Gotham Gazette

The Place for New York Policy and politics

Economy

Lessons For


A year ago Mayor Michael Bloomberg put the finishing touches on a city budget that forced some $6 billion of deficit-reduction actions. That bold fiscal success - based mostly at the last moment on an 18.5 percent increase in property taxes - is in sharp contrast to the mayor's political loss with his three city charter proposals in the election this month. Yet the release of the city comptroller's annual financial report this month is a reminder that the mayor's budget balancing last year has worked remarkably well. At least in broad budget terms, city services in the 2003 fiscal year (ending June 30, 2003) remained stable - in spite of the severe economic and fiscal crises caused by national and city recessions, the World Trade Center attack, and a previous administration's tax cuts.

At the same time, buried in the comptroller's report and the sad little 2003 Charter Revision Commission exercise are some lessons for more democratic fiscal management. A public distaste for mayoral hubris seems to have fired up opposition to the nonpartisan election ballot question. But the defeat of the obscure ballot questions 4 and 5 reined in other dubious mayoral power grabs as well. Question 4 would have expanded mayoral discretion in city contracting, yet the city comptroller's new annual report cites several contracting problems - particularly in information technology procurement -- that suggest more, not less, outside monitoring. And question 5, an odd mayoral wish list of expanded powers, included the elimination of the preliminary mayor's management report (discussed in October's Finance column). Yet the comptroller report suggests current management can't even count potholes accurately.

Budget Stability and Services

The comptroller's report reflects the depth and vision in last November's budget modification. The property tax increase meant a full-year, recurring $1.7 billion revenue boost, helping the city to end the 2003 fiscal year with more than a $1.4 billion surplus. The carry-over of that surplus to the current year served as a big stabilizing factor. Political acceptance of the property tax increase -- and the new personal income and sales tax rates added in June 2003 for the current fiscal year's budget -- may or may not be evident in the recent council elections, but none of the re-elected incumbents seems to have suffered for their votes for new taxes.

The payoff for the revenue initiatives is clear in the comptroller's report. In several large service areas, budgets were stable or up substantially in 2003. If the budget numbers for fiscal year 2001 (i.e., the full fiscal year before September 11) are compared with those in fiscal 2003 (the first full fiscal year after September 11), the results range from an 18 percent increase in public education spending to just over a one percent increase in public safety and judicial spending:

· 2003 education spending was up 18.4 percent to $14.5 billion.

· Health spending rose to $2.7 billion from $2.3 billion, up 16.3 percent.

· Social services spending went to $9.8 billion from $9.2 billion, up 6.8 percent.

· Public safety expenditures hit $8.8 billion, up 1.2 percent from $8.7 billion.

Money, of course, does not guarantee services. But the few available numbers suggest stability and even some gains. The increase in education dollars is apparently largely the result of delayed salary increases. The number of full-time pedagogical staff, for example, was stable over the two years, although the ratio of students to pedagogues was up fractionally (11.2 to 11.6). As for educational performance results, indicators are few: the percentage of pupils meeting and exceeding standards in English language arts rose over two years nearly one percentage point in grade 3 (to 43 percent) but lost 1.2 percentage points in grade 8 (to 32.5 percent!).

In health, there are even fewer numbers in the comptroller's report. At the city's municipal hospitals, the number of billable outpatient day and emergency room visits was down slightly (from 5.7 million to 5.65 million, or just under one percent) from 2001 to 2003 - arguably a small improvement. There are also few statistics in social services. The number of persons receiving public assistance dropped from 497,100 in 2001 to 421,500 in 2003 (over 15 percent). Since 1994 the number of recipients is down 719,100, or 63 percent. (Neither the semi-annual mayor's management reports nor the comptroller's report can say where the former recipients are today.)

In the public safety area, the comptroller's statistics on service delivery point out that from 2001 to 2003 the number of uniformed officers decreased from 38,630 to 36,120 (- 6.5 percent). Nevertheless, the mayor's management report for 2003 (in pdf format) shows that major felony crimes fell by more than 14 percent during the same two years - an interesting opportunity for productivity analysis in a $3.5 billion agency.

Another section of the comptroller's report that is useful for measuring budget effects is the one on contracting. It shows that between 2002 and 2003, service contract expenditures (on everything from computer and child welfare services to legal and youth services) rose almost seven percent, from $6.66 billion to $7.02 billion. Most of the categories of health, social, and human services included here show little change. But there are some big-dollar exceptions to the status quo:

· Contracted homeless-family services were up 35 percent, to $297 million.
· Contracted individual homeless services went up 9 percent, to $148 million.
· Contracted employment services were up nearly 14 percent to $339 million.
· Contracted day care services were down 14 percent, to $331 million.

Contracting

The votes against ballot questions 4 and 5 were slightly less harsh than the vote against nonpartisan elections (64 percent and 66 percent against, respectively, vs. 70 percent). But they were also questions obviously of much less interest, with about 100,000 fewer people voting on 4 and 5 than the 471,000 who voted on question 3. The low turnout for the ballot questions (less than 13 percent of registered voters, according to The New York Times post-election figures) and the 100,000 non-responses on questions 4 and 5 among even those dedicated folks should be a signal that constitutional change is too important to trust to mayoral-driven summer exercises.

Coincidentally, the release of the comptroller's annual report provides some evidence that the few hardy souls who voted down expanding the mayor's contracting powers (#4) and eliminating the mayor's preliminary management report (#5) did the smart thing. For instance, the comptroller found that a $28 million amendment to an $84 million IBM contract "was beyond the scope of the original contract and accordingly required a new procurement. This contract is symptomatic of a greater procurement problem in which large computer contracts are written with vague scopes of work, loosely supervised, and not graded for performance. The Comptroller's Office is closely monitoring such contracts."

As baseball- and football-fan mayors look to new city subsidies for sports teams, it's always useful to keep in mind comptroller audits of these teams. Most recently, the comptroller found the New York Mets owed the city $4.6 million in rent because they "understated revenue by $18.8 million and overstated deductions by $35.4 million." The newest team in town, the Staten Island Yankees, is already following the big-league practices: The minor league Yankees owed the city Economic Development Corporation "$373,517 for various items including electricity, fees or signage revenue, and late payment charges." The audit also found "internal control weaknesses."

An audit of one of the Human Resource Administration computer systems -- its Auto Time System -- "found that the system was incomplete and cost $24.8 million, $15.2 million more than the initial contract amount." Nor did the audit see any way that $15.7 million in anticipated savings would be realized.

The Mayor's Management Report

The vote against ballot question 5 means, among other things, that the preliminary mayor's management report lives. This is a slightly awkward situation, since the mayor made it clear he thinks the document is not worth the trouble. What might invigorate the use (and value) of the February report is closer cooperation between the mayor and the City Council, the report's charter-mandated recipient. As noted in our October Finance column, the Council under Speaker Peter Vallone was an aggressive participant in the management-report process. The council held separate hearings and issued in-depth analyses, complete with extensive recommendations for the next round. Over the past two years, both these council efforts have been abandoned.

If the mayor and the council need any evidence to get back to serious work on the reports -- the best test of mayoral accountability -- the city comptroller's report is again a useful guide. A section summarizing some " Service Delivery/Program Performance" audits notes, for instance, that "an audit of [Administration for Children's Services] disclosed that the agency does not adequately monitor its 493 contracted day care centers."

Then there are the potholes. Potholes have often been the most visible (and most embarrassing) measurement of a mayor's management skills. The mayor's management reports keep records of potholes and repair operations, but look at what the comptroller found:

"Audit of [Department of Transportation] found that the agency lacks a useful standard for measuring the performance of its pothole repair operations. [The agency] took an average of 57 days - ranging from one to 2,494 days (seven years) to complete 1,774 sampled pothole repair ordersâ€|and some repairs are counted more than once in theâ€| pothole productivity figures."

Whether it's potholes, failed computer systems, the whereabouts of 719,000 former welfare recipients, or education performance standards, there is need for information, analyses, and self-examination in city government. We have budget stability for the moment, but particularly with no strong economic turnaround in sight, the city would gain from a higher standard of accountability in its work and its reports. The ballot voters had it right.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

Shrinking Accountability: Proposed Changes To The Mayor's Management Report


Mayor Michael Bloomberg has taken a second step in his quiet plan to diminish the role of the city charter-mandated mayor's management report, the city's key tool for judging mayoral performance. The September management report for fiscal year 2003 (in pdf format) reflects the first step, the slimmed-down text he introduced a year ago. The second step is the mayor's charter revision commission's August proposal to eliminate one of the two annual management reports. This proposal (in pdf format) is buried among several unrelated changes in ballot question #5 for the November 4 election.

The commission's proposal is disingenuous and anti-democratic. It misreads the intent of the charter mandate, shrinking its accountability mechanisms rather than enhancing them. The key question, which the mayor and commission sidestep, is what the two annual reports are supposed to do. The City Council argued for years that Mayor Rudy Giuliani ignored the fundamental role of the management reports. Now Mayor Bloomberg repeats that error. Together, the two annual reports are supposed to link budgets to service delivery. Accountability stems from knowing what each dollar in the budget buys. Without the budget-service links, we are left with widget-counting.

In proposing the elimination of the February report, the charter revision commission argues, for example, that it is outdated, ineffective, and too expensive. Because the commission does not offer any new ideas on how performance will be measured in the single annual report, it is simply arguing that less is more. Furthermore, the current, streamlined September mayor's management report is not a good model. It has some virtues - neighborhood statistics, five-year trends in data, internet accessibility, concise agency mission statements, for example - but it is weak in such basic management-reporting areas as budget targets, timely data, and productivity measurements.

THE 2003 MAYOR'S MANAGEMENT REPORT

The September report is a useful guide to city policies and services, particularly at the neighborhood level. There are local maps, indicator definitions, data-saving and manipulation devices, and a lot of information. This permits much "customizing" of the data and should be a valuable asset for managers, community service advocates, and researchers.

But the report's weaknesses outweigh its new accessibility. One major limitation is the lack of any mayoral overview. There is no introduction, no summary, and no prospective vision. Rather, there are over 200 "critical objectives" in city agencies (the first: "Reduce smoking and the illness and death caused by tobacco use,"and the last: "Encourage the contribution and use of donated materials.") These broad, bland objectives are followed by similarly brief "performance highlights," and then occasionally useful "performance reports."

True, there are some clues to the mayor's priorities. The Human Resources Administration, a $6 billion agency, is clearly not a priority, with only three broad critical objectives ("Provide public assistance, food stamps or medicaid benefits to eligible individuals and families|.") and only three and a half pages of performance reports on those objectives.

