New York City Mayor Michael Bloomberg on Friday proposed cutting back on the bond-funded portion of the city's 10-year capital commitment plan.
"We have to continue to make capital investments but we also have to be realistic about what we can afford to do," Bloomberg said at a presentation of his preliminary fiscal 2010 budget.
Considering falling revenues and rising debt service have opened up a $4 billion budget gap in fiscal 2010, the proposed budget would reduce total expenditures to $58.83 billion from $60.09 billion in the current fiscal year.
The city would sell $6.23 billion of general obligation bonds in fiscal 2010 as opposed to the $7.01 billion proposed as part of the mayor's five-year financing program at this time last year. The city would sell $5.83 billion of bonds in fiscal 2011, a roughly $1 billion reduction from projections made a year ago.
The proposed change would cut capital commitments funded by either general obligation bonds or New York City Transitional Finance Authority bonds by 30% over the city's ten-year plan. The reduction does not include TFA bonds backed by state building aid for school construction. The city expects to market $250 million of TFA bonds in fiscal 2010.
The reduced borrowing over ten years would trim the city's forecasted annual debt service growth to 3.4% from 4.8%. The city's outstanding debt would still increase, with outstanding GO debt rising to $53.16 billion in fiscal 2013 from $40.13 billion in the current fiscal year.
Bloomberg's proposed budget closes a $4 billion gap by relying on $955 million of agency cuts, $1 billion of Medicaid aid expected from the Federal stimulus package, a 0.25% sales tax increase that would generate $894 million and changes to employment benefit programs that would save $1 billion.
The sales tax increase would require action by the state Legislature. Bloomberg proposed cutting growth in city benefits by creating a new "Tier 5" pension plan for new city employees that would replace a defined benefit program. Bloomberg also called for organized labor to secure health care contributions from city employees. The proposal includes slashing 19,647 city-funded jobs, with 14,000 of those coming from education.
The city budget office projects the city will lose 294,000 jobs from the third quarter of 2008 through the second quarter of 2010. From the third quarter of 2007 through the second quarter of 2010, Wall Street will have shed 46,000 jobs.
Economically sensitive taxes, which includes personal income, sales, business, real estate and some miscellaneous taxes, are projected to fall from $24.6 billion in fiscal 2008 to $20.55 billion in the current fiscal year to $17.83 billion in fiscal 2010. The city forecast that Wall Street will lose an additional $10.4 billion in 2009 before returning to profitability in 2010.
Bloomberg stressed that the proposed budget would likely go through changes before adoption in June.
City Council member David Weprin, who chairs the council finance committee, said he will push for a reinstatement of the commuter tax, which he said would bring $700 million in 2010.
New York City Comptroller William Thompson Jr., an expected candidate in the 2009 mayoral election, criticized the mayor's proposal in a statement.
"The mayor's plan would balance the budget on the backs of working people," Thompson said. "The mayor's budget proposal relies far too heavily on a sales tax increase at a time when the city's hardworking families and small businesses are suffering."
Thompson proposed instead to raise temporarily the city's personal income tax on taxpayers earning more than that $500,000 annually.
