(Bloomberg) -- General contractor Hely Duarte is considering laying off half his workers because New York City’s transit system is halting most capital projects as its legal battle with New Jersey over congestion pricing lingers on. 

The Metropolitan Transportation Authority, which runs the city’s subways, buses and commuter rail lines, has said that because of the litigation it can only commit to a quarter of the $12 billion it had planned to contract out this year to repair and update the aging system. The delay has reverberated down to small businesses — including those like Duarte’s that are owned by underrepresented groups the MTA has made a point of supporting. It awarded $833 million in contracts to about 500 minority or women-owned businesses last year, more than any other state agency or authority. 

Duarte’s Zion Contracting rehabilitates train stations and bus depots, with MTA projects accounting for nearly all his business. “The subways not only move people, it moves the economy,” Duarte said. “People rely on it to go to work, to go to school, to go to the malls. There is a lot of us that work to sustain that system and all that is being affected.”

The nation’s biggest transit operator plans to launch a first-in-the US congestion toll in June by charging $15 to drive into Manhattan’s traffic-clogged central business district and bond against that money to modernize infrastructure that is more than 100 years old. But politicians in New Jersey and Staten Island, along with labor unions and district residents, are contesting the plan in court. That has forced the MTA to suspend awarding new construction contracts as long as the revenue stream that would fund them remains in limbo.

Contractors like Stacy Seecharan, owner and president of B&S Iron Works, have been left uncertain about normal purchasing decisions. Her Bronx-based shop fabricates steel to make handrails, canopies and mechanical closures to protect the subway system from heavy rain. But for now she’s stopped buying materials ahead of time even though prices continue to rise. The situation is even worse and more unpredictable than the pandemic, Seecharan said, when work resumed fairly quickly and businesses could still plan ahead.

“I’m in limbo basically,” Seecharan, who built her business and her career entirely on MTA projects, said in an interview. “I’m not sure if I should be taking any other work as yet because I don’t know what their situation’s going to be.”

The $15 toll would apply once a day to E-ZPass cars driving into Manhattan’s central business district, which begins at 60th Street and includes midtown office buildings, Times Square, the Theater District and the World Trade Center. Passengers in taxis and other for-hire vehicles would pay a lower fee for each ride. It’s expected to bring in $1 billion a year, revenue that the MTA will borrow against to raise $15 billion for subway signal upgrades, new electric buses and a Second Avenue subway extension into Harlem. 

But New Jersey Governor Phil Murphy and others are seeking to postpone or halt the tolling program. Those legal battles put the June start date at risk and forced the MTA in February to notify contractors that it would suspend entering into new construction contracts. 

Murphy has said that congestion pricing will force New Jersey commuters who drive into the city to pay for the MTA’s expenses, and he wants a court to require the agency to delay implementation and undertake a longer environmental analysis to consider how the tolling plan would saddle his state’s residents with more traffic and pollution. 

A report in February estimated the MTA will need $43 billion during the next five years for repair projects. Nearly 40% of its 6,500 subway cars are more than 30 years old. Almost 70% of its signaling system uses a structure that dates back more than century, requiring more space between trains to operate safely.

The MTA has already postponed subway signal upgrades in Manhattan and Brooklyn that would cut down on train delays and boost service for 1.5 million daily riders. Other projects are at risk of being sidelined: Extending the Second Avenue Subway to Harlem, accessibility projects at 20 different subway stations, $1 billion to replace subway cars from the 1980s and the purchase of 270 electric buses. Even some repair work to keep the system operational will have to wait.

The transit agency’s construction contracts are tools for advancing equity, Janno Lieber, the MTA’s chief executive officer, said during a March 7 event where he signed the Equity in Infrastructure Project Pledge, a national initiative to award more government contracts to small and disadvantaged businesses. 

Lieber said the MTA is seeking to increase the number and size of contracts. But that will be difficult with the agency slowing down its capital work. Still he said “we’re confident that the court business is going to run its course in the next couple of months and then we’re going to be able to resume that.”

Jennifer Herman, owner of MKJ Communications, has built her business around providing intercoms, digital signs, closed-circuit surveillance equipment and street-level totems to the MTA. Herman now has more than 60 employees that she has spent time training. Retaining them without taking on more MTA work will cut into her already-narrow profit margins, but rehiring and retraining later on when activity resumes also has a cost, she said.

“Either way it’s a lose-lose game for me,” Herman said. “What’s better, keep an employee even if it’s going to negatively impact the financial aspect of the project or let them go and then try and rehire someone down the line when that job starts up again?”

Contractors and other small businesses who work for the MTA would need to pay the congestion toll when driving into the district. Trucks with an E-ZPass will pay $24 to $36, depending on their size, during peak hours. That’s an additional expense, but one that’s manageable, said Duarte, owner of Zion Contracting.

“The benefits outweigh the downside by a lot,” Duarte said. “The benefits of doing all these capital projects will improve the economy.”

(Updates with infrastructure needs in the tenth paragraph.)

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