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UPDATE 2-NY Senate plan won't halve subway fare hike-Gov

* State Senate proposes lower fare and toll hikes

* Governor blasts plan for not solving long-term deficits

* MTA says hikes will be 4 times bigger than Senate says (Adds comments from governor, authority and assembly speaker in new paragraphs 5-6, 8-15)

NEW YORK, March 17 (Reuters) - Fares for riding New York City buses, subways and commuter trains would rise only 4 percent under an alternative plan unveiled by the state senate on Tuesday that halved the increases sought by the governor.

As part of the same plan to shore up the cash-starved Metropolitan Transport Authority, a new payroll tax for local employers would increase to only about 25 cents per $100, about 10 cents less than a governor-appointed panel proposed.

And drivers would be spared tolls on now free East and Harlem River bridges, which are owned by New York City. Fares on state-owned bridges and tunnels would rise just 4 percent.

“There will be no service cuts with this, there will be no layoffs with this plan,” Democratic Majority Leader Malcolm Smith said at an Albany news conference.

But Democratic Gov. David Paterson said the Senate plan did not solve the agency’s long-term problems and used faulty math, including a $300 million error on merging bus service.

The MTA’s chairman, H. Dale Hemmerdinger, estimated the Senate plan would force the agency to raise fares and tolls by 17 percent -- about four times more than the Senate calculated -- as it would only raise about $1 billion more.

The authority, the nation’s biggest with nearly 9 million passengers, said last week that without a state bailout, its board must approve much higher fare increases of 25 percent to 30 percent, severe service cuts, and layoffs.

SHARING THE PAIN AS DEFICITS RISE

The Senate’s plan was a counter-proposal to higher fare and toll increases and a steeper payroll tax that were recommended by a former MTA chairman. This plan was backed by Paterson, transit advocates, environmentalists, and business groups as a multi-year solution that would help fund upgrades.

Paterson justified the new tolls for the East and Harlem River bridges, estimating the MTA’s series of deficits at $1.2 billion this year, $2.4 billion in 2010, $2.6 billion in 2011, and $3 billion in 2012.

“Any delay is only going to exacerbate that,” he said.

This is the first time Democrats have run the state Senate in more than 40 years, and Paterson softened some of his initial criticism, saying many senators might not appreciate that their plan will only force them to come up with more money later.

Democratic Speaker Sheldon Silver had the same criticism.

“Unfortunately, the Senate plan as presented today is a stop-gap measure that will have to be revisited in the near future because it doesn’t deal with capital stock,” he said.

Paterson had accepted an Assembly plan slicing the new tolls on the city-owned bridges to $2 from $5.

But Smith said the Senate rejected that compromise because agency officials failed to explain how they would make up for the money that would be lost without the higher tolls.

Asked why outer borough drivers should not “share the pain” by paying tolls on city bridges, Smith said they should not be penalized for having moved out there when there were no tolls. But he suggested such tolls might be an option when the agency’s new capital plan, which pays for upgrades and maintenance, is drafted, starting in October.

Smith also demanded that the nation’s biggest mass transit agency undergo a “forensic” accounting probe and accept stiffer oversight, ceding more power to the state comptroller.

“The paradigm has to shift. We cannot continue to put money into the MTA, which is sort of a black hole.” (Editing by Jan Paschal)

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