Gotham Gazette https://www.gothamgazette.com/component/tags/tag/509 Sat, 05 Dec 2020 00:35:08 +0000 Joomla! - Open Source Content Management en-gb webmaster@gothamgazette.com (Webmaster) MTA’s ‘Worst Case’ is Really a Massive $23 Billion Deficit Through 2024 https://www.gothamgazette.com/130-opinion/9959-mta-worst-case-23-billion-deficit-through-2024 https://www.gothamgazette.com/130-opinion/9959-mta-worst-case-23-billion-deficit-through-2024 govcoumo sub ob

Governor Cuomo at an MTA train depot (photo: governor's office)


New York’s Metropolitan Transportation Authority (MTA) is facing the largest fiscal crisis in its history due to COVID-19. With more federal aid not forthcoming, the MTA has been buying time – quite literally, by borrowing up to $2.9 billion from the Federal Reserve – before the axe will need to fall on service and its workforce. The MTA’s Chief Financial Officer, Bob Foran, said that layoffs would need to start in May of 2021, and fare and toll increase hearings start this month. The MTA Board could vote on fare and toll increases as soon as February 2021.

Unfortunately, the public and many of New York’s elected leaders still have not fully grasped the magnitude of the MTA’s potential “worst case scenario” losses: $23 billion from 2020 to 2024 according to the latest budget numbers. This is partly because the MTA’s November Financial Plan does not clearly show the worst-case possibilities to the public and MTA Board, but rather emphasizes this period’s mid-point $16 billion deficit – still a debilitating sum. 

A cumulative deficit of $23 billion is a massive amount: the equivalent of 15 months of pre-pandemic operating costs for the MTA. For comparison, the New York City Department of Education has a budget of $34 billion for the 2020-2021 school year to educate more than 1 million students.

When factoring in a worst-case scenario “adjustment,” the MTA’s deficit through 2024 balloons to nearly $23 billion, up from $16 billion, as shown in the chart below, an increase of $7 billion and 44% worse.

Chart

The MTA’s worst-case scenario “adjustment” assumes more depressed ridership than anticipated, and a significant “second wave” of COVID-19 accompanied by more lockdowns this winter, according to an updated analysis from McKinsey. In the worst case, McKinsey assumes an average “ridership recovery” of 27% for 2021, 54% for 2022, 71% for 2023, and 79% for 2024.

ChartThis means that the worst case would be only 27% of ridership coming back in 2021 compared to what the MTA had projected pre-pandemic. It is worth noting that these recovery rates are not pegged to 2019 ridership rates, which saw steady ridership gains that were expected to continue through 2024. The MTA/McKinsey assumption shows relatively larger revenue deficits than if 2019 were held as a “base” year for ridership, and therefore for fare revenue, based on expected growth. However, steadily increasing MTA ridership is certainly a positive goal for the agency and the New York City region as a whole, albeit one that may be harder to attain post-covid.

Overall, McKinsey predicts a reduction in ridership due to the following factors: remote work (-4% to -12%); reduced non-work trips like shopping or for tourism (-2% to -5%); mode shifts such as walking, bicycling, driving, etc. (-2% to -3%); and decreased employment (-.2%).

MTA’s November Doomsday Plan Doesn’t Close Either a $16B or $23B Deficit
The MTA’s August Doomsday plan showed a number of options to close the gaps, as seen in our prior analysis, which also showed a $1 billion gap even with brutal cuts. The MTA’s November plan repeats many of these bad options to close the gaps in the absence of federal aid and greater support from New York State. Together, these gap-closers make up $14 billion of the MTA’s $16-$23 billion deficit, and include borrowing that will need to be paid back.

This means that at least $2 billion more in cuts will be needed, and as much as $9 billion in a worst-case scenario. Our summary of the MTA’s latest budget gap-closing options is below. It includes the MTA using its Other Post-Employment Benefits (OPEB) trust, which was intended to help pay future MTA retirement benefits, and borrowing $2.9 billion from the Federal Reserve’s Municipal Liquidity Facility (MLF) program, which will require the MTA to start paying interest in 2023.

Chart

Fare Hikes
In August, the MTA hinted at possible fare hikes beyond the regular increases planned every other year, for an additional 1% above the planned 4% increase. While the MTA’s November Financial Plan shows only 4% increases as originally planned pre-covid (as included in the chart above), some MTA Board members loyal to the governor have indicated that there should be no increases, or new discounts to lure riders back. No one will dispute that fare policies should consider the impact on ridership, as who wants to pay more for much, much less? Higher fares could deter riders from coming back, and 2019’s ridership gains already seem a distant memory.

The problem here is that the only solutions being proposed by Governor Cuomo and his MTA are cuts, borrowing, discounts on fares, or holding the fare steady. At best, discounts and holding the fare at current levels will have a neutral impact on the MTA’s bottom line, if not further increasing the deficit. The proposed fare hikes were expected to net $148 million more in revenue for 2021, and $267 million more in 2022.

MTA is Planning on the State Raiding Its Dedicated Funds
Even worse, the governor is actively withholding from the MTA its dedicated funds as part of the state’s budget adjustment process, with 20% across-the-board cuts being inflicted on everything from the MTA to nonprofit service-providers, CUNY, and other vital institutions. Funds have been withheld for months now, and are becoming de facto cuts in the absence of formal cuts. The withheld funds have allowed the state to accumulate a cash hoard of $23.8 billion – 62% more than this time last year, according to the latest cash reports from the State Comptroller. This is nearly the same amount as the MTA’s worst-case deficit through 2024: $22.9 billion.

The MTA has acknowledged that $600 million in state subsidies are at risk if the federal government doesn’t provide emergency aid to New York State, even factoring this loss into its $12 billion ask for federal aid. Translated from Albany budget lingo into real-world terms, the state plans to raid $600 million in MTA dedicated taxes to prop up its own finances.  

Congress and Governor Cuomo Both Have a Role to Play
So where are the solutions? Everyone agrees that the federal government is the MTA’s best option. Congress provided the MTA with nearly $4 billion in CARES Act funds earlier this year, which was fully spent down this summer. And the Federal Reserve’s Municipal Liquidity program is going to give the MTA $2.9 billion more in liquidity to help it make up some of these gaps. But any borrowing needs to be paid back, and the MTA will start paying $143 million a year in interest on this loan, according to its November Financial Plan.

The MTA’s “worst case” $22.9 billion deficit also happens to be nearly the same size as the ‘deficit’ New York has with the federal government. The MTA is essential to boosting the region’s economy, and State Comptroller Tom DiNapoli’s recent report shows that New York’s economic successes allowed it to send $23.7 billion more to Washington D.C. than it got back in federal aid in 2019. New York State ranked second worst only to New Jersey for what it got in return for its tax contributions. Forty-four other states got more back than they sent to the federal government; New Mexico, for example, got back nearly $12 billion more than it paid in taxes.

Now is the time for New York’s Congressional delegation to hold firm and ensure that the MTA is a necessary part of any emergency aid package. The latest aid proposal being discussed is yet again an anemic package that fails to fully support the MTA, which carries 40% of transit riders nationwide. The nation depends on New York to bolster federal tax revenue, and if the federal government lets the MTA fail, it only hurts itself.

At the same time, Governor Cuomo must once and for all pledge to stop raiding the MTA’s dedicated taxes to prop up the state’s budget shortfalls. The governor controls the MTA, and his own Board members have a fiduciary duty to the agency (including his Budget Director Rob Mujica), yet that is far from evident given that the State Division of the Budget is withholding millions from the MTA. It’s time they respect MTA dedicated funds – which were created by the Legislature to provide the MTA stable revenue in good times and bad – by giving them to the MTA at its time of greatest need.

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Rachael Fauss is Senior Policy Analyst at Reinvent Albany. On Twitter @RachaelFauss & @ReinventAlbany.

 

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MTA’s ‘Worst Case’ is Really a Massive $23 Billion Deficit Through 2024 Wed, 02 Dec 2020 05:00:00 +0000
‘Hanging On’ is Not a Management Strategy https://www.gothamgazette.com/130-opinion/9953-hanging-on-not-a-management-strategy-nyc-budget-de-blasio https://www.gothamgazette.com/130-opinion/9953-hanging-on-not-a-management-strategy-nyc-budget-de-blasio fy202 eb

Mayor de Blasio (photo: Michael Appleton/Mayoral Photography)


As required by the state Financial Control Act, last Monday Mayor de Blasio presented a modification of New York City’s current fiscal year budget and four-year financial plan. This “first quarter mod” is usually a no-drama, technical adjustment that makes few substantive changes to the budget adopted at the start of the fiscal year in July. It incorporates changes in revenue projections based on receipts actually received through September and any unanticipated adjustments in expenses (usually increases). But this has been anything but a usual year, and a more urgent tone and more aggressive budget changes were called for and not delivered. 

Budget watchers hoped that the new budget documents would present a more realistic picture of the serious fiscal situation the city faces and the concrete steps the de Blasio administration will take to address it. Covid continues to wreak havoc on the city’s residents and its economy. Despite the expected arrival of a vaccine in the next few months, it is far from certain that things will bounce back and tax revenue will quickly return to pre-covid levels. Even during prior (”normal”) recessions, it has taken three years for the city’s economy to recover, and this recession is not normal.

Tourism, commercial real estate transactions, entertainment, and other activities may well take years to rebound and/or may undergo permanent changes and retrenchment. How will the city adjust its revenue and spending over the next four years to respond to these changes over an extended period of time? This budget modification doesn’t tell us.

