New York City's Fiscal Plan Tightening the Purse Strings

Mayor Michael R. Bloomberg proposed a $59.1 billion budget plan for Fiscal Year 2009 and presented an updated four-year financial plan for New York City. The mayor’s budget plan maintains the city’s financial footing in the near term by reining in expenditures across the city, with city-funded spending only expected to grow by 0.1 percent.

One of the highlights of the budget for homeowners is that initiatives contained previously like the $400 property tax rebate will continue and the plan also includes the same property tax rate reduction introduced in 2007-08. The executive budget includes $600 million in savings in FY 2008 and $1.3 billion in FY 2009 from reductions in planned agency spending. The proposal will produce out-year savings of $1.1 billion annually. However, future years contain some warning signs. The overall city’s financial plan shows deficits of $1.3 billion in FY 2010 and $4.6 billion in FY 2011.

“Through a combination of agency savings and short-term revenue receipts, we will once again return tax dollars to New Yorkers who today face their own budget problems created by the subprime mortgage meltdown and the ensuing credit crunch,” said Mayor Bloomberg in a statement. “That includes the $400 homeowner property tax rebate, which will be continued in Fiscal 2009 and in the out-years as well. Our expectation at this time is that we’ll also be able to extend, for another year, the 7 percent property tax cut that we enacted last year.”

The mayor’s budget analysis, though, shows some dark clouds on the horizon. The national economy is slowing, the labor markets and housing markets are softening and Wall Street is feeling the pinch of the economic downturn. “Locally, New York City’s economic outlook is uncertain. Wall Street firms have announced hundreds of billions of dollars of write-downs and thousands of planned layoffs. After posting a record $21 billion in profits in 2006, Wall Street firms had over $11 billion in losses in 2007. Large commercial real estate transactions have already begun to decline and are forecast to fall further,” the report says.

One area of optimism that will bring in additional spending is visitors to the city, the report notes. “Tourism remains a bright spot, with New York City recording an increase in overseas visitors of 33 percent since 2000, while the rest of the country has seen a 20 percent decline in overseas visitors during this period.”

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