Facing Surplus, Mayor Plans to Spread It Around
By MIKE McINTIRE
New York City will end the fiscal year with a record $3.3 billion surplus fueled in part by taxes from a superheated real estate market. Mayor Michael R. Bloomberg proposed an election-year budget yesterday that would spread that wealth around by cutting taxes and spending millions more on reducing class sizes, increasing garbage pickups and other measures sure to please voters.
The surging revenues from taxes on real estate sales and refinancing of mortgages, expected to top $2 billion this year, helped the mayor propose a budget that for the first time approached $50 billion.
Saying the city "can afford a little bit of relaxation" from the more stringent spending plans he has put forward since taking office in 2002, Mr. Bloomberg moved to steal some thunder from his political rivals. He proposed a property tax rebate for a second straight year, and tax reductions for clothing purchases, small businesses and improvements to apartment buildings.
Fiscal analysts and some Democratic mayoral candidates noted the size of the budget plan - $49.7 billion for the 2006 fiscal year that begins on July 1, a 6 percent increase over last year's proposal. And they suggested that Mr. Bloomberg should use more of the tax windfall to close deficits, which are projected to be $4.5 billion in 2007 and $4.2 billion in 2008.
The mayor, however, insisted he is continuing to be fiscally prudent by cutting spending at most agencies, making conservative forecasts of tax revenues and using surplus money to cover rising costs over which the city has little control, including employee pensions, Medicaid and interest on the city's debt.
He justified his plan for $500 million in tax cuts next year as an obligation to "try to make the burden of living in this city tolerable," and he credited the tighter budgets of recent years, coupled with an improving economy, for making his proposals possible.
"Last year I said 'cautious optimism,' " Mr. Bloomberg said at a City Hall news conference. "We have a reason to have a grin on our face. A big smile, maybe not, but a grin on your face, because we have made the tough decisions, and in retrospect I think it's fair to say that we made the right decisions."
But he acknowledged that he did not know what the city would do to address the looming deficits. His own long-range financial plan shows the boom in real estate taxes dropping off precipitously after this year, while mandatory costs continue to rise, creating the future deficits. Critics were quick to suggest that his assertion of fiscal stability was illusory.
"If you can grin while looking ahead a year to a situation where your budget gap is something like 8 percent of your revenues, I guess you're pretty optimistic," said Edmund J. McMahon, an analyst at the Manhattan Institute, a conservative policy group. "It's troubling to see how big the out-year gaps have grown."
Elizabeth Lynam, deputy director of research for the Citizens Budget Commission, a business-backed policy group, called Mr. Bloomberg's budget "a one-year party."
She added, "The party's going to come to an end quickly." She also said the proposal includes the highest level of spending of surplus money in a single year on record.
The budget blueprint released yesterday represents the mayor's final proposal, which now goes to the City Council for review, and it includes revisions to spending and revenue projections put forth in his preliminary financial plan in January. The Council and the mayor must now negotiate a formal budget agreement and adopt it before the end of the fiscal year in June, a fractious process that may be even more so this year, considering that the Council's speaker, Gifford Miller, is also running for mayor.
In announcing the budget, Mr. Bloomberg revealed that a recent actuarial review found that the municipal retirement system had not properly accounted for 1,000 teachers and revised some other assumptions, forcing the city to set aside $862 million next year to cover the newly discovered pension liabilities.
The mayor's tax proposals include the immediate elimination of a 4 percent city sales tax on purchases of clothing and footwear costing less than $110, something that would require approval by the State Legislature. An additional state sales tax of a little more than 4 percent would remain in effect.
Also, he proposes to reduce the unincorporated business tax, as well as the tax assessment imposed on the cost of improvements and repairs to apartment buildings that have 4 to 10 units. In addition, he plans to issue another $400 property tax rebate to homeowners, with the checks showing up close to the election.
On the spending side, Mr. Bloomberg, a Republican who is up for re-election in November, moved to outflank his Democratic opponents by adding money to a number of programs that some of them have long championed. He would add $50 million for smaller class sizes, programs for gifted and talented students and other education initiatives; $13 million for more frequent trash collections; $15 million for summer jobs and after-school programs; $7 million for libraries; and $17 million for meals and other services for the elderly.
"He's not leaving Miller or anybody else much room," said Doug Turetsky, a spokesman for the city's Independent Budget Office, a nonpartisan fiscal monitor.
Mr. Miller called a press conference to claim some of the mayor's ideas as his own.
"I think the mayor has clearly come half of the way towards the Council's priorities and the vision that we laid out last month for a better budget for our city," said Mr. Miller, who went on to criticize Mr. Bloomberg for not proposing more help for mass transit, H.I.V./AIDS programs and infant mortality prevention.
Another Democratic candidate, Fernando Ferrer, the former Bronx borough president, noted that the $49.7 billion proposal set a "new high-water mark in this city," and yet included no money to address the billions that a court concluded needs to be spent on city schools. The Bloomberg administration contends that the state should foot the bill.
Mr. Bloomberg rejected suggestions that his budget plan was tailored to help his re-election campaign, and he asserted that the city was simply reaping the benefits of improved tax revenues and his administration's fiscal prudence.
"If it comes in an election year, that's great," he said. "I hope we have it next year, and the year after, and the year after that. And if we stay the course, it will."
Jim Rutenberg and Nicholas Confessore contributed reporting for this article. |
