View Comprensive Annual Financial Report

Comptroller William C. Thompson, Jr. today released his Comprehensive Annual Financial Report for Fiscal Year 2005, which shows that New York City ended the year with a General Fund surplus of $5 million.

The General Fund, a primary indicator of the financial activity and legal compliance for the City, shows revenues and other financing sources of $52.795 billion for FY 2005 and expenditures and other financing uses of $52.790 billion, netting a $5 million surplus. Spending increased by $5.498 billion in FY 2005, an increase of 11.6 percent from FY 2004. Excluding the transfers and subsidy payments to eliminate future fiscal year projected gaps and a non-recurring pass-through of Federal funds to the WTC Captive Insurance Company of $999 million, expenditures and other financing uses increased by $2.893 billion, or 6.4 percent.

The $5 million surplus for FY 2005 is a result of expenditures and other financing uses included in transfers and subsidy payments of $3.529 billion to help eliminate the projected budget gap for the current fiscal year, FY 2006.

“The City balanced its budget problems for FY 2005 with the use of a FY 2004 surplus,” Thompson stated. “The pattern of current fiscal year surpluses accompanied by large outyear budget gaps is a familiar one. The City's heavy reliance on year-to-year surpluses to balance the budget is unsustainable over the long term, because surpluses can disappear quickly and without notice.”

Among the results of operations reported in the Financial Report are the following:

Economy and Budget: The City's economy, as measured by the Comptroller's Gross City Product (GCP), rose 3.3 % in FY 2005 after declining 0.1% in FY 2004. Payroll jobs rose 28,300 in FY 2005, after three years of decline. The private sector added 31,800 jobs, while government lost 3,500 jobs. Within the private sector, all industries added jobs except manufacturing and construction.

The City began FY 2005 in the early stage of an economic turnaround that started in the second quarter of FY 2004, when the local economy, as measured by the GCP, turned positive for the first time after 11 consecutive quarters of decline. The Mayor's FY 2005 Executive Budget, released on April 26, 2004, projected a balanced budget of $46.9 billion. During the course of FY 2005, tax revenues, fueled by continued strength in the economy and a robust real estate market that exceeded expectations, were substantially higher than projected. As a result, the Mayor's FY 2006 Executive Budget submission on May 5, 2005, reflected a FY 2005 budget stabilization account of $3.3 billion, funded with an expected FY 2005 surplus. The FY 2006 Executive Budget included prepayments of $3.3 billion of certain FY 2006 expenditures from this budget stabilization account.

Pension Funds : For the 10-year period ending June 30, 2005, the Pension Funds had annualized returns of 9 percent. During the course of FY 2003 all of the Funds conducted review of their assets allocation and decided to increase their level of investment in longer term, less liquid securities – in particular, real estate and private equity. In addition, they decided to invest a portion of their fixed-income securities in inflation-linked treasury securities. The new policies are designed to increase the diversification of the assets by reducing the Funds' concentration of assets in U.S. equity securities. The funding of these new asset classes continued during FY 2005.

Public Finance : The City and its related issuing entities issued $10.89 billion of long-term bonds to finance its capital plan and to refinance certain outstanding bonds. The City also entered into several interest rate exchange agreements with the goal of lowering its overall cost of long term borrowing over the life of its bonds and diversifying its existing portfolio.