Debt affordability refers to the ability of New York City and the Metropolitan Transportation Authority to manage their long-term financial obligations without compromising essential services or crowding out other budget priorities. This page covers CBC’s work on debt service caps, capital plan financing, structural budget gaps, infrastructure project prioritization, and the management of city and state debt limits.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
Continue biennial fare and toll increases and consider tying them to year-over-year expense growth instead of a flat 4 percent.
Implement additional operating efficiencies in collaboration with labor by modifying work rules, increasing employee availability, and sharing the benefits of additional operational flexibility and higher productivity to cut costs while supporting competitive wages.
Reduce paratransit per-trip expenses by using the paratransit fleet and broker services strategically to ensure users are provided with the lowest-cost transportation option that meets their needs.
Continue to reduce fare evasion, which is on track to cost more than $900 million this year, by accelerating the rollout of new faregates and a proof-of-payment system.
Collaborate with the City to improve uptake, assess the cost-effectiveness, and consider expanding Fair Fares NYC.
Key Data
In December 2025, the CBC reported that the MTA's operating budget-backed debt service is projected to reach $3.5 billion, or 14.7% of its $24 billion operating budget, by 2029.
In July 2024, the CBC highlighted New York City's long-standing practice of limiting debt service to 15% of City tax revenue to prevent long-term debt from crowding out operating budget priorities.
According to a policy brief from April 2024, New York City held $96.9 billion in outstanding debt against a constitutional debt limit of $127.5 billion at the end of fiscal year 2023, leaving 24% or about $30 billion of remaining borrowing power.
In July 2022, the CBC noted that New York State was projecting to exhaust its available debt capacity by fiscal year 2027, assuming continued growth in personal income.
Sherif Soliman has more than 30 years of experience in government and currently serves as Budget Director of the New York City Mayor’s Office of Management and Budget. In this role, he oversees the city’s fiscal policy, including the development of the expense and capital budgets, the city’s bond and…
Blake G. Washington is the Budget Director for the State of New York, appointed by Governor Kathy Hochul. Mr. Washington is responsible for the development and management of the New York State budget and leads a team of public servants to administer the fiscal duties of the state, including economic…
The Metropolitan Transportation Authority's November 2025 Financial Plan shows near-term stability but masks a $1.1 billion structural budget gap in 2029, which threatens long-term fiscal health. Rising debt service costs, combined with potential revenue shortfalls and increased operating expenses, risk straining the budget and necessitating future service reductions or bailouts.
Recommendations related to Debt Affordability
Continue biennial fare and toll increases and consider tying them to year-over-year expense growth instead of a flat 4 percent.
Implement additional operating efficiencies in collaboration with labor by modifying work rules, increasing employee availability, and sharing the benefits of additional operational flexibility and higher productivity to cut costs while supporting competitive wages.
Reduce paratransit per-trip expenses by using the paratransit fleet and broker services strategically to ensure users are provided with the lowest-cost transportation option that meets their needs.
Continue to reduce fare evasion, which is on track to cost more than $900 million this year, by accelerating the rollout of new faregates and a proof-of-payment system.
Collaborate with the City to improve uptake, assess the cost-effectiveness, and consider expanding Fair Fares NYC.
Key Data
$1.1 billion
— The MTA's underlying structural budget gap in 2029.
$3.5 billion
— The projected debt service expenses in 2029.
15 percent
— The MTA's benchmark level for debt service as a share of operating expenses.
$900 million
— The estimated cost of fare evasion in 2025.
$24.0 billion
— The MTA's total operating budget in 2029.
$13 billion
— The amount of MTA debt the 2025-2029 Capital Plan relies on.
The next mayor should cap debt service and redefine the city's debt limit to ensure it accurately reflects all financial obligations and resources, especially as the city spends over $115 billion annually. Implementing these fiscal controls is necessary to maintain the city's long-term financial stability and competitiveness.
Recommendations related to Debt Affordability
The next mayor should cap debt service and redefine the City’s debt limit to reflect all obligations and resources.
New York faces a more than $30 billion funding gap for the Metropolitan Transportation Authority's capital investment needs, necessitating immediate action to prevent further system deterioration. To address this, the state should prioritize repair projects, increase contributions, and implement modest fee hikes to support $6.8 billion in bonds while securing $500 million in recurring operating savings.
Recommendations related to Debt Affordability
Focus capital investment exclusively on projects to repair and improve the system.
Increase the State contribution by $7 billion, primarily by shifting funds from lower impact programs, and increase the City contribution by $2 billion to help close the funding gap.
Modestly increase fares, tolls, and vehicle registration fees, dedicating them to support $6.8 billion in bonds.
Ensure labor provides the flexibility to implement $500 million in recurring operating savings to support the planned level of MTA borrowing.
Key Data
$30 billion
— The size of the funding gap for the Metropolitan Transportation Authority's capital investment needs.
$6.8 billion
— The amount of bonds to be supported by modest increases in fares, tolls, and vehicle registration fees.
$500 million
— The amount of recurring operating savings needed to support the planned level of MTA borrowing.
$16 billion
— The additional funding needed for the Capital Plan beyond the initial proposals.
$7 billion
— The proposed increase in State contribution to the capital plan.
$2 billion
— The proposed increase in City contribution to the capital plan.
This year, voters will choose the next New York City Comptroller, who will play a critical role holding the City Administration accountable, managing five pension funds with $280 billion in assets, and partnering in the issuance of billions of dollars of City debt. The Comptroller is important to New York City's fiscal…
New York City's total outstanding gross funded debt reached $136,218 million in fiscal year 2024, while state-related debt outstanding totaled $54,319 million. These figures reflect the ongoing financial obligations and capital expenditure commitments managed by the city and state governments.
Key Data
$136,218 Million
— Total outstanding gross funded debt for the City of New York in FY 2024.
$54,319 Million
— State-related debt outstanding for the State of New York in FY 2024.
$8,765 Million
— Total debt service for the City of New York in FY 2024.
$6,997 Million
— State-related debt service for the State of New York in FY 2024.
The Metropolitan Transportation Authority's proposed $69 billion five-year capital plan faces a significant funding shortfall, exacerbated by the pause on congestion pricing which created a $15 billion gap. To maintain financial stability and avoid excessive debt, the state must prioritize a focused investment strategy that balances the system's critical repair needs with the region's existing tax burden.
Recommendations related to Debt Affordability
State leaders should evaluate options rigorously to identify how much capital investment to fund and who will pay.
The cost should be fairly spread among all beneficiaries — the region’s riders, taxpayers and drivers.
Albany also should trim and hyper-focus the plan to ensure the MTA’s 5-year commitment goal is realistic.
The MTA should reduce fare evasion and increase efficiency to stabilize its operating budget and finance debt.
State leaders should support a tightly focused and smartly financed MTA capital plan and empower the MTA to reduce fare evasion and increase efficiency.
Key Data
$69 billion
— The MTA's proposed 5-year capital plan.
$15 billion
— The funding hole created by pausing congestion pricing.
$1 billion
— The MTA's structural budget gap.
$8.6 billion
— The amount the MTA would spend for new and previously planned service expansion projects.
$90 billion
— The MTA's 5-year commitment goal including already planned projects.
The MTA's proposed capital plan is currently too large to be achievable, and the inclusion of $10 billion in new bonds is not financially sustainable given the agency's projected structural budget gap. To ensure long-term financial stability and maintain reliable service, the agency must prioritize essential infrastructure projects, reduce fare evasion, and secure a sustainable funding strategy that does not rely on frequent tax increases.
Recommendations related to Debt Affordability
The MTA should trim the plan to a more achievable level to reduce the funding gap.
The MTA should transparently schedule essential rebuild and improve projects before expansion projects.
The State should unpause congestion pricing to help fill the financing hole.
The State should develop a funding plan that is sustainable and does not require a new tax increase every five years.
The MTA must reduce fare evasion to help stabilize the operating budget and provide the capacity to finance debt.
Labor must be a partner to increase productivity to help stabilize the operating budget.
Key Data
$8.6 billion
— The amount of proposed and previously planned expansion projects that divert resources from essential rebuilding and improvement efforts.
$10 billion
— The amount of new MTA bonds proposed in the capital plan that are currently considered not affordable.
$1 billion
— The amount the MTA's structural budget gap will exceed by the end of the decade.
15%
— The portion of the operating budget that is not fully funded, which contributes to the lack of debt affordability.
The MTA's proposed capital plan relies on $10 billion in new bonds that threaten fiscal stability, as the agency faces a structural budget gap projected to exceed $1 billion by 2027. To ensure long-term financial health and avoid service risks, the state must identify sustainable funding sources and implement operational efficiencies rather than relying on unsustainable debt.
Recommendations related to Debt Affordability
The State should unpause congestion pricing and then identify a funding plan that is sustainable in the long run, ensures those who benefit pay their share, and does not harm New York’s competitiveness.
The State should thoroughly evaluate funding options to wisely identify financing that is sustainable, allocated among the many beneficiaries, and that does not harm New York’s competitiveness.
To fund more capital investment and stabilize the operating budget, the MTA will have to reduce fare evasion, and the labor unions should agree to operating changes that increase efficiency.
Critical state of repair projects should be front-loaded, or they may not be committed in the plan period given the extremely ambitious proposed pace of investment.
Key Data
$10 billion
— The amount of proposed new MTA bonds that are not fiscally sustainable.
$1 billion
— The amount the MTA’s structural budget gap will exceed by 2027.
$68 billion
— The total investment in the proposed Capital Program.
$96 billion
— The total investment when previously planned but not yet committed projects are included.
$19 billion
— The amount the MTA would be committing annually under the proposed plan.
68 percent
— The percentage by which the proposed annual commitment exceeds the MTA’s prior $11.4 billion annual peak.
The MTA's capital program requires significant funding to address critical infrastructure needs, but the agency must prioritize "Rebuild and Improve" projects while ensuring financing remains sustainable without relying on unsustainable debt or frequent tax increases. To achieve this, the MTA should right-size its capital plan to match commitment capacity, unpause congestion pricing, and improve operational efficiency to generate necessary savings.
Recommendations related to Debt Affordability
New MTA debt costs must be affordable within the operating budget, without damaging service or requiring massive fare increases.
The MTA should use recurring revenue to support capital investment on a pay-as-you-go basis, as much as it appropriate.
Adopt at most a $62.4 billion 2025-2029 Capital Program to ensure the plan is sustainable and matches commitment capacity.
Increase productivity and reduce fare evasion to provide at least $1.5 billion in needed operating budget savings.
Focus the capital program exclusively on projects to Rebuild and Improve the system to avoid diverting resources to expansion projects.
Key Data
$62.4 billion
— MTA's capacity for new capital investment over six years.
$1.5 billion
— Needed operating budget savings from increased productivity and reduced fare evasion.
$700 million
— Annual fare evasion amount.
$2 billion
— Potential annual savings from increasing efficiency with collaboration from labor.
$106.6 billion
— Lower bound of the five-year cost of Rebuild and Improve projects.
$115.0 billion
— Upper bound of the five-year cost of Rebuild and Improve projects.
The City's current policy of keeping debt service below 15 percent of tax revenues is not binding, creating a risk that debt could crowd out other essential expenditure priorities. To ensure long-term fiscal stability, the Charter should be amended to codify this 15 percent cap on debt service payments within the financial plan.
Recommendations related to Debt Affordability
Set the maximum debt level in the Executive Budget certificate of indebtedness to a level that ensures debt service remains below 15 percent of the tax revenue forecast in each year of the financial plan.
Add to the budget and financial plan standards a provision that debt service payments may not exceed 15 percent of projected tax revenue in any year of the financial plan.
Key Data
15 percent
— The maximum threshold for debt service payments relative to tax revenue that the City should be required to maintain to ensure affordability.
$100 billion
— The estimated long-term liability for other postemployment benefits, which represents a substantial financial challenge for the City.
To ensure long-term debt does not crowd out essential operating budget priorities, the City Charter should be amended to formally limit debt service to 15 percent of City tax revenue. This codification would solidify a long-standing practice into law, protecting the City's fiscal stability and integrity.
Recommendations related to Debt Affordability
The City Charter should be amended to ensure long-term debt does not crowd out operating budget priorities by limiting debt service to 15 percent of City tax revenue.
Key Data
15%
— The proposed limit on debt service as a percentage of City tax revenue to ensure long-term debt does not crowd out operating budget priorities.
To ensure long-term fiscal sustainability, the City Charter should be amended to formally cap debt service at 15 percent of tax revenues. This measure would codify an existing informal policy into a binding requirement to better manage the city's indebtedness.
Recommendations related to Debt Affordability
The Charter should limit debt service to 15 percent of tax revenues to help ensure that long-term debt is affordable.
To ensure long-term fiscal sustainability, the City Charter should be amended to cap debt service at 15% of tax revenues. This measure would provide a necessary constraint to maintain the affordability of the city's long-term debt obligations.
Recommendations related to Debt Affordability
The City Charter should cap debt service at 15% of tax revenues to help ensure that long-term debt is affordable.
Key Data
15%
— The proposed cap on debt service as a percentage of tax revenues to ensure long-term debt affordability.
New York City's debt limit, currently constrained by state law, requires a more holistic approach that indexes borrowing capacity to personal income and formalizes debt service limits to ensure long-term fiscal sustainability. Rather than arbitrary, lump-sum increases, the city should adopt a framework that aligns debt capacity with economic growth while prioritizing necessary capital investments and reducing project costs.
Recommendations related to Debt Affordability
Index the TFA Statutory limit to 2.5 percent of total personal income to ensure the City’s debt capacity grows with its underlying economic capacity.
Formalize the City’s long-standing practice of keeping annual debt service costs below 15 percent of tax revenue to protect its operating budget and credit ratings.
Continuously and comprehensively improve how the City makes capital investments, including prioritizing projects, reducing costs, and streamlining project delivery.
Amend the Constitutional debt limit to be more holistic by consolidating TFA FTS and general obligation debt under a single debt limit based on an appropriate economic metric.
Review each capital project to determine if it is necessary and scoped and priced properly, updating outdated estimates and dropping unnecessary projects.
Key Data
$18.5 billion
— The amount of the increase to the TFA Statutory limit requested by the City.
$12 billion
— The cumulative increase in debt capacity proposed by the State Executive Budget.
$13.5 billion
— The current TFA Statutory limit as of fiscal year 2023.
$23.8 billion
— The projected TFA Statutory limit by fiscal year 2033 under the recommended 2.5 percent indexing.
$152.2 billion
— The total cost of the current 10-year City-funded capital plan.
$96.9 billion
— The amount of outstanding debt held by the City against a debt limit of $127.5 billion.
The Metropolitan Transportation Authority faces significant fiscal risks, including potential revenue shortfalls from ridership recovery delays, fare evasion, and rising labor costs, which threaten the stability of its capital and operating budgets. To manage these challenges, the authority must prioritize capital projects based on available funding and ensure congestion pricing implementation remains clear and consistent to meet revenue goals.
Recommendations related to Debt Affordability
Limit exemptions to public and some private transit providers, those specified in the law, and those agreed to in the Final Environmental Assessment.
Do not provide credit for payment of MTA or Port Authority of New York and New Jersey tolls.
Vary the congestion charge by time of day and day of the week, and ensure the charge is easily understood and well-communicated.
Consider charging a vehicle-miles travelled (VMT) fee for those that stay inside of the zone.
Monitor and report congestion pricing outcomes and operational metrics to inform future policy adjustments.
The MTA should prioritize projects based on needs and available funds as capital needs will exceed available resources.
Key Data
$15 billion
— Amount of borrowing for the MTA's 2020-2024 Capital Plan expected to be supported by congestion pricing revenues.
$1 billion
— Annual revenue expected from congestion pricing.
45 percent
— Portion of the $55 billion in funding for the 2020-2024 capital plan that comes from sources that will not recur in the next cycle.
