The MTA capital plan is rejected. What does that mean?

In a surprise move on Christmas Eve, state Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie rejected the Metropolitan Transportation Authority’s proposed five-year capital plan for 2025-2029. It leaves the agency in a limbo as it can’t officially get its next set of capital projects, many state of good repair endeavours, underway as planned at the start of the new year. And it sets the stage for a contentious legislative session as it once again puts the leaders and Gov. Kathy Hochul at stark odds at the beginning of budget negotiations. But how did this happen? And what does this mean for the MTA and state leaders now?

Why did legislative leaders reject the capital plan?

In a letter to MTA Chair and CEO Janno Lieber, the leaders cited revenue concerns – about $33 billion of the $65 billion plan does not have an identified funding stream yet, leaving a big question as to where the money would come from. “Closing the MTA’s proposed 2025-2029 capital plan deficit may require State legislative action, or identifying additional non-state revenue sources, and can be solved during the upcoming legislative session in the context of the State Budget negotiations,” Stewart-Cousins and Heastie wrote.

Although Hochul announced her support for the MTA capital plan in November and a commitment to see it fully funded, she has offered few if any details on her specific proposals for revenue streams. She has largely rolled her statements about the current and next capital plan money into one discussion, asserting that the funding question would get answered in the next legislative session. Some possible answers from Hochul are expected in her executive budget, which she is set to deliver on Jan. 14.

Why were the leaders able to do that? And why on Christmas Eve?

Stewart-Cousins and Heastie are part of a little-known and largely opaque body known as the MTA Capital Program Review Board, which votes on the proposed capital plan submitted by the MTA. All four voting members are appointed by the governor, with one recommendation each from the legislative leaders and the mayor of New York City. Stewart-Cousins and Heastie recommended themselves for the role, giving them direct voting power on the MTA’s capital projects funding plan. They also have veto authority – which they exercised on Christmas Eve. “This is one tool that the Legislature has to influence the MTA capital plan, and really, it's the only tool they have to influence it, other than the budget process,” said Rachael Fauss, senior policy adviser at the good government group Reinvent Albany.

The timing of the decision was out of necessity – one more day and the proposed plan would have automatically been adopted. The MTA Board approved the proposal on Sept. 25 and submitted it to the review board, giving them 90 days to make a final decision on the plan, per state law. A vote by the board must be unanimous. If they don’t proactively vote, the plan automatically is adopted after the 90-day clock expires. This year, that would have been Christmas Day, so the leaders submitted their rejection letter right before the deadline.

So what happens now? Will the trains stop running on Jan. 1 or something?

While the rejection is not necessarily good news for MTA officials, experts say that a few months of delay likely won’t have an enormous impact, given how far behind projects from the current capital plan already are. But a lot is up in the air. “I think if it extends past budget season, then that gets much more significant,” said Justin Backal Balick, senior state program director for Evergreen Action, who said he was in “wait and see mode.” Whether congestion pricing goes into effect as planned on Jan. 5 will also play a role in the negotiations over funding and shaping conversations around MTA revenue.

A spokesperson for the MTA did not identify any specific projects that would be delayed or deprioritized immediately due to the rejection, but implied that there could be an immediate impact. “(The plan) will unlock dozens of transformative projects – many of which are funded and ready to go on January 1st,” John McCarthy, the agency’s chief of policy and external relations, said in a statement. “We remain optimistic that the legislature will join the governor in supporting safer, more reliable, and expanded transit.”

The next steps will be intense debate among lawmakers and the governor over funding the MTA capital plan. A similar discussion took place in 2023, when the governor and legislative leaders struck a $1 billion deal to bail out the MTA when it faced a deficit in its operational costs, separate from its capital costs. Hochul originally proposed a regional payroll mobility tax increase, but it faced staunch opposition from suburban lawmakers. So the tax hike agreed upon only covered New York City in the end. Such a compromise may take center stage again.

Although legislative leaders did not object to any specific project included in the 2025-2029 capital plan, it’s still possible that those can get tweaked or adjusted as part of negotiations, along with the overall price tag as well. According to state law, MTA officials can submit a revised plan at any point after a disapproval by the Capital Program Review Board, so Balik predicted that they will also likely wait to see what happens with congestion pricing and the start of the legislative session before offering up a revision. It’s possible that with funding secured, the legislative leaders won’t have an objection to the original proposal.

What would have happened if the leaders didn’t reject the plan?

The capital plan would have taken effect Jan. 1, but many other aspects would have remained the same. Adoption of the plan would not have inherently solved the revenue issue, and those discussions would have dominated next year’s legislative session regardless. Because the MTA’s fiscal year does not align with the state’s, it is often the case that transit officials approve a plan and state officials figure out where to get the money from after the fact, a process Fauss described as “a little bit backwards.”

The difference made with the rejection is that it gives the Legislature a little more political power to negotiate during the executive-driven budget process. “They don't have the upper hand in the budget process, so this gives them a little bit more leverage,” Fauss said. Without a plan in place, it creates more of a sense of urgency to find sustainable funding streams, and puts more pressure on the governor to compromise with lawmakers to get projects underway as fast as possible.

Has this happened before?

It’s not unheard of. The review board rejected the 2015-2019 Capital Program at the end of 2014. The veto came from then-Gov. Andrew Cuomo’s appointee to the board. At issue, again, was likely the source of funding for the then-$32 billion plan. Like now, a little under half of the proposal did not have an identified revenue stream. That started a fight that lasted more than a year over capital plan funding; the review board didn’t approve a revised five-year plan until May 2016, nearly a year and a half after it was meant to have been underway, at a slightly smaller $29.5 billion price tag. It sparked an intense battle between Cuomo and then-New York City Mayor Bill de Blasio over the share of the city’s funding of the plan as well, which critics charged was far too low.

The current five-year capital plan automatically was approved by default with much less fanfare after the review board declined to formally vote on the proposal and took effect as planned in January 2020. It notably included $15 billion meant to come from – you guessed it – congestion pricing, which lawmakers and the governor approved as part of the state budget in 2019. That funding has since become a political football as Gov. Kathy Hochul delayed the rollout of congestion pricing by six months, and it still faces lawsuits to stop it.

Speaking of congestion pricing, wasn’t that meant to fill the hole in MTA funding?

Congestion pricing will likely play an important role in the upcoming 2025-2029 Capital Program, but state law only currently requires it to provide $15 billion to the five-year capital plan that is about to end. At issue when the governor paused was projects that were already meant to be underway or relied on the revenue stream to finalize contracts so work could begin. The MTA officials approved the current $54 billion capital plan with congestion pricing as an explicit funding source, so its pause put into jeopardy money that had been expected since 2019. That is unrelated to the $33 billion question mark for the proposed capital plan set to begin next year. However, as long as the tolling scheme gets up and running, it should become a continuous source of money and bonding potential for the MTA that state leaders can tap to help fill that hole as they debate stable revenue streams for transit projects.