CBC: Absent the payroll tax, a steep fare hikeBy
Later this morning, at a breakfast hosted by Crain’s New York and in front of a crowd of influential New Yorkers, MTA Chairman and CEO Joseph Lhota will take the microphone to defend and promote the MTA. He is likely to talk about the power of transit and its role in shaping New York, and inevitably, as his talk with mirror recent headlines, he will have to defend the payroll mobility tax. Under assault by a state judge with an agenda, the payroll mobility tax was no one’s good idea other than David Paterson, but the MTA can ill afford to lose over $1.5 billion in annual revenue.
The payroll tax has always been an odd creature. The state approved it despite congestion pricing or bridge tolling schemes that may city-based transit advocates thought were more progressive. It is a seemingly small tax — just 34 cents for every $100 in payroll — that has generated opposition from the end of Long Island to the norther reaches of Metro-North. Politicians want to see its demise, but no one has yet offered up how the MTA can replace a gaping hole of approximately 17 percent of its annual operating budget. We are at an impasse.
Earlier this week, Charles Brecher and Rahul Jain from the Citizens Budget Commission ran the numbers and determined what would happen if the MTA had to face a future without a payroll tax, in part or in whole. As many have suggested in the comments to my post, it’s not unreasonable to assume that the MTA would look to jack up fares for the suburban riders whose neighbors are so opposed to the tax. The outcome, the two write, would be quite extreme. They note that of the $1.4 billion in revenue generated by the payroll tax, 70 percent came from city-based employers. So how do we replace the remaining $428 million if the suburban portion of the payroll tax were to be eliminated? Take a read:
Since the forgone money came from the suburbs, the MTA could reasonably look to those counties to make up the gap by either paying more in another way or taking cuts in services — to the Long Island Rail Road (LIRR) and Metro-North Railroad (MNR).
Both railroads are heavily subsidized by regional and statewide taxes in addition to the PMT. In 2012 the LIRR will cost more than $1.6 billion to operate and MNR will have expenses surpassing $1.3 billion. Passenger fares are expected to cover only about 36 percent of the LIRR budget and less than 46 percent of the MNR budget. Relatively small amounts come from Connecticut for MNR and from advertising and other “earned” revenue sources. The bulk of both railroads’ costs are covered by taxes like the PMT appropriated through the State budget.
What if the LIRR and MNR had to deal with the $459 million in lost PMT revenue? This would mean expenditure cuts of about 16 percent for the LIRR and 15 percent for the MNR. In rough terms, that is the equivalent of ending service one day per week. If offset by higher fares, the lost sums would require a 46 percent increase on the LIRR and a 32 percent increase on the MNR. The price of a ticket to Ronkonkoma, the largest station by ridership on Long Island, would increase from $334 a month to $488; a 32 percent change in the price of a monthly ticket from White Plains to Grand Central Terminal on MNR would increase the price from $229 to $302. These changes do not include already planned fare hikes of 7.5 percent for all MTA riders for 2013, bringing the monthly fare to more than $513 for Ronkonkoma and $319 for White Plains. Neither the service cuts nor the fare hikes would make riders happy.
A few days ago, Greg David at Crain’s wrote about how the payroll tax has “undermined support” for transit amongst certain suburban leaders. He advocated for a combination of a restored commuter tax and a tolling proposal. In essence, the dollars should be the same as the payroll tax, and those paying are the same as well. It’s basically just reallocated the money to similar constituents and calling it something else. Maybe that would work or maybe not.
Perhaps the solution is to stiff suburban riders — at least temporarily. Suburban representatives would cry bloody murder over such a fare hike, but they can’t have their cake and eat it too. Transit service provides a benefit to those towns and residents who don’t live in the city but want easy access, and nothing is free. As Brecher and Jain wrote, “People should be careful about what they wish for; the theory of an unconstitutional PMT could be far less pleasant in reality. There is no such thing as a free lunch or a free train ride; the LIRR and the MNR must be paid for in one way or another, and the PMT may be less painful than many other options.”
Until Albany finds a better, more equitable solution, the payroll mobility tax should stand, and even though neither he nor his predecessor Jay Walder proposed the idea, Lhota will fight for it until the end. The MTA budget has little other choice right now.