Expecting a budget gap of $126 million in the fiscal year that begins July 1, MBTA officials are planning to test the market for transportation merchandise, from T-shirts to coffee mugs, General Manager Rich Davey told reporters Monday morning.

“I’ve turned over every stone and we’re turning them over again,” Davey said at South Station.
Davey called fare hikes and major service cuts for commuters “off the table” and said he’s instead looking to squeeze savings and revenue from other budget nooks and crannies. The MBTA, which has raised parking rates in recent years, is cracking down on parking scofflaws, eyeing ways to boost ad revenue and considering a plan to securitize parking facilities and generate upfront revenue, he said.

Davey also said the T is looking to save $22 million by forcing employees into the state’s Group Insurance Commission for health care coverage, a plan he noted is the subject of litigation. A proposal to run Red Line trains with only one MBTA official on board – a move to cut personnel costs that has been implemented on the Orange Line – is also on the table.

The MBTA’s current budget is $1.62 billion, including $404 million in spending to pay off debt. The authority’s debt burden is scheduled to “grow tremendously” over the next four years, Davey said.

Davey said that so far, the agency is running 1.3 percent under budget. However, he warned that “weather-related costs” and a sharp increase in demand for the RIDE – a service for physically and developmentally impaired riders – could determine whether the system remains under budget.
“The RIDE continues to trend at a pace that’s frankly extraordinary,” he said.

Davey said that even as sales tax collections return from their low points during the recession, the T is unlikely to see a revenue windfall because revenues will still fall below statutory minimum levels.

His comments came as the T unveiled a pair of new “diesel-electric” locomotives – the first new commuter rail engines operated by the T in 23 years. Eighty percent of the $7 million cost of the cars will be reimbursed by the federal government, according to Lt. Gov. Tim Murray, who joined Davey to ride from Worcester to Boston in one of the cars Monday morning.

“This is a great day for our system,” Murray told reporters gathered at South Station. His train arrived about 20 minutes late, which he attributed to a delay caused by another train.

The new cars were purchased from the Utah Transit Authority, and Davey said the agency is seeking to lease additional cars. Each car burns about 36,500 fewer gallons of fuel per year than the MBTA’s current fleet, cutting about $78,000 a year in fuel costs. The T also intends to introduce 20 new diesel-electric locomotives by 2013, replacing a quarter of the existing 80-locomotive fleet at a cost of $114 million, a cost that will also be 80 percent covered by federal funds. The commuter rail carries about 148,000 passengers every weekday.

Davey said the new cars would increase reliability of the commuter rail, which he described as the “number one problem” for passengers. The last time new locomotives were purchased was in 1988.
Pointing to the aging fleet, Davey said, “Those chickens are coming home to roost.”

Transportation Secretary Jeff Mullan rated the system’s performance B-minus during the “challenging” winter that has frozen equipment, buried tracks and switches in snow and led to one of the commuter rail’s worst months of delays in years.

“Commuter rail has been a big problem,” he said, blaming some of the problem on a “lack of investment” in equipment and physical structures in previous years. “We need to do better.”

He said the state’s budget for snow and ice removal, which began the fiscal year at $59 million, had been depleted by last week’s storm – and then some. The account is running $22 million over budget, he said. Gov. Deval Patrick has requested $25 million from the Legislature for snow and ice costs, but Mullan said that more will likely be necessary during the snow-heavy month of February. “We’ll need more,” he said. “We won’t compromise public safety.”

Mullan said Massport has offered an acre of land to hold snow removed by the city. He added that potholes that have cracked open across the state may require a concerted repair effort once the snow clears. He said he’s eyeing “a coordinated approach to fixing pavement surfaces statewide.”