In her abrupt decision on Wednesday to halt New York City’s congestion pricing plan, Gov. Kathy Hochul made a familiar argument: The city’s economic recovery from the coronavirus pandemic was still too “delicate.”
It’s true that by several measures, the recovery is far from complete. But experts who study the city’s economy are adamant that congestion pricing — which would have tolled drivers entering Manhattan south of 60th Street in order to reduce traffic and pollution and raise much-needed funds for public transit — could have only helped it bounce back.
Governor Hochul said she didn’t want to pile on another cost for New Yorkers struggling to make ends meet or discourage commuters from visiting Manhattan, where their absence during the pandemic emptied out office buildings and hurt businesses.
But many economists, business owners and civic leaders say the city’s fiscal health is a more complicated matter than the governor’s reasoning would indicate.
“She’s citing a problem, but it’s not one made worse by congestion pricing,” said James Parrott, the director of economic and fiscal policy at the Center for New York City Affairs at the New School.
The plan was expected to collect about $1 billion a year to help pay for crucial improvements to the city’s aging subway, bus and commuter rail systems. Without those funds, a failing transit system could be the worst economic blight of all, critics said.
Governor Hochul’s office did not immediately respond to questions on Friday about the decision to halt the program.
Her reversal was applauded by an eclectic mix of opponents who had accused the Metropolitan Transportation Authority, which oversees congestion pricing, of unfairly targeting them, among other complaints.
A recent Siena College survey of about 800 registered voters in New York found that nearly two-thirds of respondents opposed the tolling plan.
Some of the plan’s critics, including New Jersey’s governor, a teachers’ union and a trucking association, had filed federal lawsuits seeking to halt it.
But even as those critics celebrate, it remains unclear how the state will fulfill a $15 billion funding requirement for the M.T.A., as the legislative session in Albany nears its end.
With a growing chorus of politicians and congestion pricing advocates calling for the plan to be put back on track, here is an overview of the city’s economic health, and why those who hope to see the program survive believe the alternatives are worse.
Workers are back on the job, but with worse pay.
The city announced in October that it had recovered the more than 946,000 private-sector jobs that were lost in the pandemic, more than a year ahead of some predictions.
But many of the jobs that returned have been in lower-paying industries like home health care and social services, Dr. Parrott said. Job growth in both of those fields is driven largely by government spending, not by the expansion of private industries.
At the same time, jobs in key sectors like retail, construction and hospitality, which were a source of middle-income employment, especially for Black and Latino New Yorkers, still lag behind prepandemic totals, he said.
“There are segments of the population that have borne the brunt of a lack of recovery,” Dr. Parrot said, pointing to the nearly 8 percent unemployment rate for Black New Yorkers in April, compared with 3.3 percent for white residents.
From rising rents to higher costs at the grocery store, New Yorkers are justified in feeling financially burdened. Incomes retreated between 2019 and 2022, with the median household income falling nearly 7 percent over that period when adjusted for inflation, according to the Center for New York City Affairs.
Critics of congestion pricing pointed to New Yorkers’ shrinking buying power as a reason to reject the tolling plan.
“With inflation, with costs of goods and services overall increasing, everyday New Yorkers just can’t afford this,” said Susan Lee, the president of New Yorkers Against Congestion Pricing Tax, a group of plaintiffs that sued to halt the program.
The poorest New Yorkers would have rarely paid the tolls.
In her announcement on Wednesday, Governor Hochul said she “cannot add another burden to working and middle-class New Yorkers,” who would have been hard-pressed to pay $15 when they drove into the tolling zone during peak hours.
But fewer than 5 percent of poor New Yorkers living outside Manhattan drive into the borough for work, while more than half take public transit, according to a 2022 analysis by the Community Service Society of New York, a nonprofit antipoverty group. Poverty is defined as a family of four making less than $31,200 annually. The plan included off-peak toll discounts and exemptions for some low-income workers.
