenue yields by an annualized 23% beginning in 2009. On March 25, 2009, The MTA Board approved the increased tolls which will become effective in mid July, 2009. During 2008 and 2007, ratings of several bond insurers were downgraded by the three rating agencies thereby lowering the ratings of TBTA bonds insured by such insurers. The bond insurer downgrades have affected municipal issuers nationwide, including all major New York State issuers in terms of market volatility and increased interest costs on variable rate bonds. These downgrades have not affected the underlying TBTA bond ratings. Additionally most regularly scheduled auctions of variable rate bonds currently in the auction mode have been failing due to lack of investor interest, thereby impairing the marketability of several series of TBTA bonds. In a “failed” auction TBTA has agreed to the auction

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agent setting the periodic rate at percentage of one month LIBOR (London Interbank Offered Rate) index. .During 2008 and 2007, TBTA has redeemed or refinanced a number of its bonds to order to manage its interest cost risk. See Footnote 11 for further Long Term Debt details and Footnote 24 for further Subsequent Events details. The Authority is keenly aware of the adverse conditions and events which have affected the banking industry and other financial firms over the past fifteen months. The Authority invests substantially all available cash overnight through collateralized repurchase agreements, short term treasuries and agency securities backed by the U.S. Government. This minimizes the Authority's exposure to its banking institutions. An integral part of Management's effort to safeguard the Authority's financial position and to fulfill its due diligence requirement is to monitor the ongoing banking situation for further signs of deterioration through publicly available financial data. The Authority also consults its outside legal counsel and financial advisor as needed.

* * * * * *

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BALANCE SHEETSAS OF DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007ASSETS

CURRENT ASSETS: Cash — unrestricted (Note 3) 11,962$ 17,398$ Investments (Notes 4 and 5): Unrestricted 33,890 21,103 Restricted 169,400 201,743 Accrued interest receivable 205 1,675 Accounts receivable — net of allowance of $2,949 in 2008 and $2,841 in 2007 17,561 18,815 Due from MTA (Note 22) 1,916 1,886 Prepaid expenses 14,772 17,018

Total current assets 249,706 279,638

NONCURRENT ASSETS: Investments (Notes 4 and 5): Unrestricted 45,093 52,058 Restricted 266,746 255,761 Capital assets — net (Note 6) 3,350,775 3,104,620 Bond issuance costs 351,048 370,302

Total noncurrent assets 4,013,662 3,782,741

TOTAL ASSETS 4,263,368$ 4,062,379$

See notes to financial statements. (Continued)

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BALANCE SHEETSAS OF DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007LIABILITIES AND EXCESS OF LIABILITIES OVER ASSETS

CURRENT LIABILITIES: Current portion — long-term obligations (Notes 12 to 14) 86,491$ 146,000$ Interest payable due 72,289 65,775 Accounts payable 104,459 118,767 Payable to MTA — capital expense — operating (Note 22) 52,928 8,345 Payable to NYCTA — operating expense (Note 22) 696 457 Accrued salaries 4,098 12,477 Accrued vacation and sick pay benefits 16,979 16,008 Current portion of estimated liability arising from injuries to persons (Note 16) 11,873 14,954 Due to NYCTA (Note 1 and 22) 8,180 15,097 Current portion of capital lease obligation (Note 15) 6,488 6,541 Due to MTA (Note 1 and 22) 121,145 127,644 Pollution Remediation Projects (Note 10) 748 - Prepaid tolls revenue (includes $28,115 and $22,930 in 2008 and 2007, respectively, due to other toll agencies) 122,151 110,524

Total current liabilities 608,525 642,589

NONCURRENT LIABILITIES: Estimated liability arising from injuries to persons (Note 16) 12,548 6,866 Escrow obligation - 16,401 Other postemployment benefits other than pensions (Note 8) 127,606 61,283 Long-term debt (Notes 11 to 14) 8,409,203 7,010,151 Capital lease obligations (Note 15) 125,976 115,444 Other long-term liabilities - 1,808

Total noncurrent liabilities 8,675,333 7,211,953

Total liabilities 9,283,858 7,854,542

EXCESS OF LIABILITIES OVER ASSETS: Invested in capital assets — net of related debt 1,074,145 1,642,784 Restricted 436,146 457,504 Unrestricted (6,530,781) (5,892,451)

Total excess of liabilities over assets (5,020,490) (3,792,163)

TOTAL LIABILITIES AND EXCESS OF LIABILITIES 4,263,368$ 4,062,379$ OVER ASSETS

See notes to financial statements. (Concluded)

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STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN EXCESS OFLIABILITIES OVER ASSETSYEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007

OPERATING REVENUES: Bridges and tunnels 1,273,974$ 1,250,549$ Building rentals and fees 12,767 12,172 Other income 549 635

Total operating revenues 1,287,290 1,263,356

OPERATING EXPENSES: Salaries and wages 137,094 129,244 Retirement and other employee benefits 136,534 128,794 Insurance 8,284 9,126 Maintenance and other operating contracts 161,355 135,400 Professional service contracts 14,207 12,366 Materials and supplies 15,819 14,008 Depreciation expense 77,213 69,793 Other expenses 1,021 1,370

Total operating expenses 551,527 500,101

OPERATING INCOME 735,763 763,255

NONOPERATING REVENUES (EXPENSES): Interest expense (Notes 11 to 14) (369,707) (295,752) Investment income (Notes 1, 4 and 5) 4,513 5,744

Total nonoperating revenues (expenses) (365,194) (290,008)

INCOME BEFORE CONTRIBUTIONS AND TRANSFERS 370,569 473,247

TRANSFERS (OUT) IN — Metropolitan Transportation Authority (1,251,781) 12,685

TRANSFERS OUT (Note 1): New York City Transit Authority (120,260) (156,474) Metropolitan Transportation Authority (226,855) (249,969)

CHANGE IN EXCESS OF LIABILITIES OVER ASSETS (1,228,327) 79,489

TOTAL EXCESS OF LIABILITIES OVER ASSETS — Beginning (3,792,163) (3,871,652)

TOTAL EXCESS OF LIABILITIES OVER ASSETS — Ending (5,020,490)$ (3,792,163)$

See notes to financial statements.

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STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007

CASH FLOWS FROM OPERATING ACTIVITIES: Tolls collected 1,274,017$ 1,247,552$ Building rentals and fees received 13,177 28,913 Payments to employees and related costs (160,375) (150,325) Other operating costs (254,040) (232,929)

Net cash provided by operating activities 872,779 893,211

CASH FLOWS FOR NONCAPITAL FINANCING ACTIVITIES: Subsidies paid to affiliated agencies (365,021) (414,979)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES FOR THE AUTHORITY AND AFFILIATES: Purchase of capital assets (258,808) (297,994) Payments for Transportation Projects (512,384) - Principal payments on Senior, Subordinate, and COPS (144,380) (131,435) Proceeds from new bond issues 2,247,370 227,179 MTA bonds refunded (858,307) - TBTA bonds refunded (673,025) - Interest payments on Senior, Subordinate, and COPS (382,149) (354,336)

Net cash used in capital and related financing activities (581,683) (556,586)

See notes to financial statements. (Continued)

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STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2008 AND 2007(In thousands)

2008 2007

CASH FLOWS FROM INVESTING ACTIVITIES: Gross sales of short-term securities 30,565,888$ 29,140,250$ Gross purchases of short-term securities (32,160,292) (29,187,648) Gross sales of long-term securities 2,924,986 372,878 Gross purchases of long-term securities (1,304,676) (291,584) Increase in MTA investment pool 34,801 36,421 Unrestricted income from investments 3,738 6,569 Investment income restricted for capital purposes 4,044 5,414

Net cash provided by investing activities 68,489 82,300

NET (DECREASE) INCREASE IN CASH (5,436) 3,946

CASH — Beginning of year 17,398 13,452

CASH — End of year 11,962$ 17,398$

RECONCILIATION OF INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES Income from operations 735,763$ 763,255$

ADJUSTMENTS TO RECONCILE INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation 77,213 69,793 Capitalized salary expense (16,447) (16,057)

CHANGES IN OPERATING ASSETS AND LIABILITIES: Decrease in receivables 1,224 2,552 Increase in operating payables 65,960 70,165 Decrease (increase) in prepaid expenses and deferred charges 2,246 (2,739) (Decrease) increase in accrued salary costs, vacation and insurance (4,807) 8,397 Increase (decrease) in prepaid toll revenue 11,627 (2,155)

NET CASH PROVIDED BY OPERATING ACTIVITIES 872,779$ 893,211$

See notes to financial statements. (Concluded)

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NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2008 AND 2007 (In thousands)

1. BASIS OF FINANCIAL STATEMENTS

The Triborough Bridge and Tunnel Authority (the “Authority” or “MTA Bridges and Tunnels”) is a public benefit corporation created pursuant to the Public Authorities Law (the “Act”) of the State of New York (the “State”). MTA Bridges and Tunnels is part of the related financial reporting group of the Metropolitan Transportation Authority (MTA). The MTA is a component unit of the State and is included in the State of New York Comprehensive Annual Financial Report of the Comptroller as a public benefit corporation.

MTA Bridges and Tunnels operates seven toll bridges, two toll tunnels, and the Battery Parking Garage. All Authority toll facilities operate E-Z Pass in conjunction with a regional electronic toll collection system. MTA Bridges and Tunnels’ annual net earnings before depreciation and other adjustments (“operating transfer”) are transferred to the New York City Transit Authority (the “TA”) and the MTA pursuant to provisions of the Act. In addition, MTA Bridges and Tunnels annually transfers its unrestricted investment income to the MTA. The operating transfer and the investment income transfer can be used to fund operating expenses or capital projects. The TA receives $24,000 plus 50% of MTA Bridges and Tunnels’ remaining annual operating transfer, as adjusted, to reflect certain debt service transactions and the MTA receives the balance of the operating transfer, as adjusted, to reflect certain debt service transactions, plus the annual unrestricted investment income. Transfers are made during the year. The remaining amount due at December 31, 2008 and 2007, of $38,481, and $51,897, respectively, is recorded as a liability in MTA Bridges and Tunnels’ financial statements.

MTA Bridges and Tunnels certified to the City of New York (the “City”) and the MTA that its operating transfer and its unrestricted investment income at December 31, 2008 and 2007, were as follows:

2008 2007

Operating transfer 347,114$ 406,443$ Investment income (excludes unrealized gain or loss) 4,491 5,558

351,605$ 412,001$

2. ACCOUNTING POLICIES

Basis of Accounting — The accompanying financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

In accordance with Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Fund Accounting, MTA Bridges and Tunnels applies all applicable GASB pronouncements as well as all Financial Accounting Standards Board

(FASB) Statements and Interpretations issued on or before November 30, 1989, that do not conflict with GASB pronouncements. Subsequent to November 30, 1989, MTA Bridges and Tunnels exclusively applies all applicable GASB pronouncements.

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.

New Accounting Standards — The MTA Bridges and Tunnels has completed the process of evaluating the impact that will result from adopting GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions and has disclosed the required information as per this statement in Note 8. The Statement establishes standards for the measurement, recognition, and display of OPEB expense/expenditures and related liabilities (assets), note disclosures, and if applicable, required supplementary information (RSI) in the financial reports of state and local governmental employers. The Statement is effective for financial statement periods beginning after December 15, 2006.

The MTA Bridges and Tunnels has completed the process of evaluating the impact that will result from adopting GASB Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfers of assets and Future Revenues. The MTA Bridges and Tunnels has concluded that GASB Statement No. 48 had no impact on its financial position and results from operations. The Statement establishes criteria that governments will use to ascertain whether proceeds received should be reported as revenues or as a liability. The Statement is effective for fiscal periods beginning after December 15, 2006.

The MTA Bridges and Tunnels has completed the process of evaluating the impact that will result from implementing GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. This Statement addresses accounting and financial reporting standards for pollution (including contamination) remediation obligations. The Statement is effective for fiscal periods beginning after December 15, 2007. The Statement establishes standards for determining when expected pollution remediation outlays should be accrued as a liability or, if appropriate, capitalized. An operating expense and corresponding liability, measured at its current value using the expected cash flow method, have been recognized for certain pollution remediation obligations that are no longer able to be capitalized as a component of a capital project. Pollution remediation obligations, which are estimates and subject to changes resulting from price increases or reductions, technology, or changes in applicable laws or regulations, occur when any one of the following obligating events takes place:

� An imminent threat to public health due to pollution exists � MTA Bridges and Tunnels is in violation of a pollution prevention-related permit or license � MTA Bridges and Tunnels is named by a regulator as a responsible or potentially responsible party

to participate in remediation � MTA Bridges and Tunnels is named or there is evidence to indicate that it will be named in a

lawsuit that compels participation in remediation activities, or � MTA Bridges and Tunnels voluntarily commences or legally obligates itself to commence

remediation efforts MTA Bridges and Tunnels does not have objective and verifiable information to apply the provisions of GASB Statement No. 49 to periods prior to 2008. See Footnote 10 for additional details. The MTA Bridges and Tunnels has completed the process of evaluating the impact that will result from implementing GASB Statement No. 50, Pension Disclosures. This Statement more closely aligns the financial reporting requirements for pensions with those for other postemployment benefits (“OPEB”) and, in doing so, enhances information disclosed in notes to financial statements or presented as required supplementary information (RSI) by pension plans and by employers that provide pension benefits. The reporting changes required by this Statement amend applicable note disclosure and RSI requirements of GASB Statements No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and GASB Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, to conform with requirements of GASB Statements No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, and GASB Statement No. 45, Accounting and

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Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The Statement is effective for fiscal periods beginning after June 15, 2007. See Footnote 8 for additional details.

The MTA Bridges and Tunnels has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets. The MTA Bridges and Tunnels is therefore unable to disclose the impact GASB Statement No. 51 will have on its financial position, results of operations, and cash flows when such statement is adopted. This statement amends GASB Statement 34, paragraphs 19-21, and GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, paragraphs 9e, 16, and 18 and relates to the recognition and recording of intangible assets as capital assets in the statement of net assets. The requirements of this Statement are for financial statements for periods beginning after June 15, 2009.

The MTA Bridges and Tunnels has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The MTA Bridges and Tunnels is therefore unable to disclose the impact GASB Statement No. 53 will have on its financial position, results of operations, and cash flows when such statement is adopted. This Statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments, and addresses hedge accounting requirements. This statement is effective for financial statements for periods beginning after June 15, 2009.

The MTA Bridges and Tunnels has not completed the process of evaluating the impact that will result from implementing GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. MTA Bridges and Tunnels is therefore unable to disclose the impact GASB Statement No. 54 will have on its financial position, results of operations, and cash flows when such statement is adopted. The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2010. Use of Management’s Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the market value of investments, allowances for doubtful accounts, arbitrage rebate liability, accrued expenses and other liabilities, depreciable lives of capital assets, estimated liability arising from injuries to persons, and other postemployment benefits. Actual results could differ significantly from those estimates. Operating Revenues — Bridges and tunnel revenue is recorded as earned (i.e., as tokens are used and tolls are paid in cash or when vehicles pass through the electronic toll collection system).

Investments — It is MTA Bridges and Tunnels’ intent to hold its investments to maturity. Investments are recorded on the balance sheet at fair value which is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. All investment income, including changes in the fair value of investments, is reported as revenue (either as investment income and net increase (decrease) in fair value of investments) on the statements of revenues, expenses and changes in excess of liabilities over assets.

Capital Assets — Capital assets include all land, buildings, toll equipment, and other structures of MTA Bridges and Tunnels having a useful life of greater than two years and having a cost of at least $25.

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Capital assets are generally stated at historical cost, or at estimated historical cost based on appraisals or on other acceptable methods when historical cost is not available. Capital leases are classified as capital assets in amounts equal to the lesser of the fair market value or the present value of net minimum lease payments at the inception of the lease.

Accumulated depreciation and amortization are reported as reductions of fixed assets. Depreciation is computed using the straight-line method based upon estimated useful lives, generally 99 years for primary structures, 10 to 50 years for buildings and improvements, 30 years for roadways, and 2 to 7 years for all other equipment. Capital lease assets and leasehold improvements are amortized over the term of the lease or the life of the assets, whichever is less.

Major reconstruction and improvements to such facilities are capitalized. Expenditures for maintenance and repairs which do not extend the useful life of the asset are charged to operations as incurred.

Title to substantially all real property is vested in the City of New York, and MTA Bridges and Tunnels has the use and occupancy thereof as long as its corporate existence continues.

Compensated Absences — MTA Bridges and Tunnels has accrued the full value (including fringe benefits) of all vacation and sick leave benefits earned by employees to date if the leave is attributable to past service and it is probable that MTA Bridges and Tunnels will compensate the employees for the benefits through paid time off or some other means, such as cash payments at termination or retirement. Total outstanding compensated balances at December 31, 2008 and 2007 were $304 and $792, respectively.

Subsidies — Subsidies provided by MTA Bridges and Tunnels represent its operating transfer and investment income computed on an accrual basis.

3. CASH

The Bank balances are insured up to $250 in the aggregate by the Federal Deposit Insurance Corporation (FDIC) for each bank in which funds are deposited.

The Bank balances that were not insured were maintained in major financial institutions considered by management to be secure. The difference between the carrying amount and the bank balance for the years ended December 31, 2008 and 2007 is due to the petty cash and change funds which are maintained at the various toll facilities and not recorded by the bank. In addition, there were deposits in transit in each of the years ended December 31, 2008 and 2007.

Cash at December 31, 2008 and, 2007 consists of the following:

Carrying Bank Carrying BankAmount Balance Amount Balance

Insured deposits 250$ 250$ 100$ 100$ Collateralized deposits 9,550 6,145 9,149 9,149 Uncollateralized deposits 2,162 - 8,149 966

11,962$ 6,395$ 17,398$ 10,215

2008 2007

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4. INVESTMENTS

MTA Bridges and Tunnels’ investment policies comply with the New York State Comptroller’s guidelines for investment policies. MTA’s All-Agency Investment Guidelines restrict MTA Bridges and Tunnels’ investments to obligations of the U.S. Treasury, its agencies and instrumentalities and repurchase agreements backed by U.S. Treasury securities. All investments were managed by the MTA, as MTA Bridges and Tunnels’ agent, in custody accounts kept in the name of MTA Bridges and Tunnels for restricted investments and in the name of the MTA for unrestricted investments. MTA’s All-Agency Investment Guidelines state that securities underlying repurchase agreements must have a market value at least equal to the cost of the investment. As of December 31, 2008 and 2007, all investments are at fair value as set forth below:

2008 2007

Investments maturing in 2009 to 2015 under terms of repurchase agreements 128,407$ 123,645$ U.S. Treasuries due 2009 to 2016 49,557 172,766 U.S. Treasury Notes - 218 MTA Investment Pool 190,920 156,119 Other government agencies 69,745 1,417 Irrevocable deposit account 76,500 76,500

515,129$ 530,665$

The fair value of the above investments consists of $78,983 and $73,161 in 2008 and 2007 in unrestricted investments, respectively, and $436,146 and $457,504 in 2008 and, 2007 in restricted investments, respectively. Investments had weighted average monthly yields ranging from 2.21% to 5.91%, for the year ended December 31, 2008 and 4.24 % to 5.1 %, for the year ended December 31, 2007. The net unrealized gain on investments for the years ended December 31, 2008 and 2007 were $22 and $185, respectively.

Unrestricted cash and investments available to pay operating and maintenance expenses, debt service and operating surplus transfers, at December 31, 2008 and 2007, are as follows:

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Investments: 2008 2007

CURRENT: Restricted: General Purpose Revenue Bonds 1980 Resolution — Operating Funds 1,317$ 20,068$ Bond Proceeds Fund 58,345 52,640 Debt Service Fund 109,176 127,361 Cost of Issuance Fund 1 1 COPS 2 Broadway 561 1,673

Total current — restricted 169,400 201,743

Total current — unrestricted 33,890 21,103

Total — current 203,290$ 222,846$

LONG-TERM: Restricted: General Purpose Revenue Bonds 10,276$ 22,359$ General Purpose Debt Service Fund - 24,389 Senior Revenue Bonds 140,428 110,860 General Purpose Bond Proceeds Fund 22,352 14,995 Capital Lease Obligation: US Treasury Strips 17,190 6,658 Irrevocable Deposit Account 76,500 76,500

Total long term — restricted 266,746 255,761

Total long term — unrestricted 45,093 52,058

Total — long-term 311,839$ 307,819$

The unexpended bond proceeds of the General Purpose Revenue Bonds 1980 Resolution, not including proceeds held for the Transportation Project, were restricted for payment of capital improvements of MTA Bridges and Tunnels’ present facilities. The Debt Service Funds are restricted for the payment of debt service as provided by the bond resolutions.

MTA Bridges and Tunnels’ accrual of the liability to the federal government for rebate of arbitrage income from tax-exempt borrowings was $0 and $1,526 at December 31, 2008 and 2007, respectively. In 2008 and 2007, MTA Bridges and Tunnels’ transfer of its unrestricted investment income to the MTA was not increased for such arbitrage rebate accruals.

5. MTA INVESTMENT POOL

The MTA, on behalf of MTA Bridges and Tunnels, invests funds which are not immediately required for MTA Bridges and Tunnels’ operations in securities permitted by the MTA’s All-Agency Investment Guidelines in accordance with the State Public Authorities Law, including repurchase agreements collateralized by U.S. Treasury securities, U.S. Treasury notes, and U.S. Treasury zero-coupon bonds.

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6. CAPITAL ASSETS

Balance Balance BalanceDecember 31, December 31, December 31,

2006 Additions Deletions 2007 Additions Deletions 2008

CAPITAL ASSETS NOT BEING DEPRECIATED: Land 27,940$ - $ - $ 27,940$ - $ - $ 27,940$ Construction in progress 317,077 338,316 198,351 457,042 314,182 190,378 580,846

Total capital assets not being depreciated 345,017 338,316 198,351 484,982 314,182 190,378 608,786

CAPITAL ASSETS BEING DEPRECIATED: Building — 2 Broadway 82,398 - - 82,398 - - 82,398 Primary structures 1,712,196 101,587 - 1,813,783 83,398 - 1,897,181 Toll plazas 206,187 - - 206,187 - - 206,187 Toll equipment 98,199 8,834 - 107,033 - - 107,033 Buildings 359,692 16,970 - 376,662 80,008 - 456,670 Roadway 622,840 51,907 - 674,747 21,789 - 696,536 Other 82,184 23,519 - 105,703 14,369 - 120,072

Total capital assets being depreciated 3,163,696 202,817 - 3,366,513 199,564 - 3,566,077

LESS ACCUMULATED DEPRECIATION: Building — 2 Broadway 23,003 3,152 - 26,155 3,099 - 29,254 Primary structures 367,503 15,663 - 383,166 16,597 - 399,763 Toll plazas 88,194 4,660 - 92,854 4,660 - 97,514 Toll equipment 26,777 2,564 - 29,341 2,674 - 32,015 Buildings 63,662 8,996 - 72,658 10,208 - 82,866 Roadway 55,503 21,627 - 77,130 22,854 - 99,984 Other 52,440 13,131 - 65,571 17,121 - 82,692

Total accumulated depreciation 677,082 69,793 - 746,875 77,213 - 824,088

TOTAL CAPITAL ASSETS BEING DEPRECIATED — Net of accumulated depreciation 2,486,614 133,024 - 2,619,638 122,351 - 2,741,989

CAPITAL ASSETS — Net 2,831,631$ 471,340$ 198,351$ 3,104,620$ 436,533$ 190,378$ 3,350,775$

In 2008 and 2007, capital asset additions included $16,447 and $16,057, respectively, of costs incurred by engineers working on capital projects.

MTA Bridges and Tunnels’ 1992-1999 Capital Program, which was developed to rehabilitate MTA Bridges and Tunnels’ bridges and tunnels, totals $1,137,221. Over the 1992 to 1999 period, MTA Bridges and Tunnels committed $1,137,044 under the Capital Program for such activities.

MTA Bridges and Tunnels’ 2000-2004 Capital Program totals approximately $999,067. Total amounts committed through December 31, 2008 and 2007, totaled $974,883 and $971,445, respectively.

MTA Bridges and Tunnels’ 2005-2009 Capital Program totals $1,209,112. Total amounts committed through December 31, 2008, total $1,065,841.

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7. EMPLOYEE BENEFITS

Most employees of MTA Bridges and Tunnels are members of the New York City Employees’ Retirement System (“NYCERS”), which is a cost sharing, multi-employer retirement system. MTA Bridges and Tunnels’ total payroll costs were $142,728 or 93% for 2008 and $129,739 or 89.3% for 2007, which includes the cost of capital engineers charged to capital projects, of which such costs relate to employees who participate in NYCERS.

NYCERS provides retirement, as well as death, accident and disability retirement benefits. Benefits vest after 5 years of credited service depending on date of employment. Certain retirees also receive supplemental benefits from MTA Bridges and Tunnels.

Benefit and contribution provisions, which are contingent upon the point in time at which the employee last entered qualified service and length of credited service, are established by State law and may be amended only by the State legislature. NYCERS has both contributory and noncontributory requirements, with retirement age varying from 55 to 70 depending upon when an employee last entered qualifying service. Employees entering qualifying service on or before June 30, 1976, are enrolled in a noncontributory plan. Employees entering qualifying service after June 30, 1976, are enrolled in a plan, which requires a 3% contribution of their salary. The State legislature passed legislation in 2000 that suspends the 3% contribution for employees who have 10 years or more of credited service. In addition, members who meet certain eligibility requirements will receive one month’s additional service credit for each completed year of service up to a maximum of two additional years of service credit. Bridges and Tunnels is required to contribute at an actuarially determined rate. The current rate is 14.3% of annual covered payroll. The contribution requirements of plan members and MTA Bridges and Tunnels are established and may be amended by the State Legislature.

NYCERS established a “special program” for employees hired on or after July 26, 1976. A plan for employees, who have worked 20 years, and reached age 50, is provided to Bridge and Tunnel Officers, Sergeants and Lieutenants and Maintainers. Also, an age 57 retirement plan is available for all other such MTA Bridges and Tunnels employees. Both these plans required increased employee contributions.

Certain participants are permitted to borrow up to 75% of their own contributions including accumulated interest. These loans are accounted for as reductions in such participants’ contribution accounts. Upon termination of employment before retirement, certain participants are entitled to refunds of their own contributions, including accumulated interest, less any loans outstanding.

Employee contributions amounted to $10,863 (7.61% of covered payroll) and $9,288 (7.16% of covered payroll) in 2008 and 2007, respectively. MTA Bridges and Tunnels contributions to NYCERS for the years ending December 31, 2008, 2007, and 2006, were $20,403, $18,537 and $12,926, respectively, equal to the required contributions for each year.

Additional information about the plan is presented in the component unit financial report prepared by NYCERS. NYCERS issues a publicly available financial report that includes financial statements and required supplementary information. The NYCERS financial report may be obtained by writing to NYCERS Headquarters, 340 Jay Street, Brooklyn, NY, 11201.

Postretirement Benefits — In addition to providing pension benefits, MTA Bridges and Tunnels provides certain health care and life insurance benefits for retired employees. Substantially all of MTA Bridges and Tunnels’ employees who are members of NYCERS may become eligible for those benefits if they reach normal retirement age while working for MTA Bridges and Tunnels. The insurance premiums for these

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benefits are recorded on a pay-as-you-go basis and totaled $11,378 and $10,217 in 2008 and 2007, respectively. No contributions are made by participants. As of December 31, 2008 and 2007, 1,396 and 1,420 retirees, respectively, including spouses and dependents, met those eligibility requirements. See Note 8 for further disclosure on Other Post-Employment Benefits.

8. OTHER POSTEMPLOYMENT BENEFITS

The MTA and its Related Groups, which includes the TBTA, has implemented GASB Statement No. 45, “Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions” (“GASB 45”). This Statement establishes the standards for the measurement, recognition, and display of Other Postemployment Benefits (“OPEB”) expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (“RSI”) in the financial reports of state and local governmental employers.

Postemployment benefits are part of an exchange of salaries and benefits for employee services rendered. Most OPEB have been funded on a pay-as-you-go basis and have been reported in financial statements when the promised benefits are paid. GASB 45 requires state and local government’s financial reports to reflect systematic, accrual-basis measurement and recognition of OPEB cost (expense) over a period that approximates employees’ years of service and provides information about actuarial accrued liabilities associated with the OPEB and whether and to what extent progress is being made in funding the plan.

Plan Description

The Benefits provided by the MTA and its Related Groups include medical, pharmacy, dental, vision and life insurance, plus monthly supplements for Medicare Part B or Medicare supplemental plan reimbursement and welfare fund contributions.

Annual OPEB Cost and Net OPEB Obligation

The TBTA’s annual OPEB cost (expense) represents the accrued cost for post-employment benefits under GASB 45. The cumulative difference between the annual OPEB cost and the benefits paid during a year will result in a net OPEB obligation, included on the balance sheet. The annual OPEB cost is equal to the annual required contribution (“ARC”) less adjustments if a net OPEB obligation exists. The ARC is equal to the normal cost plus an amortization of the unfunded frozen actuarial accrued liability.

For determining the ARC, the MTA and its Related Groups have chosen to use Frozen Initial Liability (“FIL”) cost method with the initial liability amortized over a 22-year period.

In order to recognize the liability over an employee’s career, an actuarial cost method divides the present value into three pieces: the part that is attributed to past years (the “Accrued Liability” or “Past Service Liability”), the part that is being earned this year (the “Normal Cost”), and the part that will be earned in future years (the “Future Service Liability”). Under FIL, an initial past service liability is determined based on the Entry Age Normal (“EAN”) Cost Method and is amortized separately. This method determines the past service liability for each individual based on a level percent of pay. The Future Service Liability is allocated based on the present value of future compensation for all members combined to determine the Normal Cost. In future years, actuarial gains/losses will be incorporated into the Future Service Liability and amortized through the Normal Cost. Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and that actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future.