$325 million
— Revenue reduction resulting from a 5-percentage point shortfall in ridership.
$500 million
— Annual fare revenue shortfall resulting from the recent spike in fare evasion.
$100 million
— Annual cost of each additional percentage point increase in employee raises.
NYC Budget Director Jacques Jiha briefed CBC Trustees on the New York City Fiscal Year 2024 Executive Budget. Director Jiha was appointed to serve as Budget Director in October 2020. He oversees New York City’s fiscal policy, including the development of the Expense and Capital Budgets, the City’s bond finance…
The Metropolitan Transportation Authority faces a recurring annual structural deficit of $2.5 billion, necessitating a strategy to balance the budget through federal aid, potential debt restructuring, and new state revenue sources. To mitigate long-term fiscal risks, the authority is considering using $3.5 billion in federal COVID aid to retire debt, which could generate $3.9 billion in savings between 2024 and 2028.
Recommendations related to Debt Affordability
The MTA should seize the opportunity and runway created by federal aid to implement efficiency-focused operating reforms and—to the extent possible—restructure its long-term debt, which would reduce its structural deficit before the region’s critical transit system risks falling off the fiscal cliff.
The Citizens Budget Commission supports a multi-year phase-in plan starting with efficiencies under the purview of management, followed by implementing changes collectively bargained with labor over time to achieve recurring annual savings.
Key Data
$2.5 billion
— The MTA's projected annual recurring structural deficit.
$3.9 billion
— The amount of savings generated from 2024 through 2028 by restructuring and defeasing long-term debt.
$3.5 billion
— The amount of federal COVID aid the MTA proposed using to retire long-term debt.
$2.9 billion
— The amount the MTA borrowed from the Federal Reserve Board’s Municipal Liquidity Facility during the pandemic.
$800 million
— The amount of additional aid the MTA proposed the State provide in 2023 to balance the budget.
$1.6 billion
— The amount of additional aid the MTA proposed the State provide annually beginning in 2024 to balance the budget.
The Metropolitan Transportation Authority faces a significant capital funding shortfall, with at least $12 billion of planned financing considered unaffordable or at risk due to a structural operating deficit. To address this, the authority must prioritize critical state-of-good-repair projects and improve operational efficiency to ensure fiscal sustainability before pursuing system expansion.
Recommendations related to Debt Affordability
Increase the efficiency of operations to help eliminate the structural deficit, possibly creating the capacity to issue debt for capital when the operating budget’s recurring revenues and expenditures are appropriately balanced.
Develop an ambitious and solidly financed 2025-2029 capital program based on a realistic assessment of available financing, especially own-source funding in light of the fiscal sustainability of the operating budget.
Publish a $22.8 billion to $25.4 billion plan that identifies projects that can be committed by 2024, focusing on state of good repair, normal replacement, and system improvement projects.
Prioritize projects that maintain safety, restrain maintenance costs, and reduce capital costs by packaging contracts.
Continue to work with the federal and State governments to implement congestion pricing by 2023 to provide critical revenues.
Key Data
$11.5 billion
— Amount of MTA pay-as-you-go funding or long-term debt that is unaffordable due to the authority's structural operating deficit.
$12.0 billion
— Amount of future planned capital financing that is at risk or unaffordable, representing 20 percent of the total.
$2.5 billion
— The MTA's underlying structural operating budget gap that occurs annually.
$500 million
— Amount of capital funding at risk due to lower-than-expected revenue from the new dedicated real estate transfer tax.
$3.0 billion
— Additional capital funding that may be at risk if excessive subsidies or price-induced reductions in volume weaken congestion pricing revenue.
New York State added $1.6 billion in capital projects to the fiscal year 2023 budget without rigorous evaluation, with much of this spending financed by long-term bonds that consume limited state debt capacity. This practice threatens the state's ability to fund future critical infrastructure needs, especially as the state projects it will exhaust its available debt capacity by fiscal year 2027.
Recommendations related to Debt Affordability
The State should utilize a comprehensive capital planning process to prioritize critical projects and avoid wasteful spending that consumes debt capacity.
The Governor and Legislature should stop using lump sum appropriations for capital projects to prevent ad hoc spending that lacks oversight and strains state debt capacity.
The Executive should provide transparency on disbursements of existing lump sum pots to ensure that authorized spending is justified and does not unnecessarily exhaust the state's limited debt capacity.
Key Data
$1.6 billion
— Total amount of capital appropriations added to the fiscal year 2023 enacted budget.
$920 million
— Amount of capital appropriations added in the form of lump sums.
$656 million
— Amount of capital appropriations added for specific projects.
$1.2 billion
— Amount of the added capital projects that may be financed through bonds, consuming state debt capacity.
$418 million
— Funding for the Buffalo Bills Stadium that will be paid for with current money.
70%
— Percentage of the Buffalo Bills Stadium funding that will be paid for with current money rather than long-term bonds.
The proposed Penn Station redevelopment project carries significant financial risks, including potential cost overruns and the diversion of future tax revenue, which necessitates careful scrutiny of the financing plan to protect the city's fiscal health. Local officials must retain authority over whether and how much future property tax revenue is dedicated to this transit project versus other essential public needs.
Recommendations related to Debt Affordability
Before any financing plan is approved, the scope of work should be reasonably detailed, scrutinized, and streamlined as much as possible.
The State and the railroads should focus on improving safety, circulation, and functionality and doing so in the most cost-effective manner.
They should avoid costly, non-essential, cosmetic improvements and should not preclude the possibility of future capacity or service enhancements.
It is important to evaluate how the State will manage and mitigate the financing risks inherent to value capture projects, including who will be responsible for interest payments until revenue from new development comes online or who will be responsible for paying for cost overruns.
Ultimately, the Mayor and City Council should guide whether and how much of the City’s future property tax revenue should be dedicated to specific needs, such as a mass transit project, instead of other needs like public safety, education, or housing.
Key Data
$6 to $7 billion
— Estimated cost for the renovation of Penn Station.
$12 billion-plus
— Estimated cost for the expansion of Penn Station.
New York City is projected to have $12.1 billion in debt capacity by the end of fiscal year 2026, making a proposed increase to the Transitional Finance Authority’s borrowing authority premature. Instead of expanding borrowing limits, the City should focus on improving capital planning, prioritization, and execution to ensure cost-effective investments.
Recommendations related to Debt Affordability
The State should reject the proposal to increase the New York City Transitional Finance Authority’s (TFA) borrowing capacity that is outside of the City’s constitutional debt limit.
The City should improve its capital planning, prioritization, and execution to ensure that New Yorkers are being provided with cost-effective, targeted capital investments serving their City’s long-run needs.
Key Data
$12.1 billion
— The amount of debt capacity the City expects to have at the end of fiscal year 2026.
$95 billion
— The total value of the City's 5-year capital plan, which current projections likely overstate.
The proposed Penn Station Area Civic and Land Use Improvement Project, estimated to cost up to $17 billion, lacks sufficient detail regarding its value capture financing plan and the potential fiscal impact on the City. Before proceeding, the State should provide a clear scope of work and cost estimates to ensure the project's financing strategy is appropriate and does not create undue risk for the City's general fund.
Recommendations related to Debt Affordability
The plan should avoid costly, non-essential cosmetic improvements and should not preclude the possibility of future capacity or service enhancements.
The public approval process should include broader discussions about financing risks and the most effective strategies for mitigating and managing those risks.
New York City should have a substantive role in the planning process and should be a partner that agrees to the use of tax revenue that would otherwise flow to the City’s general fund.
There should be additional public discussion about the merits of the financing strategy compared to other alternatives and whether this is the most appropriate financing approach for the renovation of Penn Station.
There should be a robust discussion about potential tax incentives or abatements for redevelopment projects in the GPP district.
Key Data
$17 billion
— Estimated cost of the entire Penn Station project, including renovation, expansion, land acquisition, demolition, and public space improvements.
$6 to $7 billion
— Estimated cost of a scaled back renovation project without the proposed Penn South expansion.
$1.3 billion
— Amount included in the State’s Fiscal Year 2022 Enacted Budget for Penn Station-related projects.
50 percent
— Anticipated funding share for the Gateway project from the federal government.
25 percent
— Anticipated funding share for the Gateway project from New Jersey.
25 percent
— Anticipated funding share for the Gateway project from New York.
The Authorities Budget Office requires an annual funding increase to $5 million to effectively oversee nearly 600 state and local authorities that hold $243 billion in public debt. Current resource constraints prevent the agency from fulfilling its statutory duties, including providing critical recommendations on debt limits for public authorities.
Recommendations related to Debt Affordability
The state should provide an annual allocation of $5 million to the Authorities Budget Office to ensure it has the resources to oversee public authorities holding significant public debt.
The state should increase the existing budget of the Authorities Budget Office by $2.95 million to reach the necessary funding level for effective oversight of public authorities.
The Authorities Budget Office must be empowered to make recommendations to the Governor and Legislature on debt limits for public authorities to ensure fiscal responsibility.
Key Data
$243 billion
— Public debt held by state and local authorities and their subsidiaries.
$40 billion
— Annual spending by state authorities.
$20 billion
— Annual spending by local authorities.
$5 million
— Recommended annual funding for the Authorities Budget Office.
$2.05 million
— Current annual budget of the Authorities Budget Office.
$2.95 million
— Required increase to the Authorities Budget Office's budget.
New York State can balance its budget without raising income taxes by shifting more capital financing to long-term debt and reducing unproductive economic development spending. These strategies would generate billions in savings between fiscal years 2022 and 2025, providing a viable alternative to proposed tax increases and spending cuts.
Recommendations related to Debt Affordability
The State should focus its capital investments on the most critical projects during this period to avoid adding to already high outstanding debt levels.
If the State reduces its planned capital disbursements by 10 percent and finances up to 50 percent of the remaining paygo capital spending with debt, it would save $1.6 billion in fiscal year 2022.
A 50 percent reduction in proposed economic development capital spending plus financing 50 percent of the remaining paygo spending with debt would yield another $713 million in fiscal year 2022.
The State should smooth the year-to-year fluctuations in aid to avoid a sudden drop-off.
The overall distribution approach, however, should focus on directing aid to high need districts and reducing aid to wealthier districts.
Key Data
$1.6 billion
— Savings in fiscal year 2022 if the State reduces planned capital disbursements by 10 percent and finances up to 50 percent of the remaining paygo capital spending with debt.
$713 million
— Yield in fiscal year 2022 from a 50 percent reduction in proposed economic development capital spending plus financing 50 percent of the remaining paygo spending with debt.
$2.3 billion
— Total budget savings in fiscal year 2022 from the proposed alternative gap-closing strategies.
$2.1 billion
— Total budget savings in fiscal year 2023 from the proposed alternative gap-closing strategies.
$1.8 billion
— Total budget savings in fiscal year 2024 from the proposed alternative gap-closing strategies.
$1 billion
— Total budget savings in fiscal year 2025 from the proposed alternative gap-closing strategies.
New York State's fiscal outlook for 2022 remains challenging, with significant budget gaps extending beyond 2023 despite projected tax receipts. To avoid harmful tax increases, the state should prioritize structural spending reforms, including reducing aid to wealthy school districts and shifting cash spending on capital projects to debt.
Recommendations related to Debt Affordability
Before considering personal income tax increases, the State should adopt other less harmful measures, including shifting cash spending on capital projects to debt.
The State should be pursuing structural spending reforms to ensure that its finances are stable coming out of the recession.
The State should adopt other less harmful measures, such as reducing aid to wealthy school districts.
The State should adopt other less harmful measures, such as eliminating wasteful economic development spending.
Key Data
$6 billion
— Baseline assumption of federal aid.
$15 billion
— Amount of federal aid the State hopes to receive.
New York City's total outstanding debt reached $125 billion by the end of fiscal year 2020, representing an 84 percent increase since 2005. This rising debt burden has resulted in debt service costs consuming nearly 11 percent of the City's tax revenues.
Key Data
$125 billion
— New York City debt outstanding at the end of fiscal year 2020.
84 percent
— Growth of total debt since 2005.
11 percent
— Debt service costs as a percentage of tax revenues in fiscal year 2020.
New York City faces a fiscal crisis where borrowing to cover budget gaps threatens long-term financial stability, necessitating rigorous management and oversight rather than debt-fueled spending. Instead of relying on borrowing or layoffs, the city should implement efficiency measures, utilize attrition, and reform labor-management agreements to ensure sustainable fiscal health.
Recommendations related to Debt Affordability
If borrowing does become justified, authorization should come with significant conditions and oversight.
The city should have to produce and implement a multiyear plan that will lead to fiscal stability.
The Financial Control Board should have to certify and oversee the plan and borrowing, reestablishing a control period.
The Financial Control Board should review and approve major city fiscal actions and any debt issuances.
The city should implement the savings included in this year’s budget and additional savings of an equal or greater amount in the future.
Key Data
$1 billion
— labor savings committed to in the budget that have not been identified.
$2 billion
— amount by which the current city budget, adjusted for inflation, is higher than what the city spent in 2018.
$5 billion
— hypothetical amount the city might borrow.
$7 billion
— amount the city would have to pay back if it borrows $5 billion.
New York City should avoid borrowing to balance its operating budget, treating it only as a last resort if revenues fall significantly below projections. Any authorization for such borrowing must be contingent upon implementing existing savings, establishing a comprehensive fiscal stability plan, and ensuring oversight by the Financial Control Board.
Recommendations related to Debt Affordability
The City should implement all the savings included in this year’s adopted budget and more in the future before authorizing any borrowing for operating expenses.
Borrowing should only be authorized for the amount needed to address additional revenue shortfalls.
No borrowing should occur without a comprehensive and feasible plan that leads to fiscal stability.
Any borrowing must be accompanied by certification, monitoring, and approval of major actions by the Financial Control Board.
Borrowing should be treated as a last resort for balancing the budget.
Borrowing for operating expenses should be a last resort, and if authorized, it must be subject to strict conditions like implementing savings and oversight by the Financial Control Board. This approach ensures that current fiscal challenges are managed without placing an undue burden on future budgets or compromising long-term stability.
Recommendations related to Debt Affordability
New York City should not borrow now in order to balance the fiscal year 2021 budget.
The City must implement all savings included in this year’s adopted budget and identify and implement an equal or greater amount of savings in future years.
The amount authorized for borrowing must be limited to what is needed to address additional revenue shortfalls in the near term that are not supported by new federal aid.
Borrowing must be part of a comprehensive and feasible multiyear plan that leads to fiscal stability, as certified by the Financial Control Board or that meets criteria defined in law.
A control period should be established during which the Financial Control Board is empowered to condition each instance of borrowing, closely monitor the City’s fiscal management, and approve or reject City actions that have major fiscal impacts.
The Metropolitan Transportation Authority faces a severe fiscal crisis with multi-billion dollar operating shortfalls, necessitating a strategic combination of operational efficiencies, capital project prioritization, and potential fare and toll adjustments. To maintain essential services, the authority must balance these difficult choices while minimizing reliance on borrowing, which should be treated only as a last resort.
Recommendations related to Debt Affordability
The MTA should prioritize planned capital investments to lower debt service costs, including postponing expansions and possibly slowing accessibility improvements.
The authority should pursue greater efficiencies to lower operating expenses, which in large part requires working collaboratively with labor unions.
The new financial plan should set a substantial target for savings from negotiations with the major unions regarding work rules and compensation.
The MTA should postpone lower priority capital projects until after 2024 to ensure the capital plan remains realistic and affordable.
The authority should consider a revision of fare and toll policies that seeks more revenue from fares and raises tolls proportionally more than fares.
The MTA should borrow for operating expenses only as a last resort to sustain vital services during the crisis period.
The authority should be honest about what it truly expects to accomplish in its capital plan rather than maintaining a wish list that ultimately disappoints.
Key Data
$8.4 billion to $12.6 billion
— The estimated operating budget shortfall for 2020 and 2021.
