Debt service represents the annual payments New York City makes to pay off the principal and interest on the bonds it issues to fund long-term capital projects. This page covers CBC’s work on debt management policies, capital planning, the 15 percent debt service-to-tax revenue limit, citywide borrowing capacity, and the impact of debt costs on agency budgets.
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..
The City Charter should be amended to ensure long-term debt does not crowd out operating budget priorities by limiting debt service to 15% of City tax revenue.
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.
The City and State should index the TFA Statutory limit to 2.5 percent of total personal income to ensure debt capacity grows with the underlying economic capacity.
Policymakers should formalize the City’s long-standing practice of keeping annual debt service costs below 15 percent of tax revenue to protect the operating budget and credit ratings.
The State should amend the Constitutional debt limit to be more holistic by creating a single limit based on an appropriate economic metric that covers all City debt repaid with tax revenues.
The City should review each capital project to determine if it is necessary, properly scoped, and priced, while dropping unnecessary projects.
The City should continuously and comprehensively improve how it makes capital investments, including prioritizing projects, reducing costs, and streamlining project delivery.
Key Data
In a February 2026 letter, the CBC noted that persistent growth in overtime spending presents an opportunity for reform through improved management, which could help moderate debt service over time.
In a November 2025 statement, the CBC noted that the City's budget plan largely consists of technical adjustments, savings in pensions and debt service, and funding a smattering of new programs.
As of October 2025, debt service for parks has grown more than six-fold, increasing from $81 million in fiscal year 2004 to $516 million in fiscal year 2026, which has consumed a larger share of total spending for parks.
In a June 2025 questionnaire, mayoral candidate Brad Lander stated he would create a debt management policy to meet capital needs and keep debt service below 15% of annual revenues.
According to the December 2024 5 Year Pocket Summary, the City's total debt service expenditures were $8,765 million in fiscal year 2024, compared to $8,796 million in fiscal year 2023.
New York City's fiscal challenges stem from excessive spending growth, necessitating a multi-year improvement plan focused on productivity, service redesign, and evidence-based impact. Improving capital execution and prioritizing state-of-good-repair investments are essential strategies to control capital costs and moderate long-term debt service.
Recommendations related to Debt Service
Prioritizing state-of-good-repair investments and improving capital execution can help control capital costs, moderate debt service, and reduce maintenance spending over time.
The New York City November 2025 budget modification incorporates savings in pensions and debt service as part of its technical adjustments to manage fiscal pressures. These measures are intended to help the city navigate a projected $5 billion to $8 billion budget gap while addressing broader financial obligations.
New York City's total commitment to parks in the Fiscal Year 2026 budget is $1.4 billion, with debt service for capital investments accounting for $516 million of that total. While overall park spending has remained relatively steady over decades, debt service costs have grown six-fold since 2004, consuming a larger share of resources and reducing the portion available for daily operations.
Key Data
$516 million
— The amount allocated for debt service in the Fiscal Year 2026 Adopted Budget.
$81 million
— The amount allocated for debt service in fiscal year 2004.
six-fold
— The growth of debt service spending between fiscal year 2004 and fiscal year 2026.
Mayoral candidates have proposed establishing a debt management policy that limits debt service to 15% of annual tax revenues to ensure long-term fiscal sustainability. This approach aims to balance necessary capital investments with the need to maintain fiscal discipline and avoid excessive borrowing costs.
Recommendations related to Debt Service
The City should maintain long-term capital investment practices including not allowing debt service to exceed 15% of tax revenue.
The City should create a debt management policy to meet capital needs and keep debt service below 15% of annual revenues.
As Mayor, I’ll eliminate chronic under-budgeting, strengthen reserves, cut inefficiencies, cap debt costs, & modernize infrastructure planning for long-term fiscal health based on strategic criteria.
Key Data
15%
— The proposed limit for debt service as a percentage of tax revenue.
$111 billion
— The total value of the City's five-year capital program.
15%
— The proposed limit for debt service as a percentage of annual revenues.
New York City's total debt service reached $8,765 million in fiscal year 2024, while its total outstanding gross funded debt climbed to $136,218 million. Simultaneously, New York State reported $6,997 million in state-related debt service and $54,319 million in total state-related debt outstanding for the same period.
Key Data
$8,765 Million
— Total debt service for the City of New York in fiscal year 2024.
$136,218 Million
— Total outstanding gross funded debt for the City of New York in fiscal year 2024.
$6,997 Million
— State-related debt service for New York State in fiscal year 2024.
$54,319 Million
— State-related debt outstanding for New York State in fiscal year 2024.
The City of New York has committed $429.2 million in capital for the NYC Ferry system, resulting in an annual debt service cost of $26.4 million that is not currently reflected in the official per-trip operating subsidy. Including these capital costs reveals a true per-ride subsidy of $12.54, significantly higher than the reported $8.55 figure.
Recommendations related to Debt Service
The City should include debt service costs in the official per-trip operating subsidy calculation to accurately reflect the true cost of the ferry system.
EDC should eliminate the lowest-ridership routes to reduce the financial burden on the system, including the associated capital costs and debt service.
EDC should increase fares for other riders to match those of comparable premium transit services, like the $7 per trip charged for the MTA’s express bus system, to offset high operating and capital costs.
EDC should continue to hold the line on service expansions absent rigorous analysis that they would be financially feasible, preventing further accumulation of debt service obligations.
Key Data
$429.2 million
— Total capital committed by the City of New York for NYC Ferry through fiscal year 2023 to acquire boats, improve docks, and build homeports.
$26.4 million
— Estimated annual debt service on NYC Ferry capital commitments, assuming level payments on 30-year bonds issued at 4.5 percent.
$3.99
— The amount of debt service cost per ferry trip.
$12.54
— The full per-ride subsidy for NYC Ferry when accounting for both operating expenses and debt service.
25 percent
— The portion of the operating budget that debt service would equal if NYC Ferry were a stand-alone entity.
To ensure long-term obligations do not overwhelm operating budget priorities, the City Charter should be amended to codify the long-standing policy of limiting debt service to 15% of tax revenue. This measure aims to maintain fiscal stability by preventing debt costs from crowding out essential city services.
Recommendations related to Debt Service
The City Charter should be amended to ensure long-term debt does not crowd out operating budget priorities by limiting debt service to 15% of City tax revenue.
Key Data
15%
— The proposed limit on debt service as a percentage of City tax revenue to prevent long-term debt from crowding out operating budget priorities.
