New York puts national spotlight on congestion pricing implementation
Congestion pricing is going to be reality in New York, where decision makers must now hammer out the variables and decide the course of a policy that is likely to set a precedent for other cities across the country.
Implementation of the plan, included in New York State's fiscal 2020 budget, will require officials to deal with variables ranging from the amount of tolls and time-of-day pricing to which Metropolitan Transportation Authority units receive funding. A six-member Traffic Mobility Review Board will flesh out the tolling details, with 2021 the target date for implementation.
Congestion pricing, touted as the first of its kind and a likely precedent setter in the U.S., for drivers entering Manhattan south of 60th street was one of several policy measures Gov. Andrew Cuomo pushed through in Albany.
It could leverage up to $15 billion for the capital needs of the state-run MTA, which operates the city's subways, buses, two commuter rail lines and several intraborough bridges and tunnels.
Moody's Investors Service called the plan a credit positive for the MTA, the state, and city in a brief report released Tuesday.
"Congestion pricing will provide the MTA, which faces a substantial deferred maintenance backlog, a significant funding injection for critical infrastructure investment and service improvements, and will improve the competitive position of the agency's subways, buses, and bridge and tunnel crossings," Moody's said. "Given the essential nature of mass transit to the economies of New York City and New York State, both governments will also benefit from the MTA’s improvements. [It] is a key step in resolving uncertainty over the MTA’s funding future, which has been a looming fiscal challenge for all three entities."
Questions remain about funding for the rest of the MTA’s estimated $40 billion capital plan, which will be released in the second half of 2019, the agency said.
Other open questions include how the MTA will use the funding and how it will reorganize under the governor and the MTA's new chairman, Patrick Foye. He has been the MTA's president the past two years and was executive director of the Port Authority of New York and New Jersey from 2011 to 2017.
"Congestion pricing will certainly help because if they didn't get that through, it would have been detrimental to the MTA's bond rating and how the paper trades, but [there are] a lot of other issues to focus on," said Howard Cure, director of municipal bond research for Evercore Wealth Management.
S&P Global Ratings last year downgraded the MTA twice within five months, landing its issuer credit rating at A. The MTA is one of the largest municipal issuers with roughly $41 billion in debt.
"The congestion fees will likely be leveraged to support up to $15 billion of bonds, answering at least part of the question about how the MTA's significant needs will be financed," Moody's said. "Although this would significantly add to the MTA's outstanding debt, if well-managed, the burden would be balanced by the new revenue and the value to the economy of the improved infrastructure assets."
One area of clarity is Cuomo and the MTA controlling city streets — essentially a multi-billion dollar asset — to implement the program, said Nicole Gelinas, a senior fellow with the Manhattan Institute for Policy Research whose focus has been on infrastructure.
"What's good is that it's very clear who is in charge," Gelinas said. "This gives the governor and the MTA total control of New York City streets with very little city input."
The traffic board will have two suburban representatives and only one from the city. "Even by statute, the suburbs outnumber the city two to one," Gelinas said.
Unlike former Mayor Michael Bloomberg's plan 10 years ago, the city did not pass a home-rule resolution.
Exemptions — part of the political trade-off process — could restrict revenue, according to Maria Doulis, a vice president of the Citizens Budget Commission. The traffic board will determine exemptions for such groups as disabled, elderly and retirees, and the poor. The new law exempts Manhattan congestion-zone residents with incomes of less than $60,000.
"The greater the number of exemptions you bake into this thing, the less the revenue that you will have to support the MTA. That is something very critical to look at," Doulis said on a recent Bond Buyer podcast.
The enacted state budget also includes a framework to begin requiring online sellers to collect sales taxes, which Cuomo projects will generate $320 million for the MTA capital plan lockbox. Lawmakers also enacted a "mansion tax" with a top rate of 4.15% for the sale of residential properties valued at $25 million or above withing the five boroughs to raise an estimated $365 million for MTA projects.
"I give the governor a lot of credit for coming back from this Amazon thing to enact the state budget and pass congestion pricing," Gelinas said. Tech powerhouse Amazon in February backed out of a deal to establish a supplemental headquarters in Long Island City, Queens.
Cuomo has tightened his grip on the MTA the past three years. He wants to eliminate staggered terms for board members. According to MTA bylaws, the governor now appoints six of 17 board members, including the board chair. New York's mayor appoints four while suburban county executives appoint the rest.
The political controversy has resonated across the state line. On Monday, New Jersey Gov. Phil Murphy asked Cuomo to dedicate a portion of the revenue to NJ Transit and Port Authority Trans Hudson capital upkeep.
"The double charging of George Washington Bridge drivers will ultimately shift more individuals onto constrained and aging NJTransit and PATH systems without the commensurate capital support to mitigate those impacts," Murphy said in his letter.