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Proposed postponement

On June 5, Governor Hochul, in a major reversal, announced that the implementation of congestion pricing on June 30 would be indefinitely paused. She cited concerns that implementing the program would hurt the city's economic recovery. Hochul said that the State had set aside funds to address the gap in revenue from the program in preparation for the possibility that the program would be delayed due to lawsuits. Hochul also proposed increasing a payroll tax on New York City businesses to fund the MTA. The MTA had already spent $555.8 million on congestion pricing equipment and earmarked $15 billion of congestion-toll revenue for transit improvements. With the Governor's announcement, attorneys for the MTA submitted court notifications in lawsuits against congestion pricing that, with the pause, they no longer expected congestion pricing to start by June 30.

The previous evening, Politico and The New York Times had reported that Hochul was considering delaying congestion pricing. Their reporting indicated that Hochul's decision was driven not by economic concerns, but out of concern that congestion pricing could hurt Democrats in competitive races for the House of Representatives in the New York suburbs and thus their efforts to take control of the House in November elections. Both Republican and Democratic political operatives saw the decision as a political panic move to take the controversial issue off the table. Curbed would later report that Hochul was very concerned about polling that indicated the program was very unpopular.

Reporting in Crain's New York indicated that Hochul had been worried about the political implications of the implementation of the program for several months and had been looking for cover to pause the program. She also reportedly voiced frustration for months that the plan was implemented by the administration of former Governor Andrew Cuomo, and that she never believed it was correctly structured. Curbed reported that Hochul was never fully on board with the program. Assembly Speaker Carl Heastie said that the Governor had let him know in the previous two weeks that she was getting concerned with the response of voters to congestion pricing.

Internal discussions about pausing congestion pricing significantly picked up right after an unrelated visit to the White House earlier in the week. While at the White House, Hochul spoke with President Joe Biden and other officials about postponing the plan. In the days prior to her announcement, Hochul notified the White House, House minority leader Hakeem Jeffries, Mayor Eric Adams and other politicians of her decision, though state lawmakers and MTA Board members were not briefed beforehand about the decision.

Hochul's decision was strongly condemned by environmentalists, transit advocates, and business groups that generally supported her, including the Partnership for New York City, and the New York Building Congress. Congestion pricing advocates said the lack of congestion-toll revenue would negatively affect the transit system, Those business groups were strongly opposed to the Governor's proposal to further increase the payroll tax in New York City. Even though Mayor Eric Adams said he would stay aligned with the Governor's position, multiple top-level appointees of his spoke out against Hochul's decision, including two appointees to the MTA Board, one of whom was a deputy mayor, and the head of the Department of City Planning. The Governor's appointees to the Board were irritated by the decision.

MTA Chairman and CEO Janno Lieber was informed of the Governor's decision shortly before the news publicly broke. The decision caught MTA leadership by surprise. Streetsblog reported that Lieber initially tried to convince lawmakers to support a stopgap solution to fund the MTA with the hope that congestion pricing could be saved in the 2025 legislative session, but, pulled back after realizing the extent of the backlash to the Governor's decision. He also reportedly threatened to resign over the delay at one point, though Lieber later denied this.

News outlets such as Politico and the New York Times initially reported that Hochul's decision would have to go to a vote of the MTA Board. Crain's and other news outlets like Politico suggested that the MTA Board could overrule the Governor's order since, according to the Public Authorities Reform Act of 2009, board members had an explicit fiduciary duty to the authority. News outlets questioned whether it was legal for Hochul to defer congestion pricing unilaterally. A lawyer from Columbia University said that the Governor's decision could be subject through a legal challenge under Article 78 of the state Civil Practice Law, which requires government officials to comply with their legal obligations under state law. That expert also noted that that the decision could violate a provision in the 2020 Climate Leadership and Protection Act requiring state agencies to consider if their decisions are inconsistent with the state's requirement to reduce greenhouse gas emissions by 85 percent by 2050, and the Green Amendment made to the state's constitution in 2021.

To fill the gap of $1 billion a year that would have been raised by congestion pricing, the Governor proposed increasing the MTA payroll mobility tax on certain New York City businesses. Her proposal would have increased the tax on businesses with payroll expenses of more than $1.75 million a year from 0.6 percent of expenses to 0.825 percent of expenses. There also would have been a tax cut for smaller businesses. The State Legislature extended their session past Thursday as they considered the Governor's announcement and the proposed tax increase. This would have been the second increase in that tax in New York City in two years. While Assembly Democrats were considered to be willing to consider the Governor's proposed PMT increase if it was part of a larger deal, State Senate Democrats were more openly opposed to the proposed PMT increase. The Governor's team had offered to sign other bills she had initially been opposed to in exchange for the approval of Hochul's proposed tax. The proposal was considered dead by the late afternoon of June 6.

