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Kris
April 16th, 2003, 09:04 PM
Is the current situation a fatality? Following are two articles exposing opposite analyses.


April 16, 2003
A Mayor With No Control Over His City's Destiny
By JENNIFER STEINHAUER

Moments after laying out his description of a New York City with far fewer firehouses, thousands of laid-off workers and no pools for city children to frolic in during the summer, Mayor Michael R. Bloomberg stared toward the cameras and talked wistfully about why the city's fiscal predicament left him "a little sad, a little angry."

"We're not totally in control of our own destiny," said Mr. Bloomberg, referring to the union contracts that bind the city, the court orders that mandate numerous expenses and the vast control Albany holds over much of what the city can to do, right down to taxing itself.

At roughly the same moment, Gov. George E. Pataki held a news conference in Albany with the Orangemen of Syracuse — the champion basketball team — and refused to answer questions about the two gloomy budgets that Mr. Bloomberg presented yesterday.

While the vagaries of Wall Street, war and the national economy are also out of the mayor's hands, yesterday's disparate news conferences illustrate what Mr. Bloomberg controls the least: the political dynamics of Albany, which set New York City and the state capital farther apart than the 150 miles between them.

It is a world in which politicians never show their cards, budget books are incomprehensible and no one really knows what is going on until it has basically already happened, as was the case yesterday when the Senate majority leader, Joseph L. Bruno, and the Assembly speaker, Sheldon Silver, struck a tentative deal out of nowhere on how much of the governor's proposed cuts to restore.

Three men control all the power, and their political needs have almost nothing to do with the fiscal needs of New York City, yet Mr. Bloomberg's entire budget is pure paper without their acquiescence.

"You have a city that is a creature of the state," said William T. Cunningham, the communications director for Mr. Bloomberg. "The issues of Buffalo are handled at the same time as the issues of New York City, which is partly a function of the state Constitution and partially the function of the culture of Albany."

Governor Pataki, who some politicians believe may have dreams of a political career outside Albany, seems bent on preserving his legacy as the man who cut taxes and kept them cut. Should New York City fall into a total financial debacle, its residents are more likely to blame the mayor than the governor.

Mr. Bruno wants to please the governor, but he is also aware of the need to keep his Republican conference members happy, lest he lose his leadership post. Many of those members are from the suburbs of New York City, and will not tolerate the tax on commuters Mr. Bloomberg seeks. But Mr. Bruno also knows he has something to gain by staying in the good graces of Mr. Bloomberg, a wealthy political donor who has ties to the national Republican Party.

Mr. Silver, a Democrat, is masterly at playing these men off one another, insisting, for instance, that Mr. Bloomberg pressure the governor, a fellow Republican, for more help — while Mr. Silver buys time and figures out what his conference needs.

On top of it all, there is enough competition and personal animosity between the three Albany men to create a nerdy reality television show, in which everyone stands around in dark suits denouncing one another.

These factors, as much as matters of fiscal substance, are what drive the outcome of the state budget, and ultimately determine how onerous the cuts to the city's budget will be.

Mr. Bloomberg is but a bit player in this drama, with no constant ally. "Those three guys can't get along," said one former city official who had regular dealings with all three Albany leaders. "And if as mayor you get along with one of them, you are the enemy of the others. How do you win in a triangulation?"

While Mr. Bloomberg prides himself on having run for election as a nonpolitician with debts to no one, having no political favors to call in can be a liability as well.

Mr. Bloomberg is in a somewhat similar situation with union leaders, whose political interests center on keeping their leadership positions, which are at risk if they give away too much.

The mayor sounded this theme numerous times yesterday during his hourlong budget presentation. "We are very dependent on Albany," he said more than once.

But the mayor saved his true choler for the unions, mocking their suggestion that the city borrow from their pension funds at 8 percent interest, and belittling them for what he said is a refusal to step up to the plate. At one point during his presentation, Mr. Bloomberg displayed a slide with various quotations from union leaders in recent weeks suggesting that they would not give up any concessions to help the budget.

"The fact of the matter is," Mr. Bloomberg said, "we are all in this together, and we are all going to have to make sacrifices together. And when somebody says, `We'll I'm just not going to participate,' I sort of shake my head and wonder what they're thinking about."


Copyright 2003 The New York Times Company


Gotham Gazette - http://www.gothamgazette.com/article//20030414/202/344

An Alternative to Suicide By Budget
by Bonnie Brower
April 04, 2003

With Mayor Michael Bloomberg preparing to release his worst-case scenario executive budget this week, possibly containing as much as $1 billion in additional service cuts and thousands of layoffs to close the city's budget gap, the Budget for a Livable NYC Coalition -- a new, growing citywide coalition of dozens of community, civic, labor and religious organizations -- is instead urging a far-reaching revenue proposal.

"Follow the money," they are telling the mayor, just as Deep Throat advised cub reporters Woodward and Bernstein to do in the beginning of their investigation into Watergate. And that money is mostly right here in New York City, not in the closed pockets of Albany or Washington, DC.

The city's continued reliance on additional aid from New York State to close its $3.5 billion gaping budget hole is beginning to feel like suicide by budget. The New York State Financial Control Board recently warned against it, and the New York City Council estimated that $1.9 billion of the city's budget gap -- just under 60 percent -- is the result of harmful actions that the governor has proposed in his state budget! Even though the city sends Albany at least $3.5 billion more in revenue each year than we receive in state aid, this year we will get even less such aid - at least hundreds of millions of dollars less.

Unlike the governor, who sailed through his re-election campaign vigorously denying any coming state fiscal distress, Mayor Bloomberg spent his first year in office seriously addressing the city's economic downturn and the budget crisis he inherited. He and the City Council have already made over $2.6 billion in cuts; enacted the highest property tax rate increase in city history; imposed a staggering number of "user fees" for various public services as well as higher fines for various infractions. Unfortunately, most of these revenue increases and service cuts were regressive, hitting hardest the New Yorkers with the least resources and greatest needs.

But the city is still confronted with at least a $3.5 billion hole in the Fiscal 2004 budget, which begins July 1. And although the mayor has stated his commitment to raising broad-based, recurring revenues to protect essential public services and revitalize the economy, his current gap-closing strategy falls far short of this. He continues to rely on significant additional aid from the state and federal governments that, other than increased homeland security funding, is highly unlikely to materialize. He is also now calling for $1.2 billion in municipal labor givebacks and "productivity savings," which are both unfair and unrealistic; they entail negotiations with multiple unions in a very short period of time, as well as deep cuts in individual workers' benefits. Where is the comparable demand for business assistance and givebacks?

Mayor Bloomberg's only significant proposal for new revenue -- a "reform" of the city's personal income tax that combines a new commuter tax six times higher than the repealed version, with a tax cut of 38 percent for city residents -- has been declared "dead on arrival" by the governor and the majority leader of the State Senate leader, who must approve it. It is, moreover, a thoroughly perplexing proposal, since in just three years, the added revenue from commuters would be canceled out by the tax cuts for residents.

Despite the starkly compelling post-9/11 case for additional state and federal aid, the sad truth is that while we continue to seek it, New York City must prepare to rely primarily on itself, as usual, to balance its budget and begin our economic recovery. Almost two-thirds of the city's annual revenues are raised from city taxes, fees and fines, and we will have to reform these to find additional ongoing revenues to grow, not cut, our way out of our fiscal crisis.

And this is exactly the recipe for survival being pressed by the Budget for a Livable NYC Coalition, which was convened and is being staffed by City Project. It is proposing a progressive revenue package which, if enacted, would generate $3.5 billion in additional recurring revenues for the city, avoid the need for further painful and destructive service cuts, and spread the pain and burdens of the fiscal crisis more evenly and fairly.

The coalition's revenue recommendations "follow the money" to wealthy city residents and profitable businesses, which have so far been insulated from contributing to the city's recovery.

We propose to capture a small portion of the federal income tax windfall, by enacting a one percent income tax increase for residents with incomes above $250,000, which would raise $595 million in new revenue. Our recommended commuter tax is a simple one percent tax, which would, by itself, generate $950 million, almost as much as the mayor's complicated personal income tax reform proposal, but in ongoing revenues.

Of equal importance, the coalition calls on the city's business community to shoulder a fairer portion of the fiscal burden, through revising and restructuring business taxes.

New York City's three major business taxes, enacted in 1966, have undergone only minor changes since then, despite sea changes in corporate ownership structures and business practices. They are outmoded, deeply inequitable, and filled with irrationalities. Unlike the city's personal income tax, whose revenues rise and fall with people's incomes during boom and bust times, revenues from the business taxes together contribute only about 12 percent of city revenues, a share that has remained essentially flat over the past twenty-five years, regardless of whether the local economy was sizzling hot or ice cold.

To remedy this situation, the coalition has made three business tax reform proposals that together would generate $1.19 billion in additional revenue for the city, and ensure that the most profitable businesses contribute a larger share of revenues.

Our most lucrative proposed change affects businesses that form as limited liability partnerships and companies, so-called "LPs" and "LCs." Since the mid-1990s, these businesses have been subject to the city's unincorporated business tax. Originally enacted to apply to small partnerships and sole proprietorships, which were not incorporated and exposed their owners to full personal liability if anything went wrong in their businesses, this tax was set at a very low rate - four percent -- which has never been increased. By contrast, the city's general corporate tax, which applies to over 240,000 regularly incorporated businesses, has an 8.85 percent tax rate.

The coalition is proposing that the city's 6,800 large limited liability partnerships and limited liability companies, which include Bloomberg, LP, and the largest and wealthiest law firms and financial service companies in the city, and which are structured to shield their owners from personal legal liability, have their tax rate equalized to 8.85 percent, the same as the general corporate tax. Doing this would raise $881 million in new city revenues and level the business playing field, where these companies now pay 55 percent lower taxes than comparable businesses because of the fluke of their ownership structure, rather than the level of their profitability.

The coalition also proposes that New York City-based insurance businesses, which were exempted from paying corporate income taxes in 1974, be restored to the tax rolls, and shoulder their fair share of business tax, which would generate at least $200 million in city revenues. Putting them back into the tax pool would also remove the unfair competitive edge their exemption gives them in their non-insurance business ventures, including real estate and financial services, which have become an ever-larger portion of their businesses.

Then there is the matter of the $300 minimum general corporate tax, charged to corporations that, because of tax deductions, exemptions, loopholes or lack of income, do not qualify to pay the 8.85 percent tax rate. This fee, which is paid by over half the city's 240,000 plus corporations, was established in 1966 and never increased; can you think of any of your expenses that haven't gone up since the 1960's? The coalition proposes to increase this minimum fee to $1,000, an increase of just over $58 a month, and still substantially lower than if it merely had been adjusted for inflation since its enactment. (By comparison, a family of four struggling to survive in New York City on $30,000 now pays the city nearly twice the current minimum corporate tax in personal income taxes.) This rate change would net the city $107 million in new revenue.

Finally, the coalition is calling for a reinstated stock transfer tax, which was in effect for decades until the state effectively repealed it. This is a tax on individual and institutional stock transactions, not on the stock market or stockbrokers, and it exists in virtually every major stock market throughout the world. The proposal is to reinstate it at a mere penny-a-share, or 80 percent lower than the original tax. If passed, and if the revenues were split with the state, as the coalition proposes, each jurisdiction would be enriched by approximately $760 million a year.

Some would argue that the coalition's proposals could lead to the wholesale exodus of businesses from the city. This is the standard claim of the no-taxes/no-government crowd. It is an unsupported assertion. Not only are the changes fair and reasonable, but more important, they will help guarantee continued funding for public services, resulting in streets that are free of crime and filth, an educated workforce, and good public transportation - all of which recent studies show businesses consider far more crucial factors than the level of taxes in their decision where to locate. Or, as our businessman-mayor put it, "Any company that makes a decision as to where they are going to be based on the tax rate won't be around very long." In addition, since the mid-1990s, New York State has slashed business taxes so many times and so deeply, that the state dropped from ninth to 25th place among all states in terms of corporate income tax rates, with city businesses receiving the full benefit of these enormous tax savings. It is time for them to give a little back.

All the coalition's measures must also, unfortunately, be approved by the state legislature, because the city has direct control only over its property tax rate. But all except the commuter tax and stock transfer tax apply exclusively to city residents and businesses, which should significantly increase their likelihood of passage. If passed, these proposals would not only close the city's budget gap, but broaden its tax base, increase long-term, recurring revenues to maintain vital public services, and make our tax policies fairer and more progressive by spreading tax burdens to those best able to shoulder them. Not a bad way to turn a huge fiscal crisis into an unparalleled opportunity to create a more solidly funded, livable and compassionate city.

Bonnie Brower is the executive director of City Project, a "progressive, nonpartisan public policy organization." http://www.cityproject.org

Kris
April 18th, 2003, 11:05 AM
April 18, 2003
Time to Ask, Who Needs Albany?
By CLYDE HABERMAN

SIXTEEN months into his mayoralty and 37 years after he first came to New York to make his fortune, Michael R. Bloomberg has discovered that the city's fate rests largely with a distant, often-uncaring Albany. That made him angry, Mr. Bloomberg said this week as he announced a worst-case budget for the next fiscal year that is already producing shock and ugh.

"Angry we're not totally in control of our own destiny, unfortunately," he said. "We are very dependent on Albany and a little bit dependent on Washington. And that's not good."

There is an almost irresistible temptation to reply: Duh! You just found this out?

It has always been so. New York City can barely wipe its own nose without first getting Albany's permission.

To be fair, Mr. Bloomberg was probably aware of that fact even before he decided that it would be neat to be called Mayor Mike. So the real news is that he seems to be finally getting steamed about it, at least a tiny bit.

From the get-go since taking office, he has been dealt about as rotten a hand as any mayor has seen when it comes to city finances. But for the longest time, he tried to play it like Cool Hand Luke. We'll get through it, he said. Things will work out.

All last year, during the state elections, he lay low, making no tough demands of Gov. George E. Pataki, a fellow Republican. Mr. Bloomberg no doubt figured that once Mr. Pataki was re-elected, he would remember that display of solidarity and reward his good buddy.

Obviously, it hasn't worked out that way. Not only has the governor not come through, but he has also done harm by trying to grab some of the mayor's share of federal antiterrorism money.

And so Mr. Bloomberg is beginning to chafe at having been left holding the bag. Who can blame him? He, not the governor, is the one who will be mauled by New Yorkers for the municipal layoffs and service reductions that lie ahead. Another "duh" is in order here. New Yorkers blame their mayors even for bad weather.

Sensing that, Mr. Bloomberg has radically altered his tune about raising taxes.

During his 2001 campaign, he hated the thought. Worst idea since Coca-Cola fiddled with its syrup formula. "You cannot raise taxes," he said then. "That is clear. If you raise taxes you will drive enough business and people out of this city."

This week, Mr. Bloomberg acknowledged that some alternatives were worse. "People will leave this city if we don't keep the streets clean and safe," he said. This will happen "long before they will leave it with taxes going up."

While the mayor squirms, Mr. Pataki has stayed aloof. Indeed, during the city's ordeal, the governor has not been sighted for so long that someone may want to steal a page from the Pentagon's book and issue a playing card with his picture on it.


IN this climate, it is hardly surprising that there are rumblings once again about New York City's seceding from the state and going it alone.

(There is also talk in some circles about Brooklyn's withdrawing from the city, a proposal reminiscent of Staten Island's secession vote in 1993. Not to be harsh, but this effort is destined to go nowhere, and it risks inspiring unkind remarks like one heard in 1993 about Staten Island, that its secession would be comparable to "Gummo leaving the Marx Brothers." Do we really need that?)

The notion of New York City as "the 51st state" tends to be revived whenever people here feel especially bruised by Albany. Its latest champion is City Councilman Peter F. Vallone Jr., a Queens Democrat who has introduced a bill to take the first tentative steps toward secession. By any measure, Mr. Vallone says, Albany treats the city shabbily, taking $3.5 billion more in taxes from the five boroughs than it gives back in state aid.

"When we were able to take care of the rest of the state, we did," he said. "Now we need our own money back. Forget aid. We haven't received a penny in aid. We just want our money back."

As a practical matter, secession seems a nonstarter. For one thing, can you imagine Congress approving a plan that would give New York two more United States senators? Many in Washington aren't keen about the two we have now.

Besides, some would say in light of recent international events that this country already has a 51st state. They call it Britain.

If nothing else, a secession campaign is a way to vent anger at Albany. In the words of the director of one nonprofit group that monitors city affairs, "It's certainly worth asking the state, `Where would you be without us?' "


Copyright 2003 The New York Times Company

billyblancoNYC
April 18th, 2003, 11:43 AM
Do it, damnit.

Fabb
April 30th, 2003, 04:21 AM
April 30, 2003

City, in Deep Hole, Seeks Private Sector Help
By JENNIFER STEINHAUER

The Bloomberg administration, hampered by a $3.8 billion deficit and dim prospects of financial assistance from the state, is leaning on New York's private sector for a helping hand in ways not attempted by any administration in recent memory.

Since taking office, Mayor Michael R. Bloomberg has asked friends to pay for major city events and has told his commissioners to look to foundations and corporations to help the city pay for certain programs. He has hired a chief marketing officer to persuade corporations to pay to sponsor events and city sites. His schools chancellor has tapped Caroline Kennedy to raise money for public education.

And the mayor recently restarted the New York City Public Private Initiatives, a city-controlled nonprofit group begun under the Giuliani administration to pay for various pet projects. Its goal is to persuade as many wealthy individuals and foundations as possible to shore up certain services the city can no longer afford to provide.

Under the Bloomberg administration, the private sector has been underwriting everything from Parks Department festivals to positions within the Department of Cultural Affairs to building a $1.2 million counterterrorism center and creating a mobile chemical and biological detection lab, both for the Police Department. The next major wave of financing will most likely be focused on educational programs, an area where government dollars are shrinking.

To put it in perspective, between 1994 and 2001, the Public Private Initiatives raised $11 million, excluding funds raised for World Trade Center victims. Since Mr. Bloomberg took office 13 months ago, it has raised nearly $14 million.

"Not in my lifetime has there been this level of concentrated expectation that the private sector will help basic city services," said Kathryn S. Wylde, president of the Partnership for New York City.

Mr. Bloomberg recently asked Steven Rattner, a managing principal in a private investment firm and a well-known philanthropist, to be the chairman of the Public Private Initiatives. (Name change under consideration: The Mayor's Fund to Advance New York.) A former associate director of development at Stanford University, Joel Getz, is the president.

"We need enormous involvement and help," said Patricia E. Harris, the deputy mayor for administration. "P.P.I. will be more aggressive in reaching out to more foundations, corporations and individuals for support."

Of course, government has always depended on the largess of the private sector. But the city's needs are their largest since the fiscal crisis of the 1970's, which is the last time government aggressively courted the private sector to help bail it out.

And today's problems — and their private-sector solutions — are quite different from those of that era. In the 1970's, New York's many hometown banks were involved in the city's recovery, stretching out debt payments and working closely with city officials to get its house in order. This was partially out of self-interest since many had large investments in New York City bonds.

Back then, foundations tended to pay for local civic groups to supplement city services like community policing or cleaning streets. Unlike now, the city was trying to stave off bankruptcy, and the efforts of the private sector, labor unions and state agencies focused on that goal, with those groups often lobbying for the city in Albany and Washington.

