Gotham Gazette https://www.gothamgazette.com/component/tags/tag/92 Thu, 24 Oct 2019 05:20:16 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) A Chore We Must Do: Over-Hauling Private Waste Management in New York City https://www.gothamgazette.com/130-opinion/8706-a-chore-we-must-do-over-hauling-private-waste-management https://www.gothamgazette.com/130-opinion/8706-a-chore-we-must-do-over-hauling-private-waste-management assist parade cleanup

(photo: Michael Anton/Department of Sanitation)


Environmental advocates and labor unions are dissatisfied with New York City’s system of collecting garbage from commercial establishments. Unlike waste from residences, including apartment buildings, which is collected by the city’s Department of Sanitation, waste from office buildings, retail businesses, and restaurants is collected by for-hire companies that charge their customers fees for the service.

Environmentalists decry the traffic and pollution caused by multiple different waste collection companies’ trucks driving all over the city on uncoordinated routes and schedules. Labor unions are concerned about the reliance of many of the smaller waste-haulers on non-unionized workers with low salaries, no benefits, and relatively little in the way of safety protections. These concerns were highlighted by fatal crashes that led to the shutdown of one waste hauling company. 

My former organization, Citizens Budget Commission, has long been concerned about the high costs of New York City’s waste disposal practices; as CBC President I first testified about this issue before the City Council Committee on Sanitation and Solid Waste Management in October 2011.

We published a comprehensive analysis of city solid waste management in 2014. With respect to commercial waste collection, CBC noted that the high number of private carters (as many as 250 in 2014, including those that handle only special types of waste such as construction and medical) has kept collection prices low and minimized corruption, but a more efficient zoned system would minimize congestion and greenhouse gas emissions:

“...the City should shift from “open” competition to competitively awarded franchises for service in designated districts. The franchise should not be given exclusively to one carter but instead limited to a small number of firms. Such “non-exclusive” franchises allow for greater competition and provide greater opportunity for small and medium size businesses to compete…The franchise agreements should include standards for worker safety and vehicle environmental performance.” 

In November 2018, after two years of study and consultation with stakeholders, the Department of Sanitation released a reform plan that largely reflects CBC’s recommendations. As the City Council appears close to movement on solid waste management reform, it would be wise to quickly adopt legislation that includes the key tenets of what CBC and Sanitation have put forward, so that an aggressive but careful multi-year implementation process can begin.

Sanitation proposes a Commercial Waste Zone (CWZ) program that would divide the city into 20 zones. Within each zone carters would compete to win city contracts to provide waste collection services. Three to five carters would be selected in each zone, depending on the density of commercial activity in the zone. Selected carters would have to specify a maximum price, offer recycling and organic collection at discounted rates, and comply with vehicle emission standards. The contracts would last 10 years and the first awards would be made in 2021 with the system to be phased in over the following two years, 2022-2023.

CWZs would be a dramatic change and all change meets resistance. Some carters are opposed to limiting the number of franchisees, fearing that they would not be able to compete and would go out of business. Businesses, especially large ones that are now able to drive a hard bargain, are concerned that collection fees will increase and they will have little leverage to control costs. They also want flexibility to be able to change trash haulers if they believe they can get a better deal or performance isn’t meeting expectations.

Environmentalists contend that there should be only one carter per zone to achieve the maximum reduction in greenhouse gas emissions. Labor unions want the better salary and benefits that union-only employees would receive and that only very large collection firms that have exclusive franchises can assure. 

The City Council Sanitation Committee chair, Antonio Reynoso, has been a strong advocate of some environmentally–oriented waste management policies, like charging for single-use plastic bags and curbside collection of organic waste. Now, he has taken the lead on CWZs by introducing legislation to create franchise zones.

His bill provides for only one franchisee per zone. The enviro/labor groups are pleased, but the business community is very concerned about the prospect of dramatically increased waste collection fees and a loss of customer choice. They point to the recent experience in Los Angeles, which adopted single-vendor zones and prices for some companies quadrupled.  (The LA system is quite different and much larger and more expensive in that it applies to multi-family residential as well as commercial waste collection.)

As they say, the mark of a good compromise is that all stakeholders are somewhat dissatisfied. CWZs will require significant readjustments by the Department of Sanitation, the city’s Business Integrity Commission ( which licenses carters), the business community, and the waste collection industry; it would be wise to move resolutely but carefully.

Moving from what is essentially a free-for-all to a highly constrained and regulated system is probably too much to do all at once. The Department of Sanitation’s proposal to allow several franchisees per zone would give businesses some price and quality leverage to select among a few competitor vendors. It would enable some of the smaller waste haulers to remain in business while elevating the quality of equipment and safety of the industry citywide.

Studies indicate that as much as 85% of the greenhouse gas emission reductions to be gained from a CWZ system would be achieved by limiting franchisees to a small number. So while it may not be the more categorical result that some would prefer, let’s hope that the Council doesn’t let the perfect become the enemy of the very good.

The Sanitation Department’s proposal is a thoughtful balancing of interests and concerns. Hopefully some areas of compromise can be found so that the Council can adopt CWZ legislation in the fall and adjustments can be made, if needed, after the city has some experience with the new system. But the time to act is now.

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Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

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A Chore We Must Do: Over-Hauling Private Waste Management in New York City Wed, 31 Jul 2019 04:00:00 +0000
Governor Gets What He Wants at the MTA; Now It's Time to Deliver https://www.gothamgazette.com/130-opinion/8637-governor-gets-what-he-wants-at-the-mta-now-it-s-time-to-deliver https://www.gothamgazette.com/130-opinion/8637-governor-gets-what-he-wants-at-the-mta-now-it-s-time-to-deliver oped gov cuomo

Gov. Cuomo on the subway (photo: the governor's office)


At the end of the state legislative session that just finished several steps were taken to consolidate Governor Cuomo’s power over the MTA. First, he swapped out two of his ‘independent’ appointees to the MTA Board for two members of his state cabinet, Robert Mujica, his budget director, and Linda Lacewell, commissioner of the Department of Financial Services.

Second, in order to legitimize the board appointment of someone who is not a resident of the MTA region, the law was changed to provide that the state budget director, regardless of residence, may serve on the board ex-officio.

Finally, a new law was passed requiring the appointment within six weeks of a “transformation director” to report directly to the MTA Board to implement the reorganization plan that was required by the budget bills passed in early April and is expected to be prepared and submitted by June 30.

These actions have been criticized by respected transit analysts, (see here and here), largely on the grounds that the governor is creating conflicts of interest by placing his own full-time employees on a board that is supposed to be independent and that he is undermining the governance of the MTA by creating new positions outside the existing chain of command.

These are valid concerns; however, for those who have bemoaned Governor Cuomo’s past ambivalence about his responsibility for the transit system, the actions have a significant upside: they establish clearly and beyond any doubt that the Governor of the State is the ultimate authority and decision-maker with regard to the MTA. And this governor has now taken ownership of it in a clear and unequivocal way.

