Is New York “Fine” City?

Posted by Doug Turetsky, August, 13, 2013

There may be no greater unifier among New Yorkers than their aggravation with the city’s proclivity for ticketing and fining. Shopkeepers, motorists, dog owners, and a variety of other New Yorkers have reasons to believe that the city is trying to balance its budget by burying residents and businesses under a blizzard of tickets. While the city is knee -deep in tickets, it’s less clear that’s all about the money.

There’s no question that tickets bring in a lot of money for the city. The Bloomberg Administration estimates that fine revenues will total $812.5 million in 2014, up about $13 million from last fiscal year. While that’s about $300 million more than the city expects to reap from the hotel tax and about 13 times more than the city will bring in from the cigarette tax, fine revenue is actually down from a few years ago. In 2010, fines brought in nearly $830 million and in 2012 almost $855 million.

Much of the city’s fine revenues come from a single source: parking tickets. The Mayor expects the city will collect $518.2 million in revenue from parking tickets this year, about $34 million more than last year when Hurricane Sandy forced the city to suspend some parking regulations for a while and city workers who typically focused on issuing parking tickets were redeployed to direct traffic. Yet even with the increase in parking ticket revenue expected this year, the total is about $50 million less than the roughly $568 million generated in both 2011 and 2012.

But it’s not just the amount of money raised from tickets that gives New Yorkers that overburdened feeling. It’s also the sheer number of things for which New Yorkers can be fined and the volume of tickets issued. Despite the Sandy-imposed hiatus, nearly 7.4 million parking tickets were written last year. A quick review of documents from the Environmental Control Board, the city agency responsible for adjudicating many types of tickets (other than parking), makes plain just how many different kinds of infractions there are and how many tickets are written besides for parking.

Under the heading of Park Rules there are about 50 different types of violations—from “unauthorized assembly” to “unauthorized possession of a garden tool or plant.” Of course, being in a park after it’s closed or failing to pick up after your dog can also get you a fine. There are even more ways to be ticketed under the heading of Recycling Sanitation Collection. Among the roughly 80 infractions are “failure to bundle newspapers/magazines/cardboard” in a building with nine or more units and “failure to post comingling notice.”

For these and dozens of other types of violations, the Environmental Control Board adjudicated more than 464,600 tickets in fiscal year 2013. That may seem like a lot, but it’s actually down by nearly 100,000 from 2012. Violations that are related to sanitation and recycling account for more than half of the total number of these tickets—nearly 270,000 in 2013 and 345,600 in 2012.

The number of tickets written for various infractions can vary widely. Take for example two issues that infuriate some New Yorkers: street vendors and noise. Street vendors are frequent recipients of tickets. Street food vendors received more than 12,800 tickets last fiscal year, although down from nearly 14,000 in 2012. These numbers don’t include the increasingly popular food trucks, for which there are special set of violations along with those for restaurants. Street vendors hawking general merchandise were ticketed nearly 1,800 times last year and more than 2,600 the year before.

Conversely, noise elicits relatively few tickets. Last month, The New York Times dedicated 3,242 words to the problem of noise in the city. That’s far more words than the combined total of 461 tickets issued under the heading of Noise in the control board reports covering 2012 and 2013. New Yorkers who seethe over the use of cell phones by audience members at the movies, plays, or concerts may be glad to know that there is an infraction on the books aimed at discouraging such annoyances. But only three tickets were issued for irritating cell phone use at public performances last year.

A 2010 Crain’s story highlighted the burden many small business owners felt from a bevy of fines. But the article also acknowledged the role fines play in deterring behavior that can threaten public health and safety.

While some New Yorkers may think that all this ticketing is just a way to stuff the city budget with additional cash, a 2003 IBO report found that enforcing city health and safety rules are actually a money loser. Only parking tickets generated more in revenue than it cost to enforce regulations and collect parking-related fines. In most other cases the costs of enforcement and collection far outweighed the revenues collected.

Take the thousands of tickets issued to street vendors as an example. An IBO report found, as did a more recent news story, only a small share of the fines are actually collected—not a surprise since fine levels are so out of proportion to the incomes generally earned by vendors. The ticketing may have more to do with public policy and efforts to deter certain behavior or control public space than raising revenue.

Why the Mayor’s Resiliency Plan Is Likely to Cost Well More Than $19.5 Billion

Posted by Doug Turetsky, July 26, 2013

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Photo Credit: Flickr/Pamela Andrade

The recently enacted city budget for 2014 includes about $250 million in new capital spending for some of the projects outlined in Mayor Michael Bloomberg’s 400-plus page report A Stronger, More Resilient City  last month.  Consider the funding a small down payment on what promises to be very costly projects to prepare the city to deal with the effects of climate change.