After the legislature rejected Hochul's tax plan, her team pivoted on the evening of June 6 to pushing the legislature to approve a resolution that would provide the MTA with an initial appropriation of $1 billion from the state's general fund, and put the full faith and credit of the state behind the bonds, which allow the MTA to sell $15 billion in bonds for its capital program. A recurring funding stream would be identified in the following legislative session in 2025. A vote had been planned for the plan that evening, but was pushed off after it became clear there was inadequate support for it in the legislature. By the following day, six Senate Democrats had already announced their opposition to the proposal, and 13 were reportedly opposed to it.

Hochul doubled down on her decision in a June 7 press conference and insisted that the pause would be temporary. She also stated that she did not believe a vote by the MTA Board on the pause was necessary since it would be temporary, and that MTA leadership agreed to implement it. Hochul said she made the decision when she did to catch legislators before the end of the session. She also stated that the funding was not essential since it would have taken months for the revenue to accumulate.

The State Legislature adjourned their session on the morning of June 8 without passing legislation to provide alternative funding for the MTA. The Governor's last-minute announcement regarding congestion pricing had a major impact on the other priorities of the State Legislature. With lawmakers spending time discussing the Governor's proposals for alternative funding for the MTA and the legislative session coming to an end, there was less time to discuss other legislation, including the NY Heat Act. Legislation that was easily expected to pass both houses, were no longer expected to be passed.

In response to the pause in congestion pricing, Moody's gave the MTA a credit negative watch on June 7, and analysts at S&P said that their rating on MTA revenue bonds could decrease.

On the evening of June 7, the MTA made its first public statement since the Governor's initial announcement. The statement said that Hochul's decision put large sections of the 2020-2024 Capital Program at risk, and that the agency would deprioritize modernization and improvement projects, such as making stations ADA accessible, in favor of those necessary to maintain the basic operation of the system. The MTA Board would review the Capital Program to make necessary changes, and a revised capital program was expected to be presented at its June meeting. The MTA statement also said that, per federal law, congestion pricing required approval from the federal government, New York City, and New York State, and that the agency no longer had the state's consent with the Governor's announced pause, and thus could not unilaterally implement the program.

The final approval of the program required the New York State and New York City departments of transportation, and the MTA to sign the final approval of an agreement as part of the federal government's Value Pricing Pilot Program. On June 8, ABC reported that the federal government had not yet issued its final approval for the plan for the other three parties to sign, and that the MTA had not yet obtained written agreements with the New York State Department of Transportation and the New York City Department of Transportation. Streetsblog reported that officials at the MTA had expected that the approval of the final VPPP agreement would just be a formality after the FHWA reviewed the program's final environmental review.

On June 10, MTA CEO Lieber, at a news conference, said the agency was working to scale back its capital program, and that the agency would not give up on congestion pricing. He tapped former MTA CEO Thomas Prendergast to help the agency review cuts to the capital program to ensure that they did not compromise the safety of the transit system. Lieber said the agency would look into how to preserve federal funding grants that have already been awarded, such as for Phase 2 of the Second Avenue Subway, though he acknowledged this would be difficult. He also said that the agency would need to use its own bonds to fund the capital program earlier than had been previously planned, increasing the amount of the operating budget going to debt service. Lieber confirmed that the Governor directed the State DOT commissioner not to sign the final VPPP agreement.

On June 12, a coalition of legal experts, advocates, potential plaintiffs, and New York City Comptroller Brad Lander announced they were looking at different legal avenues to overturn Hochul's pause of congestion pricing. Lander said he would file a lawsuit in July if congestion pricing did not start. The following day, on June 13, Streetsblog reported that the USDOT withheld its approval of the MTA's final environmental review of congestion pricing and the final VPPP agreement. The FHWA had been ready to approve these two steps before Hochul's announcement, but held off afterwards as it waited a formal notification from New York on how to proceed. The following day, on June 14, the FHWA approved the MTA's re-evaluation of the environmental assessment of congestion pricing completed to assess the impacts of the tolling structure approved by the MTA Board.