We know that in addition to further income, business, and real estate tax revenue losses, the city could also face severe cuts in state aid because the state is in even worse financial shape, but that is not  reflected in the budget either. One billion dollars in state school aid to the city has already been removed from the state’s baseline budget for fiscal year 2022. In addition there is potentially $8 billion in unspecified statewide local aid cuts that could mean a loss of $2-3 billion to New York City. Instead, the city’s new budget mod relies on debt service savings (which are routine, not the result of new, affirmative steps by the city government), minimal efficiencies, and largely symbolic, non-recurring measures like short furloughs of management employees and postponements of payments to public employees (laughably characterized as “savings”) to balance this year’s budget and reduce the 2022 budget deficit by $400 million to $3.8 billion. 

According to Mayor de Blasio, the strategy is to ‘hang on’ because sometime soon, there will be an infusion of federal stimulus funds which will close both the city and state gaps: 

“….first of all, we need relief immediately to be able to continue to provide city services and to be able to keep people employed…We do not want to reduce services exactly when we're trying to come back and when people are in such dire need. So, this was a way of getting us to next year. But we've said all along, the only way we can actually make all of this come together is with the stimulus…And the federal government was supposed to protect us. Obviously, that didn't happen…So, for us to just keep hanging on is the right approach to get to the day where there's actually the federal support we deserve and which I absolutely believe is within reach.”

But federal aid to states and localities is far from certain. Hopes for imminent help were first focused on the post-election Congressional session, which will likely end by mid-December. There is discussion of a last-minute stimulus deal before Congress recesses in the next few weeks but Republican Senate recalcitrance makes adequate help for state and local governments unlikely, even though a number of ‘red’ states are in financial trouble as well as 'blue' ones.

The mayor’s preliminary budget for next fiscal year must be submitted to the City Council in January. Will President-Elect Biden be able to deliver any more state and local aid than is possible in the current Congress? Not necessarily. And if making that determination takes until February, or even later, is Mayor de Blasio going to ‘hang on’ even longer without taking any steps to solve our fiscal problems? Delaying the start of gap-closing measures will only make the problem and the necessary solutions more painful.

Federal funding to assist the city and other jurisdictions that faced economic shutdowns because of the pandemic is unquestionably necessary and appropriate, but whatever amount is authorized — if any — will unlikely be sufficient to cover the full New York City deficit and will not last for more than one or two years. As Citizens Budget Commission President Andrew Rein has said, federal stimulus will only be a bridge to a more sustainable future; the City and State will face continuing budget gaps if the economy doesn’t fully recover by 2023. So, what’s the plan? 

The MTA and Port Authority, also struggling with dramatically-reduced revenue, have presented budget plans showing how they will survive without federal aid. The prospects of reduced transportation service are daunting indeed, but the public needs to understand them and be prepared if these difficult scenarios come to pass. Governor Cuomo has temporarily withheld substantial state aid payments to localities and cut back agency spending, warning that these cuts and more could become permanent. Mayor de Blasio prefers to avoid proactively making tough decisions that will make New Yorkers unhappy, but the uncertainty is already causing distress and there will be anger if New Yorkers feel they were misled to believe that federal aid would make everything better and they are confronted with service cuts, layoffs, tax increases, or a combination of all of these at the very last minute.

If the administration will not present a specific plan for multi-year gap closing then the Financial Control Board (FCB) should require that it do so. It is the FCB that requires the city to maintain a balanced budget, prepare a four-year financial plan, keep it updated, and demonstrate the fiscal discipline to maintain long-term fiscal stability. At the FCB meeting in August the Executive Director suggested that because of the unique circumstances wrought by covid it would be appropriate to hold another session in November to review the budget modification. But it is December and it doesn’t appear that such a meeting has yet been scheduled and the Executive Director of the FCB retired in mid-October; no replacement has been announced. It is critical that the FCB adopt a more assertive strategy to assure there is clarity about how state aid cuts will impact the city and hold the mayor accountable for a real fiscal management plan.

Moreover, if the mayor is going to ‘hang on,’ he will be leaving his successor to confront revenue shortfalls along with the larger issues of how to get the economy back on track. When he took office the mayor complained that his predecessor left him with a raft of unresolved labor contracts. What he seems to be ready to leave his successor is much worse. The media and voters should start asking mayoral candidates what their plans are for closing our budget gaps if federal funds do not make our fiscal challenges go away. The sooner we hear from them about this crucial issue, the better.

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Carol Kellermann was president of Citizens Budget Commission from 2008 through 2018. Norman Steisel was a First Deputy Mayor of New York City, Sanitation Commissioner, and First Deputy Budget Director, all between 1974 and 1994.

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‘Hanging On’ is Not a Management Strategy Tue, 01 Dec 2020 05:00:00 +0000
Trump Decimated Refugee Admittance; Biden Promises Massive Expansion — What it Means in New York https://www.gothamgazette.com/state/9944-trump-cut-refugee-admittance-biden-promises-expansion-new-york-impact https://www.gothamgazette.com/state/9944-trump-cut-refugee-admittance-biden-promises-expansion-new-york-impact 1 after trump

A New York City rally in support of asylum-seeking refugees (photo: John McCarten/City Council)


As part of a systematic dismantling of providing asylum to refugees in the United States, the Trump administration in October 2020 reduced the cap on resettling refugees in the country to just 15,000 for fiscal year 2021, which runs from October 1, 2020 to September 30, 2021, down from 18,000 for fiscal year 2020, and from 85,000 in the last year of the Obama administration.

These reductions have a significant impact not only on those seeking refuge in the United States, but also on New York, where many refugees often settle, whether in New York City or places including Erie County and Rochester, where there are significant refugee populations from countries such as Afghanistan and Democratic Republic of Congo. About 1,800 refugees are resettled every year and New York State provides millions of dollars in funding annually to refugee resettlement organizations.

Trump’s move to limit refugees -- people fleeing persecution and armed conflicts -- into the country is part of a larger administration push to limit legal and illegal immigration and to create a broadly xenophobic and nationalistic policy.

The outgoing Republican president, recently defeated by former Vice President Joe Biden, has repeatedly publicly railed against Congressional Rep. Ilhan Omar of Minnesota, who came to the country in 1995 as a refugee from Somalia.

Along with painting refugees as unwelcome outsiders, Trump has argued for the lower refugee cap by indicating he believes it would effectively give more jobs to Americans and save the federal government money. 

These claims have been debunked: federal funding for each refugee resettled is limited to only $1,000 if the resettlement is done within or by 90 days, and refugees often initially fill low-skill jobs, with little discernible impact on the larger labor market.

President-elect Biden, a Democrat set to take office January 20, has promised to work with Congress to ensure the United States admits a minimum of 95,000 refugees each year. On June 20, commemorated as World Refugee Day, Biden pledged he would increase the number of refugees admitted to the U.S. annually to 125,000, which would be a historic high.

But it could take months to years to be able to start admitting so many refugees, mostly because so few are in the pipeline after Trump’s policies. To be admitted into the U.S., refugees go through several rounds of background checks, screenings, and interviews under U.S. Citizenship and Immigration Services as well as ongoing vetting by a variety of intelligence agencies including the FBI and CIA. This process can take up to two years. 

Along with the damage inflicted on those seeking refuge in the United States who won’t be allowed to resettle in this country, the decimation of the United States’ refugee program and its impact on New York has largely left refugee resettlement agencies dealing with the fallout.

But another significant challenge came from the current state budget, passed in early April amid major coronavirus-related challenges and question marks. Funding for the New York State Enhanced Settlement for Refugees Program (NYSESRP), which supports these non-profit agencies, was slashed by $1 million, cut in half from the $2 million allocated the previous year. Advocates have called for an increase to $4.9 million, but the state’s cuts have compounded the financial pressure on both NYSESRP agencies and agencies that don’t come under the NYSESRP. The state funds at least 11 organizations that have worked for a significant amount of time in refugee resettlement.

Shelly Callahan, Executive Director of The Center, a non-profit NYSESRP agency located in Utica, New York, said everything is in a state of flux at this moment. “Even if Biden wins, the damage this administration has done cannot be undone,” she said in late October. “To get back to the point where we can settle 110,000 refugees a year, it’s going to take a lot of time. We went from resettling 400 refugees before the cap was reduced, and this year we did 104. We also have huge lack-of-workforce issues across the state, we also get secondary migrants — refugees who come from other parts of the country. We’re not keeping at pace with the population growth that we need in these areas.” 

There are high rates of secondary migration by refugees to New York, mostly from Texas and Tennessee, according to Callahan. While The Center and other resettlement agencies provide services to them as well, it is an additional stressor and a great deal of work for which they don’t receive funding from the government. New York is recognized as being hospitable and welcoming to refugees (and immigrants generally), and the NYSESRP funding was instituted after the Trump administration's actions in 2017.

The cut in state funding in the current fiscal year 2021 budget, Callahan said, makes a significant difference. 

“For an agency like mine $2 million [in the state budget] meant $200,000 a year,” she said of the portion of overall state NYSESRP funding that her agency received until last year. “Even though the number of refugees has been cut significantly, our services have increased, especially when covid happened. But now, we have to find money from other places, reduce programs, and that won’t be good for the community.”

As for non-NYSESRP agencies, Isabel Miller, Executive Director at Saint’s Place, based in Pittsford, New York, is relying largely on donations from loyal philanthropists and emergency covid grants from the state. “When the [refugee] numbers started to decline, we made a pivot to focus on refugees that have already been resettled,” she said. “We haven’t had to stop our programs, though part-time staff were let go. Our peak was about four years ago where we helped 1,200 refugees, most from Cuba and Afghanistan. Once the latest lower cap was put into order, we are expecting maybe 120, and only 30 have arrived so far.” 

“The pivot we made to focus on existing refugees in the area was not due to lack of funding, it was lack of refugees,” Miller continued. “If we didn’t make the pivot, we would not be of any use. We hear in different areas that people have cut back on staff significantly. We have a lot of volunteers of 150 refugees who help us, and just five others on staff. There are many refugees who have been vetted, but are not allowed to come into the country, so they’re just waiting.”