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Actuarial Methods and Assumptions

The Frozen Initial Liability (“FIL”) Cost Method was used for determining the Normal Cost. The Entry Age Normal (“EAN”) Cost Method was used to determine the Frozen Accrued Liability and will be used to determine the unfunded actuarial accrued liability in the GASB 45 supplementary schedules. This method determines the Frozen Accrued liability for each individual based on a level percent of pay for service accrued through the initial valuation date. The difference between the Actuarial Present Value of Benefits and the Frozen Accrued Liability equals the Present Value of Future Normal Cost. The Normal Cost equals the Present Value of Future Normal Cost divided by the present value of future compensation and multiplied by the total of current compensation for members less than certain retirement age. Inflation rate used was 2.5% per annum compounded annually. Salaries were assumed to increase by years of service as follows:

0-5 years 10.5% 5-10 years 4.0% 20-15 years 4.0% 15-19 years 4.0% 19+ years 5.0%

Increases in postretirement benefits were calculated using a trend of 11% beginning in 2007 decreasing 0.5% per year until an ultimate rate of 5%. The trend assumption was applied to all benefits. Investment returns were calculated using a discount rate of 4.2%, compounded annually, based upon a projection of the MTA Investment Pool. Valuation Date January 1, 2006 Discount Rate 4.2%

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Per Capita Claim Costs For members of NYSHIP who retired prior to NYSHIP availability, unadjusted premiums were used. For some of the self-insured benefits provided to Pre-NYSHIP Transit members per capita claim costs adjusted by age were used. A sample of these claim costs are shown below:

Pre-NYSHIP Pre-NYSHIP Pre-NYSHIP Group 1 Retirees Group 2 Age Hospital Pharmacy Hospital Male Employees 30-34 79.28 46.79 69.79 35-39 98.72 66.64 86.91 40-44 131.16 84.97 115.47 45-49 178.35 113.59 157.01 50-54 234.54 136.72 206.48 55-59 277.66 142.71 244.44 60-64 372.58 168.45 328.00 Pre-NYSHIP Pre-NYSHIP Pre-NYSHIP Group 1 Retirees Group 2 Age Hospital Pharmacy Hospital Female Employees 30-34 173.83 78.64 153.03 35-39 167.05 93.30 147.07 40-44 162.14 114.73 142.74 45-49 181.72 144.45 159.97 50-54 210.21 170.16 185.06 55-59 233.16 185.64 205.27 60-64 304.58 204.52 268.14

Medicare Part B Premiums The Medicare Part B premium reimbursement was included in the 2006 premium for those members covered by NYSHIP. Recently NYSHIP issued revised premiums for 2007 removing this reimbursement. Assuming the adjustment to the 2006 premium rate would be similar to that announced for 2007; the impact of using the revised premium rates (including the percentage increase in the premium rates from 2006 to 2007) on the Annual Required Contribution (ARC) for the MTA and its Related Groups was estimated. For other members, where applicable, the reimbursement was determined using the 2006 premium level and increasing this amount by the Health Care Cost Trend rates.

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Health Care Cost Trend Rates

Fiscal Year Trend Fiscal Year Trend 2007 11.0% 2014 7.5% 2008 10.5 2015 7.0 2009 10.0 2016 6.5 2010 9.5 2017 6.0 2011 9.0 2018 5.5 2012 8.5 2019+ 5.0 2013 8.0

In addition, 2006 premiums and claim costs were trended 11% to 2007. Participation For the 2,942 members who participate in NYSHIP, 100% of eligible members, including current retirees and surviving spouses, are assumed to elect the Empire PPO Plan. For groups that do not participate in NYSHIP, various coverage election rates are used. Dependent Coverage Current retirees are valued using coverage reported by the MTA. Based on an analysis of members who retired within the last 5 years, we have assumed that, for future retirees, 85% of male members and 55% of female members elect family coverage with a spouse. Demographic Assumptions Mortality: Pre-retirement and postretirement healthy annuitant rates are projected on a generational basis using Scale AA, as recommended by the Society of Actuaries Retirement Plans Experience Committee. Pre-retirement: RP-2000 Employee Mortality Table for Males and Females with blue-collar adjustments. No blue-collar adjustments were used for management members of Headquarters. Postretirement Healthy Lives: RP-2000 Healthy Annuitant mortality table for males with Blue Collar adjustments and 133% of the rates from the RP-2000 Healthy Annuitant mortality table for females. No blue-collar adjustments were used for management members of Headquarters. Postretirement Disabled Lives: 75% of the rates from the RP-2000 Disabled Annuitant mortality table for males and females. At age 85 and later for males and age 77 and later for females, the disability rates are set to the male and female healthy rates, respectively. Turnover and retirement rates: All demographic assumptions were based on assumptions utilized in the 2006 actuarial valuations for the pension plans, with the exception of the mortality assumption. The following is a table displaying the various sources of the assumptions utilized by group.

Group Pension Plan TBTA NYCERS - TBTA

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Vestee Coverage For members that participate in NYSHIP, Vestees (members who have terminated, but not yet eligible to retire) are eligible for NYSHIP benefits provided by the Agency upon retirement, but must maintain NYSHIP coverage at their own expense from termination to retirement. Vestees are assumed to retire at first eligibility and would continue to maintain NYSHIP coverage based on the following percentages. This assumption is based on the Development of Recommended Actuarial Assumptions for New York State/SUNY GASB 45 Valuation report provided to Participating Employers of NYSHIP. These percentages were also applied to current vestees, which were only provided by Headquarters.

Age at Termination

Percent Electing

<40 0% 40-43 5 44 20 45-46 30 47-48 40 49 50 50-51 80 52+ 100

The following table shows the elements of TBTA’s net OPEB cost for the year ended December 31, 2008 and 2007, the amount paid, and changes in TBTA’s net OPEB for the year ended December 31, 2008 and 2007:

2008 2007Amount Amount

Annual required contribution 80,500$ 71,500$ Interest on net OPEB obligation 2,600 - Adjustment to annual required contribution (5,400) -

Annual OPEB cost/expense 77,700 71,500

Payments (11,377) (10,217)

Increase in net OPEB obligation 66,323 61,283

Net OPEB obligation — beginning of year 61,283 -

Net OPEB obligation — end of year 127,606$ 61,283$

The TBTA’s annual OPEB cost, the percentage of annual OPEB cost contributed, and the net estimated OPEB obligation for the year ended December 31, 2008 and 2007 projected is as follows:

Percentage ofYear Annual Annual OPEB Net OPEB

Ended OPEB Cost Paid Obligation

12/31/2007 71,500$ 14.3 % 61,283$ 12/31/2008 77,700$ 14.6 % 66,323$

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UnfundedActuarial Actuarial Actuarial Ratio of

Value Accrued Accrued UAAL toPeriod Valuation of Liability Liability Funded Covered Covered Ended Date Assets (AAL) (UAAL) Ratio Payroll Payroll

{a} {b} {c}={b}-{a} {a}/{c} {d} {c}/{d}

12/31/2008 1/1/2008 - 560.1$ 560.1$ - 101.1$ 554.0 %

12/31/2007 1/1/2007 - 576.6$ 576.6$ - 97.2$ 593.2 %

The required schedule of funding progress immediately following the notes to the financial statements and the supplemental schedules presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

9. THE TRANSPORTATION PROJECT

2005-2009 Capital Programs

Capital programs covering the years 2005-2009 have been approved for (1) the commuter railroad operations of the MTA conducted by The Long Island Rail Road Company (“MTA Long Island Rail Road”) and the Metro-North Commuter Railroad Company (“MTA Metro-North Railroad”) (the “2005-2009 Commuter Capital Program”), (2) the transit system operated by the New York City Transit Authority (“MTA New York City Transit”) and its subsidiary, the Manhattan and Bronx Surface Transit Operating Authority (“MaBSTOA”), and the rail system operated by the Staten Island Rapid Transit Operating Authority (“MTA Staten Island Railway”) (the “2005-2009 Transit Capital Program”) and (3) the toll bridges and tunnels operated by MTA Bridges and Tunnels (the “2005-2009 MTA Bridges and Tunnels Capital Program”). The 2005-2009 MTA Bridges and Tunnels Capital Program was effective upon adoption by the Board. The 2005-2009 Commuter Capital Program and the 2005-2009 Transit Capital Program (collectively, the “2005-2009 MTA Capital Programs”) have been approved by the Metropolitan Transportation Authority Capital Program Review Board (the “Review Board”) and are also effective. The Review Board consists of one member each appointed by the Governor of the State, the Majority Leader of the State Senate and the Majority Leader of the State Assembly and, in the case of transit programs only, the Mayor of the City of New York.

As of April 2007, the 2005-2009 MTA Capital Programs and the 2005-2009 MTA Bridges and Tunnels Capital Program provided for $22,585,600 in capital expenditures, of which $11,219,500 related to ongoing repairs of, and replacements to, the Transit System operated by MTA New York City Transit and MaBSTOA and the rail system operated by MTA Staten Island Railway; $3,545,400 related to ongoing repairs of, and replacements to, the commuter system operated by MTA Long Island Rail Road and MTA Metro-North Railroad; $495,000 related to a security program throughout the transit, commuter and bridge and tunnel network; $155,400 relates to certain interagency projects; $3,730,000 related generally to the expansion of existing rail networks for both the transit and commuter systems to be managed by the MTA Capital Construction Company (including the East Side Access, Second Avenue Subway and JFK rail link projects); $2,100,000 related to the City’s funding of the proposed extension of the #7 subway line; $1,202,100 related to the ongoing repairs of, and replacements to, bridge and tunnel facilities operated by MTA Bridges and Tunnels; and $138,200 related to capital projects for the MTA Bus Company (“MTA Bus”).

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The combined funding sources for the 2005-2009 MTA Capital Programs and the 2005-2009 MTA Bridges and Tunnels Capital Program included $7,842,399 in Federal funds; $1,450,000 in proceeds from New York State general obligation bonds approved by the voters in November 2005; $2,528,600 from the City; $1,273,500 in asset sales, program income and carryover from the 2000-2004 capital program; and $9,440,700 in bonds; and $50,400 from other sources.

On July 23, 2008, the MTA Board further amended the 2005-2009 Capital Program for the purposes of updating capital project budgets and recognizing changes in funding sources. The amendments, insofar as they relate to the Transit and Commuter Systems, will not become effective until they are submitted to, and approved by, the Review Board. (The amendments relating to the MTA Bridges and Tunnels’ capital programs were effective upon adoption by the Board.)

� The value of the plan (including the Transit, Commuter and MTA Bridges and Tunnels programs) was increased by $1,131,100, from $22,585,600 to $23,716,700. The changes in the plan included a $48,900 increase in the core Transit and Commuter programs and the interagency program, a $7,000 increase in the MTA Bridges and Tunnels program, a $1,068,900 increase in Network Expansion Projects and a $6,300 increase in MTA Bus Company.

� Federally approved Full Funding Grant Agreement (FFGA) funds to the MTA Capital Construction Company for both East Side Access (ESA) and Second Avenue Subway (SAS) reflects an addition of $1,031,200. For ESA, this amendment added the remainder of $267,100 to the already approved FFGA and $764,100 of new FFGA funds to SAS.

� New York City Transit’s program was decreased by $65,200 to transfer funds to prior capital programs that have experienced cost-overruns.

� Funds from the discontinued LaGuardia Airport Access Project have been transferred from the 2000-20004 Capital Program and included with its own fund sources in the 2005-2009 Plan. $69,700 was previously approved by the MTA Board and the balance of $134,800 will be used for new priority initiatives.

2000-2004 Capital Programs

Capital programs covering the years 2000-2004 have been approved for (1) the commuter railroad operations of the MTA conducted by MTA Long Island Rail Road and MTA Metro-North Railroad (the “2000-2004 Commuter Capital Program”), (2) the transit system operated by MTA New York City Transit and its subsidiary, MaBSTOA, and the rail system operated by the MTA Staten Island Railway (the “2000-2004 Transit Capital Program”) and (3) the toll bridges and tunnels operated by MTA Bridges and Tunnels (the “2000-2004 MTA Bridges and Tunnels Capital Program”). The 2000-2004 MTA Bridges and Tunnels Capital Program was effective upon adoption by the Board. The 2000-2004 Commuter Capital Program and the 2000-2004 Transit Capital Program (collectively, the “2000-2004 MTA Capital Programs”) have been approved by the Review Board and are also effective.

The 2000-2004 MTA Capital Programs and the 2000-2004 MTA Bridges and Tunnels Capital Program provide for $20,893,900 in capital expenditures, of which $10,227,300 relates to ongoing repairs of, and replacements to, the Transit System operated by MTA New York City Transit and MaBSTOA and the rail system operated by MTA Staten Island Railway; $3,894,300 relates to ongoing repairs of, and replacements to, the commuter system operated by MTA Long Island Rail Road and MTA Metro-North Railroad; $4,531,700 relates generally to the expansion of existing rail networks for both the transit and commuter systems to be managed by the MTA Capital Construction Company (including $658,100 for a security

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program throughout the transit, commuter and bridge and tunnel network); $489,700 relates to planning and design and customer service projects; $248,900 relates to World Trade Center repair projects; $467,200 relates to bus purchases for MTA Bus Company; and $1,034,800 relates to the ongoing repairs of, and replacements to, bridge and tunnel facilities operated by MTA Bridges and Tunnels.

The combined funding sources for the 2000-2004 MTA Capital Programs and the 2000-2004 MTA Bridges and Tunnels Capital Program include $7,919,300 in bonds; $6,482,400 in Federal funds; $4,575,000 from the proceeds of the MTA/MTA Bridges and Tunnels debt restructuring in 2002; and $1,917,200 from other sources.

On December 13, 2006, the MTA Board amended the 2000-2004 Capital Programs for the purposes of updating capital project budgets and recognizing changes in funding sources. The amendments, insofar as they relate to the Transit and Commuter Systems, will not become effective until they are submitted to, and approved by, the Review Board. The amendments relating to the MTA Bridges and Tunnels’ capital programs were effective upon adoption by the Board.

� The value of the plan (including the Transit, Commuter and MTA Bridges and Tunnels programs) was increased by $253,000, from $20,893,900 to $21,146,600, with the Transit and Commuter programs increasing by $285,000 and the MTA Bridges and Tunnels program decreasing by $32,000 (which was transferred to the 2005-2009 MTA Bridges and Tunnels capital program to fund cost increases).

� The operating agency programs increased by $133,000, which includes transfers from the 2005-2009 Capital Program to fund cost increases for work still underway and the addition of new projects for MTA Metro-North Railroad’s Yankee Stadium station and MTA Long Island Rail Road’s Shea Stadium station. The two stadium projects are funded by the transfer of allocations from the discontinued LaGuardia Airport Access project.

� The Phase I Security Program was allocated an additional $129,000 in MTA operating and Federal sources (bringing the total to $721,000) to fund the completion of the Phase I initiatives.

� The South Ferry Terminal project was allocated an additional $34,000 in MTA operating sources to fund additional costs needed for the final contract award.

� MTA Bus received an additional $35,000 of City funding representing its match for Federal funds transferred by the City as part of the City-MTA agreement relating to the takeover of the private bus companies by MTA Bus.

On December 11, 2007, the MTA submitted to the MTA Capital Program Review Board an amendment to the 2000-2004 Capital Program, reallocating $13.7 million from MTA New York City Transit’s East New York Depot project (in the 2005-2009 Capital Program) to Transit’s Charleston Depot Construction project (in the 2000-2004 Capital Program). This amendment was approved by the Review Board on January 14, 2008.

10. POLLUTION REMEDIATION PROJECTS

MTA Bridges and Tunnels implemented GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations, in 2008. In accordance with GASB Statement No. 49, a pollution remediation expense provision totaling $49 and a corresponding liability were recorded. The expense provision was measured at its current value utilizing the prescribed expected cash flow method.

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As of December 31, 2008, the pollution remediation liability totaled $748 primarily consisting of future remediation activities associated with asbestos removal and soil contamination at MTA Bridge and Tunnels facilities.

The pollution remediation liability is an estimate and is subject to changes resulting from price increases or reductions, technology, or changes in applicable laws or regulations.

11. LONG-TERM DEBT MTA Bridges and Tunnels issues long-term bonds to fund its own capital projects, as well as the Transportation Project, through the following two credits:

� General Revenue Bonds, and

� Subordinate Revenue Bonds.

The following represents MTA Bridges and Tunnels’ issuance of long-term debt in 2008.

In March 2008, $822,700 General Revenue Fixed Rate Bonds, Series 2008A-the net proceeds of the Series 2008A Bonds were used to finance transit and commuter projects and to refinance outstanding indebtedness issued by MTA and MTA Bridges and Tunnels.

In March 2008, $252,230 General Revenue Variable Rate Bonds, Series 2008B-the net proceeds of the Series 2008B Bonds were used to finance certain improvements of MTA Bridges and Tunnels.

In July 2008, $629,890 General Revenue Fixed Rate Bonds, Series 2008C-the net proceeds of the Series 2008C Bonds were used to refinance outstanding indebtedness issued by MTA.

In July 2008, $491,110 General Revenue Fixed Rate Bonds, Series 2008D-the net proceeds of the Series 2008D Bonds were used to refinance outstanding indebtedness issued by MTA Bridges and Tunnels.

In October 2008, MTA Bridges and Tunnels completed a conversion and remarketing of the Series 2001B Bonds and Series 2001C Bonds. The 2001B Bonds totaling $145,760 are supported by an irrevocable, direct-pay letter of credit from State Street Bank and Trust Company. The 2001C Bonds totaling $145,760 are supported by an irrevocable, direct pay letter of credit from Bayerische Landesbank. Bond Insurance previously provided by Ambac Assurance Corporation for the 2001B and 2001C Bonds was terminated.

In December 2008, all 2002C Bondholders, including the Liquidity Provider were paid from the proceeds of MTA Transportation Revenue Bonds, Series 2008C.

The following represents MTA Bridges and Tunnels’ issuance of long-term debt in 2007:

� $223,355 General Revenue Fixed Rate Bonds, Series 2007A — the net proceeds of the Series 2007A Bonds were used to finance certain improvements of MTA Bridges and Tunnels’ bridges and tunnels

� $201,120 Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB, and $201,080 Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD as a result of combining Subordinate Revenue Variable Rate Refunding Bonds, Series 2000A and 2000B and Series 2000C and 2000D, respectively as part of its “Remarketing Plan”.

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MTA Bridges and Tunnels’ long-term debt as of December 31, 2008 and 2007 is comprised of the following:

2008 2007

Senior Revenue Bonds (Note 11) 6,334,176$ 4,731,793$ Subordinate Revenue Bonds (Note 12) 2,033,937 2,236,560 2 Broadway Certificates of Participation (Note 13) 41,090 41,798

Total long-term debt — net of premiums and discounts 8,409,203$ 7,010,151$

TBTA has entered into several Standby Bond Purchase Agreements (SBPA) as listed on the table below.

Resolution Series Provider (Insurer) Exp. Date TBTA General Revenue 2003B Dexia 7/7/2012 TBTA General Revenue 2005A Dexia 5/9/2012 TBTA General Revenue 2005B-2 Dexia 7/6/2012 TBTA General Revenue 2005B-3 Bank of America 7/6/2012 TBTA General Revenue 2005B-4 Landesbank Baden-Wurttemberg (NY) 12/29/2015 TBTA General Revenue 2002F ABN AMRO 11/8/2012 TBTA Subordinate 2000AB JPMorgan (FSA) 10/7/2014 TBTA Subordinate 2000CD Lloyds TSB Bank (NY) (FSA) 10/7/2014 TBTA General Revenue 2005B-1 Depfa Bank 7/7/2015

According to each respective SBPA, if the remarketing agent fails to remarket any of the bonds listed above that are tendered by the holders, the bank is required (subject to certain conditions) to purchase such unremarketed portion of the bonds. Bonds owned by the bank and not remarketed after a specified amount of time (generally 90 days) are payable to the bank as a term loan over five years in ten equal semiannual principal payments including interest thereon.

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12. LONG-TERM DEBT — SENIOR REVENUE BONDS

Senior Revenue Bonds at December 31, 2008 and 2007, consist of the following:

PrincipalRepayments

Original December 31, & Retirements December 31,Issuance 2007 Issued During 2008 2008

Series EFC 1996A 23,530$ 17,895$ - $ 1,305$ 16,590$ Series 2001A, 5.77% due through 2032 1,125,720 504,930 - - 504,930 Series 2001B&C, 4.10% – 5.25% 296,400 296,400 - 4,880 291,520 Series 2002A 268,300 171,765 - - 171,765 Series 2002B 2,157,065 1,833,820 - 69,265 1,764,555 Series 2002C 103,305 103,305 - 103,305 - Series 2002F 246,480 240,930 - 5,775 235,155 Series 2003B 250,000 235,155 - 5,350 229,805

Series 2005A 150,000 144,755 - 2,835 141,920 Series 2005B 800,000 797,200 - 2,800 794,400 Series 2006A 200,000 191,360 - 3,635 187,725 Series 2007A 223,355 219,570 - 3,640 215,930 Series 2008A 822,770 - 822,770 - 822,770 Series 2008B 252,230 - 252,230 - 252,230 Series 2008C 629,890 - 629,890 - 629,890

7,549,045$ 4,757,085 1,704,890 202,790 6,259,185

Add net unamortized bond discount and premium 75,583 61,537 14,519 122,601

4,832,668$ 1,766,427$ 217,309$ 6,381,786$

Debt Service Requirements:

Year Ending AggregateDecember 31 Principal Interest Debt Service

2009 47,610$ 294,515$ 342,125$ 2010 133,415 284,509 417,924 2011 139,845 277,742 417,587 2012 137,240 280,818 418,058 2013 143,720 274,023 417,743 2014–2018 894,685 1,187,192 2,081,877 2019–2023 1,122,295 951,805 2,074,100 2024–2028 1,349,945 693,142 2,043,087 2029–2033 1,663,160 14,306 1,677,466 2034–2038 627,270 93,650 720,920

6,259,185$ 4,351,702$ 10,610,887$

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The above interest amounts include both fixed and variable rate calculations. The interest rate assumptions for Senior Revenue variable rate bonds are as follows:

� MTA Bridges and Tunnels General Revenue Bonds, Series 2005A – 4.00% per annum � MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2005B – 3.513% per annum based

on the Basis Risk Interest Rate Swap through January 1, 2012 and 3.076% per annum based on the Initial Interest Rate Swaps thereafter.

� MTA Bridges and Tunnels General Revenue Refunding Bonds, Series 2002F – 4.00% per annum � MTA Bridges and Tunnels General Revenue Bonds, Series 2001B&C - 4.00% per annum and including

net payments made by MTA Bridges and Tunnels under the swap agreements � MTA Bridges and Tunnels General Revenue Bonds, Series 2003B - 4.00% per annum

13. LONG - TERM DEBT – SUBORDINATE REVENUE BONDS

Subordinate Revenue Bonds at December 31, 2008 and 2007 consist of the following:

PrincipalRepayments

Original December 31, & Retirements December 31,Issuance 2007 Issued During 2008 2008

Series 2000AB 201,120$ 201,120$ - $ 12,520$ 188,600$ Series 2000CD 201,080 201,080 - 12,480 188,600 Series 2002D 261,700 255,750 - 255,750 - Series 2002E 756,095 756,095 - - 756,095 Series 2002G 181,025 181,025 - 181,025 - Series 2003A 500,170 440,640 - 8,095 432,545 Series 2004A 250,000 236,250 - 236,250 - Series 2008D 491,110 - 491,110 9,250 481,860

2,842,300$ 2,271,960 491,110 715,370 2,047,700

Add net unamortized bond discount and premium 8,770 16,896 1,809 23,857

2,280,730$ 508,006$ 717,179$ 2,071,557$

Debt Service Requirements:


2009 37,620$ 104,564$ 142,184$ 2010 49,145 102,410 151,555 2011 51,280 99,878 151,158 2012 54,540 97,068 151,608 2013 56,515 94,059 150,574 2014–2018 356,765 417,808 774,573 2019–2023 432,865 317,801 750,666 2024–2028 435,430 202,176 637,606 2029–2033 573,540 58,302 631,842

2,047,700$ 1,494,066$ 3,541,766$

D-33

The Subordinate Revenue Bonds are special obligations issued in accordance with the 2001 Subordinate Revenue Resolution Authorizing Subordinate Revenue Obligations.

The above interest amounts include both fixed and variable rate calculations. The interest rate assumptions for Subordinate Revenue variable rate bonds are as follows:

� MTA Bridges and Tunnels Subordinate Revenue Refunding Bonds, Series 2000AB - 4.00% per annum and including net payments made by MTA Bridges and Tunnels under the swap agreements

� MTA Bridges and Tunnels Subordinate Revenue Refunding Bonds, Series 2000CD - 4.00% per annum and including net payments made by MTA Bridges and Tunnels under the swap agreements

14. CERTIFICATES OF PARTICIPATION

In 2000, the Trust (Note 15) issued $121,200 of fixed rate Serial and Term Certificates of Participation, Series 2000A. In 1999, the Trust issued $328,205 of fixed rate Serial and Term Certificates of Participation, Series 1999A. In 2004, the Trust issued $357,925 of fixed rate Serial and Term Certificates of Participation, Series 2004A. The proceeds of the Certificates were used to finance certain building and tenant improvements to the 2 Broadway office building in New York City, occupied by the Transit Authority, MTA, on behalf of its subsidiaries, The Long Island Rail Road Company, Metro-North Commuter Railroad Company, and MTA Bridges and Tunnels (Notes 15 and 22). The Transit Authority is obligated to pay 68.7% of the debt service, the MTA 21.0%, and MTA Bridges and Tunnels 10.3%.

Certificates of Participation 2008 2007

Serial Bonds, 4.60%–5.625%, due through 2015 5,905$ 6,860$ Variable rate Certificates of Participation due 2030 36,413 36,619

Subtotal 42,318 43,479

Unamortized discount (2) (785) Unamortized premium 35 59

42,351$ 42,753$

D-34

MTA Bridges and Tunnels’ share of the debt service requirements:

Certificates of Participation


2009 1,261$ 1,677$ 2,938$ 2010 1,115 1,604 2,719 2011 1,389 1,527 2,916 2012 1,461 1,447 2,908 2013 1,537 1,361 1,537 2014–2018 8,756 5,798 14,554 2019–2023 10,561 3,928 14,489 2024–2028 12,731 1,675 14,406 2029–2030 3,507 25 3,532

42,318$ 19,042$ 59,999$

The above interest amounts include both fixed and variable rate calculations. The interest rate assumptions for Certificates of Participation are as follows:

� Certificates of Participation, Series 2004A – 3.542% per annum taking into account the interest rate swaps

15. CAPITAL LEASE OBLIGATIONS

2 Broadway

During 1998, the MTA, TA, and MTA Bridges and Tunnels entered into an agreement with the United States Trust Company of New York (collectively, the “Trust”) to provide for the lease of an office building located at 2 Broadway in New York City. Subsequently, the same parties provided for the delivery of certain certificates of participation to finance building and tenant improvements at 2 Broadway (Note 14). The lease is composed of both an operating lease (for the lease of land) (Note 22) and capital lease (for the lease of the building) elements.

The lease term expires June 30, 2048, with the right to extend the term of the lease for two successive periods of fifteen years each. Rental payments will be allocated to the MTA, TA, and MTA Bridges and Tunnels based upon usage.

MTA Bridges and Tunnels has recorded capital lease assets using the net present value, and using a borrowing rate of 9.11%, and has reflected a capital lease obligation as of December 31, 2008 and 2007, of $38,773 and $38,826, respectively.

Subway Cars

During 1995, MTA Bridges and Tunnels entered into a sale-leaseback transaction with a third party whereby MTA Bridges and Tunnels sold certain subway cars, which were contributed by the TA, for net proceeds of $84,229. These cars were subsequently leased back by MTA Bridges and Tunnels under a capital lease. The gain on the sale of $34,231 was deferred and netted against the carrying value of the leased assets, and the assets were recontributed to the TA. MTA Bridges and Tunnels transferred $5,488 to

D-35

the MTA, representing the net economic benefit of the transaction. The remaining proceeds equal the net present value of the lease obligation, of which $71,258 was placed in an irrevocable deposit account and $7,483 was invested in U.S. Treasury Strips. The estimated yields and maturities of the deposit account and the Treasury Strips are expected to be sufficient to meet all obligations under the lease as they become due.

In 2008 and 2007, there were no capital lease obligation payments which were funded by the aforementioned investments. At December 31, 2008 and 2007, the balance in the irrevocable deposit account was $76,500 and the investments in U.S. Treasury Strips had a market value of $17,191 at December 31, 2008.

At the end of the lease term, MTA Bridges and Tunnels has the option to purchase the subway cars for approximately $106,000, which amount has been reflected in the net present value of the lease obligation, or to make a lease termination payment of approximately $89,000, which is expected to be covered by the irrevocable deposit.

Total obligations under all capital leases as of December 31, 2008 and 2007, are as follows:

2008 2007

2 Broadway 38,773$ 38,826$ Subway cars 93,691 83,159

132,464 121,985

Less current portion (6,488) (6,541)

125,976$ 115,444$

D-36

Minimum lease payments are as follows:

AggregateYears Ending LeaseDecember 31 Payments

2009 11,397$ 2010 11,494 2011 11,566 2012 11,663 2013 11,785 2014–2018 152,097 2019–2023 32,364 2024–2028 34,002 2029–2033 34,109 2034–2038 31,240 2039-2043 24,720 2044-2048 12,393 2049 415

Minimum future lease payments 379,245

Less amount representing interest (246,781)

132,464$

Total accumulated depreciation under capital leases was approximately $29,254 and $26,155 in 2008 and 2007, respectively.

16. RISK MANAGEMENT

MTA Bridges and Tunnels is exposed to various risks of loss related to torts; theft of, damage to, and destruction of its assets; injuries to persons, including employees; and natural disasters.

MTA Bridges and Tunnels is self-insured up to $1,400 per occurrence for liability arising from injuries to persons, excluding employees. MTA Bridges and Tunnels is self-insured for work-related injuries to employees and for damage to third-party property. MTA Bridges and Tunnels provides reserves to cover the self-insured portion of these claims, including a reserve for claims incurred but not reported. The annual cost arising from injuries to employees and damage to third–party property is included in “Retirement & other employee benefits” and “Insurance” in the accompanying statements of revenues, expenses and changes in excess of liabilities over assets.

D-37

A summary of activity in estimated liability arising from injuries to persons, including employees, and damage to third-party property, as of December 31, 2008 and 2007, is as follows:

2008 2007

Balance — beginning of year 21,820$ 18,916$

Activity during the year: Current year claims and changes in estimates 5,950 7,198 Claims paid (3,349) (4,294)

Balance — end of year 24,421 21,820

Less current portion (11,873) (14,954)


Claims for injuries to persons, excluding employees, over $1,400 per occurrence (up to a limit of the lesser of the assets available for claims or $50,000) are insured by First Mutual Transportation Assurance Company (“FMTAC”), a public benefit corporation subsidiary of the MTA. FMTAC insures MTA Bridges and Tunnels, MTA and the other MTA affiliates and subsidiaries for such claims. FMTAC assumed such coverage from the MTA Excess Loss Trust Fund, which was terminated during 2003.

