Home Asides Amidst a payroll tax appeal, MTA gets a credit boost

Amidst a payroll tax appeal, MTA gets a credit boost

by Benjamin Kabak

Even as Nassau County and various other suburban counties appeal the ruling upholding the payroll tax as constitutional, the MTA has enjoyed a credit boost from one ratings agency. According to a report issued this week by Moody’s, the payroll tax ruling represented “a credit positive” for the MTA, but as an appeal is ongoing, it’s a fragile step in the right direction for the debt-laden agency.

As Moody’s noted, the payroll tax represents nearly a tenth of the MTA’s annual budget, and overturning the tax would be very costly. “Loss of this revenue stream would add significant financial strain on the MTA and eliminate a sizable resource available for payment of debt service on the transportation revenues bonds,” the report explained. The MTA currenty has $33.2 billion in outstanding debt on the books, nearly $19 million of which are in those bonds.

The stark reality of the MTA’s budget situation has seemingly escaped those protesting against the payroll tax. The same group of politicians and business interests strenuously objected to a congestion pricing plan and were left with the payroll tax as the best option among a sea of bad ones. Overturning it would be incredibly costly not just to the MTA but to the suburban areas that benefit from having a direct transit connection to New York City. Yet the appeal, likely to be unsuccessful for Nassau County, rolls on.

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Larry Littlefield July 10, 2013 - 1:53 pm

“Loss of this revenue stream would add significant financial strain on the MTA and eliminate a sizable resource available for payment of debt service on the transportation revenues bonds,” the report explained. The MTA currenty has $33.2 billion in outstanding debt on the books, nearly $19 million of which are in those bonds.”

Just think about that for a moment. We’re paying the payroll tax, and will be into the future. But those revenues have already been spent in the past.

So where does the money for the next capital plan, and the one after, come from?

al July 10, 2013 - 3:59 pm

So where does the money for the next capital plan, and the one after, come from?

A: We’ll do just enough to keep what we have running. The MTA will have a hard time paying for existing debt and getting good bond rates on new debt at he same time. Meredith Whitney’s claims of mass municipal and public authority bankruptcy may had been a bit overblown, but there is much validity to her claims. MTA may be one of those Authorities that will have a hard time keeping afloat fiscally.

Benjamin Kabak July 10, 2013 - 4:00 pm

All the suburban politicians so outraged by the payroll tax should understand why the MTA needs the payroll tax. Pay for the capital investment at the time, bond out future revenue-producing measures and there’s no need to go $30 billion into debt.

SEAN July 10, 2013 - 4:36 pm

Interesting video regardless of ones political viewpoint.

SEAN July 10, 2013 - 4:37 pm
Larry Littlefield July 10, 2013 - 7:16 pm

In this video the former MTA head says NYC does not bond for operating costs.

He guess he didn’t notice the “reimbursible” expenditures, or the “capital projects” consisting of painting.


al July 11, 2013 - 11:44 am

There is also City, State, and Federal funds that don’t come anymore. Westway funds helped restore the MTA (especially NYCTA) during the 80’s. However, once the early 90’s rolled around, Federal and State funds for capital projects and maintenance started to decay. Remember Pataki’s first term? He took an ax to the state budget. The R142 and R142 contracts are debt financed. Operating fund agreements for Student MetroCards also didn’t hold up. The MTA ended up papering it over with debt and fare hikes.

Bolwerk July 10, 2013 - 2:02 pm

I really wish these fucks would have to reimburse the MTA for its legal expenses too.

Scott E July 10, 2013 - 2:42 pm

I meant to write this in response to an earlier post this week (the one about the Elmhurst LIRR stop) but it applies here too:

Right now, there is no defensible reason for Nassau County (and others) to oppose the payroll tax. But if the LIRR and MNR fares are altered such that they are subway-cheap within the boroughs and then jump up dramatically when crossing the city line, then the politicians might be justified in saying that that the funding is used more to benefit city residents.

Little Neck, Queens (my old stomping grounds) has a pathway at the east end of the eastbound LIRR platform that leads to a condo community in Great Neck, Nassau County. If the residents on that side of Great Neck (walkable to Queens) pay considerably less in fare than the residents closer to the Great Neck station, but both sides of town pay the same in payroll tax, you can imagine the uproar that will result.

Alon Levy July 10, 2013 - 4:20 pm

These things happen at fare zones. At the New York/Long Island boundary it can be called a tax on white flight and school segregation.

Personally I think the city zone (1-2, with 1 being the CBD) should extend as far out as the subway ex-Rockaways, and that people in Riverdale, the Rockaways, Staten Island, and Bayside should be in zone 3 already, but I don’t think it’s that problematic if they’re all bumped into zone 2.

