Mayor Michael R. Bloomberg today announced his Fiscal Year (FY) 2007 Executive Budget and presented an updated four-year financial plan for New York City.  The $52.7 billion budget maintains the City's firm financial footing in the near term and uses $3.4 billion in FY '06 resources to help close the budget gap in FY '07.  The budget also includes $6.5 billion secured from the State of New York to fund 50% of the City's five-year capital education plan. The Executive budget maintains the initiatives outlined in the Preliminary budget to improve the long-term financial health of New York City, including a $2 billion trust to fund a portion of the City's liability for the health benefits of its current and future retirees

"New York's economy is growing, our streets are safe and people from around the world are flocking here to visit and live," said Mayor Bloomberg.  "This year's budget is strong and stable, but long-term financial problems persist and the out-year budget gaps loom large. Now is the time to plan for eventual down-turns and to use the extraordinary one-shot revenues to help secure the long-term growth and fiscal stability of the City.  This budget includes $2 billion for future health care costs and uses surpluses for pay-go capital and debt relief. Today's investment in our City's future will not only soften the blow from the invariable down-turn in the City's economy, but ensure that New York continues to grow and prosper."

Economic Outlook:
New York City's economy is strong in the short-term and jobs are being created throughout the City.  The Administration's five borough economic development strategy has helped push unemployment to 5.3%, the lowest level since March 2001. The commercial real estate market remains strong and vacancy rates continue to decline. The tourism sector is thriving with record numbers of tourists visiting New York, new highs in hotel room occupancy and room rates and historic levels of tourism related employment.  However, signs of a cooling economy abound. Wall Street bonuses continue to grow, but the rate of increase is down sharply.  Fourth quarter Wall Street profits were recently revised downward form $11.8 to $9.4 billion. National and local data shows a modest slowdown in real estate transactions and value. Real estate transaction taxes, which have buoyed the City's coffers over the last few years, have slowed, but the mortgage recording tax continues to outpace expectations as variable sub-prime mortgages entered into two years ago are refinanced in the face of rising interest rates.

Use of One-Time Resources to Reduce Long-Term Costs:
The Mayor uses one-time resources to reduce long-term costs. Extraordinary one-time resources, including increased real estate transaction taxes, the Personal Income Tax and delays in the City's pension contributions will be used to establish a $2 billion trust to fund a portion of the City's liability for the health benefits of its current and future retirees. Deposits into the trust are irrevocable and all money deposited into the trust must be used to pay the costs of retiree health care benefits in future years.  The Mayor also reduces the City's long-term debt by using $1 billion as pay-go capital over the next five years and reducing the debt burden by an additional $800 million between FY '08 and FY '10. 

Program Highlights:
Nearly $900 million is invested in new programs in FY '06 and '07. Some of the program highlights and their net agency costs are:

• $21 million in FY '07 to hire 800 new Police Officers and 400 civilians at the NYPD 
• $100 million in FY '06 to close an operating deficit at the New York City Housing Authority 
• $108 million in FY '06 and '07 for the Administration for Children's Services 
• $385 million in FY '06 to fund extraordinary Medicaid claims for the Health and Hospitals Corporation 
• $273 million in FY '06 and '07 for new needs at the Department of Education 
• $68 million in FY '07 for payment of Real Estate Taxes in the watershed and employee health and safety training and other programs at the Department of Environmental Protection 
• $11 million in FY '07 for the Board of Elections to help implement the Help America Vote Act
• $15 million in FY '06 and '07 to increase security at the Staten Island Ferry and for other transportation needs.
• $18 million in FY '06 and '07 for the Department of Small Business Services, NYC & Company  and Governors Island

FY '07 Fiscal Plan Update:
Since the January Plan, $420 million in new revenue has been recognized in FY '06 and $406 million in new revenue has been recognized in FY '07. Increased agency expenses total $471 million in FY '06 and $401 million in FY '07. Other expense changes save $236 million in FY '06 and $110 million in FY '07. An additional $185 million will be rolled from FY '06 into FY '07 pushing the '06 prepayments to $3.4 billion.

Out-Year Budget Gaps:
Despite the City's strong economy and fiscal stability, significant budget gaps exist in the out-years.  Out-year budget gaps have swelled to nearly $3.6 billion in 2008 and $4.2 billion in 2009 largely driven by the growth in non-discretionary spending.   In FY '07 the difference between agency and non-discretionary spending grows to $4.7 billion compared to a difference of $1.4 billion in 2002.  Pension and fringe benefits now consume more than 62% of the total salaries for municipal employees.  Non-discretionary spending on employee related costs, Medicaid and debt service are significant contributors to the structural shortfall in the City's budget.  Without long-term solutions to these recurring problems and structural shortfalls, the City will be plagued by a continuous boom-bust cycle that in the past has caused painful budget cuts and tax increases.

State School Construction Aid:
Since the January Plan, New York State has agreed to provide a 50% share of City's $13.1 billion five -year school capital construction plan.  The State's total contribution will help provide 107 new schools, creating 66,000 additional seats and 50 new partnerships with charter schools. In addition, the plan will make available $2.5 billion for capital improvements and repairs, $2.1 billion for technology, school safety, science lab and auditorium upgrades.  The plan will also fund $1.5 billion for the SIRA program to restructure and enhance struggling schools and $1.5 billion for code compliance and emergency lighting.

Four-Year Capital Plan:
The Four-Year Capital Plan invests more than $36.5 billion in City infrastructure over the next four years.  A total of $10.5 billion, or 29%, is invested in New York City schools.  The plan invests more than $3 billion in the Hudson Yards redevelopment of the West Side of Manhattan, including the extension of the Number 7 train and to develop new parks.  $1.3 billion is allotted for street resurfacing and reconstruction.  The Croton Water Filtration Facility receives $1.1 billion in funding and Bronx Park Development receives $198 million.  $308 million is used to renovate firehouses and EMS stations and $187 million is used to construct and renovate Police precincts.  $149 million is pledged for Yankee Stadium infrastructure, $136 million is for Fresh Kills Park re-development, $107 million for the Atlantic Yards Project, and $105 million for the Mets Stadium infrastructure and parks.  The City will fund $99 million in acquisition, remediation and construction of over 30 acres of open space along the Greenpoint-Williamsburg waterfront.  Randall's Island receives $82 million for sports fields and infrastructure and $70 million is pledged to fund the High Line Park. The City will spend $51 million on Brooklyn Bridge Park and $48 million on design and reconstruction of retaining walls.