Testimony of Richard T. Anderson, President New York Building Congress Before the New York City Council Finance Committee
Published on Jun 1, 2009 by
The New York Building Congress is testifying this afternoon on the Capital Budget component of the proposed Fiscal Year 2010 New York City Budget out of concern for sufficient funding of the City’s Capital Plan over the next decade.
After proposing, in January, a 30 percent reduction in overall spending as part of the City’s ten-year capital strategy, the Mayor’s revised executive budget plan instead proposes a more modest reduction that allows for overall capital spending at about $10 billion for the next two years. The Building Congress, which called the original proposal counterproductive to the City’s economic health, believes the revised plan is a significant improvement, much of it due to the efforts of the City Council. This was achieved by:
reducing commitments financed by the City’s general obligation bonds to 27 percent rather than 30 percent;
applying federal stimulus funds toward education projects; and
reducing the non-City-financed portion of the plan by just 10 percent, including the Department of Environmental Protection’s capital projects, which are financed by dedicated water and sewer fees.
The Building Congress acknowledges the depth of the City’s current budget problems and the limited options available to close the deficit. For this reason, we appreciate and applaud the willingness of the City’s leaders to find ways to modify the actual reduction in commitments from 30 percent to approximately 17 percent in the ten-year plan.
This revised capital strategy, and the continuation of $10 billion annual near-term spending levels, is important for the construction industry as well as for the local economy.
While the initially proposed cuts, by our analysis, would have resulted in construction job losses of up to 10,000, the revised plan is expected to reduce that number to 5,800. Building Congress research shows the City lost 22,600 construction jobs between August of last year and February 2009 – a decline of 16 percent in just six months. Given that construction spending and employment generally lag the rest of the economy, it is likely that this alarming rate of job loss will continue until next year and possibly beyond.
By maintaining spending levels in the near term, the City will preserve thousands of jobs for working-class New Yorkers and significantly bolster economic activity during a period of rising unemployment.
Nevertheless, while the near-term outlook has improved, the forecast for fiscal 2011 and beyond is significantly more grim. The impact, most likely, will be felt starting in fiscal year 2012, when many current projects will be near or at completion. At the same time, the construction industry will likely be experiencing the severe impact of spending declines across the board. The Bloomberg administration is projecting that annual capital spending will drop to $8 billion by fiscal year 2013 and continue its decline through the end of the next decade where, absent revisions, spending would drop to about $6 billion annually. We must do everything possible to avoid this scenario.
As the Building Congress has long advocated, the solution to the City’s capital spending challenge is to identify and implement dedicated sources of funding – not to diminish spending on critical infrastructure needs.
The Bloomberg administration and the City Council deserve credit for their dedication to forward-looking investments in the City’s infrastructure. We have been impressed with the City’s commitment to school construction, transportation, environmental projects, and affordable housing – all comprehensive investments with long-term benefits. The Building Congress stands ready to continue working with the Mayor and the City Council, as well as the State Legislature and Governor, to identify dedicated sources of infrastructure financing and reduce reliance on debt while ensuring that the City’s physical needs are continually and efficiently addressed.
The New York Building Congress appreciates this opportunity to comment on the Capital Budget component of the Fiscal Year 2011 Preliminary Budget. The Building Congress endorses the Capital Commitment Plan presented in the Mayor’s Preliminary Budget in order to maintain core infrastructure and education facilities, and to help prepare the City for future growth in the face of growing global competition.
Without question, New York City and New York State are facing substantial fiscal challenges, which will continue into the coming year and beyond. In recent budgets, the City addressed funding shortfalls by stretching four years of capital program commitments into five years, effectively reducing the City-funded portion of the capital commitment program by twenty percent annually over the Financial Plan period. In the FY 2010 budget cycle, the Mayor proposed another thirty percent reduction in the City’s Capital Plan – which threatened the viability of many critical projects. Thanks to the efforts of the City Council, a reduction of sixteen percent was finally approved. This reduction was still considerable but maintained essential capital programs without significant interruptions.
New York City and State governments again face considerable operating deficits in the coming fiscal year — $9 billion being the latest estimate for the State and $4.9 billion for the City. The magnitude of these budget gaps will impact all aspects of government services, including the repair, maintenance and expansion of critical infrastructure. In addition, a Building Congress report released last week found that the economy has effectively stalled most private construction and that the New York City construction market has become more dependent on government work. While we remain hopeful that the private economy is beginning to reveal light at the end of the tunnel, government is an essential lifeline for the construction industry at this time.
With this perspective, the Capital Commitment Plan outlined in the Mayor’s January Plan is a prudent, hold-the-line budget. It provides for a gradual reduction in overall capital spending, more in line with the "pre-boom" years of the early 2000s, but retains higher-level investments in roads and bridges, public schools, and the water and sewer system.
