Musings on footing the bill for transit service

By · Published in 2011

Despite the fact that the State’s legislative year ends in just 11 days, Senators Lee Zeldin and Jack Martins aren’t going to give up on their attempts at repealing the state’s payroll mobility tax. Doing so would rob the MTA of $1.3-$1.5 billion annually that it needs to meet its budget mandate, and while these State Senators seem to think the MTA can just make these cuts materialize without further impacting fares or service, they are also quite content to shift more of the funding burden onto the backs of New York City residents. It just doesn’t make sense.

So what have Zeldin and Martins done? With the help of a bipartisan group of Senators and Assembly representatives, they have introduced a bill that would gradually repeal the payroll tax in the suburban counties while lessening the percentage but keeping it in place for New York City residents. If you care to read the memo or the full text of the bill, you can check it out right here.

As Martins explained, the proposal basically boils down to three topline actions:

  • Small businesses and non-profits with 25 employees or less and schools would be completely exempt from the MTA payroll tax as of Jan. 1, 2012.
  • Starting on Jan. 1, 2012, the remaining MTA payroll tax for Nassau and Suffolk Counties would begin a gradual reduction, resulting in a $35.4 million in savings to Nassau County taxpayers in that first year alone.
  • This would lead to the complete elimination of this onerous tax by 2014. The resulting savings to Nassau and Suffolk county taxpayers is projected to be $220 million per year. That’s $220 million back in our local economy.

As NewsLI.com noted, “within New York City’s five boroughs, the tax would be reduced to .28% on January 1, 2013 and .21% beginning on January 1, 2014. The payroll tax would remain in effect at the .21% rate for New York City’s five boroughs.” We’ll return to this tax discrepancy in a second.

The argument these representatives are making are identical to the ones I discussed in this post back on June 1. Basically, after speaking with MTA officials and examining the agency’s budget documents, these state officials think the authority can somehow cut over 10 percent of its costs. The proposals Zeldin has put forward are laughably inadequate and would, as I noted, generate tens of millions of dollars of savings and not $1.3 billion. Without a replacement funding solution — a more equitable tax, bridge tolls, congestion pricing, higher fares, less service — the MTA simply cannot afford to lose the payroll tax.

That’s an old story, though, and I want to take a quick look at a new story. Essentially, because they campaigned on the issue, these state representatives are proposing something fairly outrageous: They want to eliminate the tax in suburban counties while New York City folk continue to prop up the transit system to a great and substantial degree. They want us to pay more than we already do.

Right now, New York City Transit riders are shouldering more of the funding burden than anyone else. New York City Transit’s farebox operating ratio is clocking in at 64 percent while Metro-North and the LIRR are seeing figures of 58.7 percent and 48.6 percent, respectively. Already, dollars spent in New York City are subsidizing transit trips. By eliminating the tax outside of the suburbs and keeping it in place in the city, our dollars will further subsidize commuter rail travel. Maybe we should ask Zeldin and Martins to guarantee that any payroll mobility tax generated in New York City be siphoned only to Transit operations. We’ll see how long commuter constituents last as service degrades and fares climb.

In laying out an argument for repealing the tax, Martins further claims that the MTA “has the luxury of approximately $1.3 billion in cash reserves from which they can draw if for some reason they are unable to balance their budget through cost savings measures alone.” This though is a claim not backed up by evidence. The MTA’s latest budget projects show a reserve fund of $100 million in the adopted 2011 budget. If the MTA has that much of a cash reserve, they would risk defaulting on debts if they started using it to pare down the operating deficit, but I see no evidence that it exists in the first place.

Eventually, suburban politicians will have to come to terms with a tradeoff. They can claim that the payroll mobility tax is a “job stifling” “iniquitous” one as Martins contends, but they have to recognize that worse or more expensive transit service will also have a calamitous effect on jobs. Just ask UBS how they feel off the beaten track of reliable transit. Without a source of replacement funds, the payroll tax, for better or worse, simply cannot be eliminated, and suburban representatives cannot eat their transit cake without footing the bill.

Categories : MTA Economics

18 Responses to “Musings on footing the bill for transit service”

  1. Jason A says:

    Well said.

    And it needs to be said again and again and again…

  2. Tsuyoshi says:

    Hold on, we can make this work!

    You say this proposal reduces revenue by $1.5 billion? Well, the combined budgets of Long Island Rail Road, Metro-North Railroad, and Long Island Bus add up to $2.8 billion. It would be interesting to see how much service we could provide to the suburbs for $1.3 billion.