The Department of Education, a $12.5 billion agency now under the direct control of the mayor, gets a little more attention - 12 critical objectives ("Increase attendance" is the first; the last is "Work with the School Construction Authority to design, construct, modernize and repair durable, functional and attractive education facilities, on schedule and within budget.") followed by seven and a half pages of performance reports. Unfortunately, 24 of the 46 major performance indicators (52 percent) have no 2003 information, so that the most recent data on such matters as graduation and drop-out rates are 15 months old.

One of the most obvious agencies for judging mayoral performance is the Department of Sanitation, where the closing of the Fresh Kills landfill has resulted in huge new costs. But the three pages of performance reports are uninformative, with new detail provided about snowfall and salt used last winter, but little about current and prospective costs of trucking 12,600 tons of waste out of the city daily. Several cost-per-ton indicators have no 2003 data nor any targets for fiscal year 2004. (The agency says changes in policy during the year have delayed estimates.) The nearly 40 percent increase in sanitation costs (now $1 billion a year) in just four years would seem to call for a fuller analysis.

The September report also falls victim to the widget-counting data that Rudy Giuliani loved. The number of pages actually increased by 36 percent over last September's report, largely due to the inclusion in each agency of the number of calls into the agency on the new 311 phone line. We now know, for instance, that there were 7,228 calls to the Department of Transportation about "dangerous" ("priority") potholes and 6,360 calls about (not dangerous? non-priority?) other potholes reported during a 4-month period ending June 30. What's the point? But there is minimal current and prospective cost data about road repair costs, and one big success in 2003 - 89 percent of potholes filled within 30 days - prompts a planning target for 2004 of only 65 percent.

BALLOT QUESTION #5: VOTE NO

The 2003 charter revision commission has posed three ballot questions for the November 4 election. Question #3 is the widely discussed nonpartisan election issue. Question #4 makes adjustments to the city's contracting process. Number 5 is entitled "Government Administration," and includes four unrelated changes:

· expand mayoral authority over the city's administrative law practices

· permit the Conflicts of Interest Board to increase penalties

· change the structure of the Voter Assistance Commission

· "require annual publication only of the Mayor's Management Report. The Preliminary Mayor's Management Report would no longer be required."

Since the current charter mandate on the management reports is about mayoral accountability, it is disingenuous to call the change "administrative." This is a proposed change about the reporting responsibilities of the city's highest elected official and the public's access and use of that information. It is an important question that deserves more than the brief attention it received in the mayoral-dominated charter revision commission.

The Commission in its final report gives three reasons for the elimination:

· "it is no longer necessary as a result of technological advances which allow for greater public accountability.

· it is not an effective means of assessing or improving agency performance; and

· it is relatively expensive to produce without a lot of 'bang for the buck' in terms of reporting on the delivery of citywide programs and services."

This is a rather lame rationale, a mix of throwing the baby out with the bathwater and saying the mayor can't produce a cost-effective report, a curious admission of managerial defeat.

The speaker of the City Council, Gifford Miller, strongly opposes the elimination of the February report. (The council will hold a hearing at City Hall on Question 5 on October 16, 2003, at 10 am.) The council position is important because the management reports are directed to the council, and the council is currently mandated to hold agency hearings on those reports and issue its own findings. During the Giuliani years the council aggressively used the mayor's management report hearings to question agency spending and make the case for enhanced performance indicators. One of its reports (In PDF format) from March 2001 illustrates the importance of the February preliminary mayor's management report:

"The Charter clearly intends the [preliminary mayor's management report] to relate performance measures to proposed budget appropriations so that the council, its mandated recipient, can consider what agencies have accomplished or produced with the resources allocated, and the effect of budget proposals, during the budget process.The [preliminary mayor's management report] otherwise falls far short of achieving its intended purpose|.

"Absent a precise delineation of the link between specific appropriations (past or proposed) and programmatic performances, the [mayor's management report] fails to provide the legislative body with the information it needs in order to assess the results of prior funding decisions and determine appropriate funding levels for the future." The elimination of the February management report also eliminates the charter mandate of council hearings and reports. The council would, according to the commission, retain its council oversight powers (Sections 28 and 29 of the charter) and, therefore, by implication, could choose to continue such hearings and reports. But that, of course, substitutes political discretion for constitutional mandate.

In a city whose constitution already gives its mayor extraordinary power, particularly on budget matters, any enhancement of those powers is worth examining closely, particularly when so clearly prompted and packaged by the mayor himself. The City Council and public in general are too often out of the budget loop, and they need all the information, analysis and power the city charter can give them.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

To Keep People In New York City, Cut Costs


 
Leaving New York
While some New Yorkers are leaving the city, citing bad schools, high housing costs or the daily stresses of urban life, analysts debate whether the exodus is anything alarming or unusual, and what to do about it.

Why New Yorkers Are Leaving:

The City Is Too Expensive
by E.J. McMahon

City Schools and Housing Are Inadequate
by David Kallick

New Yorkers Who Left:

Rondrae Hunter
A Frustrating Apartment Search

Allison Woods
Struggling with Strollers and Schools

David Bassine
Fear of Terrorism

Stefan Kochi
Bad for Business


The cost of living in New York City is 240 percent of the national average, according to one recent estimate. That’s not just the highest in the country. It's nearly twice as high as the next most expensive metro areas (Boston and Washington, D.C, in that order).

If you want to keep people in New York, the first thing you have to do is to reduce the staggeringly high cost of staying here. The single biggest factor driving that cost is a crushing state and local tax burden.

We have become so used to hearing about New York City’s high taxes that we have become sort of numb to it. But consider these statistical tidbits:

• New York’s overall tax burden is by far the highest found in any of America’s largest cities.

• Despite relatively low residential property taxes, the overall tax burden on New York City homeowners is the highest in the state.

• For households with incomes of $100,000 a year (middle class by New York standards) the combined state and local tax burden is 32 percent higher than the average for major cities.

• The commercial property tax is absolutely out of sight, reaching nearly $10 per square foot for prime space in midtown Manhattan. The only city that comes close is Chicago. In most other major cities, it is less than $5. In New Jersey, it is $3.

• The combined state and city personal income tax rate this year will reach a maximum of over 12 percent – highest in the nation, almost double the rate in New Jersey, and more than double the rate in Connecticut or Pennsylvania.

With the exception of the last item in the list, these comparative measures do not reflect the impact of the roughly $2.8 billion in city tax increases that have been enacted since Mayor Michael Bloomberg took office last year, or the $3 billion in state tax increases enacted by Albany this year.

Just because many New Yorkers do not directly pay these taxes, either because they are renters or because their incomes are below the median, does not mean they are unaffected by them. The impact of taxes is pervasive, rippling through every sector of the economy. High taxes ultimately drive down the number of new jobs created in the city and drive up the price of goods and services produced there.

Tackling this problem will require a constant, unrelenting effort to steadily bring down the cost of government at both the state and city levels. This is why it is so important for Mayor Bloomberg to continue pressing municipal labor unions for productivity concessions.

Beyond taxes, the most important factor driving cost is the price of housing in the city. This is a classic supply and demand problem, growing directly out of rent regulation and restrictive zoning and building codes. The answer is to stop treating housing as a socialized good, a government-funded entitlement. Clear away the dense thicket of regulatory barriers to building in New York, and let the market do the rest.

Beyond taxes and housing, improving city schools and doing even more to drive down the crime rate obviously are both crucially important to retaining residents. But if its economy is drowning in high costs, the city will lack the tax base to do those good things in any event.

E. J. McMahon is a senior fellow for Tax and Budgetary Studies, at the Center for Civic Innovation at the Manhattan Institute.

 

 

 

 

 

 

 

 

 

 

 

 

 

Bad for Business


 

 
Stefan Kochi
Stefan Kochi has lived in Boston since 2001.


Leaving New York
While some New Yorkers are leaving the city, citing bad schools, high housing costs or the daily stresses of urban life, analysts debate whether the exodus is anything alarming or unusual, and what to do about it.

Why New Yorkers Are Leaving:

The City Is Too Expensive
by E.J. McMahon

City Schools and Housing Are Inadequate
by David Kallick

New Yorkers Who Left:

Rondrae Hunter
A Frustrating Apartment Search

Allison Woods
Struggling With Strollers and Schools

David Bassine
Fear of Terrorism


I moved from Albania to Boston in the early 1990s when the economy was just picking up. I had always wanted to move to New York, but there are dreams and then there is reality, so I stayed in Boston where the high-tech industry is very developed.

In 1998, a couple of partners and I created a business building Internet sites for start-up companies. When we decided to open an office in New York City, I moved there and rented an apartment on the Upper East Side.

From the very first time I went to New York I loved it. I saw the tall buildings and the big organizations behind them: JP Morgan, Time, you name it. I thought, "How do they do it, how do they go from an idea to a business that has lasted so long?" And the energy. New York City has the most energy of any city in the world, at least the ones I've seen. So when I moved to New York, I wanted to stay there for good.

My business was very successful, but then the market started to turn. The start-up market was getting dry, and large companies weren't buying, let alone buying from start-ups with uncertain futures. We had to close the New York office in summer of 2001. The Boston office lasted until 2002, when we shut that down as well.

My inclination was to sell my house in Boston and move to New York. But then I began talking to friends in New York. Everybody was lukewarm about the prospects for the economy. I thought if these people, who I had planned to rely on to start my life in the city and build another business, were not comfortable, the recession must be pretty bad.

So, I returned to Boston. I had a house there, I knew more people. Several were offering me jobs.

Now, back in Boston, I have started a new company with a couple of partners. It is doing well, but considering my experience, I am very cautious about declaring success or defeat. I have been to New York several times on business, and if the opportunity came, I would move to New York in a heartbeat. But I got married last month, so now there is one more factor -- my wife -- to consider. She doesn't think she would like New York, but that's what lots of people who haven't experienced the city think.

Stefan Kochi, moved to New York in 1999 and moved out in 2001.

Private Money for Public Needs


  Mayor Bloomberg and Caroline Kennedy ask for charity.
Gossip columnist Liz Smith claimed to desire just one thing for her 80th birthday earlier this year: She wanted people to help New York City. "I'm not expecting gifts. I have enough," she wrote. "But what about the gifts we all owe this great city?... If the schoolchildren of the nation once saved their pennies to build a foundation for the Statue of Liberty, surely we can begin saving New York by sending our dollars to Mayor Mike Bloomberg."

Smith's campaign raised more than $200,000, which went to provide parks, jobs for young people and to train the new parent coordinators for the Department of Education.

With the city budget tight but demand for services high, the Bloomberg administration hopes individuals, organizations and corporations will, like Smith and her readers, write checks to New York City. Leading the donors -– and urging others to follow his example -- is Mayor Michael Bloomberg. The billionaire "anonymously" gave $10 million to city cultural institutions suffering the effects of budget cuts and $5 million to help restore Gracie Mansion, the official mayoral home where he decided not to live.