But now, the private sector is being asked to help address directly what are essentially holes in the city's operating budget, either with direct financial assistance for programs the city would like but cannot afford, like a colon cancer prevention program or a Parks Department winter festival, or to pay to be the host of special events in the city, like the Republican National Convention, which will be held in New York in August of next year.

"I am not so sure that private charity played such a big role in the 1970's," said Osborn Elliott, the chairman of the Citizens Committee for New York City, which was created in 1975 in response to the city's fiscal crisis. "The big things that the private sector did was lobby, buy bonds and create neighborhood initiatives."

Further, the city has never quite had a mayor like Mr. Bloomberg, who has spent most of his professional life as a generous philanthropist. Philanthropy is a quid pro quo sport among affluent New Yorkers, and Mr. Bloomberg has plenty of chits to call in. Now, when he calls on friends whose charities he has supported, his pet cause is New York City.

The approach is not without risks. Because of a national economic slowdown and a downturn on Wall Street, corporations, private donors and foundations all have less to give than they did even two years ago. Some nonprofit groups, which tend to supplement city programs even in flush times, are concerned that the city will end up competing with them for scarce resources.

"We recognize that in times of fiscal shortfalls, the city won't be able to fund certain things," said Laura Wolff, program officer of the Robert Sterling Clark Foundation, which finances advocacy groups. "But there needs to be recognition that there is no hidden pot of money."

"Government and nonprofs are the two legs on the stool," Ms. Wolff went on, "and you can fiddle with the balance, but if one leg goes away," it will be hard for groups that traditionally rely on both the government and the private sector to survive.

Ms. Harris said that Public Private Initiatives was looking to young donors — "the next Steven Rattners"— and companies like BP, which are just establishing themselves as corporate citizens in New York, and others apart from the list of usual suspects in the philanthropic world, which she said would reduce competition with smaller organizations. (BP Amoco will finance three fellowships in the Department of Cultural Affairs.)

Mayor Bloomberg has looked to private money — including his own — before he even took office. It is well known that the mayor has dipped into his pocket anonymously to pay for a large part of the restoration of Gracie Mansion, and to finance small arts organizations to the tune of $20 million.

And he has turned to his friends. When it came time to raise $9 million to pay for the commemoration ceremonies for the first anniversary of Sept. 11, Mr. Bloomberg asked three friends — Gerald M. Levin, the former chairman of AOL Time Warner; Stanley S. Shuman, managing director of Allen & Company; and Thomas S. Murphy, retired chairman of Capital Cities/ABC — to raise it.

All three men will sit on the newly configured Public Private Initiatives board, which Mr. Rattner said would have about 30 members, including the gossip columnist Liz Smith and 10 other prior members.

Private money has been used by the Bloomberg administration to bring a special session of Congress to New York last year, to attract the Grammys and to restore the Governors Room in City Hall. Verizon gave money for an after-school program and other causes, and the Paul and Klara Porzelt Foundation has donated $25,000 to restore the mural on the ceiling of the City Council chamber.

Ms. Smith, in the sort of oddball effort that city officials love, implored her readers to send checks to the city in lieu of gifts for her 80th birthday and then continued to press the case in subsequent columns; the effort raised more than $200,000.

Sometimes, what donors can offer is expertise, office space, people or other resources. In one recent case, a few nonprofit groups had workers fan out across the city to help the federal government's effort to get low-income residents to apply for the earned-income tax credit. A pharmaceutical company donated smoking-cessation patches for the city to dole out to potential quitters.

"There are many ways for private philanthropy to work with the city," said Karen L. Rosa, the executive director of the Altman Foundation, which gives money to social welfare, health care, education and arts groups. "We bring a lot more than dollars. We need to do more in terms of sharing expertise and knowledge about programs. It is less likely that we would give money directly to the city. There is no way private philanthropy can fill those gaps."

The city's efforts will certainly hold the attention of the nonprofit world.

"I applaud the mayor's efforts," said Jonathan Greengrass, the acting director of Learning Leaders, which supports public education. "But I would also say that we are concerned about the long-term impact they will have on our fund-raising. It is a concern to everybody because it is such an unknown. Of course, in New York there is a tendency to get upset about things before seeing if they have really happened."

Copyright 2003*The New York Times Company

ZippyTheChimp
June 28th, 2003, 10:51 AM
June 26, 2003

A Budget Success, but Bloomberg Gets No Respect

By JENNIFER STEINHAUER

Yesterday should have been Mayor Michael R. Bloomberg's victory lap. He shook hands with the City Council on a budget deal that closed a $6.4 billion gap, yet left libraries open, health clinics running and trash picked up as usual.

And yet Mr. Bloomberg, who cut astonishingly few city services when faced with the worst fiscal crisis in a generation, is probably best known throughout the city as the man who closed six firehouses.

His poll numbers are the lowest for a mayor in two decades, in large part, those polled say, because of how he has handled the city's fiscal woes.

The city budget, in many ways, embodies the paradox of Mr. Bloomberg's mayoralty: When he tries to be the hardball chief executive that voters said they wanted when they elected him in 2001, he is reviled. But when he wraps himself clumsily in the cloak of a politician, the effort almost inevitably falls flat.

He has ingratiated himself with the Republican Party with generous donations, but alienated the city's conservatives by closing the budget gap in large part through tax increases. He befriended various politicians around the country, but extracted almost nothing from the one who counted the most: the governor of New York.

He has kept crime in check, but is maligned for his expanded ban on smoking. He has appealed to a broad and diverse swath of constituents, but has alienated some groups more severely than even his most polarizing predecessors.

"I think he started with a great poker hand," said William B. Eimicke, a professor of public administration at Columbia University. "But he sort of played it the wrong way. When he came in, everyone thought he was pretty special. And he has had a tough environment to deal with."

In some ways, as his aides are fond of pointing out, Mr. Bloomberg is a victim of timing. A national economic slowdown has hurt every municipal economy, particularly that of New York City, which is highly dependent on the fortunes of Wall Street. Further, New York State has its own financial problems.

Indeed, Mr. Bloomberg is often blamed for moves made by other governments or authorities over which he has no control, like the recent increase in transit fares.

"The mayor is always the lightning rod," said Edward Skyler, Mr. Bloomberg's press secretary. "And this mayor is no different. He always said he wanted to cut the budget without cutting essential services; that is what doing more with less is about. And that is why people chose him for the job." He added that in time, New Yorkers would acknowledge the mayor's accomplishments.

But in many ways, Mr. Bloomberg created his own public perception problem, even amid great successes.

To begin with, he led the public down a budget road that changed considerably from the one he started on in January, when he first began discussing the budget for fiscal 2004.

For most of the year, the cornerstone of Plan A was a huge commuter tax that was rejected by Albany from the day it was introduced. Mr. Bloomberg repeatedly insisted that he would have to cut services no matter what, but he also said that if Albany did not pass a commuter tax, draconian measures — Plan B — would be taken, including widespread layoffs and service cuts.

In the end, Mr. Bloomberg suddenly sprung Plan C: a personal income tax increase and a sales tax increase, which came in conjunction with a state sales tax increase and on the heels of a large property tax increase for city residents. After insisting for months that the commuter tax — which would actually have reduced city residents' taxes — was the only way to go, he presented Albany's permission for the city to raise its own taxes as a gift.

The mayor was also able to persuade the Legislature to restore large scheduled cuts in education and health care, but the only true freebie he got from the state was a restructuring of the city's debt from the 1970's, which the state will pay.

To be fair, the city's requests from the state had to be adjusted to account for the state's own budget — an unexpected two-way legislative deal that left Gov. George E. Pataki on the sideline.

But many of Mr. Bloomberg's moves seemed custom-made to infuriate the public. He refused to criticize Mr. Pataki's budget-cutting proposals and gave unqualified support to the transit fare increase, even as the Metropolitan Transportation Authority was coming under fire for misleading the public about its own financial condition. The new taxes, on top of various fee increases throughout the city, shocked and rankled many New Yorkers. He stood firm on closing fire stations, but gave back things New Yorkers said in polls that they cared less about, like money for cultural institutions.

He stood by and permitted the state's problems to reflect upon him, rarely using his public appearances to clarify his role or to respond to those who were attacking the city. This seemed calculated in part to protect his friendship with Mr. Pataki, who in return did little to bolster the mayor as his poll numbers sank.

"The bottom line in my neighborhood is that folks wanted to protect city services," said Councilman Bill DeBlasio, a Democrat from Brooklyn. But, he agreed, few credit the mayor for saving services.

Even when Mr. Bloomberg tried to make a point of benevolence, he apparently failed to seal the impression among New Yorkers. For instance, he made the unusual move of restoring $90 million in service cuts before the Council wheedled him into it, but then failed to brag about it. This left the air time to Council Speaker Gifford Miller, who leaped from one borough to the next, arguing for even more budget restorations.

Mr. Bloomberg said last night that his budget process simply reflected democracy. At a news conference with Mr. Miller, the mayor said: "At every level of government, you start out with a set of proposals both on the income and revenue side that would give you a balanced budget. And then you get as much input as you can from all the interested parties. Sometimes those are better ideas than what you started with. Sometimes those are ideas that are more practical. Sometimes those are ideas that are better able to form a constituency."


Copyright 2003 The New York Times Company

Kris
July 30th, 2003, 01:13 AM
July 30, 2003

With Tightened Belt, New York Pulls Back From Fiscal Brink

By ERIC LIPTON

For the first time since the terrorist attacks in 2001, there is evidence that New York City is emerging from its fiscal crisis, a startling turnaround that is a result of a budget formula consisting of higher taxes, service cuts, extra aid and greater government efficiency.

The city will still have to close a budget gap next year, as it has every year for more than two decades. But the boost provided by tax increases and belt-tightening will recur, which should allow the city to close the gap without extreme measures.

In other words, the city — which is budgeted to have its smallest full-time city-financed work force since 1986 — is no longer standing at the edge of a fiscal cliff, city fiscal monitors and commentators from bond rating agencies budget watchdog groups agree.

"The city clearly has emerged from that period of fiscal crisis," said Robert A. Kurtter, an analyst in the public finance group at Moody's Investors Service.

Similarly, Rae D. Rosen, a senior economist and officer at the Federal Reserve Bank of New York, said, "Both from a fiscal and an economic sense for New York City, the worst is behind us."

Mayor Michael R. Bloomberg, speaking at a homeowners' association meeting last night in the Bronx, offered a similarly upbeat prognosis.

"I think, in all fairness, the worst is over," he said.

The best evidence, the monitors say, is that the scale of the deficit projected by the Bloomberg administration for next year is significantly smaller than the one the city just overcame. The gap, estimated at $2 billion, translates into 6.1 percent of the anticipated city revenues in the year that begins next July 1. That percentage is the lowest one-year gap projection since 1995 and the third-lowest since the end of the Koch era.

By comparison, a year ago, Mayor Bloomberg's one-year gap projection was 13 percent of city revenues, the highest since at least 1981.

None of this is to suggest that the city has fully recovered from its fiscal malaise; it clearly has not. Significant hurdles remain that could easily cause a painful relapse. New York State, for example, is still in pitiful fiscal shape and could try to cut its aid to local governments in the coming year. Settling city labor union contracts will also most likely prove to be much more expensive than Mr. Bloomberg's budget projections suggest.

Much depends on the city's economy, which is showing signs that it has bottomed out and may be on the verge of improving. Unemployment is dropping. Wall Street profits, for the first half of the year, are way up. Tax revenues are coming in slightly higher than projected. Still, the city economy has a long way to go toward full recovery.

Yet even after taking these caveats into account, New York City is indisputably in much more stable financial shape today than it was just a few months ago.

"Michael Bloomberg was dealt a very difficult hand when he took office, a terrible fiscal crisis," said Alan G. Hevesi, the state comptroller, who is a Democrat and a former political rival of the mayor. "He promised to make some extraordinarily painful decisions to get us out of the situation. And he has done so. We may disagree with this particular tactic or that particular tactic, but essentially they have dealt with these deficits. They have done the right thing."

Even some fiscal conservatives, like E. J. McMahon, senior fellow for tax and budgetary studies at the Manhattan Institute, a research group, agree that the fiscal health of the city, at least in the short term, has improved. "We are in a state now where the financial fever has passed," he said. "What that means is they are not watching their revenues erode with each passing quarter and not having to play catch up. But that doesn't mean they have fixed the fundamental problem."

Tomorrow, the city's fiscal health will be the topic of the annual meeting of the Financial Control Board, an entity created in the wake of the mid-1970's fiscal crisis to monitor the city's capacity to remain solvent. Mr. Bloomberg is scheduled to testify.

The control board's staff has already put out a report asserting that the situation has improved. It called the balanced budget for this year "an achievement of no little note," and said that while the remaining tasks required to complete a recovery were complicated and by no means certain, they were "hardly insurmountable."

Even the president of the Citizens Budget Commission, a pro-business watchdog group, which gave the city a grade of C yesterday for its budget package (the state received an F), said New York had dug itself out of a deep hole, at least temporarily.

"We have moved past the immediate crisis and into a long, tough slog," the president, Diana Fortuna, said.

The $2 billion deficit that the Bloomberg administration must close by next July 1 may sound like a lot, and it is. But it is also part of a chronically fiscally challenged way of life in New York City, where mayors always want to spend more money than they expect to raise in taxes. That sets off the annual budget dance, in which the mayor proposes cuts in everything from libraries to parks, negotiates with the City Council and arrives at a settlement that largely keeps spending intact. The situation becomes a crisis when major tax increases or layoffs are needed to balance the budget.

After city officials raised so many taxes and cut so many jobs this year to balance the budget, it may be more difficult to find new strategies to close next year's gap, even though the deficit is expected to be much smaller.

But, Mark Page, the director of the mayor's Office of Management and Budget, said, "We're not looking at this frightening cliff for next year."

For city residents, this turnaround could translate into a quite tangible benefit. If Mr. Bloomberg honors his own financial plan, two of three major taxes that were increased this year will be cut: the tax on individual clothing items worth $110 or less, which is supposed to be eliminated by June 1, 2004, and the income tax increase on highest earners, which is supposed to start rolling back next year and be phased out by mid-2007.

Speaking last Friday on his weekly WABC radio broadcast, Mr. Bloomberg made it clear that eliminating those taxes remains his goal. "I would love to be able to, six years from now when I leave office, say that, you know, on balance we reduced taxes," he said.

But Mr. Bloomberg's ability to do that remains precarious. It will depend primarily on two factors: his ability to win at least some concessions from labor unions and to get at least level funding from the state.

He is in a tricky political situation, as well. If he were to openly declare the city's fiscal crisis over — even though arguably it is — he would in effect be hurting his chances of getting what he needs from the unions and the state. That ability to contribute to his own failure is part of the reason why Mr. McMahon, Ms. Fortuna and Mr. Kurtter say that the new stage the city has entered may be just as dangerous as the last.

"After 9/11, for a time there, it was virtually unanimously recognized, across all segments of the population and among all the key interest groups, that things have changed," Mr. McMahon said. "A serious shift had occurred in the city's prospects and dramatic steps would have to be taken.

"This was a moment," he continued, "when the unions could have been confronted much more powerfully with the need to make significant concessions."

Now, he said, the urgency has passed. "All of the key segments of the community are getting lulled into sense of complacency," he said.

Mr. Hevesi, the state comptroller, shares some of those concerns. And William C. Thompson Jr., the city comptroller, who is not as optimistic about the city's fiscal condition, cautioned the Bloomberg administration about revenue projections.

But, Mr. Thompson added, echoing others: "We have moved beyond the point of crisis. We are still in a state of serious challenge."

The single biggest component of the administration's effort to close an $8 billion budget gap this year was tax increases. The 18.5 percent increase in property taxes will generate $1.7 billion, the increase in the personal income tax will bring in $644 million and the sales tax will draw $377 million.

Although Albany refused to give Mr. Bloomberg virtually any of the things he had requested to help balance his budget — a commuter tax proposal went nowhere — the state wound up helping the city in a big way. About $474 million in state education aid that Gov. George E. Pataki had cut from the state budget was restored by the Legislature.

An additional $675 million was added to the pot in the form of higher payments to the city from the state-owned Battery Park City, extra education aid and permission to sell more taxicab medallions, among other items. The state also agreed to effectively assume the cost of paying off debt from the city's 1970's fiscal crisis, saving the Bloomberg administration $530 million.

The federal government came through, too, with $232 million in special Medicaid aid.

Mr. Bloomberg started the budget-balancing process as soon as he arrived in office, following a burst of spending toward the end of the Giuliani administration and a dive in the city's economy linked to the tech bust and the aftermath of 9/11.

The Bloomberg administration cut expenses and raised the property tax in the fiscal year that ended June 30, giving the city a $1.3 billion surplus that it could roll over to this year. And by cutting out planned increases in spending by many agencies, reducing some services and finding ways to operate the government more efficiently or at least on someone else's tab, it cut an additional $2.1 billion in city spending for the new fiscal year.

Altogether, the assistance, taxes and fiscal self-control totaled enough to close a seemingly catastrophic budget gap.

Though the overall budget went up — to $43.66 billion for next year, including an increase of 5 percent in city-financed spending — many agencies had their spending reduced this year. The budget, in fact, calls for a $185 million reduction in spending by the agencies, or 1 percent less spending by the agencies than in the year that ended June 30.

As a result, the city has fewer police officials. It has closed six fire companies. It is laying off thousands of school paraprofessionals and teacher aides. And it has cut back its support for libraries and cultural institutions, although by not nearly as much as had been threatened.

City agencies today have 9,016 fewer full-time workers than they did two years ago — about 4,000 full and part-time workers are being laid off — bringing down the total city-financed work force to 200,276 employees. That is the lowest it has been since 1986, meaning Mr. Bloomberg has already cut out all the employees Mayor Rudolph W. Giuliani had added by the end of his tenure, in the booming economy.

But other costs of government are still rising, and at a very fast clip. Largely because of the stock market declines, pension costs rose to $2.5 billion in the current fiscal year from $1.3 billion in 2002. The cost of paying off long-term city debt is also rising, in part because of heavy borrowing during the Giuliani era.

Most of the gap-closing budget measures the city has adopted will have recurring benefits. And, if the economy continues to improve, tax revenues will grow still more, even if some of the tax increases are phased out. Mr. Bloomberg, then, would not be the first mayor to see his fiscal fortunes rise with the stock market.

There is some reason to be hopeful that might happen, said Ms. Rosen, from the Federal Reserve Bank of New York. While the securities industry, one of the most important drivers of the city economy, reported $6.9 billion in pretax profits for all of 2002, it has already reported $7.4 billion in pretax profits for the half year that just ended. Large commercial banks also reported a good second quarter.

In part as a result, income tax withholdings from New York City residents are rising, an important sign of a possible economic turnaround, Ms. Rosen said.

And unemployment dropped to 8.1 percent in June, from a high of 8.8 percent in February, leading Ms. Rosen to predict a net rise in the number of jobs in the city in the fourth quarter.

"The worst of the recession appears to be over," said Thomas H. Marks, an economist in the Office of the State Deputy Comptroller for New York City.