$64 billion
— The amount of capital commitments called for in the MTA's current five-year plan.
$742 million
— The cumulative total of projected debt service for projects in the first five years of the new capital plan.
$2.7 billion
— The cumulative shortfalls below MTA plan projections for 2020 to 2022.
$7.9 billion
— The combined cost of the Second Avenue Subway Phase 2 and the Penn Station Access project.
$250 million
— The estimated annual revenue yield from increasing the current in-bound toll on MTA tunnels by $11.
New York can improve its fiscal outlook and balance the budget by utilizing $3.5 billion in rainy day funds and financing $3 billion in capital investments through bonds rather than relying on tax increases like a stock transfer tax. Additionally, the state should reduce inefficient spending, including $1.6 billion in aid to wealthy school districts and $4.4 billion in ineffective economic development programs.
Recommendations related to Debt Affordability
The state should finance $3 billion in capital investments through bonds instead of cash to provide a sustainable way to balance the budget.
The state should utilize its $3.5 billion in rainy day funds to help balance the budget.
The state should curtail inefficient spending, such as the $1.6 billion in aid to school districts with more than enough local resources, to balance the budget without raising taxes.
The state should reduce the $4.4 billion in economic development spending that has demonstrated little impact to improve the state's fiscal outlook.
The state should delay the Jan. 1, 2021 personal income tax cut and suspend the sales tax exemption on clothing to create a comprehensive and balanced budget package.
Key Data
$1.6 billion
— Aid provided to school districts with more than enough local resources to fund a sound, basic education.
$4.4 billion
— Spending on economic development that has demonstrated little impact, particularly in upstate communities.
$3.5 billion
— Available rainy day funds that can be used to help balance the state budget.
$3 billion
— Capital investments that can be financed through bonds instead of cash to help balance the budget.
New York City faces significant fiscal challenges, with projected budget gaps reaching billions of dollars annually through 2024, necessitating difficult choices to avoid long-term debt. To maintain fiscal stability without burdening future generations, the City should prioritize expenditure reductions, workforce attrition, and temporary tax increases over long-term borrowing.
Recommendations related to Debt Affordability
The City should avoid long-term borrowing for operating expenses, as it should be used only as a last resort to balance the budget in extraordinary circumstances.
City leaders should implement a temporary property tax increase in fiscal years 2022 and 2023 to help close budget gaps.
The City should reduce the workforce by roughly 9,000 positions, which could be done through attrition, to achieve necessary expenditure reductions.
The City should implement a health insurance premium-sharing arrangement for employees and retirees to provide significant recurring savings.
The City should reduce the five-year capital plan by $2.4 billion through operational strategies to reduce planned new school construction and by $4.3 billion by delaying and limiting expansion projects.
Key Data
$7 Billion
— The amount the City is seeking authority to issue in long-term debt to balance the budget.
$5.0 Billion
— The projected budget gap for fiscal year 2022 in the Fiscal Year 2021 Executive Budget.
$4.5 Billion
— The projected budget gap for fiscal year 2023 in the Fiscal Year 2021 Executive Budget.
$4.9 Billion
— The projected budget gap for fiscal year 2024 in the Fiscal Year 2021 Executive Budget.
$6.9 Billion
— The increased budget gap for fiscal year 2022 after accounting for identified risks.
$5.8 Billion
— The increased budget gap for fiscal year 2024 after accounting for identified risks.
CBC hosted a special panel discussion of prominent fiscal experts who helped New York overcome some of the most dire crises of the past. They provided insights and lessons from past experiences to help us understand and navigate the looming crisis. Stephen Berger Chairman, Odyssey Investment Partners; Former Executive Director,…
New York City faces a $7.4 billion tax revenue shortfall over two fiscal years, yet spending cuts for fiscal year 2021 were limited to only 2.1 percent of city-funded spending. Consequently, the state should reject legislation that would allow the city to issue long-term debt for operating expenses, as this should only be a last resort after other budget-balancing options are exhausted.
Recommendations related to Debt Affordability
The State Legislature should reject S.8418/A.10520, which would permit the City of New York to issue long-term debt to pay for operating expenses.
The State Legislature should not consider granting borrowing authority until the City has exhausted options for balancing the budget that do not irreparably harm today’s New Yorkers.
Borrowing should only be used as a last resort after other actions are exhausted and federal aid proves insufficient.
Key Data
$7.4 billion
— Tax revenue shortfall projected over two fiscal years.
2.1 percent
— Spending cuts of city-funded spending in fiscal year 2021.
New York's state and local governments face acute fiscal stress due to the pandemic, necessitating careful consideration of options like borrowing, tax increases, and expenditure reductions. Adhering to the principle of intergenerational equity is crucial, as long-term borrowing for operations unfairly burdens future generations with debt service costs.
Recommendations related to Debt Affordability
Future generations should not be obliged, usually through long-term borrowing, to pay for services for today’s residents.
Long-term borrowing for operations is generally considered inappropriate because it violates the principle of intergenerational equity by requiring future taxpayers to pay for the services consumed by current residents.
The more fiscally prudent policy is to use proceeds from assets sales to create equivalent value on the balance sheet; that is, use the proceeds for capital investments or keep them as reserves.
Sound public finance generally requires that capital investments be financed with bonds of a duration equal to the useful life of the asset purchased and that the debt service be equal in each of the years reflecting the equal use of the asset by each set of future residents.
Key Data
$100 million
— Amount of capital spending avoided that saves about $6.5 million annually in debt service.
$6.5 million
— Annual savings in debt service achieved by avoiding $100 million of capital spending.
two-thirds
— Maximum portion of any rainy day fund recommended for use in the first year.
New York State faces significant fiscal gaps that require a balanced approach to expenditure reductions, asset sales, and strategic borrowing to preserve intergenerational equity. By modifying capital plans to prioritize essential projects and utilizing debt financing for long-term investments, the state can manage fiscal stress while minimizing the burden on future generations.
Recommendations related to Debt Affordability
The State should modify its capital plan for the current period of fiscal stress and eliminate unproductive economic development capital spending.
The State should use debt to finance the remaining 90 percent of capital projects now funded on a pay-as-you-go basis to save a net $3.2 billion in fiscal year 2021.
The State should identify assets that can be sold with minimal adverse impacts for a target of $1.0 billion in fiscal year 2022 and in fiscal year 2023.
The State should freeze the implementation of middle class tax cuts at the calendar year 2020 rate.
The State should use some of its reserves to close current and future gaps.
Key Data
$3.2 billion
— Net savings in fiscal year 2021 from using debt to finance 90 percent of capital projects currently funded on a pay-as-you-go basis.
$36 million
— Lower bound of annual debt service savings from eliminating 50 percent of most Empire State Development economic development capital spending.
$134 million
— Upper bound of annual debt service savings from eliminating 50 percent of most Empire State Development economic development capital spending.
$1.0 billion
— Target for asset sales in fiscal year 2022 and fiscal year 2023.
$3.1 billion
— Amount of reserves the State would need to use in fiscal year 2021 if recommendations are adopted.
The Metropolitan Transportation Authority's 2020-2024 Capital Program relies heavily on new revenue streams and significant new debt, which threatens to increase debt service costs and pressure the operating budget. To ensure financial stability, the authority must prioritize projects, limit exemptions to new revenue sources, and reconsider using volatile real estate taxes to back long-term debt.
Recommendations related to Debt Affordability
The MTA should allocate its human and financial resources to the highest priority projects, and its capital plan documents should reflect these priorities by including, at minimum, the year in which the MTA plans to commit and complete each project.
The MTA and other public officials must ensure that exemptions and credits to the central business district tolling charge are limited, so that the revenue promised is available to support the plan.
Rather than using this volatile revenue source to support debt, the MTA should consider the new real estate transfer taxes a source for pay-as-you-go capital projects.
The MTA should provide the detail needed and present a five-year plan for investment so the MTA Board, oversight bodies, and the public can assess whether it is appropriate and hold the MTA accountable for implementation.
Key Data
15.8 percent
— Current debt service as a percentage of total operating spending.
31 percent
— Forecasted growth in debt service from 2019 to 2023.
18.6 percent
— Projected debt service as a percentage of operating spending in 2023.
$1 billion
— Estimated annual revenue generated by central business district tolling.
$15 billion
— Amount of bonds planned to be supported by central business district tolling revenue.
$10 billion
— Amount of bonds backed by the expansion of the real estate transfer “mansion” tax and a newly dedicated portion of State and City sales tax revenue.
The Metropolitan Transportation Authority's 2020-2024 Capital Program relies heavily on bonding against new revenue streams, which will increase debt service from 15.8 percent to 18.6 percent of operating spending by 2023. Because this strategy puts significant pressure on the operating budget and utilizes volatile revenue sources like real estate transfer taxes, the plan requires more rigorous prioritization and a shift toward pay-as-you-go financing for certain projects.
Recommendations related to Debt Affordability
The MTA should prioritize the most impactful projects and initiate those as soon as practicable to ensure debt-funded investments yield the greatest benefits.
The MTA should provide a detailed five-year plan for investment so oversight bodies can assess whether the level of debt is appropriate.
The MTA should reconsider using volatile real estate transfer taxes to support debt and instead use this revenue source for pay-as-you-go capital projects.
Public officials must ensure that exemptions and credits to the central business district tolling charge are limited, so that the revenue promised is available to support the plan's debt obligations.
Key Data
$1 Billion
— Annual revenue estimated from central business district tolling, which is planned to support $15 billion in bonds.
$15 Billion
— Amount of bonds planned to be supported by central business district tolling revenue.
15.8%
— Current percentage of total operating spending comprised by debt service.
18.6%
— Forecasted percentage of operating spending that debt service will reach by 2023.
31%
— Forecasted growth in debt service from 2019 to 2023.
$1 Billion
— The approximate cash shortfall the MTA faces over four years, which adds pressure to the operating budget alongside debt service.
The Metropolitan Transportation Authority's proposed $51.5 billion capital plan faces significant financial uncertainty, as it relies on $6 billion in unauthorized funding from the State and City while struggling to manage projected operating deficits. Furthermore, the agency must accelerate project execution to handle a plan that is 70 percent larger than its predecessor, despite having only committed 65 percent of the previous plan's funds as of June 2019.
Recommendations related to Debt Affordability
The MTA should make public a comprehensive needs assessment to ensure the plan is spending money on the right things.
The MTA must clarify the soundness of the financing plan, specifically regarding the $3 billion in funding from New York State and $3 billion from New York City that have not yet been authorized.
The MTA needs to accelerate the pace to execute projects to successfully implement a plan that is 70 percent greater than the 2015-2019 capital plan.
Key Data
$51.5 billion
— Total investment proposed for the region's mass transit network.
$3 billion
— Assumed funding from New York State that has not yet been authorized.
$3 billion
— Assumed funding from New York City that has not yet been authorized.
$9.8 billion
— Amount in bonds and pay-as-you-go capital the MTA must finance given projected operating deficits.
70 percent
— The extent to which the proposed plan is larger than the MTA's 2015-2019 capital plan.
65 percent
— Portion of the 2015-2019 capital plan committed as of June 2019.
New York City can reduce its capital spending by at least $2.4 billion and achieve annual debt service savings of at least $150 million by utilizing alternative strategies like rezoning and repurposing existing school space instead of relying solely on new construction. These approaches, which include enforcing enrollment caps and converting non-instructional space, would address school crowding more efficiently while alleviating the financial burden of new school projects.
Recommendations related to Debt Affordability
New school construction should be used only when alternative strategies are inadequate.
The DOE should implement a more flexible system of overlapping or grouped zones to more effectively balance enrollment between nearby crowded and non-crowded elementary school buildings.
The DOE should cap high school enrollment at levels consistent with capacity standards to eliminate crowding.
The DOE should convert excess administrative space and space allocated to non-school uses into instructional capacity.
The DOE should make unused middle school capacity available to crowded elementary schools by reconfiguring the grades served in underutilized middle school buildings.
Key Data
$2.4 billion
— Potential reduction in capital spending by utilizing alternative strategies instead of new construction.
$150 million
— Annual debt service savings for New York City and State from reduced capital spending.
95,984 seats
— Total seat shortage across 618 crowded school buildings.
$7.9 billion
— Funding allocated for 89 new school buildings in the fiscal years 2020 to 2024 capital plan.
31,854 students
— Excess enrollment in 93 crowded high school buildings.
16,000 seats
— Estimated additional capacity achievable through more flexible elementary school zoning.
New York State is nearing its statutory debt limit, which restricts its ability to finance capital projects through borrowing. To maintain fiscal responsibility, the state should limit capital spending to essential infrastructure investments justified by need or economic return rather than funding discretionary local projects.
Recommendations related to Debt Affordability
The State should limit capital spending to investments justified on the basis of need or rate of return, particularly since it is approaching its statutory debt limit.
The State should be very cautious about adding more debt to finance capital spending.
If the State is going to add debt-funded capital appropriations, the additional spending should be limited to significant state infrastructure investments.
Absent an emergency, State spending should be allocated during the budget process, where state leaders can adequately consider priorities and tradeoffs.
The legislature should close out session without passing any capital pork.
Key Data
$1.4 billion
— The amount of debt capacity available in fiscal year 2021, representing 2.4 percent of total capacity.
$107 million
— The remaining available debt capacity projected for fiscal year 2024.
$1.9 billion
— The amount authorized for the State and Municipal (SAM) Facilities Program to provide small grants to local governments and nonprofits.
$157 million
— The amount of a 2008 reappropriation for the New York State Capital Assistance Program included in the capital plan.
$475 million
— The amount of SAM funding in the fiscal year 2019 budget, which, if repeated, would cause the State to hit its debt ceiling in fiscal year 2023.
The NYC Ferry system requires significant public subsidies due to high operating costs and low farebox recovery, with planned expansions expected to further increase these costs and associated debt service payments. City officials should reevaluate the current operating strategy, pricing model, and expansion plans to ensure transportation funding is used efficiently and effectively.
Recommendations related to Debt Affordability
City officials should charge higher fares on weekends and for noncommuters to offset the cost of subsidies for daily commuters.
The City should implement dynamic pricing models for long, low-productivity routes that require substantial subsidies and see demand spikes on weekends.
City officials should adopt a different fare structure to mitigate the need to charter vessels or purchase larger boats.
City officials should review the system’s costs and subsidies to determine if the current operating strategy, pricing model, and expansion plans represent the most efficient use of transportation funding.
Key Data
$638.5 million
— Total estimated capital commitments for the NYC Ferry system.
$48.6 million
— Annual debt service payments at full buildout of the ferry system.
$108,000,000
— Upfront capital costs for building new landings and purchasing additional ferries for the expansion.
$114.3 million
— City capital commitments for NYC Ferry as of February 2019.
$8.7 million
— Annual debt service payments incurred by the $114.3 million in commitments to date.
$7,723,972
— Annual debt service for the new ferry routes and services.
New York City faces significant long-term fiscal challenges, with aggregate long-term liabilities reaching $257 billion and outstanding bonded debt totaling $111.0 billion as of fiscal year 2018. To prepare for potential economic downturns, the city must prioritize reducing these liabilities, limiting spending growth, and scaling back the bloated ten-year capital plan to focus on essential infrastructure.
Recommendations related to Debt Affordability
The City should focus on priority projects and reduce the funding level in the upcoming Ten-Year Capital Strategy.
Surplus revenues should be directed to paying off outstanding bonded debt.
The City should plan for annual deposits at higher levels in each year of the financial plan to address the long-term unfunded liability for retiree health insurance.
The City should limit spending growth to inflation to maintain fiscal discipline.
New initiatives should only be included in the capital plan if they can be justified by a clear return on investment.
Key Data
$257 billion
— Aggregate long-term liabilities at the end of fiscal year 2018.
$111.0 billion
— Outstanding bonded debt at the end of fiscal year 2018.
$100 billion
— Long-term unfunded liability for retiree health insurance and other postemployment benefits.