Anthony Farmer, a communications officer for the state’s Office of Temporary and Disability Services, under which the New York State Enhanced Services to Refugees Program (NYSESRP) functions, said that the program was created in response to the federal government severely limiting refugee admissions, something no other state has done. “NYSESRP has enabled refugee resettlement agencies across the state to continue actively serving refugees, in spite of the federal government’s callous action, with some even expanding their scope by serving refugees who have resettled more than five years ago,” he said in a statement. 

State Senator Andrew Gounardes, a Brooklyn Democrat who has led the effort to increase state funding for resettlement and whose district is home to many Syrian refugees, among others, said in a statement to Gotham Gazette: "The gap in funding for refugee services will affect not just these families but the local economies of the communities in which they live. It is urgent that funding be restored as soon as possible."

Donald M. Kerwin Jr, Executive Director of the Center for Migration Studies, believes that “minimal infrastructure” must be in place for Biden to be able to successfully keep his promise to increase refugee numbers. “By minimal infrastructure, I mean vetting, the procedures that ideally shouldn’t take years,” he sad, “and a smoother process for them to resettle.”

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by Divya Karthikeyan, Gotham Gazette
     

Read more by this writer.

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Trump Decimated Refugee Admittance; Biden Promises Massive Expansion — What it Means in New York Sun, 29 Nov 2020 05:00:00 +0000
The State Must Step In Now to Avoid a Mass Transit Apocalypse https://www.gothamgazette.com/130-opinion/9922-new-york-state-must-step-in-avoid-mass-transit-apocalypse https://www.gothamgazette.com/130-opinion/9922-new-york-state-must-step-in-avoid-mass-transit-apocalypse lead cuomo rides

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


Hope that Congress can enact a post-election stimulus package to aid the economy amid another explosion of coronavirus cases has narrowed. One major institution in New York, the Metropolitan Transportation Authority (MTA), is now out of time to get help. It is therefore necessary for New York State to step up and rescue the MTA before it begins a series of wrenching cutbacks that could permanently harm the New York region. The agency is being overwhelmed by financial losses due to the pandemic and its impact on the economy.

MTA Chair Patrick Foye, describing the MTA’s desperation, said in a NY1 interview on October 28, that “Our urgent request…to the United States Senate, is for $12 billion, which will take us through 2020…and 2021. That money is desperately needed. If we don’t receive it, our hand may be forced in terms of draconian service reductions, up to 40% on subways and buses, up to 50% on commuter rails, on top of laying off…thousands of our colleagues, plus fare and toll increases above those that are budgeted. This is an apocalyptic scenario.”

He went on to say that the MTA Board would make a decision at its December Board meeting to proceed with the cutbacks in the first quarter of 2021 if Congress didn’t give the MTA the money. He expressed optimism nonetheless.

An October 2020 New York State Comptroller report on the MTA presented the below graph showing the staggering ridership losses for the subways and other parts of the massive transit agency.

jb image osc

The graph shows subway ridership plunging 90% at the start of the pandemic, recovering to an 80% loss as the economy partially reopened by mid-June, and trending up to a still devastating 70% ridership loss from the beginning to mid-September. New York City Comptroller Scott Stringer has been tracking MTA ridership reports and other city economic matters and the most recent ridership numbers show losses are still 63-70% below weekday daily numbers from the year prior. The suburban commuter rail systems are faring badly too.

New York State adopted its 2020-2021 budget in April 2020, just weeks after the declaration of the national and New York COVID-19 emergencies. The state budget anticipated the economic plunge and authorized New York to cut its budget. It also authorized New York to borrow up to $11 billion short-term to adjust to potential massive cash flow problems, some of which stemmed from Congress postponing the April 15 income tax filing deadline to July 15. New York’s large borrowing authorization also permitted conversion of short-term loans into longer repayment periods, including 30-year bonds.

To date, New York State has borrowed $4.5 billion. Current plans are to repay $1 billion by December 31, and the remaining $3.5 billion by March 31, 2021 the end of the current fiscal year, according to the mid-year forecast issued by the State Division of the Budget. New York State is in possession of this cash now.

Governor Cuomo can ask the State Legislature to quickly appropriate this $3.5 billion in cash to the MTA. The state can convert the earlier short-term borrowing into 30-year bonds in the next several months. The state may be proceeding now to repay the other $1 billion and it would not be wise to interfere with any processes underway in relation to that repayment. 

The State Comptroller’s Annual MTA Financial Report said the agency faces the greatest financial crisis in its history. The table below from that report shows that in 2020 the MTA has lost nearly $5 billion in fare and toll revenue, and nearly $2 billion in revenue from dedicated taxes and subsidies. Those $7 billion in losses were partially offset by the major federal stimulus package enacted in March, the CARES Act, which gave the MTA $4 billion. The MTA had a modest (a mere $412 million) deficit for 2020 before covid, but its final deficit for 2020 was projected in July to be $3.4 billion.

New York State appropriating $3.5 billion to the MTA now will stem this hemorrhaging for the moment and push the MTA’s crisis into later in 2021, though the MTA will need federal help sooner or later. State action now could help get the MTA to the Biden administration without catastrophe.

jb img1 cares

Even if the MTA gets the financial relief it needs for 2020, from New York State or the federal government, the table shows it faces a $6.2 billion deficit in 2021. If the economy fails to improve as much as anticipated, or if the huge part of New York City’s employment base now working home continues to do so, the MTA’s revenue losses would be higher and its deficits larger as a result. The MTA may be facing a major long-term restructuring.

The state budget allowed the MTA itself to borrow money, but it has said it simply cannot afford to do so. In fact, to survive into 2021 it must hoard cash. Among the options are deferring pension contributions, deferring Social Security payroll taxes, and halting cash contributions to the capital program. These options will save $3 billion in 2020-2021. The MTA can continue a hiring freeze and work with the labor unions on possible savings.

The 2020-2024 MTA capital program has been temporarily suspended. The centerpiece of revenue for that program, congestion pricing, was not approved by the Trump administration and awaits action from the Biden administration. It will be at least several years before most of this capital program can be started. The MTA will need to focus on finishing the 2015-19 capital plan with the remaining available sources of funds.

Severe health and economic problems other than the MTA confront New Yorkers. If the state is going to rescue the MTA, it could also borrow either short-term or long-term to avoid implementing its planned cutbacks to public services and aid to localities.

The State Division of the Budget’s plan to implement the adopted 2020-2021 budget provided for $8 billion in spending reductions in local assistance, in schools, health care, transportation, and emergency services. In its recently-released mid-year budget update, the Division of Budget reported that by the end of September it had withheld $2.4 billion in local aid, as it awaited the elusive new stimulus package that Congress and the President have failed to enact.

The Department of Budget’s April 25 Financial Plan indicated it would backload 40% of the state’s local assistance cutbacks to the final quarter of the state fiscal year, meaning from January through March 2021. That would represent a $3.2 billion cut to schools, hospitals, and other vital public services. If the state used $3.5 billion in borrowing authority to help the MTA, it could use part of the remaining borrowing authority to halt the cutbacks planned for the final quarter of the 2020-2021 fiscal year. This would mean the state would not be compounding the financial problems of local governments, including New York City, for now.

Sooner or later, Congress will pass another stimulus package that will include more aid for the unemployed, for state and local governments, and for transit agencies. It may be the President Biden stimulus package. But the MTA and New York’s local governments will be reeling by then if New York State does not act now. The state can use some of the funds from Congress to repay loans and cover deficits.

While such action is necessary, it will also remain true that the state, the city, the MTA, and the rest of New York’s local governments will likely confront the reality of continued budget deficits in 2021-2022, and beyond, and the necessity of a full-on restructuring of spending, borrowing, and taxing for years to come. But that likelihood does not negate the importance of state action now.

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Jim Brennan was a member of the New York State Assembly for 32 years, where he chaired four committees. On Twitter @JimBrennanNY.

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The State Must Step In Now to Avoid a Mass Transit Apocalypse Wed, 18 Nov 2020 05:00:00 +0000
City Identifies Potential Sites to Relocate Manhattan NYPD Tow Pound, Requests State Waiver on Fines https://www.gothamgazette.com/city/9903-city-relocate-west-side-nypd-tow-pound-state-fines https://www.gothamgazette.com/city/9903-city-relocate-west-side-nypd-tow-pound-state-fines tow pound ground

google view entrance of tow pound


As a state-imposed deadline approaches for relocating a massive NYPD tow pound at Pier 76 in Manhattan, Mayor Bill de Blasio’s administration has requested the state waive fines that would be imposed if it fails to complete the task while the city continues to look at alternate sites for towing operations in the borough. The city may even have found a target Manhattan site owned by the state.

In the state budget this year, Governor Andrew Cuomo pushed through a provision that requires the NYPD to vacate its 250,000-square-foot tow pound at Pier 76 in Hell’s Kitchen and hand it over to the Hudson River Park Trust for redevelopment. The move has been in the works for more than two decades, having been first included in the Hudson River Park Act of 1998. The state gave the de Blasio administration a tough ultimatum. By the law passed in early April, if the city fails to move the tow pound by December 31, it will have to pay the Hudson River Park Trust a fine of $12 million, with an additional $3 million every month it occupies the space after February 1, 2021.

Mayor de Blasio and NYPD officials opposed the move, citing the city’s lengthy land use process. At a City Council hearing in late January, then-NYPD Chief of Transportation William Morris criticized the “unrealistic deadline” imposed by the state, noting that it would take far longer to find a suitable alternative in Manhattan. Last year alone, he said, the department towed 50,000 vehicles to the pound, a volume that can’t easily be handled by other locations.

