Building congress urges industry support for payroll mobility tax after judge strikes down law

Organization, Though Now Exempt, Will Continue to Pay Tax

Facing a system-wide rebuilding effort after the destruction caused by Hurricane Sandy, the Metropolitan Transportation Authority (MTA) may also lose billions of dollars in vital revenue after a Nassau County judge declared the 2009 law authorizing the Payroll Mobility Tax (PMT) and several other dedicated fees unconstitutional.

The August decision followed a court case brought by elected officials from counties served by MTA trains and buses, and which could cost the Authority more than $1.6 billion annually, reduce its capital program, and impact service for millions of commuters.  The law will remain in effect until the appeals process is complete and a final judgment is rendered.

In response, the New York Building Congress is asking the design, construction and real estate industry to fight efforts to repeal or alter the Payroll Mobility Tax. 

The 2009 tax was approved by the State Legislature to address chronic funding shortages due to increases in non-discretionary operating costs and historic levels of debt-financed investments in the system’s century-old infrastructure. 

In 2010, the MTA collected $1.4 billion from the PMT and an additional $268 million from other fees authorized by the law.  This money accounts for more than 35% of all MTA dedicated taxes and fees and more than 15% of all revenues.

The Legislature has since amended the law to exclude schools, non-profit organizations – including the New York Building Congress – and small businesses, reducing revenue by some $250 million.  That revenue gap was filled this year by a special appropriation, but must be reappropriated every year.

Building Congress President Richard T. Anderson stated, “Elected officials cannot afford to jeopardize the MTA system by reacting to divisive arguments about who reaps the benefits of the MTA and who should bear the burden. The maintenance and rebuilding of the MTA is our collective responsibility.  That’s why the Building Congress will voluntarily continue to contribute its share of the Payroll Mobility Tax despite the recent law exempting us.  We hope others will recognize the importance of the tax and follow suit.”

After it was exempted in April, the Building Congress estimates that it would have owed $3025 for the rest of 2012 tax year.  The Building Congress will submit this amount to the State.

The PMT is essential to the MTA’s future financial well-being.  The Authority’s most recent financial plan projects a small surplus at the end of 2013, and deficits for 2014 and 2015.  The plan makes three key assumptions:

• Labor costs will be controlled through a proposed “three zeros” contract for 2012-2014, where salary increases will be offset by higher productivity or concessions. 
• The plan does not project any new debt after the end of the 2010-2014 capital campaign, meaning the next capital program will require a new source of revenue over and above any revenues now collected by the MTA.
• A series of already-scheduled, 7.5 percent fare and toll hikes will be approved by the MTA board in early 2013 and 2015.

A change in any of these assumptions would alter the MTA’s delicate financial balance.  In this context, the loss of the PMT would be disastrous, likely forcing cuts to both service and the MTA capital program.  An alternative revenue source would also be needed.

Anderson said, “By seeking to eliminate the PMT, public officials advocating repeal are playing with fire.  As the impact of the hurricane on our system so amply demonstrated, the State – indeed, the whole region – simply cannot survive economically without a well-functioning mass transit system.  It is too important to our economy to be the subject of political brinksmanship, and it must have the funding it needs to rebuild and carry our economy forward.”

What You Can Do:

• Contact your local and State elected officials and tell them you support reinstating the PMT as originally designed and support designating all the funds collected to mass transit. 

• Consider voluntarily paying the PMT if you represent an organization that recently became exempt.