But the mayor's efforts go beyond his personal largesse. He has put an unprecedented amount of effort into bringing private funds into city coffers, creating a revamped Mayor's Fund to Advance New York City, exploring corporate sponsorships and naming an official to market the city (see box). Earlier this month, he announced that the city had signed a five-year $166 million dollar deal with Snapple making its juices, ice teas, water and other drinks "official" beverages of New York City.

"Not in my lifetime has there been this level of concentrated expectation that the private sector will help basic city services," Kathryn Wylde, president of the Partnership for New York, a network of business leaders, told the New York Times.

Despite the obvious appeal of having millionaire corporate magnates pick up the tab for services that we all would otherwise have to pay for through higher taxes, some see pitfalls. Private money can come with strings attached and can vanish when the donor moves on to other interests. Further, since corporations and individuals tend to fund projects where they are located, private money may not be evenly distributed throughout the city.

In light of all this, warns Bonnie Brower, executive director of the City Project, a liberal public policy group, the move to private funding is "very, very much a two-edged sword, if not a dagger to our heart."

LOOKING TO THE PRIVATE SECTOR

As big government has fallen increasingly out of favor since the 1970s, politicians, policy experts and officials have sought alternative ways to deliver services. Many have turned previously public enterprises over to private corporations or non-profit organizations. So, for example, many homeless shelters in the city are run by private organizations, and the city contracts with private agencies to care for foster children. Former Schools Chancellor Harold Levy sought -- unsuccessfully - to have a private for-profit company take over some of the city's most troubled public schools, and former Mayor Rudolph Giuliani failed in his efforts to transfer some public hospitals and the Off Track Betting to private hands.

While Giuliani pursued such efforts, known as "privatization," Bloomberg has focused on the reverse: He wants private individuals and businesses to give money to public enterprises.

This is not a new phenomenon. One only has to look at name plaques on many facilities in city parks and at the City University to recognize that private philanthropy has long played a role in shaping public New York. The city sponsors Business Improvement Districts, in which money from businesses supplement city services such as cleaning streets. And libraries and parks actively seek contributions.

"New Yorkers have a great sense of philanthropy," says Rowena Daly of New Yorkers for Parks. In fact, many New Yorkers who grumble about paying taxes are then more than willing to pay an equal or greater amount in voluntary contributions to a city parks group or their local school parents association.

But Bloomberg has sought to take this to a new level, reflecting a combination of his own conviction, his personal record of giving, and the city's economic slump.

Encouraging private donation is "a big thing" for the mayor, says Mark Davies, executive director of the city Conflict of Interest Board. "It's something he is very interested in."

 

Other Ways To Raise Funds

Sponsorships:

The mayor has suggested that parks be named for companies that give money to sponsor them. The goal, said parks department spokeswoman Jane Rudolph last year, "is not to make Central Park change its name. The goal is to take specific facilities or a special garden like the Heather Garden in Fort Tryon Park and possibly give it a sponsorship."

But the plan has met with criticism from those who see it as another sign of creeping commercialism. "These parks exist to give people a respite from the aggressive hawking of products and huckstering that we are all subject to on a minute-to-minute basis in our society," said Gary Ruskin, the executive director of Commercial Alert, a non-profit organization founded by Ralph Nader. "Naming rights defeats that worthy purpose."

So far the idea has not moved beyond the talking stage.

Marketing the City:

Bloomberg wants the city to seek out sponsorship, merchandising and other revenue-generating opportunities such as creating a line of New York City licensed products and working with corporations interested in becoming official sponsors of the city.

"New York is the best-known city on the planet," Bloomberg said in his State of the City address in January. "Yet, as a city, we've never taken direct, coordinated custody of our image."

The administration has likened this effort to the National Football League and National Basketball Association's businesses of licensing and distributing team trademarks. And in April Bloomberg named Joseph Perello as the city's first chief marketing officer. Perello previously was president of Perello and Company -- a marketing firm whose clients included the NFL. Perrello's main accomplishment so far has been in negotiating the $166-million deal that made Snapple an official drink of New York City.

In line with this, Bloomberg has renamed Public Private Initiatives, a city controlled nonprofit started by former Mayor Rudolph Giuliani. It is now the Mayor's Fund to Advance New York. Between January 2002, when Bloomberg took office, and this April, the fund raised $14 million; in the seven years between 1994 and 2001 it had brought in only $11 million, not counting contributions for World Trade Center victims. Liz Smith's money was channeled through the fund.

The most touted city fundraising effort has come in the public schools. Last year, Schools Chancellor Joel Klein named Caroline Kennedy Schlossberg to head the Fund for Public Schools, part of the Department of Education's new Office of Strategic Partnerships. Kennedy is supposed to drum up financial support and other help for the public school system and work to make sure private resources are used wisely. Shortly after her appointment, Klein said that the school system needed to harness the energy of the business and philanthropic communities and to make sure their contributions were put to good use. "Who can better accomplish this than Caroline Kennedy by her willingness to say, 'Yes I am behind this effort, I believe we can get an education for every child in New York, not just for some children'?" Klein said.

Since its highly publicized debut, the office has kept a low profile, but it played a role in organizing the September 24 Dave Matthews Band Concert in Central Park, which is expected to raise at least $2 million for city schools, including $1 million from America Online. And the office developed a partnership with The History Channel, in which, according to the New York Times, the cable channel will donate $1 million in scholarships, materials and staff hours. According to the New York Post, Kennedy has also "helped reel in" commitments totaling $49 million to fund a training academy for school principals.

Last week, Bill Gates announced the Bill and Melinda Gates Foundationwould donate $51.2 million to open 67 new small public high schools in the city. That money, however, will go not directly to the school system but to non-profit groups that will help create the schools.

(See related article on grassroots efforts to raise money for public schools.)

PARKS, LIBRARIES AND SECURITY

City Council has also taken up the private money cause.

In August, the council passed a bill to create an Adopt-A-Park program. Picking up on the success of private groups in raising money for Central Park, Prospect Park and other prominent parks, the measure would allow companies, organizations and individuals to adopt all or part of more modest neighborhood parks and playgrounds. Taking cognizance of a controversial proposal to allow corporations to get naming rights to a facility in exchange for supporting it (see box), the bill notes that "the program is not intended to rename any park property or structure, but to provide another mechanism whereby individuals, community groups, businesses and corporations can help the city preserve its precious land and recreational programs."

Parks advocates say they must resort to private funding because parks have been particularly vulnerable to budget cutters. "Over the past two decades, parks have been repeatedly cut in good times and bad," says Daly of New Yorkers for Parks. And certainly in this climate, she says, "we're not going to get more tax dollars for parks."

Some critics worry that parks in affluent areas will be quickly adopted, while those in poorer neighborhoods will be neglected. City Councilmember Joseph Addabbo, Jr., chair of the parks committee and a sponsor of the bill, says he hopes this can be avoided. "The real focus is to help outer borough parks," says Addabbo, who is from Queens. He hopes city officials will approach corporations and organizations to urge them to help parks in less affluent communities. And, a provision that allows groups to provide labor to help their park -- a kind of "sweat equity program -- could also help parks in these areas. Finally, Addabbo says, if a disproportionate amount of contributions reach parks in rich areas, it could free up city funds for those in poorer places.

Like parks, libraries have proved particularly vulnerable to budget cutters and so have long sought private money. But this year, the libraries have stepped up their efforts, launching an Emergency Campaign for the Library that will try to raise $18 million over the next three years, including $4 million a year for the branch libraries in all five boroughs.

The fund drive will include what the library is calling a "take out, give back" campaign. As part of that, the New York Library will begin offering addressed envelopes at branch libraries for people to mail in contributions.

Even services almost all New Yorkers consider essential seek voluntary contributions. The New York City Police Foundation is soliciting money to improve police department technology.

But apparently there are limits. When the city announced plans to close firehouses last winter, efforts were launched to raise private funds to keep the companies operating. The mayor rejected the idea, and the fund-raising effort was abandoned.

PROS AND CONS

Many proponents of private funding do not claim it is an ideal solution, although some do see benefits in it. Getting funds from the police foundation is "just an easier, quicker way for us to fund things that we need," Police Commissioner Ray Kelly has said.

And others see private funding as a way to build community, to give New Yorkers a stake in the services they use -- whether it is the local park or the neighborhood school.

But generally, fund-raising campaigns for libraries, parks and schools argue that city money simply is not available, begging the question of whether, in a better world, it would be.

"It's a sign of the times," says Addabbo, noting that virtually every state in the country is suffering a budget crunch. When there is a sluggish national economy, he says, "these ideas...come about."

People are already highly taxed -– New Yorkers have seen sales, property and income taxes rise in the past 10 months -- but still want services: clean safe parks, art and music programs in schools, museums that are open and affordable, the latest best seller on the branch library shelf.

By paying for some of these things, private fund-raising, says Brower of the City Project, provides a "mechanism to avoid raising the most fundamental question, which is what does it cost to run the city of New York the way we want and need to have it run."

Brower sees a number of problems with increased reliance on private money. "It raises questions of distributing resources not by need but by salability or sexiness." And, she adds, "These gifts always have strings attached." In funding city services, corporations are buying access, if not outright control.

In an effort to make sure private fund-raising does not produce an ethnical quagmire, the Conflict of Interest Board has written an advisory opinion on solicitation of private funds by the city and by city affiliated not-for-profit organizations such as the Central Park Conservancy. This opinion, says executive director Mark Davies, attempts to strike a balance between not discouraging private contributions, while making sure that public access is not restricted and that public officials are not somehow coerced by the private sector. For example, it says that when officials solicit contributions, they must "make clear that the donor will receive no special access to city officials or preferential treatment as a result of a donation."

Another issue is whether the drive for private money will work. Ken Sherrill, a professor of political science at Hunter College, thinks that in the long run, it will not. "Private contributions are not going to provide adequate levels of these things" such as higher education, he said. "At some point, enough voters will become dissatisfied with the level of public services" to demand change.

And it is not just proponents of bigger government who see problems with private funding. By simply contributing to the current system, Sol Stern wrote in City Journal in 1999, business people and others help perpetuate a failing system. "Businessmen shouldn't be embarrassed to judge the schools by the same standards that make them successful in their own companies," Stern wrote. "If they don't, if they continue to insist that they are not 'in the business of reform,' they will become increasingly irrelevant to the 1.1 million children who presently have no choice but to rely on the public schools as they are."

For now, few in city government seem to be heeding such arguments from either the left or the right. They simply want the money. The New York Post recently reported that city officials had reached an agreement with corporate sponsors to pay the $75,000 bill for illuminating the decorative lights on the East River crossings. The city had flipped the off switch this summer, extinguishing the necklace lights that had twinkled on the city skyline since the 1970s. Getting them turned back on, one official told the Post, was "something City Hall worked very hard to do."

Additional reporting by Anne Sachs.

 

A Taxi Fare Increase?


