New York City Mayor Michael Bloomberg last week presented a $59.44 billion executive budget proposal for fiscal 2010 that boosts the city's sales tax by 0.5% and decreases its 10-year capital plan to $61.7 billion from $71.1 billion.
In addition to the spending plan for fiscal 2010, which begins July 1, the reduction in the capital plan will help New York City keep debt service costs during the next few years in line with decreasing revenue.
In January, Bloomberg's 10-year capital plan included an average annual growth in debt service cost of 4.8% in comparison to a lower, average yearly growth in city revenue of 3.4%. By reducing the size of the capital spending plan, those two percentages will even out to roughly 3.5% each.
The mayor stressed that while economic realities call for a reduction in capital spending, the city will not dramatically halt infrastructure improvements as it did in the 1970s.
"Even in these tough times ... we cannot walk away from our future and make the mistakes from the '70s," Bloomberg said Friday in a press conference on the budget. "We're not doing that. We are continuing to invest in the future by building these things, but before this plan debt service costs were growing at 4.8% and our average growth in city revenue only 3.4%. With the new plan they roughly match. So we're trying to be prudent but not walk away for the investments that are going to help us get out of this."
Principal and interest payments will increase in fiscal 2010 by $617 million to $4.17 billion, a 17.3% increase over the current year. For fiscal 2011, debt service is expected to total $4.53 billion, an increase of $356 million, or 8.5%. The mayor said the uptick in principal and interest payments for the city reflects current capital improvements.
"Debt service has been growing a little bit, but it seems to be starting to go up and that's because we have a very aggressive capital plan," Bloomberg said. "People want us to build things and there's a cost. It's not free money. It's just you and your children pay it rather than you pay it."
Officials anticipate selling $27.76 billion of general obligation bonds and $10.71 billion of New York City Municipal Water Finance Authority bonds from fiscal 2009 through fiscal 2013. The plan does not include New York City Transitional Finance Authority debt as that agency has reached its bonding capacity, although it can still issue refunding bonds, recovery bonds, and building aid revenue bonds. Increasing the TFA's borrowing power requires legislative approval.
"If the TFA cap is lifted, up to half of what otherwise would be issued in the form of GO bonds would be issued by the TFA instead, significantly reducing the city's financing costs," according to the 10-year capital strategy plan.
Current plans include $6.45 billion of general obligation borrowing in fiscal 2010, down slightly from the more than $7 billion of GO bonding proposed in early 2008. The city anticipates selling $6 billion, $5.3 billion, and $4.72 billion of GO debt in fiscal 2011, fiscal 2012, and fiscal 2013, respectively.
Along with the revised capital plan, Bloomberg is looking to generate more than $1 billion of additional revenue in the next two fiscal years by increasing the sales tax by 0.5%. In addition, pension reforms for future city employees would create $400 million of savings in the next two years. Both initiatives require approval from New York State lawmakers in Albany.
The mayor also proposed cutting the city's workforce by more than 13,500.
"Without such help from Albany and the unions, we do face a shortfall of more than $1.4 billion and that would have to be filled by other measures," the mayor said. "And even with such assistance, there will still have to be further belt-tightening by city agencies. So if we were to have no help from Albany and labor, it really would be a very serious situation."