In his speech last month introducing the report, the Mayor estimated that the cost “of everything we’re proposing” is $19.5 billion. This total cost, projected over 10 years in inflation-adjusted 2013 dollars, includes two main components. One component is the long-term resiliency projects that are the focus of the report. Those total $14 billion. The other $5.5 billion component is spending on recovery from Sandy, which the report describes as related to the city’s longer-term resiliency efforts. But the combined $19.5 billion estimate is surely low, and not just because construction and other capital projects tend to have escalating price tags.

To start with, for each of the 250 projects expected to cost $1 million or more—and that includes the vast majority of them—the estimated cost is presented in ranges such as $1 million-$10 million, or $150 million-$175 million, with the highest $1.1 billion-$1.4 billion. The $14 billion estimated cost of the long-term resiliency projects is based on totaling the lower bound of each proposal’s cost range. Total the projects up based on the higher end and the expected cost of the long-term resiliency projects climbs to $16.8 billion.

Then there’s the fact that for a number of projects the estimated cost only reflects the expected price of a planning study—not the cost of the actual construction project that would result from the study’s findings. For example, for a study of how to minimize drainage pipe flooding has a cost range of $10 million-$20 million. It’s reasonable to assume that for at least some of these projects implementing the study’s findings will cost more than the study itself. The Mayor’s proposal for Seaport City, a new community that would be built on landfill on the east side of the Lower Manhattan waterfront, is also presented just in terms of a study cost.

Nor do the anticipated expenditures presented in the report always reflect the full project cost. The plan to “complete repairs and resiliency retrofits” of public housing damaged by Sandy is accompanied by an estimated cost of $700 million-$750 million. That cost, though, covers only 40 percent of affected buildings. So the repair and resiliency work for the other 60 percent of the buildings will still need to be done, but at some as of yet undetermined—but probably quite substantial—cost.

The cost of all the initiatives outlined in the report is expected to be funded through the city’s capital budget.  About $10 billion in funds for the 250 proposals have already been identified, including $5.5 billion in city capital budget allocations for projects already underway and that are now being cited as part of the city’s resiliency efforts. The Bloomberg Administration also counts $4.5 billion in federal funds towards the $10 billion in identified resources. Some of the federal dollars have already been allocated, some not.

The rest of the funding remains uncertain, although the Bloomberg Administration anticipates some $4 billion in additional federal aid will be available and that $1 billion in projects to shore up the city’s electric and gas utilities will be covered by passing the costs on to ratepayers. That still leaves a $4.5 billion hole—and that’s assuming that the cost for these projects don’t rise above the Mayor’s estimate.

Then there’s a whole other category of expenditures that will also be needed for many of the resiliency initiatives. As Director of Resiliency Daniel Zarrilli and his colleagues Gwendolyn Litvak and Daynan Crull noted in a phone conversation, no funds for operating or maintaining any of the projects have as yet been included in the in the city’s financial plan for upcoming years. So while there may be money to install integrated flood protection systems or build new docks for expanded ferry service, there’s no money set aside to operate and maintain them. Tallying up the potential maintenance and operation costs remains on a “to do” list.

And there’s another big-ticket item to consider: the Metropolitan Transportation Authority. Proposals for safeguarding the city’s transit system are not addressed in the Mayor’s plan because those are not expected to be city budget expenditures. But it’s an expense that will likely be borne, at least in part, by city residents.

Protecting the city from rising tides, storm surges, and other effects of climate change is critical. It will also be expensive. While a great deal has been said recently about the near-term costs of settling the expired contracts with the city’s municipal labor force, it could be the longer-term costs of resiliency that swamp the city’s budget.

Operator of Yankee Stadium Parking System Strikes Out: With Bonds in Default and Growing Debt to the City, Company Issued Request for Proposals to Redevelop Two Lots

Posted by Doug Turetsky, July 11, 2013

In 1970, Joni Mitchell famously sang about tearing down paradise to put up a parking lot. More than 40 years later, it looks like a financially troubled set of parking lots and garages built in conjunction with the new Yankee Stadium will add a different twist to Mitchell’s refrain.

The parking system, which contains nearly 9,300 spaces, was built with substantial public subsidies, including $238 million in tax-exempt bonds and direct subsidies of $70 million from the state and $39 million from the city. Additionally, about 3 acres were removed from use as city parkland and leased by the city to the parking system. Use of the garages and lots has been well below expectation and the parking system has not generated sufficient revenue to make recent payments to bondholders.

With the Bronx Parking Development Company, which runs the parking system, in default and in need of new revenue, a request for proposals was issued to sublease and redevelop two lots near Yankee Stadium. The responses were due June 5 to the Bronx parking company. Edward Moran, who was hired to restructure the parking company, did not respond to two e-mail requests and a follow-up phone call for information about the number of proposals received and when a selection is expected to be made.

