FOR IMMEDIATE RELEASE
July 27, 2009
MAYOR MICHAEL R. BLOOMBERG PRESENTS CITY FINANCIAL PLAN TO THE NEW YORK STATE FINANCIAL CONTROL BOARD ANNUAL MEETING
The following are Mayor Bloomberg’s remarks as prepared. Please check against delivery:
"Thank you, Governor Paterson, and good afternoon everyone.
"Before I comment on the City's financial plan, I'd like to thank the members of the Financial Control Board for their steady leadership. The Board was first created in extraordinary circumstances: the grave fiscal crisis of the 1970s that drove New York to the brink of bankruptcy. The FCB helped pull New York through its very worst days. And still today, the thoughtful and diligent service shown by FCB board members and staff makes an enormous difference in keeping our city on a sound financial footing.
"The world has changed drastically since the last time I stood before this board. By last fall, what had started as a meltdown in sub-prime housing mortgages had become a once-in-a-generation global financial crisis. With the nation's economy in recession - and New York at the epicenter of the crisis - our tax revenues plummeted.
"History has shown us that when the economy turns down, New York City tends to fall harder and faster than the rest of the nation. Today, New York is certainly feeling the effects of the national recession. Far too many people are struggling to hold on to their homes and their jobs. And our unemployment rate has risen to levels not seen in years.
"But there are some bright spots on the horizon. While our financial services industry has been hit very hard, other sectors of our economy are performing better than expected. And the vital signs of the city's economy remain a lot stronger than in much of the rest of the nation, which suggests that instead of bearing the full brunt of the national recession - as we have in the past - New York may well be able to avoid some of its most devastating effects.
"Total employment in the city has contracted by 2.9 percent since August 2008 - a significant decline, but still less severe than the national decline of 4.7 percent. What's more, the labor force is growing faster in New York City than elsewhere in the country. Our growth - at 1.6 percent - is nearly twice that of the nation's at .7 percent. The fact that people continue to come here to find work - or stay here despite job loss - indicates a hopefulness about the city's future and its ability to recover.
"Even though the financial markets remain stressed, they have shown some signs of recovery since late 2008: credit markets have thawed; equity markets have improved; and a handful of major firms have returned to profitability in the first half of 2009.
"Our real estate market, on the other hand, is continuing to slide: primary commercial vacancy rates have risen to 11.5 percent; sales activity in Class 1 residential properties is now 37 percent below activity in the first quarter of 2008; and condo activity, which was last to weaken, declined over 50 percent in the first quarter of 2009 compared to 2008.
"The current economic downturn is not likely to end quickly or painlessly. But the City entered this recession at a higher point than we've ever been and better positioned than ever to ride out the storm.
"The best course of action for the long haul is to continue to be fiscally responsible, just as we have been for the past seven years. That means, first and foremost, vigilantly working to keep our budget in balance by planning ahead and making the tough decisions when necessary. Second, diversifying our economy and strengthening other sectors so that's Wall Street's losses do not bring down the rest of the local economy. And third, strengthening New York's competitive position by enhancing the already great quality of life that makes our city such an attractive place to live and do business.
"Let me briefly discuss each of these three strategies.
"First, as your staff report indicates, we need to continue exercising the same fiscal discipline that has allowed us to keep the Fiscal Year 2009 budget in balance, and adopt a balanced budget for Fiscal Year 2010.
"We always knew that economic booms don't go on indefinitely. So when times were good and New York City enjoyed unprecedented budget surpluses, we used our good fortune to pre-pay expenses and prepare for leaner times. That's why we were able to roll approximately $5 billion in previously accumulated revenues into the Fiscal Year 2010 budget. We knew that our reserves would not be enough to get us through these hard times - and that spending cuts were also necessary. So we asked our agencies, which had already begun to tighten their belts throughout 2008, to continue to do more with less - without jeopardizing City services. And they have - with a total of more than $3 billion in gap-closing actions.
"We also knew that closing the budget gaps was not something that we could do alone - and that we'd need help from New Yorkers, and from our partners in government and labor. I'm pleased to say that earlier this year, we came to an historic agreement with the City's municipal unions and made changes to the New York City Health Benefits Program. Those changes will save the City more than $200 million over each of the next two years and $150 million every year after that. On the revenue side, we worked with our partners in the City Council to push for changes in the City's tax structure.
"On the one hand, we asked New Yorkers to help generate some of the needed revenue - just as they did during the last recession. We eliminated a previous reduction to the City's property tax and raised the sales tax by .5 percent.
"And on the other hand, we re-configured our business taxes to make New York City a more attractive place to do business - especially for small businesses. We reduced or eliminated the unincorporated business tax now paid by some 17,000 freelancers and self-employed contractors. And we lowered taxes on more than 18,000 businesses headquartered in our city by going to a single sales factor of taxation. As you know, some of these critical reforms required legislative approval from the State - and we thank the governor and all our leaders in Albany for passing the necessary laws.