 What a difference being in the private sector makes, at least for transportation providers in New York City.

Before last November’s election, Governor George Pataki and his appointees on the Board of the Metropolitan Transportation Authority (MTA) said that no fare increase was under contemplation. As every straphanger knows, the base fare increased by 33 percent, from $1.50 to $2.00, just six months later.

By contrast, taxicab owners, who represent the city’s largest privately operated transportation sector, formally petitioned the Taxi and Limousine Commission (TLC) for a 23.3 percent fare increase in November 2001. The commission held a hearing at the end of December 2001 but took no further action, even though soon after his inauguration Mayor Michael Bloomberg endorsed a taxi fare increase. The taxi industry resubmitted the petition this summer. To date, however, no hearing has been scheduled nor has Taxi and Limousine Commission announced a timeline for consideration of the industry’s request.

Thus, while the MTA was able to raise fares in a mere six months, the city has taken two years without deciding yea or nay on a taxi fare increase and the clock continues to tick.

Although the transit fare increase was controversial, the MTA’s reasoning was not particularly complex. MTA officials based the fare increase on the need to balance the authority’s budget and avoid major service cuts. There was a simplicity to the authority’s logic – higher costs mean higher fares.

The Taxi and Limousine Commission, on the other hand, is instructed by the City Charter to consider “all facts which in its judgment have a bearing on a proper determination” of whether to grant a fare increase. These range from fare revenues to “the return upon capital actually expended.” Thus, the commission has looked into a range of issues including changes in taxi operating costs, changes in ridership, the availability of drivers and fares in other cities. Unlike the Metropolitan Transportation Authority, the Taxi and Limousine Commission lacks a clear focus for deciding whether to adopt or reject a fare increase.

It is particularly ironic that the commission itself was behind much of the increase in taxi operating expenses in recent years. The commission mandated that only new vehicles can be put into service as taxicabs, required the more-expensive stretch version of the Ford Crown Victoria, and insisted on expanded insurance coverage for the vehicles. These actions were long overdue and benefited the riding public. Yet when it comes time to underwrite the costs, the Taxi and Limousine Commission hesitates.

Not so at the Metropolitan Transportation Authority. The MTA has also increased service (largely in response to rising ridership) and bought fleets of new rail cars and new buses. The MTA invested billions of dollars in the process, much of it paid for through fare-backed borrowing. No one questioned whether this spending needs to be paid for, either through fares or government subsidies.

One area where the private and public sectors both experience problems is with tracking of expenses and revenues. The MTA came under blistering criticism for hiding the true state of its finances, first painting an overly rosy pre-election picture of its finances and then drawing what auditors viewed as an artificially gloomy picture after the 2002 election.

The finances of taxi owners have often been fairly opaque, the picture complicated by the diversity of operations within the industry. But at least the MTA keeps records, however open to criticism. The Taxi and Limousine Commission, on the other hand, has not conducted its own analysis of taxi expenses or the need for a fare increase in nearly a decade. Until recently, TLC pointed to the city charter’s provision that the burden of proof for showing that current rates are “unreasonable” lies with the taxi industry. That is fair enough and industry figures submitted financial information to justify their fare request. But recently, the city decided to use a consulting firm to conduct an independent analysis of taxi industry finances. That step may be long overdue but it will further stretch out the process.

This sort of contrast between public and private transportation providers is evident not only with the fare issue but also with another big issue affecting both taxicabs and transit: the supply of service. The MTA has a well-developed methodology for assessing whether more buses or trains are needed on each route. MTA staff regularly observe levels of crowding on trains and buses; this information is feed into periodic reviews of service levels. Thus, when fare incentives, service improvements and other forces produced record-fast growth in subway and bus patronage, the MTA expanded service. Not enough, said critics, and not quickly enough, but at least someone was keeping track and taking some action.

Not so with taxicabs. The only recent systematic studies of taxicab availability were one sponsored by a taxi industry group two years ago and another conducted by yours truly in 2000. Both of these studies showed a need for more cabs. (Both studies are on my website.) The city lacks a methodology for determining whether more cabs are needed, not to mention a regular process for considering the issue. As a result, over the past 60 years only 400 new licenses have been issued (in the mid-1990s) despite rapid growth in the demand for cab service.

Mayor Michael Bloomberg has proposed issuance of up to 900 new taxi medallion licenses. The mayor wasn’t motivated by a sudden realization that the city needs more cabs, however. He was motivated by the city’s desperate need for new revenues. The new medallions would be auctioned to the highest bidder, which would bring a total of $220 million to city coffers at current medallion prices.

Despite the riding public’s need for more cabs and the city’s need for revenues, the process to issue additional licenses has moved at about the same pace as the fare increase.

Bloomberg proposed the 900 new cabs in the spring of 2002. The city is just now conducting the required environmental reviews. Any additional licenses will be issued in stages over three years, probably starting sometime in 2004. Meanwhile, would-be taxicab passengers are left to respond to the friendly honk of the car service or black car illegally picking up street hails.

Taxicab fares and service levels are important because cabs are an important transportation provider in New York City. According to the NYC Taxicab Fact Book, cabs carried 11 percent of riders using taxis, subways, buses, car services or black cars in 2002, and 25 percent of passengers using these modes within Manhattan. Looking at fares paid instead of ridership raises the profile of cabs even further. Taxi fares (including tips) totaled $1.4 billion in 2002. As a comparison, this is two-thirds the total of $2.1 billion that riders paid in MTA subway and bus fares in 2002.

Whether taxi fares should be increased and whether additional medallion licenses are needed are issues that can be discussed and debated. Even though the MTA’s method of addressing its fare and service issues has been subject to criticism, the contrast between taxicabs and transit shows that the city could do a much better job addressing taxi fare and supply issues. The city’s shortcomings in these areas demonstrate the perils of being a private sector transportation provider, even in Mayor Bloomberg’s business-friendly New York.

Bruce Schaller is Principal of Schaller Consulting, which provides research and analysis to government, business and non-profit groups seeking to identify and meet customer needs in the transportation sector. He is also a Visiting Scholar at the Center for Transportation Policy and Management at New York University.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Actions By Governor Pataki That Dim City Budget Prospects


If anyone needed reminding that cities are creatures of the state, Governor George Pataki has done the job. In a series of late-summer actions and inactions, the governor has added problems to the city’s financial plan adopted in June. First, by going to state court to stop Mayor Michael Bloomberg from refinancing $2.5 billion in city debt, the governor has, at least temporarily, taken $500 million a year in revenues out of the city budget over five years. Second, by delaying or misdirecting action in several public authorities that he controls, Governor Pataki threatens the loss or misuse of additional billions of city tax-revenue and economic dollars. And lastly, his new 16-member school-finance commission is so full of Pataki supporters that even the mild-mannered mayor was outraged, calling it “a cruel hoax,” presumably because its makeup makes the prospect of substantial new state education funding more difficult.

Of course one governor is not necessarily the state. The governor’s court challenge to the city’s bond issue may lose — or lead to some kind of compromise. And the governor’s school finance commission will hardly be the last word in designing a more equitable and sound educational financing system. But the pattern of blocking — or ignoring — city policy decisions is an unsettling pattern as the city continues to experience economic and budget uncertainty. In addition, the tools the governor is using — court challenges, state public authorities, and an insular advisory group – make it hard for the general public to understand or participate in decisions that will affect them.

The Immediate Problem

The New York State Legislature’s budget for the state’s current fiscal year (the legislature overrode the governor’s veto) authorized a state takeover of the $2.5 billion remaining city debt service owed the Municipal Assistance Corporation. The city would refinance the $2.5 billion debt now and stretch out the re-payment schedule. This would save the city $500 million a year, for five years. The state would pay approximately $170 million a year for 30 years to pay off this debt. One explanation for the deal was that it was the legislature’s way of making up (at least for five years) for the elimination of the city’s $500 million-a-year commuter tax a few years ago.

Of course there are excellent fiscal-policy arguments against this deal. For instance, the Democratic State Comptroller, Alan Hevesi, opposes the refinancing, pointing out that it extends for another 30 years debt that was prompted by the city’s 1970s’ fiscal crisis. It will cost state (including New York City) residents $5.1 billion over 30 years. And this is long-term borrowing for one-shot, operational budget purposes, generally a fiscal sin.

But these are peculiar times. The governor himself proposed borrowing $4.2 billion to help balance the state budget (an idea accepted in the legislature’s state budget for this year), using tobacco-settlement revenues to pay off the debt over a similar long term. And the governor and state legislature two years ago authorized $2.5 billion of borrowing by the city as an emergency resource after September 11. (The city used $2 billion of that authorization for budget-balancing in fiscal years 2002 and 2003, but Mayor Bloomberg decided not to use the remaining $500 million authorization.)

The governor’s court challenge is based on arguments that the legislature’s 2003 authorization was constitutionally and legally flawed. Supporters say the authorization, while perhaps technically flawed because of a rushed drafting process, was done in a conventional fashion. The governor’s timing – several weeks after the city budget was adopted – is another odd element. City budget direct Mark Page has said the city has already lost $25 million, because of higher interest rates since the court challenge.

This Pataki challenge is apparently an extension, in part, of issues in two other court cases currently before two state appellate division courts, in which the budget powers of the governor and state legislature are in question. One, Pataki v. Assembly and Senate, stems from the 2001 state budget fight, and the other, Silver v. Pataki, challenges the governor’s use of his line item veto on non-appropriation bills in 1998. (John Caher’s article in the September 2 New York Law Journal explains both cases.)

The Governor and Public Authorities

The governor already had a dubious role in another substantial piece of the new city budget – revenues anticipated over four years from new and retroactive rent payments from the Port Authority for use of the city’s two airports. The state comptroller’s July report (in pdf format) on the adopted budget, for instance, says $978 million of that anticipated revenue is at risk, because negotiations over such payments have gone on for years with no resolution. Since Governor Pataki single-handedly controls all New York State issues on the bi-state Port Authority, he bears substantial responsibility for the near-billion dollar risk in the city’s current financial plan.

Two new studies -- the Independent Budget Office’s “World Trade Center Assistance: Aid Received, Aid to Come,” and the New York City Comptroller’s September study, “9/11: Two Years Later, An Analysis of Federal Aid” (in pdf format) -- also illustrate the governor’s many roles through other public authorities in the downtown federal assistance program.

The Independent Budget Office study notes that the Lower Manhattan Development Corporation – largely controlled by the governor – currently has no plans for $1.16 billion in available Community Development Block Grant disaster-related funding. (The Labor Community Advocacy Network to Rebuild New York – LCAN -- is actively promoting a billion-dollar job-creation and job-development plan using this money.) And among existing Lower Manhattan Development Corporation proposals for Community Development Block Grant funding is capital money for another of the governor ’ s public authorities, the Hudson River Park Trust.