A payment of $6.9 million was due bondholders April 1. The last payment made was in October, when the company drained much of its reserve fund to meet its obligation to bondholders. While the bonds were issued by the city’s Industrial Development Agency, the city is technically not responsible for repaying the bondholders.

Yet the city may still lose on the deal. The Bronx parking company has not paid the city any of the $3.2 million in annual rent that has been due since January 2008 nor has it made any of the required payments in lieu of taxes. Under the terms of the lease with the Bronx Parking Development Company, money owed to the city takes a back seat to payments to bondholders if revenues are insufficient to cover both.

In October 2012, it was reported that the parking company owed the city $25.5 million. City financial documents that IBO receives do not specify how much is currently owed by the Bronx parking company. Neither Moran nor the Mayor’s Office of Management and Budget responded to several requests for this information.

Although the Yankees demanded a parking system able to hold about 8,700 cars plus 600 for its own use—more parking spots than were available for the old stadium even though the new stadium holds about 6,600 fewer fans—the team itself bears no financial responsibility for the garages and lots.

Even on game days, use of the Bronx parking company’s system has been much lower than expected. A number of factors contribute to this, not the least of which is cost. The price for parking at the system’s garages and lots is higher than at the old stadium, and on game days can run as much as $48 for valet parking. There are cheaper parking alternatives nearby at the Gateway Mall and more fans are taking public transit to the game than in the past, especially after the opening of the new Metro-North railway station in 2009. Ironically, the recent request for proposals to redevelop the lots on 151st Street between River and Gerard Avenues touts the site’s easy accessibility by public transportation as a prime selling point.

Last March, City Comptroller John Liu issued an audit report critical of a number of Industrial Development Agency deals, including the one with Bronx Parking Development Company. The Comptroller’s office contended that the projections of revenue from the parking system “…were based on questionable occupancy rates and inflated attendance figures and did not account for demand fluctuations that would result from price increases and competition.”

While the default sparked the effort to redevelop two of the lots and bring in more revenue for the fiscally challenged parking company, it has also brought some new players into the saga of the parking system—including a major proponent of building a new stadium for the Yankees. Creditors hired  Bracewell & Giuliani, the firm of former Mayor Rudolph Giuliani, to represent them in negotiations with Bronx Parking Development Company. The parking company agreed to pick up the tab for Bracewell & Giuliani and has budgeted $240,000 in 2013 to pay the Mayor’s firm.

But none of the expected $7.1 million in parking company operating expenditures this year include rent or payments in lieu of taxes owed to the city. As the saying goes, wait till next year.

Cooper Union Will Begin Charging Tuition, But Will Still Be Getting Special Tax Breaks From the City

Posted by Doug Turetsky, June 4, 2013

In April, Cooper Union ended its 150-year tradition of providing students a tuition-free education. Although starting in 2014 the school will no longer be giving all of its students a free education, Cooper Union will still be getting an unusual set of tax breaks from the city—breaks that help fund the school’s annual expenses. These tax breaks cost the city about $20 million in forgone revenue this year, in effect providing a more than $21,000 a year subsidy to each of the highly selective school’s roughly 930 undergraduate engineering, architecture, and art majors.

The largest and most well known of the unusual tax breaks dates back to 1902 and centers on land at Lexington Avenue and 42nd Street given to the school to boost its endowment by heirs of Cooper Union’s founder Peter Cooper. The endowment paid off for Cooper Union when the school leased the site to Walter Chrysler in 1928 to construct the eponymously named Chrysler Building. The land has remained exempt from property taxes because it is owned by the school.  Cooper Union gets rent from the land of about $9 million a year along with payments equal to what the city would collect in property taxes if the site were still on the tax rolls. The payment amounted to $18 million this year.

Schools typically get a property tax break only for locations where classes are held, students housed, or administrative operations conducted. But the unusual property tax exemptions afforded Cooper Union, which include land the school sits on as well as any land it may receive as part of its endowment, date back to the charter granted to the school in 1859 by the state Legislature, provisions upheld in subsequent court cases.

Albany has continued to do its part to keep the break in place. In 1969, Mayor John Lindsay sought legislative help in restoring the site to the tax rolls for a cash-hungry city that several years later would begin to charge tuition to City University of New York students. Albany did indeed pass legislation stipulating that only property directly used for educational purposes could receive a tax exemption. But the legislation only applied to property acquired after the bill went into effect.

