Budget OptiOns - IBO · New York City Independent Budget Office. Ronnie Lowenstein, Director 110...

IBONew York City

Independent Budget Office

Ronnie Lowenstein, Director110 William St., 14th Floor • New York, NY 10038Tel. (212) 442-0632 • Fax (212) 442-0350e-mail: [email protected] • http://www.ibo.nyc.ny.us

Budget OptiOnsfor new york city

February 2 0 0 8

mailto:[email protected]

www.ibo.nyc.ny.us/iboreports/bridgetolls.pdf

ContentsIntroduction 1

Savings Options

Reducing Subsidies EliminatePublicFundingofTransportationforPrivateSchoolStudents 4 EliminatePublicFundingofTextbooksforPrivateSchoolStudents 5 ReduceOperationalSubsidytoCulturalInstitutionsGroupsReceivingSubsidies of$1MillionorMore 6

Revising or Eliminating Programs *Citywide“Vote-by-Mail” 7 ReplaceLate-NightServiceontheStatenIslandFerrywithBuses 8 ConsolidateSeniorCenters 9 EvictionInsurancePilotProgram 10EliminateOutreachServicestotheHomeless 11 EliminateGrassClippingsfromTrashCollection 12 IncreasePublicSchoolGeneralEducationClassSizesbyTwoStudents 13

Charging for Services Pay-As-You-Throw 14 CollectDebtServiceonSupportiveHousingLoans 15 EstablishCopaymentsfortheEarlyInterventionProgram 16

Restructuring the City Workforce *ReduceFDNYEngineCompanyStaffing 17 MakeParentCoordinatorsPartTimeinSchoolswithFewerthan500Students 18 PerformAllHousingCodeInspectionswithOneInspector 19*AlterStaffingPatternInEMSAdvancedLifeSupport(ALS)Ambulances 20 IncreasetheWorkweekforMunicipalEmployeesto40Hours 21 AllowPoliceOfficerstoWorkFewerbutLongerToursWhileAlsoEliminating 22 20MinutesofPaid“WashUp”Time *EncourageClassroomTeachersToServeJuryDutyDuringNoninstructionalSummerMonths 23Lowering the Cost of Benefits for City Workers ConsolidatetheAdministrationofSupplementalBenefitandWelfareBenefitFunds forCityEmployees 24 BonusPaytoReduceSickLeaveUsageAmongCorrectionOfficers 24 ReduceSupplementalWelfareContributionsforCityWorkersby10Percent 26 *MergeSeparateCityEmployeePensionSystems 27 InstituteaNewDefined-ContributionPensionPlanforCivilianWorkers 28*Establish50astheMinimumAgetoCollectRetirementBenefits29ForNewlyHiredUniformedPersonnel HealthInsuranceCopaymentbyCityEmployees 30 InstituteaBiweeklyPayrollSystemforCityEmployeesCurrentlyPaidonaWeeklyBasis31*denotesnewoption

*Increasefrom5to10theNumberofYearsNeededforPensionVesting 32 EliminateOvertimeasaFactorintheComputationofPensionBenefitsforCityEmployees 33

Shifting State and Federal Burdens *IncreaseStateReimbursementforCertainCriminalJusticeCosts 34 SwapLocalMedicaidBurdenforaPortionofLocalSalesTax 35 StateReimbursementforInmatesinCityJailsAwaitingTrialforMoreThanOneYear 36 *RaiseReimbursementRateforCertainCategoriesofStateInmatesHeldInCityJails 37

Revenue Options

Adjusting the Personal Income Tax PersonalIncomeTaxIncreasesforHigh-IncomeResidents 39 RestoretheFormerCommuterTax 40 EstablishaProgressiveCommuterTax 41 RestructurePersonalIncomeTaxRatestoCreateaMoreProgressiveTax 42*SubjectVariableSupplementalFundPaymentstoNewYorkCityandStateIncomeTaxes 43

Revising the Property and Related Taxes RaiseCaponPropertyTaxAssessmentIncreases 44 TaxVacantResidentialPropertytheSameasCommercialProperty 45ExtendtheMortgageRecordingTax 46 LuxuryApartmentRentalTax 47

Eliminating or Reducing Tax Breaks EliminatetheManhattanResidentParkingTaxAbatement 48 EliminatePropertyTaxExemptionforMadisonSquareGarden 49 ReviseCoop/CondoPropertyTaxAbatementProgram 50 SecurePaymentsinLieuofTaxesfromCollegesandUniversities 51 ExtendtheGeneralCorporationTaxtoInsuranceCompanyBusinessIncome 52 EliminatetheCapontheCapitalTaxBaseintheGeneralCorporationTax 53

Broadening the Tax on Sales and Services TaxLaundering,DryCleaning,andSimilarServices 54 ImposeSalesTaxonCapitalImprovements 55 TaxonCosmeticSurgicalandNonsurgicalProcedures 56 RestaurantTax 57Raising Fees and Fines IncreasetheFineforRecyclingViolations 58 InstituteaResidentialPermitParkingProgram 59 ChargeforFilmandTelevisionPermits 60 ConvertMultipleDwellingRegistrationFlatFeetoPerUnitFee 61 ExpansionoftheBottleBillandReturnofUnclaimedDepositstoMunicipalities 62 ChargeforFreon/CFCRecovery 63 ChargeFeesforAssessmentAppealsattheTaxCommission 64*denotesnewoption

Fares, Tolls, and Other Revenue Generators RestoretheFareontheStatenIslandFerry 65 Chargea“Tourist”FareontheStatenIslandFerry 66 TolltheEastRiverandHarlemRiverBridges 67

NYC Independent Budget Office February 2008�

Introduction

Ingoodtimesandinbad,balancingthemunicipalbudgetisultimatelyabouttradeoffs.Choicesmustbemadeabouthowtoallocateresourcesamongcompetingbudgetpriorities.Therearealsochoicesthatmustfrequentlybemadeamongoptionsforsavingmoneyorraisingrevenue.

Thesechoicesinvolveweighingthepotentialconsequencesofthesavingsorrevenueraisingmeasuresbeingconsidered.ChargingforFreonremoval,aservicenowdoneforfreebythesanitationdepartment,couldresultinmoreillegaldumping;raisingtaxesonhigh-incomeearnerscouldinducesomeofthemtoleavethecity,negatingallorpartoftheoftheadditionalrevenueexpected.

SinceIBOpublishedthefirsteditionofitsannualBudget Options for New York Cityin2002,thevolumehasservedadualpurpose:One,itprovidesaquickreviewofthebudgetaryeffectsandlegislative,negotiated,orotherapprovalsrequiredforimplementingahostofsavingsandrevenuemeasures.Two,itoffersasynopsisofthepositiveandnegativeeffects—theprosandcons—thatmayresultfromtheseactions.

Someofthespendingandrevenueoptionsoutlinedherealsomaydomorethansavemoneyorleverageadditionaldollars.Someofthemeasuresprovidepolicymakersandthepublicwithalternativesthatmayleadtoamorefaircollectionofrevenueormoreeffectivelyusingcityfunds.Forexample,raisingthecaponpropertytaxassessmentincreasesforhomesandsmallapartmentbuildingswouldreducesomeoftheinequitiesinthepropertytaxsystemwhilemergingsomeofthecity’sfivepensionsystemswouldreduceadministrativeandmanagementcostswithoutaffectingbenefits.

AnumberofoptionspresentedinprioryearshavebeenadoptedbythecitysuchasthemergeroftheDepartmentofEmploymentintotheDepartmentofSmallBusinessServices,theredeploymentofpoliceofficerswhohadbeenassignedtotheDrugAbuseResistanceEducationProgram,thecreationofasubsidiaryinsurancecompanyfortheHealthandHospitalsCorporation,andshiftingchildrenfromthechildwelfaresystem’scongregatecarefacilitiesintofamily-basedhomecare.Inthislatestedition,weexamine63optionsandmakeobjectivecalculationsoftheanticipatedsavingsorrevenuefromeachofthemeasures.Nineoftheoptionsarenewandsomeothersaresubstantiallyrevised.Fortheoptionsthatarerepeatedfromlastyear,weprovideupdatedfiscalcalculationsandinsomecasesadditionalpolicyconsiderationsaswell.Andforalltheoptionsdiscussed,IBOpresentsasetofargumentsforandagainstimplementingthemeasures.

NYC Independent Budget Office February 2008 �

Manyoftheoptionsincludedinthisvolumehavebeeninthepublicdomainforsometime,raisedbyfiscal-orpolicy-orientedorganizationssuchastheCitizensBudgetCommission,FiscalPolicyInstitute,andManhattanInstituteorbycurrentorformerpublicofficials.Otheroptionsareherebecausewehavebeenaskedbyelectedofficials,civicleaders,oradvocatestoestimatetheircost-savingsorrevenuepotential.TherearealsosomeoptionsincludedheredevelopedoutoftheknowledgeandinsightofIBO’sowneconomistsandbudgetanalysts.Regardlessofitssource,eachbudgetoptionunderwentthesamethoroughandimpartialanalysis.

Theoptionspresentedherearebynomeansexhaustive.Innowaydoesthereport’sinclusion—oromission—ofspecificbudgetoptionsreflectanassessmentoftheirviabilityordesirability.LiketheCongressionalBudgetOffice,whichdevelopsasimilarvolumeforthefederalgovernment,ourroleistoanalyze,notendorse.

InsubsequentvolumesIBOintendstocoverabroaderrangeofoptions.Wewelcomeyoursuggestionsforinclusioninfuturebudgetoptionsaswellascommentsonthisnewinstallment.

Savings Options


OPTION:Eliminate Public Funding of Transportation for Private School Students

Savings: $45.7 million annually

ProPonents might arguethatwhenfamilieschoosetouseprivateschools,theyassumefullfinancialresponsibilityfortheirchildren’seducationandthereisnoreasonforthecitytosubsidizetheirtransportation,exceptforthoseattendingprivatespecialeducationprograms.Proponentsconcernedaboutseparationofchurchandstatemightarguethatalargenumberofprivateschoolchildrenattendreligiousschoolsandpublicmoneyisthereforesupportingreligiouseducation.TransportationadvocatescouldalsoarguethatthereductionofeligiblestudentsintheMetroCardprogramwillbenefittheMTAevenmorethanthecityandstateastheprogramcoststothetransportationauthorityarebelievedtobegreaterthantheamountoffunding.

NEWYORkSTATELAWrequiresthatifcityschooldistrictsprovidetransportationfornon-disabledstudentsthedistrictmustalsoprovideequivalenttransportationtoprivateschoolstudentsinlikecircumstances.UnderDepartmentofEducationregulations,studentsinkindergartenthrough2ndgrademustlivemorethanahalfmilefromtheschooltoqualifyforfreetransportation,andasstudentsagetheminimumdistanceincreasesto1.5miles.TheDepartmentofEducation(DOE)providesseveraldifferenttypesoftransportationbenefitsincludingyellowbusservice,andfull-andreduced-fareMetroCards.

Inthe2006-2007schoolyear,25percentofgeneraleducationstudentsreceivingfull-orreduced-fareMetroCardsattendedprivateschools(nearly123,000children).Inthesameyear,about37percentofgeneraleducationstudentsusingyellowbusserviceattendedprivateschools(approximately30,080children).

DOEspendsover$263millionontheMetroCardprogramandyellowbusservicesforgeneraleducationstudents.TheMetroCardprogramisfinancedbythestate,thecity,andtheMetropolitanTransportationAuthority(MTA)—thecityandstatecontributionis$45millioneachwhiletheMTAabsorbstheremainingcosts.Totalexpendituresinthe2007-2008schoolyearforyellowbusserviceareexpectedtobe$236million,makingthecity’sportionroughly$92.3millionbasedona39percentshareofexpenditures.

Eliminationoftheprivateschoolbenefit,whichwouldrequireachangeinstatelaw,couldreducecityfundingbyroughly$46million—$11millionforMetroCards(25percentofthecity’s$45millionexpense)and$34millionforyellowbusservice(37percentofthecityshareofyellowbusexpenditures).

oPPonents might arguethatthemajorityofprivateschoolstudentsinNewYorkattendreligiousschoolsratherthanindependentschools.Familiesusingsuchschoolsarenot,onaverage,muchwealthierthanthoseinpublicschoolsandtheincreasedcostwouldbeaburdeninsomecases.Additionally,theparochialschoolsenrollalargenumberofstudentsandserveasasafetyvalveforalreadycrowdedpublicschools.Iftheeliminationofatransportationbenefitforcedalargenumberofstudentstotransferintothepublicschools,thesystemwouldhavedifficultyaccommodatingtheadditionalstudents.Opponentsalsomightarguethatparentsofprivateschoolstudentssupportthepublicschoolsthroughtaxdollarsandarethereforeentitledtosomegovernmentservices.Furthermore,opponentsmightarguethataspublictransportationbecomesincreasinglyexpensiveinNewYorkCityallschoolchildrenhaveanincreasedneedforthisbenefit.


OPTION:Eliminate Public Funding of Textbooks For Private School Students


ProPonents might arguethatthestateshouldbeusingallofitseducationfundsforpublicschoolsandshouldnotsubsidizereligiousandindependentschools.Proponentsalsoclaimthatwheneducationdollarsareatapremium,itisdifficulttojustifythesupportofprivateschools,particularlywell-fundedindependentschools.Giventhehighincomeofmanyfamilieswhosendtheirchildrentoindependentschools,theadditionalcostoflessthan$64perstudentseemsrelativelyminorfortheseschoolsandfamilies.

NEWYORkSTATEprovides$58.25perstudenttoeachschooldistrictforthepurchaseoftextbooks:$15ofthisamountisfundedbytheNewYorkStateLotteryandtheremainderisfundedfromthestate’sgeneralfund.Theallocationtoeachdistrictincludesstudentsattendingpublicschoolsaswellasnon-publicschools.Privateschoolssubmitrequeststothedistricttopurchasetextbooksuptotheperstudentallocation.Theschooldistrictpurchasesthebooksandloansthemfortheschoolyear.Onlytextbooksincludedontheapprovedstatetextbooklistareeligibleforstateaidreimbursement.Infall2007,itisestimatedthat445,000studentsattendednon-publicschoolsacrossNewYorkState.MorethanhalfofthesestudentsareinNewYorkCity.Overall,thestatespentalmost$26millionontextbooksforprivateschoolstudents.

Textbookaidisnotfundedwithcitydollars;therefore,eliminatingnon-publicschoolsfromtheprogramwouldnotresultindirectsavingstothecitybudget.However,ifthesefundswereredirectedtopublicschoolstudentsthroughoutthestate,thetextbookallocationperpupilwouldrisebyalmost$9.57perstudent.NewYorkCitypublicschoolswouldhaveover$9.4millioninadditionaltextbookfunds.Forthe2007-2008schoolyear,NewYorkCityisestimatedtospend$56.9millionontextbooksforpublicschoolstudents.Reallocatingthenon-publicschoolportionofthestatetextbookbenefitwouldincreasetheamountofstatereimbursement,thusfreeingupcityfunds.

oPPonents might arguethatsomeprivateschoolsaresubjecttothesameacademicstandardsandtestingrequirementsaspublicschools,andthereforethestatehassomeobligationtosupporttheseschools’curriculum.Theyalsomightarguethatparentsofprivateschoolstudentssupportpublicschoolsthroughtaxdollarsandarethereforeentitledtopubliclyfundedservices.OpponentscoulddemonstratethatthemajorityofprivateschoolstudentsinNewYorkattendreligiousschools,manyofwhichstrugglefinancially,ratherthanindependentschools.Familiesusingreligiousschoolsalsoarenot,onaverage,muchwealthierthanthoseinpublicschools.Opponentscouldalsoarguethathigherprivateschoolcostsmightleadsomefamiliestoswitchtoanalreadyovercrowdedpublicschoolsystem.


OPTION:Reduce Operational Subsidy to Cultural Institutions Groups Receiving Subsidies of $� Million or More

Savings:$21.4 million annually

THE34MEMBERSOFTHECULTURALINSTITUTIONSGROUP(CIGs)mostlyoperateonlandownedbythecity.Theseinstitutions—rangingfromtheMetropolitanMuseumofArttotheBrooklynMuseum—receiveoperatingsupportforenergycostsundertheircontractswiththecity.Beyondtheenergypayments,whichtotal$41.9million,theCIGsarescheduledtoreceiveanadditional$80.1millioninoperationalsubsidiesforthecomingfiscalyear(2009).Beginningwiththe2009fiscalyear,eachCIGwillinitiallyreceiveonly90percentofitsbudgetedallocation,withthebalancecontingentuponperformancemeasures;theformulaforthe90percentbaselineallocationisdescribedbelow.

Thisoptionisaone-timeadjustmentthatwouldreduceoperationalsubsidiestosomeCIGsbasedupontheamountofmoneytheinstitutionscurrentlyreceive;theenergypaymentswouldremainunchanged.TheoptionwoulddividetheCIGsintothreeseparategroupsforoperatingsubsidyreduction:thethreeCIGsthatcurrentlyreceivesubsidiesgreaterthan$8million(TierI)wouldhavetheirsubsidyreducedby50percent;the10CIGSthatcurrentlyreceivebetween$1millionand$8million(TierII)wouldgetareductionof25percent;finally,theremainingCIGsreceivingunder$1million(TierIII)wouldhavenocutsintheirfunding.

TheoperationalfundingtotheCIGswoulddecreasebyatotalof27percent,savingthecity$21.4million.Thesereducedsubsidieswouldthenbemaintainedinsubsequentyears.

oPPonents might argue thatgiventheirsize,TierIandIIinstitutionshavelargefixedcostsandhavehistoricallydependedoncitysupport.Evenifprivatedonationseventuallymakeupforthelostsubsidy,thisisunlikelytooccurimmediately,leavingsomedisruptionsinprograms,atleastfortheshortterm.TheyalsotendtoservefarlargerpopulationsthandothemajorityoftheotherCIGsandculturalprogramgroups,sothatmeasuredonapervisitorbasistheremaybelessdifferencebetweenCIGsthanwhencomparedsimplyonsizeofsubsidy.Inaddition,suggestedadmissionpricesarealreadyhighatmanyoftheseinstitutions,andmighthavetorisefurthertocoverthesubsidyreduction,deterringsomepotentialvisitors.Finally,manyofthecity’sculturalinstitutionshavebeencreditedwithdrawingout-of-townvisitorstoNewYork.Ifservicesarecutoradmissionpricesincreased,tourismanditsaccompanyingspendingonrestaurants,hotels,entertainment,andshoppingcouldbecurtailed.

ProPonents might argue thatalthoughfewpeopleadvocateareductioninculturalfunding,withthecityfacingprojectedbudgetshortfallsinthecomingyearscutswillbeunavoidableinmanycity-fundedprograms.ThistypeofcutismoreprogressivethanotherproposalsasitplacesthestrainoftheoverallreductioninfundingonthewealthiestCIGswhileleavingthemajorityoftheinstitutionswithnodecreasesinfunding.ThewealthierTierIandTierIICIGsaremorelikelytohavesubstantialfundraisingcapabilitiesandwouldbebetterabletowithstandtheoverallreductionstotheiroperationalfundingthanthesmallerCIGsandtheculturalgroupsthatarealsofundedbythecity.Evenwiththe50percentreduction,theTierICIGswouldstillreceiveanaverageof$5.1millioneachindiscretionaryfunds.


OPTION:Citywide “Vote-by-Mail”

Savings: $7 million annually

ProPonents might arguethatVBMsystemspresentanumberofadvantagesinadditiontosignificantcostsavings.AsinOregon,wherevoterparticipationhasincreasedafterstatewideadoptionofvote-by-mailin1998,implementingaVBMsystemherecouldboostvoterturnout.

Thepublicwouldcometoappreciatenolongerbeingrequiredtorushtopollsites,sometimesforcedtodealwithinclementweatherandthenoftenneedingtowaitonlonglinestovote.Voterswouldalsohavemoretimetogatherinformationonnewballotinitiativeswhichheretoforetheymayhaveencounteredforthefirsttimeuponenteringavotingbooth.Rigorousvote-by-mailsecuritysystemslikethoseinplaceinOregonwouldprotectagainsttheriskoffraud.Finally,voterwatchdoggroupswouldvaluethereadilyauditable“papertrail”ofmail-inballots.

ELECTIONDAYPOLLSITESNOLONGEREXISTINTHESTATEOFOREGON.Instead,allOregoniansregisteredtovotereceivetheirballotsinthemailthreeweeksbeforeeachelectionandthenhavetheoptionofreturningtheircompletedballotseitherbyregularmailorbypersonallydroppingthemoffatspeciallydesignatedcollectionsitesorcountyelectionboardoffices.Votersin37of39countieswithinWashingtonStatealsonowvote-by-mail,asdosome40percentofCalifornians.ThisoptionproposesthatNewYorkCitymovetowardsdiscontinuingtheoperationofelectionpollsitesacrossthecitybyadoptingasimilarvote-by-mail(VBM)system.ImplementingthisproposalwouldrequireamendingNewYorkState’sConstitution.

SecuringpermissiontoinstituteaVBMsysteminNewYorkCitywouldresultinannualsavingsofabout$7million,whichwouldbeattainedlargelyfromreducedpersonnelneeds.Thereareroughly4.2millionregisteredvotersinthecity.Onaverage,$15.6millionisspentannuallybythecityonabout30,000perdiemworkersneededtostaffelectionsatroughly1,350pollsitesacrossthefiveboroughs.Thecityalsospendseachyearabout$1.5milliontotransportvotingmachinestoandfromthepollsitesandroughly$800,000onpoliceovertime.TheinitialinvestmentinscannersandotherequipmentneededtoimplementaVBMsystem—whichweestimateatabout$5.5million—wouldmostlikelybeeligibleforfederalfundsundertheHelpAmericaVoteAct.Thiswouldbesignificantlylesscostlythanreplacingtheexistingmachineswitheligiblepollingsite-basedoptionssuchasanopticalscannersystem($28.4million)oradirectrecordingelectronicsystem($75.5million).

oPPonents might argue thatpollsitesareplacesofciviccommunityandthatthegatheringofcitizensatElectionDaypollingplacesisavenerabletraditionthatmustbepreserved.Opponentswouldalsoargue,notwithstandingclaimstothecontrarybyofficialsinjurisdictionsthathaveadoptedVBMsystems,thatsuchaprocesswouldalmostcertainlyincreasetheriskoffraudorabuse.Forexample,giventhelossoftheprivacyenjoyedonceoneclosesthecurtainatapollsite,votersthathavereceivedtheirballotsinthemailcouldconceivablybeeithermonetarilyenticedorintimidatedintofillingouttheirballotsinacertainmanner.


OPTION:Replace Late-Night Service on the Staten Island Ferry with Buses


ProPonents might arguethatduetothelownumberofridersontheStatenIslandFerryduringthelatenightperiod,evensmallferryboatsareaninefficientuseofresources.Usingbusesinsteadofferriestotransportpassengerswouldallowformorefrequentserviceatalowercost.Withtime,busservicecouldpotentiallybeextendedtoservetheneighborhoodsofStatenIslanddirectly,andnotjusttheSt.GeorgeTerminal.

THISOPTIONWOULDELIMINATElate-nightserviceontheStatenIslandFerry.Servicewouldendatmidnightonweekdays,and1a.m.onweekends,andwouldresumeat5a.m.Inplaceofferryservice,buseswouldcarrypassengersbetweenManhattanandStatenIslandterminals.

TheStatenIslandFerryisoperatedbythecityDepartmentofTransportation(DOT).InJuly1997thepassengerfarewaseliminated,andsincetheattacksofSeptember2001novehicleshavebeenallowedontheferry.

Averagedailyridershipontheferryisaround52,000passengers.Onatypicalweekdayonly2percentto3percentofthesepassengerstravelaftermidnightandbefore5a.m.OnweekdaystherearefivetripsthatleaveStatenIslandandsixtripsthatleaveManhattanbetween12:01a.m.and4:59a.m.ExpressbusservicebetweenManhattanandStatenIslandisverylimitedduringthesehours.