To ensure long-term fiscal stability and prevent debt obligations from crowding out other essential expenditures, the City Charter should be amended to codify the existing policy of capping debt service at 15 percent of tax revenues. This reform would mandate that the Executive Budget and financial plan standards strictly adhere to this limit in every fiscal year.
Recommendations related to Debt Service
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 proposed cap on debt service as a percentage of tax revenues to ensure affordability and protect other expenditure priorities.
New York City currently lacks a formal Charter requirement to limit debt service, relying instead on informal policies that could be easily amended. Establishing a formal Charter cap on debt service at 15 percent of tax revenues would help ensure the long-term affordability of the City's debt.
Recommendations related to Debt Service
To help ensure that long-term debt is affordable, the Charter should limit debt service to 15 percent of tax revenues.
Key Data
15%
— The proposed cap on debt service as a percentage of tax revenues to ensure long-term affordability.
New York City's current approach to debt limits relies on arbitrary, negotiated increases that fail to account for long-term affordability or economic capacity. A more sustainable framework would index the Transitional Finance Authority's debt limit to total personal income and formally codify a cap on annual debt service costs at 15 percent of tax revenue.
Recommendations related to Debt Service
The City and State should index the TFA Statutory limit to 2.5 percent of total personal income to ensure debt capacity grows with the underlying economic capacity.
Policymakers should formalize the City’s long-standing practice of keeping annual debt service costs below 15 percent of tax revenue to protect the operating budget and credit ratings.
The State should amend the Constitutional debt limit to be more holistic by creating a single limit based on an appropriate economic metric that covers all City debt repaid with tax revenues.
The City should review each capital project to determine if it is necessary, properly scoped, and priced, while dropping unnecessary projects.
The City should continuously and comprehensively improve how it makes capital investments, including prioritizing projects, reducing costs, and streamlining project delivery.
Key Data
$18.5 billion
— The amount of the increase to the TFA Statutory limit requested by New York City.
$12 billion
— The cumulative increase in debt capacity proposed by the State Executive Budget.
$13.5 billion
— The TFA Statutory limit in fiscal year 2023.
$23.8 billion
— The projected TFA Statutory limit in fiscal year 2033 if indexed to 2.5 percent of total personal income.
15 percent
— The threshold for annual debt service costs as a percentage of tax revenue that the City should formally adopt.
1.9 percent
— The TFA Statutory limit as a percentage of total personal income in 2024.
New York State Budget Fiscal Year 2024 Major Actions and Fiscal Risks As of First Quarter Update New York City Fiscal Year 2024 Adopted Budget and Outlook
New York City's fiscal year 2024 budget gaps have widened to $7.5 billion, $9.7 billion, and $10.7 billion in fiscal years 2025 through 2027, necessitating more effective savings strategies. While recent initiatives have generated savings through measures like lower-than-expected debt service and vacancy reductions, these actions are insufficient to close the projected gaps without risking critical services.
Recommendations related to Debt Service
Future actions should focus much more on prioritizing impactful programs and restructuring operations to preserve services, lest the City balance its budget by reducing critical services unnecessarily.
The City should shift vacancies to where they are most needed and take steps to aggressively reform how it hires, especially for critical functions.
The best strategy to narrow budget gaps significantly while preserving services is to implement additional PEGs that focus on improving efficiency—reducing costs without reducing services.
Key Data
7%
— Percentage of fiscal year 2024 to 2027 savings derived from lower debt service spending.
The Adams Administration's savings plans, which reduce ongoing budgeted spending by approximately $3.0 billion annually, rely heavily on re-estimating costs and eliminating vacant positions rather than service cuts. Debt service savings, achieved through lower interest rates and debt refunding, account for 9 percent of these recurring savings.
Key Data
9%
— Percentage of the plans' recurring impact that comes from debt service savings due to lower than budgeted interest rates and spending, and refunding existing debt.
$136.0 Million
— Debt service savings identified in the fiscal year 2023 budget reductions.
$239.0 Million
— Debt service savings identified in the fiscal year 2024 budget reductions.
$304.9 Million
— Debt service savings identified in the fiscal year 2025 budget reductions.
$327.7 Million
— Debt service savings identified in the fiscal year 2026 budget reductions.
The New York City fiscal year 2023 budget includes $50 million in projected savings from debt service, attributed to variable rate debt and lower than planned issuance. This adjustment is part of the broader effort to balance the budget amidst economic uncertainty and potential fiscal gaps.
Key Data
$50 million
— Projected debt service savings in fiscal year 2023 resulting from variable rate debt and lower than planned issuance.
The Metropolitan Transportation Authority faces an annual structural deficit of at least $2.0 billion, which is currently being covered by federal aid and borrowing. Future financial updates will clarify how the Infrastructure Investment and Jobs Act impacts the capital plan and resulting debt service, as well as how borrowed funds will support operations beyond 2025.
Key Data
$2.9 billion
— Amount borrowed from the Municipal Liquidity Facility (MLF) that may support operations beyond 2025.
$11.9 billion
— Total federal aid and borrowing used to cover the MTA's annual structural deficit from 2021 to 2025.
$2.0 billion
— The minimum annual structural deficit the MTA faces, which is currently covered by federal aid and borrowing.
At this time last year, New York State estimated that tax receipts would fall short of pre-pandemic estimates by $15 billion annually on average, totaling $60 billion over four years. Receipts, however, have been much stronger than expected. By April 2021, the State reduced its four-year tax receipt shortfall estimate by 80 percent, to $11.8 billion. Over the four-year period, the State also will receive at least $21.1 billion of targeted and general federal fiscal…
The next New York City Comptroller will play a critical role not only in holding the next Administration and agencies accountable, investing and managing five pension funds with $248 billion in assets, and partnering in $13 billion City debt issuance, but also in spotlighting and promoting New York City’s fiscal…
New York City utilized debt service refunding and lower interest rates on variable rate debt to generate $541 million in net savings to help close budget gaps. Recent refunding offerings were structured to maximize savings in the first two years, with the August 2020 and December 2020 deals allocating 93 percent and 100 percent of savings to that initial period.
Key Data
$541 million
— Net savings provided by the City's management of long-term debt, including lower interest rates on variable rate debt and savings from refunding General Obligation debt.
93 percent
— Portion of savings that accrued to the first two years in the August 2020 refunding offering.
100 percent
— Portion of savings that accrued to the first two years in the December 2020 refunding offering.
