NYC Comptroller's Office Press Office


PR07-12-141		December 3, 2007
Contact: Press Office		212-669-3747

THOMPSON ISSUES REPORT ON STATE OF NEW YORK CITY'S ECONOMY AND FINANCES

View State of the City's Economy and Finances 2007

New York City Comptroller William C. Thompson, Jr. today issued his Charter-mandated report on the State of the City's Economy and Finances, indicating the City could confront a budget gap in excess of $6 billion in Fiscal Year 2011.

“New York City’s economy is at a turning point,” Thompson said. “Turmoil in the nation’s housing and mortgage markets has reverberated through the financial sector, threatening to produce a marked slowdown in local economic activity.”

“The principal threat to both the national and local economies is the unfolding subprime mortgage debacle and its collateral effects on credit markets,” Thompson said in his report. “The resulting financial losses and layoffs are likely to fall disproportionately on New York firms and workers.”

The report – which is available at www.comptroller.nyc.gov - contains an analysis of the Mayor's October Modification to the Fiscal Years’ 2008-2011 Financial Plan.

“With the October 2007 revisions to the City’s financial plan, the Mayor has taken the first steps toward addressing the budgetary risks of this shift in the economic cycle,” Thompson said.

Thompson’s report notes that the City’s tax revenue projections are now lower than at the time of the Adopted Budget by $148 million in FY 2008, $579 million in FY 2009, $642 million in FY 2010 and $858 million in FY 2011. Lower expected tax revenues in FY 2008 open a budget gap of $296 million for the current year, which the Modification closes by reducing the amount of FY 2009 expenses that would be paid using FY 2008 resources.

This FY 2009 gap has grown from $1.55 billion at the time of budget adoption to $2.73 billion, prompting the Mayor to already direct agencies to develop initiatives to achieve budgetary savings of 2.5 percent this year and 5 percent in FY 2009.

The Comptroller’s review of the Modification finds that tax revenues in FY 2008 and FY 2009 are likely to be better than the City is projecting by $255 million and $170 million, respectively. However, the review identifies net expenditure risks of $105 million in FY 2008, $102 million in FY 2009, $52 million in FY 2010 and an offset of $5 million in FY 2011.

As a result, the Comptroller’s Office projects a $149 million surplus for FY 2008, offsets to the FY 2009 and FY 2011 gaps of $68 million and $40 million, respectively, and an addition of $187 million to the FY 2010 gap.

Other significant features of the October Modification include:

All-funds spending adjusted for the impacts of prepayments will grow at a projected annual rate of 3.8 percent, compared to a projected inflation rate of 2.1 percent.

The City has increased funding for collective bargaining by $91 million, $436 million, $1.073 billion, and $1.609 billion for FYs 2008 through 2011.

Investment gains on the New York City Pension Funds were well in excess of the assumed actuarial investment return of 8 percent in FY 2007, leading to reductions in projected pension contributions that exceed $700 million when totaled over the Plan period. Nonetheless, pension contributions are projected to grow from $4.7 billion in FY 2007 to nearly $6.3 billion in FY 2011.

Debt service as a percent of tax revenues is projected to grow rapidly from a base of 11.8 percent in FY 2007 to 15.4 percent in FY 2011. This increase reflects average annual growth in debt service costs of 7.3 percent, outpacing projected tax revenue growth of 2.5 percent annually.

The City-funded portion of the four-year Capital Plan totals $41 billion. Four major program areas—environmental protection, education, transportation, and housing and economic development—account for 62 percent of the plan.

“The City has responsibly prepared for a cyclical downturn by using surpluses accumulated in recent years to prepay debt payments and other obligations,” Thompson said. “As the Comptroller has observed in previous reports, this practice of using current-year surpluses to stabilize the budget in the future should be further enhanced and institutionalized through the establishment of a rainy day fund that provides a mechanism through which savings can be used only under specified conditions.”

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