New York State Withholding a Fortune in Transit Taxes From MTA

How many ways can New York state raid the MTA piggy bank? Here’s one to keep an eye on.

As the state budget deadlock drags on into its third month, Albany is withholding hundreds of millions of dollars in dedicated transit tax revenue from the MTA. 

The state, which collects transit taxes before distributing the revenue to the MTA, has yet to deliver a quarterly payment originally scheduled for May 10. According to an article published earlier this week in the Bond Buyer (it’s behind a very steep pay wall), $275 million in tax revenue that’s ostensibly dedicated to transit is being withheld.

While the state says it will deliver the funds when a budget is finally passed, the MTA could be forced to take on additional debt in the meantime. That means subway and bus riders will effectively be helping to pick up the tab for the state’s budget mess. It also means transit advocates should keep their attention fixed on Albany to see whether the state eventually replenishes the full $275 million, or steals the dedicated MTA funds like it did in December.

The MTA is not the only public agency feeling the pinch. To keep from going broke, the state has also withheld payments to school districts and threatened to shut down state parks. But the state’s latest MTA money drain has so far escaped public scrutiny, in what might become another case of Albany avoiding any political consequence for making transit riders worse off.

"In the political economy of scapegoating, the MTA is at the top of the charts," said one insider who’s watched electeds perfect the art of blaming the MTA for budget woes inflicted by Albany.

Perhaps the only person in a position to shift that dynamic is Andrew Cuomo, who notes on page 100 of his "New NY Agenda" [PDF] that the MTA is "teetering on the edge of financial collapse." That leaves one huge unanswered question for the prohibitive favorite in the governor’s race: What are you gonna do about it?

  • Larry Littlefield

    So if the MTA doesn’t have it’s “dedicated revenues,” why doesn’t it shut down or stop paying its unconstitutional debts?

    The MTA Board should know that in the end, it is the only way.

    How much heroin do you have them to use before withdrawl, given that in the end they aren’t the ones who will OD?

  • Larry Littlefield

    Moreover, as for the MTA getting its “dedicated taxes” when the budget is passed, how do you know that ALL the dedicated revenues won’t be shifted elsewhere, leaving Downstate New York with higher state taxes but no transit?

  • JK

    Just to be clear, this $275 million is from MTA dedicated funds the state has raided. This is the MTA’s money that the state has “borrowed.” This is not like schools and parks, which have their budgets appropriated by the legislature using sales and income tax and federal aid. The MTA does not get a dime from the legislature.

    Candidate Cuomo should pledge to create a Governor’s Locked Box, and veto any budget which includes the diversion of dedicated funds.

  • Agree with JK. If Cuomo won’t promise to fix this — and then follow through — his candidacy is worth nothing to city voters.

  • Clarence Eckerson Jr.

    Too bad we can’t withhold Albany’s paychecks and force them to borrow money to keep their finances alive. I’d bet this would all get solved real quickly.

  • Larry Littlefield

    “Too bad we can’t withhold Albany’s paychecks and force them to borrow money to keep their finances alive. I’d bet this would all get solved real quickly.”

    Actually unless they changed it, that IS the rule, and they ARE borrowing. Although no one has mentioned it this time around.

    You may ask, why are they doing this. Do they not care about mass transit? Do they not care about anyone in New York City? Do they not care about Downstate New York?

    Combine transit issues with what they have done on infrastructure in general, debts in general, pensions and the relative compensation of public employees hired at different times, and it is clear what they do not care about. The future, and the younger generations that will live in it.

    Sadly, the more I read about similar decisions in other places, the more I get the feeling they aren’t alone.

  • So if the MTA doesn’t have it’s “dedicated revenues,” why doesn’t it shut down or stop paying its unconstitutional debts?

    Because it’s illegal.

    Candidate Cuomo should pledge to create a Governor’s Locked Box, and veto any budget which includes the diversion of dedicated funds.

    There exist people in New York State who do not live in New York City, or even in its suburbs. Maybe this pledge would work in Brooklyn, but don’t expect it to be a vote winner in Rochester.

  • Larry Littlefield

    “So if the MTA doesn’t have it’s “dedicated revenues,” why doesn’t it shut down or stop paying its unconstitutional debts?”

    “Because it’s illegal.”

    Really? The MTA has limited authority to borrow, even aside from the constitution, based on the approval of its capital plan by the state legislature.

    It could announce that it is out of money and therefore cannot make payroll. Or it can borrow more illegally and hope someone someday will pay it back. That’s enabling the legislature to shift more burdens to the future and those who will live with it. Something it is doing increasingly frantically as we approach collapse.

  • It’s all illegal, Larry. The MTA is contractually bound to keep making payroll and pay its debts as long as it can, and it most definitely still can.

  • Candidate Cuomo took a $5000 campaign contribution from Bruce Ratner, one of the prime (and least deserving) beneficiaries of the MTA’s, and Albany’s, largesse. So a Cuomo lockbox would be a lot more believable if he returned Ratner’s money — and asked Ratner to return ours.

