Nov. 19 (Bloomberg) -- New York, approaching its borrowing limit, needs new revenue sources to maintain its transportation system and back debt for projects such as replacing the Tappan Zee Bridge, Lieutenant Governor Richard Ravitch said.
The Metropolitan Transportation Authority, operator of the New York City subway system, and the state Transportation Department, which says 5,500 bridges need repair or replacement, don’t have enough funding to cover operating costs and the new borrowing needed for construction projects, Ravitch said in a report to Governor David Paterson.
“New York, therefore, faces a choice: significantly higher taxes, fees, fares and tolls or a drastically diminished transportation program that could jeopardize safety and economic well-being,” Ravitch wrote.
Ravitch, 77, was appointed in July 2009 by Paterson to break a tie between Republicans and Democrats in the state Senate and serve as an adviser on budgetary and financial issues. He is a former real estate developer and chairman of the MTA. His term expires Dec. 31.
New Jersey Governor Chris Christie last month canceled a proposed train tunnel under the Hudson River, saying his state couldn’t afford as much as $5 billion in potential overruns on the $8.7 billion initial cost of the project. New York City officials say they are studying a less-expensive proposal to extend the city subway system under the river.
Deferred maintenance and age were blamed for the sudden closure last year of a bridge connecting New York and Vermont over Lake Champlain. Replacing the 55-year-old Tappan Zee, which carries about 140,000 vehicles daily and costs $100 million annually to maintain, is estimated to cost $6 billion to $10 billion, according to the report.
A regional strategy for tolls “that includes all key bridges and statewide roads” could provide funds for projects such as the Tappan Zee, the report said. The bridge over the Hudson River, about 25 miles (40 kilometers) north of New York City, connects Westchester and Rockland counties.
“The state should also explore the creation of special taxing districts for certain mega-projects that have the potential to dramatically increase economic activity and property values in an area,” it said.
Financing options for the Tappan Zee include expanding the jurisdiction of the Port Authority of New York & New Jersey to include the bridge, Paterson said Nov. 18 in an interview on New York City radio station WOR. The proposal, which would have the states share the costs and revenue of the bridge, has been presented to Christie, Paterson said.
New York, with more than $55 billion of bonds, is the second-most-indebted state after California. It is approaching the legal cap on its ability to sell new bonds, Budget Director Robert Megna said yesterday in a speech to the Albany-based Nelson A. Rockefeller Institute of Government. A state law passed in 2000 limits debt to 4 percent of residents’ personal income.
Because of its borrowing cap, New York this year trimmed the Transportation Departments’ five-year, $26 billion capital plan to two years and $7 billion, Megna said.
At the MTA, which also operates a suburban rail network, a five-year, $28 billion capital plan “faces a gap of at least $10 billion for its final three years,” according to the Ravitch report.
Taxing Options ‘Difficult’
“Taxing options to fill in these kinds of large gaps in the capital infrastructure program are difficult to think about,” Megna said.
An additional payroll tax approved last year for New York City and surrounding counties in the state to fund the MTA has been criticized by Republican lawmakers.
New York Governor-elect Andrew Cuomo, a Democrat, has promised a freeze on state taxes. He proposed maximizing federal funding, adding private revenue sources and additional state funds to pay for projects. He also proposed creating an infrastructure bank to use federal and state money “as equity and lever that equity” to create a larger pool of funds.
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