May 9 (Bloomberg) -- New York Mayor Bill de Blasio presented a $73.9 billion budget for the fiscal year beginning July 1 that would spend more on school programs and teachers, social services, housing and traffic safety.
The 2015 budget, which is balanced for this year, is $200 million more than de Blasio proposed in a preliminary plan in February. It anticipates deficits of $2.2 billion for fiscal 2016, $2 billion in 2017 and $3.2 billion in 2018.
Since February, the mayor has proposed an affordable-housing program costing $8.2 billion over 10 years and an agreement with the 110,000-member teachers union he estimates will require an outlay of more than $5 billion through 2021.
De Blasio, 53, the first Democrat elected to run New York in 20 years, has attracted national attention for what he described as a “progressive agenda” that includes construction or preservation of 200,000 affordable-housing units, rent subsidies and universal, all-day pre-kindergarten.
“This is something that we can bank on for the remainder of our time in office in this term and I hope in the future,” de Blasio said yesterday at a City Hall news briefing. The budget, he said “reflects three core values, the same as what we talked about the time before I became mayor, a budget that is responsible, progressive and honest.”
New York City, the most populous in the U.S., has a budget bigger than every state apart from California, New York and Texas.
State law requires the city to balance its budget each year, and de Blasio projected deficits totaling $7.4 billion through 2018, while planning to commit $17.75 billion in raises for city workers through fiscal year 2021.
That may raise concerns about the city’s credit, said Howard Cure, director of local and state government research in New York at Evercore Wealth Management LLC, which oversees about $4.9 billion in municipal debt.
“There are no spending cuts and the budget seems very generous on salaries,” Cure said in an interview. “It creates bigger deficits in the out years and although the mayor may expect them to be covered by higher revenue in a growing economy, the deficits could be even larger if a recession hits.
‘‘We’re trying to assess whether we should buy more city debt when there’s a new bond issue, and should we re-evaluate our own holdings with the city,” he said.
City debt remained in demand, with investors accepting less additional yield compared with top-rated municipals. General obligation bonds maturing August 2027 traded today with an average yield of 2.7 percent, the lowest level this year, and just 0.83 percentage point above benchmark municipals with similar maturity -- the smallest yield gap this year -- data compiled by Bloomberg show.
The spending plan must be approved by a City Council vote before June 30, when the current fiscal year ends, and council Speaker Melissa Mark-Viverito has called upon the mayor to add 1,000 to the police department’s 35,000 officers at a cost of more than $90 million. While De Blasio rejected the proposal, it remains subject to negotiation.
“I know it’s a heartfelt request on their part, but thank God the NYPD is achieving what it is achieving with the resources it has now,” he said. “Their efforts have continued to succeed.”
De Blasio did allocate $28 million to improve traffic safety with more law enforcement; a safety advertising campaign; installation of 50 speed bumps near schools; development of neighborhood slow zones; installation of speed cameras, and intersection redesigns.
The budget announced yesterday takes into account an agreement the city reached last week with the United Federation of Teachers, providing 4 percent retroactive raises other city unions got in 2009 and 2010, at a cost of at least $5 billion through 2021. De Blasio said he expects other unions that also missed out on raises to accept a similar back-pay arrangement.
The plan to stretch out back pay through 2021 drew criticism from Charles Brecher, research director for the Citizens Budget Commission, a business-funded nonpartisan fiscal monitor, who said it was borrowing against the future to pay past expenses.
“It’s unwise fiscal policy to create expenses now and spread out payments for them this far into the future,” Brecher said.
De Blasio defended the plan to extend the payments, saying the agreement was a “one-time only” deal out of fairness to teachers who missed increases granted to other city workers.
“This clears the decks once and for all,” de Blasio said. “We now are in a position to have consistent labor contracts.”
The teachers’ agreement also included salary increases of 1 percent to 3 percent through 2018 totaling 10 percentage points. De Blasio said yesterday he expects all other city unions, representing about 200,000 more workers, to accept such raises.
“The good news now is that a pattern is being set,” the mayor said.
If negotiations work out in the pattern de Blasio wants for all 350,000 workers, it would total $13.4 billion through 2018. Added to that would be $4.35 billion paid in 2018 through 2021 in retroactive payments for 110,000 teachers and the 40,000 others.
The mayor said that amount would be offset by more than $8 billion in savings, including $3.4 billion in unspecified, union-agreed health care cost reductions and $3.5 billion in money reserved in past city budgets to pay for labor settlements.
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