QUARTERLY CASH REPORT April – June 2017 Fourth Quarter of Fiscal Year 2017
September 1, 2017
At the close of 4Q17, the City recorded an unrestricted cash balance of $9.341 billion, compared to $11.719 billion last year, $9.502 billion in FY15, $9.858 billion in FY14, and $7.944 billion in FY13. The 4Q17 average cash balance of $9.398 billion fell below the 4Q16 average by $2.663 billion. Total receipts in the quarter rose 2.5%, while expenditures rose 3.9%.
The City’s practice is to dedicate any year-end budgetary surplus to a prepayment of the following year’s expenses. This year’s prepayment totaled $4.169 billion, compared to $3.994 billion at the end of FY16. The prepayment consisted of $1.560 billion of general obligation (GO) debt service, $1.909 billion of Transitional Finance Authority (TFA) debt service, $400 million of advance subsidy to Retiree Health Benefits Trust Fund (RHBT), and $300 million of advance subsidy to Health + Hospitals (H + H). In addition to the prepayment, the City deposited $100 million into RHBT above the amount required for FY17 pay-as-you-go retiree health benefits. Without prepayments, the City would have ended FY17 with $13.610 billion of cash-on-hand.
FY17 cash balances declined from record-breaking balances last year, but they were still very strong compared to historical levels. The average cash balance for FY17 measured $9.512 billion, compared to $10.684 billion last year, $9.460 billion in FY15, $7.779 billion in FY14, and $5.959 billion in FY13.
Total receipts in FY17 declined 2.2%. Meanwhile, expenditures reached a new record, up 2.5% compared to a year ago. Once again, as in FY05-FY16, there was no need for the City to borrow short-term for operations.
Total receipts in 4Q17 were the highest 4Q inflows on record, up 2.5% versus a year ago. Net of reimbursements for capital expenditures, 4Q17 cash receipts rose 4.3% versus a year ago.
The City collected $16.7 billion in tax revenues for 4Q17, compared to $15.9 billion at the same time last year. During the quarter, real property and sales tax collections increased 17.2% and 2.8%, respectively. Commercial rent tax was up 22.3% and general corporation tax rose 17.5%. Meanwhile, unincorporated business tax declined 18% and mortgage and real property transfer taxes fell 12.4%. Personal income tax was down 2.2%.
During 4Q17 the City received $6.2 billion in Federal and State aid, up 11.5% compared to 4Q16. The growth in Federal and State aid was mostly due to increases in State education aid, State higher education aid, and Federal education aid.
During FY17, total cash receipts measured $96.066 billion, a decrease of $2.2 billion from the previous year. Net of reimbursements for capital expenditures, FY17 cash receipts decreased 2.2% versus a year ago.
The five largest sources of cash in FY17 were: real property tax, personal income tax, NYS education aid, sales tax, and general corporation tax. These leading sources of cash accounted for 60.7% of total cash receipts in FY17.
“Debt Service Funding” includes retention of personal income and real property taxes for GO and TFA PIT debt service payments. Debt service funding is counted as a negative inflow (rather than a positive expense), offsetting the total cash receipts figure. FY17 debt service funding equaled $2.4 billion compared to only $120 million in FY16. In FY16, the debt service funding was very low because the Office of the New York State Comptroller released $1.186 billion back to the City after it had over-retained $2.3 billion in real estate revenue in June 2015 for debt service payments through October 2015.
Tax receipts for FY17 totaled $56.3 billion, an increase of 1.9% from the previous year. Real property tax collections rose 7.8%, and PIT receipts increased 2.3%. Sales tax fell 4%, in part due to the State intercept of sales tax revenue to recoup savings from refinancing the State-backed Sales Tax Asset Receivable Corporation (STARC) bonds. The State’s FY 2016-17 Adopted Budget included a provision that authorizes a three-year sales tax revenue intercept to recapture benefits accrued to the City from refinancing STARC bonds. Beginning in May 2016, the State is authorized to retain $16.7 million from the City’s sales tax each month, for a total of $50 million per quarter. The largest drag on tax receipts was NYS School Tax Relief program (STAR), which slipped 54.7% versus a year ago. Previously, NYC PIT payers received a tax credit on their local income taxes and the City was paid by the State for the cost of offering this tax credit. Beginning in tax year 2016, the NYC PIT payers have this credit applied to their NYS taxes and the reimbursement payment has been eliminated.