Effective October 31, 2005, the MTA renewed an all-agency catastrophic liability insurance policy providing limits of $250,000. This policy covers liability above FMTAC’s policy described in the preceding paragraph (excess of $50,000) and is designed to drop down to replace the FMTAC policy if the assets of FMTAC held for such purpose are exhausted and total claims exceed $125,000.

FMTAC also directly insures property damage claims of MTA Bridges and Tunnels, MTA and its affiliates and subsidiaries in excess of a $25,000 per occurrence self-insurance retention, subject to an annual $75,000 aggregate. The aggregate limitation of $1,250 per occurrence covers all property of MTA Bridges and Tunnels, MTA and its affiliates and subsidiaries collectively. The property insurance provides replacement cost coverage for all risks of direct physical loss or damage to all real and personal property, with minor exceptions. The policy also provides extra expense and business interruption coverages. With the exception of acts of terrorism (both domestic and foreign), FMTAC is fully reinsured in the domestic, London and European marketplace, for this coverage. With respect to acts of international terrorism covered by the Terrorism Risk Insurance Act of 2002 (“TRIA”), FMTAC is reinsured by the United States Government for 90% of losses, subject to an annual cap on all losses payable under TRIA of $100,000. The remaining 10% of losses would be covered under an additional policy. With respect to acts of terrorism not covered by TRIA, MTA obtained an additional all-agency commercial reinsurance policy that provides coverage against all acts of terrorism in an amount of up to $100,000 per occurrence (subject to the $25,000 per occurrence self-insurance retention). In the event the occurrence is covered by TRIA, the coverage afforded by the additional policy would provide for the payment of the remaining 10% not covered by TRIA as described above.

17. CONVENTION CENTER PROJECT

Convention Center Project Bonds are secured solely by lease payments from New York State under a sublease and the funds and accounts established under the bond resolution. These special obligation bonds are not secured by or payable from any revenues or assets of MTA Bridges and Tunnels. In view of the

D-38

foregoing, and since the State is obligated to make rental payments equal to the debt service on these bonds pursuant to its sublease and MTA Bridges and Tunnels has no obligation for the operation and maintenance of the Convention Center, MTA Bridges and Tunnels does not include the Convention Center bond liability and other related accounts in its financial statements. MTA Bridges and Tunnels continues to collect rental payments from the State and deposits such sums with paying agents for the bonds.

A summary of the Convention Center accounts which are excluded from the financial statements as of December 31, 2008 and 2007 is as follows:

2008 2007

Assets: Debt service Fund 38,083$ 36,922$ Futures sublease receivables due from New York State 109,831 141,770

147,914$ 178,692$

Liabilities: Convention Center Bonds 109,831$ 141,770$ Bond principal due 2009 and 2008 34,320 32,000 Interest payable due January 1, 2009 and 2008 3,763 4,922

147,914$ 178,692$

All interest income earned on investments related to the Convention Center reduces the amounts due from New York State to repay the outstanding bonds.

18. LEASE-LEASEBACK TRANSACTION

On March 31, 1997, the MTA entered into a lease/leaseback transaction with a third party whereby the MTA leased MTA Long Island Rail Road’s Hillside maintenance facility to the third party. The term of the lease is 22 years, and the third party has the right to renew for a further 21.5 year term. The facility was subsequently subleased back to the MTA as a capital lease, and sub-subleased by the MTA to MTA Long Island Rail Road.

Under the terms of the lease/leaseback agreement, the MTA initially received $314 million, which was utilized as follows. The MTA paid $266 million to Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A.

(Rabobank Nederland), an affiliate of the third party’s lender, which has the obligation to pay to the MTA an amount equal to the rent obligations under the sublease attributable to the debt service on the loan from the third party’s lender. The MTA used $21 million to purchase Treasury securities, which are pledged as collateral to the third party. The value at maturity of these Treasury securities, together with the proceeds from the aforementioned obligation of Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., is sufficient to pay all of the regularly scheduled rent obligations, including the cost of purchasing the third party’s remaining rights at the end of the 22 year sublease period, if the related purchase option is exercised. A further $0.6 million was used to pay for legal and other costs of the transaction, and $3 million was used to pay the first rental payment under the sublease. A further $23 million is the MTA’s net benefit from the transaction, representing consideration for the tax benefits. MTA Bridges and Tunnels has entered into a guarantee with the third party that the sublease payments will be made.

D-39

19. COMMITMENTS AND CONTINGENCIES

At December 31, 2008 and 2007, MTA Bridges and Tunnels had unused standby letters of credit, relative to insurance, amounting to $2,712.

MTA Bridges and Tunnels is involved in various litigations and claims involving personal liability claims and certain other matters. Although the ultimate outcome of these claims and suits cannot be predicted at this time, management does not believe that the ultimate outcome of these matters will have a material effect on the financial position, results of operations and cash flows of MTA Bridges and Tunnels.

20. SWAP AGREEMENTS

Board-adopted Guidelines - The Related Entities adopted guidelines governing the use of swap contracts to manage the interest rate exposure of their debt. The Guidelines establish specific requirements that must be satisfied for a Related Entity to enter into a swap contract, such as suggested swap terms and objectives, credit ratings of the counterparties, collateralization requirements and reporting requirements. Objectives of the Swaps - In order to protect against the potential of rising interest rates, to achieve a lower net cost of borrowing, to reduce exposure to changing interest rates on a related bond issue, or, in some cases where Federal tax law prohibits an advance refunding, to achieve debt service savings through a synthetic fixed rate, MTA Bridges and Tunnels entered into separate pay-fixed, receive-variable interest rate swaps at a cost anticipated to be less than what MTA Bridges and Tunnels would have paid to issue fixed-rate debt. Fair Value - Relevant market interest rates on the valuation date (December 31, 2008) of the swaps reflected in the following charts in some cases were higher than, and in some cases were lower than, market interest rates on the effective date of the swaps. Consequently, as of the valuation date, some of the swaps had negative fair values and some had positive fair values. A negative fair value means that MTA Bridges and Tunnels would have to pay the counterparty that approximate amount to terminate the swap. In the event there is a positive fair value, MTA Bridges and Tunnels would be entitled to receive a payment from the counterparty to terminate the swap; consequently, MTA Bridges and Tunnels would be exposed to the credit risk of the counterparties in the amount of the swaps’ fair value should the swap be terminated. The fair values listed in the following tables represent the theoretical cost to terminate the swap as of the date indicated, assuming that a termination event occurred on that date. The fair values were estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero-coupon bond due on the date of each future net settlement on the swap. In the event both parties continue to perform their obligations under the swap, there is no risk of termination and neither party is required to make a termination payment to the other. MTA Bridges and Tunnels is not aware of any event that would lead to a termination event with respect to any of their existing swaps. See “Termination Risk” below. Terms and Fair Values - The terms, fair values and counterparties of the outstanding swaps of MTA Bridges and Tunnels, as well as the swaps entered into in connection with the 2 Broadway Certificates of Participation refunding, are reflected in the following tables. The MTA Bridges and Tunnels swaps are reflected in separate tables for the senior lien and subordinate revenue bonds.

D-40

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D-41

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D-42

2 Broadway Certificates of Participation Swaps

In addition to the foregoing, MTA, MTA New York City Transit and MTA Bridges and Tunnels entered into separate ISDA Master Agreements with UBS AG relating to the $357,925,000 Variable Rate Certificates of Participation, Series 2004A (Auction Rate Securities) in connection with the refunding of certain certificates of participation originally executed to fund certain improvements to the office building located at 2 Broadway in Manhattan. The 2 Broadway swaps have (1) an effective date of September 22, 2004, (2) a fixed rate paid of 3.092%, (3) a variable rate received of the lesser of (a) the actual bond rate, or (b) 67% of one-month LIBOR minus 45 basis points, and (4) a termination date of January 1, 2030. Based on the aggregate notional amount of $355,525,000 outstanding as of December 31, 2008, MTA New York City Transit is responsible for $244,250,000 aggregate notional amount of the swaps, MTA for $74,650,000 aggregate notional amount, and MTA Bridges and Tunnels for $36,625,000 aggregate notional amount. As of December 31, 2008, the aggregate fair value of the swaps was negative $70.100 million. Counterparty Ratings The current ratings of the counterparties are as follows as of December 31, 2008:

Counterparty


S&P Moody’s Fitch Ambac Financial Services, L.P. A Baa1 NR Bear Stearns Capital Markets Inc. A+ Aa2 AA- BNP Paribas North America, Inc. AA+ Aa1 AA Citibank, N.A. A+ Aa3 A+ Citigroup Financial Products Inc. A A2 A+ JPMorgan Chase Bank A+ Aa2 AA- UBS AG A+ Aa2 A+

Except as set forth below, the notional amounts of the swaps match the principal amounts of the associated bonds. The following table sets forth the notional amount and the outstanding principal amount as of December 31, 2008 for the swap where the notional amount does not match the outstanding principal amount of the associated bonds.


Principal Amount of

Bonds (in millions)

Notional Amount

(in millions)


$291.520 $177.900


$235.155 $77.100

Except as discussed below under the heading “Rollover Risk,” the swap agreements contain scheduled reductions to outstanding notional amounts that are expected to approximately follow scheduled or anticipated reductions in the principal amount of the associated bonds.

D-43

Risks Associated with the Swap Agreements From MTA Bridges and Tunnels’ perspective, the following risks are generally associated with swap agreements:

� Credit Risk – The counterparty becomes insolvent or is otherwise not be able to perform its financial obligations. In the event of a deterioration in the credit ratings of the counterparty or MTA Bridges and Tunnels the swap agreement may require that collateral be posted to secure the party’s obligations under the swap agreement. See “Collateralization” below. Further, ratings deterioration by either party below levels agreed to in each transaction could result in a termination event requiring a cash settlement of the future value of the transaction. See “Termination Risk” below.

� Basis Risk – The variable interest rate paid by the counterparty under the swap and the

variable interest rate paid by MTA Bridges and Tunnels on the associated bonds may not be the same. If the counterparty’s rate under the swap is lower than the bond interest rate, then the counterparty’s payment under the swap agreement does not fully reimburse MTA Bridges and Tunnels for its interest payment on the associated bonds. Conversely, if the bond interest rate is lower than the counterparty’s rate on the swap, there is a net benefit to MTA Bridges and Tunnels.

� Termination Risk – The swap agreement will be terminated and MTA Bridges and Tunnels

will be required to make a termination payment to the counterparty and, in the case of a swap agreement which was entered into for the purpose of creating a synthetic fixed rate for an advance refunding transaction may also be required to take action to protect the tax exempt status of the related refunding bonds.

� Rollover Risk – The notional amount under the swap agreement terminates prior to the final

maturity of the associated bonds on a variable rate bond issuance, and MTA Bridges and Tunnels may be exposed to then market rates and cease to receive the benefit of the synthetic fixed rate for the duration of the bond issue.

Credit Risk. The following table shows, as of December 31, 2008, the diversification, by percentage of notional amount, among the various counterparties that have entered into ISDA Master Agreements with MTA Bridges and Tunnels, or in connection with the 2 Broadway Certificates of Participation refunding. The notional amount totals below include all five swaps (including the UBS basis risk swap) in connection with the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2005B. The counterparties have the ratings set forth above.


(in thousands)


UBS AG $1,029,625 45.60% Citigroup Financial Products Inc. 366,500 16.23 BNP Paribas North America, Inc. 198,600 8.80 Citibank, N.A. 198,600 8.80 JPMorgan Chase Bank 198,600 8.80 Bear Stearns Capital Markets Inc. 188,600 8.35 Ambac Financial Services, L.P. 77,100 3.42

Total $2,257,625 100.00%

D-44


� Bear Stearns Capital Markets Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000AB,

� Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels Subordinate Revenue Variable Rate Refunding Bonds, Series 2000CD,

� Citigroup Financial Products Inc. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C, and

� Ambac Financial Services, L.P. with respect to the MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2002F (currently only one transaction outstanding under that Master Agreement)

Under the terms of these agreements, should one party become insolvent or otherwise default on its obligations, close-out netting provisions permit the nondefaulting party to accelerate and terminate all outstanding transactions and net the transactions’ fair values so that a single sum will be owed by, or owed to, the nondefaulting party.

Collateralization. Generally, the Credit Support Annex attached to the ISDA Master Agreement requires that if the outstanding ratings of MTA Bridges and Tunnels or the counterparty falls to a certain level, the party whose rating falls is required to post collateral with a third-party custodian to secure its termination payments above certain threshold amounts. Collateral must be cash or U.S. government or certain Federal agency securities.

The following tables set forth the ratings criteria and threshold amounts relating to the posting of collateral set forth for MTA Bridges and Tunnels and the counterparty for each swap agreement. In most cases, the Counterparty does not have a Fitch rating on its long-term unsecured debt, so that criteria would not be applicable in determining if the Counterparty is required to post collateral.


Associated Agencies






$25,000,000


$0



Then the Counterparty must post collateral if its estimated

termination payments are in excess of

Moody’s – Baa1 or lower, or S&P – BBB+ or lower

$0

D-45












$10,000,000 $30,000,000 $15,000,000


$0 $0










Notwithstanding the foregoing, in the event any downgraded party is responsible for an event of default or potential event of default as defined in the ISDA Master Agreement, the downgraded party must immediately collateralize its obligations irrespective of the threshold amounts.

Under each MTA Bridges and Tunnels bond resolution, the payments relating to debt service on the swaps are parity obligations with the associated bonds, as well as all other bonds issued under that bond

D-46

resolution, but all other payments, including the termination payments, are subordinate to the payment of debt service on the swap and all bonds issued under that bond resolution. In addition, MTA Bridges and Tunnels have structured each of the swaps (other than the 2 Broadway swaps) in a manner that will permit MTA or MTA Bridges and Tunnels to bond the termination payments under any available bond resolution.

The payments relating to debt service on the 2 Broadway swaps are parity obligations with respect to the sublease payments under the 2 Broadway Certificates of Participation, payable solely from available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds. All other payments, including the termination payments, are payable from substantially the same pool of available transportation revenues after the payment of the MTA’s transportation revenue bonds and additional parity and subordinate bonds.

The ISDA Master Agreement sets forth certain termination events applicable to all swaps entered into by the parties to that ISDA Master Agreement. MTA Bridges and Tunnels have entered into separate ISDA Master Agreements with each counterparty that governs the terms of each swap with that counterparty, subject to individual terms negotiated in a confirmation.

The following table sets forth, for each swap, the additional termination events for the following associated bond issues. In certain swaps, where the counterparty has a guarantor of its obligations, the ratings criteria applies to the guarantor and not to the counterparty.


Counterparty






Senior Lien Revenue Bonds Series 2001B and 2001C and Series 2002F

1. MTA Bridges and Tunnels can elect to terminate the swap relating to that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Ambac Assurance Corporation.



Subordinate Revenue Bonds Series 2000AB and 2000CD 1. MTA Bridges and Tunnels can elect to terminate the swap relating to

that Series on 10 Business Days’ notice if the Series of Bonds are converted to a fixed rate, the fixed rate on the converted Bonds is less than the fixed rate on the swap and MTA Bridges and Tunnels

D-47

demonstrates its ability to make the termination payments, or MTA Bridges and Tunnels redeems a portion of the Series of Bonds and demonstrates its ability to make the termination payments. 2. Negative financial events relating to the related swap insurer, Financial Security Assurance Inc.

Rollover Risk. MTA and MTA Bridges and Tunnels are exposed to rollover risk on swaps that mature or may be terminated prior to the maturity of the associated debt. When these swaps terminate, MTA or MTA Bridges and Tunnels may not realize the synthetic fixed rate offered by the swaps on the underlying debt issues. The following debt is exposed to rollover risk:


Bond Maturity

Date

Swap Termination

Date MTA Bridges and Tunnels General Revenue Variable Rate Refunding Bonds, Series 2001B and 2001C

01/01/32 01/01/19


11/01/32 01/01/13

Swap payments and Associated Debt. The following tables contain the aggregate amount of estimated variable-rate bond debt service and net swap payments during certain years that such swaps were entered into in order to: protect against the potential of rising interest rates; achieve a lower net cost of borrowing; reduce exposure to changing interest rates on a related bond issue; or, in some cases where Federal tax law prohibits an advance refunding, achieve debt service savings through a synthetic fixed rate. As rates vary, variable-rate bond interest payments and net swap payments will vary. Using the following assumptions, debt service requirements of MTA Bridges and Tunnel’s outstanding variable-rate debt and net swap payments are estimated to be as follows:

� It is assumed that the variable-rate bonds would bear interest at a rate of 4.0% per annum. � The net swap payments were calculated using the actual fixed interest rate on the swap

agreements.


(in millions) Variable-Rate Bonds

Year Ending December 31

Principal

Interest

Net Swap Payments

Total

2008 $ 38.5 $ 68.1 $ 4.9 111.5 2009 40.9 66.5 4.4 111.8 2010 43.0 64.8 3.5 111.3 2011 45.8 63.0 2.6 111.3 2012 48.0 61.1 1.7 110.7

2013-2017 290.2 272.1 (14.5) 547.7 2018-2022 196.0 220.0 (34.2) 381.8 2023-2027 188.8 185.0 (32.4) 341.4 2028-2032 845.6 83.9 (15.8) 913.7

D-48

21. OPERATING LEASES

During 1998, the MTA, TA and MTA Bridges and Tunnels entered into a lease and related agreements whereby each, as sub lessees, will rent for at least an initial stated term of approximately 50 years, space at 2 Broadway in lower Manhattan (Note 15).

The total annual rental payments over the initial lease term are $1,600,000. Of this amount, approximately $488,000 represents land accounted for under an operating lease agreement. Rental payments will be allocated to the MTA, TA, and MTA Bridges and Tunnels based upon usage.

Minimum lease payments representing MTA Bridges and Tunnels’ share of the operating lease are as follows:

AggregateTwelve Months Ending Lease December 31 Payments

2009 2,405$ 2010 2,405 2011 2,405 2012 2,405 2013 2,405 2014–2018 2,405 2019–2023 2,405 2024–2028 2,405 2029–2033 2,405 2034–2038 2,405 Thereafter 72,155

Minimum future lease payments 96,205$

22. RELATED PARTY TRANSACTIONS

MTA Bridges and Tunnels and other affiliated MTA agencies receive support from MTA in the form of budget, cash management, finance, legal, real estate, treasury, risk and insurance management, and other services, some of which are charged back.

The resulting receivables and payables from the above transactions are recorded in the due from/to MTA and affiliated agencies account included in the accompanying balance sheets.

Due from/to MTA and affiliated agencies consists of the following at December 31, 2008 and 2007:

Receivable (Payable) Receivable (Payable)

Due from (due to) MTA 1,916$ (174,073)$ 1,886$ (135,989)$ Due from (due to) affiliated agencies - (8,876) - (15,554)

Total MTA and affiliated agencies 1,916$ (182,949)$ 1,886$ (151,543)$

2008 2007

D-49

23. SETTLEMENT OF CLAIMS

On November 4, 2003, MTA entered into agreement to end the litigation between the MTA and the owners of the 2 Broadway facilities. The settlement provides for a rent credit to MTA Bridges and Tunnels over a 30-year period commencing January 1, 2004.

24. SUBSEQUENT EVENTS

On February 18, 2009, Triborough Bridge and Tunnel Authority issued General Revenue Bonds, Series 2009A-2 for $325,000 and General Revenue Mandatory Tender Bonds, Series 2009A-1 for $150,000. The Series 2009 Bonds were issued to finance bridge and tunnel projects, and to refinance indebtedness issued by MTA Bridges and Tunnels.

* * * * * *

D-50


REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)SCHEDULE OF FUNDING PROGRESS- POSTRETIREMENT HEALTHCARE PLANYEARS ENDED DECEMBER 31, 2008 AND 2007(In millions)

Actuarial Accrual (UAAL) As a

Actuarial Liability Unfunded PercentageActuarial Value of (AAL) (AAL) Funded Covered of Covered Valuation Assets Initial Entry (UAAL) Ratio Payroll Payroll

Date (a) Age (b) (b-a) (a/b) (c) ((b-a)/c)

1/1/2008 - 560.1$ 560.1$ - 101.1$ 554.0 %

1/1/2007 - 576.6$ 576.6$ - 97.2$ 593.2 %

D-51


TB

TA Independent

Engineer’s R

eport

APPENDIX E

HISTORY AND PROJECTION OF TRAFFIC, TOLL REVENUES

AND EXPENSES

and

Review of Physical Conditions

Of the Facilities of

Triborough Bridge and Tunnel Authority

June 8, 2009

Prepared for the Triborough Bridge and Tunnel Authority

By


TABLE OF CONTENTS Page TRANSPORTATION INFRASTRUCTURE .............................................................................E-1

Triborough Bridge and Tunnel Authority (TBTA)..........................................................E-1 Metropolitan Area Arterial Network ...............................................................................E-3 Other Regional Toll Facilities..........................................................................................E-4 Regional Public Transportation .......................................................................................E-5

TOLL COLLECTION ON THE TBTA FACILITIES................................................................E-5

Present and Proposed Toll Structures and Operation ......................................................E-5 E-ZPass Electronic Toll Collection System ....................................................................E-9 TBTA’s Role in E-ZPass ...............................................................................................E-10 Passenger Car Toll Rate Trends and Inflation ...............................................................E-11

HISTORICAL TRAFFIC, REVENUES AND EXPENSES AND ESTIMATED/BUDGETED NUMBERS FOR 2009 ................................................................E-14

Traffic and Toll Revenue, 1998 to 2008........................................................................E-14 Traffic by Facility and Vehicle Class, 2008 ..................................................................E-17 Monthly Traffic, 2008....................................................................................................E-19 Changes in Monthly Traffic, 2007 to 2008....................................................................E-19 Estimated Traffic and Toll Revenue, 2009 ....................................................................E-20 Operating Expenses 1998 to 2008 .................................................................................E-22 2009 Budget ...................................................................................................................E-24

FACTORS AFFECTING TRAFFIC GROWTH ......................................................................E-25

Employment, Population and Motor Vehicle Registrations ..........................................E-25 Fuel Conditions..............................................................................................................E-30 Toll Impacts and Elasticity ............................................................................................E-31 Bridge and Tunnel Capacities........................................................................................E-33 TBTA and Regional Operational and Construction Impacts .........................................E-34 Summary of Assumptions and Conditions ....................................................................E-44

PROJECTED TRAFFIC, REVENUES AND EXPENSES ......................................................E-46

Traffic and Toll Revenue at Current Tolls.....................................................................E-46 Traffic and Toll Revenue with Periodic Toll Increases .................................................E-47 Effects of Second Avenue Subway Construction in Forecast Years .............................E-50 Operating Expenses .......................................................................................................E-50 Net Revenues from Toll Operations ..............................................................................E-52

REVIEW OF PHYSICAL CONDITIONS................................................................................E-53

Review of Inspection Reports........................................................................................E-55 Other System-wide Improvements ................................................................................E-60 Long-Term Outlook for TBTA Facilities ......................................................................E-62

E-i

E-ii

TABLES

Table Page Table 1 Current Toll Rates at TBTA Facilities E-6 Table 2 Toll Rates at TBTA Facilities, Effective July 12, 2009 E-7 Table 3 E-ZPass Participation Rates E-9 Table 4 Historical Trends in Non-Discounted Cash Passenger Car Toll Rates E-11 Table 5 Cash Passenger Toll Rates Versus Consumer Price Index E-13 Table 6 Annual Toll-Paying Traffic and Toll Revenue: 1998 to 2008 E-16 Table 7 Summary of Annual Paid Traffic and Toll Revenue: 1998 to 2008 E-17 Table 8 Traffic by Facility and Vehicle Class, 2008 E-18 Table 9 Monthly Traffic Variations, 2008 E-19 Table 10 Changes in Monthly Average Daily Traffic – 2007 to 2008 E-20 Table 11 Estimated Changes in Annual Traffic – 2008 to 2009 E-21 Table 12 Estimated 2009 Toll-Paying Traffic and Toll Revenue E-21 Table 13 Historical Operating Expenses: 1998 to 2008 E-23 Table 14 Employment Trends and Projections E-26 Table 15 Population Trends and Projections E-28 Table 16 Motor Vehicle Registrations E-29 Table 17 Elasticity Factors for 2009-2019 E-32 Table 18 Estimated Percent Change in Average Toll Rates and Traffic E-32 Table 19 Comparison of 2008 Traffic with Highest Recorded Levels Since 1970 E-33 Table 20 Traffic and Toll Revenue Forecast, Constant Tolls E-48 Table 21 Traffic and Toll Revenue Forecast, Periodic Toll Increases E-49 Table 22 Projected Operating Expenses E-51 Table 23 Net Toll Revenue Forecast E-52 Table 24 Opening Dates of TBTA Facilities E-53 Table 25 Capital Commitments by Facility, 2005 to 2009 E-54

FIGURES Figure 1: Location Map E-2 Figure 2: Aggregated TBTA Facilities Paid Traffic and Toll Revenue, 1970 to 2008 E-14

June 8, 2009

To Triborough Bridge and Tunnel Authority: In accordance with your request, URS Corporation-New York (URS) conducted this annual study to develop projections of traffic, toll revenues and expenses for the toll bridge and tunnel facilities operated by Triborough Bridge and Tunnel Authority (TBTA), and to provide an overview of the physical conditions of each facility. We have reviewed the bridge and tunnel inspection reports provided by TBTA and discussed TBTA’s on-going maintenance and capital programs with its engineering staff. Our projections have taken into account: (1) the general physical condition of TBTA’s toll facilities; (2) traffic and toll revenue data, reflecting the 13 toll increases since 1972; (3) the impact of the E-ZPass electronic toll collection system; (4) the toll structure; (5) planned and possible future toll increases; (6) population, employment and other demographic forecasts in the New York Metropolitan Area; (7) the traffic capacities of the bridges and tunnels and the existing roadway network that feeds the facilities in terms of the potential for future growth of peak versus non-peak period traffic; (8) current and programmed construction activities on TBTA’s facilities and the arterial highway network serving the New York Metropolitan Area, including the toll-free East River bridges; (9) mass transit network projects; and (10) the impacts of recent economic and political events on metropolitan area traffic. In 2008, actual total toll revenues for the TBTA facilities were $1,274.0 million, or 2.7 percent lower than the forecasted $1,309.4 million. Total revenue traffic was 295.7 million vehicles, or 1.4 percent lower than that forecasted of 299.8 million vehicles. TRANSPORTATION INFRASTRUCTURE The New York Metropolitan Area’s transportation infrastructure consists of an extensive net-work of highways, tunnels and bridges (both tolled and toll-free), regional commuter rail and the New York City transit system. Triborough Bridge and Tunnel Authority (TBTA) TBTA operates nine toll facilities within New York City (the “City”), consisting of seven bridges and two tunnels that provide vital links across the City’s rivers and bays. In 2008, these facilities carried 299.2 million total vehicles, of which 295.7 million were toll paying, and generated $1,274.0 million in toll revenue. (Non-revenue transactions include police, emergency and TBTA vehicles.) The locations of the facilities are shown on the following map in the context of the regional highway network.

Fax: 212.629.4249 www.urscorp.com

URS Corporation One Penn Plaza, Suite 610 New York, NY 10119-0698 Tel: 212.736.4444

Figure 1: Location Map

RFK BRIDGE

E-2

The facilities are briefly described as follows: Verrazano-Narrows Bridge - a two-level suspension bridge, with three lanes of traffic in each direction on both decks. It crosses the entrance to New York Harbor and connects Brooklyn and Staten Island. Robert F. Kennedy (RFK) Bridge (formerly the Triborough Bridge) - a complex of three bridges connecting Manhattan, the Bronx and Queens, with a central connecting interchange on Randall’s Island. Manhattan is reached via a six-lane vertical lift bridge over the Harlem River. The Bronx is accessed via a six-lane truss bridge over the Bronx Kill. An eight-lane suspension bridge over the East River leads to Queens. Bronx-Whitestone Bridge - a suspension bridge, with three lanes of traffic in each direction, which crosses the East River connecting the boroughs of Queens and the Bronx. Throgs Neck Bridge - a suspension bridge, with three lanes of traffic in each direction, which crosses the upper East River also connecting the boroughs of Queens and the Bronx. Queens Midtown Tunnel - a twin-tube tunnel with each tube carrying two lanes of traffic under the East River between the boroughs of Queens and Manhattan. During normal morning com-muting hours, three lanes are operated in the peak traffic direction. Brooklyn-Battery Tunnel - a twin-tube tunnel with each tube carrying two lanes of traffic under the East River connecting the southern tip of Manhattan with Brooklyn. During normal morning commuting hours, three lanes are operated in the peak traffic direction. Henry Hudson Bridge - a two-level steel arch bridge, with four southbound lanes on its lower deck and three northbound lanes on its upper deck that crosses the Harlem River to connect the northern tip of Manhattan with the Spuyten Duyvil section of the Bronx. Marine Parkway - Gil Hodges Memorial Bridge (Marine Parkway) - a four-lane crossing of the Rockaway Inlet that connects the Rockaway peninsula in Queens with Brooklyn. Cross Bay Veterans Memorial Bridge (Cross Bay) - a pre-stressed concrete viaduct with three lanes of traffic in each direction crossing Beach Channel in Jamaica Bay, connecting the Rockaway peninsula in Queens with the Queens mainland, via Broad Channel. Metropolitan Area Arterial Network The New York Metropolitan Area is served by an extensive network of highway facilities. Many of the bridges and tunnels operated by TBTA are links in the Interstate highway network, as these limited-access expressways pass through New York City to serve both local and long distance traffic. These regional facilities are shown on the map on page 2. The Verrazano-Narrows Bridge is part of I-278 (Staten Island, Gowanus and Brooklyn-Queens Expressways), which connects with the Brooklyn-Battery Tunnel and the RFK Bridge. The

E-3

Queens Midtown Tunnel carries I-495 (Long Island Expressway) into Manhattan. The RFK Bridge joins I-87 (Major Deegan Expressway) and I-278 (Bruckner Expressway) with I-278/Grand Central Parkway in Queens and the FDR Drive in Manhattan. The Bronx-Whitestone Bridge carries traffic between the Hutchinson River and Merritt Parkways and Long Island via I-678 (Whitestone and Van Wyck Expressways) and the Cross Island Parkway. The Throgs Neck Bridge carries traffic between I-95 (New England Thruway and George Washington Bridge) and Long Island via I-295. The Henry Hudson Bridge is part of the Henry Hudson Parkway, a major commuter route into Manhattan from the extensive parkway network in western Westchester County and beyond. In addition to TBTA facilities and their expressway/parkway connections, New York City’s toll-free East River bridges — Brooklyn, Manhattan, Williamsburg and Queensboro — also connect Manhattan with Brooklyn and Queens; and nine toll-free bridges over the Harlem River connect Manhattan with the Bronx. Unlike the TBTA facilities, the approaches to these bridges are mostly surface arterials, such as Flatbush Avenue and Queens Boulevard. Only a few have expressway ramp connections (such as the Brooklyn-Queens Expressway connection to the Williamsburg Bridge), and the Alexander Hamilton Bridge, or I-95, is part of the Cross Bronx Expressway. Other Regional Toll Facilities TBTA is one of a number of toll authorities that operate bridge, tunnel and highway facilities in the New York Metropolitan Area. The agency whose facilities are geographically closest to TBTA’s bridges and tunnels is the Port Authority of New York and New Jersey. The Port Authority’s George Washington Bridge is linked to the RFK, Bronx-Whitestone and Throgs Neck bridges via the expressway system in the Bronx (plus the George Washington-RFK Bridge connection in Manhattan via the Harlem River Drive and the George Washington-Henry Hudson Bridge connection in Manhattan via the Henry Hudson Parkway); while the Bayonne Bridge, Goethals Bridge and Outerbridge Crossing are linked to the Verrazano-Narrows Bridge via the expressway system in Staten Island. Only motorists using the Port Authority’s two tunnels — Holland and Lincoln — must traverse surface streets (in Manhattan) to reach TBTA’s and the City’s East River crossings. The other toll authorities in the region are the New York State Thruway Authority (Tappan Zee Bridge and several Thruway sections), New York State Bridge Authority (five Hudson River bridges) and the New Jersey Turnpike Authority (Garden State Parkway and New Jersey Turnpike). All of these authorities, together with twenty others beyond the New York Metropolitan Area, are linked through the E-ZPass Interagency Group (IAG) to better serve the regional traveler through a common electronic toll collection tag. E-ZPass and its impact on the TBTA facilities are discussed further in this report.

