NYC Mayor and Council Agree on $98.7 Billion Recovery Budget

(Bloomberg) -- New York Mayor Bill de Blasio and the City Council agreed to a $98.7 billion budget that will chart the course for the largest U.S. metropolis as it recovers from the pandemic, which eliminated hundreds of thousands of jobs, devastated tourism and shuttered countless small businesses.

The agreement, $100 million more than proposed by de Blasio in April, was smoothed by more than $15 billion in federal aid that buoyed the city’s finances. The budget for the fiscal year beginning July 1 expands free pre-kindergarten to 3-year-olds and increases spending on violence-reduction programs, tourism promotion and aid to small businesses. Better-than-expected income-tax collections allowed the city to boost its rainy-day fund by $500 million, to about $1 billion, and raise total reserves to $5.1 billion.

The budget “will drive economic growth in every neighborhood, all while building on strong reserves and investing stimulus funds aggressively to put the pandemic behind us,” De Blasio said in a statement.

Revenue Turnaround

The budget, De Blasio’s eighth and final spending plan, is a sharp turnaround from the bleak fiscal picture the mayor forecast last year. City tax revenue in the year ending Wednesday exceeded projections by $2.1 billion, buoyed by a booming Wall Street and federal aid payments to individuals and businesses. New York City has spent $8 billion fighting Covid-19, de Blasio said.

More than half of the city’s 8.3 million residents are fully vaccinated against the coronavirus and Governor Andrew Cuomo has lifted restrictions on businesses and social gatherings. Subway ridership climbed above 2.5 million for the first time since March 2020 and last week Madison Square Garden held its first concert since the pandemic.

The budget adds $44 million for violence-prevention programs and establishes an initiative to create jobs for 1,000 people at risk of violence. It includes $30 million to boost tourism and $11 million to help businesses open or reopen quickly. Other programs include:

• $15 million for NYC Baby Bonds, giving every kindergartener a college savings account with at least $100, starting in September
• $4 million for 4-Year City University of New York scholarships for low-income students
• $57 million for housing, health care and employment counseling for individuals returning to the community after incarceration

Police Funding

To curb an uptick in crime, the New York Police Department will re-deploy 200 officers from desk jobs to the field in high-violence precincts.

Last summer, in the wake of protests against racial injustice and police brutality, the mayor promised $1 billion in cuts to the nation’s largest police force. Those reductions never materialized. Now, in the budget for fiscal 2022, the NYPD was allocated $200 million more in funding than it was slated to receive in last year’s spending plan, a 3.8% increase that de Blasio attributed to additional overtime spending.

Community groups and activists criticized the increase.

“Instead of defunding an unaccountable and lawless institution that has rained violence on Black and Brown New Yorkers, our elected officials gave them a raise,” Donna Lieberman, executive director of the New York Civil Liberties Union, said in a statement.

In a press conference announcing the budget, de Blasio sought to downplay the changes. “The growth is $200 million, but what that comes down to is the police reform money from the March agreement – and this is crucial – in March, the Council and the administration got together to create an unprecedented set of reforms for the NYPD,” the mayor said. “That included expenditures that went into the NYPD budget for civilian activities.”

Challenges Ahead

New York City has recovered about half of the 900,000 private sector jobs it lost in the early months of the pandemic, and the next mayor, who takes office Jan. 1, will have plenty of work to do.

The city’s finances face risks from the shift to remote work, which has damaged commercial real estate as Covid-19 emptied out Manhattan. The next mayor will also have to negotiate new contracts with the city’s municipal unions.

The contest for mayor was thrust into turmoil Tuesday after the city’s Board of Elections erroneously counted test ballots alongside election night results. The board may republish corrected figures Wednesday that will show whether Brooklyn Borough President Eric Adams will maintain his lead in the Democratic primary over former Sanitation Commissioner Kathryn Garcia and civil rights lawyer Maya Wiley. The winner will likely prevail in November against the Republican nominee in the overwhelmingly Democratic city.

In the mayor’s April budget proposal, property-tax revenue was projected to decline $1.6 billion in fiscal 2022, the most significant drop since the early 1990s, because of weakness in offices, hotels, and stores. The Partnership for New York City, the city’s business lobby, expects 62% of Manhattan’s office workers will return by the end of September and the risk of population migration and shifts in working patterns is real.

Budget Concern

Budget watchdogs have expressed concern that they city doesn’t have to a plan to pay for new, or expanded programs funded with one-time federal stimulus funds. The budget forecasts budget gaps of $4.1 billion in fiscal 2023, $3.8 billion in fiscal 2024 and $4.1 billion in fiscal 2025.

“The agreement largely misses a golden opportunity to stabilize the city’s finances in the long run,” said Andrew Rein, president of the Citizens Budget Commission, a business-backed budget watchdog. “The budget hamstrings the next Administration with sizable future budget gaps, plus looming fiscal challenges when federal funds are depleted, and labor contracts are negotiated.”

De Blasio said future deficits are “manageable.”

“Revenue is going to be coming back stronger and stronger as the economy grows at a very fast rate,” De Blasio said.

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