The city's fiscal story can quickly turn ominous again. New York State, which balanced its budget this year with borrowing and other one-shot solutions, remains in a fiscal crisis and could react next year by slashing its aid to New York City. If the mayor is unable to win any significant concessions from the labor unions and then agrees to raises, even ones that merely match inflation, it would add $1.2 billion to the expense ledgers next year that he does not have in his spending plan. (He has insisted that he will only approve raises that are paid for out of money-saving changes in work rules.)

The economists could turn out to be wrong in predicting the end of the recession. The city may decide it cannot afford to roll back the taxes it had promised it would, perhaps driving businesses and residents away, a scenario conservatives raise. And, of course, there could be another terrorist attack or other calamity.

For this reason, budget watchers who agree that the crisis appears to be abating, add in the next breath that the situation is tenuous. J. Scott Albrecht, a senior portfolio manager at Federated Securities Corporation, had stopped investing in New York City debt in early 2001, as the city's economy stalled. Just recently, he started buying city bonds again.

"They have endured this fiscal crisis better than anyone would have expected," he said. "It is definitely a manageable situation now. But the city today has less of a margin for error than it has had any time in the past 10 years."


Copyright 2003 The New York Times Company

Kris
July 30th, 2003, 01:15 AM
July 30, 2003

With Tightened Belt, New York Pulls Back From Fiscal Brink

By ERIC LIPTON

For the first time since the terrorist attacks in 2001, there is evidence that New York City is emerging from its fiscal crisis, a startling turnaround that is a result of a budget formula consisting of higher taxes, service cuts, extra aid and greater government efficiency.

The city will still have to close a budget gap next year, as it has every year for more than two decades. But the boost provided by tax increases and belt-tightening will recur, which should allow the city to close the gap without extreme measures.

In other words, the city — which is budgeted to have its smallest full-time city-financed work force since 1986 — is no longer standing at the edge of a fiscal cliff, city fiscal monitors and commentators from bond rating agencies budget watchdog groups agree.

"The city clearly has emerged from that period of fiscal crisis," said Robert A. Kurtter, an analyst in the public finance group at Moody's Investors Service.

Similarly, Rae D. Rosen, a senior economist and officer at the Federal Reserve Bank of New York, said, "Both from a fiscal and an economic sense for New York City, the worst is behind us."

Mayor Michael R. Bloomberg, speaking at a homeowners' association meeting last night in the Bronx, offered a similarly upbeat prognosis.

"I think, in all fairness, the worst is over," he said.

The best evidence, the monitors say, is that the scale of the deficit projected by the Bloomberg administration for next year is significantly smaller than the one the city just overcame. The gap, estimated at $2 billion, translates into 6.1 percent of the anticipated city revenues in the year that begins next July 1. That percentage is the lowest one-year gap projection since 1995 and the third-lowest since the end of the Koch era.

By comparison, a year ago, Mayor Bloomberg's one-year gap projection was 13 percent of city revenues, the highest since at least 1981.

None of this is to suggest that the city has fully recovered from its fiscal malaise; it clearly has not. Significant hurdles remain that could easily cause a painful relapse. New York State, for example, is still in pitiful fiscal shape and could try to cut its aid to local governments in the coming year. Settling city labor union contracts will also most likely prove to be much more expensive than Mr. Bloomberg's budget projections suggest.

Much depends on the city's economy, which is showing signs that it has bottomed out and may be on the verge of improving. Unemployment is dropping. Wall Street profits, for the first half of the year, are way up. Tax revenues are coming in slightly higher than projected. Still, the city economy has a long way to go toward full recovery.

Yet even after taking these caveats into account, New York City is indisputably in much more stable financial shape today than it was just a few months ago.

"Michael Bloomberg was dealt a very difficult hand when he took office, a terrible fiscal crisis," said Alan G. Hevesi, the state comptroller, who is a Democrat and a former political rival of the mayor. "He promised to make some extraordinarily painful decisions to get us out of the situation. And he has done so. We may disagree with this particular tactic or that particular tactic, but essentially they have dealt with these deficits. They have done the right thing."

Even some fiscal conservatives, like E. J. McMahon, senior fellow for tax and budgetary studies at the Manhattan Institute, a research group, agree that the fiscal health of the city, at least in the short term, has improved. "We are in a state now where the financial fever has passed," he said. "What that means is they are not watching their revenues erode with each passing quarter and not having to play catch up. But that doesn't mean they have fixed the fundamental problem."

Tomorrow, the city's fiscal health will be the topic of the annual meeting of the Financial Control Board, an entity created in the wake of the mid-1970's fiscal crisis to monitor the city's capacity to remain solvent. Mr. Bloomberg is scheduled to testify.

The control board's staff has already put out a report asserting that the situation has improved. It called the balanced budget for this year "an achievement of no little note," and said that while the remaining tasks required to complete a recovery were complicated and by no means certain, they were "hardly insurmountable."

Even the president of the Citizens Budget Commission, a pro-business watchdog group, which gave the city a grade of C yesterday for its budget package (the state received an F), said New York had dug itself out of a deep hole, at least temporarily.

"We have moved past the immediate crisis and into a long, tough slog," the president, Diana Fortuna, said.

The $2 billion deficit that the Bloomberg administration must close by next July 1 may sound like a lot, and it is. But it is also part of a chronically fiscally challenged way of life in New York City, where mayors always want to spend more money than they expect to raise in taxes. That sets off the annual budget dance, in which the mayor proposes cuts in everything from libraries to parks, negotiates with the City Council and arrives at a settlement that largely keeps spending intact. The situation becomes a crisis when major tax increases or layoffs are needed to balance the budget.

After city officials raised so many taxes and cut so many jobs this year to balance the budget, it may be more difficult to find new strategies to close next year's gap, even though the deficit is expected to be much smaller.

But, Mark Page, the director of the mayor's Office of Management and Budget, said, "We're not looking at this frightening cliff for next year."

For city residents, this turnaround could translate into a quite tangible benefit. If Mr. Bloomberg honors his own financial plan, two of three major taxes that were increased this year will be cut: the tax on individual clothing items worth $110 or less, which is supposed to be eliminated by June 1, 2004, and the income tax increase on highest earners, which is supposed to start rolling back next year and be phased out by mid-2007.

Speaking last Friday on his weekly WABC radio broadcast, Mr. Bloomberg made it clear that eliminating those taxes remains his goal. "I would love to be able to, six years from now when I leave office, say that, you know, on balance we reduced taxes," he said.

But Mr. Bloomberg's ability to do that remains precarious. It will depend primarily on two factors: his ability to win at least some concessions from labor unions and to get at least level funding from the state.

He is in a tricky political situation, as well. If he were to openly declare the city's fiscal crisis over — even though arguably it is — he would in effect be hurting his chances of getting what he needs from the unions and the state. That ability to contribute to his own failure is part of the reason why Mr. McMahon, Ms. Fortuna and Mr. Kurtter say that the new stage the city has entered may be just as dangerous as the last.

"After 9/11, for a time there, it was virtually unanimously recognized, across all segments of the population and among all the key interest groups, that things have changed," Mr. McMahon said. "A serious shift had occurred in the city's prospects and dramatic steps would have to be taken.

"This was a moment," he continued, "when the unions could have been confronted much more powerfully with the need to make significant concessions."

Now, he said, the urgency has passed. "All of the key segments of the community are getting lulled into sense of complacency," he said.

Mr. Hevesi, the state comptroller, shares some of those concerns. And William C. Thompson Jr., the city comptroller, who is not as optimistic about the city's fiscal condition, cautioned the Bloomberg administration about revenue projections.

But, Mr. Thompson added, echoing others: "We have moved beyond the point of crisis. We are still in a state of serious challenge."

The single biggest component of the administration's effort to close an $8 billion budget gap this year was tax increases. The 18.5 percent increase in property taxes will generate $1.7 billion, the increase in the personal income tax will bring in $644 million and the sales tax will draw $377 million.

Although Albany refused to give Mr. Bloomberg virtually any of the things he had requested to help balance his budget — a commuter tax proposal went nowhere — the state wound up helping the city in a big way. About $474 million in state education aid that Gov. George E. Pataki had cut from the state budget was restored by the Legislature.

An additional $675 million was added to the pot in the form of higher payments to the city from the state-owned Battery Park City, extra education aid and permission to sell more taxicab medallions, among other items. The state also agreed to effectively assume the cost of paying off debt from the city's 1970's fiscal crisis, saving the Bloomberg administration $530 million.

The federal government came through, too, with $232 million in special Medicaid aid.

Mr. Bloomberg started the budget-balancing process as soon as he arrived in office, following a burst of spending toward the end of the Giuliani administration and a dive in the city's economy linked to the tech bust and the aftermath of 9/11.

The Bloomberg administration cut expenses and raised the property tax in the fiscal year that ended June 30, giving the city a $1.3 billion surplus that it could roll over to this year. And by cutting out planned increases in spending by many agencies, reducing some services and finding ways to operate the government more efficiently or at least on someone else's tab, it cut an additional $2.1 billion in city spending for the new fiscal year.

Altogether, the assistance, taxes and fiscal self-control totaled enough to close a seemingly catastrophic budget gap.

Though the overall budget went up — to $43.66 billion for next year, including an increase of 5 percent in city-financed spending — many agencies had their spending reduced this year. The budget, in fact, calls for a $185 million reduction in spending by the agencies, or 1 percent less spending by the agencies than in the year that ended June 30.

As a result, the city has fewer police officials. It has closed six fire companies. It is laying off thousands of school paraprofessionals and teacher aides. And it has cut back its support for libraries and cultural institutions, although by not nearly as much as had been threatened.

City agencies today have 9,016 fewer full-time workers than they did two years ago — about 4,000 full and part-time workers are being laid off — bringing down the total city-financed work force to 200,276 employees. That is the lowest it has been since 1986, meaning Mr. Bloomberg has already cut out all the employees Mayor Rudolph W. Giuliani had added by the end of his tenure, in the booming economy.

But other costs of government are still rising, and at a very fast clip. Largely because of the stock market declines, pension costs rose to $2.5 billion in the current fiscal year from $1.3 billion in 2002. The cost of paying off long-term city debt is also rising, in part because of heavy borrowing during the Giuliani era.

Most of the gap-closing budget measures the city has adopted will have recurring benefits. And, if the economy continues to improve, tax revenues will grow still more, even if some of the tax increases are phased out. Mr. Bloomberg, then, would not be the first mayor to see his fiscal fortunes rise with the stock market.

There is some reason to be hopeful that might happen, said Ms. Rosen, from the Federal Reserve Bank of New York. While the securities industry, one of the most important drivers of the city economy, reported $6.9 billion in pretax profits for all of 2002, it has already reported $7.4 billion in pretax profits for the half year that just ended. Large commercial banks also reported a good second quarter.

In part as a result, income tax withholdings from New York City residents are rising, an important sign of a possible economic turnaround, Ms. Rosen said.

And unemployment dropped to 8.1 percent in June, from a high of 8.8 percent in February, leading Ms. Rosen to predict a net rise in the number of jobs in the city in the fourth quarter.

"The worst of the recession appears to be over," said Thomas H. Marks, an economist in the Office of the State Deputy Comptroller for New York City.

The city's fiscal story can quickly turn ominous again. New York State, which balanced its budget this year with borrowing and other one-shot solutions, remains in a fiscal crisis and could react next year by slashing its aid to New York City. If the mayor is unable to win any significant concessions from the labor unions and then agrees to raises, even ones that merely match inflation, it would add $1.2 billion to the expense ledgers next year that he does not have in his spending plan. (He has insisted that he will only approve raises that are paid for out of money-saving changes in work rules.)

The economists could turn out to be wrong in predicting the end of the recession. The city may decide it cannot afford to roll back the taxes it had promised it would, perhaps driving businesses and residents away, a scenario conservatives raise. And, of course, there could be another terrorist attack or other calamity.

For this reason, budget watchers who agree that the crisis appears to be abating, add in the next breath that the situation is tenuous. J. Scott Albrecht, a senior portfolio manager at Federated Securities Corporation, had stopped investing in New York City debt in early 2001, as the city's economy stalled. Just recently, he started buying city bonds again.

"They have endured this fiscal crisis better than anyone would have expected," he said. "It is definitely a manageable situation now. But the city today has less of a margin for error than it has had any time in the past 10 years."

http://graphics7.nytimes.com/images/2003/07/30/nyregion/budget_graph.gif

Copyright 2003 The New York Times Company

Kris
August 7th, 2003, 02:22 AM
August 7, 2003

Pataki Blocks Deal Crucial to City Plan to End Fiscal Crisis

By AL BAKER

ALBANY, Aug. 6 — In a direct rebuke to Mayor Michael R. Bloomberg, Gov. George E. Pataki and State Comptroller Alan G. Hevesi moved today to block a municipal bond deal that is critical to the city's efforts to close its $6.4 billion budget gap this year.

The vote by an obscure but powerful three-member board threw into chaos the city's plan to solve its financial crisis, possibly depriving it of up to $500 million a year in savings through 2008.

The city had hoped to achieve those savings by having the state take over its debt left over from the 1970's financial crisis. Mr. Pataki opposed the idea, but the State Legislature overrode his veto in May.

The vote to kill the plan was made by the board of New York's Local Government Assistance Corporation, which the governor, a Republican, effectively controls; two of the board's three members are appointed by him, and the other one is Mr. Hevesi, a Democrat. The move comes while Mr. Bloomberg and fiscal monitors have been saying that the worst of the city's budget crisis is probably behind it.

Mayor Bloomberg said last night that he would challenge the board's action in court, igniting what promises to become intense negotiations between City Hall and Albany.

"It is disappointing that after all the difficulties New Yorkers have faced to get us through the fiscal crisis, L.G.A.C. wants to saddle the people of New York City with even more of a burden in these tough times," Mr. Bloomberg said in a written statement.

The two-paragraph statement by Mr. Bloomberg still did not mention the governor by name. Leaders in the State Legislature, though, sharply criticized Mr. Pataki for opposing their efforts to help the city.

"It is only the continuation of his attempt to try to hurt the city in any way possible, and like a child who comes to a game with his ball and does not like the results, he takes the ball and goes home," said Sheldon Silver, the Democratic Assembly speaker. "The override of his budget veto is what he is still fighting."

Mr. Silver added, "This looks like a direct attack on his fellow Republican, the mayor of the City of New York, who, in previous attacks, has turned the other cheek and refused to criticize the governor."

Today's events raised questions about whether a rift had developed between Mr. Pataki and Mr. Bloomberg, those on both sides of the political aisle said. City officials said they were not warned of Albany's pending action and were taken by surprise.

As of late today, the mayor and other city officials were scheduled to hold a joint, unrelated news conference with the governor at a city park on Thursday; by the evening, the event had been canceled.

A response from the corporation's board, sent by e-mail last night by Kevin C. Quinn, a spokesman for the State Division of the Budget, seemed to underline just how fierce any fight could become: "It is unfortunate that the city has chosen to attack the Local Government Assistance Corporation board rather than work cooperatively with state officials and the Legislature to provide the budget relief New York City needs in a fiscally responsible and legal manner that doesn't burden taxpayers with billions of dollars in new costs."

For weeks, the governor and Mr. Hevesi have condemned the municipal bond plan as a bit of fiscal chicanery, saying it would stretch out the payment of debt left over from the city's 1970's fiscal crisis until the year 2034, or beyond.

The governor has continued that stance despite the pleas of Mayor Bloomberg to allow the deal to stand. Mr. Hevesi, a former city comptroller, said he decided the deal was not in the state's best fiscal interests.

When asked if the move was intended as a message to steer potential bond buyers on Wall Street away from the deal, Mr. Hevesi said: "I think any responsible investor is going to say, `If I take these bonds, how is it backed up? Who is going to reimburse?' That's a fair question."

Under the plan, approved by state lawmakers last spring, the state would allow the city to create a new local development corporation. That entity would be allowed to borrow money to pay off the remaining bonds issued by the Municipal Assistance Corporation, which was created in the 1970's to help the city out of its financial crisis.

The state would then pay the city $170 million a year, probably for about 30 years, to pay off the debt service on the new bonds. The state money would come from the Local Government Assistance Corporation, which gets its money from the state sales tax. The city would then not have to spend about $2.5 billion over the next five years paying off its remaining 1970's debt.

A city official said the issue was far from over. The mayor wanted to market his bonds on Wall Street next week, and on Tuesday, Standard & Poor's Ratings Service assigned a preliminary AA rating to the bonds and expressed confidence that issuing them would be constitutional. Now, the Bloomberg administration will speak with people at Goldman Sachs, the lead investment banker on the deal, to determine how and whether to proceed with the financing. "The city is analyzing its options," said Edward Skyler, a spokesman for the mayor.

City Hall's legal theory has been that because the financing arrangement was completed as part of the state budget, it is unimpeachable, so the state corporation cannot block it.

In May, the governor said this part of the Legislature's budget had been improperly drafted, and was therefore unconstitutional. One legislative aide said it appeared that the governor was now trying to use the state corporation to underscore that point.

The move was also a direct rebuke to leaders in the State Legislature, who saw the refinancing plan as a more palatable alternative than, for instance, taxing commuters who work in New York City, a measure Mr. Bloomberg advocated.

John E. McArdle, a spokesman for Joseph L. Bruno, the Republican State Senate majority leader, struck a conciliatory note, saying the Senate hoped the issue could be resolved in a budget cleanup bill. But, Mr. McArdle said, "we still support the basic agreement that has the state relieving the city of these payments."


Copyright 2003 The New York Times Company

ZippyTheChimp
August 8th, 2003, 09:07 AM
August 8, 2003

For Pataki and Bloomberg the Rift Is Becoming Visible

By JENNIFER STEINHAUER and AL BAKER


In the nearly two years of Michael R. Bloomberg's mayoralty, he has enjoyed what many political experts and government officials say is the best relationship a New York City mayor has had with his governor in decades.

Even as Mr. Bloomberg and Gov. George E. Pataki have disagreed over major policy and budget issues, they have taken pains to be publicly solicitous. In the case of the mayor, his generous and constant praise of Mr. Pataki has often made him the object of ridicule among fellow elected officials.

But on Wednesday, when a board controlled by the governor's representatives voted to quash a five-year $2.5 billion aid package for the city, a year's worth of acrimony brewing between the two men was laid bare. Mr. Bloomberg called the action "irresponsible" and "illegal," and vowed to fight it in court.

Suddenly, the city canceled a joint news conference the mayor and governor had scheduled yesterday, and though the two men were polite in referring to each other, City Hall remained steamed.

"We're not going to let it get personal," said William T. Cunningham, the mayor's communications director. "But we are going to protect the interests of the city of New York. We don't need to take a step backward."

And many on both sides of the political aisle in Albany said the two men appeared headed for a war — if they were not already in one. "It's escalating," a legislative official said today of the tension between the two men. "They are on a collision course here." The official added: "It could get uglier. It could get into other things. It could carry over into other areas."

Over the last several months, aides and associates say, Mr. Bloomberg has privately seethed over a variety of actions by the governor, among them his attempt last spring to redistribute federal money the city won for antiterrorism into the state's coffers; his appointment of the head of an agency that controls the redevelopment of Lower Manhattan without consulting the mayor; and his threat to veto the construction of a water-filtration plant in the Bronx.

With each incident, Mr. Bloomberg and his aides have chafed as the governor has exercised the prerogatives of his office.

