MTA tax defeated but not dead - Westfair Communications

W01-06_MTA — View looking north up the Hudson Line from the overpass at Greystone Metro-North station in Yonkers. Credit: Daniel Case

Buoyed by a state judge”™s recent ruling that the strongly opposed Metropolitan Transportation Authority payroll tax on employers is unconstitutional, attorneys are pressing for a court judgment that would refund all money paid by employers in the region since the 3-year-old tax was enacted.

MTA officials called the Aug. 22 ruling by state Supreme Court Justice R. Bruce Cozzens Jr. “erroneous” and warned that the loss of revenue resulting from the court decision in Nassau County would be “catastrophic” for the MTA and for the state economy. A spokesman said the MTA, which stands to lose more than $1.2 billion in annual revenue from the tax, will appeal the judge”™s decision.
The state Department of Taxation and Finance on its website advised that “this litigation is not concluded” and said employers should continue to pay and file payroll tax returns. Businesses in the affected counties pay 34 cents on every $100 of payroll.

“This is not over yet,” said Michele Babcock, an attorney at Jacobowitz and Gubits L.L.P. in Walden. She and her firm represented three Orange County municipalities and the Orange County Chamber of Commerce in the legal challenge to the payroll tax.

Babcock said the MTA is expected to file its appeal with the state Appellate Division in Brooklyn after Cozzens issues a judgment in the case. As for the full refund sought by plaintiffs”™ attorneys, “The justice may not agree to that,” she said.

Filed in 2010, the legal challenge to the tax on employers in the MTA”™s 12-county commuter transportation district also was joined by Long Island”™s Nassau and Suffolk counties, Westchester County, Putnam County and more than a dozen towns and villages in the region. At a press conference following the court ruling, Westchester County Executive Robert P. Astorino reportedly said county government has paid nearly $5 million in payroll tax since state legislators enacted the tax in 2009, when the MTA turned to Albany for help in closing a $1.8 billion budget deficit.

Though municipalities under state law generally cannot challenge the constitutionality of state legislation, there are exceptions, Cozzens noted in his decision. He found that the MTA tax legislation was a special law affecting some but not all counties in the state and therefore required a home-rule message from affected local governments requesting the state Legislature to enact the law. The tax was unconstitutionally passed by state lawmakers without the required home- rule message, he ruled.

Cozzens rejected MTA attorneys”™ argument that the special law serves “a substantial state concern” and so did not require a home-rule message from local municipalities.

While counties in the MTA commuter district would be affected by a decrease in MTA capability, “it is hard to see how the residents in Buffalo or other upstate areas would similarly be affected,” the judge wrote. If the MTA budgetary crisis were a substantial state concern, then the Legislature could have taxed all counties under a general law to close the deficit, he said.

MTA officials said they expect the judge”™s ruling to be overturned, since four previous Supreme Court challenges to the tax and its constitutionality were dismissed.

Those cases, including one brought by Rockland County, were heard in state Supreme Court in Albany County. In the case on Long Island, MTA attorneys unsuccessfully sought a change of venue to Albany County or, as a second choice, Manhattan. When Cozzens refused to grant the change, the MTA appealed the decision to the Appellate Division, where the lower court”™s ruling was upheld.

Keeping the case in Nassau County was crucial to the outcome, Babcock said.

“It”™s not over yet,” she said, “but we”™re hopeful that at the end of the day, this will be a real victory for everyone” in the MTA commuter district. Babcock said she is confident that the judge”™s ruling will be upheld on appeal.

MTA officials warned that without the payroll tax or another reliable funding source, the MTA “would be forced to implement a combination of extreme service cuts and fare hikes.” They said the judge”™s ruling on Long Island also could affect “hundreds of millions of dollars more from other taxes.”