“It literally would cause us to violate city law that requires a land use process for any such action to take place and that process by law takes more than a year to begin with,” de Blasio said of the proposal when testifying before the joint fiscal committees of the State Legislature in February. “This tow pound is basically the size of Union Square Park. Finding an alternative in and near Manhattan is a very complex undertaking.”

The city is now seeking a two-year waiver of those fines and fees and has offered to purchase or lease a State Department of Transportation parking lot at 621 West 45th Street that can accommodate the tow pound’s capacity. Deputy Mayor Vicki Been made the request in a letter dated October 29, sent to Erik Kulleseid, commissioner of the State Office of Parks, Recreation and Historic Preservation and to Basil Seggos, commissioner of the Department of Environmental Conservation and chair of the Hudson river Park Trust.

In the letter, as the mayor himself has noted previously, Been said the city can ill-afford millions of dollars in fines as it struggles to bring its budget under control because of the devastation caused by the coronavirus pandemic. “Already the City has had to make severe cuts to vital programs affecting NYC residents, the maintenance and improvement of other parks and critical infrastructure in the city, and the funding of nonprofits and the services they provide,” the letter reads. “Implementing a fine against the City would further shift resources away from such core programs at a time when they are most needed.”

A spokesperson for the state Department of Environmental Conservation declined to comment on the city’s request but provided an earlier September 17 letter sent by Seggos to Mayor de Blasio. In the letter, Seggos said he would ask the Hudson River Park Trust to open the pier as it could provide “extraordinary benefit” as a public space. But the letter also seemed intended as leverage against the administration.

“I’m sure we all agree at this time of economic pressure that it would be wholly unacceptable to the public to lose the benefit of the pier and to burden the City’s already stressed budget through noncompliance with state law at a time when the City is considering laying off personnel,” Seggos wrote. “Any site can be used as an NYPD parking lot, but only the pier can provide spectacular open space for the public.”

Despite the concerns about the fiscal cost that the city would have to bear, prominent elected officials also continue to push for the move of the tow pound. A spokesperson for City Council Speaker Corey Johnson, who represents the area, said he “supports moving the tow pound and creating more open public space in the area. He will continue working with the city and the state to make this happen as soon as possible."

towpound 3c

State Senator Brad Hoylman, whose district includes the tow pound, also wants the city to meet the deadline. “The City has had over two decades to move the NYPD tow pound from Pier 76. New Yorkers deserve to have this pier in the Hudson River Park available for open space rather than used as a rent-free dumping ground for cars by the NYPD,” he said in a statement to Gotham Gazette. “I can’t speak to whether the Governor’s office is open to negotiating more time with the City, but I’d urge the City not to delay any further and find appropriate City- and NYPD-managed locations for the tow pound. We want a park, not a parking lot.”

The city’s ideal proposed site is currently used for tour bus parking and a pedestrian bridge for the Intrepid Museum. The administration has said it will be willing to pay the fair market value for it. Over the years, the city has also reduced the footprint of the tow pound, requiring less space than in the past. Horse stables for a mounted NYPD unit were moved from the site in 2015 and  the city is now in the middle of lease negotiations to move another 18,000-square-foot service shop from the premises, according to Been’s letter.

The city also identified Marshalling Yards, owned by the New York Convention Center Development Corporation, as an alternate site. According to Been’s letter, the Yards, between West 33rd and 34th Streets, will be redundant after the Javits Center expansion is completed in 2021, allowing the tow pound to be moved there.

Although the administration is considering two private properties as well, Been’s letter notes that “given the complexity of tow pound operations and procurement processes, conversations with private landlords often stall or move slowly.”

As the letter notes, the siting decisions were supported with a Capital Project Scope Development (CPSD) study, conducted by the firm Dattner Architects at a cost of $1 million. The study also examined whether booting illegally parked cars could be an alternative that would reduce the NYPD’s reliance on towing. The administration, however, concluded that it would be “frequently counterproductive” to do so. “Booting would significantly worsen the situation that the City is trying to address. Particularly in Manhattan, this creates an unsafe situation, as cars, pedestrians and bikers will be required to  maneuver in and out of traffic,” the letter reads.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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City Identifies Potential Sites to Relocate Manhattan NYPD Tow Pound, Requests State Waiver on Fines Thu, 12 Nov 2020 05:00:00 +0000
What's At Stake for New York City in the 2020 Presidential Election https://www.gothamgazette.com/city/9868-whats-at-stake-for-new-york-city-in-the-2020-presidential-election https://www.gothamgazette.com/city/9868-whats-at-stake-for-new-york-city-in-the-2020-presidential-election 3 whats pres ed

Joe Biden, with Andrew Cuomo (photo: governor's office)


The country will be watching, and voting, with bated breath on Tuesday as the most consequential presidential election in decades nears conclusion. More than 84 million Americans have already cast their ballots in early voting and turnout is expected to break records despite the lingering coronavirus pandemic. 

There’s much at stake for New York City in this election and it’s an understatement to say that the future of the city and state will vary widely depending on the next president and the next Congress. All signs and polls point to a victory for the Democratic nominee, former Vice President Joe Biden, and if that should happen, the state and city will have an ally in the White House. Despite -- or perhaps because of -- his critics on the left, including, at least during the primary, many prominent New York politicians, Biden has the most progressive agenda of any Democratic nominee ever.

Many planks of Biden’s platform match up well with what Governor Andrew Cuomo, Mayor Bill de Blasio, and other New York Democrats (as well as many Republicans and independents) hope to get from Washington beginning in 2021. That alignment would have a much better chance of bearing fruit if Democrats keep control of the House of Representatives and swing the Senate, with the former likely and the latter possible but less assured.

Should President Donald Trump be reelected, however, the federal government’s hostility to New York and other blue states may continue unabated. This is especially true if the Senate also remains under the leadership of Senate Majority Leader Mitch McConnell, though one or the other could make things especially challenging for New York in its quest for more aid from Washington.

New York City is facing multiple crises. The city worst-hit by COVID-19 is seeing cases creep back up. The pandemic decimated the economy, leading to massive governmental budget deficits that have yet to be resolved. Unemployment skyrocketed; more than a million New Yorkers lost jobs. The impact on tourism, arts, and culture -- all essential to the city’s economy and vitality -- has been devastating. Small businesses are closing. Immense office buildings sit empty. An eviction epidemic is looming. Students, especially the most vulnerable, are falling further and further behind. The mass transit system, in need of billions in upgrades before the pandemic, is going broke. Public housing, home to half-a-million New Yorkers, is still in a state of severe disrepair. The city’s vulnerability to climate change continues virtually unabated. The gap between law enforcement and communities of color appears wider. Hundreds of thousands of undocumented immigrants who live in the five boroughs, left out of federal and state relief efforts, are more unsure of their futures than ever.

Even as the economy begins to pick up again, there are fears of a K-shaped recovery, with the most vulnerable Americans with lower paying jobs suffering higher rates of sustained unemployment than those with higher paying jobs. New York, already a city with gaping wealth, income, and quality of life disparities between the haves and have-nots is only becoming more unequal. Even before the pandemic more than 1 million New Yorkers lived in poverty and roughly 1 million were food insecure -- both numbers have only grown.

“It’s hard, if not impossible, to overstate the stakes for the City,” said Bill Neidhardt, press secretary to Mayor Bill de Blasio, in an email. “There is the immediate legislative impact – we’re in desperate need of a stimulus, which Biden has championed and Trump has been an obstacle to. And there are the longer term, big picture issues that touch on the lives of all New Yorkers, from the security of immigrant communities to whether or not our federal government will fight against climate change or continue to fuel it and doom us all. It’s hard to fathom the entire scope of the impact this has on New York City.”

The immediate concern for the city is a dire need for federal aid. New York City has faced billions of dollars in lost revenue and is headed into the next fiscal year with a massive budget gap. There is broad agreement that no matter who wins, Congress will approve another round of federal stimulus. Democrats are likely to be friendlier to states and municipalities and have recommended a larger stimulus package than Republicans are willing to accept, in part to plug those government budget gaps left by severe drops in tax revenue and threatening services for constituents and the livelihoods of many thousands of workers who rely on government jobs and contracts.

Cuomo has pegged the overall New York number -- to aid state government, local governments, the Metropolitan Transportation Authority, and other governmental entities -- at $59 billion to cover the current and next fiscal years.

“The big issue that we continue to sound the alarm on, both in New York State and for New York City, is the need for additional federal stimulus and relief,” said State Comptroller Tom DiNapoli, in an interview.

But Republicans would stymie a broader Biden agenda, he said. “I think the most complicated scenario would be Biden wins, but the Senate is controlled by the Republicans, because I think it's pretty clear how they've handled things in the past that they will just be obstructionist.”

Both Governor Cuomo and Mayor Blasio have pushed off hard budget decisions until after the election, but the state must soon establish its plans for, among other things, aid to localities and the city must determine the extent of municipal employee layoffs or other major budget-balancing measures, perhaps including long-term borrowing that needs state approval.

"Donald Trump is an existential threat to the health of this city,” said City Comptroller Scott Stringer, in a statement. “His mismanagement has wrecked the economy, his cruelty has decimated immigrant families, and his incompetence has cost over 200,000 lives. New York City's future depends on resoundingly defeating him -- and then getting to work to rebuild and repair. That means fighting for a robust federal aid package for small businesses, transit, schools, and our coastal resiliency. The work to build a better future for New York City isn't over on Tuesday -- it's just beginning."