More recently, Cooper Union engineered two more commercial deals on land it owns. In order to generate funds, Cooper Union proposed a large-scale development plan that included two locations it would lease much as it did with the land under the Chrysler Building: 51 Astor Place, where its engineering school stood, and 22-36 Astor Place, which was a parking lot. In 1959, ownership of 51 Astor Place–then a city property—was transferred to Cooper Union with the condition that it be used for educational purposes.

To make the sites more attractive to prospective developers, Cooper Union won zoning changes from the City Planning Commission. In addition, in 2007 the Bloomberg Administration released Cooper Union from the requirement that 51 Astor Place be used for educational purposes in exchange for a $980,000 payment to the city and a promise that a portion of the building would be used for school purposes.

Cooper Union leased the parking lot to Related Companies, which built a 21-story luxury residential building on the site. At 51 Astor Place, Edward J. Minskoff Equities leased the site and is seeking tenants for a 13-story “starchitect”-designed office building with a Jeff Koons sculpture in the lobby.

The tax breaks for these two locations, hammered out with the Bloomberg Administration, are more complex than the tax exemption for the Chrysler Building. While both Astor Place buildings will remain fully exempt as is the Chrysler Building, the city will get payments—technically called payments in lieu of taxes—equal to half of what the tax bills would be.

The city can’t collect payments at either site until the office building is ready for occupancy. The residential building opened in 2005 and was exempt from any payments until fiscal year 2011. But the city still has to wait to collect any payments on that property until a certificate of occupancy has been issued for the office building. IBO’s Ana Champeny estimates this cost the city $2.1 million this year in foregone taxes from the residential building. We won’t know the amount of taxes foregone on the office tower until the building is completed and assessed.

When seeking the Astor Place zoning changes, Cooper Union told the City Planning Commission it needed them in part to generate funds to continue to provide a tuition-free education for its students (the school also wanted a new building for its engineering program, which it built at 41 Astor Place). With the public purpose of the unusual tax breaks now mostly a thing of the past (about 25 percent of students won’t pay tuition), some New Yorkers may question why the city should forego tax dollars on Cooper Union’s commercial development deals at a time when the city’s own university system has seen repeated tuition hikes.

Missing From Albany’s Family Relief Tax Break: 1.2 Million NYC Kids

Posted by Doug Turetsky, April 19, 2013

Tucked into the state budget adopted last month is a special three-year tax break for New York families with children. The first of three annual rounds of checks for $350 per qualifying family will be sent out in October 2014 (just weeks before the next year’s gubernatorial and legislative elections) at a cost of about $400 million statewide. While New York City families stand to garner a large share of the checks, many will find their mailboxes empty.

An analysis by IBO’s Michael Jacobs, which uses data from a sample of 2010 income tax returns, finds that about 575,000 of the city’s tax-filing families with children will qualify for the check next year. Each of these families will receive a check for $350, bringing just over $200 million into the city.

But that same analysis also reveals that nearly 725,000 New York City families with children—families with an estimated 1.2 million kids—will receive nothing. That’s because in most instances they earn too little to qualify.

Here’s how the tax break, called Family Tax Relief, works: To qualify, a tax-filing family or household with at least one child needs an income after tax-deductions (adjusted gross income in tax-speak) of between $40,000 and $300,000, and they must have owed New York at least a $1 on their 2013 state income taxes. If the family qualifies, they’ll get a check for $350, regardless of whether they have one child or a dozen under the age of 17, and even if the amount they owed is far less than the $350 check they’ll receive.

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Family Tax Relief is described as help for “middle class families that are struggling to make ends meet” Yet in a city where the median adjusted gross income for families with children is $38,400, Family Tax Relief’s definition of middle-class is high and wide of the mark. As a result, tens of thousands of relatively well-off New York families will get a check while many low, moderate, and middle-income families with children will not.

To put that observation into numbers: more than 190,000 New York City families with children and adjusted gross incomes from $100,000 to $300,000 will be receiving checks worth more than $66 million combined. But roughly 660,000 families with adjusted gross incomes under $40,000 will find their mailbox empty. Among those left out are about 126,000 families—most of them single mothers with children—with incomes below $40,000 but who still owe income tax to New York State.

IBO’s Julie Anna Golebiewski estimates that about 60 percent of all the households with children in the Bronx will not qualify for the credit, based on data from the American Community Survey. In nearly all cases, the households won’t qualify because their incomes are too low. In Staten Island, about 28 percent of households with children won’t qualify and in Queens about 36 percent. In Brooklyn and Manhattan, roughly half of all households with children are expected to get a check. About 16 percent of Manhattan households with children won’t get a check because their incomes are too high, giving Manhattan the largest share of over-the-limit earners among the five boroughs.