I know Rob Mujica; he is one of the most competent people I have worked with in government. I have no reason to think that Linda Lacewell is any less capable.

They both bring a great deal of management experience and knowledge of public finance to their new roles as MTA board members. Yes, they will have to navigate their loyalty to Governor Cuomo and their fiduciary duty to the MTA; there may be issues on which one or both of them will need to recuse themselves. But for the most part, their other roles should complement and enhance their value as board members.

In fact, it may be a good idea to designate the state budget director as an ex-officio member of the MTA Board – and the city budget director as well, for that matter. Both governments have significant control over resources that are and/or should be devoted to the MTA, particularly with regard to its capital spending.

On the other hand, it is certainly unusual and probably not optimal to specify that a particular staff line at the MTA, i.e. a new Transformation Director, report directly to the Board and not to the CEO.
Consolidation of services has long been a favorite topic of Governor Cuomo and it makes sense that redundant departments among MTA divisions (NYCT, LIRR, MetroNorth, and TBTA) be combined. But reorganization of those agencies will not fundamentally change the MTA’s financial picture; more concerning than the new hire is raising unrealistic expectations about what “transformation” will accomplish.

In any event, Governor Cuomo, with the assistance of the state Legislature, has solidified his control, and it is long past time for him to move on from bashing the organization to creating and supporting useful change. He should take responsibility for:

1. Release of a new 20-year needs assessment that shows the full cost of getting every single piece of MTA infrastructure to a state of good repair. The last assessment was issued in 2013 and another is required by law in 2020. We cannot pay for everything at once, and there may be some items on the wish list we can never pursue, but we must see what all the needs are so that the public can provide input and the MTA Board can decide what needs to be prioritized.

2. Release of a five-year capital plan. The current plan covers 2014-19 and another is expected by October, for 2020-2024. Estimates of the cost of a complete plan for the MTA’s next five years range from $40-60 billion. Let’s see what the authority has decided to prioritize and how it is going to be paid for. Of course, money should not be wasted; but don’t skimp on this, the most important infrastructure in the state. In the past, the governor and his representatives have pressured the MTA to reduce its “bloated” capital plan, only to later agree to increases because of the urgency of the needs. Will Mujica and Lacewell support the full amount the MTA needs or try to protect the Governor from having to come up with more revenue by arguing for less?

3. Making it clear that the commitment to contribute $8 billion in state dollars to the current five-year capital plan will be honored, and specify what projects it will fund. All the projects in the current plan have not been completed; large projects are almost never fully achieved within a single five-year capital plan because construction commitments take time. But this money should not be allowed to disappear or be rolled over to fund the next five-year plan.

4. Focusing most of the money, time, and attention on getting the current transit system to operate effectively and safely, not on shiny new projects that lend themselves to ribbon cuttings but don’t improve travel times and experiences for most commuters.

5. Negotiating tough new contracts with the TWU and other unions that do not add any costs for the MTA and its riders. Curbing overtime abuse is of course important (another hands-on tactic of the governor was to hand-pick a new MTA Inspector General) but it is labor costs that are the primary driver of MTA spending, accounting for 60% of the MTA’s annual operating budget. The next round of contracts MUST contain work-rule changes that make workers more productive and contribute to cost savings, not increases. (Bob Linn is an excellent new appointment to the MTA Board who should be able to assist in this effort.)

OK, Governor Cuomo, you have been given everything you wanted in terms of control, more than many think is appropriate. Use your power wisely and effectively because there is no longer any question the subway buck stops with you.

***
Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

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Governor Gets What He Wants at the MTA; Now It's Time to Deliver Mon, 24 Jun 2019 04:00:00 +0000
'Blow Up the MTA'? Not Yet https://www.gothamgazette.com/130-opinion/8532-blow-up-the-mta-not-yet https://www.gothamgazette.com/130-opinion/8532-blow-up-the-mta-not-yet state otc ad spk co jo del

Council Speaker Corey Johnson (photo: John McCarten/City Council)


With subway and bus riders so frustrated with poor service, it is understandable that city leaders are talking about changing the governance of the MTA and its New York City Transit (NYCT) division as a solution.

Most notably, City Council Speaker Corey Johnson has come up with a well-intentioned but ultimately misguided plan to break NYCT off from the MTA and vest full responsibility for its funding and operation in a mayor-controlled structure he’s named Big Apple Transit, or BAT. BAT would run the city transit used by millions of New Yorkers every day.

The speaker and I, along with MTA Board member Veronica Vanterpool and moderator Charles Komanoff, appeared Wednesday evening on a panel to discuss his plan, part of the Theodore Kheel Fellowship Program at Roosevelt House at Hunter College.

The appeal of the speaker’s plan has been enhanced by Governor Cuomo’s pre-election (and continuing, although to a lesser extent) protestations that neither he nor anyone, really, controls the MTA and is responsible for improving how it operates.

But shifting from MTA to city government control would only substitute New York City-centric political challenges for regional ones, and could well make some of the system’s problems worse. Attention and effort would more usefully be focused on reminding the current MTA Board of its fiduciary responsibility to the agency, not to the Governor, demanding more transparency and requiring serious oversight by the State Legislature.

It is far easier to argue for city control of subways and buses than to get into the weeds of how to reform MTA procurement, why and how to install a new signal system, or the need for work rule changes in union contracts. But these are the dynamics that need change the most.

There are several reasons why a shift in control of subways and buses from a regional to a city authority would be problematic.

First, the separation of city buses and subways from the rest of the MTA’s assets runs counter to the long-term goal of creating a more integrated regional transit system. More than 1.1 million people commute into New York City to work. They swipe their metrocards half-a-million times a day. We need these workers to contribute to the city’s economy, shop, and pay sales taxes in addition to bridge tolls and fares that help support the buses and subways. We need to be thinking about how to better connect Westchester and Long Island transit systems (and yes, New Jersey and Connecticut as well) to the city’s, not allow them to exist in siloes.

Second, even if it were desirable, a new Big Apple Transit would not be financially viable. We have a Metropolitan Transit Authority because it serves, and derives revenue from, seven suburban counties in addition to the five boroughs of New York City.

The Payroll Mobility Tax and the dedicated regional sales tax are levied on businesses and activities in the region with suburban counties as well as residents and businesses paying a significant share. In particular, the PMT generates more than $1 billion per year for NYCT. This tax was vehemently opposed by suburban legislators when it was adopted in 2009 and it has repeatedly been subjected to various exceptions. The state Legislature agreed to make up some of the lost revenue from the exemptions.

Can there be any doubt that if NYCT were separated from the regional MTA the state Legislature would quickly and gleefully cease providing the lost revenue from the exemption from the PMT and might well suspend or redirect other regional taxes designated for the MTA exclusively to the LIRR and Metro North?

This could mean that city residents and businesses would be required to make up the loss of some of the $2 billion in annual revenue from sales taxes, ride-hail surcharges, mortgage transfer fees, etc. now devoted to the NYCT. Even if replacement of these revenues with local taxes were acceptable to the public(!), there is no guarantee that the state Legislature would grant New Yor City authority to impose them.

