Monday, December 06, 2010

Tax Revenue Shortfalls Hit MTA Hard Again

Once again, overly optimistic tax revenue projects are going to hit New Yorkers hard. The MTA is again facing a massive deficit because tax revenues from payroll taxes, fees and other revenue sources for the MTA have fallen short of their projections by over $300 million.
The controversial business tax -- which hits all business owners in the MTA region with a 34-cent levy for every $100 of payroll -- appears to be $321 million under expectations, MTA data show.

Overall, it will bring in about $1.34 billion instead of the $1.66 billion that bean counters projected.

And the "MTA aid" levies -- like a 50-cent surcharge on every yellow-cab ride along with car-rental, garage-parking and license fees -- are under projections by $60 million, the numbers show.

"The riders have done their part with service cuts and fare hikes, but motorists aren't doing their part," fumed Andrew Albert, an MTA board member.

He added that the bailout bill "is not a good package" and that city's free bridges should be tolled to help finance mass transit.

It's those poorly performing taxes and other moves -- like Gov. Paterson yanking $160 million from the MTA to help the state budget -- that hit straphangers in the wallet.

At first, the state thought the MTA would get mounds of payroll-tax cash because many business owners didn't know to pay it in late 2009.

But the returns fell short because of "overstated 2009 [payroll-tax] estimates that the state initially believed were delayed," according to MTA documents.

Also, the economy was weaker than expected, the MTA said, "which in turn resulted in lower-than-expected tax receipts."
That means that the likelihood of another round of fare hikes and/or service cuts looms even as new fare hikes are scheduled to take effect at the beginning of 2011.

How is it that once again the state and MTA economists overestimated the strength of the economy when putting together their revenue projections. Instead of being more conservative in their estimates, particularly given the way the local and national economy have been sputtering along for the past two and a half years, overly optimistic revenue projections that fall short means far wider deficits and an inability to make them up with still more tax revenues. The state continues trying to take blood from a stone and the situation is not going to improve anytime soon. Businesses are still limping along, and expecting new tax revenues to come in at or above the projections just makes no sense.

At the end of the day, the tax hikes failed to bring about the financial stability needed for the MTA to operate properly and the deficits mean that the agency will struggle to find ways to plug the hole.

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