July 23 (Reuters) - New York City may collect an extra $950 million in property tax revenue from fiscal 2014 to 2016, because the U.S. Federal Reserve likely will keep interest rates low long enough to delay any dampening effect on the real estate market until 2017, the state comptroller said on Monday.
“We also believe the city’s rising population and shortage of housing will maintain values for large residential properties, and that the large pipeline of assessment increases waiting to be phased in will further support growth,” Comptroller Thomas DiNapoli said in a report.
Because changes in property tax valuations are phased in, any change in interest rates that would affect the real estate market would not have an immediate impact. The latest improvements in the real estate market also have not been fully taken into account.
The city also stands to collect an extra $430 million in property tax revenue in the current 2013 fiscal year that began on July 1. However, the state legislature is expected to renew a property tax break for condominium and cooperative apartment owners that will erase that extra revenue.
DiNapoli, a Democrat, outlined a number of risks Mayor Michael Bloomberg faces in keeping the city’s $68.5 billion budget balanced.
New York Stock Exchange member firms are the bedrock of the city’s economy, and DiNapoli noted that the securities industry has only recovered 40 percent of the 28,200 jobs axed in the financial crisis. The mayor’s budget assumes another 2,600 jobs will be cut this year, and 1,600 more by 2016.
Tourism set new records last year, with spending by visitors hitting $32.5 billion. But Europe’s still-unfolding debt crisis could crimp tourism. In addition, tourism-related jobs tend to be low-paying and produce much less income tax revenue than Wall Street jobs.
Bloomberg, a political independent whose third and final term ends in 2013, expects taxpayers to accelerate recognizing capital gains this year to take advantage of low tax rates before the scheduled year-end expiration of Bush-era income tax cuts. Capital gains are expected to help boost personal income tax revenue 6.3 percent in 2013, but the shift will also restrain the growth in income tax revenue to 0.5 percent in 2014, the report said.
The mayor has not negotiated new contracts with city workers, and his budget assumes they will accept yearly wage increases of 1.5 percent. But if pay rises at the rate of inflation, the city would have to spend an extra $878 million from 2013 to 2016.
A new contract with unionized teachers could increase costs by $900 million a year, if the terms were similar to those agreed with other unions, the report said.
Overtime costs for the police, fire, correction and sanitation workers, for a second year in a row, - are expected to have exceeded $1 billion in fiscal 2012, which ended on June 30. Bloomberg has projected this expense will decline to $972 million in 2013.
The amount the city spends on health insurance for public workers is expected to increase nearly 50 percent to $6.3 billion by 2016 from $4.2 billion in 2012, the report said.
New York City has just under 3 million people enrolled in Medicaid, the state-federal health plan for the poor, and the city’s share of the expense should stabilize at $6.3 billion in 2014, as the state will pay for any costs increases.
The city’s Health and Hospitals Corporation, the nation’s largest network of public hospitals, must close budget gaps of $941 million in 20 and rising to $1.4 billion in 2016, the report said. Though the agency’s plan includes 944 layoffs from in 2013 and 2014, it also is relying on “substantial” amounts of federal and state aid. “If the gap-closing actions are unsuccessful, HHC could run out of cash in 2014 unless alternative actions are taken,” the report said.