There is a mad scramble at the NY Capitol

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Hochul has not publicly detailed her plan to make up the lost revenue after she ordered the public transit system to “indefinitely” abandon its congestion pricing program.
The tax hike would not apply to businesses in New York City’s suburbs, which also currently pay the MTA payroll tax to help fund the transit system.
Where the difference lies is, do we implement congestion pricing today?
“The governor should allow congestion pricing to move forward.” What comes next for the MTA?
The MTA board, which is responsible for the agency’s finances, could make the unprecedented move of overriding Hochul’s order to pause the rollout of congestion pricing.
“So whether that crosses the line for the staff or board members, it’s up for them to decide.” There are some signs of dissent on the board over Hochul’s decision.
One of those members, Midori Valdivia, said in a statement that the board had overwhelmingly approved the congestion pricing tolls twice.
“There is no plan B to fund the MTA.” “The MTA board members have a purview on the future of congestion pricing, including any significant delays or pauses,” she added.

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New York Gov. State legislators had to rush behind closed doors to examine the governor’s proposed tax on city businesses in order to make up for the multibillion-dollar hole in the MTA’s capital budget caused by Kathy Hochul’s sudden reversal on her position on congestion tolling in Manhattan.

The public transportation system was ordered to “indefinitely” abandon its congestion pricing program by Hochul, but she has not made public her plan to make up the lost revenue. The base daytime toll for vehicles entering Manhattan below 60th Street would have been $15, and it was scheduled to go into effect on June 30.

However, legislators and state representatives briefed on the governor’s proposed funding stoppage stated that she intends to raise the current payroll tax rate from 0.6 percent of expenses to 0.825 percent of expenses for businesses located in New York City that have payroll expenses exceeding $1.75 million annually.

Despite the fact that some of their colleagues in the state Assembly seem more receptive to the idea, state Senate Democrats in particular have so far shown a dislike for it.

The senator remarked, “I don’t think the Senate is ready for that.”. Liz Krueger is a Democrat from Manhattan and the head of the influential Senate Finance Committee. “But, I’m not the only one saying that; my colleagues and I haven’t made an official statement yet. “.

On Wednesday and Thursday, Democrats in both houses convened in private to determine whether or not to endorse Hochul’s tax plan. As their annual session came to an end and an election was just months away, they learned about it.

Given that a sizeable portion of Democratic members strongly disagree with the plan, it is uncertain whether state lawmakers will support it. Businesses in the suburbs of New York City, who already pay the MTA payroll tax to support the transit system, would not be subject to the tax increase.

The MTA was relying on this increase to generate $15 billion in bonds to finance various infrastructure and station upgrades throughout the city and surrounding area, but the additional revenue would only bring in about $1 billion a year. If authorized, it would be Hochul’s and Albany lawmakers’ second tax increase in as many years. It was 0 point 34% at the beginning of 2023.

In order for the MTA to replace the funds that were intended to come from congestion pricing, the state Legislature must approve a recurrent revenue source. Legally speaking, the tolls had to generate $1 billion annually in revenue in order to fund improvements to mass transit.

Hochul and MTA representatives have stated time and time again that those improvements are required to prevent the subway from becoming unsafe. Several new subway elevators and the extension of the Second Avenue subway to East Harlem are among the proposed upgrades.

Hochul may be able to draw from the state’s reserve funds even if lawmakers reject her request for a tax increase. However, the funds aren’t regular sources of income, which are necessary to issue the $15 billion in bonds that will be needed to pay for the upgrades.

Though many said Hochul’s about-face was motivated by a fear of upsetting suburban voters in congressional districts that are in close race, a faction of legislative Democrats who hold majorities in both chambers applauded the decision to halt the congestion pricing program. At a news conference on Thursday at the Capitol, proponents of the delay praised the governor.

Assemblymember Kenny Burgos, a Democrat from the Bronx who assisted in setting up the press conference, remarked, “I think the majority of, if not the entire [Assembly Democratic] conference, is focused on getting the MTA to be world class, right?”. “Everyone can concur. The question is, “Should we implement congestion pricing now or look for another way to fund the MTA and obtain that capital plan?”.

In order to close the multibillion-dollar budget deficit, some appeared amenable to an increase in the payroll tax.

“We see the [payroll] mobility tax] as a possibility,” Queens Democrat Assemblymember David Weprin stated. There are additional suggestions. “.

Those who expressed opposition to the measure included Krueger. She cited the 2010 MTA payroll tax “debacle,” in which Democrats in the state Senate lost control of the majority after the tax was first imposed, in her argument that raising business taxes in New York City would be politically unpopular on Wednesday.

Influential group Partnership for New York City, which advocates for small businesses in the area, is one of the groups opposing the proposed tax hike. The group stated that one of the reasons it is against the increase is that it does not apply to suburban companies that are served by the MTA.

According to a statement released by the partnership on Thursday morning, “New York City, which is already the most highly taxed city in the country, is entirely on the payroll mobility tax burden.”. “Congestion pricing should proceed, as approved by the governor. “.

How does the MTA proceed from here?

The extraordinary decision to overrule Hochul’s directive to halt the implementation of congestion pricing could be made by the MTA board, which is in charge of the organization’s finances.

The Public Authorities Reform Act of 2009 in the state mandates that board members “have an explicit fiduciary duty to the authority and not to the appointing entity.” Despite being designated by the governor, mayor, and county executives, the board members are considered independent. “.

While the board is independent, there is no historical example of its members defying the governor on a matter as important as congestion pricing.

The independence of the MTA board, according to analyst Rachael Fauss of the government watchdog organization Reinvent Albany, is a “fiction.”. “.

“She just told them to do something that goes directly against their financial interests, and they are under the governor’s authority,” Fauss said. Therefore, it is up to the staff or board members to determine whether that crosses the line. “.

There are indications that the board is divided regarding Hochul’s choice. Since the governor’s announcement, all four of the board’s fourteen members, nominated by New York City Mayor Eric Adams, have already voiced their disapproval.

The board had twice approved the congestion pricing tolls overwhelmingly, according to a statement from one of those members, Midori Valdivia.

“In my opinion, projects like the Second Avenue Subway Phase II, our accessibility program featuring elevators and escalators in our subway system, and a completely zero-emission bus fleet were announced today without the MTA Board’s input,” Valdivia stated on Wednesday. “The MTA has no backup plan for funding.”. “.

She continued, “Any major delays or pauses in the future of congestion pricing are within the purview of the MTA board members.”. “I think voting on such issues is within the MTA board’s jurisdiction. I’d like to put it to a vote. “.

June 26 is the day the board is supposed to meet. Any vote by the group would have to be on the items on the agenda, which is determined by MTA Chair Janno Lieber.

Many requests for comment from Lieber and his representatives were met with silence.

Legislators would need to move quickly to approve Hochul’s proposed tax increase. While the Senate and Assembly were originally scheduled to reconvene on Friday, Thursday was supposed to be the last day of the legislative session in Albany.

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