Jan
10

A State Senate with its sights set on the payroll tax

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For all of its criticism, the state’s Payroll Mobility Tax delivers $1.3 billion a year to the MTA, and without that tax, the authority would have to either cut a tremendous amount of services or jack up the fares well beyond any acceptable level. We’ve long heard how New York Republicans in the State Senate would like to repeal the payroll tax, and now, as Streetblog’s Noah Kazis reported today, a splinter group of State Democrats has joined the repeal efforts.

The Independent Democratic Caucus, a splinter group consisting of Diane Savino, David Valesky, David Carlucci and Jeffrey Klein have already called the payroll tax a Democratic failure, and now they will join the Republicans in seeking a repeal. From their full agenda comes this gem:

MTA Tax Reform: Gross mismanagement is blamed for 1/3 of the MTA’s current fiscal debt. Our goal is to conduct a comprehensive forensic audit of the MTA to find areas of waste and corruption and determine the need and the efficacy of the current MTA tax.

As Kazis says, there’s a lot to be concerned about in this two-sentence statement. He writes on Streetsblog, “It’s the phrase “determine the need” that’s most threatening, with its suggestion that there may be no need at all. Remember, the transit agency’s capital program — which covers expansions and badly-needed repairs — is a staggering $10 billion short and the agency just went through a painful round of service cuts, fare hikes and layoffs to make its operations budget add up. Even a deal that exempts the suburbs from the payroll tax but not the city would cause some combination of more service cuts, higher fares, and deferred maintenance.”

I have two takes on this development. First, enough with the threats of a forensic audit. For two years, since the payroll mobility tax first found its way to the legislative docket, representatives have been threatening forensic audits, but none have been forthcoming. At some point, these politicians must take responsibility for the fact that they have direct oversight over the MTA. If they want a forensic audit, then they should do one. My belief is that they’ll find out that far, far less than one-third of the MTA’s current fiscal debt is a result of “gross mismanagement” and will lose their ability to scapegoat the MTA for their own failures of government. Bring on the audit.

That said, the payroll tax should go. It’s a crazy way to subsidize transit, especially in a bad economy, and repeal seems all but inevitable. That said, as I mentioned earlier today, if the payroll tax goes, it must be replaced with something else. The MTA can’t afford to see a $1.3 billion revenue stream dry up, and even congestion pricing — the ideal trade-off for the end of the payroll tax — would generate only between $400-$500 million a year for the authority.

Again, we’re seeing State Senators playing a game of Russian Roulette with the MTA’s finances, and for the city’s 5 million subway riders, this story almost can’t have a happy ending.



Categories : MTA Economics

13 Responses to “A State Senate with its sights set on the payroll tax”

  1. SEAN says:

    I must ask… is the goal to destroy public transit in the most transit dependent city in this country?

  2. Aaron says:

    Gross mismanagement is blamed for 1/3 of the MTA’s current fiscal debt.

    Also, 43% of statistics are made up on the spot.

    More seriously, is there any evidence for that at all? Ignoring the fact that “current fiscal debt” is not a particularly precise use of language. Debt as in bonds? Debt as in the deficit between yearly revenue and expenses?

    • To me, and to other people who care about the words they use, the term for the annual revenue/expenses gap is “deficit,” and the word “debt” refers to bonds and other long-term borrowing.

      So take their statement at face value for a minute – I know, stop giggling – if 1/3 of the MTA debt is to be blamed on mismanagement, then I suppose the other 2/3 is the fault of State Senators failing to properly fund what are, by their exclusion from the “mismanagement” slur, the authority’s legitimate expenses.

      Golf clap.

      Is this the same Diane Savino who basically came out and said she didn’t read the bill last December that appropriated previously dedicated transit funds to the general treasury? Awesome.

  3. al says:

    There are several causes of MTA’s current budget woes in capital investments and operations:

    1) Part of MTA’s shortfall is due to borrowing. One big item was subway fleet replacement. The State and City have been giving the the MTA the short stick on a host of funding issues for over a decade. They include Student Pass MetroCards and capital investments. When Pataki cut spending in the 90′s to balance the budget, MTA’s capital budget took a hit. They covered the gap by borrowing, and never got the state funding fully restored. Those years of borrowing for capital investment is now coming back in the form of debt servicing in the operations budget.