E-4

E-5

Regional Public Transportation In addition to the TBTA facilities, most of the public transportation facilities within the City and the suburban counties north and east of the City are part of the Metropolitan Transportation Authority (MTA) system. These include the New York City Transit Authority subway and buses, MTA Bus Company, Staten Island Rapid Transit, Metro-North Commuter Railroad, Long Island Rail Road, and the Long Island Bus system (in Nassau County, and serves adjacent por-tions of Queens and Suffolk County). For those major TBTA facilities directly serving Manhattan — RFK Bridge, Queens Midtown Tunnel and Brooklyn-Battery Tunnel — the motorist can, for the most part, choose to use transit. For the outlying bridges, however, the choice is more difficult, due to a reduced level of transit service or different trip characteristics. TOLL COLLECTION ON THE TBTA FACILITIES The nine TBTA toll facilities have three toll structures, in terms of toll levels and methods of collection: major, minor and the Verrazano-Narrows Bridge. The major crossings include the RFK Bridge, Bronx-Whitestone Bridge, Throgs Neck Bridge, Queens Midtown Tunnel and Brooklyn-Battery Tunnel. The minor crossings are the Henry Hudson Bridge, Marine Parkway-Gil Hodges Memorial Bridge and Cross Bay Veterans Memorial Bridge. The Verrazano-Narrows Bridge is the only facility on which tolls are collected in one direction only, while the cash tolls for passenger cars on the minor bridges are half the level of those on the major facili-ties, with the exception of the Henry Hudson Bridge. Present and Proposed Toll Structures and Operation The current toll structure, in place since March 16, 2008, is shown in Table 1. The proposed toll structure, as approved by the MTA and TBTA Boards on May 11, 2009 and scheduled to go into effect on July 12, 2009, is shown in Table 2. Tolls are determined using a basic rate as modified by variables specific to a number of factors. These factors include:

crossing used vehicle classification toll payment method place of residence vehicle occupancy

Tab

le 1

Cu

rren

t T

oll R

ates

at

TB

TA

Fac

ilit

ies

Ver

raza

no-N

arro

ws

Bri

dge

(a)

RF

K B

ridg

e B

ronx

-Whi

test

one

Bri

dge

Thr

ogs

Nec

k B

ridg

e Q

ueen

s M

idto

wn

Tun

nel

Bro

okly

n-B

atte

ry T

unne

l

Hen

ry H

udso

n B

ridg

e

Mar

ine

Par

kway

- G

il H

odge

s M

emor

ial

Bri

dge

Cro

ss B

ay V

eter

ans

Mem

oria

l Bri

dge

Cla

ssif

icat

ion

Cas

h E

-ZP

ass

C

ash

E-Z

Pas

s C

ash

E-Z

Pas

s

Cas

h E

-ZP

ass

$5.0

0 $4

.15

$ 5.

00

$4.1

5 $2

.75

$1.9

0 $2

.50

$1.5

5

Tw

o-ax

le v

ehic

les,

incl

udin

g: P

asse

nger

veh

icle

s, S

UV

s, s

tati

on w

agon

s, s

elf-

prop

elle

d m

obil

e ho

mes

, am

bula

nces

, hea

rses

, veh

icle

s w

ith

seat

ing

capa

city

of

not

mor

e th

an 1

5 ad

ult p

erso

ns (

incl

udin

g th

e dr

iver

) an

d tr

ucks

wit

h m

axim

um g

ross

w

eigh

t of

7,00

0 lb

s. a

nd u

nder

E

ach

addi

tion

al a

xle

cost

s 2.

25

2.25

2.

25

2.25

1.

50

1.50

1.

50

1.50

The

fol

low

ing

disc

ount

ed p

repa

id c

harg

es a

re p

rese

ntly

ava

ilab

le f

or th

e tw

o-ax

le

vehi

cles

ref

eren

ced

abov

e:

Pre

paid

cha

rges

thro

ugh

toke

n ro

ll p

urch

ases

1.

667(b

)

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le

vehi

cle

wit

h th

ree

or m

ore

occu

pant

s 1.

165

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le

vehi

cle

thro

ugh

toke

n ro

ll p

urch

ase

3.35

(b)

Reg

iste

red

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le v

ehic

le

2.

49

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Roc

kaw

ay P

enin

sula

/Bro

ad C

hann

el

Res

iden

ts u

sing

an

elig

ible

veh

icle

1.

40(b

) 1.

03(c

)

All

two

axle

veh

icle

s gr

eate

r th

an 7

,000

lbs.

and

bus

es (

othe

r th

an f

ranc

hise

bus

es

and

mot

or h

omes

) 10

.00

7.50

10

.00

7.50

5.

00

3.75

3 A

xle

16.0

0 12

.00

16.0

0 12

.00

(d)

(d)

8.00

6.

00

4 A

xle

21.0

0 15

.75

21.0

0 15

.75

10.5

0 7.

88

5 A

xle

27.0

0 20

.25

27.0

0 20

.25

13.5

0 10

.13

6 A

xle

32.0

0 24

.00

32.0

0 24

.00

16.0

0 12

.00

7 A

xle

38.0

0 28

.50

38.0

0 28

.50

19.0

0 14

.25

Eac

h ad

diti

onal

axl

e ab

ove

7 6.

00

4.50

6.

00

4.50

3.

00

2.25

Tw

o-ax

le f

ranc

hise

bus

es

4.00

3.

00

4.00

3.

00

(d)

(d)

2.00

1.

50

Thr

ee-a

xle

fran

chis

e bu

ses

4.75

3.

56

4.75

3.

56

(d)

(d)

2.50

1.

88

Mot

orcy

cles

2.

25

1.81

2.

25

1.81

2.

25

1.29

2.

25

1.29

E

ach

addi

tion

al a

xle

cost

s 1.

00

1.00

1.

00

1.00

1.

00

1.00

1.

00

1.00

E-6

Not

es: (a)

Und

er th

e V

erra

zano

-Nar

row

s on

e-w

ay c

ross

ing

char

ge c

olle

ctio

n pr

ogra

m, a

ll p

er c

ross

ing

char

ges

show

n sh

ould

be

doub

led;

toll

is c

olle

cted

in th

e w

estb

ound

dir

ecti

on o

nly.

(b

) P

repa

id d

isco

unt t

oken

rol

l sal

es m

ay b

e di

scon

tinu

ed w

hen

perm

issi

ble.

(c

) R

ocka

way

Pen

insu

la a

nd B

road

Cha

nnel

res

iden

ts u

sing

E-Z

Pas

s at

the

Cro

ss B

ay V

eter

ans’

Mem

oria

l Bri

dge

rece

ive

a re

bate

of

this

am

ount

, rei

mbu

rsed

to T

BT

A b

y M

TA

. T

his

prog

ram

w

as in

stit

uted

Jan

uary

1, 1

998.

(d

) P

assa

ge p

rohi

bite

d.

Tab

le 2

Tol

l Rat

es a

t T

BT

A F

acil

itie

s, E

ffec

tive

Ju

ly 1

2, 2

009

Ver

raza

no-N

arro

ws

Bri

dge

(a)

RF

K B

ridg

e B

ronx

-Whi

test

one

Bri

dge

Thr

ogs

Nec

k B

ridg

e Q

ueen

s M

idto

wn

Tun

nel

Bro

okly

n-B

atte

ry T

unne

l

Hen

ry H

udso

n B

ridg

e

Mar

ine

Par

kway

- G

il H

odge

s M

emor

ial

Bri

dge

Cro

ss B

ay V

eter

ans

Mem

oria

l Bri

dge

Cla

ssif

icat

ion

Cas

h E

-ZP

ass(e

) C

ash

E-Z

Pas

s(e)

Cas

h E

-ZP

ass(e

) C

ash

E-Z

Pas

s(e)

$5.5

0 $4

.57

$5.5

0 $4

.57

$3.0

0 $2

.09

$2.7

5 $1

.71

Tw

o-ax

le v

ehic

les,

incl

udin

g: P

asse

nger

veh

icle

s, S

UV

s, s

tati

on w

agon

s, s

elf-

prop

elle

d m

obil

e ho

mes

, am

bula

nces

, hea

rses

, veh

icle

s w

ith

seat

ing

capa

city

of

not

mor

e th

an 1

5 ad

ult p

erso

ns (

incl

udin

g th

e dr

iver

) an

d tr

ucks

wit

h m

axim

um g

ross

w

eigh

t of

7,00

0 lb

s. a

nd u

nder

E

ach

addi

tion

al a

xle

cost

s 2.

50

2.50

2.

50

2.50

1.

75

1.75

1.

75

1.75

The

fol

low

ing

disc

ount

ed p

repa

id c

harg

es a

re p

rese

ntly

ava

ilab

le f

or th

e tw

o-ax

le

vehi

cles

ref

eren

ced

abov

e:

Pre

paid

cha

rges

thro

ugh

toke

n ro

ll p

urch

ases

1.

833(b

)

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le

vehi

cle

wit

h th

ree

or m

ore

occu

pant

s 1.

28

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le

vehi

cle

thro

ugh

toke

n ro

ll p

urch

ase

3.67

5(b)

Reg

iste

red

Sta

ten

Isla

nd R

esid

ents

usi

ng a

n el

igib

le v

ehic

le

2.

74

Pre

paid

cha

rges

per

cro

ssin

g fo

r re

gist

ered

Roc

kaw

ay P

enin

sula

/Bro

ad C

hann

el

Res

iden

ts u

sing

an

elig

ible

veh

icle

1.

538(b

) 1.

13(c

)

All

two

axle

veh

icle

s gr

eate

r th

an 7

,000

lbs.

and

bus

es (

othe

r th

an f

ranc

hise

bus

es

and

mot

or h

omes

) 11

.00

8.25

11

.00

8.25

5.

50

4.13

3 A

xle

18.0

0

13.5

0

18.0

0

13.5

0

(d)

(d)

9.00

6.

75

4 A

xle

23.0

0

17.2

5

23.0

0

17.2

5

11.5

0

8.63

5 A

xle

30.0

0

22.5

0

30.0

0

22.5

0

15.0

0

11.2

5

6 A

xle

35.0

0

26.2

5

35.0

0

26.2

5

17.5

0

13.1

3

7 A

xle

42.0

0

31.5

0

42.0

0

31.5

0

21.0

0

15.7

5

Eac

h ad

diti

onal

axl

e ab

ove

7 7.

00

5.25

7.

00

5.25

3.

50

2.63

Tw

o-ax

le f

ranc

hise

bus

es

4.50

3.

30

4.50

3.

30

(d)

(d)

2.25

1.

65

Thr

ee-a

xle

fran

chis

e bu

ses

5.25

3.

92

5.25

3.

92

(d)

(d)

2.75

2.

07

Mot

orcy

cles

2.

50

1.99

2.

50

1.99

2.

50

1.42

2.

50

1.42

E

ach

addi

tion

al a

xle

cost

s 1.

25

1.25

1.

25

1.25

1.

25

1.25

1.

25

1.25

Not

es: (a)

Und

er th

e V

erra

zano

-Nar

row

s on

e-w

ay c

ross

ing

char

ge c

olle

ctio

n pr

ogra

m, a

ll p

er c

ross

ing

char

ges

show

n sh

ould

be

doub

led;

toll

is c

olle

cted

in th

e w

estb

ound

dir

ecti

on o

nly.

(b

) P

repa

id d

isco

unt t

oken

rol

l sal

es m

ay b

e di

scon

tinu

ed w

hen

perm

issi

ble.

(c

) R

ocka

way

Pen

insu

la a

nd B

road

Cha

nnel

res

iden

ts u

sing

E-Z

Pas

s at

the

Cro

ss B

ay V

eter

ans’

Mem

oria

l Bri

dge

rece

ive

a re

bate

of

this

am

ount

, rei

mbu

rsed

to T

BT

A b

y M

TA

. T

his

prog

ram

w

as in

stit

uted

Jan

uary

1, 1

998.

(d

) P

assa

ge p

rohi

bite

d.

(e)

New

Yor

k C

usto

mer

Ser

vice

Cen

ter

tran

spon

ders

onl

y.

E-7

Passenger Car Tolls TBTA crossings are separated into major and minor categories plus the Verrazano-Narrows Bridge for toll classification purposes. The passenger car cash toll of $5.00 will increase $0.50 to $5.50 for the major crossings on July 12, 2009. On that date, the minor crossing passenger car cash toll of $2.50 will increase $0.25 to $2.75 on the Gil Hodges Memorial and Cross Bay Bridges and $0.25 from $2.75 to $3.00 on the Henry Hudson Bridge. All tolls are collected in each direction except on the Verrazano-Narrows Bridge where the round-trip tolls are collected only in the westbound (Staten Island-bound) direction in order to comply with a provision of Federal law. Tolls for passenger cars are discounted under the following programs: (1) E-ZPass and tokens; (2) place of residence/crossing used; (3) place of residence/vehicle occupancy; and (4) some combination of the foregoing. E-ZPass electronic toll collection is available on all TBTA toll facilities (see the following section for a more complete description of E-ZPass and its impact). Motorists open a pre-paid E-ZPass account and receive a transponder that they mount on their windshields. TBTA toll plazas are all equipped with E-ZPass antennas that identify and read the on-board tags and electronically debit the toll from the motorist’s prepaid account. Passenger cars equipped with an E-ZPass transponder presently receive an $0.85 discount at all major facilities ($1.70 for Verrazano-Narrows Bridge westbound only) and the Henry Hudson Bridge, and $0.95 at the Cross Bay Veterans Memorial and Marine Parkway-Gil Hodges Memorial bridges. Under the new toll schedule, passenger cars equipped with a New York Customer Service Center (NYCSC) E-ZPass will receive a $0.93 discount per trip at all major facilities ($1.86 for Verrazano-Narrows Bridge westbound only), $0.91 on the Henry Hudson Bridge, and $1.04 at the Cross Bay Veterans Memorial and Marine Parkway-Gil Hodges Memorial bridges. Passenger cars equipped with a non-NYCSC transponder will pay the same toll rate as cash customers resulting in larger increases in their toll rates. A separate discount program is in place for registered Staten Island residents on the Verrazano-Narrows Bridge and for registered Rockaway peninsula and Broad Channel residents on the Cross Bay and Marine Parkway-Gil Hodges Memorial bridges. A toll-rebate program for the benefit of E-ZPass customers who are residents of Broad Channel and the Rockaway peninsula was implemented on January 1, 1998 for use on the Cross Bay Bridge. MTA reimburses the TBTA in the amount of approximately $3.4 million annually in toll rebates. Tolls for Vehicles over 7,000 Pounds The toll charges for vehicles over 7,000 pounds are a function of weight/number of axles as well as the crossing used. For the major crossings, the present cash rate for these vehicles will increase $1.00 from $10.00 to $11.00 for two axles and increase $1.00 from $6.00 to $7.00 for each additional axle over seven (rates at the Verrazano-Narrows Bridge should be doubled since the toll is collected in the westbound direction only). Vehicles with three to seven axles pay varying rates, as shown in Tables 1 and 2. These vehicles presently receive, and will remain eligible for a 25 percent discount with a NYCSC E-ZPass.

E-8

For the minor crossings, the two-axle cash rate for vehicles over 7,000 pounds will increase $0.50 from $5.00 to $5.50, with the additional per axle rate over seven axles increasing $0.50 from $3.00 to $3.50. Vehicles with three to seven axles pay varying rates, as shown in Tables 1 and 2. These vehicles presently receive, and will remain eligible for, a 25 percent discount with a NYCSC E-ZPass. Commercial vehicles are not permitted on the Henry Hudson Bridge. E-ZPass Electronic Toll Collection System The E-ZPass Electronic Toll Collection (ETC) system has been fully installed at all TBTA bridges and tunnels since December 1996. E-ZPass usage at each facility has shown strong growth as motorists have become more familiar with the system and its time saving advantages. Unlike cash transactions, vehicles equipped with E-ZPass tags can use the gated E-ZPass-only lanes. An electronic reader identifies the tag code at the toll plaza and the toll is deducted from the customer’s pre-paid account. TBTA has over 3.1 million E-ZPass tags in use. Currently, participation rates are at 74 percent of toll-paying traffic TBTA-wide. The total number of active Interagency Group (IAG) tags in use for all agencies in the extended region as of December 31, 2008 was over 18 million. With the introduction of E-ZPass at all TBTA crossings, toll plaza operations have improved and vehicle-hours of delay have been reduced. This, in turn, has led to even more motorists enrolling in E-ZPass. Electronic payment of tolls has accelerated vehicle processing through the E-ZPass lanes, thereby reducing the overall vehicle queue at the plazas. TBTA estimates that manual toll lanes are able to process approximately 250 vehicles per hour, and dedicated E-ZPass lanes are able to process approximately 900 to 1,000 vehicles per hour. Prior to implementation of E-ZPass, vehicle processing through the TBTA toll plazas during peak periods was a primary cause of congestion at the crossings. Table 3 lists the E-ZPass annual TBTA-wide participation rates starting in 2000, the fourth year since all nine crossings had E-ZPass in operation. Implementation of E-ZPass started in October 1995 on the Verrazano-Narrows Bridge and was phased in gradually on the remaining crossings through December 1996. Also shown are the participation rates for each of the facilities for 2008.

Table 3 E-ZPass Participation Rates

Yearly Average 2000 2001 2002 2003 2004 2005 2006 2007 2008

Percent Participation 63.7% 67.4% 68.5% 69.8% 70.1% 71.5% 72.6% 73.5% 74.0%

(All Facilities)

Facility

RFK

Bronx- Whitestone

Henry Hudson

Marine Parkway Cross Bay

Queens Midtown

Brooklyn Battery

Throgs Neck

Verrazano-Narrows

Percent Participation 66.8% 67.0% 81.7% 80.4% 76.3% 78.3% 81.9% 73.6% 77.7%

(2008) Source: TBTA

E-9

Based on customer acceptance of the technology, TBTA expects that the E-ZPass share of total transactions will continue to increase, albeit marginally, over time. E-ZPass is fully integrated at facilities operated by 24 agencies located in 13 states. The transportation network includes the six interstate crossings of the Port Authority of New York and New Jersey, the New Jersey Turnpike and Garden State Parkway operated by the New Jersey Turnpike Authority, the New York State Thruway including its Tappan Zee Bridge, the five bridges of the New York State Bridge Authority (from Bear Mountain northward), the Buffalo and Fort Erie Public Bridge Authority’s Peace Bridge, the Atlantic City Expressway, the four toll bridges between New Jersey and Pennsylvania operated by the Delaware River Port Authority, the seven toll bridges between New Jersey and Pennsylvania operated by the Delaware River Joint Toll Bridge Commission, the Delaware Memorial Bridge between New Jersey and Delaware operated by the Delaware River and Bay Authority, the two toll roads in Delaware, toll facilities in Virginia and Maryland, the West Virginia Turnpike, the Maine Turnpike, the Massachusetts Turnpike, the Tobin Bridge operated by the Massachusetts Port Authority, the Pennsylvania Turnpike, the New Hampshire Turnpike System, two toll bridges between New Jersey and Pennsylvania operated by the Burlington County Bridge Commission, the toll roads maintained by the Illinois State Toll Highway Authority, the Chicago Skyway Bridge operated by the Skyway Concession Company, LLC, the Indiana Toll Road Concession Company, Chesapeake Bay Bridge and Tunnel Commission and the Rhode Island Turnpike and Bridge Authority. In addition, the Ohio Turnpike Commission joined the IAG in 2008 and they are expected to be fully operable by the end of 2009. TBTA’s Role in E-ZPass TBTA was a founding member of the E-ZPass IAG, originally comprised of toll authorities in Delaware, Pennsylvania, New Jersey and New York, and the IAG now includes Maryland, Massachusetts, Virginia, West Virginia, New Hampshire, Illinois, Indiana and Maine, as well as the Peace Bridge between Buffalo and Fort Erie, Ontario. The IAG has been working since 1991 toward the development and delivery of a compatible electronic toll collection system for the tri-state region. In July 1998, TBTA entered into an inter-operability agreement with the IAG. Customers of the member IAG agencies are able to use their tags at any E-ZPass-equipped facil-ity operated by an IAG member. All IAG members provide inter-operability among agencies for their customers. As IAG members have implemented electronic toll collection systems, the E-ZPass customer base has increased, which has helped increase usage of E-ZPass on TBTA facilities. TBTA customers must pre-pay their E-ZPass accounts. These pre-payments are based on a cus-tomer’s E-ZPass usage at both TBTA and other IAG member facilities. Through the IAG sys-tem, TBTA and other member agencies transfer payments associated with inter-operability to each other on a routine basis. For 2008, TBTA transferred $452.3 million to other members and received $253.8 million from other members within the IAG.

E-10

Passenger Car Toll Rate Trends and Inflation Since 1971, toll rates have been increased periodically on the TBTA facilities. Table 4 displays passenger car toll rates for the nine TBTA bridges and tunnels over the past 38 years. Since 1982, passenger car toll rates have been separated into three categories, as follows:

Major crossings - RFK, Bronx-Whitestone and Throgs Neck bridges, and the Queens Midtown and Brooklyn-Battery tunnels;

Minor crossings - Henry Hudson, Marine Parkway-Gil Hodges Memorial and Cross Bay

Veterans Memorial bridges; and

Verrazano-Narrows Bridge – a major crossing with one-way toll collection.

Table 4 Historical Trends in Non-Discounted Cash Passenger Car Toll Rates

Verrazano-

Narrows Bridge

RFK, Bronx-Whitestone and

Throgs Neck Bridges and Queens Midtown Tunnel

Brooklyn- Battery Tunnel

Henry Hudson Bridge

Marine Parkway-Gil Hodges

Memorial & Cross Bay Bridges

1971 $0.50 $0.25 $0.35 $0.10 $0.10 1972 – 1975 0.75 0.50 0.70 0.25 0.25 1975 – 1980 1.00 0.75 0.75 0.50 0.50 1980 – 1982 1.00 1.00 1.00 0.60 0.75 1982 – 1984 1.25 1.25 1.25 0.90 0.90 1984 – 1986 1.50 1.50 1.50 0.90 0.90 1986 – 1987 1.75(a) 1.75 1.75 1.00 1.00 1987 – 1989 2.00(a) 2.00 2.00 1.00 1.00 1989 – 1993 2.50(a) 2.50 2.50 1.25 1.25 1993 – 1996 3.00(a) 3.00 3.00 1.50 1.50 1996 – 2003 3.50(a) 3.50 3.50 1.75 1.75 2003 – 2005 4.00(a) 4.00 4.00 2.00 2.00 2005 – 2008 4.50(a) 4.50 4.50 2.25 2.25 2008(b) 5.00(a) 5.00 5.00 2.75 2.50 2009(c) 5.50(a) 5.50 5.50 3.00 2.75

Notes: (a) Effective March 20, 1986, round-trip tolls (twice the amount shown) have been collected on the Verrazano-Narrows

Bridge in the westbound direction only in compliance with a Federal legislative mandate. Eastbound traffic uses the bridge toll-free. These amounts are the equivalents of collecting tolls in each direction.

(b) Effective March 16, 2008. (c) Scheduled to go into effect on July 12, 2009.

On the minor crossings, cash tolls on the Henry Hudson Bridge are presently $2.75 and will increase to $3.00, while cash tolls on the Gil Hodges Memorial and Cross Bay bridges will rise from their present $2.50 to $2.75, collected in each direction.

E-11

The present Verrazano-Narrows Bridge one-way cash toll of $10.00 is collected westbound only and will increase to $11.00. The present one-way cash passenger car toll rate for the major crossings is $5.00, collected in each direction, and will increase to $5.50, effective July 12, 2009. Over the years, various discount programs have been introduced. In March 1987, the Staten Island Carpool Program was initiated on the Verrazano-Narrows Bridge. Staten Island residents were offered 30-round trip coupons for vehicles with three or more occupants at a discounted price of $30.00. This program was revised to 24 coupons for $30.00 in July 1989, to 24 coupons for $42.00 in May 2003, and to 24 coupons for $54.00 in March 2005. Effective March 16, 2008, the cost of 24 coupons increased $1.92 to $55.92. On July 12, 2009 the cost of 24 coupons will increase $5.52 to $61.44. In general, tolls for vehicles over 7,000 pounds have also been adjusted upward whenever pas-senger car toll rates were increased. Notable exceptions occurred in 1987 and 1989 when these toll rates were not raised while there was a general increase for passenger cars. Historically, these vehicles received discounts on any TBTA facility when they used pre-paid accounts. This plan continues with E-ZPass with the exception of non-NYCSC customers.

E-12

Inflation The Consumer Price Index (CPI), compiled by the US Department of Labor, Bureau of Labor Statistics for United States Cities, is intended to represent the average inflation rate for all urban consumers. Table 5 displays the TBTA major crossing passenger car toll rates from the 1971 level of $0.25 to the present toll rate of $5.00 set in 2008, alongside the CPI.

Table 5 Cash Passenger Toll Rates Versus Consumer Price Index

Year

RFK, Bronx-Whitestone and Throgs Neck Bridges

and Queens Midtown Tunnel

Consumer Price Index(a)

Tolls Adjusted to 1982-84 Dollars(b)

1971 $0.25 43.6 $0.57 1972 0.50 45.5 1.10 1975 0.75 57.6 1.30 1980 1.00 82.1 1.22 1982 1.25 95.3 1.31 1984 1.50 104.8 1.43 1986 1.75 112.3 1.56 1987 2.00 118.0 1.69 1989 2.50 130.6 1.91 1993 3.00 154.5 1.94 1996 3.50 166.9 2.10 2003 4.00 197.8 2.02 2005 4.50 212.7 2.12 2008 5.00(c) 235.8 2.12 Ratio

2008/1971 20.0 5.4 3.7 Notes: (a) New York Metropolitan Statistical Area: New York–Northern New Jersey-Long Island, NY-NJ-

CT-PA, All Urban Consumers, All Items. Base period: 1982-1984 = 100.0. Not seasonally adjusted. Source: US Department of Labor, Bureau of Labor Statistics.

(b) The current toll divided by the CPI and expressed as a decimal. (c) Effective March 16, 2008.

As indicated in the table, TBTA tolls in current dollars have risen faster than the CPI during the 37-year period. As can be seen in Table 5, the $5.00 toll effective on March 16, 2008 in 2008 dollars is equivalent to a toll of $2.12 in 1982-1984 dollars. The actual 2008 cash toll for passenger cars is 20 times the actual toll in 1971. However, if adjusted for inflation, the toll in 2008 was only 3.7 times that in 1971 (in each case based on 1982-1984 dollars).

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HISTORICAL TRAFFIC, REVENUES AND EXPENSES AND ESTIMATED/BUDGETED NUMBERS FOR 2009 Historical traffic, toll revenues and expenses were reviewed for the nine TBTA bridges and tun-nels. Over the last 38 years, paid traffic volumes on the crossings have ranged from approximately 220 million in the 1970s to 304 million in 2007. As displayed in Figure 2, the growth of traffic reflects the region’s moderate overall growth in population and employment, offset by the impact of 13 periodic toll increases. By 2000, with tolls at 14 times the 1971 level, toll revenues had increased more than 13-fold, from $72 million to a high of $941 million in 2000. Revenues then declined to $915 million in 2001 primarily due to the closures and restrictions on TBTA facilities following the September 11 terrorist attack on the World Trade Center and the regional decline in employment. In 2007, with tolls having been increased again in 2003 and 2005, revenue reached $1,251 million, $9 million greater than revenues in 2006. With the toll increase in March of 2008 plus the impact of rising fuel prices and the weakening economy, revenue in 2008 reached $1,274 million, $23 million higher than revenues in 2007.