"Everything is on the line for New York City this election. In dollars and cents, we need the federal government to make us whole and to bail out the MTA for the good of the entire national economy,” said City Council Speaker Corey Johnson, in a statement. “In broader terms though, I agree with Joe Biden that the soul of our nation is on the ballot. Will we be a nation that is proud of places like New York City, a city where hundreds of languages are spoken and diversity is celebrated, or will our nation go deeper down the path of hate and nativism. Donald Trump represents the absolute worst of America."

Fiscal and urban experts point to the major differences between what a Biden or Trump administration would mean for the city, particularly its budget, mass transit system, taxes and infrastructure, among other things.

“We know if Trump wins, we'll just get more of the same, which is a very unconstructive and antagonistic relationship on both sides,” said Nicole Gelinas, senior fellow at the Manhattan Institute. “The designation of the ‘anarchist jurisdiction’ is a good example of that. Under no definition is New York City any more violent or lawless than any other place in the country.”

Andrew Rein, president of Citizens Budget Commission, questioned whether Trump winning a second term will “embolden the kind of ‘anarchist jurisdiction’ punishment policy, whether we'll see more of that, legal or not, types of actions and that battle between the two, New York and Washington, DC, which has been amped up.” 

“The consequences are more clear cut than usual,” said E.J. McMahon, founder and research director of the Empire Center for Public Policy. “They are fiscal and economic and the differences between the two results are definitely pretty extreme.”

Getting the Virus Under Control and the Economy Humming
“If you think of the New York City economy as having run off the road into a ditch in a storm, Biden winning is like the tow truck backing up, ready to pull you out of the ditch,” said James Parrott, an economist at the New School. “Your car's not going to be the same as it was before, but at least you're on the road, and you'll have a chance. Whereas if Trump gets reelected, it's like he's whizzing by and going out of his way to hit a puddle to splash more water in your face.”

As Parrott and others have pointed out, there is no feasible chance of a recovery if the country does not get the coronavirus under control. Even now, nearing nine months since the pandemic hit, the daily number of cases across the country continues to rise. Though New York has come far from the early days when it was the epicenter of the outbreak, there are worrying localized spikes and an expected second wave in the winter. “The first thing you have to do is get the virus under control...and Trump shows no ability or even an interest in doing that,” Parrott said, referring to the president’s lack of a national strategy. While Trump has all but given up on controlling the virus but for the arrival of a vaccine, New York leaders have also questioned his plans for distributing the potential medicine through private carriers.

As the recovery in New York continues, Parrott said Biden recognizes the need for more equitable growth as opposed to Trump. “Trump has never recognized, never admitted that the kind of growth we had before was not ideal,” he said. “He doesn't recognize any racial disparities or the need to provide a path out of poverty for low-income people.”

“The better we control the pandemic, the more we can grow our economy,” said Rein. “New York City is especially challenged by this type of health and economic crisis because what makes New York so strong and so wonderful is that people can socialize together, you have a great tourist economy, you have a great arts economy.”

Aid Package and Tough Potential Choices
“Even if we got another national rescue package, if Trump were still in charge, he would use his executive powers to put as many obstacles in our way to accessing that as possible,” said Gelinas, referring to the president’s repeated insistence that he does not want to “bail out” Democrat-led states and cities. 

Most observers expect that there will be a stimulus package of some sort that will be approved after the election, though there were also high hopes of something coming together during the summer months. Comptroller DiNapoli pointed out that even Republicans will be willing to provide aid to states and municipalities as their own states are suffering deeply. “I do think there will be some more stimulus and relief. But if the Republicans are in charge, it will clearly be a lot less than if the Democrats were in charge,” he said. 

Without an effective stimulus package, New York State will have to drastically cut funding, particularly to localities, which would especially and directly hurt health care and education in New York City. Though state lawmakers, as DiNapoli noted, have mostly insisted that budget shortfalls should be filled by increasing taxes on the wealthy and finding more revenue rather than cutting programs, it’s unclear what such measures may look like given the need to compromise among the two legislative majorities and Cuomo.

“It could be some combination of budget cuts, tax increases, and increased debt which, none of that frankly, would be helpful to New York's economic recovery,” DiNapoli said.

A robust federal package could help make New York whole. The lack of one, or a very limited one, will force the city and state to make tough decisions that have been put off for months.

“The federal action won't solve all of [the city’s] problems,” said CBC’s Rein. “We still need to right-size our government, deal with the revenue risks, deal with spending risks. These are real and no one should sit back and rest based on any outcome of this election and say, ‘Oh, see, now we don't have to do anything.’”

As Empire Center’s McMahon noted, “The city and the state have pointedly postponed and pushed off making any decisive spending choices...They will then be forced to make some very hard decisions and choices on the revenue and spending and capital end that they have put off because they were literally banking on Biden and a blue wave.”

The Metropolitan Transportation Authority, a state entity that runs the city’s buses and subways, and its boosters and dependents are hoping for Democrats to win so the transit agency has a good chance to receive a bailout as it faces the prospect of bankruptcy given ridership has plummeted. MTA leadership has said it requires at least $12 billion in federal aid, without which it has warned that it may have to reduce subway and bus service by 40% next year while also increasing fares by 1% above the scheduled increase for 2021. Both moves could serve to further depress ridership, particularly harming low-income commuters, and therefore revenue, also stunting the city’s and state’s -- and nation’s -- larger economic recovery.

The MTA is also awaiting federal Department of Transportation permission to institute a congestion pricing system in Manhattan, whereby new fees for cars and trucks entering the central business district would go toward repairs and upgrades of the authority’s subways, buses, and commuter rails.

Eli Dvorkin, editorial and policy director at the Center for an Urban Future, noted that the previous stimulus package only included a “tiny fraction” of the funds for workforce development, education and training compared to the stimulus provided during the Great Recession. “I think, potentially the single biggest need, especially when it comes to rebuilding the city's economy more inclusively, is going to be funding to support retraining and reskilling for the jobs that are going to come back and they're not going to be all the same jobs that we've lost since February,” Dvorkin said. “I think that's maybe the single biggest question mark about what any further stimulus looks like.”

Tax Policy
Biden has been campaigning on raising taxes on people who earn more than $400,000 annually, repealing most of the Trump tax cuts, and creating a more progressive taxation system while Trump has floated the idea of further tax cuts. One of the key pieces of the equation for New York is the cap placed on state and local tax deductibility from federal taxes as part of the Republican tax plan enacted under Trump and that most impacts higher earners in states and localities with high local taxes.

McMahon said higher federal taxes are a major variable under a possible Biden administration. It may not directly drive wealthier New Yorkers to other states but it would certainly nudge them in that direction, he said. “There are incentives and incentives have an effect. It doesn't mean that you raise the tax rate a smidge and moving vans have backed up the Holland Tunnel full of Park Avenue householders, but it does mean you've nudged them further,” he said. 

Comptroller DiNapoli, however, said those effects could be mitigated. “The higher taxes on wealthier [people, if it's done at the federal level, and then we would benefit from increased federal spending coming to the state, that doesn't put us at a competitive disadvantage with other states,” he said. 

CBC’s Rein pointed to the possibility of a Biden administration and Democratic Congress eliminating the cap on the state and local tax deductions, where higher earners in blue states are now helping to supplement tax cuts given to many people and corporations across the country. “The SALT cap has hurt New York,” Rein said. “It has made New York a more expensive jurisdiction to live in, especially for the very wealthy. Reversing that SALT cap would help. Now, there might be federal tax policy and tax increases at the top end, as candidate Biden has talked about. Those will not hurt our competitiveness with other jurisdictions, which is really what the SALT cap has stuck a dagger in.”

Infrastructure, Housing and Climate Change
Trump promised a major infrastructure plan when he first ran for office and in the four years of his presidency, he has yet to produce one. Biden and the Democratic Party have themselves expressed support for a massive infusion of funds into the country’s infrastructure, one that is also likely to help bolster economic recovery efforts and job growth amid the covid recession. 

New York City’s massive infrastructure needs extend to everything from transit to housing to climate resiliency projects, and Biden and Trump are poles apart on all of those issues. 

Trump has derailed funding for the Gateway Tunnel, one of the most important infrastructure projects not just for the city but the northeast region and thus the country. He has questioned the settled science behind climate change and pulled the U.S. out of the Paris Climate Agreement that set goals for reducing carbon emissions.

On the other hand, Biden has promised to rejoin the Paris Agreement and proposed a $2 trillion plan that includes significant investments in green infrastructure from energy to housing as well as changes to zoning and insurance regulations to protect coastal communities. He regularly talks about climate change as a crisis whereby the planet must be saved but also a great opportunity to create jobs.

“Joe Biden offered us hope tonight, and there are good reasons to be hopeful about the fight against climate change,” said Gina McCarthy, president and CEO of the NRDC (National Resource Defence Council) Action Fund, which has endorsed Biden, in a statement after the first presidential debate this year. “His plan to create millions of good-paying jobs and rebuild our country while tackling the climate crisis head-on is exactly the type of bold leadership we desperately need right now. Donald Trump keeps trying to convince us that we can’t do any of those things, and I bet most Americans are pretty tired of him letting us down.”  

Though some climate change activists balked at Biden’s plans during the primaries, compared to the more ambitious ones put forward by other Democratic candidates, they have since pulled him to the left. The Sunrise Movement, a youth-led climate change advocacy group, did not officially endorse Biden but has been urging people to vote for him. “The strength of the Green New Deal movement, and the weight we threw behind Bernie’s campaign, has compelled Biden to re-write his plans from top to bottom and placed climate at the top of the priority list for him and Congress,” reads a recent blog post on the organization’s website. “As it stands now, Biden’s plan is not everything we want. But, with Biden, we will actually have a window of opportunity to pass the largest federal climate justice policy in the history of the United States in time to make a difference. Because, remember: we’re running out of time.”

