Despite Windfall, Mayor Budget Director Will Not Rule Out Tax Increases

Despite another windfall of extra cash for the city, Mayor Bloomberg's budget director is not ruling out tax increases to make up for cuts in homeland security funding from the federal government.

The administration is predicting $170 million more in tax revenue than officials projected when Mayor Bloomberg released his executive budget last month, the director of the city's Office of Management and Budget, Mark Page, told the City Council at a hearing yesterday. The city is now expecting nearly $700 million more in revenue than it did when the mayor offered his preliminary budget in January.

Officials said the latest revenue projections have not altered estimated surplus for this fiscal year, which remains a record $3.4 billion. Mr. Bloomberg has preached caution in dealing with the surplus, which would be much larger if the city had not already committed $2 billion to a health fund for retirees. The city is using most of the extra funds this year to balance the budget in 2007 and pay down future debt.

While a strong real estate market has made the city's short-term outlook rosier and rosier, the administration has stuck to warnings that an expected market slow-down and rising healthcare and pension costs will lead to budget shortfalls in the years ahead. Officials project deficits of more than $3.5 billion in 2008, 2009, and 2010.

Further clouding the fiscal future is the decline in anti-terrorism money. The city had asked for about $450 million but only received $124.5 million, a drop of 40% from last year. The chairman of the council's Finance Committee, David Weprin, asked Mr. Page if the city would need to raise taxes to cover the costs.

"I'm not aware of any immediate plans to raise taxes but the fact of the matter is that we live in a situation where there are always things we want to spend money on, and ultimately, we get the money out of taxes or we get the money from somebody else," Mr. Page responded. "The best somebody else in the business, as far as we're concerned, is the feds."

The city comptroller, William Thompson Jr., and the Independent Budget Office also testified at yesterday's hearing. In a report accompanying his remarks, Mr. Thompson largely concurred with the city's projections. The IBO, however, is more optimistic about the future. In a report issued last month, the office projected a $400 million surplus in 2007 and smaller budget gaps than the city is predicting for 2008-2010.

The testimony came as the council concluded more than two weeks of hearings heading into final negotiations on Mr. Bloomberg's $52.7 billion proposed budget. The council wants $338 million in restorations, as well as hundreds of millions of dollars for other initiatives. Following testimony from city budget and finance officials, dozens of residents signed up to speak in the public comment portion of the hearing. Packing the council chambers, they pleaded for more funding in an array of areas and programs, from childcare services and schools to cultural institutions and the Landmarks Preservation Commission.