New York City plans to appeal a state Supreme Court ruling that struck down the city’s plans to expand yellow taxi service into all five boroughs, a ruling that could blow a $1.4 billion hole in its budget.

“We are deeply disappointed by the court's decision, and will be filing an immediate appeal," Michael Cardozo, corporation counsel for the city's Law Department, said in a statement. "The irrational fear of lost profits by medallion owners and lenders should not be permitted to derail these important programs.”

On Friday, Justice Arthur Engoron in Manhattan called the enabling law unconstitutional because Mayor Michael Bloomberg circumvented the City Council, which had opposed the measure.

Bloomberg instead went to the New York State Legislature, which approved it. Gov. Andrew Cuomo signed the bill on Feb. 17.

Once Engoron formalizes the opinion within a few days, the city will proceed with the appeal, a Law Department press officer said Monday.

The city two months ago finalized its $68.5 billion budget for fiscal 2013 that relied on one-shot items that included the expected amount from the sale of 1,800 new taxi medallions. Reliance on iffy assumptions worried some critics.

“Even if it is allowed to go forward, it remains to be seen whether the medallions will sell for the expected price,” the watchdog Independent Budget Office warned in a report.

City Comptroller John Liu said the budget was pockmarked with stopgap measures.

“The reliance on such one-shots as the realization of $1 billion in revenue from the sale of 2,000 taxi medallions and the use of $1 billion of funds set aside in the Retiree Health Benefits Trust to fund current-year health care costs for retirees further conceals the budget’s structural imbalance,” he said.

Taxi and Limousine Commissioner David Yassky said Friday the city would appeal. “The court’s decision … is a great loss to millions of New Yorkers outside of Manhattan, as well as for the professional livery drivers whose ability to feed their families by providing a popular service their communities want and deserve is now in jeopardy,” he said in a statement. “We owe it to all New Yorkers to appeal this judge’s opinion.”

The Metropolitan Taxicab Board of Trade filed the lawsuit on behalf of the industry, which argues that expanding cab service would devalue medallions.

“Rights and privileges that have existed for the taxicab industry for nearly a century have been abolished with the stroke of a pen,” the group’s law firm, Emery Celli Brinckerhoff & Abady LLP, said in an April 18 filing.

“The primary beneficiaries of the new scheme will be a select class of licensees — livery drivers and owners — many of whom have openly violated laws that have been in effect for more than 50 years.”

Moody’s Investors Service rates the city’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s each assign AA.

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