23 percent to 49 percent
— Range of savings that accrued to the first two years from November 2018 to April 2020 refunding offerings.
$215.3 million
— Debt service savings realized in fiscal year 2021 according to January 2021 data.
$326 million
— Debt service savings realized in fiscal year 2022 according to January 2021 data.
New York City's total debt outstanding reached $125 billion by the end of fiscal year 2020, representing an 84 percent increase since 2005. This accumulation of debt has led to higher debt service costs, which accounted for slightly below 11 percent of tax revenues in fiscal year 2020.
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 for City-supported debt in fiscal year 2020.
The November 2020 Financial Plan relies heavily on non-recurring debt service savings from refunding rather than implementing significant, long-term structural changes to stabilize city finances. This approach fails to address the underlying fiscal crisis, as the savings program is relatively small and does not provide the necessary recurring relief for future budget gaps.
Recommendations related to Debt Service
The City’s November 2020 Quarterly Modification should have included the significant recurring savings needed to stabilize the City’s finances in the long run, rather than relying on non-recurring debt service savings.
The Mayor should immediately ask each agency to identify significant recurring savings, with a focus on improving long run efficiency, to replace the reliance on non-recurring debt service savings.
Key Data
60 percent
— of the annual savings in the November 2020 Financial Plan do not recur, with the vast majority attributable to debt service savings from refunding.
0.35 percent
— of City-funded spending is represented by the fiscal year 2023 savings, which are part of a program heavily reliant on debt service savings.
The Metropolitan Transportation Authority faces a dire fiscal situation with budget gaps totaling $15.9 billion, necessitating a reliance on borrowing $2.9 billion through the Federal Reserve's Municipal Liquidity Facility. Converting this short-term borrowing into long-term debt should be treated as a last resort, as increasing annual debt service obligations threatens the system's long-term capacity to finance operations and capital investments.
Recommendations related to Debt Service
The MTA should treat the conversion of short-term debt to long-term debt as a last resort.
The decision to convert the Municipal Liquidity Facility borrowing to long-term debt should only occur after increasing efficiency, adjusting service levels, and determining federal aid levels.
Key Data
$2.9 billion
— Amount the MTA will borrow through the Federal Reserve's Municipal Liquidity Facility to balance the budget and reduce the next year's gap.
$15.9 billion
— Total budget gaps the MTA faces between 2020 and 2024.
The Metropolitan Transportation Authority faces a severe fiscal crisis that requires prioritizing capital investments to lower future debt service costs, including the potential postponement of expansion and accessibility projects. By shifting project timelines and managing capital commitments, the authority can reduce the projected growth of debt service, which is estimated to rise from $31 million to $466 million annually over the first five years of the current plan.
Recommendations related to Debt Service
The MTA should prioritize planned capital investments to lower debt service costs, including postponing expansions and possibly slowing accessibility improvements.
The MTA should set priorities to determine which planned projects will be implemented in the coming years, as postponing lower priority projects will reduce future debt service.
The MTA should be honest about what it truly expects to accomplish in its capital plan to avoid creating a wish list that ultimately disappoints stakeholders and complicates fiscal planning.
Key Data
$31 million
— Projected annual debt service for projects in the first five years of the new plan at the start of the period.
$466 million
— Projected annual debt service for projects in the first five years of the new plan at the end of the period.
$742 million
— Cumulative total of projected debt service for projects in the first five years of the new plan.
$1 billion
— Annual revenue expected from the congestion pricing system for debt service starting in 2021.
The New York City Police Department's budget includes centrally allocated costs, which encompass fringe benefits, pensions, and debt service. In fiscal year 2020, the department's debt service obligations totaled $215 million, reflecting a portion of the $10.9 billion in total expenses allocated to the agency.
Key Data
$215 million
— The amount allocated for NYPD debt service in fiscal year 2020.
$99 million
— The amount allocated for NYPD debt service in fiscal year 2010.
$180 million
— The amount allocated for NYPD debt service in fiscal year 2019.
$116 million
— The growth in centrally allocated debt service expenses for the NYPD between fiscal years 2010 and 2020.
New York's state and local governments face acute fiscal stress due to the pandemic, requiring careful consideration of options like using reserves, reducing expenditures, and managing debt. Officials should prioritize intergenerational equity by avoiding long-term borrowing for operating expenses and ensuring debt service does not unfairly burden future taxpayers.
Recommendations related to Debt Service
Future generations should not be obliged, usually through long-term borrowing, to pay for services for today’s residents.
Wise public officials will give careful consideration to the implications of their decisions regarding debt and fiscal policy for their heirs.
Long-term borrowing for operations is generally considered inappropriate because it violates the principle of intergenerational equity.
Capital investments should be financed with bonds of a duration equal to the useful life of the asset purchased, with debt service equal in each year.
The more fiscally prudent policy is to use proceeds from assets sales to create equivalent value on the balance sheet by using the proceeds for capital investments or keeping them as reserves.
Key Data
$100 million
— Amount of capital spending avoided that saves about $6.5 million annually in debt service at current interest rates for 30-year bonds.
$6.5 million
— Annual savings in debt service achieved by avoiding $100 million of capital spending at current interest rates for 30-year bonds.
The Citywide Savings Program relies heavily on routine budget adjustments like re-estimates and debt service savings rather than structural efficiency improvements. These non-efficiency measures account for the majority of the program's savings, limiting the potential for long-term fiscal sustainability.
Recommendations related to Debt Service
The Citywide Savings Program should prioritize efficiency savings, which involve changes to agency practices to reduce spending without reducing service, rather than relying on routine budget adjustments like debt service re-estimates.
The city should increase its focus on efficiency savings, as the current program relies too heavily on non-recurring or routine adjustments.
Key Data
18%
— The portion of the FY2021 Citywide Savings Program attributed to lower than expected <b>debt service</b> expenditures.
0.6%
— The total five-year savings identified by the FY2021 Citywide Savings Program as a percentage of city-funded expenditures.
$2 Billion
— The amount the FY2021 budget would have been reduced if 1 percent efficiency savings had been achieved in each budget cycle since FY2016.
33%
— The portion of the FY2021 Citywide Savings Program attributed to efficiency savings.
43%
— The portion of the FY2021 Citywide Savings Program attributed to re-estimates and funding shifts.
0.23%
— The average efficiency savings as a percent of city-funded spending between FY2016 and FY2021.
