MTA Chair Peter Kalikow took a bold and critical step last week when he identified revenue sources to pay for the MTA’s proposed 2005-2009 capital plan. His proposal included raising a variety of fuel, real estate and business taxes that already help pay for MTA capital and operating costs. The measures are predicted to raise $850 million annually if approved by the governor and legislature.

But NY State Senate Majority Leader Bruno opposed Kalikow’s plan, telling the New York Post vaguely that "we have sources of revenue without raising taxes." Deputy Senate Majority Leader Dean Skelos told Newsday he would not support new revenue because the scale of the capital program is "irresponsible." Skelos has criticized the plan several times and called for its scaling down, without publicly indicating which projects he wants delayed or canceled. Spokespeople for Governor George Pataki initially noted the governor’s "ardent opposition to tax increases."

Transit advocates say Kalikow is doing the right thing. It has long been known by anyone paying attention that state government would have to supply new revenue to keep MTA capital investment going into 2005 and beyond, and groups such as the Regional Plan Association, Straphangers Campaign and others have been calling for the leadership Kalikow has now exhibited.

Statements from Governor Pataki’s office cited in a recent NY Times article indicated that the Governor may be considering something along the lines of the Kalikow proposal. The piece said Pataki has "asked his administration to explore options to raise revenue" for the MTA, which represents progress over the stock opposition to all tax increases.

Kalikow’s letter to the MTA capital program review board proposed raising the rates of NY State taxes that support MTA programs by 50%, though not the sales tax surcharge the MTA collects. They include fuel, business and real-estate related taxes. Kalikow argues that the region’s entrepreneurs, investors, property owners and motorists all benefit significantly from the transit system.

The discussion about the capital budget is likely to continue well into next year, but Kalikow noted in his letter that if no funding plan is in place by mid-2005, the MTA will be forced to transfer remaining 2000-2004 capital funds from expansion projects like the 2^nd Ave subway and LIRR East Side Access to pay for day to day upkeep.

Even if Kalikow’s solution is approved, there remains the problem of debt service costs from the current capital program. Although some of the taxes Kalikow would like to raise pay at least in part into the fund the MTA draws operating support from, his proposal for new revenue appears directed entirely to the future capital program. Ballooning debt from the huge rounds of borrowing the MTA carried out over the last ten years still threaten giant annual operating deficits for at least the next several years.

The MTA’s 2005 budget, which still includes proposals for fare increases and cuts to services like station booths, will be voted on by the MTA board this Thursday. Transit advocates, riders and workers have called on the MTA to apply the full revenue the agency has realized from the robust real estate market to its 2005 budget, but the agency is seeking to retain $200 million as a reserve fund to apply to deficits in future years (see MTR # 481).

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