And the subsidy from general state revenue would be at risk as well. The governor has made his view on this clear: “If New York City took [transit] over, they take it over. They don’t get the state funding.”

Speaker Johnson’s proposal assumes that all regional and state subsidies to NYCT would remain in place and even then, he projects the city would need to come up with an additional $1-1.5 billion in revenue a year. The loss of any or all state and regional support, totaling almost $3 billion a year, could make the shortfall overwhelming and would require significant increases in fares and other taxes. And the shortfall would be even worse if there is a recession.Will city taxpayers and riders put up with absorbing all of that?

It is of course undeniable that the MTA Board structure obscures accountability. But it is necessary and appropriate for a regional transit system to have representation of all the impacted counties on its board.

Nonetheless, the Mayor has more appointees than anyone besides the Governor, who also appoints the CEO/Chair. After all the drama of the last year over service disruptions, the declaration of a state of emergency to expedite repair work, the announcement of the Fast Forward Plan, and the governor’s last-minute intervention and rejection of the planned shutdown of the L line for a modified plan, it is now abundantly clear that the buck stops with the Governor.

Yes, the Board needs to fulfill its fiduciary responsibilities, be more transparent and exercise better oversight, but merely switching ultimate responsibility from one elected official to another will not change the fact that, so long as public transit is a public responsibility, it will have political leadership that shies away from making tough decisions.

To properly maintain and improve 24-hour bus and subway service, fares need to be regularly and steadily raised. Service needs to be suspended on some lines for periods of time so they can be properly maintained and repaired. A Board appointed by the Mayor will not find these decisions any easier than one controlled by the Governor, especially if it has to generate even more revenue because of the absence of state and regional tax support.

It is clear that one of the main drivers of NYCT cost growth is personnel. Why will the Mayor be any more likely than the Governor to resist the power of the Transportation Workers Union (TWU) and other labor unions? Notwithstanding Governor Cuomo’s intervention in 2014 to forge a contract settlement with transit unions – with no productivity initiatives or fringe benefit savings to offset wage increases – TWU head John Samuelson is already threatening a strike in response to recent exposés on overtime abuses and related criticism. A Mayor would be even more susceptible to these kinds of threats.

Disjointed regional transit planning and administration, possible loss of substantial state and regional funding, a fraught environment in which to implement fare increases, raise taxes, and negotiate labor contracts – these are the likely results of “blowing up the MTA.” Better to focus on practical, feasible steps to make the MTA work better right now. Reinvent Albany recently published a report with 50 Actions New York Can Take To Renew Public Trust in the Metropolitan  Transportation Authority that contains many worthwhile proposals. Among the most significant:

-The MTA Board should vote on policy decisions, not adopt them de facto though contract approvals.

-The Senate and Assembly should create committees dedicated specifically to oversight of the MTA, not treat it as part of the general Transportation or Authorities Committee jurisdiction where the MTA region are not well-enough represented.

-MTA Board members should be subject to a real, thorough vetting and confirmation process.

-There should be much more open data on contracts, project progress, budget and capital planning.

-The MTA fiscal year should be moved to begin in July instead of January, so state budget actions can be taken into account in financial planning.

-Procurement should be streamlined so there are fewer incentives for change orders and cost overruns.

Instead of devoting time and attention to the idea of putting different people in the seats on the deck of the Titanic, let’s work on getting the ship into stable waters and smooth sailing by insisting on competence and accountability from the crew we have.

***
Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

 

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

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'Blow Up the MTA'? Not Yet Thu, 16 May 2019 04:00:00 +0000
Max & Murphy Podcast: The 2019 City Charter Commission Narrows Its Focus https://www.gothamgazette.com/city/8471-max-murphy-podcast-the-2019-city-charter-commission-narrows-its-focus https://www.gothamgazette.com/city/8471-max-murphy-podcast-the-2019-city-charter-commission-narrows-its-focus may b d blasio first ferry

(photo: mayor's office)


April 24, 2019 - Max & Murphy Podcast: The 2019 City Charter Commission Narrows Its Focus

The 2019 New York City Charter Revision Commission released its "preliminary staff report" on Tuesday, indicating which areas of city governance and elections the commission will further consider as it prepares to propose changes to voters in November. Gail Benjamin, chair of the 2019 commission, joined the show to discuss the staff report, the commission's work thus far, some of the proposals the commission will consider moving forward, and more. Then, city budget expert Carol Kellermann, former president of Citizens Budget Commission, joined the show to give her analysis of the commission's preliminary report.

Listen to the conversation and let us know what you think -- we're on Twitter @TweetBenMax and @JarrettMurphy. You can listen to the show through the embedded audio below or download the episode wherever you get your podcasts, under "Max & Murphy," and listen to Max & Murphy live on Wednesdays at 5 p.m. on WBAI radio, 99.5FM or wbai.org

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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Max & Murphy Podcast: The 2019 City Charter Commission Narrows Its Focus Wed, 24 Apr 2019 04:00:00 +0000
Charter Revision Commission Needs a Hippocratic Oath https://www.gothamgazette.com/130-opinion/8359-charter-revision-commission-needs-a-hippocratic-oath https://www.gothamgazette.com/130-opinion/8359-charter-revision-commission-needs-a-hippocratic-oath citycouncil vdrr cm

(photo: William Alatriste/City Council)


The entire New York City Charter, the city's foundational governing document, is on the operating table, and it is essential that the surgeons act with extreme caution.

On March 7 I testified before the Charter Revision Commission created at the initiative of City Council Speaker Johnson, former Public Advocate James, and Manhattan Borough President Brewer. Charter revision can be a very wonky, technical topic, but the Charter is our city’s constitution and any changes made to it can have a significant, lasting impact. The last comprehensive charter revision was in 1989 and it has served us well.

I urged the members to follow two guiding principles in their deliberations:

First, do no harm. The current structure of city government has for the most part served the city quite well for the last 30 years. With respect to finance and budgeting in particular, as a result of the fiscal crisis in the ‘70s and the enactment of the Financial Emergency Act in state law, New York City has the most transparent, professional, and sound fiscal management and budgeting process of any state or city in the country. Let’s not fix what isn’t broken.

Second, limit charter revision to structural changes that can only be made through the charter. It is meant to define core powers, structures, and processes. Most changes to current rules and procedures can and should be made through City Council law-making.

Every complaint about the way city government functions (and there are surely many valid complaints) cannot and should not be addressed through the charter. It is already cluttered with hundreds of outdated provisions and others that belong in local law. Do not add to that clutter.

Here are the most worrisome proposals that should be rejected by the Commission:

Independent Budgeting. This would enable the Public Advocate, Comptroller, Borough Presidents, and several other offices to self-determine their budgets, in some cases according to a formula that is based on a percentage of another agency’s budget or the entirety of the city budget.

