New York City Mayor Michael Bloomberg yesterday proposed a $63.6 billion preliminary budget that closes a projected $4.9 billion deficit in fiscal 2011.
The city plans to sell $9.02 billion of bonds in fiscal 2011 to partially finance $9.63 billion of capital commitments, according the January financial plan released with the budget proposal yesterday.
In the next fiscal year, the city would sell $3.1 billion of general obligation bonds, $3.1 billion of personal income tax bonds through the New York City Transitional Finance Authority, and $2.16 billion through the New York City Municipal Water Finance Authority. The city also plans to market $660 million of TFA building aid revenue bonds, which are backed by state aid for school construction.
The city’s capital program counts on using its allocation of qualified school construction bonds — tax-credit bonds created under the American Recovery and Reinvestment Act — but it’s unclear whether it will do so. The city received a $699 million allocation of QSCBs in 2009 but did not issue the debt.
City budget director Mark Page said that they were looking to Congress to enact revisions that he said would make the bonds more marketable. The House passed a bill that would allow issuers to receive a direct subsidy on QSCBs similar to Build America Bonds.
“The market for the tax-credit interest support in those bonds hasn’t really functioned,” Page said. “The federal improvements of this program ... is extremely likely to happen in the next few months.”
The Treasury Department allocated $11 billion of QSCBs to states and large municipalities last year, but only $2.8 billion of the bonds were sold through Dec. 31, 2009, according to Thomson Reuters.
“If there’s not a market for the bonds, you can’t sell ’em,” Bloomberg said.
City officials declined to comment on whether New York’s 2009 QSCB allocation had expired or reverted to the state. A state Division of Budget spokesman referred questions about New York City’s allocation to city officials. The House measure would also allow municipalities like New York with their own allocations to roll them into 2010.
The city’s outstanding debt is projected to rise to $64.4 billion in fiscal 2011 compared to $60.56 billion in the current fiscal year. Annual debt service will increase to $5.61 billion from $5.19 billion. The figure does not include water authority bonds, which are supported by water rates, or TFA building aid revenue bonds, which are supported by state aid.
To close the city’s deficit in fiscal 2011, the mayor’s preliminary budget would cut the city’s workforce by 4,286 —mostly through attrition, but the cuts would include 834 layoffs. Cost-cutting actions since 2008 have created a $2.9 billion surplus that the proposal includes to cut the deficit.
The budget doesn’t include approximately $1.3 billion of cuts to the city in the executive budget Gov. David Paterson proposed last week in Albany. Rather, Bloomberg has prepared a contingency budget that would cut 19,000 city jobs if the city receives those cuts.
Paterson’s proposed budget “is unfair in that it basically protects the state’s workforce and makes our workforce have to bear the burden of what I would argue is the state’s irresponsible fiscal policies for many years,” Bloomberg said in a budget presentation at City Hall. He said it was up to state legislators to “to protect the economic engine of the state, which is the city.”
Bloomberg’s budget also counts on concessions by the teachers union to accept lower pay increases than expected to save $160 million in fiscal 2010 and $357 million in fiscal 2011. Under the proposal, wage increases for other city workers will have to be funded through productivity, increased worker contributions to health care costs, and less generous pensions for new employees.
The mayor presented a mixed picture of a city economy that is showing signs of recovery but still faces tough fiscal choices. City revenues are projected to grow to $43.6 billion in fiscal 2011 from $41.8 billion in the current fiscal year. Since December 2007, the city has lost 3.4% of its private sector jobs compared to a 6.3% loss nationwide. While Wall Street revenue rose in 2009, real estate transaction taxes fell as commercial office space prices declined.
City Comptroller John Liu said in a statement that “the mayor’s proposal contains quite some pain, unavoidably so, given the large $4.1 billion deficit the city currently faces,” using a smaller figure for the deficit than the mayor used. While Bloomberg’s budget did not include any broad-based tax increases, Liu suggested that revenue increases could be necessary.
New York City’s fiscal year begins July 1.
