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NYC Eyes Borrowing $7 Billion to Deal With Pandemic Revenue Hit

NYC Eyes Borrowing $7 Billion to Deal With Pandemic Revenue Hit

(Bloomberg) -- New York City is seeking authority to borrow possibly as much as $7 billion if necessary to make up for the revenue lost because of the coronavirus pandemic.

Senator Liz Krueger, chair of the state senate’s finance committee, introduced a bill Monday that would authorize the city’s Transitional Finance Authority to issue debt to make up for the projected loss through mid-2021. The TFA, which issues bonds backed by city income-tax revenue, was previously authorized to borrow for costs arising from the Sept. 11 terrorist attacks.

“We’re dealing with something as horrible as 9-11 in every sense, humanly and otherwise,” Mayor Bill de Blasio said at a news conference. “We’re going to be in a horrible budget situation for years. So this borrowing capacity is to give us a fall-back, no matter what happens up ahead.”

NYC Eyes Borrowing $7 Billion to Deal With Pandemic Revenue Hit

De Blasio proposed an $89.3 billion budget for the fiscal year beginning July 1 that relies on spending cuts and drawing from reserves to make up for revenue lost after the city shut non-essential businesses to contain the pandemic. More than 930,000 city residents, or one in four workers, has filed for unemployment since mid-March, according to city Comptroller Scott Stringer.

The city’s Office of Management and Budget estimates New York will lose at least $7.4 billion in revenue through June 2021.

New York is among the hardest hit by the surge in unemployment and business shutdowns that are hammering states and cities nationwide. Illinois and New Jersey have both considered borrowing to help close their budget shortfalls and the Federal Reserve has rolled out a plan to extend as much as $500 billion of loans to state and local governments, if needed, to ease the pressure on public markets.

De Blasio said the federal government should pass another stimulus package that makes up for the hundreds of billions of revenue governments have lost amid the worst economic contraction in decades.

The U.S. House of Representatives passed a $3 trillion virus-relief bill that extends such aid, but it has little chance of passage in the Republican Senate. While U.S. Treasury Secretary Steven Mnuchin has said there’s a strong likelihood that another stimulus is necessary, the Senate hasn’t agreed on a bill.

“We have dealt with an international crisis, an international pandemic that was something that our federal government like any foreign threat was supposed to address,” de Blasio said. “The only way to possibly keep this city functioning, keep the services provided, keep people on our payroll is if we get a really substantial stimulus program from Washington.”

Borrowing for operations should only be used as a last resort, said Maria Doulis, vice president of the Citizens Budget Commission, a business-backed budget watchdog.

“The city needs to do a lot more to cut spending, streamline operations, partner with labor, and make the hard choices now before we ask future New Yorkers to sacrifice their tax dollars for today’s expenses.”

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