While it is arguable that a few totally independent entities should have set budgets so they can do their work without concern about retaliation by an unhappy Mayor or Council (as is now the case for the Independent Budget Office, and only the IBO) it should not be extended to so many agencies, and especially not to the offices of elected officials. Their independence derives from and is protected by their direct election, not the size of their budgets. Spending priorities are to be determined in the budget negotiation process between the Mayor and the Council and removing budgeting for so many entities from this process would, in effect, take a range of positions and functions of city government as well as a significant amount of resources out of the control of those democratically-elected to oversee them.

Revenue Estimating. A proposal by the City Council would create a process whereby the Mayor would submit an estimate of the amount of revenue expected in the following fiscal year, the Council would accept or reject this estimate and if rejected, a revenue estimate would be set by the IBO. This would be a similar process to the one followed by New York State in which the Comptroller sets the revenue estimate if the Legislature and the Governor cannot agree upon one. The revenue estimate is important because it sets a limit on the amount that can be spent in the annual budget. But this new ‘consensus estimate’ is unnecessary in New York City.

The City Office of Management and Budget is generally cautious in its revenue estimates, as it should be in order to mitigate downside risk. This has not unduly constrained spending; the city budget has grown an average of more than 5% a year over the last 18 years. Moreover, there are several other revenue forecasts published during budget season including that of the IBO, the Office of the State Special Deputy Comptroller, and the City Comptroller. All of these estimates are already compared and contrasted as part of the Mayor’s negotiation of the city budget with the Council.

A more formal procedure for the Council to adopt or reject the OMB revenue estimate would only further politicize the process with each entity compelled to manipulate its forecast to anticipate the reaction of the others. Indeed, you can see how political the revenue estimating process can become by looking at what has just happened in the state process: the Governor announced a very dramatic revenue decline, requiring significant budget discipline; the Assembly and Senate each projected almost $1 billion more in revenue than the Governor, and the Comptroller eventually resolved the conflict with an estimate very close to the Governor’s. There is no reason for New York City to create a similar drawn out form of budget dance.

Pre-Audit Contract Screening. There is widespread dissatisfaction with the city’s procurement process. It is opaque, takes too long, and leaves too much discretion to individual employees. The solution to these problems lies in much better management and oversight, not with adding another layer of review by the Comptroller. It is up to the executive branch to decide the terms and contents of contracts and there should be far more public reporting and disclosure about them, but it is only going to cause even more delay to give the Comptroller the right to review these decisions in advance.

A number of other proposals that would improve transparency and better link spending to performance goals, such as more specific Units of Appropriation in the Budget, use of Budget Function Analysis in more agencies, and better publicly-available tracking of capital projects, would be worthwhile but could be required through local law and do not belong in the City Charter.

Proposals that are appropriate for the charter and that should be adopted by the Commission are:

Better Capital Budgeting. The Charter should be amended to assure that the capital budgeting process is more transparent, comprehensive and effective. In particular, the AIMS report should be expanded to include all city and city-controlled public authority capital assets (i.e., those of the Health and Hospitals Corporation) with at least a five year life and a minimum replacement cost low enough to cover most assets, including computer equipment and moveable assets. This more comprehensive report should be cross-referenced to the Ten Year Capital Strategy and the Capital Commitment Plan so it is possible to assess whether enough is being invested to keep all city infrastructure in a state of good repair.

Rainy Day Fund. There should be a way for the city to set aside funds to be used in the event of an economic downturn or a crisis that reduces revenue so that spending would not have to be drastically cut or taxes increased to maintain a balanced budget. The Financial Emergency Control Act doesn’t allow for such a fund, so while it is appropriate to include one in the Charter, it would also require state law to implement it. Such a fund should, in my view, be in addition to the Retiree Health Benefit Trust, which already exists but is regarded by some as a de facto Rainy Day Fund. Both of these funds should have specific criteria for mandatory deposits and limitations on withdrawals so that money is steadily deposited in good times and can only be withdrawn under set conditions.

Revision of the City Charter should be done with care. It should not be used to settle scores or re-allocate authority in ways that could have unintended adverse consequences despite the best of intentions.

Here is an idea for the Commission: limit your proposed amendments to no more than one page for each of the four topic areas you have delineated. If you can keep it that short you have less chance of doing damage and are more likely to make only adjustments that will enhance the efficiency and effectiveness of our government.

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Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

 

 

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Charter Revision Commission Needs a Hippocratic Oath Sun, 17 Mar 2019 04:00:00 +0000
Ending The School Aid Charade https://www.gothamgazette.com/130-opinion/8324-ending-the-school-aid-charade https://www.gothamgazette.com/130-opinion/8324-ending-the-school-aid-charade gov cuomo edu

(photo: governor's office)


It is budget season in New York State and the annual game of determining the amount of state aid each of the 674 school districts will receive is in full swing. Every district and its legislators will fervently argue that more school aid is needed, that its schools are underfunded, and that its students will suffer serious harm if more money isn’t devoted to them as soon as possible. But in fact, the vast majority of New York’s schools are generously funded, while our results in terms of achievement are only mediocre. Instead of targeting additional aid to the few truly needy districts, all are given more.

As is the case in most states, New York public schools are primarily a local responsibility. Each school district runs its own schools, has its own contract with the teachers union, and relies on local property taxes to fund a large part of its costs. State school aid is meant to supplement the local tax contribution so that children in ‘low wealth’ districts are not denied the ‘sound basic education’ guaranteed by the State Constitution.

Each year a chorus of school advocates including the teachers union, school administrators, and state legislators argue for more state school aid. Whatever increase the Governor proposes is inevitably denounced as too little. The higher amount recommended by the State Education Department (SED) (controlled not by the Governor but by the Legislature via the State Board of Regents) is also decried as too low. Inevitably, some compromise amount is set in the state budget that is always a significant increase over the prior year.

The total amount of legislatively-approved school aid statewide rose 32% percent over the ten years between 2006 and 2017 and totaled more than $28 billion in fiscal year 2018, the largest expense in the state’s operating funds budget. Combined with local allocations, New York State school districts now spend a whopping $69 billion a year, an average of more than $25,000 per student, by far the highest amount in the country.

The game in its current form has been played since 2011, following the recession of 2008 when across-the-board school-aid cuts were imposed, when the Governor and the Legislature agreed to an annual ‘cap’ on the growth of school aid tied to growth in personal income and used a ‘foundation formula’ to determine the amount of aid each district would get, based on its number of poor students, English language learners, students with disabilities, regional cost differences, property values, and wealthy residents.

But the cap has never really been adhered to, and the results of the foundation formula are undermined through the addition of other kinds of aid (e.g. transportation, high tax aid) and foundation aid ‘hold harmless’ provisions ensuring that no district ever loses aid and indeed, that all get at least some increase each year no matter what they spend.