ThesmallestferryboatsoperatedbyDOThaveacapacityof1,280passengers,andrequireacrewofnineplusoneattendant.Thiscapacityisfarbeyondwhatisneededduringlatenights.DOThasbeenplanningtocontractoutitslate-nightferryservicetoprivatecompaniesinordertotakeadvantageofthesecompanies’smallerboats.Thecityprojectsthatthisactionwouldsave$1.2millionperyear.

TheoperatingexpensesoftheStatenIslandferryareroughly$74millionperyear.Late-nighttripsarearound11percentofthetotalnumberoftrips.Assumingthatterminatinglate-nightservicewouldreduceoperatingexpensesby7percent,theannualsavingswouldbeslightlyunder$5.2million.BasedonFederalTransitAdministrationdataforexpressbusserviceinNewYorkCity,theoperatingexpenseofabustripbetweenManhattanandStatenIslandwouldbearound$230pertrip.Theannualcostofprovidingbusserviceevery20minutesto30minutesbetweenmidnightand5:00a.m.wouldbejustover$2.2million,givinganetsavingsof$2.9million.Weassumethebuseswouldnotchargeafare,astheywouldreplaceafare-freeservice.

oPPonents might argue thatusingbusesinsteadofferrieswillmeanalonger,lesscomfortablerideforpassengers,aswellaspotentiallylongerwaitsifbusesarefull.Inaddition,shuttingdowntheferrylateatnightmightbeseenasaprecedentforotherreductionsintransitservice.Finally,allowingbuspassengerstowaitinsidetheferryterminalswouldreducethecostsavingsanddelaytheboardingprocess,butforcingpassengerstowaitoutsideraisessafetyandcomfortconcerns.


OPTION:Consolidate Senior Centers


ProPonents might arguethattheneedsofthecity’selderlypopulationarechanging.Accordingtothe2000censusthecity’selderly,frailpopulationaged85andovergrewbynearly20percentoverthelastdecade.Betweenfiscalyears2000and2007theaveragenumberofhome-deliveredmealsservedperdaygrewby6.7percent.Thesedatasuggestthattheneedforcenter-basedorcongregateservicesmaybewaningandthatintheupcomingyearsmorehome-basedservicesmayberequired.Further,seniorswhoaredisplacedduetothisproposalandwhorequirecriticalservicessuchasmealsandcasemanagementandassistancecantraveltoorcontactothercentersintheirneighborhoodtoaccesstheseservices.

THEDEPARTMENTFORTHEAGINGOVERSEES323seniorcenters,placesforseniorstocongregateandobtainservices.Seniorcentersprovideabroadrangeofservices,includingbreakfastsandlunches,recreationalactivities,andinformationsessionsaboutbenefitsandservicesavailabletoseniors.Seniorcenterutilizationratesaredeclining,however.AccordingtotheMayor’sManagementReport,thepercentageofseniorcentersoperatingat90percentofprogramcapacitydeclinedto56percentin2007from58percentin2006.1Theaveragenumberofseniorcenterlunchesserveddaily—astatisticthatdeterminescitywidecenterutilizationrates—decreasedby2.8percentfrom28,856in2003to28,038in2007.Thisbudgetoptioncallsfortheeliminationoffiveseniorcentersoperatingbelow60percentofcongregatelunchcapacity(basedonagencyplannedandactualutilizationratesfor2007)foranannualsavingsof$1.9million.

oPPonents might argue thatseniorsmaynotbeableorwillingtotravelafewextrablockstoadifferentcenter.Seniorsalsomayhavedevelopedstrongemotionaltiestotheirneighborhoodcenterandprogramstaff.Individualcentershavemadeanefforttodevelopprogramsandservicesthatcatertospecificcultural/ethnicgroups.Therefore,ifseniorsaredisplacedfromonecentertheymaybereluctanttoparticipateincongregateservicesatadifferentcenter,evenifitisrelativelycloseby.Asaresult,someseniorswhohadpreviouslybenefitedfromthesocializationopportunitiesprovidedatseniorcentersmaynolongerdoso.

1StartingintheSeptember2007Mayor’sManagementReport,DFTAbegancalculatingcongregatelunchutilizationbyprogramsiteinsteadofbycontracts.Thisnewformuladoesnotallowustocompare2006or2007toanypreviousyears.

NYC Independent Budget Office February 2008 �0

OPTION:Eviction Insurance Pilot Program

Savings: $679,000 annually and up

ProPonents might arguethatpreventinghomelessnessisbothlessexpensiveandmorehumanethanemergencyshelter.Evictioninsurancewouldbeessentiallyself-supporting,soanyreductioninshelteruserepresentsanetgainforthecity.Anevictioninsuranceprogramwouldcomplementtheexistingsystemofemergencygrantsandloansthatthecityoffers,butwouldbemoreconsistentwiththeethicofpersonalresponsibilitythatunderliescurrentwelfarepolicy.(Thesegrantandloanprogramscouldbemorenarrowlytargetedinordertopromoteparticipationinaninsuranceprogram.)Landlordsmightbemorewillingtorenttolow-incomehouseholdswithevictioninsurance,becauseitreducestheirrisk—bothrealandperceived.Thecitycouldrequiresixmonthsormoreofpremiumpaymentsbeforehouseholdswouldbeeligibleforinsurancecoverage,topreventlast-minuteenrollmentsbythosefacingimminenteviction.

BEGINNINGASAPILOTPROGRAM,thecitywouldoffer“evictioninsurance”tohouseholdsthatarepotentiallyatriskofhomelessness.Participatinghouseholdswouldpayasmallmonthlypremium,andiffacedwitheviction,wouldreceivefundstopayforbackrentorlegalfees.Sincesomeofthehouseholdsthatwouldhavebeenevictedintheabsenceoftheprogramwouldhavebecomehomeless,bypreventingtheeviction,thecitywillsaveonemergencyshelterexpenditures.

IBOhasassumedthatthepilotprogramwouldinclude1,000households.Atthissize,themonthlypremiumwouldbe$16.22,whichwouldmaketheprogramfullyself-sustaining,includingthesalaryofonefull-timestaffpersontoadministerit.Inaddition,thecitywouldgeneratesavingsfromavoidedemergencysheltercosts.Astheprogramisexpanded,themonthlypremiumforindividualhouseholdswillfall,andthetotalsavingstothecitywillrise.Forexample,iftheprogramgrewto10,000households,themonthlypremiumwouldbe$13.59,andannualsavingstothecityinavoidedsheltercostswouldbe$6.8million.

oPPonents might arguethatlow-incomehouseholdsdonothavetheresourcestopayevenamodestpremium.Particularlygiventhatthecityalreadyoffersgrantsandloanstopreventhomelessness,itisnotclearthattherewouldbeenoughhouseholdswillingandabletoparticipateinanevictioninsuranceprogramtomakeitfeasible.Theexistenceofinsuranceprotectioncouldcreatea“moralhazard”—thatis,byprovidingasafetynet,itcouldunderminethenormalincentivetopayrent.Moreover,ifonlythosehouseholdsfacingimminentevictiontakeadvantageoftheprogram,thecostsarelikelytogreatlyoutweighthepremiumpaymentsunlessthelatterareprohibitivelyhigh.Finally,itisnotclearthatevictionisagoodpredictoroffuturehomelessness.Iffewoftheparticipatinghouseholdswouldhavebecomehomeless,savingswillbelimited.

NYC Independent Budget Office February 2008��

OPTION:Eliminate Outreach Services to the Homeless

Savings: $17.5 million

ProPonents might argue thattheoutreachserviceshavearelativelylowsuccessrate.Only5percentofcontactsresultinaplacementintotemporaryhousing.Itmaybethattheseresourcescanbeusedmoreefficientlyelsewhere.UnlikemostofDHS’sprograms,theagencyisnotrequiredtoprovideoutreachservices.ThisisoneofthefewDHSprogramareasthatcanbeeliminatedatthecity’sdiscretion.

THEDEPARTMENTOFHOMELESSSERVICES(DHS)CONDUCTSOUTREACHtohelpbringhomelessindividualslivingonthestreets,inparks,orinotherpublicplacesintothesheltersystemandpermanenthousing.Infiscalyear2007,DHSspentabout$26.1milliononoutreachactivities,andmadeatotalof85,459contacts.About5percentofthesecontactsresultedinplacementsinshelter.

IfDHSeliminatedtheoutreachprogram,itwouldsaveabout$17.5millionincityfunds.Therestofthefundingfortheoutreachprogramcomesfromthestateandfederalgovernments,andthereforewouldnothelptocloseanypotentialcitybudgetgaps.

oPPonents might argue thattheindividualsservedthroughoutreachprogramsareboththosemostinneedofassistance,andthemostlikelytocontributetoquality-of-lifeproblemssuchasaggressivepanhandling.Thereforeitisintheinterestsofboththeindividualsandthecityasawholetobringthesepeopleintothesheltersystem.Inaddition,outreachcanbenefithomelesspeopleevenifashelterplacementisnotmade;forexample,anoutreachworkercanspotmedicalorotheremergenciesandhelppeopleaccesshealthcare,food,andotherservices.

Finally,inJuneof2004MayorBloombergintroducedanambitiousplantoendchronichomelessnessinNewYorkCity,whichcallsforreconfiguringandexpandingoutreachservices.TheDHSHomelessOutreachPopulationEstimatefor2007projectedthattherewere3,755peoplelivingonthestreetsofManhattan,Brooklyn,andStatenIsland,andinthesubwaysystem.Thecityhopesthatbyimprovingoutreachservices,itwillbeabletoreducestreethomelessnesstofewerthan1,000individualsbythefifthyearofplan’simplementation.Althoughreconfiguringandexpandingoutreachareonlypartoftheoverallefforttoreducethenumberofstreethomelesspeople,eliminatingoutreachservicescouldmakeithardertoreachthisgoal.

NYC Independent Budget Office February 2008 ��

OPTION:Eliminate Grass Clippings from Trash Collection


ProPonents might arguethateliminatingthecollectionofgrassclippingsfromresidenceswouldsignificantlydecreaseexporttonnagesofNewYorkCitygarbage.Exportcurrentlycoststhecityapproximately$82pertonoftrash.Inaddition,grassclippingsprovidenaturalfertilizerforlawns.Thisdecreasespollutantsinourwastewaterstream,aswellasprovidingcostsavingstoresidents.

CURRENTLY,THEDEPARTMENTOFSANITATION(DSNY)collectsbaggedgrassclippingsfromresidentialyardsaroundthecity.Grassclippingsarenotincludedinthecitywidecompostingprogrambecausetheycannotbecompostedonsuchalargescale.Potentialodorproblemsassociatedwiththismaterialwouldaffectcommunitiesnearthecompostsites.Instead,theyjointheregularstreamofrefuseexportedfromthecity.Grassclippingsrepresentabout81percentofthe136,000tonsofyardwastethecitycollectseveryyearbutcannotrecycle.Toreducethisportionofrefusetonnage,DSNYhasencouragedresidentsandinstitutionsnottobaggrassclippingsandplacethemoutforcollection.Instead,residentsareurgedtoletgrassclippingsdecomposenaturallyontheirlawns.DSNYhaspublishedabrochuretoencouragesuchpracticeentitled,“LeaveitontheLawn:Aguidetomulch-mowing.”

Ifthecityeliminatesgrassclippingcollectionentirely,$9.0millionwouldbesavedannually.Thisrepresentstheexportcostofabout110,500tonsofgarbage(basedonrefusestream),multipliedbytheweightedaverageofthefiveboroughs’exportcontractcostswithcommercialhaulers.

oPPonents might arguethatgrassclippingsleftonlawnsareanuisancetoresidents,andcandamagelawns.Usingmulchingmowersisidealtogrindtheclippingsdowntotheappropriatesizeforfertilizing.Thesemowers,however,wouldrepresentanaddedcosttoresidentsandonlyasmallsegmentofthecity’sresidentswouldbeartheburdenofthiscitywidesavings.

NYC Independent Budget Office February 2008�3

OPTION:Increase Public School General Education Class Sizes by Two Students

Savings:$177 million annually

ProPonents might arguethattheresearchonthebenefitsofsmallerclasses,particularlyintheuppergrades,isnotconclusive,andthatthemarginaldifferenceofincreasingclasssizesbytwostudentsislikelytohaveaminimalimpactonacademicoutcomes.ProponentscouldclaimthatscalingbackthesizeoftheteachingforcewouldmakeiteasierforDOEtorecruitwelltrainedandproperlycertifiedpedagogues.Smallerclasssizescanalsorequireasubstantialcapitalinvestmentwhichcompeteswithotherfacilityneedsofthesystem.

UNDERTHISOPTION,thegeneraleducationaverageclasssizesineachgradewouldbeincreasedbytwostudents,whichwouldproducesavingsbyreducingteacherheadcount.Basedoncurrentenrollmentsatwostudentincreaseinclasssizeintheearlygradeswouldeliminate811teachingpositions;withanadditionalreductionof389positionsingrades4through6.Inthemiddleschools,afteraccountingforTitleIstatuswhereappropriate,largerclasseswouldresultinareductionof510morepositionswhileinthehighschoolsthechangewouldmeanthereductionof512positions.Theaggregatetotalstaffreductionequals2,222teachers.Thisreductionyieldsacombinedestimatedannualsavingsof$177.3million,basedoncurrentsalariesandbenefits.

Undercollectivebargainingagreements,theDepartmentofEducation(DOE)cannotraiseclasssizesingradesk-3beyond25studentsperclass.PreviousChancellor’sregulationshadsetevenlowergoalsintheseearlygrades,aswellastargetingmiddleschoolclasssizesforreduction.Additionallynowforthefirsttimethedepartmenthasa“contractforexcellence”withthestatewhichsupersedesbothpriorlaboragreementsandChancellor’srestrictions.Underthecontract,averageclasssizesmustbereducedinallgradesoverthenextfiveyearswithprioritygiventothelowestperformingschools.Thepenaltyfornotmakingprogresswithclasssizereductionplanscouldresultinlessstateaidbecausethebasicgrantwhichnowincludestherevenuestreamdedicatedforearlygradeclasssizereduction.Alloftheseregulationswouldneedtobealteredifthisoptionweretobeimplemented.

TheDOEexpectstoreceiveover$168millioninstatefundsplus$15millioninfederalfundsunderastateinitiativeplusanother$95millionfroma100percentfederallyfundedinitiativetoreduceclasssizeingradesk-3infiscal2008.Positionsfundedwiththesestateandfederalfundswouldnotbeeliminatedunderthisproposal.

oPPonents might arguethatclasssizesinNewYorkCityarealreadyamongthehighestinthestateandthatmakingthemanylargerwouldbecounterproductive.Opponentsmayalsopointoutthatthecity,state,andfederalgovernmentshavemadelargeeffortsandspenthundredsofmillionsofdollarstoreduceclasssizeinrecentyearsandthisproposalwouldessentiallywastetheseefforts.Opponentscouldciteacademicresearchlinkingsmallerclasssizestostrongerstudentperformance,particularlyintheearlygrades.Theyalsocitethedesireofparentstohavetheirchildrenreceiveindividualizedattention.Finally,theycouldpointtothepotentialthataheavierteachingloadcoulddrivequalifiedteachersoutofthesystem.


OPTION:Pay-As-You-Throw


ProPonents might arguethatbymakingtheend-usermorecost-conscioustheamountofwasterequiringdisposalwilldecrease,andinalllikelihoodtheamountofmaterialrecycledwouldincrease.Theyalsopointtothecity’simplementationofmeteredbillingforwaterandsewerservicesasevidencethatsuchaprogramcouldbesuccessfullyimplemented.Toeasethecostburdenonlower-incomeresidents,about10percentofcitieswithPAYTprogramshavealsoimplementedsubsidyprograms,whichpartiallydefraythecostwhilekeepingsomeincentivetoreducewaste.ProponentsalsosuggestthatstartingimplementationwithClass1residentialproperties(one-,two-,andthree-familyhomes)couldhelpequalizethedisparatetaxratesbetweenClass1andClass2residentialbuildingswhileachievingsavingsof$104million.TheyalsomightarguethatillegaldumpinginotherlocalitieswithPAYTprogramshasmostlybeencommercial,notresidential,andthatanyneededincreaseinenforcementwouldpayforitselfthroughthesavingsachieved.

UNDERASO-CALLED“PAY-AS-YOU-THROW”(PAYT)program,householdswouldbechargedforwastedisposalbasedontheamountofwastetheythrowaway—inmuchthesamewaythattheyarechargedforwater,electricity,andotherutilities.Thecitywouldcontinuetobearthecostofcollection,recycling,andothersanitationdepartment(DSNY)servicesfundedbycitytaxes.

PAYTprogramsarecurrentlyinplaceincitiessuchasSanFranciscoandSeattle,aswellasmorethan6,000communitiesacrossthecountry.PAYTprograms,alsocalledunit-basedorvariable-ratepricing,provideadirecteconomicincentiveforresidentstoreducewaste:Ifahouseholdthrowsawayless,itpaysless.ExperienceinotherpartsofthecountrysuggeststhatPAYTprogramsmayachievereductionsof14percentto27percentintheamountofwasteputoutforcollection.ThereareavarietyofdifferentformsofPAYTprogramsusingbags,tags,orcansinordertomeasuretheamountofwasteputoutbyaresident.Residentspurchaseeitherspeciallyembossedbagsorstickerstoputonbagsorcontainersputoutforcollection.

BasedonIBOprojectionsofwastedisposalcostsandDSNYprojectionsofvolumeandrecyclingdiversionrates,eachresidentialunitwouldpayanaverageof$91ayearforwastedisposalinordertocoverthecostofwasteexport,achievinganetsavingsof$296million.A14percentreductioninwastewouldbringtheaveragecostperhouseholddownto$78anda20percentreductionwouldfurtherlowertheaveragecostto$73perresidentialunit

oPPonents might arguethatpay-as-you-throwisinequitable,creatingasystemthatwouldshiftmoreofthecostburdentowardlow-incomeresidents.ManyalsowonderaboutthefeasibilityofimplementingPAYTinNewYorkCity.Roughlytwo-thirdsofNewYorkCityresidentsliveinmultifamilybuildingswithmorethanthreeunits.Insuchbuildings,wasteismorecommonlycollectedincommunalbins,whichcouldmakeitmoredifficulttoadministeraPAYTsystem,aswellaslessentheincentiveforwastereduction.Increasedillegaldumpingisanotherconcern,whichmightrequireincreasesinenforcement,offsettingsomeofthesavings.


OPTION:Collect Debt Service on Supportive Housing Loans

Savings: $1.8 million in 2009, $3.5 million in 2010,$5.3 million in 2011, $7.1 million in 2012

ProPonents might arguethattheSupportiveHousingLoanProgramistheonlyHPDloanprograminwhichdebtserviceisnotcollected.RecoupingtheseloanfundswouldallowHPDtostretchitsavailablefundstosupportmorehousingdevelopment.Becausetheinterestrateisverylow,thesupportiveloanprogramwouldstillprovideasignificantsubsidytothenonprofitdevelopers,particularlyifonlytheinterestwascollected.

THEDEPARTMENTOFHOUSINGPRESERVATIONANDDEVELOPMENT(HPD)makesloanstononprofitdevelopersbuildingsupportivehousingforhomelessandlow-incomesingleadultsthroughtheSupportiveHousingLoanProgram.Borrowersarecharged1percentinterestonthefunds,butaslongasthehousingisoccupiedbythetargetpopulation,HPDdoesnotcollectdebtservice—eitherprincipalorinterest—ineffectmakingtheloanagrant.

Collectingbothprincipalandinterestonnewloans,whichhaveaveraged$45.6millionperyearoverthelastfiveyears,wouldyield$1.8millioninrevenueinthefirstyear,andgrowasthetotalvolumeofoutstandingloansgrows.Weassumetheloansaremadefora30-yearterm.Collectingonlytheinterest,whileforgivingtheprincipal,wouldyieldlessrevenue,beginningwithabout$456,000inthefirstyear,growingto$1.7millionperyearby2012.Collectingonlytheprincipalwouldgenerate$1.5millionin2009risingto$6.1millionby2012.

oPPonents might arguethatbecausetheloanprogramprojectsserveextremelylow-incomeclients,developerssimplydonothavetherentrollsnecessarytosupportdebtservice.Thenonprofitdeveloperswouldbeunabletosupportloanrepayments,evenonverylow-interestloans.Significantlylesshousingwouldbebuiltforaparticularlyvulnerablepopulation.Theresultwouldbemorepeoplelivingonthestreetsorinthecity’scostlyemergencysheltersystem.Theymightarguethatevenadeepsubsidyforpermanenthousingismorecost-effective—andhumane—thanrelyingonthesheltersystem.


OPTION:Establish Copayments for the Early Intervention Program


ProPonents might arguethatestablishingcopaymentscouldalleviatesomeofthestraintheEIprogramplacesonthecitybudgetwithoutreducingthelevelofserviceprovision.Inparticular,theymightnotethatsincethecurrentstructuregivesparticipatingfamiliesnoincentivetoprovideinsuranceinformationtothecity,publicfundsarepayingforEIservicesformanychildrenwithprivatehealthcoverage.TheinstitutionofcopaymentswouldprovidethesefamilieswiththeincentivetoseekpaymentsfromtheirinsurersforEIservices.ProponentsmightalsonotethattheEIprogramclaimsadisproportionateshareofDOHMHresourcesforarelativelysmallpopulation.Finally,ifastatewidecopaymentforEIserviceswereenacted,itwouldgeneratesavingsnotonlyforthecity,butforthestateandotherlocalgovernmentsaswell.

THEEARLYINTERVENTIONPROGRAM(EI)providesdevelopmentallydisabledchildrenuptotheageof3withservicesthroughnonprofitagenciesthatcontractwiththeDepartmentofHealthandMentalHygiene(DOHMH).Eligibilitydoesnotdependonfamilyincome.Dueprimarilytorisingenrollment,thecostsoftheprogramgrewrapidlyintheearlypartofthisdecade,andby2004accountedforoverone-thirdofthetotalDOHMHbudget.Enrollmenthassincestabilizedandcostshavedeclinedsomewhatsothatthe$450millionprogramnowaccountsforjustover25percentoftheDOHMHbudget.

Earlyinterventionisfundedfromamixofprivateandpublicsources.Forchildrenwithprivatehealthinsurance,paymentfromtheinsurerissoughtfirst,butrelativelyfewsuchclaimsarepaid;only$3.8millioncamefromprivateinsurancein2007.MedicaidandChildHealthPluspaythefullcostforchildrenenrolledinthoseprograms,with$250millioncomingfromthosesourcesin2007.SincetheMedicaidcapwasinstitutedin2005,thecitydoesnotbearanyshareofthesecosts,whichareinsteaddividedbetweenthestateandfederalgovernments.Theremainingcostsaresplitbetweenthecityandthestate,historicallya50-50split.Butinrecentyearsthestatehaspaidalargershare.Asaresult,thenetcostofEItothecityhasdeclinedfromwellover$100millionin2004to$66millionin2007.

Underthisoption,thecitywouldseektofurtherreducethesecostsbyrequiringa20percentcopaymentforservicestofamiliesthathaveprivatehealthinsuranceandincomesabove200percentoftheFederalPovertyLevel.Inadditiontoraisingrevenuedirectlyfromtheestimated21percentofEIfamiliesthatfallintothiscategory,itcouldalsoincreasepaymentsfromprivateinsurersbygivingparticipantsanincentivetoprovideDOHMHwithinsuranceinformationandassisttheagencyinchallengingrejectedclaims.EstablishingacopaymentmustbeapprovedbythestateLegislature;thestatewouldrealizesomewhatgreatersavings,anestimated$11.8millioninNewYorkCityalone.

oPPonents might arguethattheinstitutionofa20percentcopaymentforEIservicescouldleadtointerruptionsinserviceprovisionforchildrenoffamiliesthat,toreducetheirout-of-pocketexpenses,opttomovetheirchildrentolessexpensiveserviceprovidersoroutofEIaltogether.Opponentsmightalsoarguethatthecreationofacopaymentmaybemoreexpensiveforthecityinthelongrun,aschildrenwhodonotreceiveEIservicescouldrequiremorecostlyserviceslaterinlife.Finally,opponentsmightnotethatenrollmentandcostsintheprogramhavebeenstablesince2004,suggestingthatadditionalcost-savingsmeasuresarenoturgenthereandthatthecityshouldnotbecreatinganynewbarrierstoenrollment.


