Funding the MTA’s Capital Plan: Only Congestion Pricing Checks All the Boxes
In light of Governor Hochul’s congestion pricing “pause” that created a $16.5 billion dollar hole in the MTA’s 2020-2024 Capital Plan, the Governor, elected officials, pundits and gadflies— and even some advocates— have pitched or pondered a variety of alternative funding mechanisms to keep the transit system afloat. However, of the funding mechanisms proposed as alternatives to congestion pricing, many are regressive and would tax even more New Yorkers than the small number of mostly affluent people who drive into the CBD every day, others vastly inadequate to fill the gap, and some both.
And none of them meet the three core goals of congestion pricing: reducing traffic; improving air quality – while providing funding for mitigation in Environmental Justice communities; and raising critical funding for transit improvements.
Regardless of whether some alternate action is taken to fill the $16.5 billion hole, come January, the State Legislature will be tasked with finding funding for the MTA’s 2025-2029 capital program, which MTA Chair Janno Lieber estimated would cost upwards of $75 billion dollars. Although that funding will come from a variety of local, state and federal sources, there will be an incredible need for new sources of revenue to keep the system in a state of good repair. Therefore, any of the below options being considered should be dedicated to the next Capital Plan— not retroactively applied to the 2020-2024 plan to replace the $15 billion already allocated to come from congestion pricing.
Without congestion pricing, legislators face an even greater hole in both current and future MTA Capital Plans and lack a crucial tool to make the improvements riders are counting on.
Funding Options Explained
All capital plans are not created equal. The MTA’s 2020-24 plan was built around the legislatively created congestion pricing mechanism that would by statute raise $1 billion, bondable to $15 billion, while also reducing congestion and improving air quality. Future capital plans, beginning with the 2025-29 plan, will need new, dedicated and recurring funding sources to stave off a fiscal crisis and infrastructure deterioration most recently seen during the 2017 Summer of Hell, but reminiscent of the 1970’s and 1980’s. Therefore, even while Governor Hochul seeks to muster support for one shots or temporary infusions to fill in the funding hole created when she announced the pause of congestion pricing, finding solutions for the future is imperative.
We weighed the pros and cons of the funding options that have been suggested as alternatives to congestion pricing:
Congestion Pricing
Congestion pricing has been extensively studied and was passed into law in 2019 to reduce traffic, improve air quality, and fund $15 billion (bonded) of the MTA’s 2020-2024 Capital Plan set aside in a lockbox. The congestion pricing “stool,” as described by Senate Majority Leader Andrea Stewart-Cousins, is composed of three crucial legs that make it the only viable option to tackle the challenges MTA riders, and our region, are facing: less traffic in the Central Business District, which costs New York’s economy $20 billion annually according to the Partnership for New York City; cleaner air to address the 3,000 New Yorkers killed by PM2.5 pollution annually; and a reliable, bondable funding stream to invest in the transit millions of New Yorkers rely upon each and every day.
Raising Taxes on the Ultra-Wealthy (per the Working Families Party)
Groups including the Working Families Party have suggested exploring a tax increase on the ultra-wealthy if Governor Hochul fails to implement congestion pricing. But since taking office, Governor Hochul has steadfastly refused to raise New York’s personal income tax, even on the ultra-wealthy. For the last three budgets she has kept that promise, making this option politically infeasible in the short term. Were this funding mechanism to be utilized, the funds raised would be better spent on the 2025-2029 MTA Capital Plan, which the legislature will be tasked with finding funding for in the upcoming session.
Increasing the Payroll Mobility Tax on NYC Businesses (per Governor Hochul)
Shortly after announcing the indefinite pause of congestion pricing due to “affordability concerns” for New Yorkers, Governor Hochul proposed raising the Payroll Mobility Tax on businesses within New York City. According to the Fiscal Policy Institute, increasing the Payroll Mobility Tax in New York City would impact 4,347,806 workers, while congestion pricing would impact just 283,708 New Yorkers – who make an average of $40,000 more than those impacted by a payroll mobility tax increase. In 2023, the Fiscal Policy Institute found that the decision to increase the Payroll Mobility Tax solely in New York City led to workers of color paying $704 million of the $800 million raised. Were this funding mechanism to be utilized, it should be applied to the broader MTA service territory that benefits from a well-funded transit system to support the 2025-2029 MTA Capital Plan.
