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Congestion Digestion: What You Need to Know About the MTA Budget Boosters

Photo: Ben Fractenberg/THE CITY

Tucked into the $175.5 billion state budget the New York Legislature passed in the wee hours Monday are measures to stabilize the financially precarious Metropolitan Transportation Authority.

The deal struck by Gov. Cuomo, Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie aims to infuse as much as $25 billion into subways, buses and commuter rails by imposing fees on vehicles entering Manhattan’s busiest streets, increasing taxes on luxury real estate and collecting sales taxes from transactions in online retail marketplaces like eBay.

But the promised new revenue won’t even deliver half of what the head of New York City Transit says is needed to save the city’s ailing subways and buses.

Here’s what you need to know – amid a bunch of unknowns:

Congestion Pricing Is Coming — But Question Abound

New York City is slated to become the first city in the nation to implement congestion pricing. The fee on motor vehicles aimed to lower traffic in Manhattan south of Central Park is projected to bring in roughly a billion dollars annually, according to the Cuomo administration – enough to sell $15 billion in bonds to boost transit.

How much? During what days of the week and hours of the day? And when will it all start?

The budget deal outsources those critical decisions and more to a six-member expert panel appointed by the MTA’s Triborough Bridge and Tunnel Authority. The panel will make those recommendations by Dec. 31, 2020 or at least 30 days before congestion pricing begins.

Photo: Ben Fractenberg/THE CITY

Vehicles traveling bridges or tunnels directly to or from the FDR Drive and West Side Highway will not get tolled unless they get off the roads and enter the congestion pricing zone. The panel will be empowered to identify other exempt routes.

Most motorists looking for a break on the fee to enter local streets are likely to be disappointed: Only Manhattan residents who live in the congestion pricing zone south of 60th St. and whose gross annual incomes are less than $60,000 are guaranteed a tax credit equal to the total amount spent on tolls in a year. But then again, the panel may recommend other exceptions.

Taxes and More Taxes

Still more funds, a projected $10 billion, are to come from new taxes — drawn from trinkets purchased online on Etsy to ultra-luxury real estate.

A new measure for the first time will require retail websites that carry transactions from third-party vendors — like Amazon, eBay and Wayfair — to begin collecting sales tax from buyers in New York, starting June 1. The 4.5% share for purchases made by New York City buyers will go to an MTA lockbox fund, with the governor’s office projecting $320 million a year in MTA revenue from the sales tax.

The tax could prove a boon above ground, too: Having an internet sales tax “is a good thing because it helps out brick and mortar stores, because they’re no longer at a disadvantage,” said David Friedfel of the Citizens Budget Commission, a nonpartisan fiscal group.

Meanwhile, a proposal for a pied-a-terre tax on high-end residences owned by out-of towners gave way to increases in an existing 1% “mansion tax” attached to million-dollar-plus home sales, plus a luxury transfer tax.

Starting in July, New York City properties selling for $2 million or more will be subject to a stepped-up mansion tax on the transaction, starting at 0.25% and ranging up to 2.9% on sales of $25 million or more, on top of the existing 1% tax. Sales for $3 million or more will be subject to an additional 0.25% transfer tax. All told, according to the governor, these real estate taxes are projected to raise $365 million.

More Money Needed

Looking to cut costs, Cuomo pressed a series of MTA management reforms into the funding plan, requiring a reorganization plan by June, along with audits and efficiency reviews, with a special focus on major construction projects.

But that still leaves a potentially vast gap between projected revenues and projected costs of a subway and bus overhaul.

Even if congestion pricing delivers its projected $15 billion in borrowing power and the new taxes contribute their $10 billion via bond sales, not all of that funding will be going to New York City Transit, which runs the subways and buses in the five boroughs. Twenty percent of the revenue will be split between Metro-North and Long Island Rail Road commuter rail services.

That leaves $20 billion for New York City Transit — just half the $40 billion Andy Byford, president of New York City Transit, has said the MTA needs over the next decade to purchase new train cars and buses and to upgrade the subway signal system.

Pat Foye, the new chair of the MTA, said at a press conference Monday that the MTA’s finances are “within striking distance” of the $40 billion needed to fix the transit system, with additional funds anticipated from federal, state and city government.

This story was originally published in Intelligencer at nymag.com.