OPTION:Reduce FDNY Engine Company Staffing


THENEWYORkCITYFIREDEPARTMENT’s(FDNY)currentcontractwiththefirefightersunionspecifiesthatthemajority(150)oftheagency’s210enginecompaniesaretobestaffedwithfourfirefightersandafireofficer.Elevenotherenginecompaniesareatalltimesstaffedwithfivefirefightersandanofficer.

Theremaining49enginecompaniesarestaffedwithfivefirefightersandanofficeraslongasthecitywidesickleaverateforfirefightersremainsatorbelow7.5percent,asispresentlythecase.Intheeventthesickleaveraterisesabove7.5percent,thecityiscontractuallyentitledtoreducethestaffinglevelofthese49enginecompaniestofourfirefightersandanofficer.

Thisoptioncallsforacollectivelybargainedseveranceofthelinkbetweenfirefightersickleaveratesandmandatedstaffingonthese49enginecompanies,therebyremovingthefifthfirefighterpostfromeachunitandgeneratingannualsavingsofabout$35.8million.Someportionoftheseproductivitysavingscouldbesharedwithfirefightersintheformofsalaryincreases,althoughdoingsowouldreducethenetsavingstothecity.

ProPonents might arguethatthefiredepartment’swillingnesstostaffthe49enginecompaniesatissuewithfourfirefightersratherthanfivewhenthesickleaveraterisesabove7.5percentsuggeststhatdoingsoisnotinconsistentwiththeagency’sgoalsofprotectingpublicandfirefightersafety.Theymightalsoarguethatfirefightersshouldrefrainfromabusingtheirunlimitedsickleaveprivilegeswithouttheneedforanincentivesystemencouragingthemtodoso.

oPPonents might argue thattheadditionalresponsecapabilityassociatedwithfiveasopposedtofourfirefightersonenginecompaniessignificantlyenhancesnotonlythesafetyoffirefightersbutalsotheirabilitytorespondeffectivelytoemergencysituations.Theymightfurthercontend,particularlyinanerainwhichthecitycontinuestofacethethreatofanotherterroristattack,thatall210oftheFDNY’senginecompaniesshouldunderallcircumstancesbestaffedwithfiveratherthanfourfirefighters.


OPTION:Make Parent Coordinators Part Time in Schools With Fewer Than �00 Students


ProPonents might arguethatthelackofspecificresponsibilitieswithmeasurableoutcomesforthesepositionsraisesquestionsabouttheuseofthefunds.Proponentscanalsosuggestthatlimitedschoolresourcesarebestusedfordirectservicestostudentsandthatthesepositionsshouldbefundedfromasourceotherthantaxlevydollarsgiventhatthesejobsarenotintegraltooperatingaschool.Otherproponentsmightarguethatschoolsinwhichparentinvolvementisalreadystrongdonotneedanadditionalfull-time,paidpositiontoencourageparticipationofparents.ThepublicschoolsystemhasotherresourcestosupporttheparentinvolvementpieceofChildrenFirstreformincludingparent/teacherassociations,schoolleadershipteams,32communityeducationcouncils,anddistrictfamilyadvocatesundertheOfficeofFamilyEngagementandAdvocacy.

INTHE2003-2004SCHOOLYEAR,aspartoftheNewYorkCityDepartmentofEducation’sChildrenFirstreforms,eachschoolwasprovidedfundingforaparentcoordinatorposition.Halfofthefundingforthesepositionswasprovidedfromcitytax-levydollarsandhalffromreimbursablefunds.Thepositionwascreatedtofosterengagementwithparentsandtoprovideparentswithtoolstobetterparticipateintheirchildren’seducation.Thecoordinatorsweretohelpfacilitatetwo-waycommunicationwithparentsateachschoolandworktoresolveissuesandconcernsraisedbyparents.

Inthefirstyearoftheprogram,approximately,1,270positionswerebudgetedatanannualsalaryof$34,000plusfringebenefits.Thetotalcostforthenewpositionswasalmost$50million.Forthe2007-2008schoolyear,approximately1,423positionsarebudgetedatacitywideaveragesalaryof$38,138alongwithanadditional$500OTPS(otherthanpersonalservices)allocation,foratotalcostof$54.9million.Thepositionsarenowfullyfundedwithtax-levydollars.Currently,roughly721schoolswithFull-timeparentcoordinatorshaveenrollmentsoflessthan500students.Conversionofthesepositionstohalf-timepositionswouldsaveapproximately$13.9million.

oPPonents might argue thatresearchindicatesthereisapositiverelationshipbetweenparentalinvolvementandacademicoutcomesandthathavingafull-timeparentcoordinatorineveryschoolhelpstostrengthentheparents’role.Opponentsmayalsoarguethatreducingthepositiontohalf-timebasedonenrollmentisarbitraryandabetterapproachwouldbetoatleasttargetTitleIschoolstomaintainparentcoordinators,sincetheyarealreadyrequiredtospend1percentoftheirTitleIallocationonparentinvolvement.


OPTION:Perform All Housing Code Inspections with One Inspector


ProPonents might argue thatsendingindividualinspectorstorespondtohousingcomplaintsrepresentsaclassicexampleof“doingmorewithless.”Thehousingdepartmentwouldbeabletoinspectthesamenumberofapartmentseachyear,whilereducingspending.Thebulkofthesavingscomesfromreducingtheamountoftimespenttravelingbetweeninspectionsites.Whiletravelisanunavoidablecostoftheinspectionprocess,itisessentially“downtime”thataddsnothingtotheinspectionquality.Reducingtraveltimeisastraightefficiencygain.

THEDEPARTMENTOFHOUSINGPRESERVATIONANDDEVELOPMENTinspectsapartmentsinmultifamilybuildingsinresponsetocomplaintsaboutviolationsoftheHousingMaintenanceCode.Infiscalyear2007,theagencycompletedover516,000non-leadinspections;inspectionsregardingleadcomplaintsarealwaysdonewithtwo-personteamsbecauseitismoredataintensivethanotherinspections.Roughly40percentoftheseinspectionsweredonebytwo-personteamsofinspectors.Thehousingagencycouldsendindividualinspectors—ratherthanteams—torespondtonon-leadcomplaints.Inspectinganapartmentwillpresumablytakemoretimeifthereisonlyoneinspector.Assumingthateachinspectiontakesone-and-a-halftimesaslongasitcurrentlydoes,theagencywouldneed67fewerinspectorstohandleitscurrentworkload,forasavingsof$4.0millionannually.Evenifeachinspectiontooktwiceaslongwithonlyoneinspector,thehousingdepartmentwouldstillneed40fewerinspectorsandwouldsave$2.4millionannually.

oPPonents might argue that thequalityofinspectionscouldfallwithouttwoindependentobservers.Asingleinspectormightbemorelikelytomissaviolationthatwouldbenoticedbyateamoftwoinspectors.Also,thedepartmentusestwo-personinspectionteamstotrainnewhousinginspectors.Two-personteamsarealsoutilizedforsafetybecausesometeamsareconductinginspectionslateintheevening.Intheshortrun,thehousingagency’sabilitytodeploysingleinspectorscouldbelimitedbythenumberofvehiclesavailableforinspectors’use,orthecitywouldhavetopurchasevehicles,whichwouldreducesavingsinthefirstyears.Switchingfromtwo-personinspectionteamstosingleinspectorswouldlikelyrequireunioncooperation.Finally,manyopponentswouldarguethatanyefficiencygainsshouldbedirectedtodoingmoreinspections,ratherthanreducingspending.


OPTION:Alter Staffing Pattern In EMS Advanced Life Support Ambulances


THEFIREDEPARTMENT’SOPERATIONOFTHECITY’SEMERGENCYMEDICALSYSTEM(EMS)currentlyincludesthestaffingeachdayofabout150AdvancedLifeSupport(ALS)alongwithsome400BasicLifeSupport(BLS)ambulancetours.Thelatterarestaffedwithtwoemergencymedicaltechnicians(EMTs);incontrasttwohigher-skilledandmorehighly-paidparamedicsaredeployedinALSambulanceunits.ThisoptionproposesstaffingALSunitsoperatedbythefiredepartmentwithoneparamedicandoneEMTasopposedtotwoparamedics.

CitinganinabilitytomeetitsgoalsforALSresponsetimeandacriticalshortageofparamedicsbothlocallyandthroughoutthenation,thefiredepartmentinJanuary2005petitionedtheNewYorkCityRegionalEmergencyMedicalAdvisoryCommittee(REMAC)forpermissiontostaffALSambulanceunitswithoneparamedicandoneEMTasopposedtotwoparamedics.Eachareaofthestatefallsunderthejurisdictionofoneof14suchcommittees,withtheprimarypurposeofeachREMACbeingtoallowforlocalmedicaldirectionandguidanceinthedevelopmentofregionalEMSsystems.TheNewYorkCityREMACistheonlysuchcommitteeinthestatethatrequiresALSambulanceunitsanswering911callswithinitsjurisdictiontobestaffedwithtwoparamedics.InitsJanuary2005requesttothelocalREMAC,thefiredepartmentarguedthat“throughoutthecountrythereisnosetstaffinglevelofambulances,”andthat“thereisnopublisheddatathatshowsimprovedclinicaleffectivenessbyALSambulancesthatarestaffedwithtwoparamedics.”Furthermore,thefiredepartmentpledgedthatALSunitsstaffedwithoneparamedicandoneEMTwould,whennecessary,receivesupportinthefieldfromotherALSunits.Theagencyalsostateditscommitmenttoperforma“qualityassurancereview”duringimplementationofitsproposalsoastoensurethatqualityofcareismaintained.

Inresponsetothefiredepartment’srequestconcerningALSstaffing,thelocalREMACessentiallyconcludedthattheagencywouldneedtoprovidefurtherevidencesupportingthecontentionthatALSambulanceunitsinNewYorkCitycouldbesafelystaffedbyfewerthantwoparamedics.

ProPonents might argueasdidthefiredepartmentin2005,thattheagency’sabilitytomeetitsinternalperformanceobjectivesrelatedtoALSresponsetimeandothercapabilitiesnecessitatesthedeploymentofadditionalALSambulanceunitseachdaythroughoutthefiveboroughs.Underexistingstaffingprotocolsthiswouldobviouslyrequirehiringmoreparamedics,whichtheagencyhasarguedisexceedinglydifficultgiventheshortageofparamedicsinthelabormarket.Also,NewYorkCityistheonlyplaceinthestatewhereALSunitsarerequiredtobestaffedwithtwoparamedics.

oPPonents might argue thatthecityshouldnotriskthediminishedmedicalexpertisethatcouldresultfromtheremovalofoneofthetwoparamedicscurrentlyassignedtoeachALSunit.Amoreappropriatesolutiontothecity’sdesiretodeploymoreALSunitswouldbeanincreaseinpayforparamedics,therebyimprovingourabilitytorecruitandretainemergencymedicalpersonnel.


OPTION:Increase the Workweek for Municipal Employees to �0 Hours

Savings: $146.2 million in 2009; $298.2 million in 2010; and $455.5 million in 2011

ProPonents might arguethatthecityisunusualinhavinga35-hourworkweekformostofitsemployees,andmostfull-timeprivate-sectoremployeesintheNewYorkareawork40ormorehoursperweek.Thefederalgovernment,alongwithmanystateandmunicipalgovernments,alsohasa40-hourworkweekforitsemployees.

THISPROPOSALWOULDINCREASEtheworkweekforcivilian,non-uniformed,nonpedagogicalworkersfrom35hoursand37.5hoursto40hours.Withtheexceptionoftheuniformedmembersofthepolice,fire,correction,andsanitationdepartments,thepedagogicalstaffoftheCityUniversityofNewYorkandtheDepartmentofEducation,andcertainSection220craftworkers,mostcityemployeesworka35-hourweek.Thereareafewemployees,primarilyatthefiredepartmentandattheprobationdepartment,thathaveaworkweekof37.5hours.Withcityemployeesworkingalongerworkweek,agenciescouldperformthesametaskswithfewerworkers,savingwage,benefit,andeventuallyothernonlaborcosts.

Becausenolayoffswouldbeinvolvedwiththisproposal,savingswouldbeachievedovertimethroughattrition.Intheory,ifemployeescurrentlyworkinga35-hourworkweekweretoworka40-hourworkweek,thecitywouldrequire12.5percentfewerworkers.Similarly,ifemployeescurrentlyworkinga37.5-hourworkweekweretoworka40-hourworkweek,6.25percentfewerworkerswouldbeneeded.

IBOestimatesthatapproximately7,000positionswouldbeeliminatedifthisproposalweretobeimplemented—approximately10percentofallnon-managerialcivilianemployeesworkinglessthan40hoursaweek.Asaresult,thecitycouldsave$438millionannuallyinwageandbenefitcosts(excludingstateandfederalgrant-fundedpositions).Giventhe10percentannualattritionrateforcityworkers,itisreasonabletoassumethatthisnumberofpositionscouldbeeliminatedoverthreefiscalyears.

Implementingthisproposalrequirescollectivebargaining.

oPPonents might arguethatcityworkersearnsubstantiallylessthancomparableworkersintheprivatesectorandarecompensatedaccordinglybyhavingashorterworkweek.Opponentsmayalsoarguethatrequiringcityworkerstoworkatotalof40hoursperweekwithoutacommensurateincreaseinsalarywouldbeundulyburdensometoworkers,whowouldbesufferingeffectivelya12.5percentpaycut(inthecaseofthoseworking35hoursperweek)ora6.25percentpaycut(inthecaseofthoseworking37.5hoursperweek).Finally,opponentsalsomightarguethatthecitywillnotbeabletoachievethe10percentinproductivitysavingswiththeincreasedworkweek,andthattheanticipatedsavingsareoverlyoptimistic.


OPTION:Allow Police Officers to Work Fewer but Longer Tours While Also Eliminating �0 Minutes of Paid “Wash Up” Time


POLICEOFFICERSARECURRENTLYSCHEDULEDtoworkatotalof243tourseachyearbeforevacation,personalleave,andotherexcusedabsencesaresubtracted.Eachtourlasts8hoursand35minutes,withthelast35minutesconsidered“washup”time.Thisbudgetoptionproposesallowingpoliceofficerstobescheduledforfewerbutlongertours—specifically,170toursperyearof12hoursand15minutes.Theannualnumberofhoursscheduledwouldremainconstantbut20minutesofwash-uptimeattheendofeachtourwouldbeeliminated.Suchanalterationinpoliceofficers’scheduleswouldneedtobeattainedviacollectivebargaining.

Thereductionof20minutesattheconclusionofeachtourconstitutesareductioninpaid“washup”time,theperiodreservedfordebriefingactivitiesaswellasfor“washingup”andchangingclothesbeforeheadinghome.Giventheincreaseintourlengthanddecreaseinscheduledtours,policeofficerswouldalsoneedtoagreetofewerscheduledvacationdayseachyear,althoughthetotalnumberofhoursofvacationtimewouldnotbealtered.

Thedesirabilityofthisoptionintheeyesofpoliceofficersisbasedonanassumptionthatbeingrequiredtoreporttoworksignificantlyfewertimeseachyearwouldoutweightheincreaseinthelengthofeachtour.Budgetarysavingsforthepolicedepartmentwouldresultinlargepartfromthe20minutedecreaseinpaid“washup”timeattheconclusionofeachtour.Exercisingthisoption,whichwouldneedtobeapprovedthroughcollectivebargaining,wouldallowthepolicedepartmenttomaintainthesamedailypolicecoveragewithabout450fewerofficers,generatingannualsavingsofabout$55.2million.

ProPonents might arguethattheextra20minutesofwash-uptimecurrentlyallottedattheendofeachtourismorethanisneeded.Theywouldalsonotethatpastattemptstocontractuallyenticepoliceofficersintoareductionof“washup”havefailed,soadifferentapproachisrequired.Offeringtheopportunitytoworkfewerbutlongertourscouldwellbesuchanapproach;giventhatmanyofficersliveaconsiderabledistancefromthecityandtheprecinctsinwhichtheywork,somemaywelcomeascenarioinwhichtheywouldneedtotravellessoftentoandfromtheirassignedcommands.ProponentsmightalsoaddthatneighboringNassauCountyhasadopted12-hourtoursofdutyfortheirpoliceofficers.

oPPonents might arguethatthecurrentallotmentof20minutesattheendofeachtourfordebriefingandchangingclothesislegitimate.Othersmightalsoarguethatgiventhestressinherentinpolicing,a12-hourshiftissimplytoolong.Theendresultwouldbeadeclineinpoliceofficerperformanceaswellassafety.Also,havingthreetoursperdayasopposedtoonlytwoincreasestheagency’sabilitytorespondtolarge-scaleemergenciesbecausereinforcementpersonnelunderthecurrentthree-tourperdayscenariowouldbeduetoarrivefordutysoonerthanwouldbethecasewithtwo12-hourshifts.


OPTION:Encourage Classroom Teachers To Serve Jury Duty During Noninstructional Summer Months


ProPonents might arguethataboveandbeyondfinancialsavings,thebestbenefitisfortheschoolchildrenwhowouldnolongerlosethreedaysofinstructionwhiletheclassroomteacherisatthecourthouse.Thedepartment’sownsubstituteteacherhandbookpointsoutthat,especiallyforshort-termsubstitutes,timewillbespentonestablishingauthorityotherwiseknownasclassroommanagementasopposedtoactualinstruction.Additionally,manyschoolshavedifficultyingettingsubstituteteacherstocomein.Jurydutyabsencesmayplaceavoidablestressonschooladministratorsandotherschool-basedstaffastheyattempttoworkoutcoverageissues.

UNDERTHISOPTIONTEACHERS,whoarenotexpectedtoteachsummerschool,wouldbeencouragedtodeferjurydutyserviceuntilthesummerwhenregularschoolisnotinsession.Useofperdiemsubstituteswoulddecline,whichwouldproducesavingsbyloweringtheabsencecoveragebudget.Theanticipatedabsencecoveragebudgetisreducedbythenumberofjurydutydaysservedmultipliedbythenumberofteacherscalledintojuryserviceduringanygivenschoolyear.Weassumeanaveragelengthofjurydutyserviceofthreedaysperteacher.Thesubstituteteachersavingsequal$443perteacher.If10percentoftheteachingforcewerecalledforservicebutdeferredtothesummer,thisreductionyieldsacombinedestimatedannualsavingsofslightlyover$3million,basedoncurrentoccasionalperdiemratesforteachersasofSeptember13,2007.

Overthecourseofoneyear600,000peopleservejurydutyinNewYork.Onanygivenday,civilandcriminalcourtsinManhattanalonerequireanywherebetween1,800to2,000jurors.IntheDepartmentofEducation,timeawayonjurydutyhasspecialclassificationasanonattendancedayalthoughit’sanexcusableabsence.Theeducationdepartmentisrequiredtocovereveryteacherabsencewithanappropriatesubstitute.Undercurrentstatutorylawanypersonwhoissummonedtoserveasajurorhastherighttobeabsent.Undercurrentcollectivebargainingagreements,teacherswhoarerequiredtoservejurydutyreceivefullsalaryduringtheperiodofsuchservice,andarerequiredtoremitanamountequaltothecompensationpaidtothemforsuchjuryduty.Ifserviceisperformedoverthesummer,jurydutychecksmaybekeptifemployeesarenotworking.

oPPonents might arguethatteachersneedtobeabletofullyrelaxandrechargeduringthesummer“off ”months.Deferralofjurydutymightotherwisehinderwelllaidoutfamilyvacationplans.Opponentscouldalsoarguethatthepolicywouldunfairlyplayoneformofcivilserviceagainstanother,encouragingotherstodefer.Giventhesizeoftheeducationdepartment’steachingforce,itisalsopossiblethatdeferralofallteacherjuryservicetothesummercouldresultinconcentrationsofteachersinthejurypoolsoverthesummer.


OPTION:Consolidate the Administration of Supplemental Benefit And Welfare Benefit Funds for City Employees


SINCE1971,NEWYORkCITYHASPROVIDEDFUNDStothevariousunionsrepresentingcityemployeestosupplementtheirhealthbenefits.Thesebenefitfundsareadministeredbytheunionsandoffermembersarangeofbenefitsnotcoveredbythegeneralhealthinsuranceplans,includingdentalandvisioncoverage.Consolidating74ofthesesupplementalhealthandwelfarebenefitfundscurrentlyreceivingcitycontributionsintoasinglefundservingtheseaffectedemployeeswouldyieldsavingsbyeliminatingduplicationandgivingtheenhancedfundgreaterpricingpowerwhencontractingtoprovidebenefitstoitsmembers.Whilethespecificbenefitspackageofferedtosomemembersmaychangebasedonthisgreatercontractingpower,itisexpectedthat,onthewhole,benefitlevelsafterconsolidationwillremainunchanged.

In2004,thelastyearforwhichdataisavailable,theComptrollerestimatedthatthecitycontributedapproximately$813millionto74supplementalbenefitfunds,ofwhichmorethan$70million,or8.7percentofthetotalcitycontribution,wasusedtocoveradministrativeexpenses.Becausethesupplementalbenefitfundsaremanagedbyeachindividualunion,theadministrativeexpensesperemployeevarygreatlybybenefitfund.Administrativecostsofthesevariouswelfareplansrangedfrom$22perbenefitfundmemberto$403permemberin2004,withtheaveragebeingalittlemorethan$122permember.

DistrictCouncil37’sbenefitfund,whichhasoneofthelargestnumberofmembers,spentapproximately$100permemberonadministrationin2004.IftheconsolidatedbenefitsfundhadDistrictCouncil37’sadministrativecostpermember,thecitycouldsavealmost$13millionannually,withoutreducingthelevelofcitycontributionsforbenefitservices.Enactingsuchaconsolidationwould,however,requiretheapprovaloftheunionsthroughcollectivebargainingnegotiations.

ProPonents might arguethatconsolidatingtheadministrationofthesupplementalbenefitfundswouldproducesavingsforthecitywithoutreducingbenefitlevelsorothercityservices.Theycouldalsocontendthatacentralizedstaffdedicatedsolelytobenefitadministrationcouldimprovethequalityofserviceprovidedtothosememberswhosefundsdonotcurrentlyemployfull-timebenefitadministrators.

oPPonents might argue thatbecausethetypeofsupplementalbenefitsofferedtomembersisdeterminedseparatelybyeachfund,memberscouldbeworseoffifthebenefitpackagechangesasaresultofconsolidation.Inaddition,opponentsmayassertthatindividualunionsarethemostknowledgeableaboutthespecificneedsoftheirmembersandthataconsolidatedfundadministratormaynotbeasresponsivetotheseneedsasaunionadministrator.


OPTION:Bonus Pay to Reduce Sick Leave Usage Among Correction Officers Savings: $4.7 million annually

ProPonents might argue thatnumerousstateandlocalgovernmentsreapsavingsbymonetarilyrewardingpersonnel(includinglawenforcementpersonnel)thatlimitusageofsickleave.Proponentsalsomightarguethateveniftheproposalresultedinonlyminimalnetsavings,thepaymentofabonustoofficerswhodemonstrateveryhighratesofattendancewouldrightlyofferthematangiblerewardtheydeserve.

ATPRESENT,UNIFORMEDPOLICE,fire,corrections,andsanitationpersonnelarecontractuallyentitledtounlimitedsickleave.ThisproposalwouldhavetheDepartmentofCorrectionmakebonuspaymentstocorrectionofficerswhousethreeorfewersickdaysinaconsecutivesix-monthperiod.Thegoalwouldbetoinduceareductioninthecostlyutilizationofsickleave,therebyresultinginnetfinancialsavings.Ifsuccessful,suchanincentiveprogramcouldbeadoptedbythecity’sotheruniformedagencies.

Thesickleaverateforuniformedcorrectionspersonnelhasbeenhigherthanthatoftheirsanitation,police,andfirecounterpartseachyearsince1990.Thecostlinessofsickleaveusagebycorrectionofficersstemsfromthefactthatthecity’sjailscontainnumerous“fixed”poststhatmustbestaffedatalltimes.Asaresult,additionalstaffisscheduledtoworkineachjailinanticipationthatsomenumberofthestaffwillcallinsick.Also,officerscompletingtheirscheduledshiftarefrequentlyrequiredtoworkasecondshiftonovertimetofillapostleftunstaffedasaresultofcolleaguescallinginsick.Basedondepartmentaldata,theaverageof17sickdaysutilizedbyroughly8,300correctionofficersinfiscalyear2007costthecityatotalofabout$71.4millionperyear,orabout$507peroccurrence.

