The New York State Financial Control Board on Wednesday voted to remain in "sunset mode" for a 32nd straight year.
The control board, which was created by the state legislature during the city’s financial crises in the 1970s, voted unanimously at its annual meeting to certify New York City’s financial house is in order. What that means is that the board will continue to have no actual power over the city, but rather will act as its fiscal monitor. The board issues quarterly reports on the city's financial plan and its members meet with the mayor and the governor's office on a regular basis.
From 1975 to 1986, the board controlled the city's finances, bond issuance and large contracts. While those powers were sunset in 1986, by law, the board can re-activate its control if it finds budgetary red flags, such as the city running an operating deficit of more than $100 million or it sees a default by the city on its note or bonds.
Among those attending Wednesday’s meeting in midtown Manhattan were New York City Mayor Bill De Blasio, City Comptroller Scott Stringer, New York State Comptroller Thomas DiNapoli, NYS Budget Director Robert Mujica, NYC First Deputy Mayor Dean Fuleihan, NYC OMB Director Melanie Hartzog, NYC Deputy Comptroller for budget Preston Niblack and the control board’s acting director Jeffrey Sommer.
The board reviewed the city’s fiscal year 2019 budget and found that the city “adopted a balanced total funds budget for FY 2019 of $89.2 billion,” according to its staff report.
“With the aid of a surge in personal income tax collections at the end of FY 2018, the city was able to achieve a surplus of almost $4.6 billion,” the report said. “All of the surplus was used to prepay FY 2019 expenses and the city adopted a balanced budget.”
De Blasio spoke to the board about the progress the city has made and the challenges it faces.
“We must remember the current economic expansion in this country has now stretched to 109 months, making it the second longest expansion in history and, therefore, we must always be prepared for a downturn,” he said. “We believe we are prepared. We believe very strongly, our cautious revenue and debt projections, manageable out-year gaps, ongoing commitment to setting aside unprecedented levels of reserves and to finding savings are all consistent with the current economic situation.”
The mayor cited a record level of city reserves: In fiscal 2019, the general reserve was set at $1.125 billion, an increase of $125 million, while the city is maintaining an annual $250 million investment in the capital stabilization reserve.
“We also added $100 million to the retiree health benefits trust fund, which brings it to a record high $4.35 billion,” De Blasio said, adding that City Council has been pushing on the issue of building reserves.
“We have contributed to this progress every year since taking office,” de Blasio said. “Credit ratings agencies often cite our commitment to unprecedented levels of reserves in support of our strong ratings, which has helped us maintain the highest credit ratings in the city’s history.”
Moody's Investors Service rates the city's general obligation bonds Aa2, while S&P Global Ratings and Fitch Ratings assign AA ratings to the city’s GOs. All three agencies maintain stable outlooks on the credit.
In a staff rreport, the control board pointed to several areas of concern for the future.
“For the last two years, we have expressed concerns over federal actions that could affect the delivery of health services and its impact on Health + Hospitals,” the report said. “The latest federal budget delayed any actions for two years. If the planned reductions resurface, there could be pressure on the city to increase its subsidies to Health + Hospitals.”
The report also cited the New York City Housing Authority and the Metropolitan Transportation Authority as possible trouble spots ahead.
“The state mandated that in FY 2019 the city fund half of the emergency Subway Action Plan. This funding is included in the financial plan. Subsequently, the MTA has developed a plan to upgrade the signal systems in the subways, as well as additional improvements, in two phases of five years,” the board’s report said. “While preliminary and unofficial, the first phase alone is estimated to cost over $19 billion. There have been no agreements reached on whether this plan will proceed or how it will be funded.”
The report noted that concerning NYCHA, the city entered a federal consent decree requiring $1 billion of capital funds over fiscal 2019 through 2022 and an additional $200 million every year thereafter, to make repairs and remove lead paint, until the federal court says the project is complete.
“The decree also established a federal monitor to oversee the work and make other recommendations. NYCHA’s total capital funding is only a small portion of the estimated $31 billion of capital needs. The federal, state, and local government will have to determine how to meet these needs. The additional impact on the city’s budget is unknown,” the report said.
Stringer echoed the mayor’s optimism but also called for caution.
“I am pleased to report today that our city’s economy and fiscal position remain strong and sound,” Stringer said. ”New York City has created more jobs in the years since the great recession than in any period in our history and unemployment is at historic lows across all five boroughs.”
He said that the city did face many challenges.
“First and foremost we are living through a disaster at the New York City public housing authority, which has literally left 400,000 New Yorkers living in deplorable and dangerous situations,” Stringer said. “Decades of federal disinvestment have left NYCHA with a staggering $31.8 billion in capital needs.”
In that same vein, Stringer said the public transit system “has begun to physically crumble from years of neglect.
“These challenges cannot be underestimated and our response must be immediate and comprehensive. We, the city and the state, must come together to address our current problems.”
DiNapoli cited the strength of the city’s economy over the past several years.
“The current economic expansion has been exceptional and continues to set records. The city’s economy added 715,000 between 2009 and 2017, the largest and longest job expansion the post-World War II period,” he told the board.
He added that “after growing by 81,000 jobs in 2017, employment reached 4.4 million, a new record of 615,000 hired from the pre-recession peak. Although job growth has since slowed, the city is on pace to add more than 72,000 jobs in 2018.”