As the Metropolitan Transportation Authority, the state-controlled agency responsible for operating the New York City subway and its buses, prepares to shutter a heavily used subway line that connects Northern Brooklyn with Lower Manhattan so that it can undergo necessary maintenance to repair some of the lingering damage from Hurricane Sandy, the recently appointed head of the agency has warned that NYC and New York State are facing a stark choice: Either invest $40 billion in the subway for badly needed upgrades and improvements, or allow one of the world's most heavily used mass transit systems to sink into a "death spiral," according to Bloomberg.

NYC Transit Authority President Andy Byford - who was credited with turning around Toronto's mass transit system before heading to New York - has been telling anybody who will listen (subway riders, taxpayers, business executives and the city council, the name a few) that these upgrades are needed asap. And if Albany won't allocate the money, the City must do something.

"You don’t get the billions you need by just going to Albany with a begging bowl," Byford, recruited a year ago to run New York City Transit, told executives at a Crain’s Magazine breakfast this month.

As anybody who relies on the subway, or regularly reads the New York Times Metro Section, is probably aware, the subway has been struggling with acute signs of distress - typified by rapidly worsening service - that have intensified in the aftermath of Hurricane Sandy. So, why is Byford issuing this warning now?

Well, after months of being stonewalled by the city, Byford is hoping to capitalize on a new power dynamic in Albany after Democrats won control of the State Assembly, creating a state of unified rule in Albany. The subway could be struggling with a nearly $1 billion operating deficit by 2022, which is clearly unsustainable.

Already, credit ratings agencies like Moody's have downgraded their outlook on the MTA's bonds.

Voters in November flipped control of the state Senate, putting Democrats in charge of both houses of the Legislature and increasing the chances of approving transit funding. Many support Democratic Governor Andrew Cuomo’s plan to charge motorists "congestion pricing" fees to enter Manhattan’s business core. Still, the MTA - which controls the subways and buses along with commuter trains and some bridges and tunnels - faces a $991 million deficit looming in 2022 and political arguments over who will pay to close it and how. On Dec. 13, Moody’s Investors Service revised its credit-rating outlook on the MTA to negative from stable, noting how deteriorating service has produced lower-than-expected revenue as subway and bus ridership declined. That situation could worsen if fares go up, as the MTA board prepares to vote on a 4 percent increase in January.

Gov. Cuomo is planning to institute "congestion pricing" for cars entering Manhattan's busiest areas - a plan he hopes will reduce traffic and bolster revenues for the subway. But while any additional money will help, the funds raised by this new tax are expected to merely offset debt service and some operating costs. Meanwhile, investors are becoming increasingly wary.

"This is going to be a real test year," said Howard Cure, director of municipal bond research for Evercore Wealth Management, who said he’s become more selective in considering MTA bonds. "Will they get enough revenue? Will they lower their really high construction costs? Will they be able to stop the loss of riders, reducing breakdowns and delays?"

But with no obvious source to cover the funding shortfall - and the MTA board preparing to vote on a 4% rate hike in January even as the quality of service clearly declines, something that will almost certainly outrage riders - Byford is quickly realizing that there may be no way out of this crisis.

"I don’t know of any business model where people can charge more money for worse service," Shameek Robinson of Harlem told Byford during a Dec. 10 gathering in Manhattan. Budget analysts say without the fare increase, the agency would face a $1.6 billion operating deficit by 2022. Debt service is already projected to increase 26 percent to $3.3 billion by 2022, consuming 37 percent of fare and toll revenue, state Comptroller Thomas DiNapoli reported in October. The fare and toll hikes, and most of Cuomo’s "congestion pricing" plan, would merely help to pay annual expenses. While Mayor Bill de Blasio has dropped his opposition to the concept, he still has questions about its details, and some suburban lawmakers have objected to their constituents being asked to pay more.

And as NYC becomes less hospitable to commuters, expect the crumbling subway to add one more source of downward pressure on already shaky rents and real-estate valuations.