New York Mayor Bill de Blasio touted his $98.6 billion
Critics say the number, while appropriate for a body temperature, is too feverish for a spending plan.
The mayor's
“It's going to reach every part of this city in so many ways,” an optimistic de Blasio told reporters.
Roughly $15 billion in federal and state aid the city has received since December and higher-than-projected revenues allowed the mayor to loosen the budget belt. That includes $5.9 billion in direct local aid and $7 billion in federal education aid, both from Washington. The city must use both by 2024.
“There is a lot of money thrown at helping people cope with the pandemic — healthcare and schooling, for instance — but once the federal and state money runs out, are they going to be locked into these programs?” said Howard Cure, director of municipal bond research for Evercore Wealth Management.
“There’s got to be some fiscal responsibility.”
State Comptroller Thomas DiNapoli sees red flags in using some federal aid for recurring operational costs not directly related to the coronavirus, notably in education.
“The restoration of planned cuts should be followed by renewed commitment to long-term initiatives that allow for recurring savings while addressing collective bargaining agreements, which will begin expiring in May,” DiNapoli said.
Moody’s Investors Service rates the city's general obligation bonds Aa2 and Fitch Ratings has the city at AA-minus; both downgraded the city a notch during the pandemic. S&P Global Ratings rates New York City GOs AA. All three assign negative outlooks.
De Blasio hopes to fully reopen the city from pandemic health restrictions by July 1 although Gov. Andrew Cuomo, long a political adversary, could have a say in that. “There is no person who will safely reopen faster than myself,” Cuomo told reporters in Buffalo.
When term-limited De Blasio leaves office on Jan. 1, questions loom about what the next mayor will inherit.
Variables include a lingering pandemic, the return of workers and tourism, plummeting real estate values business relocation, escalating crime and confidence in public transit.
City Hall must also stare at open labor contracts, property tax variables, workforce size and the use of the rainy-day fund and its variants.
The property tax, which in fiscal 2021 totaled 46% of total city funds, took a hit during the pandemic.
The state’s recently enacted $212 billion budget includes large increases in personal income taxes for the wealthiest residents, plus a hike in the corporate franchise tax. Additional revenues will aid programs such as education and a variety of social initiatives, including renters and healthcare.
Increases to top personal income tax rates are projected to generate $2.8 billion for the state in fiscal 2022, rising to $4.5 billion in FY25. According to a
The top rate in California is 13.3%. Top rates in neighboring New Jersey and Connecticut are 10.75% and 6.99%, respectively.
Relocation of wealthier people and businesses leaving could pose continued risk, according to Cure.
“In the past, I wasn’t worried about New York State and New York City being highly taxed, but the paradigm has shifted,” he said. “Now people and companies have so much more flexibility.”
Andrew Rein, president of the watchdog Citizens Budget Commission, said the city is using some of the federal aid wisely to support one-time fiscal and programmatic needs, including academic recovery, Summer Rising and the emergency food program.
Still, he added, recurring programs such as universal 3-K pre-kindergarten lack resources in the future.
“No matter how worthy the programs may be, this sets them up to fall off future budget cliffs since there are no efforts to identify efficiencies that could generate the resources to support the programs over time.”
Outyear shortfalls, which the city by law must close, exceed $4 billion.
To help balance the budget, the city reinstated a planned $1.6 billion drawdown from its Retiree Health Benefits Trust. It also added $200 million to the general reserve. De Blasio said overall reserves in fiscal 2022 total $4.6 billion, including $3.8 billion in the Retiree Health Benefits Trust, $493 million in the new rainy-day fund, and $300 million in the general reserve.
Many city labor contracts are set to expire within two years. De Blasio could punt the sticky matter to his successor, as Michael Bloomberg did to de Blasio when he left office.
“Whoever becomes mayor will have to deal with these,” Cure said. “The unions didn’t want to deal with Bloomberg. They waited for de Blasio. He then backfilled pay and gave some pretty generous benefits.”
Long under the radar in budget discussions has been the need to curb capital construction costs. De Blasio’s 10-year capital program totals $133 billion.
Think tank Center for an Urban Future estimated that the city could save nearly $200 million per year through strategic improvements to a capital construction process it considers broken.
Its
CUF said the Department of Design and Construction, the city's public works agency, has made “notable progress” in improving the process, reducing the average timeline to 90 months from 96 months since beginning an overhaul in January 2019, but DDC will need far more help from other city departments that “contribute mightily” to inefficiencies, including the Mayor’s Office of Management and Budget.
“It’s always been an issue with New York City and the MTA, just how costly it is to finance or implement any capital project,” Cure said, also referring to the state-run Metropolitan Transportation Authority, which operates the region’s mass transit.
“There’s not been enough attention given to just how costly these capital projects are compared with other parts of the country or even the world,” Cure said. “Things are so much more costly in New York. You have these infrastructure numbers but there’s not been enough attention to how costly it is.”
The center urged mayoral hopefuls to emphasize capital-cost overhaul, and called on the next mayor to appoint a deputy mayor for infrastructure to coordinate with every agency involved with the capital construction process.
“When I was at DEP, I reduced the operating budget by 10% without a layoff by looking at things that are in our control, like procurement, how we manage our operations,” Kathryn Garcia, a candidate and Department of Environmental Protection commissioner, said on a Citizens Budget Commission forum.
A more efficient process is already happening, according to the center. During the pandemic, DDC leveraged its emergency powers to fast-track impromptu medical construction.
DDC Commissioner Jamie Torres-Springer said his department managed more than $200 million of emergency construction over the past year. The city created 28 testing sites, 18 vaccination sites and 1,110 field hospital beds, and is building three long-term acute-care centers in underserved areas.
"We used emergency powers to fill the gaps," he said on an Infraday webcast. "We know we can apply these techniques to work faster and more efficiently."
