New York City officials and market observers on Wednesday weighed in with words of caution about the uncertainties facing the city's finances, a day after Mayor Bill de Blasio released his $84.7 billion
"We can still deepen our investments in the quality of life in this city," de Blasio told reporters at the City Hall Blue Room, after unveiling a 10-year, $89.6 billion capital budget that emphasizes infrastructure spending. "While we're still waiting for the situation in Washington to develop, we have to keep improving."
The mayor was taken to task by the Citizens Budget Commission, which said the budget continued to feed the expansion of municipal government to a record size. His budget proposal is 1.4% bigger than last November's $83.5 billion spending plan.
"A significant portion of this growth is consistent with the implementation of the administration's policy agenda, which includes proposals for expansion of pre-kindergarten programs, affordable housing initiatives, and improved mental health services," the CBC said in a statement. "But a substantial portion of the expenditure growth derives from challenges managing serious problems, notably an inability to stem the growth in homelessness and in the reliance on overtime among city agencies."
Other city officials joined DeBlasio in expressing concerns over the great unknown – what will President Donald Trump do?
"The uncertainty surrounding future policy decisions by the Trump administration and the Republican Congress presents real risks to our city budget," City Comptroller Scott Stringer said in a press release. "My office conducted an analysis outlining potential federal cuts – and I'm concerned many critical areas could be affected. From affordable housing to programs that support at-risk children, our social safety net could be fundamentally changed by backwards policies from Washington."
Howard Cure, director of municipal bond research for Evercore Wealth Management, said the actions of the federal government will be key to the city's continued financial health.
"Possible repeal of the Affordable Care Act (Obamacare) could have a significant impact on Health + Hospitals," he said. "The city's hospitals had mostly treated those that were on Medicaid or that didn't get any benefits."
He said a question to ask would be what would be the impact on the city's finances if the ACA were repealed – how many more people would the hospitals have to treat and would they be treated effectively.
"Amid the uncertainty of the federal and to a lesser extent state budget landscape and the substantial effect it could have on the city's operating budget, many of the new initiatives introduced by Mayor de Blasio – from public housing roof repair to street repaving to a new firing range for the police – are in the capital budget, where the timing and scope of projects often shifts," said Doug Turetsky, chief of staff of the NYC Independent Budget Office. "With the growth in the city's capital plan comes growing debt service costs, which are estimated to rise from $6.4 billion this year to $8.4 billion in 2021."
City Council finance chair Julissa Ferreras-Copeland took a wait and see attitude toward President Trump
"I say this so reluctantly, but there are some positives," she said at City Hall, citing a possible boost to Wall Street and any infrastructure initiatives out of Washington.
After the City Council holds a series of hearings on this preliminary proposal, the mayor will present a revised executive budget in April. By law, the 51-member council must vote on it by July 1, when the new fiscal year starts. The fiscal 2017 budget was finished a month ahead of schedule.
"I look forward to working with the mayor and the city council to ensure we have a budget that accomplishes these goals and gives every New Yorker a fair shot to make it here," Stringer said "My office is currently reviewing the preliminary budget and will release a comprehensive analysis in the coming weeks."
Cure said an area of concern was federal policy changes regarding so-called Sanctuary Cities, as Trump is threatening to cut funding to cities that don't cooperate with his plan to deport undocumented immigrants.
"There could be substantial federal funding losses," Cure said.
Stringer recently released an analysis (
In his budget, de Blasio officials have identified $1.1 billion in preliminary budget savings, with a directive to the Office of Management and Budget to find an additional $500 million of savings in the executive budget. The mayor has also identified health-care savings of $3.4 billion through fiscal 2018.
Reserves include $250 million for capital stabilization, $4 billion in a retiree health benefits trust fund and a general reserve of $1 billion a year over four years. "It's the highest ever achieved and highly appropriate," he said.
Ferreras-Copeland said she would like to see the city to bolster its reserves even further.
"I think it is prudent that we actually save more," she said. "There are ways to be more efficient."
The CBC concurred.
"More should be done to better manage a range of municipal services. The mayor's plan builds upon his earlier effort to achieve savings from efficiencies, but the scale is still relatively small," the CBC said. "Approximately 18% of the Citywide Savings Plan is efficiency measures. The upcoming deliberations with the City Council should focus on how to better manage agencies with significant expenditure growth."
De Blasio's budget calls for issuing $1 billion of bonds over 10 years to fix roofs on NYCHA buildings. The city's general obligation bonds are rated Aa2 by Moody's Investors Service and AA by S&P Global Ratings and Fitch Ratings.
Cure also said this could also be problematical at the federal level, noting that it's not know how sympathetic the new Housing and Urban Development Secretary Ben Carson is toward funding for affordable housing