Thisproposal,whichwouldrequirecollectivebargaining,wouldrewardcorrectionofficerswhousenosickdaysinasix-monthperiodwithabonusequalto0.5percentofbasesalary.Officerswhouseone,two,orthreesickdayswouldreceivebonusesequalto0.375percent,0.250percent,and0.125percentofannualbasesalary,respectively.Althoughutilizationoffourormoresickdayswouldresultinforfeitureofbonuspayforthatperiod,allofficerswouldbeentitledtostartwitha“cleanslate”atthebeginningofthenextsix-monthperiod.

Theaveragebasesalaryforcorrectionofficersiscurrentlyabout$57,876.Therefore,thebonusforanofficerwhousesnosickdaysinasixmonthperiodwouldbe$289anddropto$72foranofficerusingthreedays.Toachievenetsavings,theproposalwouldneedtoreducethecostlinessofsickleaveusagebyanamountgreaterthanthesumpaidoutinbonuspay.Forexample,enticingstaffthatcurrentlyaveragethreetotensickdaysperyeartoreducetheirsickleaveusagebythreedayswouldyield$4.7millioninnetsavingsforthecity.

oPPonents might argue thatcityemployeesshouldrefrainfromabusingtheirsickleaveprivilegeswithoutarewardsystementicingthemtodoso.Onpracticalgrounds,opponentsmightarguethatsomeparticularlycost-consciouscorrectionofficersmayreporttoworkondaysonwhichtheyaretrulyillsoastonotlosebonuspay,therebypotentiallyjeopardizingthesafetyandhealthofinmatesandfellowofficers.Theyalsomightarguethatofficerswhoseassignmentsexposethemtogreaterstressandriskofgettingsickwouldendupunfairlylosingbonuspayasaresultoflegitimatesickleaveusage.


OPTION:Reduce Supplemental Welfare Contributions For City Workers by �0 Percent


ProPonents might arguethatcityworkersalreadyhavebenefitsthataremoregenerousthanthoseintheprivatesector.Inaddition,cityhealthinsurancecostshaverisensubstantiallyinrecentyears.Proponentsmayalsoarguethatthefundscouldoffernearlythesamelevelofbenefitswith10percentlessinfundingbyconsolidatingindividualunions’welfarefundsintoasmallernumberofplansinordertoreduceadministrativeexpensesandnegotiatevolumepriceswithbenefitsproviders.

NEWYORkCITY’SBENEFITCOSTShaveincreasedsharplyoverthepastdecade.Savingscouldbeachievedbychangingthecity’smunicipalworkers’benefitcontributionallowancetoreducethecity’spaymentsforSupplementalWelfareBenefits.Thecitycanunilaterallyimplementthischangefornonunionemployees.Ontheotherhand,forunionemployees,thesesavingshavetobenegotiatedatthebargainingtablewiththeirrespectiveunions.Specifically,thecitywouldreduceitscontributionby10percenttowardstheunion-sponsoredSupplementalWelfareBenefitFundandtheManagementBenefitsFund.

Infiscalyear2007,thecityprovidedalittleover$1billionperyearforemployeesupplementalwelfarefunds.Thesecontributionsareintendedtoprovidedental,vision,prescriptiondrugs,andotherbenefitstocityemployeesasasupplementtobenefitsalreadyprovidedfromthecity’shealthinsuranceplan.Thisproposalwouldreducethesepaymentsby10percentperyearorapproximately$100millionperyear.

TheOfficeofLaborRelations(OLR)currentlyprocesses120retireewelfarefundpaymentsand115activewelfarefundpaymentseachmonthorcycle.Thisdoesnotincludeactivewelfarefundsforthefire,policeandsanitationdepartments(nineintotal)orthatofindependentagenciessuchastheDepartmentofEducationwhichmakethesepaymentsonbehalfoftheirownemployees.Foractiveemployees,cityannualcontributionscurrentlyrangefromalowof$1,090peractiveemployee(Local15-HighPressurePlantTenders)toahighof$1,690(CivilServiceBarAssociation).Forretirees,therangeis$785peryear(AssociationofSurrogate&SupremeCourtReporters)to$1,840(Local237).

oPPonents might arguethatmunicipalworkersarepaidlessthancomparableworkersintheprivatesector,andthatthesupplementalwelfarebenefitsservetopartiallyoffsetthewagedifferential.Opponentsmayalsoarguethatthesesupplementalbenefitsprovideavaluableresourcetopotentialworkers,especiallyhigh-skilledworkers,inatightlabormarket.Finally,theymayalsoarguethatwelfarefundsmustbetailoredbyeachrespectiveunionaccordingtotheirmembers’uniqueneeds.


OPTION:Merge Separate City Employee Pension Systems

Initial One-Time Costs: $67 million in 2009Savings: $36 million in 2010, $40 million in 2011 and $45 million in 2012

ProPonents might arguethatthereisnoreasontoincurtheadditionalcostofmaintainingseparateretirementsystemswhentheirpensionplanshavesimilar,ifnotidentical,retirementplanfeatures.WithrespecttoBERS,itcouldbearguedthatitisanartifactoftheBoardofEducationeraandthusisnolongerneeded.Themergingoffacilitiescouldreducecostsand,inthecaseofBERS,potentiallyfreeupadditionallandandbuildingspacefortheDepartmentofEducation.TheOfficeoftheActuarycouldaccrueproductivitysavingsinthefutureastheoversightresponsibilitiesfortheseretirementsystemscouldbestreamlined.Moreover,themergedsystemswouldallowforefficienttimemanagementforthosepublicofficialswhoserveastrusteesofthefunds.

NEWYORkCITYCURRENTLYHASFIVERETIREMENTSYSTEMS:TheNewYorkCityEmployees’RetirementSystem(NYCERS),theNewYorkCityTeachersRetirementSystem,theBoardofEducationRetirementSystem,thePolicePensionFund,andtheFirePensionFund.Incontrast,thestatehasonlythreeretirementsystems.ThisoptioninvolvesmergingtheNewYorkCityPoliceandFirePensionFunds,whichprovidebenefitstouniformedpoliceandfirepersonnel,andtheBoardofEducationRetirementSystemwithNYCERS.Eithermergerwouldrequireachangeinstatelegislationfortheproposaltobeimplemented.

TheBoardofEducationRetirementSystem(BERS)coverscivilian,non-pedagogicalpersonnelemployedattheNewYorkCityDepartmentofEducation.NYCERScoversmostothercivilianandsomeuniformedcityemployees.Bothretirementsystemsoffersimilarbenefitstocivilianemployeesintermsofpensioneligibility,pensioncalculations,andcreditableservice.

Similarly,thePoliceandFirePensionFundshaveverysimilar,ifnotidentical,retirementplanparameters.Currently,theonlysignificantdifferencesbetweenthetwofundsrelatetocertainactuarialassumptions.Sincethemainattributesofthetwosystemsarevirtuallyidentical,theinitialtransitioncostswouldbelessthanthoseinvolvedinmergingthemorevariedNYCERSandBERS.

Althoughtheinitialcostsofthemergerswouldentailoutlaystocovermoving,training,portfoliorebalancingandtransitioncosts,theestimatedsavingsinsubsequentyearswouldberealizedbyeliminatingredundantorganizationaltitlesandgradualemployeeattrition,negotiatinglowerfeeswithinvestmentfundadvisorsandprogrammanagers,andincreasingorganizationalefficiencies,suchasperformingoneauditayearratherthantwo.

oPPonents might arguethatsimplymergingthenowseparateBoardsofTrusteeswouldresultinBoardsthatweretoolargeandcumbersometomanageeffectivelyandthushinderfiduciaryoversightofthenewlymergedretirementsystem.Inaddition,NewYorkCityrecentlytriedtomergeBERSintotheTeacher’sRetirementSystemandthestatelegislaturedecidedagainsttheproposal,inpartbecauseofunionopposition.InthecaseoftheFireandPolicesystems,onemightalsoarguethatthereareculturalandoccupationalcharacteristicsuniquetoeachuniformedforcethatmaymakethemergerundesirabletomanyofitsmembers.


OPTION:Institute a New Defined-Contribution Pension Plan for Civilian Workers

Savings: $33 million in 2011, $66 million in 2012, $98 million in 2013, $130 million in 2014

ProPonents might arguethatthisproposalwouldprovidesignificantsavingstothecitywhilegivingcityworkersadditionalflexibilityandportabilityintheirretirementsavings.Sinceworkerswholeavecityservicecanrollovertheir401(k)or457balancesintoanIndividualRetirementAccountoranotheremployer’splan,thisproposalprovidesmorebenefitsandmakescityemploymentmoreattractivetoyoungerandmoremobileworkers.Thisproposalalsoprotectsthecityfromtheriskofoverestimatinginvestmentreturnsandunderestimatingthefuturelongevityofemployeesandfuturewageincreases.Finally,itprotectsthecityfrombearingthecostofunfundedbenefitincreasesthatmayariseduetofuturepensionlegislationinAlbany.

MOSTFULL-TIMENEWYORkCITYCIVILIANNONPEDAGOGICALEMPLOYEESaremembersofeithertheNewYorkCityEmployeesRetirementSystem(NYCERS)ortheBoardofEducationRetirementSystem(BERS)andmostnewemployeesareeligibletoretireasearlyasage57,providedtheyhaveatleastfiveyearsofcreditableNYCERSorBERSservice.

Thisproposalwouldestablishanew,defined-contributionpensionplantoreplacethecurrentNYCERSorBERS“57/5”programfornew,nonpedagogicalcivilianemployeeshiredduringorafter2009.Thecitywouldcontribute7percentofeachemployee’ssalaryintoa401(k)or457account,withtheemployeechoosingbetweenthesetwooptions.Employeescouldmakeadditionalcontributionstothesetax-deferredaccountsuptothelegalmaximum.Severalstateshaveproposedandimplementedadefined-contributionplanfortheirgovernmentworkers.Michigan,forexample,adoptedsuchaplanin1997foritsnewstateemployees,excludingschoolemployeesandthestatepolice.In2006(mostrecentyearavailable),thedefined-benefitpensioncostsfortheMichiganstatecivilianworkforcewere13.4percentofpayroll,whilethedefined-contributioncostwas6.4percent.Savingswouldaccruebecausetheemployercontributionrate,asapercentageofpayroll,exceeded7percent.ThisoptionrequiresachangeinNewYorkStatestatue.

oPPonents might arguethatadefined-contributionplanunfairlytransfersstockmarketriskfromthecitytoitsworkersandprovidesalowerlevelofbenefitstoworkerswhoremainwiththecityfortheirentirecareersincontrasttothecurrentsystem,whichprovidesgenerousbenefitstolong-termemployees,andlittleornobenefitstoemployeeswholeavecityserviceearly.Theymightalsoarguethatworkersmayspendratherthanrollovertheiraccruedretirementbalanceswhentheychangejobs,possiblyleavingthemwithinadequateretirementsavings.Nordoesadefined-contributionplanofferdisabilityprotectionforworkersdisabledbeforeretirement.Moreover,adefined-benefitpensionplanisanecessarydeferredcompensationtooltoattractandretainhigh-qualityworkers,especiallyhighlyeducatedandprofessionalworkers.Theyalsomightarguethatbecauseofmarketrisk,individualworkerswhohappentoretireafterorduringamarketdownturnwillhaveasignificantlowersavingsonwhichtolive.


OPTION:Establish �0 as the Minimum Age to Collect Retirement Benefits for Newly Hired Uniformed Personnel

Savings: $5.0 million in 2011, $10.2 million in 2012, $16.0 million in 2013, $22.0 million in 2014, and $28.4 million in 2015

ProPonents might arguethatthepaymentofcityretirementbenefitstoindividualslessthan50yearsofageisincreasinglyunsustainablegiventoday’slongerlifespans.Theabsenceofaminimumageforbenefitspaidtoretiredpolice,fire,correction,andsanitationpersonnelsignificantlyaddstothecostoffundingtheirrespectivepensionsystemsandthereforeimplementingthisoptionwouldresultinsavingstothecity.Moreover,manyuniformedservicepersonnelareabletohavesecondcareersaftertheyretirefromcityserviceandcollectretirementbenefitsatthesametime.Finally,proponentsmighturgeNewYorkCitytofollowthecurrentpracticeinthemajorityoftheU.S.’snextfivelargestcities,whichalsofaceahostofcompetingneedsforpublicresources.

ATPRESENT,UNIFORMEDPOLICE,FIRE,CORRECTIONS,ANDSANITATIONpersonnelcanretireandbegincollectingfullretirementbenefitsassoonastheyhavecompleted20yearsofcreditedservice,regardlessoftheirage.Theannualpensionbenefitforindividualswhoretirewith20yearsofserviceisequaltoroughlyone-halfoftheirfinalsalary,andtheseretireesalsoretaincityhealthinsurancecoverage.Mostothercityemployeestypicallymayretireafter20yearsofservicebutmustwaituntilage57orolderbeforebeginningtocollecttheirpensions.

Inthreeofthenation’snextfivelargestcities(LosAngeles,Chicago,andPhiladelphia),newlyhiredpoliceofficersandfirefighterswhochoosetoretirepriortoage50donotbegincollectingfullpensionbenefitspriortothatageeveniftheyhavecompleted20yearsofservice.InHouston,thefourthlargestcityintheU.S.,newlyhiredpoliceofficersarenoteligibletobegincollectingretirementbenefitsuntilage55.Thisoptionproposesthatuniformedpersonnelthatjoincityservicebeginninginfiscalyear2009andremainonthejobfor20ormoreyearsbeeligibletoretireandbegincollectingretirementbenefitsonlyuponreachingtheir50thbirthday.Inaddition,uniformedpersonnelthatservelessthan20yearsbutlongenoughtoqualifyforareducedpensionwouldnotbegincollectingretirementbenefitsuntilthelatteroftheir50thbirthdayorthedateonwhichtheywouldhavecompleted20yearsofservicehadtheynotleftpriortothatpoint.Disabilitypensionpoliciespertainingtothecity’suniformedpersonnelwouldnotbeeffectedbythisoption.

NewYorkStatelegislationmustbeenactedtoimplementthisproposalbecausenewpensioneligibilityrequirementsforcitypersonnelcannotbesetsolelythroughlocalcollectivebargaining.

oPPonents might arguethatsucharevisiontothecity’spensionsystemforuniformedpersonnelwouldsignificantlyhinderrecruitmentefforts,particularlyforpolicerecruitswhoareatpresentinveryshortsupply.TheycouldalsocontendthatthepayandretirementbenefitsofferedtoprospectivepersonnelbydistantcitiesisofverylimitedrelevanceincomparisontothatwhichisofferedbycompetingpublicsectorentitiesinNewYorkStateandinjurisdictionsthatneighborNewYorkCityandhavesimilarretirementplansasourcity.

NYC Independent Budget Office February 2008 30

OPTION:Health Insurance Copayment by City Employees

Savings: $398 million in 2009, $431 million in 2010, $468 million in 2011, $508 million in 2012

ProPonents might arguethatthisproposalgeneratesrecurringsavingsforthecityandpotentialadditionalsavingsbygivingcityemployeestheincentivetobecomemorecostconsciousandtoworkwiththecitytoseeklowerpremiums.Itwillalsoprovidegreaterincentivesforunionstoworkwiththecitytoaggressivelyseeklowerhealthcarepremiums.Proponentsalsomightsaythatgiventhedramaticriseinhealthinsurancecosts,premiumcostsharingcouldpreventareductioninthelevelofcoverageandserviceprovidedtocityemployees.Additionally,proponentscouldarguethatcontributingashareofthecostsinadefined-benefithealthinsuranceplanwouldbepreferabletoshiftingtoadefined-contributionplan(e.g.,ahealthcarereimbursementarrangement),wherethecitygivestheemployeeafixedamountofmoneyfortheemployeetopurchasehealthinsurance.Finally,theycouldnotethatemployeecopaymentofhealthinsurancepremiumsiscommonpracticeintheprivatesector,andincreasinglyinpublicemploymentaswell.

THECITY’SHEALTHINSURANCECOSTShaveincreasedsharplyoverthepastdecade.Savingscouldbeachievedbyrenegotiatingmunicipalworkers’healthcarebenefitpackagetoshiftaportionofthehealthinsurancepremiumcoststoactiveemployeesandretirees.Specifically,employeesandretirees(approximately560,000NewYorkCityhealthcareplanenrollees)wouldcontribute10percentofthecostoftheirhealthinsurancepremiumsforindividualandfamilycoverage.Implementationofthisproposalwouldhavetobenegotiatedwiththerespectivemunicipalunions.

Approximately90percentofactivecityhealthinsuranceenrolleesselecteitherGHIorHIPhealthinsuranceandpaynopremiums.Themajorityofpublic-andprivate-sectoremployersrequiresomecopaymenttowardshealthinsurancepremiums.NewYorkstateemployeesarerequiredtopay10percenttowardthecostofindividualcoverageand25percentoftheadditionalcostsoffamilycoverage.Underthisoption,currentemployeesandretireeswouldcontribute10percentofthecurrentNewYorkCityhealthinsurancecontributionrateonapre-taxbasis.Thiswillmarginallyreducetheemployeecontributionratebelow10percent.

oPPonents might arguethatrequiringemployeecontributionsforhealthinsurancewouldbeaburden,particularlyforlow-wageemployees.Criticscouldarguethatcostsharingwouldmerelyshifttheburdenofrisingpremiumsontoemployees,withnoguaranteethatslowerpremiumgrowthwouldresult.Also,opponentsfearthatoncecostsharingisinplace,thecitywouldbemorelikelytoaskemployeestobearanevenbiggershareofthecostsifhealthinsurancepremiumscontinuetorise.Finally,criticswillarguethatmanycityemployees,particularlyprofessionalemployees,arewillingtoworkforthecitydespitehigherprivate-sectorwages,inreturnfortheattractivebenefitspackage.Thus,thisproposal,ifrealized,couldeffectthecity’sefforttoattractorretaintalentedemployeesinthelongrun,especiallyinpositionsthatarehardtofill.


OPTION:Institute a Biweekly Payroll System for City Employees Currently Paid on a Weekly Basis

Savings: $810,000 annually

MOSTCITYEMPLOYEESAREPAIDoneitherabiweeklyorsemi-monthlybasis.However,certaincityemployees—membersoftheUniformedSanitationmen’sAssociation(USA)andcertainDepartmentofEnvironmentalProtection(DEP)andDepartmentofSanitation(DSNY)Section220craftworkers—arepaidonaweeklybasis.

Aconversionofthepaydateperiodforthesecityemployeestoabiweeklybasiswouldsavethecitymoneyfromtwoprimarysources.First,thecitywouldaccrueinterestontheadditionalweekofmoneyheldbythecitytreasury.Second,DSNYandDEPwouldaccrueproductivitysavingsbyeliminatingtheneedtodeploypersonnelforthedistributionofpaycheckstotheworksitesoftheaffectedemployees.Institutingthischangeinthepayrollsystemwouldallowthecitytosave$810,000intotalfromboththeadditionalinterestearnedandtheincreasedproductivity.ImplementingthischangerequirescollectivebargainingnegotiationswiththeaffectedunionsatDSNYandDEP.

ProPonents might arguethatthisoptionprovidescostsavingstothecityinarelativelypainlessmanner.SavingscouldberealizedbystreamliningtimekeepingandpayrollpracticesatDSNYandDEP.Further,totheextentthattheweeklypayrollsystemengenderssomesystem-specifichumancapital,training,orexperience,exercisingthisproposalcouldallowmoreflexibilityinmanpowerplanningatbothagencies.

Fortheunions,thischangecouldcountasproductivitysavingsinbargainingwiththecity,andmightbemoreacceptabletotheunionsandtheirmembersthanotheroptionsmightbe.Thisoptioncouldalsohaveadditionalbenefitsfortheaffectedunionizedemployees;forexample,USAmembersdonothavedirectdepositbecauseitistoocostlyforthecitytoprocessdirectdepositeveryweekandthereisatimeconstraintaswell.

oPPonents might argue thatthisproposalwouldrepresentatransferofinterestearningsfromemployeestothecitytreasury.Manyunionmembersmaybeagainstthis“subsidy”sincetheywouldarguethattheyarecurrentlyunderpaidfordifficultwork.Somemayarguethatnoorlittleproductivitysavingswillaccruebecausenootherproductiveworkwillbeavailableforthoserestricted/light-dutyemployeeswhowouldotherwisebeassignedtothesepaydistributionfunctions.Thelatterwouldhavetogoonsick-leaveifnootherworkisavailable.Finally,somemayarguethatifthisoptionisimplemented,trainingmayberequiredforcurrentclericalpersonnelassignedtotheweeklypayrollfunctioninordertoteachthemthebiweeklypayrollandtimekeepingsystem.Asaresult,someofthesavingsmaybeoffsetbythistrainingcost.

NYC Independent Budget Office February 2008 3�

OPTION:Increase From � to �0 the Number of Years Needed for Pension Vesting

Savings: $3.1 million in 2011, $6.5 million in 2012, $10.0 million in 2013, $13.6 million in 2014, and $17.3 million in 2015

NEWYORkCITYEMPLOYEESAREMEMBERSoftheNewYorkCityEmployees’RetirementSystem,theTeacher’sRetirementSystem,theBoardofEducationRetirementSystem,thePolicePensionFund,andtheFirePensionFund.Currently,allcityemployeesneedtohavefiveyearsofcreditedservicetobeconsidered“vested”andeligibleforapensionbenefit.

Forcitycivilianemployeesinthe57/5retirementprogram,thepensionbenefitispaidattheageof57ifthememberisvested.Forcityuniformedpersonnelwhoarevested,thepensionbenefitispaidattheagethememberhascompleted20yearsofcreditedservice.Incontrast,allcityemployeesareentitledtoretireehealthinsuranceifheorshehasatleast10yearsofcreditedserviceandisreceivingapensioncheckfromanyofthemunicipalretirementsystems.

Thisproposalcallsforincreasingthepensionvestingrequirementfrom5yearsto10yearsforallnewcityemployees.Ifimplementedinfiscalyear2009,thesavingsfromthisproposalwouldgrowannuallyfrom$3.1millionin2011to$17.3millionin2015.Inaddition,thisproposalwouldhavenoimpactonotherpensionfeatures,suchasaccidentalandregulardisability,ofthevariousretirementsystems.WhileNewYorkCityandtherespectiveunionscanbargainoverthesupportofthispensionreformproposal,NewYorkStatelegislationisalsorequiredforittotakeeffect.

ProPonents might arguethatthischangewouldappropriatelyalignthe10yearservicerequirementforpensionswiththatforretireehealthinsurance,easingtheadministrationofbothprogramsfromahumanresourcemanagementperspective.Additionally,employeeretentioncouldbeenhancedasmorememberswouldstayincityserviceforatleast10yearstoobtainbothpensionandretireehealthinsurancebenefits.Finally,unionsmaybemoreinclinedtosupportthispensionreformproposal,asopposedtoothers,becausethisproposalwillonlyaffectnewmembers.

oPPonents might arguethatachangeinthepensionvestingrequirementwouldhinderrecruitmenteffortsamongexperiencedprofessionals,suchasengineersandaccountants,whoareover50yearsofage.Publicsectorprofessionalsareoftennotaswell-compensatedasprivate-sectoremployeesdoingsimilarwork,andprospectiveolderapplicantsmaybewillingtoacceptthelowersalaryinreturnforavestedpensionbenefitafteronlyfiveyearsofservice.Finally,criticsmightalsocontendthattheeliminationofthefiveyearvestingrequirementinhard-to-recruittitles,suchaspoliceofficerandemergencymedicaltechnician,couldmakeitevenmoredifficulttostaffthosepositions.

