Budget Monitor: Transit Plan Would Strain NYC Property Taxes

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By John Herzfeld

New York Gov. Andrew M. Cuomo’s (D) budget proposal requiring New York City to match state appropriations for emergency mass transit repairs would strain the city’s property tax system and capital spending, a fiscal watchdog agency said.

The March 8 analysis by the city Independent Budget Office weighed in on the revenue challenges presented by tension between Cuomo and New York City Mayor Bill de Blasio (D) over how to fund the Metropolitan Transportation Authority’s massive infrastructure needs. Responsibility for billions of dollars in spending might be at stake.

Cuomo and de Blasio, at odds over how to divide responsibility for the funding gap, fundamentally disagree “over which level of government is ultimately responsible for the system’s performance,” the IBO report said.

The MTA, a state-controlled public authority, runs the city’s mass transit system, plus suburban commuter railroads—though the city owns the subway stations and many other capital assets.

Budget Due April 1

The governor’s state budget proposal, which faces an April 1 deadline, calls for additional MTA funding from the city property tax. But the proposal was included over the city’s objections and would tie the city’s hands in accommodating it with other spending adjustments, the IBO said.

Negotiations might yield modifications or alternatives, the report added.

A 2015-2019 MTA capital plan called for $16.5 billion for the city subways and buses, with the city agreeing to raise its contribution from roughly $1 billion to $2.5 billion, the IBO said.

If the proposed budget legislation had been in effect, however, the city would have been responsible for the $14 billion balance over the five years, representing a substantial jump in its capital spending obligations, according to the report.

Property Tax Subdistricts

Another Cuomo budget proposal would allow an added property tax assessment in MTA-designated “transit improvement subdistricts,” up to one mile from the site of significant capital projects, to finance capital or operating costs. It would apply not only to new projects but also to projects completed since 1981.

The IBO faulted the proposal for the broad one-mile range and for a funding stream that it said would flow to the MTA “forever”—even after debt service has ended—and could be used for the suburban railroads, not only the city subways and buses.

Also, since property tax assessments already reflect the benefits of transit investment, “owners would be paying twice for the same investment.”

“While the plan would impose a surcharge on the existing city property tax rather than diverting city revenue, depending on how common such districts were to become, the proposal could constrain the city’s ability to continue raising property tax revenue,” the report found. “With taxpayers assessed an additional MTA charge, it would be that much harder for the city to rely on the property tax for its own needs.”

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Text of the IBO analysis is at http://src.bna.com/wXb. Text of the budget proposal is at http://src.bna.com/wXa, pp. 68-77.

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