Out of 1.5 million people who work in the planned congestion pricing zone, only about 1 percent — about 16,000 workers — both earn less than $50,000 and drive to work, according to the M.T.A.’s Traffic Mobility Review Board, which was created to oversee the tolling program.
Average daily ridership on the subway, buses and commuter rails was 4.9 million in May, according to the Community Service Society of New York.
That is why improving the city’s mass transit system is vital to the economy, said Rachel Weinberger, the director of research at the Regional Plan Association, which supports congestion pricing.
“If the transit system is unreliable, unsafe, then people don’t want to use it — so people aren’t going to go to Broadway, or to the office or the museums,” she said.
Tourism and business is still lagging.
Critics of congestion pricing argued that the tolls would have slowed the return of the office workers and tourists whom many of the city’s businesses depend on — concerns the governor echoed.
The tolling zone included the vast majority of Manhattan’s biggest office towers and most of the city’s top tourist destinations, including the theater district and Madison Square Garden. Thinner crowds have already hurt local businesses, and some worried that the tolls could have further depressed sales.
In Times Square, a proxy for the city’s tourism industry that is in the heart of the congestion pricing zone, foot traffic was at less than 70 percent of prepandemic levels in April, according to the New York City Economic Development Corporation.
At the same time, the return-to-office push has stalled.
From mid-April to early May, only 56 percent of Manhattan workers were at their workplace on an average weekday, amounting to about 72 percent of prepandemic attendance, according to the Partnership for New York City, an influential business group that represents some of the largest employers in the city.
Reduced foot traffic has contributed to store closures. In 2019, the city had an average net gain of 400 new businesses every three months, according to the E.D.C. In the third quarter of 2023, the latest period available, there was a net loss of about as many.
But proponents of congestion pricing point to its underappreciated benefits to businesses.
The plan was expected to reduce traffic in Manhattan by 17 percent, which could have been the difference between gridlock and steady movement, said Kathryn Wylde, the president and chief executive of the Partnership for New York City.
A 2018 study by the business group found that the annual cost of delays in commuting time and work-related travel in the metro area was $9.2 billion.
“Nobody is thinking of the positives,” she said. “You will be able to accomplish your small-business activity so much faster, and more efficiently.”
A functioning M.T.A. is vital to the city’s economic recovery.
The biggest problem, in the absence of congestion pricing, is the need to raise the billions of dollars that the M.T.A. is counting on to fix the mass transit system and fund its projects.
For proponents of congestion pricing, the money the program would have raised is the economic stimulus that the city most needs.
“Low- and moderate-income people depend almost exclusively on public transportation,” said David R. Jones, the president and chief executive of the Community Service Society, and an M.T.A. board member.
The $15 billion to be raised from congestion pricing was to have paid for long-planned projects, including buying new trains and buses, improving accessibility for commuters with disabilities, and making crucial improvements to signal systems and switches that, in some cases, date back to the 1930s.
“You can’t strip this money away and not have a plan for making sure the system doesn’t implode,” Mr. Jones said.
As an alternative to the tolls, Governor Hochul proposed an increase in the payroll mobility tax, which has roughly doubled for the biggest companies in New York City since it was introduced in 2009.
On Friday, that plan appeared dead. A proposal that would pledge to find some revenue within the year also faced roadblocks, with no clear alternative to fund transit projects.
Lawmakers were said to be considering committing $1 billion to shore up the loss, but the congestion pricing law passed in 2019 mandated specific funding measures that might not be tenable without the tolling plan.
On Friday, Reinvent Albany, a good governance group, called the last-minute alternative “cockamamie,” and insufficient to fill the M.T.A.’s capital needs.
Andrew Rein, the president of the Citizens Budget Commission, a watchdog group, said he was hopeful there is still a way to restore the congestion pricing plan.
“We shouldn’t throw in the towel, because it’s such a good option, and the others would have much more damaging effects,” he said.
Ana Ley and Grace Ashford contributed reporting.