NYC Independent Budget Office February 200833

OPTION:Eliminate Overtime as a Factor in the Computation of Pension Benefits for City Employees

Savings: $15 million in 2011, $31 million in 2012, $49 million in 2013, $67 million in 2014, and $85 milliom in 2015

PUBLICSECTORPENSIONPROGRAMSinNewYorkCityandStateareunusualinthatearnedovertimepayisafactorinthedeterminationofanemployee’spensionbenefit.Thisisnotthecaseinmostotherjurisdictionsacrossthecountry.Infact,accordingtoa1998nationalsurvey(themostrecentdataavailable)conductedbytheU.S.DepartmentofLabor,only6percentoffull-timeemployeesinstateandlocalgovernmentpensionplansnationwidehaveovertimeasa“pensionable”componentoftheirplans.

Forindividualsnewlyhiredbythecitybeginninginfiscalyear2009,eliminatingovertimeasafactorinthecomputationoftheireventualretirementbenefitwouldyieldannualsavings(netofemployeecontributions)of$15millionin2011,withannualsavingsclimbingto$85millionby2015.Thecitywouldnotrealizesavingsuntil2011duetoacurrentactuarialpracticethatbuildsinatimelagbetweenthepointatwhichapensionplanismodifiedandthatmodification’simpactonthecitybudget.ThisproposalwouldaffectvirtuallyallcityemployeesexceptteachersandotheremployeesoftheDepartmentofEducation.

Suchachangetothecity’spensionplanwouldrequiretheapprovalofthestateLegislatureandwouldnotaltertheprovisionsofthecity’svariouspensionplansastheyrelatetocurrentcityemployees.

ProPonents might argue thattheinclusionofovertimeasafactorinitspensionplansisacostlyanomalythatthecitycannotafford.Theymightalsoarguethatthecurrentpracticeofincludingovertimeinthecomputationof“finalaveragesalary”—uponwhichannualpensionbenefitsarebased—mightluresomecityemployeestoseekoutexcessiveamountsofovertimeintheirfinalyear(s)onthejob.ItwasreportedthatmanyfirefightersandpoliceofficersretiredintheaftermathoftheSeptember11,2001terroristattackbecauseofthefactthattheirveryhighovertimeearningsinwhatwouldbetheirlastyearonthejobhadsignificantlyincreasedthepensionbenefittheywouldreceiveforretiringatthatpointintime.

oPPonents might arguethatinclusionofovertimeasafactorinthecomputationofretirementbenefitsislegitimateinthatitispartofemployees’hard-earnedcompensation.Opponentsmightalsoarguethatanydiminutionofpensionbenefitsfornewcityemployeescouldexacerbateongoingdifficultiesinattractingcertaincategoriesofnewhires,perhapsmostmarkedlyeffortstoattractasufficientnumberofpoliceofficerrecruits.


OPTION:Increase State Reimbursement for Certain Criminal Justice Costs


UNDERCURRENTNEWYORkSTATELAW,certaincriminaljusticecostsaresharedbetweenlocalgovernmentsandthestate.Overtime,thestate’sreimbursementforprobationserviceshasdeclined;thisoptionwouldraisethestate’sreimbursementrateforprobationservicesto50percent.Inaddition,newcity-fundedalternativeprogramswiththepotentialtoavoidcostlyincarcerationhavedevelopedinrecentyears.Thisoptionenvisionsthatthestateandcitywouldsharethecostsofthesealternativeprogramsequally—potentiallygeneratingsavingsforboththecityandthestate,whichbearsthefullcostofincarcerationofadultfelons,andhalfthecostofincarcerationofjuveniles.

UnderNewYorkState’sExecutiveLaw246,thestatereimbursesupto50percentofeligiblelocalprobationservicescosts.Asrecentlyas1986,NewYorkStatereimbursedcountyprobationdepartmentsfornearly47percentoftheirtotalbudgets.However,theamountofstatefundinghasdroppedsignificantlyovertheyears,andinrecentyearsthestatehasreimbursedNewYorkCityforonlyabout19percentofapprovedexpenditures.Atthesametimetheresponsibilitiesofthecity’sDepartmentofProbationhaveincreasedinareassuchasDNAtestingandsexoffenderregistration.

TheDepartmentofProbationalsooperatesoroverseesseveralprogramsdesignedtoprovideeligibleallegedjuveniledelinquentswithanalternativetodetention(ATD)inthecity’sDepartmentofJuvenileJustice’ssecureandnon-securedetentionfacilities,andtoprovidejuvenilesfoundtobedelinquentwithanalternativetoplacement(ATP)instatecustody.Totheextentthattheseprogramsdivertyouthfromdetentionandplacement,thesealternatives—whicharefarlessexpensive—saveboththecityandstatemoneyalthoughtheyareprimarilyfundedbythecity.

Restoringthestate’scontributionto50percentwouldprovidemorethan$26millioneachyearforNewYorkCityprobationservices,whilemakingATDandATPprogramseligibleforreimbursementwouldsavethecityanother$3million.ThesupportofNewYork’sGovernorandstateLegislaturewouldberequiredtoimplementthisproposal.

ProPonents might arguethathistoricallythestatehasbeenamoreequalpartnerinfundinglocalprobationservices.Ifstatefundingforprobationcontinuestoerode,thequalityofprobationservicesmaysuffer,especiallygiventhatthecity’sprobationdepartmentsupervisesroughly39percentofallprobationersinthestateand51percentofallfelonsonprobationinthestate.Asprobationisanalternativetoincarceration,thestatebenefitsdirectlywhenfelonsareplacedunderprobationratherthanincarceratedinNewYorkStateprisons,forwhichthestatebearsthebulkofthecost.Similarly,thecostsofATDandATPprogramsshouldbesharedbecauseboththecityandstatebenefitfromavoidingthehighercostsofincarceration.Moreover,alternativesallowyouthtoremaininthecommunityandschools,potentiallydecreasingrecidivismbyavoidingdifficulttransitionsfromdetentionorplacementbackintothecommunity.

oPPonents might arguethatNewYorkStateExecutiveLaw246allowsforastatutorycapbutdoesnotrequireaminimumcontributionforlocalprobationservices.TheymightalsoarguethattheATDandATPprogramsdevelopedbythecityarestillintheirearlystagesandhavenotbeenproveneffective.Furthermore,theseprogramsmayserveyouthwhowouldhaveotherwisebeenreleasedtotheirfamiliespre-adjudication,orplacedundersupervisionpost-adjudication,andthereforewouldnotyieldtheexpectedsavings.


OPTION:Swap Local Medicaid Burden for a Portion of Local Sales Tax

Savings: $2.3 billion initially

ProPonents might arguethatthenonfederalportionofMedicaidismostproperlyborneequallyacrossthestate.Forcinglocalitiestobearasubstantialportionofwhatinmostotherstatesisastate-levelburdenresultsinhigherlocaltaxesinlocalitieswithconcentrationsofMedicaid-eligibleresidents,whichcanresultincompetitivedisadvantagesforthosecounties.Proponentsmightfurtherarguethatthestate’scurrentsystemdiminishesaccountabilityformanagingtheprogram.ThelocalitiesareforcedtosupportandadministeraprogramwithpoliciesandprioritiesthatarelargelydeterminedbyAlbany.Shiftingthefullnonfederalcosttothestatewouldresultinmoreaccountabilityatthestatelevel.Finallyproponentsmightarguethatbecauseasimilarswapwasproposedinthecontextofthe2006legislationestablishingthecap,thisisaplausiblereform.

ONLYABOUTAqUARTEROFTHESTATESrequirelocalsharingofthestate’sMedicaidobligations.NewYorkisoneofthesestates,andtherequiredlocalsharehereisbyfarthelargestinthecountry.Beginningin2006,NewYorkimplementedacapontheannualincreaseinlocalMedicaidspending,withthestateabsorbingadditionalcostsabovethecap.Underthisoption,thestatewouldabsorbtheentirelocalMedicaidcostsfromallcounties(thecityistreatedlikeasinglecountyforMedicaidpurposes)acrossthestate,notjustthecostsexceedingthecap.Tohelpthestatefunditsmuchlargerobligations,aportionofthecountyshareofthelocalsalestaxwouldbeshiftedtothestatetreasury.Thus,thecostofprovidingmedicalassistancetolow-incomeresidentswouldbespreadacrosstheentirestate,ratherthanconcentratedincountieswithdisproportionatenumbersofpoorpeople.

ShiftingtheburdenforalllocallyfinancedMedicaidtothestategovernmentwouldaddanestimated$6.5billiontostateexpendituresin2008,$4.6billionfromNewYorkCityand$1.9billionfromtherestofthestate.Shiftinghalfofthecity’ssalestaxrevenueand20percentofothercounties’salestaxrevenuetothestatewouldyieldthestategovernment$3.6billioninnewrevenuein2008.Thenetincreaseinstateexpenditureswouldbeapproximately$3billioninitially.Thecosttothestatewoulddiminishovertime,sincesalestaxrevenueisexpectedtoincreaseatarateabovethe3.0percentcaponlocalMedicaidcosts.

Theswapwouldsavethecityabout$2.3billioninitiallyandsomewhatsmalleramountsinfutureyears.Theothercountieswouldhaveanetgainofabout$670millionin2008.Gainstosuburbancountieswoulddiminishovertime,whileslow-growingcountiessuchasErie,Monroe,andOnondagawouldgainmoreinlateryears.

oPPonents might arguethataswapthatresultsinasubstantialnetshiftofresourcestoNewYorkCityisnotrealisticwhilethestatefacesitsownfiscaldifficultiesandonlyayearafterthestatesubstantiallyincreasedaidtocityschools.Conversely,theymightarguethatsinceMedicaidisprimarilyastateresponsibility,thestateshouldmovetowardabsorbingthefullcostoftheprogramwithoutdemandingashareoflocalsalestaxrevenue.Finally,opponentsmightarguethat,byshiftingthemarginalcostofchangesinMedicaidpolicytothestate,thecaponlocalsharehasalreadyresolvedtheaccountabilityconcernscreatedbytheformersystemofMedicaidfunding.Inthatcase,itwouldmakemoresensetofocusonotherpolicyareaswheretheremaybemoreseriousdiscrepanciesbetweenhowprogramsarefundedandwhereauthorityoverthemlies.


OPTION:State Reimbursement for Inmates in City Jails Awaiting Trial for More Than One Year


ProPonents might arguethatthecityisunfairlybearingacostthatshouldbethestate’s,andthatthecityhaslittleabilitytoeffectthespeedyadjudicationofcasesinthestatecourtsystem.Theycouldaddthatimposingwhatwouldamounttoapenaltyonthestateforfailuretomeetstatecourtguidelinesmightpushthestatetoimprovethespeedwithwhichcasesareprocessed.Inaddition,thefactthatpretrialdetentiontimespentincityjailsisultimatelysubtractedfromupstateprisonsentencesmeansthatthestateeffectivelysavesmoneyatthecity’sexpense.

ATANYGIVENTIMEabouttwo-thirdsoftheinmatesinDepartmentofCorrection(DOC)custodyarepretrialdetainees.Amajordeterminantoftheagency’sworkloadandspendingisthereforetheswiftnesswithwhichthestatecourtsystemprocessescriminalcases.Throughouttheadjudicationprocess,detentioncostsarealmostexclusivelybornebythecityregardlessofthelengthoftimeittakescriminalcasestoreachdisposition.Themajorityoflong-termDOCdetaineesareeventuallyconvictedandsentencedtomultiyeartermsinthestatecorrectionalsystem,withtheirperiodofincarcerationupstate(atthestate’sexpense)shortenedbythatperiodoftimealreadyspentinlocaljailcustodyatthecity’sexpense.Therefore,thequickertheadjudicationofcourtcasesinvolvingdefendantsdetainedincityjailsandultimatelydestinedforstateprison,thesmallerthecity’sshareoftotalincarcerationcosts.

ExistingstatecourtstandardscallfornofelonycasesinNewYorkStatetobependinginSupremeCourtformorethansixmonthsatthetimeofdisposition.Incalendaryear2006,however,justover1,300convictedprisonersfromthecityhadalreadyspentmorethanayearincityjailsaspretrialdetainees.

Ifthestatereimbursedthecityonlyforlocaljailtimeinexcessofoneyearatthecity’saveragecostof$310perday,thecitywouldrealizeannualrevenueofabout$105million.Itshouldbestressedthatthereimbursementbeingsoughtinthisoptionisseparatefromwhatthecityhasbeenseekingforseveralyearsforothercategoriesofalreadyconvictedstateinmatestemporarilyheldincityjailsforanumberofreasons(e.g.,paroleviolationsandnewlysentenced“statereadies”).Thereimbursementsoughtwiththisoptionisassociatedwithlong-termpretrialdetentiontimeservedbyinmateswhoarelaterconvictedandsentencedtomultiyeartermsintheprisonsystem.

oPPonents might arguethatmanyofthecausesofdelayinprocessingcriminalcasesareduetofactorsoutofthestatecourt’sdirectcontrol,includingthespeedwithwhichlocaldistrictattorneysbringcasesandtheavailabilityofdefenseattorneys,amongotherthings.Furthermore,giventhatadisproportionatenumberofstateprisonersarefromNewYorkCity,callinguponthecitytobearthecostsassociatedwithlong-termdetentionconstitutesanappropriateshiftingofcostsfromthestatetothecity.


OPTION:Raise Reimbursement Rate For Certain Categories Of State Inmates Held In City Jails


ProPonents might arguethatimposingonlocalitiesthecostofincarceratingstateinmatesisinherentlyunfair.Theymightargue,asdidtheBloombergAdministrationindocumentationaccompanyingthereleaseofthe2008PreliminaryBudget,thatstate-readyinmatesandparoleviolatorsaretheresponsibilityofthestateandthecityshouldthereforereceivefullreimbursementfortheactualcostofincarceratingtheseinmates.

THECITYCURRENTLYRECEIVESFROMTHESTATEjust$40perdayforseveralcategoriesofstateinmatestemporarilyheldincityjails,farlessthantheaveragecostincurredbythecityof$310perday.

Thestateinmatesatissuecompriseabout9percentoftheroughly14,000inmatesheldincityjails.Theseinmatesincludeindividualswhohaveviolatedsomeaspectoftheconditionsunderwhichtheywereparoledfromstateprison,newlyconvictedandsentencedfelonsawaitingtransferintothestateprisonsystem,andotherstateinmatesbeingheldincityjailsasaresultofanordertoappearinlocalcourtproceedings.

Underthisoption,thereimbursementratewouldbeincreasedfrom$40to$310perday,theaveragedailycostofincarceratinganinmateinthecity’sjailsystem.Implementationofthisoptionwouldrequireenactmentofstatelegislation.

oPPonents might arguethatthereisatleastsomejustificationforholdinglocalitiesresponsibleforthecostoftemporarilyincarceratingthesestateinmates.Forexample,paroleviolatorsandnewlysentencedfelonsareincarceratedincityjailsasaresultoftransgressionsorcrimestheywereeitherallegedtohavecommittedorfoundguiltyofwithinthecity.Inaddition,locallyelecteddistrictattorneysoftenplayakeyroleinthedecisiontosummon“courtordered”stateinmatesbroughtbacktothecityforthepurposeofappearingincourtproceedingswithinthefiveboroughs.

Revenue Options


OPTION:Personal Income Tax Increases for High-Income Residents

Revenue: $366 million in 2009, $619 million by 2012

ProPonents might arguethatcontinuingtherecentPITincreaseswouldprovideasubstantialboosttocityrevenueswithoutaffectingthevastmajorityofcityresidents.Only5.3percentofallcityresidenttaxfilersin2009—or7.8percentofalltaxpayers—wouldpaymoreunderthisproposal;allofthemwouldhaveadjustedgrossincomesabove$125,000.ThereisnoevidencethattheseaffluentNewYorkershaveleftthecityinresponsetotherecentthree-yeartaxincrease,evenwithalargerNewYorkStatePITincreasealsoenactedatthesametime.Also,thisproposalavoidsburdensomerecaptureprovisionsandfeaturesfarsmallertaxincreasesthanthoseenactedfrom2003to2005,somostallaffectedtaxpayerswouldbearlessofataxincreasethantheydidpreviously.Finally,fortaxpayerswhodonotpaythealternativeminimumtaxandareabletoitemizedeductions,increasesincityPITburdenswouldbepartiallyoffsetbyreductionsinfederalincometaxliability,lesseningdisincentivesforthemostaffluenttoremaincityresidents.

UNDERTHISOPTION,THEMARGINALTAXRATESOFHIGH-INCOMENEWYORkERSwouldbeincreased.Currently,thehighestofthefourpersonalincometax(PIT)bracketsbeginsat$50,000to$90,000oftaxableincome,dependingonfilingstatus,andhasaneffectivemarginaltaxrateof3.65percent(the3.2percentbaseratemultipliedbythe14percentsurcharge).Thisoptionwouldcreatetwoadditionaltaxbracketsatthetop.Thefifthbracketwouldbeginat$125,000forsinglefilers,$225,000forjointfilers,and$150,000forheadsofhousehold,andwiththesurchargeitsmarginalratewouldbe3.92percent.Thetopbracketwouldbeginat$250,000forsingles,$450,000forjointfilers,and$300,000forheadsofhousehold,withaneffectiverateof4.20percent.Thisoptionissimilarinstructuretothe2003-2005PITincreasethatraisedupper-incometaxburdens,buttheincomelevelsdefiningthetopbracketsaredifferentandtheincreasesinmarginalratesare0.25percentagepointslessthanthoseineffectfrom2003to2005.Thisoptionalsodiffersinthatitdoesnotincludethe2003-2005“recaptureprovisions”underwhichsomeoralloftaxableincomesnotinthehighestbracketsweretaxedatthehighestmarginalrates.Ifthehigherratesofthisproposalwentintoeffectatthebeginningofcalendaryear2009,theirfullrevenue-raisingeffectwouldnotbeevidentuntilfiscalyear2010,whenthecitywouldreceiveanadditional$603millionofPITrevenue.ThistaxchangewouldrequireapprovalbythestateLegislature.

oPPonents might arguethatNewYorkersarealreadyamongthemostheavilytaxedinthenationandafurtherincreaseintheirtaxburdenislikelytoinducemovementoutofthecity.NewYorkisoneofonlythreeamongthelargestU.S.citiestoimposeapersonalincometax,anditsPITburdenissecondonlytoPhiladelphia’s.Taxincreasesonlyexacerbatethecity’scompetitivedisadvantagewithrespecttootherareasofthecountry.Evenwithoutrecaptureprovisions,in2009cityresidentsearningmorethan$500,000wouldonaveragepayanadditional$11,100inincometaxes.Thesetaxpayersareprojectedtoaccountforalittlemorethanhalfofthecity’sPITrevenueinthatyear,andif5percentofthemweretoleavethecityinresponsetohighertaxes,PITrevenuewoulddeclineby$198million(assumingthosemovinghadaveragetaxliabilitiesforthegroup).Overtimetherevenuelosswouldbefurthercompoundedbyreductionsinothercitytaxsources,suchasbusinessincometaxes,thesalestax,andthepropertytax.


OPTION:Restore the Former Commuter Tax


ONEOPTIONTOINCREASECITYREVENUESwouldbetorestorethenonresidentearningscomponentofthepersonalincometax(PIT),knownmorecommonlyasthecommutertax.Since1971thetaxhadequaled0.45percentofwagesandsalariesearnedinthecitybycommutersand0.65percentofself-employmentincome.NineyearsagotheNewYorkStateLegislaturerepealedthetax,effectiveJuly1,1999.IftheLegislatureweretorestorethecommutertaxatitsformerrateseffectiveonJuly1ofthisyear,thecity’sPITcollectionswouldincreaseby$713millionin2009,$755millionin2010,$798millionin2011,and$835millionin2012.

oPPonents might argue thatreinstatingthecommutertaxwouldadverselyaffectbusinesslocationdecisionsbecausethecitywouldbecomealesscompetitiveplacetoworkanddobusinessbothwithintheregionandwithrespecttootherregions.Bycreatingdisincentivestoworkinthecity,thecommutertaxwouldcausemorenonresidentstopreferholdingjobsoutsideofthecity.If,inturn,businessesfinditdifficulttoattractthebestemployeesforcity-basedjobsorself-employedcommuters(includingthoseholdinglucrativefinancial,legal,advertising,andotherpartnerships)areinducedtoleavethecity,theemploymentbaseandnumberofbusinesseswouldshrink.ThetaxwouldalsomaketheNewYorkregionarelativelylessattractiveplaceforbusinessestolocate,thusdampeningthecity’seconomicgrowthandtaxbase.Anotherargumentagainstthecommutertaxisthatthecompaniesthatcommutersworkforalreadypayrelativelyhighbusinessincometaxes,whichshouldprovidethecityenoughrevenuetopayfortheservicesthatcommutersuse.Finally,atthetimethatthestateLegislaturerepealedthecommutertax,suburbanlegislatorsarguedthatitwasfairtoprovidecommuterswithataxcutbecausecityresidentsbenefitedgreatlyfromtheeliminationofthe12.5percent(“criminaljustice”)surcharge,whichintermsofabsolutedollaramounts(thoughnotpercentageterms)isaboutone-thirdgreaterthanthenonresidenttaxthatwasrepealed.

ProPonents might argue thatpeoplewhoworkinthecity,whetheraresidentornot,relyonpolice,fire,sanitation,transportation,andothercityservicesandthusshouldassumesomeofthecostofprovidingtheseservices.Revenuefromthetaxcouldbededicatedtospecificusesthatarelikelytobenefitcommuters,suchastransportationinfrastructureorpolice,fire,andsanitationinbusinessdistricts.IfNewYorkCityweretotaxcommuters,itwouldhardlybeunusual:NewYorkStateandmanyotherstates,includingNewJerseyandConnecticut,taxnonresidentswhoearnincomewithintheirborders.Moreover,withtaxratesbetweenroughlyafourthandaneighthofPITratesfacingresidents,itwouldnotundulyburdenmostcommuters.CensusBureaudataonthenumbersandearningsofcommutersandcityresidentsindicatesthatin2005commutersonaverageearned$92,100inthecity,comparedtoresidents’averageearningsof$48,400.Also,bylesseningthedisparityoftherespectiveincometaxburdensfacingresidentsandnonresidents,reestablishingthecommutertaxreducestheincentiveforcurrentresidentsworkinginthecitytomoveout.Finally,somemightargueforreinstatingthecommutertaxonthegroundsthatthepoliticalprocesswhichledtoitseliminationwasinherentlyunfairinspiteofvariouscourtrulingsupholdingthelegalityoftheelimination.ByrepealingthetaxwithoutinputfromorapprovalofeithertheCityCouncilorthen-MayorGiuliani,thestateLegislatureunilaterallyeliminatedasignificantsourceofcityrevenue.


OPTION:Establish a Progressive Commuter Tax

Revenue: $1.4 billion in 2009, $1.6 billion by 2012

ProPonents might arguethatpeoplewhoworkhere,whetheraresidentornot,relyonbasiccityservices,socommutersshouldbearsomeportionofthecostofprovidingtheseservices.Becauseitwouldtaxupper-incomefamiliesathigherratesthanitwouldmoderate-incomefamilies,aprogressivecommutertaxwouldbefairerthantheformertax,whichtaxedincomeearnedinthecityatflatrates(0.45percentofwagesandsalariesand0.65percentofself-employedincome).Asestimatedforcalendaryear2009,halfofallcommuterswillhaveannualincomesabove$125,000(comparedwith8.6percentofallcityresidentfilers);thisgroupwouldalsoberesponsiblefor87.6percentofthecommutertaxliability,sothetaxwouldprimarilybebornebyhouseholdswhocanbestaffordit.Moreover,residentsofNewJerseyandConnecticut,whoconstitutemostout-of-statecommutersandtendtohavehighercity-basedincomesthandoin-statecommuters,wouldbeabletoreceiveacreditagainsttheirstatepersonalincometaxforaportionoftheircommutertaxliability,thusoffsettingsomeoftheiradditionaltaxburden.Toagreaterextentthanjustrestoringtheoldtax,aprogressivecommutertaxwouldlessenthedisparityoftherespectiveincometaxburdensfacingresidentsandnonresidentsandthusreducetheincentiveforcurrentresidentsworkinginthecitytomoveout.

