New York is heading into a financial abyss. On October 1, Moody’s downgraded New York City general obligation debt for the first time since the Dinkins era, and warns that more downgrades may be ahead.
Meantime, the De Blasio administration announced October 3 that it was defaulting on a long scheduled $900 million deferred payout to current and former employees. Intervention by a court led to more obligations.
City revenues are plunging, particularly sales tax revenue. Only 10% of Manhattan office employees are back working on site, a lower figure than almost anywhere else in the nation. With workplaces empty, the businesses around them are failing. Retailers, shoe shines, food trucks and restaurants have too few customers. State Comptroller Thomas DiNapoli predicts half of the city’s restaurants will fail, costing over 160,000 more jobs.
New Yorkers need to take action to rescue our city. Here’s a two part strategy to halt the city’s rapid decline.
Step One: Reactivate the Financial Control Board that led New York out of financial ruin in the 1970s. The board was established in September, 1976 as the city faced bankruptcy. For a decade, under the mayoralties of Abraham Beame and Edward Koch and for part of the tenure of Governor Hugh Cary, the Financial Control Board served as the Bad Cop, imposing wage freezes, nixing labor contracts the city couldn’t afford, and overseeing the city’s budget.
By 1986, the FCB had restored the city to fiscal stability, with balanced budgets and access to the credit markets. At that point the board’s emergency powers expired, but the Board itself still exists. By law , it includes the Governor, Mayor, state and city comptrollers and three additional members appointed by the Governor.
The Control Board can make changes that elected politicians lack the will to demand. The city needs to provide services at a lower price tag by reducing labor and fringe benefit costs and improving work rules. The city’s current leaders have shown little willingness to reduce spending, even suggesting borrowing to cover operating losses instead.
Now is the time for Albany lawmakers to step in and impose FCB control on city finances. Any future mayor should welcome it.
Step Two: To restore commerce and the sales tax revenue it generates, the city needs to attract the office workers and visitors who are staying away out of fear of the virus. Whatever federal stimulus money is forthcoming should be used to install anti-viral technologies in office buildings, other workplaces and transit systems.
Politicians want to use forthcoming federal stimulus money to plug current budget holes . That would be a lost opportunity. At the end of a few months, there will be nothing to show for it. New York City will not be safer or any more prepared for the next pandemic, and spending will still be at unsustainable levels
Instead the federal aid should go to for permanent indoor and transit improvements including air cleaning systems, virus-de-activation technologies, and antimicrobial coatings on desks, keyboard, subway poles and seats. These technologies will make employees feel comfortable returning to the city.
Federal funding can pay directly to improve public facilities and support tax incentives for the private sector to do the same.
Right now, the COVID19 infection rate in New York City is hovering just over one percent, far lower than in most parts of the U.S. Yet the city’s recovery from COVID-19 lags the rest of the nation. That can change by re-empowering the Financial Control Board and using science to make the city feel safer.