Transportation is heavily financed by public money in the form of subsidies or direct taxes. But those sources are never a certainty — illustrated by a New York judge’s ruling last week that could end the state’s payroll mobility tax.

The tax, and four other related fees that the judge also deemed unconstitutional, contribute nearly $2 billion a year to the budget of the Metropolitan Transit Authority, which runs the Metro-North commuter rail system.

“If this ruling is upheld and no other revenues are found, it’s going to have a dramatic effect on commuters, on businesses, on the environment and the region,” said Ryan Lynch, associate director of the Tri-State Transportation Campaign, a transportation advocacy group in the region.

The implications for Connecticut commuters would be less dire, since the state Department of Transportation owns the New Haven line tracks between New Haven and the New York state line, and therefore pays for track maintenance and decides train fares. Still, the MTA stands to lose nearly 14 percent of its operating budget, which is bound to have implications for Connecticut commuters since the agency pays to maintain New Haven line tracks within New York State.

The MTA has also tried to cut service on the New Haven line in recent years due to budget problems; there were discussions about eliminating the latest night train on that line in 2010, as part of a series of cuts that raised $93 million. Connecticut was able to fend off such service cuts because of its operating agreement with the agency, but the need to raise $2 billion would be hard for the state to ignore entirely.

At a press conference at Grand Central Terminal last week, MTA Chairman Joseph Lhota called the decision “flawed” and “erroneous.”

“We will vigorously appeal this decision,” he said.

At the heart of the lawsuit is the issue of who should pay for public transit that may not directly benefit everyone. In his decision last week, New York Supreme Court Justice Bruce Cozzens Jr. wrote that the tax and the MTA’s budget woes are “not a matter of substantial state concern.”

Others would beg to differ.

“Without the services that MTA provides, New York would choke on its own traffic,” said Lhota.

The Tri-State Transportation Campaign has advocated for a toll on drivers who enter the New York City central business district.  “Motorists that don’t take the transit system should contribute as well, because they see reduced congestion on their roads,” said Lynch.

In Connecticut, Lynch said, the concept of “value capture” is growing popularity among transit advocates. Under that concept, developers who are completing work around a train station, for instance, would pay a type of “impact fee” that would go toward the transit system.

The payroll mobility tax, in existence since 2009, has been scaled back significantly. As a tax of up to 34 cents per $100 in payroll for businesses, it was introduced after revenue from real estate transaction taxes declined dramatically in the midst of the housing bust. Other taxes and fees for taxi rides, driver’s license renewals, and car rentals that generate hundreds of millions in revenue are also at play in the lawsuit.

New York’s Nassau County executive Ed Mangano filed the lawsuit against the MTA and New York state officials challenging the tax in 2010, after the agency eliminated $26 million in funding to the county. In a press release, he called the tax “job-killing” and “oppressive,” adding, “clearly, the millions of dollars that Nassau’s businesses have handed over to the MTA have not been used for the benefit of the public.” Suffolk, Westchester and Putnam counties, as well as some municipalities, have since joined the lawsuit.

MTA officials say they’re confident they will win an appeal, citing four other cases that have challenged the mobility tax and were struck down. The agency could appeal directly to the Court of Appeals — the state’s highest appelate court — since the lawsuit deals with a constitutional issue.

But whatever happens, the recent decision has reignited a debate on how public transit should be funded. While it’s clear that not all revenue can come from the farebox, some railroads, such as Metro-North and the New York City subway, are heavily funded by fares, while others get most of their revenue elsewhere. So far this year, Metro-North’s “farebox operating ratio” has been 62 percent, meaning that the fare covers that much of the day-to-day operating cost of a commuter’s ride.

Some commuter advocates have argued that such a high ratio means fares should actually be lowered. But higher fares have so far not deterred ridership, with New Haven line trips reaching a record 38 million last year. It’s the taxes, such as the payroll mobility tax, that may be actually be more uncertain.

“There’s always uncertainties. So what we have to do is find the most balanced way to invest in the system or support the system,” Lynch said.

This story is the result of a partnership between The Mirror and WNPR/Connecticut Public Radio. A radio version will be available the morning of Aug. 28.

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