Dated March 6, the draft bill suggests the Cuomo administration might be more intent on following through with its interpretation of “value capture” than with congestion pricing. | Getty With congestion pricing on sidelines, Cuomo doubles down on controversial subway-funding measure

Gov. Andrew Cuomo has yet to embrace a plan to toll drivers to enter Manhattan’s central business district, but he is doubling down on a more controversial subway-funding scheme that experts say targets New York City’s tax base and, relatedly, the administration of Mayor Bill de Blasio.

Draft legislation acquired by POLITICO, which two sources say is being peddled by the Cuomo administration, would demarcate huge swaths of Manhattan and the Bronx as “transportation improvement districts,” and allow the state-run Metropolitan Transportation Authority to take property tax revenue from those districts that it claims is generated by transit improvements as far as a mile away.


It’s an updated version of the so-called value capture proposal contained in Cuomo’s executive budget, and while it has some minor changes, it “is effectively the same thing,” said Dean Fuleihan, New York City’s first deputy mayor, in an interview Tuesday.

“It is [the] unprecedented taking of the city tax base ... without the local government participating in the decision," he added.

Dated March 6, the draft bill suggests the Cuomo administration might be more intent on following through with its interpretation of “value capture” than with congestion pricing, which it has yet to properly embrace and which is, among transportation types, budget experts and now de Blasio, substantially less controversial.

Though during his reelection campaign de Blasio ran against congestion pricing, he has since begun to warm up to the idea.

The mayor wanted more details, but he "was positive about the latest plan," Fuleihan said, referring to the plan put forth by a Cuomo-created panel that Cuomo himself has yet to endorse.

In contrast, this legislation would, wrest “billions” from New York City, Fuleihan said.

Major transit improvements typically enhance neighboring property values, and "value capture" refers to the concept of capturing part of that extra value and using it to pay for the transit improvement in question. The city is using the technique to pay for the extension of the 7 train to the far West Side. It's also using it to pay for transit improvements in East Midtown.

While experts generally laud the technique, this version of value capture has generated a good deal of consternation, with experts even suggesting it could endanger New York City's ability to self-govern.

In “Uses and Abuses of Value Capture for Transit,” a report to be released Wednesday morning by New York University’s Rudin Center for Transportation Policy and Management, Eric Kober writes that the first iteration of the proposal “diverts New York City’s largest and most stable tax source in a manner that could affect the City’s fiscal stability.”

The property tax generates 30 percent of the revenue supporting the city’s budget, he notes, and it’s the only tax the city can levy without state approval.

“If the MTA is permitted to have access to a large share of the City’s property tax increment, the city will still be required to provide services and balance its budget,” Kober writes. “It will need to make up for lost revenues with service cuts or increases in other taxes (increasing the property tax rate will just funnel more money to the MTA).”

Kober’s views were recently seconded by Nicole Gelinas, a transportation expert at the right-leaning Manhattan Institute, who co-wrote an oped in the New York Post with former de Blasio planning director Carl Weisbrod.

The proposal "seeks to seize power historically held by New York City: the power to tax local property and decide which public services, from firefighting to policing to education, to spend those tax dollars on," they wrote.

Also not a fan: the nonpartisan Citizens Budget Commission.

“The congestion pricing proposal appears to be moving too gradually to provide a significant new MTA revenue stream in the near term and I fear that the Value Capture proposal may become the more attractive vehicle for generating funding for the MTA — because, among other things, it doesn’t impact anyone outside the 5 boros,” emailed Carol Kellermann, president of the Citizens Budget Commission, after reviewing the new version of the proposal.

This latest iteration of the proposal differs from the original in both the aggressiveness of its implementation timetable and the precision with which it demarcates transportation improvement districts.

It would, upon passage, establish a transportation improvement district in the area anchored by the already-completed first phase of the Second Avenue Subway.

“Transportation Improvement Districts should not include completed projects,” Kellermann said.

It would also allow for the creation of districts surrounding the still hypothetical extension of the Second Avenue Subway up to Harlem, and the barely notional phases three and four of the Second Avenue Subway, which would extend the line downtown.

Starting in the upcoming fiscal year, "it starts taking revenues for projects that are imagined, and may never even happen," Fuleihan said.

It would, finally, create a district anchoring the already-underway improvements to Penn Station, thereby encompassing much of Manhattan’s most valuable real estate.

Were the state or MTA to want to take advantage of additional districts, they would need the approval of a newly created “Metropolitan Transportation Authority value capture review board,” on which the city would have veto power.

Depending on when the district is created, the MTA could wrest between 50 and 75 percent of the “increment” it determines was created by related transit improvement, even if that project was a mile away.

“These districts should not extend more than a quarter mile from an improvement,” Kellermann said.

Fuleihan was even more emphatic.

“The boundaries are unreasonable, the process is unreasonable, the benefits aren’t even known,” he said.

Asked for comment, Cuomo spokesman Peter Ajemian pointed to de Blasio's ongoing unwillingness to split the cost of the state MTA's plan to stabilize the subway system.

“The executive introduced a proposed budget which is currently being negotiated with the Legislature and any draft budget language is just that — draft," Ajemian said. "The city has demonstrated a complete lack of interest in helping fund the subway which makes it all the more necessary to implement value capture — a proven way to fund mass transit projects and improve the system for riders. Going forward, the city would of course have a say in the creation of these districts and will end up with more tax revenue than if the MTA hadn’t funded these projects in the first place.”