New york city capital spending shows short term stability but longer term declines

Capital spending by the City of New York will remain near record levels through Fiscal Year 2013, according to a New York Building Congress analysis of the City of New York’s Preliminary Fiscal Year 2013 Budget.  However, the longer-term forecast of spending and new commitments drops to levels not seen since the middle of the last decade. 

Highlights of the Capital Commitment Plan

• In the current 2012 fiscal year  (July 1, 2011-June 30, 2012), capital spending is anticipated to reach $9.4 billion, higher than all but the two peak years of this administration; and the fourth-highest inflation-adjusted outlay in thirty years.
• Capital Commitments (contracts registered with the Comptroller’s Office) for 2012 are anticipated to be the highest of any year of this administration, at $11.8 billion, indicating that actual spending in the near term will remain strong.
• The forecast for Fiscal Year 2013 includes $8.75 billion in spending and $9.1 billion of new commitments, further assuring a stable flow of public work in the near term.
• After 2013 there is a steady decline in the City’s planned expenditures and commitments, which means less infrastructure spending and construction. 

Shrinking Commitment Plan
The total commitment plan for Fiscal Years 2013-2015 is $21 billion, the smallest three-year plan since January 2004.  After robust commitments of $9.1 billion in 2013, the number drops to $6.8 billion in 2014 and $5.1 billion in 2015.

Notable declines include:

• Department of Environmental Protection commitments decline from $2 billion in 2013 to $1.35 billion in 2015.
• Economic development initiatives decline from $338 million in 2013 to $40 million in 2015.
• Transportation commitments drop from $1.23 billion in 2013 to $550 million in 2015.
• Health and Hospitals declines from $240 million in 2013 to $21 million in 2015.
• Commitments for cultural institutions drop from $198 million in FY 2013 to $14 million in 2015.

While later-year forecasts are typically low because capital construction agencies are still in early planning stages, the preliminary numbers look bleak, nonetheless.  As it stands, the three-year capital commitment outlook is at its lowest level since 2004.

Declining Expenditures
The Fiscal Year 2013 Preliminary Capital Budget also forecasts actual spending over four years of $32.3 billion.  In historical terms, this is high. However, it is a significant decline from the peak years of the past decade.  The last time the City forecast a four-year spending plan this low was Fiscal Year 2006. 

Alongside decreases in spending and new commitments, the City is forecasting a commensurate decline in borrowing, from $7.4 billion in the current fiscal year to $5.4 in Fiscal Year 2016, a 27% drop in debt financing.  

Debt service levels remain manageable
Despite the decrease in debt financing, the City’s cumulative debt burden will rise through 2016.  However, the growth of debt has been in line with increasing revenues and other metrics used to evaluate the City’s capacity to manage its debt. 

In fact, debt service during the Bloomberg Administration has taken up a smaller portion of City tax revenues compared to prior administrations, and will remain a smaller portion even as the City’s gross debt burden increases.  Moreover, the City remains well below its statutory debt cap.

Richard T. Anderson, President of the Building Congress said, “As the City’s economic outlook improves, increasing capital expenditures must remain a first tier priority.  Capital investment ensures that schools, cultural institutions, roads, bridges, mass transit, parks and innumerable other public facilities provide a high quality of life, attract investment, and keep the City livable.  Disinvestment in infrastructure ultimately leads to the erosion of the City’s tax base.  These investments are not luxuries, but critical linkages that bind the City’s and the region’s economy, support job growth and continued private investment.”

WHAT YOU CAN DO:

Contact Mayor Bloomberg, City Council Speaker Christine Quinn and City Council Finance Committee Chairman Domenic Recchia to tell them that the City must continue investing in the City’s infrastructure at high levels.  The City must remain committed to building on the successes of the past decade in order to retain private investment, promote economic growth, and improve quality of life.