FCB Warns New York
Not to Renew 7% Cut
In City's Property Tax
By Henry J. Stern
July 23, 2008
Our warning yesterday about the impending financial crisis for city and state government, so far relatively undiscussed by public officials and local media, was reflected in the July report of the New York State Financial Control Board for the City of New York.(FCB). To learn about the FCB, go to its short website. To read a summary of the Board's July report, link here.
The FCB was generally supportive of the city government's effort to avoid budget deficits. They pointed out that because of deteriorating market conditions and declining real estate activity there was a likelihood of a revenue shortfall in Fiscal 2009. To repeal the 7 per cent rebate on the property tax which Mayor Bloomberg and the City Council have granted for the past two years would bring in an additional $1.2 billion this year and a projected $1.4 billion in Fiscal 2012.
Adam Lisberg, City Hall bureau chief for the News, covers the story today on p6: PROPERTY TAX CUT FACES AX. The lede:
"New York must rescind its 7% property tax cut next year in order to keep the city from drowning in red ink, the city's fiscal watchdog warned Tuesday. Eliminating the cut will raise more than $1 billion extra in each of the next three years, which would still leave the city with a $12.6 billion budget gap...the FCB said.
"The tax break for homeowners was extended last month for another year at the City Council's insistence despite misgivings from Mayor Bloomberg, who said the city desperately needs that money as the economy sours and tax collections plummet."
You can link to the Lisberg story, which is a brisk summary of the impending fiscal crisis.
There are two conclusions that we draw from reading dozens of fiscal stories. We suggest some possible reasons for coming to those conclusions. We do not offer these suggestions as solutions to the fiscal shortfall, but they are observations based on experience with what is certainly a chronic condition.
1. The city is more responsible than the state, perhaps because of Mayor Bloomberg's background in business, perhaps because there have been three governors in the last eighteen months, and one mayor for the past seventy-eight months.
2. The executive (governor or mayor) is more responsible than the legislature (senate, assembly or city council), perhaps because the executives and their staffs know more, perhaps because they have already reached the top and are not that fixated on ways to climb there, and perhaps because executives fear they will be held accountable for fiscal calamities in ways that legislators are not.
In general, the public is indifferent to predictions of fiscal difficulties. That is because they have all seen and heard it before, because they don't particularly believe what the government says anyway, and because they expect that, in time, the authorities will resolve these matters as they have done in the past.
If and when the fiscal shortfalls result in tax increases or loss of services, you will probably see some reaction from those members of the public who are directly affected by the changes. Meanwhile, the struggles of the Yankees and the Mets engage more New Yorkers than the economic clouds which lie ahead, unless, of course, they have already been laid off or the bank has foreclosed on their home.
Our point in calling attention to these matters at this time is that, as we said yestreen (an allusion to yesterday's subject line, Red Ink at Morn, Sailors Take Warn), the sooner the Paterson and Bloomberg administrations start taking action to deal with the impending deficits, the less draconian the actions they take will have to be.
Sometimes one feels that the situation is comparable to addressing a mule. Asking the creature nicely to act promptly is usually a hopeless task. Our fiscal anxiety, however, is a far milder version of the concern expressed by Linda Hamilton, who having disposed of Arnold Schwarzenegger (in his most famous role) is driving to Mexico to escape what she knows is about to happen to Los Angeles.
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