New York City's debt service expenditures grew from $5,535.1 million in fiscal year 2014 to $6,428.2 million in fiscal year 2019, representing a 16.1 percent increase over that period. This rise in debt service is one of the factors contributing to the overall growth in municipal spending driven by capital program borrowing.
Key Data
$5,535.1 million
— Debt service expenditures in fiscal year 2014.
$6,428.2 million
— Debt service expenditures in fiscal year 2019.
$893.1 million
— The dollar change in debt service expenditures between fiscal year 2014 and fiscal year 2019.
16.1%
— The total percent change in debt service expenditures between fiscal year 2014 and fiscal year 2019.
The total New York City budget grew by $19 billion between fiscal year 2014 and fiscal year 2019, with debt service accounting for 5% of that increase. This growth was driven by federal and state mandates, inflationary costs, wage increases for the municipal workforce, and administration priorities.
Key Data
5%
— The share of the $19 billion total budget growth between fiscal year 2014 and fiscal year 2019 allocated to debt service.
The Metropolitan Transportation Authority's 2019 budget includes $17 billion in operating expenses and debt service, with significant capital investments planned for 2020-2024. While the infographic outlines these financial figures and operational metrics, it does not provide specific data or recommendations regarding debt service.
New York State has utilized accounting maneuvers, including the prepayment of debt service, to mask the true growth of State Operating Funds spending, which is actually 4.9 percent rather than the reported 2 percent. These practices undermine fiscal transparency by shifting billions of dollars in expenses off-budget or between fiscal years without generating any actual interest savings.
Key Data
$1.5 billion
— Amount of fiscal year 2020 debt service payments shifted into the prior year.
$594 million
— Amount of fiscal year 2019 debt service payments made in fiscal year 2018.
$200 million
— Amount of fiscal year 2021 debt service expected to be paid in fiscal year 2020.
New York City's long-term liabilities totaled $283.6 billion in fiscal year 2018, with bonded debt accounting for $111.0 billion of that amount. These figures illustrate the significant scale of the city's financial obligations and debt burden.
Key Data
$111.0 billion
— Bonded debt in fiscal year 2018, which is a component of the city's largest long-term liabilities.
$283.6 billion
— Total long-term liabilities for New York City in fiscal year 2018, encompassing bonded debt, net pension, and net OPEB.
The NYC Ferry system requires significant public subsidies, with capital commitments totaling $638.5 million that will result in annual debt service payments reaching $48.6 million at full buildout. City officials should reevaluate the ferry's operating strategy, pricing model, and expansion plans to ensure a more efficient and effective use of transportation funding.
Recommendations related to Debt Service
Before an expansion of service is implemented, City officials should reconsider the policy choices that contribute to the high subsidies, evaluate options that would reduce the level of subsidy, and consider whether alternative uses would meet the city’s transportation needs more efficiently and more effectively.
The high rate of leisure travel offers an opportunity to charge higher fares on weekends and for noncommuters to offset the cost of subsidies for daily commuters.
Dynamic pricing models could be more appropriate for long, low-productivity routes that require substantial subsidies and see demand spikes on weekends.
A different fare structure could also mitigate the need to charter vessels or purchase larger boats.
Key Data
$8.7 million
— Annual debt service payments incurred from the $114.3 million in capital commitments to date.
$48.6 million
— Annual debt service payments at full buildout on the estimated $638.5 million in actual and planned capital commitments.
$108 million
— Upfront capital costs for building new landings, upland infrastructure, and purchasing additional ferries for the proposed expansion.
$4.6 million
— Additional annual debt service costs resulting from the $64 million capital investment in the Coney Island route and Ferry Point landing.
The Metropolitan Transportation Authority's 2019 operating expenses and debt service totaled $17 billion, with the vast majority allocated to subway and bus operations. This financial data highlights the significant costs required to maintain and operate the transit system alongside capital improvement plans.
Key Data
$17 b
— Total 2019 operating expense & debt service for the Metropolitan Transportation Authority.
New York City's long-term liabilities, including bonded debt, retiree health benefits, and pension obligations, reached $252.5 billion in fiscal year 2017, creating significant annual legacy costs that consume over 20% of the city's operating budget. To ensure long-term fiscal stability, the city must implement a more realistic capital plan that prioritizes critical infrastructure and utilizes pay-as-you-go funding to reduce reliance on new bonded debt.
Recommendations related to Debt Service
New bonded debt should be limited by implementing a more realistic capital plan developed around specific priorities and predominantly focused on repairing critical infrastructure, ensuring safety, and expanding where investments make economic sense or can improve critical services.
Current year resources should be used to pay for part of the City’s capital investment, and these funds should be used as PAYGO capital to reduce the borrowing needed each year to finance the capital plan.
Key Data
$252.5 billion
— Total long-term liabilities for New York City at the end of fiscal year 2017.
$7.0 billion
— The amount of debt service in the fiscal year 2019 budget.
$8.6 billion
— Projected debt service for fiscal year 2022.
$9,782
— New York City's debt burden per resident in 2016.
$4,687
— Average debt burden per resident for 11 other cities in 2016.
$30.4 billion
— Total City funds committed to capital projects between fiscal years 2014 and 2017.
New York City's capital plan has expanded significantly, with projected spending reaching $65.1 billion for fiscal years 2019 to 2022, leading to a rise in debt service costs. By 2022, debt service is expected to grow to $8.6 billion, consuming 12.9 percent of tax revenue, prompting calls to utilize "pay-go capital" to mitigate long-term liabilities.
Recommendations related to Debt Service
The Capital Plan should be reduced and refocused on strategic priorities that emphasize state of good repair and maximize the return on investment for new projects.
The City should utilize current resources as “pay-go capital” instead of borrowing to invest in infrastructure without increasing long-term liabilities.
Key Data
$7.0 billion
— Budgeted debt service in fiscal year 2019, representing 11.6 percent of tax revenue.
$8.6 billion
— Projected debt service in fiscal year 2022, representing 12.9 percent of tax revenue.
$65.1 billion
— Projected capital spending for fiscal years 2019 to 2022 in the Executive Capital Commitment Plan.
87.5 percent
— Increase in the capital plan from the Fiscal Year 2015 Executive Financial Plan to the fiscal years 2019 to 2022 projection.
New York City's fiscal year 2019 savings plan relies heavily on debt service savings, which account for $1,349 million or 29% of the total savings program. While these debt service reductions contribute to the city's budget, they represent a significant portion of the proposed savings compared to efficiency-based measures.
Key Data
$1,349
— The amount of debt service savings in the Fiscal Year 2019 Citywide Savings Program, representing 29% of total savings.