Then there is the federal authorization of $8 billion in tax-exempt Liberty Bonds, for commercial and residential development. The state and city have approved only $1.2 billion in bonds thus far, according to the city comptroller. Good Jobs New York, among other advocacy organizations, has highlighted the failure of the governor to produce affordable units of housing thus far with the Liberty Bonds – and attacked the closed-door fashion in which spending decisions are made by the state finance authorities.

The city comptroller, William Thompson, concludes that “the remaining $1.2 billion of the total $3.5 billion [Community Development Block Grant] allocation still lacks well developed action plans, and are therefore considered at risk.” Since these federal dollars would have a substantial economic impact, the risk is a further loss of city tax revenues as well as unrealized jobs. The comptroller anticipates full use of the $1.6 billion in Liberty Bonds set aside for housing development in the downtown area, but sees as much as $4 billion of the $4.4 billion allocated for commercial development downtown going unused.

The Governor and School Financing

In this financial and economic context, the governor’s 16-member school finance commission serves as a kind of metaphor for his insular and anti-city political style over the past several months. While there are several well-known members of the commission, including its designated chairman, Frank Zarb, Floyd Flake, and city teachers’ head, Randi Weingarten, the commission reflects little political outreach. As the New York Times’ September 4 story indicated, “not one member of the group that brought the suit [against the state], the Campaign for Fiscal Equity, was named to the panel, nor was anyone from the Bloomberg administration, the state or city education departments, the State Legislature or the New York State Board of Regents, which oversees educational standards.”

The governor lost the suit to the Campaign for Fiscal Equity and therefore must come up with a financing plan that satisfies the court. Everybody assumes the state will have to contribute substantially more money to the city schools than it does now. But the governor’s finance commission thus far (nine additional seats are anticipated) looks like yet another heavy-handed Pataki tool that promises only more roadblocks for the city’s long-term financial plans.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

Firehouses


 

Fire Fight
A recent meeting of activists fighting the closing of Engine Company 212 in Williamsburg, Brooklyn.
. . . . . . . . . . . . . . . . . .

STORIES ON THE SIX FIREHOUSES CLOSED IN MAY:
Engine Company 204
A Struggle for Real
Estate in Cobble Hill
Engine Company 212
Another Fight in Williams-
burg -- 30 Years Later
Engine Company 209
A Muted Response
in Bed-Stuy
Engine Company 261
A Small Victory in
Long Island City
Engine Company 278
A Temporary Reprieve
in Sunset Park
Engine Company 36
Refusing to Give
Up in Harlem

A first-term mayor, facing a budget crunch, shuts a firehouse, assuring neighboring residents that their community will remain safe. But, within days of the closing, a blaze sweeps through a home near the shuttered company. Two men die.

Two years later, the closing becomes a key issue in the mayoral campaign with the challenger assailing the mayor's decision. The challenger wins and soon after reopens the firehouse.

This nightmare scenario happened when Mayor David Dinkins closed Engine Company 294 in Richmond Hill, Queens in January 1991.

Mayor Michael Bloomberg, or at least his aides, must surely know this story. Yet in June of this year, Mayor Bloomberg shut down six engine companies - four in Brooklyn and one each in Manhattan and Queens (see articles on each one on our Community Gazettes.) He had promised to do so in his proposed budget, and he stuck to the decision even as he and the City Council agreed to restore many other slashed programs, such as funding to cultural institutions and senior citizen programs.

Last week, the fire department announced that the average response times - the time it takes for the first fire truck to arrive at the scene - have increased in five of the six communities where the fire companies were closed last May.

The news produced an intense reaction, as there was in May - as there has been ever since the city started closing firehouses in the 1970's The arguments against the closings have been loud and well publicized. Shutting a fire station, activists have argued, puts lives at risk and threatens a cherished community institution. Further, some say, it is a "slap in the face" to the 343 firefighters who died at the World Trade Center on September 11, 2001.

On the day in May when the six companies were ordered to cease responding to radio calls, actor Steve Buscemi and hundreds of other protesters demonstrated in front of Engine Company 204 in Cobble Hill, Brooklyn (see story). That same morning at Engine Company 212 in Williamsburg, Brooklyn, Paul Veneski chained himself to the fire truck - as his father had done 30 years earlier to save the exact same firehouse. (see story). In East Harlem, an angry group of people stood outside Engine Company 36 holding banners that read, "They go, We die." (see story).

But supporters of the closings say that, despite all the local protests, the firehouses are not needed. The average city firehouse was built at least 75 years ago, when many neighborhoods had more people; when buildings burned more often; and when fire-fighting equipment was nowhere near as effective. Refusing to change an outmoded system, some argue, is an exercise in nostalgia that a financially strapped city simply cannot afford.

Whatever the validity of such arguments, they lack the emotional appeal of the entreaties of the anti-closing forces, leaving many people, even Bloomberg's supporters, wondering why he would risk his political future to save several million dollars in a $44 billion budget.

Are firehouses today's equivalent of the five-cent transit fare, something city officials and residents fought to preserve for decades, even though it bankrupted a basic city service? Or is the shutting down of the firehouses more analogous to the demolition of the original Pennsylvania Station in the 1960s, when the government destroyed a beloved building without much thought or reason?

WHY THEY SHOULD BE CLOSED

The New York City Fire Department today has 340 fire companies, staffed by more than 11,000 uniformed officers and firefighters. To members of the Bloomberg administration, that is simply more than is necessary.

Deputy Mayor Marc Shaw said this bluntly at a conference in December. The department was particularly "ripe for finding productivity savings... Firefighters," he said, "only fight fires five percent of the time;they're sitting around doing nothing the other 95 percent of the time."

The comment provoked outrage and made the news. But it helps explain why the administration proposed that a few of the firehouses be closed, and why a budget watchdog group like the Citizens Budget Commission approved.

"It was a great decision," says Douglas Offerman, senior research associate with the budget commission. "They should have done it a long time ago."

In the years since many firehouses were built, fire safety has improved dramatically, with the installation of such measures as metal stairs and sprinkler systems. The city now is far safer than it was even 30 years ago, a tribute, Offerman says, to "good fire fighting and a tribute to good building regulations."

After peaking at more than 300 civilian fire fatalities in the early 1970s, such deaths dropped to around 100 in the late 1990s. Between 1980 and 1990, a Citizens Budget Commission report found, the number of structural fires (fires in buildings) dropped by 13 percent.

Mayor Rudolph Giuliani tried to solve the fire department's declining workload in the mid 1990s when he merged the department with the Emergency Medical Service. At that time EMS was responding to four times as many calls as the fire department.

Mayor Bloomberg's supporters would argue that he too has been trying to adjust the fire department to present-day reality -- but they also concede he was less than politically astute in making his case.

If much of the fire department is outmoded, wrote Newsday columnist Joseph Dolman, "why not do a total citywide remake?...A mayor might actually build a constituency for this idea."

Instead, the administration relied on a technical argument about response time. A fire department analysis predicted that, after the companies closed, response times in all of the affected communities except one -- the area served by Engine Company 261 -- would remain below the city average of four minutes and 46 seconds. In determining which fire houses to close, the department also reportedly considered how long it would take for a second engine company to reach a fire in the affected area as well as the company's total number of runs.

Last week, the fire department released statistics that showed that response times in June and July did increase in five of the six neighborhoods where fire companies were closed, but emphasized that the increase was minimal. In all but two communities, officials said, the response times were below the citywide average of 4 minutes 50 seconds

"The changes we have seen during the past two months are, for the most part, below our estimated increases, or in line with what we expected," said Fire Police Commissioner Nicholas Scoppetta.

WHY THEY SHOULD BE REOPENED

Those who want the firehouse reopened say that the city's response time statistics are not reassuring and in fact they are misleading. They reflect only the time it takes the first engine company to get to a scene, while the department typically requires at least two engine companies and one ladder company at the scene of a blazing fire.

"They're still a long way from putting out the fire," said Stephen Cassidy, president of the Uniformed Firefighters Union.

In the communities affected, the debate has done little to counter the fear of causing fatalities and the sorrow at losing community heroes.

Closing a fire station is "like Russian roulette," says Tom Butler, spokesman for the firefighters' union, the United Firefighters Association (http://www.ufalocal94.org). "You don't want to be the one instance where a life is lost. But, inevitably, these things happen."

The closing would not even be cost effective, the union said. The six closings are expected to save only about $8 million, since all the affected firefighters kept their jobs; they were simply transferred to other companies. In a $44 billion budget, the union said, that's "like a nickel found in your couch."

They disputed the arguments about response time. A study by the International Association of Fire Fighters said that the closings could increase response times by 30 seconds and by a minute if a second emergency occurred in the area simultaneously.

Some of the critics noted that response time only measures the time for the first fire truck to reach the scene and does not reflect how much time it takes for all the vehicles actually needed to put out the blaze to reach the emergency.

The numbers, they say, simply do not tell the whole story. "All the firehouses are connected," says Debora Jackson of nofirecuts.com, which tracks the firehouse closings. "Envision a balloon; every time you push on one area the other side gets stretched out. That's how the fire department works ...Fewer firehouses mean longer response times."

But to those who feel most passionate about the firehouses, the arguments about response time, staffing levels and demographics ignore the popular appeal of the firefighters. New Yorkers recount not only how they put out flames but also how they come when someone falls sick; how they befriended newly-arrived immigrants near one of the closed firehouses, in Sunset Park, going so far as to fix the plumbing in their homes (see story); how they calm children by rescuing toys stuck in trees.

Throughout the city, residents "have some sort of friendship or relation with the men in the firehouse that they probably don't have with the police," according to Terry Golway, the author of a history of the fire department, "So Others Might Live."

THE BATTLE

Closing firehouses has been a nearly bizarre pendulum swing between savings and safety, fiscal prudence and political reality, ever since Mayor Abe Beame, facing a frightening fiscal crisis, was the first to close them in the mid-1970's. Thirty-two were shut down in all; Beame served one term in office. His successor, Ed Koch, reopened a Brooklyn firehouse that Beame had closed. But then, citing a decline in fires, Koch closed some firehouses himself. Dinkins reversed Koch's closing of a South Bronx company, then saw his own closing of the Richmond Hill firehouse overturned by Giuliani.

So far, Mayor Bloomberg cannot be accused of such vacillation. As budget discussions continued throughout this winter and spring, the mayor held firm to his closing plan. He rejected proposals that private corporations and individuals contribute funds to keep the stations open.

In February, the mayor and Council Speaker Gifford Miller announced the formation of a seven-member panel to review the closings. The commission voted to approve the closings, with the five members appointed by the mayor and fire department voting yes and the two named by Miller voting no. Neither the mayor nor the commission detailed the findings.