Biden’s housing plan includes a $100 billion affordable housing fund and a massive expansion of the Section 8 voucher program. He also plans on restoring the Affirmatively Furthering Fair Housing (AFFH) rule, which is aimed at ending housing discrimination and was recently eliminated by the Trump administration. He’s also proposed tax credits for low-income renters and supports funding legal assistance for tenants facing eviction. His plan also includes expanded funding for homeless services and he has promised a national plan to address homelessness in his first term.

Biden hasn’t, however, spoken about his plan for public housing. NYCHA needs tens of billions of dollars to upgrade to a state of good repair.

In a virtual discussion on housing hosted by City Limits, Barika Williams, executive director of the Association for Neighborhood and Housing Development (ANHD) critiqued Trump’s rollback of AFFH and his less-than-subtle narrative that low-income people of color are a threat to white suburbs. She said Biden’s plan to provide universal housing vouchers was “a promising thing to see a presidential candidate propose something new and different on housing.”

“Unfortunately, housing has been one of the issues that for most families’ lives is front and center but in the national political discourse, oftentimes gets glossed over and doesn’t take center stage,” Williams added. 

Though she said Biden’s plan was “trying to be aspirational” on homelessness, she said it left “huge questions” unanswered. “There is no pathway right now to ending homelessness unless we address the immediate crisis of potentially having a sea of people sliding into homelessness,” she said. 

Immigration
Federal immmigration policy matters significantly for New York City, with its large immigrant communities, particularly undocumented immigrants, who have not only suffered punitive enforcement under the Trump administration but have also been left in the lurch during the pandemic. 

Trump has used the bureaucratic and law enforcement arms of the federal immigration system to discourage immigration, both legal and illegal. His administration’s “zero tolerance” policy at the border separated children from their parents and housed them in inhumane conditions. He banned immigration from certain Muslim-majority countries. He rescinded the Deferred Action for Childhood Arrivals (DACA) program, which protects undocumented immigrants who arrived in the U.S. as children from deportation and allows them to hold jobs. He’s also revoked Temporary Protected Status for immigrants who would be unsafe returning to their home countries. Under Trump, Immigration and Customs Enforcement agents have threatened sanctuary cities like New York with large-scale raids and arrests.  

Biden has promised to reverse all those actions while pursuing legislation to give 11 million undocumented immigrants a path to citizenship. Facing questions about the large number of deportations during the Obama-Biden administration, Biden has pledged to pursue a less aggressive policy with regard to removing undocumented residents from the country.    

Biden Seen as Savior
For Democrats in New York City, a Biden victory is seen as the beginning of the end of a collective nightmare that began four years ago.  

“I think people are hungry for a positive vision,” said Mayor de Blasio, at a September 21 press briefing, with a placard next to him displaying the number of days until Election Day. “They're hungry for a sense that there can be unity. They're just fatigued by all the negativity and hatred coming from President Trump. And of course on top of that, something I think Joe Biden understands deeply, speak to working people about their lives and what they need, and people need to hear a vision of how they'll have health care for their families, how they will have jobs again, that they can live on. This is an area I think Joe Biden can be very, very strong on because everyone understands he empathizes with working people and I think that combination of hope and unity on the one hand and a vision of a nation that's actually devoted to working people again is a winning formula.”

Biden would, however, take over at a time of significant turmoil and with an immense wish list from states, localities, elected officials, activists, interest groups, and others. The right and left have never been more divided. And the coronavirus pandemic is far from over. After months of uncertainty, Americans are looking for solutions to both the disease and the effects it has had on their lives. 

“Biden has a very, very short honeymoon to show that he can lead the country out of this,” Manhattan Institute’s Gelinas said of the former vice president’s potential victory. “And the bar is low, but goodwill toward him won't last very long.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

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What's At Stake for New York City in the 2020 Presidential Election Mon, 02 Nov 2020 05:00:00 +0000
Could a Tax on Stock Trading Help New York Fill Its Massive Budget Hole? https://www.gothamgazette.com/state/9821-could-tax-on-stock-trading-help-new-york-cuomo-fill-budget-hole https://www.gothamgazette.com/state/9821-could-tax-on-stock-trading-help-new-york-cuomo-fill-budget-hole rings op bell

Gov. Cuomo at the New York Stock Exchange (photo: Darren McGee/Governor's Office)


This story was published in partnership with New York Focus, an independent, investigative news publication covering New York state and city politics, as part of its launch.
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As the pandemic roiled markets in the spring, New York recorded surging revenue from an obscure tax on Wall Street stock trading. From April to June of this year, according to state tax department data, it collected $2.9 billion—more than double the amount it notched over the same period last year.

But that money never made it to state coffers: New York does not actually keep the tax revenue. Instead, since 1981, it has rebated the money to investors, meaning that, in practice, the stock transfer tax is little more than an administrative hurdle for brokers’ legal teams.

A proposal to start collecting the dormant tax has seen growing support in the state Legislature, following a staggering pandemic-spurred drop in tax revenue and state funding cuts to localities, which could deepen without an infusion of funds. The bill, which is one plank in a campaign led by progressive labor groups and activists, would end the rebate, allowing tax authorities to begin collecting the revenue again.

Opponents of the legislation center their argument on the threat of capital flight. If New York imposed the tax, they say, firms would move their residency or trading activities to another state to escape it—a notion that may be keeping even some progressives spooked.

Neither the Assembly nor the State Senate, both led by Democrats, has moved the relevant legislation. While the Assembly majority has long-favored several revenue-raising measures, Senate leadership recently formed a working group to examine possible strategies for filling the state's multi-billion-dollar budget gap in lieu of federal aid. Governor Andrew Cuomo, a third-term Democrat, has resisted calls for new taxes, and argues that the stock transfer tax proposal would undermine New York’s position as a global financial hub.

“In the digital age it would be even easier for transactions to simply be moved out of state to avoid the tax,” Freeman Klopott, Cuomo’s budget spokesperson, said in a statement to New York Focus.

The reasoning echoes a recent memo circulated by lobbyists for the Securities Industry and Financial Markets Association (SIFMA), reviewed by New York Focus, which argues that the tax would place heavy operational burdens on brokerage firms. “To avoid these additional costs, trading activity will naturally migrate to areas outside New York,” the memo reads.

But tax experts say that most frequently threatened avoidance strategies are unlikely to succeed. Traders would struggle to evade the tax, even if they moved out of state, those experts say. The New York Stock Exchange is unlikely to pack up and leave, since it doesn’t pay the tax itself but passes it on to investors. And investors are unlikely to stop trading on the exchange anytime soon, economists say, since New York’s trading hub far outstrips its closest rivals in high liquidity and low transactions costs—and would even after reinstituting a small tax on stock sales.

What transactions are in New York’s jurisdiction?
In order to impose a tax, the state needs “nexus”: it needs to show that the transaction occurred within New York’s jurisdiction.

But when most trading is electronic, what does nexus mean, anyway? The financial services industry is heavily concentrated in New York, but many operations—especially data storage and communication technologies—are housed in New Jersey and Illinois. Both of those states are currently seeing fierce pushback against similar efforts to impose a financial transaction tax.

Lawmakers seeking to tax finance say lobbyists’ arguments can seem like a game of whack-a-mole. Depending on which state is attempting to impose a tax, the securities industry may contend that what really confers tax jurisdiction is the location of trading firms, the location of exchanges, or the location of data centers. Failing those arguments, lobbyists argue that the industry is largely conducted beyond state borders, in the global financial cloud.

The stock transfer tax currently in place—the one that is immediately rebated—is levied on nearly all stock sales that occur “within New York State.” On paper, it imposes a tax of 1.25 cents on a sale of stock worth $5 or less a share, rising with the price of shares. Under the bill to begin collecting that tax again, a transaction would be subject to the tax “if any activity in furtherance of the transaction occurs within the state or if a party involved in the transaction satisfies a nexus with New York state which shall be defined as broadly as is permitted under the United States Constitution.”

Could New York’s tax department really collect taxes under that ultra-broad definition?

The short answer, experts say, is: probably.

The United States has not seen a new financial transactions tax imposed in decades, meaning there is a lack of litigation on the issue—so it’s not clear which way courts would rule, if the STT were implemented and challenged. Even so, legal experts think a recent Supreme Court ruling means investors lack attractive options that put them beyond the long arm of New York’s tax authority.

What if trading firms moved out of state?
If a firm moved to New Jersey but continued trading on the New York Stock Exchange, New York would likely still have substantial enough connection to impose a tax, attorneys familiar with state residency requirements say.

Before the rise of online commerce, state tax authorities imposed sales tax on businesses with a brick-and-mortar presence in that state. In the 2018 decision South Dakota v. Wayfair, the Supreme Court relaxed the older “physical presence” requirement, noting that states are “confronting the complexities of defining physical presence in the Cyber Age.” Explaining that out-of-state tax exemptions had become “a judicially created tax shelter,” the Court expanded states’ ability to impose taxes remotely.

Timothy Noonan, a partner at Hodgson Russ LLC who specializes in litigation on tax residency in New York City and State, said Wayfair appears to give New York broad authority to tax trades that are requested in other parts of the country.

An investment firm seeking to avoid the tax might try to argue that it is unconstitutional for New York to tax an out-of-state firm, Noonan said. But the case would be hard to make.

“I think the government would point to the Wayfair case—point to the trend indicating that nexus, in 2020, is a lot easier to establish,” he said. “And that an economic presence, such as trading over the New York Stock Exchange, is enough to create that taxable nexus.”

The current trend, Noonan said, points toward more decisions like the one in Wayfair.

Darien Shanske, a tax professor at UC Davis Law School, told New York Focus that firms would probably not be able to escape the tax by leaving the state.