The banking corporation tax fell 45.9%. Beginning in tax year 2015, the general corporation tax and the banking corporation tax merged. All New York City C-corporations now pay under the general corporation tax.
During FY17, the City received $21.4 billion in Federal and State aid, compared to $20.8 billion in FY16. In FY17, the NYS education aid rose 5.4% and NYS higher education aid increased 19.8% compared to a year ago.
Cash expenditures, including capital expenditures, rose 3.9% during 4Q17. PS spending, which includes payroll, pensions, health plan, social security, and supplemental (union-related) welfare benefits, reached $14.1 billion in 4Q17. Embedded in this number is the City’s FY17 payment to the NYC Retiree Health Benefits Trust (RHBT). This year’s payment to the RHBT equaled $2.258 billion, versus $2.160 billion in FY16 and $1.988 billion in FY15. For the fourth year in a row, the City also added funds into the RHBT above the amount required for FY17 pay-as-you-go retiree health benefits. This year’s additional contribution was $100 million, compared to $500 million in FY16 and $955 million in FY15. OTPS spending increased 11.9% compared to a year ago. Other social services increased 16.4%, followed by vendor and other payments (up 13.4%), and public assistance (up 11.4%).
Total expenditures, including capital expenditures, rose 2.5% versus a year ago, to a new record high of $98.444 billion. Net cash expenditures (which exclude capital expenditures) rose 2.4% in FY17. Personal service expenditures increased 2.3% versus a year ago. Gross payroll increased 2.7% and spending on fringe benefits rose 1.8%. Meanwhile, other-than-personal-service expenditures (OTPS) increased 6.8% versus a year ago, mostly due to a $2 billion increase in vendor and other payments. Outlays considered “All Other” decreased 4.2%, due to slower Non-City-funded capital spending and the outflow of cash from the restricted Fund 700 account.
Capital Expenditures (CapEx) and Reimbursements
CapEx totaled $1.761 billion in 4Q17, up 1.3% from $1.738 billion in 4Q16. City-funded CapEx increased 9.2% while Non-City-funded CapEx declined 31.8%.
Reimbursements for CapEx in 4Q17 were lower than reimbursable expenditures, decreasing the cash balance by $4 million.
Total CapEx equaled $8.201 billion in FY17, up 3.3% from $7.937 billion in FY16. The City-funded component increased 11.9% while the Non-City-funded component declined 24.9%.
FY17 reimbursements for CapEx totaled $7.625 billion and accounted for 7.9% of total cash receipts. Reimbursements during the fiscal year exceeded reimbursable expenditures, increasing the cash balance by $237 million. Over time, reimbursements and CapEx should offset each other.
Two new money transactions closed in 4Q17. The first was a TFA sale of $800 million of tax-exempt fixed rate bonds and $300 million of taxable fixed rate bonds. The second transaction was a TFA sale of $850 million of tax-exempt fixed rate bonds and $250 million of taxable fixed rate bonds.
In FY17 New York City and TFA issued a combined total of $8.4 billion in new money and refunding bonds, compared to $7.2 billion in FY16. In FY17 the City refinanced $1.7 billion in GO and TFA bonds, compared to $2.8 billion in FY16.
FY17 refundings produced $233 million in budget relief over the life of the bonds, or $204 million on a present value basis. In FY17 the City achieved 14% budget savings, as a percentage of the refunding par. In comparison, the refunding activity in FY16 was the most efficient during the last decade when the City achieved 18% budget savings, as a percentage of the refunding par.