Page 1 of 4 1234 LastLast
Results 1 to 15 of 49

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

  1. #1

    Default The Fiscal Crisis - What can the mayor really do?

    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

  2. #2

    Default The Fiscal Crisis

    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

  3. #3
    Forum Veteran
    Join Date
    Jan 2003
    Location
    Garden City, LI
    Posts
    1,778

    Default The Fiscal Crisis

    Do it, damnit.

  4. #4

    Default The Fiscal Crisis

    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

  5. #5

    Default The Fiscal Crisis

    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

  6. #6

    Default The Fiscal Crisis

    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

  7. #7

    Default The Fiscal Crisis

    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
    Last edited by Kris; October 30th, 2010 at 08:21 AM.

  8. #8

    Default The Fiscal Crisis

    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

  9. #9

    Default The Fiscal Crisis

    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

  10. #10

    Default The Fiscal Crisis

    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.

  11. #11

    Default The Fiscal Crisis

    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

  12. #12

    Default The Fiscal Crisis

    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

  13. #13

    Default The Fiscal Crisis

    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

  14. #14

    Default The Fiscal Crisis

    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

  15. #15
    Forum Veteran
    Join Date
    Nov 2002
    Location
    New York City
    Posts
    3,298

    Default The Fiscal Crisis

    High time for secession, don't you think?

Page 1 of 4 1234 LastLast

Similar Threads

  1. Mayor Offers $13.1 Billion Schools Plan
    By Kris in forum New York City Guide For New Yorkers
    Replies: 6
    Last Post: September 23rd, 2011, 09:32 PM
  2. Mayor unveils $11 billion plan for Lower Manhattan
    By JMGarcia in forum New York City Guide For New Yorkers
    Replies: 8
    Last Post: December 20th, 2006, 09:41 PM
  3. Mayor Wants to Move Site of Power Plant
    By Kris in forum New York City Guide For New Yorkers
    Replies: 7
    Last Post: August 20th, 2005, 01:07 AM
  4. Mayor Widens Privacy Rights for Immigrants
    By Kris in forum New York City Guide For New Yorkers
    Replies: 2
    Last Post: October 4th, 2003, 09:17 PM
  5. Mayor Calls for Thousands of New Homes
    By Edward in forum New York Real Estate
    Replies: 0
    Last Post: December 11th, 2002, 09:57 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  


Google+ - Facebook - Twitter - Meetup

Edward's photos on Flickr - Wired New York on Flickr - In Queens - In Red Hook - Bryant Park - SQL Backup Software