Nov. 5 (Bloomberg) -- New York City, reeling from financial turmoil on Wall Street, must roll back a property tax cut and reduce its workforce by 3,000 to help shrink a $4 billion budget gap over the next 18 months, Mayor Michael Bloomberg said.

The job cuts, including the firing of 500 workers, and a 7 percent property tax increase starting in January, were included in a budget modification plan Bloomberg presented in City Hall today. They represent part of an effort to save $1.5 billion to offset projected tax revenue declines. The city faces $3.1 billion less in revenue in the year starting July 1 than last year, the mayor said.

``There is no magic answer,'' Bloomberg, 66, said. Even with the savings and tax rollback, the mayor projected a $1.3 billion budget gap for fiscal 2010 beginning July 1.

New York, dependent upon Wall Street for at least 9 percent of its tax revenue last year, may lose as many as 147,000 private sector jobs trough 2009, Bloomberg said. A report by the Federal Reserve Bank of New York last month warned of spreading job losses and a prolonged recession amid the spreading impact of Wall Street's falling profits.

``There's something that's happened in the economy nationwide, and particularly to us, that requires us to make these very difficult choices,'' Bloomberg said.

Pension Losses

Pension funds have been hit by market losses estimated at 20 percent in the current fiscal year, which may force the city to make additional contributions, Bloomberg said. He expects city payments for pensions and health benefits to grow to $16.2 billion from $11.2 billion for the period from last year through fiscal year 2016, he said.

With the state's budget deficit ballooning to at least $12 billion next year, according to Governor David Paterson's predictions, less state aid will be available for city schools, Medicaid reimbursements and other services, Bloomberg said.

Bloomberg called for the city to reverse a 7 percent across-the-board property tax cut enacted two years ago on Jan. 1, rather than July 1, 2009, as previously planned. That would add $576 million. He also seeks to rescind a $400 homeowner rebate, producing $256 million.

``We cannot justify sending out the checks,'' Bloomberg said.

``We are troubled by the proposed withdrawal of the $400 homeowner tax rebate,'' Council Speaker Christine Quinn said, adding that she has scheduled hearings for Nov. 18 on Bloomberg's proposals. ``We also have questions bout how budget cuts will affect education, public safety and public housing.''

Too Generous

Carol Kellermann, president of the Citizens Budget Commission, a non-partisan business sponsored fiscal monitoring group, said the mayor should have called for changes to the city's pension and health benefits programs, which she characterized as too ``generous.''

The mayor should have also called for more productivity and sacrifice from the city's more than 300,000 employees, Kellermann said.

``Changes to the generous pension and health insurance benefits should be a major element of the city's response to these difficult times,'' she said.

Other council members vowed a fight over the mayor's call to rescind the $400 rebate for apartment and home owners instituted in 2004.

``The mayor is reneging on a promise he made to the homeowners of this city, with dubious moral or legal authority to do that,'' said Finance Committee Chairman David Weprin, a Queens Democrat.

Police Academy

The cuts include canceling the Police Academy's January 2009 class with a reduction in the department's 35,838-person headcount to save $116.7 million over 18 months; cutting the Fire Department's training academy to 18 weeks from 23 weeks to save $9 million; reducing operations at five engine companies in firehouses that also contain ladder companies for a $13.5 million savings, and closing a 44-site, $2.5 million Health Department dental program, the mayor's office said.

The mayor and City Council enacted a $59 billion spending plan for the fiscal 2009 budget year that began July 1. In September, Bloomberg directed all agency heads to trim their budgets by 2.5 percent for the remaining six months of the current year, and 5 percent for fiscal 2010.

The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net; Henry Goldman in New York at hgoldman@bloomberg.net

Last Updated: November 5, 2008 16:00 EST