IBO: Big Budget Surplus for NYC, but Beware

New York City's near-term fiscal outlook appears even stronger than what outgoing Mayor Michael Bloomberg's administration expected, according to the Independent Budget Office watchdog organization.

Bloomberg's 12-year run will end Jan. 1, when Bill de Blasio succeeds him.

According to a Dec. 19 report, IBO anticipates the city will end the current fiscal year with a surplus of $2.4 billion, $581 million more than projected. It also projects a budget surplus of $1.9 billion in fiscal year 2015, which starts on July 1, 2014.

But several challenges loom that could quickly erode the city's fiscal condition, IBO added.

Largest among these challenges may be the cost of an eventual settlement with the city's municipal labor unions, all of which are working with expired contracts. Bloomberg's financial plan assumes the unions will settle for no back pay for the years without contracts or raises. "A costless settlement for these prior years remains a longshot as part of an accord with the unions," IBO said.

"Ensuring the fiscal integrity of the city's public housing and public hospitals in the wake of diminishing federal subsidies and continued fiscal ills is also likely to strain city resources," the organization said.

"Although the recent budget deal in Washington will lessen some cuts to federally subsidized programs, there will be pressure to replace lost federal aid with local funds to avert service cutbacks. And with a new mayor and City Council taking office, there may be considerable expectations from issue advocates and the broader public for new initiatives from City Hall that could add to local spending," IBO added.

Roughly one-third of the 51-member City Council will take office along with de Blasio.

Standard & Poor's and Fitch Ratings assign AA ratings to the city's general obligation bonds while Moody's Investors Service rates them Aa2.

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