$16 billion
— Potential revenue shortfall in a recession, measured against the four-year financial plan.
$95.8 billion
— Size of the Ten-Year Capital Strategy released under Mayor de Blasio.
New York State's infrastructure faces significant funding challenges, with over $100 billion in investment needed and a decreasing debt capacity that limits the state's ability to finance critical projects. To address these issues, the state must improve capital planning, explore alternative funding sources like congestion pricing, and adopt more efficient project delivery methods to manage rising costs and debt.
Recommendations related to Debt Affordability
Establish a New York State Office of Infrastructure to institutionalize long-term, cross-agency planning and serve as a clearinghouse for infrastructure investment information.
The Office of Infrastructure should articulate a set of criteria to prioritize infrastructure investment, such as tying investment to economic growth, resiliency, and equity.
The Office of Infrastructure should create a Center of Excellence for state infrastructure investment to tackle cost drivers, assess project delivery methods, and facilitate knowledge sharing.
New York should pursue alternate funding sources, such as congestion pricing and value capture, to address the uncertainty of existing revenue streams like the gas tax.
The State should perform benefits/cost analysis on State of Good Repair (SOGR) projects to determine the potential economic cost of not bringing assets to a state of good repair.
Key Data
$100 billion
— Estimated investment required to meet the state’s infrastructure needs.
$31.7 billion
— Amount of debt the State projects issuing over the next five years.
$20.4 billion
— Amount of debt the State projects retiring over the next five years.
20%
— Projected increase in outstanding debt at the MTA by 2022 from 2017 levels.
$1.1 billion
— Estimated annual revenue generation from a congestion pricing charge on cars and trucks below 60th St.
$21 billion
— Total amount the proposed Resiliency Finance Corporation could raise over 20 years.
New York City's long-term liabilities for bonded debt, pensions, and retiree health benefits reached a record $257.3 billion in fiscal year 2018, an increase of $4.7 billion from the previous year. This debt burden equates to an average of $82,577 per city household, driven largely by rising retiree health and other nonpension benefit obligations.
Key Data
$257.3 billion
— Record long-term liabilities for bonded debt, pensions, and other postemployment benefits.
$4.7 billion
— Increase in total long-term liabilities since fiscal year 2017.
$82,577
— Average liability per New York City household.
$99 billion
— Total OPEB liability for retiree health and other nonpension benefits.
$111.0 billion
— Total bonded debt for the City.
75.9%
— Funded status of the City’s pension funds.
New York's state-funded debt and debt service have stabilized over the last nine years, with debt outstanding increasing 8 percent to $66.7 billion and debt service rising 11 percent to $7.3 billion since fiscal year 2011. Despite this stabilization, the state's debt burden remains high, ranking 9th in debt per capita and 15th for state debt as a share of personal income as of 2015.
Key Data
$66.7 billion
— State debt outstanding as of fiscal year 2019, which represents an 8 percent increase since fiscal year 2011.
$7.3 billion
— Annual debt service as of fiscal year 2019, reflecting an 11 percent increase since fiscal year 2011.
9th
— New York's rank in debt per capita in 2015, indicating a high debt burden.
15th
— New York's rank for state debt as a share of state personal income in 2015.
3.1 miles is the length of the newly constructed Governor Mario M. Cuomo Bridge. At a cost of $4 billion dollars, the bridge was financed with debt, but no new tolls have been announced to repay it. CBC's Patrick Orecki explains why the toll may need to double from current…
New York City faces $252.5 billion in long-term liabilities, including bonded debt, retiree health benefits, and pension obligations, which consume over 20% of the annual operating budget. To ensure long-term fiscal stability, the city must implement a more realistic capital plan, reduce retiree benefit costs, and establish strategies to prefund liabilities rather than treating reserves as rainy day funds.
Recommendations related to Debt Affordability
New bonded debt should be limited by implementing a more realistic capital plan developed around specific priorities and predominantly focused on repairing critical infrastructure.
The City should use the dedicated $250 million capital reserve as PAYGO capital to reduce the borrowing needed each year to finance the capital plan.
The City should establish a goal of cutting retiree health benefit costs by 50 percent through measures like premium sharing and eliminating reimbursement of Medicare Part B.
The City should develop a policy for deposits and withdrawals to the Retiree Health Benefits Trust Fund to prefund the OPEB liability rather than treating it as a rainy day fund.
The City should advocate for legislative changes that focus on reducing the greatest cost drivers of pension benefits and risk factors to the funds.
Key Data
$252.5 billion
— Total long-term liabilities for the City of New York at the end of fiscal year 2017.
$81,100
— Total long-term liabilities per household at the end of fiscal year 2017.
$9,782
— New York City’s debt burden per resident in 2016.
$19.3 billion
— Expected legacy costs in fiscal year 2019, including debt service, pension contributions, and retiree health benefits.
$88.4 billion
— Unfunded liability for other postemployment benefits (OPEB) in fiscal year 2017.
$56.2 billion
— Unfunded pension liability in fiscal year 2017.
New York City's debt repaid by tax dollars is projected to rise from $76 billion to $96 billion in four years, necessitating a shift toward purchasing capital assets outright rather than incurring new debt. Additionally, the city must continue making deposits into the Retiree Health Benefits Trust Fund to address the $90 billion obligation for public retiree health benefits.
Recommendations related to Debt Affordability
Surplus revenues should be used to purchase capital assets, such as equipment and vehicles, outright instead of incurring new debt.
The mayor and Council should make a deposit to the Retiree Health Benefits Trust Fund to help defray the city’s $90 billion obligation for the health benefits of public retirees.
The City Council should limit its own agenda to those items that provide the most return on investment.
Key Data
$90 billion
— The city's total obligation for the health benefits of public retirees.
$4.25 billion
— The current balance of the Retiree Health Benefits Trust Fund.
$76 billion
— The amount of debt repaid by city tax dollars next year.
$96 billion
— The projected amount of debt repaid by city tax dollars in four years.
New York City's five-year capital commitment plan has grown to approximately $82 billion, raising concerns about the sustainability of rising debt levels. Consequently, there is a need for greater caution, scrutiny, and structural reform in the city's capital planning and budgeting processes.
Recommendations related to Debt Affordability
Additions to the capital plan should be treated with the same caution and scrutiny as those to the operating budget, given that the City’s debt outstanding and debt service levels continue to rise.
Reforms to the city’s capital planning and budgeting processes should be part of the approval process for the capital commitment plan.
Key Data
$82 billion
— The five-year capital commitment plan has ballooned to approximately this amount.
New York City's capital commitment plan is overly ambitious and relies heavily on borrowing, leading to a growing debt burden and rising debt service costs. To manage these fiscal pressures, the city should prioritize essential infrastructure repairs, incorporate life-cycle cost analysis, and shift toward pay-go financing to offset increasing borrowing costs.
Recommendations related to Debt Affordability
The City should offset increasing borrowing costs by using pay-go financing to fund capital projects.
Capital projects, particularly those billed as “economic development,” should only be included in the budget if they demonstrate greater benefits than costs or a return on investment to ensure fiscal responsibility.
The capital planning process should include a life-cycle cost analysis that incorporates the cost of operating, maintaining, and ultimately replacing capital assets to better manage long-term debt obligations.
Key Data
$79 billion
— The size of the Preliminary Capital Commitment Plan for Fiscal Years 2018 to 2022, which is funded through borrowing and contributes to the city's debt burden.
New York City's capital commitment plan is consistently front-loaded and overly ambitious, leading to a buildup of excess appropriations and inaccurate projections of city borrowing. By reducing the size of the plan to reflect realistic agency capacity, the city could improve project oversight and better align capital spending with actual priorities.
Recommendations related to Debt Affordability
The City should reduce the size of the capital commitment plan to force agencies to identify their capital priorities.
The commitment plan should reflect what agencies can reasonably commit and manage in a given year.
Reducing the size of the plan will prevent the buildup of excess appropriations and allow for better oversight of capital expenditures.
Eliminating the front-loading of planned commitments will allow for more accurate timing of future commitments.
The City should clearly articulate its capital priorities and immediate needs to facilitate improved tracking of capital projects and allow for more accurate projections of City borrowing.
Key Data
$69.6 billion
— Total capital commitments called for in the Fiscal Year 2019 plan from fiscal year 2018 through fiscal year 2021.
$21.7 billion
— Amount of capital commitments planned for the first year of the Fiscal Year 2019 plan.
$1.7 billion
— Amount by which the current capital commitment plan exceeds the plan proposed one year ago in January 2017.
$15.7 billion
— Commitment target for 2018 in the current Preliminary Capital Commitment Plan.
$6.0 billion
— Reserve for unattained commitments in the current Preliminary Capital Commitment Plan, representing 28 percent of the target.
$10.9 billion
— Actual capital commitments made during the fiscal year when the City projected it would commit $20.0 billion.
New York State's one-time financial settlements should be prioritized for long-term fiscal health, such as paying down debt or funding retiree benefits, rather than covering annual operating expenses. Additionally, the state faces significant future liabilities, including $87.3 billion in unfunded other postemployment benefits, necessitating more disciplined budget practices.
Recommendations related to Debt Affordability
The State's $702 million in one-time financial settlements are best used to enhance reserves or provide long-term benefits such as pay-as-you-go capital investments that replace borrowing, paying down debt, or making payments to the retiree benefits trust.
The State should not rely on revenues from health insurance company conversions to balance the budget, as relying on speculative revenues exacerbates budget deficits.
The Administration should adopt a less risky budget if it already anticipates the need to make significant midyear spending corrections.
Key Data
$702 million
— Amount in one-time financial settlements available to the State.
$383 million
— Amount of one-time financial settlements used for annual operating expenses.
$194 million
— Amount of one-time financial settlements used for the MTA Subway Action Plan.
$125 million
— Amount of one-time financial settlements recommended for health care capital grants.
$87.3 billion
— Total liability for other postemployment benefits (OPEB) with no assets reserved.
New York City's capital spending has reached unprecedented levels, resulting in a high debt burden that consumes a significant portion of the operating budget. To ensure fiscal responsibility, the city should implement a formal investment policy that limits debt, increases the use of pay-as-you-go funding, and prioritizes 'fix it first' maintenance projects.
Recommendations related to Debt Affordability
The next administration should articulate a standard for keeping debt from becoming unaffordable.
The administration should also develop criteria for paying for some capital expenses from the operating budget.
The City should adopt a “fix it first” strategy, in which state of good repair projects receive priority at each agency.
The City should also renew its Project Labor Agreements to reduce labor costs and improve managerial flexibility.
City leaders should advocate for a repeal of Wicks Law to reduce costs and improve construction management.
Key Data
$100 billion
— Amount of capital spending financed by debt between fiscal years 2003 and 2014.
14.3 percent
— Ratio of debt outstanding to personal income in fiscal year 2013, which is more than double the 6 percent benchmark for high debt.
65 percent
— Growth in city debt service costs between fiscal years 2002 and 2014.
$7.8 billion
— Projected annual debt service cost by fiscal year 2017.
$300 million
— Estimated annual expenditure from the operating budget for pay-as-you-go capital to fund regular replacement of vehicles and equipment.
The New York City Housing Authority faces a massive capital funding gap, with needs exceeding $25 billion, while its ability to independently fund improvements is severely restricted by federal regulations and limited operating surpluses. To address these shortfalls, the Authority has increasingly turned to alternative financing strategies, such as public-private partnerships and the Rental Assistance Demonstration program, to leverage private funds for necessary building repairs.
Key Data
$299 million
— Amount of the 2012-2016 capital plan allocated for debt service on new bonds backed by federal capital subsidies.
$500 million
— Amount of new debt NYCHA anticipated issuing in the 2012 Capital Plan to support its capital plan.
$186 million
— Amount of existing debt NYCHA refunded when it sold new Capital Fund Financing Program bonds in 2013.
$470 million
— Amount of new funds raised by NYCHA when it sold new Capital Fund Financing Program bonds in 2013.
$253 million
— Amount raised by NYCHA through tax-exempt bonds and LIHTC equity via the Rental Assistance Demonstration program to rehabilitate the Ocean Bay development.
Tax Increment Financing (TIF) allows municipalities to fund infrastructure projects by pledging future property tax revenue, but it carries significant risks if projects fail to generate the projected growth. Because TIF bonds are often riskier than general obligation bonds and can divert resources from other needs, governments must conduct rigorous due diligence to ensure projects are financially viable and truly necessary.
Recommendations related to Debt Affordability
Governments should ask if the project passes the 'but for' test to ensure development would not occur without the TIF-funded capital improvements.
Officials must determine if the investment will generate new economic activity or simply shift it from elsewhere in the city or region.
Leaders should evaluate if the project's expected return on investment is strong enough to justify diverting revenue from other prospective needs.
Municipalities must test their revenue projections against a range of economic scenarios, including the impact of possible cost overruns, revenue shortfalls, cost spillovers, and economic downturns.
Policymakers should implement strong transparency provisions to help protect future taxpayers against the risks associated with TIF projects.
Key Data
$3 billion
— The projected cost of the Hudson Yards project, which public investments and actions were expected to finance.
$359 million
— The amount New York City paid from its general fund to subsidize Hudson Yards’ interest payments after the Great Recession delayed office development.
$14 million
— The amount of TIF debt the Troy Downtown Development Authority in Michigan defaulted on, which the city eventually bailed out.
$75.4 million
— The total outstanding Pilot Increment Financing (PIF) debt in New York as of June 2017.
$10 million
— The amount raised and spent by a majority of Chicago's TIF districts over a 13-year period, which often failed to generate significant property appreciation.
$266 million
— The amount of capital cost overruns incurred by the Hudson Yards project after it went over budget.
The construction of the new Mario M. Cuomo Bridge requires repaying $2.9 billion in loans and bonds, which should be funded by increasing tolls specifically for bridge users rather than implementing a system-wide toll hike. This approach ensures that those benefiting from the new infrastructure bear the costs, while maintaining transparency and public discussion regarding the necessary toll adjustments.
Recommendations related to Debt Affordability
Increasing the toll on the new Cuomo Bridge alone is the appropriate approach, and the new toll should cover all of the bridge’s debt and maintenance costs.
The Thruway Authority should reconsider the toll freeze and increase tolls by the rate necessary to service the debt when the costs are payable.
There should be transparency and public discussion on the toll increase now, as the bridge is opened for use.
The best approach would be to effectuate a toll increase that covers all of the increased debt service costs, when the asset begins serving users with the completion of the bridge.
Key Data
$2.9 billion
— Long-term loans and bonds that will need to be repaid for the bridge construction.
$10.61
— Projected toll for passenger vehicles using E-Z Pass under full-cost scenarios.
$174 million
— Average annual debt service costs for the Cuomo Bridge’s loans and bonds.
24 percent
— Increase on all Thruway tolls required to fund the debt service if applied system-wide.
$4 billion
— Total cost of the Cuomo Bridge funded by pay-as-you-go capital contributions and borrowing.
$1.6 billion
— Federal TIFIA loan approved for the Tappan Zee Bridge replacement.
New York State’s transportation capital planning is constrained by limited debt capacity, with total debt outstanding capped at 4 percent of personal income and debt service costs capped at 5 percent of the state budget. Projections indicate that debt outstanding will reach $59.5 billion by fiscal year 2022, nearing the $60 billion cap and limiting the state's ability to fund future infrastructure investments without increasing taxes or fees.
Key Data
4%
— The cap on total debt outstanding as a percentage of State personal income.
5%
— The cap on debt service costs as a percentage of the State budget.
$59.5 billion
— Projected debt outstanding by fiscal year 2022, which is just below the $60 billion cap.
$6.2 billion
— The actual remaining debt capacity by the end of fiscal year 2017.
New York's fiscal health is ranked 39th nationally, largely due to high levels of long-term debt and significant spending relative to personal income. To improve this standing, the state needs to shift toward pay-as-you-go capital funding and utilize alternative development tools to manage infrastructure needs without further increasing the debt burden.