And more recently, according to many lawmakers in the State Capitol, Mr. Pataki continues to be angry with the mayor for joining forces with the Legislature in supporting a budget deal that left the governor on the sidelines last spring.

But the undoing of the bond deal — which represents about $500 million annually in overall aid to the city over five years — comes as Mr. Bloomberg seeks to make a political comeback from a year of increasing taxes on New Yorkers and cutting their city services. To that end, he has recently spoken publicly about the city's economic recovery, and offered up the possibility of future tax cuts.

But the vote on Wednesday by an obscure but powerful board essentially controlled by Mr. Pataki may force Mr. Bloomberg to cut more from the city's budget, and stop talking about tax cuts. In its action, the board — made up of two people appointed by Mr. Pataki and the state comptroller, Alan G. Hevesi — voted not to finance a deal struck between the city and State Legislature for the state to take over payments of debt from the fiscal crisis of the 1970's.

The action comes at a delicate time; the last thing Mr. Bloomberg wants to do is go back to his agencies and ask them to whack their budgets again to compensate for what his administration thought was money in the bank. "Just as the sun was starting to peek out," one city official said, "they threw a half-a-billion dollar grenade."

But aides to Mr. Pataki said today that rather than highlighting tension between the men, the litany of issues the governor and mayor had faced in recent months actually underscored how durable their relationship is, and said the men had a better relationship than perhaps any governor and mayor in state history.

Lisa Dewald Stoll, a spokeswoman for the governor, said the men worked hard to get along and clearly like one another.

"The water filtration plant — in the beginning there was a difference in opinion — and in the end, the strength of the relationship was demonstrated," she said, referring to Mr. Pataki's initial objections to the city's plan for a plant in the Bronx.

Although Mr. Pataki kept the city on pins and needles on the filtration-plant decision, Ms. Stoll pointed out that "they came together and found a way to move forward."

But the unraveling of the bond deal caused tensions to escalate.

From the city's point of view, the bond refinancing deal is legal, since it was passed in the budget by the Legislature, which adopted it over the governor's vetoes. But the governor said that part of the budget was improperly drafted and thus unconstitutional and was also fiscally irresponsible.

"There are those who share the governor's opinion, including Comptroller Hevesi, a statewide elected Democrat, and there are those who share the mayor's opinion," Ms. Stoll said of the debt issue. "Having said that, they have one of the best working relationships between a governor and mayor, arguably in New York history."

Mr. Bloomberg's strategy all along, no matter how personally vexed he has been by the governor's moves, has been to bend over backward to keep the relationship on friendly terms, even while his aides groused privately that the governor has tried to shut the mayor out of the redevelopment of Lower Manhattan and taken other actions against Mr. Bloomberg's interests.

While Mr. Bloomberg may not have gotten substantial rewards from Mr. Pataki, who faces his own budget woes, the mayor and his aides have calculated that they may have staved off worse treatment.

By having a public brawl, they reason, the Bloomberg administration risks facing Mr. Pataki's wrath in the fall, when the Legislature returns to fine-tune the budget.

In general, it is not unlike a bad marriage in which one partner keeps up appearances even when the whole world is predicting divorce behind their backs.

Yesterday, Mr. Bloomberg hewed somewhat to that program.

When asked about Mr. Pataki's role during a news conference yesterday at a Midtown hotel, Mr. Bloomberg replied: "The actions were taken by the three members of the board — two are appointed by the governor, one is the state comptroller. I don't know, I don't want to personalize any of this."

Earlier in the day at a news conference at the same hotel, Mr. Pataki indicated a desire to work with the mayor. "I think the mayor has made tremendous progress toward putting the city's fiscal difficulties behind us," he said.

The two men also spoke on the phone yesterday, and Edward Skyler, a spokesman for the mayor, said their relationship remained cordial. "The mayor is disappointed in the governor's decision but they have a good relationship which can survive disagreements," he said.

Indeed, unlike the protracted feuds that consumed previous governors and New York mayors — from Hugh Carey and Abe Beame to Mr. Pataki and Rudolph W. Giuliani — the tensions between the men are not personal, and may be more rooted in their often contradictory missions.

"The job of the mayor is to take as much of the whole pie as he can get for his 36 or 37 or 38 percent of the population" of the state, said former Governor Mario M. Cuomo. "But that slice of the pie comes out of the rest of the pie that belongs to the larger part of the population and that's the governor's mission, to make sure it's distributed fairly."

Copyright 2003 The New York Times Company

JMGarcia
August 8th, 2003, 10:49 AM
to make sure it's distributed fairly

The plain facts show that the city constributes well more than its 37% but gets back well less than 37%.

I fully support secession for the City.

Kris
August 9th, 2003, 05:37 AM
August 9, 2003

Pataki's Compromise on Debt Plan Is Rebuffed by City Hall

By JAMES C. McKINLEY Jr. and AL BAKER

ALBANY, Aug. 8 — After a tense two-day standoff with City Hall, Gov. George E. Pataki offered a compromise city aid plan late today, saying the state would assume a large portion of New York City's debt payments on bonds left over from the 1970's fiscal crisis.

But the Bloomberg administration immediately rejected the offer, saying that the governor was proposing a deal that is inferior to an aid package the Legislature has already enacted and that city officials believe will hold up in court.

The governor's offer and the Bloomberg administration's icy response represented the latest skirmish in the growing war between the three-term Republican governor and the first-time Republican mayor over the state's aid package for the city.

The governor put out his latest proposal in a news release at 5:20 p.m., several hours after Mayor Michael R. Bloomberg challenged him on a morning radio program to come up with an alternative financial aid package to solve the city's budget crisis.

On Wednesday, Governor Pataki and the state comptroller, Alan G. Hevesi, blocked a bond refinancing deal the Legislature had enacted over Mr. Pataki's veto in May to provide the city with $2.5 billion in savings over the next five years. The governor and the comptroller said the refinancing was irresponsible because it pushed off on future generations debts the city had incurred 30 years ago.

The move dealt a blow to Mr. Bloomberg's plan to balance the city's books, and came at a time when the mayor is hoping to rebuild his image by touting his record in bringing the city's fiscal crisis under control.

This morning the mayor again threatened to sue over the decision by the governor and the comptroller and proceed with the refinancing, even though experts said the governor's action might discourage people from buying the bonds.

"Keep in mind, there's still the chance, between now and when we try to sell these bonds next week, that the governor's budget people can come up with a good idea," Mr. Bloomberg said on his weekly radio program on WABC-AM. "But so far, they have not come up with one idea that would help the city remotely as much as this."

Mr. Pataki responded by dropping one of his main objections to the deal: the state takeover of the debt payments. He proposed refinancing the $2.5 billion in bonds to stretch the remaining 5 years of payments out over 10 years, rather than 30. He said the state would provide about $170 million annually for paying off the newly issued bonds.

In addition, he said the Metropolitan Transportation Authority, which he controls, would take over the operation of private bus lines from the city, so that Mr. Bloomberg could use the savings, about $80 million, to pay the rest of the debt service.

"From the start I have made it clear that there is a better way to help New York City and provide it with the real relief that it needs," Mr. Pataki said in a statement.

Mr. Hevesi hailed the proposal as an "important step towards compromise, and that's a step in the right direction."

Two hours after the governor put out his press release, the city budget director, Mark Page, and the Mayor's spokesman, Edward Skyler, appeared on NY1 News to shred the governor's proposal. They said the city planned to press ahead with selling the bonds, though they will only proceed with $500 million of the sale, not the full $2.5 billion. They also said the administration was willing to take its chances in court with the governor, who had said the original bond refinancing was drafted improperly and did not pass constitutional muster.

Asked if they are rejecting the plan, Mr. Skyler said, "Correct."

The governor's director of communications, Lisa Dewald Stoll, said the governor's offer was a sincere attempt at compromise that would save the taxpayers $1.8 billion over the life of the loan. "We are very disappointed the city refuses to discuss or even consider the proposal," she said. "The governor has said all along he was working to build a consensus."

Legislative aides said the governor's plan could not go forward in any case without the approval of the State Legislature. Tonight, legislative leaders from both parties said they were skeptical of the plan because it would rely on money from the takeover of the bus lines, which faces myriad political and financial hurdles. But they added that it was a step in the right direction, from the Legislature's point of view, because the governor had finally acknowledged that the state should assume at least part of the city's debt.

"We're going to review the proposal, but we're hopeful we can get all the parties together to get beyond this issue in a way that benefits both the city and the state," said John E. McArdle, a spokesman for Joseph L. Bruno, the Republican State Senate majority leader. "And if this proposal does it, that is a good thing."

The Assembly speaker, Sheldon Silver, a Manhattan Democrat, agreed that the proposal appeared to signal the governor's willingness to compromise, but he criticized the governor for releasing a press release late on a Friday without consulting with the mayor or the Legislature. He said the plan appeared flawed in several ways.

He said it does not, for instance, provide a guarantee that the state will make payments on the bonds in the future — something city officials also complained about, saying it left them at the mercy of the Legislature and the governor every year.

Mr. Silver also said the takeover of the private bus lines by the transit authority had the potential to cause fares to rise throughout the city's transit system, since the authority's finances are already precarious. The bus lines, which serve many suburbanites and residents of the outer boroughs, cost the city about $100 million a year to operate, which the authority would have to swallow.

"What does this mean for the fare?" Mr. Silver said. "If we are going to get another fare increase in the city as a result of this plan, then I don't think we can pass it."

Some fiscal analysts said Mr. Pataki appeared to have given in to public pressure from the mayor and other prominent New Yorkers. In his previous proposals, the governor had avoided having the state take over the debt.

"I think to a great extent he is caving," said Edmund J. McMahon, an analyst at the conservative Manhattan Institute. "He's moving from offering significant relief to the city to offering total relief."

But Gifford Miller, the City Council speaker, was angry with the governor for different reasons.

"I think all New Yorkers should be angry," he said on NY1 last night. "We have a governor who is actively trying to scuttle an aid package to us.

"All he has sought to do is blow up the one really helpful part of the budget deal," Mr. Miller said, adding, "The point is, this is the only help we've got."


Copyright 2003 The New York Times Company

Kris
August 12th, 2003, 05:11 AM
August 12, 2003

The Governor and the City

Residents of New York City can be forgiven for sometimes thinking that Gov. George Pataki is out to get them. After Mayor Michael Bloomberg supported Mr. Pataki in the last election — holding off dealing with the city's financial emergency until the governor was safely re-elected — the mayor went to Albany for a payback. After cutting city services and raising city taxes, the mayor still needed funds to fix a crippling $6.4 billion budget gap. Mr. Bloomberg proposed that those who live in the suburbs and work in the city should pay their fair share of the cost of fire and police protection through a commuter tax. But the governor refused, snubbing the city and instead giving the suburbs what amounted to a bonus in special aid.

So the mayor and the Legislature came up with a less savory idea: a municipal bond deal that would save the city as much as $500 million a year by having the state take over debt incurred by the city in the fiscal crisis of the 1970's, and stretching out the payments. Fiscally, it was a terrible plan — as Comptroller Alan Hevesi has made clear. But it was at least a way for the state to help the city, its biggest economic engine.

Last week, just as the city prepared to sell these key bonds and its financial picture started to brighten, Mr. Pataki dragged in the storm clouds. A board controlled by the governor blocked the city's bond sale, calling it financially irresponsible. Mayor Bloomberg vowed to fight in the courts and the bond markets — a prospect that sounds threatening to the city's and the state's financial well-being.

Late last week Mr. Pataki finally came up with a good first step toward a compromise on the bonding. It shortens the new bond issue to 10 years instead of 30, removing the possibility that the next generation of New Yorkers will still find themselves paying for a fiscal crisis that occurred before they were born. The governor also acknowledged, some say for the first time, that the state could pay for these bonds, at least in the beginning. But the lack of clear, firm commitments is understandably unnerving to the city, given Mr. Pataki's lack of reliability in the past.

Still, Mr. Bloomberg should give Mr. Pataki a chance to work out a compromise. At a minimum, the governor should produce a plan in which the state clearly agrees to pay for the refinancing, but over a shorter period of time than the Legislature originally decreed. If that does not work, the best solution would still be for the commuters to pay a modest new tax for the city services they use.


Copyright 2003 The New York Times Company

Kris
August 13th, 2003, 07:04 AM
August 13, 2003

Going Against Governor, Mayor Plans to Sell Bonds

By MICHAEL COOPER

Defying Gov. George E. Pataki, the Bloomberg administration announced plans yesterday to sell $556 million worth of bonds to refinance its remaining debt from the 1970's fiscal crisis and said it would go to court to force the state to repay the new bonds.

The city's move brought Mayor Michael R. Bloomberg a step closer to a showdown with Governor Pataki, a fellow Republican who the mayor often describes as a friend and ally. Aides to the governor quickly complained that the city was unwilling to compromise, and accused it of rushing ahead with what they called a risky deal.

The deal that the city is trying to get done was part of the aid package for New York City that the State Legislature passed last spring over the veto of Governor Pataki. It was conceived after the Legislature rejected the mayor's plan to impose a tax on commuters, a proposal that was also rebuffed by the governor.

In the deal, the state agreed to pay back the city's remaining 1970's debt, which would otherwise cost the city $500 million a year until it was paid off in 2008. The city would borrow $2.5 billion to pay off the old debt, and the state would pay the city $170 million a year for 30 years to pay off the new debt.

But last week the governor, who objected to that plan from the start, moved to scuttle it. The little-known state corporation that was supposed to make the annual payments to the city, the Local Government Assistance Corporation, which Mr. Pataki controls, voted to halt the deal. The city said it would go to court to force the board to comply with the state law that directed it to make the annual payments to the city.

Mr. Pataki and Jonathan A. Ballan, the chairman of the Municipal Assistance Corporation, which issued the 1970's bonds, both made counterproposals, but the city rejected them, saying that they failed to guarantee the long-term relief they need.

Yesterday the city announced its plans to go through with the first phase of the refinancing plan by selling $556 million in bonds next week.

To protect bond buyers from the risks posed by the governor's attempts to stop the deal, the city structured the sale so that the almost all of the money would be placed in escrow until next June 30. If the city should lose its suit to force the state to make the payments, or not get the money for another reason, the bondholders will be paid back then. (A small amount, $24 million, will be sold separately and not placed in escrow.)

In the city's preliminary offering for the bonds, it writes, "On or about August 15, 2003, the city intends to commence litigation" to direct the corporation to pay the money.

Although aides to the governor complained that the plan was risky, two prominent ratings agencies assigned the bonds reasonably stable ratings: the bonds were rated AA by Standard & Poor's and A1 by Moody's Investors Service Inc.

The bond offering, and the repeated threat of legal action, drew a blistering response from the Pataki administration. Noting that the $24 million part of the bond issue was not rated by Moody's, one senior Pataki administration official went so far as to say, "The city is acting, I believe, in a reckless way by going ahead to issue expensive junk bonds, and to announce at the same time that they want sue instead of negotiate."

The board of the Local Government Assistance Corporation — which is made up of two Pataki appointees and State Comptroller Alan G. Hevesi, a Democrat — issued a statement calling it "wrong that the city of New York is rushing to move forward with this fiscally irresponsible financing scheme." Other fiscal watchdogs have also criticized the arrangement, saying it is bad fiscal practice and expensive to borrow to pay current operating expenses, let alone 25-year-old operating expenses.

Mayor Bloomberg said that he was open to negotiation, but that he would not settle for anything less than what the city already has.

"You always want to reconcile differences through negotiation if you possibly can," he said at news conference on Staten Island. "Having said that, it is my obligation, our obligation, to protect this city, and if it means going to court we will."


Copyright 2003 The New York Times Company

Kris
August 14th, 2003, 03:59 AM
August 14, 2003

Court Blocks City's Plans for Bond Sale

By MICHAEL COOPER

The Pataki administration sued New York City yesterday and won a court order temporarily blocking a bond sale the city had planned for next week, escalating a battle between the governor and the mayor over a deal to save the city $500 million a year.

With the filing of the lawsuit, the dispute between Gov. George E. Pataki and Mayor Michael R. Bloomberg went from a simmer to the boiling point. City officials angrily complained that state officials had given them no warning that the suit was coming, and that they had filed it in an Albany courtroom to keep the city from presenting its side of the case. The suit charges that part of the city's budget plan — which was passed by the State Legislature over the governor's veto — is unconstitutional.

Yesterday, Justice Thomas W. Keegan of State Supreme Court in Albany granted the state a temporary restraining order that keeps the city from moving forward with the deal until Aug. 25. The city had planned to sell $556 million worth of bonds next week.

The plan in dispute, which the Legislature offered the city in place of its request for a commuter tax, would allow the city to refinance debt left over from the fiscal crisis of the 1970's. It would free the city of $500 million in annual payments to bondholders by allowing it to stretch out the remaining five years of debt for 30 years. The state agreed to pay back the new long-term loan for the city in annual installments of $170 million.

Governor Pataki, State Comptroller Alan G. Hevesi and budget watchdogs have condemned the deal, arguing that it is expensive and bad fiscal policy, and likening it to taking out a new mortgage to pay for last year's groceries. But city officials said they needed help closing a $3.8 billion deficit once the state rejected the commuter tax.

Yesterday, the Local Government Assistance Corporation, the state authority directed to make the annual payments, which is controlled by a board made up of two Pataki appointees and Mr. Hevesi, filed suit to keep the city from moving ahead.

The lawsuit, which reads in places like the news releases that the state has put out in recent days, calls the plan "a public policy disaster."

"If allowed to stand, it would unjustifiably burden state taxpayers for generations to come with $5.1 billion in obligations," the lawsuit says. "It is also unconstitutional."

Mark Page, the city's budget director, countered in a statement that the plan was legal and constitutional, and he noted that New York State had often resorted to the very kind of long-term borrowing to pay operating costs that it was now objecting to.

"It is nothing less than hypocritical to conveniently object to this structure when it benefits the people of New York City, and we will not stand for it," Mr. Page said.

But Pataki administration officials countered that existing state debt was not analogous to the deal the city was trying to move ahead with, which seeks to stretch out debt issued in the 1970's until the 2030's.

The lawsuit capped a week of steadily escalating tensions between the governor, who is on vacation at his upstate farm on Lake Champlain, and the mayor, who had believed that the city's severe budget crisis this year was behind him and that smoother fiscal times were ahead.

On Aug. 6, the board of the Local Government Assistance Corporation, which gets its money from the state sales tax, voted not to proceed with the plan to pay the city $170 million a year even though a state law directed it to.

Mayor Bloomberg threatened legal action and ordered the city to proceed with the bond sale. The governor made a counterproposal, offering to spread out the debt for 10 years instead of 30. But the mayor rejected the offer, saying it did not provide the city with the same amount of money as the Legislature's plan and required the city to go back to Albany every year and request a reallocation of funds, something city officials deemed too risky.

On Tuesday, in defiance of the governor, city officials announced that they were forging ahead with their plan. They said they would sue the state corporation to try to compel it to comply with the state law in a few days, and sell the bonds next week.

The Pataki administration moved to try to scare buyers away from the bonds. A senior Pataki official, speaking on the condition of anonymity, was quoted as describing a small part of the bond issue as "junk bonds."

Then, before the city could file suit, the state beat it to the punch, getting the court order yesterday.

