New York's Metropolitan Transportation Authority yesterday approved fare and toll hikes and service cutbacks to close a $1.2 billion budget gap as the Legislature failed to agree on a rescue plan.

"Neither the board nor the senior staff of the MTA would be advancing these measures if we had any other choice," executive director and chief executive officer Elliot Sander said before the vote. "The fare increases and service cuts that the board must approve today are the only major tools Albany has given the board to operate the transit system and keep those operations in the black."

Dedicated taxes such as real estate transaction taxes that support the MTA's operating budget, as well as debt service, have fallen sharply over the past year. The authority also faces rising debt service costs, which Sander said was due to "decisions made early in the decade to put the 2000-2004 capital program on a credit card."

A proposal to create a new debt-issuing authority and raise revenue through a combination of smaller fare and toll increases, a payroll tax in the 12 counties served by the MTA, and new tolls on currently free bridges on the East River and Harlem Rivers was blocked by Senate Democrats who proposed a short-term solution instead.

Barring action by Albany, a series of fare and toll increases will begin to take effect on May 31 and bring in an additional $670 million in 2009 and $1.15 billion in 2010.

In a sign of how the fiscal difficulties are affecting the MTA's capital budget, the authority said this week it would eliminate a third track that would have relieved congestion at a station on the Second Avenue subway line currently under construction to save a net $65 million.

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