Unwilling to accept what seemed to be inevitable, some opponents took to the streets, and others to the courts. A group of politicians filed suit charging that the city did not conduct a formal environmental review and did not follow required city procedures such as notifying affected community boards. State Supreme Court Justice James Starkey largely rejected the complaint, although he did rule that the city should have notified the Roosevelt Island Community Board of the closing of Engine Company 261 in Long Island City, which serves the island. Starkey did not, however, demand that 261 remain open, and it has in fact closed (see story).

At the same time the court was hearing arguments, the mayor and City Council were hammering out a budget deal. While the accord restored many programs, the final budget did not call for keeping the companies open.

"Not everyone gets everything they want but that's democracy," said Jordan Barowitz, a spokesman for the mayor.

But others say the mayor's staff was adamant about keeping the six companies closed. Councilmember Bill deBlasio, an opponent of the closings, said the mayor had indicated that, even if the money were put back in the budget, he might not spend it.

The firehouses have closed, but local protests continue, with plans to appeal the court ruling and institute legal action. If Mayor Bloomberg has recently started sounding optimistic about the city's financial recovery, the protesters are sounding optimistic too -- the improved financial picture is yet another reason, they say, why their firehouses should be saved.




From Gotham Gazette's Community Gazettes, a look
at each of the six firehouses closed in May 2003:
Engine Company 204
A Struggle for Real
Estate in Cobble Hill
Engine Company 212
Another Fight in Williams-
burg -- 30 Years Later
Engine Company 209
A Muted Response
in Bed-Stuy
Engine Company 261
A Small Victory
in Long Island City
Engine Company 278
A Temporary Reprieve
in Sunset Park
Engine Company 36
Refusing to Give
Up in Harlem
also:
from Gotham Gazette's NYC Books:
FDNY Bookshelf
A list of books about the Fire Department of New York

The Fiscal Monitors Assess The Budget


Three official fiscal monitors have given New York City’s adopted budget for fiscal year 2004 generally favorable reviews, but two private budget groups are rather harsh, giving the Mayor and City Council grades ranging from “B” to “F“. City Comptroller William C. Thompson in a July report (pdf format) says the budget “charts a reasonable course toward current-year balance.” The State Financial Control Board’s July 24 staff report calls the budget “an achievement of no little note,” and State Comptroller Alan G. Hevesi says in his July report on the city’s finances that “the city has demonstrated its ability to manage the budget during difficult times.”

On the other hand, the Citizens Budget Commission, a conservative nonpartisan civic organization, and City Project, a progressive nonpartisan public policy organization, attack several elements of the adopted budget, if from quite different perspectives. The commission’s City Budget Report Card gives a “B” for the budget’s transparency and timeliness, “C” for productivity, “D” for budgeting responsibly (i.e., too much spending), and “F” for tax policy (a high city tax burden “grows even higher”). City Project gives the adopted expenditure budget a “B”, for saving essential services, and the revenue budget a “D-“, for the “temporary and largely regressive nature of its revenues, and its over reliance on debt refinancing and funding shifts.”

Looking ahead, the five new reports highlight several interconnected issues that will be crucial to budget discussions over the next year – issues such as future budget gaps, a squeeze on human service spending, and city tax burdens. The official monitors, for instance, worry about the large deficits beginning in fiscal year 2005 – approaching $3 billion in 2005 and $4 billion in 2006 and 2007. Although those gaps are significantly less than the $7+ billion deficit the adopted budget filled, Thompson says the “city’s options going forward are limited.” The monitors cite problems like increasing mandated costs in non-service areas (pension, health insurance, and debt service in particular) and the Financial Control Board worries about the economic impact of increasing tax burdens.

Notable Cuts In The Adopted Budget

The city’s new $43.9 billion budget for 2004 includes about $3.2 billion in new taxes and fees and nearly $900 million in cuts in basic municipal services. (Another $1.2 billion includes new revenues, re-estimates in spending, staff reductions where the service impact is unclear, and cost-shifting to non-city sources). The budget also reflects a final surplus in fiscal year 2003 of $1.3 billion (largely the result of the November 2002 increase in property taxes), which was used to pre-pay 2004 expenses.

Several cuts are notable. Hevesi points out that city funding for the Department of Education has been reduced by $495 million (“nearly the lowest level permitted under state law”) just as the new department faces higher state and federal educational standards.

The uniformed agencies’ budgets (police, fire, corrections, sanitation) are reduced by $505 million, with the police force to be reduced by 2,100 in 2004.

Libraries take a big hit, with most now open only five days a week instead of six. The Administration for Children’s Services is also hit hard. Hevesi says that since fiscal year 2002, the agency has experienced the most cuts among social service agencies – both in percentage and absolute dollars: “Between July 2001 and April 2003, the city reduced planned funding in FY 2004 for child welfare services by $54 million, and for child care by $107 million…partially offset by an increase of $19 million in community development block grant funds.” The results, among others, include cuts in child welfare contract agency payments, fewer beds, fewer child care slots, higher child care costs for parents, and cuts in crisis services. The mayoral/City Council negotiations in June restored only $11.6 million in city funding for child welfare and $10.9 million for child care.

Future Spending

In the face of such substantial cuts in schools, libraries, and child welfare, it is sobering to see the projected spending priorities in the monitors’ reports. For example, the Hevesi report notes that although spending in 2004 actually grows by 8.2 percent, far above the rate of inflation, the great bulk of the increase is in areas such as pension, health insurance, and debt service costs. Pension costs are projected to grow by $927 million (61 percent) in 2004 alone, and debt service by $663 million (20 percent).

The pressure of such non-discretionary spending only increases over the longer term. The City Comptroller’s report shows how these expenditures (including Medicaid and legal claims on the city) are projected to grow by 51 percent ($5.9 billion) over the next four years. Over the same four-year period, salaries and wages of the city’s workforce are projected to fall by 4.6 percent. City funding of public assistance is estimated to fall by 11.6 percent. And the city’s remaining $11 billion OTPS (other-than-personal-service) budget – over half of which represents the city’s huge contracted-services budget – is projected to fall by just over one percent over the next four years.

The four-year projections in the adopted budget, according to the Thompson report, add up to a fiscal year 2007 city budget that looks like this:

· 2007 Expenditures $49.5 billion
· 2007 Revenues 46.2 billion
· 2007 Budget Gap ($3.2 billion)

However, the City Comptroller (like the other monitors) sees a lot of risks in the projections, and says the 2007 deficit could approach $4 billion.

Tax Burdens

The conventional political wisdom at the moment is that the large tax increases in the 2004 budget preclude any new taxes as the city begins to fill these out-year budget gaps. If this view persists, especially in the face of the huge non-discretionary spending increases, the pressures to cut core city services are likely to be severe. In this context, it is interesting that both the City and State Comptrollers at least begin analyses of the actual tax burdens now facing individuals and businesses. The results of these studies – and two others -- provide initial important data.

The new personal income tax surcharge is a three-year tax increase, in effect from January 1, 2003 to December 30, 2005. According to the State Comptroller, it will produce $644 million in 2004. Who pays? Only singles with adjusted gross income of $100,000 and couples with income over $150,000. For those earning over $500,000, their effective city income tax rate (taxes paid divided by income) rises from 3.65 percent to 4.45 percent. This is a progressive change in tax rates. But the State Comptroller report puts the increase in the larger context of recent federal tax reductions. Those paying the new city surcharge are net winners:

· Couples earning $200,000 will net $3,066: They will pay $1,252 more in city income taxes, but $4,318 less in federal taxes.
· Couples earning $600,000 will net $14,937: They will pay $4,418 more in city income taxes, but $19,355 less in federal taxes.

Incidentally, those couples that make $100,000 and $150,000 – who won’t pay the surcharge – are getting $1,442 and $2,534 reductions in federal taxes, respectively. The State Financial Control Board’s July report ignores this larger context and warns that if the three-year income tax surcharge is not allowed to expire in 2005, it “could well have counterproductive consequences for the economy and for the city’s ability to balance its budget in the long run.”

The tax burden imposed by the new property tax rate increase is much harder to determine. In broad terms, according to the State Comptroller, half of the $1.7 billion increase is paid by commercial and utility properties, 35 percent by condo, coop and rental properties, and the balance by one-, two-, and three-family homeowners (so-called class 1). Factoring in the November 2002 18.5 percent rate increase and assessment increases, the State Comptroller says, “the average real property tax bill for class 1 homeowners has increased to $2,490, which is $591 (or 31.1 percent) higher than in FY 2002.” Since class 1 homeowners have long been protected by a number of technical details in the property tax law – resulting in lower effective tax rates than in surrounding counties – and since the November increase was the first average rate increase in 11 years, further analysis is necessary to understand the full consequences of this hefty homeowner tax increase.

The City Comptroller’s report is interesting also for an ambitious attempt to measure tax burdens in New York City. One dense chart (p. 19) shows four measures of actual and projected tax burden over the 1992 to 2007 period. The measures:

· Taxes per capita
· Taxes per worker
· Taxes as a fraction of gross city product
· Taxes as a fraction of personal income

The report notes that from 1992 to 2001, all four measures grew slowly or declined, “very likely due to the tax cuts in the 1990’s.” In 2002 they all fell, because of the recession and 9/11. Not surprisingly, they all show rises in 2003 and especially in 2004.

To take only the most common measure – taxes as a fraction of personal income, the measure which Rudy Giuliani used regularly to mark his success in reducing taxes – city residents paid an average of 10 cents for every dollar earned during the early 1980s, then 8.5 cents in city taxes for every dollar earned in 1991 and 7.5 cents in 2001, an average annual decline of 1.3 percent. The new taxes will increase this rate by six percent in 2003 and seven percent in 2004.

So what to make of this? On this most common measure, it looks as if in 2004 city residents will have roughly the same tax burden they had from 1991 to 1993, another period suffering from recession and big budget gaps.

What may be different now is the effect of the property tax increase. After 11 years of a frozen average property tax rate, the sudden 18.5 percent increase has exposed how incredibly complex and inequitable the city’s property tax system is. The Citizens Budget Commission report card, for instance, says that the property tax burden on commercial properties is three times that on single-family homeowners. A new report from the New York Public Interest Research Group illustrates the inequitable impact of assessment practices on class 1 homeowners. Another new study, by the Independent Budget Office (in pdf format) , shows how the new tax on absentee landlords will have an unfair impact on poorer neighborhoods. Renters and certain coop and condo owners also get a bad deal, as shown in earlier Independent Budget Office reports and an earlier Gotham Gazette finance column.