SEAN July 10, 2013 - 8:14 pm

If Jamaica is zone 3, then what is zone 2 since the fare from Woodside, Forest Hills & Kew Gardens is the same as Penn Station. And if that is zone 2, then what is the point of it.

This is interesting… it takes roughly the same length of time to go from Jamaica to Minneola as it takes to go from Fordham to Larchmont, but the LIRR fare is significantly more.

Fordham to Larchmont
1 Way $3.50 any time
SR/ Disabled $1.75
Monthly $72

Jamaica to Minneola
1 Way Peek $7.25
Off Peek 1 Way $5.50
SR/ Disabled $3.50
Monthly $180

Travel time for both is roughly 15 minutes, so the difference is quite stark.

Sorry for the missfire postings, was trying to post a video from Youtube on bonds & other economic issues.

Alon Levy July 11, 2013 - 11:21 am

Jamaica should be zone 2, to be subway-compatible. I’m thinking about it in terms of Paris and Berlin, where the base subway fare is zones 1-2, not zone 1. In Berlin specifically the inner zone, zone A, is just the inner part of the city, while the rest of the city is zone B, and the inner suburbs are zone C. Tickets are AB, BC, or ABC. The idea with this scheme is to offer cheaper tickets to people who don’t travel to the CBD: the marginal cost of providing those trips is very low, and transit needs to compete harder with cars.

For example, New York might have the following zones:
Zone 1: all of Manhattan except Marble Hill
Zone 2: all of Brooklyn, most of Queens and the Bronx, with easily understood boundaries (if it’s too hard, then the entire boroughs except the Rockaways), Hudson County east of Secaucus
Zone 3: Staten Island, the rest of Hudson County, Newark, the rest of Queens and the Bronx, the first tier of northern and eastern suburbs (Yonkers, Hempstead, Great Neck, etc.)

Beyond a certain point, towns stop being obvious suburbs and start attracting people on their own, e.g. Stamford and Bridgeport. There, the concentric zones should be broken up into compact zones, all with the same fare to New York, but with low intra-zone fares to allow cheap local travel to Stamford, White Plains, Hicksville, Edison-Woodbridge, and so on. Newark is close enough to New York it can stay part of the concentric scheme, though.

alen July 11, 2013 - 11:23 am

i used to take the LIRR from FH to Atlantic Ave over a decade ago and there used to be a city zone back then. Jamaica and everything west was in the city zone and one ticket

BBnet3000 July 10, 2013 - 8:20 pm

Scott E: Fares are a funding source too. Suburban residents love to use regional taxes to justify lavish expenditures on service for them, while not taking relative ridership and fare payment into account.

alen July 10, 2013 - 2:43 pm

if the burbs don’t want to pay the payroll tax and the appeal succeeds, just raise the fares on those lines to make up the short fall

Bolwerk July 10, 2013 - 3:26 pm

There is no guarantee that would even work. The fares are already ridiculously high for what LIRR does.

al July 10, 2013 - 4:10 pm

Those M7 are in line for a refurb later this decade. M9 are also on order for ESA. They should consider designs that allow for 2 man (1 Conductor & 1 Engineer) train operation on MNCR and LIRR. Existing M3 should be refurbed for single car train (and single operator ala Budd diesel railcar) operation on low ridership runs.

Bolwerk July 10, 2013 - 4:26 pm

One (two if legally obligated) man operation with fare control gates or POP without. LIRR is a parade of railroad wrongthink.

al July 11, 2013 - 11:29 am

FRA requires both a Conductor and an Engineer on passenger trains. The exception is with single self propelled cars like the Budd RDC.

There can be as many as 5 conductors and assistant conductors on a LIRR train running peak direction during peak hrs. Add the Engineer and that is a 6 man crew. MNCR also runs trains with multiple conductors, though its usually 2-4 Conductors and 1 Engineer.

BBnet3000 July 10, 2013 - 8:22 pm

2? Try 1 (or 0, lol). Regardless, theres a whole platoon of people manning the trains now on LIRR and there isnt even a bar car.

SEAN July 10, 2013 - 8:28 pm

I don’t know if you realize this or not, when you board or disembark west of Jamaica on the LIRR, your ticket is checked twice not once. NJ Transit could do the same when going through either Newark Penn or Broad Street, but they don’t unless you are transfering through Secaucus. MNR has no such policy, but I find it an anoyance on the LIRR as it is.

SEAN July 10, 2013 - 4:38 pm

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