After five years of booming development and growth, the economy is at a crossroads. The crisis in the housing and credit markets is expected to result in a slowdown in growth nationally this year and in lower city tax revenues and jobs generated by our financial services industry.
If elected city comptroller I will fight for policies that support these goals and manage the city's fiscal affairs so that the maximum resources are available to attain them.
As financial advisor to the city's five pension funds, the city comptroller carries the immense responsibility of producing the best possible investment returns on the $112 billion of assets currently in the funds. The failure to do so not only hurts future payouts to retired city employees but can also increase the city's annual contributions to the funds (which are projected to reach more than $6 billion in each fiscal year from 2009 to 2011). While investment returns have been stellar in recent years, the economic downturn poses a significant hazard to the funds and the city's fiscal health.
Through my role as a trustee of the New York City Employee Retirement System for the last six years, I have become intimately aware of the complex decisions involved in investing in global financial markets and am prepared to take on the role of financial advisor. One of the first actions I would take as comptroller is to direct more staff and resources to this function of the office to meet the challenges posed by current economic conditions. I would also continue and accelerate Comptroller William Thompson's policies of protecting our pension investments through shareholder rights initiatives.
The city is facing a debt burden that will increasingly restrict our ability to pay for school, housing and economic development initiatives, and other pressing capital needs. This burden will only intensify in an economic downturn. As comptroller, I will advocate for solutions to this problem that include, among other things, increased "pay-as-you-go" financing and a harder look at what capital projects really need to be financed.
The current law that allows city budget surpluses to be rolled over only into the next fiscal year and not beyond masks serious imbalances between our revenues and expenses and deprives the city of the chance to salt away money during the good years.
In the bad years, the city has often resorted to "one-shot" infusions of cash that only exacerbate future budget deficits. The city needs authority to establish a rainy-day fund, in addition to the city's retiree health care trust fund, that can be tapped for general expenses during the kind of economic downturn we are about to face. While it is not the function of the comptroller's office to create budget policy, I will work for statutory changes that would allow us to create such a fund and avoid the use of one-shots.
The comptroller's power to review and audit city contracts and agencies is essential to ensuring a well-managed, efficient city government. During an economic downturn, it is even more important that the city comptroller require city vendors to deliver what they promise and city agencies to eliminate wasteful spending.
As Bronx borough president, I have led the charge in the development of green, energy-efficient buildings in the borough and will vigorously support the movement to more energy-efficient city facilities. I will also continue Thompson's push to increase the accountability of businesses receiving city tax subsidies from the New York City Industrial Development Authority.
The city comptroller's office also plays a limited, but important role in providing direct services to constituents and weighs in on policies having a major effect on city residents. Of particular concern to me is the sub-prime mortgage debacle and the increasing loss of Mitchell-Lama housing in the city. In the Bronx, I have been leading an effort to better coordinate information and services among the various institutions that provide assistance to Bronx homeowners unable to make the payments on their sub-prime mortgages.
As comptroller, assisting homeowners to keep their homes will be a top priority. I will use the bully pulpit to demand that the federal, state and city governments expand their housing programs in the city and create new financing options that help city residents remain homeowners.
I believe that by addressing these issues we can continue to grow a stronger economy and improve the lives of all New Yorkers.
Adolfo CarriĂłn, a Democrat, has served as Bronx borough president since 2002.
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With a sluggish national economy and recession looming, New York City faces a potentially perilous economic future. Because of this, next year's election is so important. While the media's attention will be largely focused on the race for mayor, it is the position of comptroller that can have the most direct impact on the strength of city finances for years to come.
The authority of the office, which includes the power to audit city agencies as well as investment oversight of the $106 billion pension fund, brings with it an immense amount of responsibility. The next comptroller will play a critical role in protecting the solvency and economic vitality of our City.
The situation confronting the next comptroller will depend in large part on the duration and depth of the looming recession. It will take bold vision and creativity to lessen the financial impact on the city and get the engines of our economy moving again. As comptroller, I will push for a three-pronged strategy to: maintain our core tax base, streamline government services to tighten spending and invest in the future.
When New York has faced financial crises in the past, we have seen our core taxpayers -- working families -- driven from the city. No new spending program or bold initiative will be possible if we lose our working families, the heart of New York City. A New York without public school teachers, police officers, firefighters or sanitation workers is not what we want to become. If we are to remain a viable, dynamic, thriving city, we must protect our urban middle class.
As I travel throughout the city, the number one question I am asked is how the sub-prime housing crisis will affect New York. Current trends in the real estate market suggest that Manhattan should remain safe for now, but we need to protect ourselves. It is the residents of the four boroughs outside Manhattan, where most of New York's working families live, who are most vulnerable
The crisis already has had a direct impact on many New Yorkers, from families losing their homes to financing for larger commercial projects proving much more difficult. Nationwide, the domino effect from the sub-prime fiasco is spreading from banks to credit markets to bond insurers to municipal bond ratings, which could devastate the entire financial services industry.