The official monitors suggest that at least in the short run the city is in reasonable budget shape. That gives decision-makers some time to examine more closely charges from the political right and the political left that the new taxes are excessive and/or unfair. A comprehensive look at the property tax is the natural place to begin. Budget balance also gives them some time to determine more accurately how several substantial budget cuts affect children in schools, libraries, and the various human service agencies designed to serve them.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

Summing Up the 2004 Budget; Looking Ahead in Education


After several weeks of negotiations with Mayor Michael Bloomberg, the City Council adopted a $43.7 billion budget for fiscal year 2004 on June 27. The final changes were relatively minor, as the mayor agreed to restore $115 million in cuts, on top of the $90 million he restored earlier in June. The New York Times' front-page news story on the agreement on June 26 reported that the new city budget "was remarkable not for how many services were cut, but how few." (The Times' story also quoted Gotham Gazette's June finance column, when I praised the mayor for a bold $3 billion tax revenue package that minimized the cuts and "avoided a fiscal meltdown.")

Commentators were quick to point to likely future problems: the adopted budget itself says the city faces a $1.8 billion deficit for fiscal year 2005, and the City Comptroller's May report and State Comptroller's June report on the mayor's executive budget projected a possible 2005 deficit of about $3 billion. The comptrollers and other monitors will fine tune those projections in coming weeks, but the general fiscal outlook at the moment seems much more positive than a year ago, when the 2003 budget unraveled almost immediately after its adoption.

Looking ahead, however, one area -- city and state support for public education -- deserves special monitoring. The 2004 education-budget cuts, sold as modest and focusing on management changes, raise a number of questions about fairness and actual impact. Governor George Pataki's repeated attacks on state aid to schools and higher education, foiled in part by the state legislature, continue. For instance, in June the City University board of trustees, controlled by the governor, increased tuition by 25 percent in the city's four-year colleges. On the brighter side, there is good news for the city in the Campaign for Fiscal Equity's victory in the state-court decision that finds the state's education funding system unconstitutional. How the governor responds to the remedial order in that case will be the big education budget story in the next year.

 

Budget 2004

 

The mayor's restoration of $90 million in services and the council's additional $115 million led to general relief among human service advocates.

The zoos were saved, 2,300 day-care slots were restored, and 11 child health clinics were saved. Current recycling was not only saved but will be expanded. Council favorites like the Vallone CUNY scholarship and infant mortality programs were restored. Libraries and cultural institutions and programs got substantial, but not full, restorations.

A full accounting of restorations and remaining cuts awaits analysis by the various monitors. What everybody knows now is that six firehouses closed by the mayor will not be re-opened -- a long-running story that apparently had more to do with bureaucratic and political positioning than saving money. What got much less publicity was the layoff of about 4,000 city workers, most of them paraprofessionals and school aides in the department of education. In addition, the extensive use of attrition will cost the city thousands of additional jobs. The New York Times' Eric Lipton pointed out that the police force will dip to 37,500 officers in the new fiscal year, down more than 3,000 from its peak three years ago.

 

Looking Ahead: Education

 

While there is already concern about the next fiscal year's (2005) budget deficit -- officially set at $1.8 billion by the mayor and likely to rise quickly as various risks, especially new labor costs, are factored in -- there seems to be breathing room for the mayor and his agencies, at least to maintain existing services. If there is a major question mark about the impact of the new budget, it may be in public education. Not only did the department of education take an inequitable share of staff layoffs, its total dollar "savings" will be by far the largest among city agencies.

With the huge education budget now under the direct control of the mayor, there is some hope that its traditional bureaucratic walls will crack a bit and improve public understanding and influence. According to April's executive budget, education will represent approximately $12 billion of the city's budget in 2004, about $5 billion of it city money. (State aid is about $5.8 billion and federal about $1.3 billion.) The executive budget claimed that cumulative education savings for fiscal year 2004 from actions since January 1, 2002 could total $983 million. Although reduced somewhat in the adopted budget, the original reduction plan represented nearly 20 percent of the city's share of education funding.

Trying to figure out how school services will be affected by nearly $900 million in reduced city funding will be a huge challenge. The plan itself provides little detail. According to the April executive budget, decisions made before February 1, 2003, will produce such savings in 2004 as:

• $66 million from administration reductions
• $64 million from cost shifting to federal and state agencies
• $96 million from cutting low-priority programs
• $60 million from re-estimating salaries and enrollment
• $35 million from better purchasing
• $180 million from a per capita reduction to the schools

The post-February actions for 2004 -- part of the $600 million contingency plan the mayor blamed the city labor unions for -- included cutting nearly 2,400 staff, most by layoffs, to save $83 million. Other actions included cutting teacher sabbaticals ($35 million) and more summer school cuts ($13 million). (Another $120 million in education cuts, part of the mayor's draconian $1 billion contingency plan for 2004, were abandoned in the adopted budget.)

The dry language of these budget statements begs the issue in several cases about the actual impact of the actions. The loss of teacher aides, elimination of "low-priority" programs (teacher mentoring, summer school, summer camp), cuts in per capita spending, and the loss of professional development that goes with dropping teacher sabbaticals all seem to be potentially damaging.

Beyond doubts about the impacts of these budget actions is the larger question of the adequacy of current city spending. Certainly, there is little new spending in the 2004 education budget. The new required curriculum will cost $20 million, a new system for disruptive students nearly $6 million, and a class-reduction effort in the middle schools $14 million, according to the Independent Budget Office's March 2003 report on the preliminary budget for 2004.

Looking further ahead, the Independent Budget Office's May analysis of the executive budget shows education spending almost flat between 2003 and 2007, averaging only 0.2 percent annual growth, well below anticipated rates of inflation. This is alarming in the context of the 1990s: a January 2001 IBO study of education spending in the 1990s showed that real (adjusted for inflation) spending per pupil declined steadily throughout the Dinkins and first Giuliani terms (1990-1997), and had only regained the 1990 level in the 2000 fiscal year.

 

A New $3.3 Billion Question

 

Given the current cuts in education spending and anticipated flat spending for years ahead, the June decision of New York State's highest court in the 10-year-old Campaign for Fiscal Equity case is especially timely.The campaign argued that the state's education-funding system was unconstitutional and that it under-funded New York City schools. The court agreed.

As reported by in Gotham Gazette's education topic page, the court's remedial order requires the state by July 30, 2004 to 1) determine the actual cost of providing a sound basic education, 2) reform the state funding system to ensure adequate funds for every city school, and 3) establish an effective accountability system to make sure the reform works. This is obviously a tall order and one that no doubt will affect many other, if not all, state school districts in any implementation plan. (For an excellent essay on this likelihood, see William Hammond's column in the New York Sun, June 30, 2003.)

The Independent Budget Office, at the request of Councilmember David Yassky, has twice done an analysis of what a resolution of the Campaign for Fiscal Equity case might cost, using a State Education Department model (from an unreleased Department study) to determine educational adequacy. As IBO deputy director George Sweeting testified on their most recent analysis, on September 23, 2002 before the City Council, with adjustments for higher costs and greater needs in New York City, the spending difference between the city's public schools and those in the [state's] high-performing districts [is] $3,029 per pupil. With the city system's enrollment of 1.1 million students, IBO concludes that equalizing the city's spending with the level in [those] districts would require $3.3 billion.

The scope of a $3.3 billion equity goal underscores the marginal, patchwork actions in the city's current education budget. Until the state comes up with funding at this kind of scale, the city will be playing catch-up in education budgeting. (There is at least some chance that the city itself may be required to increase its efforts as well.)

 

The CUNY Case

 

Offsetting the good news in the Campaign for Fiscal Equity case, the CUNY board of trustees on June 23 raised tuition for students in the four-year colleges of CUNY by $800, or 25 percent. The move followed Governor Pataki's huge cut in state aid to the state and city universities and the state legislatures' decision not to restore the cuts.

This is significant, first, because it threatens to push many lower-income, minority students out of CUNY. (Full-time students who are income-eligible can receive Tuition Assistance Program grants, but the protections for tens of thousands of part-timers are much less. See testimony by the Professional Staff Congress for more detail) It is also significant because it shows again how little the governor believes in public education, an ominous sign in terms of the Campaign for Fiscal Equity case. (The recent restoration of most of the governor's proposed major cuts to city elementary and high schools was done by the state legislature, not the governor.)

The City University of New York decision is also another reminder of the conflicts in the Pataki-Bloomberg relationship. The university's board of trustees, for instance, is not, as one might expect, city run. The board is made up of 17 members, two of them ex-officio, representing students and faculty, respectively. Of the 15 appointed members, the chairperson and nine other members are appointed by the governor. The mayor appoints the other five members. Currently three of the five mayoral members are left-over Rudy Giuliani appointees (including former deputy mayors Joe Lohta and Randy Mastro). The mayor seems powerless in this context.

So as the new fiscal year begins, there is, first, a good chance that the mayor';s strong stand on promoting tax revenues to minimize service cuts will stabilize the city's fiscal condition, at least for the near future. And secondly, there is now, with the state court's decision on state education funding, an opportunity for the mayor to show similar strength -- by pushing the governor and state legislature to do the right thing for public education in New York City.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

Dedicated Taxes


NYC Taxes Annual Revenue for City *
Real Property $9.9 billion
Personal Income $3.9 billion
Sale and Use $3.6 billion
General Corporation $1.1 billion
Unincorporated Business $779 million
Real Property Transfer $509 million
Mortgage Recording $482 million
Commercial Rent $398 million
Utility $292 million
Banking Corporation $181 million
Cigarette Tax $156 million
Other $516 million
*Estimated from Mayor Michael Bloomberg's Executive Budget, Independent Budget Office, and City Comptroller's reports, and includes tax increase approved for fiscal year 2004
Like many New Yorkers, Forest Hills resident John Romanski has been frustrated by the recent budget battles at City Hall.

Romanski's property taxes went up more than a hundred dollars a year when Mayor Michael Bloomberg and the City Council raised them by 18.5 percent last fall. Then this spring, the mayor has closed firehouses, cut teacher's aides, threatened to reduce trash pickups in his neighborhood, and even proposed closing the Queens zoo. (For more on the final budget agreement see Breaking Down the Budget Game)

If his property tax increase was not going pay for all of these services, Romanski wondered, how was it being spent?

"I thought that if my real estate tax was divided up for essential services like police, fire, and sanitation, and the city was cutting back, then I might be in line for some kind of rebate," he said.

If Romanski lived in Nassau County, he would have had a little better idea of how his property tax money was being spent. In Jericho, for example, residents get a bill that includes not only a county and town tax, but also a tax to support libraries, and a separate levy to fund schools.

However, New York City operates with a highly consolidated government and budget process. Every year, $20 billion in taxes are collected and put into a general fund and then distributed to various agencies according to a budget decided by the mayor and the City Council.

Some argue that this kind of budget process means that things like education, parks, libraries, and cultural institutions routinely get shortchanged.

One way to relieve this problem - and citizens' confusion about where their money is going - is to institute dedicated taxes that go to specific purposes.

In April, Manhattan District Attorney Robert Morgenthau called for a "public safety tax" on commuters who earn a living in New York City to boost funding for the city's police, firefighters, hospital employees and other public safety workers.