Why does this game go on? First, school aid is the primary vehicle for state legislators to ‘bring home the bacon’ and demonstrate effectiveness to their voters. The wealthiest school districts are in suburban areas where residents have shown the value they attach to top quality schools by paying very high property taxes. Even though these districts are already spending outsized amounts per pupil on their schools, they want more and their representatives need to get it for them. The Governor needs the support of these legislators for other parts of his agenda, so he is loath to disappoint them.

Second, public education advocates continue to make the argument that there are unmet school needs as revealed by the shortfall between aid amounts and what would have been provided under the foundation formula had it continued to be applied as approved in a lawsuit filed by a consortium known as the Campaign for Fiscal Equity (CFE).

The lawsuit ended in a settlement in 2007, and, while clearly articulating the right of all children in New York to free quality education, did not legally require implementation of its calculations of optimum aid. The Governor has called the CFE aid formula a ‘ghost of the past’ but the state teachers union and an alliance of other advocacy groups continue to insist that there is a shortfall of at least $4 billion in state school aid.

It is true that some school districts are underfunded and should receive more state aid to make up for their high number of poor students and their low property tax wealth. But there are less than 35 districts in this category and their unmet needs total less than $200 million. This shortfall could easily be filled by re-allocating a small part of the money that is going to school districts that do not need it; they are already spending far more than enough.

The 62 wealthiest districts in New York are receiving almost $5,000 a year in state school aid and are spending an average of $30,500 per student per year. The 68 poorest districts are getting much more aid – an average of $15,700 per student – but because they don’t have sufficient local resources, they can spend only $22,000 per student per year. There is no educational reason to give the wealthier districts any aid, and certainly no more than they are getting.

Surely, everyone involved in setting school aid amounts knows this. But the CFE advocates don’t want to alienate a large of portion of their support from the wealthy districts by arguing only for targeted aid increases and the legislative representatives of the well-funded school districts are certainly not going to kill the golden goose. So we continue with a charade of hand-wringing about the need for more school funding state-wide.

This year Governor Cuomo has proposed almost $1 billion in additional aid, SED wants more than $2 billion more, and the CFE groups are still demanding $4 billion. The reality is there is no justification for more state school aid, it just needs to be re-allocated and targeted to the specific districts that are actually needy. But more school aid there surely will be. This is especially infuriating when the Governor is proposing to reduce spending on Medicaid to address an expected $2.3 billion revenue shortfall in the next fiscal year.

In his second State of the State address, in 2012, Governor Cuomo complained that all the adults in the public school system have lobbyists pressing for more spending and that he would now be the students’ lobbyist. But over time, he has made compromises with the political realities; while his school aid proposals are accompanied by rhetorical acknowledgement of the need for better targeting, the chorus of calls for everyone everywhere in the state to receive more school funding continues. It is well past time for this charade to end.

***
Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018.

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Have an op-ed idea or submission for Gotham Gazette? Email opinion@gothamgazette.com

 

 

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Ending The School Aid Charade Sun, 03 Mar 2019 05:00:00 +0000
What's The [DATA] Point? 1996, with Chris Jones of the Regional Plan Association https://www.gothamgazette.com/city/7367-what-s-the-data-point-1996-with-chris-jones-of-rpa https://www.gothamgazette.com/city/7367-what-s-the-data-point-1996-with-chris-jones-of-rpa whats the data point


What's The Data Point? Episode 23 -- 1996, with Chris Jones of the Regional Plan Association [You can download What's The [Data] Point? wherever you get your podcasts, including on iTunes]

chris jones wtdp ep 23

The Regional Plan Association (RPA) just released its latest comprehensive 25-year regional plan -- The Fourth Plan -- to help New York, New Jersey, and Connecticut plan for the present and the future. RPA's Chief Planner, Chris Jones, joined the podcast to discuss the plan, its goals and key components, possible challenges, and immediate steps toward needed progress.

Listen to the conversation and let us know what you think: Ben Max of GG (@TweetBenMax), Carol Kellerman of CBC (@cbcny), and guest Chris Jones of RPA (@RegionalPlan). Listen below or download wherever you get your podcasts!

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by Ben Max, Gotham Gazette
     

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What's The [DATA] Point? 1996, with Chris Jones of the Regional Plan Association Thu, 14 Dec 2017 05:00:00 +0000
De Blasio's Record on Budgeting and Fiscal Health https://www.gothamgazette.com/city/7300-de-blasio-s-record-on-budgeting-and-fiscal-health https://www.gothamgazette.com/city/7300-de-blasio-s-record-on-budgeting-and-fiscal-health de Blasio city budget

De Blasio during a budget presentation (photo: Michael Appleton/Mayor's Office)


This article is part of a series on Mayor de Blasio's first term record as he seeks reelection this fall, in partnership with WNYC radio and City Limits. Find all pieces of the series here.

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Mayor Bill de Blasio inherited a city with a healthy economy and strong tax revenues, allowing him to add billions in new spending for his priorities and increase the size of city government while also saving substantial funds for a rainy day. Though fiscal monitors and budget experts generally agree that the city’s budget has been handled responsibly, they are cautious about the future. This is a mayor who has encountered few budgetary challenges, and numerous loom on the horizon, from slowing economic growth to federal policies that threaten to create a sharp financial crunch. There are also ongoing financial crises at the city’s public housing authority, NYCHA, and public hospital system, New York City Health + Hospitals.

As de Blasio seeks a likely reelection on Tuesday, budget watchdogs warn that the incumbent Democrat might face his biggest tests in a second term, to which there are no easy solutions.

Under de Blasio, the city’s operating budget grew to $85.2 billion for fiscal year 2018, an increase of $12.5 billion or 17.2 percent from the last budget that was modified under Mayor Michael Bloomberg. Much of the new spending has come from an increase in the municipal workforce. The administration has added more than 31,000 employees in de Blasio’s first term for a total headcount of about 328,267 full-time and full-time equivalent employees, the highest it has ever been. That number is expected to grow to 329,055 by the end of the fiscal year on June 30, 2018. These new employees also come with future obligations in terms of pension and health care costs.

The administration has simultaneously put aside what the mayor and others often refer to as “historic” levels of reserves. This includes $1 billion each year in the general reserve, $250 million each year till 2021 in the capital stabilization reserve, and $4 billion in the Retiree Health Benefits Trust fund. Those reserves added up to a $9.8 billion or 11.1 percent budget cushion (reserves as a percentage of adjusted expenditures) at the start of fiscal year 2018, according to City Comptroller Scott Stringer’s report on the adopted budget. Stringer noted that the cushion remained at the same level as fiscal year 2017 since increased savings were matched by expenditures. He recommended an optimal cushion of between 12 and 18 percent, and has emphasized that the administration needs to create more savings through efficiencies at city agencies.

De Blasio has eschewed targeted cost-efficiency initiatives at city agencies, which were a signature of previous administrations. He has opted instead for a voluntary Citywide Savings Program which identifies savings at agencies, more often through re-estimates of expenditure rather than efficiencies. He recently announced a partial hiring freeze at city agencies, though some see this as something of a gimmick given how many employees he’s already allowed to be hired.