The first step in addressing the concerns of working families is to assist New Yorkers in weathering this. While homeowners throughout the country will need substantial assistance at the federal level, New York can work quickly with major banks and lenders to shore up the housing market here by guaranteeing portions of existing mortgages in exchange for extensions in favorable introductory rates. This will help settle the New York real estate market and send a clear message to affected residents that our city is fighting for them.
Because public education is the cornerstone of the urban middle class, the second key component of keeping our tax base is through a strong public school system. While the jury is still out on many of the Bloomberg administration's education reforms, thanks to the hard work of our teachers and principals, we are seeing signs of progress. In difficult budgetary times, the classroom must remain one of the last places where we cut funding. Instead, we should focus any funding reductions on the Department of Education itself.
City government must tighten its belt and evaluate how government services can be provided more efficiently. The first step for the next comptroller will be to use the audit authority of the office to make sure our money is being spent wisely. Comptroller William Thompson has focused on auditing city agencies and making them work more efficiently, a practice that the next comptroller should continue as the city's fiscal watchdog.
In building on these efforts, the comptroller should not only use this authority to streamline city agencies, such as the Department of Education or the Department of Buildings, but also act as an advocate for New York City with Albany. For example, with recent questions on fare hikes and wasteful spending, it is clear that the Metropolitan Transportation Authority needs to be examined regarding providing for fairer treatment to New York City residents. I pledge to fight for the interests of New York City to ensure that every dollar we send to Albany is well spent.
With our tax base shored up and our budgetary belts tightened, we must work to get the engines of the city economy moving again. The next comptroller should think creatively on how to take advantage of certain economic challenges to turn them to our advantage. For example, the weak dollar abroad has made New York an attractive option for foreign investment. As residents of the financial capital of the world, New Yorkers should embrace globalism and encourage foreign investment to capitalize on the weakened dollar. Americans have sent enough of our jobs overseas. Let's get some of that global investment back and use it to put New Yorkers to work.
While we work to keep New York at the forefront of the global economy, we have to take steps to encourage businesses to remain and grow in the city. An easy first step would be to eliminate the city sales tax, an immediate boost to the retail economy. In addition, the city must develop initiatives for new businesses to move to New York, employ our residents and pay wages that will not only employ but also train workers for advancement.
As Wall Street cools off and construction slows down throughout the city, forward-looking government leaders would be wise to invest in long-term infrastructure projects. These public works projects will keep the momentum of the economy going and keep workers employed. It could also be smart shopping, taking advantage of reductions in construction costs due to slowing commercial activity. Should the private sector slow down due to financing difficulties, opportunity will be ripe for the city to take advantage of lower costs and frontload needed capital projects. This will jumpstart portions of the economy, keep people working and be more cost-efficient in the long run. As a much-needed result, these capital projects -- improved roads and bridges, upgraded sewers and new schools -- will help build a better-running city.
While our City may face a difficult road ahead, New Yorkers have always met challenging times with the strength and perseverance that define who we are. I entered public service more than a decade ago because I wanted to be part of building the future of the City I grew up in and love. I have been so humbled in serving the people of my district in the Assembly, on the City Council, and all of New York as Chair of the Land Use Committee. As we confront this next set of challenges, I hope to be part of building a New York that we can all be proud of as the next Comptroller of New York City.
Melinda Katz, a Queens Democrat, has served on the City Council since 2002 and heads the Land Use Committee.
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The past several months have been chaotic for most municipal economies in the nation, New York City included. And Mayor Michael Bloomberg's preliminary budget reflects this worsening economic picture. I believe the single biggest challenge facing New York City in 2008 is how to maintain current spending demands on less tax revenue - the fuel that keeps the furnace burning.
There are two issues that severely threaten our revenues, both of which I discuss often as chair of the City Council's Finance Committee. The first is the risks to Wall Street profitability, something most other cities need to worry about only tangentially. Despite starting off 2007 on a strong note - Office of Management and Budget reports that New York Stock Exchange member firms gained more than $8 billion in profits in the first two quarters - the credit crisis that developed over the summer has weakened portfolios.
New York City relies so much on Wall Street profits primarily because it greatly impacts the taxes we collect on income, including bonuses, and on employment generally.
Although bonuses are expected to remain rather steady due to strong performances in early 2007 and strength in sectors unrelated to the credit crunch, we expect an overall drop in financial sector wages. Additionally, the budget office reports that several financial firms have announced or are likely to announce layoffs and reduced staffing, leading to an expectation that financial sector employment will shrink by about 12,000.