Last year, the New York City Council proposed a personal income tax surcharge that would cost the average New Yorker $25 a year and would generate $400 million a year for school construction.

And for years, some parks advocates have been lobbying for a dedicated funding stream to pay for green space, such as is done in such cities as Chicago, Seattle, Denver, and Minneapolis. (See sidebar on Minneapolis parks.)

But in New York, which already has the highest taxes of any city in the country, would dedicated taxes provide reliable sources of funding or make it even harder to balance a $44 billion budget?

WHY NEW YORK TAXES THE WAY IT DOES

Most large cities, like Los Angeles, Chicago, and Houston, rely on just two taxes - the property tax and sales tax. But New York City has more than two dozen taxes including property, general sales, personal income, and business income taxes. (See chart for local taxes.)

Part of the reason that New York City must get its revenue from a wider range of sources is it also spends its money on a wider range of services. Most cities do not have the large municipal workforce, the extensive police and fire departments, and social service programs that New York does.

"In New York State half of Medicaid and welfare are borne by local governments," said George Sweeting, deputy director of the Independent Budget Office, who notes that in many cities the state and federal government pay the entire bill for these programs. "That forces the city to look at a range of revenue."

NYC'S DEDICATED TAXES - PAST AND PRESENT

The idea of a dedicated tax may seem alien in New York City, but it has been used in the past.

In 1989, the City Council and then Mayor David Dinkins approved the "Safe Streets-Safe City" surcharge on the property tax and persuaded the State Legislature to approve an income tax surcharge as well. In allowing the tax hike, the state required the city to have at least 38,310 officers, an increase of more than 6,000. The additional funding has been credited with dramatically reducing crime in the city.

In 1996, when the tax expired, City Council Speaker Peter Vallone proposed extending the surcharge for three years to renovate and build schools, but Mayor Rudolph Giuliani rejected the idea.

And although most New Yorkers are not aware of it, they already pay taxes that go to specific purposes.

A quarter percent of the local city sales tax as well as a portion of mortgage recording tax goes to the Metropolitan Transportation Authority to help fund subway, bus, and commuter rail service. And there is a $1 a month tax on every New Yorker's phone bill that goes to 911 emergency phone service.

And there are also designated fees that residents and businesses in certain areas pay.

In the city's 44 Business Improvement Districts, the property owners in a defined area vote to pay a special assessment on the property tax for security, street cleaning, park improvement, and other services above and beyond what the city provides.

In Battery Park City, which an independent state authority operates, more than a third of the $5.9 million spent annually in the parks on horticulture, maintenance, and programming comes from "civic facility fees" paid by residents and developers.

The Department of Environmental Protection, which oversees the city's water and sewers, is the one city agency that has its own revenue stream. Funding for maintaining and upgrading these systems comes from water and sewer fees levied and collected by the independent New York City Water Board. These fees are used to back bonds issued by the New York City Municipal Water Finance Authority for capital improvements. The State Legislature established the two independent agencies in 1984 because of a concern that the city was not adequately funding the modernization of the essential systems that supply and safeguard drinking water and collect and clean wastewater.

"We have dedicated funding for water and sewer because long ago it was realized that a good water and sewer system requires a long term view [and] should not be left up to the annual political shenanigans," said John Rooney, an advocate for funding parks in a similar manner.

HOW WOULD DEDICATED FUNDING WORK IN NEW YORK CITY?

Education

Most school districts in New York State are required to win voter approval for any substantial increases in their school budgets. That rule, however, does not apply to New York City, Yonkers, Rochester, Syracuse and Buffalo - often labeled the "Big Five" - in which school spending is subsumed by the larger, municipal budget process.

New York City schools get their funding from the state and the city budgets and must compete with other services like the fire department or sanitation for funding. The governor and State Legislature in Albany negotiate state education funding as part of the state budget package. Money is distributed to the various school districts through 40 different complicated aid formulas.

Some argue that means that New York students do not get their fair share. In 1999, New York City spent $9,623 per-pupil - $694 less than the state average of $10,317. The average downstate suburb, including Westchester, Rockland, Orange, and Nassau counties, spent $12,520 per student. Last week, the Court of Appeals, the state's highest court, agreed that the funding for education has been inequitable, and ordered the state to find a new formula so that schoolchildren in New York City are no longer at a disadvantage.

A personal income tax surcharge proposed by the City Council in 2002 would have generated $400 million a year for school construction. But Mayor Bloomberg never pursued the idea and it was abandoned when the mayor and the City Council chose to increase property taxes 18.5 percent to raise $1.7 billion for the general budget.

This year, the idea of a dedicated tax for education was never part of the budget process as the mayor gained approval from Albany to increase the sales and income taxes.

Some feel that if New Yorkers were given more say over how their tax money is spent - in particular on education - that city residents would support the idea.

"In my opinion, the majority of people would say `yes' to increasing the amount of money going to education if they knew the money was being well spent," said Councilmember Robert Jackson, who serves on the education committee. With the court's ruling last week, Jackson's opinion may soon be tested.

Parks

A dedicated real estate tax is the major source of funding for some of the country's s best park systems - including Seattle, Chicago, and Minneapolis. (See side bar on Minneapolis parks.)

"By and large, the systems that have dedicated funds are in better shape and do a better job," said Peter Harnik, author of Inside City Parks.

Minneapolis "may come closer to urban park nirvana than any other metropolis in the United States," urban parks expert Peter Harnik wrote in Inside City Parks, his in-depth look at 25 city park systems in the United States.

The Twin City is known for its 53-mile-long Grand Rounds parkway system of scenic roadways, trails, and paths linking many of the city's lakes, parks, gardens, and natural areas. There are miles of pedestrian and cycling paths and ski trails, all well maintained. Minneapolis has almost half as many sports fields and more recreation centers than New York City, even though it has one-twentieth the population. According Harnik's most recent data, in 2001 Minneapolis spent $164 per resident in parks operating and capital expenses, the third highest of 48 major U.S. cities. In comparison, that year New York City spent $54 per capita on parks.

A major reason Minneapolis has been able to create and maintain its extensive park system is that the parks are owned and operated by the semi-autonomous Minneapolis Parks and Recreation District, governed by an elected board of commissioners. The district determines its own budget and has the authority to levy taxes and issue bonds. It also keeps the fees and concession revenues from specialized recreation areas like golf courses and water parks.

In 2002, the park district received 9.6 percent of a resident's property tax bill, which would be $227 on a median value house. The other significant source of funding is state local government aid, which provided about 20 percent of the district's budget until recent cuts due to the economic downturn.

Having an elected park board has made the Minneapolis park district more accountable and responsive to residents. When the board had to cut the 2003 budget this spring, it went to the community for feedback on where the cuts should be made.

-Anne Schwartz

One argument often made for a dedicated tax for parks is that they require the long-term planning made possible by a consistent level of funding. A predictable revenue flow allows regularly scheduled maintenance of buildings and grounds that would otherwise deteriorate to the point where they need costly capital renovations.

From 1991 to 2002, for example, the city spent $1.9 billion in capital funding on parks - borrowed money on which the city pays interest - much of which went to restore things that had fallen into disrepair.

The Independent Budget Office has calculated that a dedicated property tax of 1.5 percent of assessed value could raise about $100 million for parks, roughly half of recent park budgets but far less than park advocates believe is needed. A dedicated tax of that size would raise property taxes $48 for the average coop, $29 for a rental apartment in a large building, and $34 for a single-family house.

David Lutz, the director of the Neighborhood Open Space Coalition, has been calling for a dedicated funding source for parks, favoring a tax on plastic grocery bags, beverage bottles and takeout containers. It would be similar to Ireland's year-old 15-cent plastic bag tax, which is earmarked for the environment - although that tax has been so successful in reducing supermarket bag use and litter that it has raised a fraction of the money expected.

Libraries

Many library systems across the nation are funded by local taxes. Homeowners on the North Shore of Long Island, for example, pay about $70 a year to fund their own library system.

New York has a system of libraries - the New York Public Library, Brooklyn Public Library, and Queens Borough Public Library, as well as the New York Research Libraries - that operate on a mix of city, state, and federal revenue as well as private contributions.

If the city were to dedicate part of the property tax for libraries, property owners would see a rise in assessed value from more than a third of a percent to almost one percent, depending on the borough, according to an Independent Budget Office estimate. To fund the New York Public Library, which serves the Bronx, Manhattan, and Staten Island, the average single-family home owner would pay about $58 more a year and the average condo owner would pay about $174 a year.

The idea of a library tax has not caught on and the alternative during the recent budget crisis has been to seek private funding. Recently the Carnegie Corporation donated $4.5 million and the Starr Foundation gave $1.5 million in an effort to raise additional money for library operation.

Cultural Centers

Recently, the Brooklyn Museum of Art announced that it would be forced to close for two weeks in August because of budget cuts. It is one of 34 institutions owned by the city or on city property that make up the Cultural Institutions Group, whose budget would be reduced to $77 million from $105 million under the mayor's proposed budget.

As with libraries, Mayor Michael Bloomberg's solution has been to encourage private donations.

"What I would suggest is that you write a check, get all of your friends to write checks, and if every one of your friends gets another person to write checks, with six degrees of separation, pretty soon everybody will be supporting the culturals," Bloomberg said.

Another idea, which was never discussed in this year's budget process, is to issue a hotel tax to help fund the Department of Cultural Affairs.

Under a scenario analyzed by the Independent Budget Office, increasing the hotel tax by 1 percent could raise additional $39 million for museums, theatres, zoos and botanical gardens. On the downside, the extra tax might reduce hotel stays, decreasing the city's total receipts from the hotel tax and the sales tax.

WOULD DEDICATED TAXES WORK IN NEW YORK CITY?

While advocates argue that dedicating taxes would generate a stable revenue and help protect schools, parks, libraries and museums from cuts, many budget experts consider dedicating taxes to specific services an unwise public policy.

"From a fiscal perspective, it is less attractive because it can skew priorities, particularly in a downturn like we're in at the moment, when competition for tax funding is very intense," said Ronnie Lowenstein, director of the Independent Budget Office. "At times like these, if you lock in a certain piece for parks or tourism or libraries, it limits the city's options."

The kind of dedicated tax that would be worth exploring, according to Edmund J. McMahon, of the Manhattan Institute, is one going to very local districts organized around neighborhood services, following the model of a Business Improvement District.

For example, if a park adds value to the surrounding area, those residents might be willing to pay for it. "If a neighborhood park is well kept up, if it's nice and clean and has a full array of services, it obviously helps keep up the property value," said McMahon.

However, in the last eight months, New Yorkers have seen hikes property tax, sales tax, income taxes, and cigarette taxes, so the chance that politicians or the public would go for more seems unlikely.

"I think most people feel we've had enough already," said Marcia Van Wagner of the Citizens Budget Commission.



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