One area of concern is the City’s contribution to the CUNY capital program. In recent years, the City has made sizable capital contributions enabling CUNY to upgrade outdated facilities and in some cases expand. These investments – more than $200 million in both
Fiscal Years 2009 and 2010 – have been key to allowing CUNY to compete in the highly competitive higher education marketplace. However, for Fiscal Year 2011, the City is proposing just $6 million in new capital dollars and in Fiscal Year 2012 there appears to be no funding at all from the City. We urge the Mayor and the Council to find ways to ensure that CUNY has the capital resources it needs to maintain existing facilities in the short term and to plan for long-term solutions.
While the Administration and the City Council should be applauded for their efforts to preserve infrastructure investment at reasonable levels, the Building Congress believes the current fiscal crisis presents an opportunity to look at innovative infrastructure financing tools. The Building Congress therefore recommends that the City undertake a wholesale examination of its assets and financing methods and propose policies that maximize asset value and investment opportunities, much like the initiative led by the New York State Commission on State Asset Maximization with regard to State assets. This effort, given its broad scope and potential for savings, cannot be a one-time effort, but an ongoing function of government.
In conclusion, the Building Congress supports the Mayor’s proposed Fiscal Year 2011 Capital Plan. It pares spending in the coming years in recognition of the City’s difficult financial outlook. However, it retains important investments in the City’s core infrastructure programs to ensure that our City is able to emerge from the downturn prepared for future growth and able to retain its competitive position in the world economy.
The New York Building Congress appreciates this opportunity to comment on the Capital Budget component of the Fiscal Year 2011 Preliminary Budget. The Building Congress endorses the Capital Commitment Plan presented in the Mayor’s Preliminary Budget in order to maintain core infrastructure and education facilities, and to help prepare the City for future growth in the face of growing global competition.
Without question, New York City and New York State are facing substantial fiscal challenges, which will continue into the coming year and beyond. In recent budgets, the City addressed funding shortfalls by stretching four years of capital program commitments into five years, effectively reducing the City-funded portion of the capital commitment program by twenty percent annually over the Financial Plan period. In the FY 2010 budget cycle, the Mayor proposed another thirty percent reduction in the City’s Capital Plan – which threatened the viability of many critical projects. Thanks to the efforts of the City Council, a reduction of sixteen percent was finally approved. This reduction was still considerable but maintained essential capital programs without significant interruptions.
New York City and State governments again face considerable operating deficits in the coming fiscal year — $9 billion being the latest estimate for the State and $4.9 billion for the City. The magnitude of these budget gaps will impact all aspects of government services, including the repair, maintenance and expansion of critical infrastructure. In addition, a Building Congress report released last week found that the economy has effectively stalled most private construction and that the New York City construction market has become more dependent on government work. While we remain hopeful that the private economy is beginning to reveal light at the end of the tunnel, government is an essential lifeline for the construction industry at this time.
With this perspective, the Capital Commitment Plan outlined in the Mayor’s January Plan is a prudent, hold-the-line budget. It provides for a gradual reduction in overall capital spending, more in line with the "pre-boom" years of the early 2000s, but retains higher-level investments in roads and bridges, public schools, and the water and sewer system.
One area of concern is the City’s contribution to the CUNY capital program. In recent years, the City has made sizable capital contributions enabling CUNY to upgrade outdated facilities and in some cases expand. These investments – more than $200 million in both
Fiscal Years 2009 and 2010 – have been key to allowing CUNY to compete in the highly competitive higher education marketplace. However, for Fiscal Year 2011, the City is proposing just $6 million in new capital dollars and in Fiscal Year 2012 there appears to be no funding at all from the City. We urge the Mayor and the Council to find ways to ensure that CUNY has the capital resources it needs to maintain existing facilities in the short term and to plan for long-term solutions.
While the Administration and the City Council should be applauded for their efforts to preserve infrastructure investment at reasonable levels, the Building Congress believes the current fiscal crisis presents an opportunity to look at innovative infrastructure financing tools. The Building Congress therefore recommends that the City undertake a wholesale examination of its assets and financing methods and propose policies that maximize asset value and investment opportunities, much like the initiative led by the New York State Commission on State Asset Maximization with regard to State assets. This effort, given its broad scope and potential for savings, cannot be a one-time effort, but an ongoing function of government.
In conclusion, the Building Congress supports the Mayor’s proposed Fiscal Year 2011 Capital Plan. It pares spending in the coming years in recognition of the City’s difficult financial outlook. However, it retains important investments in the City’s core infrastructure programs to ensure that our City is able to emerge from the downturn prepared for future growth and able to retain its competitive position in the world economy.