The second major risk to the city's revenues is the declining local real estate market. Although this past year the local housing market has been stronger than that of most cities, consumer confidence, lower overall employment and other factors have increased housing supply.
The Office of Management and Budget estimates that single-family home sales will drop about 20 percent in 2008 and that co-op and condo sales, which reached an all time high this past year, will fall measurably.
So with the decline in the city's finances, led by Wall Street instability and a worsening housing market, what can Bloomberg do to steer the city clear of the economic downturn? What wisdom can I or anyone else recommend to stem the downward slide? The answer to both questions is: not much.
The plain truth is the city's economy is not exempt from a law of economics: For every up, there is a down. The other plain truth is that mayors have no real control over the duration of these economic cycles.
One of the few things mayors can do, and what Bloomberg is already doing, is working to limit how deeply the city feels the effects of the downturn. This is principally done by tightening spending to maintain a balanced budget. Bloomberg has reduced city spending in the current fiscal year and in the next. I'm not happy with all the cuts, and I've vowed to fight the most unpalatable ones. These include cuts made to the Runaway and Homeless Youth program, geriatric mental health and the Autism Initiative, a $1.5 million program I created last year that lends educational and emotional support to affected children.
Another of the few things mayors can do, particularly during a recession, is, of course, raise taxes to make up for revenue shortfalls. Bloomberg did this by way of raising property taxes during the 2001 recession. None of us at City Hall want to do that this time around.
It remains to be seen how much worse the economic scenario gets before this option becomes a viable idea. Just as Bloomberg has said, the next few months will shed light on the many tough decisions ahead. In the meantime, I've said often that a tax increase is on the table only as a last resort.
So, you'll notice I've used the "R" word. Some cities have already been claimed by recession. Many analysts say Detroit, with its rate of housing foreclosures in the double digits and its high unemployment, is already in recession. San Francisco, Cleveland, and Miami are a few others being watched closely for symptoms of acute recession. Is New York City soon to join the list? The city is in an economic downturn, to be sure, but based on the current data, I don't think we'll fall into actual recession.
We might be lucky this time. One of the many things I've advocated for at the City Council is to use our surpluses in the smartest manner possible. Pre-paying some of our obligations, including placing $2 billion aside for retiree health expenses, when we had surpluses has proved helpful to us now.
Amid the doom and gloom there are some economic bright spots for the city -- including that our tourism industry is booming. We can thank our superb attractions and the weak dollar for that. NYC & Co., the city's tourism agency, predicts that the city welcomed a record 46 million tourists, many of them international visitors, in 2007. And all signs continue to point to similar tourism rates over the next couple of years.
A strong tourism industry plays a vital role in sustaining the city through the lean times, because it keeps hotel taxes, sales taxes and employment humming. There are also some sectors of the economy that continue to grow regardless of the current economic cycle. Demand and employment in both the education sector and health services sector remains strong.
Is there any role to be played by the city's next comptroller in ameliorating the effects of the ongoing downturn? The office of the comptroller is involved in the issuance of General Obligation bonds, setting the terms and conditions for all debt, analyzing contracts and auditing programs and agencies, and is the investment advisor and custodian of the city's pension funds. Within each of these responsibilities and in varying degrees the comptroller can join the mayor to also limit the effects of the downturn. Scrutinizing spending is one responsibility the comptroller can implement rather swiftly. I already do that in my role as chair of the City Council's Finance Committee.
Apart from official functions of the city's comptroller, there is a more nuanced yet potent function. As the finance specialist for the city, the comptroller is in an excellent position to advocate fiscal policy that would cushion the blow of economic downturns. One such policy I've consistently called for is the creation of a Rainy Day Fund, which requires state legislation. This savings account would be funded over a period of years with budget surpluses to aid the city during lean times.
A Rainy Day Fund would not only cushion services during downturns, but, assuming it would replace the current practice of rolling prior year surpluses into the next, it would also make the city adopt a budget that more accurately reflects our current financial status. Additionally, the comptroller can use his or her position to advocate for reduced reliance on non-recurring revenues to balance the budget, something that has occurred too often and will be untenable in coming years.
The final analysis for comptroller ought not rest on what he or she can do during tough times, because the official tools at his or her disposal are very limited. Rather, the analysis ought to rest on what skills the current and future comptroller possesses in order to understand and deftly manage the effects of economic downturns. As someone who has spent more than 20 years on and off Wall Street as an expert in municipal finance and who has served as chairman of the City Council's Finance Committee, I will bring to the comptroller's office a host of related experience.
David Weprin, a Queens Democrat, has served on City Council since 2002 and chairs the Finance Committee.
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