Recommendations related to Debt Affordability
New York’s leaders should focus on decreasing long-term debt and reducing the State’s OPEB liabilities.
New York must do a better job of funding its capital expenses on a pay-as-you-go basis.
New York should look to innovative development tools, such as public-private partnerships, to expand capital investment more efficiently without increasing the State’s debt burden.
Key Data
39th
— New York's national ranking for long-run solvency, which is negatively impacted by large long-term debts.
45th
— New York's national ranking for outstanding OPEB liability per thousand dollars of income.
37th
— New York's national ranking for service level solvency, which is dragged down by high levels of spending as a share of personal income.
The City's Ten-Year Capital Strategy lacks transparency and realistic planning, which obscures the true long-term costs of infrastructure projects. If the City were more realistic about out-year spending, debt service obligations could reach 15.1 percent of projected tax revenue, exceeding the City's own affordability benchmark.
Recommendations related to Debt Affordability
The City should adjust its strategy to acknowledge more appropriate commitment levels at the end of the ten-year period to avoid unrealistic long-term spending plans.
The Administration should incorporate a rebalancing of capital allocations in future capital strategies to reflect a more realistic timeline over the first four years.
The Strategy should clearly relate back to statements of needs so that the City and the public can determine whether or not planned capital investment is adequate.
The Strategy should include other benchmarks to measure progress toward the project’s completion for spending categories that do not lend themselves to unit cost comparison.
Formulating a capital strategy should incorporate past experiences to plan more transparently and effectively.
Key Data
$12.9 billion
— Projected debt service obligations if the compounded annual growth rate from fiscal years 2018 to 2023 were applied to the final four years of the strategy.
15.1%
— The share of projected tax revenue that debt service obligations would reach if the compounded annual growth rate from fiscal years 2018 to 2023 were applied to the final four years of the strategy.
7.9%
— The compounded annual growth rate of anticipated debt service obligations from fiscal years 2018 to 2023.
0.3%
— The compounded annual growth rate of anticipated debt service obligations from fiscal years 2023 to 2027.
New York City's capital construction process for libraries and cultural institutions is plagued by excessive delays and high costs, often driven by inefficient multi-agency oversight and a reliance on piecemeal discretionary funding. These systemic issues, combined with a lack of accountability and outdated procurement laws, result in projects that take years longer and cost significantly more than those managed by the institutions themselves.
Recommendations related to Debt Affordability
The mayor should convene a task force to examine the current capital construction approval and management system, ensuring that representatives of the city’s libraries and cultural institutions are at the table.
The city should leverage its existing Capital Projects Dashboard and expand it to systematically track the real costs and timelines of all capital construction projects, including DDC-managed projects and those managed by other agencies.
The city should consider reducing OMB’s role in project approvals after the initial CP approval and institute frequent randomized audits instead to ensure that all legal and finance law obligations are met.
With the help of the Mayor’s Office, DDC should work with other relevant departments—including the Fire Department, Department of Buildings, and Public Design Commission—to establish a common design review process and agree to achievable timetables for feedback and approval.
The city should fund an expanded agency-wide data and analytics team within DDC, which could work with existing city teams, including the Mayor’s Office of Data Analytics and the pool of technologists at the Department of Information Technology and Telecommunications, to develop and implement data analytics tools for capital construction management.
The city should follow the lead of the HHS Accelerator system, which centralizes contracting and procurement for social service providers, and develop a similar portal for prospective recipients of capital construction dollars.
The city council should then adopt and fund a fixed five-year capital program, aligned with the city’s required ten-year capital strategy.
To improve the efficiency and transparency of the approval process, OMB should create a handbook providing an easy-to-understand summary of all capital eligibility rules and requirements with specific examples to help institutions understand the rationales behind various rulings.
The city should escalate its long-standing efforts to encourage the State Legislature to authorize design-build on appropriate capital construction projects.
The city should implement a risk-based contract review procedure that includes the bidder’s experience as a criterion, with metrics assessed to validate past performance.
Key Data
$930 per square foot
— The median cost for new buildings in our sample of DDC-managed capital projects.
1,550 days
— The median time it took for the DDC-managed capital projects analyzed to complete.
$1,272 per square foot
— The average cost of ground-up construction projects when managed by the city.
$641 per square foot
— The average cost of ground-up construction projects when managed by the New York Public Library.
328 days
— The average time it took for the Office of Management and Budget (OMB) to approve Certificates to Proceed (CP) and amendments for the average project.
22 percent
— The reduction in project approval durations from OMB cited in DDC’s 2017 State of the Agency report.
New York State should utilize its $1.8 billion in one-time financial settlements to fund long-term capital investments that replace borrowing or accelerate debt payments rather than funding operating expenses. Additionally, capital plan allocations, such as the $270 million for the Department of Transportation, should be prioritized only if they effectively displace debt and improve infrastructure functionality.
Recommendations related to Debt Affordability
The State’s current year $1.8 billion in one-time financial settlements should be used to provide long-term benefits such as pay-as-you-go capital investments that replace borrowing, enhance reserves, or accelerate debt payments.
The $270 million dedicated to the Department of Transportation capital plan may prove beneficial if the investment displaces debt and improves functionality.
Key Data
$1.8 billion
— One-time financial settlements available in the current year that should be used to replace borrowing or accelerate debt payments.
$270 million
— Funds dedicated to the Department of Transportation capital plan that could be beneficial if the investment displaces debt.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
The Metropolitan Transportation Authority faces a projected GAAP deficit exceeding $2.7 billion in 2017, necessitating a shift in funding strategies to better align revenue with operating expenses. To improve fiscal sustainability, the agency should implement regular, predictable fare increases and explore additional motor vehicle charges, such as tolling or vehicle-miles traveled fees, to reduce reliance on tax subsidies.
Recommendations related to Debt Affordability
The Board should continue the policy of regular and predictable fare increases and move toward a long-term goal of covering approximately half of mass transit expenses with fare revenue.
The MTA should seek additional motor vehicle use charges to cross-subsidize transit.
Transit fares should increase greater than 4 percent in 2017 and 2019.
The MTA should ensure the contractor and the agency have the capacity to implement an income-conditioned fare structure so that if such a policy is adopted by the Mayor and City Council, it can be implemented quickly.
The MTA should explore peak pricing on subways and buses to reduce rush hour crowding.
Key Data
$2.7 billion
— The MTA's deficit using GAAP is expected to surpass this amount in 2017.
40 percent
— The current share of relevant expenses covered by fares.
12 percent
— The current share of relevant expenses covered by cross-subsidies from motorists.
42 percent
— The increase in fringe benefits for employees and retirees since the MTA implemented a fare increase in 2009.
$90 million
— The estimated yield from capping the number of allowed rides for weekly and monthly passes in 2015.
The Metropolitan Transportation Authority's labor agreement with the Transport Workers Union provides 28 months of labor peace but exceeds the financial plan, potentially necessitating higher fare increases or increased borrowing to fund the capital program. This settlement delays the implementation of productivity gains from work rule and benefit changes.
The 2016-17 state budget agreement includes a $54 billion, five-year transportation capital plan that raises questions about the state's already high debt burden. While the budget includes significant spending increases and tax cuts, the long-term financial plan faces potential risks if economic growth slows or enters a recession.
Key Data
$54 billion
— The five-year transportation capital plan, which raises concerns regarding the state's already high debt burden.
New York State's fiscal year 2017 budget prioritizes expediency over fiscal discipline, failing to address the long-term debt implications of significant capital spending initiatives. While rejecting some imprudent cost-shifting proposals, the budget neglects necessary reforms to retiree health benefits and tuition policies, while increasing spending on projects like the Jacob Javits Center expansion and nanotechnology subsidies.
Recommendations related to Debt Affordability
The State should address the long-term debt implications of capital initiatives within the budget legislation.
The State should reform retiree health benefits in a responsible and sustainable manner to improve long-term fiscal health.
The State should freeze the poorly targeted School Tax Relief (STAR) program to reduce unnecessary spending.
The State should reauthorize a rational tuition policy for SUNY and CUNY to manage operating costs.
Key Data
$1.3 Billion
— Subsidies for nanotechnology and high-tech manufacturing included in capital spending.
$1 Billion
— Funding allocated for the Jacob Javits Center expansion.
$300 Million
— Funding allocated for a research corridor on Long Island.
The New York State Thruway Authority should rely on toll revenue rather than state subsidies to fund infrastructure projects like the New NY Bridge, as current toll rates remain historically low and capable of supporting necessary debt service. Relying on bank settlements to subsidize operations undermines the principle of user-funded transportation and creates long-term fiscal instability for the authority.
Recommendations related to Debt Affordability
The Governor and the Legislature should make a U-turn in policy and return to a sounder approach to funding the Authority.
The Legislature should concur with the proposal to remove the Canal Corporation from the Thruway to save operating losses and capital spending.
The Legislature should reject the proposal to require the Thruway Authority to pay the annual cost of policing, which is approximately $35 million.
The State should avoid allocating additional settlement funds in the 2016-2017 budget to the Thruway Authority.
Key Data
$2.3 billion
— The amount of State funds from bank settlements the Governor wants to provide to subsidize the New York State Thruway Authority.
$1.3 billion
— The amount of bank settlement funds previously appropriated to the Authority for its capital program.
$50 million
— The estimated annual operating losses saved by removing the Canal Corporation from the Thruway.
$209 million
— The amount of planned capital spending alleviated by removing the Canal Corporation from the Thruway.
$35 million
— The annual cost of policing the Thruway that the Executive Budget would require the Authority to pay.
$7.29 to $7.43
— The necessary toll increase to cover incremental debt service if tolls financed construction of the replacement bridge.
The Metropolitan Transportation Authority's financial plan relies on optimistic economic growth projections that may leave the agency vulnerable to significant revenue shortfalls during a recession. To mitigate these risks, the agency should adopt more cautious revenue assumptions, establish an explicit rainy day fund, and limit the reallocation of capital and retiree benefit funds to cover operating expenses.
Recommendations related to Debt Affordability
More cautious economic and revenue assumptions seem appropriate to better prepare for potential downturns.
An explicit rainy day fund should be established covering a larger share of total expenses before releasing future reserves to reduce other long-term liabilities.
Greater restrictions on the diversion of OPEB funding and a firmer commitment to PAYGO capital allocations would reduce the risks associated with reallocating those items.
Accumulation of general reserves should be permitted to provide a buffer against revenue volatility.
Continuing to increase planned efficiency gains beyond current targets for future years would help bring expenditures in line with the revenues available when a downturn occurs.
Key Data
$1.5 billion
— The cumulative shortfall of revenue the MTA would experience over a four-year period in an illustrative case recession.
$616 million
— The revenue loss in Year Three of the illustrative case recession, representing a 3.9 percent shortfall relative to plan assumptions.
$4.6 billion
— The revenue shortfall the MTA would face over the financial plan period if a recession similar to the 2007 downturn occurred.
$20 billion
— The current unfunded OPEB liability of the MTA, which would grow by about $1.5 billion annually without future funding.
$1.3 billion
— The amount of annual savings the MTA achieved in 2015 through its expenditure reduction initiative.
New York City's outstanding debt has grown by 96 percent since 2002, exceeding $110 billion, while the proposed Ten-Year Capital Strategy for Fiscal Years 2016-2025 threatens to further increase debt service costs to one out of every eight dollars in tax revenue. Because the City lacks a comprehensive needs assessment and performance metrics for capital projects, new investments must be limited to clearly defined initiatives with demonstrable benefits to avoid a future budget crunch.
Recommendations related to Debt Affordability
New investments need to be undertaken cautiously given the large and growing debt load.
Proposed capital spending should be limited to clearly defined projects with demonstrable benefits.
The City must provide the information needed to judge whether planned investments are worthwhile.
The City should link the Ten-Year Capital Strategy to a needs assessment to determine progress toward achieving a state of good repair.
Key Data
$110 billion
— New York City's outstanding debt as of June 30, 2014, including the Water Authority.
96 percent
— Growth of New York City's outstanding debt since 2002.
8 percent
— Projected debt repaid from tax revenues in fiscal year 2016 as a percentage of the City's real property values.
13 percent
— Projected debt repaid from tax revenues in fiscal year 2016 as a percentage of personal income.
$83.8 billion
— Total value of the proposed Ten-Year Capital Strategy for Fiscal Years 2016-2025.
30 percent
— Projected increase in debt service paid from the operating budget.
New York City's debt burden is high, with debt outstanding exceeding $100 billion and debt service costs growing 41% since fiscal year 2005. Current debt levels, which reach 8% of real property values and 13% of personal income, exceed standard affordability benchmarks and are increasingly crowding out other essential operating expenditures.
Recommendations related to Debt Affordability
The Council should require improved reporting on the rationale for and performance goals of capital spending and should limit the capital budget to clearly defined projects with demonstrable benefits.
Investments should be undertaken based on clear analysis that demonstrates increased economic activity, improved operating efficiency, or enhanced service delivery.
The Strategy should incorporate information from agency assessments and clearly spell out how much of state of good repair needs will be addressed by the proposed investments, and how quickly.
The City should ensure specificity regarding project goals and cost-benefit analysis before dollars are appropriated for new investments.
Key Data
$100 billion
— Total debt outstanding for New York City.
8%
— Debt outstanding in fiscal year 2016 as a percentage of the City’s real property values.
13%
— Debt outstanding in fiscal year 2016 as a percentage of personal income.
41%
— Growth in debt service spending since fiscal year 2005.
$7.7 billion
— Projected annual debt service cost by fiscal year 2019.
New York City's preliminary ten-year capital strategy faces scrutiny regarding its affordability, as debt supported by tax dollars has reached 8 percent of real property values, exceeding the 5 percent benchmark. The plan requires greater transparency regarding infrastructure priorities, per-unit costs, performance targets, and the timeline for addressing state of good repair needs.
Recommendations related to Debt Affordability
The City should clarify how much more debt will be issued and what benchmarks will be used to determine debt affordability.
Each agency should describe how its capital spending plans advance the goals of OneNYC, and funding for specific OneNYC infrastructure initiatives should be clearly identified.
Agency plans should be accompanied by information on per-unit costs and performance targets to assess priorities and performance.
The Strategy should incorporate information from asset assessments and clearly spell out how much of state of good repair needs will be addressed by the proposed investments, and how quickly.
Key Data
$67.7 billion
— Total capital commitments in the preliminary version of the Ten-Year Capital Strategy.
$14 billion
— Amount by which the Preliminary Strategy exceeded the previous ten-year plan.
8 percent
— Debt supported directly by City tax dollars as a percentage of real property values.
5 percent
— Affordability benchmark for debt supported directly by City tax dollars.
$100 billion
— Amount of debt outstanding already surpassed by the City.
The Metropolitan Transportation Authority faces significant financial instability due to recurring deficits and a heavy reliance on borrowing to fund capital projects, which has caused debt service to consume an increasing share of total revenue. A new financing policy is proposed to shift the burden of funding regular maintenance from debt to operating revenues while implementing a "25-50-25" formula for allocating costs among drivers, riders, and taxpayers.
Recommendations related to Debt Affordability
The MTA should stop running large deficits and lower its future debt burden by funding regular replacement needs with operating revenues rather than borrowing.
The MTA should adopt a formula referred to as 25-50-25 to allocate the costs of operating and maintaining the MTA among the three categories of revenue.
The cost of bridge and tunnel facilities should be funded entirely through user fees paid by motorists.
Mass transit users should pay fares sufficient to cover approximately one-half the operating cost of those services.
State and local tax subsidies to mass transit should cover at least one-quarter of the operating cost of those services and fund “catch-up” capital investments.
Key Data
$14 billion
— MTA debt outstanding in 2000.
$32 billion
— MTA debt outstanding in 2011.
$39 billion
— Projected MTA debt outstanding in 2015.