“My broad assessment is that [de Blasio] and budget director Dean Fuleihan have done an excellent job of managing the city budget,” said James Parrott, director of economic and fiscal policy at the New School’s Center for New York City Affairs. “They’ve been fortunate that the revenue situation has been accommodating to an ambitious agenda and they’ve been fiscally responsible to build reserves.”

In keeping with his progressive agenda, de Blasio has massively increased funding for social services and related to homelessness, education, public safety, and mental health services, among other major investments.

The combined budgets for the Departments of Homeless Services and Social Services increased to $11.5 billion in the fiscal year 2018 budget, up from $10.6 billion in the modified fiscal year 2014 budget that de Blasio inherited from Bloomberg. Department of Education spending increased by $4.4 billion in the same period, owing in large part to the implementation of universal pre-kindergarten and its planned expansion to three-year-olds. NYPD funding increased by $600 million, largely from the hiring of 1,300 more officers, while the Department of Corrections saw a nearly $340 million increase in its budget despite a continued drop in the city’s jail population.

“I think we're in a sustainable position,” de Blasio told the New York Daily News editorial board in an interview last month. “I think it also interacts. I think the investments we're making are strengthening our tax base. Safer city, better schools, stronger tax base. So it works. It's not limitless. You're absolutely right. It's not like you can just add all the time. There's a point -- and we'll have to watch Washington in particular very carefully – there’s a point where we may have to make tough decisions. But to date, I feel they've been responsible, and thank god, and I knock on wood as I say it, the economy continues to cooperate.”  

Parrott noted that the administration’s strongest achievement, begun early in 2014, was the settling of 99.1 percent of expired municipal labor contracts, which provided thousands of employees with retroactive raises and dispelled significant uncertainty about how the administration would handle a “daunting challenge” in a fiscally prudent manner. “That was an amazing feat,” Parrott said. “He gets four gold stars just for that, even if he hadn’t done anything else.”

But, with an increase in the employee workforce and the new union contracts, the city also added significant long-term funding obligations. The last budget under Bloomberg predicted that salaries and wages would be about $26.3 billion in fiscal year 2018, while latest estimates show them to be about $1 billion higher. In total, the city will spend about $47 billion in salaries, wages, pensions and benefits for the city’s workforce this year, increasing to $52.5 billion by fiscal year 2021. (The city’s pension contributions are estimated to be about $9.57 billion this year and are expected to grow to about $10 billion by 2021. City employees receive guaranteed pensions, funded by taxpayers, but the administration can do little to reform pension obligations since they are controlled by the state government.)

“I think he’s just been very lucky,” said Nicole Gelinas, senior fellow at the Manhattan Institute. “He’s had a good economy. He hasn’t had to make any decisions. He’s just increased spending on everything.”

“The mayor has not used the good times to make any reforms in government spending, particularly on health care costs for government workers,” she added. The city will bear $10.1 billion in the cost of health care benefits this year, which will grow to $11.7 billion by 2019, and Gelinas insisted that the mayor should look to reduce that cost in the current round of contract negotiations. “The city should really be thinking about how to bargain that workers pay some of the costs without putting the burden on taxpayers.”

Currently, city employees pay no portion of their health care premiums, a fact that has been a point of contention over time but de Blasio has not shown any interest in changing.

“I think it’s easy to be responsible when times are so good,” she added. “The real test will be if we have a recession. No two-term mayor has avoided at least a mild recession.”

Most experts agree that some form of slowdown will hit the city’s economy, which is currently in the ninth year of an unprecedented expansion. Gelinas warned that though the city has reserves set aside, “it’s kind of easy to run through those.” In the 2008-2009 recession, she said, about $3 billion in tax revenue “sort of disappeared overnight.” In a similar situation, de Blasio would have to make some difficult choices, and signs of lower revenues are already evident. At the annual meeting of the State Financial Control Board in August, de Blasio said his administration had already projected a $416 million reduction in revenue in the 2018 fiscal year.

The biggest uncertainty the city faces is cuts in federal funding and changes in federal policy on health care, taxes and infrastructure, though those have all remained a nebulous since before budget season. Efforts by the Republican-led Congress to repeal the Affordable Care Act have repeatedly failed; and a tax overhaul currently making it’s way through the two houses faces bipartisan opposition over a proposal to change the state and local tax deduction, which is a boon to filers in high-tax states like New York. Should it pass, however, tax revenues in the city will take a major hit.

De Blasio made no significant adjustments for federal policies in his 2018 budget, insisting that the city periodically adjusts its budget to account for economic trends. The next budget modification is expected later this month. “We have an obligation and responsibility to provide New Yorkers with quality services now,” said Freddi Goldstein, a mayoral spokesperson on budget issues, in an email. “We cannot and will not let threats of cuts to federal funding that have yet to be realized deter us from strengthening New York’s future.” The city has been cautious in revenue estimates, and tax revenues are expected to grow at 4.5 percent over last year, in keeping with the administration’s plans.

Carol Kellermann, president of Citizens Budget Commission, a nonpartisan fiscal watchdog, echoed Gelinas’ assessment of the mayor’s fiscal management. “He hasn’t really been tested in terms of fiscal policy,” she said, “because times have been so good so he hasn’t had to exercise as much restraint as CBC would’ve liked.” CBC gave the mayor’s last budget “mixed marks” over the growth in employee headcount and compensation costs.

Kellermann emphasized that many of the programmatic expansions made by the de Blasio administration are permanent and escalating in cost, making them harder to pare down in the future. “It’s very hard for public officials to cut back,” she said. “Every program has its constituency and it’s very hard to take those things away, and it’s very hard to layoff public employees.”

Both Kellermann and Gelinas also pointed out that the mayor has repeatedly touted the Retiree Health Benefits Trust fund as a reserve, even though it should be solely used to fund retiree health benefits and not in cases of a general shortfall.

The mayor has also significantly expanded capital investments to support his agenda. The ten-year capital budget increased by about $6 billion this year to $95.9 billion. The increase includes $1.9 billion in additional funding for affordable housing, $1.1 billion to create new borough-based jail facilities, $300 million to renovate 30 homeless shelters, among other investments. These investments also add to the city’s debt service -- the money spent to satisfy debt from borrowing each year -- which is $6.5 billion for fiscal year 2018, and is expected to grow to about $8.3 billion by fiscal year 2021. “If the interest rates go up, that’s gonna be a big burden down the road,” Kellermann said.

Assemblymember Nicole Malliotakis, de Blasio’s Republican challenger in the mayoral race, has repeatedly criticized the mayor’s ballooning budget and his “tax-and-spend” policies. At the first mayoral debate in the general election, on October 10, she attacked the mayor for the 300 new special assistants he has hired at City Hall, and his administration’s overall expenditure. “When we’re spending $15 billion more and we still have roads that are broken, we have subways that don’t run, we a homeless crisis, we have so many issues that are plaguing our city, then that is...the epitome of mismanagement,” she said, insisting that the city needs to streamline agencies.

