UPDATE 1-NYC surplus grows $2 bln despite downturn-source

(Adds Bloomberg plans, background, Weprin comment, byline)

By Joan Gralla

NEW YORK, April 30 (Reuters) - New York City will capture nearly $2 billion of extra tax revenues this year, a financial source said on Wednesday, a fresh sign that corporate tax declines warned of by the mayor could take some time to show up.

For months, Mayor Michael Bloomberg has been warning that the U.S. housing-led economic downturn will hurt New York City. On Monday, the independent mayor warned corporate tax payments could "fall off a cliff."

A factor driving up the tax surplus is a long-standing policy of New York City mayors to underestimate tax revenues to prevent the city's Council from spending too much, explained the financial source who requested anonymity.

The law-making Council oversees New York City agencies, and has sole responsibility for approving the city's budget.

Bloomberg plans to prepay debt with the windfall, getting a jump on slicing next year's deficit, the source added.

The mayor plans to unveil his revised $58.5 billion budget plan on Thursday. A spokesman declined to comment.

Bloomberg appears likely to keep a 7 percent property tax cut enacted previously for the new budget that starts on July 1, but he might rescind that popular tax break in the following year, the financial source added.