  • Courtney

    If Albany is escaping scrutiny, what we can do is put the pressure on by tapping into the millions (I assume) of transit riders in New York. Of course Albany is going to keep it’s hand in the cookie jar if they think no one is looking. A good old fashioned demonstration, well- organized and well-attended would, at the very least, send the message that lots of people are watching, are fed up, and are concerned about the ramifications.

  • The problem is that “Albany” is not one entity. Overall, the Governor has been good on these issues. The responsibility is distributed across the 62 state senators and 150 assemblymembers. Shelly Silver has said things like “I am not opposed to bridge tolls, but the votes aren’t there,” but he has made no effort to bring together a pro-tolls coalition or trade any favors for tolls. The Senate leadership is anti-toll, and there are no senators who are unequivocally pro-toll. While some of them may be voted out this year, their challengers are not necessarily pro-toll.

    In order to put pressure on them, you would have to target legislators beyond Silver and the “Fare Hike Four.” Very few people have been willing to do that, because of the patronage power they get from member items.

  • Larry Littlefield

    On the issue of tolls, for those of us who want them for demand management and street use equity reasons, isn’t it a blessing that there aren’t any right now?

    They were being oversold as a cure for the MTA’s massive financial ills. Those ills are so great that tolls would not have sold them. Even TBTA-level tolls would not have generated enough money, and tolls high enough to theoretically generate enough money would have generated far less, for good (people switching modes and carpooling) or bad (economic activity leaving) reasons.

    They got their way on tolls, so they can’t blame toll proponents. So their desperate search for someone to blame goes elsewhere.

  • Larry Littlefield

    “It’s all illegal, Larry. The MTA is contractually bound.”

    Isn’t it amazing that the lawyers in Albany (they are all lawyers in the legislature) have rigged things so that older generations and interest groups have legally binding contracts? Whereas younger generations and the general public were not parties to the deal and received no benefit, but are somehow legally bound?

    That’s why the conflict that is coming will go extra-legal and perhaps extra constitutional during an institutional collapse.

  • Larry, the tolls would’ve generated $400 million a year, which is a little more than half the MTA’s current budget shortfall.

  • Larry Littlefield

    “Larry, the tolls would’ve generated $400 million a year, which is a little more than half the MTA’s current budget shortfall.”

    By shortfall, do you mean that if the MTA had another $800 million, it would be able to continue with the ongoing replacement portion of its capital plan with no more debt? And the pension and retiree health care benefits that are being accrued would be fully funded?

    Remember, a large part of the shortfall is pension contributions that should have been made in the past, interest on money that was borrowed in the past, and the need to catch up on maintenance that was deferred in the past. Things will never change if the “MTA has a surplus” while borrowing $billions propaganda is follwed by “the MTA is breaking even” while borrowing $billions.

  • JK

    The theft of dedicated funds is a political bridge between Upstate and Downstate. Albany has plundered the gas tax and Thruway Authority tolls from dedicated road and bridge funds much more than the MTA dedicated funds. The result is one big bridge down (Crown Point/ Lake Champlain) and another crumbling (TZ) and the general decay of roads and bridges statewide. This is less a geographic rip off than a cost shift from infrastructure to education and hospitals. A big political problem is that higher gas taxes and Thruway tolls aren’t going to buy much new infrastructure because the rest of the taxes and tolls have been bonded out

  • If I’m not mistaken, the borrow-and-spend era ended in the 2000s. So the $700 million the MTA is down right now are genuinely for breaking even, not for just bridging the rest with bonds.

  • Larry Littlefield

    Well, it isn’t always easy to figure this out, but this calendar of MTA bond issues sure as hell looks like borrowing to me:

    Dated Date Credit/Series Purpose Amount
    ($ in millions)

    January
    MTA Transportation Revenue Bonds, Series 2010A New Money $364

    January
    TBTA General Revenue Mandatory Tender Bonds, Series 2009A-1 Refunding $150

    That means they are re-borrowing rather than paying down principle. Each of these refunding carries the possibility of an interest rate spike, over and above the variable rate bonds.

    February
    MTA Transportation Revenue Bonds, Series 2010B New Money $657

    March
    MTA Dedicated Tax Fund Bonds, Series 2010A New Money $503

    March
    MTA Revenue Anticipation Notes, Series 2010 Operating and Maintenance
    $475

    “Revenue anticipation notes, operations and maintenance?” That half a $billion borrowed that just went poof!

    Projected Issuance

    Month Credit/Series Purpose Forecasted Amount* ($ in millions)

    June MTA Transportation Revenue Bonds, Series 2010C New Money $600

    September MTA Transportation Revenue Bonds, Series 2010D New Money $634

    October TBTA General Purpose Revenues Bonds, Series 2010A New Money/Refunding of TBTA 2009 BANs $318

    November MTA Transportation Revenue Bonds, Series 2010E CP Takeout $765

    http://www.mta.info/mta/investor/bicalendar.htm

    The totals per this source, over and above refundings (debt increases):

    New Money Bond Issuance Forecast
    Financial Plan Borrowing Estimates ($ in millions)
    2011 2012 2013
    $1,613 $2,252 $2,537

    That also doesn’t include money borrowed by the state backed by dedicated MTA revenue streams, such as the 1/8 cent sales tax increase. And the various bond issues “for the Second Avenue Subway.”

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