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New York City's growing rate of indebtedness and the resulting debt service costs continue to place a serious burden on the City's operating budget, according to the Capital Debt and Obligations report, a charter-mandated report released today by City Comptroller William C. Thompson, Jr.

"Currently, 15 cents of every dollar the City collects is consumed by debt service costs," Comptroller Thompson said. "Although the Mayor and City Council have taken steps to reduce debt service costs related to the Capital Program, this figure will approach 18 cents by Fiscal Year 2007. This increase will reduce the availability of funds for vital City services including schools, police and fire protection."

Debt per capita (the share of the burden on each of the City's 8 million citizens), has grown to $5,645 in FY 2003 from $2,490 in FY 1990, an increase of 127 percent. Over the same period, the cumulative growth in debt per capita exceeded both the rate of inflation by 82 percent and the growth in City tax revenues by 71 percent. New York City leads a sample of large U.S. cities in the size of debt burden per capita by a margin of 2.2 to one.

Section 232 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 capital bond proceeds for the construction and rehabilitation of schools, roads and bridges, correctional and court facilities, sanitation garages, parks and cultural facilities, public building, and housing and urban development initiatives. Bond proceeds are also used for financing shorter-lived capital items such as comprehensive computer systems.

New York City's general debt limit, as provided in the New York State Constitution, is 10 percent of the five-year rolling average of the full value of taxable real property. The City's FY 2004 general debt-incurring power of $39.99 billion is projected to rise to $42.44 billion in FY 2005, $44.38 billion in FY 2006, and $45.77 billion in FY 2007. The City is projected to be below the limit by $8.48 billion on July 1, 2004, by $7.67 billion on July 1, 2005, and by $8.03 billion by July 1, 2006.

In addition to General Obligation debt, the debt-incurring capacity of NYCTFA and TSASC, Inc. totals $14 billion and has already provided approximately $13.2 billion in resources to finance the City's capital program. After adjusting for the benefit of the NYCTFA and TSASC debt-incurring power, the City will be able to incur additional debt of approximately $8.9 billion through FY 2007.

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