New York City could sell up to $12 billion in “relief bonds” to help businesses and workers hit financially by the COVID-19 virus under a plan proposed by City Council Speaker Corey Johnson.
Johnson on Thursday proposed the plan to be paid for by the federal government but said the city could sell bonds if that doesn’t happen.
“Ideally, the federal government would step up and immediately fund each of these programs. But the city can't wait on that,” Johnson said. “After the 9/11 attacks, the city got to work rebuilding right away, which was financed by selling bonds. The state Legislature took action to allow the sale of new bonds by the New York City Transitional Finance Authority and they were on the market by early October.
“If we act quickly, we can replicate the success of that program and invest in our shared recovery again. New Yorkers who are able can give back by buying these bonds. It will be a great way to help the city and fellow New Yorkers during this crisis," he said.
Johnson added that a new revenue stream would be needed to pay for the bonds.
“To issue these bonds, our city is going to need new revenue streams. We should ask the wealthiest corporations and people, those who are most able to weather this storm, to chip in a bit more. That could be in the form of a temporary payroll tax, a surcharge on high-end commercial property, or a small tax increase on personal income over $500,000 a year,” he said.
“If we provide these benefits for six months, it will cost about $12 billion. We might come out of this crisis before then. But the longer we wait, the harder it will be to bring the city back to normal. The costs of failure here are incalculable,” Johnson said. “This is a defining moment. New York has faced many challenges, each different than the last. We have persevered by coming together and rallying around the common good. We will do the same here.”
The proposal includes a temporary universal basic income for all New Yorkers, temporarily deferring fees and refunding business taxes, and up to $250,000 to cover fixed costs for impacted businesses. It also includes unemployment protections for those who have had their hours cut, gig economy and freelance workers.
The Council estimates that over 500,000 workers and more than 40,000 businesses are in the industries hardest hit during the COVID-19 crisis. These businesses generated $40 billion in taxable sales last year.
While full economic extent of this pandemic is unknown, Council members said they wanted to take action now.
“We have a plan to bring relief to the hundreds of thousands of NYC workers who have been hit hard by COVID-19. By deferring fees without penalty, refunding business taxes, expanding the safety net and putting money into New Yorkers' pockets, this plan will ensure that many who need help will receive it,” said Council Finance Chair Daniel Dromm. “At the same time, it will serve to stimulate our local economy. Our plan takes into account the fact that federal dollars may be slow in coming or may simply not be enough. Regardless of how the federal government acts, all New Yorkers should know that, under the leadership of Speaker Corey Johnson, the Council is stepping up for them in a big way.”
The components of the plan are:
- Institute a temporary universal basic income. Even if current federal proposals for immediate payments of $1,000 or $2,000 to Americans pans out, the impact of those dollars is far less in New York than almost every other city in the country. Under the Council’s proposal, every New York City resident would get money in their pocket — $550 for each adult and $275 for each child. This means we reach everyone and provide some much-needed stimulus.
- Provide extra help for impacted New Yorkers. The plan would temporarily expand eligibility for unemployment to freelancers, gig workers, and those who have had their hours reduced. It would also temporarily enhance benefits for everyone by 30%. To do so, the city would also need to shore up New York’s unemployment insurance trust fund, which started the year with a balance of $2.6 billion. With a surge in workers applying for benefits and fewer businesses paying in, the fund won’t hold out long.
To help impacted businesses, the plan would:
- Immediately defer sales and use taxes due in March, as well as the
commercial rent tax and business taxes.
- Institute penalty-free deferment of the collection of city fees, such as sidewalk cafe fees and permit renewal fees.
- Build on the city's small business loan program by expanding eligibility to reach more businesses and increasing the maximum loan amount to $250,000. These should be structured as zero-interest loans, but the city, with the help of the federal government, should be prepared to forgive some of this debt if it's necessary to keep businesses afloat.
The city is one of the largest issuers of municipal debt in the United States. As of the end of the second quarter of fiscal 2020, the city had about $37.7 billion of general obligation debt outstanding. That's not counting the various city authorities that issue debt.
Moody’s Investors Service rates the city's GOs Aa1 and S&P Global Ratings and Fitch Ratings rate it AA. All three rating agencies assign stable outlooks to the GOs.
The NYC Transitional Finance Authority has $38.9 billion of debt outstanding while the NYC Municipal Water Finance Authority has $30.8 billion of debt outstanding. The TFA’s debt consists of future tax-secured senior bonds (Aaa/AAA/AAA), future tax-secured subordinate bonds (Aa1/AAA/AAA) and building aid revenue bonds (Aa2/AA/AA). The MWFA’s debt consists of general resolution bonds (A1/AAA/AA+) and second general resolution bonds (Aa1/AA+/AA+).
For fiscal 2020, the city had estimated total bond issuance at $8.61 billion, with sales of $9.9 billion in fiscal 2021, $11.3 billion in fiscal 2022, $12.7 billion in fiscal 2023 and $13.3 billion in fiscal 2024.
