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Thread: The Fiscal Crisis - What can the mayor really do?

  1. #31

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    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

  2. #32

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    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

  3. #33

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    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.

  4. #34

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    The city council is just, if not more, responsible for the budget's structural mess than the mayor.

  5. #35
    Forum Veteran krulltime's Avatar
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    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?

  6. #36
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    Quote Originally Posted by Agglomeration
    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.

  7. #37
    Chief Antagonist Ninjahedge's Avatar
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    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...

  8. #38
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    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!

  9. #39
    Forum Veteran krulltime's Avatar
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    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.

  10. #40
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    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

  11. #41

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    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

  12. #42

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    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

  13. #43
    NYC Aficionado from Oz Merry's Avatar
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    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-ne...es-its-budget/

  14. #44

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    Amazing. I wonder if they'll save the surplus, or if the money's already spent?

  15. #45

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    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?

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