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Transcript: De Blasio Administration Officials Host Press Call on MTA Funding

January 23, 2018

Moderator: Hi, everyone. Thanks for joining. Today, we have our First Deputy Mayor Dean Fuleihan, Department of Transportation Commissioner Polly Trottenberg, and Corporation Counsel Zach Carter to discuss MTA funding. To ask a question, please press zero at any time. We will start with remarks from the First Deputy Mayor. 

First Deputy Mayor Fuleihan: Good afternoon. I’m going to be extremely brief, and then hand it over to Zach, and then to Polly so we can quickly get to your questions. We want to highlight today the budget actions that were proposed in the executive budget, as well as actions that are occurring this week at the MTA Board. We – as you’re well aware from the Mayor’s comments, we are objecting strongly to language that was inserted into the budget that would both create a new capital liability – a new capital commitment liability on the part of the City for New York City transit, which is breaking a long-standing history of how the MTA is funded – and we’re happy in the q&a to go into more detail. We certainly object to the arbitrary nature of the value capture proposal, which targets in a way that’s unprecedented for local governments that targets specific projects in New York City and takes most of what they claim would be of value [inaudible] determined without any local input by the MTA. And, third, of course, our objection continuing to the way the action plan is funded, as well as more accountability that we want to see out of the MTA. 

With that, I’ll quickly turn it over to Zach. 

Corporation Counsel Zach Carter: And I’ll be very brief – the Governor’s proposal for legislative action is a tacit admission of what we’ve been saying all the while in that there is no legal obligation for a capital contribution from the City, except the amount of $5 million that was capped in 1953 by State legislation. There has been no legislative obligation on the City imposed since that time. As a matter of fact, the only provision for funding since the original legislation was he authority granted by the Legislature to the Transit Authority to raise funds through the issuance of bonds. And so, in the 65 years that has passed since the ’53 legislation, any contribution by the City has been voluntary and-or he subject of political negotiation between the City and the State. There is no legal obligation on the part of the City to contribute more. 

Commissioner Polly Trottenberg, Department of Transportation: I’ll jump in – I think just to follow on what Dean and Zach said – some of you saw yesterday at the MTA committee meetings the four City representatives voted against two of the contracts that were on the docket to advance the Governor’s Enhanced Station initiative. The reason we gave is, at this point, again, as obviously the funding situation for the MTA is acute – we all agree on that – that taking in the aggregate what’s going to be nearly a billion dollars to spend on stations that are not the – we think – the highest priority in terms of ridership and where the City’s going to grow. To not put accessibility elevators in any of those stations is not the best use of those precious funds at this point. 

Moderator: As a reminder, to ask a question, please press zero at any time. You’re still on the line, we’re just waiting for the callers.

Dan Rivoli, Daily News?

Question: Hi, yes – question for Zach Carter about the legal obligation. I mean, this is a budget – how does that change the legal obligation since this is the Governor putting it in his budget and how would that this 1953 law? And then, question for the First Deputy Mayor – regardless of the legal obligations, again, what is the objection to simply just putting in some funding towards the MTA and what is the administration’s rationale for leaving it entirely to the State?

Corporation Council Carter: First, addressing the legal obligation – there is none beyond the obligation enacted in 1953 to contribute no more than $5 million. The contributions by the City subsequently has been either voluntary or the subject of political negotiation. And any legislation that has been enacted since then has not imposed any additional obligation on the City, or altered the obligation that was imposed in 1953. 

First Deputy Mayor Fuleihan: And, if I may, Zach, just to expand on that – and I think you’ll agree with this – as a practical matter, what happened with the MTA ins subsequent major changes both in ’67, ’68 when t became part of – when TBTA revenue was put in and then, more importantly, really the brilliance of the Ravitch ’81, ’82 plan which allowed the MTA to finance – to bond – to issue debt – and dedicated revenues, regional tax revenues to the MTA was how the MTA was to move forward. That’s how the MTA came out of that crisis. It was a recognition that it was [inaudible] primarily was not to be a State or City obligation, but it was to be regional taxes. And we should all remember that nearly 70 percent of the revenue that is raised comes from New York City residents, New York City workers, and New York City businesses. So, it just helps in the whole context. As to your question about why wouldn’t New York City contribute – we contribute. We contribute a significant amount. Again, New York City residents, taxpayers, workers contribute nearly 70 percent of the approximately $16 billion of revenue to the MTA. And New York City on an annual basis is contributing in direct and indirect support $1.6 billion a year, in addition to the $2.5 billion we contributed to the Capital Plan. So, we are contributing great amounts here. As [inaudible] said, we need additional [inaudible] we recognize and we’re happy to participate in finding additional means and additional revenue for the MTA. The Mayor said his preference is the millionaire’s tax. He’s opened other proposals, and he’s articulated that. 

