Comptroller questions creation of new authority to expand
regional transportation investment

Thompson proposes strategy to lower long-term Water Authority capital costs

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New York City Comptroller William C. Thompson, Jr. today issued his charter-mandated report analyzing Mayor Bloomberg’s Fiscal Year (FY) 2008 Executive Budget showing that the City’s FY 2007 surplus is expected to be $5.63 billion.

“City Hall has exhibited disciplined and thoughtful fiscal management in addressing the City’s current and future needs,” Thompson said. “Coupled with prudent management choices have been a booming real estate market, a stable national economy and increased Wall Street profits, all of which have contributed to revenue collections far exceeding the City’s expectations.”

Since the FY 2007 budget was adopted last June, the City has increased tax revenue projections by $4.95 billion for FY 2007 and $3.2 billion for FY 2008. Miscellaneous revenues also contributed to the surplus, as more than $500 million in one-time revenues are expected for FY 2008.

Thompson’s report details the prudent measures undertaken by the City to employ surplus funds to reduce future budget gaps and notes the unprecedented prepayments of expenses in the third year of the Financial Plan.

He notes that the Mayor’s plan calls for the use of the FY 2007 surplus to balance the FY 2008 budget and reduce the gaps to $1.553 billion in FY 2009 and $3.261 billion in FY 2010. Without the benefit of the FY 2007 surplus, the FY 2011 gap would climb to $4.289 billion. However, Thompson projects that a steadily growing economy will yield strong tax revenues that would largely offset risks and reduce those gaps even more, to $648 million in FY 2009, $2.717 billion in FY 2010, and $3.991 billion in FY 2011.

 Thompson’s report also highlighted the following:

• Thompson projected that the FY 2008 surplus and thus the additional resources available for FY 2009 and beyond, will likely be $247 million greater than the City is projecting based on Thompson’s expectations for an additional $440 million in FY 2008 tax revenues. These would more than offset added risks of $193 million, attributable to overtime expense, collective bargaining, and assumed Federal education aid.
  
  
• Thompson noted that growth rates for several non-controllable expenditures have begun to moderate. Pension costs, which escalated after investment losses in 2002 and 2003, are expected to remain relatively flat starting in FY 2009, and the State has brought growth of the local share of Medicaid expense under control via a cap. Overall, spending is slated to grow 3.8 percent annually over the Plan period, after adjusting for prepayments.

• The Comptroller noted that the New York City Water Board, which sets water rates, voted on May 14 to raise water rates 11.5 percent for FY 2008. The New York Municipal Water Finance Authority’s (NYW) lease requires rent payments for use of the City’s assets be embedded in the water rates. The rental payment is based on a formula tying the amount of rent to NYW net debt service. With the growth of the debt-financed capital program, the rental payment to the City will grow in tandem.
  
  Thompson has proposed a strategy to mitigate the long-term impact of rapidly growing rental payments on ratepayers. The plan calls for the City to forego collecting most rental payments so that NYW could use those funds for rate reduction and pay-as-you-go capital spending.

• The City recently unveiled plaNYC 2030, a long-term plan to accommodate future population and economic growth, which includes energy-conservation tax incentives valued at $3 million. The proposal would divert $50 million from the personal income tax revenue stream to a new financing authority, the Sustainable Mobility and Regional Transportation Financing Authority, which would finance transportation infrastructure. Thompson questioned the need to create a new authority with an accompanying lack of transparency and public input, and whether this would be the best route to accomplish the desirable goal of expanding regional transportation investment.

• Debt service is projected to cost $4.649 billion in FY 2007 and to increase 35.5 percent over the Plan period. Growing debt service reflects the City’s ambitious capital plan, which is attempting to redress deficits in the state of good repair of the City’s infrastructure, comply with Federal mandates, and provide expanded capacity for future growth.

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