Swap the Suburban Payroll Tax for East River Bridge Tolls — Deal or No Deal?

Five Senate Republicans, led by Sen. John Bonacic, are making transit advocates an offer they can probably refuse. The payoff is appealing: state authorization for bridge tolls on the East River bridges. But the price they are demanding in return, the total repeal of the payroll mobility tax outside New York City, is too high to pay.

The basic contours of a road pricing-for-reduced payroll tax swap could potentially turn into a big win for transit riders — the right deal would reduce traffic, improve bus speeds and reliability, and raise a substantial amount to plug the gap in the MTA capital program.

Bonacic’s bill, however, is not the deal transit advocates want to aim for. It would only authorize the New York City Council to institute tolls over the East River bridges, not the Harlem River bridges (a fact which may be related to the fact that four of the five sponsors represent the Hudson Valley, not Long Island). And it seems that the rate to charge motorists would be left up to the city. So right off the bat there’s a lot of uncertainty about whether the City Council would act and what level of tolling they would consent to.

If the city charged $2 tolls in each direction, as was proposed by Assembly Speaker Sheldon Silver and endorsed by Public Advocate Bill de Blasio in a 2009 plan, East River-only tolls would likely raise around $240 million, according to an analysis by road pricing expert Charles Komanoff. (UPDATE: Due to revisions in his model, Komanoff now estimates that $2 tolls would bring in $300 million.)

In comparison, the seven suburban counties in the MTA region contributed roughly 30 percent of total payroll tax revenues. In 2010, the payroll tax brought in just under $1.35 billion. Without the suburban counties, that would have dropped by $405 million.

In other words, swapping the suburban payroll tax for $2 East River bridge tolls would end up costing the MTA roughly $165 million each year.

The Bonacic bill does not appear to have an Assembly equivalent yet, suggesting that it isn’t going anywhere right now. It does, however, mark the first attempt to legislate an often-suggested swap: a lower suburban payroll tax in exchange for bridge tolls or congestion pricing. A differently structured deal, one which partially reduces the suburban payroll tax while guaranteeing a more robust road pricing system, could be much more attractive, especially given that raising revenues through bridge tolls has the added benefit of cutting congestion and speeding up buses.

It’s possible, of course, that the city would decide to charge more than $2 each way under Bonacic’s plan. Even if the new bridge tolls were as high as the currently-tolled MTA bridges and tunnels, however, that would barely make up for the lost payroll tax revenue. Using the Independent Budget Office’s recent calculation of bridge toll revenue and holding constant the share of Komanoff’s East River bridge estimate to the total Silver plan revenue, even tolls that high would only raise around $517 million. That would net the MTA a small profit (but unless the tolls steadily increase over time, it could be an ever-shrinking profit — by 2014, the suburban share of estimated payroll tax revenue is projected to reach $485 million).

More importantly, once you’ve traded away suburban payroll tax revenue, you can’t get it back. There’s only one chance to get this deal right, and if you institute tolls just to offset a suburban tax break, you can’t use the revenue to pay for system repairs. To close the MTA’s potentially disastrous $10 billion capital plan deficit, both the payroll tax and bridge tolls will be necessary.

While the congestion-busting effects of East River bridge tolls are tempting, transit riders can’t afford to give up one source of funding without getting a bigger revenue source in return. Otherwise New York is still on track for a combination of rising fares and deteriorating transit service. The verdict on this version of the payroll tax-for-bridge tolls swap should be clear: No deal.