New York’s Family Tax Relief bears some similarity to a 1991 proposal by former New Jersey Senator Bill Bradley to provide a $350 tax credit to families in the U.S. for each of their children. But Bradley’s plan called for the program to be universal, with everyone regardless of income getting help. If a family was too poor to owe taxes they would get the benefit in the form of a direct payment rather than a tax credit.

IBO’s Jacobs calculates that making the New York State program universal so that it covers all families with children—regardless of their income level or state tax liability—would more than double the cost of the program in New York City to about $453 million in 2014, even if the checks are capped at $350 a family no matter the number of children. Alternatively, if Albany were to let those single mothers and other families with incomes below $40,000 qualify for relief while maintaining the requirement that families have some tax liability, it would raise the total cost to the state of the Family Tax Relief program in New York City to roughly $245 million—about $45 million more than under the current legislation.

The City’s Easiest Savings

Posted by Doug Turetsky, April 12, 2013

Over the past few years, one of the biggest sources of city budget savings has come without any effect on municipal services. It’s involved no reduction in staffing. No cutback in program operations or number of New Yorkers served. The savings has come from debt service, the interest and principal the city pays on the money it borrows to build schools, fix roads, buy fire trucks, and the like.

Record low interest rates over the past few years have enabled the Bloomberg Administration to save a bundle. The cost to the city on money borrowed through variable-rate bonds has been relatively low, and the city also has been able to refinance some existing fixed-rate debt at lower interest rates than when those bonds were first issued. In IBO’s report on the Preliminary Budget for 2013, we estimated that the city had recognized $875 million in savings just on its variable-rate general obligation debt (the city also borrows large sums through an entity called TFA) due to lower than forecast interest rates in fiscal years 2010 through 2013.

Besides the $875 million in savings, there are two additional terms to focus on in that last sentence: “recognized” and “forecast.” When and how the Bloomberg Administration has been building these savings into the city budget is worth a closer look.

Take the city’s current budget plan, for example. The Mayor’s plan assumes interest rates on variable- rate general obligation bonds will be 2.45 percent through the rest of this fiscal year, which ends in June. In fact, as IBO’s Sean Campion points out, interest rates on these bonds (based on a Securities Industry and Financial Markets Association index) have been below 0.50 percent—about one-fifth of City Hall’s forecast—since April 2009.

And the Bloomberg Administration projection for this interest rate in fiscal year 2014? Try 4.15 percent. Yet there’s no indication this rate is poised to rise and the Federal Reserve has made clear its intention to keep interest rates low, at least in the near term.

While some might see the Bloomberg Administration’s interest rate projections as fiscal prudence others might view it as a bit of forecast sleight-of-hand.

Last month in IBO’s report on the Preliminary Budget for 2014, Campion estimated that if the city lowered its interest rate assumption for the rest of the fiscal year to a still-above-market-rate 0.30 percent for variable-rate bonds and issued no more of this debt in the remaining months of this fiscal year, debt service spending in 2013 would be $148 million less than currently projected. That savings won’t be recognized until late in this year’s budget cycle and will likely become part of the end-of-year surplus.

One way to look at these savings is as a cushion in case some revenue source comes in lower than expected, or some form of spending such as shelter costs for the homeless winds up costing more than budgeted. Having this type of savings tucked away in the budget plan can fill a last minute shortfall, although the city maintains a general reserve for just this purpose.

But another way to think about it is $148 million that could have been used elsewhere in this year’s budget. The considerably higher than likely projections of debt service enable the Mayor to “park” money out of sight and out of mind of Council Members and other elected officials who might want to use those funds for new or existing programs. With the much higher than likely forecast for interest rates in 2014, the amount of money that could be “freed up” in next year’s budget by a projection closer to recent trends would be even more substantial.

Despite the record low interest rates and the savings they ultimately produce in the budget, overall debt service spending under the Mayor’s budget plan continues to be one of the city’s fastest growing expenditures. Spending on debt service is projected to increase $1.7 billion from this year through 2017 (adjusted for the use of the 2012 surplus to prepay some of the 2013 cost), when debt service expenditures are expected to total $7.7 billion.

But if past is prologue, debt service costs will not grow by as much as in the budget plan. Still, costs will grow largely because of the plan for more borrowing. The Bloomberg Administration expects that the city’s total outstanding debt will grow from $68 billion this year to nearly $75 billion in 2017.

 

The Last (Budget) Dance?

Posted by Doug Turetsky, March 1, 2013

Public hearings on the Mayor’s budget plan get underway next week at City Hall. These hearings are the opening steps in what has become known as the “budget dance” between the Mayor and the City Council. The dance begins with the Mayor proposing budget cuts to a mostly routine group of programs and ends with a typical set of restorations negotiated by the City Council.

