“The people of New York have every reason to be happy,” Mayor Michael Bloomberg declared Jan. 25, after unveiling his fiscal year 2008 Preliminary Budget and announcing a $3.9 billion surplus and “$1 billion in tax relief to New Yorkers.”

Indeed, the mayor’s $57.1 billion budget for the fiscal year beginning July 1, 2007, was a breath of fresh air to many city labor leaders who had braced themselves for yet another attack on union pensions and other benefits.

The budget address included none of the usual rhetoric about the need for union concessions and givebacks that had become customary in previous budget addresses. Even as the fire and police unions wrestle with the administration for better contracts and working conditions, Mayor Bloomberg announced that the city would invest heavily in building more schools and a new training center for police, while providing more training for firefighters.

Bloomberg added that the surplus allows him to put away another $500 million in the Retiree Health Benefits Trust Fund created last January, for a total of $2.5 billion in deposit in the trust to be used to pay the costs of retiree health care benefits in future years. Another $1.4 billion from the surplus would go toward helping to reduce a projected budget deficit in FY 2009.

“When times are good, you have to squirrel away something to cover the bad times, because you will always have bad times,” the mayor said. “And New York City is familiar with the negative effects of fiscal downturns.” He added that the city is facing multi-billion dollar budget gaps in the out-years of the plan (FY 2009 – FY 2011), and “this is no time to be squandering our good fortune on unsustainable spending increases.”

However, Bloomberg plans to take advantage of the “booming economy” and the “good times” to cut business, sales, and property taxes. Some $750 million of this tax relief will be a temporary, one-year property tax rate reduction, which would come in addition to the extended $400 property tax rebates for homeowners. In addition, the mayor outlined $250 million in proposed permanent tax cuts for families and small businesses: $140 million in sales tax relief by eliminating city sales taxes on all clothing and shoes, and $110 million in five job-creating tax breaks for small businesses and S-corporations (companies with “limited liability”) in New York City.

Local 237 President Carl Haynes praised the mayor for putting aside money from the surplus into a “rainy-day fund,” but cautioned against excessive tax cuts “that may come back to bite us in a few years when the city is broke. We’ve been there, and done that so many times before,” he said, adding: “That’s what happened with the pension funds from 2000 to 2002 when the city could not afford to make its contributions into the pension systems, and each time city workers are the ones who end up bearing the brunt of it at the negotiating table.”

The mayor attributed the city’s whopping $3.9 billion surplus to a robust economy and the boom on Wall Street, which produced a total of $25 billion in 2006 for year-end bonuses for top executives in the securities industry. The city reports Wall Street profits at an estimated $16.8 billion in 2006, and forecasts predict profits closer to $14 billion in 2007 with significant softening in 2008.


Credits ‘Five Borough’ Strategy

Mayor Bloomberg credited his administration’s “Five Borough economic development strategy” for pushing unemployment to its lowest levels ever in 2006, with an annual unemployment rate of 5.0 percent. He added that “New York City has added 124,000 private sector jobs since 2003; the city’s leisure and hospitality sectors alone created 8,000 new jobs in 2006, and are expected to continue expanding.

The city’s larger-than-expected coffers also allow the city to spend more money on improving its infrastructure and building more schools. Bloomberg’s Preliminary Ten-Year Capital Plan, which accompanies the budget, focuses on education and economic development. Over 37 percent of the $77 billion capital plan between FY 2008 and FY 2017 will be spent on educational facilities, and includes extending the five-year, $13 billion school-capital-construction-plan, for which the city won $6.5 billion from Albany last spring, at the same level of annual commitment through 2017.

In addition, the city plans to develop the Hudson Yards area of Manhattan, the Atlantic Yards in Brooklyn, and invest in a variety of projects large and small citywide. The capital plan also includes an initial city investment of $15 million in the Lower Manhattan Security Initiative that will help safeguard bridges, tunnels, and infrastructure as well as everyone who lives, works, and does business downtown. The administration expects the federal government to invest $10 million in the first stages of this project, which is essential to protecting our nation’s financial center.

From the New York City Council’s response to the mayor’s spending plan, the budget process at City Hall is likely to be less contentious than at any other time. Council Speaker Christine Quinn and Finance Committee Chair Council Member David Weprin applauded the administration’s tax relief measures and expressed support for the planned “baseline funds for cultural, parks and family day care services.”