The fiscal impact of Mayor Michael Bloomberg’s plaNYC 2030 could be huge in the long run, but judging from the mayor’s $59 billion executive budget for 2008, the short-term impact will be quite modest. Released a few day’s after Bloomberg’s Earth day speech, it includes only $200 million for programs called for in his plan for a sustainable city, and the $84 billion, 10-year capital budget plan has only $1.6 billion specifically targeted for plaNYC.
The long-term fiscal impact of the plan is unclear because its big-ticket investments, especially in the key transportation area, depend largely on the future political actions of officials from outside the city. To fund its grand vision, plaNYC will require a new state-authorized public financing authority, shared city/state authority on regional transportation issues, a multi-billion dollar revenue stream from congestion pricing, and a promise from the state to match billions of future city investment dollars. And the term-limited mayor has little more than two and a half years to get this done.
Who Pays What
Wasting no time, the mayor has bravely assumed early state cooperation and therefore targets $50 million of the $200 million in his expense budget for plaNYC initiatives to the so-called SMART fund, a joint city and state pool to be used to pay for currently unfunded transportation projects through 2030. The fund would be controlled by the proposed city/state SMART (Sustainable Mobility and Regional Transportation) Financing Authority. The executive budget assumes the SMART funding jumps to $220 million in 2009, $260 million in 2010, and then to $275 million in 2011.
The mayor hopes that the state will match those city SMART dollars every year â€“ and beyond -- much as it currently does with capital costs for the city’s public school system. The third source of money for the fund would be congestion pricing fees, estimated to be $380 million in the first year of operation, and over $900 million a year by 2030. But the congestion pricing program itself would require an investment of $224 million. Together these thre funding sources would funds pay the debt service on bonds the new financing authority would issue to pay construction costs for the many transportation projects.
The SMART fund would raise and spend $31 billion from 2008 to 2030 on 21 unfunded or only partially funded “first priority projects,” including such capital programs as a 10th Avenue subway station for the extended Number 7 train on Manhattan’s West Side ($225 million), an express bus lane to the Lincoln Tunnel ($650 million), a major share of the rail link between the Long Island Railroad and Grand Central State ($2 billion), and the second phase of the Second Avenue Subway ($1.7 billion).
The total costs of these projects amounts to $50 billion â€“ the balance would be funded by the Metropolitan Transportation Authority, the state, and the federal government â€“ so the $31 billion SMART share is crucial.
Other items included in the 2008 expense budget commitment to PlaNYC are $81 million for energy conservation, $27.5 million for a brownfields fund
And related expenses and $8 million for tree pruning and maintenance. By 2011 total expense budget spending on plaNYC 2030 would reach $400 million a year.
On the city capital budget side, the modest $1.6 billion in PlaNYC investments (over 10 years) includes nearly $250 million for street trees (15,500 trees a year) and $118 million for trees in the city’s parks. Parks overall would get more than $950 million over 10 years and transportation initiatives about $250 million.
The Political Thicket
Because the big money in plaNYC is tied to future state legislative and state budget decisions around the proposed SMART authority, the basic questions here are political, not fiscal. The mayor wants the city to be an equal partner with the state on regional as well as city transportation matters. Today, the mayor lacks power over the agencies that could implement his large vision. He is often at the mercy of the governor, who controls the MTA and other state authorities and agencies, and the state legislature.
The mayor’s plan also makes an implicit case for creating and maintaining a Bloomberg legacy. In its proposal for the SMART authority, the administration asks that any legislation establishing the authority not only split its governance evenly between city and state, but it “should state that board members must not be government employees; that membership terms should be staggered; and that experience in finance, planning or transportation be a prerequisite for membership.” This would give the mayor appointment powers to help place supportive individuals who would remain on the authority’s board beyond the end of his term in 2009.
A fiscal plan that depends on as many political variables as does PlaNYC 2030 will require enormous good will and cooperation among state and city officials in order to push forward. One thing that the city has going for it is its solid, long-term experience and commitment to major capital projects. As the new 10-year, $84 billion capital plan dramatizes, the city is already thinking big.
Moreover, as a recent study by the Independent Budget Office of an earlier 10-year capital plan (the 2000-2009 plan, developed by former Mayor Rudy Guiliani and amended and implemented by Bloomberg) shows, the city has generally met or exceeded its ambitious capital goals.
For instance, between 2000 and 2006, the city committed nearly $42 billion in capital investments, $4.6 billion more (12 percent) than originally planned in 2000. Economic development projects totaled $1.3 billion, 85 percent more than planned, largely because of Bloomberg additions. (Interestingly, one area in which commitments fell well behind plan during the six years was transportation, where state-of-good-repair commitments for bridges and highways were about $2 billion less than originally planned.)
Thus a case could be made that the city has the track record and capacity to contribute much more to the long-term funding for PlaNYC. City government is certainly flush with cash. The executive budget reports nearly $5 billion of unexpected revenues in the current fiscal year (plus nearly $700 million of savings on the expense side). Tax revenues â€“ mostly from business income and real estate transaction taxes â€“ rose $1.5 billion just since January’s preliminary budget. With several weeks left, the 2007 budget could approach the $6.4 billion of unanticipated resources realized in 2006.
The mayor continues to use these resources in very conservative ways: the Retiree Health Benefits Trust Fund gets another $500 million in 2008, and now totals $2.5 billion; much of the other revenues and savings go to prepayments of future costs, particularly debt service. Some $350 million will go to debt service otherwise due in 2010. A new wrinkle in the executive budget is that $1.25 billion of excess dollars in 2007 will be used to retire debt, which will save about $650 million of expenses in both 2009 and 2010.
One mayoral argument for these conservative uses of extra revenues is the prospect of $3.3 billion and $4.3 billion deficits facing the city in 2010 and 2011. Yet the four-year city plan continues to include four years of a new tax reduction program that will cost the city $1.3 billion in 2008 in lost revenues, rising to $1.85 billion in 2011.
So, as the mayor enters the thickets of state politics in search of the authority and non-city money to implement PlaNYC 2030, he and the city council might want to consider using more of the city’s extraordinary resources to better insure its development.