Candidates Speak Up In Comptroller Race

New York voters next week will decide whether a politician or a businessman should be the state’s comptroller.

The Legislature appointed Long Island Democrat Thomas DiNapoli, 56, comptroller in 2007 after his predecessor, Alan Hevesi resigned in a scandal. DiNapoli was an Assemblyman for 20 years. Republican challenger Harry Wilson, 38, has had a  career working on transactions and investments for Wall Street firms, including Goldman, Sachs & Co., Clayton, Dubilier & Rice, the Blackstone Group, and Silver Point Capital.

In separate recent interviews, the candidates spoke about the state’s financial issues. The comptroller is involved in many bond transactions, including the marketing of general obligation bonds and signing off on many authorities’ and municipalities’ bond deals. Debt service costs are an ongoing concern.

The comptroller also adminsters the New York State and Local Retirement System for public employees, is the sole trustee of the Common Retirement Fund, manages the state’s assets, and issues debt.

Wilson said the comptroller should create a plan for the state’s financing needs based on better forecasting of revenues and expenses. “The fundamental problem with our finances is there is no comprehensive approach to our kind of future financings,” he said.

Wilson added that New York doesn’t adequately calculate its contingent liabilities, such as pension and retiree health benefits. “What we need to do is reduce expenses and reduce our borrowing needs, but the only way to think about that thoughtfully is to put it into a consolidated plan that addresses our needs on a holistic basis,” he said.

DiNapoli said New York should do more capital projects on a pay-as-you-go basis and has criticized the state’s use of the dedicated highway and bridge trust fund for operating costs rather than capital expenses.

“We need to go back to as much as we can to pay as you go,” DiNapoli said.  “I am not of the opinion that all debt is bad. Obviously we need debt and we will continue to borrow, but one of the things we’ve called for besides a more defined cap on state debt would be the requirement that we limit debt for capital purposes.”

New York established a debt cap in 2000 that will be fully phased in by 2014, but that only applies to state-backed debt issued since the cap was enacted.

DiNapoli said the state should be create an “infrastructure council” to inventory assets, prioritize capital needs, and tie the capital plan to the debt program. 

Neither candidate comes from a municipal bond background. DiNapoli said that as a legislator and member of the Assembly Ways and Means Committee he “had a review of issues related to state debt and concerns about municipal bonds, and obviously state debt was a big focus.”

Wilson said he had worked on corporate bond transactions and had worked with municipalities on public finance issues. He gave as an example past work with the Los Angeles Department of Water and Power but would not answer repeated questions about the nature of the work, when it took place or what firm he worked for at the time. “I’m not going to client-specific issues — that wouldn’t be appropriate,” Wilson said.

On pension issues, the incoming comptroller will deal with a fund the assets of which fell to $124.8 billion in June compared $154.5 billion three years ago. DiNapoli last month lowered the assumed rate of return on the pension fund to 7.5% from 8% and increased the contribution rates for employers.

“As for all investors, the most recent years have been very challenging,” he said. “We’re building a pension fund on assumptions that are in consideration not of years but of decades.”

Wilson said the pension fund should be more conservative in its investments than it has been under DiNapoli. He also said the 7.5% rate of return is unrealistically high and that the way to solve the problem of higher contributions was to reduce pension benefits for new employees by creating another tier.

“My approach is to acknowledge there’s a problem but solve it through reduced benefits and a new tier six for new employees,” Wilson said. “To focus on the assumed rate of return is an accounting gimmick as opposed to thinking through what the right investment strategy is for the fund.”

Wilson and DiNapoli both said the cash-strapped Metropolitan Transportation Authority needs to do more to become more efficient but declined to say whether an unpopular employer payroll tax, which faces legal challenge, should be repealed.

“It’s hard to believe the efficiencies that should be able to be achieved would be enough to offset the current payroll tax, but it’s hard to say without actually going through the details,” Wilson said.

DiNapoli said while public wants to ­revisit the tax, “we don’t want the system to go back to the ways they were in the ’70s when the capital program was neglected.”

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