ANOTHEROPTIONTOINCREASECITYREVENUESwouldbetoestablishaprogressivecommutertax—oneinwhichcommuterswithhigherincomesaretaxedathigherrates,similartohowcityresidentsaretaxedthoughatonlyone-thirdtherates.Regardlessofwhereitisearned,thecommuter’sentiretaxableincomewouldbesubjecttoaprogressivelystructuredtax,thoughtheresultingliabilitywouldthenbereducedinproportiontotheshareoftotalincomeactuallyearnedinNewYork—comparabletohowNewYorkStatetaxesnonresidentswhoearnsomeoralloftheirincomewithinitsborders.MayorBloombergproposedsuchataxinNovember2002,buthecalledfortaxingcityresidentsandcommutersatthesamerates.Enactingthisproposalrequiresstateapproval.Ifaprogressivecommutertaxatone-thirdtheratesoftheresidenttax(0.97percentinthelowesttaxbracketto1.22percentinthehighest)weretobeginonJuly1,2008,theboosttocityrevenueswouldbesubstantial:$1.407billionin2009,$1.484billionin2010,$1.578billionin2011,and$1.617billionin2012.

oPPonents might arguethatanycommutertaxwouldadverselyaffectbusinesslocationdecisionsbecausethecitywouldbecomealesscompetitiveplacetoworkanddobusinessbothwithintheregionandwithrespecttootherregions.Theadverseeconomiceffectsoftheproposedprogressivetaxwouldbeworsethanthoseoftheformercommutertaxbecausetheprogressivetax’sratewouldbehigher;averagetaxliabilityin2009wouldbeanestimated$1,600.Bycreatingdisincentivestoworkinthecity,thecommutertaxwouldcausemorenonresidentstopreferholdingjobsoutsideofthecity.If,inturn,businessesthatfinditdifficulttoattractthebestemployeesforcity-basedjobsorself-employedcommuters(includingthoseholdinglucrativefinancial,legal,advertising,andotherpartnerships)areinducedtoleavethecity,theemploymentbaseandnumberofbusinesseswouldshrink.ThetaxwouldalsomaketheNewYorkregionarelativelylessattractiveplacefornewbusinessestorelocate.Anotherpossibleargumentagainstthecommutertaxisthatthecompaniesthatcommuterstypicallyworkforalreadypayrelativelyhighbusinessincometaxesandhighcommercialpropertytaxes,whichshouldprovidethecityenoughrevenuetopayfortheservicesthatcommutersuse.


OPTION:Restructure Personal Income Tax Rates To Create a More Progressive Tax


THISOPTIONWOULDCREATEAMOREPROGRESSIVESTRUCTUREofthepersonalincometax’s(PIT)ratesbyreducingmarginalratesinthebottomincomebracketsandraisingmarginalratesatthetop.Unlikethe2003-2005PITincreaseaffectingupper-incomefilers,thisoptionwouldprovidebothtaxcutstomostresidenttaxfilersandalastingboosttocitytaxcollections.

Thebasetaxrateswouldbecomeasfollows:Thelowestmarginalratewouldbereducedfrom2.55percentto2.35percent,andthenexthighestratewouldbereducedfrom3.1percentto2.95percent.Theratesandincomerangeofthethirdbracketwouldremainthesamebutthetopbracketwouldnowbecomedividedintothreegroups.Anewfourthbracketwithaslightlyincreasedbaserateof3.35percentwouldendatincomesof$125,000forsinglefilers,$225,000forjointfilers,and$150,000forheadsofhouseholds(singleparents).Thenextbracketwouldhaveamarginalrateof3.44percentforincomesupto$250,000,$450,000,and$300,000forsingle,joint,andheadofhouseholdfilers,respectively.Themarginalrateinthenewtopbracketwouldbe3.68percent,a0.60percentagepointincreaseoverthetopratepriortothetemporaryincrease.Thisoptiondoesnotinclude“recapture”provisions,sotaxpayersinthetopbracketswouldagainbenefitfromthemarginalratesinthelowerbracketsofthetaxtable.Ifthenewrateswereapprovedbythestateandwentintoeffectatthebeginningofcalendaryear2009,theirfullrevenue-raisingeffectwouldnotbeevidentuntilfiscalyear2010.

oPPonents might argue thatiftheprincipalgoalofalteringthePITistoraiserevenue,thisoptionissomewhatinefficient.Fortaxyear2009,thereductionsinbaseratesinthebottomtwotaxbracketsdecreasetherevenue-raisingpotentialoftheaccompanyingincreasesbyatleast$117million.Furthermore,whilemanynon-affluentfilerswouldreceivetaxcutsunderrestructuring,filerswithincomesabove$1millionwouldstillseetheirPITliabilitiesriseonaveragebyanestimated$21,300in2009.Thislargeanincreasecouldcauseatleastsomeofthemostaffluenttoleavethecity.Ifonly5percentof“average”millionaires(about1,100filers)weretoleavetown,thecitywouldloseroughly$167millionannuallyinPITrevenue,andovertimethisrevenuelosswouldbefurthercompoundedbyreductionsinothercitytaxsources.Finally,inthecomingyearsmoreNewYorkerswillbecomesubjecttothefederalalternativeminimumtax,whichdoesnotallowtaxpayerstodeductstateandlocaltaxliabilities,somanywhowouldpayhighertaxesunderthisoptionwillbeartheentireadditionaltaxburden.

ProPonents might argue thataprogressiverestructuringofPITbaserateswouldsimultaneouslyachieveseveraldesirableoutcomes:alastingincreaseincitytaxrevenue,ataxcutforthemajorityoffilers,andamoreprogressivetaxratestructure.RestructuringwouldsignificantlyheightentheprogressivityofthePIT,whichhadbeenmadelesssoin1996whenthenumberoftaxbracketswasreduced.Restructuringhastheadvantageofprovidingtaxcutstoandraisingthedisposableincomesofalargenumbersoffilers.Aprojected76.8percentofalltaxfilers,almostallwithincomesbelow$250,000,wouldreceiveataxcutincalendaryear2009.Thisproposalalsowouldavoidtheburdensomerecaptureprovisionsofthe2003-2005increase.Finally,formanytaxpayerswhoitemizedeductions,increasesincityPITburdenswouldbepartiallyoffsetbyreductionsinfederalincometaxliability,lesseningdisincentivesforthemostaffluenttoremaincityresidents.


OPTION:Subject Variable Supplemental Fund Payments To New York City and State Income Taxes

Revenue: $3.2 million annually

UNLIkEOTHERJURISDICTIONS,NewYorkCityprovidesavariablesupplementalfund(VSF)allowanceforuniformedpolice,fire,andcorrectionpersonnelafter20yearsofcreditedservice.Individualswhoretireeitherwithlessthan20yearsofcreditableserviceorwhoretireonadisabilitypensionarenoteligiblefortheVSFallowance.

TheVSFwascreatedaspartofanagreementwiththeuniformedpoliceandfireunionsinreturnforallowingthePoliceandFirePensionFundstoinvestinhigherriskequities,whosehigherratesofreturnwereexpectedtoreduceNewYorkCity’srequiredannualcontributionstothesefunds.WhilethepoliceandfireVSFswereestablishedthroughthecollectivebargainingprocess,thecorrectionofficer’sVSFwasthedirectresultofstatelegislation.

Variablesupplementalfunddistributionsarenotconsideredretirementbenefitsandthus,arenotprotectedfromthepensiondiminutionclauseoftheNewYorkStateConstitution.Asaresult,theVSFallowancecanbeadjustedbyachangeinstatelaw.Forpoliceandfirepersonnel,theVSFallowanceisstatutorilyguaranteedat$12,000peryear.However,forcorrectionpersonnelitisnotguaranteeduntiltheyear2019.Atthepresenttime,correctionpersonneldonotreceiveVSFdistributionsbecausetheirVSFallowanceisbasedonadditionalearningsgarneredfromthepensionfund’shigher-riskinvestments.Becausetheseadditionalearnings(the“pensionskim”)continuetofallshortofthetotalamountnecessarytopaythefullVSFallowanceforalleligiblecorrectionspersonnel,noVSFpaymentsarecurrentlymadetotheseretirees.Roughly,two-thirdsofallPolicePensionFundretireesandone-thirdofallFirePensionFundretireesreceiveaVSFallowance.

Currently,allpensiondistributionsfromNewYorkCity’sfiveretirementsystemsareexemptfromanycityorstateincometaxes.Underthisoption,VSFdistributionswouldbesubjecttocityandstateincometaxes,therebygeneratingeachyearabout$3.2millioninrevenueforthecityand$11.1millionforthestate.NewYorkStatelegislationwouldberequiredforthisoptiontotakeeffect.

oPPonents might argue thatthisproposal,ifenacted,couldactuallycostthecitymoneysinceitwouldserveasaninducementforVSFbeneficiariestomoveoutofthecityorstatetoavoidtheNewYorkCityorNewYorkStatetax.Inaddition,itwouldcontravenethebargaininghistoryoftheVSF.

ProPonents might arguethatthefactthattheVSFpaymentsaremadefromthepensionfundsshouldnotimmunizethemfromeithercityorstateincometaxes.SincetheVSFisnowadefinedbenefitforuniformedpoliceandfirepersonnel,NewYorkCitynowbearsalltheriskoffundingthe$12,000peryearVSFallowanceintheeventthattheadditionalpensionearningsareinsufficient.


OPTION:Raise Cap on Property Tax Assessment Increases

Revenue:$74 million in first year and $140 million to $175 million in fifth year

ProPonents might arguethatanincreaseinthecapswouldeventuallyyieldsignificantnewrevenueforthecity.Further,byallowingtheassessmentsonmorepropertiestogrowproportionatelywiththeirmarketvalues,intra-classinequitieswouldbelessened.Finally,byallowingtheoveralllevelofassessmentinClass1andinpartofClass2togrowfaster,theinterclassinequitiesinthecity’spropertytaxsystemwouldbereduced.

UNDERCURRENTLAW,propertytaxassessmentsforClass1properties(one-,two-,andthree-familyhomes)maynotincreasebymorethan6percentperyearor20percentoverfiveyears.Forapartmentbuildingswithfourto10units,assessmentincreasesarelimitedto8percentinoneyearand30percentoverfiveyears.Thisoptionwouldraisetheannualassessmentcapsto8percentand30percentforfiveyearsforClass1propertiesandto10percentannuallyand40percentoverfiveyearsforsmallapartmentbuildings.Statelegislationwouldbeneededtoimplementthehighercapsandtoadjustthepropertytaxclasssharestoallowthecitytorecognizethehigherrevenues.

Thischangewouldbringin$74millionforfiscalyear2010(withtheassessmentrollforfiscalyear2009alreadylargelycomplete,2010isthefirstyeartheoptioncouldbeineffect)and$140millionto$175millionannuallyafterfiveyears.Theserevenueestimatesarehighlysensitivetoassumptionsaboutchangesinmarketvalues.TheaveragepropertytaxincreaseinthefirstyearforClass1propertieswouldbeapproximately$81.

TheassessmentcapsforClass1wereestablishedinthe1981legislationcreatingthecity’scurrentpropertytaxsystem(S7000a)andfirsttookeffectforfiscalyear1983.ThelimitsonsmallapartmentbuildingsinClass2wereaddedseveralyearslater.Thecapsareoneofanumberoffeaturesinthecity’spropertytaxsystemthatkeepsthetaxburdenonClass1propertiesverylowinordertopromotehomeownership.Assessmentcapsareonewaytoprovideprotectionfromrapidincreasesintaxesdrivenbyappreciationintheoverallpropertymarketthatmayoutstriptheabilityofindividualownerstopay,particularlythosewhoareretiredoronfixedincomes.

Althougheffectiveatprotectingsuchowners,itisacknowledgedthatassessmentcapscauseotherproblems.Theycanexacerbateexistinginequitieswithinthecappedclassesifmarketvaluesinsomeneighborhoodsaregrowingfasterthanthecapwhilevaluesinotherneighborhoodsaregrowingslowerthanthecap.Moreover,inaclassifiedtaxsystemsuchasNewYork’s,ifonlyonetypeofpropertybenefitsfromacap,interclassdifferencesintaxburdenswillalsogrow.Beyondtheseequityconcerns,capscanconstrainrevenuegrowthifmarketvaluesaregrowingatarateabovethecap,particularlyifthecapsaresetlowerthanneededtoprovidethedesiredprotectionforhomeowners’abilitytopay.

oPPonents might arguethatincreasingtheburdenonhomeownerswouldunderminethecity’sgoalsofencouraginghomeownershipanddiscouragingtheflightofmiddle-classtaxpayerstothesuburbs.Otheropponentswouldarguethatgiventheequityandrevenueshortcomingsofassessmentcapstheyshouldbeeliminatedentirelyratherthanmerelyraised.


OPTION:Tax Vacant Residential Property the Same as Commercial Property

Revenue: $47.5 million in 2009, rising to $256.3 million per year when fully phased in

UNDERNEWYORkSTATELAW,avacantpropertyinNewYorkCity(outsidetheareasouthof110thStreetinManhattan)whichissituatedimmediatelyadjacenttopropertywitharesidentialstructure,hasthesameownerastheadjacentresidentialproperty,andhasanareaofnomorethan10,000squarefeetiscurrentlytaxedasClass1residentialproperty.Infiscalyear2009,thereareroughly25,000suchvacantproperties.AsClass1property,thesevacantlotsareassessedatnomorethan6percentoffullmarketvalue,withincreasesinassessedvalueduetoappreciationcappedat6percentperyearand20percentoverfiveyears.In2009,themedianratioofassessedvaluetofullmarketvalueisexpectedtobe1.7percentfortheseproperties.

Underthisoption,whichwouldrequirestateapproval,eachvacantlotwithanareaof2,500squarefeetormorewouldbetaxedasClass4,orcommercialproperty,whichisassessedat45percentoffullmarketvalueandhasnocapsonannualassessmentgrowth.About13,600lotswouldbereclassified.Phasingintheincreaseinassessedvalueevenlyoverfiveyearswouldgenerate$47.5millioninadditionalpropertytaxrevenueinthefirstyear,andthetotalincrementwouldgrowby$52.2millionineachofthenextfouryears.Assumingthatratesremainattheir2008levels,propertytaxrevenueinthefifthandfinalyearofthephase-inwouldbe$256.3millionhigherthanwithoutthisoption.

oPPonents might argue thatthecurrenttaxtreatmentofthisvacantlandservestopreserveopenspaceinresidentialareasinacitywithfartoolittleopenspace.Opponentsalsomighthavelessfaithinthepowerofexistingzoningandlandusepoliciestoadequatelyrestrictdevelopmentinresidentialareas.

ProPonents might argue thatvacantpropertyshouldnotenjoythelowassessmentbenefitsofClass1thataremeantforhousing.Theymightalsoarguethatthisspecialtaxtreatmentofvacantlanddiscouragesresidentialdevelopment,anunwisepolicyinacitywithacriticalhousingshortage.Proponentsmightfurthernotethatthelotsizerestrictionof2,500squarefeet(themedianlotsizefornon-vacantClass1propertiesinNewYorkCity)wouldnotcreateincentivestodevelopverysmalllots,andthecity’szoninglawsandlandusereviewprocessalsoprovideasafeguardagainstinappropriatedevelopmentinresidentialareas.


OPTION:Extend the Mortgage Recording Tax

Revenue: $136 million annually

THEMORTGAGERECORDINGTAX(MRT)isleviedontheamountofthemortgageusedtofinancethepurchaseofhouses,condoapartments,andallcommercialproperty.Itisalsoleviedwhenmortgagesonsuchpropertiesarerefinanced.TheresidentialMRTtaxrateis1.0percentofthevalueofthemortgageiftheamountoftheloanisunder$500,000,and1.125percentforlargermortgages.Currently,salesofcoopapartmentsarenotsubjecttotheMRT,sincecoopfinancingloansarenottechnicallymortgages.ExtendingtheMRTtocoopswasinitiallyproposedin1989whentherealpropertytransfertaxwasamendedtocovercoopapartmentsales.

ThechangewouldrequirethestateLegislaturetobroadenthedefinitionoffinancingsubjecttotheMRTtoincludenotonlytraditionalmortgagesbutalsoloansusedtofinancethepurchaseofsharesinresidentialcooperatives.IBOestimatesthatextendingtheMRTwouldraise$136millionannually.

oPPonents might argue thattheproposalwillincreasecoststocooppurchasers,resultingindepressedsalespricesandultimatelylowermarketvalues.

ProPonents might argue thatthisoptionservesthedualpurposeofincreasingrevenueandendingtheinequitythatallowscooperativeapartmentstoavoidataxthatisimposedontransactionsinvolvingothertypesofrealestate.


OPTION:Luxury Apartment Rental Tax

Revenue: $24.2 million in 2009, $25.7 million in 2010, $29.9 million in 2011

THISPROPOSALWOULDIMPOSEATAXontheownerofaresidentialdwellingunitrentingformorethan$3,000permonth.A1percenttaxontheestimated50,000apartmentsrentingfor$3,000ormore—whichhaveanaveragerentof$4,047permonth—wouldraiseapproximately$24.2millionin2009,risingasrentsincreaseandthenumberofunitsrentingforabove$3,000grows.Theincrease,whichwouldrequirestateapproval,couldbepassedontotenantsinwholeorinpart(dependingonmarketconditions)whenleasesarerenewedorunitsbecomevacant.

oPPonents might argue thatthepropertytaxalreadytendstofalldisproportionatelyonrentalbuildings,comparedtoeithersingle-familyhomesorcoopandcondobuildings.Anadditional“luxury”surchargewouldfallonmanyrenterswho,duetoalackofaffordablehousinginthecity,pay$3,000ormorebutforwhomthisrepresentsasignificantfinancialburden.Approximately53percentofthetenantslivinginunitsrentingfor$3,000ormorepermontharepayingmorethanone-thirdoftheirincomeinrent,accordingtothe2005HousingandVacancySurvey.About31percentofthesetenantsarepayingmorethan50percentoftheirincomeinrent.Evenasmallincreaseinrentwouldbedifficultforthesetenantstoafford.Finally,opponentsmightarguethatthetaxwouldatleastinitiallyfallonbuildingowners,whomayormaynotbeabletoaffordtheincrease.

ProPonents might arguethatthe$3,000thresholdforthistaxisabove$2,000—thepointatwhichapartmentsareremovedfromrentregulation.Thereforethetaxwillnotaffectthecity’sstockofaffordablehousing.Totheextentthatthetaxispassedontotenants,itislikelythatthisproportionatelysmalltaxwouldfalllargelyonthecity’swell-to-do,whocouldeasilyaffordtopayanaverageof$40morepermonth.Theyalsocouldarguethatvacancydecontrolforrent-regulatedapartmentsrentingfor$2,000ormorehasyieldedsignificantprofitstobuildingowners,whocanthusaffordtopaythismodesttaxthat,atleastinitially,willfallonowners.


OPTION:Eliminate the Manhattan Resident Parking Tax Abatement


THECITYIMPOSESataxof18.5percentongarageparkinginManhattan.Manhattanresidentswhoparkacarlongtermareeligibletohaveaportionofthistaxabated,andareinsteadchargeda10.5percenttax.Byeliminatingthisabatement,whichrequiresstateapproval,thecitywouldgenerateanadditional$3millionannually.

oPPonents might argue thatthetaxabatementisnecessarytoencourageManhattanresidentstoparkingarages,therebyreducingdemandfortheverylimitedsupplyofstreetparking.Furthermore,carsarescarcelyaluxurygoodformanyoftheManhattanresidentswhoworkoutsidetheboroughandrelyontheircarstocommute.Eliminatingthetaxabatementcouldpushthesehouseholdstoleavethecityaltogether.Finally,theycouldarguethat,atleastincertainneighborhoods,residentsareessentiallyforcedtopaythesamepremiumrateschargedtocommutersfromoutsidethecity,whicharehigherthanthosechargedinpredominantlyresidentialareas.

ProPonents might argue thathavingacarinManhattanisaluxury.Driverswhocanaffordtoownacarandleasealong-termparkingspacecanaffordtopayapremiumforgaragespace,whichisinshortsupplyinManhattan.Manhattancarownerscontributetothecity’scongestion,poorairquality,andwearandtearonstreets.Inturn,theyshouldpaythetaxtopayfornecessarycityservices.

TheymightalsopointoutthattheadditionaltaxwouldbeasmallcostrelativetotheoverallexpenseofowningandparkingacarinManhattan.Themedianmonthlycosttoparkis$500indowntownManhattan,and$630inmidtown.Thetaxincreasewouldthereforerangefrom$40to$50permonth—lessinresidentialneighborhoodswithlessexpensiveparking.Thisrelativelymodestincreaseisunlikelytosignificantlyinfluencecarowners’choicesaboutwheretopark.


OPTION:Eliminate Property Tax Exemption for Madison Square Garden

Revenue:$12 million in 2009

ProPonents might argue thattaxincentivesarenowunnecessarybecausetheoperationofMadisonSquareGardenisalmostcertainlyprofitable.BecauseMadisonSquareGarden,L.P.ownstheknicksandRangersteams,andtheMSGNetworkandFoxSportsNewYork,itreceivesgame-relatedrevenuefromtickets,concessions,andcablebroadcastadvertising.Inaddition,MadisonSquareGardenhostsconcerts,theatricalproductions,iceshows,thecircus,andmuchmoreinitsarenaandtheater,anditcollectsbothrentandconcessionrevenueontheseevents.Proponentsalsomightnotethatprivatelyownedsportsarenasbuiltinrecentyearsinothermajorcities,suchastheFleetCenterinBostonandtheUnitedCenterinChicago,generallydopayrealpropertytaxes—asdidMSGfrom1968whenitopeneduntil1982—althoughsomehavereceivedothergovernmentsubsidiessuchasaccesstotaxexemptfinancingandpublicinvestmentinrelatedinfrastructureprojects.InthecaseofMSG,thecontinuingsubsidy,longaftertheconstructioncostshavebeenrecouped,isatoddswiththephilosophythatguideseconomicdevelopmenttaxexpenditurepolicy.

THISOPTIONWOULDELIMINATETHEREALPROPERTYTAXEXEMPTIONforMadisonSquareGarden(MSG).Formorethantwodecades,MadisonSquareGardenhasenjoyedafullexemptionfromitstaxliabilityforthepropertyitusesforsports,entertainment,expositions,conventions,andtradeshows.Infiscalyear2009,thetaxexpenditure,oramountofforegonetaxes,isexpectedtobe$12.4million.UnderArticle4,Section429oftheRealPropertyTaxlaw,theexemptioniscontingentuponthecontinueduseofMadisonSquareGardenbyprofessionalmajorleaguehockeyandbasketballteamsfortheirhomegames.Adjustedforinflation,thecumulativevalueoftheexemptionsinceitwasenactedin1982,measuredin2008dollars,willreach$215.3millionin2009.

Whenenacted,theexemptionwasintendedtoensuretheviabilityofprofessionalmajorleaguesportsteamsinNewYorkCity.Legislatorsdeterminedthat“operatingexpensesofsportsarenasservingasthehomeofsuchteamshavemadeiteconomicallydisadvantageousforsaidteamstocontinuetheiroperations;thatunlessactionistaken,includingrealpropertytaxreliefandtheprovisionofeconomicalpowerandenergy,thelossoftheteamsislikely…”(Section1ofL.1982,c.459).Eliminatingthisexemptionwouldrequirethestatetoamendthissectionofthelaw.

oPPonents might argue thatthepresenceoftheteamscontinuestoeconomicallybenefitthecityandthatforegoing$12millionisreasonablecomparedtotheriskthattheteamsmightleavethecity.Somealsomightcontendthatrenegingonthetaxexemptionwouldaddtotheimpressionthatthecityisnotbusiness-friendly.InrecentyearsthecityhasenteredintoagreementswiththeNets,Mets,andYankeestosubsidizenewfacilitiesforeachoftheseteams.Theseagreementshaveleveledtheplayingfieldintermsofpublicsubsidiesforourmajorleagueteams.EliminatingthepropertytaxexemptionnowforMSGwouldbeunfair.


OPTION:Revise Coop/Condo Property Tax Abatement Program

Revenue:$95 million in 2008, rising to $128 million in 2011

ProPonents might arguethatsuchinefficiencyinthetaxsystemshouldneverbetolerated,particularlyatatimewhenthecityfacessignificantbudgetgaps.Furthermore,theseunnecessaryexpendituresareconcentratedinneighborhoodswheretheaveragehouseholdincomesareamongthehighestinthecity.Sincecityresourcesarealwayslimited,itisimportanttoavoidgivingbenefitsthataregreaterthanwereintendedtosomeofthecity’swealthiestresidents.

