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The head of the deficit-ridden Metropolitan Transportation Authority argued his case to the business community that the MTA needs $20 billion in state capital funding if this region is to be spared the “profound consequences” of a financially derailed mass transit system.
Elliot G. Sander, MTA executive director and CEO, heard a strong pledge of support from the Westchester County Association in White Plains, where he was keynote speaker at the business membership group”™s distinguished speaker breakfast series. Yet that unqualified support was not shared across the region, as business and economic development leaders and government officials in the Hudson Valley last week made clear they oppose a proposed payroll tax on employers in the MTA”™s 12-county commuter district to help offset its projected $1.2 billion deficit in 2009.
That “mobility tax” was recommended in a December report to Gov. David A. Paterson by the Commission on Metropolitan Transportation Authority Financing headed by former MTA chairman Richard Ravitch. It would amount to one-third of 1 percent of wages and salaries paid by employers and of net earnings of self-employed persons. The tax, which businesses could deduct on federal tax returns, is expected to raise $1.5 billion annually.
Sander said the MTA hopes the state Legislature will adopt the full Ravitch Commission report, which also recommends the state fully fund the MTA”™s five-year capital program that starts in 2010. “I recognize that what we propose is a hit on the business community,” he said of the payroll tax, “but I think the alternative is unacceptable.”
That alternative would be the “draconian” budget approved by the MTA board in December, Sander said. It includes service cuts and a 23 percent increase in revenue from transit fares and bridge tolls. The fare and toll hikes would be 8 percent if state lawmakers adopt the Ravitch Commission recommendations.
The MTA chief said this year”™s $1.2 billion deficit is primarily due to the 70,000-employee authority”™s debt service for its five-year capital program from 2000-04, which was not funded by the state. Those debt payments are now at $2 billion a year. “We could probably weather this storm were it not for that,” he said.
With the decline in real estate transactions and other tax sources in the weak economy, the MTA projects its deficit will grow to $2.4 billion in 2010, $2.6 billion in 2011 and nearly $3 billion in 2012. “We are in an extraordinarily critical time for the MTA due to the financial crisis,” Sander said in White Plains.
Sander said a five-year, $22-billion capital program is needed to maintain a transit system with $1 trillion in assets. If improvements are made, a $30 billion program will be needed. He said the MTA will request $20 billion from the Legislature, “a reasonable number,” while anticipating $6 billion to $10 billion in federal aid over the same period.
Noting that fares and tolls could rise by 25 to 30 percent without state funding, “The impact psychologically as well as to the system I think would be devastating to this region,” Sander said. “This is the right time to make the investment as far as stimulating the economy, creating jobs” both in the metropolitan region and with MTA contractors and equipment suppliers around the state.
The Ravitch Commission noted the MTA”™s last five-year capital program is estimated to have created an average of up to 38,500 jobs annually for nine years.
“We”™re supporters of a strong regional transportation system,” said Jonathan Drapkin, president and CEO of Pattern for Progress, a nonprofit public policy research and planning institute in Newburgh. “We think this (payroll) tax is just not the way to do it.”
Orange County Chamber of Commerce directors last week unanimously opposed mobility tax legislation. Chamber President John A. D”™Ambrosio said compromises on all sides must be made “in today”™s roller-coaster business world.” Levying a tax “on selected businesses and organizations to solve one organization”™s financial woes is not the way to go.”
In the 12-county commuter region, municipalities and employees already pay six separate taxes or fees to the MTA, Drapkin said. “It”™s not that we don”™t contribute. It”™s just that we think this is one tax too many. At some point it becomes irrational.” Drapkin said the Ravitch Commission should have asked, “Is there a better way to fund this?”
Dutchess County Executive William R. Steinhaus said: “Killing jobs by taxing already struggling businesses, particularly in this tough economy, is the wrong method to fund transportation infrastructure.”
He said the county from 2005 through 2007 paid more than $78 million to the MTA, including mortgage and sales tax revenue and station maintenance payments. In Dutchess, the proposed payroll tax would cost county government alone $400,000, he said.
“It”™s unthinkable we are going to be asked to pay even more,” said Ron Hicks, Rockland Economic Development Corp. president and CEO. “They barely serve Rockland as it is.”
Drapkin said the payroll tax would add to the financial troubles of major hospitals in the region already facing steep cuts in Medicaid funding because of the state”™s budget deficit. At both Orange Regional Medical Center and Vassar Brothers Medical Center, hospital officials have estimated they would have to eliminate 10 full-time employees to pay the mobility tax, he said.
Drapkin said opponents of the tax have “an uphill battle” in killing the proposal in Albany. As a compromise measure, they would support a sliding tax scale for Hudson Valley employers proportioned to county votes on the MTA board. As Dutchess, Rockland, Orange and Putnam counties each have a one-fourth vote, employers there should be charged no more than one-fourth of the proposed payroll tax, he said.
Sander told his business audience in Westchester that a sliding scale would “take apart” the region and the regional economic flow. “To take it apart I think would be a mistake,” he said. “To not look at this as one region would not be correct from a public policy perspective.”
The MTA chief said he was “guardedly optimistic” that state lawmakers will approve the requested funding package.