$633
— The amount of debt service savings in the Fiscal Year 2018 Citywide Savings Program.
$658
— The amount of debt service savings in the Fiscal Year 2019 Citywide Savings Program.
$304
— The amount of debt service savings in the Fiscal Year 2020 Citywide Savings Program.
$329
— The amount of debt service savings in the Fiscal Year 2021 Citywide Savings Program.
$357
— The amount of debt service savings in the Fiscal Year 2022 Citywide Savings Program.
New York City's fiscal plan relies heavily on debt service re-estimates to achieve savings rather than implementing agency-wide cost reductions. Furthermore, the five-year capital commitment plan has grown to approximately $82 billion, necessitating greater scrutiny and reform of the city's capital planning and budgeting processes.
Recommendations related to Debt Service
Additions to the capital plan should be treated with the same caution and scrutiny as those to the operating budget as 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 this amount, which is relevant to rising debt service levels.
The New York State Fiscal Year 2019 Executive Budget claims to limit spending growth to 1.9%, but this figure is artificially low due to accounting shifts and reclassifications that obscure the true 4.1% growth rate. These maneuvers include prepaying $340 million in debt service and shifting billions in expenditures off-budget to meet self-imposed spending limits.
Key Data
$340 million
— The amount of debt service prepaid in fiscal year 2018 that was not due until fiscal year 2019.
The New York City Preliminary Budget for Fiscal Year 2019 is criticized for its 'wait-and-see' approach, which fails to address potential federal tax law impacts or state budget cuts. The budget relies heavily on dwindling debt service savings and lacks necessary additions to city reserves, prompting calls for limited spending growth and improved fiscal stability.
New York City's capital spending has led to a high and growing debt burden, with debt service costs rising 65 percent between fiscal years 2002 and 2014. To manage this, the city should adopt an investment standard that includes policies for debt and pay-as-you-go capital to ensure long-term fiscal responsibility.
Recommendations related to Debt Service
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 also advocate for changes to contracting rules that increase costs and impede efficient construction management.
Key Data
65%
— The rate at which city debt service grew between fiscal years 2002 and 2014.
12%
— The share of city-funded expenditures currently made up by debt service.
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.
$7.8 billion
— The projected amount of city debt service by fiscal year 2017.
New York City's fiscal monitors project budget gaps of $3.2 billion, $2.3 billion, and $1.6 billion for fiscal years 2019 through 2021, though they caution that potential federal and state policy changes could significantly alter these assessments. While there is a consensus that debt service costs will be lower than budgeted, the monitors' current projections should be viewed with caution until the full impact of external fiscal factors is better understood.
Tax Increment Financing (TIF) allows municipalities to fund infrastructure by capturing future property tax revenue, but it carries significant financial risks if revenue projections fail to cover debt service obligations. To protect taxpayers, governments must conduct rigorous due diligence, including "but for" testing and stress-testing revenue against economic downturns, before committing to these complex financing arrangements.
Recommendations related to Debt Service
Municipalities should answer whether the development and property value appreciation would occur in the absence of the TIF-funded capital project to satisfy the 'but for' test.
Cities should test their revenue projections against a range of economic scenarios, including the impact of possible cost overruns, revenue shortfalls, cost spillovers, and economic downturns.
The project’s total return on public investment should include an assessment of the net value after also taking into account the cost of providing public services in the TIF district.
Governments should implement strong transparency provisions to protect future taxpayers against the risks associated with TIF projects.
Governments should ask five questions before launching a redevelopment project to identify those in which TIF would be appropriate.
Key Data
$359 million
— Amount paid by New York City from its general fund to subsidize Hudson Yards’ interest payments after the Great Recession.
$14 million
— Amount of TIF debt the Troy Downtown Development Authority in Michigan defaulted on.
$266 million
— Capital cost overruns funded by New York City for the Hudson Yards project.
$10 million
— Amount raised and spent by a majority of Chicago's TIF districts over a 13-year period.
$75.4 million
— Outstanding Pilot Increment Financing (PIF) debt in New York as of June 2017.
$3 billion
— Total cost of the Hudson Yards project, which New York City guaranteed interest payments on.
The November 2017 Financial Plan modification includes adjustments to spending projections, with debt service re-estimates contributing to decreased outyear gaps. However, the post does not provide specific recommendations or detailed data regarding debt service.
This episode's datapoint is "60+," as in the combined years of professional experience of special guests Renee Boicourt and Kent Hiteshew in matters of public finance. Listen to a live recording from CBC's recent event, "Fiscal Crises," where our expert guests discussed lessons learned from the bankruptcy of Detroit and…
The Citywide Savings Program has generated significant fiscal relief by re-estimating expenses and actively managing debt service, resulting in hundreds of millions of dollars in savings across fiscal years 2017 and 2018. While some agencies have successfully implemented efficiency initiatives like procurement reform and overtime management, broader participation across all city departments is necessary to maximize long-term budgetary benefits.
Key Data
$295 million
— Savings achieved in fiscal year 2017 through the active management of debt service.
$421 million
— Savings achieved in fiscal year 2018 through the active management of debt service.
New York State's reported spending growth of 2 percent for fiscal year 2018 is misleading because it relies on accounting maneuvers, including shifting debt service payments and reclassifying programs. Adjusting for these timing shifts and accounting changes reveals that the actual growth in State Operating Funds spending is 3.7 percent.
Recommendations related to Debt Service
The Governor should ensure transparency by avoiding the use of accounting adjustments, such as debt service prepayments, to artificially lower reported spending growth.
State officials should make appropriate adjustments when calculating spending growth if accounting methodologies are changed, ensuring that spending growth figures accurately reflect total expenditures.
Key Data
$219 Million
— Net debt pre-payments made in fiscal year 2017.
$490 Million
— Net debt pre-payments made in fiscal year 2018.
Accelerating the release of $704 million in state capital funding allows the Metropolitan Transportation Authority to defer borrowing, resulting in $12 million in debt service savings for 2017 and $38 million annually thereafter. These savings, alongside other financial adjustments, help mitigate the impact of rising labor costs and reduced state subsidies, though the agency still faces a projected $372 million cash deficit by 2020.
Recommendations related to Debt Service
The MTA should establish a 1 percent annual general reserve, which could provide $650 million over the plan period if not needed each year.
The agency must pursue new policy actions to maintain fiscal stability, as current strategies like unspecified efficiencies and one-time insurance recoveries are insufficient to address the projected 2020 cash deficit.
