(Adds comment from advocacy groups, details on MTA's financing needs)
By Jonathan Allen
NEW YORK, Feb 26 (Reuters) - Drivers entering midtown and lower Manhattan would have to pay a congestion charge to help fund repairs to New York City's deteriorating subway system under a plan announced on Tuesday by Mayor Bill de Blasio and New York Governor Andrew Cuomo.
Cuomo has long favored the new toll to generate revenue for an aging subway system that has been plagued by delays and closures. The mayor, who had favored raising taxes on the wealthiest New Yorkers rather than congestion pricing, said he was dropping his opposition.
"I still believe a Millionaires Tax provides the best, most sustainable revenue source for the transit improvements our city needs," de Blasio said in a statement. "But the time to act is running out, and among all alternatives, congestion pricing has the greatest prospects for immediate success."
Under the plan, which requires approval from the state legislature, most people who drive into the island of Manhattan below 61st Street - roughly everything south of Central Park - will have to pay a toll. The toll amounts are to be set by the end of the year.
"It's a luxury to drive into Manhattan," Cuomo said in a radio interview with WNYC on Tuesday, noting that most vehicles filling Manhattan each day drove in from another state.
The plan has been modeled on those introduced in London, which began charging vehicles driving into the city center in 2003, and some other cities.
Both Cuomo and de Blasio have said the city's subway system, one of the world's busiest, is in a crisis as the Metropolitan Transportation Authority, the state agency that runs the system, struggles to find funding to fix aging infrastructure.
About a third of trains run late. Decades-old signals require large gaps between trains, leading to commuters struggling to squeeze into crowded carriages at rush hour.
The MTA estimates that it needs between $41 billion and $60 billion to pay for improvements and repairs under its next five-year capital plan that begins next year, on top of its roughly $17 billion annual operating expenses budget.
A working group created by the state legislature last year recommended congestion pricing, saying it could generate $1 billion or more a year. The revenue would support at least $15 billion in bonded financing over the next decade, the working group said.
Drivers unhappy at the new toll could take consolation in estimates that traffic would move 20 percent faster than the current average of 7.1 miles per hour under the plan, the working group said.
Transit advocacy groups welcomed the agreement, saying the mayor's relenting was an important step forward.
"It's not a silver bullet to fixing the current crisis, but it raises a significant amount of money," Jaqi Cohen, the campaign coordinator at the Straphangers Campaign, the New York commuter advocacy group, said in a telephone interview.
The governor and the mayor said they expected reduced tolls during off-peak hours, and exemptions for vehicles driven by or transporting people with disabilities, among other categories.
The FDR Drive, the main highway tracing Manhattan's eastern flank and a main thoroughfare connecting the island to outer boroughs, will also not carry a toll.
Fernando Ferrer, appointed by Cuomo as the acting chairman of the MTA, endorsed the plan.
After London introduced a congestion charge, the number of bus riders in central London increased by 37 percent in the first year, and traffic congestion dropped by about a quarter, according to the Centre for Public Impact, a non-profit organization created by the Boston Consulting Group. (Reporting by Jonathan Allen in New York Editing by James Dalgleish)
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