Long Beach vows to fight MTA tax

The City of Long Beach is looking to launch a legal battle with the state over its Metropolitan Transportation Authority payroll tax, which Governor Paterson signed into law last spring.

"We intend to challenge the MTA tax and look to abolish it," Theofan announced last week.

Ever since the tax was enacted, Theofan said, he has looked for viable ways to challenge it. Now he and city officials think they have found one. They point to a lawsuit pending in New York Supreme Court in Suffolk County, in which William Schoolman, president of the Bohemia-based bus company Hampton Luxury Liner, challenges the law on constitutional grounds, claiming the state failed to follow proper procedures in enacting the law, as well as demands refunds be made to employees who have so far paid more than $1 billion into the tax.

"It's a magnificent piece of legal research that we're looking into right now, and I would say there's a very good chance that we're going to join in this suit or commence our own action," Theofan said.

With the state facing a $1.8 billion deficit last year, the MTA approved sweeping fare increases and the payroll tax last May. As it stands now, employers in New York City and seven neighboring counties must pay a 34 percent tax on payroll, so that if a company has a payroll of $1 million, it costs the company an additional $3,400 to do business. Paterson has proposed a change in the payroll tax that he wants included in the upcoming 2010-11 budget, which would raise the tax to 54 percent in New York City while lowering it to 17 percent in suburbs, including Nassau County.

With the rate as it presently stands, not the reduced rate, the tax's imposition will come to about $160,000 the city will have to pay the state this fiscal year, from July 1, 2010, to June 30, 2011.

"That's nice that they're going to cut our rate in half, but it's still half too much to have to pay," Theofan said. "It doesn't make it right, it just makes it look all that more arbitrary."

Assemblyman Harvey Weisenberg, who voted against the payroll tax, said that while he cannot justify Paterson's proposed percentages, he embraces the idea of lessening the tax burden on Long Island and other areas outside the five boroughs.

"With the burden basically being a financial obligation within the city of New York, [the city] should pay more than what the suburbs pay," Weisenberg said. "The people of my city who take the train to go to work there pay their fair share with their purchases in their daily living and provide the city with resources."

Looking ahead, however, Weisenberg expects road blocks to go up for virtually any proposal coming from Albany. "Anything that this guy makes a proposal for, I don't know if he can get anything passed," he said, referring to Paterson. "I don't know if we'll ever have a budget ... The budget it so onerous, I don't know who's going to vote for it."

City Council member Michael Fagen, who attended a Feb. 17 West End Neighbors Civic Association meeting, at which Theofan announced his plans to challenge the MTA tax, questioned why the city failed to put provisions into the 2009-10 budget for the payroll tax. "I still find it curious that the MTA tax was signed by the governor the first week of May 2009, and the Long Beach budget wasn't approved until the last week of May," Fagen said. "Why did the city not prepare or project anything for that in our budget?"

Theofan responded that at the time the legislation was passed, the city was not advised about how much its obligation was and when it would have to pay it. "And at that point, there was talk of not only reimbursing the school districts, which doesn't seem to be happening, but also of reimbursing local government as well," Theofan said. "So we did not know if, when or how much we were required to pay."

The city manager added that Paterson's latest proposal to cut the tax rate in half proves that the matter is still in flux. "So how could anyone with any certainty budget for this?" Theofan added.

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