Question: Can I just follow up?

Moderator: Sure. 

Question: I just want to follow up with the First Deputy Mayor on that point. Is the argument then that the MTA has enough and shouldn’t be coming to ask the City for more, or do you agree that the MTA does need more and is there a figure on how much from the City’s perspective the MTA should be getting?

First Deputy Mayor Fuleihan: No, what we have consistently said – and the Commissioner can certainly jump in here – that the MTA needs to do things much better and needs to improve the operation and its priorities. That’s one of the actions that occurred in yesterday’s committee meetings – it’s one of the reasons for our objection. At the same time, we have said that we recognize there are additional revenue sources that may be needed for the MTA. The Mayor identified the millionaire’s tax to both help as an additional permanent revenue source, and to take care of Fair Fares, as you recall. And finally, we also – when I went back to the ’81, ’82 Ravitch plan and – let’s remember, Richard Ravitch, again, as Lieutenant Governor – the major additional revenue that was added in 2008 and 2009 – the payroll mobility tax – those were all intended to primarily come from New York City, but form the region. Those were intended to provide the operating capital support that the MTA needs. And from that money, since 2011, $456 million has been diverted. Now, what the Mayor has said and been very clear about – that money needs to be repaid and other improvements need to occur with the MTA, but we are of course willing to have that conversation and the Mayor identified the millionaire’s tax for that. 

Moderator: Sarah Nir, New York Times –

Question: Hi, so just to back up a little bit – you said that the requirement for contribution by the City was 1953 and capped at $5 million. That’s accurate? That’s just reading back what you said. So, 1953, that was established. I mean, is there any concession that maybe it’s time for an update to this requirement that the City put in something? I mean, that’s a bazillion years ago. Are we just going to stick to these old rules? Is there a chance that something needs to change here, or are we digging in?

First Deputy Mayor Fuleihan: Zach, do you want to start and I’ll finish?

Corporation Counsel Carter: Sure. What we’re saying is that the legal obligation has not changed – that over the past 65 years, the legislature has not chosen to enact any law that imposes a fixed obligation on the City for a contribution. And I think that Dean has gone into some detail about the alternative sources of financial support that the legislature did enact. And that it takes into account the fact that substantial support does come from the City from the users of the subway system. 

First Deputy Mayor Fuleihan: We object to the premise of the question, right? The City, City residents, City workers, City businesses are paying a significant amount – nearly 70 percent of the revenues to the MTA. Whether they are collected by the State as a pass-through, or as the State is now recommending that the payroll mobility tax go directly to the MTA is irrelevant to the fact of where they are coming from and the fact that they are what are to finance and make improvements at the MTA. Same thing that occurred in 1981, ’81 – in 2009 – these are the kinds of things that we’ve said – we have other kinds of improvements that we are open to – I can keep repeating it. The State owes back to the MTA $456 million and the Mayor has put other plans for helping the MTA move forward on the table. 

Moderator: Dana Rubinstein, Politico – 

Question: Hi, two questions. First, do you guys have some sort of legal memo on this issue? I mean, it’s obvious that expert consensus agrees with you, that the State is misreading the law, but it’s very arcane, there are a lot of dates at play and there’s just been incessant back and forth and it would be nice to see it in some sort of written form – the legal arguments. 

First Deputy Mayor Fuleihan: Zach, I assume that we can put together a short fact sheet?

Corporation Counsel Carter: We can put together a short fact sheet that explains the rationale. It’s pretty simple and straightforward.

Question: Okay, thank you. My other question is – the Governor and Joe Lhota have been making these claims for months – the fact that you’re holding this press conference, or press call now indicative of your belief that it is actually possible that the language he put in the executive budget will become law?