Figure 2: Aggregated TBTA Facilities Paid Traffic and Toll Revenue, 1970 to 2008

Total Annual Paid Traffic

200

225

250

275

300

325

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Fa

cil

itie

s P

aid

Tra

ffic

(m

illi

on

s)

Total Annual Toll Revenue

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

An

nu

al

Re

ve

nu

e (

mil

lio

ns

)

Since 1970, annual operating expenses for the toll facilities have risen by a multiple of 16.3, from $25 million to $408 million in 2008, during which time the CPI for the New York Metropolitan Statistical Area increased by a multiple of 5.7. Among the significant increases over this period were additional expenses to maintain the facilities and increased security costs after the events of September 11, 2001. Traffic and Toll Revenue, 1998 to 2008 Table 6 lists the traffic and toll revenue record for each of the nine crossings for the 1998-2008 period. Total TBTA traffic and toll revenue are shown in Table 7. The peak in toll-paying traffic during this period, 304 million crossings, occurred in 2007. The general system-wide pattern had been that when toll rates are increased, traffic declines moderately and then traffic begins to rise until the next rate increase. However, as stated earlier, the toll rate increase in 2008 was also accompanied by rising fuel prices through mid-2008 and the deteriorating economy, resulting in a 2.9 percent drop in traffic. (The historical relationship between toll increases and traffic volume is described in the Toll Impacts and Elasticity section of this report.) The two most recent toll increases (prior to the 2008 toll increase) reflected in Tables 6 and 7, in

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2003 and 2005, are evident in the jump in average tolls in those years. The strong growth of almost 10 percent in revenues between 2004 and 2005 is due to the toll increase in March 2005. In 1998, toll revenue was reported at $884 million. Revenues rose to $941 million in 2000, an increase of over 6 percent, and then declined in 2001 due to the impact of September 11 and a decline in regional employment. The greatest impact from September 11 was due to closures and restrictions at the Brooklyn-Battery Tunnel, with negative impacts also occurring at the Queens Midtown Tunnel and at the RFK Bridge. In 2002, residual effects due to September 11-related traffic restrictions were seen particularly in the results for the Brooklyn-Battery Tunnel. Also in 2002, the positive impact on the Verrazano-Narrows Bridge was brought about by the truck restrictions at the Holland Tunnel as well as New York City’s single occupancy vehicle restrictions. Since November 17, 2003, when the morning peak-period ban on Manhattan-bound single occupancy vehicles south of 14th Street was lifted, there have been no externally imposed traffic restrictions on any of TBTA’s facilities. Revenue in 2003 topped $1 billion, as a result of the May 18, 2003 toll increase. After the March 13, 2005 toll increase, 2005 traffic volumes decreased 0.9 percent and revenue rose to $1,205 million in 2005 and then increased to $1,242 million in 2006 and increased further to $1,251 in 2007. In 2008 traffic volumes decreased 2.9 percent from 304.4 million in 2007 to 295.7 million, while toll revenues increased 1.9 percent over 2007 to $1,274.0 million, as a result of the March 16, 2008 toll increase. Traffic on the Bronx-Whitestone and Throgs Neck bridges has been of essentially equal magnitude over the years. These two bridges generally serve the same areas in the Bronx and Queens, and historically traffic has shifted back and forth to the crossing providing the better level of service, at times based on lane restrictions due to construction activity. The RFK Bridge reported the highest toll revenue for 2008 at $287.9 million, while the Marine Parkway-Gil Hodges Memorial Bridge registered the lowest revenue at $12.0 million.

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Table 6 Annual Toll-Paying Traffic and Toll Revenue: 1998 to 2008 (000’s)(a)

Verrazano-Narrows Bridge RFK Bridge Bronx-Whitestone Bridge

Traffic Traffic Traffic Year

Volume(b) Change Revenue

Average Toll(c) Volume Change

Revenue Average

Toll Volume Change Revenue

AverageToll

1998(d) 65,886 4.8% $192,788 $2.93 59,524 4.9% $208,324 $3.50 38,112 4.8% $140,083 $3.681999(d) 67,496 2.4 196,556 2.91 61,943 4.1 216,414 3.49 40,155 5.4 147,597 3.682000(d) 69,107 2.4 203,172 2.94 63,677 2.8 222,612 3.50 42,334 5.4 155,938 3.682001 70,929 2.6 208,164 2.93 62,506 –1.8 215,241 3.44 42,090 –0.6 152,881 3.632002 73,361 3.4 216,312 2.95 60,747 –2.8 208,905 3.44 44,359 5.4 160,730 3.622003 71,108 –3.1 233,482 3.28 58,339 –4.0 222,224 3.81 44,413 0.1 175,393 3.952004 71,404 0.4 246,322 3.45 61,638 5.7 247,937 4.02 45,223 1.8 187,231 4.142005 69,980 –2.0 267,276 3.82 62,841 2.0 280,516 4.46 41,198 –8.9 188,808 4.582006 70,381 0.6 274,100 3.89 63,063 0.4 288,300 4.57 39,488 –4.2 186,384 4.722007 70,382 0.0 272,837 3.88 62,511 –0.9 285,847 4.57 42,397 7.4 200,076 4.722008 68,884 –2.1 278,906 4.05 59,741 –4.4 287,877 4.82 42,803 1.0 212,125 4.96

Throgs Neck Bridge Brooklyn-Battery Tunnel Queens Midtown Tunnel


Volume Change Revenue

Average Toll Volume Change

Revenue Average

Toll Volume Change Revenue

Average Toll

1998(d) 37,660 2.6% $149,711 $3.98 19,651 15.4% $63,578 $3.24 25,362 3.1% $85,626 $3.38 1999(d) 38,076 1.1 152,134 4.00 20,778 5.7 67,080 3.23 25,969 2.4 87,284 3.36 2000(d) 37,535 –1.4 152,453 4.06 21,298 2.5 69,018 3.24 26,573 2.3 89,451 3.37 2001 37,802 0.7 150,764 3.99 16,452(e) –22.8 52,188 3.17 26,177(e) –1.5 87,067 3.33 2002 39,687 5.0 157,988 3.98 15,447(e) –6.1 48,880 3.16 26,901(e) 2.8 88,865 3.30 2003 39,082 –1.5 172,603 4.42 17,806(e) 15.3 61,810 3.47 27,512(e) 2.3 99,994 3.63 2004 39,439 0.9 184,338 4.67 17,700 –0.6 64,366 3.64 28,181 2.4 107,067 3.80 2005 41,199 4.5 210,242 5.10 17,426 –1.5 70,294 4.03 28,751 2.0 121,666 4.23 2006 43,186 4.8 223,756 5.18 17,718 1.7 73,868 4.17 28,966 0.7 127,075 4.39 2007 41,931 –2.9 217,958 5.20 18,139 2.4 75,980 4.19 29,375 1.4 129,348 4.40 2008 40,492 –3.4 219,855 5.43 16,899 –6.8 73,590 4.35 28,620 –2.6 131,264 4.59

Henry Hudson Bridge Marine Parkway-Gil Hodges Memorial Bridge Cross Bay Veterans Memorial Bridge


Volume Change Revenue Average Toll Volume Change Revenue

Average Toll Volume Change Revenue Average

Toll 1998(d) 20,300 2.7% $28,731 $1.42 7,322 0.2% $8,577 $1.17 5,647 10.0% $7,021 $1.24 1999(d) 21,287 4.9 30,068 1.41 7,391 0.9 8,461 1.14 6,012 6.5 7,199 1.20 2000(d) 22,546 5.9 31,938 1.42 7,207 –2.5 8,374 1.16 6,356 5.7 7,651 1.20 2001 23,290 3.3 32,242 1.38 7,263 0.8 8,344 1.15 6,712 5.6 7,965 1.19 2002 24,657 5.9 34,045 1.38 7,745 6.6 8,938 1.15 7,091 5.6 8,471 1.19 2003 24,582 –0.3 37,744 1.54 7,704 –0.5 9,694 1.26 6,919 –2.4 8,993 1.30 2004 24,703 0.5 40,149 1.63 7,719 0.2 10,102 1.31 6,989 1.0 9,477 1.36 2005 24,136 –2.3 43,920 1.82 7,673 –0.6 11,234 1.46 7,182 2.8 10,988 1.53 2006 24,159 0.1 44,901 1.86 7,737 0.8 11,536 1.49 7,361 2.5 11,630 1.58 2007 24,117 –0.2 44,779 1.86 7,833 1.2 11,635 1.49 7,679 4.3 12,090 1.57 2008 22,823 –5.4 46,126 2.02 7,829 –0.1 12,019 1.54 7,589 –1.2 12,212 1.61

Notes: (a) Toll rate increases occurred on May 18, 2003, March 13, 2005 and March 16, 2008.

(b) Westbound toll traffic volume doubled. (c) Average toll on basis of revenues divided by doubled westbound volume. (d) Includes write-offs due to unredeemed tokens and tickets. (e) Reflects traffic restrictions and closures beginning September 11, 2001 and ending gradually through November 17, 2003.

Source: TBTA

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Total annual TBTA toll traffic volume and revenue are shown in Table 7 for the period 1998 through 2008.

Table 7 Summary of Annual Paid Traffic and Toll Revenue: 1998 to 2008

Year

Total Paying Traffic Volume

(000)

Total Toll Revenue

(000) Average

Toll 1998(b) 279,463 $884,439 $3.16 1999(b) 289,107 912,793 3.16 2000(c) 296,633 940,607 3.17

2001 293,220 914,856 3.12 2002 299,995 933,134 3.11

2003(a) 297,465 1,021,937 3.44 2004 302,995 1,096,989 3.62

2005(a) 300,385 1,204,944 4.01 2006 302,059 1,241,551 4.11 2007 304,364 1,250,549 4.11

2008(a) 295,680 1,273,974 4.31

Notes: (a) Toll rate increases occurred on May 18, 2003, March 13, 2005 and March 16, 2008. (b) Includes $2.5 million relating to the write-off of unredeemed tokens and tickets. (c) Includes $9.7 million relating to the write-off of unredeemed tokens and tickets.

Source: TBTA

Traffic by Facility and Vehicle Class, 2008 TBTA maintains traffic counts for each crossing in 13 toll-paying categories, ranging from pas-senger cars to trucks with seven axles. Displayed in Table 8 are the 2008 traffic volumes by facility. Passenger cars totaled 273.8 million crossings and represented 93 percent of the total toll-paying vehicles (which has remained relatively constant over time). Of the TBTA facilities, the Verrazano-Narrows Bridge registered the highest two-way traffic volume of 68.9 million toll-paying vehicles. The lowest toll-paying volume, 7.6 million vehicles, was recorded at the Cross Bay Veterans Memorial Bridge.

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Table 8 Traffic by Facility and Vehicle Class, 2008

(000’s)

Franchise Buses

Facility

1 Passenger

Cars

2 Pass. Cars w/one-axle

Trailer

3 Pass. Cars w/two-axle

Trailer

4 Trucks 2 Axles

5 2 Axles

11 3 Axles

6 Trucks 3 Axles

7 Trucks 4 Axles

Throgs Neck Bridge 36,099 49 45 1,692 2 0 334 344

Bronx-Whitestone Bridge 39,683 12 8 1,404 161 3 354 218

RFK Bridge 54,909 22 9 2,959 110 287 599 106

Queens Midtown Tunnel 26,154 5 4 1,791 79 217 265 35

Brooklyn-Battery Tunnel 15,358 1 1 695 31 585 142 12Verrazano-Narrows Bridge(a) 64,337 28 23 1,936 155 401 420 220

Henry Hudson Bridge(b) 22,644 1 1 126 0 0 3 1

Marine Parkway Bridge 7,567 2 1 165 50 0 19 2

Cross Bay Bridge 7,076 3 1 309 92 28 37 5

Total 273,826 123 91 11,076 680 1,521 2,175 943

Percent of Paid Vehicles 92.6% 0.0% 0.0% 3.7% 0.2% 0.5% 0.7% 0.3%

Facility

8 Trucks 5 Axles

9 Motor- cycles

12 Trucks 6 Axles

13 Trucks 7 Axles

14 Other

Vehicles

Total Toll-

Paying Vehicles

10 Non-Rev

Vehicles(c) Total

Vehicles

Throgs Neck Bridge 1,750 75 99 1 2 40,492 247 40,739

Bronx-Whitestone Bridge 877 71 12 0 0 42,803 214 43,017

RFK Bridge 608 107 24 0 0 59,741 1,205 60,946

Queens Midtown Tunnel 18 48 2 0 0 28,620 421 29,040

Brooklyn-Battery Tunnel 7 65 1 0 0 16,899 492 17,391Verrazano-Narrows Bridge(a) 1,173 156 35 1 1 68,884 700 69,584

Henry Hudson Bridge(b) 1 47 0 0 0 22,823 86 22,909

Marine Parkway Bridge 9 14 1 0 0 7,829 81 7,911

Cross Bay Bridge 17 20 1 0 0 7,589 119 7,708

Total 4,459 604 175 2 4 295,680 3,564 299,244

Percent of Paid Vehicles 1.5% 0.2% 0.1% 0.0% 0.0% 100.0% Notes: Totals may not add due to rounding. Traffic numbers are final audited figures.

(a) Westbound traffic doubled. (b) Truck passage prohibited. (c) Includes police, fire and other emergency vehicles and TBTA vehicles.

Source: TBTA

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Monthly Traffic, 2008 Monthly variations in traffic volumes on the nine crossings have historically been attributed to several factors, including severe winter weather which may result in lower volumes; and, conversely, traffic reaching its highest levels during the summer months when recreational travel peaks. Toll rate increases have also affected the traffic volumes in the aftermath of a toll increase. Furthermore, individual facilities can be affected by construction projects on the facility itself or its approaches, and on adjacent arterials or competing bridges. The limited number of crossings in the region; however, sustains the overall demand for TBTA’s bridges and tunnels. In addition to these normal impacts, there are extraordinary events such as the effects of September 11. The data in Table 9 indicate that total traffic on the nine crossings in 2008 peaked in June. August was the second highest month in 2008. For the combined facilities, the monthly varia-tions in 2008 ranged from 6 percent below the annual average in January to 6 percent above in June. This is indicative of a stable traffic mix comprised of a solid base of commuting and commercial traffic. However, due to the high price of fuel in mid-2008 and the state of the economy, traffic during the peak month of June was diminished as compared to 2007, when June 2007 traffic was 8 percent above the annual average.

Table 9 Monthly Traffic Variations, 2008

Average Daily Toll-Paying Traffic Month Throgs

Neck Bronx-

Whitestone RFK

Queens Midtown

B’klyn Battery

Verrazano-Narrows(a)

Henry Hudson

Marine Pkwy

Cross Bay

Total Ratio to AADT

January 102,862 107,188 154,658 74,593 45,798 179,864 60,204 18,710 19,141 763,017 0.94 February 102,702 107,051 155,965 75,883 46,816 178,905 59,849 18,458 18,930 764,558 0.95 March 109,243 113,632 162,516 79,813 47,757 187,482 62,273 19,604 19,701 802,022 0.99 April 112,618 117,790 167,523 79,189 47,254 190,115 64,334 20,225 20,598 819,644 1.01 May 114,916 119,826 171,340 80,151 47,141 192,395 65,598 21,793 21,212 834,371 1.03 June 112,281 127,711 173,730 81,489 48,481 196,878 65,621 24,625 23,749 854,565 1.06 July 116,833 124,989 167,326 77,893 45,004 192,070 61,324 26,052 23,536 835,026 1.03 August 119,565 127,641 168,126 79,174 44,694 196,394 60,967 25,101 22,345 844,007 1.04 September 111,241 117,198 164,140 79,144 46,161 187,438 62,978 21,804 20,872 810,977 1.00 October 112,364 115,838 161,278 78,598 45,952 186,955 63,489 20,225 20,154 804,853 1.00 November 109,726 113,524 156,957 76,683 44,372 184,384 63,092 19,861 19,388 787,987 0.98 December 102,837 110,639 154,998 75,715 44,726 185,192 58,626 20,089 19,117 771,939 0.96 AADT(b) 110,633 116,949 163,227 78,196 46,172 188,207 62,359 21,392 20,734 807,868 1.00

Notes: May not add due to rounding. Traffic numbers are final audited figures. (a) Westbound traffic doubled. (b) Annual Average Daily Traffic

Changes in Monthly Traffic, 2007 to 2008 All of the traffic restrictions that were introduced at TBTA facilities following the September 11, 2001 attack have been removed. However, a ban on large commercial vehicles remains in effect on the lower level of the Verrazano-Narrows Bridge and at the Holland Tunnel and on the lower level of the George Washington Bridge. The recovery of traffic has differed considerably between the crossings depending on the timing of the lifting of restrictions, but traffic at most facilities returned to or exceeded pre-September 2001 levels through 2007. At the Brooklyn-

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Battery Tunnel, traffic volumes continue to be below the 2000 level due to the loss of employment in lower Manhattan.

Table 10 lists the monthly average daily traffic changes that have occurred between 2007 and 2008.

Table 10 Changes in Monthly Average Daily Traffic – 2007 to 2008

Percent Change Comparing 2008 Monthly Average Daily Traffic to 2007

Month Throgs Neck

Bronx- Whitestone

RFK Queens

Midtown Brooklyn-

Battery Verrazano-

Narrows Henry

Hudson Marine

Parkway Cross Bay

Bridge

January –2.0% 1.5% –1.2% –1.1% –4.8% –1.4% –2.5% –0.2% 0.5% February –1.2 1.6 –0.1 –0.8 –4.7 –0.9 –2.4 2.5 2.9 March 0.0 2.7 –3.3 –1.6 –8.5 –1.3 –4.2 –0.9 –1.0 April –0.9 3.1 –3.2 –1.9 –4.4 –1.5 –1.8 4.4 3.9 May –5.1 –0.3 –5.6 –3.5 –8.8 –4.3 –7.0 –4.0 –4.6 June –8.9 2.0 –6.4 –3.8 –9.6 –4.7 –7.0 –2.7 –1.3 July –4.2 1.6 –4.8 0.9 –5.4 –2.4 –5.7 –0.2 –0.3 August –4.5 1.7 –5.8 –3.7 –10.2 –2.6 –8.0 –1.7 –2.6 September –6.8 –2.2 –6.1 –2.3 –3.3 –3.2 –6.4 –2.1 –4.0 October –3.7 0.0 –7.4 –6.5 –9.5 –2.6 –8.7 –1.1 –5.2 November –3.6 –2.7 –7.5 –6.8 –9.2 –2.3 –7.0 0.9 –3.4 December –1.8 –0.4 –3.2 –2.0 –5.7 –1.1 –5.4 4.3 –0.1 Annual(a) –3.7 0.7 –4.7 –2.8 –7.1 –2.4 –5.6 –0.3 –1.4

(a) The annual changes differ slightly from the corresponding 2008 changes in Table 6, due to the process of calculating the monthly

average daily traffic changes that include the extra day in February 2008.

Reasons for monthly traffic changes include: The March 16, 2008 toll increase; The continuing worsening of the state of the economy; The steep increases in the price of motor fuel from early 2008 and continuing through the

summer before abating due to the deepening recession; There was an extra day in February due to the leap year; and There were various construction projects on the Throgs Neck Bridge beginning in March

2008, resulting in diversions to the Bronx-Whitestone Bridge. Estimated Traffic and Toll Revenue, 2009 The development of the traffic and toll revenue estimates for 2009 took into account the worsening economic condition of the region, as well as the impact of the last toll increase on March 16, 2008 and the impact of the proposed toll increase on July 12, 2009. The impacts in the long term, regarding the national and regional economies, projected employment in lower Manhattan and the traffic and toll revenue forecasts beyond 2009, are covered in the following sections of the report. In developing the traffic and toll revenue estimates for 2009, anticipated traffic volumes based upon historical understanding of traffic growth trends and price elasticity

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of demand were compared to actual traffic volumes from April 2008 through April 2009, the most recent time period under a consistent toll rate schedule. This comparison represents the impact of the declining economy which was assumed to continue for the remainder of 2009. Traffic levels were further adjusted to reflect the proposed toll increase of July 12, 2009 using the adjusted historic elasticities, reflecting the increased usage of ETC transponders, observed from previous toll increases. The forecast percent changes are shown in Table 11. The percentages reflect the declining economy and the estimated effect of the proposed toll increase.

Table 11 Estimated Changes in Annual Traffic – 2008 to 2009

Facility Percent

Change Throgs Neck Bridge –2.2% Bronx-Whitestone Bridge –2.2 RFK Bridge –4.6 Queens Midtown Tunnel –5.4 Brooklyn-Battery Tunnel –8.3 Verrazano-Narrows Bridge –2.1 Henry Hudson Bridge –5.3 Marine Parkway-Gil Hodges Mem. Bridge –1.2 Cross Bay Veterans Memorial Bridge –5.0 All –3.6

The traffic and toll revenue estimates for 2009 are presented in Table 12.

Table 12 Estimated 2009 Toll-Paying Traffic and Toll Revenue

Facility Traffic (000s)

Average Toll

Revenue(*) (000s)

Throgs Neck Bridge 39,593 $5.75 $227,615 Bronx Whitestone Bridge 41,880 5.27 220,739 RFK Bridge 56,991 5.12 291,776 Queens Midtown Tunnel 27,076 4.87 131,850 Brooklyn Battery Tunnel 15,502 4.66 72,179 Verrazano-Narrows Bridge 67,461 4.34 292,874 Henry Hudson Bridge 21,606 2.17 46,980 Marine Parkway Bridge 7,732 1.63 12,565 Cross Bay Bridge 7,208 1.71 12,334

Total 285,050 4.59 1,308,912 (*) Includes adjustment for increase in E-ZPass usage and shift in E-ZPass usage from non-NYCSC to NYCSC.

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The 3.6 percent decrease in traffic and the overall increase in revenue of 2.7 percent over 2008 reflect actual performance through April 30, 2009, the proposed toll increase of July 12, 2009 and anticipated changes in traffic volumes for the remainder of the year. Table 12 provides the transition between the historical traffic and revenue data presented on the preceding pages and the 10-year forecasts in Tables 20 and 21. The methodology used to develop the estimated growth rates beyond 2009 is discussed under the “Projected Traffic, Revenue and Expenses” section of this report. Operating Expenses 1998 to 2008 Table 13 displays the historical operating expenses for the TBTA facilities from 1998 through 2008. TBTA divides operating expenses into two major categories: labor and non-labor. Labor includes salaries, overtime and fringe benefits, net of capital reimbursements. Major maintenance, bridge painting, outside services, insurance, Coliseum operations (until its sale in 1999), TBTA’s share of the E-ZPass Customer Service Center, and other non-personnel expenses are included in non-labor. TBTA labor expenses increased from $106.6 million in 1998 to 207.3 million in 2008. A significant part of this increase was due to the creation of 265 new security positions after the events of September 11, 2001. Because of the introduction of the E-ZPass system, TBTA was able to eliminate over 200 bridge and tunnel officer positions through attrition with E-ZPass, and these reductions were the primary offset to growth in wage and fringe benefit expenses in recent years. Non-labor expenses increased from $101.6 million in 1998 to $200.7 million in 2008. The primary driving factors in TBTA’s non-labor expense growth were inflation, an increase in major maintenance and bridge painting activities. Timing of major expenses and other items has also resulted in some year-to-year fluctuations. An enhanced bridge painting program, including lead paint removal, implemented as part of TBTA’s effort to extend the useful life of the structural elements of its facilities, began to increase non-labor expenses starting in 1995. E-ZPass startup costs for tags and customer service center operations were primarily responsible for non-labor growth in 1996 and 1997. In 1998, E-ZPass startup costs eased and bridge painting activities were delayed due to an extensive evaluation of contractor experience. Resumption of the planned level of bridge painting increased non-labor costs in 1999, and rental expenses for TBTA administrative offices at 2 Broadway that were formerly in the New York Coliseum office building increased non-labor costs in 1999 and 2000.

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Table 13 Historical Operating Expenses: 1998 to 2008

Operating Expenses (000s) Year

Labor (a) Non-Labor

(b) Total

Percent Change(c)

1998 106,603 101,587 208,190 –7.0% 1999 107,430 120,561 227,991 9.5 2000 112,256 129,002 241,258 5.8 2001 123,316 133,198 256,514 6.3 2002 140,967 159,229 300,196 17.0 2003 159,976 169,039 329,015 9.6 2004 158,403 160,811 319,214 –3.0 2005 173,549 170,123 343,672 7.7 2006 183,268 169,642 352,910 2.7 2007 196,755 172,270 369,025 4.6 2008 207,305 200,686 407,991 10.6

Notes: (a) Includes salaries, overtime and fringe benefits, net of capital reimbursements.

(b) Non-labor includes the following categories: major maintenance and supplies, bridge painting, outside services, insurance, power, leases and rentals and other expenses.

(c) For discussion on expense fluctuations, see accompanying text. Source: TBTA

The 2001-2003 numbers reflect the additional expenses that were incurred in the aftermath of the attack on the World Trade Center. TBTA describes the added expenses as overtime labor costs for security, cleanup costs for the Brooklyn-Battery Tunnel and Battery Parking Garage, and emergency electricity generation for the Brooklyn-Battery Tunnel. Also included are costs asso-ciated with overtime incurred by represented employees required to make up for lost time as a result of the temporary closure of 2 Broadway. Some of the increases associated with these addi-tional costs have been reimbursed to TBTA through MTA from a combination of insurance proceeds and emergency grants from the Federal Emergency Management Agency (FEMA). The 2002 results reflect the additional expenses incurred after the terrorist attack that include an upgrade of communication and electrical systems and the replacement of a radio communication system. Also included is a delay in bridge painting from 2001 to 2002, additional security at all facilities, and E-ZPass tag replacement. The 2003 increase in labor costs was caused by additional expenditures for security staff, worker’s compensation adjustments and health and welfare benefits rate increases. The 2003 increase in labor costs was the result of the hiring of additional security staff, adjustments to worker’s compensation and increases in health and welfare fringe benefit rates. In non-labor expenses, increases due to major maintenance and bridge painting were partially offset by decreases in insurance costs, E-ZPass Customer Service Center (CSC) costs and other business expenses.

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In 2004, non-labor expenses were 4.9 percent lower than 2003 due to a decrease in the number of E-ZPass tag purchases. In 2005, expenses reflected a continuation of the security measures noted above, E-ZPass tag replacement, and increases in major maintenance and bridge painting, offset by a reduction in 2 Broadway lease charges. Labor costs increased in 2006 primarily due to rising payroll, pension and health and welfare expenses. Regarding non-labor expenses, increased funding for additional bridge painting needs in 2006 was offset by a decrease in E-ZPass tag purchases and lower insurance costs. In 2007, labor costs increased 7.4 percent primarily due to higher payroll expenses associated with collective bargaining agreements, inflation, higher pension expenses and a revised actual cost adjustment for worker's compensation, while non-labor expenses increased less than two percent primarily due to lower bridge painting program costs than in 2006. In 2008, labor costs increased 5.4 percent from 2007 primarily due to higher payroll and associated fringe costs, and non-labor expenses increased 16.5 percent primarily due to higher major maintenance needs in 2008. 2009 Budget Operating expenses have been budgeted by TBTA for 2009 at $423.1 million. These expenses are split into the following categories: labor expenses of $223.3 million and non-labor expenses of $214.7 million, offset by expected savings from additional actions for budget balance of $14.9 million. Personnel costs are expected to increase 7.7 percent over 2008 primarily due to the anticipated filling of positions held vacant. The non-labor portion is also expected to increase by 7 percent over 2008 due primarily to the increase in credit card fees for E-ZPass accounts resulting from the anticipated toll increase, increase in bond service fees, higher E-ZPass tag inventory needs, and an increase in planning studies for a barrier-free tolling assessment, offset by lower bridge painting requirements. A reduction in expenses of $14.9 million were proposed for the additional actions for budget balance, which consist of a variety of actions, including reductions in administrative personnel and a re-estimate of bridge painting expenses. Finally, we noted that the total 2008 operating expenses of $408.0 million were under the $426.9 million 2008 operating expense budget (prepared by TBTA in 2007) by $18.9 million, a savings of 4.4 percent.

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FACTORS AFFECTING TRAFFIC GROWTH The previous section of the report set forth the historical traffic, revenue and expense data for the nine TBTA bridges and tunnels. Before developing the forecasts, several factors affecting future traffic were considered, including projected growth (population and other demographics), TBTA and regional construction impacts, capacity constraints in the regional highway network, and toll and elasticity impacts. E-ZPass improvements were discussed previously. This section of the report concludes with a summary of the assumptions and conditions upon which the traffic and toll revenue forecasts were based. Employment, Population and Motor Vehicle Registrations Regional demographic data providing information on long-term trends are maintained by the New York Metropolitan Transportation Council (NYMTC). Information from NYMTC regard-ing employment and population history and projections from 1970 to 2035 is included in the following tables. In general, and in the recent past more than ever, traffic volumes in the region are affected by changes in employment and population. Normally the demand on the TBTA facilities tends to be less influenced by regional demographic trends because water crossings are limited. Another indicator of trends in traffic volumes is motor vehicle registrations, which have continued on an upward trend since 1970 in the tri-state region. To better understand how these indicators may influence traffic volumes on the TBTA crossings in the long term, URS first reviewed historical trends and forecasts by NYMTC and others, and adjusted the traffic forecasts in the short term to account for the present economic climate. Employment Trends and Projections Jobs traditionally influence traffic generation. Generally, when the economy is robust and jobs are plentiful, there is an increase in traffic. Conversely, when employment trends are downward, as is the present case, traffic volumes generally decline. The long-term trend in employment in the region is shown in Table 14. A downward trend in employment occurred between 1970 and 1980 in New York City. Jobs declined by 1.2 percent per year, from 4,066,500 in 1970 to 3,614,000 in 1980. Staten Island, where employment increased by 3.5 percent per year, was the exception. The most recent employment forecasts were released by NYMTC in March 2008. Despite the worsening of the economic situation since then, NYMTC has stated that it will not be updating its long-term forecasts and thus its projections continue to show a steady growth through 2035. Between 1970 and 2005, employment increased in the New York suburbs, in Northern and Central New Jersey and in Southern Connecticut. NYMTC projected that employment in the tri-state region (including New York City) as a whole, would grow during their forecast period through 2035, in the range of 0.7 to 1.4 percent annually.

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Table 14 Employment Trends and Projections (000s)

New York City Year

Manhattan Bronx Brooklyn Queens Staten Island Total (a)

New York Region (b)

New Jersey Region (c)

Connecticut Region (d)

1970 2,550.3 251.3 631.9 586.0 47.1 4,066.5 1,554.6 2,447.6 727.4

1980 2,277.5 216.9 516.4 536.7 66.4 3,614.0 1,918.6 2,828.2 869.3

1990 2,565.1 237.8 504.5 567.3 91.6 3,966.1 2,339.0 3,403.9 1,008.9

2000 2,682.2 269.4 584.6 624.1 116.9 4,277.3 2,537.5 3,676.3 1,065.5

2005 2,680.7 306.1 605.4 646.1 122.6 4,360.9 2,715.9 3,894.6 1,099.6

2010 - Projected 2,824.2 342.1 707.7 724.4 149.3 4,747.8 2,888.6 4,148.3 1,176.6

2015 - Projected 2,885.1 367.6 760.3 751.2 164.5 4,928.8 3,017.7 4,352.9 1,229.7

2020 - Projected 2,948.0 388.9 809.3 776.7 177.8 5,100.7 3,129.1 4,521.5 1,277.0

2025 - Projected 3,069.7 408.8 855.2 806.6 192.0 5,332.4 3,250.5 4,717.2 1,324.9

2030 - Projected 3,171.5 425.8 896.1 831.5 205.1 5,530.0 3,367.0 4,905.4 1,378.8

2035 - Projected 3,288.7 442.3 936.7 858.2 218.4 5,744.3 3,491.8 5,078.7 1,440.9

Average Annual Percent Change

1970 to 1980 –1.1% –1.5% –2.0% –0.9% 3.5% –1.2% 2.1% 1.5% 1.8%

1980 to 1990 1.2 0.9 –0.2 0.6 3.3 0.9 2.0 1.9 1.5

1990 to 2000 0.4 1.3 1.5 1.0 2.5 0.8 0.8 0.8 0.5

2000 to 2005 0.0 2.6 0.7 0.7 1.0 0.4 1.4 1.2 0.6

2005 to 2010 1.0 2.2 3.2 2.3 4.0 1.7 1.2 1.3 1.4

2010 to 2015 0.4 1.4 1.4 0.7 1.9 0.8 0.9 1.0 0.9

2015 to 2020 0.4 1.1 1.3 0.7 1.6 0.7 0.7 0.8 0.8

2020 to 2025 0.8 1.0 1.1 0.8 1.5 0.9 0.8 0.9 0.7

2025 to 2030 0.7 0.8 0.9 0.6 1.3 0.7 0.7 0.8 0.8

2030 to 2035 0.7 0.8 0.9 0.6 1.3 0.8 0.7 0.7 0.9 Notes: (a) Totals may not add due to rounding.

