A rescue plan for the cash-strapped Metropolitan Transportation Authority appeared to be headed for derailment yesterday after New York Senate leaders proposed measures intended to address the agency's $1.2 billion operating deficit but not its long-term capital needs. Gov. David Paterson said the Senate's plan was unacceptable.

Senate Majority Leader Malcolm Smith, D-Queens, yesterday proposed a fare increase of 4% and imposing a 0.25% payroll tax on employers in the counties the MTA serves. Smith, however, rejected tolling currently free bridges on the East River and Harlem River, a controversial measure that was opposed by some democratic Senators in districts that would have been affected by the tolls.

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