New York City needs to cut its government workforce and operating expenses and rescind property tax breaks to deal with growing deficits caused by falling revenue, Mayor Michael Bloomberg said yesterday.
As Wall Street reels from the credit crunch and write-offs Bloomberg said were approaching $500 billion, the city faces a $4 billion deficit through fiscal 2010. Even with gap-closing measures, the city still faces a $1.3 billion gap in the next fiscal year. As of October, non-property tax collections were $108 million below projections forecast in June.
"They're tough times. We have been dealing with it prudently, we will continue to do it," Bloomberg said. "I'm not any happier about it than anyone else."
The mayor submitted a budget modification that calls for $461.6 million of agency cuts in the current fiscal year and $1.08 billion in fiscal 2010, which begins on July 1. The cuts include a reduction of 3,000 city employees, of which 2,500 will be through attrition and educations cuts totaling $566 million.
Rescinding a 7% homeowner property tax increase immediately rather than waiting until it expires in July as planned, would generate an additional $576 million of revenue. Rescinding a $400 per homeowner property tax rebate will increase revenue by $256 million.
The city faces private-sector job loses of 147,000 through calendar 2009, he said.
Bloomberg did not suggest cutting any capital spending. Asked whether the city could still afford its capital program, he said: "The better question is, could the city not afford it? We have to go ahead and do that or we're not going to have a future."
In May, the mayor said the city was stretching its four-year capital program into five years, effectively cutting the capital budget by 20% over four years. Bloomberg said the city needed to continue building schools and working on projects like the water tunnel now under construction.
Budget modifications are negotiated between the mayor's office and the City Council and could face some opposition.
City Council member David Weprin called rescinding the property rebate "outrageous."
"That has already been promised and voted on and was supposed to be sent out on Oct. 1, so I think it's, if not a legal obligation, a moral obligation," he said.
Weprin said moving up the expiration of the 7% property tax would be considered by his committee.
A looming problem for the city is rising pension costs. The city's pension funds are down 20% this year and the city is obligated to increase contributions. Bloomberg wants to dip into the city's $1.9 billion future Retiree Health Benefits fund to pay its liability to fund the increase, would total $1.1 billion through fiscal 2012.
Robin Prunty, senior director at Standard & Poor's, said that the city's financial cycles are not uncommon and that the modification included more than one shots.
"The fact that [the city] is looking at both sides not just nonrecurring but also recurring methods that helps address structural budget issues for the future years."
Carol Kellermann, president of the business-oriented fiscal watchdog group Citizens Budget Commission, praised the mayor's proposed modifications but criticized the rescinding of the property tax break.
"The proposed mid-year property tax increase is not needed to balance this year's budget," Kellermann said in a press release. "The added revenue is to be used to help with next year's projected gap. Any property tax increase should be accompanied by reform in the structure of that tax that makes it more equitable for the vast majority of New Yorkers who rent rather than own their homes and for businesses that suffer from the highest property tax rates among all large cities in the country."