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New York Post

 

Mike's Mountain Of IOUs

May 07, 2013

By Nicole Gelinas

Leaving a mess for next mayor

Mayor Bloomberg wanted reporters to take away one thing from his final budget speech last Thursday: He’s not leaving a short-term mess. Thing is, the mayor will hand over a big long-term mortgage — his legacy of debt.

Bloomberg stuck to his theme: He’s leaving the city in good shape. Thanks to his "long-term policy of fiscal discipline," he said, "we will be turning over a balanced budget to the next mayor."

True enough. As usual, the mayor will cobble together sufficient money to fund the $53.8 billion budget (not including $18.1 billion we get from the feds and the state).

Some of this is good luck (sort of): The city will get an extra $650 million in capital-gains taxes because people sold stock at year’s end, before the Obama tax hike kicked in.

Some of it is enforcement: City Hall’s green eyeshades will get $200 million more in corporate taxes after tough audits.

And some is good management: Gotham is enjoying $6.5 billion this year in "repetitive savings" — the result of 12 separate rounds of budget-cutting since 2008.

Expect the mayor to push this theme further in the months ahead — and even to announce in the fall that, thanks to higher-than-planned tax revenues, the next mayor will face less of a first-year deficit than the $2.2 billion now expected.

Behind the superficial "balance," though, what’s in the budget is a disaster.

For the fiscal year that starts in July, New Yorkers will spend $23.3 billion — fully 43 percent of the money they pay in taxes and fees — on just three things: pensions and health benefits for city workers and retirees, plus payments on city debt.

When Bloomberg took office 11 years ago, these three things ate up just 24.3 percent of the budget, $6.9 billion — a figure that was already too high for our long-term good.

In the past two years, as it’s become clear that a new Wall Street bubble wouldn’t rescue Bloomberg’s third term, he’s been talking more about the first two costs — city-worker pensions and health care.

But Bloomberg talks about these things only to argue that they aren’t his fault. The "out-of-control stuff, there’s really nothing we can do about it," he said Thursday.

Funny: He hasn’t been at all shy about taking on other things he doesn’t control — like national gun policy.

Plus, the mayor does control the third big-ticket item: debt.

Next year, New Yorkers will make more than $6.2 billion in annual debt payments — nearly triple what they spent when Bloomberg took office.

That’s because the total amount the city owes has jumped from $42.7 billion to $77.2 billion. Every New Yorker owes $8,919 — 47.6 percent more than the runner-up among US cities, Chicago.

(By the way, this figure doesn’t include $28.4 billion in water-related debt, which people pay via their water bills, not taxes.)

Why so much debt? New York borrows not for its day-to-day budget, but to build and replace stuff.

"We have to build more classroom seats, we have to build a new water tunnel, we have to fix a water tunnel that’s falling apart, we need more sanitation trucks to plow," Bloomberg said.

Yes — and the city had to borrow heavily as it emerged from the 1970s and early-’80s fiscal crisis, when it let bridges and schools deteriorate. But as the city caught up with that neglect, it should have borrowed less, especially for day-to-day repairs and replacements.

That’s because most of this spending doesn’t create new tax revenues that can repay the debt. We’re not building bridges to get people to move here, we’re painting bridges so they don’t corrode — so that the people who are already here don’t fall into the water. This maintenance is not something we should be borrowing for.

The Bloomberg debt will squeeze the next mayor. The city is set to make fewer new investments in infrastructure, such as new schools. But even though we’ll be incurring less new debt, we’ll still be adding to the huge existing pile. So annual debt costs will continue rising, hitting $7.2 billion during the next mayor’s first full year in office.

He’s also leaving his successor with a risk: 14 percent of our debt is "variable rate" (like teaser-rate mortgages). This costs less now, thanks to record-low interest rates — but taxpayers will have to pay more when interest rates go up.

Bottom line: The city’s headed for trouble — and, for all his efforts to suggest otherwise, it’s because Bloomberg will leave us teetering on a mountain of long-term debt.

Original Source: http://www.nypost.com/p/news/opinion/opedcolumnists/mike_mountain_of_ious_uj03rw2AYrbpGkhSAYNhBK

 

 
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