New leaders for New York State and New York City could create a national collaboration blueprint while avoiding another fiscal cliff, according to one of the major players in the city’s 1970s fiscal crisis.
“The next governor and the next mayor should create a vision in terms that can resonate in other states,” said Peter Goldmark, the state’s budget director when banks told city officials that they would no longer underwrite bonds and notes.
“In 1975, New York City was an aberration and the country was saying ‘look at those crazy people getting themselves into trouble,’” Goldmark said Tuesday at a webcast sponsored by the Rockefeller Institute of Government.
Kathy Hochul became governor in late August after Andrew Cuomo resigned amid allegations of sexual misconduct. In New York City, Democrat and Brooklyn Borough President Eric Adams is a heavy favorite to defeat Republican Curtis Sliwa, a former talk-show host, in November’s general election.
“The city and state should work together. Get to know each other. Consult, talk,” said Goldmark, also executive director of the Port Authority of New York and New Jersey from 1977 to 1985.
The state's public agencies are important assets, Goldmark added.
“They can fire up interest and create jobs and make sure they’re a positive force,” he said. “To the next mayor, Eric Adams: Put someone on your senior staff to get to know the state agencies. They’re a source of strength and expansion.”
Excessive borrowing for about a decade pushed New York to the edge of bankruptcy in the 1970s, said Richard Ravitch, who helped stabilize the city’s finances as chairman of the New York State Urban Development Corp.
“The city was desperately dependent on borrowing to remain solvent,” said Ravitch, who later was head of the MTA and lieutenant governor. “There was no limit and Wall Street was eager to make commissions from underwriting the bonds. Nobody thought about it, nobody was asking a question about it.”
Business leaders went to Washington to lobby for a $3 billion federal loan. They included Citicorp chairman Walter Wriston, “whose politics were to the right of Marie Antoinette,” Ravitch said, adding that business leadership today lacks unity.
The city’s recovery included the formation of the New York State Fiscal Control Board, which while in sunset mode now, still signs off on the city’s budget with comments. “It forces everyone to stay relatively in the straight and narrow,” said Carol Kellermann, president of the watchdog Citizens Budget Commission from 2008 to 2018.
The control board in August rubber-stamped the city’s $98.7 billion
Today, the state and city navigate through the lingering COVID-19 pandemic, both having gotten reprieves from several rounds of federal rescue aid.
Money from Washington has provided a runway to think about the immediate future, said Marc Shaw, former city budget director and former executive director of the state-run Metropolitan Transportation Authority, which runs the city’s mass-transit system.
“But the structural budget issues are very real and should not be masked by the moment,” said Shaw, now a senior advisor at the City University of New York’s Institute for State and Local Governance.
Uncertainties today include the slow returning of employees to offices and the domino effects on the real estate market, the restaurant and entertainment industry and mass-transit ridership.
“Property-tax revenue will go down by God knows how much and the losses are going to be substantial,” Ravitch said.
S&P Global Ratings and Moody’s Investors Service rate the city’s general obligation bonds AA and an equivalent Aa2, respectively. Fitch Ratings and Kroll Bond Rating Agency assign respective ratings of AA-minus and AA-plus, respectively. All four assign stable outlooks.
Fitch said the uncertain length of the pandemic combined with trending remote work is creating uncertainty in the immediate- to longer-term office demand outlook.
“As the largest U.S. office market, New York City provides an excellent case study to examine the potential negative feedback loop for office demand caused by the pandemic and exacerbated by the legacy issues from living costs, regulatory burdens, public health and safety,” Fitch said.
Relocation, notably for coastal gateway markets, is also a challenge for the city, Fitch added. Lower-cost, business-friendly markets include Denver, Nashville, Raleigh and Austin.
“The pandemic underscored the expensive, often-cramped living conditions for many [younger] workers, while also stressing revenues for key infrastructure and amenities, such as mass transit systems, entertainment, retail and restaurants.”
Weekday subway ridership is still only 45% of pre-pandemic levels, according to MTA officials, who expect it to slowly recover to only 80% to 92% of pre-pandemic levels through 2024 — subway, bus, commuter rail and paratransit combined.
