Is New York City back from the fiscal depths for good?
In a matter of days, officials here will announce with a great sense of pride and accomplishment that the nation's largest city has achieved its first truly balanced budget in nearly a decade.Skip to next paragraph
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In fact, the Office of the Special New York State Deputy Comptroller for the City of New York estimates that the city will have a $400,000 surplus for fiscal year 1981 ending June 30. Other forecasts put the figure at close to half a million dollars.
Nonetheless, new doubts are being raised about the city's fiscal stability. And the facts indicate that contrary to what city officials like Mayor Edward I. Koch (D) would like everyone to believe, New york's fiscal time bomb is still ticking away -- to some extent louder than ever.
According to experts in and out of government, these are some of the reasons why the city's so-called financial comeback is shaky and may be short-lived:
* Leading economic indicators are down.
Retail sales, hotel occupancy, and foreign tourism are off substantially from recent years. Thus revenue projections for fiscal year 1982 may be inflated, according to special state deputy comptroller Sidney Schwartz.
* New hiring policies threaten to balloon expenses.
Instead of making "productivity" its main avenue for bolstering services, the city plans to hire new workers at great cost while not focusing on productivity nearly enough, according to the Citizens Budget Commission (CBC), a private citizens' watchdog group.
* The city is wrongly counting on a continuing boom economy.
"Our major concern is that the city is beginning to anticipate a higher revenue growth when it may be that the peak has passed," deputy comptroller Schwartz told the Monitor in an interview.
* The real estate taxes have not kept pace with growth in property values.
The real estate tax is the city's single largest revenue source, amounting to inflation nor with the growth rate of other city taxes, a state study recently showed.
At the same time, city officials can look back at the ledger of six years ago and smile with satisfaction. In 1975, the city deficit, according to generally accepted private industry accounting principles, was $2 billion. The nation's largest city could not sell its bonds on the private market; bankruptcy was often literally just days away, only to be averted by the most adroit of fiscal juggling acts.
Now the budget is more than just balanced; it's showing a surplus. Earlier this year the city reentered the private bond market. Standard & Poor's Corporation has given city securities a "triple B" rating, the lowest investment grade rating, but certainly a step above no rating at all. With a combination of attrition, early retirement, and layoffs, as well as some productivity gains, the city has made deep cuts into its work force; the Sanitation Department, for example, has 16 percent fewer employees today than six years ago.
But satisfaction with past budgetary progress should be tempered with a great deal of caution, fiscal experts contend. "A lot of people have been lulled into a certain sense of relaxation," says CBC research director Jim Hartman. He characterizes the city's fiscal condition as still "very fragile."
Last fall, the CBC wrote in a "Report on New York":
"[The] city maintains that its budgetary problems are not as difficult as previously reported, largely because a strong city economy is producing higher tax revenues. As a result of these increased revenues, as well as expenditure cuts, [and] increased state aid . . . the city now projects a balanced budget for fiscal year 1981."
The city was right at the time. but its booming economy, with retail sales at times increasing at a whopping annual rate of more than 20 percent, has begun to wind down, in part because of the strengthening of the dollar abroad that has made New York a more expensive place for foreign tourists and business people.