(b) Consists of the following counties: Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, Ulster and Westchester.

(c) Consists of the following counties: The 13 counties of the North Jersey Transportation Planning Authority (Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren) plus Mercer.

(d) Consists of the following counties: Fairfield, Litchfield, New Haven.

Source: New York Metropolitan Transportation Council, March 2008.

A review of historical traffic demand for the TBTA crossings indicated that volumes did fluctu-ate system-wide during the 1970s and increased through the 1980s. During the 15-year period from 1985 to 2000, and again in 2003 and 2005, fluctuations occurred in response to toll increases, when traffic declined while toll revenues increased. Looking to the short-term impacts of the current recession, in the New York Metropolitan Statistical Area (MSA), the unemployment rate (as calculated from the monthly data) for 2008 was 5.3 percent, up from the 4.4 percent in 2007 as reported by the Bureau of Labor Statistics. The MSA’s highest monthly unemployment rate in the past ten years was forecasted for February 2009 to be at 8.2 percent. Previous to the economic downturn that began in April 2008, the MSA’s unemployment had been generally decreasing since hitting a high of 7.2 percent in January 2003. According to New York City’s Office of Management and Budget (OMB) Monthly Report on Economic Conditions, released March 20, 2009, “the City has lost jobs every

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month since August 2008 and almost every major sector has contracted.” These employment data correspond with the Class A commercial real estate vacancy rates for Manhattan from the OMB report. Vacancy rates were at their peak in mid-2003 and have since experienced steady decline. In 2007, the vacancy rate stood at 5.3 percent, and asking rents jumped 33 percent over the prior year. In 2008 the vacancy rate increased to 7.3 percent and the associated average square foot asking rent dropped 15.3 percent. According to the OMB report:

Tenant activity essentially froze in the last quarter of 2008. Only one million square feet of space was leased per month on average from November through February in the Class A and Class B markets throughout the City. As demand dwindled, the amount of vacant space on the market rose to over 32 million square feet, up from about 19 million just two years ago. As a result, the average asking rent has fallen by approximately 11 percent for Class A and by 5 percent in Class B over the past six months.

As noted in the report, the real estate industry anticipates that vacancy rates will rise over the next five years to an estimated high of 13.5 percent in 2010 before beginning to decline and employment will decrease by 4.7 percent and 2.8 percent in 2009 and 2010, respectively, until a moderate rise in job growth begins in 2011. This estimate is more pessimistic than the NYMTC data shown in Table 14 due to the availability of more recent input data contained in the OMB Report. Population Trends and Projections Between 1970 and 1980, population in New York City declined in the Bronx, Brooklyn, Manhat-tan and Queens, but increased on Staten Island. For the five boroughs, population totaled 7.9 million in 1970 and 7.1 million in 1980, as displayed in Table 15. The 1990 Census indicated that there was a turnaround and population grew at an average annual rate of approximately 0.3 percent. The Census results for the year 2000 show the population of New York City grew by approximately one percent annually and now exceeds 8 million. Nearby New York, New Jersey and Connecticut counties also show increased growth.

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Table 15 Population Trends and Projections (000s)

New York City Year

Manhattan Bronx Brooklyn Queens Staten Island Total (a)

New York Region (b)

New Jersey Region (c)

Connecticut Region (d)

1970 1,539 1,472 2,602 1,987 296 7,895 4,372 5,800 1,682

1980 1,428 1,169 2,231 1,891 352 7,072 4,537 5,857 1,725

1990 1,488 1,204 2,301 1,952 379 7,323 4,635 6,097 1,806

2000 1,537 1,333 2,465 2,229 444 8,008 4,933 6,662 1,889

2005 1,606 1,365 2,511 2,257 475 8,214 5,072 6,874 1,935

2010 - Projected 1,663 1,372 2,525 2,279 481 8,320 5,188 6,994 1,968

2015 – Projected 1,691 1,382 2,534 2,297 487 8,391 5,314 7,184 2,018

2020 - Projected 1,743 1,415 2,609 2,370 509 8,646 5,467 7,422 2,079

2025 - Projected 1,778 1,450 2,694 2,462 528 8,911 5,664 7,656 2,151

2030 - Projected 1,820 1,489 2,778 2,585 546 9,218 5,898 7,940 2,249

2035 - Projected 1,885 1,528 2,860 2,752 561 9,586 6,123 8,230 2,368

Average Annual Percent Change

1970 to 1980 –0.7% –2.3% –1.5% –0.5% 1.8% –1.1% 0.4% 0.1% 0.3%

1980 to 1990 0.4 0.3 0.3 0.3 0.7 0.3 0.2 0.4 0.5

1990 to 2000 0.3 1.0 0.7 1.3 1.6 0.9 0.6 0.9 0.4

2000 to 2005 0.9 0.5 0.4 0.2 1.4 0.5 0.6 0.6 0.5

2005 to 2010 0.7 0.1 0.1 0.2 0.3 0.3 0.5 0.3 0.3

2010 to 2015 0.3 0.1 0.1 0.2 0.3 0.2 0.5 0.5 0.5

2015 to 2020 0.6 0.5 0.6 0.6 0.9 0.6 0.6 0.7 0.6

2020 to 2025 0.4 0.5 0.6 0.8 0.7 0.6 0.7 0.6 0.7

2025 to 2030 0.5 0.5 0.6 1.0 0.7 0.7 0.8 0.7 0.9

2030 to 2035 0.7 0.5 0.6 1.3 0.5 0.8 0.7 0.7 1.0 Notes: (a) Totals may not add due to rounding.

(b) Consists of the following counties: Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk, Sullivan, Ulster and Westchester.

(c) Consists of the following counties: The 13 counties of the North Jersey Transportation Planning Authority (Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Warren) plus Mercer.

(e) Consists of the following counties: Fairfield, Litchfield, New Haven.

Source: New York Metropolitan Transportation Council, March 2008.

NYMTC’s latest population projections for the tri-state region as a whole (including New York City) for 2010 to 2035 were released in March 2008. NYMTC projects steady population growth throughout the entire region as a whole ranging from 0.3 percent to 0.8 percent. As stated earlier, despite the change in economic conditions, NYMTC will not be updating its forecasts. With the 2000 Census exceeding previous expectations and population increases region-wide, population growth should continue to have a positive effect on traffic demand on the TBTA crossings in the long-term. NYMTC’s most recent projection is for a population of over 9 million for New York City by 2030. In summary, generally, employment indicators overall appear to have had a more noticeable effect on traffic volumes on the TBTA facilities than population growth. However, TBTA traffic

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variations do not always correlate year by year with the regional demographic trends. As discussed throughout this report, demand for the TBTA facilities has been strong overall, and NYMTC’s long-term regional population projections indicate an increasing trend throughout the forecast period. With regard to employment, there may be some years that will show declines, but there will be other years that will be characterized by significant growth. Overall growth is expected in the long-term through the end of NYMTC’s forecast period in 2035. Motor Vehicle Registrations One of the indicators of traffic stability and/or growth in an area is the trend in the number of motor vehicle registrations. As shown in the following table, motor vehicle registrations increased for the period 2000 through 2008 in New Jersey, decreased slightly in New York City and remained relatively constant throughout New York State. The most recent data available indicate that between 2000 and 2008 vehicle registrations grew by an average annual rate of growth of 1.4 percent in New Jersey. In Connecticut, registrations increased between 2007 and 2008, continuing an upward trend. From 2000 to 2008, registrations in Connecticut grew at an average rate of 1.3 percent per year. Note that, despite the recession, motor vehicle registrations in New York, New Jersey and Connecticut increased from 2007 to 2008. These data are illustrated in Table 16. Motor vehicle registrations are not projected for future years. However, based on past trends, it is expected that growth will continue in regional motor vehicle registrations in parallel with the demographic indicators.

Table 16 Motor Vehicle Registrations

(000s)

Year New York

City New York

State (a) New Jersey Connecticut

2000 2,044 10,661 6,907 2,735 2001 2,025 10,707 7,086 2,796 2002 1,946 10,445 7,325 2,893 2003 1,869 10,414 7,420 2,928 2004 1,849 10,450 7,475 2,989 2005 1,857 10,477 7,545 3,011 2006 1,833 10,551 7,621 3,016 2007 1,926 10,665 7,728 3,035 2008 1,945 10,698 7,744 3,036

Average Annual Growth

2000-2008 –0.6% 0.0% 1.4% 1.3%

Notes: (a) Including New York City. Sources: New York State Department of Motor Vehicles, Connecticut Department of Motor

Vehicles and New Jersey Department of Motor Vehicles.

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Fuel Conditions The availability and pricing of motor fuel has historically affected the use of TBTA facilities. During the previous 36 years, fluctuations in traffic volumes occurred when fuel was either in short supply and/or prices increased rapidly. These conditions existed in 1973-1974, the summer of 1979, during the first war in the Persian Gulf in 1990-1991 and again during the Iraq war and in the aftermath of Hurricane Katrina. More recent history has shown that U.S. motor fuel prices reached $4.11 for regular gasoline in July 2008. Prices for regular gasoline in the New York City area averaged $4.01 per gallon during the summer, with the maximum being $4.18 per gallon the week of July 7, 2008. The price then dropped precipitously in the second half of the calendar year as the economy contracted. As of June 1, 2009, the average price for a gallon of regular gasoline in the U.S. was $2.52―down $1.45 per gallon (36.5 percent) from a year ago. The current price in the New York City area was $2.49 per gallon, a decrease of $1.55 per gallon (38.4 percent) from the same time last year. The lowest prices were reached in early 2009 and have since increased with the seasonal increase in demand. The $4.11 per gallon represents an all time high, surpassing the previous high set in March 1981, when a gallon of regular gasoline cost $3.40 in today’s (May 2009) dollars. Other factors currently driving the prices on fuel are: Steady incremental gas price increases caused by speculative investments in gasoline

futures in the commodities markets; Gasoline consumption while currently down, is expected to continue to grow, albeit at

modest rates; Similar demand for gasoline and petroleum products from China and other developing

nations is also down because of their contracting economies; The supply of gasoline in the United States in storage continues to expand, and Volatility and political unrest continues in oil producing countries, particularly in the

Middle East. During 2008, transactions on the TBTA facilities decreased from their 2007 levels as gasoline prices fluctuated, first up and then down, and the economy continued to worsen. Also affecting traffic was the March 2008 toll increase. Gasoline prices in New York City are currently hovering near $2.50 per gallon. The travel benefits of this reduced price, however, are being offset by the impact of the recession. This occurs since most of the trips on the TBTA facilities are commuter or work-oriented and they will be affected by the level of employment, discussed previously.

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Toll Impacts and Elasticity Tolls that are increased periodically affect traffic usage, especially if they outpace the rate of inflation, as they have on the TBTA facilities, as well as in those instances where competing facilities provide a good alternative. Elasticity, as used herein, is the relationship between traffic volume and the toll rate change, and represents the relative decrease in traffic corresponding to a given increase in toll. Elasticity is expressed as a negative value and the higher the absolute value, the more apt a facility is to lose traffic, which can be due to diversions to competing facilities, switches in travel modes, consolidation of trips and elimination of trips. Elasticity, in this sense, is used to analyze the relationship between tolls and use, i.e., when tolls are increased, motorists react and travel patterns may change. Elasticity factors vary, demonstrating that users react differently to toll increases depending on influencing conditions. On the TBTA crossings, elasticity tends to be influenced by the prox-imity of the toll-free City bridges and other considerations. The low factors for the Throgs Neck and Bronx-Whitestone bridges indicate their relative isolation from the nearest toll-free com-petitor, the Queensboro Bridge. Further south on the East River at the RFK Bridge and the Queens Midtown and Brooklyn-Battery tunnels, elasticity increases as the degree of toll-free competition increases. The TBTA tunnels tend to lose traffic particularly when the competing crossings are operating under reasonable levels of traffic service and providing motorists with viable toll-free alternatives during non-peak periods. In addition, trip purpose influences demand, i.e., peak-period, work-related trips are less elastic than off-peak trips that have fewer travel-time constraints. It is our understanding that TBTA intends to implement future toll increases of 5 percent every two years in the future, after the planned toll increase on July 12, 2009. For the forecast period of this report, this would be toll increases in 2011, 2013, 2015, 2017 and 2019. The 5 percent biennial increases (2.47 percent per year, compounded) will be at approximately the same level as recent general cost increases due to inflation. This relatively small increase coupled with the high usage of Electronic Toll Collection (ETC) on TBTA facilities would tend to reduce the elasticity factors seen in past toll increases. Also, the elasticities resulting from the 2003 and 2005 toll increases (the first two toll increases of the ETC era) were lower than the historical elasticities. Such results for TBTA – that show that ETC users are not as affected by toll increases as those who pay cash tolls – are consistent with results of other toll agencies with substantial ETC usage.. The new toll increase implemented on March 16, 2008 recognized this modest change to the historical elasticities. Going forward, however, due to the simultaneous impacts of the toll increase, the steep rise and fall of fuel prices and the worsening economy, it was not possible to isolate and evaluate the specific effects of this increase and to determine if the elasticity factors have changed significantly. In the absence of any definitive/empirical data it was determined to be prudent to continue to use elasticity factors in projecting toll facility volumes for 2009 through 2019 which continue to reflect this adjustment from the historical elasticity factors seen in toll increases occurring prior to the ETC era. These are shown on Table 17.

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Table 17 Elasticity Factors for 2009-2019

Location Elasticity Factors

Throgs Neck Bridge –0.063 Bronx-Whitestone Bridge –0.063 RFK Bridge –0.125 Queens-Midtown Tunnel –0.115 Brooklyn-Battery Tunnel –0.215 Verrazano Narrows Bridge –0.076 Henry Hudson Bridge –0.174 Marine Parkway Bridge –0.061 Cross Bay Bridge –0.082

Note: For each 1% increase in toll the volume is expected to decrease by the elasticity factor; e.g. for each 1% increase in the toll at the Queens-Midtown Tunnel, volume would decrease by .115%.

Two sets of forecasts have been prepared: one at constant tolls (at the July 2009 level); and the other with toll increases assumed by URS to occur in January 2011, 2013, 2015, 2017 and 2019. For the periodic toll-increase scenario, it was assumed that the toll levels (i.e., the cash toll for passenger cars) on the major and minor crossings would be increased by 5 percent every two years from 2011 to 2019. It was also assumed that the truck tolls would be increased propor-tionately, and that the relationships between cash and E-ZPass tolls for passenger cars would remain the same as those implemented for the upcoming toll increase on July 12, 2009. As for the impacts of the toll increases on traffic demand, the elasticity factors from Table 17, as described above, were used to calculate traffic decreases, as shown in Table 18. These traffic impacts represent the reduction in values from the corresponding annual traffic levels that would be expected if the tolls were not increased.

Table 18 Estimated Percent Change in Average Toll Rates and Traffic

2009 2011 2013 2015 2017 2019

Facility Elasticity

Factor Toll Traffic Toll Traffic Toll Traffic Toll Traffic Toll Traffic Toll Traffic

Throgs Neck –0.063 11.3% –0.7% 5.0% –0.3% 5.0% –0.3% 5.0% –0.3% 5.0% –0.3% 5.0% –0.3%

Bronx-Whitestone –0.063 11.0 –0.7 5.0 –0.3 5.0 –0.3 5.0 –0.3 5.0 –0.3 5.0 –0.3

RFK –0.125 11.0 –1.4 5.0 –0.6 5.0 –0.6 5.0 –0.6 5.0 –0.6 5.0 –0.6

Queens-Midtown –0.115 11.1 –1.3 5.0 –0.6 5.0 –0.6 5.0 –0.6 5.0 –0.6 5.0 –0.6

Brooklyn-Battery –0.215 11.2 –2.4 5.0 –1.1 5.0 –1.1 5.0 –1.1 5.0 –1.1 5.0 –1.1

Verrazano Narrows –0.076 11.4 –0.9 5.0 –0.4 5.0 –0.4 5.0 –0.4 5.0 –0.4 5.0 –0.4

Henry Hudson –0.174 11.7 –2.0 5.0 –0.9 5.0 –0.9 5.0 –0.9 5.0 –0.9 5.0 –0.9

Marine Parkway –0.061 13.2 –0.8 5.0 –0.3 5.0 –0.3 5.0 –0.3 5.0 –0.3 5.0 –0.3

Cross Bay –0.082 12.9 –1.1 5.0 –0.4 5.0 –0.4 5.0 –0.4 5.0 –0.4 5.0 –0.4

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The periodic toll increases indicated above were selected by URS to provide increases for cash passenger cars of 5 percent, and corresponding increases for the other vehicle classifications, every two years on all facilities. These increases have been assumed by URS for forecasting purposes only. Bridge and Tunnel Capacities URS assessed the peak-hour capacity level of each facility at the mid-point of the bridge or tun-nel, based on a highway-type capacity analysis. We recognize, however, that the TBTA bridges and tunnels have different physical and operational characteristics than do highways. Therefore, in our capacity assessment, we considered operational factors such as ramp approaches, vehicle merges, grades, sight lines, lane widths, lack of shoulders, and vehicle spacing and lane configu-ration at toll plazas, including E-ZPass lanes. The local street system feeding the TBTA crossings also becomes constrained during peak periods, with unstable traffic flows occurring on congested roadways. This could have an impact on TBTA facility operations during various travel periods. We also reviewed toll plaza operations with the electronic toll payment system. Characteristics of the E-ZPass system are discussed throughout this report. The acceleration of vehicle through-put for E-ZPass customers has mitigated congestion at the toll plazas. With E-ZPass participation rate at 74 percent in 2008, and the customer base increasing, efficient toll plaza operations are anticipated throughout the forecast period. Additionally, we have reviewed past annual traffic volumes at each facility for comparison with the current traffic levels. URS conducted this review (in early 2009), matching the 2008 traffic volumes against the highest annual volumes recorded, by facility, going back to 1970. Note in Table 19 that the Cross Bay Bridge and the Queens Midtown Tunnel carried their highest volumes in 2007.

Table 19 Comparison of 2008 Traffic with Highest Recorded Levels Since 1970

Highest Volume Since 1970 Facility

Year Volume (000s)

2008 Volume* (000s)

2008 Percent of Highest Volumes

Throgs Neck Bridge 2006 43,186 40,492 93.8%

Bronx - Whitestone Bridge 2004 45,223 42,803 94.6

RFK Bridge 1988 64,215 59,741 93.0

Queens Midtown Tunnel 2007 29,366 28,620 97.5

Brooklyn-Battery Tunnel 1971 22,920 16,899 73.7

Verrazano-Narrows Bridge 2002 73,361 68,884 93.9

Henry Hudson Bridge 2004 24,703 22,823 92.4

Marine-Parkway- Gil Hodges Bridge 1971 9,150 7,829 85.6

Cross Bay Veterans Memorial Bridge 2007 7,676 7,589 98.9

* From Table 6

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While traffic volumes during peak hours may approach capacity and limit traffic growth during these hours, there is room for traffic growth during non-peak conditions through peak spreading. Traffic volumes can continue to grow, but growth would be at a slower pace. TBTA and Regional Operational and Construction Impacts Traffic volumes on TBTA facilities are influenced by construction and rehabilitation projects involving roadways and bridges in the New York City area.

Major projects that result in long-term closures on the competing bridges may increase volumes on TBTA’s facilities. Also, long-term lane closures on the roadway network serving the TBTA crossings or on the TBTA crossings themselves may affect TBTA traffic volumes or cause traffic to shift from the affected crossing to either another TBTA facility or to one of the City’s toll-free bridges. For example, when the replacement of the deck on the Bronx-Whitestone Bridge began in June of 2005, some traffic diverted to the Throgs Neck Bridge. A number of roadway construction/rehabilitation projects, over the past few years, have influ-enced traffic volumes on TBTA facilities, and future construction will also affect traffic. The following descriptions also highlight area construction activities and measures that have influ-enced TBTA volumes and other planned and proposed projects that may affect traffic during the forecast period. Information on future construction activity was obtained from the New York State Department of Transportation, New York City Department of Transportation, NYMTC, and the Port Authority of New York and New Jersey. In general, the majority of construction activities programmed for the TBTA facilities them-selves are scheduled to take place during off-peak hours, including nighttime lane closures in the tunnels. Therefore, they are expected to have no discernible effect on toll revenue.

On the Verrazano-Narrows Bridge, widening of the Belt Parkway ramps in future

capital programs is not anticipated to require lane restrictions since the ramps will be widened to accommodate staged construction. Peak hour flow of three lanes will be maintained during upper level redecking in 2010 with a movable barrier, so no effect on traffic is anticipated.

The Cross Bay Veterans Memorial Bridge superstructure/deck rehabilitation began in 2007. The roadway is to be reduced to two lanes in each direction through 2010. Due to low traffic volumes, this has not had a detrimental effect on traffic flows.

The Marine Parkway-Gil Hodges Memorial Bridge had daily lane closures until April

2009 for on-going construction. On the Bronx-Whitestone Bridge, the replacement of the approach decks began in the

Bronx in 2008, and in Queens are expected to be scheduled in 2011-2012 once the Bronx approach is completed. Three lanes will be maintained in the peak direction, with two lanes in the reverse direction during staged construction.

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The Throgs Neck Bridge has multiple rehabilitation projects scheduled, including replacing the concrete deck. Installation of an orthotropic deck is expected to begin in the next capital program. With a contraflow lane, three lanes will be maintained in the peak direction. Cross Island Parkway ramp closures will occur this summer (for 35 days on each ramp). It is anticipated that traffic will divert to the Bronx-Whitestone Bridge during these construction projects, or in the case of the Cross Island Parkway ramps, to the Clearview Expressway (Queens) approach to the Throgs Neck Bridge.

Redecking of the lower level of the Henry Hudson Bridge is underway, with completion

scheduled by 2010. Construction is staged to minimize traffic impacts. Replacement of the upper level deck in the vicinity of the toll plaza that was scheduled for 2008 remains on hold. Construction to replace curb stringers and remove upper level sidewalks will necessitate closing one lane to traffic in 2010.

RFK Bridge deck widening and repair on Wards and Randalls Islands and at the Bronx

and Manhattan toll plazas requires off-peak closures but no peak restrictions. Queens-Midtown Tunnel has no on-going work. Roadway slab work, which is

anticipated in future capital programs, will be performed during off-peak weekend or night closures.

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Operational Changes Resulting from September 11, 2001 The ban on eastbound commercial vehicles remains in effect at the Holland Tunnel.

Some commercial vehicles (classes 1, 2 and 3 - 2 and 3-axle single unit trucks) may now use the westbound Holland Tunnel to exit New York City. Vehicle classes 4, 5 and 6 (larger trucks) are banned in both directions. In addition, no trailers or towed vehicles are allowed in both directions.

Competing Ferry Service

New York Water Taxi operates East River ferry service between Manhattan, Brooklyn and Queens. A new commuter service was instituted on May 12, 2008 between Pier 11/Wall Street and Breezy Point in Rockaway with an intermediate stop at Brooklyn Army Terminal in Bay Ridge Brooklyn. The East River ferry service resumed during July 2008. The East River routes include Pier 11/Wall Street and East 35th Street to Fulton Ferry Landing, Hunters Point and Schaefer Landing. In addition to the East River routes, New York Water Taxi provides service between Yonkers and both the World Financial Center and Pier 11/Wall Street. Service generally operates during peak periods.

As part of the NYCDOT’s proposed expansion of East River ferry service, there is a plan

to further expand service by adding new stops at North Williamsburg and Greenpoint in Brooklyn. Studies conducted by the New York City Economic Development Corporation and NYC Department of Transportation have concluded that this arrangement on the East River will provide the most useful service for commuters in Manhattan, Queens and Brooklyn. This phase of the plan will also include the construction of a new landing at Roosevelt Island that will be used by a private operator.

NYC Department of Transportation operates the Staten Island Ferry between the

Battery and St. George. Ferries carry vehicles and passengers on frequent schedules around the clock. Additional weekend service began in 2006 with 30-minute service during the day.

Since ferries have limited or no capacity for vehicles, ferry services will not significantly affect TBTA facilities.

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Competing East River Crossings Construction

Queensboro Bridge – Continuing numerous rehabilitation projects have involved the upper or lower levels, or ramp approaches to the bridge, including miscellaneous items at various locations throughout the bridge, approaches and ramps that were not addressed or were deleted from previous contracts. The rehabilitation of the north and south lower outer roadways was recently completed. A total of one lane in each direction may be closed on the lower level from 10:00 PM to 5:30 AM Monday to Friday; Saturday 12:01 AM to 7:00 AM; and Sunday from 1:00 AM to 11:00 AM. Additionally one of the two lanes on the north upper roadway to Manhattan may be closed for roadway repairs from 10:00 PM to 5:00 AM Sunday nights to Friday mornings. The south outer roadway to Queens may be closed 1:00 AM to 6:00 AM , weeknights and Saturday 1:00 AM to 7:00 AM. The south upper roadway to Queens may be closed 1:00 AM to 5:30 AM Sunday night to Friday morning, 2:00 AM to 7:00 AM Saturday, and 2:00 AM to 8:00 AM Sunday. The north upper roadway to Manhattan may have one of two lanes closed 10:00 PM to 5:00 AM weeknights, and 12:01 AM to 7 AM Saturday and Sunday. These lane closures are necessary to facilitate NYCDOT bridge maintenance, repairs and/or painting until the end of November 2009. Seismic retrofitting of the Queensboro Bridge is programmed to be completed in 2013.

Williamsburg Bridge – There are four lanes westbound (Manhattan-bound) and two lanes eastbound (Brooklyn-bound) with two lanes closed for construction in the off-peak direction weekdays from 6:00 AM to 10:00 AM. Weekdays from 10:00 AM to 3:00 PM there are three lanes maintained inbound, and two lanes maintained for traffic outbound, with three lanes closed for construction activity. There are four lanes eastbound and four lanes westbound all other times. These off-peak hour lane closures are required to facilitate NYCDOT bridge maintenance and rehabilitation work until December 2009. Truck traffic is allowed on the bridge in both directions on the outer roadways only. Pedestrian and bicycle access maintained at all times.

Manhattan Bridge – There are five lanes from 6:00 :00 AM to 10:00 :00 AM Monday to

Friday westbound (Manhattan-bound) of which two are on the north upper roadway (the left lane HOV2+) and three on the lower roadway; two lanes are maintained on the south upper roadway eastbound (Brooklyn bound). There are three lanes westbound and two eastbound 10:00 AM to 3:00 PM Monday to Friday. No trucks are permitted on the north upper westbound roadway from 5:00 AM to 3:00 PM Monday to Friday. Overnight Monday to Friday from 3:00 PM to 5:00 AM the next day, there are five lanes eastbound and two lanes westbound. There are five lanes westbound to Manhattan and two lanes eastbound to Brooklyn over the weekend from 9:00 PM Friday to 10:00 AM Monday. Lane closures may occur on weekends and overnight for maintenance and construction activity on an as needed basis through June 2009. Replacement of the Manhattan Bridge suspender ropes and rewrapping all cables is expected to be complete in 2012. Seismic retrofitting is scheduled to be completed in 2014.

Brooklyn Bridge – The reconstruction program that began in 1980 is expected to be complete in 2014. Maintenance and inspection of the maintenance travelers on the main

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span of the Brooklyn Bridge is expected to be completed in June 2009. At that time, rehabilitation of the approaches and ramps and the painting of the bridge is scheduled to begin. One of three lanes may be closed in the eastbound direction to Brooklyn as needed 10:00 AM to 3:00 PM weekdays, 11:00 PM to 6:00 AM Monday to Friday, and Saturday and/or Sunday 2:00 AM to 2:00 PM to facilitate NYCDOT bridge maintenance through June 2009. Beginning in June 2010, all Manhattan-bound lanes will be closed for 24 summer weekends to be spread out from 2010 through 2013. An Intelligent Transportation System is scheduled to be implemented after 2009 allowing for traffic routings to the Brooklyn-Battery Tunnel and Manhattan Bridge. All construction projects, including seismic retrofitting of the Brooklyn Bridge, are programmed to be complete in 2014.

It is unlikely any of the TBTA facilities will gain materially from these construction projects, but it is possible that the Brooklyn-Battery Tunnel will experience slightly higher usage levels. Other Major Bridge and Roadway Construction During the forecast period, several major roadway and bridge projects, which are part of NYMTC’s Transportation Improvement Program (TIP) for 2008-2012, will potentially have traffic implications for the TBTA facilities. The TIP includes the planned year of construction; however, adherence to this schedule is not mandated. Some of these projects do not yet have lane closure plans, which will be developed in coordination with NYCDOT and local community boards. As a matter of policy, NYCDOT seeks to restrict lane closures to off-peak and nighttime hours. Other bridges, roads and overpasses programmed for construction include:

Willis Avenue Bridge – Connects the FDR Drive, Major Deegan Expressway and Bruckner Expressway. Construction of a new Willis Avenue Bridge started in 2007 and is scheduled to be completed by the end of 2012. A new off-line bridge is to be constructed south of the existing bridge, which will be maintained in service until the new bridge is opened to traffic. Any restrictions on the Willis Avenue Bridge or approach ramps would induce some diversions to the RFK Bridge.

Third Avenue Bridge – Replacement of the span over the Harlem River was completed

in 2006. All five lanes are open to traffic, and approaches in the Bronx have been restored. Whatever diversions to the RFK Bridge that had occurred during reconstruction should have returned to routings based on normal driver preferences.

Broadway Bridge ― Rehabilitation of the Broadway Bridge over the Harlem River is

scheduled to begin in 2010 and finish in 2013, which may divert some traffic to the Henry Hudson Bridge.

