Hochul, Albany lawmakers scramble to find new funding stream for MTA after pausing congestion pricing

Gov. Kathy Hochul.
(Darren McGee/ Office of Governor Kathy Hochul)

In the wake of Gov. Kathy Hochul’s decision earlier this week to indefinitely pause congestion pricing, she and state lawmakers have been scrambling to find a new funding stream for the Metropolitan Transportation Authority’s capital projects before the legislative session ends late Friday.

Assembly Speaker Carl Heastie, during a Friday afternoon news briefing, said his conference is weighing how to raise revenue for the MTA in the absence of congestion pricing. The tolling program was designed to raise $1 billion in annual revenue by charging drivers entering Manhattan below 60th Street a $15 toll, which would then have been used to secure $15 billion in municipal bonds for capital upgrades.

“Well, your only choice is to raise revenue, right?” Heastie said, referring to finding the funds necessary to pay for the capital upgrades. “If congestion pricing…is not going to be what funds it, you have to raise revenue [elsewhere]. So either have to do that now, sometime between now and January or January.”

The Assembly speaker said lawmakers plan to continue the discussion into Friday night.

The governor hit the brakes on congestion pricing earlier this week, shocking New Yorkers who were bracing for the program to take effect on June 30. She cited economic reasons for the sudden pause, but many argue she made the decision out of concern for how the program could impact Democrats trying to flip Republican House seats in the city’s suburbs.

The money raised from congestion pricing would have funded projects like the next phase of the Second Avenue Subway, upgrading decades-old signaling systems throughout the subway system, and making accessibility upgrades to 39 subway stations and nine Long Island Rail Road stations.

At first, Hochul floated the idea of levying a new payroll tax on city businesses intended to temporarily replace the billions of dollars congestion pricing was meant to generate for the MTA, according to published reports. But that proposal appears to be dead due to widespread opposition among Albany lawmakers.

Now, Hochul is reportedly weighing passing an IOU — a measure that would essentially make the promise that the state would find $1 billion for the beleaguered transit agency from the state’s general fund. As of midday Friday, state Senate Democrats left a closed-door meeting on the proposal without reaching a consensus, according to a WNYC/Gothamist reporter’s post on X.

State Senate Deputy Majority Leader Michael Gianaris (D-Queens) told NY1 late Thursday night that while details are still scant and in flux, Hochul’s proposal is “very simply something that just says there will be a billion dollars for the MTA in the [coming] year’s budget.”

Gianaris said state lawmakers are trying to determine if that money can even be used to secure municipal bonds.

Nathan Gusdorf, director of the Fiscal Policy Institute, slammed Hochul’s reported plan in a Friday statement as “ill-advised tax and economic policy” because it could involve tapping into the state’s reserves.

“The governor is now proposing to temporarily rely on informal reserves in New York’s general fund — an inappropriate use of reserves, which should be used to manage fluctuations in the state economy, not replace permanent sources of revenue,” Gusdorf said. “Long-term investment needs, such as the MTA’s capital budget, must be funded through stable, recurring revenue measures.”

Rachael Fauss, the MTA researcher at Reinvent Albany, said that the governor’s plan is currently a “concept” that “doesn’t exist on paper.”

“I think the governor likes it that way because if it did see the light of day, it wouldn’t stand any kind of scrutiny,” Fauss said. “Congestion pricing is the law. As soon as it turns on, the MTA can get $15 billion and bond that. So, trying to replace it with $1 billion in general fund money this year and some kind of future promise is just not at all the same. It’s a scam.”

The difference, Fauss said, is that the toll revenue would specifically be used by the MTA for capital projects, whereas there is nothing guaranteeing that money from the general fund would be used toward the agency’s capital improvements.

Several state lawmakers have already indicated that they would not vote for the IOU being floated by Hochul. That includes progressive state Sen. Zellnor Myrie (D-Brooklyn), who is exploring a run for mayor against Eric Adams next year.

“I am opposed to the Governor’s last-minute plan to cancel congestion pricing,” Myrie said in a Friday statement. “I will vote against any plan that will redirect funds from other priorities to cover the revenue lost from congestion pricing.”