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In a recent Infrastructure Update, the Building Congress reported that the funding gap in the final three years of the Metropolitan Transportation Authority’s (MTA) $10 billion dollar capital plan could be much higher as key funding sources continue to dry up.
Moreover, a host of existing or dedicated sources of transit revenue that could be used to address these funding shortages have instead been raided by the State to fill other budget gaps, robbing the MTA of billions of dollars necessary to build, maintain and operate the subway and bus system.
For example, the MTA receives funding from the Statewide Mass Transportation Operating Assistance Program (the “18b” program) based on a mandated State/City matching formula. According to New York State Comptroller Thomas DiNapoli, after decades of using general fund dollars to pay its matching share, in 1996 the State began redirecting other dedicated transit tax revenues to meet its 18b obligations. Each year, the State has redirected well over $150 million, costing the MTA an estimated $2.5 billion over this period.
This is not the only example of the State raiding a dedicated transportation fund. In 2009, months after approving a major new MTA financing package, including a new Payroll Mobility Tax (PMT), Governor Paterson and the Legislature approved the redirection of $143 million of dedicated tax revenues from the MTA to the general fund. As a result, the MTA was forced to implement major service cuts affecting thousands of commuters.
Other funding sources also have evaporated in the last decade, including State and City support for student transit passes, passing on hundreds of millions of dollars in accumulated additional costs to the MTA. Similarly, Nassau County has been allowed to renege on its commitment to fund its local bus system, saddling the MTA with over $140 million in costs each year.
These actions, taken singly, have had a painful impact on MTA operations. Taken together, they are devastating. In the last completed fiscal year, the MTA could have received an additional $600 million, mitigating many of the impacts facing the agency’s capital and operating budgets.
While some funding streams have been diverted, the sales tax on gasoline has been capped artificially, depriving the State of vital funds. Though most sales taxes on goods are calculated on a percentage basis, in 2006 the State voted to cap the sales tax on gasoline at eight cents a gallon regardless of the actual price. As gasoline prices continue to rise the State has chosen to forgo this potential revenue entirely, losing additional millions in critical resources.
The State’s financial gimmickry has forced capital priorities to compete for the same resources as the MTA operating budget. Despite a yawing capital funding hole, the MTA recently borrowed $500 million from its “Capital Financing Fund” to pay operating expenses. The MTA claims it will repay this money beginning in 2012, a year it already anticipates a $207 million operating deficit. However, if it does not, the MTA reports that it “will be unable to meet obligated capital program expenditures, further increasing the $10 billion funding gap.”
RECOMMENDATIONS
In the face of this enormous capital program deficit, State leadership must no longer raid the State’s transit funding programs, choking the system most essential to the economy’s recovery and long-term health. The Building Congress recommends the following steps for the administration of Governor Cuomo and the State Legislature to implement in concert:
- Return to funding the 18b program through the general fund, estimated conservatively at $175 million a year.
- Reverse the decision to divert $143 million of dedicated tax revenues from the MTA, which precipitated some of the most sweeping service cuts in the agency’s history.
- Stop efforts to repeal the PMT. Even with the $1.3 billion that the PMT generates annually, the MTA faces an unprecedented financial crisis.
- Lift the gas tax cap. Returning to a standard percent-per-gallon charge like most other State sales taxes could allow the State to add new resources to the MTA.
- Increase annual capital commitments. The City provides approximately $100 million a year for MTA capital programs; the State does not have funds set aside for capital construction.
- Reconsider congestion pricing or other financing alternatives that directly link the cost of the use of roads, bridges and mass transit. These user fees must then be placed in a lock box for transportation.
- Support a schedule of biannual fare and toll increases for the MTA. With no prospects of new sources of aid from the State, the MTA must preserve service by levying predictable, modest increases in the one revenue source it controls.
- Continue efforts to cut costs and increase efficiencies at the MTA. If the State’s taxpayers and businesses are going to pay more in taxes and fares to support the MTA, the MTA needs to do more to ensure that this money is spent wisely and efficiently.
WHAT YOU CAN DO:
Contact the State’s legislative leadership and urge them to address MTA’s capital funding crisis by acting on the above recommendations.
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