RECOGNIzINGTHATMOSTAPARTMENTOWNERShadahigherpropertytaxburdenthanownersofClass1(one-,two-,andthree-family)homes,in1997theMayorandCityCouncilenactedapropertytaxabatementprogrambilledasafirststeptowardsthegoalofequaltaxtreatmentforallowner-occupiedhousing.Aproblemwiththisstopgapmeasure,whichhassubsequentlybeenrenewedtwice,isthatsomeapartmentowners—particularlythoseresidingeastandwestofCentralPark—alreadyhadlowpropertytaxburdens.ADecember2006IBOstudyfoundthat40percentoftheabatementprogram’sbenefitsgotoapartmentownerswhosetaxburdenswerealreadyaslow,orlower,thanthatofClass1homeowners.Another14percentgaveotherapartmentownersbenefitsbeyondtheClass1level.

Undertheoptionoutlinedhere,thecitycouldreducetheinefficiencyintheabatementbyrestrictingiteithergeographicallyorbyvalue.Forexample,certainneighborhoodscouldbedeniedeligibilityfortheprogram,orbuildingswithhighaverageassessedvalueperapartmentcouldbeprohibitedfromparticipating.Anotheroptionwouldbetoexcludeveryhighvaluedapartmentsinparticularneighborhoodsfromtheprogram.Withanyoftheseexamples,stateapprovalisnecessary.

Theadditionalrevenuewouldvarydependingonpreciselyhowtheexclusionwasdefined.Thecurrentwasteintheprogramisestimatedat$158millionin2008andwillgrowto$213millionby2011.Whileitisunlikelythatanexclusionliketheonesdiscussedabovecouldeliminatealloftheinefficiency,itshouldbepossibletoreducethewastebyatleast60percent.

oPPonents might arguethateveniftheabatementwerechangedinthenameofefficiency,theresultwouldbetoincreasesomeapartmentowners’propertytaxesatatimewhenthecityfacespressuretoreduceoratleastconstrainitsveryhighoveralltaxburden.Inaddition,thosewhoarebenefitingdidnothingwrongbyparticipatingintheprogramandshouldnotbe“punished”byhavingtheirtaxesraised.Theabatementwassupposedtobeastopgapandhadacknowledgedflawsfromthebeginning.Thecityhashadmorethansixyearstocomeupwitharevisedprogram,butsofarhasfailedtodoso.


OPTION:Secure Payments in Lieu of Taxes from Colleges and Universities


ProPonents might arguethatcollegesanduniversitiesconsumevaluablecityservices,includingpoliceandfireprotection,withoutpayingtheirshareofthepropertytaxburden,whilefor-profitemployersandresidentsmustpaythebill.Theyalsocouldcontendthatprivatecollegesanduniversitiesgenerallyserveawidercommunitybeyondthecityandthatitisappropriatetoshiftsomeoftheburdenofcityservicessupportinguniversitiesandcollegestothatbroadercommunity.Finally,theymightpointtoseveralothercitieswithlargeprivateeducationalinstitutionsthatcollectPILOTpayments,eitherdirectlyfromtheinstitutionsorfromtheirstategovernments.Theseincludelargecities(suchasBoston,Philadelphia,Providence,NewHaven,andHartford)andsmallercities(suchasCambridgeandIthaca).

UNDERNEWYORkSTATELAW,realpropertyownedbycollegesanduniversitiesusedinsupportingtheireducationalpurposeisexemptfromthecity’srealpropertytax.Thisexemptionisexpectedtocostthecity$258.2million1in2008inforegonepropertytaxrevenue(oftencalleda“taxexpenditure”).Exemptionsforstudentdormitoriesandadditionalstudentandfacultyhousingwillrepresent25.2percent($65.1million)ofthistotal.Underthisoption,privatecollegesanduniversitiesinthecitywouldmakepaymentsinlieuoftaxes(PILOTs),eithervoluntarilyorthroughlegislation.APILOTof25percentofthetotaltaxexpenditurewouldequal$65million.

Asanalternative,NewYorkStatecouldmakethePILOTpaymentstoNewYorkCityforthecollegesanduniversities.Theexemptinstitutionswouldcontinuetopaynothing.Thisfiscalyear,thestateofConnecticutwillreimburselocalgovernmentsfor77percentofthetaxrevenueforegoneontax-exemptpropertyownedbycolleges,universities,andhospitals.RhodeIslandalsoreimburseslocalgovernments,thoughatalowerpercentagethanConnecticut.

oPPonents might arguethatcollegesanduniversitiesprovideemploymentopportunities,purchasegoodsandservicesfromcitybusinesses,provideaneducatedworkforce,andenhancethecommunitythroughresearch,publicpolicyanalysis,culturalevents,andotherprogramsandservices.Opponentsalsocouldarguethatthetaxexemptiononfacultyhousingencouragesfacultytoliveinthecity,payincometaxes,andconsumelocalgoodsandservices.

1Atpresent,thereislittleincentiveforeitherthecityortheacademicinstitutionstoobtainthemostaccurateassessmentpossible.Ifasaresultofthisoption,paymentsbegantobebasedonbetterassessmentsofuniversityproperty,theassessedvaluesmightchangesignificantly.


OPTION:Extend the General Corporation Tax to Insurance Company Business Income

Revenue:approximately $250 million annually

ProPonents might arguethatthistaxwouldputinsurancecompaniesonmoreequalfootingwithotherincorporatedbusinessesinNewYorkCity.Retaliatorytaxeswouldprobablybeimposedonlybythestatesthatretaliateagainstgeneralcorporateincometaxationofinsurancecompanies,avoidingthemorewidespreadretaliationthatwouldbetriggeredbyaseparateinsurancecorporationtax.

INSURANCECOMPANIESARETHEONLYLARGECATEGORYOFBUSINESSESthatarecurrentlyexemptfromNewYorkCitybusinesstaxes;thecity’sinsurancecorporationtaxwaseliminatedin1974.Insurancecompaniesaresubjecttofederalandstatetaxation.InNewYorkState,lifeandhealthinsurerspaya7.5percenttaxonnetincome(oralternatively,a9.0percenttaxonnetincomeplusofficers’compensation,ora0.16percenttaxoncapital)plusa1.5percenttaxonpremiums;nonlifeinsurerscoveringaccidentandhealthpremiumspaya1.75percenttaxonpremiums;allothernonlifeinsurerspaya2.0percenttaxonpremiums.

Almostallstateswithinsurancetaxesprovideforretaliatorytaxation,underwhichanincreaseinStateA’staxonthebusinessconductedinAbyinsurancecompaniesheadquarteredinStateBwillautomaticallytriggeranincreaseinStateB’staxonthebusinessconductedinBbycompaniesheadquarteredinStateA.Likeotherstates,NewYorkincludesacreditforretaliatorytaxesinitsinsurancetax.

ReimposingtheNewYorkCitytaxoninsurancecompanieswouldraisethecombinedstateandlocalinsurancetaxrateinNewYorksubstantiallyabovethenationalaverageandtriggerwidespreadtaxretaliation.However,theDepartmentofFinancehassuggestedinitstaxexpenditurereportsthatextendingthecity’sgeneralcorporationtaxtoinsurancecompanies—thatis,taxingthenetincometheyearninthecitybutnotthepremiumstheyarepaid—couldresultinalessadverseretaliatoryimpact.Stateapprovalwouldberequiredforthesechanges.

oPPonents might arguethatenoughstatesbaseretaliationontotaltaxesandfeespaidbyinsurerstomakeretaliationtoacitygeneralcorporationtaxoninsurancecompaniesaseriousproblem.Morebroadly,anyextensionofbusinessincometaxeswouldmakeNewYorkCity’staxstructureless“city-like”:NewYorkisoneofthefewU.S.citieswithbusinessandpersonalincometaxes,andtheseareontopofthemoretypicalpropertyandsalestaxesalsoleviedhere.TheadditionaltaxesareoftenthefocusofcomplaintsthatNewYorkCityisovertaxedandnotbusiness-friendly.


OPTION:Eliminate the Cap on the Capital Tax Base in the General Corporation Tax

Revenue:approximately $150 million annually

ProPonents might arguethatforsomeofthefirmswithlownetincomeinthecurrentyearthereasonispreviouslossescarriedforwardratherthancurrentfinancialdifficulties.Thecapitaltaxbasewasestablishedtoinsurethatsuchfirmsdonotavoidcorporationtaxes.Thecaponcapitaltaxbaseliabilityunderminesthecity’sabilitytopreventsuchavoidance.Alternatively,ifthecapisretained,tighteningrestrictionsontheuseoftaxpreferencesincalculatingbusinessandinvestmentcapitalliabilitywouldmakeitlesslikelythatthecityisprovidingtaxbreakstocorporationsthatdonotreallyneedthem.

CORPORATIONSSUBJECTTOTHEGENERALCORPORATIONTAX(GCT)mustpaythelargestoffourbasiccalculationsofliability:(1)8.85percentofnetincomeallocatedtoNewYorkCity;(2)2.655percentofnetincomepluscompensationpaidtomajorindividualshareholdersallocatedtoNewYorkCity;(3)0.15percentofbusinessandinvestmentcapitalallocatedtoNewYorkCity;and(4)a$300alternativeminimumtax.

In1988,acorporation’sallocatedcapitalbasewascapped,fortaxpurposes,atalevellimitingtheamountofliabilityunderalternative(3)to$350,000.Thiscapaffectsallcorporationswithallocatednetincomelessthanapproximately$4.0million,allocatednetincomepluscompensationlessthanapproximately$13.2million,andallocatedbusinessandinvestmentcapitalgreaterthanapproximately$233.3million.Inshort,theaffectedfirmsarehighlycapitalizedbusinesseswithrelativelylowcashflows.BytheDepartmentofFinance’smostrecentpublishedcalculation,therewere44suchcorporationsinNewYorkCity,andtheysavedanaverageofalittlelessthan$3.3millioninGCTtaxeseachduetothecap.Eliminatingthecapwouldrequirestatelegislation.

oPPonents might arguethattherecipientsofthistaxbreak(firmswithlargeassetsrelativetoincome)tendtobemanufacturingfirms,andtheseincludefirmsthattrulyarecashpoor.GiventheprecariouspositionofmanufacturersinNewYorkCity,thecapitalliabilitycapmayservetoslowtheerosionofmanufacturingjobshere,easingthetransitiontothe“NewEconomy.”Moreover,anyattenuationofNewYorkCity’suniquelyheavylocalbusinesstaxburdenslessensthecompetitivetaxdisadvantageoffirmsoperatinginthecity.


OPTION:Tax Laundering, Dry Cleaning, and Similar Services


ProPonents might arguethatlaundering,tailoring,shoerepair,andsimilarservicesshouldnotbetreateddifferentlyfromothergoodsandservicesthatarepresentlybeingtaxed.Existingtaxdistortionscreateeconomicbiastowardconsumptionoftheseservices.Byincludinglaundering,drycleaning,andotherservicesinthesalestaxbasethecitywoulddecreasetheeconomicinefficiencycreatedbydifferencesintaxtreatment.Thebulkoftaxeswouldbepaidbymoreaffluentconsumerswhousesuchservicesmorefrequently,slightlydecreasingtheregressivenatureofthesalestax.Thecity’scommitmenttoacleanerenvironment,whichisreflectedinthevariouscitypoliciesthatregulatelaunderinganddry-cleaningservices,furtherjustifiesinclusionoftheseservicesinthesalestaxbase.

CURRENTLY,RECEIPTSFROMLAUNDERING,drycleaning,tailoring,shoerepairingandshoeshiningservicesareexcludedfromthecityandstatesalestax.Thisoptionwouldlifttheexemption,broadeningthesalestaxbasetoincludetheseservices.Itwouldresultinadditionalrevenueofabout$40millionannually.

oPPonents might argue thatlaundering,tailoring,shoerepair,andsimilarservicesareprovidedbytheself-employedandsmallbusinesses,andtheseoperatorsmaynothaveaccountingorbookkeepingskillsandcouldhavedifficultiesincollectingthetax.Someindividualsandfirmsmightbeforcedoutofbusiness.Theycouldalsoarguethatbecauseaportionoflaunderinganddrycleaningreceiptsareactuallypaidbybusinesses(i.e.hotelsandrestaurants),bringingthoseservicesintothesalestaxbasewouldfurtherincreasethenumberofbusiness-to-businesstransactionssubjecttothetax.Theywouldpointoutthatideally,salestaxesshouldonlybeimposedonthefinalsaletoaconsumer;thisisbecausewhenbusiness-to-businesstransactionsaretaxed,theburdenofthetaxisshiftedontotheconsumerthroughanincreaseinthepriceofthegood.


OPTION:Impose Sales Tax on Capital Improvements


ProPonents might arguethatthereisnoeconomicdistinctionbetweencapitalimprovementsandotherservicesandgoodsthatarecurrentlytaxed:broadeningthebasewouldensureamoreneutraltaxstructureanddecreasedifferentialtaxtreatment.Thepresenttaxstructurecreatesconsumptiondistortions,whichthisproposalwoulddiminish.Italsomightbearguedthatthesalestaxasawholewouldbecomelessregressivesinceexpendituresoncapitalimprovementservicesriseasincomerises.

THISOPTIONWOULDINCREASECITYREVENUESbybroadeningthesalestaxbasetoincludecapitalimprovementinstallationservices.InNewYork,servicessuchaslandscapingandautorepairaretaxedbutotherservicestoimprovebuildingsorpropertysuchastheinstallationofcentralairsystems,refinishingfloors,andupgradingelectricalwiringarenotsubjecttosalestax.IfNewYorkCitytaxedcapitalimprovements,itcouldcollectanadditional$259million.

oPPonents might argue thatthisproposalcouldreducethenumberofpeopleemployedinthecapitalimprovementservices.Smallindependentcontractorsandsmallfirms,burdenedbyadditionaltaxation,mightleavethebusinessorattempttoevadethetax.Thetaxwouldalsoproduceasmalldisincentivetoimproverealproperty.Theyalsocouldarguethatbecauseaportionofcapitalimprovementsaredirectedatimprovementofbusinessproperty,bringingthoseservicesintothesalestaxbasewouldfurtherincreasethenumberofbusiness-to-businesstransactionssubjecttothetax,andbusinesseswouldinturnshifttheburdenofthetaxontoconsumersbyincreasingprices.Theywouldpointoutthat,ideally,salestaxesshouldonlybeimposedonthefinalsaletoaconsumer.


OPTION:Tax on Cosmetic Surgical and Nonsurgical Procedures

Revenue: Approximately $65 million per year

ProPonents might arguethisisalucrativefee-for-serviceindustry.Whilemedicaltrainingandcertificationisrequiredtoperformallofthesurgicalandmostofthenonsurgicalprocedures,theproceduresthemselveshaveprimarilyaestheticratherthanmedicalrationales.TheAmericanMedicalAssociation(AMA)distinguishescosmeticsurgery,whichis“performedtoreshapenormalstructuresofthebodyinordertoimprovethepatient’sappearanceandself-esteem,”fromreconstructivesurgery,whichis“performedonabnormalstructuresofthebody…generally…toimprovefunction,but[it]mayalsobedonetoapproximatenormalappearance,”andrecommendsthatthelatter,butnottheformer,beincludedinstandardhealthbenefitspackages.Fortaxpurposes,thereisnoreasontotreatcosmeticenhancementsdifferentlythancosmeticproducts.TheycouldalsoarguethatwiththeintroductionofataxoncosmeticproceduresinNewJerseyin2004,thepotentialbordereffects(tax-drivenshiftsineconomicactivity)ofaNewYorkCitytaxwouldbelimited.

FEESFORMEDICALPROCEDURESarecurrentlynotsubjecttostateorcitysalestax.Underthisoption,bothsurgicalandnonsurgicalcosmeticprocedureswouldbesubjecttothecitysalestax.In2006cosmeticproceduresbyboard-certifiedphysiciansyielded$11.4billioninfeepayments,nationwide.(Thistotaldidnotincludeproceduresthatwerereconstructiveratherthancosmetic.Nordiditincludefeesforfacilities,anesthesia,medicaltests,prescriptions,andotherancillaries.)Weestimatethatover$1.4billionwasgeneratedinNewYorkCity.Theamountofadditionalrevenuesgeneratedinthecitybyfeesforfacilitiesandotherancillaries,aswellasbynoncertifiedcosmeticiansor“facialists”forproceduressuchasdermabrasionsandchemicalpeels,isunknown,andisnotfactoredintothetaxrevenueestimateprovidedabove.

oPPonents might argueratherthanseeingcosmeticproceduresasluxuries,peopleincreasinglyregardthemasvitaltoimprovingself-esteemandgeneralqualityoflife.Asthepurviewofmedicineextendstonotjustcuringillness,butpromotingwellness,qualityoflifeimprovementsaremoreandmorebeingconsideredhealthnecessities.Healthbenefitsnevershouldbesubjecttoasalestax,anditwillnotsufficetotaxproceduresnotcoveredbyinsurance,becauseinsurersdonotprovideconsistentguidelines.Furthermore,marketsurveysindicatethatcosmeticsurgicalandnonsurgicalproceduresaresoughtbypersonsatallincomelevels.Theburdenofataxontheseprocedureswouldthereforenotfallonlyonthewealthy.


OPTION:Restaurant Tax

Revenue: $34 million to $216.1 million annually, depending on rate and base

SEVERALSTATESANDCITIES(includingWashingtonDC,Dallas,Mississippi,Utah,NorthDakota,andMinnesota)imposeanadditionaltaxonfoodandbeveragesalesmadebyrestaurants.Therevenuesfromthesetaxesareoftendedicatedtotourismandeconomicdevelopmentprojects,althoughrecentlytherehasbeensomemovementtousethereceiptstofundgeneralbudgetneeds.Thestructureofthe“restauranttax”varieswidelyfromataxonallfoodanddrinkpreparedinrestaurantsforconsumptiononthepremises,toacombination“mealsandlodging”taxcomputedonthebasisofhotelcharges,coveringmealsinhotelrestaurants.Chicago,forinstance,imposesanadditionalquarterofapercenttaxonrestaurantmealsthatisdedicatedtotourism-relatedactivities.

InNewYorkCity,restaurantrevenueisestimatedtohavereached$14billionin2007.Underthecurrentcitysalestaxof4percent,roughly$559millioniscollected.(CombinedwiththestateandtheMetropolitanTransportationAuthoritytaxes,thetotalsalestaxrateinthecityis8.375.)Addinganadditionalquarterofapercenttothecityratewouldbringinroughly$34.2million;adding1.25percent,whichwouldbringthecombinedtotalrateto10percent,wouldbringin$216.1million.Inbothcases,weassumeaslightdecreaseinthesalesbase(2percentand5percent,respectively)ascustomersadjusttheirdininghabitsinresponsetothehigherfinalprice.Thiswouldrequirestatelegislationtoenact.

oPPonents might arguethatimposingahighertaxrateonrestaurantfoodanddrinkwoulddirectlyharmthisextensivepartofthecity’sservicesector,especiallyitsmanylow-wageworkers.ItcouldcausefurtherindirectharmbymakingNewYorkCitysomewhatlessdesirableasatouristdestination,hurtingotherpartsofthelocaleconomy.Inaddition,eatingoutmaynotbethe“luxury”itmayhavebeeninthepast,andismorecommoninNewYorkthaninmanyotherpartsofthecountry.

ProPonents might arguethatimposingasmallincreaseinthesalestaxforrestaurantmealswouldmeansubstantialrevenuewithonlyminimaleconomicdisruption.Byonlytaxingfoodpreparedinrestaurants,thetaxwouldaffectonlythosechoosingtoeatatrestaurants—thetaxcouldbeavoided.Inaddition,withthelargenumberofvisitorsandcommuters,notalltheadditionalrevenuewouldbeextractedfromthepocketsofcityresidents.


OPTION:Increase the Fine for Recycling Violations

Revenue: $2.7 million to $8.2 million annually

ProPonents might argue thatbecausea$25finebringslittleinthewayofdeterrencetocityresidentswhoviolaterecyclingrules,anincreasewouldgiveaddedforcetotherecyclingprogramatatimewhenNewYorkersmaybequestioningthecity’scommitmenttorecycling.Asidefromobviousenvironmentalbenefits,arecentIBOanalysisalsofoundthatmorerecyclingwouldlowerthecity’scostpertonforcollectingrecyclablescurbside.

IN2007,THEREWERE145,500CITATIONSGIVENTOCITYRESIDENTSANDBUSINESSESforviolatingcityrecyclingrules.Approximately87percentofthosedeemedvalidwerepaidinfull.Thisisaveryhighyieldratecomparedtothoseofothercityviolations.Butthesizeofarecyclingviolationfineisoneofthecity’slowest.At$25,thefineforafirstviolationhasnotincreasedsinceitwassetinLocalLaw19of1989.Whilethefine’slowcostundoubtedlycontributestoitshighpaymentrate,itmaynotdeterfutureviolationsaswellasahigherfinemight.

Anincreaseintherecyclingfinefrom$25to$50wasproposedforfiscalyear2003,butitneverreceivedCityCouncilapproval.Itwasthoughtthatanincreasewouldbeunfairtoresidentsconfrontingchangesintherecyclingprogramthatyear,asglassandplasticsrecyclingwastemporarilysuspendedfromtheprogram.Thebasefineforallothersanitationviolationsincreasedfrom$50to$100in2004.

Ifthebasefineforrecyclingviolationswasdoubledto$50,revenuewouldlikelygrowby$2.7million.Ifthebasefinewasraisedtothecurrentlevelofothersanitationfines($100),thecitycouldexpectanadditional$8.2millioninrevenue.(Theseestimatesdonotassumethatthecurrentpaymentratewoulddeclineasthefineamountincreases.)

oPPonents might argue thatahigherfinewouldplaceanundueburdenonlandlordsandbuildingownersbecauseitisdifficulttosingleoutviolatorswithinlargeapartmentbuildings.Withoutindividualaccountabilityforrecycling,anyincreasetothefinewoulddolittletodeterviolations.Furthermore,manyviolationsmaybeattributednottobuildingresidentsatall,buttothosewhobreakopenbagslookingforredeemablebottlesandcans.Lastly,opponentsmightargue,therecentandmultiplechangestotherecyclingprogramhaveconfusedresidentsandanincreaseatthistimewouldunfairlycapitalizeonthisconfusion.


OPTION:Institute a Residential Permit Parking Program

Revenue: $2 million in 2009, $4 million in 2010, and $6 million in 2011

ProPonents might arguethatresidentialpermitparkinghasaproventrackrecordinothercities,andthatthebenefitstoneighborhoodresidentsofeasierparkingwouldfaroutweighthefees.Mostneighborhoodshaveamplepublictransportationoptions,andinmanycasespaidparkingisavailableaswell;thesealternativescoupledwithlimited-timeon-streetparkingshouldallowsufficienttraffictomaintainlocalbusinessdistrictactivity.Indeed,theycouldargue,oneoftheprincipalreasonsforlimitingparkingtimesincommercialdistrictsistofacilitateaccesstolocalbusinessesbydriversbyensuringturnoverinparkingspaces.

THISOPTIONINVOLVESESTABLISHINGapilotresidentialpermitparkingprograminNewYorkCity.Theprogramwouldbephasedinoverthreeyears,with25,000annualpermitsissuedthefirstyear,50,000thesecondyear,and75,000thethirdyear.Ifsuccessful,theprogramcouldbeexpandedfurtherinsubsequentyears.

On-streetparkinghasbecomeincreasinglydifficultforresidentsofmanyNewYorkCityneighborhoods.Oftentheseresidentshavefewornooff-streetparkingoptions.Areasadjacenttocommercialdistricts,educationalinstitutions,andmajoremploymentcentersattractlargenumbersofoutsidevehicles.Thesevehiclescompetewiththoseofresidentsforalimitednumberofparkingspaces.Manycities,facedwithsimilarsituations,havedecidedtogivepreferentialparkingaccesstolocalresidents.Themostcommonlyusedmechanismisaneighborhoodparkingpermit.Thepermititselfdoesnotguaranteeaparkingspace,butbypreventingallormostoutsidevehiclesfromusingon-streetspacesformorethanalimitedperiodoftime,permitprogramscanmakeparkingeasierforresidents.

