For 12 years, soon-to-be-former Mayor Mike Bloomberg had a fiscal and economic philosophy: He couldnt cut the costs that were ballooning the city budget. But he would try to grow the economy so the city could better afford those costs.
Incoming mayor Bill de Blasio will benefit from Bloombergs investments — but he also needs to keep up economic growth to help pay for those investments.
The city is growing well. Weve got 413,000 more private-sector jobs than when Bloomberg took office. Thats 13.7 percent growth — 2¹/₂ times more than the country.
But its not enough to support another generation of public workers who retire in their 40s and 50s. The mayor said as much two weeks ago. He forthrightly admitted efforts to trim future pension and health-care costs had met with “very little success,” and that those costs could “not be sustained for another generation.”
Still, even though economic growth cant work miracles, it sure is necessary for fiscal health. Thats especially true because Bloomberg borrowed to pay for his investments in the future — and so we need the future to repay that debt.
Just look at how the citys debt has grown over the Bloomberg years. In the fiscal year that ended in June 2002, six months after the mayor took office, New York owed $55.3 billion in inflation-adjusted dollars. Today, the city owes $79.4 billion. Thats up 43.6 percent, after inflation. Back then, every New Yorker owed $6,857 in local-government debt. Today, each owes $9,522. That matters, because a big chunk of the budget must pay for this debt.
Before Bloomberg took office, the city spent $1.8 billion annually on interest and principal costs, or about 5.5 percent of the city-funded budget. During de Blasios first year, debt will cost $7 billion, or 13.1 percent of the budget.
Of course, lots of this debt has a real benefit. Consider one of Bloombergs proudest accomplishments: extending the No. 7 subway southwest from Times Square to the Far West Side, near the Javits Center.
This $2.4 billion investment has already spurred growth, even before it opens next summer. The West Side above Greenwich Village and below Central Park grew by 18 percent between 2000 and 2010, faster than any other New York neighborhoods. (Greenwich Village shrunk, and the Upper West Side remained stagnant.)
Besides towers going up, the subway has already encouraged the construction of 6,000 apartments — including thousands of rental apartments for Manhattans upper-middle-class tech, media and financial workforce. (If you dont build new apartments for wealthier people, theyll buy or rent older apartments, pushing up costs for middle-class people.)
Its the first time the city, rather than the state or feds, paid for a new subway in 60 years. This debt likely will pay for itself over the next decades through tax revenues from new jobs and higher property values. But lots of debt cant pay for itself.
Of the citys general-obligation debt, the city comptroller reported this month, a third went to education — largely refurbishing old schools. This type of debt doesnt really spur growth, but keeps the city where it was decades ago, just as repainting your house doesnt make you richer. Likewise, of the 11.5 percent of debt that financed roads and bridges, most was just to keep old stuff from falling down, not to build new stuff.
Plus: what does de Blasio want to build?
In his 2002 inauguration speech, even as rebuilding from 9/11 threatened to overwhelm everything else, Bloomberg was looking forward. He said “we will plan” projects like the No. 7 extension now to “build as funds become available.”
But in his November victory speech, de Blasio didnt mention infrastructure. He seems more interested in redistributing the wealth New York already has than in figuring out how to make it richer.
Some de Blasio policies, too, could dampen Bloombergs efforts to create future growth. A higher “living” minimum wage for unskilled workers would push executives at low-profit retail and fast-food outlets to replace humans with technology like shelf-stocking robots.
Higher taxes on the wealthy, too, may hurt our ability to pay for past debt. With the top 1 percent paying 43 percent of the citys personal-income taxes, we cant afford to lose even a few of them.
Bloomberg leaves a debt burden. But de Blasio can make dealing with that burden easier or harder.
Original Source: http://nypost.com/2013/12/29/how-to-keep-gotham-growing/