Judge Strikes Down Vital MTA Funding Source, Threatening State’s Economic Health

Senate Majority Leader Dean Skelos' office was "pleased that the judge found the payroll tax unconstitutional;" the Senator's office told MTR that it had not discussed the future of MTA funding | Image: nysenate.gov

The payroll mobility tax, a vital funding source for the MTA, has been struck down by New York State Supreme Court Justice R. Bruce Cozzens, Jr. Revenues from the tax, which is levied on some employers in the downstate metropolitan area, net the MTA over a billion dollars annually, but no elected officials have announced plans for an alternative source of funding.

A funding shortfall would threaten the quality of service and transit infrastructure of the Lower Hudson Valley, Long Island, and New York City, and could lead to fare hikes, service cuts, and the deterioration of equipment.

“We have not talked about next steps on how to fund the MTA,” said Scott Reif, spokesman for New York State Senate Majority Leader Dean Skelos. Reif told Mobilizing the Region that the Senator’s office was “pleased that the judge found the payroll tax unconstitutional.”

Justice Cozzens reportedly ruled the law unconstitutional because it “does not serve a substantial state interest.” Newsday, which broke the story, explains the decision:

To impose the tax, the state had to have received home rule messages from the municipalities or pass the tax law with a two-thirds vote in both houses of the State Legislature, the suit argued. State Supreme Court Justice R. Bruce Cozzens Jr. agreed.

“The MTA payroll tax is a special law, which does not serve a substantial state interest,” Cozzens Jr. wrote in his decision. Because the state did not seek a home rule message or the two-thirds votes, “this was passed unconstitutionally.”

The MTA has pledged to “vigorously appeal” the court’s decision, and has reportedly said that they expect New York State to keep taking in the tax during the appeals process.

Regardless of how the appeals process ends, New York State’s economy depends on a fully funded MTA. The MTA creates and sustains well-paying jobs across the state—on Long Island, in the Hudson Valley, upstate and down—and there is no doubt that this tax is essential to the MTA’s financial health. The MTA’s 2010-2014 Capital Program is expected to create 350,000 jobs across New York State, providing a $44 billion economic impact [pdf]. In the past, too, MTA construction has kept New York’s economy churning. The 2005-2009 Capital Program provided 50,000 jobs and a $6.3 billion economic impact on Long Island, and that program provided 37,497 jobs and a $4.7 billion economic impact in the Mid-Hudson region.

In a statement yesterday [pdf], Tri-State urged New York State lawmakers to find a funding solution for the MTA by any means necessary.

“If today’s decision stands, Albany must take action. New revenues must be found, through congestion pricing, tolling, or other means,” said Tri-State Executive Director Veronica Vanterpool.

A 2011 Independent Budget Office report [pdf] said that the payroll mobility tax is “by far the most significant revenue source for the MTA.”

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