“If everything is the same, except that instead of yelling into your phone on the New York Stock Exchange [floor], you’re yelling into your phone in New Jersey—but all the other machinery is the same—then that still looks like New York has a good claim to tax that transaction,” he said.

Furthermore, Shanske said, New York’s tax department “is notorious for being persnickety.” The Department of Taxation and Finance has aggressively brought cases seeking to tax financiers who work from second homes in Connecticut or Vermont—and won them.

“The idea that the New York revenue authority is just going to be like, ‘Yeah, you moved to New Jersey, I guess we can’t tax you anymore’—that’s just not how it’s gonna go,” Shanske said.

Alternatively, an investor seeking to avoid the stock transfer tax might point out that trading is conducted through the New York Stock Exchange’s out-of-state servers.

But here, too, tax attorneys say it would be tricky to skirt New York’s jurisdiction. Since Wayfair, courts appear to care less about where sales transactions take place—whether in New Jersey, Panama, or cyberspace.

“Even if the servers are in the cloud,” Noonan told New York Focus, “if you follow the sales tax issue in the Wayfair case, an economic presence is enough to create that nexus. And the economic nexus here, the nexus of the transaction, would be, ‘We don’t care where the servers are, we don’t care where the traders are. It’s happening on the New York Stock Exchange. That gives us the nexus—the jurisdiction—to tax it.’”

What if the New York Stock Exchange left altogether?
What if the entire New York Stock Exchange relocated? (Many—though not all—of the equity purchases under the stock transfer tax are conducted on the NYSE.)

If the New York Stock Exchange moved to another state, Shanske said, this could pose a more serious threat to transfer tax collections, making it harder for the revenue authority to argue that NYSE’s stock trades remained within their tax nexus. Still, it would be a matter of degree.

“How much of the New York Stock Exchange has to move, or shift its business, before the connection is too slight? I’m not sure,” Shanske said. “It’s something of an unknown.”

Historians have cast doubt on the suggestion that the Exchange would pick up and move, pointing out that the NYSE threatened to move to New Jersey immediately after New York initially adopted the tax in 1905, but never followed through. Others point out that the Exchange already pays a premium to maintain its operations in high-rent Manhattan.

James Parrott, a tax policy expert and economist at The New School, said the battle is more a matter of political negotiation than about the marginal costs of algorithm-driven trading. If the stock tax is enacted without the acquiescence of industry, he said, brokers might retaliate.

“Whatever the relocation costs are involved in moving the New York Stock Exchange and NASDAQ and all of the trading floors out of New York,” Parrott said, firms might be prepared to pay “whatever it takes to evade this.”

To avoid this scenario, Parrott said, stock tax proponents should focus on building public pressure—so that a major undertaking like moving the stock exchange during a lopsided recession, to avoid a tax, would look too politically risky.

What if firms leave the New York Stock Exchange?
Another strategy the securities industry suggests might help investors skirt the tax: why not simply delist from the New York Stock Exchange, and conduct trades over cheaper platforms?

The trouble here, say economists who study stock trading, is that there are few good alternatives.

There’s the London Stock Exchange (LSE), but that floor has had an analogous transfer tax in place since 1694, despite continuous grumbling from traders. The LSE’s levy is frequently cited as a success story for transfer taxes, since it has not stopped the Exchange from consistently ranking among the world’s top exchanges by market capitalization.

Within the United States, economists who have studied stock levies say, investors in search of highly-liquid, low-cost trading platforms have few alternatives to the New York Stock Exchange.

“Even with the reinstatement of the STT, overall transaction costs for firms trading on the New York exchanges would almost definitely still be well below those of alternative trading platforms,” the economists Robert Pollin and James Heintz found.

“One of the advantages of the New York [Stock] Exchange is, with the high volume of trading, your transaction costs tend to be low. So, when you add in the stock transfer tax, it makes less of a difference,” said Assemblymember Phil Steck, a Democrat representing Schenectady and the longtime champion of legislation to revive the STT. State Senator James Sanders, Jr., a Queens Democrat, sponsors the bill in the Senate.

Stephany Griffith-Jones, an economist at Columbia University who studies financial markets, said moving off the New York Stock Exchange would carry other costs, like higher capital adequacy requirements—the amount of capital a financial institution is required to keep on hand—and increased legal risk.

Plus, she said, new markets do not spring up overnight.

“You’re going to want to sell in New York, because that’s where the big markets are,” Griffith-Jones said. “You’re not going to find, in Oklahoma, a lot of people wanting to trade very sophisticated securities.”

‘A backdoor to federal relief’
Far from worrying that the stock tax would push firms to flee to other states, proponents tout the tax as a convenient way to capture new out-of-state revenue. Advocates contrast the STT’s potential to raise revenue from trades in New York and beyond with Cuomo’s escalating pleas for federal funding to replace lost tax revenue, which have so far failed to draw concessions from a gridlocked Congress.

Patrick Nelson, a Democratic Committeeman from Saratoga Springs, said the STT is one in a bundle of measures that could help New York capture a greater share of economic activity.

“We’re simply asking for some of the money back that we use, as New Yorkers, to bail out Kentucky and Mississippi and Florida and Texas and Georgia, and all these other states that take more from the federal government than they pay in,” said Nelson, who is the Democratic and Working Families Party nominee for State Senate in New York’s 43rd district. “It’s a means for us to access some of the money that we pay out to the other states.”

“You could almost think of it as a backdoor to that federal relief, as well,” Nelson added.

‘Salami tactics’
Multilateral financial taxes—designed to span multiple states or governments—are more effective than unilateral ones, the International Monetary Fund (IMF) has found. Intuitively, this makes sense: scaled-up taxes offer fewer opportunities for escape.

Although local taxes are more vulnerable to evasion, several existing examples work fine. The same IMF study noted the success of the UK, Hong Kong, and Singapore in imposing STTs without international cooperation. “Unilateral STTs, even if levied on fairly narrow bases, are certainly feasible as witnessed by their use in numerous developed countries,” the study found—especially when imposed in “established financial centers.”

Local financial taxes can also be forerunners to national or international versions. In Europe, individual member states’ existing levies could soon be knitted together into an European Union-wide tax. Likewise, advocates for a state-level STT say it could be a forerunner to the national financial tax supported by senators such as Kirsten Gillibrand (D-NY).

Griffith-Jones, who has advised efforts to implement a European financial transaction tax, said the securities industry’s lobbying campaigns follow a predictable, divide-and-conquer pattern.

“It’s salami tactics,” she said. “They always do this. When the UK wanted to expand its financial transaction tax, even people on the right of the Labor Party would say, ‘Oh yes, we’ll do it, but only if the U.S. does it. For it to work, it has to be internationally coordinated.’”

While an international tax would be harder to evade than a national one, and a national tax would be harder to evade than a state tax, the question is just how much evasion would occur with a state tax. And many tax attorneys think that at the current level, most firms wouldn’t take on the hassle and cost of evasion.

“There’s clearly some level of stock transfer tax that is sufficiently low that nobody’s going to change their business structure to avoid it,” Shanske said. “And the rate on this tax is pretty low.”

Although debates have centered on the risk of tax flight, there are other considerations for and against reviving the tax. Governor Hugh Carey signed legislation phasing out the tax in 1978, citing concerns that it put New York at a competitive disadvantage.

Opponents say it will cause job losses in the securities industry—which could have ripple effects—and that it will increase stock volatility. Proponents say it will reduce dangerous high-frequency trading by the same firms that have seen record profits amid coronavirus-driven market pandemonium. Still others say that it should be expanded beyond stocks to a broader tax on all financial transactions.

Michael Kink, director of the labor-backed progressive coalition Strong Economy for All, which is helping lead the push for several revenue-raising measures, said advocates would like to see more debate about tax initiatives outside annual hearings on the governor’s budget proposal. Typically, he said, there are too few occasions for on-the-record testimony by stakeholders.

“I would love public hearings as an opportunity to help lawmakers and the public understand the mechanics of all these bills.” Kink said. “Talking about proposals, digging into the details, forcing SIFMA to say in public under oath what they like to whisper and sleaze about in private.”

No 'Urban Neo-Marxists' Here
The stock transfer tax’s putative strength is its political feasibility: it is already on the books. Since the collection infrastructure is already in place, it has been popular among legislators looking for relatively painless ways to raise revenue without authorizing brand-new taxes, and unlike some other revenue-raising proposals being debated, it could immediately help fill state coffers devastated by the pandemic’s impact on existing taxes.

A federal financial tax has also gained popularity. Jared Bernstein, a top economic advisor to Democratic presidential nominee Joe Biden, is a vocal booster of the idea, as is Biden running mate Kamala Harris.

The California senator is no crusader against Wall Street. Her selection for the Democratic ticket drew praise from “titans of industry,” as one banking attorney, who specializes in distressed debt, recently gushed to the Financial Times. Harris is so unthreatening to the securities industry, according to the Wall Street Journal, that traders attributed a recent stock market rally to her selection for the coveted VP slot.

And even Michael Bloomberg, who shot down a proposal to reinstate New York’s STT as mayor, supported a federal equivalent during his 2020 presidential bid.

New York City Mayor Ed Koch supported reinstating the STT as part of an aid package to the city and the Metropolitan Transportation Authority, as the city struggled to close a $1.3 billion budget gap in 1982. Koch’s deputy mayor for finance Kenneth Lipper—a Wall Street insider recruited from Salomon Brothers bank—reportedly opened discussions with brokerage houses about reinstating the tax.

“This is not a tax being proposed by left-wing radicals to pillage the coffers of the gentry,” New York Times columnist Sydney Schanberg wrote at the time. “Edward Koch and Kenneth Lipper hardly qualify as urban neo-Marxists.”

Yet the proposal to reinstate New York’s stock transfer tax has been stuck in the same news cycle for two decades: it is perpetually an idea whose time has finally come.