The state's action appeared to have caught the Bloomberg administration by surprise.

Today, the city plans to go to court to try to get the court order lifted and have the case transferred to New York City.

Pataki and Bloomberg administration officials accused each other of negotiating in bad faith. Mr. Page's statement said the state obtained the court order "at the very moment we were continuing good-faith negotiations with the state over possible alternatives" and added, "This action has brought negotiations to a halt."

A senior Pataki official countered: "They're the ones that broke down the negotiations. We're negotiating, and they released a statement announcing that they were going to sell the bonds at a certain time and sue on or around a date."

Throughout the battle, Mayor Bloomberg has carefully avoided criticizing Governor Pataki by name. Even Mr. Page's statement complains that "a nonrepresentative state agency is standing in the way of our recovery."

He omitted noting that the governor controls the agency, and that the only two plaintiffs mentioned by name are his appointees: Carole E. Stone, his budget director, and Maryanne Gridley, a former first deputy secretary to the governor who is now the executive director of the State Dormitory Authority.

But Gifford Miller, the City Council speaker, who unlike Mr. Pataki and Mr. Bloomberg is a Democrat, seized on the opportunity to attack the governor as someone "trying to destroy the city's finances."

After Mr. Miller criticized the governor for hiring a "white shoe" law firm at public expense — the suit was filed by Kornstein Veisz Wexler & Pollard — a reporter noted that Mr. Miller had hired a white-shoe firm this year to argue his case to change the city's term limits law so he could stay in office longer.

"But that was for justice," Mr. Miller said. "And I never checked their shoes."


Copyright 2003 The New York Times Company

TLOZ Link5
August 14th, 2003, 02:06 PM
High time for secession, don't you think?

Kris
August 20th, 2003, 06:05 AM
August 20, 2003

POLITICAL MEMO

Bond Battle Could Blow Hole in City's Shaky Budget

By MICHAEL COOPER

New York State is suing New York City, but only because the city did not get to court first. The governor and the Legislature are at war. The city is fighting for an aid package it did not even want at first. Even by Albany standards, the battle over a state aid package to help New York City balance its budget is one for the books.

A series of political decisions, cascading down through the years in much the way the power failure cascaded through the electric grid last week, led to the current standoff.

"This is the way New York State seems to do things," said Barbara Bartoletti, the legislative director for the New York State League of Women Voters. "We are usually in a fine kettle of fish for one reason or another having to do with our dysfunctional government."

At stake is a plan to save the city half a billion dollars a year. If the deal is scuttled without a workable alternative, it will blow a hole in the city's precariously balanced budget, requiring more cuts or taxes. The battle has its roots in the repeal of the commuter tax, which was done in 1999 with the blessing of State Assembly Democrats from New York City who wanted to help sway a State Senate race that year. It has since cost the city more than a billion dollars.

Mayor Michael R. Bloomberg decided not to call for the commuter tax's reinstatement until after Gov. George E. Pataki, his fellow Republican, won re-election last year. At that point, the governor and the State Senate refused even to consider it.

The route to a state budget eliminated the chance for a compromise. Governor Pataki walked away from negotiations in the spring and left everything up to the Legislature, which passed a budget and a city aid package over his vetoes. Now Mr. Pataki has gone to court to try to undo the city aid package that was reached without him.

To cap it off, all sides now agree that there is apparently an error in the way the city aid bill was drafted. Mark Page, the city's budget director, said in an affidavit released yesterday that the bill "was enacted at the end of an intensely negotiated state budget process, as part of a large budget bill, and that it was drafted in considerable haste." That is, of course, business as usual in Albany.

From a fiscal management point of view, the disputed deal does not have much to recommend it. It would save $500 million this year — roughly the same amount the city would have gotten from the commuter tax — by allowing the city to refinance its debt left over from the 1970's fiscal crisis. The state would then give the city the money, $170 million, to pay off the refinanced bonds.

What that amounts to is making the generation that is just now being born pay off debt that is already about 25 years old. That disco era debt, which is just five years from being paid off, would be stretched out until the 2030's, with state taxpayers paying it back plus more than $2 billion in interest.

Even when the plan was announced, one city official described it as a kind of "Rube Goldberg contraption." The city was to form a corporation to borrow $2.5 billion to pay back the old debt. A state corporation called the Local Government Assistance Corporation, which gets its money from the state sales tax, would disburse $170 million a year for the next 30 years so the city could pay back the new bonds.

But just as the city prepared to sell the first bonds, the board of the state corporation, which is made up of two Pataki appointees and State Comptroller Alan G. Hevesi, voted this month not to send the money to the city. Then they filed a lawsuit to block the deal, and won a court order to stop the city's bond sale.

"Pataki's criticisms of the deal are absolutely correct," said Jonathan Bowles, the research director of the Center for an Urban Future, a nonprofit public policy organization. "But I fault the governor and the Legislature for not coming up with a better plan to help New York City."

Yesterday the city filed legal papers in State Supreme Court in Albany seeking permission to proceed with the refinancing deal. The city argued that any error in the aid package bill was unintentional and that the structure of the deal was legal.

The city wants to lock in the state payment of $170 million a year because it knows that future lawmakers could try to renege on the deal made this year, and it wants to reassure investors that the bonds they buy will be paid back. The state law passed by the Legislature this spring establishing the deal says in one place that the state money is not subject to an annual appropriation in the state budget. But the State Constitution, both sides agree, requires that the budget authorize such expenditures each year.

Michael A. Cardozo, the city's corporation counsel, argued yesterday that the line in question was an unintentional error. He said that the court should either interpret the law to require an annual appropriation, in line with the State Constitution, or strike the erroneous line and let the overall law stand.

"We say, when you put all of this together, it can't possibly be that the Legislature tried to help New York City to the tune of this $500 million a year, intended to pass a statute and at the same time make it unconstitutional," he said at a news conference.

The city argues that it would face "irreparable harm" if the sale is delayed, because interest rates are rising and each percentage point in the interest rate will cost the city corporation $25 million in interest on the deal.

But Kevin Quinn, a spokesman for the governor's budget office, said, "We continue to strongly believe that taxpayers and their children and grandchildren will face irreparable harm if this plan is allowed to move forward because they will be saddled with billions of dollars in unnecessary and avoidable costs."

It is a strange turn of events for the city to be fighting for this deal. For months this year it was Mayor Bloomberg who used the line about not saddling future generations with today's burdens. He wanted to tax commuters to get the people who use city services to pay for them. He has refused to do the exact kind of borrowing to pay for city services that he is now fighting for.

But, many city officials say, the deal is necessary to compensate for a state error made four years ago — the repeal of the city's commuter tax. It was a move rooted in the kind of pragmatic politics that Albany has become known for.

The state's Democrats were trying to win a State Senate seat in 1999, an open seat in Rockland County. After the commuter tax became an issue in the race, Democrats decided to support its repeal. So, with the blessing of Sheldon Silver, the Assembly speaker, and other city Democrats from the city, the tax was repealed. The Democrat lost the election anyway.

New York City was left with a hole in its budget that appeared insignificant at first. Then, when the national recession hit and the city was attacked on Sept. 11, 2001, the hole mattered.

A judge could rule on the legal case brought by the governor by Friday.


Copyright 2003 The New York Times Company

Kris
August 21st, 2003, 03:22 AM
August 21, 2003

In Blow to Pataki, Judge Approves City's Plan to Sell Bonds

By AL BAKER

ALBANY, Aug. 20 — A state judge today approved New York City's plan to sell bonds to refinance its 1970's debt, dealing a blow to Gov. George E. Pataki, who had tried to block the plan as fiscally irresponsible and unconstitutional.

In his ruling, the judge, Louis C. Benza of State Supreme Court in Albany, said that he was not convinced by the state's arguments and that the statute allowing the sale was indeed constitutional. Hours later, however, an appellate judge stayed Justice Benza's order, preventing the city from proceeding until a full appellate panel can hear the state's request to block the sale while it appeals the decision.

Still, Mayor Michael R. Bloomberg said he was buoyed by Justice Benza's ruling and confident that the city would be able to hold the sale even during the appeals process. "The judge ruled 100 percent in the city's favor on virtually everything that we asked for," he said at a campaign-style appearance in the Bronx, "and I see nothing that will get in our ways."

In his nine-page ruling, Justice Benza struck down efforts by the Local Government Assistance Corporation, a state authority, to block the bond sale, part of a city aid package approved by the Legislature in May over the governor's veto. The governor, who controls the agency, had argued that the bond sale plan, under which the state would pick up the city's remaining debt from its 1970's fiscal crisis, was unconstitutional.

Justice Benza's decision was the latest development in what has become an open political war between Mr. Bloomberg and Mr. Pataki, two Republicans running governments with their own sets of financial problems.

The state's lawyer, Robert S. Smith, did not return a phone call seeking comment today.

Michael A. Cardozo, the city's corporation counsel, said that in seeking an appeal, the state was pursuing a lost cause.

"I would hope they would recognize," he said, "in light of this decision, that they're wasting their time, the court's time, and continuing to make it very, very difficult for New York City to move forward with its bond sale."

In his decision, Justice Benza rejected the state's legal arguments, concluding: "As a final matter, the court notes that it is not the court's function to create the public policy of the state. Rather, it is incumbent upon the judiciary to uphold the public policy as enacted by the Legislature."

Justice Benza also denied the state's request for an injunction, which would have blocked the bond sale while the state's appeal makes its way through the courts. The state then took its case to the appellate judge, Anthony V. Cardona of the Appellate Division of State Supreme Court, who issued a temporary restraining order.

Under the financing deal, the state would repay the city's debt from the 1970's, which would otherwise have cost the city $500 million a year until it was paid off in 2008. The city would borrow $2.5 billion to pay off the old debt, and the state would then pay the city $170 million a year for 30 years to pay off that new debt.

But the governor, along with State Comptroller Alan G. Hevesi, a Democrat, assailed the plan as fiscally irresponsible, saying it would unfairly burden future taxpayers. The governor has offered a series of alternative financing plans, all of which Mr. Bloomberg has rejected.

Mr. Pataki even used his power over the Local Government Assistance Corporation, an obscure but powerful agency, to block the deal on Aug. 6, just as the city was moving to issue its bonds. The corporation was to have served as a conduit for state sales tax funds that the Legislature had set aside to back the new bonds.

"Our children and grandchildren should not be saddled with billions of dollars in unnecessary and avoidable costs associated with this illegal and fiscally irresponsible borrowing scheme," the corporation's board said in an e-mail statement sent today by Kevin C. Quinn, a spokesman for the State Division of the Budget.

In court, the state argued that legislators had erred in drafting the fiscal aid plan by inserting language that said the Legislature did not need to appropriate sales tax money each year to pay off the new bonds. The State Constitution says the state may not borrow money without a referendum, but in practice that requirement has been circumvented.

Justice Benza found that the state did not demonstrate that its credit rating, or that bondholders, would be harmed by the refinancing. He also wrote that if any party would be hurt, it would be New York City, which he said could be taken over by a financial control board if the bond sale did not go forward.

In court last week, Mr. Cardozo conceded that the Legislature had made a mistake in drafting the law and that the city would have to ask lawmakers to approve the $170 million each year. But Justice Benza ruled that the statute, taken in totality, was constitutional.

Still, the lawsuit and the state board's vote not to send the city its payments could make it very difficult for the city to sell the bonds.

Mark Page, the city's budget director, said in court papers that the legal questions raised by the state budget director and the board's vote "have seriously complicated the marketing process" of the bonds.

Others, particularly in the Legislature, were more confident.

"It allows the city to go forward subject to their underwriters, obviously," Assembly Speaker Sheldon Silver, a Democrat, said of the decision. "The judge made, clearly, what's clearly the right decision. The Legislature has acted."

He said that Mr. Pataki, still angry about the Legislature's overriding his vetoes, had tried to use the Local Government Assistance Corporation to derail the Legislature's attempt to help the city. But, he said, the governor "has now failed."


Copyright 2003 The New York Times Company

Kris
October 6th, 2003, 02:26 AM
October 6, 2003

Mayor Hopeful About Closing Budget Gap

By MICHAEL COOPER

Mayor Michael R. Bloomberg said yesterday that he hoped the city would be able to cut a further $300 million in spending without resorting to some of the unpopular service cuts that he had proposed — and then abandoned — when drafting the budget last spring.

"We want to find those things that will be able to be done more efficiently, so that we don't have to cut services," he said yesterday before marching up Fifth Avenue in the Pulaski Day Parade. "But there's no question we have to cut expenses."

The Bloomberg administration told city agencies last week that it wanted to cut $300 million in spending later this fall to get a head start on balancing the budget for the next fiscal year, which begins July 1. That budget has a projected deficit of $2 billion.

The $300 million is much less than the city has had to cut over the past two years, but more than the amount of proposed cuts that the mayor and the City Council averted in June.

Those abandoned cuts — which would have saved about $200 million — would have reduced garbage collections, scaled back library hours, cut back Staten Island Ferry service at peak travel times and closed the zoos in Brooklyn and Queens.

Each agency but the Department of Education — where spending levels are mandated by state law — is being asked to cut its budget by 3 percent.

After discussing the city's austerity plans at a news conference, Mr. Bloomberg marched in the Pulaski Day Parade, and then flew in a city helicopter to Staten Island, where he marched at a Columbus Day parade.

Mr. Bloomberg has been taking special care in recent months to appeal to Staten Island voters, a crucial bloc for New York City Republicans. Yesterday he got a warm reception along the route, and a re-election plug from Staten Island's borough president, James P. Molinaro, a fellow Republican.

"Staten Island is a very important place for the mayor, and he keeps showing that," Mr. Molinaro said. "And we're going to show to him in '05 how we appreciate what he's doing for Staten Island."


Copyright 2003 The New York Times Company

ZippyTheChimp
October 23rd, 2003, 11:42 AM
WCBS TV New York (http://cbsnewyork.com/campaign/politicsny_story_295070704.html)

Bloomberg's Approval Rating Inches Up

Oct 22, 2003 7:04 pm US/Eastern

Mayor Michael Bloomberg's overall approval rating continues to inch upward, according to a poll released Wednesday.

Forty-two percent of New York City voters approved of the way Bloomberg is handling his job, while 47 percent disapproved, according to the Quinnipiac University poll.

That was an improvement of nine points over his ratings in a Sept. 9 Quinnipiac poll, in which 38 percent of voters approved and 52 percent disapproved of the way he was doing his job.

Bloomberg's ratings reached a low point in Quinnipiac's July survey, when he dipped to a 31 percent approval rating, with 60 percent of voters expressing dissatisfaction with his performance.

``Little by little, Mayor Bloomberg is climbing out of the basement,'' said Maurice Carroll, director of the Quinnipiac University Polling Institute. ``If the Yankees win and taxes don't go up again, Bloomberg could get back to plus ratings this year.''

But as in September's poll, voters in the latest survey said nearly 3-1 that they don't want Bloomberg re-elected.

Fifty-two percent of white voters approved of Bloomberg's job performance, compared with 38 percent who disapproved. Among black voters, 32 percent approved and 58 percent disapproved. Hispanic voters approved of the mayor 36 percent, while 50 percent disapproved.

Voters continued to express dissatisfaction with Bloomberg's tax policies, with 61 percent disapproving of his handling of taxes and 28 percent approving. His performance on taxes has been unpopular since he pushed to raise property taxes last year in an effort to balance the city's budget.

Many also voiced unhappiness with his progress on reforming the city's schools. Fifty-three percent said they disapproved of his handling of schools, while 28 percent approved. Only 14 percent said they were satisfied with the quality of public schools in the city.

A majority of voters said they supported the ban on smoking in bars and restaurants: 62 percent approve of the ban, versus 35 percent who don't.

The poll surveyed 887 New York City registered voters from Oct. 16-20. It has a margin of error of plus or minus 3.3 percentage points.


© 2003 The Associated Press. All Rights Reserved.

Kris
November 4th, 2003, 03:46 AM
November 4, 2003

City Comptroller's Fiscal Report Shows More Reasons for Smiles

By MIKE McINTIRE

Higher property and sales taxes, along with increased real estate values, combined with tightfisted budgeting to help New York City end its fiscal year in June in the black, according to a report issued by the city comptroller yesterday.

The annual report on the state of the city's finances has few revelations, but it confirms recent indications that the economic clouds are lifting and that the city, if not at risk of a sunburn, can at least put away the umbrella.

The comptroller, William C. Thompson Jr., said that in addition to closing a $6 billion gap in last year's $44 billion budget, the city has available more than $1.4 billion to help balance the budget for the year that ends next June. City officials, however, are already projecting a $2 billion shortfall for the fiscal year that starts next July 1.

Much of the extra money last fiscal year came from the 18.5 percent increase in the property tax that took effect at the end of 2002 and helped generate an additional $1.3 billion. Real estate taxes, in general, were up because of higher market values for property in the city, as were taxes on real estate transactions, the report said.

In addition, a rebound in tourism was credited with increasing sales tax revenues. Also, city officials have said recently that increased profits from the securities industry are expected to bring larger tax revenues from businesses in the year ahead.

On the downside, the increased revenue from real estate, sales and cigarette taxes was partly offset by a decline in income tax receipts, a weak spot that the comptroller said reflected lower employment, a continuing threat to the city's otherwise brighter fiscal outlook.

"Even more than the nation," the report said, "the city's labor market has been weak, and household employment data suggest that a significant number of city residents have either left or have given up looking for employment."

The Bloomberg administration, seeking to keep a tight lid on spending, has asked its department heads to find an additional $300 million in savings in the current year's budget, to put the city in a better position for the following year.

The comptroller's report shows that, despite the success in cutting costs, some expenses are hard to control.

Overtime for all city agencies, for instance, cost $288 million more than expected. Also, professional services contracts for the Department of Education cost $200 million more than what was originally budgeted, and contracts for computer services citywide nearly doubled, to $141 million.


Copyright 2003 The New York Times Company

Kris
November 19th, 2003, 07:06 AM
November 19, 2003

Mayor Sees More Budget Cuts With Nearly $2 Billion Deficit

By MIKE McINTIRE

New York's budget problems have eased slightly because of higher taxes and an improving Wall Street economy, but Mayor Michael R. Bloomberg warned yesterday that the city still faces a deficit of nearly $2 billion for the fiscal year that starts next July.

Speaking hours before his office was expected to release its quarterly modification to this year's budget of roughly $44 billion, the mayor said that both tax revenues and expenses "are slightly ahead of projections." The budget for this year remains balanced, and the shortfall projected for the next fiscal year has decreased, but not enough to avoid further spending cuts, he said.

"We have a big problem going forward," Mr. Bloomberg said. "I think the numbers will show roughly, instead of $2 billion, it may be $1.8, $1.9 billion, but same order of magnitude."

Later in the day, Jordan Barowitz, a spokesman for Mr. Bloomberg, said the mayor's office would not be releasing details of the modification after all. They are expected to be released as early as today, Mr. Barowitz said.

In lean fiscal times, the modifications are a widely anticipated City Hall ritual, as they provide insight into how the administration expects to close gaps and plan for future problems. Last month, Mr. Bloomberg's budget director offered a clue about what was likely to be in this modification, when he circulated a memo asking department heads to find $300 million in spending cuts in this year's budget.