    They also have higher than expected debt servicing levels from the bonds taken out earlier this decade. Guess who helped the MTA with the debt issuance… some of the same people and firms that put together junk CDOs, aka Collateralized Debt Obligations.

    2) Another item that gets overlooked was the unsustainable revenue level during the bubble. The real estate bubble propped up the MTA 2004-2007 with tax receipts from real estate transactions. As long as the sector stays sluggish, the funding from this source is going to be problematic.

    http://www.newsday.com/long-is.....t-1.882042

    3) Sales tax also boomed during the bubble and is markedly lower from highs. These tax receipts go towards operations and capital budgets. As long as the sluggish economy and real estate result in lower receipts, the MTA will face budget issues.

    4) High cost deals with unions inked during flush times coming back to haunt them (operations).

    5) Contracts inked for mega-projects during the past decade that reflected high labor, materials, equipment prices during the bubble. Many contracts signed since mid 2009 (public and private projects) are significantly lower (capital).

    6) Capital projects at the MTA may suffer from unqualified politically connected leadership and management. The MTA also seems to have serious project planning, execution, monitoring and control issues. Sidebar: Part of the ARC project cost overruns, and demise, was due to Executives and Senior Management on the project who had connections, but were under-qualified with respect to project management. They had their eye on getting as much done, rushing to get as much in the ground, as a fait accompli, and deprioritizing project budget and overall schedule. The resulting cost overruns gave Gov Christie a clear and easy excuse to cancel it.

  4. Henry says:

    “MTA Tax Reform: Gross mismanagement is blamed for 1/3 of the MTA’s current fiscal debt.”

    Note the use of the word “blamed”. The truth is, until someone actually decides to look into it instead of using the MTA as a political punching bag, someone will always “blame” the MTA for wasting money. Also, notice that the lawmakers do not mention the consistent cuts to MTA funding over the years.

    I’d like to see the payroll tax replaced with something else, too (if it at least gets the politicians to shut up about it) but I don’t think there’s another source of funding out there. No one likes congestion pricing, the eoconomy is in bad shape, and the state and city are strapped for cash.
    Just curious, how unpopular would it be if tolls were put on every highway in the city?

    • No one likes congestion pricing…

      I’d just like to point out that a majority — 60 percent — of those polled in 2008 said they’d support congestion pricing as long as the revenues were dedicated to transit. I’m sure even more would prefer congestion pricing over the payroll tax.

      • Justin Samuels says:

        Congestion pricing is a defacto tax, just like raising the fares for public transportation passengers.

        At this point, I don’t think the public wants to deal with either scenario. Wages are declining across the board in private sector jobs. The MTA is going to have to do what it must to lower wage costs, and this may include hiring new employees with lower wages.

        • Henry says:

          I should’ve mentioned that when I said “no one”, I meant the politicians that consistently refuse to get more funding to the MTA.
          I’m positive that the MTA could save lots of money by using OPTO on the L line – the idea that you need two people for the sole purpose of handling evacuations is ridiculous. If the rest of the world can deal with one motorman a train, then so can the MTA.

  5. Bolwerk says:

    My understanding is that the rejected CP proposal would generate “$400-$500 million.” An expanded one could generate far more, and might make a bit more sense.

  6. Al D says:

    Hey, forensic audit #529. Just what we need, another way to waste more taxpayer $. Our state is soooo effciciently run and managed.

    What about the other countless public authorities that are surely a big waste of $, and yet fly below the radar?

  7. J B says:

    I wouldn’t be surprised if a “forensic audit” never happens because of the patronage it would reveal. I bet a lot of these MTA-bashing State Senate jokers have put in more than their fair share of job requests.

Trackbacks/Pingbacks

  1. [...] and more members of the new Republican majority in the State Senator and a few Democrats too have taken aim at the state’s controversial commuter mobility tax, I’ve speculated about a tit-for-tat trade. In return for a reduced tax burden for suburban [...]

  2. [...] to mention is her own role in the cuts. She is leading a splinter group of Senate Democrats who support repealing the payroll tax, and she has consistently voted against congestion pricing measures. She did vote for the measure [...]

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