Undertheproposal,permitparkingzoneswouldbecreatedinselectedareasofthecity.Withinthesezones,onlypermitholderswouldbeeligibleforon-streetparkingformorethanafewhoursatatime.Permitswouldbesoldprimarilytoneighborhoodresidents,althoughtheymightalsobemadeavailabletononresidentsandtolocalbusinesses.IBOhasassumedanannualchargeof$100,withadministrativecostsequalto20percentofrevenue.

oPPonents might arguethatitisinherentlyunfairforcityresidentstohavetopayforon-streetparkingintheirownneighborhoods.Opponentsalsomightworrythatdespitetheavailabilityofpublictransportationoroff-streetparking,businesseslocatedinoradjacenttopermitzonesmayexperiencealossofclientele,particularlyfromoutsidetheneighborhood,becausemoreresidentswouldtakeadvantageofon-streetparking.Someopponentsmaynotethatincitiesandtownsthatalreadyhaveresidentialpermits,itappearstohaveworkedbestinneighborhoodswheresingle-familyhomespredominate.


OPTION:Charge for Film and Television Permits


ProPonents might arguethatfilmmakingconsumescityservicessuchaspoliceandsanitation,usescityproperty,anddisruptsneighborhoods.Chargingafeeforfilmingpermitswillcompensatethecityforsomeoftheexpensesitincurs.Furthermore,therearenosubstitutesforNewYorkCity,theyargue:Filmmakerswhowanttoincludeimagesofthecity’sskylineandlandmarksmustfilminthecity,soimposingamoderatepermitfeewillnotmateriallyaffectthecostsofproduction.Inaddition,NewYorkprovidesavaluableservicetofilmmakersthroughits“one-stop-shop”permittingprocess,forafeewellbelowthecostofcityservices.Finally,othermajorfilminglocations,suchasVancouver(Canada)alsochargeafeeforfilmingpermits.

NEWYORkCITYISAVERYPOPULARsiteforshootingmovies,televisionshows,commercials,andmusicvideos.In2007thenumberoflocationshootingdaysinNewYorkCitywas28,594andtheaverageoverthelastfouryearswasabout29,500.Thewinter2004issueofMovieMaker MagazinelabeledNewYorkthenumberonefilminglocationforindependentmoviemaking.TheMayor’sOfficeofFilm,Theatre,andBroadcastingcoordinatesallfilminginNewYorkCity,andservesasa“one-stop-shop”forpermitsandlogisticalassistance.Filmmakersarenotchargedafeeforthesefilmingpermits.Inaddition,theyareexemptfromstateandmostlocalsalestaxesandthestaterecentlyadoptedataxcreditforfilmandtelevisionproduction.Thisproposalwouldcharge$250perdayforfilmandtelevisionpermits,raising$7.4millioninannualrevenueforthecity.

oPPonents might arguethatimposingapermitfeewouldunderminetheMadeinNewYorkTaxIncentiveProgram.Theymightarguethattheincentiveprogram,whichconsistsofstateandcitytaxcreditsforproductionsfilmedinthecity,wasimplementedbecauseNewYorkwasfacinganexodusoffilmmakerswhowereleavingforcheaperlocations.ThenumberofshootingdaysdeclinedinNewYorkCityin2007by17.6percentfromtherecord34,718in2006;therefore,theimpositionofevenamoderatepermitfeecouldhaveaneffectonnumberofshootingdays.Inaddition,theCanadiangovernmentrebates22percentoflaborcostsdirectlytofilmmakerswhichhasencouragedmorefilmmakerstoworkinCanada.NewYorkCitycannotaffordtolosefurtherfilmstoCanadaorotherlocations.Thefilmindustryisimportanttothecity’seconomy,whichaccordingtotheMayor’sOfficeofFilm,Theatre,andBroadcasting,bringsinover$5billionannuallyandemploysabout100,000NewYorkers.


OPTION:Convert Multiple Dwelling Registration Flat Fee to Per Unit Fee

Revenue:$2.8 million annually

OWNERSOFRESIDENTIALBUILDINGSwiththreeormoreapartmentsarerequiredtoregistertheirbuildingannuallywiththeDepartmentofHousingPreservationandDevelopment(HPD).Thefeeforregistrationis$13perbuilding.In2008,thecityexpectstocollect$1.6millioninmultipledwellingregistrationfees.Convertingtheflatfeetoa$2perunitfeewouldincreasetherevenuecollectedbyHPDby$2.8millionannually(assuminga90percentcollectionrate).

oPPonents might arguethat,bylaw,feesandchargesmustbereasonablyrelatedtotheservicesprovided,andnotsimplyarevenuegeneratingtool.Simplyregisteringabuildingshouldnotbeacostlyactivityforthecity.Theyalsomightexpressconcernaboutaddingfurtherfinancialburdensonbuildingowners,particularlyafterthe2003propertytaxrateincrease.

ProPonents might arguethatmuchofHPD’sregulatoryandenforcementactivitiestakeplaceattheunit,ratherthanbuilding,level.Tenantsreportmaintenancedeficienciesintheirownunits,forexample,andHPDisresponsibleforinspectingandpotentiallycorrectingthesedeficiencies.Thereforeabuildingwith100unitsrepresentsamuchlargeruniverseofpossibleactivityforHPDthanabuildingwith10units.ConvertingtheregistrationflatfeetoaperunitbasismoreequitablydistributesthecostofmonitoringthehousingstockinNewYorkCity.Theyalsowouldarguethata$2perunitfeeisanegligiblefractionoftheunit’svalue,soitshouldhavelittleornoeffectonlandlords’costsandrents.


OPTION:Expansion of the Bottle Bill and Return of Unclaimed Deposits to Municipalities

Revenue:$55 million annually

ProPonents might arguethatsuchachangeinthecurrentlegislationwouldhelptheenvironmentbyreducingwaste,andcouldprovideasourceoffundingforthecity’srecyclingandwastereductionprograms.Inaddition,expansionofthetypesofbeveragecontainerscoveredwouldprovideadditionalincometothecity’scottageindustryofbottleredeemersandreducelitteroncitystreetsandinparks.Finally,proponentsmightarguethatthediversionofadditionalmaterialsfromthewastestreammanagedbytheDepartmentofSanitationwouldlowerexpendituresoncollectionanddisposaloperations.

THISPROPOSALINVOLVESTWOSEPARATEACTIONS,bothincludedinproposedstatelegislation.First,thestate’sbottlebill,whichrequiresa5centdepositoncertainbeveragecontainers,wouldbeexpandedtoincludeallcarbonatedandnoncarbonatedbeverages,exceptmilkandthosealcoholicbeveragesnotalreadyincluded.Second,insteadofthebeveragedistributorretainingtheunredeemeddeposits,theywouldbereturnedtolocaljurisdictionsinproportiontolocalsales.

Currently,NewYorkState’sbottlebillcoversbeerandothermaltbeverages;carbonatedsoftdrinks;mineralandsodawater;andwinecoolerssoldinglass,metal,orplasticcontainersofupto1gallon.Underthecurrentdepositsystem,aminimumof5centsdepositiscollectedbythedistributorforeachfilledcontainersold.Theretailer,inturn,chargestheconsumer5cents.Whentheconsumerbringsabottleinforredemption,theconsumerreceivesthe5centsbackfromtheretailerandtheretailerisreimbursedthe5centsfromthedistributorfortheemptycontainer.However,ifmorecontainersaresoldthanredeemed,thereisabalanceofdepositsleftwiththedistributor.Underthecurrentbottlebilltheunredeemeddepositsarenotrequiredtobereturnedtothestateormunicipalityandthereforearesimplyretainedbythedistributor.

Recently,severalamendmentshavebeenaddedtotheproposedstatelegislation.TheseincludeseveralprovisionsthatwouldhelpNewYorkCityresidentsandbusinessestocomplywiththelaw.First,thenewlegislationwouldallowdealersinNewYorkCitytolimitthenumberofcontainerstheyacceptto72perpersonperday—ratherthanthecurrentlimitof240—undercertainconditions.Second,municipalitiesandnonprofitsoperatingredemptioncenterswouldbeallowedtobereimbursedfortheircostsbyastatefundingstreamforrecyclingprojects.

EstimatesofthenumberofcontainerssoldinNewYorkCityvary.Dependingonthenumberofcontainerssold,thecitycouldreceiveaminimumof$38millionunderthecurrentbottlebill.Withtheproposedexpansion,thepotentialrevenueincreasestoatleast$55millioneachyear.Costsavingswouldlikelyresultasadditionalmaterialsaredivertedfromcity-managedrefuseandrecyclingcollectionanddisposal.

oPPonents might arguethecosttoconsumersfortheseproductswouldincreasebecausebottlersanddistributorswouldnotbeabletooffsettheiradditionalrecycling,handling,andprocessingcostswithunredeemeddeposits.Bottlersalsoworryaboutpotentialfraudwith“bordercrossers”—peopleinneighboringstateswithoutdepositswillbringtheircontainerstoNewYorktoredeemthedeposit,eventhoughtheywerenotpurchasedinNewYork.Finally,NewYorkCityretailers—especiallysmallbodegasanddelis—arguethattheyalreadylacksufficientspacetohandleandstorereturnedcontainers.Manyrefusetoredeemcontainersnow.


OPTION:Charge for Freon/CFC Recovery


ProPonents might arguethatchargingafeeforCFCrecoveryisappropriatebecauseitisaservicerendereddirectlytotheresidentorbusiness.TheycouldnotethatmostothermunicipalitieschargeforCFCrecovery.

CHLOROFLUOROCARBON(CFC)gas,alsoknownasFreon,isconsideredamajorcontributortothedeteriorationoftheearth’sozonelayerandglobalwarming.Beforediscardinganyfreezer,refrigerator,watercooler,dehumidifier,airconditioner,orothertypeofappliancecontainingCFC,cityresidentsarerequiredtoscheduleanappointmentfortherecoveryoftheCFC.Thereisnochargeforthisservice,althoughitmustbecompletedinordertohavetheapplianceremovedbythecity’sDepartmentofSanitationonaregularrecyclingcollectionday—anitemthathashadtheCFCrecoveredis“tagged”toindicatethatitisreadyforcollectionanddisposal.Inmostotherlargemunicipalities,residentsarechargedbetween$25and$100forCFCremoval.

Accordingtosanitationdepartmentrecords,99,783appliancesweretaggedforCFCrecoveryin2007.TheCFCrecoveryisdonebysanitationworkerswhohavecompletedCFCrecoverycertification.Therearecurrently56certifiedCFCrecoveryuniformedworkersandeightcivilianmechanicswhomaintainthevehiclesusedbytherecoveryworkers,aswellastwoclericalaidesresponsibleforsettinguptherecoveryappointments.Charging$25perappointmentwouldgarnerthecityroughly$2.5millionannually,approximatelythepersonnelcostsfortheCFCrecoveryprogram.At$75perappointment,thecitycouldcollectabout$7.5million,easilycoveringthepersonnelandcapitalcostsfortheCFCrecoveryprogramandprovidingafundingstreamforotherprograms.

oPPonents might arguethatchargingforCFCremovalmightleadtoillegaldumping.Inaddition,theymightexpressconcernabouttheburdenofmandatorychargesonlow-incomehouseholds.


OPTION:Charge Fees for Assessment Appeals at the Tax Commission

Revenue:$2.6 million annually

ProPonents might arguethatthisserviceisheavilyusedbyownersofrealpropertywhowouldfindthesenominalfeesfarfromonerous.Moreover,theinitiationoffeesmightappropriatelyreducetheTaxCommission’sworkloadandeliminatethosewhoappeal“becausetheyhavenothingtolose,”i.e.theappealsarefreeandtheTaxCommissionhasnopowertoraiseassessments,onlytolowerthem.Thepresenceoffeesmightacttoreduceboththesheernumberofapplicantsandthenumbersrequestingaformalhearing,whichisoptional.Moreover,othercities,forexampleSanFrancisco,chargeseparatefeesforfiling,hearingappeals,andevenforreceivingwrittenfindingsfromthehearing.Ashareofthefundsgeneratedfromfeescouldbeusedforongoingoperationsortoprovidesupportfordesiredimprovements.

THETAXCOMMISSIONservesasthecity’sadministrativereviewbodyforpropertytaxassessmentssetbytheDepartmentofFinance.In2006,theTaxCommissionreceivedabout40,000appealsapplications.Theseapplicationswereasmallpercentageofthetotalnumberofpropertiesinthecity,butweredisproportionatelyfiledbyownersofapartmentbuildingsandcommercialproperties,especiallyinManhattan.TheTaxCommissionchargesnofeesatpresentforthisservice,andiscurrentlybudgetedatabout$3.1million,anamountthatisaboutthesameaswouldberaisedbythisoption.Thisproposalwouldinstituteafilingfeeof$40perapplicant,andanadditional$50feeforapplicantswhoproceedtoahearingbeforeTaxCommissionmembers.Approximately50percentofallapplicantsreachedthehearingstagein2006.

oPPonents might arguethattheTaxCommissionhashistoricallyprovidedthisserviceatnocostandshouldcontinuetodoso,andthatapropertyownerhasafundamentalrighttopursueclaimsofoverassessmentwithoutthehurdleofapplicationfeeseveryyear.TheyalsomightarguethatthefeesmightdriveawaypropertyownerswholegitimatelyfeelthattheyhavebeenoverassessedbytheDepartmentofFinance,butwhodonotwanttospendmoneypursuingtheirclaim.ThatwouldundercuttheTaxCommission’sroleasacheckonmaintainingthefairdistributionofexistingpropertytaxburdens.


OPTION:Restore the Fare on the Staten Island Ferry


THISOPTIONWOULDRESTORETHEFAREchargedtopassengerswhoboardtheStatenIslandFerryaspedestrians,beginninginJuly2008.UntilJuly4,1997,pedestrianspaidaround-tripfareof50cents.Aspartofthestateandcity’seffortstopromotea“onecity,onefare”policy,fareswereabolishedatthesametimethatfreeMetroCardsubwayandbustransferswereinstituted.Faresarestillinplaceforvehicles($3regularfare,$2forcarpools,and$1.50forseniorcitizendrivers,allcollectedeachway),butvehicleservicehasbeensuspendedsincetheattacksofSeptember11,2001.

TheStatenIslandFerryisoperatedbythecityDepartmentofTransportation,andin2007hadaround19millionriders.Ifandwhenvehiclesareallowedbackontheferry,pedestrianswillstillmakeupthevastmajorityofpassengers.Grossrevenuesfroma50centround-tripfarewouldbeslightlyover$4.7millionperyear.Assumingcollectioncostsequalto10percentoffares,netrevenuewouldberoughly$4.3millionannually.

BeginningMarch2008,StatenIslandresidentswhousetheVerrazanoNarrowsBridgepayatollof$4.98(chargedgoingintotheboroughonly)usingE-zPass,or$6.70usingtokens.Residentstravelinginvehicleswiththreeormoreoccupantshavetheoptionofusingprepaidcouponscosting$2.33percrossing(alsopaidonlygoingintoStatenIsland).ExpressbusriderstravelingfromStatenIslandtoManhattanpaya$5.00cashfareeachway,withdiscountsavailableusingMetroCard.Finally,travelerswhotakelocalbusesovertheVerrazanoNarrowsBridgetoBrooklynpayacashorMetroCardfare.Whiletheseriderscanthentransferfreeofchargetoabusorsubway,fortraveltoManhattanthisisaverytime-consumingoption.

oPPonents might argue thatchargingferryriderswouldcontradictthe“onecity,onefare”policystartedbytheGiulianiAdministration.OnceMetroCardreaderswereinstalledthroughthetransitsystem,freetransfersbetweenbusesandsubwayswereinstituted.Asaresult,amajorityoftransitusersinNewYorkCitycannowmaketheirtripswithonlyonefare.However,accordingtoananalysisbyIBOofdatafromtheRegionalTransportation-HouseholdInterviewSurvey,amajorityofStatenIslandresidentswhousetheferrytotraveltoManhattanstillpaymorethanonefaretogettotheirfinaldestination.Inaddition,ferryridersareonaveragelessaffluentthanexpressbusriders,andfacelongertotaltraveltimes.

ProPonents might argue thatferryridersshouldbeexpectedtopayatleastanominalshareoftheservicecosts.TheStatenIslandFerry’soperatingexpenseshaveincreaseddramaticallyinrecentyears,duetoadditionalsafetyandantiterroristmeasures.AccordingtotheMayor’sManagementReportforfiscalyear2007,theoperatingexpenseperpassengerfortheStatenIslandferrywas$4.62.Ifthe25centfarewererestored,passengerswouldbepayingwellunder10percentofthecostofaride.Incontrast,faresonNewYorkCityTransitsubwaysandbusescovermorethanhalfofoperatingexpenses.


OPTION:Charge a “Tourist” Fare on the Staten Island Ferry

Revenue:Up to $3.4 million annually

ProPonents might arguethattouristsvisitingNewYorkCitywouldstillbegettingabargaintopay$4.00toridetheStatenIslandFerryacrossNewYorkHarborandback,orvisitStatenIslandanditsrecentlyrevitalizedSt.Georgewaterfrontareaandotherattractions.Operatingcostsfortheferryhaverisenfrom$40millionin2003tonearly$90millionbudgetedfor2008,duetoacombinationofsecurityneeds,risingfuelcosts,andincreasedservicefrequency.Currently,nofareischarged.Chargingafaretovisitorswouldbringinatleastsomerevenuetohelpoffsettheserisingcosts.Continuingtonotchargeregularusersafaremaintainsthe“one-city,one-fare”policy,allowinganymasstransitusertogetfromanypointinthecitytoanyotherforasinglefare.

THESTATENISLANDFERRYisusednotonlybyStatenIslanderscommutingtoworkinManhattan,buthasalsobecomeatouristdestinationinitsownright—perhapsbecauseofthestrikingviewsitprovidesofthedowntownskyline,StatueofLiberty,andEllisIsland.Oftheroughly19milliontripstakenontheferryeachyear,anestimated3.6millionareridersfromoutsidetheNewYorkmetroregion,andanadditional0.7millionareweekendexcursionistsfromtheregion,excludingStatenIslanditself.Imposingaround-tripfareof$4.00ontheseusers—whileprovidinganannualpassatanominalchargetoregularcommutersandStatenIslandresidents—wouldbringinanestimated$3.4millioninfarerevenuesannually,afteroperatingandmaintenancecosts.

oPPonents might arguethatestablishingatouristfarewouldunfairlyimposeachargeforaserviceononeclassofusersandnotanother.TheymightalsobeconcernedabouttheimpactonStatenIslandifafareweretocurtailthenumberofvisitorstotheSt.Georgeminorleagueballparkandsurroundingwaterfront,andtootherculturalattractionsonStatenIslandsuchastheSnugHarborCulturalCenter.Finally,opponentsmightworrythatchargingafaretotouristswouldopenthewaytoeventuallychargingallusers.


OPTION:Toll the East River and Harlem River Bridges

Revenue:$830 million annually

ProPonents might arguethatthetollswouldprovideastablerevenuesourcefortheoperatingandcapitalbudgetsofthecityDepartmentofTransportation.Manyproponentscouldarguethatitisappropriatetochargeauserfeetodriverstocompensatethecityfortheexpenseofmaintainingthebridges,ratherthanpayingforitoutofgeneraltaxesbornebybridgeusersandnon-usersalike.Transportationadvocatesarguethat,althoughtollsrepresentanadditionalexpensefordrivers,theycanmakedriversbetteroffbyguaranteeingthatroads,bridges,tunnels,andhighwaysreceiveadequatefunding.Sometransportationadvocacygroupshavepromotedtollsnotonlytogeneraterevenue,butalsoasatooltoreducetrafficcongestionandencouragegreatertransituse.Peak-loadpricing(higherfaresatrushhoursthanatnon-rushhours)isanoptionthatcouldfurtherthisgoal.Ifmoredriversswitchtopublictransit,peoplewhocontinuetodrivewouldbenefitfromreducedcongestionandshortertraveltimes.Aportionofthetollrevenuecouldpotentiallybeusedtosupportimprovedpublictransportationalternatives.Finally,proponentsmightnotethatcityresidentsorbusinessescouldbechargedatalowerratethannonresidentstoaddresslocalconcerns.

THISPROPOSAL,analyzedinmoredetailintheIBOreportBridge Tolls: Who Would Pay? And How Much?involvesplacingtollson12city-ownedbridgesbetweenManhattanandqueens,Brooklyn,andtheBronx.Inordertominimizebackupsandavoidtheexpenseofinstallingtollboothsortransponderreadersatbothendsofthebridges,atollequivalenttotwicetheone-waytollonadjacentMetropolitanTransportationAuthority(MTA)facilitieswouldbechargedtovehiclesenteringManhattan,andnotollwouldbechargedleavingManhattan.TheautomobiletollonthefourEastRiverbridgeswouldbe$8.30,equaltotwicetheone-wayE-zPasstollintheMTA-ownedBrooklyn-Batteryandqueens-MidtownTunnels.TheautomobiletollontheeightHarlemRiverbridgeswouldbe$3.80,equaltotwicetheone-wayE-zPasstollontheMTA’sHenryHudsonBridge.AninthHarlemRiverbridge,WillisAvenue,wouldnotbetolledsinceitcarriesonlytrafficleavingManhattan.

Estimatedannualtollrevenuewouldbe$590millionfortheEastRiverbridgesand$240millionfortheHarlemRiverbridges,foratotalof$830million.Onallofthetolledbridges,buseswouldbeexemptfrompayment.IBO’srevenueestimatesassumethattruckspaythesametollsasautomobiles.Iftruckspaidmore,astheydoonbridgesandtunnelsthatarecurrentlytolled,therewouldbeacorrespondingincreaseintotalrevenue.IBOestimatesthatexemptingallcityresidentsfromtollswouldreducerevenuesbymorethanhalf,to$376million.

oPPonents might arguethatmotoristswhodrivetoManhattanalreadypaysteepparkingfees,andthatmanydriverswhousethefreebridgestopassthroughManhattanalreadypaytollsonotherbridgesandtunnels.ManytollopponentsmaybelievethatitisparticularlyunfairtochargemotoriststotravelbetweenManhattanandtheotherboroughs.Theseopponentsdrawaparallelwithtransitpricingpolicy.WiththeadventoffreeMetroCardtransfersbetweenbusesandsubways,andtheeliminationofthefareontheStatenIslandFerry,mosttransitriderspaythesamefaretotravelbetweenManhattanandtheotherboroughsastheydototravelwithineachborough.TollsontheEastRiverandHarlemRiverbridgeswouldmaketraveltoandfromManhattanmoreexpensivethantravelwithinaborough.Inaddition,becausemostautomobiletripsbetweenManhattanandtheotherboroughsaremadebyresidentsofthelatter,inhabitantsofStatenIsland,Brooklyn,queens,andtheBronxwouldbemoreadverselyaffectedbytollsthanresidentsofManhattan.Anadditionalconcernmightbetheeffectonsmallbusinesses.Finally,opponentsmayarguethatevenwithE-zPasstechnology,tollingcouldleadtotrafficbackupsonlocalstreetsandincreasedairpollution.


This Report Prepared By:

Coordinators: AnaVenturaandPaulLopattoAnalysts:

EldarBeiseitov,DavidBelkin,AnaChampeny,BrendanCheney,MartinDavis,PatrykDrozdik,MichaelJacobs,JoshuaMason,BernardO’Brien,NashlaRivasSalas,YolandaSmith,kerrySpitzer,ShariStrauss,andAlanTreffeisen

Editorial Assistance: NicoleFleming

Production Coordinator: TaraSwanson

IBONew York City

Independent Budget Office

Ronnie Lowenstein, Director

110 William St., 14th Floor • New York, NY 10038

Tel. (212) 442-0632 • Fax (212) 442-0350

e-mail: [email protected] • http://www.ibo.nyc.ny.us

mailto:[email protected]


Budget OptiOns - IBO · New York City Independent Budget Office. Ronnie Lowenstein, Director 110...

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