The memo suggested that most of the cuts should come from reductions in hiring and "a continued downsizing of the work force."

Yesterday, Mr. Bloomberg said that further cuts would be difficult without reducing services, but that he was determined not to raise taxes again.

He said he intended to try to reduce the property tax increase that was enacted last year, and noted that increases in the sales and personal income taxes are due to begin phasing out as early as next year.

"We still have this $2 billion deficit to close," the mayor said. "But taxes are coming down, not going up."

Copyright 2003 The New York Times Company

Kris
January 16th, 2004, 01:53 AM
January 16, 2004

A Proposal for Few Cuts, No Layoffs and Even a Tax Rebate

By MICHAEL COOPER

For the first time since he was elected, Mayor Michael R. Bloomberg was able to propose a budget yesterday that called for few cuts, no layoffs, only a modest amount of aid from Albany and Washington and a property tax rebate for most homeowners. It was a far cry from the gloom and doom budgets he has proposed before.

The $2 billion gap that Mr. Bloomberg must close in the fiscal year that begins July 1 is only a fraction of the size of the deficits he has had to wrestle down since he took office, and he presented a plan to do so without any of the deeply unpopular measures, from firehouse closings to tax increases, that he has called for before. His plan does not include the kind of expensive, showcase programs that mayors sometimes propose to leave their mark on the city. While Mayor Bloomberg found money to put in the budget to hire a new class of police cadets, keep garbage pickup at its current level and restore planned cuts to cultural institutions, he warned that the rising cost of Medicaid, debt service and pensions would saddle the city with more deficits in 2006 and 2007.

"We're a little bit over the hump, but we're certainly not back to the kinds of boom times that would let us expand everything,'' Mr. Bloomberg said in his budget address at City Hall.

Mayor Bloomberg, a Republican who angered many in his party and the city by raising the property tax, the sales tax and the income tax over the last two years, said he was optimistic enough about the city's fiscal future to plan to turn his proposal to give a $400 property tax rebate to most city homeowners into an annual event.

Because of the cuts he made, the taxes he raised and the economic upturn, the mayor said the city was on course to end the current fiscal year with a $1.4 billion surplus. He said he planned to divide that in two to help plug gaps in this budget proposal and the one for the year after that.

He acknowledged, however, that there were still risks to the city's fiscal health.

The city and state are battling in court over a plan in this year's budget to save the city $500 million a year in the final payments for its debt from the 1970's. The mayor included no money in this year's budget for raises for municipal unions, which are working without contracts; he said any increases would have to be offset by other savings. The state is facing a deficit that the governor's office said yesterday was still $5.1 billion. That could lead state lawmakers to cut, not raise, city aid.

Union leaders complained that if there is enough money for surpluses and tax rebates, there should be enough money to give their members raises, but some did say they were pleased that the mayor was no longer counting on $600 million in savings from union concessions to balance the budget, as he asked for last year.

"Once we couldn't reach a deal last May, I think everybody realized that there had to be a different strategy on all sides with respect to both bargaining and budgeting,'' said Randi Weingarten, the president of the teachers' union and chairwoman of the Municipal Labor Committee, which coordinates bargaining for municipal unions.

The $45.7 billion spending plan that Mayor Bloomberg outlined yesterday seeks to balance the optimism born of the economic recovery and higher tax revenues with the caution that comes from the fact that the city still has a structural deficit, and expenses are still set to exceed revenues in the long term.

It was a very different kind of budget from the bitter-medicine, bottom-line plans that the mayor put forward during his first two years in office, which left his popularity in tatters. The mayor, who faces re-election in 2005, spoke in a very different tone yesterday in presenting the budget.

"Budgets are not really, if you come down to it, about money,'' he said yesterday. "They are about people; they are about making choices; they are about sharing and sacrifice and being in this together and taking care of each other.''

Analysts said the plan showed just how far the city has come from what some were calling a crisis just two years ago, but they differed about the mayor's approach.

"The city now has the types of gaps and budget problems that need to be dealt with, but which are manageable,'' said Jeffrey L. Sommer, the executive director of the New York State Financial Control Board, which monitors the city budget.

Some analysts said it was premature to offer the tax rebate. The rebate will cost the city $250 million, a small portion of the property tax increase it passed in 2002, but the proposal is structured so that it will essentially eliminate the rate increase for homeowners while leaving it in place for landlords and the owners of commercial properties.

"This year's surplus is a far cry from last year's $6 billion gap, but all the risks out there make it premature to start doing tax rebates, as small as this one is,'' said Diana Fortuna, president of the Citizens Budget Commission, a business-backed group.

Others said that they would like to see more spending cuts. Edmund J. McMahon Jr., a senior fellow with the Manhattan Institute, a conservative organization, praised the mayor for cutting taxes for homeowners but said he would like to see more cuts. "He's kind of like someone who's gone halfway through the Atkins diet, and is now going onto maintenance because he's tired of eating so much bacon,'' he said.

Still others expressed concern that the plan still included cuts to children's services and other areas.

Over all, Mr. Bloomberg's plan to close next year's gap calls for using $700 million of this year's surplus, seeking $700 million in aid from Albany and Washington, and using $526 million in additional tax revenues that it now expects to collect.

While the plan calls for saving $324 million in agency spending - by cutting some services, raising fees (like charging $2 for haircuts for prisoners), or finding alternate sources of money - it also calls for $381 million in new spending for 2005.

Some of the new spending will be at the Department of Transportation, which is trying to improve Staten Island Ferry service after the crash that killed 11. The budget calls for stepping up random drug testing on the ferry, hiring more legal staff to assist with liability lawsuits, adding ferry security training, installing a public address system on some boats, and hiring a temporary replacement crew to fill in while some crew members are out on sick leave or called to make depositions.

Mayor Bloomberg, who is sometimes known for candor that is uncharacteristic in politicians, offered an unusual description of the city's fiscal obligations yesterday.

"The law says you balance the budget with no shenanigans whatsoever, or at least, very few shenanigans,'' he said.

Copyright 2004 The New York Times Company

Kris
January 17th, 2004, 09:30 AM
January 16, 2004

Improving Economy Is Complicating City's Bid for Aid From the State

By AL BAKER

ALBANY, Jan. 15 - The city's improving fiscal picture is already complicating Mayor Michael R. Bloomberg's efforts to get millions of dollars in aid from Albany, where Gov. George E. Pataki and state lawmakers are trying to dig out of their own financial mess.

State lawmakers said on Thursday that they were happy that the city was no longer facing cuts in services and higher taxes. But they said coming to them for help when the mayor was planning property tax rebates for homeowners was awkward.

"I think the problem the mayor is going to have is, you can't declare things to be rosy and everything is fine but say to the state, 'Give us another $400 million, whatever,' '' said Senator Dale M. Volker, a Republican from western New York. "That is not going to be easy to sell.''

Some in Albany said permission for the mayor's tax rebate plan would ultimately pass in Albany, where lawmakers from the city, who are facing re-election, also want some credit for cutting taxes - especially after they permitted the city to raise some of them on city residents last year. The question is whether they can be as generous with other mayoral requests.

The Assembly speaker, Sheldon Silver, a Democrat from Manhattan who supports the rebate plan, has suggested that the mayor consider lowering tax rates locally or choosing for cuts other taxes raised last year, such as sales or income taxes.

The Senate majority leader, Joseph L. Bruno, an upstate Republican, has also weighed in on what the city should do. In the context of a battle over how to fix the city's schools, he has questioned whether the city was contributing enough money to educate its own students.

But even as he tried to paint a rosier outlook, giving cash to homeowners who shouldered much of the city's fiscal bailout in 2003, the mayor argued that the state should give the city budget relief and help pay for a new school program.

The mayor pointed out that the city had a higher local tax burden than the state average and that the city paid $2.6 billion a year more in state taxes than it got back in state spending on the city.

"We are not only paying our own way, we are paying expenses for many other programs that the state runs outside New York City,'' said William T. Cunningham, the mayor's communications director. He said the $250 million cost of the tax rebate would take no money from anyone outside the city.

Some in Albany said the mayor's Albany request, because it was so small, would not be a heavy lift. Consequently, Mr. Bloomberg may wind up getting much of his $400 million aid request. That is much less than the $2.7 billion he asked for last year.

It also helps that, on Thursday, he gave Albany a menu of $937 million worth of options to choose from, including $495 million in Medicaid relief, a concept Governor Pataki generally supports.

The mayor was also pragmatic in not assuming any state aid for city schools' operating costs to satisfy a court order to provide New York City students a "sound basic education,'' especially after the governor and Mr. Bruno said more money was not the only solution. But he did ask Albany to float bonds to pay for $6.5 billion of his $13.1 billion schools capital construction plan to upgrade, build and maintain school buildings over the next five years.

By arguing that, "the needs of the city school system are so great, the city's fiscal capacity is limited and the state's building aid formula has historically shortchanged city schools,'' Mr. Bloomberg seemed to be increasing pressure on Albany. At the same time, he is trying to wrest Medicaid relief from the state and is fighting in court for a plan to have the state pay back the city's remaining debt from its 1970's fiscal crisis - all big-ticket items that suburban and upstate legislators are not naturally inclined to support.

Mr. Bloomberg's timing, however, might be better this year than last: the governor is expected to report next week that the state's budget plight is not as bad as had been expected, because of rising revenues for the improving economy that is also boosting the city's budget.

Aides to the governor said on Thursday that the anticipated state budget shortfall for the fiscal year that starts on April 1 would be about $5.1 billion, about a billion less than they had originally anticipated, though still formidable.

In the end, Mr. Silver said: "Obviously when the mayor comes out with a statement that he is providing tax rebates, which I support fully, it makes our job more difficult to achieve that aid for the city of New York. I just hope the financial picture that he paints does not hinder us in advocating for the city.''


January 17, 2004

The City Wades Out of Red Ink

Mayor Michael Bloomberg began his attempt to journey back into the political good graces of New Yorkers this week by showing them how he had turned the city's multibillion-dollar budget gap into a $1.4 billion surplus — and promising many of them a piece of it. His preliminary budget plan was an impressive starting point for keeping the city safe, clean and fiscally sound. But it went too far in trying to make people happy.

By promising homeowners a $400 rebate on property taxes this year and beyond — at an annual cost of $250 million — the mayor is betting that everyone will want to help nurture the city's new fiscal breathing room. That's unlikely, because Albany and Washington have their own money problems. The state faces a budget shortfall of about than $5 billion. That leaves little room for the kind of sympathy that spurred state lawmakers to break with Gov. George Pataki and help the city last year. Yet Mr. Bloomberg needs the state to approve the tax rebate and then agree to absorb more Medicaid costs and carry out a plan to take over $500 million in debt service from the 1970's. The mayor deserves the support on Medicaid and old debt, but the rebate guts his best argument for help.

Mr. Bloomberg sounded a note of caution on the budget, but we wish he had gone further and dropped the rebate plan until the city showed clearer signs of being out of the woods economically. Happily, the budget contains other solid signs of economic prudence. The mayor is counting only half of the surplus toward balancing the 2005 budget, and squirreling away the rest for 2006. He also wisely moved toward "pay as you go" on capital projects, a step that lightens future debt obligations.

Mr. Bloomberg avoided another open confrontation with union leaders by not setting down a specific marker on the cost of the coming contracts. But that leaves another question mark in the budget. Even keeping wages level with inflation could cost an additional $500 million.

The much-hailed surplus could easily fade away before anyone has a chance to spend it. But Mr. Bloomberg has been steady in making choices, however unpopular, to do right by the city. We are counting on him not to change course now.

Copyright 2004 The New York Times Company

ZippyTheChimp
January 30th, 2004, 01:19 AM
January 29, 2004

Citing Improvement, Moody's Upgrades City's Bond Outlook

By MICHAEL COOPER

A major credit rating agency announced yesterday that New York City is on pace to resolve "one of the most serious fiscal challenges it has faced in decades.''

The agency, Moody's Investors Service, revised its ratings outlook on the city's bonds to stable, from negative. It said in a statement that Mayor Michael R. Bloomberg had balanced the city's books through a combination of tax increases, spending restraint and borrowing. It called his newest budget plan "reasonable and achievable.''

The agency said that the city had reduced its deficits "to manageable levels, more proportionately in line with pre-Sept. 11 and pre-recession amounts.''

The Bloomberg administration was pleased with the announcement, which it saw as evidence of Mayor Bloomberg's success in guiding the city through two consecutive years of multibillion-dollar budget deficits.

"Moody's upgrading of New York's outlook demonstrates that Mayor Bloomberg is successfully managing the city's budget through the worst fiscal crisis in a generation,'' said Jordan Barowitz, a spokesman for the mayor. "However, he still faces considerable financial challenges and fiscal prudence is still necessary."

Two other credit ratings agencies have already upgraded their ratings outlooks on the city's bonds. Moody's rates the city's bonds A2, a midrange rating. The ratings are important to the city because they help determine how much interest it will have to pay on the money it borrows.


Copyright 2004 The New York Times Company

Kris
March 5th, 2004, 02:49 AM
March 5, 2004

Budget Director Says City Can't Keep Up With Deficits

By MIKE McINTIRE

To hear Mark Page tell it, New York City's budget glass is most definitely half empty.

Yes, the city closed yawning deficits once predicted for this year and next, but numerous trap doors remain. Yes, tax revenues are up, but they will never keep pace with the rising costs of Medicaid, debt service, and pensions and health benefits for city workers, many a result of expensive projects and labor contracts from long ago.

"It's sort of odd," Mr. Page, the city's budget director, said yesterday. "We're at a position where it feels as though things ought to be better. Yet we're faced with this legacy of what's gone before, in terms of fixed costs that we have no choice but to cover."

Mr. Page's comments led off the first day of City Council hearings on Mayor Michael R. Bloomberg's proposed $46 billion budget for the fiscal year that starts in July. They contrasted with the sunnier viewpoints of some Council members and fiscal watchdogs who also testified.

Where one side emphasized potential pitfalls that lie ahead, with an eye toward lowering expectations of pay raises for municipal workers and funds for new programs, the other side saw opportunities to enhance services for favored constituencies or reduce property taxes.

Such is the start of the springtime dance between the mayor and the City Council, an annual rite that begins each year around this time and concludes with adoption of a budget in June. In recent years, the deliberations have often been rancorous, shaped by the need to close huge budget gaps by raising property and sales taxes, shutting firehouses and scaling back services.

By comparison, this year's hearings are expected to be relatively tame. By all accounts, revenues are up, the economic outlook is guardedly optimistic and the debate is focusing not on raising taxes but on how deeply, and for whom, to cut them.

Councilman David I. Weprin, chairman of the Finance Committee, suggested the city should forgo Mr. Bloomberg's $250 million plan to offer $400 property tax rebates to homeowners, in favor of a more expensive Council plan to roll back property taxes by 2 percent for everyone, including renters and businesses. The Council plan, which would cost $297 million, would also repeal last year's 18.5 percent property tax increase for elderly residents on fixed incomes.

"Don't you think it's not very good tax policy to give a rebate to only 30 percent of those eligible?" Mr. Weprin asked the city finance commissioner, Martha E. Stark.

Ms. Stark disagreed, saying that the Council's proposal would translate into just a $50 savings for most homeowners .

"When we think about this stuff from a tax policy perspective, what we want to talk about is who actually sacrificed and who is going to benefit," she said.

Councilman Michael E. McMahon wondered whether the city might be able to afford both tax-cut proposals, rather then just one. Other Council members sought restoration of what they called "hidden cuts" in Mr. Bloomberg's proposed budget, including $12 million for libraries, $8.5 million for health services, $10 million for summer youth jobs and $11 million for senior centers.

Adding fuel to the calls for restored services and greater tax cuts were projections by Council finance officials and nonpartisan budget watchers of greater-than-expected revenues from taxes on Wall Street profits, retail sales and tourism. A report from the city's Independent Budget Office said that the city's economic outlook "is markedly better" and should translate into more money "to fund new priorities or meet other needs."

In response to questioning that lasted several hours, Mr. Page repeatedly colored the city's fiscal canvas in muted tones, painting a decidedly autumnal horizon. He warned that expectations of $300 million in federal aid were "problematic" and noted that previous rosy predictions of higher Wall Street profits had proven to be greatly overblown.

At one point, the normally laconic Mr. Page caught himself launching into a lengthy doomsday scenario of unchecked city borrowing for capital projects, fretting that "even if we stopped the capital program this afternoon, it would take a number of years for the debt service costs to actually come down."

"We get the benefit, somebody else gets the problem in the future," said Mr. Page, growing animated. "On the other hand, here we sit, we've got the problem from all the guys behind us, what do you do with this - I should stop."


Court Backs Plan for State to Repay City's Debt

By MICHAEL COOPER and AL BAKER

ALBANY, March 4 - New York City's plan to have the state pay back the last $2.5 billion of the city's debt from the fiscal crisis of the 1970's can proceed with some changes, the Appellate Division of State Supreme Court ruled here on Thursday.

But even as the city was proclaiming victory in the case, the state authority that would be responsible for paying off the debt said it would appeal the decision to the state's highest court, the Court of Appeals.

The plan to have the state take over the debt was one of the few concrete pieces of state aid that the city was promised last year as it sought to dig itself out of a multibillion-dollar budget deficit. While most of the state aid package simply gave the city permission to tax itself more, the decision to have the state take over the city's debt would save the city half a billion dollars a year over the next five years.

The plan to assume the debt was passed by the Democratic-controlled State Assembly and the Republican-controlled State Senate over the veto. of Gov. George E. Pataki. It was to work this way: the city would create a corporation to borrow $2.5 billion to pay off its remaining 1970's debt, and a little-known state authority, controlled by Mr. Pataki, a Republican, and State Comptroller Alan G. Hevesi, a Democrat, would be directed to pay the city $170 million a year over 30 years to pay off the new debt.

Although officials in both houses of the Legislature said they were pleased that the court had basically signed off on their plan to have the state assume the city's debt, an official in the Senate indicated it was open to other proposals to relieve the city of the debt payments. The city, however, has rejected several alternative plans proposed by Mr. Pataki, saying they would not provide the same benefit as the Legislature's.

The plan has been hotly debated since it was passed last May. While city officials praised the plan, saying it would save a much-needed $500 million a year that could be spent on vital services, some fiscal monitors expressed concern that the city's disco-era debt was being spread into the far-off 2030's.

Soon after it passed, the governor moved to block the plan. The Local Government Assistance Corporation, the state authority that was to make the annual payments of $170 million, sued to stop the deal, declaring that the plan was not only fiscally irresponsible, but unconstitutional as well. A lower court judge, Louis C. Benza of State Supreme Court in Albany, sided with the city in August.

Before the city could move to sell the bonds to refinance its old debt, though, the state appealed. The case was argued in November. On Thursday, the Appellate Division ruled that the plan could proceed. The Appellate Division did find that part of the law was unconstitutional - a provision that said the Local Government Assistance Corporation would automatically pay the $170 million a year to pay down the debt without an annual appropriation by the Legislature. But the court decided simply to strike that section and declared the rest of the law legal.

