In light of diminished government funding, the Metropolitan Transportation Authority has increasingly turned to selling bonds – and increasing its debt – to raise money for its capital spending program.

The MTA plans to sell $500 million worth of transportation revenue bonds today on the municipal credit markets to raise money for its 2004 capital budget. The sale, which has long been approved by the state as a way to finance the MTA’s capital program for 2004, is the first of several the authority expects will raise $2.8 billion this year. That will be the most debt raised in a single year since the MTA began its capital-improvement program in 1982.

The sale of bonds – a form of debt – takes money out of the agency’s operating budget, since bondholders are the first ones to receive payment from the MTA’s revenue stream.

According to a report last October by the state comptroller, the money needed to pay MTA debt will increase at an annual rate of 10.2%.In 2005,the comptroller reports, the MTA will use $1.3 billion of its revenue to pay off debt.

The MTA told the comptroller that debt servicing is the “primary contributor” to deficits in its operating budget.

Since the first capital program was introduced to upgrade the city’s aging subway system in 1982, the MTA has increased the percentage of its program paid for by issuing debt, from 25% in the second capital program, beginning in 1987, to 60% in the latest program, which ended in 2004.

“That’s the reason there is a problem with the MTA’s operating budget, which now has this huge debt burden,” an economist with the Fiscal Policy Institute, James Parrot, said. “A high percentage of the last two capital programs were borrowed. The bill has come due.”

This is why the sale of hard assets, such as air rights over the West Side rail yards for the proposed Jets stadium, has become so important, Mr. Parrot said. That sale is expected to generate as much as $300 million. It would, however, be a one-time payout.

“There is a lot of pressure from the MTA to come up with sources,” Mr. Parrot said. “The more it can get for the rail yard air rights, the less it will have to raise fares.”

A spokesman for the office of the state comptroller, Alan Hevesi, declined to comment, citing today’s bond sale.

Leading up to that sale, bond agencies gave the MTA an “A” rating, in large part because increased tolls will increase the revenue stream and because the transit system enables the city’s economic engine to churn.

Even so, the raters expressed in their assessment some concern that the MTA had become too reliant on debt.

“The risk is the increasing use of debt without additional funding ultimately constrains operations,” a senior director at Fitch Ratings, Scott Trommer, said. That was one of the companies that gave the MTA bonds an “A” rating.

This year, because of toll and fare hikes, the MTA is expected to meet its operating expenses. In 2006 and beyond, the MTA projects growing operating budget deficits.

“The key is – and we’ll see this over this year – is how the authority meets its upcoming financial challenges,” Mr. Trommer said. “It’s less a number and more of a strategy. The needs are so huge, the funding will never be able to keep up. But transit agencies have a history of living within their needs.”