The New York City Council last week pushed back against Mayor Michael Bloomberg’s cancellation of a $400 rebate for homeowners. The council said the mayor does not have the right to withhold the checks and several lawmakers filed a suit last week to force the checks to be released.

The rebates were supposed to have gone out in October but have not, and Bloomberg announced earlier this month he wanted to cancel them to save the city $256 million.

At a council hearing last week with city budget director Mark Page, council member and finance committee chairman David Weprin challenged the mayor’s right to cancel the rebates by holding up a preliminary official statement for city general obligation bonds that said “rescinding the $400 property tax rebate … requires city legislative approval.”

Bloomberg spokesman Marc LaVorgna said that the mayor’s office will work with the council but that the city doesn’t have the money to pay for the rebates.

The mayor’s mid-year budget modification called for $500 million of cuts in the current fiscal year and $2.2 billion in the next fiscal year. Even with those reductions, the city — which is facing lower tax collections from a battered financial sector — projects a $1.3 billion deficit in fiscal 2010, which begins on July 1.

Page suggested the city lobby the state government in Albany to revive a commuter tax that was rescinded in 1999.

The tax had brought in about $400 million annually by taxing employees who worked in New York City but lived outside the city limits. Weprin said part of the tax could be used to help the Metropolitan Transportation Authority, which faces budget problems of its own.

Connecticut Gov. Jodi Rell has said she would fight a return of the commuter tax.

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