New York City could face a budget gap of more than $6 billion for fiscal year 2011, the city comptroller, William Thompson Jr., predicts in a report issued yesterday. “New York City’s economy is at a turning point,” Mr. Thompson warned. “Turmoil in the nation’s housing and mortgage markets has reverberated through the financial sector, threatening to produce a marked slowdown in local economic activity.”

Mr. Thompson said in the report that the “collateral effects” of the housing crisis are likely to include financial losses and layoffs that will “fall disproportionately on New York firms and workers.”

Mr. Thompson praised Mayor Bloomberg for imposing budgetary restrictions and hiring freezes in late October, in anticipation of an economic slowdown. “With the October 2007 revisions to the City’s financial plan, the mayor has taken the first steps toward addressing the budgetary risks of this shift in the economic cycle,” Mr. Thompson said in the report. City officials are now lowering their tax revenue estimates for the coming years. Compared with the estimates the City Council made this spring, revenues for the 2008 fiscal year have been revised down by $148 million. Estimates for the 2009–2011 fiscal years have also been lowered, by $579 million, $642 million, and $858 million respectively.

In the face of declining tax revenue, Mr. Thompson raised alarms about the rising cost of interest on New York City’s debts. His report projects that debt payments will begin to eat into more and more of the city’s tax revenues during the coming years. Debt service is expected to grow at an annual rate of 7.3% through fiscal year 2011, his report warns. Mr. Thompson suggests that the “laudable practice” should be augmented through the establishment of a so-called rainy day fund, which would allow the city’s savings to be spent only under specified conditions.