Key Data
$12 million
— Debt service savings achieved in 2017 by accelerating the release of state capital funding.
$38 million
— Annual debt service savings achieved thereafter by accelerating the release of state capital funding.
$704 million
— Amount of previously appropriated state funding released to support the capital program and lower debt service.
The Citywide Savings Program relies heavily on debt service savings and re-estimates, with 26 percent of total savings derived from debt service alone. To hedge against budget risks, the administration should prioritize recurring savings from government productivity improvements rather than relying on these volatile measures.
Recommendations related to Debt Service
To serve as a meaningful hedge against budget risks, the administration should ensure the next $500 million in savings comes from improving government productivity in ways that generate recurring savings.
City agencies should be required to identify efficiency improvements to generate the next $500 million in savings promised by the Administration.
The creation of a Savings Unit should not absolve city agencies of responsibility for initiating their own efforts to operate more efficiently.
Key Data
$960 million
— Total debt service savings identified in the Citywide Savings Program.
26%
— Portion of the total Citywide Savings Program comprised of debt service savings.
$75 million
— Annual savings achieved because the City no longer plans to do any short-term borrowing.
The Metropolitan Transportation Authority's 2017 budget faces significant fiscal risks, including rising labor costs, potential declines in tax receipts, and substantial unfunded postemployment benefit liabilities. With debt service consuming over one-sixth of total spending and cash balances projected to be exhausted by 2020, the agency requires new revenue sources and increased operational efficiencies to maintain its capital program.
Recommendations related to Debt Service
The MTA should prepare a plan to fund PAYGO capital contributions without exhausting cash balances to mitigate the need for excessive borrowing.
The MTA should secure new revenue sources, such as higher tolls, gasoline taxes, and license fees, to support the capital program and reduce reliance on debt.
The MTA should continue and intensify its efforts to identify and implement efficiencies to manage rising costs and improve the agency's fiscal health.
The MTA should adjust financial projections to better reflect foreseeable risks, including potential labor cost increases and tax receipt volatility.
The MTA should set aside additional resources for the agency’s OPEB trust fund to address the nearly $14 billion in unfunded liabilities.
Key Data
1/6
— The portion of total MTA spending allocated to debt service.
6.1%
— The rate of increase for MTA debt service costs in 2017.
$153 million
— The dollar amount increase in MTA debt service costs in 2017.
$93 million
— The amount by which 2017 debt service would have been higher without changes to financial plan assumptions.
New York City's legacy costs, which include debt service, pension contributions, and retiree health benefits, are projected to grow by 20% to more than $20 billion by fiscal year 2020. While debt service payments are fixed by schedule, the city is exploring reforms to retiree health benefits and union welfare funds to curb the growth of these long-term obligations.
Legacy costs in the New York City budget, which include debt service, pension contributions, and retiree health benefits, are projected to grow to over $20 billion by fiscal year 2020. While debt service and pension obligations are largely fixed, implementing reforms to retiree health benefits could generate significant savings and help curb the rapid growth of these long-term financial commitments.
Recommendations related to Debt Service
The City should fund some infrastructure improvements through current year resources to mitigate the growth of debt service.
Key Data
$6.1 billion
— Debt service payments for the City’s debt obligations in fiscal year 2016.
$8.4 billion
— Projected debt service payments for the City’s debt obligations by fiscal year 2020.
one-third
— The projected increase in debt service payments between fiscal year 2016 and fiscal year 2020.
New York City's planned spending increase through fiscal year 2020 includes a significant rise in debt service, which is growing by 36 percent to reach nearly $8.2 billion. This growth is driven by a capital commitment plan requiring $32.9 billion in new borrowing, resulting in a total of $85.2 billion in outstanding City debt by the end of fiscal year 2020.
Key Data
$8.2 billion
— Projected amount for debt service in fiscal year 2020.
36 percent
— Growth rate of debt service expenditures between fiscal years 2014 and 2020.
$32.9 billion
— Amount of new borrowing required by the capital commitment plan between fiscal years 2016 and 2020.
$85.2 billion
— Total outstanding City debt projected at the end of fiscal year 2020.
New York City's financial plan includes projections for tax revenues, expenses, headcount, and debt service. It also outlines savings derived from the health savings agreement with the Municipal Labor Committee and the Citywide Savings Plan.
The Citywide Savings Program aims to generate $5.4 billion in savings, yet relies heavily on uncertain measures like debt refinancing and Medicaid payment reductions rather than operational efficiencies. Only 16 percent of the proposed savings stem from agency efficiency measures, highlighting a need for more strategic and creative approaches to government spending.
Recommendations related to Debt Service
The administration should prioritize efficiency gains over other savings devices, such as debt refunding.
The administration should continue to build on the progress in the Citywide Savings Program by focusing more on efficiency initiatives rather than alternative approaches like debt service reductions.
Key Data
$1.0 Billion
— Savings derived from reductions in required debt service payments.
The fiscal year 2017 executive budget includes a plan to forgive $180 million in debt service payments for NYC Health + Hospitals to support its operations. However, the overall financial plan relies heavily on debt service savings and other re-estimates to close budget gaps rather than implementing structural agency initiatives.
Recommendations related to Debt Service
The City should prioritize agency initiatives to close budget gaps rather than relying on debt service savings and other re-estimates.
Key Data
$180 million
— The City will forgive H+H’s <b>debt service payments</b> worth this amount in fiscal year 2017.
$1.25 billion
— The financial plan includes this amount in additional savings for fiscal years 2016 and 2017, which are largely reliant on <b>debt service savings</b> and other re-estimates.
The controversy surrounding the Sales Tax Asset Receivable Corporation (STARC) involves the City's decision to borrow $637 million more than necessary during a bond refunding, prompting the State to attempt to reclaim $600 million in sales tax revenue. Rather than splitting these funds, the contested money should be utilized to pay off long-term debt, thereby providing lasting relief to taxpayers.
Recommendations related to Debt Service
The best outcome of this dispute would be to return the contested money to City and State taxpayers in the form of long-term savings.
The resolution of the current controversy should be neither in favor of State’s or City’s claim to the contested $600 million, nor a “splitting of the baby” to give half to each, but instead the money should be put to a use that yields longer term savings for taxpayers.
The contested funds should be used to pay off outstanding debt that requires debt service payments over a period longer than three years and closer to the duration of the STARC bonds.
A negotiated division between the City and State should be reached, to give relief to city and state taxpayers over the longer term.
