How NYC will pay for the unprecedented repairs to flooded subways

New York /
Nov.November 02, 2012 11:30 AM

As the MTA rushes to drain the corrosive salt water and repair the subway system, the resulting price tag is sure to be astronomical. According to Bloomberg Businessweek, a 2011 study predicted that the levels of flooding experienced as a result of a Hurricane Sandy-like storm would cost approximately $10 billion to undo. But where is that money coming from?

One way the MTA will pay for repairs is through insurance. In 1997 the MTA determined that it would be cheaper to pay premiums to itself than to another company and started its own insurance firm, First Mutual Transportation Assurance. But just because the MTA is self-insured does not mean that is can pay the full costs of the storm-related repairs. The MTA’s insurer covers only the first $25 million of property damage. When a disaster triggers larger losses, First Mutual Transportation Assurance recoups up to $1 billion in losses from reinsurers — basically insurance for insurers, according to Businessweek.

But after $1 billion, what happens? That tab will be picked up by FEMA, which is required to reimburse municipalities for 75 percent of repair costs, but in extreme cases can pay the full cost — which is exactly what Governor Cuomo has asked the federal government to do.

“The cost to restore the complex electrically driven subway and rail transportation systems after total inundation from saltwater flooding will place a tremendous financial burden on New York State,” Governor Cuomo said on during his October 31 request to the federal government.

Yesterday, it was announced that FEMA has agreed to bear the full costs for the first week-and-a-half of the recovery. [Bloomberg]Christopher Cameron

 

Related Articles

arrow_forward_ios
Governor Kathy Hochul, casino chips, film camera
How Hochul’s film tax credit, casino plan affect real estate
How Hochul’s film tax credit, casino plan affect real estate
Governor Kathy Hochul with rendering of redesigned Penn Station (Getty, MTA)
Hochul taps team to redesign Penn Station
Hochul taps team to redesign Penn Station
Office Market, Subway, work from home
Nearly 50% of workers return to office post-Labor Day
Nearly 50% of workers return to office post-Labor Day
Hudson Companies' David Kramer with 806 9th Avenue (Hudson Companies, City of New York)
Hudson’s affordable project in Hell’s Kitchen earns approval
Hudson’s affordable project in Hell’s Kitchen earns approval
The home on the left is on the market for $6 million. The one on the right isn't a home at all. (Google)
Brooklyn Heights townhouse next to “secret” MTA air shaft hits market for $6M
Brooklyn Heights townhouse next to “secret” MTA air shaft hits market for $6M
Photo via NYCEDC
NYC floats $5B coastline extension in Lower Manhattan climate plan
NYC floats $5B coastline extension in Lower Manhattan climate plan
New York Governor Kathy Hochul touring construction in the subway (Getty)
Hochul promises Second Avenue Subway work to advance in 2022
Hochul promises Second Avenue Subway work to advance in 2022
Photo Illustration of Douglas Durst, chairman of the Durst Organization (Getty)
Durst accuses MTA of stalling East Harlem development
Durst accuses MTA of stalling East Harlem development
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...