The city, already under pressure from an economic downturn and an anticipated loss of tax revenues, is facing larger-than-expected budget gaps, according to the city comptroller.
Comptroller William Thompson Jr.'s budget projections, which he will present at today's meeting of the New York State Financial Control Board, mark the second time a fiscal monitor is reporting that the city is underestimating its financial shortfall for future years.
Mr. Thompson projects that weak tax revenues and overtime costs will create a $68 million gap in this year's budget and that the city faces budget gaps of nearly $5.7 billion in 2011 and $5.4 billion in 2012, about $538 million and $334 million more than the city had projected, respectively.
In a report issued yesterday, the comptroller states his concern about the city's rising debt service costs, which he expects will increase by 7.6% a year over the next few years. Last year, the city's outstanding gross debt totaled more than $7,000 a person, according to his office.
The report attempts to poke holes in the mayor's budget, pointing out that the city is banking on a $200 million annual savings by restructuring its health insurance costs before it has put forth a plan to achieve those savings.
It also says the city is underestimating its overtime costs for employees, saying they will exceed the $100 million a year predicted by the city.
The city's pension costs are expected to grow by $142 million between 2010 and 2012, the report notes, and says changes in accounting standards will prevent the city from borrowing money for certain expenses, at an estimated cost of $500 million a year.
Mr. Thompson is urging the city to reduce its debt service by paying up front for capital projects, rather than borrowing and accumulating more debt.
He calls on the city to create a "rainy day" reserve fund to help it weather the economic downturn. Creating such a fund, however, would require approval from Albany. A spokesman for Mayor Bloomberg declined to comment on the report.
Despite the new numbers issued by Mr. Thompson, who is a likely candidate for mayor, the impact on the city's budget of the economy's performance, the slashing of Wall Street bonuses, and layoffs in the financial sector is an open question among fiscal monitors, who are attempting to estimate the fallout.
"It is just a tremendously uncertain period, and we keep thinking that in a few months we will have a better idea of how things are going to go," the city's deputy comptroller for budget, Marcia Van Wagner, said. "This is going to be more a slowly deflating situation in the city rather than falling off a cliff, but that could change and in six months we could be saying: 'It is a total financial disaster,'" she said.
The Financial Control Board presented a budget forecast that is grimmer than the comptroller's estimates in a report it issued last week. It said budget gaps could be $2 billion more than the city projects in 2010 and $2.4 billion greater than projected for 2011.
In its projections, the Financial Control Board did not assume that the city would rescind a 7% property tax cut in place this year, as Mr. Bloomberg has said he plans to do.
Mr. Thompson assumed in his projections that property taxes would increase to bring the city more than $1 billion in new revenues beginning next year. A change in property taxes would require approval from the City Council.
Mr. Thompson also found that spending in the city will grow by 4%, while the city has stated that spending would stay virtually flat. Mr. Thompson recalculated spending rates so that they included expenses that were prepaid in an earlier year
Mr. Bloomberg and Governor Paterson are expected to testify at the Financial Control Board's annual meeting today in Manhattan.