NEW YORK -- When Governor Andrew Cuomo signed a $320-million reduction in the downstate payroll tax on Monday, the MTA, which runs New York City's subways, lost a critical, dedicated revenue stream. Cutting the payroll tax was essential to getting Cuomo's much-touted income tax deal through the state Senate. But the burden that deal places on the MTA may make it even more difficult for the transit agency to fill a $9.9 billion capital budget gap in the years leading up to 2014.
Transit advocates warn that the governor's proposal for a state infrastructure fund that relies on "public-private partnerships" may do little to make up the shortfall for one of the state's most important infrastructure elements: the MTA subways.
Cuomo's office promised in the tax deal's announcement that they would maintain "the necessary funding for the MTA from other sources."
Those "other sources," however, have yet to be identified, and transit advocates worry they may never materialize, particularly if the budget situation gets worse next year. The governor himself has noted that revenue projections are "collapsing."
"The only way the partial elimination of the tax won't hurt the MTA is if Cuomo is serious about finding a permanent replacement for the money," said Benjamin Kabak, who writes about transit at the blog Second Ave. Sagas.
Even if the MTA's budget gap for next year created by the payroll tax elimination is closed, he noted, "Just giving the MTA $320 million in 2012 won't stem the tide."
"What happens in 2013 when the payroll funds and the discretionary dollars aren't there? The answer is clear: steeper fare hikes or more service cuts or both," Kabak said.
What's more, transit fans looking to the proposed New York Works Infrastructure Fund for a permanent solution to the payroll tax revenue shortfall may be disappointed.
As a sort of gimme for New Yorkers worried about the future of the state's roads and rails, Cuomo made the unrelated announcement of a $1 billion infrastructure fund of accelerated future spending as part of the grand tax bargain. An additional "public/private infrastructure fund would raise up to $1 billion from pension funds and private investment," a press release from his office said.
The governor has promised to reveal more details in January, but if private capital invests in infrastructure, it will likely be as part of so-called public-private partnerships.
In a recent op-ed, the governor said the fund would "promote innovative public-private partnerships with business and labor."
Those partnerships don't equal free money. They often pay private investors back by giving them a cut of toll revenues or other "user fees" thrown off by new infrastructure. Tolls would be used to pay back the cost of building a replacement for the Tappan Zee Bridge, a top Cuomo infrastructure priority, for instance.
"I think you need to look at all the options," said Jay Simson, executive director of the American Council of Engineering Companies of New York. "Typically the private sector is more efficient than the public sector."
Cuomo said in a press conference on Friday that the infrastructure fund would make money available to the MTA.
Finding private investment opportunities for New York City's chronically money-losing subways, however, would be difficult.
Whether the investors are private companies, or union pension funds (as Cuomo has suggested), "they're going to want a good rate of return," said Gene Russianoff of the Straphangers Campaign.
"That raises all sorts of questions about whether the money is good for the agency," he said. He noted that transit authorities can often borrow money more cheaply than private firms.
"Public/private partnerships make sense for one-offs such as when the MTA is opening a new subway line, but for long-term state of good repair maintenance projects, they make less sense," said Kabak. "It's tough to convince a private investor to give favorable [terms] for standard repairs that don't materially increase ridership or revenue levels."
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