  3. Al D says:

    You know this is just politics, pure and simple. These guys are so narrowminded and self absorbed. There are precious few big thinking leaders in government anymore, or maybe they just never existed, and these buffoons typify this.

    Instead of worrying about a 0.28% payroll tax, perhaps they should instead turn their attention to the tax rates that are really stifling growth, such as personal and corporate income taxes. Eliminate and/or reduce those, and watch how fast ‘growth’ occurs in NY. I don’t know about you, but my state income is truly ridiculous!

  4. John-2 says:

    If the suburban counties are exempted from the tax, the MTA’s response at the moment should be to issue hypothetical future fares for LIRR, Metro North and New Haven riders, as well as tolls on the northern and eastern approaches to the city, based on the agency recouping the cost of running trains into areas where the tax contribution has been removed. If nothing else, that would alert the lines’ and highways’ commuters that they’re not getting a something-for-nothing deal if the payroll tax is removed.

  5. jim says:

    I am beginning to think that it may be best to break the MTA back up into NYCT, MetroNorth and the LIRR. Put funding NYCT back onto the City (it used to be up until the ’70s financial crisis) and require the suburbs to fund the commuter rail lines.

    It’s become clear that Albany is unable to deal with the MTA’s problems.

    It’s also become clear that merging these services into the MTA hasn’t resulted in any integration. There is no real benefit from having an MTA.

  6. AlexB says:

    Can someone explain the funding sources for the MTA before the payroll tax? Besides fares, how has the MTA been funded. Most places have regional sales taxes that are dedicated to the local transit authority. Most places vote county by county to decide to pay those taxes and participate. I have no problem putting the payroll tax to a vote. If the counties decide not to pay the tax, they don’t have to get their trains. Problem solved.

    • Alon Levy says:

      When the MTA was first formed, the subway was cross-subsidized by tolls. As time went by, it added more revenue sources – no direct taxes deeded to transit, but various real estate transactions.

      • al says:

        There is the mta petroleum tax.

        • Justin says:

          I think when real estate transactions went down, that’s when the MTA got into fiscal trouble. If the economy continues to recover this should help the MTA tremendously. If not, the MTA is screwed, lol.

          But if the suburban counties contribute less to the MTA, then the MTA should simply cancel Li Bus and whatever buses they have in Westchester, and operate the LIRR and MetroNorth at the level of funding that they receive.

    • Christopher says:

      That’s basically the way SF’s BART works. There’s a reason that there is no BART in Marin and San Mateo counties — the people didn’t agree to the sales tax hike.

      Chicago has something similar with the RTA. If you’re in the RTA district there’s a segment of your sales tax that pays for the trains. Not in the district? No sales tax.

  7. Roy says:

    Speaking as someone who’s just moved to the NYC area from London, the commuter rail here is an absolute bargain. My commute now from Westchester to Grand Central is pretty equivalent to the commute I was doing from Kent to London in terms of distance and journey time, but I am currently paying around half of the cheapest fare I could have paid in the UK. In fact I pay less than half of what I was actually paying as I took the premium “high-speed” service as it brought me a lot closer to my then workplace than the ordinary trains (even then it only saved me about 10 minutes round-trip).

    So the current Metro-North fares only bring in about 60% of the needed revenue. Well, even if they were increased to cover 100%, I’d still be paying lower fares here than in the UK, and the trains are a lot more reliable, on-time and roomier here.

    It seems to me that the suburban people here really don’t appreciate what a good deal they’re getting.

    • Alon Levy says:

      London has the most expensive transit system on the planet. If you’d commuted the same distance in Paris or Berlin or Munich, you’d be paying half or two thirds of what you pay on Metro-North, and the farebox recovery would be better or not much worse.

  8. John Paul N. says:

    Build a new MTA-controlled tolled bridge/tunnel between Nassau and Westchester. Although the studies say it won’t reduce congestion, it should deliver a ton of revenue (can this be confirmed?) and it would provide another mass evacuation point for Long Island, something that Rep. Peter King would support if not for any other reason (assuming federal funding is sought), the likely reason being the wealthy NIMBYs on LI’s Gold Coast.


  1. […] look at potential problems for public transportation financing from a bill to repeal the state’s payroll mobility tax. [2nd Avenue […]

  2. […] discussing the suburban payroll tax revolt last night, I briefly alluded to USB’s looming decision to move back to Manhattan. I went to […]

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