New York City's rapidly growing outstanding debt will substantially increase the City's debt service costs and place mounting pressure on the City's operating budget, according to the Capital and Debt Obligations report, a charter-mandated report released today by City Comptroller William C. Thompson, Jr., who warned that this issue must be addressed quickly.

"Presently, 16 cents of every tax dollar collected by the City is consumed by debt service costs," Comptroller Thompson said. "This figure will approach 20 cents by Fiscal Year 2006. These costs reduce the funds available for vital city services, such as schools, police and fire protection. We must act now to develop a long-term plan to reduce the growing debt burden."

The report also finds that debt per capita (the share of the burden on each of the City's 8 million citizens) has grown to $5,083 in FY 2002, an increase of 104 percent over FY 1990, when the figure was $2,490 per citizen. Over this period, the cumulative growth in debt per capita exceeds the rate of inflation by 63 percent and the growth in City tax revenues by 55 percent.

Section 22 of the City Charter requires the Comptroller to report on the amount of debt the City may soundly incur for capital projects during the current fiscal year and each of the three succeeding fiscal years.

Debt is issued by the City of New York (the "City"), or on behalf of the City, through a number of different mechanisms including General Obligation debt, the New York City Transitional Finance Authority (NYCTFA) and TSASC, Inc. The City uses its capital bond proceeds for numerous long-term projects, including the construction and rehabilitation of schools, roads and bridges, correctional and court facilities, sanitation garages, parks and cultural facilities, public buildings, and housing and urban development initiatives. Bond proceeds are also used for financing shorter-lived capital items

New York City's general debt limit, as stipulated in the New York State Constitution, is 10 percent of the five-year average of the full value of taxable real property. The report finds that the City's FY 2003 general debt-incurring power of $35.99 billion is projected to rise to $39.17 billion in FY 2004, $41.87 billion in FY 2005, and $43.74 billion in FY 2006. The report estimates that the City will be below these limits by $3.3 billion on July 1, 2003, by $3.2 billion on July 1, 2004, and by $2.6 billion by July 1, 2005.

In addition to General Obligation debt, the debt-incurring capacity of NYCTFA and TSASC totals $13.7 billion and will provide the City with resources to finance its capital program through FY 2006. After adjusting for the additional benefit of the NYCTFA and TSASC debt-incurring power, the City will be able to incur additional debt of approximately $6 billion through FY 2006.

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