Musings on footing the bill for transit service

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.