First Deputy Mayor Fuleihan: No, we believe that – it was submitted in the executive budget, we are responding. The Mayor will be testifying in Albany. We are working with both Houses and we are raising our objections to the Governor and his staff. This is a normal process that we go through. So, I mean, clearly this is timely to the submission of only a week-and-a-half ago. 

Question: And do you think that – is it your impression that the legislative leaders are on board with this executive budget language? 

First Deputy Mayor Fuleihan: We certainly hope they are not. We anticipate they will not be, but we need to make sure that these changes don’t occur. And remember, it’s both a change to the obligation, which you just asked Zach about for the fact sheet, it is also the value-capture provisions, which we also objected. 

Moderator: Ben Max, Gotham Gazette –

Question: Hey, everybody. Two questions – one, just a quick factual one – when did Dean, or the Mayor, or your team – when did you find out about these proposals from the Governor that he was putting it in his executive budget?

First Deputy Mayor Fuleihan: We found out with the budget – with the submission of the budget. 

Question: Okay, and my second question is in terms of negotiating over these proposals, you know, it seems to me similar to really two years ago when the State was sort of figuring out ways to off load some costs to the City because the State budget picture is not as sunny as the City budget picture. Is that a reasonable argument from the State to make that the City has reserves and has you know money whereas this $456 million is long gone?

First Deputy Mayor Fuleihan: So the $456 million were dedicated revenues, the majority of which were collected in New York City, and they should be returned to the MTA. I mean it’s that simple. As to – the City has significant obligations that we need to keep, that we need to make sure we are able to commit to – safest big city in America, universal pre-k for four years old, expansion of pre-k, we can go on – addressing the opioid crisis. We have many urgent needs, and we know that those urgent needs are not going to be addressed by Washington. As a matter of fact, we anticipate and continue to anticipate the exact opposite is going to be happening, and as other levels of government withdraw from the assistance we need, we need to make sure we can provide the services that are desperately needed in this city. So no we don’t believe that’s a rationale. The State just like the City needs to find ways to balance its budget, to put aside reserves for things that can easily and quickly happen in Washington. So we don’t believe that’s a legitimate defense for taking this action.

Moderator: Danielle, New York Post.

Question: Primarily for Polly, but also for the other two of you. Just wondering in terms of the station renovation initiative, what do you feel would be a better use of that money? I know the word mysterious was used yesterday in terms of how these stations are chosen. Do you feel like there should be other stations that should be part of this priority or this just shouldn’t be done at all until these other more pressing concerns are addressed?

Commissioner Trottenberg: It’s a good question Danielle, and as I mentioned – and we are going to at least share with reporters, share some things with you – but one thing that we have, that I got from the MTA – and you heard me mention it yesterday, I got it from Tom Prendergast – is a list of the stations where we see the most overcrowding, where we anticipate the most growth, and the city itself has a list that we think are higher priority stations. Stations where we’re seeing big population growth, where there’s going to be zoning, and we also think – and look you’ve been to the board meetings as well, Danielle – I think the disability community has made a powerful argument on accessibility. If we’re spending $1 billion on station improvements, we need to make accessibility and elevators part of what we do here. And look, I didn’t use the word mysterious, but I did say – one of you, I think Dana or one of you reported on it – the City had no input into picking these stations. I mean, we’re talking – Dean is here mentioning that the City covers nearly 70 percent of the MTA’s cost, city residents, city drivers, city subway riders. We had no input into that billion dollar plan.

Question: Great, thank you.

Moderator: Henry Goldman, Bloomberg.

Question: Hi, are you – the value capture provision, which would basically create kind of a special property tax district if I’m not mistaken – are you objecting to this because you feel that the City should be getting this revenue and should have the right to decide how this revenue is going to be spent and that you feel this is a State usurpation of the City’s taxable authority. What’s the – why would you –

First Deputy Mayor Fuleihan: Henry, very nicely said. We could leave it at that.

Question: Okay, so I’m correct in assuming that’s your rationale for this. Correct?

First Deputy Mayor Fuleihan: Yes, absolutely.

Question: Okay, and –

First Deputy Mayor Fuleihan: These are – go ahead.