$48 billion
— Projected MTA debt outstanding in 2019 if the 2015-2019 Capital Plan requires the MTA to fund half the plan with borrowing.
12%
— Debt service as a share of total revenues in 2003.
21%
— Projected debt service as a share of total revenues in 2016.
The Preliminary Ten-Year Capital Strategy for Fiscal Years 2016 - 2025 is proposed at $68 billion, a significant increase from the $54 billion strategy for 2014 - 2023. This expansion in capital spending occurs alongside a growing debt burden, necessitating a thorough review of the plan's priorities and long-term affordability.
Key Data
$68 billion
— The proposed Preliminary Ten-Year Capital Strategy for Fiscal Years 2016 - 2025.
$54 billion
— The previous Ten-Year Capital Strategy for Fiscal Years 2014 - 2023.
New York State should reject the $2 billion Smart Schools Bond Act because the state is nearing its statutory debt cap and must prioritize limited borrowing capacity for critical infrastructure rather than unjustified technology purchases. The state's debt burden is already high compared to other states, and there is no evidence that the proposed technology investments will yield sufficient benefits to justify the cost.
Recommendations related to Debt Affordability
New York State is approaching its statutory debt cap (4 percent of personal income) and should prioritize its capital spending.
Other high priority capital needs that have a proven return on investment should take precedence.
Any list of capital needs to be funded with state-supported debt should be established through the new statewide capital planning process.
The borrowing capacity remaining under the debt cap should be reserved for these high-priority investments, not used to fund yet unjustified one-time technology purchases.
New Yorkers should reject the Smart Schools Bond Act.
Key Data
$2 billion
— The amount of general obligation bonds authorized by the Smart Schools Bond Act.
4 percent
— The statutory debt cap imposed by the Debt Reform Act of 2000 on state personal income.
$366 million
— The projected unused debt capacity in fiscal year 2016-17 if the Smart Schools Bond Act passes.
$20 billion
— The amount of New York's long-term liabilities in the 'danger zone' compared to the norm for other states as of 2010.
$6.4 billion
— The total debt service in fiscal year 2013-14, which comprised 7.1 percent of total operating costs.
$2,899
— The cost of repaying the State's outstanding debt per capita as of fiscal year 2011-12.
New York State's adherence to a 2 percent spending cap is increasingly challenged by fixed costs like debt service, which is exacerbated by the inclusion of $7.6 billion in new bond authorizations in the enacted budget. Achieving the cap requires either significant cuts to other areas or a return to transparent financial planning that acknowledges baseline budget gaps rather than relying on unspecified future savings.
Key Data
$7.6 billion
— Amount of new bond authorizations included in the adopted budget that will add to debt service costs.
The PATH transit system faces growing annual deficits, projected to reach $487 million by 2018, which are currently covered by bridge and tunnel toll revenues. To improve fiscal sustainability, the system should adopt a more equitable funding model that includes fare increases, a new tax subsidy, and potentially transferring operations to New Jersey Transit.
Recommendations related to Debt Affordability
PATH should adopt a consistent funding structure that shares the cost of operating the transit system among all who benefit.
The agency should implement a tax subsidy, such as a sales or property tax in the five New Jersey counties with the most PATH use, to cover a share of operating costs.
PATH should consider transferring operating responsibility to New Jersey Transit to improve coordination and planning for bi-state transit operations.
The system should implement higher fares to better align revenue with the actual cost of providing service.
PANYNJ should repurpose the cross-subsidy currently used to cover PATH deficits to fund other regional economic projects.
Key Data
$487 million
— The projected annual deficit for the PATH transit system in 2018.
$3.7 billion
— The total accumulated annual losses for PATH from 2004 to 2013.
$312 million
— The amount of annual bridge and tunnel toll revenue that could be freed up for other regional priorities by 2018 under the "50-25-25" funding model.
$1.5 billion
— The expected cost of the project to extend PATH to the Newark Airport AirTrain.
$387 million
— The projected annual deficit for the PATH transit system in 2014.
Achieving a $2 billion surplus through a 2 percent spending growth cap requires significant reductions in state agency operations and local assistance, as major programs like Medicaid and school aid are statutorily protected. Controlling costs is further complicated by rising debt service and fringe benefit obligations, which are difficult to manage without reducing capital spending or implementing further reforms.
Recommendations related to Debt Affordability
The State could reduce planned capital spending to help control rising debt service payments on long-term debt.
The State must maintain continued discipline and serious efforts at agency reform and redesign to keep State Operating Funds spending growth under 2 percent.
Key Data
$6.8 billion
— Amount added to spending by fiscal year 2016-17 due to debt service payments on long-term debt.
3.8 percent
— Average annual rate at which debt service payments on long-term debt are expected to rise.
$15.1 billion
— Expected cost of debt service and fringe benefits by fiscal year 2016-17.
$13.1 billion
— Cost of debt service and fringe benefits in fiscal year 2013-14.
This discussion took place as part of the CBC's Conference, The Most Important Economic and Fiscal Decisions Facing the Next Mayor, held on December 6, 2013 in New York City. Presenter: Maria Doulis Moderator: Anita Laremont Panelists: Rohit Aggarwala, Denise Richardson, Marcia Van Wagner, and Christopher Ward
New York City's capital spending has led to a high and growing debt burden, with debt service costs consuming a significant portion of the city's budget. To address this, the city should implement a formal investment policy that establishes clear standards for debt management and increases the use of pay-as-you-go capital to ensure long-term fiscal sustainability.
Recommendations related to Debt Affordability
The next mayor must focus on reducing the city’s high debt burden by defining the scale of capital spending through an investment policy that includes standards for debt and pay-as-you-go capital.
The administration should develop criteria for paying for some capital expenses from the operating budget to help keep the long-run debt burden manageable.
The next administration should articulate a standard for keeping debt from becoming unaffordable to ensure debt service does not consume excessive resources.
The City should renew its Project Labor Agreements to reduce labor costs and improve managerial flexibility.
City leaders should advocate for changes to contracting rules that increase costs and impede efficient construction management, such as repealing the Wicks Law.
Key Data
80%
— The growth in City-related debt outstanding since fiscal year 2002, which has surpassed $100 billion.
$67.6 billion
— The total city debt in fiscal year 2013, which was more than 8 percent of the full value of property.
14.3%
— The ratio of debt outstanding to personal income in fiscal year 2013, which is more than double the 6 percent benchmark for high debt.
13.7%
— The projected share of city-funded expenditures that debt service will make up by fiscal year 2017.
$300 million
— The estimated annual expenditure from the operating budget required to fund the regular replacement of vehicles and equipment using pay-go capital.
The Metropolitan Transportation Authority faces a worsening financial outlook characterized by significant GAAP deficits and a reliance on borrowing to cover capital needs rather than current revenues. To address this debt-driven instability, the agency should implement a sustainable funding model that balances fare revenue, tax subsidies, and auto-user fees while prioritizing cost reduction.
Recommendations related to Debt Affordability
The MTA should adopt the '50-25-25' funding model, where fares cover 50 percent of full operating costs, a tax subsidy covers 25 percent, and a cross-subsidy from auto users covers 25 percent.
The MTA should continue moderate (but regular) fare increases to ensure revenues cover operating costs and reduce reliance on borrowing.
The MTA should enact new forms of auto-cross subsidy, such as higher bridge and tunnel tolls or congestion pricing, to provide sustainable funding.
The MTA should put renewed energy into cost reduction efforts to improve financial stability.
Key Data
$26.6 billion
— Estimated core capital needs for the five-year period from 2015-2019 that will likely require large-scale new borrowing.
$2.8 billion
— The MTA's current annual deficit when calculated using Generally Accepted Accounting Principles (GAAP).
$3.0 billion to nearly $3.4 billion
— Projected annual deficits for each of the next four years using GAAP accounting.
$1.9 billion
— New resources identified by the MTA since February 2013.
$240 million
— The cumulative total of out-year budget gaps.
$67 million
— The amount of annual savings generated by cost-reduction initiatives outside of the paratransit program by 2017.
New York State's first 10-year statewide capital plan, while a positive step toward consolidating infrastructure planning, requires better data on asset conditions, a more robust financing framework to ensure debt affordability, and improved project-level tracking. Establishing a clear assessment model for debt capacity and infrastructure needs is essential to ensure the $174 billion investment plan remains sustainable and accountable.
Recommendations related to Debt Affordability
The State should include an improved financing plan that addresses the issue of debt affordability in future versions of the capital plan.
A framework for assessing the affordability of the capital plan should be established, similar to New York City's Annual Statement of Debt Affordability.
The State should provide better information about asset condition and the match-up between planned levels of state of good repair (SOGR) spending and need.
Future Statewide Plans should include information that allows the user to "roll down" to project-specific information to facilitate tracking.
The State should set condition improvement targets and provide estimates of the cost of achieving the desired improvement for every asset.
Key Data
$174 billion
— Total planned investment commitments across eight broad sectors for the fiscal year 2013-14 to 2022-23 period.
$180.3 billion
— Total debt outstanding for the agencies and authorities included in the plan for fiscal years ending in 2011-12.
$641 million
— Projected amount by which debt outstanding will be below the debt limit by fiscal year 2016-17.
$52.8 billion
— Amount of State-supported debt under the Debt Reform Act (DRA) debt limit.
$123.9 billion
— Debt outstanding for thirteen public authorities, including the Dormitory Authority, Empire State Development, the MTA, and the Port Authority of New York and New Jersey.
The Port Authority of New York and New Jersey requires a more transparent and structured approach to its budget and capital planning to ensure long-term financial viability. Implementing a long-term capital strategy and a multi-year financial plan would help the agency better manage its infrastructure investments and balance pay-as-you-go funding with debt-supported spending.
Recommendations related to Debt Affordability
The PANYNJ’s capital budgeting should be guided by a long-term (a period of 10 to 20 years) capital strategy that is revised every four years to ensure long-term financial viability and infrastructure investment.
The capital budget should include an annual and a four-year commitment plan, accompanied by a financing plan that indicates the source of funding for each planned investment to ensure responsible capital spending.
The financing plan should be guided by explicit Board policies for financing capital investments that indicate the desired balance of pay-as-you-go and debt-supported capital spending.
The PANYNJ should have a detailed annual operating budget and a four-year financial plan prepared in accord with GAAP to improve budget transparency and accountability.
New York City's capital planning faces significant challenges as the city's debt burden remains high, with debt service projected to rise to 17 percent of city-funded expenditures by fiscal year 2017. Future administrations must navigate difficult trade-offs between infrastructure maintenance, resiliency investments, and the need to keep debt levels manageable for taxpayers.
Recommendations related to Debt Affordability
The next mayor must determine a level of long-term capital investment that takes into account the city’s already high debt burden.
Policymakers must make difficult trade-offs among competing priorities to keep debt from becoming unaffordable.
Future capital agendas must incorporate resiliency proposals to address threats from climate change.
Key Data
$67.9 billion
— City debt outstanding in fiscal year 2013.
$75.5 billion
— Projected city debt outstanding by fiscal year 2017.
8.1 percent
— Debt outstanding as a share of the full value of the property tax base in fiscal year 2013.
14 percent
— Debt outstanding relative to personal income in fiscal year 2013.
14.6 percent
— Current debt service as a share of city-funded expenditures.
17 percent
— Projected debt service as a share of city-funded expenditures by fiscal year 2017.
Legacy costs, including pension contributions, retiree health benefits, and debt service, are projected to consume nearly 25 percent of New York City's budget by fiscal year 2015. These costs, which are driven by past commitments, have more than doubled from $8.5 billion in 2005 to $17.8 billion in 2015, significantly outpacing the growth of other city spending.
Key Data
$4.2 billion
— Debt service for the City’s major debt obligations in 2005.
$7.2 billion
— Projected debt service for the City’s major debt obligations by 2015.
almost 25 percent
— Share of the New York City budget dedicated to legacy costs by fiscal year 2015.
$8.5 billion to $17.8 billion
— Growth of legacy costs between fiscal years 2005 and 2015.
The Metropolitan Transportation Authority faces significant financial instability due to recurring deficits and a heavy reliance on borrowing for capital projects, which has driven debt outstanding to $32 billion as of 2011. To address this, a "25-50-25" funding formula is proposed, which would reallocate costs among motorists, transit riders, and taxpayers to ensure fiscal stability and fund necessary capital repairs.
Recommendations related to Debt Affordability
The MTA should stop running large deficits and lower its future debt burden by funding regular replacement needs with operating revenues rather than borrowing.
The cost of bridge and tunnel facilities should be funded entirely through user fees paid by motorists.
User fees paid by motorists should also generate a surplus large enough to cover approximately one-quarter of the cost of providing mass transit services.
Mass transit users should pay fares sufficient to cover approximately one-half the operating cost of those services.
State and local subsidies to mass transit should cover at least one-quarter of the operating cost of those services and fund “catch-up” capital investments needed to bring the system to a state of good repair.
Key Data
$32 billion
— MTA debt outstanding in 2011.
$39 billion
— Projected MTA debt outstanding in 2015.
$48 billion
— Projected MTA debt outstanding in 2019 if the 2015-2019 Capital Plan funds half with borrowing.
$3.6 billion
— Projected deficit in 2016.
$17.8 billion
— Cumulative unfunded OPEB liability as of the end of 2011.
$17.1 billion
— Annual operating and financing expenditures of the MTA’s agencies budgeted for 2012.
The Metropolitan Transportation Authority faces significant debt obligations that consume a large portion of its revenue, necessitating careful management of debt refunding strategies to avoid unfair burdens on future taxpayers. By adhering to strict guidelines that prioritize total savings over short-term relief, the authority can avoid practices like back-loading or stretching debt that ultimately increase long-term costs.
Recommendations related to Debt Affordability
The MTA is subject to the State Comptroller’s guidelines, and the Board should not seek any exemptions.
The refunding should follow guidelines that promote the greatest total savings and prevent the unfair passing of costs onto future taxpayers and straphangers.
Significant opportunities for savings from high-to-low interest rate exchanges should not be offset with shuffling and stretching of debt service payments.
Key Data
$32 billion
— The amount of long-term debt outstanding held by the Metropolitan Transportation Authority.
$2.1 billion
— The cost of debt service for the MTA in 2012.
$2.6 billion
— The projected debt service cost for the MTA by 2015.
$7 billion
— The amount of outstanding debt MTA leaders are considering for a large-scale refunding.
$18.6 billion
— The total debt service payments after the 2002 refunding.
The $500 million CityTime settlement should be used to retire existing debt from technology projects or fund capital projects on a pay-as-you-go basis to avoid further borrowing. This approach ensures the recouped funds support long-term capital needs rather than short-term budget relief.
Recommendations related to Debt Affordability
An appropriate and responsible use of settlement funds would be to retire debt issued to finance technology projects.
An appropriate and responsible use of settlement funds would be to use the funds as pay-as-you-go capital financing, reducing the need for additional borrowing.
Key Data
$500 million
— The amount of the CityTime settlement.
Public-private partnerships offer a mechanism to improve infrastructure management and maintenance by leveraging private sector expertise and capital, though they should not be viewed as a source of new money that circumvents public debt limits. These arrangements are most effective when used selectively for projects where they can achieve efficiencies in lifecycle costs and ensure high maintenance standards over the long term.
Recommendations related to Debt Affordability
New York’s leaders should give high priority to assets that are currently in poor condition and have a history of poor maintenance when selecting opportunities for effective public-private partnerships.
In most cases, public-private partnerships should be initiated as pilot programs and viewed as benchmarks for project delivery times and maintenance standards.
The public sector must develop an enhanced capacity for contract design, performance measurement and monitoring in order for public-private partnerships to be successful.
Public-private partnerships should be pursued selectively for initiatives that will have the greatest benefits and designed to avoid known pitfalls.
Key Data
$509 billion
— Total value of 1,109 public-private partnership projects launched globally between 1985 and 2007.
