Home MTA Economics More money for the MTA, but at the expense of NYC businesses

More money for the MTA, but at the expense of NYC businesses

by Benjamin Kabak

David Paterson taketh away, and then David Paterson giveth. Just over two weeks ago, when David Paterson unveiled his executive budget for the 2010-2011 fiscal year, it contained a shock for the MTA. Payroll tax receipts were project to be $104 million less than originally anticipated, and the MTA’s overall budget hole has grown to nearly $800 million since then.

Today, Paterson announced his 21-day amendments to the Executive Budget, and the MTA should net an additional $230 million in 2010. “The new proposal I am putting forward will provide relief to straphangers, as the MTA makes the difficult decisions necessary to balance its budget during an historic fiscal crisis that is significantly impacting all levels of government,” Governor Paterson said in a statement. “In addition, it also makes key improvements to the current tax structure, promoting regional equity and delivering relief to small businesses.”

Before we rejoice, a few caveats: First, this budget adjustment simply corrects for Albany’s originally overly optimistic revenue projections. In May 2009, the payroll tax was projected to bring in $1.54 billion for the MTA, and prior to this amended budget, the MTA was going to receive just $1.3 billion this year. Paterson may be patting himself on the back with

Basically, New York City businesses will see an increase of nearly 60 percent in the payroll tax to support the MTA while businesses outside of the city who clearly benefit from the presence of mass transit will have to pay less. Paterson claims this to be an “equitable” solution, but it seems to be a prime example of Paterson’s political pandering at a time when his poll numbers are down.

In response, the MTA had this to say:

“The MTA is grateful to Governor Paterson for his continued focus on funding the MTA and the critical service we provide to 8.5 million New Yorkers every day. The MTA’s revenues have taken two significant hits since December: a nearly $400 million deficit was closed in December with administrative reductions and service cuts; and just last week we learned of a new approximately $400 million shortfall due primarily to reduced State projections of the payroll mobility tax. Based on the estimates provided by the Governor’s office, the changes to the payroll mobility tax proposed today would provide $230 million to recover much of the latest $400 million in deterioration and could lessen the need for additional cuts on top of those passed in December. It would not eliminate the need for the service cuts and administrative reductions included in the MTA Budget passed in December.

“The proposal also changes the structure of the payroll mobility tax, which is a decision to be made by the Governor and the Legislature. Even if this restructuring is enacted, the MTA will remain focused on overhauling how it does business to reduce costs and operate within the funding provided.”

For now, at least, we can breath a sigh of relief as the agency should see some of its deficit reduced. Unfortunately, that increased state contribution will come at the expense of those who live and work in New York City.

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17 comments

rhywun February 8, 2010 - 7:29 pm

Ridiculous. Not even one year into this stupid payroll tax and it’s being manipulated for political purposes. Who saw that coming…?

Maybe it’s time to start charging everyone the actual cost of operating their ride… or some invariant percentage thereof.

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Alon Levy February 8, 2010 - 9:19 pm

I don’t think it’s stupid to make the city pay more than the exurbs. The city uses the MTA more. If the subway were shut down then the entire region would suffer, but the suffering would be concentrated in the city; some exurbs might actually gain from the massive flight of businesses and residences.

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AK February 8, 2010 - 10:29 pm

But we don’t do individualized tax assessments like that for anything in the US, with the narrow exceptions of water/sewage districts that only serve certain areas. Moreover, NYC already pays an additional share to the MTA via a special City income tax. I am fine with the latter, as the City’s expenses are truly extraordinary. But let’s not let the boys in Albany off the hook on this one. This is politics, through and through, and makes no sense when compared to taxation for any other service.

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E. Aron February 8, 2010 - 11:17 pm

over/under for how long it takes for them to discover the “estimated” revenue is far short of what they had “estimated?”

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Matt R February 8, 2010 - 11:27 pm

The payroll tax is unfair for the suburbs given that probably 90% or more of surburban residents in the MTA district have absolutely nothing to do MTA services on a daily basis. Trips and employment in the CBD as a % of regional population have been on a decline since the 1970s and that hasn’t stopped. Residents in the suburbs already pay gross recept taxes on energy, sales taxes, real estate transfer taxes, taxes on telephone service and, I believe a tax on gasoline for the support of the MTA. In addition county governments already pay direct assessments for the operation of MTA station facilities within their boundaries and they then shoulder the costs of their local transit operations (even MTA Long Island Bus). Combine that with the fact that all new transit and transportation investments in the region are concentrated in the city CBD while suburban New York needs are pretty much completely ignored makes that payroll tax on surburban businesses look rediculus.

The real question regarding MTA funding is to find out where the funding that the MTA used to receive go to? Up until the early 1990s, NYC used to contribute several hundred million for NYCT capital expenses as well as fund the operations of Staten Island Railway and provide reimbursement for school fares. In addition the state used to provide direct funding for the capital program in addition to a lesser amount that was funded by fare box backed bonds. However in the 1990s the state stopped its capital funding and placed the MTA on a track to raise all its capital funds from fare box and tax revenues backed bonds with the state kicking in funds to make minimum debt payments from time to time (like the minimum payments on credit card). Analysts at the time said the move would be financially disasterous as debt service costs would skyrocket – and they have. In the mid 1990s debt service costs were 40-50M per year but now these costs have risen to several hundred million per year and are projected to keep on rising. In the mean time the average transit fare paid per ride is almost lower than it was 10 years ago and even lower if you add in free bus transfers.

