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Sep 28, 2011 12:05 PMPublication: The Southampton Press

Towns Lose Court Challenge To MTA Payroll Tax

Oct 19, 2011 7:10 AM

A judge has summarily dismissed the lawsuit filed by Southampton Town and Southold Town challenging the Metropolitan Transportation Authority’s imposition of a payroll tax on all New York metropolitan region employers.

Southampton Town Supervisor Anna Throne-Holst said she does not think the town will take on the added expense of appealing the September ruling.

A State Supreme Court justice dismissed the case without trial, ruling that the grounds on which the towns had anchored their challenge were baseless. Town Attorney Tiffany Scarlatto said at the time she did not expect Southampton Town to appeal the case in light of the sweeping defeat.

When the towns announced their intention to sue, leaders attacked the tax as unfair to eastern Long Island residents because of the limited services provided to the East End by the MTA, which owns the Long Island Rail Road. Much of the region is served by just three or four trains per day.

The lawsuit had claimed that the MTA’s tax, which levies $3.40 in tax for each $1,000 of payroll, is unconstitutional and that, as municipalities, Southampton and Southold towns themselves should be freed from the tax because it violates their right to home rule.

Judge Gerald W. Connolly, however, flatly disagreed. He ruled that none of the towns’ arguments carried enough legal weight to warrant a trial on the case.

“While plaintiffs allege that the MTA Act encroaches on the plantiffs’ home rule powers ... such contention is without merit,” the judge wrote in his 20-page decision. “The MTA Act does not limit the power of plantiffs to adopt and amend local laws ... Plaintiffs, in opposition, have failed to raise a triable issue of fact concerning such claim.”

Initially announced as a joint effort by seven eastern Suffolk County towns that were outraged that the MTA would propose to tap them for millions of dollars a year in new taxes without any increase or improvements to service on the East End, the suit was ultimately filed by only Southampton and Southold towns.

Southampton Town itself pays slightly more than $100,000 annually in payroll tax to the MTA.

The lawsuit was the fuel for bitter in-fighting on the Southampton Town Board last year over the use of outside counsel to litigate the suit rather than the town attorney’s office, as Southold’s in-house attorneys had done. Southampton paid Smithtown law firm Devitt, Spellman, Barrett, LLP $50,000 to handle the litigation.

The town’s Republican majority overruled Ms. Throne-Holst and Councilwoman Bridget Fleming, who voted against hiring outside council. At the time, Councilman Chris Nuzzi highlighted the importance of the suit as an avenue toward easing the tax burden on East End businesses and said it was worth the investment of hiring attorneys.

After the case was dismissed last month, Ms. Throne-Holst revived the issue, lamenting that other towns might have signed on to the lawsuit had Southampton not upped the ante by hiring outside counsel.

“I think we would have been far more effective with the suit if all the towns and all the villages signed onto it,” Ms. Throne-Holst said. “I’m not willing to spend anymore money on it unless we can handle it in-house.”

Mr. Nuzzi did not return several recent requests for comment for this story.

Councilwoman Nancy Graboski said that the board was disappointed at the recent verdict, but she said the finality of the ruling by the judge and the daunting task of a successful appeal led them to the conclusion that legal channels would not be the route to ending the MTA tax.

“It was very discouraging,” Ms. Graboski said. “You’re trying to buck such a big, powerful entity. We’re just a bump in the road for them. We let them know we weren’t happy about it, but the air has come out of the balloon, I think. At the end of the day, I guess we’re going to have to try different avenues.”

The suit also spurred a dramatic moment at Southampton Town Hall when, after Ms. Throne-Holst insisted on having the lawyer handling the case for the town give the board an update on the case in public session, the three GOP members stood up in unison and walked out of a board work session in protest. All three later criticized the supervisor and former Town Attorney Michael Sordi for having pushed to have the case discussed in public, which they thought was ill-advised in pending litigation.

“That had to be one of the most outrageous meetings I’ve ever attended,” Ms. Graboski said, blaming Mr. Sordi for having wrongly advised Ms. Throne-Holst that public discussion was proper. “It was reminiscent of the days with Skip [Heaney] and Linda [Kabot]. Before that, we had the political split, but we all worked together. There was no more working together after that.”

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