July 29 (Bloomberg) -- New York City’s tax collections this fiscal year will probably be $800 million higher than forecast after Wall Street reported strong first-quarter results, state Comptroller Thomas DiNapoli said.
Mayor Bill de Blasio projected a tax-revenue increase of $325 million in the $75 billion budget that the city council approved last month, a forecast DiNapoli called “overly conservative” in a report released today. Financial firms had profits of $5.3 billion in the first three months of 2014, even though earnings were held down by litigation costs, DiNapoli said.
DiNapoli released the report to the annual meeting of the state board that oversees the city’s finances, which met today at Governor Andrew Cuomo’s office in Manhattan. De Blasio attended.
“New York city is on solid financial footing with new labor agreements in place, a strong economy and increased reserves,” DiNapoli, a 60-year-old Democrat, said in an e-mailed statement that accompanied the report.
De Blasio, 53, the first Democrat elected to run New York in 20 years, has attracted national attention for what he describes as a progressive agenda that includes construction or preservation of 200,000 affordable housing units, rent subsidies and universal, all-day pre-kindergarten.
Since the 18-month recession ended in 2009, job growth in New York City has averaged 1.8 percent annually, almost twice the rate in the U.S. and New York state, DiNapoli said. The budget assumes that the pace of job expansion will slow to 1.5 percent in calendar year 2014, from 2.1 percent in 2013, the report said.
The city’s budget for the fiscal year that began July 1 assumes that personal income-tax collections will decline by 3.2 percent in the current fiscal year, even though the city continues to add jobs at a steady pace, the report said.
In May, de Blasio struck a deal with the 110,000-member United Federation of Teachers, which included two years of retroactive 4 percent pay increases and additional raises totaling 10 percentage points. Other unions followed, bringing to almost 60 percent the share of the city’s workforce that has used the pattern set by UFT, DiNapoli said.
At the meeting of the seven-member control board, created to oversee city finances during the 1970s fiscal crisis, de Blasio’s first budget garnered praise from DiNapoli and city Comptroller Scott Stringer. They cited the addition of $864 million to a trust fund to pay retiree health-care benefits and a plan to keep $750 million in reserves during the next four years.
Their compliments were tempered by board member Lawrence Golub, chief executive officer of Golub Capital Partners, who urged New York to devise a plan to address a $92 billion unfunded liability for retiree health-care benefits. The costs, growing at about $5 billion a year, threaten to crowd out other budget priorities, he said.
“Based on current trends, the private members are concerned that the city may be unable to afford the retiree health benefits that current contracts provide for,” Golub said.
De Blasio said the labor settlements reduced health-care costs by $3.4 billion, including $1.3 billion in annual savings starting in 2018.
“Labor, I think, is convinced it’s in everyone’s interest to continue to find deeper savings for the fiscal health of the city, and we’re adding to the reserves,” de Blasio told reporters after the meeting.
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