By Henry Goldman
Aug. 31 (Bloomberg) -- The U.S. subprime mortgage crisis has cooled New York City's real-estate market and lowered Wall Street revenues, reducing the city's and state's ability to finance mass transit, Mayor Michael Bloomberg said.
Rising defaults on home loans made to borrowers with poor credit ultimately will lead to less revenue at the Metropolitan Transportation Authority, operator of the largest U.S. public transit network, because it gets a percentage of real estate transaction fees, Bloomberg said.
``At the same time expenses are going up. Something's got to give,'' Bloomberg said during his weekly appearance on WABC radio. ``You have either the tax base subsidizing this, or the straphangers, or a combination.''
Bloomberg said that reduced revenue made it more important to enact the plan he has proposed to charge motorists fees to enter Manhattan's most congested parts. The revenue from that program could be applied to the mass-transit system, he said.
State Assembly Speaker Sheldon Silver, who has questioned the mayor's plan and said it would be unfair to target commuters with the fees, rejected Bloomberg's argument.
``There's no logic to the idea that when peoples' mortgages are foreclosed, we should add to the burdens on them,'' he said in an interview.
Silver said he wants to wait for the findings of a commission impaneled to study the issue and present recommendations by March 31, 2008.
Congestion Pricing
Silver has three appointees on the 17-member panel, which must determine how to cut traffic into Manhattan by at least 6.5 percent to qualify for a $354 million U.S. Department of Transportation grant. The federal grant requires that the city's plan use some form of pricing structure to discourage car use.
Bloomberg also has three appointees on the panel, as do such supporters of his plan as Governor Eliot Spitzer, City Council Speaker Christine Quinn, and state Senate Majority Leader Joseph Bruno. The Senate and Assembly minority leaders each appointed one member to the commission.
The cooling of the city's hot real estate market will probably end a period of unanticipated surpluses for the MTA and to city and state government during the past three years, Bloomberg said. The slowing revenues come at a time when the transit agency is projecting a $965 million deficit in 2008 without fare increases and other gap-closing actions.
Higher borrowing costs, declining affordability and a jump in the number of subprime defaults have sapped housing demand, leaving a glut of unsold properties.
In 2006, 1 percent of real estate deals brought in about 50 percent of New York City's revenue from the property transfer tax, a situation that couldn't be repeated amid tighter credit because of subprime lending difficulties, the mayor said.
Wall Street profits ``are now down 50 percent from what they were last year,'' he said. ``That's a lot of tax revenues.''
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net .
Last Updated: August 31, 2007 15:55 EDTSource: http://www.bloomberg.com/apps/news?pid=20601103&sid=a7IZ9OOnoZ_g&refer=us
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