Mayor Michael R. Bloomberg, who is counting on the refinancing to save the city $500 million in the fiscal year ending June 30, and another $500 million next year, praised Thursday's decision. "We are pleased that the Appellate Division affirmed the decision of the State Supreme Court, and we are confident that the Court of Appeals will agree with these two courts and rule that the bond issuance is legal and constitutional," he said. "Issuing the bonds will allow us to provide the vital city services that New Yorkers rely on so our economic recovery can continue."

But the board of the Local Government Assistance Corporation said the debt refinancing was "bad public policy that would burden hard-working taxpayers and saddle our children, and even our grandchildren, with billions of dollars of debt costs for borrowing that occurred in the 1970's." The board said it believed that its appeal would prevent the city from issuing the new bonds until the high court decides the matter.

Assembly Speaker Sheldon Silver, a Democrat, said the court had "delivered a victory for the people of New York City, for the financial stability of the city's budget and for the city's continued recovery and resurgence."

But a Senate official signaled a willingness to drop the plan if the parties involved could agree on a negotiated settlement, as Mr. Pataki has long proposed. "We're pleased that the court agreed with our approach," said John McArdle, a Senate spokesman. "However, what's more important is that we resolve this so that the city and the state can equally benefit and we can move on to other important matters."

Copyright 2004 The New York Times Company

Kris
March 9th, 2004, 09:59 AM
Budget Surplus Obscures Uncertainties (http://gothamgazette.com/article/finance/20040309/8/908)

Kris
April 27th, 2004, 02:47 AM
April 27, 2004

In Budget Plan, Bloomberg Proclaims Healthy Surplus

By MIKE McINTIRE

Declaring that the city's economic recession is over, Mayor Michael R. Bloomberg released a $46.9 billion budget proposal yesterday that foresees a surplus of $1.3 billion this year to help finance tax breaks for homeowners and wage increases for all city workers.

Surging profits on a reinvigorated Wall Street, an increase in the property tax and a booming real estate market mean the city now expects to take in $791 million more in tax revenues for the fiscal year that ends in June than it had anticipated in January. The city also envisions an additional $658 million in revenues next fiscal year, which begins July 1.

"It shows that the recession that hurt our city has ended, or at least ameliorated, and our economy and the jobs it generates are coming back," Mr. Bloomberg said in presenting his budget at City Hall.

The extra income makes it possible for the mayor to break from the gloomy budgets he has presented since taking office in 2002, which together have reduced the municipal workforce by 18,000 employees, cut $3 billion from agencies and increased property taxes by 18.5 percent.

This time, instead of closing fire companies and threatening layoffs, the mayor is planning no major cutbacks in the fiscal year that begins in July. What is more, he is planning to use $250 million to provide property tax rebates of $400 to homeowners and spend $533 million to cover retroactive pay increases for firefighters, teachers and other city workers not covered by the contract negotiated last week with District Council 37, the union representing about a third of the municipal workforce.

The mayor hopes to use that three-year contract, which calls for no raises in the first year, a 3 percent raise in the second and a minimum 2 percent raise in the third year, as a model for negotiations with other unions. The money being set aside for wage increases would be spent only if contracts are reached.

The swell of black ink, while certainly preferable to the deficits that have dominated budget deliberations in recent years, brings its own political challenges for a mayor who has made fiscal prudence a centerpiece of his administration. Mr. Bloomberg finds himself in the unaccustomed position of competing with the City Council to find ways of spending hundreds of millions of dollars instead cutting the budget.

City Council members said yesterday that despite the mayor's rosier-than-usual assessment, they believe he is continuing to underestimate the amount of tax revenue flooding into the city while inflating projected costs for other items. Gifford Miller, the Council speaker and a likely Democratic candidate for mayor in 2005, called Mr. Bloomberg's plan "a missed opportunity budget."

Mr. Miller has proposed a more permanent 2 percent rollback on property taxes, and more than $300 million in additional spending throughout city government.

But Mr. Bloomberg, a Republican, warned that the sudden wave of revenue also threatens to be fleeting, and he is forecasting a $3.8 billion budget gap in the fiscal year that begins in July 2005, largely because of rising costs of Medicare, employee pensions and other expenses beyond the city's control. The mayor said such nondiscretionary expenses are expected to rise to $22 billion in 2008 from $16 billion this year.

"There's no chance that the economy is going to grow fast enough to take care of a $3.8 billion deficit," the mayor said. "We'll have to find other ways."

Much of the $1.3 billion surplus in this year's budget would not go toward tax rebates and pay raises, but would be used to pay for costly items that the Bloomberg administration said it had not previously anticipated. Among them are a $200 million subsidy for the Health and Hospitals Corporation, $100 million to comply with a new lead abatement law and $500 million from a debt refinancing that has been stalled because of a legal challenge by the state.

Other expenses included in the budget are $30 million for police coverage at the Republican National Convention in August, $500,000 to begin random drug testing of Fire Department employees and $116 million to support the school system's new policy of retaining poorly performing third graders.

During Mr. Bloomberg's hourlong PowerPoint presentation on the budget, the mayor departed from the talk of doomsday scenarios and pleas for state aid that peppered his appearances in previous years. Most notably, he acknowledged for the first time what some economists and the city comptroller have been saying since last year: the recession is over.

Employment has been up in recent months, Wall Street profits are expected to top $16 billion this year — $4 billion higher than the city estimated in January — and the number of tourists visiting New York has been rising steadily.

Rae D. Rosen, a senior economist with the Federal Reserve Bank of New York, said the city's collection rates for sales taxes and gross income taxes are up by 13 percent and 27 percent, respectively, so far this year.

"We are out of a recession," she said. "Depending on how you look at it, the recession ended sometime in the third quarter of last year."

The mayor's reluctance to accentuate the positive when discussing the city's financial affairs has been a hallmark of his approach to budget negotiations. For instance, he successfully kept hidden the fact that he had quietly set aside $200 million in this year's budget to help pay for the eventual labor agreement with District Council 37, fearing that disclosure of the reserve would weaken his negotiating position.

The mayor's budget presentation sets off what is expected to be up to two months of negotiations with the City Council leadership. A balanced budget must be enacted by the end of June.

Some observers expressed surprise at the projections of large budget deficits for the years ahead, which the mayor predicts could run as high as $4.2 billion in fiscal year 2007.

Diana Fortuna, president of the Citizens Budget Commission, a nonpartisan group backed primarily by businesses, said any surplus revenues would be better spent reducing future debt.

"After you've done this gigantic tax increase, as you're beginning to reflect increased tax revenues from a strengthening economy, to still be looking at gaps of that size is very worrisome," Ms. Fortuna said. "I don't see how the city won't be doing some very significant spending cuts a year from now."

While unusually upbeat about the city's prospects, Mr. Bloomberg insisted that "there is no big pot of money" waiting to be spent in future years. He also managed to find a downside to the increase in tourists, noting that most of them are Americans, who tend to spend less than foreign visitors.

"The good news is, the hotels are full; the bad news is, not at the rate you'd like," he said. "Restaurants are doing very well, but they're not selling their expensive wines, which is probably where they make most of their money."

http://graphics7.nytimes.com/images/2004/04/26/nyregion/27FISCAL.chart.jpg


Mayor Bloomberg's Sunny Budget

Having led New York out of two years of multibillion-dollar budget shortfalls, Mayor Michael Bloomberg has brought the city to something like an oasis. The improved economy and the current surplus of about $800 million demonstrate how wise Mr. Bloomberg was when he decided to raise taxes to protect the city's quality-of-life services during the recession. The turnaround is an enormous fiscal achievement for Mr. Bloomberg, but it's a tenuous one. Politicians with their eyes on the next election could ruin everything with too many ill-targeted tax breaks, too soon. That includes Mr. Bloomberg's own plan to give a $400 property tax rebate to each homeowner in the city.

In unveiling his executive budget plan yesterday, the mayor made the rebate a centerpiece, which no doubt appeals to the hundreds of thousands of New Yorkers who own houses, co-ops and condos. The rebate has the advantage of being a one-time giveback, but Mr. Bloomberg would do better to use the up to $250 million it would cost to retire a bit of the city's crushing debt. His own projected figures make the case: the budget for fiscal year 2006 may require closing a gap of about $3.7 billion, in part because of the rising costs associated with Medicaid and employee pensions, which the city does not control. Now isn't the time to play Santa Claus.

The mayor needs to strike the most fiscally conservative pose possible because there are so many other forces at work, eager to prod him into risking more money than the city can afford in spending or tax breaks. The city's teachers, firefighters and police officers are still trying to get generous contracts. The City Council is looking to beef up spending in education. That is certainly a better priority than the idea Speaker Gifford Miller is floating for both tax reductions and rebates. Mr. Miller has his eyes on a mayoral candidacy of his own, and he can be expected to try to use the budget battle to elevate his profile.

The mayor needs to convince everyone that fiscal responsibility is still a necessary piece of the budget formula. New York's rainy days are not over yet.

Copyright 2004 The New York Times Company

Kris
April 28th, 2004, 06:01 AM
April 28, 2004

Required Costs Weigh Heavily on City Budget

By MIKE McINTIRE

Deep in the back of the $46.9 billion budget proposal Mayor Michael R. Bloomberg released on Monday is a chart showing this year's hefty surplus giving way to multibillion-dollar deficits each year into the foreseeable future.

Driving these persistent imbalances are what city officials portray as the hidden threat to the city's future fiscal health: the "nondiscretionary" costs, mostly for Medicaid, employee pensions and interest on municipal debt, that the mayor says are largely beyond his control. The extent to which City Hall is powerless over some of those rising expenses is debatable.

But what is not in question is that these costs are making it increasingly difficult to bridge the gap between what New York takes in and what it spends each year. The nondiscretionary portion of the budget surpassed all other spending categories in 2002, and Mr. Bloomberg's fiscal plan estimates that it will swell to $22.3 billion in the 2008 fiscal year from $16.1 billion this year.

For all the good news in the latest budget, these rising nondiscretionary costs portend larger deficits in the future if revenues do not grow significantly. The mayor is projecting deficits of $3.8 billion in the fiscal year that starts in July 2005, and $4.2 billion the year after that as these costs rise.

As a result, the mayor says he is forced to rein in spending over those areas he does have control over: union contracts, the size of the city's workforce and other discretionary spending by city agencies. Except for periods of robust economic growth that make it easier to close the gaps, the overall trend of restraining discretionary spending, while lobbying for more federal and state aid, seems likely to continue.

Speaking yesterday at Jacobi Medical Center in the Bronx, where he noted that the city was spending $200 million to make up for a decrease in state aid to city hospitals, Mr. Bloomberg said the city needed to keep its priorities in sight when dealing with the deficits.

"We've got to find ways to keep the drastic alternatives of cutting services from having to be implemented, because people's lives and futures are at stake here," he said. "We do not want to close any hospitals, and I'm confident that we will not have to close any hospitals."

City officials blame outside forces for most of the increases in municipal spending. They say that the state, for instance, has shifted responsibility for financing much of Medicaid to the city, which has had its Medicaid-related expenditures increase by $1.5 billion since 2000.

Also, cost-of-living adjustments to employee pensions, mandated by the State Legislature several years ago, have added millions to the budget. Annual pension costs, which are determined by labor agreements reached between the city and its unions, are expected to nearly double, to $4.3 billion, by the 2007 fiscal year.

While many of these nondiscretionary costs are difficult, if not impossible, for the city to curtail, there are steps the city could take to mitigate the impact, said Doug Turetsky, a spokesman for the Independent Budget Office.

Among them, he said, is continuing to seek a less costly pension formula for new employees, and rethinking expensive projects that increase the city's debt burden, which is expected to rise to $4.2 billion in 2008 from $3.4 billion this year. Mr. Bloomberg has said that he is trying to change the pension system for municipal workers and that the city has taken advantage of low interest rates to ease the cost of its debt.

The projections of large deficits in the years ahead, particularly in light of an improving economy, has alarmed analysts on both sides of the political aisle.

Diana Fortuna, president of the Citizens Budget Commission, a business-backed group, said the mayor's plan to use $250 million to provide property tax rebates of $400 to homeowners was "the wrong tax cut at the wrong time," given the future deficits that need to be closed.

"What the mayor is saying is that they're caused by these escalating nondiscretionary expenditures," Ms. Fortuna said. "But at some point, somebody's got to get a handle on those expenditures or the city's not going to be able to function."

Another organization, the Budget for a Livable New York City Coalition, made up of labor, religious and community groups, found itself in an uncommon agreement with the Citizens Budget Commission. It released a statement on Monday saying that any tax cuts at this time "are premature and fiscally irresponsible."

Edmund J. McMahon, a senior fellow with the Manhattan Institute, a conservative policy group, said the continued deficits were evidence that "the city tries to do too much, and it has got a government that's bigger than it can afford."

Pressed on Monday during his budget presentation about his plans to close the projected deficits, Mr. Bloomberg offered few clues. Politically, it could be difficult for him to take drastic steps next year, like significant spending cuts or tax increases, because he will be seeking re-election in November 2005.

Saying that his administration has already cut more than $3 billion from city agencies since taking office in 2002, the mayor seemed to indicate that no matter what he intended to do, a major reduction in city services would not be high on his list of options. He pointed to budget figures showing that discretionary spending in many city agencies has remained flat and, in some instances, actually decreased if adjusted for inflation.

"There is a point at which you get down where there is no fat anymore, if there ever was fat there," he said. "Eventually, everybody agrees all that's left is bone, and those cuts are very painful. We have provided better services, but it gets harder and harder every time when you face the same problem."

http://graphics7.nytimes.com/images/2004/04/28/nyregion/fisc.jpg

Copyright 2004 The New York Times Company

Kris
April 29th, 2004, 05:56 AM
April 29, 2004

State's Highest Court Hears Arguments on City Bailout Plan

By MICHAEL COOPER

ALBANY, April 28 - The long-running battle between Gov. George E. Pataki and Mayor Michael R. Bloomberg over a fiscal bailout for New York City has reached the state's highest court, where lawyers for both men clashed on Wednesday over whether a plan for the state to take over the city's remaining debt from the 1970's is constitutional.

The city's lawyers said that if it were to lose the case, there would be a $1 billion gap in its budget in the fiscal year that begins July 1 - an amount nearly equal to the Fire Department budget. But the state's lawyers said that the governor had offered the city money-saving alternatives to the plan, which the city rejected.

The hearing came nearly a year after the State Legislature passed a bailout package for the city in an extremely rare override of one of Governor Pataki's vetoes. Although the vast majority of the plan simply gave the city permission to raise taxes on its own residents, one portion offered direct relief: the state agreed to essentially take over the city's remaining $500-million-a-year payments on its remaining debt from the 1970's fiscal crisis.

But that fiscal relief came in a convoluted way: the city was given permission to create a bond-issuing corporation to borrow $2.5 billion to pay off the last five years of the city's debt from the 1970's, and a little-known state corporation was then directed to pay the city $170 million a year for the next 30 years to pay off the new debt.

Governor Pataki called the complex plan both fiscally irresponsible - because it would force future taxpayers to continue paying off the city's disco-era debt until 2034 - and unconstitutional. Last summer, just as the city was set to sell the first bonds under the plan, the state corporation, which is controlled by Mr. Pataki, a Republican, and the state comptroller, Alan G. Hevesi, a Democrat, sued to block the sale.

The issue has been tied up in the courts ever since, preventing the city from selling its bonds. Mayor Bloomberg has given up on saving $500 million in the current fiscal year. But the city anticipates saving $1 billion - the money it was supposed to save this year plus the money it was to save next year - in the fiscal year beginning July 1.

At issue, among other things, is whether the law is unconstitutional because it calls for having the state send the city money each year without an appropriation by the Legislature. The city agrees that the money should be subject to an annual appropriation, but argues that the entire law should not be thrown out.

Last month, a lower court, the Appellate Division of State Supreme Court, struck down the portion of the law about the annual appropriation and declared the rest of it constitutional. But Guy Miller Struve, the state's lawyer, told the Court of Appeals here on Wednesday that other parts of the law that were unconstitutional as well.

Michael A. Cardozo, the city's corporation counsel, told the court that it should strive to recognize the intent of the Legislature, which was to help the city. And he noted that the consequences of losing the case would be severe for the city.

"It would mean that there would be a $1 billion hole in the budget that Mayor Bloomberg announced earlier this week," Mr. Cardozo argued in the ornate, oak-paneled chamber of the Court of Appeals, standing beneath scores of portraits of former judges, including one of Mr. Cardozo's great-grandfather's first cousin: Benjamin N. Cardozo, who was chief judge here before he joined the United States Supreme Court in 1932.

But the city's fiscal outlook, while still uncertain, has vastly improved since the bailout plan was passed last spring. Mayor Bloomberg said earlier this week that he expects the city to end its current fiscal year with a large surplus, and even as he argues that the city needs the relief of $500 million a year in debt payments, he is pushing a plan to give away $250 million next year in property tax rebates to city homeowners.

The state noted as much in its court papers. "The city does not deny that it will realize a substantial surplus in its current fiscal year, no matter what the resolution of this case may be," it said in a brief.

To which the city responded in its court papers: "A sudden loss of resources on the scale of $500 million per year would require major layoffs and would diminish the city's ability to provide vital services."

Copyright 2004 The New York Times Company

Kris
May 14th, 2004, 05:37 AM
May 14, 2004

Court Allows New York City to Refinance Debt From 70's

By AL BAKER

ALBANY, May 13 - The state's highest court on Thursday upheld New York City's plan to refinance the remainder of its debt from the 1970's fiscal crisis, rebuffing the Pataki administration's nine-month battle to kill the plan. The refinancing would provide the city with $500 million a year to balance its budget over the next five years.

The refinancing plan would spread the debt over the next 30 years. The state would then be responsible for paying it off, at a cost of $170 million a year.

In a 6-to-0 ruling, the state's Court of Appeals offered what appeared to be the last words on the bruising battle over the debt plan, which pitted the governor, George E. Pataki, against Mayor Michael R. Bloomberg, a fellow Republican.

Mr. Pataki tried to kill the proposal last year as part of his veto of the state budget. But that veto was overridden, overwhelmingly, by the State Legislature. That led Mr. Pataki to take the dispute to the courts, which have sided with the city every step of the way.

In rejecting the state's three constitutional challenges, the Court of Appeals ruled that the legislation was legal, clearing the way for the city to create a bond-issuing corporation to borrow $2.5 billion to pay off the last five years of debt initially incurred when Abraham D. Beame was mayor.

As a practical matter, the decision means that the city can expect to save the $1 billion in debt payments that it is counting on to balance the budget in the fiscal year that begins July 1 - an amount nearly equal to the Fire Department's annual budget. That $1 billion would represent two years of savings from the bond refinancing.

"Today, the Court of Appeals has ruled in favor of the people of New York City,'' Mayor Bloomberg said in a statement. "Today's decision allows us to move forward with the bond sale expeditiously."

Still, the convoluted nature of the plan troubled some financial analysts and the governor. On Thursday, they continued to warn that the plan would break the cardinal rule of municipal budgets by forcing future generations of taxpayers to pay for services received by the last generation - paying off the debt of the 1970's until 2034.

"It's over-expensive and it's inequitable,'' said Charles Brecher, the director of research for the Citizens Budget Commission, a nonpartisan group backed primarily by businesses. "It's going to take 60 years to pay off debt from the 1970's."

