New York Gov. David Paterson said yesterday that the Metropolitan Transportation Authority's capital plan would be in peril if the Legislature does not pass a rescue for the cash-strapped agency by March 25.

"There will be prohibitively high fare increases, there will be extraordinary cutbacks, there will be no MTA capital plan if action isn't taken now," Paterson said. "This great system must at this time undergo a rescue plan - we must rescue the MTA from fiscal insolvency."

Negotiations have been ongoing between lawmakers to hammer out a deal that would created new revenue streams for the MTA and against which the authority could market $17.5 billion of bonds on a new credit over the next six years. A number of state senators have objected to the part of the proposal that would add tolls to currently free bridges over the East River and Harlem River that connect Manhattan to other boroughs.

A proposal to impose a payroll tax on employers in counties served by the MTA that is primarily intended to fund the agency's capital program has received little opposition. Spokesmen for Assembly Speaker Sheldon Silver, D-Manhattan, and Senate Majority Leader Malcolm Smith, D-Queens, said yesterday that there had been no progress toward passing a rescue plan. Silver has endorsed a version of the recommendation of the so-called Ravitch Commission, though no legislation has been introduced.

If the commission proposals are adopted by the Legislature, the MTA expects to market $15.5 billion of debt from 2009 through 2014 on a new credit using the new revenue streams, according to a draft schedule provided by the MTA.

In addition, the authority would sell an additional $2 billion of bonds for bridge maintenance that previously had not been scheduled. The new bonding would be in addition to borrowing already anticipated by the MTA on its existing credits.

Asked whether he would provide state money for projects to try to secure votes from senators who are opposed to the tolling proposal, Paterson said he was "not making any trades with legislators. I think that the issue is serious and important on its own value."

Following a press conference yesterday at the opening of the new South Ferry subway terminal in lower Manhattan, the first new station to open in New York City since 1989, the governor did not take a question asked by a reporter about whether he would accept a deal that did not include new tolling.

"That wasn't a question, that was a negotiation," Paterson quipped.

If the MTA does get a new credit, it could be well received by investors looking for diversity, depending on its rating and yield, according to Evan Rourke, portfolio manager at Eaton Vance.

With "a new credit, nobody's full on it, nobody's reached capacity," he said. "If they approve it, generally it has a broader pool of attraction initially. "

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