Key Data
$600 million
— The amount of New York City sales tax revenue the Governor proposed to divert to the State.
$2.5 billion
— The amount of Municipal Assistance Corporation (MAC) debt outstanding in 2003.
$500 million
— The City's annual debt service burden that would have been eliminated over five years.
$170 million
— The amount the State guaranteed annually to repay the STARC debt.
$2.7 billion
— The amount borrowed in October 2004 to repay the City for MAC debt service, pay off remaining MAC bonds, and cover other costs.
$637 million
— The amount the City borrowed in excess of what was needed to pay off outstanding bonds during the 2014 refunding.
The Citywide Savings Program, intended to improve municipal efficiency, relies heavily on one-time savings like debt service reductions rather than structural operational improvements. This program is currently too small to effectively address projected deficits, with only a fraction of the initiatives focused on recurring efficiency measures.
Key Data
$876 million
— Debt service savings resulting from lower interest rates that are concentrated primarily in the current year.
CBC compares the Mayor’s FY2016 budget savings agenda, called the Citywide Savings Program, or CSP, with the Program to Eliminate the Gap (PEG) in fiscal years 2010 to 2015.
New York City's outstanding debt has exceeded $110 billion, and the proposed Ten-Year Capital Strategy would further increase this burden, with debt service costs projected to rise by 30 percent. Given that one out of every eight dollars in tax revenue is dedicated to debt service, new capital investments must be limited to clearly defined projects with demonstrable benefits.
Recommendations related to Debt Service
The large and growing debt load means new investments need to be undertaken cautiously.
Proposed capital spending should be limited to clearly defined projects with demonstrable benefits.
Key Data
$110 billion
— New York City's outstanding debt as of June 30, 2014.
96 percent
— The growth of New York City's outstanding debt since 2002.
30 percent
— The projected increase in debt service paid from the operating budget under the proposed Ten-Year Capital Strategy.
1 out of every 8 dollars
— The portion of tax revenue that will be dedicated to debt service costs.
$83.8 billion
— The total cost of the proposed Ten-Year Capital Strategy for Fiscal Years 2016-2025.
$30 billion
— The amount of additional debt to be issued over the next four years under the proposed strategy.
The Metropolitan Transportation Authority requires over $14 billion annually to operate, with $2.5 billion of that amount dedicated to servicing debt on bonds sold in previous years. Toll revenue in excess of operating expenses and debt service provided $587 million in 2014 to support mass transit services.
Key Data
$2.5 billion
— The amount the MTA devotes per year to servicing debt on bonds sold in previous years.
$587 million
— The amount of toll revenue in 2014 that remained after covering Bridges and Tunnels operating expense and debt service.
New York City's reliance on borrowing to fund nearly all capital projects has resulted in over $100 billion in outstanding debt, which is projected to grow by another $30 billion over the next four years. This high debt burden is increasingly crowding out other operating budget expenditures, with annual debt service costs expected to reach $7.7 billion by fiscal year 2019.
Recommendations related to Debt Service
The Council should require improved reporting on the rationale for and performance goals of capital spending.
The Council 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.
Key Data
$100 billion
— The amount of debt currently outstanding for the City.
$30 billion
— The amount of additional debt the City will issue in the next four years to support the new capital plan.
8 percent
— The projected debt outstanding in fiscal year 2016 as a percentage of the City’s real property values.
13 percent
— The projected debt outstanding in fiscal year 2016 as a percentage of the City’s personal income.
41 percent
— The growth in debt service since fiscal year 2005.
40 percent
— The projected growth in debt service by fiscal year 2019.
The Metropolitan Transportation Authority faces unsustainable growth in debt service payments due to a heavy reliance on borrowing for capital needs, which squeezes the operating budget. To achieve fiscal stability, the agency should adopt a '25-50-25' funding formula that utilizes user fees, cross-subsidies from motorists, and tax subsidies to cover operating costs and capital investments without excessive borrowing.
Recommendations related to Debt Service
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 requires the MTA to fund half with borrowing.
New York State's capital spending on economic development has led to a significant rise in associated debt service costs, which grew by 101 percent between fiscal years 2005 and 2014. This increase in debt service for economic development and housing outpaced the 63 percent growth seen in debt service for all other state functions.
Recommendations related to Debt Service
All investments should be coordinated and aligned to regional strategies, performance metrics should be standardized for all programs and across all regions, and more comprehensive disclosure requirements should be put in place so that the costs and benefits of each project can be weighed.
All programs should be reevaluated for effectiveness before existing programs are increased or new ones are added.
The framework for designing and evaluating economic development programs identified in 2011 should be utilized to improve the cost-effectiveness of the State’s large investment.
Key Data
$350 million
— Debt service for economic development and housing in fiscal year 2005.
$762 million
— Debt service for economic development and housing in fiscal year 2014.
101 percent
— Growth of debt service for economic development and housing over the 10-year period from 2005 to 2014.
63 percent
— Growth of debt service for all other state functions during the same 10-year period.
68 percent
— Overall growth of state debt service during the 10-year period.
New York state's long-term debt currently totals $52.2 billion, and utilizing a $4 billion legal settlement windfall to pay down this debt would generate $231 million in annual savings. Additionally, funding capital projects through pay-as-you-go methods rather than borrowing would avoid future debt service costs, while addressing pension liabilities could save $500 million in interest expenses over the next decade.
Recommendations related to Debt Service
The state should reduce long-term debt by using settlement funds to pay off bonds, thereby lowering the annual debt service burden.
The state should increase pay-as-you-go capital investments to fund necessary infrastructure projects without borrowing, which avoids incurring additional debt service.
The state should reduce other long-term liabilities by making pension funds whole, which would save significant interest expense over the next decade.
Key Data
$52.2 billion
— Total amount of New York state's long-term debt.
$231 million
— Annual savings generated by paying off $4 billion of 30-year bonds with 4% interest.
$500 million
— Interest expense savings over the next 10 years achieved by making pension funds whole.
$2.8 billion
— Cost to make pension funds whole to avoid future interest expenses.
$6.9 billion
— Total savings over the life of the bonds from paying off $4 billion of 30-year debt.
This presentation was given during CBC's Conference on The Most Important Economic and Fiscal Decisions Facing the Next Mayor , which took place on December 6, 2013.. CBC provides a framework for curbing expenditures effectively and provides 8 options for savings: Implementing health insurance premium-sharing; Consolidating union welfare funds;…
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
This presentation was given by Maria Doulis, CBC’s Director of New York City Studies, at “The Measured City: Using Data to Improve New York City Government” Conference, on Oct. 30, 2013.