While the dance involves funding for services that many New Yorkers find crucial—and are crucial to the budgets of many service providers—there are many who probably wish the annual ritual had faded with the Macarena. For all the angst kicked up by the annual dance, the process revolves around less than 0.5 percent of the city’s $70 billion budget.

That there are cuts in the proposed budget that would affect city services may come as a surprise to those who got their budget information from the city’s social media feed. On the afternoon the Mayor presented the preliminary budget for the upcoming fiscal year, the City of New York’s Twitter feed brightly chirped: “Today Mayor Bloomberg presented FY2014 Budget which will not increase taxes or cut services.”  NYCgov’s Tumblr post proclaimed that there’s “no reduction in city services” in the budget plan.

Social media assertions aside, some of potential service reductions in the budget plan were in plain sight. Consider for example, a new $10 million reduction in funding for after-school programs that would eliminate about 3,600 slots from the 2014 budget, the $8.1 million cut in subsidies for cultural groups,  or (speaking of plain sight) the elimination of all $2.8 million in funding for eye exams for kindergartners and first graders.

Besides such newly proposed spending cuts that would lead to service reductions, other cutbacks were introduced by the Mayor in previous budgets and embedded in the financial plan for 2014. In most of these cases, the programs had temporarily escaped cuts through City Council-initiated restorations for one year at a time. This is the heart of the dance: the Mayor proposes a cut for the upcoming budget year as well as for the subsequent years of his four-year financial plan; the Council restores the funds only for the upcoming year; but the cut remains in the financial plan for the ensuing years, to be negotiated again and again, sometimes with additional reductions.

Take, for example, the Mayor’s recent proposal to reduce after-school spending by $10 million next year. To offset a cut proposed to take effect this year, last June the Council restored $50.6 million to the Out-of-School Time program for 2013, but only for 2013. (The Council only can vote on changes in the current year’s budget and, come June and the final negotiations with the Mayor, the budget adopted for the upcoming year. The Council has no control over the remaining years of the Mayor’s four-year financial plan). So no money was added to the plan for 2014 through 2017 to cover the funding cutbacks for those years. That means that the new $10 million reduction introduced for 2014 would come on top of the previously scheduled cutbacks. If the new and underlying cuts are not restored, the number of Out-of-School Time slots would shrink from 56,000 this year to 21,500 next year.

Over the past five years, the Council has made changes totaling more than $300 million annually to the Mayor’s budget plan, reversing proposed cuts as well as funding some of its own initiatives. But as the Mayor’s proposed cuts have mounted, the Council’s ability to fully restore cuts or maintain or start new initiatives has become more difficult.

As the partners line up for the opening strains of this year’s budget dance, Council Speaker Christine Quinn has already said she intends to prevent the loss of 2,500 teachers that are part of the Mayor’s budget plan, which will cost about $160 million (although a legal challenge now underway could prevent this cut). She has also announced her intention to restore funding for 20 fire companies ($44 million), once again avoiding a cutback that the Mayor has been pursuing since his preliminary budget for 2010.

Then there are some of the other routine restorations which grow more expensive each year when you count the newly added cuts for 2014. It will take $102 million to avoid a cut to libraries, $78 million for youth services (including Out-of-School Time), and $77 million for child care.  Already the list comes to more than $400 million, and that’s without restorations to other Council perennials such as cultural programs, health services, parks programs, legal services, domestic violence programs, and senior services.

This is the last go-around on the budget for Mayor Bloomberg and the current City Council. Only time will tell if it’s the last dance.

City’s Assessment of Property Values May Need Some Extra Reassessing

Posted by Doug Turetsky, February 12, 2013

Last month the Mayor presented his Preliminary Budget for 2014, which included the projection that revenue from the property tax would increase by more than $900 million in the fiscal year that begins July 1 and total $19.4 billion. But don’t start spending all of that additional revenue quite yet.

The property tax revenue projection is derived from the most recent estimate by the city’s Department of Finance of changes in assessed value of properties across the city. A quick look at the latest assessment roll by IBO’s Ana Champeny finds that the city seems to be adding some unlikely sites to its roll of taxable properties.

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Photo Credit: Flikr/Simon English

Take the Chrysler Building as a prime example. It has been tax exempt for decades in order to help subsidize tuition-free education at Cooper Union. Yet the Chrysler Building shows up on the city’s initial tax assessment roll for fiscal year 2014 with a taxable assessed value of $184.4 million. This is the amount used to compute tax liability and should not be confused with the city’s estimate of the building’s market value, which the finance department lists at $448.7 million. (The city’s property tax system can be mind-numbingly complex. To learn more about the system and how it got this way, see IBO’s 2006 report.)