Question: Can I go back to the station objections? I’m not really familiar with the details, so $1 billion?

Commissioner Trottenberg: I mean $921 million was the original price tag. If I had to make a prediction, it will be higher than that by the time we’re done. And we’ll get you all information on this.

Question: Okay, which stations they are and what improvements they are? And you basically, I mean I listened to the mayor earlier, his objection is why spend money on stations when you’ve got to get the trains running on time. Is that basically your argument about spending?

Commissioner Trottenberg: Well, I think it’s a little different, which is a lot of these stations are not the most high priority stations in the system in terms of ridership and conditions. A lot of what is in the Enhanced Station Initiatives are things that have been basically called cosmetic, way-finding and lighting, and things that are certainly nice to have, but in what is clearly a very dire financial situation I think the agency has to start making choices between the things that are nice to have and things that we need to have. And I think a lot of us feel now a lot of what’s in this program is nice to have but not as necessary as accessibility and the work that needs to happen in the busiest stations.

Moderator: Zack Fink, NY1.

Question: Hi, good afternoon, everyone. I was just wondering about this provision put in the budget by the governor, which would essentially take the payroll mobility take – about $1.6 billion – and give it directly to the MTA. My understanding of this is that this money will be the startup capital that they need to build the infrastructure for congestion pricing. I know earlier we talked about finding more money in general for the MTA, but assuming it were going to be used for that purpose it seems to be the whole key to unlocking the whole thing? Your thoughts on that?

First Deputy Mayor Fuleihan: So Zack, they may have said something to you that’s different than my understanding. This is Dean. The $1.6 billion approximately in the payroll mobility tax goes to the MTA. A portion of it that we objected to strongly, that and the other dedicated taxes that go to the MTA, 70 percent collected in New York City, of those taxes they would simply flow through the State budget except for $456 million since 2011 that have been diverted to the State budget. So the payroll mobility tax is simply – instead of going through the State budget they’re directing it directly to the MTA, so it won’t need an additional appropriation.

Question: Is that a good thing or a bad thing?

First Deputy Mayor Fuleihan: We would actually say that that’s a good thing, to have the revenues go, so they can’t be diverted again. That’s a very positive thing.

Corporate Counsel Carter: It would just give a – forgive me, I’m sorry to keep coming back here – it would basically give the MTA the authority, assuming that was there intent, to then get the infrastructure up and running for congestion pricing –

First Deputy Mayor Fuleihan: Once again, I mean this is all money that is going to the MTA Operating Budget. So to the extent that the MTA is using – is using any of that operating money for their many uses, including the action plan, of course. Or infrastructure if it’s an MTA purpose, sure, but that is something that would obviously have to go through the budget process of the MTA. It really is independent of this action.

Corporate Counsel Carter: Thank you.

Moderator: Paul, Wall Street Journal.

Question: Hi, Henry kind of asked enough on his question on the subject I’m most interested in which is value capture, and I was wondering and correct if I’m wrong, but the whole idea behind value capture is taking or sharing if you like in the value that is created by improvements to the system like the subway, so could – if that’s correct – explain to me what it is that you oppose about the idea of value capture -

First Deputy Mayor Fuleihan: Let’s be very clear -

Question: - if you don’t like what it is that the state is proposing, what would you like to see?

First Deputy Mayor Fuleihan: So let’s be very clear, the – this is the City’s property tax base, it’s our major source of revenue. It is what provides the services that are so important and so needed to the vitality and the future of this City.

For the MTA to unilaterally have that authority in New York City, and not anywhere else, for there to be arbitrary measures of a mile-a-way from a subway station is still potentially a value capture, that is not the way it is supposed to be done. This cannot be a mandate from the State.

To the extent that the State or the MTA wants to talk to us, we’ve done that, in the last 2.5 billion capital, capital commitment we make, $600,000,000 is a relationship with the MTA working together to find economic benefit and we’ve done that in the past with the MTA.

For the MTA to arbitrarily take City tax revenues, determine what those tax revenues are, on established neighborhoods. This is not Hudson Yards where there was a blank slate and there was a green space being developed. These are established New York City neighborhoods.

