Without Congestion Pricing, Will the Subway Go Broke?

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When Governor Kathy Hochul effectively killed congestion pricing last week, she also blew a hole in the budget of the MTA, leaving the State Legislature to scramble in the last hours of its session last week to find a new source of revenue for the transit agency. The congestion-pricing program, which was slated to go into effect on June 30, was expected to bring in $1 billion annually for the MTA and back $15 billion worth of capital projects such as the extension of the Second Avenue Subway. Among Hochul’s ideas to replace the revenue were a payroll tax on city businesses and a thinly detailed IOU proposal, neither of which were popular among lawmakers. The session ended without finding a new source of funding for the MTA.

Liz Krueger, the Democratic chair of the finance committee who represents Manhattan in the State Senate, denounced Hochul’s move as “reckless” and said Hochul disrupted years of careful planning and negotiations on a “political whim.” We spoke Tuesday about where things now stand with the governor, the legislature, and the future of mass transit in the city.

Governor Hochul caught everyone off guard last week with her pause of the congestion-pricing program, forcing you and your colleagues to quickly consider a few possible proposals to potentially fund the MTA including a tax on city businesses and what essentially amounted to an IOU. What were those discussions like? What was the mood like in Albany? 
Last week was our last week of session, so the mood already was on hyperdrive because we were trying to pass, frankly, hundreds of bills between the two houses. So, it wasn’t exactly the best time for any surprises to come out of the woodwork from the governor. Not that there isn’t often some kind of end-of-session surprise, but this one was, you know, to be quite blunt, totally shocking. You could have pushed us all over with a leaf when we’re learning this. I’d been hearing rumors for a couple of days from reporters, saying, “Have you heard about a delay of congestion pricing?” And I was like, “No.” And then, I even reached out to the MTA and they said, “No, we don’t know what you’re talking about.” I was like, “Good, just a rumor, no problem.” And then boom. So it was like, I don’t know, a bad movie script.

What impact did the governor’s decision have on the Legislature’s ability to do its job last week? 
Well frankly, it’s very disturbing because I think a number of really important bills didn’t get through at the end of session because everybody got thrown off and shifted into this issue, including, by the way, the governor’s people, who were in three-way negotiations on a bunch of these bills and then suddenly weren’t available for anything cause it was all congestion pricing. I have a bill called the NY Heat Act. We literally were in three-way negotiations for several weeks and we were so close. And then the governor’s people weren’t responding to calls or requests for that very last meeting. I didn’t want to pass a bill that would be vetoed. I really wanted a bill that actually did what I needed to do and wouldn’t be vetoed. So, then they stopped reaching out and NY Heat did not pass because we never got to the three-way agreement that we were sure we would. I think if you ask some other members, they would tell you the same thing on other crucial bills that they’ve been working on, in some cases for years. It really threw things off.

The Legislature ended its session without designating a new source of funding for the MTA. Where do things stand right now? Is it likely that lawmakers will return for a special session to figure this out? 
I have no idea. We won’t return unless there’s an answer. That was what was appalling about the governor’s proposal. It wasn’t a proposal to replace the money or to replace the incredibly negative impact on congestion and the environment, particularly in Manhattan. She just decided to pause seemingly without talking to any experts, since I feel like I’ve talked to everyone in transportation, the environment, business, and none of them were consulted. And, as far as I can tell, everyone, if they were consulted, would have said, “Don’t be ridiculous, don’t do this.”

And what you learn quickly was of her two proposals, the first one was just a new tax on the quote-unquote businesses — but really the workers only in New York City because the payroll tax is actually a tax on employees. (It was the tax we used last year and increased just on the operating costs of the MTA.) And we’re going to walk away from a model where New Jersey, Connecticut, Pennsylvania, tourists, the 12 counties would all share the cost because they’re all using the mass-transit system and the streets of New York City. So, we go from a less regressive, more distributive model for paying for the MTA capital plan to a regressive, only-on–New York City–workers plan. Again, why would we do that?

So, then they came up with this sort of odd, three-sentence IOU. In fact, the bond markets, they’re gonna lower the MTA bond rating because of this debacle. Meaning when we borrow money for the MTA — which, by the way, we do every day of the week for different projects — we’re gonna have to pay more. So, no one could actually prove to us how that was gonna work and why anyone would actually lend the MTA $15 billion on an IOU.

So, we also were like, that’s not a legitimate model. We also had no idea whether any of this was legal because, speaking for myself, I didn’t think canceling this on a whim was legal. There’s public-authority law, there’s fiduciary responsibilities of the board-member law, there’s environmental law. There were agreements with the federal government, settlements on previous lawsuits. Just endless legal questions that no one in the governor’s shop was prepared to even pretend to answer.

At a press conference, Hochul seemed to suggest that the funds to fund the MTA’s capital projects do exist elsewhere and that those that think congestion pricing is the only possible source show “a lack of imagination.”
Yeah, I heard that too. Maybe I do lack imagination. I’m pretty boring. I’m just a legislator. I read bills. I talk to lawyers. I try to review statutes. So, maybe she’s right. I lack imagination.

And did she offer what her imagination offered us as real?

I don’t think she offered any specifics, no.
See, that’s the problem with all this, right? Of course, the government can always tax. Of course, the government can borrow. It’s how much and at what cost. I think what really gets lost in this storyline, this $15 billion was for projects we’ve already started and committed to and are even in the middle of from a capital plan that is four out of five years in, right? We’re going to do a new capital plan for the next five years. I haven’t seen a final document yet, but I’m going to project that’s already another $50 billion we’re going to have to figure out how to pay for through a combination of state funds, taxes, bonds, etc.

She keeps saying this was unpopular. Yes, taxes are unpopular by definition. And yet, in the absence of revenue for government, I believe you collapse into chaos and you certainly don’t have a state that people actually want to live in or can successfully live in. So yeah, I get it was unpopular. Research around previous cities that moved to congestion pricing was that it’s at its highest level of unpopularity right before it started and then quickly gets absorbed into the Zeitgeist of “Oh, yeah, now we do this. Oh, look, there’s a lot less traffic. Hurray.” I’m not challenging that public-opinion polls showed it was unpopular. I just don’t think government has the privilege of not doing things that are unpopular. I think that we are responsible and obligated to do the best we can on behalf of the people of the State of New York even when that means taking unpopular action.

There’s been speculation that Hochul’s motivations could be political, an attempt to take a divisive issue off the board before the 2024 election out of concerns that it could hurt Democrats on the ballot. If true, what do you make of that argument? 
Well, the Republicans are having a ball with this. I think they’re playing it to their advantage incredibly well. So, I do not think it’s particularly helpful to Democrats running in November. I’m old enough to remember the 1999 commuter-tax debacle where the same exact argument was made that it would be popular for elections in Long Island and the Hudson Valley if we did away with the commuter tax. And again, it was Democrats then that also just came up with this great idea to end the commuter tax and that was going to help us win elections in those specific two areas, the same areas they’re talking about now. And we lost all the seats we were hoping to win and we never got the commuter tax back.

I just feel like I’m living through some strange déjà vu of an absolutely wrong political analysis that is not going to accomplish any of its, not stated, but hypothetical reasons for being the right thing to do. No one’s saying she canceled congestion pricing specifically to help candidates. I mean, that’s implied, but I don’t think she’s ever said that. But I just see the Republicans already doing TV commercials. “I’m Mike Lawler, and I got you out of congestion pricing.” I think it’s a bad economic decision and it’s a bad political decision and it’s a bad environmental decision.

This interview has been edited for length and clarity.

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