She particularly noted the Department of Design and Construction’s consistent cost overruns for capital projects, which was a source of concern for the City Council as well when this year’s budget was adopted.

Two crucial areas where the city already faces a budget crunch, which would be further exacerbated by federal budget cuts, are NYCHA and Health + Hospitals. “These are two so-called independent authorities that all mayors, particularly this mayor, have forthrightly stepped forward to subsidize,” said Kellermann. “They were both meant to be self-sustaining and depend on federal revenue streams.”

NYCHA has a $17 billion capital backlog and though the mayor has made large capital investments -- including more than $1 billion to repair roofs at all NYCHA developments -- the agency’s woes are far from solved. The NextGen NYCHA plan has born some fruit, clearing the agency’s operating deficit for the first time in years, but progress would be threatened if the Trump administration follows through with funding cuts to the Department of Housing and Urban Development.   

NYC Health + Hospitals, the municipal hospital system, handles about 5 million patient visits each year and serves about 500,000 uninsured New Yorkers. But the cash-strapped hospital systems depends heavily on the city bolstering its finances. Even though the city has increased funding to the system from $1.3 billion in 2013 to $1.8 billion this year, Health + Hospitals projects an expected budget deficit of $1.6 billion in fiscal year 2019, growing to $1.8 billion by fiscal year 2020.

“[De Blasio’s] been hoping and saying that they will reinvent themselves into a new model, but it’s just not happening,” Kellermann said, referencing the city’s plan to overhaul the hospital system. “It’s the same thing with NYCHA. The [NextGen NYCHA] plan has the prospect of bearing fruit. But will it fill the $17 billion need? No...Both are open questions for which there are no answers at this point.”

Parrott, who recently co-authored a report on Health + Hospitals for the New York State Nurses Association, said the city’s approach to restructuring the system has been flawed since it only focuses on finances without taking into account the larger eco-system of healthcare. The city and state must work together, he recommended, to create an integrated system that involves private hospitals doing their fair share for a more equitable health care system overall.

“The testing of the ability to manage these things will come sooner or later,” said Kellermann. “He gets an incomplete,” she added about de Blasio’s budget record, “That’s the grade I would give.”

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This article is part of a series on Mayor de Blasio's first term record as he seeks reelection this fall, in partnership with WNYC radio and City Limits. Find all pieces of the series here.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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De Blasio's Record on Budgeting and Fiscal Health Sun, 05 Nov 2017 04:00:00 +0000
Budget Watchdogs Question De Blasio’s 'Mansion Tax' https://www.gothamgazette.com/city/6830-budget-watchdogs-question-de-blasio-s-mansion-tax https://www.gothamgazette.com/city/6830-budget-watchdogs-question-de-blasio-s-mansion-tax de blasio mansion tax

De Blasio pitches his mansion tax (photo: Michael Appleton/Mayor's Office)


Budget watchdogs have expressed concern that Mayor Bill de Blasio’s “mansion tax” proposal, which would impose levies on real estate transactions above $2 million, may be misguided or even unnecessary.

De Blasio made a last-minute trip to Albany on Wednesday to rally with Democratic lawmakers and progressive advocates in favor of a number of proposals currently being considered in state budget negotiations. The mayor’s chief concern, however, was the mansion tax, a proposal he has floated for years and revived this budget season as a tool to subsidize affordable housing for seniors.

The proposal would impose a 2.5 percent tax on buyers who purchase property in the city at more than $2 million, raising an estimated $336 million next year, according to the mayor. That funding would then be used for a new Elder Rent Assistance program to provide $1,300 in monthly assistance to 25,000 seniors, the mayor said at his State of the City speech in February. In order to implement the tax, the city needs state approval, which is unlikely given opposition to new taxes from the Republican majority in the state Senate as well as Governor Andrew Cuomo, a Democrat who is fiscally moderate and habitually opposed to de Blasio proposals.

The Wednesday rally at the state Capitol was one stop in something of a barnstorm by de Blasio, who has been pushing the mansion tax plan among seniors, including at two senior center stops on Thursday. The mayor has cited the necessity of the tax revenue to provide the additional rent subsidies to older New Yorkers who fit certain age and income guidelines.

[Related: In Albany, De Blasio and Democrats Push ‘Mansion Tax’]

But fiscal experts question whether the city really needs a new tax to raise that revenue and, if so, whether a transactional tax is the best way to do it.

“This could be a good idea in the context of general property tax reform and other tax reform,” said Nicole Gelinas, senior fellow at the Manhattan Institute, a conservative think tank. “But it's not a good idea as a revenue raiser."

Gelinas noted that the city already charges a mortgage tax, which she called “a tax on people who can't pay cash for an apartment.” “If we wanted to have a more progressive tax on just the purchase of more expensive properties, the money should go to reducing or eliminating mortgage taxes or other property taxes," she added.

That’s not what the mayor is proposing. Instead, Gelinas pointed out, de Blasio is attempting to raise revenue for a new program through a new tax, something mayors don’t usually do unless they face a sharp revenue crunch. “The city is not exactly starved for revenue right now,” she said.

Although the city is feeling the early effects of an economic slowdown, revenues and reserves are still robust after years of sustained growth. Available monies could be used to prioritize affordable senior housing, Gelinas said. Yet, as he once did with his universal pre-kindergarten program, de Blasio is insisting that the way to fund his senior assistance program is through a new tax.

The mansion tax also faces opposition at home from allies of de Blasio. Manhattan Borough President Gale Brewer told Gotham Gazette that she opposes the $2 million threshold for the tax since it would have an outsize impact in Manhattan, where property prices are far greater than the other boroughs. She would prefer a $5 million threshold. “Manhattan should not be the cash cow for the rest of the boroughs,” she said last month.

A report by the nonpartisan Independent Budget Office, prompted by Brewer, looked at property sales from the last three years and found that between 2014 and 2016, 8 percent of homes sold citywide were priced at $2 million or more. Of those, 86 percent were in Manhattan.

[Related: De Blasio Faces Local Questions About ‘Mansion Tax’ Plan]

In response, the de Blasio administration points out that it is a “marginal tax for incremental sales price over $2 million,” meaning that only the price above the $2 million would be taxed at the 2.5 percent. Those purchasing homes closer to the $2 million threshold would be paying very little in added tax.

There are also concerns among the real estate industry about the proposal’s effect on sales, at a time when Brooklyn brownstones can cross the $2 million threshold. The de Blasio administration dismisses that concern due to the incremental nature of the tax.

Carol Kellerman, president of the nonpartisan Citizens Budget Commission, believes the mayor hasn’t made a clear case for the mansion tax. “If the goal is to impose higher taxes on people perceived to be wealthy, there are ways to do it through the income tax structure,” she said in a phone interview. “The mayor’s not proposing this as a form of budget relief or as necessary for budget needs.”