You’ve probably heard of the Barclays Center in Brooklyn, that big new arena that was the source of much controversy right up until Jay-Z took the stage the night it opened. A lot of the controversy centered on the city’s subsidy and the use of the funds the developer would otherwise owe for property tax to instead go towards paying the annual interest and principal on the money borrowed to build the arena. Under this deal the property should be recorded as fully tax exempt. But the arena shows up on the 2014 tax roll with a taxable assessed value of $329.1 million.

How about the Museum of Modern Art’s Museum Tower? The tower was developed through an arrangement with the Trust for Cultural Resources that enables cultural organizations like MOMA to generate revenue by spinning off part of their property for private development, which remains exempt from the property tax. Although the trust’s board of directors includes the city’s Deputy Mayor for Economic Development and the head of the city’s Economic Development Corporation, Museum Tower shows up on the tax roll for the first time since it was built in 1985 with a taxable assessed value of $79.6 million for 2014.

There are many other examples as well such as Interchurch Center, which is part of Riverside Church; 3040 Broadway, owned by Columbia University; and the Church of the Heavenly Rest, which has been at 90th Street and Fifth Avenue and fully tax exempt for more than 80 years.

When the Mayor’s budget office forecasts property tax revenue, it assumes that some of the initial increase on assessments will be rolled back due to challenges by property owners and administrative changes by the finance department. But some of the jump in assessed values for 2014 is driven by these unusual shifts in exemption status, and may augur a larger number of properties than usual with assessment changes before tax bills are sent in June. Right now, these six buildings alone account for about $70 million in potential property tax revenue, which is about 8 percent of the anticipated growth in property tax collections next year.

Perhaps the appearance of some buildings on the roll of taxable properties could be explained by an effort initiated by the finance department last year to ensure that only eligible properties are getting tax exemptions. This effort requires owners to file annual applications for the exemption. But the failure to submit the necessary paperwork doesn’t explain why schools and parks department sites are also showing up on the assessment roll as taxable properties. Don’t think, though, that the glitches are limited to those showing higher assessments. The sale of buildings owned by the Jehovah’s Witnesses in Brooklyn Heights received a fair amount of press attention over the past couple of years. For the city, the sales should mean the return of tax-exempt church property to the tax rolls.

Somehow, 161 Columbia Street and 50 Orange Street are still listed in the property records as receiving tax exemptions as houses of worship. Together, the mistaken exemptions for the two buildings are worth more than $420,000 in tax savings for the property owners in the coming fiscal year.

Federal Plan for Cleanup of the Gowanus Canal May Mean Growing Costs for the City

Posted by Doug Turetsky, January 23, 2013

For decades, the Gowanus Canal has been synonymous with a polluted, and sometimes stinking, body of water. Soon after the Gowanus opened in the 1860s, it was generally treated as an open sewer. Industrial waste from coal yards, refineries, and tanneries as well as raw sewage poured into the canal. This fetid stew contained hazardous substances such as PCBs and polycyclic aromatic hydrocarbons, pesticides, and heavy metals such as mercury, copper, and lead.

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Photo Credit: Flikr/Doug Turetsky

Fast forward to March 2010 when the federal Environmental Protection Agency declared the 1.8 mile Gowanus Canal a Superfund site and set about developing a plan to contain the hazardous materials in the canal’s sediment and to prevent recontamination. Part of the Superfund process also includes determining who’s responsible for creating the environmental mess and making those responsible pay the cost of alleviating the conditions.

The EPA is still determining who is responsible and the degree of their culpability. Some of the companies being investigated may not be surprising, such as National Grid and Consolidated Edison. But based on the agency’s review so far and the remedies proposed in a plan released late last month, one of the entities on the hook for footing the cleanup bill may be the city itself.

The federal environmental agency estimates that its preferred plan (there are also some alternatives) would cost in the range of $467 million to $504 million. New York City’s share of that cost could be substantial.

For years, the city has allowed sewage and stormwater to spew into the canal. Looking just at the period from 1952 until the Red Hook Wastewater Pollution Control Plant opened in 1987, the city dumped about 20 million gallons of sewage a day into the Gowanus. The Red Hook plant and the nearby Owl’s Head wastewater plant still send sewage and stormwater into the canal when there’s an appreciable amount of rain and the two plants exceed their capacity for treating the wastewater. In a September 2011 presentation, the city’s Department of Environmental Protection estimated that about 300 million gallons of stormwater and sewage drained into the canal in a typical year, about two-thirds of it untreated sewage.

To reduce the continued contamination of the canal from what are called combined sewer overflows, or CSOs, the EPA wants the city to build holding tanks that will store the wastewater until the two treatment plants have sufficient capacity to handle much of the excess. The EPA estimates the cost of the tanks to be about $78 million.