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Benjamin Kabak February 8, 2010 - 11:31 pm

The payroll tax is unfair for the suburbs given that probably 90% or more of surburban residents in the MTA district have absolutely nothing to do MTA services on a daily basis.

I’d like to offer up a different take on this. As it stands now, the city is on the hook for 70 percent of the payroll tax, and under Paterson’s new proposal — a proposal that still has to be approved by the state legislature — the city would on the hook for 88 percent of the tax revenue. That tracks nicely with the ridership numbers you believe exist, but I’m not sure that’s right either.

However, the people who live in the suburbs enjoy a good number of indirect benefits from the MTA. They enjoy higher property values and a better quality of life because of the presence of a regional public transit network. They enjoy less congestion and better air quality than they would have. It’s not unreasonable to ask them to fund 30 percent of the payroll tax because of it.

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Marc Shepherd February 9, 2010 - 8:51 am

We could argue about precisely what the allocation should be, but the original tax, which imposed the same burden on every county in the MTA service area, was clearly not equitable.

There is no denying that whatever benefits the suburbs enjoy from the MTA, New York City enjoys more of them. This new proposal is exactly what Paterson says it is: more equitable. It may not be perfect, but it’s better than what we have now.

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AK February 9, 2010 - 9:39 am

I disagree that the original tax was not equitable re: my comment above. If anything, I would prefer a payroll tax that was applied state-wide, the receipts of which are parceled out amongst the various transit organizations (Niagara Frontier Transit, MTA, etc.) Even with a “flat” payroll tax, NYC pays significantly more of the MTA’s budget, on a per capita basis, than the rest of the state due to the NYC income tax, actual user fees, and the taxi surcharge. We would laugh at this, “I’m not benefiting so I don’t what to pay” argument if applied to anything else in the state budget. How ’bout the budget for State Parks/Forests that NYC residents, on a per capita basis, enjoy far less than upstate residents? I don’t want to pay an equal share in taxes for upkeep, because I don’t use them. That’s never the way taxation operates (with the limited exceptions noted above for water, sewage (i.e. the “special purpose” districts first described in Salyer Land Co. v. Tulare Water Dist., 410 US 719 (1973)).

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Marc Shepherd February 9, 2010 - 12:38 pm

NYC pays significantly more of the MTA’s budget, and it should. I realize that you would just love to ride more cheaply at upstaters’ expense, but those of us who live in New York should belly up to the bar, and pay fairly for what we get.

You claim that that’s “never the way taxation operates,” but the MTA tax was not imposed state-wide. It applied only in the counties where the MTA provides service, so obviously the legislature thought it would be unfair to tax people in (say) Buffalo who couldn’t ride an MTA service even if they wanted to.

The latest change that Gov. Paterson has announced simply takes this concept a bit farther in the direction of fairness. This is the way the tax should have been written in the first place.

AK February 9, 2010 - 12:49 pm

Obviously we’re going to disagree, but I want to know WHY you think New Yorkers, including ones who do not use the system, should pay more. Referencing my earlier remark, should City folk pay less for the upkeep of State Parks/Forests, the vast majority of which are upstate? How about decreasing our share of taxes paid toward road construction and repair because the majority of Manhattanites don’t own cars? Listen, I understand that I am a member of our STATE, and as such, my tax dollars will sometimes fund things I will never use/things I disagree with/etc. Why the MTA is different is beyond me…

Aaron February 9, 2010 - 1:41 pm

Alright, I’d like to see Upstate pay the full price for their road projects, without burdening car-free City residents. After all, why should City residents pay for Western New York road projects? At least the payroll tax was aimed at NYC’s surrounding communities, who plainly benefit from the MTA.

I will never understand why rural county roads remain unchallenged as an alleged “public good” but mass transportation in the largest cities in the country is maligned as a form of welfare.

Alon Levy February 9, 2010 - 11:20 am

The payroll tax is unfair for the suburbs given that probably 90% or more of surburban residents in the MTA district have absolutely nothing to do MTA services on a daily basis.

Those 90% are living off the money brought in by the other 10% working in Manhattan, so they do benefit from the MTA. They just benefit somewhat less than city residents.

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Streetsblog New York City » Today’s Headlines February 9, 2010 - 9:14 am

[…] Wants to Shift Transit Tax Burden From 'Burbs at City's Expense (SAS, WNYC, AMNY, […]

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Bloomberg blasts Paterson’s payroll tax plan :: Second Ave. Sagas | A New York City Subway Blog February 9, 2010 - 12:25 pm

[…] to help cover the MTA’s deficit while assuaging suburban concerns over the payroll tax by shifting more of the tax burden to city-based businesses. Those doing business in the five boroughs would see the tax increase by 60 percent while those […]

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DMIJohn February 9, 2010 - 2:01 pm

I propose congestion pricing as an equitable revenue source.

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Niccolo Machiavelli February 9, 2010 - 7:13 pm

I propose to fund the MTA by eliminating the use of the words fairness, equitable, parity or any equivalents. These are strictly mathematical allegations of equity.

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Pols decry payroll tax changes as advocates push for money :: Second Ave. Sagas | A New York City Subway Blog February 10, 2010 - 3:17 pm

[…] now. As we know, the same cannot be said of the MTA’s finances, and as Gov. Paterson’s new payroll tax plan percolates through the political bodies of the area, New York City reps are up in arms. […]

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