Although New York City's budget is balanced in the current fiscal year and Mayor Michael Bloomberg has presented a balanced preliminary budget for fiscal 2014, significant risks lie ahead, according to a report by New York State Comptroller Thomas DiNapoli on Tuesday.

"New York City has successfully navigated through the great recession, but it still faces a number of fiscal challenges, including the loss of federal aid," said DiNapoli. "In recent years, the city has relied heavily on reserves built up during the last economic expansion to help balance its budget, but those reserves are mostly depleted, leaving a smaller cushion to address new budgetary setbacks."

The city's financial plan projects out-year budget gaps of $2.4 billion for fiscal 2015 and $1.9 billion each for fiscal 2016 and 2017. Looming as variables, however, are impact of federal budget cuts, the potential cost of future labor agreements or the risk of further delays in the sale of additional taxi medallions, the latter the subject of ongoing litigation.

Revenue collections have yet to show any tangible impact from Hurricane Sandy, DiNapoli said. There was a sharp drop in employment in October and November of 24,800 jobs, although all of the jobs were recovered over two months. The city assumes that federal aid will cover the $4.5 billion estimated cost of Sandy, but federal budget cuts may reduce the amount of aid by an estimated $500 million.

Federal sequestration is also expected to reduce federal aid to the city by about $200 million in federal fiscal year 2013, mostly for education and social service programs. The city will have to decide whether to substitute city funds for any loss in funding or to permit a reduction in services.

Wall Street profits from broker-dealer operations totaled $23.9 billion in 2012, a large increase over last year's $7.7 billion, and DiNapoli recently estimated that the cash bonus pool for financial industry employees in the city rose by 8% in 2012. DiNapoli, however, expects continued downsizing, at least in the near term.

A message seeking comment was left with the city's Office of Management and Budget.

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

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