New York property tax cut may be history: Bloomberg

By Edith Honan and Joan Gralla

NEW YORK (Reuters) - New York City property owners might see their property taxes rise before 2010 as city revenues will keep falling because Wall Street investment bank earnings are way down this year, Mayor Michael Bloomberg said on Friday.

A 7.0 percent property tax cut was enacted last year, and Bloomberg in May extended it another year, but it might now have to be reversed.

"We may very well have to put it back for this year. Or we can balance next year's budget but it would be so onerous," he said on a local radio show, explaining that he wished to avoid cutting programs.

Banks and brokerages drive the city's economy. This industry lost "20-odd billion" dollars in the first quarter, Bloomberg said. Wall Street workers get 35 percent of all the wages and salaries in the city and each one job creates two to three positions in other sectors, from shops to restaurants.

But the property tax is almost the only levy that the city can control without state approval. Homeowners will still get a $400 property tax rebate.

The mayor pinned the need to raise revenues on a decision by arbitrators to give the police force more generous raises than other city workers. This broke the so-called pattern and entitled these other employees to seek matching hikes.

The pay increases could cost $1 billion now, just about what the 7.0 percent property tax cut costs the city. The wage rises will also increase the city's expenses by another $100 million to $200 million going forward, the mayor said.

"This arbitrator awarded money that we just don't have. The private sector is going to have to pay for this (and) they're getting laid off," Bloomberg said.

The 5 percent budget cuts Bloomberg already enacted were mainly achieved by improving efficiencies, he said.

New York City is one of the few localities that releases multi-year financial plans, and Bloomberg previously proposed abolishing the property tax cut in 2010 to help close a $2 billion to $3 billion budget gap.

The independent mayor and the Democratic-led City Council now are debating his $59 billion budget plan for the new fiscal year that starts on July 1.

Speaker Christine Quinn told reporters: "Keeping the property tax rate lower, where we set it last year, is a priority to us in the council. But ultimately, the budget is about a couple of things - setting your priorities and making hard choices, and having the resources to actually pay to implement those choices."

Asked if she would accept a smaller tax increase, Quinn, a Democrat, replied: "You can't pretend Wall Street didn't have $22 billion in losses in their first quarter."

The mayor, whose second and last term ends in January 2010, said: "I'm not going to leave a big deficit for my successor." Bloomberg inherited a historic shortfall from former Republican Mayor Rudolph Giuliani in 2001. Tax revenues slid after the dot.com gold rush ended and then fell even more because of the September 11 attacks.

Bloomberg raised property taxes by 18.5 percent in 2002.