A general reading of the EPA’s proposed cleanup plan and some other documents gives the impression that the city’s share could include more than the cost of the tanks as the federal agency sorts out who is responsible for various aspects of the canal’s pollution. Much of the heavy industrial uses along the canal ended long ago. National Grid owns the three sites where plants produced manufactured gas from coal, oil, and water to be used for street lights and home heating. These plants appear to be a significant source of the canal’s past pollution and may lead the utility to also bear a heavy share of the remediation costs. But the EPA’s extensive discussion of the role of CSOs in the canal’s past and future may be indicative of the extent to which federal officials believe the city should be underwriting the cleanup.

Any spending due to the Superfund plan comes on top of substantial sums the city has already been investing to improve the water quality of the Gowanus and reduce CSOs. Based on a review of capital budget spending by IBO environmental analyst Justin Bland, over the past 12 years the city has invested nearly $160 million to repair and upgrade a flushing tunnel that helps oxygenate the canal’s relatively stagnate water and an additional $18 million on other Gowanus cleanup-related environmental projects. The city plans to commit an additional $51 million for these projects over the next four years.

The Bloomberg Administration strenuously opposed the federal Superfund designation and developed its own plan for restoring the Gowanus. The Mayor argued that the Superfund designation could cause years of legal battles and delay redevelopment of the surrounding area. But City Hall’s plan relied in part on Congressional appropriations for the canal, funds that the EPA’s regional administrator considered far from certain. Insufficient funding could mean a lag in the cleanup.

The EPA is holding public meetings in Brooklyn on its plan on January 23 at PS 58 and January 24 at the Joseph Miccio Community Center. Written comments until March 28.

Homeless for the Holidays, and Beyond

Posted by Doug Turetsky, January 7, 2013

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Photo Credit: Flickr/-LucaM- Photograph

 

Last month, the U.S. Conference of Mayors released a report that offered a discouraging view of homelessness across the country. Among 25 cities participating in a survey by the organization, 15 said the number of homeless in their communities had been increasing and another three said the number had stayed the same as last year. The other seven reported declines.

Some of the biggest cities in the survey admitted turning away a significant share of their homeless population because emergency shelters simply don’t have enough beds. Philadelphia reported turning away a third of those seeking shelter, Charlotte 25 percent, and Boston 20 percent.

New York City didn’t participate in the survey, but it could have provided some stark numbers of its own. Not only is the number of homeless on the rise here, but individuals and families are experiencing ever-longer stays in shelter beds. While court orders dating to the 1980s provide the homeless with a legal right to shelter, some advocates would argue that the city effectively turns people away through its eligibility review process.  Still, with a growing number of people entering the homeless system, the city has added new shelter sites in recent months.

Over the first five months of this fiscal year (July-November), an average of 11,184 families, including those with children and adult families without children, spent the night in the city’s shelter system. That’s up by more than 1,600 families, or 17 percent, compared with the same five-month period last year.

These families are remaining in the shelter system more than a month longer on average than last year. Families with children typically spent 355 days in the city’s shelters as of the first four months of fiscal year 2013—up 40 days compared with the first four months of last fiscal year. For families without children, the picture is much the same. Average stays in the shelter system increased by 51 days, to 443 days during the first four months of this fiscal year.

The number of single adults spending the night in a city shelter has also grown by 10 percent, and averaged 9,213 over the first five months of this fiscal year. They, too, are also spending more days on average in the shelter system: 275 days during the first four months of this year, 12 days more than for the same four months last year.

There’s been a steady rise in the number of homeless and longer stays in the shelter system since the city eliminated the Advantage rental assistance program last year . The program had helped the homeless, mostly homeless families, leave city shelters by providing temporary rent subsidies. The program ended after the state eliminated its share of funding for the program, which cost in total about $210 million in 2011. The city’s share of the program’s cost was about $114 million.

Not surprisingly, more people and longer stays are driving up shelter spending. In November, the Mayor added $42.9 million in city, state, and federal funds to the budget for family shelters, bringing the total budget for 2013 to $466.5 million.

But IBO’s Elizabeth Brown says the additional funding is not enough to meet likely costs. Based on recent trends, she estimates that providing families with emergency shelter will cost about $42 million more than the Bloomberg Administration has budgeted for this year. Costs for emergency shelter for homeless single adults have also climbed.

In June 2004, the Mayor announced a five-year plan to cut homelessness by two-thirds. That plan never came close to meeting its goal and in recent months the city has sheltered record numbers of homeless New Yorkers. On Christmas Eve, more than 47,300 children and adults bedded down in the city’s shelters—a population about equal in size to the number of people who live in the upstate city of Binghamton.