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Debt Per Capita Reaches $7,153 – More than Twice That of Other Large Cities
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Comptroller Says City Must Continue to Lower Spending on
Capital Projects

View FY09 capital debt report (pdf)

New York City Comptroller William C. Thompson, Jr. today issued a Capital Debt and Obligations report indicating that the cost of capital projects, which are funded primarily with debt, has escalated by 187 percent since Fiscal Year 1990.

“When times are tough, New Yorkers and their families know it is necessary to tighten their purse strings, reorganize spending priorities, and minimize debt in order to be more financially responsible,” Thompson said. “Without a course correction, New York City’s debt burden is projected to grow beyond the point of affordability.”

The report can be viewed at www.comptroller.nyc.gov.

“Capital projects that seemed affordable before may have been based on a revenue bubble that has since burst,” Thompson said.  “New York City leads other large American cities in average debt per capita by a margin of two-to-one. Particularly in light of the City’s and the nation’s financial difficulties, it is imperative that now we redefine capital priorities in order to achieve fiscal responsibility.”

Debt per capita – which is the share of the burden on each of the City’s eight million people – grew to $7,153 in Fiscal Year 2008. That is an increase of 187 percent since FY 1990, when debt per capita amounted to $2,490. Over the same period, the cumulative growth rate in debt per capita exceeded the rate of inflation by 115 percentage points and the growth rate of City tax revenues by 32 percentage points.

“The City has taken an important first step by stretching or postponing certain upcoming capital projects in the November Capital Budget, but more must be done to aggressively evaluate the best ways to allocate our tax dollars,” Thompson added.

The City uses capital bond proceeds for more school buildings, firehouses, health facilities, community colleges roads and bridges, libraries, and police precincts than any other municipality in the country. Bond proceeds also are used for financing shorter-lived capital items such as comprehensive computer systems.

“The City must also continue its efforts to secure capital dollars from the Federal government when possible,” Thompson said. “While it is vitally important for the City to maintain its complex, varied, and aging infrastructure, these costs place a significant burden on the City’s operating budget and crowd out other vital city services.”

Under Section 232 of the City Charter, the Comptroller reports on the amount of debt the City may responsibly incur for capital projects during the current fiscal year and each of the three succeeding fiscal years. Debt is issued by the City, or on behalf of the City, through a number of different vehicles, including General Obligation (GO) debt, the New York City Transitional Finance Authority (NYCTFA) and TSASC, Inc.  Under the City Charter, the Capital Budget is prepared by the Mayor and approved by the City Council.

The 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 2009 general debt-incurring power of $70.42 billion is projected to rise to $75.24 billion in FY 2010, $79 billion in FY 2011, and $80.63 billion in FY 2012.

The City’s General Obligation (GO) debt was $34.19 billion at the beginning of FY 2009. After including contract and other liabilities and adjusting for appropriations, the City’s indebtedness that is counted toward the debt limit totaled $42.64 billion at the beginning of FY 2009. This indebtedness is expected to grow to $59.26 billion by the beginning of FY 2012.

Additionally, the debt-incurring capacities of NYCTFA and TSASC total $17.3 billion, of which $14.8 billion has been utilized to finance the City’s capital program.

Among the cities surveyed in the report, New York City also ranks among the highest in two measures of debt burden that factor in a locality’s wealth, and is well above the averages of the sample cities and counties.

New York City’s outstanding debt as a percentage of full value of real property in FY 2007 was 8.6 percent. This was 4.8 percentage points above the sample city average of 3.8 percent. Philadelphia at 17 percent and San Antonio at 9.4 percent both exceeded New York City’s ratio. Other major cities had considerably less debt relative to full market value compared to New York City. For example, Chicago’s debt was 4.5 percent of full market value and Los Angeles’s debt was 3.1 percent of full market value.

Compared to the same set of cities, New York City’s debt as a percentage of personal income in FY 2006 was the highest at 14.5 percent, more than twice the 7.0 percent average of the other sample cities. Philadelphia and San Antonio were the next highest ranked cities at 13.3 percent and 11.6 percent, respectively, with Boston the lowest at 2.9 percent.

Despite turmoil in the capital markets, the City continues to have market access to sell its debt and has successfully sold $2.865 billion through GO, NYCTFA Building Aid, and Water Authority credits since the Lehman Brothers bankruptcy filing in September 2008. However, some individual transactions have been reduced in size, requiring more frequent sales.

The City’s GO credit is rated AA by Standard & Poor’s, Aa3 by Moody’s Investor Service, and AA- by Fitch Ratings, in each case with a Stable outlook.

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