The state budget will kick in $68.4 billion to the MTA over the next five years to prevent the subway, buses and commuter rail that the city’s workers rely on from falling into disrepair.
State lawmakers agreed to fund the plan — the MTA’s largest ever package of mass transit upgrades — in part through an increase to the current 0.60% payroll mobility tax on certain large businesses. The exact details of the tax hike are unclear as the budget is finalized, but the increase will hit employers in the MTA’s service region with more than $10 million in payroll. Smaller employers and nonprofits will either see no change in their state payroll tax or a reduction, according to Gov. Kathy Hochul’s office.
The MTA’s chief executive said the region’s business community, whose employees rely on mass transit to commute, is the most appropriate place to turn to for mass transit funding.
“I am comfortable that we’re getting a little more from big employers,” said Janno Lieber, the MTA’s board chair and CEO during a Wednesday board meeting. “That is, in fairness, the right place to look for support for this capital plan.”
Hochul described the changes to the payroll mobility tax this week as “modest adjustments” that will “protect small businesses while ensuring large corporations contribute their share.”
State lawmakers increased the payroll tax for city businesses just two years ago, and some business groups, such as The Business Council of New York State, the Long Island Association and the Westchester Business Council, say they’re fed up with the state returning to their members for more cash, and would prefer the state get creative with other taxes and fees.
Kathryn Wylde, president and CEO of the influential Partnership for New York City, called the tax increase a good compromise to fund the MTA.
“No one likes tax increases, but the formula they came up with, I think, is fair,” said Wylde. “It is dedicated to improvement and maintenance of the transit system, which obviously employers depend on, so there’s a logic to it.”
Wylde, who has been briefed on lawmakers’ deliberations, said large businesses are expected to face a 0.29% increase on the tax, which would bring their payroll tax rate up to 0.89%.
All told, the tax increase is expected to generate $1.4 billion annually for the MTA, which it will borrow against to pay for $30 billion in projects designed to modernize and maintain the region’s mass transit. The MTA, under the agreement, must come up with $150 million in recurring annual efficiencies; the authority will use the revenue it saves to finance another $3 billion in spending, according to Hochul’s office.
Liber told reporters Wednesday that, to reduce spending, the MTA will look to carve out cost savings from its annual spending plan on construction and equipment known as the capital budget, which is separate from the MTA’s annual budget to operate train and bus service. “We’re going to study the heck out of it and make sure we get there,” said Lieber.
Raising the tax will pay for a sprawling package of MTA investments in the region’s subway, bus and commuter rail. Those efforts include modernizing the subway’s signal system, replacing dilapidated railcars and buses with new models, upgrading critical power systems, building elevators at dozens more rail stations, and bringing service to more riders by financing the Interborough Express, a light rail project designed to link Brooklyn and Queens along mostly existing freight tracks.
The MTA’s plan also counts on $14 billion from the Trump administration, which has threatened to withhold funding and approval for New York transportation projects unless the state ends its congestion pricing toll on motorists entering Manhattan south of 60th Street.
Lieber acknowledged that there is “uncertainty” around those federal funds, but reiterated that he is “very confident” that the MTA will prevail in court if the White House seeks to pull funds.
“We’re in a big group on uncertainty coming from the federal level,” said Lieber. “Time is of the essence for the work. I’m not waiting until all the ink is dry in Albany. We’re in go mode.”
