NYC Could Reap $600 Million With Car Emissions Fee, Monitor Says

New York City could generate more than a $1 billion a year by imposing an emissions toll on cars and trucks and requiring residency to receive retiree health benefits, the city’s Independent Budget Office said.

The suggested $2.49 toll on tailpipe pollution, assessed at existing bridge and tunnel tolling locations, could raise $596 million, the budget monitor said. The tax, which would need approval from the state legislature, would offset the “social cost” of emissions that contribute to asthma, heart disease and lung cancer, according to the IBO. The Metropolitan Transportation
Authority’s planned congestion pricing system would provide more tolling areas.

The city could save another $416 million by requiring retirees to live in New York City or six surrounding counties in order to be eligible for retiree health benefits. More than 30% of retired city employee who faced a residency requirement when they worked for the city now live outside the area. The city spent $2.7 billion on health insurance and Medicare Part B premiums for retired city employees and their families in fiscal 2020, according to the IBO.

“While Covid-related federal aid has provided the city with near-term fiscal relief, the city still faces projected budget shortfalls in future years even as the public’s demand for new or better services outstrips available resources,” said IBO director Ronnie Lowenstein in a news release.

Despite receiving $13 billion in new federal stimulus money, New York City is facing annual budget deficits of about $4 billion starting in the fiscal year beginning July 1, 2022, according to city budget officials. Last month, Mayor Bill de Blasio proposed a $98.6 billion budget that would expand free pre-kindergarten to 3-year-olds, hire 10,000 residents to clean up the city and increase education spending by $2.3 billion.

The Independent Budget Office is a nonpartisan agency that acts as fiscal monitor for the city, and doesn’t endorse or oppose suggestions it makes to raise revenue or cut spending. The IBO has compiled about 100 budget options for the city and includes side-by-side arguments for and against each.

For example, proponents of the vehicle-emissions toll could argue that it would motivate some drivers to take public transportation, cutting greenhouse gases and reducing city health-care costs. If drivers don’t switch, the city still benefits from increased funding. IBO set the suggested toll at $2.49, which is half the per-vehicle average estimated “social costs” of driving in New York City, based on a price of $7,800 per ton for nitrous oxides and $540,000 per ton of fine particulate matter.

Opponents might argue that toll structure in the city is already unequal and that adding an emissions fee might prompt drivers to take un-tolled routes, increasing congestion in those areas. Since trucks are major polluters, they may also say that much of the burden would fall on businesses and consumers.

©2021 Bloomberg L.P.

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