New York City should use its nearly $4 billion surplus to retire debt rather than use it cover operating expenses in fiscal 2009, the Citizens Budget Commission said in a letter to Mayor Michael Bloomberg last week.
“In the past, you have wisely devoted significant portions of any surplus revenues to purposes with long-term benefits; you should continue that practice in this year’s budget by retiring more debt, retaining pay-go capital payments, or contributing to the retiree health insurance trust fund,” CBC chairman James L. Lipscomb wrote. “Although this would create a gap in the fiscal year 2009 budget, it is more responsible to address this gap now.”
The Citizens Budget Commission, a nonpartisan fiscal watchdog organization, was founded during the Great Depression to analyze New York City’s finances and issue reports and recommendations.
The CBC criticized the city’s debt policy as not being “well-targeted.”
“To finance an ever-growing capital program, debt has grown tremendously: 40% since fiscal year 2002,” Lipscomb wrote. “This has resulted in a debt service burden that has also grown consistently and quickly, 5.4% annually on average since you entered office, and which will continue to grow at a pace faster than other expenditures in the financial plan.”
The CBC projects that the city’s total outstanding debt will be over $100 billion by fiscal year 2012, compared to $56 billion in 2002. That figure includes debt issued by the New York City Transitional Finance Authority and New York City Municipal Water Finance Authority.
The CBC suggested that some economic development projects amounted to misdirected priorities, though it didn’t single out any project.
“Particularly for economic development projects, there is little attempt to justify investments with rigorous analysis that demonstrates benefits or a rate of return,” Lipscomb wrote.
Other recommendations by the CBC include cutting the city’s 312,571 person workforce by 4,500 jobs; using pay-as-you-go capital for assets that are regularly replaced; repealing a $256 million annual homeowner rebate program and possibly cutting the citywide property tax rate to businesses; and curbing growth of fringe benefits and retirement costs for city employees.
Bloomberg released his preliminary budget in January and will release his executive budget next month. Office of Management and Budget spokesman Raymond Orlando declined to comment on the letter.