New York City faces $811 million budget gap in FY 2014: report

Thu Dec 27, 2012 4:57pm EST

The Brooklyn Bridge and lower Manhattan is seen from a helicopter in New York City, April 22, 2010. REUTERS/Jim Young

The Brooklyn Bridge and lower Manhattan is seen from a helicopter in New York City, April 22, 2010.

Credit: Reuters/Jim Young

Related Topics

(Reuters) - New York City faces an $811 million budget shortfall in fiscal year 2014 and lowered revenue projections in part because of Superstorm Sandy, the city's Independent Budget Office said on Thursday.

The city's tax revenue collections are likely to grow by just 3.4 percent in fiscal 2014 to $44.8 billion. That figure is $347 million lower than the IBO projected in May, it said.

The dimmer outlook is due to slower expected economic growth, particularly in the banking and securities industries, the IBO said. Near-term losses from Sandy, which ripped into the East Coast on October 29, also dampened projections for the current fiscal year, which ends June 30, 2013.

In June, Mayor Michael Bloomberg and the City Council agreed on a $68.5 billion fiscal 2013 budget that spared 20 fire companies from closing and increased funding for day-care and after-school programs.

To close the projected budget gap, the city is likely to cut spending further and raise fees and fines, among other measures, according to a financial plan proposed by Bloomberg in November.

That plan includes cutting 1,340 jobs through 2014, mostly through attrition, the IBO said.

The city also expects to save $230 million in 2014 by borrowing and refinancing outstanding bonds at low interest rates.


Even so, the gap -- which amounts to 1.6 percent of projected revenues -- is small enough to be closed largely through normal year-end accounting procedures, said IBO head Ronnie Lowenstein.

The city has not set aside money for a possible settlement in ongoing negotiations with organized labor, she said.

"There is, at this point, no money set aside in the city's labor reserve to pay retroactive wage and salary increases," she said.

Nearly all of the city's unions have been working without a current contract. The teachers' contract ran out in October 2009.

Under one settlement scenario, the city could owe wages and back pay of more than $5 billion through June 2013, the IBO's report said.


Before Sandy slammed into the U.S. East Coast, the IBO forecast the gross city product to grow at an annualized rate of 1.6 percent in the fourth quarter of 2012 and 1.2 percent in the first quarter of 2013.

Now, the city's economic output is likely to shrink by 1.0 percent at the end of 2012 and rebound with growth of 1.9 percent in the beginning of 2013 as storm victims repair homes and businesses, the IBO said.

It said Wall Street's importance as an economic driver for the city is expected to continue waning, as it has since the recession.

The financial sector will account for 26.1 percent of aggregate wage growth during from 2013 to 2016 -- compared to pre-recession levels of nearly 60 percent.

Yet New York City could be on track to gain nearly 480,000 payroll jobs from the end of 2009 through late 2016, which would be the greatest employment expansion since 1950, the IBO said.

Medicaid and public pensions cost increases are expected to slow. But spending on debt service payments and health and other benefits will rise, the IBO said.

The city's general obligation bonds are rated AA by Fitch Ratings and Aa2 by Moody's Investors Service.

(Editing by Leslie Gevirtz)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see
Comments (1)
Acetracy wrote:
Bloomberg’s business acumen certainly has not served NYC government. Since the beginning of his administration many coops in NYC have seen real estate taxes quadruple, subway fairs have doubled, sales tax rate increased, tolls, etc. have seen increases far greater than inflation.

Yet never has Bloomberg managed to balance NYC budget, let alone pare down his administration. Look at the salaries of deputy directors of “Economic Planning”, “Strategy Development”, etc. that serve absolutely no direct need for the city.

Instead Bloomberg goes after the wage earners in union strong holds: fire, police, teachers. While these groups are lucky to see wages keep up to inflation, Bloomberg approves salary increase for his staff who earn multiples of what a typical union employee makes.

I voted for Bloomberg for his first term and was immediately disappointed when he spent $millions for an Olympic Bid. Crazy!! A stadium in the heart of Manhattan? When that didn’t pan out, he gave away the Atlantic Yards to Rattner with state subsidized bonds! As far as most of NYC residents are concerned, Bloomberg has made the rich richer, and the middle class poorer.

This notion of business tycoons governing better than professional politicians has certainly failed in NYC.

Dec 27, 2012 8:10pm EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.