Sander is leaving in the middle of a financial crisis for the cash-strapped Metropolitan Transportation Authority.
"A change in leadership sends a message," Governor Paterson said.
He was appointed in January 2007 to head the nation's largest mass transit agency by then-Gov. Eliot Spitzer.
"I'm disappointed. I would have loved to have stayed, but again not my call," Sander told reporters on Thursday night. "I think we have put the MTA on a good path. I think it is positioned to go forward."
Sander said that he told the governor's aides several weeks ago that he would offer to resign if the bailout passed the legislature. Sander's resignation is effective May 22, 2009.
The search now begins for a new head of the MTA.
"We're looking for someone who is not afraid to bring down sacred cows and who will clean this place up," Paterson said.
Mayor Michael Bloomberg was less critical of Sander's leadership in a written statement, recognizing his effort to improve the MTA.
"Leading the MTA has always been a tough task, but Lee embraced innovative approaches to tackling issues that have troubled our City for decades," he said.
The bailout package signed by the governor on Thursday allows the Metropolitan Transportation Authority, which runs the system, to hike fares by only about 10 percent, from $2 a ride to $2.25.
The MTA had been threatening an increase of up to 30 percent to help cover massive budget deficits.
The bailout also softens the increase on the cost of a monthly fare pass, from $81 to $89, and adds a 50-cent charge for taxi rides, among other fees. The plan includes a payroll tax on businesses but no new tolls.
The bailout raises $1.5 billion from the payroll tax, of which $400 million will be put toward capital funding. That $400 million will be collateral so the state can borrow about $6.5 billion in bonds over the next two years to start the capital plan.
The state will reimburse school districts an estimated $60 million in next year's budget for what the schools will have to pay out in payroll taxes.
Tax revenues will go toward capital, and fare hikes will be used for operations.
The state-created MTA, which has an annual budget of about $11 billion, also runs the Metro-North Railroad and Long Island Rail Road, the Long Island Bus system and several bridges and tunnels.
The systems carry more than 8.2 million riders on an average weekday and more than 300 million vehicles a year.
The MTA has blamed the economic downturn for a $1.2 billion budget deficit.
The bailout was intended to avoid the threatened double-digit fare increases, service cuts and layoffs. It includes 7.5 percent increases in fares and tolls in 2011 and 2013, Assembly Speaker Sheldon Silver said.
Sander's complete statement:
"It has been a great honor to lead the 70,000 hard-working men and women who run the world's greatest public transportation system. I am tremendously proud of our accomplishments making the MTA a leaner, more efficient and effective organization. Each of the MTA's agencies is performing at peak levels, the relationship with our employees is dramatically improved and we communicate more frequently with our customers. The integration of the MTA's three bus companies, the merging of back office functions across seven agencies and the introduction of line general managers on the subway system will save the MTA millions and improve the agency's performance. New innovations like rider report cards, text message alerts and Select Bus Service have improved the customer experience. There is more work to be done, but I leave confident knowing the MTA is headed in the right direction. I am grateful to Governor Paterson and Governor Spitzer for this wonderful opportunity. I wish Governor Paterson the best of luck in choosing a successor who will build on the progress the MTA has made over the past two and a half years."
Some information from The Associated Press.
MORE NEW YORK AND TRI-STATE AREA NEWS
SEND TIP OR PHOTO || REPORT TYPO || GET WIDGET
EYEWITNESS TWITTER || FIND US ON FACEBOOK