This past summer, as ebullient markets seemed to come unstuck from an underlying economy wracked by the COVID-19 recession, the business press once again reported that lawmakers were considering resurrecting the dormant tax. It’s a familiar pattern: proposals to bring back the STT have routinely surfaced during periods of fiscal strain, and then fizzled.

Now, momentum is building again for a spate of tax-the-rich proposals. Steck told New York Focus that his bill’s revenue-raising potential dwarfs alternatives.

“You’ll hear about the pied-a-terre tax, scaffolding tax,” Assemblymember Steck said. “You’re not going to get anywhere near those numbers.” Meanwhile, he adds, “the governor is an obstacle, because the governor is stuck in 1980.”

“We have this budget hole to plug, and the governor and the [Assembly] speaker [Carl Heastie] want to wait and see if Joe Biden becomes president,” Steck said. “If that happens, they may decide to go with some of the lesser revenue-raisers.”

But eyeing the upcoming legislative session in 2021, Steck is optimistic. With New York facing the most staggering fiscal hole since the 1970s, he said, “there might be no alternative.”

This story was published in partnership with New York Focus, an independent, investigative news publication covering New York state and city politics, as part of its launch. Sign up for its newsletter here.

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Could a Tax on Stock Trading Help New York Fill Its Massive Budget Hole? Mon, 12 Oct 2020 04:00:00 +0000
The Mayor and Governor Must Save Community Nonprofits to Save Lives and Livelihoods https://www.gothamgazette.com/130-opinion/9799-save-community-nonprofits-save-lives-and-livelihoods-coronavirus-new-york https://www.gothamgazette.com/130-opinion/9799-save-community-nonprofits-save-lives-and-livelihoods-coronavirus-new-york pack home staff

Essential workers need help (photo: Michael Appleton/Mayoral Photography Office)


The COVID-19 pandemic is not just a medical problem—it's a social one. As everyone knows, it is caused by the new coronavirus, SARS-CoV-2. But it is fueled by inequity. Black and Latino New Yorkers have been twice as likely to die from COVID-19 as their white neighbors because of a raft of social factors: People of color are more likely to live in overcrowded housing that makes social distancing impossible, have jobs as "essential workers" that makes working from home impossible and increases their chances of exposure to the virus, and lack access to health insurance and health care that could help them if they fall ill.

So-called social determinants of health also play a role in the underlying medical conditions known to raise the danger posed by COVID-19. Inadequate access to nutritious food may lead to diabetes and hypertension, poor housing conditions are linked to asthma, and chronic stress (like that caused by food insecurity, discrimination, and housing instability), weakens the immune system. Social disparities are a major cause of avoidable medical conditions, and those conditions made poor communities and people of color more susceptible to the first wave of COVID-19.

The social dimension of COVID-19 means that medical providers cannot fight the pandemic alone—they need the help of the nonprofit human services sector if they are going to save as many lives as possible. Human services organizations run the food pantries, deliver assistance to seniors, operate shelters for people experiencing homelessness, support survivors of domestic violence, and provide mental health services for those in crisis. But tragically, in New York, many of these nonprofits face an existential threat because of recent policy decisions at the local and state level.

These organizations derive the majority of their funding from contracts with the New York City and State governments. But this July, Governor Cuomo issued an executive order that allows the state to delay payments to nonprofits that are delivering services like food assistance and homeless shelter. Further exacerbating the problem, this summer Mayor de Blasio and the New York City Council approved a budget that cut funding from the city budget designated to retroactively reimburse nonprofits for their indirect costs.

Even before these moves, many human services organizations were already approaching a breaking point, thanks to city and state contracts that have long been chronically underfunded. This includes payment rates that don’t cover the full cost of programs and delays in payments for services provided. In April, a survey of New York nonprofits by the New York City Employment and Training Coalition and the Human Services Council found 64 percent of organizations believe they will have to reduce service offerings in the future, and 70 percent believe they will need to lay off staff due to budget shortfalls. A July analysis by the nonpartisan organization Candid concluded that 1,800 of New York’s nonprofits could ultimately go out of business due to COVID-19, ranking New York among the ten states in the country that could see the most nonprofits close on a per capita basis.

New York’s finances are indeed in a precarious position, but it is foolhardy to balance our state and local budgets by destroying the very organizations we need most for recovery.

To rein in this pandemic and prevent future ones, New York’s policymakers need to fund the organizations with the knowledge and ability to address the social disparities that grind down the resilience of New York’s citizens. Mayor de Blasio and Governor Cuomo need to honor their financial commitments to nonprofits. The state must pay for the services it has contracted for, and the city must follow through on promised reimbursements for services that were delivered last year.

New York’s human services organizations are calling 911. If we want a healthy city and state, it’s time to answer.

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Udai Tambar is vice president for community health at Northwell Health. Michelle Jackson is the executive director of the Human Services Council of New York (HSC), an organization representing nonprofit human service organizations across New York.

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

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The Mayor and Governor Must Save Community Nonprofits to Save Lives and Livelihoods Thu, 01 Oct 2020 04:00:00 +0000
Max & Murphy Podcast: Senator Gianaris on Next Steps in New York's Recovery https://www.gothamgazette.com/state/9774-max-murphy-podcast-senator-gianaris-new-york-recovery-budget-covid https://www.gothamgazette.com/state/9774-max-murphy-podcast-senator-gianaris-new-york-recovery-budget-covid 2 max murphy podcast gianaris

State Senator Michael Gianaris (photo: Senator Michael Gianaris' office)


September 23, 2020 - Max & Murphy Podcast: Senator Gianaris on Next Steps in New York's Recovery

State Senator Michael Gianaris of Queens joined the show to discuss next steps in reopening the New York economy, how the State Senate Democratic majority is thinking about addressing the state and city fiscal crises, and more.

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.

Max & Murphy · Episode 250: Senator Gianaris On Next Steps In New York's Recovery

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by Ben Max, Gotham Gazette
     

Read more by this writer.

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Max & Murphy Podcast: Senator Gianaris on Next Steps in New York's Recovery Wed, 23 Sep 2020 04:00:00 +0000
New York Should Borrow to Plug Covid Budget Holes, But Not from Private Investors https://www.gothamgazette.com/130-opinion/9759-new-york-should-borrow-budget-crisis-but-not-from-private-investors https://www.gothamgazette.com/130-opinion/9759-new-york-should-borrow-budget-crisis-but-not-from-private-investors rontkim fiscal

Mayor de Blasio at a budget presentation (photo: Benjamin Kanter/Mayor's Office)


New York City Mayor Bill de Blasio and City Council Speaker Corey Johnson are aggressively lobbying the state Legislature to authorize the City of New York to borrow billions of dollars from private financial markets by selling municipal bonds through the Transitional Finance Authority.

Governor Andrew Cuomo also recently announced that if the federal government does not step up with stimulus money for New York, he is also open to borrowing money for our state.

Unfortunately, most people stop paying attention once they hear any financial jargon; the private investors want to keep it that way. In fact, they want the public to think that they are generously swooping in to save thousands of essential government jobs.

This is wholly false, and in bailing out our city and state we must resist borrowing from Wall Street and private investors as much as possible.

Taking private money will make the ultra wealthy even wealthier as, over the next 30 years, they collect hundreds of millions in interest from our city and state revenues. Most of their capital gains won’t even be taxed. New York’s economy will inevitably bounce back, and the 1% will continue to enrich themselves during a global crisis. 

An alternative, more responsible route is to borrow from The Federal Reserve (the Fed). It is openly allowing the city to tap into their vast public resources with a simple “Add to Cart” mouse click.

For the first time in history, the Fed has created the Municipal Liquidity Facility (MLF), a new pot of money designed for unprecedented times such to attract borrowers and spark economic reinvestment in communities. The MTA, for example, just secured $451 million in early August at a 1.92% rate, almost 1 point more competitive (or roughly $12 million) than borrowing from private banks. 

Consider this: the Fed is our currency issuer, and it never runs out of money. It is the world’s largest public bank, and it is not lending money in order to profit from natural catastrophes.

Borrowing from the MLF is more like borrowing from a family member with a magical money tree in their backyard -- we don’t really have to worry too much about paying them back on time. Moreover, “debt” to the Fed is not the same. The Fed will never come down on New York to bankrupt us, privatize public services, or negatively impact our credit ratings because their deficit ultimately adds real value to our communities.

Conversely, if New York City opts for private investors and faces another economic downturn in ten years, they will still come to collect, and possibly force us to privatize more public goods to fulfill our debt. 

Opponents of this route, like Wall Street underwriters and investment bankers, will continue telling the city the Fed’s terms and rates are not as competitive. But this is thoroughly dispelled by cases like the MTA's, so what’s really preventing this obvious path back to economic solvency?  

Corporate Democrats are unwilling to draw the line against the rich. Being self-anointed managers of corporate power has narrowed their logic and imaginative capacities. They resist new taxes and public money, two obvious solutions during this economic downturn, because their campaign donors and potential future employers -- maybe Citigroup or Goldman Sachs -- will be cut out of the deal if we turn to the Fed. 

Now is precisely the time to take full advantage of the Fed’s willingness to open up its lending facility to local governments. Leaving new money behind is reckless and irresponsible. It is money we need to make our teachers and kids safe in school, keep our public transit system solvent, and avoid painful job losses. If the Fed is willing to inject new money into municipal bond markets -- at a time when state and local governments need to employ resources and people for much-needed public services and social programs -- we have a moral obligation to take it.

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Assemblymember Ron Kim represents parts of Queens. On Twitter @rontkim.

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

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New York Should Borrow to Plug Covid Budget Holes, But Not from Private Investors Thu, 17 Sep 2020 04:00:00 +0000