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Moody's: Overturned payroll tax is 'credit negative' for MTA

A train leaves the Long Island Rail Road

A train leaves the Long Island Rail Road station in Syosset. (Credit: Chris Ware)

In a report released Monday, Moody's analysts said the court ruling last week deeming the Metropolitan Transportation Authority's payroll tax unconstitutional may negatively affect the organization's credit rating.

If the ruling is upheld in the MTA's appeal, the transit organization could lose up to $1.3 billion of revenue per year. That would cause even more pressure for the organization as it “has faced financial challenges over the past several years owing to the effects of the economic slowdown and its implementation of a large capital plan,” analysts wrote.

The credit negative is not a downgrade, but an indication that the event may have a bad effect on the organization's credit ratings in the future. A credit downgrade would make it costlier for the MTA to borrow money because a lower credit rating means that the organization is more likely to default on its loans.

Currently, the MTA's bonds are rated A2 -- an upper-medium investment grade -- and stable.

The MTA payroll tax was levied on employers in New York City and its surrounding counties in 2009 when the transit organization had severe budget gaps. It was immediately unpopular in New York City's surrounding counties, where many business owners said it was unfair that they had to pay the tax because they rarely used the MTA services.

Tags: MTA , payroll tax , transportation

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