Kellerman also emphasized the “volatile” nature of a transactional tax, which would depend on the ups and downs of the real estate industry and also have a “distortive impact” on the market and change behavior. “If there’s a need to raise that amount of revenue, a transfer tax of this nature is not a reliable source of revenue,” she said.

She also pointed out that the mayor has already allocated billions in the city’s capital plan for affordable housing, so the need for a separate tax for senior housing doesn’t necessarily pass muster.

Given opposition from state Senate Republicans, the mansion tax may be dead on arrival in Albany. De Blasio has argued, including in Albany Wednesday, that he’s heard that before about proposals, such as the $15 minimum wage. Gelinas was blunt about mansion tax prospects. "I don't think it's going to go anywhere," she said.

A spokesperson for the de Blasio administration refuted both Gelinas and Kellerman’s concerns, stressing that property tax reform is a larger undertaking and that the mansion tax is necessary when considering how the proposed federal budget will impact affordable housing and seniors in particular.

The spokesperson also pointed out New York’s existing state mansion tax, which is 1 percent for properties above $1 million, and cited jurisdictions around the world that have used similar taxes to fund policy goals from rising housing markets.

A spokesperson for another budget watchdog, city Comptroller Scott Stringer, declined to comment on the mansion tax proposal. The comptroller has not released any fiscal analysis of the proposal.

At the Wednesday rally in Albany, de Blasio reiterated the need for the mansion tax. “Here’s the bottom line, right now, there are seniors struggling to get by in New York City and all over New York State,” he said. “There are seniors struggling to get by because so many of them are on fixed incomes. So many of them don’t have a way to get more income but the cost of housing keeps going up...We owe it to them to get it right, and asking the wealthy to pay their fair share so our seniors can have decent life is a thing we call common sense.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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Budget Watchdogs Question De Blasio’s 'Mansion Tax' Thu, 23 Mar 2017 04:00:00 +0000
De Blasio Faces Local Questions About ‘Mansion Tax’ Plan https://www.gothamgazette.com/city/6773-de-blasio-faces-local-questions-about-mansion-tax-plan https://www.gothamgazette.com/city/6773-de-blasio-faces-local-questions-about-mansion-tax-plan de Blasio speech dining room gracie

Mayor de Blasio (photo: Edwin J. Torres/ Mayor's Office)


A report released by the city Independent Budget Office has raised questions about the potential effects of the so-called “mansion tax,” a proposed part of Mayor Bill de Blasio’s affordable housing strategy that would levy a 2.5 percent surcharge on the sale price over a threshold of $2 million for residential properties.

De Blasio put forward a version of the mansion tax proposal, which requires approval by the State Legislature and Governor Andrew Cuomo, in mid-2015. It failed to gain traction then. The mayor presented the current updated form at an Albany legislative state budget hearing in late January and reiterated it at his State of the City address February 13.

The mayor has said that he hopes the revenues from the tax, estimated by his Office of Management and Budget at $336 million in fiscal year 2018, will be used to subsidize rents for seniors.

The IBO report shows that about 8 percent of citywide home sales between 2014 and 2016 carried price tags of $2 million or more; and of those sales, 86 percent were for properties in Manhattan.

Manhattan Borough President Gale Brewer had requested that IBO examine the impact the tax would have on her constituency. Often in agreement with de Blasio, a fellow Democrat, Brewer told Gotham Gazette that she is opposed to the mayor’s mansion tax proposal.

“Manhattan should not be the cash cow for the rest of the boroughs,” Brewer said during a phone interview, adding that she would be “much more comfortable with [a threshold of] $5 million and not $2 million.”

At the State of the City speech, the mayor told his constituents to “ask [state legislators] if you think someone selling a home for more than $2 million can afford a little bit for senior citizens.” The tax would be paid by the buyer, according to de Blasio’s plan.

Brewer also raised concerns that mansion tax revenues would not be guaranteed to go to rent subsidies. “Any tax that has been enacted then has to be allocated. It could go to seniors, or it could go to homeless services, or it could go to anything,” she said.

Asked if she would publicly oppose and testify against the tax if given the opportunity, Brewer said she would. She said she had not been in touch with the mayor or his staff about the mansion tax specifically, but had heard from constituents concerned about the measure’s effects.

In emailed comments expanding on the report, IBO Chief of Staff Doug Turetsky said there were arguments for and against the tax. A possible issue is the specter of a price cliff: “suddenly you will probably have a lot of sales priced just under the threshold for the mansion tax.”

However, he touted the proposal’s potential to level the playing field, as both co-ops and high-end residential sales paid in cash or with foreign financing are not subject to the city’s existing mortgage recording tax. “As a result, purchasers of a comparatively moderate priced home will likely pay both the city’s mortgage recording tax and real property transfer tax, while many buyers of the city’s most expensive residential properties will only pay the transfer tax,” he said.

Along with skepticism from Brewer, de Blasio is facing a long road to mansion tax passage in Albany, where both Cuomo, a fellow Democrat, and the state Senate Republican majority are philosophically opposed to new taxes. Senate Majority Leader John Flanagan has said his conference is interested in cutting taxes, and he is facing a Cuomo proposal to extend the state’s “millionaire’s tax.”

De Blasio has said that recent progressive victories indicate nothing is impossible to see through Albany if there is enough support. The mayor also argues the city needs the mansion tax revenue to bolster his affordable housing plan, especially for seniors, though the city has been rapidly adding to its budget under the mayor without additional taxes, given revenues have been strong amid a booming city economy.

“I don’t think the mayor has thus far made the case why the tax is needed for any particular agenda he wants to pursue,” said Carol Kellerman, president of the Citizens Budget Commission, adding that “it would seem to us that the mayor and the [City] Council are able to fund anything they need $330 million for” out of the already expanded, $84.7 billion budget the mayor has proposed for fiscal year 2018.

Melissa Grace, a spokesperson for the mayor’s office, dismissed the idea of a price cliff, arguing that, since the tax would only apply for the price over $2 million, “that’s not going to affect any buyer or seller’s behavior.” She also pointed out that the average home purchase affected by the tax would be $4.5 million, an argument the mayor also raised at an unrelated press conference this week when Gotham Gazette asked about his tax plan.

In response to Brewer’s concern of the money being used for other purposes, Grace said that according to the city’s proposal, the funds would go specifically to the recently announced Elder Rent Assistance program and could not be used for anything else.

Asked at a Tuesday press conference about previous statements that the mansion tax was justifiable given tax cuts for the wealthy the mayor is anticipating from Washington, D.C., the mayor said that President Donald Trump “has been salivating for the opportunity to reduce corporate taxes and taxes on the wealthy...So I think it’s a really, really good betting assumption there will be tax cuts for the wealthy and the corporations.”

The mayor added that, even if a federal tax cut does not materialize, “I still think the mansion tax makes sense...Someone who’s buying a $4.5 million home can afford to spend a little bit more.”

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by Felipe De La Hoz, Gotham Gazette
     

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De Blasio Faces Local Questions About ‘Mansion Tax’ Plan Thu, 23 Feb 2017 05:00:00 +0000