For his part, Mr. Pataki, at an appearance in downtown Rochester, said the plan was "wrong." Taxpayers statewide, he added, would now share in bailing out the city for its past debt, a cost estimated to be more than $5 billion in total.

In his remarks, Mr. Pataki curiously singled out the Assembly for criticism of the proposal, even though the Republican-led Senate helped to write it and fought for it.

But Sheldon Silver, the speaker of the State Assembly, who was at the same event, said separately that Albany had helped to provide financial assistance to many parts of the state in the past, including Nassau County and Buffalo, and said New York City drives the state's economy.

"There are those like the governor who would seek to divide the state, but we are one state,'' said Mr. Silver, a Democrat. "We came together in a bipartisan fashion to do what is right for the residents of the state and the governor is still smarting from that defeat he had last year.''

John E. McArdle, a spokesman for Joseph L. Bruno, a Republican and the State Senatemajority leader, applauded the decision but held out the possibility of changing the deal. "What the court said is this kind of a bonding mechanism is legal," he said. "It did not weigh in on how we did it, over 30 years, 20 years or 10 years.''

In the decision, the six judges, three of whom were appointed by Mr. Pataki, were careful only to rule only the legal validity of the plan, not its fiscal prudence.

"The wisdom of this legislation is not a matter for this court to address,'' Judge George Bundy Smith wrote in the 31-page decision. "As to its legality, we conclude that the act does not violate the state or federal Constitution."

The city, in dire fiscal straits, originally asked the state to re-impose the city commuter tax, which would have produced an estimated half billion dollars a year in revenue. But Mr. Pataki and Mr. Bruno balked at that suggestion.

So the Legislature agreed to the debt refinancing.

Under the plan, the state would assume the city's remaining $500 million yearly payments on its Municipal Assistance Corporation - or "Big MAC" - bonds, which were due through 2008. But rather than pay directly, the state gave the city permission to create a corporation to issue new debt while a little-known state corporation called the Local Government Assistance Corporation, would pay the city $170 million a year to pay off the new debt.

It was that corporation, which gets its money from state sales taxes and is controlled by the governor (two of the board's three members are appointed by Mr. Pataki; the other one is Alan G. Hevesi, the state comptroller) that first moved to kill the deal.

When asked if the state would appeal to the United States Supreme Court, Michael Marr, a State Division of the Budget spokesman, said lawyers are reviewing the decision.

Michelle York, in Rochester, contributed reporting for this article.

Copyright 2004 The New York Times Company

Kris
May 27th, 2004, 11:08 PM
May 28, 2004

New York More Dependent on Income Tax, Study Says

By MIKE McINTIRE

New York City's tax base has shifted over the last 30 years, leaving it increasingly dependent - some say alarmingly so - on income and corporate taxes, as well as vulnerable to the boom and bust fortunes of Wall Street, according to a study by the Federal Reserve.

Other cities depend much more heavily on property taxes, which are typically more stable in generating revenue. The study found that while New York City relied more on property tax revenue decades ago, its tax burden has gradually shifted so that the portion of revenue derived from individual and corporate income taxes more than doubled, to about 34 percent, between 1970 and 2002.

During the same period, the portion derived from property and sales revenues either decreased or remained stable, the study by the Federal Reserve Bank of New York shows.

The increased reliance on income taxes exacerbated the city's financial problems in recent years, the study found. During the economic recession that began in 2001 and ended last year, revenue from taxes on personal income declined 19 percent and business income 23 percent.

"The city has a specialized economy that depends pretty heavily on Wall Street, and Wall Street is pretty volatile," said Andrew F. Haughwout, an economist and one of the study's authors. "So you have a pretty volatile revenue system built upon a pretty volatile economy."

The city's relatively low residential property taxes have been scorned in Albany and in surrounding suburbs, particularly when the city appeals for more state aid for needs like schools.

While other studies have suggested that the city could be getting more revenue from property, the Federal Reserve report breaks new ground in charting, over a period of decades, the gradual decline of the property tax's contribution to municipal coffers. The report's source makes it particularly noteworthy, since the Federal Reserve normally steers clear of politically charged, localized issues like New York tax policy.

The report comes amid a sharp debate between Mayor Michael R. Bloomberg and the City Council over how best to cut property taxes, a move that could deepen what the study says is already an imbalance between income and property taxes. Published late last month with little fanfare, the study was not circulated widely beyond budget watchers and the financial press.

"We had delayed this report, trying to find a time when it was more calm," said Rae D. Rosen, a senior economist at the Federal Reserve. "Political considerations are often short-term. We were trying to take a longer-term outlook."

Ms. Rosen said one of the reasons for the study was the coming expiration of the state Financial Emergency Act, which governs New York City finances. The act was adopted during the fiscal crisis of the 1970's, and its expiration, scheduled for 2008, offers a chance to change some provisions that govern city finances, like the $100 million cap on how much the city can set aside for economic downturns, she said.

The study does not take a position on any particular remedy. It offers several options to mitigate the boom and bust cycle, including increasing property tax rates and using periodic tax windfalls to lower debt.

The authors found that individual income and corporate taxes accounted for 15 percent of total taxes in 1970, and the remainder made up of property, sales and a variety of smaller taxes. By the late 1990's, income and corporate taxes made up 40 percent, even though rates had not increased dramatically.

There are several reasons for the change, economists say. Income tax brackets are not adjusted for inflation, so that as incomes grow over time, more taxpayers are pushed into the higher brackets.

Although property taxes are still the largest source of revenue, they have declined as a portion of the total to 38 percent in 2002 from 51 percent in 1977, according to the city's Independent Budget Office, a nonpartisan fiscal monitor. Before raising the property tax rate 18.5 percent in late 2003, the City Council had effectively kept it frozen through much of the 1990's, and growth in property tax revenues has been kept in check by caps on how much the city can increase residential taxes.

Experts differ on whether the city's balance of taxes is good or bad. George Sweeting, deputy director of the budget office, said one advantage to having a tax system sensitive to the Wall Street economy was that during boom times, revenue pours in and, if managed correctly, can be used to lower debt or saved to guard against future downturns.

"In some ways, it's good that we have a more diverse tax structure," Mr. Sweeting said. "Having a variety of sources is not automatically a bad thing."

Copyright 2004 The New York Times Company

Kris
June 3rd, 2004, 01:32 AM
June 3, 2004

Despite Surplus, City's Budget Is in Trouble, Monitors Warn

By MIKE McINTIRE

An improving economy is concealing serious problems in the city's budget that can only be solved through permanent spending cuts or increases in revenue, like higher taxes, a state fiscal monitor warned yesterday.

The New York State Financial Control Board said it had reviewed Mayor Michael R. Bloomberg's proposed $46.9 billion budget for the fiscal year that begins July 1, and found a "deterioration in the city's fiscal condition that was temporarily masked" by a growing surplus in this year's budget.

The board, which can take control of the city's finances if the city ends the fiscal year with a deficit, said the city is relying too heavily on temporary increases to the personal income and sales taxes that are due to expire over the next two years.

It said the projected surplus of about $1.5 billion this year would have been even larger if Medicaid costs, employee pensions and labor agreements had not increased.

"On the surface," the board said in a report, "a surplus of this size suggests that the city is in sound fiscal health. Unfortunately, the fact is the city's finances remain structurally unbalanced."

The control board's report is the latest in a series of warnings from budget watchers that the city's fiscal condition could be weaker than the numbers make it appear.

Last week, the state comptroller, Alan G. Hevesi, said he was "increasingly concerned that rising interest rates and large federal deficits will put a damper on economic activity" and squeeze New York City's budget.

And the Federal Reserve Bank of New York reported in April that the city is too dependent for its tax revenue on volatile Wall Street markets.

Mr. Bloomberg has also warned that the city faces large deficits beginning in the 2006 fiscal year, and he has repeatedly stressed the problem of rising costs, some of which are beyond the city's control. But since he proposed spending $250 million to give a $400 property tax rebate to homeowners, the mayor has also sought to characterize the city's finances as improving enough to make the rebate fiscally responsible.

The control board's report painted a starkly different picture. Citing the mayor's own estimate of a $3.8 billion deficit in 2006, the board suggested that the current surplus is little more than a fleeting break from the harsh reality of entrenched fiscal problems.

The city, it said, is benefiting from a number of temporary measures, like $1 billion in soon-to-expire tax increases, $1.5 billion it borrowed to help recover from the Sept. 11 attacks, and a booming real estate market that since January has yielded $600 million more than expected from taxes on property transactions.

The board urged the city to begin taking stronger "recurring actions" - a euphemism for permanent spending cuts or revenue increases - to close future gaps. Jeffrey L. Sommer, the acting executive director of the control board, said in an interview that even though the mayor's proposed budget for next year was balanced, he should start "building up a surplus to use in 2006, because that is the troubled year."

The board, created in 1975 when the city was on the verge of bankruptcy, does not take a position on local policy initiatives, and so it would not publicly criticize the mayor's rebate plan or an alternative tax cut proposal by the City Council that could cost about $300 million.

Asked yesterday to comment on the board's report, Jordan Barowitz, a spokesman for the mayor, sought to blame any budget problems on the City Council. Mr. Barowitz pointed to a series of employee pension enhancements, discussed at a Council committee hearing yesterday, which he said would cost millions of dollars.

David K. Chai, a spokesman for Gifford Miller, the Council speaker, said some of the pension changes were intended to benefit families of emergency services workers who died Sept. 11.

Copyright 2004 The New York Times Company

Agglomeration
June 3rd, 2004, 03:20 AM
Nice try Bloomy! :evil: You said that your financial expertise would help put this city's finances in order, but IMO you've failed, for the long-term anyway. I really think it may be time for a new mayor to try his hand.

JMGarcia
June 3rd, 2004, 08:22 AM
The city council is just, if not more, responsible for the budget's structural mess than the mayor.

krulltime
June 3rd, 2004, 10:54 AM
Asked yesterday to comment on the board's report, Jordan Barowitz, a spokesman for the mayor, sought to blame any budget problems on the City Council. Mr. Barowitz pointed to a series of employee pension enhancements, discussed at a Council committee hearing yesterday, which he said would cost millions of dollars.

David K. Chai, a spokesman for Gifford Miller, the Council speaker, said some of the pension changes were intended to benefit families of emergency services workers who died Sept. 11.

:? How many millions of dollars are they really talking about?

billyblancoNYC
June 3rd, 2004, 12:18 PM
Nice try Bloomy! :evil: You said that your financial expertise would help put this city's finances in order, but IMO you've failed, for the long-term anyway. I really think it may be time for a new mayor to try his hand.

The City Council, each year, adds hundreds of millions of dollars in restored funding from the mayor's proposed budget. In your smoking ban ranting anger, you need to really look at the facts and not blame it 100% on the mayor. There are too many factors involved to be this simplistic.

Ninjahedge
June 3rd, 2004, 01:17 PM
BBnyc, I was thinking something similar, but the way he phrased it it did not look like he was looking for a discussion... ;)

I think he is doing a good job with a LOUSY situation. All these numbers say, and this report says is that things are not as good as they seem and more needs to be done.

Well, OK. Fine. More needs to be done, but how are things RIGHT NOW?

Interesting how some things get swung in one way or another depending on who is reading it, nevermind writing it...

BrooklynRider
June 3rd, 2004, 02:27 PM
I think he is the best Mayor in my lifetime. Smart. Not looking for the spotlight. Good business sense. Not looking to "get ahead". Doesn't worry about polls.

We have more construction going on in this city than ever before. Mass Transit is getting alot of attention right now for a variety of reasons, but I'm glad we have a Mayor in the mix who actually rides the subway.

He's a philanthropic guy that takes a gentler more laid back approach, but has shown he can flex the muscle of the office when he is passionate about something, e.g., smoking ban, education.

He has my vote in 2005. I can only imagine where we'd be under Mark Green - yikes, the thought!

krulltime
June 3rd, 2004, 02:38 PM
Yeah Bloomberg has help alot.

Quote me if I am wrong...but didn't manhattan had more construction in the late 80's and early 90's than late 90's and whats been built so far?

I do think that better architecture is hapening now.

pianoman11686
April 26th, 2007, 09:13 PM
April 26, 2007

Surplus Is Larger Than City Thought

By THE NEW YORK TIMES

New York City’s revenues are running $1.3 billion ahead of projections for this fiscal year, bringing the current budget surplus to $4.4 billion, according to new figures released yesterday in advance of Mayor Michael R. Bloomberg’s executive budget announcement today.

The new projections, which also added $838 million to revenues expected in the fiscal year that begins in July, are buoyed in part by real estate taxes and the strength of the city’s economy.

Mr. Bloomberg has indicated that he wants to use a significant part of the $4.4 billion surplus toward paying down expected debt in future years. He would allocate $1.3 billion toward covering the projected deficit of $1.6 billion in the 2009 fiscal year, and $1 billion toward the deficit of $3.3 billion in the 2010 fiscal year, according to city officials.

Edward Skyler, the deputy mayor for administration, said, “By taking action now, we can begin to reduce these deficits as opposed to jeopardizing our future with politically popular giveaways.”

In addition, the mayor’s new budget proposal will include $32.5 million more over two years to address the health impacts of Sept. 11, 2001.

The release of the budget begins the negotiation process between the administration and the City Council, which must produce a completed budget by the start of the new fiscal year.

Copyright 2007 The New York Times Company

MikeW
April 27th, 2007, 11:27 AM
I dunno? If the city has a $4,000,000,000+ surplus, obviously the fiscal crisis is over, and we can close this thread.

We can start a new one the next time the budget implodes :D

ZippyTheChimp
January 8th, 2008, 10:17 PM
01/08/08
A new report by the city's Independent Budget Office paints a disappointing fiscal portrait for the coming years, which could even worsen if the nation's housing crisis begins to seriously penetrate the local real estate market. The report projects a $3.1 billion budget gap in 2009, approximately $360 million more than the mayor's office predicted in October. Those gaps grow to $4.6 billion in 2010 and $6.3 billion in 2011. The report cites costly labor agreements and slowing economic growth as reasons for the budget gaps.

Independent Budget Office-Fiscal Outlook (http://www.ibo.nyc.ny.us/iboreports/FiscalOutlookJan2008.pdf)

Merry
October 29th, 2010, 11:59 PM
New York City Balances Its Budget

By WNYC Newsroom

Despite the worst recession in decades, New York City balanced its budget and even eked out a $5 million surplus for the fiscal year that ended June 30th.
The results were part of city comptroller John Liu's Comprehensive Annual Financial Report.

The budget was balanced in part by the nearly $3 billion that was put aside last year to offset expected budget gaps due to the recession.

New York City's General Fund had $62.813 billion in revenues and other sources. The Fund spent $62.808 billion.

City Comptroller Liu says New York City is beginning to "crawl out of recession."

"We as a city are doing better than many other major metropolitan areas across the country, but that doesn’t mean we aren’t without problems," he told WNYC. "We have a national economic environmnent that is not yet strongly back on its feet and that will continue to effect New York City. We do not have an isolated economy."

The city has forecast deficits of $3-4 billion as it looks ahead to 2012. The Comptroller said the mayor and city council will need to make difficult choices, including cuts to programs in the months ahead.

This year's financial report also showed a 14 percent increase in the rate of return for the city's five pension funds. For fiscal year 2010, the pension funds paid $10.5 billion in benefits. It has assets worth $97.8 billion.

http://www.wnyc.org/articles/wnyc-news/2010/oct/29/new-york-city-balances-its-budget/

mariab
October 30th, 2010, 05:53 PM
Amazing. I wonder if they'll save the surplus, or if the money's already spent?

BBMW
November 1st, 2010, 01:53 PM
5 million? That would last 5 minutes. If the budget is balanced this year, due to accumulated prior year surplusses, what are they going to do when those run out?

Ninjahedge
November 2nd, 2010, 09:05 AM
Cut and tax.

It always amazes me that any surplus and people scream for spending and tax cuts, but then we run out and nobody wants budget cuts or more taxes....

It would be nice if we could get our governments out of the red and stop paying money on nothing more than money owed.....

BBMW
November 2nd, 2010, 11:42 AM
I'm fine with budget cuts. I'm annoyed with Bloomberg for not taking a meat axe to DC 37s membership when things looked bad. He had a perfect opportunity to prune a lot of dead wood.

Merry
January 13th, 2011, 01:12 AM
New York Can't Afford Tax Breaks for the Wealthiest

By Chloe Tribich, Sunshine Ludder and Ron Deutsch

Governor Cuomo's plan to give a tax break to the wealthy gets it wrong. The root of New York's fiscal problems isn't high taxes or excessive spending. It's that we tax the wrong people.

In 2009, Albany took a small step to fix this. It implemented an exceedingly modest income tax surcharge on households with incomes over $300,000 -- the top three percent of New Yorkers. Governor Cuomo does not plan to renew it.

The surcharge -- just one percent on incomes between $300,000 and $500,000 and about two percent on incomes above $500,000 -- generates over $4.6 billion a year for the state.

That's enough to offset a sizable chunk of the state's deficit, pay for major job-generating infrastructure projects, prevent cuts to education and health care or fund real property tax relief for middle class homeowners with an income-sensitive circuit breaker.

That's why Governor Cuomo's first step should be to extend the rates on incomes over $300,000.

Without it, afterschool programs, community health services and affordable mass transit -- lifelines for struggling New Yorkers -- will be slashed further. Those lucky enough to survive more rounds of layoffs will have a harder time getting to their jobs and caring for their families.

Without it, we will revert to an income tax structure in which a bus driver earning $40,000 a year bears the same proportional burden as a banker with an income of $4 million.

When you add property taxes and sales taxes to the mix, the picture worsens: Households earning between $33,000 and $95,000 pay a whopping 11 percent of their incomes to state and local taxes. But the top 1 percent of earners, who make over $633,000 a year, pay only 7 percent.

Even with the surcharge, the wealthiest still pay proportionally less than the middle class. Add that to the impact of the extension of the Bush tax cuts. It's still a great time to be a CEO in New York.

The results for the middle class? Secretaries, construction workers and nurses still struggle to keep their homes while Wall Street executives enjoy the fattest paychecks on record. No wonder the Empire State is the most unequal in the nation, with the top one percent now claiming a stunning 35 percent of all the state's income.

It wasn't always this way. In 1980, the top one percent controlled only 10 percent of income. But over the past decades Albany has halved the top rates for the wealthiest earners at the expense of working and middle income people.

Voters get it. Poll after poll shows that the vast majority of residents -- conservatives and liberals alike -- support higher tax rates for the very wealthy over cutting essentials like education, transit and health care.

Unfortunately the Governor's proposals are a train speeding in the opposite direction. Property tax caps, spending freezes and service cuts will deepen inequality, worsen the jobs crisis and send Main Street economies tanking.

Governor Cuomo has a golden opportunity to create jobs and usher in an era of true fiscal responsibility. First, he should extend the high-end income tax surcharge. Then he should get to work setting our revenue system right side up.

http://www.huffingtonpost.com/chloe-tribich/new-york-cant-afford-tax-_b_807434.html

Ninjahedge
January 13th, 2011, 08:47 AM
The irony being, when you cut spending on things like schools and fire/police protection, the value of the land goes down....

I am sure that some of these areas would probably pay for their OWN schools and security, but the "middle upper class" will then feel the pinch and start to be slowly squeezed into the "Have everything"s and have nots.