Rating Agencies Weigh in on MTA Court Ruling

Moody’s Investors Service on Monday called last week’s state Supreme Court ruling invalidating the Metropolitan Transportation Authority’s payroll mobility tax a credit negative, while Standard & Poor’s said it would not affect its transportation revenue bond rating.

The agency runs subway and commuter rail systems in the New York City region. Moody’s rates the bonds A2, while Standard & Poor’s assigns an A rating. Both have a stable outlook on the bonds.

Last week, Judge R. Bruce Cozzens Jr. in Long Island’s Nassau County struck down the law, which Nassau and Suffolk counties, and several of their Long Island communities, had challenged. Cozzens said the law “does not serve a substantial state interest.”

The MTA said it would appeal.

The tax, 34 cents on every $100 on payroll costs for employers in metro New York, raises an estimated $1.3 billion annually. Moody’s said losing that revenue could “increase pressure on the agency’s already-strained operations.”

Standard & Poor’s said in its statement:

“The state is continuing to collect the tax since the judge did not order it to stop doing so, and is likely to appeal the decision. If a court orders the state to stop collecting the tax, the authority’s financial position could be weakened and pressure the rating or outlook, absent added support from the state, fare increases, or service cuts to offset the loss of revenue.”

Also Monday, the MTA said it has submitted its Federal Emergency Management Agency and insurance claims to recover the $65 million in losses it suffered due to flood and wind damage related to Tropical Storm Irene, which hit the region a year ago.

Its Metro-North Railroad sustained  washouts on the Port Jervis Line, where the Ramapo River flooded miles of track and left some dangling in mid-air when it receded. Mudslides on the Hudson Line, including one in the Riverdale section of the Bronx that required the long-term evacuation of an apartment building, also contributed to the claim, the MTA said in a statement.

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Transportation industry New York
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