Madison Avenue Bridge ― Rehabilitation of the Madison Avenue Bridge over the

Harlem River is scheduled to begin in 2011.

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I-87/Major Deegan Expressway – Rehabilitation of various overpasses along the Major Deegan Expressway between 138th Street and Mosholu Parkway is scheduled for design and construction thorough 2010. Safety improvements northbound at West 230th Street are scheduled for 2009. Traffic impacts at the RFK Bridge should not be significant.

Three Bridges ― The Three Bridges Project in the Bronx included reconstruction of: o I-295 (Cross Bronx Extension) bridge over Randall Avenue; o East Tremont Ave. over I-295 (Cross Bronx Expressway); and o I-95 bridge over I-695 (Throgs Neck Expressway).

Reconstruction of these overpasses has reached substantial completion. The first two projects necessitated the closing of one lane in each direction of the Cross Bronx Expressway between East Tremont Avenue and Randall Avenue during midday. This allowed for two lanes in each direction during peak hours. More lane closures occurred during the off-peak and night hours to facilitate project work. Motorists experienced lane closures on I-95 northbound and I-695 north and southbound during off-peak hours. Service roads in this area were subject to shifts to temporary lanes. Because of these construction projects, traffic may have shifted from the Throgs Neck Bridge to the Bronx-Whitestone Bridge or possibly the RFK Bridge. Intelligent Transportation System (ITS) components were installed.

Grand Central Parkway/94th Street interchange – This project involves implementing

safety and operational improvements at the intersection of 94th Street and Ditmars Boulevard, plus bridge rehabilitation of the 94th Street bridge and the 62nd Drive pedestrian bridge over Grand Central Parkway. The project is expected to begin in 2009 and be completed in early 2013.

I-95/Alexander Hamilton Bridge and Highbridge interchange ramps rehabilitation –

This project will rehabilitate the I-95 corridor between Amsterdam Avenue in Manhattan and Undercliff Avenue in the Bronx. Major construction is expected to begin in the spring of 2009 and be completed by the winter of 2011/2012. URS will review the Maintenance and Protection of Traffic (MPT) plans when they become available to determine what, if any, impacts there will be on TBTA facilities.

I-278/Gowanus Expressway repair and interim deck replacement ― The project

includes replacement of the concrete deck and deteriorated elements, until a permanent improvement is constructed. The New York State Department of Transportation (NYSDOT) is currently preparing a Draft Environmental Impact Statement (DEIS) in support of permanent improvements to the Expressway. The DEIS, which is examining both roadway and tunnel alternatives, is not expected to be completed until 2010, with an earliest anticipated construction start date of 2013. Until a permanent replacement option is built, an interim solution is needed to maintain the viability and safety of the structure. One construction contract between the Brooklyn-Battery Tunnel and Sixth Avenue was completed in 2007. Construction on the eastbound Brooklyn-Queens Expressway connector ramp, from the Brooklyn-Battery Tunnel to the Prospect Expressway, the Prospect Expressway to the Belt Parkway and the southern section of the Gowanus

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Expressway is currently underway and is scheduled for completion in the summer of 2009. Brooklyn-Battery Tunnel approaches and Prospect Expressway interchange construction are scheduled from summer 2008 to fall 2010. The Belt Parkway interchange is scheduled from 2009 to 2011. The project is being designed to minimize lane closures and traffic disruption. The eastbound Bus/HOV lane is being maintained from the Verrazano-Narrows Bridge to the Brooklyn-Battery Tunnel during the AM peak period, and a westbound Bus/HOV lane is to be operated from 2009 to 2010.

I-278/Brooklyn-Queens Expressway ― Park Avenue viaduct. NYSDOT began

reconstruction of the Brooklyn-Queens Expressway between Flushing Avenue and Sands Street in 2005, which is anticipated to be completed in 2009. Six travel lanes are generally available at all times except 12:00 AM to 5:00 AM, during which two travel lanes will be closed one direction at a time until the end of 2009.

I-278/Brooklyn-Queens Expressway - Reconstruction of the cantilever section between

Atlantic Avenue and Sands Street is programmed for design in 2010-2012 and is currently scheduled to begin construction in 2017.

I-278/BQE Kosciusko Bridge ― NYSDOT completed the Final Environmental Impact

Statement (FEIS) for the Kosciuszko Bridge project. The FEIS recommended a replacement of the existing bridge by building a new permanent, parallel structure on the east side of the existing bridge. The recommended alternative provides for maintaining all lanes on the Brooklyn-Queens Expressway and local connections, while constructing a replacement bridge. Construction is programmed to begin no sooner than 2012.

I-678/Whitestone Expressway bridge over the Flushing River – The estimated

completion date of the project is November 2009. All existing travel lanes will be maintained during peak hours. Lane closures will take place during non-peak hours. There will be no lane closures two hours before and two hours after a New York Mets home game. Rehabilitation of the northbound and southbound Whitestone Expressway and construction of the new northbound Van Wyck Expressway ramp to the northbound Whitestone Expressway, as well as an Intelligent Transportation System, have been completed. There should be no significant effect on Bronx-Whitestone Bridge traffic.

Route 9A – After Route 9A (West Street) was heavily damaged when the World Trade

Center was attacked, a six-lane temporary road was opened, allowing the Brooklyn-Battery Tunnel to re-open. Further construction to improve Route 9A to a six- to eight-lane urban highway is scheduled for completion in June 2009. This will have a positive impact on traffic using the Brooklyn-Battery Tunnel as motorists achieve the comfort level with the permanent traffic patterns that will be in place after completion.

I-495/Long Island Expressway –Van Wyck Expressway to Grand Central Parkway ―

Alternatives include: (1) rehabilitation of overpasses, or (2) rehabilitation plus three new connecting ramps. No further information is available.

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I-278/Brooklyn-Queens Expressway ― Rehabilitation of the Grand Central Parkway interchange complex from 25th Avenue to 71st Street is scheduled to begin in 2009 and from Astoria Boulevard to 44th Street in 2010.

I-295/Clearview Expressway ― Rehabilitation of the Grand Central Parkway inter-

change is scheduled to begin in 2012 and is expected to be completed in 2021. I-678/Van Wyck Expressway – Rehabilitation of Roosevelt Avenue bridge is scheduled

to begin in 2011. Belt Parkway – Provides access to the Verrazano-Narrows Bridge from southern

Brooklyn, JFK Airport, Queens and the Long Island parkway system. Rehabilitation of bridges over four waterways and three overpasses are underway or scheduled for 2008-2014. Traffic impacts should be limited to detours or alternative access routes during off-peak periods, when construction severely limits capacity. Traffic to/from the Verrazano-Narrows Bridge could be affected.

I-278/Staten Island Expressway – NYSDOT is operating exclusive bus lanes in both

directions in the median of the Staten Island Expressway on a 24-hour/7-day basis, between Slosson Avenue and the Verrazano-Narrows Bridge toll plaza. A recent Bus Lane/Priority Lane Study analyzed the feasibility of extending the bus lanes west to the Goethals Bridge toll plaza; and allowing use of the lanes by high-occupancy vehicles (HOV3+). These improvements would provide alternatives to single-occupant automobile use, particularly during peak periods. Construction between Slosson Avenue and Victory Boulevard is programmed to begin in 2015 and is scheduled for completion in the summer of 2017. One of the feasible scenarios would allow off-peak and weekend use of the lanes by all traffic, which would make the Verrazano-Narrows Bridge more attractive to motorists at those times.

I-278/Staten Island Expressway access improvement between the Verrazano-Narrows

Bridge toll plaza and Renwick Avenue is programmed for construction beginning in fall 2009 and to be completed in fall 2011. The project will include the construction of five new ramps, relocating/reconfiguring three ramps and adding auxiliary lanes. These improvements will improve traffic flows between the Staten Island Expressway and Verrazano-Narrows Bridge, as well as reduce accidents.

FDR Drive – Design of reconstruction of the FDR Drive viaduct from East 24th to East

42nd Street. The project will reconstruct this section of the FDR Drive to reasonable standards and improve safety. It is anticipated that the construction schedule (indefinite) will resemble the current project on the FDR Drive extending from East 53rd to East 64th Streets.

Harlem River Drive ― Design of safety alignment improvements between East 116th

and East 125th Streets is scheduled to begin in 2009, followed in 2011 by reconstruction between East 125th and East 132nd Streets, including a new entrance ramp from the Third Avenue bridge onto southbound Harlem River Drive.

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Henry Hudson Parkway ― The viaduct from West 72nd to West 82nd Streets is pro-

grammed for rehabilitation beginning in 2009. Bruckner/Sheridan Expressway Interchange - Preliminary engineering and Draft

Environmental Impact Statement are currently underway on reconstructing the inter-change of Bruckner Expressway (I-278) and Sheridan Expressway (I-895). The project will relieve the four-lane bottleneck on the six-lane Bruckner Expressway and improve access to the Hunts Point peninsula. The scenarios include deconstructing the Sheridan Expressway altogether or replacing it with a lower-speed boulevard. It is anticipated that construction will be initiated by 2014/2015. Traffic patterns to/from the RFK Bridge would be altered somewhat, depending on the alternative selected.

I-278/Goethals Bridge Replacement – According to the Winter 2008/2009 Goethals

Bridge Replacement Newsletter, “Based on the screening process conducted to identify project alternatives for evaluation in the DEIS, on input received during public outreach meetings, and on design studies conducted to address height limitations set for any bridge replacement due to the Goethals Bridge’s proximity to Newark Liberty International Airport, four refined bridge-replacement alternatives have been studied for the DEIS.” The newsletter goes on to say that “each of the two roadway decks contain three 12-ft.-wide lanes, one 12-ft.-wide outer shoulder, one 5-ft.-wide inner shoulder, and one 10-ft.-wide bikeway/ sidewalk (on the northern deck only).”

Staten Island Expressway–West Shore Expressway (I-278/NY-440) interchange ―

Design of reconstruction is scheduled to begin in 2012. This project is to support poten-tial Bus/HOV lanes on the Staten Island Expressway and reconstruction of the Goethals Bridge, and provide better connections to Howland Hook intermodal marine/rail/highway facilities.

The Goethals Bridge and Staten Island Expressway-West Shore Expressway improvements would positively affect traffic volumes on the Verrazano-Narrows Bridge. Intelligent Transportation Systems – Installation began in 2008 in Brooklyn, including

on the Gowanus Expressway (I-278), on State routes in Queens including the Long Island Expressway, on the New England Thruway (I-95), and in Manhattan on the Henry Hudson Parkway and FDR Drive. Substantial funds are programmed for ITS planning, coordination and management, and for operational support of NYCDOT’s Traffic Management Center and Integrated Incident Management System. Active management of traffic and incidents should result in smoother flow on the highway system including TBTA facilities, and increase reliability and motorists’ satisfaction.

Transit Improvements - Significant transit improvements, when completed, are expected to affect TBTA traffic levels during the forecast period through the year 2019. MTA Second Avenue Subway: Construction of Phase 1 started in April 2007 and is

scheduled for completion in 2013. Service from new stations at 96th, 86th and 72nd Streets

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along Second Avenue will connect to the 63rd Street line. Phases 2, 3 and 4 will extend service to 125th Street and to Lower Manhattan by 2018 as funding becomes available, resulting in the creation of 16 new subway stations on Second Avenue. Four traffic lanes will be maintained through construction zones, and cross streets will be kept open.

The second section from 96th Street north to 125th Street is not yet funded and construction will probably be included in the 2010-2014 Capital Plan. Construction of the Second Avenue/34th Street station might result in a loss of capacity on the access routes to the Queens Midtown Tunnel due to inefficient flow during peak hours and closure of side streets adjacent to the construction area. During the construction on the northern portion of Second Avenue adjacent to the RFK Bridge, the ramps between the RFK Bridge and 125th Street may experience a loss of capacity. The high-volume ramps between the FDR Drive and the RFK Bridge would not be affected.

MTA/LIRR East Side Access: This project will result in a new connection from the LIRR mainline tracks in Queens under Sunnyside Yard, connecting to the 63rd Street Tunnel leading to Grand Central Terminal. New tunnels are being bored in Manhattan west from Second Avenue, then under Park Avenue and into the lower level of Grand Central Terminal. Completion is scheduled for 2013. MTA anticipates that some travel-ers to the East Side will shift to the LIRR from other modes, including TBTA facilities.

Yankee Stadium Station on the MTA Metro-North Hudson Line opened on May 23, 2009. It is estimated that between 6,000 and 10,000 people will use the station for Yankee home games, which will also provide service to the area on non-game days. Although the new station is located on Metro-North's Hudson Line south of the Morris Heights station, service on game days is provided from all three Metro-North services via the Mott Haven, wye rail complex. In addition to scheduled service on the Hudson, Harlem and New Haven lines, there will be special shuttles from Grand Central Terminal and 125th Street. Regular weekday and weekend train service from the new station to Grand Central Terminal and to points north will also be provided.

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Summary of Assumptions and Conditions TBTA traffic, toll revenues and expenses have been projected by URS on the basis of the historical record of traffic, toll revenues and expenses, the capacities of the TBTA facilities, traffic growth forecasts, the estimated traffic elasticity due to toll variations, impacts of construction projects and the following assumptions and conditions, which we believe are reasonable. All TBTA facilities will be operated efficiently and maintained in good physical condi-

tion in order to attract customers and to sustain traffic demand levels. The TBTA adopted capital program for 2005-2009 will be carried out throughout the

forecast period. Future capital programs sufficient to maintain the structural integrity of bridges and tunnels will be adopted and implemented throughout the forecast period.

Electronic toll payment by E-ZPass will continue to be available on all TBTA crossings,

and the payment of revenue in full to TBTA will continue to be in accordance with cur-rent interagency agreements.

Congestion pricing in Manhattan will not be implemented in the near future. For the scenario with periodic toll increases, following the scheduled toll increase on

July 12, 2009, tolls on TBTA facilities will be increased every other year by approximately five percent (2.47 percent per year compounded) beginning in 2011 and continuing through 2019. These increases are very close to recent increases due to normal inflation. Almost three-quarters of all tolls paid on TBTA facilities are ETC transactions.

Capacity constraints which may be somewhat mitigated by stagnant or no traffic growth

in the near term on the arterial highway network will, however, continue to limit traffic growth on the nine TBTA crossings.

Highway/crossing improvements, in general, for the competing bridges and roadway net-

work will be made in accordance with the plans and schedules described herein. Major TBTA roadway and structural improvements will continue to be performed during

nighttime and non-peak hours, and/or in the off-peak direction, and approaches to the nine TBTA crossings will not be significantly impaired by construction work beyond the items discussed in this report.

The forecasts are based on the assumption that E-ZPass usage will grow at the rate of 0.5

percent annually during the period included in these forecasts. While usage at a higher level would improve toll plaza operating conditions, it would also result in lower average tolls and, therefore, could reduce the rate of increase in gross toll revenues relative to traffic growth. However, growth in traffic volumes would be limited without E-ZPass at the toll plazas.

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Competing East River crossings will continue to operate toll-free and to be maintained in

efficient operating condition. The long-term trends in regional employment and population, forecast by the New York

Metropolitan Transportation Council and presented in this report, will be realized in the Tri-State area and in New York City.

If gasoline prices in the New York metropolitan area were to increase again to and above

the $4.00 per gallon level as they did last year, discretionary travel could decline and there may be fewer recreational trips. In general, however, TBTA facilities carry regular commuters and other non-discretionary trips so that the overall impact on toll volumes and toll revenues is not expected to be significant if prices do not increase substantially above the $3.00 per gallon level.

LIRR East Side Access may shift some Long Island auto commuters to rail, after its

planned completion in 2015.

Current toll discount programs remain in effect at current projected levels, including the discount for E-ZPass customers and the Staten Island residents’ discount program for the Verrazano-Narrows Bridge. The only exception to this is the elimination of E-ZPass discounts for non-NYCSC customers.

The toll-rebate program, implemented in January 1998, for the benefit of E-ZPass

customers who are residents of Broad Channel and Rockaway peninsula traveling on the Cross Bay Bridge, will remain in place.

No other toll discount programs will be introduced that would adversely affect the TBTA

toll facilities' revenue stream. Economic conditions, nationally and in the New York Metropolitan Area, will “bottom

out” in 2010 and start to improve in 2011. No material natural disaster or local, state or national emergency will occur that would

alter travel patterns and divert traffic from the TBTA facilities. While the projections are made and presented year-by-year by URS, they are intended to show trends on the basis of its analysis of historical data and the assumptions and conditions set forth above. Variations in the year-to-year forecasted results may occur and such variations may be significant.

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PROJECTED TRAFFIC, REVENUES AND EXPENSES Future traffic and toll revenues are estimated for the 10-year (2009-2019) forecast period for each TBTA facility based on historical trends in traffic and toll revenue, elasticity factors for future toll increases, toll collection operations, capacities of the nine crossings, facility mainte-nance, E-ZPass participation levels, externalities such as area roadway improvement plans and regional demographic projections, and the assumptions and conditions summarized previously. Changes in these factors, which may potentially affect future traffic and toll revenue, are detailed throughout this report. Trends in operating expenses for the toll facilities, TBTA’s 2009 budget and 2010 through 2012 financial plans, and growth estimates based on the Consumer Price Index and historical trends, are input to the future operating expense forecast. Future operating expense estimates are used to develop net toll revenue projections over the forecast period. Traffic and toll revenues were first projected on the basis that the tolls that will be placed into effect on July 12, 2009 will be continued throughout the forecast period. Then, using these estimates as a base, URS applied the elasticity impact factors listed in Table 17 and adjusted the traffic volumes and average tolls to develop the toll revenue forecast with periodic toll increases.

Traffic and Toll Revenue at Current Tolls The methodology employed by URS to forecast traffic was based on the development of an annual growth rate for each facility (based on the historical traffic trends), the construction activities (historical and projected) throughout the highway network (bridges, tunnels and arterials) and the traffic capacity constraints in the network. Regional demographic projections were also taken into consideration. All indicators point to the potential for negative to no traffic growth in the short-term due to the recession and the forecasted impacts of (a) the July 12, 2009 toll increase and (b) traffic increases in the future at low rates of growth. URS estimates that traffic on the Throgs Neck, Bronx-Whitestone, RFK, Henry Hudson, Verrazano-Narrows, and Cross Bay bridges and Queens Midtown Tunnel will increase primarily during the off-peak period, since these facilities are presently near (92 percent +) or at their capacity levels with respect to the highest recorded levels achieved since 1970 (from Table 19). Capacity constraints in the highway network are contributing factors. The technique used in the forecast was to reduce the potential growth rates to reflect lower overall growth due to the expected slow emergence from the recession and the approaching of facility capacity. This approach produces conservative forecasts even though the introduction of E-ZPass has provided some additional capacity at the toll plazas. On this basis, starting with the 2009 estimated average toll from Table 12 and the estimated traffic by facility based on assumed growth rates and the impact of the planned July 12, 2009 toll increase, URS calculated the corresponding toll revenue for the forecast period through 2019 (at constant tolls after 2009), as shown in Table 20.

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Changes in traffic volumes in the range of –8.3 to +1.1 percent annually, depending on the facility, are estimated in the forecast period. This growth is based on the actual growth in traffic on each facility during the last 11 years, after the impact of toll increases were taken into account, and an assessment of the state of the economy in the region. With respect to employment forecasts, our growth assumptions are based on the OMB employment projections in the short-term and NYMTC’s employment projections in the long-term. Note that the average tolls are anticipated to decline gradually starting in 2011, due to the expected increases in E-ZPass usage (at the discounted toll rates). Traffic and Toll Revenue with Periodic Toll Increases As mentioned previously, the traffic forecast with periodic toll increases was built upon the base forecast (from Table 20), to which the elasticity impacts (from Table 18) were applied. URS then applied the appropriate increased average tolls increased by the percentages, also shown in Table 18, in the years 2011, 2013, 2015, 2017 and 2019 (effective January 1) to calculate the corresponding toll revenues in the respective years. The traffic and revenue forecasts with periodic toll increases are listed in Table 21.

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Table 20 Traffic and Toll Revenue Forecast, Constant Tolls

Year Throgs Neck

Bronx-Whitestone RFK

Queens Midtown

Brooklyn Battery

Verrazano- Narrows

Henry Hudson

Marine Parkway-

Gil Hodges Memorial

Bridge

Cross Bay Veterans Memorial

Bridge Total

Traffic Change 2008-2009 –2.2% –2.2% –4.6% –5.4% –8.3% –2.1% –5.3% –1.2% –5.0% –3.6% 2009-2010 –0.4 –0.4 –0.7 –0.7 –1.3 –0.5 –1.1 –0.4 –0.6 –0.6 2010-2011 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2011-2012 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.3 1.1 0.5 2012-2013 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2013-2014 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2014-2015 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2015-2016 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.3 1.1 0.5 2016-2017 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2017-2018 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2018-2019 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.3 1.1 0.5

Annual Traffic (000s) 2008 40,492 42,803 59,741 28,620 16,899 68,884 22,823 7,829 7,589 295,680

2009 39,593 41,880 56,991 27,076 15,502 67,461 21,606 7,732 7,208 285,050

2010 39,448 41,727 56,575 26,893 15,301 67,154 21,373 7,700 7,168 283,339

2011 39,448 41,727 56,575 26,893 15,301 67,154 21,373 7,700 7,168 283,339

2012 39,645 41,936 56,858 27,097 15,378 67,490 21,480 7,719 7,248 284,850

2013 39,843 42,145 57,142 27,302 15,455 67,827 21,587 7,739 7,329 286,369

2014 40,042 42,356 57,428 27,508 15,532 68,166 21,695 7,758 7,411 287,897

2015 40,242 42,568 57,715 27,716 15,610 68,507 21,804 7,777 7,494 289,433

2016 40,444 42,781 58,004 27,926 15,688 68,850 21,913 7,797 7,578 290,978

2017 40,646 42,995 58,294 28,137 15,766 69,194 22,022 7,816 7,663 292,532

2018 40,849 43,210 58,585 28,349 15,845 69,540 22,132 7,836 7,749 294,095

2019 41,053 43,426 58,878 28,564 15,924 69,888 22,243 7,855 7,835 295,666

Average Toll

2008 $5.43 $4.96 $4.82 $4.59 $4.35 $4.05 $2.02 $1.54 $1.61 $4.31

2009 5.75 5.27 5.12 4.87 4.66 4.34 2.17 1.63 1.71 4.59

2010 6.09 5.57 5.42 5.15 4.99 4.68 2.30 1.73 1.86 4.89

2011 6.08 5.57 5.42 5.14 4.98 4.68 2.30 1.73 1.86 4.88

2012 6.07 5.56 5.41 5.13 4.98 4.67 2.30 1.73 1.85 4.87

2013 6.06 5.55 5.40 5.13 4.97 4.67 2.30 1.73 1.85 4.87

2014 6.06 5.55 5.40 5.12 4.96 4.66 2.29 1.73 1.85 4.86

2015 6.05 5.54 5.39 5.12 4.96 4.65 2.29 1.72 1.85 4.86

2016 6.04 5.53 5.38 5.11 4.95 4.65 2.29 1.72 1.85 4.85

2017 6.04 5.53 5.38 5.10 4.95 4.64 2.29 1.72 1.84 4.84

2018 6.03 5.52 5.37 5.10 4.94 4.64 2.28 1.72 1.84 4.84

2019 6.02 5.51 5.36 5.09 4.93 4.63 2.28 1.72 1.84 4.83

Toll Revenue (000s) 2008 $219,855 $212,125 $287,877 $131,264 $73,590 $278,906 $46,126 $12,019 $12,212 $1,273,974

2009 227,615 220,739 291,776 131,850 72,179 292,874 46,980 12,565 12,334 1,308,912

2010 240,120 232,536 306,758 138,421 76,328 314,435 49,264 13,354 13,324 1,384,540

2011 239,829 232,255 306,386 138,254 76,236 314,054 49,205 13,338 13,307 1,382,864

2012 240,736 233,134 307,545 139,130 76,525 315,242 49,391 13,355 13,440 1,388,498

2013 241,647 234,016 308,709 140,013 76,814 316,435 49,578 13,372 13,574 1,394,157

2014 242,561 234,901 309,877 140,900 77,105 317,632 49,765 13,389 13,710 1,399,841

2015 243,479 235,790 311,049 141,794 77,396 318,834 49,954 13,406 13,846 1,405,548

2016 244,400 236,682 312,226 142,693 77,689 320,040 50,143 13,424 13,984 1,411,281

2017 245,325 237,577 313,408 143,597 77,983 321,251 50,332 13,441 14,124 1,417,038

2018 246,253 238,476 314,593 144,508 78,278 322,466 50,523 13,458 14,265 1,422,821

2019 247,185 239,378 315,784 145,424 78,574 323,687 50,714 13,476 14,407 1,428,628

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Table 21 Traffic and Toll Revenue Forecast, Periodic Toll Increases

Year Throgs Neck

Bronx-Whitestone RFK

Queens Midtown

Brooklyn Battery

Verrazano- Narrows

Henry Hudson

Marine Parkway-

Gil Hodges Memorial

Bridge

Cross Bay Veterans Memorial

Bridge Total

Traffic Change 2008-2009 –2.2% –2.2% –4.6% –5.4% –8.3% –2.1% –5.3% –1.2% –5.0% –3.6% 2009-2010 –0.4 –0.4 –0.7 –0.7 –1.3 –0.5 –1.1 –0.4 –0.6 –0.6 2010-2011 –0.3 –0.3 –0.6 –0.6 –1.1 –0.4 –0.9 –0.3 –0.4 –0.5 2011-2012 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2012-2013 0.2 0.2 –0.1 0.2 –0.6 0.1 –0.4 –0.1 0.7 0.0 2013-2014 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2014-2015 0.2 0.2 –0.1 0.2 –0.6 0.1 –0.4 –0.1 0.7 0.0 2015-2016 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2016-2017 0.2 0.2 –0.1 0.2 –0.6 0.1 –0.4 –0.1 0.7 0.0 2017-2018 0.5 0.5 0.5 0.8 0.5 0.5 0.5 0.2 1.1 0.5 2018-2019 0.2 0.2 –0.1 0.2 –0.6 0.1 –0.4 –0.1 0.7 0.0

Annual Traffic (000s) 2008 40,492 42,803 59,741 28,620 16,899 68,884 22,823 7,829 7,589 295,680

2009 39,593 41,880 56,991 27,076 15,502 67,461 21,606 7,732 7,208 285,050

2010 39,448 41,727 56,575 26,893 15,301 67,154 21,373 7,700 7,168 283,339

2011 39,323 41,595 56,222 26,738 15,137 66,899 21,187 7,677 7,138 281,916

2012 39,519 41,803 56,503 26,940 15,213 67,234 21,293 7,696 7,218 283,419

2013 39,591 41,879 56,431 26,988 15,125 67,313 21,214 7,692 7,269 283,501

2014 39,789 42,088 56,713 27,192 15,200 67,650 21,320 7,711 7,350 285,013

2015 39,861 42,164 56,641 27,239 15,112 67,730 21,241 7,707 7,402 285,098

2016 40,060 42,375 56,925 27,445 15,188 68,069 21,347 7,726 7,485 286,620

2017 40,133 42,452 56,852 27,493 15,100 68,150 21,267 7,722 7,538 286,707

2018 40,334 42,664 57,136 27,701 15,175 68,490 21,373 7,741 7,622 288,238

2019 40,407 42,742 57,064 27,749 15,087 68,572 21,294 7,737 7,676 288,328

Average Toll

2008 $5.43 $4.96 $4.82 $4.59 $4.35 $4.05 $2.02 $1.54 $1.61 $4.31

2009 5.75 5.27 5.12 4.87 4.66 4.34 2.17 1.63 1.71 4.59

2010 6.09 5.57 5.42 5.15 4.99 4.68 2.30 1.73 1.86 4.89

2011 6.38 5.84 5.69 5.40 5.23 4.91 2.42 1.82 1.95 5.13

2012 6.38 5.84 5.68 5.39 5.23 4.90 2.41 1.82 1.95 5.12

2013 6.69 6.12 5.96 5.65 5.48 5.14 2.53 1.91 2.04 5.37

2014 6.68 6.11 5.95 5.65 5.47 5.14 2.53 1.90 2.04 5.36

2015 7.00 6.41 6.24 5.92 5.74 5.39 2.65 2.00 2.14 5.62

2016 7.00 6.40 6.23 5.92 5.73 5.38 2.65 1.99 2.14 5.62

2017 7.34 6.72 6.54 6.20 6.01 5.64 2.78 2.09 2.24 5.89

2018 7.33 6.71 6.53 6.20 6.00 5.64 2.77 2.09 2.24 5.88

2019 7.68 7.04 6.85 6.50 6.30 5.91 2.91 2.19 2.35 6.17

Toll Revenue (000s) 2008 $219,855 $212,125 $287,877 $131,264 $73,590 $278,906 $46,126 $12,019 $12,212 $1,273,974

2009 227,615 220,739 291,776 131,850 72,179 292,874 46,980 12,565 12,334 1,308,912

2010 240,120 232,536 306,758 138,421 76,328 314,435 49,264 13,354 13,324 1,384,540

2011 251,022 243,095 319,698 144,329 79,188 328,505 51,216 13,962 13,915 1,444,931

2012 251,972 244,014 320,908 145,244 79,488 329,748 51,410 13,980 14,054 1,450,819

2013 264,730 256,369 336,117 152,588 82,878 346,227 53,714 14,654 14,843 1,522,120

2014 265,731 257,339 337,389 153,555 83,191 347,537 53,917 14,672 14,991 1,528,324

2015 279,186 270,369 353,380 161,319 86,740 364,904 56,334 15,379 15,833 1,603,443

2016 280,242 271,392 354,717 162,342 87,068 366,284 56,547 15,399 15,990 1,609,982

2017 294,432 285,133 371,529 170,550 90,781 384,589 59,082 16,141 16,888 1,689,124

2018 295,546 286,212 372,935 171,631 91,125 386,044 59,305 16,161 17,056 1,696,015

2019 310,510 300,703 390,610 180,309 95,011 405,335 61,963 16,940 18,014 1,779,396

Effects of Second Avenue Subway Construction in Forecast Years The foregoing tables forecasting traffic and toll revenues incorporate estimated effects of the construction of the Second Avenue Subway. Activity associated with such construction could result in changes to traffic patterns, possibly resulting in a shift of traffic volumes to other TBTA facilities, as well as the toll-free East River Bridges or a diversion to mass transit. Such changes in traffic patterns could have an adverse effect on the forecasts set forth in the foregoing tables as described in the following paragraphs. Various stages of the project will result in visible construction activity on segments of Second Avenue at any given time. In addition, tunnel construction, either through the use of a tunnel boring machine or cut-and-cover, will affect vehicular activity not only on Second Avenue, but also on adjacent avenues and streets. The first phase of the project will be between 96th Street and 63rd Street. URS anticipates some changes to current traffic volumes for TBTA’s facilities when construction begins, thereby necessitating the rerouting of some traffic, as well as a change of street rules (traffic movements, parking restrictions and enforcement). For the RFK Bridge, 28 percent of the traffic exits onto Second Avenue at 125th Street, 56 percent exits onto the FDR Drive, and 17 percent exits onto the Harlem River Drive via the 125th Street/Second Avenue intersection. Construction may result in a shift of traffic to the FDR Drive, if capacity were to be available during the peak. If capacity is not available, it is estimated that the RFK Bridge will lose up to 2 percent of total traffic (3 to 5 percent of traffic on the Manhattan span) for the period when construction is in the vicinity of the bridge. The relocation of utility lines beneath Second Avenue in the vicinity of the Queens Midtown Tunnel would affect traffic patterns. This could also have an impact on the access route to the Queensboro Bridge. As mentioned previously, a 20 percent decrease in access route capacity may be anticipated and could result in a decrease in total traffic of approximately 3 to 6 percent during the period when construction is in the vicinity of the tunnel; however, this is not anticipated in the period included in the current estimates. In addition to the potential reduction in traffic noted, it is possible that construction activities limiting access to the toll-free East River crossings could result in traffic diversions to the TBTA facilities. While this was not taken into account, it could have a positive impact on TBTA revenues. Operating Expenses The projection of operating expenses is shown in Table 22. Total operating expenses, consisting of labor and non-labor, are estimated to increase from $408.0 million in 2008 to $618.2 million in 2019. Labor expenses consist of wages, salaries, overtime and fringe benefits. Non-labor expenses include items such as maintenance, supplies, utilities and other expenses.

