Against a backdrop of a dimming economic outlook in New York City, Mayor Michael Bloomberg yesterday said he will propose extending a one-year 7% property tax cut and a $400 property tax rebate in his preliminary budget next week. But his proposal, made during his annual state of city speech, came with a caveat.
“I must warn you, adopting it will depend on a variety of factors unknown today, from the health of our economy to the continued help we get from our partners in state government to the outlook for future years after our administration has come to an end,” Bloomberg said.
Bloomberg mentioned the emerging negative signs of the city’s fiscal picture in his speech, but he did not dwell on it in a generally upbeat address that touted the highest bond rating the city has received in nearly 80 years, $25 billion in new construction, the rezoning of a sixth of the city under his administration, and the creation of 179,000 private sector jobs in the past four years.
“The economy appears headed for difficult times,” he said. “Family budgets are tightening and so are budgets for businesses and governments.”
Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings upgraded New York City general obligation debt last summer to Aa3, AA, and AA-minus, respectively.
In the fall, the city implemented a hiring freeze and told agencies to find 2.5% cuts in the current fiscal year 2008, which has a $59 billion budget, and prepare for 5% cuts in fiscal 2009.
Last year’s property tax cut, as well as a repeal of sales taxes on clothing and shoes, was made at a time when the biggest argument among policy makers seemed to be how big the city’s surplus would be for the fiscal year ending in 2007. In October, the city revised its June projections for a $1.55 billion budget gap in fiscal 2009 upward to a $2.7 billion budget gap. Earlier this month, the New York City Independent Budget Office projected that gap will be $3.1 billion.
The property tax cut extension would cost the city $1.08 billion in fiscal 2009, IBO deputy director George Sweeting said. The rebate would cost the city $256 million fiscal 2009 according to numbers provided by the city though that figure could change if the city’s record homeownership rate —33% according to Bloomberg — declines due to an increased number of foreclosures, he said. The sales tax repeal is projected to cost the city $110 million in the current fiscal year and $117 million in the next, he said.
Wall Street bonuses slipped 2% to an estimated $33.2 billion in 2007 compared to the record $33.9 billion in 2006, New York state Comptroller Thomas DiNapoli announced yesterday. The financial sector accounts for about 20% of state tax revenues and 9% of New York City tax revenues, and the bonuses will generate tax revenues of $2.3 billion for the state and $650 million for the city, according to the Comptroller’s Office.
The IBO projected earlier this month that Wall Street profits would decline by more than 75% in 2007 to $5 billion compared to 2006’s $20.9 billion. The IBO also projected that the financial services industry would shed 5,900 jobs in 2008 and another 4,000 in 2009 before resuming slow growth.
New York City’s growth in assessed property values will slow to 1.44% in fiscal 2009 compared to 17.5% in fiscal 2008, according to tentative assessments released by the New York City Finance Department this week.
“The real estate market in New York [City] has been much stronger than in the nation, and even with the weak growth it recently posted this past year that’s still growth on top of a large base where across much of the nation we’re seeing substantial declines,” Moody’s managing director Robert Kurtter said.
“It’s very clear that the weakening in the national economy is affecting New York City as well, and as the city heads into the next budget year, it’s going to be much tighter than it has been in the past,” Kurtter said. “What’s important to the city’s credit is the fact that the mayor, all through the boom, has been fairly conservative in his approach to forecasting all the growth revenues from real estate and financial services sector.”