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MTA: Severe cuts, fare hikes if tax ends

MTA Chairman and CEO Joseph J. Lhota speaks

MTA Chairman and CEO Joseph J. Lhota speaks to members of the media. (July 19, 2012) Credit: Charles Eckert

The MTA will be forced to increase fares and tolls, cut services, cancel capital projects and lay off employees if a court ruling that found the payroll mobility tax unconstitutional is upheld, chairman Joseph Lhota said Thursday.

But Republican state, county and village lawmakers, who gathered in Mineola Thursday to celebrate State Supreme Court Justice Bruce Cozzens' ruling, contend the Metropolitan Transportation Authority can recoup the lost tax revenue by selling unnecessary assets, reducing layers of management, and cutting overtime.

Meanwhile, Democratic Gov. Andrew M. Cuomo, talking to reporters at the state fair in Syracuse, said that "we believe the ruling is wrong and we believe the ruling is going to be reversed."

The MTA expects to continue to collect the fees as it pursues an appeal with the State Court of Appeals. It's unclear if the state will follow suit. Attorney General Eric Schneiderman's office declined to comment on requests by GOP officials not to appeal the decision.

At a Manhattan news conference, Lhota and transit advocates said any claims of victory by GOP lawmakers are shortsighted. "I don't see them talking about what they'd like to see replace this," said Lhota, who said he remained open to alternatives to the tax.

But without the revenue the tax generates, Lhota said the MTA would have to resort to "incomprehensible" service cuts and a "radical, substantial fare increase" that would cost more jobs than the tax ever has.

Lhota noted that, in addition to the payroll tax that generates $1.48 billion a year for the MTA, the ruling also invalidates taxi and DMV fees included in the same 2009 legislation that bring in another $306 million. In total, about 15 percent of the MTA's annual budget would be lost. Lhota called it a "catastrophe." (The 1.48 billion includes $250 million the state agreed to kick in when lawmakers last year repealed the payroll tax on certain small businesses and private schools.)

William Henderson, executive director of the MTA Permanent Citizens Advisory Committee, noted that the agency's 2010 service cuts -- the deepest in history -- saved the authority only about $70 million.

"Think about how much pain we would have to inflict to save close to $2 billion," said Henderson, who questioned the reasoning behind the court ruling.

But state Sen. Lee Zeldin (R-Shirley) said the MTA can save billions by cutting its bureaucracy. "They have tens of billions of dollars in assets, many of which can be consolidated and sold off," he said. "One in six employees are managers or supervisors."

Sen. Jack Martins (R-Mineola) added that other forms of MTA revenue, such as the transfer tax and the mortgage tax, have seen an uptick, reducing the need for the payroll tax.

MTA spokesman Adam Lisberg said the agency has cut $700 million annually in operating costs and eliminated 3,500 jobs since 2010. Additional cuts, he said, will not replace the payroll tax.

"Anyone who would like to remove the payroll tax should come up with real solutions on how to replace that revenue," he said.

In its suit, Nassau successfully argued that to impose the tax -- which charges employers within the MTA region 34 cents for every $100 of payroll -- the state needed home rule messages from the municipalities or a two-thirds vote in both houses of the State Legislature, neither of which occurred.

Four other suits making similar arguments were rejected by state courts in Albany. Nassau's case is the first to reach the appeals level.

Bill Schoolman, a Bohemia small-business owner who launched the first payroll tax lawsuit, celebrated the ruling. "Public authorities are supposed to be self-sustaining," said Schoolman, owner of Hampton Luxury Liner and Classic Coach. "It's a really bad example of government out of control."

Nassau has paid $9.9 million in payroll taxes since 2009, while business owners have paid about $80 million annually. Nassau County Executive Edward Mangano, who filed the suit, said he plans to seek retroactive relief on behalf of the county and its employers. With Ted Phillips

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