A New York State appellate court has reversed a lower court and upheld the constitutionality of the Metropolitan Transportation Authority’s payroll mobility tax.
Nassau and Suffolk counties on Long Island had challenged the tax, with support from several of their communities and some upstate counties. Nassau County Judge R. Bruce Cozzens Jr. last August called the tax unconstitutional.
The tax, 34 cents on every $100 of payroll for employers in metro New York, raises an estimated $1.3 billion annually for the authority, which oversees New York City’s subway system, plus regional commuter rail lines and bridges and tunnels.
“Removal of the tax’s revenues would have had a catastrophic impact on the region’s 8.5 million daily transit riders,” MTA spokesman Aaron Donovan said Friday.
Although the ruling was widely expected – the MTA has won four similar challenges -- the bond rating agencies have cited the litigation as a possible source of strain in the authority’s budget. According to an MTA official, removal of the tax would have deprived the authority of a resource 15 times greater than the savings it generated in 2010 through widespread service cuts.
The MTA, with roughly $32 billion in debt, is one of the largest issuers in the municipal marketplace. The official said the MTA has generated annual recurring savings that totaled more than $800 million in 2013 alone, and are expected to rise to $1.2 billion by 2016.
Moody’s Investors Service rates the MTA’s transportation revenue bonds A2, while Fitch Ratings and Standard & Poor’s rate them A.