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Operating expenses have been budgeted by TBTA for 2009 through 2012 as shown in Table 22. Nonrecurring costs include additional bridge painting requirements in 2009 and the start of the next E-ZPass Tag Replacement Program in 2010. The E-ZPass Tag Replacement Program is estimated to be in effect for a five-year period, with an approximate cost of $20.3 million in 2010 and $23.1 million in 2011 and around half that level for 2012 through 2014. URS projected that labor expenses would increase at a rate of 4.25 percent annually while non-labor expenses would increase at a rate of 2.50 percent per year. URS does not project any variation in operating expenses resulting from the reduced traffic levels brought about by periodic toll increases.

Table 22 Projected Operating Expenses

(000s)

Year Labor(a) Non-Labor(b)

Additional Actions for

Budget Balance(c) Total(d)

2009(e) $223,284 $214,694 $–14,913 $423,065 2010(e) 229,790 241,249 –20,559 450,480 2011(e) 237,288 236,891 –3,778 470,401 2012(e) 244,142 245,196 –7,129 482,208

2013 254,518 251,326 – 505,843 2014 265,335 257,609 – 522,943 2015 276,611 264,049 – 540,660 2016 288,367 270,650 – 559,017 2017 300,623 277,416 – 578,039 2018 313,399 284,352 – 597,751 2019 326,719 291,461 – 618,179 (a) Salaries, overtime and fringe benefits, net of capital reimbursement. (b) Non-labor includes the following categories: maintenance and supplies, outside services, insurance,

power, leases, rentals and other expenses. (c) Expected savings from additional actions for budget balance, as provided by TBTA. (d) Totals may not add due to rounding (e) From TBTA estimates.

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Net Revenues from Toll Operations Finally, the projected operating expenses were deducted from the respective toll revenue fore-casts to produce the two sets of estimated net toll revenues, one at constant tolls and the other with periodic toll increases, as shown in Table 23. For 2009, net toll revenue under either sce-nario is estimated at $885.8 million. In year 2019, net toll revenue at constant tolls is estimated to be $810.4 million and, with periodic toll increases, net toll revenue is estimated to be $1,161.2 million.

Table 23 Net Toll Revenue Forecast (000s)

Gross Toll Revenues Net Toll Revenues Year

Constant Tolls Periodic Toll

Increases

Operating Expenses Constant Tolls

Periodic Toll Increases

2009 $1,308,912 $1,308,912 $423,065 $885,847 $885,847 2010 1,384,540 1,384,540 450,480 934,060 934,060 2011 1,382,864 1,444,931 470,401 912,463 974,530 2012 1,388,498 1,450,819 482,208 906,290 968,610 2013 1,394,157 1,522,120 505,843 888,314 1,016,277 2014 1,399,841 1,528,324 522,943 876,897 1,005,381 2015 1,405,548 1,603,443 540,660 864,888 1,062,783 2016 1,411,281 1,609,982 559,017 852,264 1,050,964 2017 1,417,038 1,689,124 578,039 838,999 1,111,085 2018 1,422,821 1,696,015 597,751 825,069 1,098,264 2019 1,428,628 1,779,396 618,179 810,448 1,161,217

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REVIEW OF PHYSICAL CONDITIONS The facilities under TBTA’s jurisdiction include two tunnels and seven bridges listed in Table 24, together with Randall’s Island Facilities and a parking garage in Manhattan near the Brooklyn-Battery Tunnel. Some of these crossings have been in service since the 1930s, i.e., the RFK, Henry Hudson, Marine Parkway-Gil Hodges Memorial and Bronx-Whitestone bridges. The Queens Midtown Tunnel opened to traffic in 1940, and the Brooklyn-Battery Tunnel in 1950. Two bridges opened to traffic in the 1960s: the Throgs Neck in 1961 and the Verrazano-Narrows in 1964 (lower level in 1969). The present Cross Bay Veterans Memorial Bridge, replacing the previous span, opened to traffic in 1970. The aging of the TBTA facilities will influence the overall upkeep and capital improvements that will be necessary to maintain the infrastructure over the forecast period and beyond. Table 25 lists TBTA’s capital commitments for each facility from 2005 through 2009 (as amended in July 2008).

Table 24 Opening Dates of TBTA Facilities

Facility Open to Traffic

Years in Use

RFK Bridge 1936 73 Bronx-Whitestone Bridge 1939 70 Throgs Neck Bridge 1961 48 Henry Hudson Bridge 1936(a) 73 Queens Midtown Tunnel 1940 69 Brooklyn-Battery Tunnel 1950 59 Verrazano-Narrows Bridge 1964(b) 45 Cross Bay Veterans Memorial Bridge 1970(c) 39 Marine Parkway-Gil Hodges Memorial Bridge 1937 72

Notes: (a) Upper deck was added and opened in 1938. (b) Lower level opened in 1969. (c) The present structure replaced the previous structure that had been in service since 1939.

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Table 25 Capital Commitments by Facility, 2005 to 2009 (Millions of dollars)

Facility Total by Facility

2005 through 2009(a, b)

Agency Wide(c) $52.7 Brooklyn-Battery Tunnel 56.9 Bronx-Whitestone Bridge 217.8 Cross Bay Bridge 69.3 Henry Hudson Bridge 94.4 Marine Parkway Bridge 22.8 Queens Midtown Tunnel 21.5 RFK Bridge 395.4 Throgs Neck Bridge 104.9 Verrazano-Narrows Bridge 173.4 Total $1,209.1

Notes: (a) Does not add due to rounding. (b) Amended July 2008. (c) Agency-wide refers to projects that have been, or will be, carried out at

two or more facilities.

Periodic contact with TBTA personnel is maintained by URS to monitor and review material, as it becomes available, pertaining to the physical condition of their seven bridges and two tunnels. This review material includes pertinent sections and updates of the following: Biennial Bridge Inspection Reports; Scheduled Tunnel Inspection Reports; Interim Inspection Reports; TBTA’s current Capital Program; Current Quality Assurance Plan; and TBTA’s Routine and Major Maintenance Program. The review by URS of the pertinent material consists of the following subtasks: Comparison of Conclusions and Recommendations sections of the current inspection

reports with the previous inspection reports to note significant changes in observed dete-rioration, and repairs to priority conditions from previous inspections, if any;

Review of the current Capital Program to verify that the repairs recommended by the latest inspection reports are being addressed; and

Review of TBTA’s Routine Maintenance Program with the facility engineers to verify that the maintenance-related recommendations of the current inspection reports are being addressed.

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Review of Inspection Reports TBTA’s seven bridges and two tunnel facilities undergo periodic condition inspections. Bridges are inspected biennially per federal and state mandate, with interim yearly inspections of any components that require monitoring. The purpose of the biennial inspection program is to maintain the safety and structural integrity of bridges. TBTA’s Bridge Inspection Program was assessed from 2006 to 2007 by an independent engineering firm well known in the field of structural inspection and appraisal, which noted that “the program is meeting the minimum state and federal standards” and “In several respects the program exceeds the minimum standards” and “with respect to the accuracy, clarity, and thoroughness of the reports generated, we find them to be of the highest quality”. While there is no federal or state mandate, TBTA has decided that it will adopt biennial inspections for their tunnels as well, with more comprehensive inspections every ten years. The FHA/FTA Tunnel Inspection Manual recommends an interval of 2-5 years between inspections, thus TBTA is in conformance with this guideline. The regular biennial inspection of the Queens Midtown Tunnel was awarded in 2007 and completed in 2008. The contract for the regular biennial inspection of the Brooklyn-Battery Tunnel is expected to be awarded in June of 2009. The TBTA bridges were last inspected and their physical condition appraised in 2006/2007 by various consultants, under the New York State Biennial Bridge Inspection Program. New cycles of NYSDOT Biennial Bridge Inspection are currently underway. In addition, separate under-water and substructure inspections were performed in accordance with the five-year cycles of NYSDOT to obtain riverbed contours and to assess potential scour conditions at the substructure. These ongoing inspections, performed by the inspection consultants, consisted of close visual examination, 100% hands on inspection of designated critical elements, sounding and chipping concrete, scraping and cleaning steel, and taking appropriate measurements to determine the physical conditions of the bridges and tunnels. The biennial bridge inspection is performed per the guidelines of the New York State Bridge Inspection Manual and the Federal Guidelines. Under these guidelines, each bridge component is inspected and assigned a rating. Any priority conditions are reported immediately to the TBTA for prompt attention. The ratings are reviewed by TBTA personnel to assess what components of the bridge require more comprehensive inspection and rehabilitation, which is then awarded as contracts under the Capital and Maintenance Programs. Bridge components which warrant more frequent monitoring to ensure public safety are monitored annually with a special inspection. The biennial inspections of the tunnels fills a similar function. The biennial tunnel inspections consist of an overall assessment and rating of the various tunnel components, as documented in TBTA’s ECP-318 guidelines, and provide a method of documenting ongoing monitoring of the tunnels for safety, operations and overall structural integrity. Since some tunnel components are not as readily accessible as bridge components, the comprehensive inspections will complement the biennials by providing a more in-depth assessment at regularly spaced intervals.

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The consulting engineering firms who performed the 2007 and 2008 biennial or special inspections and those who performed the 2001 and 2008 tunnel inspections for each facility were/are:

Facility Consulting Firm RFK Bridge HNTB/Hardesty & Hanover (2008)

Throgs Neck Bridge Charles H. Sells, Inc. (2007/2008) Bronx-Whitestone Bridge Hardesty and Hanover (2007/2008)

Henry Hudson Bridge HAKS (2007/2008) Queens Midtown Tunnel Jenny Engineering (2008) facility approach

bridges: HAKS (2007) Brooklyn-Battery Tunnel Parsons Brinckerhoff (2001)

Verrazano-Narrows Bridge Charles H. Sells/Lichtenstein Engineering Associates (2008)

Marine Parkway/Gil Hodges Mem. Br. HNTB (2007/2008) Cross Bay Bridge HNTB (2007/2008)

These firms are well known in the field of structural inspection and appraisal. Copies of perti-nent sections of the final inspection reports for the various facilities were requested and made available by TBTA. Bridges that are part of the odd-year inspection cycle listed above will be undergoing inspections this summer, and therefore the results of these inspections are not available at this time. The results of these inspections, also done by experts in the field, will generally be available at the end of the year. Funds programmed for TBTA’s 2005-2009 Capital Program total approximately $1.2 billion dollars. The plan breaks this amount into specific projects by facility as well as agency-wide projects. Comparisons between the Capital Program projects and total repair item lists for each facility, as prepared by inspection consultants, confirm that the Capital Program gives high pri-ority to key rehabilitation projects. Conclusions, recommendations and cost estimates for each facility can be found in the latest biennial bridge and tunnel inspection reports. By prioritizing necessary facility rehabilitation projects, TBTA addresses all high priority recommendations in the current Capital Program or under maintenance programs that have not been addressed as part of the previous Capital Program. Current major rehabilitation projects (and designs) addressing the recommendations of the latest inspection consultants’ reports include: RFK Bridge - The design phase of the contract for the deck replacement for the Bronx toll plaza and ramps is underway. Construction is anticipated for 2011/2012. The Manhattan toll plaza design will be completed in 2009 with construction anticipated for 2015. Deck widening and replacement construction of Ward’s Island and Randall’s Island viaducts began in August 2005, and completion is anticipated for June of 2009. The Ward’s Island Approach Deck Replacement will include widening by one lane in each direction to minimize the traffic impacts. High priority structural repairs to address flag conditions from the most recent biennial inspection have been completed, and lower priority repairs as well as stringer upgrades are ongoing.

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Maintenance painting of the Ward’s Island Viaduct and the superstructure of the suspended spans is complete. A contract to perform anchorage rehabilitation and dehumidification was awarded in August 2006 and should be complete by June of 2009. A construction contract for the rehabilitation of Building 104 was awarded in March of 2009. Projects completed within recent years include the main cable rewrapping and anchorage rehabilitation, and bridge deck replacement at the Queens approach. Numerous repair projects such as repair of the bridge deck joint drains, cracked deck, piers, superstructure, substructure, and suspended span deck replacement, and mechanical rehabilitation associated with the Harlem River and Manhattan lift span have also been completed. Bronx-Whitestone Bridge - A major program to paint the main cables, suspender ropes and towers will continue through 2009. Exterior concrete anchorage repair construction is scheduled to begin in August of 2009. Design of interior anchorage rehabilitation is ongoing and construction is scheduled to begin in 2010. Selected main cable openings were performed in November of 2008 as part of an ongoing program to inspect and monitor the condition of the main cables. Portions of the recommendations from studies that investigated deck replacement with a lightweight deck and improving the aerodynamic and seismic performance of the bridge are continuing to be implemented through TBTA’s capital projects. The following describes these projects and their status. The construction of the lightweight windfaring to replace the stiffening truss on the suspended span and the installation of a lightweight orthotropic deck, required to replace the roadway deck were completed. The feasibility study for complete replacement of the main cables, should that become necessary in the future, is complete, and it has been concluded that replacement is feasible if it becomes necessary. Several replacement options are being studied, including some that could increase the structure’s traffic capacity. There is no need to replace the cable in the near future, thus monitoring and maintenance of the main cables is ongoing. Construction of the replacement of the Bronx approach span began in fall of 2008. The Queens approach span replacement design began in June of 2008, with construction planned in 2011-2015. Flag repairs in the approaches will continue until the approaches are replaced. Projects completed within recent years include: replacement of the stiffening truss with lightweight windfaring, painting and replacement of the collars of the suspender ropes, construction and testing of the prototype deck replacement for the suspended span, installation of orthotropic bridge deck in the suspended span, addition of three new tollbooths, the installation of acoustic sensors for cable monitoring at the main cables, and the rehabilitation of the Bronx/Queens approach ramps. Throgs Neck Bridge - A full-scale design study of how to best implement orthotropic deck replacement has been awarded, with design anticipated for 2012. Construction of a major rehabilitation contract is ongoing that includes tower and structural steel painting, steel repairs of the suspended span superstructure, main cables and suspender ropes investigation and catwalk replacement, with completion anticipated in the fall of 2009. Full-scale lighting replacement on the structure began in 2008, phased with the deck replacements. Deck rehabilitation and replace-ment construction on the Queens approach was let in July of 2008. Design for rehabilitation of the fenders at the towers and anchorages began in April of 2006 with construction anticipated soon. Structural repairs to address flag conditions from the most recent biennial inspection have been completed at many locations, and will be completed at all remaining locations this summer. Projects completed within recent years include: the new bridge electrical system upgrade,

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including the installation of new electrical switchgear at the four electrical substations, reconstruction of the Bronx approach slab north of the tollbooths, rehabilitation of the Bronx approach, south of the tollbooths, scour backfilling at piers 20, 42, 47, 49, 52, 55 and 56 and pro-tection of piers 19, 20, and 46 to 57, structural steel rehabilitation, drainage system improvements, roadway barrier painting and replacement of the slab on grade in the toll plazas. Henry Hudson Bridge - The study for the southbound lower level toll plaza expansion, replacement of the garage and the south approach replacement is in the scoping phase, and design is anticipated to start in 2010. The garage and south approach is expected to be replaced in 2015. The lower level toll plaza expansion is expected to take place in 2020-2023. The design for the replacement of the upper level deck in the vicinity of the toll plaza is on hold pending discussions of how to implement new tolling options. Funds for this work are programmed in the 2010-2014 Capital Program. Construction of the lower level deck replacement will continue through 2010. The design for the removal of the sidewalk and the curb stringers on the upper level, and the widening of the bridge is ongoing with construction anticipated for 2010. The cross drainage of the approaches between Dyckman Street and the main span are undergoing rehabilitation/replacement design which was let in November of 2008. Construction for the replacement of pier caps in the approaches is ongoing to address flagged conditions from a previous biennial inspection. Full depth deck repairs are ongoing and will be complete before summer. Ongoing major maintenance includes limited rehabilitation of the lower level garage consisting of concrete repairs, and repaving and waterproofing the roadway above the garage which will be complete in 2009. Miscellaneous rehabilitation of the Staff Street. and Dyckman Street. bridges and the northbound parkway are scheduled. Projects com-pleted within recent years include: replacement of deck joints at Staff Street and spall repairs on abutments, and rock bolting, netting and scaling of the slopes adjacent to the approaches, comprehensive maintenance painting and steel repairs for the entire bridge structure including the main span and approaches, and major maintenance projects including spall repairs at the towers, resealing the upper level deck, and light pole rehabilitation on the parkway approaches. The stone wall guide rail was repaired, repair of steel stringer pedestal defects on the main bridge were completed, as well as the repair of bearings and installation of safety ladders and platforms to the Dyckman Street electrical rooms. Queens Midtown Tunnel - Design for the electrical rehabilitation and upgrades on the vent buildings, including upgrading of the emergency generator service at the service building and Manhattan plaza pump rooms was awarded in 2008, with construction planned in the next capital program. A construction contract to replace all the tunnel ventilation exhaust fans and to perform some minor repair to the supply fans to be completed in June of 2009. The rehabilitation of two overpasses including deck repair and beam encasement repair in the Manhattan approach area was completed. Construction of an annex to the service building and replacement of the facility engineer’s building with connection to the service building, and exterior rehabilitation of the service building is under design with construction scheduled to be let in fall/winter of 2009. Major maintenance projects include paving in portions of the tunnel and plazas, which is ongoing. Projects completed within recent years include the following: the rehabilitation of the pipe gallery connection between the service building and the Queens emergency garage, replacement of drainage pumps inside the ventilation building and at the plazas, rehabilitation of tunnel ceiling and walls (tunnel finish and leak repairs and upgrading of

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the fire standpipe system), reconfiguration of the traffic island in the Manhattan entrance plaza to provide better traffic flow, and various structural repairs in the ventilation buildings. Brooklyn-Battery Tunnel - The rehabilitation of the Brooklyn plaza pipe chase is complete. The design of structural and architectural repairs for vent structures is complete and construction is proceeding in phases from 2007 through 2014. The second phase of rehabilitation of the tunnel walls and fire suppression system is anticipated for award in the next capital program. Modernization and upgrade of the control room was completed in fall of 2008. On Governor’s Island, a new pump system to get water runoff into the sanitary system was completed. Design for repair of the exhaust fans in the ventilation structure is completed, with construction planned for 2010 through 2013. Electrical design to replace the tunnel feeders and switchgears is ongoing with construction planned for the next capital program. Projects completed within recent years include: the construction of the elevator upgrades in the ventilation structures, egress improvements and the replacement of the facade in the Governor’s Island building, construction of a second story addition with recladding, window replacement and masonry and roof repairs to the existing service building, construction of tunnel roadway and drainage system rehabilitation, tunnel leakage repairs and wall tile replacement, fire standpipe and waterline valve replacement, installation of a new ethanol fuel tank, and installation of new electrical generators. Verrazano-Narrows Bridge - Design for the widening of the Belt Parkway ramps is scheduled to begin in August of 2009. The toll plaza east and west bound ramps are currently in design and are scheduled to be re-decked in 2010-2012. A construction contract for the utility relocation necessary for re-decking of the upper level suspended span was awarded in December of 2008. Redecking is planned for 2010. Design for tower/suspended spans seismic retrofit is scheduled for 2010. Contracts to address miscellaneous steel repairs for priority conditions noted in the most recent biennial inspection reports have been awarded and are ongoing. Rehabilitation and expansion of the service building is being considered. General maintenance paving is ongoing. Rehabilitation of the traveler is complete. The rehabilitation of the electrical substation design is complete and construction should be awarded in 2011. The installation of sensors with the provision of real time under bridge clearance is under development. Projects completed within recent years include: deck replacement on the lower level and Lily Pond Avenue bridge, maintenance bridge painting of the entire suspended spans, rehabilitation, sealing and dehu-midifying of the Brooklyn and Staten Island anchorages, rehabilitation of the service building roof, construction of the salt storage facility, and maintenance painting of the Brooklyn approaches and tower painting including drainage rehabilitation of the lower level and top lower strut of the Brooklyn approaches. Marine Parkway-Gil Hodges Memorial Bridge - Repairs of secondary members and at lower priority locations are in construction and are expected to be completed in spring of 2009. Ongoing maintenance work includes replacement of the span locks, painting of the deck trusses and repairs to the steel roadway and grating, which will be complete in spring of 2009. Toll plaza drainage improvement design has been completed and construction will be let in 2009. A construction project for cleaning of marine growth on the piers will be let in April of 2009. Service building roof repairs are also planned to be let in 2009. Projects completed within recent years include: the installation of a pre-engineered service building, major maintenance painting of the superstructure, east and west side structural steel repairs, deck replacement and bridge

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widening, boiler replacement, navigation lights and signs for mariners, replacement of on-grade slab prototype with pre-cast slab in the toll plaza, priority steel repairs, refurbishing of the toll booths and main motor shaft west, bearing replacement in the towers and replacement of the elevators in the towers. Cross Bay Veterans Memorial Bridge - A contract to rehabilitate the deck and superstructure is ongoing with construction scheduled to be completed in 2010. A design to rehabilitate the substructure of the bridge, including the concrete piles and pile caps is complete and will be bid with construction scheduled for 2010. Painting and refurbishing of the exteriors of the toll booths is planned. Fender repair, and bike path rehabilitation are planned for the next capital program. Projects completed within recent years include: installation of a facility engineer’s trailer, a salt dome, rehabilitation of the air conditioning system in the service building, boiler replacement, installation of continuity plates in the median barrier, the construction of structural and electrical rehabilitation of the concrete slab on grade at Ramp ‘D’ (southbound ramp extending from the main bridge lanes), the replacement of the main high voltage feeders from the south abutment to the main service building, the rehabilitation of the drainage system at the promenade at the Rockaway approach, repair to the office trailers, refurbishing of the interior of the toll booths, and the complete concrete and drainage rehabilitation of the promenade and seawall. Other System-wide Improvements Agency-Wide - Since the September 11 attack on the World Trade Center, TBTA has engaged consultants to assess security risks of their facilities. As a result of these risk assessments, increased security improvements including various monitoring, surveillance and hardening projects have been implemented or will enter construction shortly at TBTA facilities. TBTA has also maintained a security department and incorporates mitigation measures into their operations, capital and maintenance programs. TBTA is currently in the process of conducting a prototype Weigh-In-Motion (WIM) project, which uses WIM technology to identify and restrict the passage of overweight vehicles on their facilities to dissuade illegal overweight vehicles from using their structures. The project will be put out for bids in fall of 2009. Trucks up to the bridge formula with a maximum weight of 80,000 lbs are currently allowed by permit on TBTA facilities. Heavier trucks are allowed on the Throgs Neck Bridge only, driving in the center lane with their speed restricted to 30 mph, for a type T6 configuration up to 105,000 pounds, and five axle milk trucks up to 100,000 pounds. Three and four axle concrete trucks with up to 11 cubic yards of concrete are allowed through the Queens Midtown and Brooklyn Battery tunnels. Overload trucks, above these limits, may be allowed on and through TBTA facilities with special handling and a permit. According to the TBTA, these increases in allowable load were demonstrated by computations performed by its consultants to be within safe limits for the structures. Bridges generally can accommodate overweight vehicles safely, but over time, these vehicles can contribute to increased wear on the facility, requiring increased maintenance repairs. In order to mitigate this, future rehabilitation designs on bridges, where feasible, will allow for heavier vehicles on some facilities, while more stringent enforcement is maintained.

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Current Intelligent Transportation System project initiatives include:

Further enhancements (additional sensors, redundant communication paths, and backup power supplies) to the previously completed weather recording systems at all facilities.

Installation of additional Closed Circuit Television (CCTV) equipment for effective monitoring and managing of traffic and incidents as well as upgrading of the communi-cations network with fiber.

Installation and expansion of TRANSMIT (an E-ZPass-based system) and other incident detection systems is continuing to proceed well. TRANSMIT is now operational at all facilities. Travel times (between TRANSMIT locations) is being measured, stored, and displayed on the internal website. An initiative to put this information out to the public is underway.

The Variable Message Sign (VMS) program is proceeding well. Eleven new VMS have been installed and approximately 19 more are in various stages of design and procurement. Even more are planned in the next capital program.

The program to install variable speed limit signs continues as well. Approximately 64 additional signs are at various stages of design and construction.

With respect to the E-ZPass toll collection system, a number of major improvements are now complete. All lane controllers and Plaza Host computers have been replaced. New Central Toll Registry (CTR) computers are being tested prior to final implementation. Further, TBTA is in the process of replacing a number of sensor and control devices in each toll lane. The Authority has also commissioned two studies designed to determine the long-term future of the tolling system.

Other projects completed within recent years include: the installation of the Computer Aided Drafting and Design (CADD) system, traffic, safety improvements, tank testing and replace-ments, installation of weather recording system and inspection platform, Randall’s Island garage roof replacement, E-ZPass initial installation at 119 toll booths system-wide, facility improve-ments to comply with Americans with Disabilities Act requirements, the installation of main electrical feeders to increase capacity at Randall’s Island, and the installation of the heating, ventilation and air conditioning system at the Robert Moses building. Restoration of the Robert Moses building at Randall’s Island, and the installation of CCTV to allow observation of traffic and activity at all bridges and tunnels were also completed. As part of the Capital Program planning process, TBTA personnel conduct a 20-year capital needs assessment every five years. The assessment is compiled from data from biennial inspections, and system improvements suggested by the technical departments, and include factors such as service life of various structural components and normal replacement cycles. Plans for scheduling major maintenance under the 20-year capital needs assessment are developed with input from operating personnel, which consider how to implement construction properly to maintain the optimal level of service to the traveling public both locally and system wide. URS’ review of pertinent sections of the recent facility inspection reports found them to be extensive and detailed. Report conclusions and rehabilitation recommendations, based on URS’

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limited review, appear, in the opinion of URS, to be reasonable appraisals of the required effort to maintain the operational integrity of each facility. URS performed a facility review of each TBTA facility with the facility engineer. The review included an interview with each facility’s engineer to obtain an update of the respective facility’s status relative to the following issues: Ongoing rehabilitation projects;

Ongoing maintenance projects;

Rehabilitation projects addressing the recommendations of the previous inspection reports; and

Repairs to alleviate the flagged conditions of the previous inspection reports.

The reviews proved informative. Facility projects and agency-wide projects specific to each structure were discussed.

It is important to note, however, that URS’ testing or inspection of portions of the work of other parties shall not relieve such other parties from their responsibility for performing their work in accordance with applicable requirements and the customary standard of care. URS shall not be responsible for the acts or omissions of other parties engaged by TBTA. Long-Term Outlook for TBTA Facilities The useful lives of bridges and tunnels, in general, could possibly be cut short for two main rea-sons: (a) they are geometrically and functionally unsatisfactory because they are too narrow, too steep, lacking in clearance or sufficient spatial capacity to handle the traffic; or (b) they are structurally unsafe because of deterioration or because their load-carrying capacity is inadequate to handle the loads imposed under current conditions. Deterioration may occur for a variety of reasons, including aging, but it will occur sooner if there has been inadequate or improper main-tenance. On the basis of the foregoing review and information available to us, from reports of others, it is our opinion that the TBTA bridges, tunnels and approaches are all geometrically and functionally adequate and structurally sound and generally maintained to good standards. Ongoing main-tenance requirements of the structures are assessed, prioritized and addressed in an appropriate manner by TBTA to maintain a high level of safety to the traveling public, and maintain the structures for many years to come.

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TBTA is looking forward, and planning to add lanes, and sometimes use peak counterflow prin-ciples on its structures, in addition to maintaining the structures, to ensure their future service-ability. We are of the opinion that all the TBTA facilities are and will be physically capable of accommodating traffic volumes at the levels projected for 2019 through the duration of the out-standing bonds that have been issued and future bonds to be issued based on a pledge of TBTA revenues through 2039, assuming maintenance consistent with past practice. The report contains forward-looking statements, revenue and expense projections, and statements of opinion based upon certain information. These forward-looking and opinion statements and projections include statements relating to preexisting conditions not caused or created by URS Corporation and external conditions beyond our control. We believe that our expectations are reasonable and are based on reasonable assumptions. However, such forward-looking statements, projections and opinions, by their nature involve risks and uncertainties beyond our control. We caution that a variety of factors could cause the actual revenue associated with the TBTA facilities to differ from that expressed or implied in this document. We assume no obligation with respect to the differences between this document and the actual performance of the bridges or tunnels. This document was prepared solely for the use of the TBTA that commissioned it. It may only be relied upon by third parties at their own risk. Under no circumstance will URS Corporation be liable to third parties for claims or damage arising out of this document unless expressly agreed between the third party and URS. Any unauthorized use of this document is at the user’s sole risk. Respectfully, URS CORPORATION – NEW YORK John Smolley, Jr. Vice President

Neal Cohen Project Manager




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Documents

This Table 2 on Page A-92 is replaced in its entirety to ...web.mta.info/mta/investor/pdf/2009/2009_CCDF... · The final MTA 2009 Combined Continuing Disclosure Filing dated June