The New York City Independent Budget Office projects that tax revenues for the city's current fiscal year (2002) will be as much as $925 million less than the amount anticipated in the budget passed last June. The shortfall in projected revenues will continue in the fiscal year that begins next July 1, with funds from taxes and other sources as much as $1.8 billion lower than previously forecast by the city.
These projections are based on a prolonged national economic downturn.
"This year's $925 million revenue shortfall amounts to 4.1 percent of tax revenues anticipated in June. This is slightly less than the 4.9 percent shortfall the city experienced during its downturn in 1990," said IBO Director Ronnie Lowenstein. "Our forecast for next fiscal year shows even larger tax revenue shortfalls, similar in magnitude to 1991."
Among the city's major revenue sources, only the property tax-with its structure of lagging assessment changes-will grow this year. The effect of the downturn on other key revenues will be negative. For example, personal income tax revenues will be nearly $1 billion-17.2 percent-lower than last year. Likewise, receipts from the general corporation tax will decline by $380 million-21.8 percent lower than last year's level.
IBO expects tax revenues to be significantly below the levels forecast in the city's Adopted Budget:
- personal income tax revenues will be $256 million less than the $4.76 billion estimated in the Adopted Budget for this year, and down $509 million from the forecast for the fiscal year 2003
- sales tax collections will be $162 million less than the $3.5 billion projected in this year's budget, and $274 million below the 2003 estimate
- payments in lieu of taxes (PILOTS) for the World Trade Center will be $45 million less than the $74 million in this year's budget, and $79 million less than the $108 million expected in 2003; likewise, Battery Park City and World Financial Center payments will be less than the $30 million budgeted for 2002 and 2003.
The economic downturn causing these revenue shortfalls began before the extraordinary events of September 11. Job losses in the city started to mount during the summer as stock market declines and the nationwide slowdown in investment also began to be felt here," said Lowenstein. "The attack exacerbated these trends, further weakening Wall Street, retail activity, and tourism as well as deepening local job losses."
IBO assumes a net loss of 130,000 jobs from July 2001 through June 2002-3.5 percent of the 3.8 million jobs in the city. Hardest hit will be the service sector, with a loss of more than 50,000 jobs; and the financial, insurance, and real estate sector losing nearly 48,000. Employment is expected to fall by 18,000 in business services and nearly 7,000 in retail trade.
IBO has also estimated revenues under an alternative economic forecast. If a national economic recovery begins sooner, the expected shortfalls would be smaller. Revenues for 2002 would be $570 million less than the city forecast, and $1 billion under for 2003.