$1 Billion “IOU” for the MTA from New York State (per Governor Hochul)
After the New York State Legislature rejected Governor Hochul’s Payroll Mobility Tax increase, she suggested passing a resolution to grant the MTA $1 billion in funding. Unlike the $1 billion of congestion pricing revenue that was anticipated to be bonded to $15 billion, you cannot bond an IOU. This option also restarts the dangerous precedent of using general fund revenue to fund the MTA. Historically, governors have raided the general fund to pay for other items to the great detriment of MTA riders.
Reducing Fare Evasion (per Assemblymembers Eachus, Eichenstein, and others)
Unlike the $1 billion of congestion pricing revenue that was anticipated to be bonded to $15 billion, the MTA cannot bond a fare evasion crackdown. While it’s crucial to curb fare evasion—which has cost the MTA an estimated $700 million annually—this increase in farebox revenue supports the operating budget, not capital. While fare evasion is costly for the MTA it is also expensive to curb. Many options to help reduce fare evasion require capital investment, such as redesigning and improving fare gates around the transit system. Reducing fare evasion is not a serious alternative to congestion pricing— it’s a complementary initiative that would be improved with funding from congestion pricing.
Casino Licensing Revenue (per Senator Addabbo and Assemblymember Pretlow)
The $1.5 billion in one-time revenue raised from casino licenses has already been promised to the MTA’s operating budget, as well as for education, and is not bondable. Raiding the operating budget to fund the capital program has a dangerous history of leading to service cuts, layoffs, and more drastic fare increases. Unfortunately, this outcome is already likely without congestion pricing, as the MTA is being forced to borrow against its operating budget earlier than planned.
Casino and Online Gaming Tax Revenue (per Senator Addabbo)
In contrast to the one-time revenue from new casino licenses, the tax revenue generated from casinos and online gambling is recurring, bondable and projected to raise approximately $2 billion annually, similar to the amount currently generated by the New York State Lottery. 50% of recurring casino tax revenue from casinos located in New York City and 40% of recurring revenue from casinos located outside of New York City has been planned to go to the MTA’s operating budget, so redirecting this funding would put additional pressure on transit operations. Additional funds from casinos have been dedicated to education. The Citizens Budget Commission estimates that recurring tax revenue from casinos will raise about $231 million annually for the MTA, starting in 2027, while around $1 billion annually could be raised from online gambling. However, it has also been widely documented that gambling has far greater negative impacts on low-income communities and communities of color.
Selling Naming Rights for all Subway Stations (per Assemblymember Weprin)
Assuming the naming rights for all 472 New York City Subway stations could be sold for the same $200,000 price as Atlantic Avenue–Barclays Center, an extraordinarily unlikely situation, the maximum amount of money raised by this option would be $94 million annually, less than 10% of the revenue to be raised by congestion pricing. Given that naming rights for stations are typically sold individually, it would be impossible to raise this revenue in the timeframe needed to supplement the $16.5 billion lost from pausing congestion pricing and challenging to bond. Renaming stations can also be unnecessarily confusing for riders.
Increasing the NY Sales Tax by .375% (per Joe Lhota)
According to the Tax Foundation, New York has the fourth highest average local sales tax rates in the United States. Raising the sales tax across the MTA region would impact millions of New Yorkers, as opposed to the 283,708 New Yorkers, whose average income is $130,140, who are anticipated to pay a congestion pricing toll. Were this funding mechanism to be utilized, the funds raised would be better spent supporting the 2025-2029 MTA Capital Plan, which the legislature will be tasked with funding in the upcoming session.