"In the months ahead, we'll have to keep a close eye on the economic indicators and take whatever steps necessary to keep our budget for Fiscal Year 2010 in balance and keep our city moving forward.
"Compounding the difficulties in our economy is another very serious threat: the rising costs of non-controllable expenses such as healthcare benefits and pensions. Even in what we hope will be a recovering economy, the outlook for the City budget in Fiscal Year 2011, which is projected to have a gap of $5 billion, is very troubling. And those gaps won't disappear in the out years. By the year 2013, our pensions costs will rise to $7.6 billion and account for nearly 11 percent of total expenditures.
"To protect our city's economic health, we must find a way to contain these spiraling costs. Already we have made some important progress towards that goal. In June, we reached a tentative agreement with the United Federation of Teachers that will save the City $2 billion over the next 20 years. The agreement reforms pension plans for newly-hired UFT members, while at the same time preserving health and pension benefits for current UFT members. I'd like to commend the United Federation of Teachers, and its leadership, for their willingness to work with us.
"The creation of a new pension tier for other employees, which our Administration has long been urging, is the only responsible way to address the long-term fiscal health of our City and State. Governor Paterson recognizes this. And the new tier he's proposed would save City taxpayers $7 billion over the next 20 years, according to initial estimates.
"I appreciate the Governor's leadership and look forward to working with him to continue to find long-term solutions to some of our greatest economic challenges. And if the cooperative spirit that's been shown in balancing this year's budget - among the City Council, Labor, and our partners in Albany - continues to guide us, then I feel confident that our city will see its way through these challenges.
"The second key to our city's long-term economic health is diversity. The fact that local industries outside of financial services are now performing better than expected suggests that our efforts to reduce the city's reliance on Wall Street - something we've focused on intensely over the past seven years - are helping to speed our economic recovery this time around.
"Our Administration will continue to pursue its successful Five-Borough Economic Opportunity Plan with the goal of strengthening our city's standing as a global financial capital, while also working to foster growth in a wide array of other industries.
"For instance, last week we announced our plan to invest in the more than 3.5-million square feet of City-owned industrial space, and develop a sustainable working waterfront district in Brooklyn's Sunset Park. That plan will spark the creation of some 11,000 new industrial jobs over the next two decades.
"We'll also continue our investments in tourism - and in attracting marquee events, like this month's NAACP Centennial Convention. It's true that tourism slowed in the first quarter of 2009, but we have since seen a number of indicators move up, including hotel occupancy and room nights. While it will not reach last year's record levels, tourism remains a viable industry for our city, and one that we'll continue to grow over the long term.
"We're also working to spur growth in the City's emerging bioscience community through the creation of the East River Science Park - a campus for commercial research that stretches along Manhattan's First Avenue medical science corridor. Last week, global pharmaceutical giant Eli Lilly & Company committed to moving one of its ImClone research divisions into the Science Park's first building. The company's decision is a great vote of confidence in the future of our city - and I think it points to the third reason why New York is weathering the storm better than anyone expected, and why we'll bounce back from this recession stronger than ever.
"As Comptroller Bill Thompson acknowledged in a recent report put out by his office, the City's competitive position is 'inherently stronger' today than it was during previous downturns. And that is mostly due to an improvement in the delivery of municipal services that contributes to our unbeatable quality of life.
"When our nation's economy first entered the recession at the end of 2007, many feared that our city's quality of life would begin to slip. That crime would rise, that our streets would get dirtier, and that companies big and small would head for the suburbs.
"So far that hasn't happened. We have worked hard to defy the conventional wisdom by continuing to increase our city's quality of life, even as the economy has turned downward. Today, crime is down more than 36 percent from where it was eight years ago. Overall crime is down 12 percent this year compared to last - and murders are down 18 percent, putting us on track to record a new low. Our public safety gains aren't limited to law enforcement: Fire fatalities and ambulance response times are also at modern lows. Our streets are cleaner than they've been in more than 30 years - and a new graffiti removal program will help us to clean up graffiti even faster and more efficiently. Our school system is improving, too. We've seen double-digit gains in test scores, and graduation rates are up more than 20 percent. And even as we've worked to enhance our city today, we've continued investments in its future - by keeping major upgrades to our water and transportation networks on track.
"Our efforts to enhance the city's great quality of life are really making the difference. Instead of fleeing the city, as they did in past recessions, businesses are choosing to stay and even expand in New York City. They are placing their bets on a city with low crime, good schools, and strong neighborhoods.
"Their optimism about our city's future is heartening. And it's just one of the many reasons I feel so confident that we can get through these tough times - just as we have before - and come out even stronger.
"The City Council - in particular Council Speaker Christine Quinn -and our partners in Albany, including Governor Paterson all deserve credit for helping us achieve a record of fiscal responsibility, while also making New York more livable, more business-friendly, and more economically diverse.
"By continuing to work together in a spirit of partnership, I'm convinced that we can meet the city's immediate and long-term budget needs, and ensure that New York City's best days are still ahead."
Stu Loeser / Marc La Vorgna (212) 788-2958