Reports

Local sales tax collections for all of New York State, including New York City, declined by 8.9 percent, or $640 million, over the first seven months of 2009 compared to the same period the year before.

This report analyzes historical trends in local capital spending and the current condition of our local infrastructure. It suggests some important steps that the State and local governments need to take to improve capital planning within New York. Finally, it suggests some policy options that could help sustain investment in the State’s infrastructure and encourage more coordinated, regional approaches to investment.

Two years ago, New York City’s economy was booming and the City’s coffers were overflowing with record budget surpluses. Today, the recession is rippling through the local economy and taking a heavy toll on tax collections. Tax collections, excluding recent tax increases, were down last year by $3.3 billion and are projected to decline by another $2.4 billion in FY 2010—a cumulative two-year drop of $5.7 billion.

This report provides a number of ideas and explains efforts undertaken by various municipal officials or identified through audits conducted by OSC that are applicable to most local governments, and that address costs that are under local control.

New York City is managing its way through its greatest fiscal challenge in decades as the recession ripples through the local economy and takes a heavy toll on tax collections. To help balance the FY 2010 budget in the face of a $6.8 billion drop in anticipated tax revenue, as well as to narrow the out-year budget gaps, the City has raised property taxes, slashed agency and capital spending, obtained extraordinary federal assistance, reached agreement with the municipal unions to reduce health care costs, and drawn down reserves built up during the last economic boom.

The Governor and State Legislature have taken important steps to stabilize the operating budget of the Metropolitan Transportation Authority (MTA) and to fund its next five-year capital program.

Over the past five years, the average cost of a college education has grown by over 30 percent, more than twice as fast as the inflation rate during this period.

The Enacted Budget for State Fiscal Year (SFY) 2009-10 clearly demonstrates the need for comprehensive fiscal reform.

In recent years, the number of affordable rental apartments in New York City has declined and more households are devoting at least 30 percent of their income toward rent. These factors have exacerbated an already serious lack of affordable housing in New York City.

Just a few years ago, New York City posted record budget surpluses, but now the City is facing its greatest fiscal challenge in decades. Tax revenues are projected to fall by $5 billion over a two-year period as a result of the rapid deterioration in the national and local economies, particularly on Wall Street, the City’s economic engine.

In 2007, nearly $61 billion in total project amounts were reported for all Industrial Development Agencies (IDAs) statewide.

Cash bonuses paid by Wall Street firms to their New York City employees declined by 44 percent in 2008 in response to record losses suffered by the securities industry.

The December 2008 Cash Report indicates that tax collections, while in line with current Financial Plan projections released with the Governor’s proposed budget on December 16, again illustrate a slowing economy.

In response to the ongoing economic crisis in the State and nation, the State Fiscal Year (SFY) 2009-10 Executive Budget recommends $9.5 billion in spending reductions, $3.1 billion in new and higher taxes and fees, and $1.1 billion in nonrecurring resources to close an anticipated $13.7 billion SFY 2009-10 General Fund deficit, including shortfalls expected in the Health Care Reform Act (HCRA) funds.

The financial crisis gripping the nation is the most serious since the Great Depression, and this recession is shaping up to be the worst in the post–World War II era. Events are transforming the Wall Street industry, which accounts for up to 20 percent of State revenue and 12 percent of City tax revenue.

The Hunts Point Food Distribution Center, often referred to as the Hunts Point Market, is the largest food distribution center in the world.

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New York State's economy is interdependent with the major U.S. automobile makers through New York State based auto- related jobs and billions of dollars of debt held by New York based financial institutions.

Wall Street and the nation have been pounded by the fallout from the subprime credit crisis that reached a critical point in July 2007.

Compared with other states, particularly those in the South and West, significantly fewer subprime loans were issued in New York, although there are areas within the State where subprime mortgages were utilized more frequently. However, the number of home foreclosures in New York is increasing as more homeowners are faced with mortgages of all types that they can no longer afford.

The current global financial market crisis could have serious implications for New York’s local governments if access to the credit markets remains constrained. While many long-term implications for local government finances may occur as a result of the broader deterioration in the economy, the credit situation has produced a more immediate impact on liquidity – the ability of local governments to finance their short-term capital operations and cash flow needs. Local governments who are dependent on short-term debt for these purposes could face continued risks.