$24.3 billion
— Cumulative value of 95 public-private partnership projects in the United States over a 22-year period.
$3.2 billion
— Critical maintenance backlog identified for the City University of New York system.
$1.7 billion
— Critical maintenance backlog identified for the State University of New York system.
$1.8 billion
— Contract value for the Airtrain project from John F. Kennedy International Airport to the Jamaica Station.
$999 million
— Total payment to be provided to New York City by Cemusa, Inc. over the life of the street furniture partnership agreement.
New York City's current method of balancing its budget relies on accounting exemptions that mask significant long-term liabilities, such as retiree health insurance and asset depreciation. Adopting a more comprehensive accounting standard is necessary to ensure that current spending does not unfairly burden future generations with debt.
Recommendations related to Debt Affordability
New York City should not have its own unique set of accounting rules, a version that allows what the rest of the world views as an operating expense to be labeled a capital investment and paid for with borrowed funds that our children will repay.
New Yorkers should be giving much more attention to the financial results disclosed under the new GAAP rules.
Municipal leaders should adopt a vision of moving from the current self-deluding standard for a balanced budget to a more meaningful one.
Key Data
$5 million
— The surplus reported by the Comptroller for the City's fiscal year 2011 based on the exemption from GASB rules.
$282 million
— The deficit the City would have faced in fiscal year 2011 if GAAP were strictly applied.
$9.6 billion
— The deficit reported in fiscal year 2011 under the new GAAP standard.
$53.3 billion
— The added expense recognized in fiscal year 2006 when the accumulated liability for retiree health insurance was first reported.
$11.7 billion
— The amount of red ink in fiscal year 2010 under the new GAAP standard.
$2.8 billion
— The amount of red ink in fiscal year 2007 under the new GAAP standard.
Proposed legislation allowing school districts to borrow against future pension contributions would undermine the property tax cap and unfairly shift financial burdens onto future students and taxpayers. Instead of accumulating debt to cover rising pension costs, the state should implement structural reforms to pension benefits to ensure long-term fiscal sustainability.
Recommendations related to Debt Affordability
The Governor should veto A6309/S4067 to prevent school districts from borrowing to cover pension costs.
New York should implement real and lasting changes to pension benefits to ensure long-term sustainability rather than relying on borrowing.
The state should avoid allowing pension raiding in any form, including through private market borrowing by school districts.
The state should prioritize the enactment of a new pension tier to address the root cause of rising costs.
Key Data
125 percent
— The amount of their required 2011 pension contributions that school districts would be allowed to borrow under the proposed legislation.
15 years
— The repayment period for the proposed school district borrowing.
$211 million
— Employer contributions to the New York State Teachers’ Retirement System in 2000.
$925 million
— Employer contributions to the New York State Teachers’ Retirement System in 2010.
16 percent
— The average annual growth rate of employer contributions to the New York State Teachers’ Retirement System between 2000 and 2010.
Allowing school districts to borrow funds to cover pension contributions creates long-term fiscal instability by shifting current service costs onto future taxpayers. This practice obscures the actual expenses of retiree benefits and undermines efforts to achieve meaningful pension reform.
Recommendations related to Debt Affordability
Legislators should reject legislation that allows school districts to finance a portion of their required pension contributions by borrowing.
Policymakers should avoid practices that push the cost of current services to future years and taxpayers.
Policymakers should avoid practices that mask the true cost of retiree benefits, as this impedes serious efforts toward pension reform.
Policymakers should adhere to sound public finance practices rather than shortsighted, counterproductive measures.
New York City frequently relies on borrowing to fund capital asset replacements, which incurs unnecessary interest costs and creates disincentives for proper maintenance. To improve fiscal health, the City should shift toward funding regular asset replacements through operating revenues, thereby reducing long-term debt service obligations and ensuring capital funds are reserved for essential improvements.
Recommendations related to Debt Affordability
The City should place all its capital assets on regular replacement cycles and fund their replacement with operating revenues, not from the capital budget.
Debt and the associated interest costs should be incurred only for investments that bring assets to a state of good repair and for expanding the capital stock.
Expansion projects should be clearly explained and justified with data that demonstrates economic and other benefits, or a high rate of return on the investment of public funds.
The City should establish a percentage of revenues to be dedicated to a fund for regular replacement costs to avoid unnecessary borrowing.
Key Data
$3.0 billion
— Depreciation of the City's major assets based on historical cost in fiscal year 2007.
$4.9 billion
— Estimated depreciation of the City's major assets when based on replacement cost.
$6.5 billion
— Unanticipated revenues in fiscal year 2007 that could have been used to fully absorb the cost of asset depreciation.
$23 billion
— Total planned expansion projects for the next ten years.
New York City should adhere to Generally Accepted Accounting Principles (GAAP) by properly classifying remediation expenses as operating costs rather than financing them through long-term borrowing. The City must prioritize these necessary expenditures within its budget process to maintain sound financial management and avoid inappropriate debt accumulation.
Recommendations related to Debt Affordability
The Financial Control Board should make clear that any deferral of GASB 49 compliance will be temporary and not a permanent or long-term exemption.
The City should continue to accept the best available standard, the GASB rules, as the basis for defining a balanced budget.
The City should use its budget process to address the difficult tradeoffs among multiple services to taxpayers, and the affected remediation expenditures should be one of the priorities addressed in budget debates.
The City should not finance remediation expenses affected by GASB 49 with long-term borrowing.
The Board should grant only the minimum necessary delay for compliance with GASB 49.
New York State's debt burden is currently in a "danger zone," with the state paying about $5.6 billion in debt service and facing a total long-term obligation of over $7.1 billion for every ten dollars paid in taxes. To fall below this danger zone threshold, the state would need to reduce its long-term liabilities from the 2008 level of $120.0 billion by $20.4 billion.
Key Data
$5.6 billion
— New York is currently paying about $5.6 billion in debt service.
$7.1 billion
— New York's state credit card obligation is over $7.1 billion for every ten dollars paid in taxes.
$120.0 billion
— New York's long-term liabilities were at the 2008 level of $120.0 billion.
$20.4 billion
— To fall below the danger zone threshold, New York would need to lower its long-term liabilities by $20.4 billion.
$71.9 billion
— New York's long-term bonds were at $71.9 billion.
$51.5 billion
— If the reduction were in long-term bonds, that debt would have to be lowered to $51.5 billion.
New York City's debt service is growing rapidly, consuming a significant portion of the budget and requiring a reduction in capital investment to control costs. To restrain this growth, the city must apply the same belt-tightening used in the operating budget to the capital budget by abandoning non-essential projects while prioritizing critical infrastructure repairs.
Recommendations related to Debt Affordability
A downsized capital program will be necessary if the Mayor is serious about restraining debt service growth.
The same belt-tightening that has occurred with the operating budget should apply to the capital budget, as well.
Cuts should be made starting in fiscal year 2011, with an eye toward abandoning non-essential items, including over $1.0 billion in economic development projects, while preserving key priorities such as repairs of essential infrastructure.
Smarter, more targeted investment will produce real savings in debt service by the end of the Mayor's term.
Key Data
$5.2 billion
— Debt service total in the current fiscal year.
12.4 percent
— Portion of all city-funded spending accounted for by debt service in the current fiscal year.
$6.5 billion
— Total debt service including $1.3 billion in costs serviced by the Water Authority.
$8.8 billion
— Projected total debt service costs.
$14.5 billion
— Expected capital commitments in fiscal year 2010.
$36.3 billion
— Updated commitment plan for fiscal years 2010-2013.
The Metropolitan Transportation Authority's 2010-2014 capital plan faces a significant funding gap of nearly $10 billion, with only $18 billion of the proposed $28 billion in investments currently identified. To address this shortfall and ensure fiscal sustainability, the plan's scope should be downsized to match realistic capacity, and financing should be rebalanced to rely less on general tax subsidies and more on farebox and auto-user contributions.
Recommendations related to Debt Affordability
The MTA should commit to greater transparency in informing the public about the status of its capital projects.
The capital program should be amended using a pragmatic approach: the size of the plan should be downsized to reflect a realistic assessment of what can be accomplished.
Planning for the capital plan should be tied more directly to the needs assessment, and priorities should be altered in favor of achieving a state of good repair.
The MTA should improve its capacity to manage mega-projects and improvements in signaling and communications systems.
More funds can and should be raised from the farebox and from auto-users to support the capital program and operating needs.
Key Data
$28 billion
— Total investments outlined in the proposed 2010-2014 capital plan.
$18 billion
— Identified funding sources for the proposed 2010-2014 capital plan.
$130 billion
— Adjusted needs estimate for the 20-year period (2010-2029).
$32.2 billion
— Adjusted needs estimate for the 2010-2014 period.
$22.2 billion
— Adjusted needs estimate for New York City Transit alone for the 2010-2014 period.
$10 billion
— Funding gap for the full five-year period.
New York City's capital commitments reached a record $13 billion in 2009, driving a projected 42 percent increase in debt service payments over the following four years. To mitigate this, the city should prioritize maintaining existing assets and eliminate non-essential expansion projects to achieve at least $100 million in annual debt service savings.
Recommendations related to Debt Affordability
The City should target capital investments to support existing facilities and lower future debt service burdens.
The capital budget should be better targeted to keeping existing assets in a state of good repair, while postponing or curbing new initiatives in non-essential areas.
The City should re-examine and eliminate expansion projects that do not have clearly demonstrated economic benefits to reduce capital spending.
The City should aim for a minimum of $100 million in annual debt service savings starting in fiscal year 2011.
Key Data
$5.8 billion
— Capital commitments in fiscal year 2003.
$13 billion
— Record level of capital commitments reached in 2009.
42 percent
— Projected growth of debt service payments over the next four years.
$5.9 billion
— Initial debt service amount before the projected 42 percent growth.
$8.6 billion
— Projected debt service amount after the 42 percent growth over four years.
$100 million
— Minimum goal for annual debt service savings starting in fiscal year 2011.
The Metropolitan Transportation Authority requires a balanced financial plan that prioritizes long-term capital investment over short-term operating needs. To ensure fiscal sustainability, any use of new mobility tax revenue for operating expenses must be contingent upon implementing toll and fare increases of at least 8%.
Recommendations related to Debt Affordability
Revenues generated by the mobility tax during the first year in which it is collected may be used to support the operating needs of the MTA, provided, however, that such revenues may only be used for this purpose if toll and fare increases of at least 8% relative to their current levels are in effect during this time.
Revenues generated by the mobility tax during the first year in which it is collected may be used to support new borrowing and direct expenses related to the MTA's capital program and the debt service associated with the MTA's current portfolio of expansion projects.
Revenues generated by the mobility tax after the first year in which it is collected shall be used exclusively to support new borrowing and direct expenses related to the MTA's capital program and the debt service associated with the MTA's current portfolio of expansion projects.
Key Data
8%
— The minimum level of toll and fare increases required to justify using mobility tax revenue for operating needs.
Public-private partnerships offer a mechanism to improve infrastructure management by focusing on life-cycle costs and maintenance, though they should not be viewed as a source of new money to circumvent debt limits. New York should selectively pursue these partnerships for assets in poor condition, ensuring that public sector management capacity is enhanced to oversee these complex, long-term agreements.
Recommendations related to Debt Affordability
New York's leaders should give high priority to assets that are currently in poor condition and have a history of poor maintenance when selecting opportunities for effective public-private partnerships.
State and local entities should initiate public-private partnerships as pilot programs to serve as benchmarks for project delivery times and maintenance standards.
The public sector must develop an enhanced capacity for contract design, performance measurement, and monitoring to ensure the success of public-private partnerships.
Public officials should ensure that user fee revenue streams are not tapped inappropriately to avoid heavily discounting the value of future revenue or diverting funds from infrastructure enhancements.
Public officials should decide the extent to which they share labor concerns and, if willing to sacrifice some benefits, provide protections for displaced workers through guarantees of other public sector jobs or negotiated compensation.
Key Data
$509 billion
— Total value of 1,109 public-private partnership projects launched globally between 1985 and 2007.
$24.3 billion
— The 22-year cumulative value of 95 public-private partnership projects in the United States.
$1.6 trillion
— Estimated investment necessary in the next five years to bring the nation’s infrastructure to a good condition, according to the American Society of Civil Engineers.
$3.2 billion
— Critical maintenance backlog for the City University of New York system.
$1.7 billion
— Critical maintenance backlog for the State University of New York system.
$220 billion
— Minimum annual investment needed through 2035 to maintain and improve all modes of surface transportation in the United States.
New York City frequently relies on borrowing to fund capital asset replacements that should be covered by operating revenues, leading to unnecessary interest costs and disincentivizing proper maintenance. To improve fiscal health, the City should establish regular replacement cycles funded through the operating budget, thereby reducing long-term debt service obligations and freeing up capital funds for new investments.
Recommendations related to Debt Affordability
The City should place all its capital assets on regular replacement cycles according to their useful lives.
The City should allocate funds in its operating budget for regular replacement to eliminate the need for costly borrowing.
Debt and the associated interest costs should be incurred only for investments that bring assets to a state of good repair and for expanding the capital stock.
Key Data
$3.0 billion
— Depreciation of the City's major assets based on historical cost in fiscal year 2007.
$4.9 billion
— Estimated depreciation of the City's major assets based on replacement cost in fiscal year 2007.
$6.5 billion
— Unanticipated revenues in fiscal year 2007 that could have been used to fully absorb replacement costs.
$23 billion
— Capital expenditures planned during the first four years of the 2000-2009 Strategy.
$22.8 billion
— Actual capital expenditures during the first four years of the 2000-2009 Strategy.
$33 billion
— Amount by which the 2004-2009 Strategy will have underestimated spending if current plans are implemented.
New York State faces significant future budget gaps driven by rapid spending growth in areas like education, health, and debt service, which has outpaced revenue growth. To address these fiscal challenges, the state must implement structural reforms, including streamlining government operations, restructuring fringe benefits, and improving capital planning to manage the state's growing debt burden.
Recommendations related to Debt Affordability
The State should develop a comprehensive capital plan to centralize capital planning and strategic asset management, thereby reducing the need for ad hoc borrowing and debt service.
The State should shave 10 percent off the capital budget to reduce capital project funds and avoid approximately $100 million per year in debt service costs.
The State should limit off-budget capital spending to prevent the accumulation of debt that is repaid by State appropriations and creates additional pressures on the operating budget.
Key Data
$4.1 billion
— The cost of debt service in fiscal year 2007-08.
12.0%
— The expected average annual growth rate of debt service.
$10 billion
— Total capital spending for which the State pays debt service in fiscal year 2007-08.
$100 million
— Estimated annual savings in avoided debt service from a 10 percent reduction in the capital budget.
New York State has historically relied on excessive long-term borrowing to fund operating expenses, often circumventing constitutional limits through "back-door" borrowing by public authorities. To ensure fiscal sustainability, the state should establish a constitutional, comprehensive debt limit that applies to all forms of state-supported obligations rather than relying on ineffective statutory caps.
Recommendations related to Debt Affordability
The state should establish a more meaningful debt limit that is constitutional rather than statutory.
The debt limit should apply to all forms of state-supported debt, ensuring no "back-door" borrowing is left open via public authorities.
The state should adopt a flexible debt limit approach that sets standards but allows an independent board to apply multiple criteria based on changing circumstances.
Key Data
$39.4 billion
— Total amount of back-door state-supported debt outstanding as of the end of fiscal year 2007.
92 percent
— Portion of all state-supported debt outstanding that was of the back-door type at the end of fiscal year 2007.
$26.1 billion
— Total outstanding debt issued since 2000 as of the end of fiscal year 2007.
$24.3 billion
— Statutory debt cap for fiscal year 2007.
$8.3 billion
— Amount of debt classified as exempt from the statutory cap at the end of fiscal year 2007.
$10 billion
— Amount by which New York exceeded the recommended debt limit in 2005.