And several of the projects that are being mentioned are actually to the benefit of commuters. The East-Side access is to the benefit of Long Island Commuters and somehow that the New York City revenue should be diverted from that, when we already paying, when New York City residents, workers, and businesses are paying nearly 70 percent of all the revenue that goes into, to provide for huge – already providing – for huge costs overrun on East Side access that is benefitting Long Island commuters and on top of that now we are now being told that there is going to be arbitrary determination of what the valuation benefit is, it’s outrageous. And there is no logical argument for this.

Question: So what would you propose instead as a way of trying to also profit from the value that the subway system for example gives –

First Deputy Mayor Fuleihan: Once again, as I started in the very beginning, the way and the brilliance of what happened in ’81 and ’82 and again 2009 was to find agreement on revenue sources that are permanent revenue sources that can provide the kind of operation that is needed for New York City Transit, for the entire MTA, as well as continuing to put pressure on the MTA to better prioritize what the needs are of the transit riders and to do it in a more cost effective way. There are many other aspects that we should be focused on than this value capture proposal.

Moderator: And this will be our final question from Randy Marshall, AM New York.

Question: Hi guys, thanks for doing this, two questions. One, I just want to clarify something that you just said on value capture which is, what’s the alternative? Where you want that value capture to go?

First Deputy Mayor Fuleihan: - Well again –

Question: Do you want this to have full control? Do you want –

First Deputy Mayor Fuleihan: - of course, we want, of course we –

Question: - would you share some of it? Some of it has been used very positively for MTA improvements and just to go to your quote, you were saying, that you know, services are important and so needed to the vitality of the City, well certainly subways are on – and buses – are one of those services, right?

First Deputy Mayor Fuleihan: Of course, and again, New York – I’m going to keep repeating it, we provide $1.6 billion a year in operating assistance that is not a minor part of a City budget –

Question: - Right the value capture for you – like that comes, that’s an easy fix for developers being able to provide for improvement –

First Deputy Mayor Fuleihan: I promise I will answer the question.

Question: Go ahead.

[28:00] First Deputy Mayor Fuleihan: So the three part answers are that we provide on an annual basis $1.6 billion in operating assistance – direct and indirect to the MTA – that [inaudible] of capital, that’s 70 percent of revenues, I’m going to keep repeating those. In addition, as part of that $2.5 billion, we identified $600 million that we would work together with the MTA and by the way, we’ve done that in the past. Polly, the Commissioner, can go through examples of where we’ve done working together. That is very different than for the first time, in my memory, having the State propose to simply take away local property taxes and only the local property of New York City. That is a very different thing. Having us work together, look, we are very interested in that $600 million and we should be working with the MTA, and we are more than open to work with the MTA. To find places where that kind of program can work, and we did that and committed to it in the $2.5 billion.

Commissioner Trottenberg: And I’ll just – I’ll add a few – this is Polly – I’ll add a few examples to what Dean was saying. He mentioned Atlantic Yards, also Pacific Yards in Brooklyn, and of course we know the one Vanderbilt deal where we got well over $200 million put in by a private developer to enhance station access there connect to East Side access as part of the East Midtown rezoning. There is going to be a benefits fund created that will also provide funds to the MTA. So I think – I think as Dean is pointing out, the City has been open to work on different value capture schemes, but it’s been a partnership. Which I think is appropriate.

Question: Okay, just one more question real quick, I’ve now listened to the entire call and I guess I’m little unclear, forgive the basic question, but why are you holding this call now? The Mayor is going to testify this is just the budget, this isn’t any law that’s been written or legislation that has been proposed right now, why hold this call now?  What is the purpose would you argue of having this call and what is the news so to speak of what you’re hoping to get out it?

First Deputy Mayor Fuleihan: It’s easy, the Governor, it’s not just the budget. It is the proposed budget for the State of New York. It has significant ramifications, negative for the City of New York, and we’re going to constantly, we’re going to constantly – and the Mayor’s made this clear – we’re going to constantly fight for what we think is the benefit of the City of New York, and to maintain the services that we need to provide. So we are going to do that.

At the same time, we are in the middle of MTA board meetings that occurred – committee meetings – that occurred yesterday and a final meeting tomorrow and we have objections that the Commissioner has raised, and that was part of the call as well.

Moderator: Great. Thanks everyone.

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