New York City Budget Balanced With Help From Wall Street
New York Stock Exchange firms bounced back after losing $2 billion in the fourth quarter of 2011, DiNapoli said in his yearly analysis of the city budget. Mayor Michael Bloomberg balanced the financial plan for the year that begins July 1 with reserves and non-recurring resources, the comptroller said.
The city’s finances remain at risk because of “heightened concerns” that the European sovereign debt crisis will further slow the U.S. recovery, which would have a disproportionate impact on a city in which Wall Street provides the most revenue of any industry, DiNapoli said.
“Wall Street got off to a strong start which bodes well for the city’s economy, but securities industry profitability in recent years has been volatile and one quarter’s results may not be indicative of the outcome for the entire year,” DiNapoli said in a news release accompanying the report.
The mayor’s budget, presented in May, assumed Wall Street profits would total $10 billion in 2012, increasing to $13.4 billion by 2016. The $7.3 billion profit in the first quarter “greatly exceeds” the city’s expectations, DiNapoli said.
Hiring in the securities industry brought back 41 percent of the 28,100 jobs lost during the financial crisis before the industry began losing jobs again, shedding 1,400 since October 2011, DiNapoli said. The mayor’s financial plan assumed 2,600 financial jobs would be lost in 2012 and another 1,600 by 2016.
The comptroller estimated that lower Wall Street profit and increased use of deferred compensation would cause a 14 percent decline in cash bonuses taxable this year. The mayor predicted cash bonuses would decline 12 percent.
DiNapoli also noted the budget predicts the costs of legal judgments to grow to $815 million in fiscal 2016, from $665 million in 2012, in part because of increased claims related to police actions, and discrimination suits against the Fire Department.
The proposed budget, which must be approved by the mayor and City Council by June 30, is balanced with $4 billion in nonrecurring resources, DiNapoli said. That includes $1.6 billion of surplus funds from fiscal 2012, $1 billion anticipated from the sale of taxi medallions, and $1 billion from a Retiree Health Benefits Trust, set up several years ago to pay future employee’s health-care needs.
The budget also received a one-time payment of $466 million from Science Applications International Corp. to settle a federal prosecution for alleged billing fraud to the city on an automated-payroll project.
The comptroller noted the city faced a $3 billion gap in 2014, rising to $3.7 billion in 2014.
“Overall, the mayor’s executive budget for 2013 is balanced based on reasonable assumptions, but the city should develop a contingency plan in case it does not realize the full $1 billion anticipated from the sale of taxi medallions in that year,” DiNapoli’s report stated.
Marc LaVorgna, spokesman for the mayor, didn’t immediately return a request for comment on the report. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
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