The Metropolitan Transportation Authority faces a growing fiscal crisis driven by heavy borrowing that diverts funds from operations to debt service, with outstanding debt projected to reach $32 billion by 2010. To ensure long-term stability and avoid fiscal disaster, the agency must implement productivity improvements and rebalance its revenue sources to reduce reliance on debt.
Recommendations related to Debt Affordability
The M.T.A. should make a greater commitment to productivity enhancements in order to reduce the rate of cost increases.
The M.T.A. needs more revenue to permit replacement of subway cars and buses and to finance other needs without excessive borrowing.
A more equitable balance of revenue should be established where fares account for half, taxes for one quarter, and tolls and fees for another quarter to reduce reliance on debt.
Key Data
$32 billion
— Projected outstanding debt for the M.T.A. by the end of 2010.
$1.9 billion
— Projected debt service for the M.T.A. in 2010.
$1.3 billion
— Current annual debt service for the M.T.A.
$900 million
— Potential annual savings from enacting productivity initiatives equal to private sector gains.
$4.5 billion
— Projected deficit for the M.T.A. in 2010 under Generally Accepted Accounting Principles.
$22 billion
— Outstanding debt for the M.T.A. in 2005.
New York State's debt has reached a historic $50 billion, with nearly 20 percent of that amount used to cover operating deficits rather than capital investments. To address this, the state must implement reforms to curb borrowing, including ending the practice of using debt for operating expenses and subjecting authority borrowing to rigorous financial oversight.
Recommendations related to Debt Affordability
State leaders should stop issuing state-funded debt to cover operating deficits.
The state should make authorities' borrowing part of the state's capital plan.
The state should institutionalize rigorous financial review of authority borrowing via an enhanced Public Authorities Control Board or the governor's budget office.
The state should reduce future debt for capital spending by relying more on pay-as-you-go financing or budget surpluses.
Key Data
$50 billion
— New York State's debt hit this historic level during the fiscal year ending March 31, 2007.
$12 billion
— Amount of debt that has gone toward operating costs, representing nearly 20 percent of the total debt.
$2,700
— The amount of state debt per capita for every man, woman, and child in the state.
$4 billion
— The amount of debt added in the past year, representing a one-year growth rate of almost 8 percent.
New York State's reliance on excessive borrowing, particularly through public authorities, has created a significant debt burden that threatens fiscal stability and places the state in a precarious financial position. To address this, the state must shift away from using debt to cover operating deficits and instead prioritize pay-as-you-go financing for capital projects while implementing more rigorous oversight of authority borrowing.
Recommendations related to Debt Affordability
Discontinue issuance of State-funded debt to cover operating deficits.
Integrate public authorities’ proposed borrowing for capital investments with the State’s capital plan in order to prevent inefficient use of borrowing capacity.
Subject public authority borrowing to more rigorous financial review by an enhanced Public Authorities Control Board or by the Division of Budget.
Reduce the State’s future debt by lowering capital spending and/or increasing pay-as-you-go financing.
Key Data
$105.8 billion
— Total debt outstanding for the State and its authorities at the end of fiscal year 2004–05.
$44.8 billion
— Amount of debt backed by State revenues as of fiscal year 2005.
$11.5 billion
— Amount of outstanding State-supported debt used to pay for operating expenses.
21 percent
— Portion of outstanding State-supported debt used to pay for operating expenses.
54 percent
— Share of capital spending financed on a pay-as-you-go basis in fiscal year 1996.
40 percent
— Average share of capital spending financed on a pay-as-you-go basis in the current capital plan covering five years ending in fiscal year 2011.
New York's public authorities have accumulated $227 billion in debt, with $166 billion of that issued by authorities operating with little oversight or accountability. To address this, the state must implement stricter constitutional limits on borrowing, require voter approval for new debt, and mandate transparent, competitive processes for authority-led projects.
Recommendations related to Debt Affordability
New York should adopt a new constitutional limit that would apply to all state-supported debt, including any debt issued by authorities.
The state should require voter approval for new debt issued by authorities to ensure borrowing is limited to true capital purposes.
The governor and budget director should be responsible for preparing a comprehensive, multi-year capital plan that includes state agencies and authorities.
The governor and budget director should be responsible for timely and transparent analyses of the feasibility of state authority projects.
Industrial-development authorities should select among private parties based on criteria established in advance and in response to competitive proposals.
Key Data
$227 billion
— Total outstanding debt of New York state and local governments and their authorities.
$166 billion
— Outstanding debt of New York's public authorities.
$10 billion
— Amount that New York's elected leaders borrow too much according to recent analysis.
$45 billion
— Current state-supported debt.
$4 billion
— Amount of "back door" debt, representing 9 percent of the $45 billion in current state-supported debt.
New York State has relied heavily on public authorities to issue debt, often bypassing constitutional limits and resulting in debt levels that exceed affordable thresholds. To address this, the state should implement comprehensive constitutional debt limits based on affordability, improve oversight of authority borrowing, and enhance governance and reporting standards for these entities.
Recommendations related to Debt Affordability
Eliminate the misuse of authorities’ debt powers by setting comprehensive constitutional limits on the amount of State-supported and City-supported debt that can be issued.
Improve the oversight of non-State-funded authority debt by eliminating the PACB review process and replacing it with more comprehensive capital planning and project feasibility studies subject to professional, transparent review.
Improve the effective use of tax-exempt conduit debt by requiring more explicit advance allocation of its purposes and more competition among private entities for its benefits.
Make authorities more accountable through more complete and accessible reporting of financial and other information.
Enhance the governance of authorities through greater independence and professionalism among board members.
Key Data
$227 billion
— Estimated total debt borrowed by state and local governments and their authorities in New York.
$41 billion
— Amount of backdoor debt issued by authorities on behalf of the State.
$10 billion
— Amount by which State-supported debt in 2003 exceeded the State’s danger-zone threshold.
$43.1 billion
— Applicable constitutional debt limit for New York City at the end of fiscal year 2004.
$52.2 billion
— Actual City funded debt at the end of fiscal year 2004.
$166 billion
— Total amount authorities have borrowed in New York.
New York State's debt has reached dangerous levels, with nearly $10 billion in excess of affordable limits, largely due to 'backdoor' borrowing that bypasses constitutional requirements. To address this, the state must implement constitutional debt reform that establishes binding limits based on affordability and restricts borrowed funds to long-term capital investments.
Recommendations related to Debt Affordability
Voters should reject bond referendums such as the Transportation Bond Act of 2005 until debt is brought under control.
The State needs a new constitutional limit that does not require voter approval for every debt issuance, but does impose a binding limit that is linked to ability to pay.
The State should establish a new debt limit based on the concept of affordability as determined by an independent Debt Policy Committee.
The State should apply the limit to all forms of state-backed debt, including such bonds issued by authorities.
The State should eliminate the need for voter approval within that limit.
The State should restrict the use of borrowed funds to true capital investments.
Key Data
$46.7 billion
— Total outstanding state-funded debt as of March 31, 2005.
$10 billion
— Amount by which New York's debt exceeds affordable levels, placing the state in the 'danger zone'.
$43.0 billion
— Amount of 'backdoor' borrowing that does not require voter approval, out of the total $46.7 billion in state debt.
$11.5 billion
— Amount of backdoor borrowing that has been used to underwrite annual operating deficits instead of being invested in long-term capital projects.
$2.9 billion
— Amount of borrowing that would be authorized by the Transportation Bond Act of 2005.
$8 billion
— Increase in outstanding state-funded debt from 2000 to 2005.
New York City can improve its financial stability by actively managing its debt service, which includes paying down existing obligations with current operating surpluses and reforming construction laws that inflate capital costs. These measures, alongside broader budget reforms, are essential to closing projected budget gaps and avoiding the burden of excessive debt on future generations.
Recommendations related to Debt Affordability
The City should pay off debt with the large operating surplus it has accumulated in fiscal year 2005.
The City should focus on reducing construction costs by advocating for repeal of, or exemption of more projects from, the State’s Wicks Law.
Key Data
$290 million
— Annual savings in fiscal year 2009 achievable through debt service reduction.
$9.1 billion
— Average annual capital spending for fiscal years 2005 to 2008.
$6.0 billion
— Average annual capital spending for the four-year period prior to 2005.
$4.2 billion
— Average annual capital spending for the fiscal year 1997 to 2000 period.
$2.0 billion
— Amount added to the City's debt by deficit financing used after September 11th, 2001.
10 percent
— Estimated added cost to the City's capital projects for affected projects due to the Wicks Law.
New York State's current debt limits are ineffective, leading to back-door borrowing that undermines fiscal responsibility. To address this, the state should adopt meaningful, effective limits on state-supported debt, utilizing existing analyses and recommendations to craft a workable solution.
Recommendations related to Debt Affordability
The Legislature should work toward meaningful, effective limits on State-supported debt.
State leaders should work on establishing a meaningful and workable constitutional debt limit.
The Legislature should use the CBC’s and the Comptroller’s analyses and recommendations to help craft a workable solution for debt limits.
Key Data
$321 million
— Amount of borrowing from the pension system proposed in the fiscal year 2006 budget.
2 percent
— Current limit of the rainy day fund as a percentage of General Fund revenues.
5 percent
— Recommended minimum rainy day fund as a percentage of revenues to better handle economic volatility.
$4.2 billion
— Total budget gap in fiscal year 2006 that the state needs to close.
New York State faces a significant fiscal challenge, with an outstanding debt exceeding $50.4 billion and a projected budget gap of at least $6.0 billion, complicating efforts to fund a court-mandated sound basic education. To address these needs without further straining the state's economic competitiveness, the report advocates for a combination of educational efficiencies, non-tax revenues like gambling, and targeted tax restructuring.
Recommendations related to Debt Affordability
The State, rather than local school districts, should be responsible for raising the additional funds needed for a sound basic education.
A new statewide system of accountability for schools should be established to ensure new resources have the intended effect.
The classroom space requirements for a sound basic education should be met through a combination of two measures – redistricting of existing schools and operating existing schools on a year-round schedule.
Teachers should be given financial incentives for better performance to make a larger share of compensation conditioned on job performance.
Financial incentives should be used to overcome shortages in selected teaching job titles by offering differentials to teachers who agree to work in schools facing the greatest difficulty securing qualified staff.
The managerial discretion of principals should be expanded by allowing them to select teachers for given posts from among multiple candidates rather than forcing decisions based on seniority.
Expanded gambling activities should be used to generate about $2 billion annually for improved education, restricted to "destination" type casinos.
Improved enforcement of the existing sales tax on remote (including internet) transactions should be used to generate significant new revenues in future years.
Broaden the base of the sales tax to include items currently exempt without a sound basis for the exemption to yield an estimated $950 million annually.
Revise the corporate income tax to include certain revenues now excluded and set a higher alternative minimum tax to yield between $320 million and $435 million annually.
Key Data
$50.4 billion
— Outstanding state debt total.
$3.6 billion
— Amount by which state debt will grow.
$200 million
— Annual debt service need for new capital investments.
$1.1 billion
— Estimated state deficit in the current fiscal year.
$6.0 billion
— Projected state budget gap for the fiscal year beginning April 1, 2005.
The New York region's transportation system faces significant financial challenges, including inadequate maintenance and a lack of comprehensive planning, which require a new regional approach to financing. By implementing consistent user fees and establishing a dedicated regional policy board, the region can better manage its debt and ensure that transportation infrastructure is adequately maintained and expanded.
Recommendations related to Debt Affordability
The governors of New York and New Jersey should create a new entity with authority to set and enforce regional transportation policies and priorities.
The region’s transportation entities should have sufficient resources to meet all necessary operating expenses.
Motor vehicle user fees should be dedicated to transportation agencies to cover the operating costs of roads and bridges and provide a cross-subsidy to mass transit.
Mass transit riders should pay a fare sufficient to cover one-half the transit agencies’ operating costs.
New capital for improvements and expansions should be generated by borrowing to be repaid in the same manner as identified for meeting current operating expenses.
The existing backlog in maintenance and repairs caused by a history of under-funding and neglect should be eliminated at an accelerated pace and be financed by general fund appropriations.
Key Data
$5.1 Billion
— The amount of debt outstanding for the New Jersey Transportation Trust Fund Authority at the end of 2002.
$42 Million
— The annual revenue needed for debt repayment for each $1 billion of new transportation investment, assuming a 30-year repayment period and 5.1 percent interest rate.
$3.7 Billion
— The average annual capital commitments made by the MTA between 2000 and 2003.
$9.4 Billion
— Total operating expenditures for mass transit in the region in 2001.
$4.1 Billion
— Total expenditures for roads and bridges in the region in 2001.
New York State's debt burden ranks among the highest in the nation, with long-term debt exceeding $38 billion in fiscal year 1999-00. To address this, the state should replace the current constitutional requirement for voter approval of debt with a limit based on relevant economic factors.
Recommendations related to Debt Affordability
Replace the constitutional requirement for voter approval of general obligation debt with a constitutional limit on the amount of all state debt that is set based on relevant, changing economic factors.
Key Data
$38 billion
— The amount of New York State's long-term debt in fiscal year 1999-00.
$5 billion
— The amount by which New York's long-term debt exceeded that of second-place California in fiscal year 1999-00.
7.3%
— New York's adjusted long-term obligations as a percent of personal income in fiscal year 1999-00, ranking fourth among the 50 states.
New York State faces a severe fiscal crisis characterized by recurring deficits and an over-reliance on long-term borrowing to fund operating expenses, which unfairly burdens future taxpayers. To restore fiscal health, the state must implement a multi-year plan that includes temporary tax surcharges, stricter adherence to Generally Accepted Accounting Principles, and a commitment to ending the use of off-budget entities.
Recommendations related to Debt Affordability
The State should avoid using borrowed funds to finance current services because it is unfair to future generations.
New York State should levy a temporary tax surcharge that would be phased out over three years to avoid long-term borrowing.
The State should be required to balance its budget based on Generally Accepted Accounting Principles (GAAP) in order to prevent the accumulation of a deficit.
The Division of Budget should be required to prepare a four-year financial plan with quarterly updates to improve fiscal transparency.
The State should ensure that all off-budget accounts are brought on budget to improve public accountability.
Key Data
$4.7 billion
— Amount borrowed by the Local Government Assistance Corporation (LGAC) over three years to finance an accumulated deficit.
$7.4 billion
— Total cost of repaying the LGAC bonds over thirty years.
$246 million
— Average annual debt service cost for LGAC bonds until 2026.
$37.7 billion
— State-supported debt level in fiscal year 2001-02.
$41.0 billion
— Projected state-supported debt level at the end of fiscal year 2003-04.
9 percent
— Increase in state-supported debt over the two-year period ending in fiscal year 2003-04.
New York State and New York City have seen their debt burdens grow rapidly, often circumventing constitutional limits, which threatens their long-term economic competitiveness. This report proposes a new framework for assessing debt affordability by establishing a "danger zone" threshold based on a ratio of debt to available resources, rather than relying on outdated constitutional constraints.
Recommendations related to Debt Affordability
New York State's elected leaders should bring the State's debt burden below the danger zone threshold identified in this report, and New York City's leaders should keep their debt below the relevant danger zone threshold.
New York City and New York State should create Debt Policy Committees to recommend long-run debt strategies and annual debt issuance limits.
The State Constitution should be amended to establish new limits on State and City debt.
New York State should develop a new plan to lower its outstanding debt.
The new limits should be made more sensible by replacing the existing constraints with an approach based on that developed in this report.
Key Data
$35.8 billion
— State debt at the end of the 1999 fiscal year.
$46.8 billion
— City debt at the end of the 1999 fiscal year.
$26.9 billion
— Amount of appropriation-backed debt, comprising 73 percent of total State-supported debt.
$1.2 billion
— Total cost of higher interest rates on appropriation-backed debt over the next 30 years.
$36,796 Million
— New York State-supported debt in fiscal year 2000.
$36,641 Million
— New York City net debt in fiscal year 2000.
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