The Metropolitan Transportation Authority faces a growing financial crisis characterized by a reliance on borrowing to cover operating costs and capital investments, leading to significant long-term debt. To address this, the agency should adopt a "50-25-25" funding model that balances fare revenue, tax subsidies, and auto-user fees to reduce the need for debt-financed spending.
Recommendations related to Debt Service
The MTA should implement a "50-25-25" funding model, where fares cover 50 percent of operating costs, tax subsidies cover 25 percent, and auto-user fees cover 25 percent to reduce reliance on debt financing.
The MTA should continue moderate, regular fare increases to ensure operating costs are covered by current revenues rather than borrowing.
The MTA should enact new forms of auto-cross subsidy, such as higher bridge and tunnel tolls or congestion pricing, to generate necessary funding without increasing debt service obligations.
The MTA should put renewed energy into cost reduction efforts to limit the need for future borrowing.
Key Data
$26.6 billion
— Estimated cost for core capital needs related to state-of-good-repair and regular replacement of rolling stock in the five-year period from 2015-2019.
$2.8 billion
— The deficit the MTA is running this year when using Generally Accepted Accounting Principles (GAAP).
$3.0 billion to nearly $3.4 billion
— The range of annual deficits the MTA will face in each of the next four years when using GAAP.
$1.9 billion
— New resources identified by the MTA since February 2013.
New York City faces a growing debt burden, with debt service costs projected to rise to 17 percent of city-funded expenditures by fiscal year 2017. The next mayoral administration must carefully balance necessary infrastructure investments and climate resiliency efforts against the need to keep the city's debt levels affordable.
Recommendations related to Debt Service
The next Mayor must determine a level of long-term capital investment that accounts for the city’s already high debt burden.
City leadership must make difficult trade-offs among competing infrastructure and resiliency priorities to keep debt from becoming unaffordable.
The administration should establish a formal debt policy to guide capital investments, similar to the practices of previous mayoral administrations.
Key Data
$67.9 billion
— Total city debt outstanding in fiscal year 2013.
$75.5 billion
— Projected city debt outstanding by fiscal year 2017.
$6.1 billion
— Debt service costs in fiscal year 2013.
$7.8 billion
— Projected debt service costs by fiscal year 2017.
14.6 percent
— Current share of city-funded expenditures dedicated to debt service.
17 percent
— Projected share of city-funded expenditures dedicated to debt service by fiscal year 2017.
New York City's legacy costs, which include pension contributions, retiree health benefits, and debt service, are projected to consume nearly 25 percent of the budget by fiscal year 2015. These obligations, driven by past commitments, are growing at a rate that significantly outpaces other city spending, thereby reducing the resources available for current service provision.
Key Data
$4.2 billion
— The City's major debt obligations for general obligation, lease purchase, and other debt totaled $4.2 billion in 2005.
$7.2 billion
— The City's major debt obligations are projected to increase to $7.2 billion by 2015.
New York City faces structural budget deficits driven by rapidly growing costs like debt service and health insurance, which are currently being masked by temporary, one-time financial measures. To achieve long-term fiscal stability, the city must move beyond these unreliable stopgaps and prioritize structural reforms, such as rightsizing capital investment.
Recommendations related to Debt Service
The City should rightsize capital investment to reduce the long-term trajectory of debt service costs.
The City should adopt more enduring, politically tougher solutions to address structural budget problems like escalating debt service costs rather than relying on one-shot resources.
Key Data
$6.2 billion
— The amount allocated for debt service, which is a major big-ticket expenditure item contributing to the structural budget deficit.
$29.2 million
— The amount of debt service savings included in the November 2012 PEG for fiscal year 2013.
$230 million
— The amount of debt service savings included in the November 2012 PEG for fiscal year 2014.
$257 million
— The amount saved by the City last year from refinancing debt obligations to take advantage of low interest rates.
$228 million
— The target in refinancing savings approved for the current fiscal year.
The Metropolitan Transportation Authority faces significant financial instability due to recurring deficits and a heavy reliance on borrowing to fund capital projects, leading to rapidly increasing debt service payments. To achieve fiscal stability, the authority should adopt a "25-50-25" financing formula that balances costs among bridge and tunnel tolls, transit fares, and tax subsidies, while funding regular asset replacements with operating revenues rather than debt.
Recommendations related to Debt Service
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, an increase from $14 billion in 2000.
$2 billion
— MTA debt service in 2010, up from $1 billion in 2000.
$3 billion
— Projected MTA debt service in 2015 under the 2012-2014 Capital Plan.
18 percent
— Share of total revenues consumed by debt service in 2011, up from 12 percent in 2003.
$17.8 billion
— Cumulative unfunded Other Post-Employment Benefit (OPEB) liability as of the end of 2011.
New York City faces rising costs driven by debt service and health insurance, necessitating a shift away from reliance on one-shot revenue sources and toward structural budget reforms. To address these fiscal challenges, the city should prioritize capital investment scrutiny and implement long-term savings measures like premium-sharing and ending retiree Medicare reimbursements.
Recommendations related to Debt Service
The City should reexamine the level and nature of capital investments as debt service continues to grow.
Growth in capital commitments should be restrained to manage the city's rising debt service obligations.
Greater scrutiny should be placed on capital projects to ensure they are justified and cost-effective.
Clear criteria should be established for prioritizing projects based on condition, need, or return on investment.
The City should use the CityTime settlement funds to pay down the debt incurred to pay for the project.
Key Data
$100 billion
— The amount of outstanding debt financing capital commitments.
7.2 percent
— The annual growth rate of debt service costs.
$40 billion
— The amount of capital spending planned over the next five years.
$1.5 billion
— The amount allocated for economic development projects over the fiscal years 2012–2015 period.
52 percent
— The portion of state-of-good-repair needs that will be funded in fiscal years 2013 to 2016.
The Metropolitan Transportation Authority faces a significant debt burden, with debt service costs consuming nearly one-third of its fare and toll revenue. To manage this, the authority should pursue refunding strategies that prioritize long-term savings and avoid unfair practices like stretching repayment periods or back-loading costs onto future taxpayers.
Recommendations related to Debt Service
The MTA should follow guidelines that promote the greatest total savings and prevent the unfair passing of costs onto future taxpayers and straphangers.
The MTA Board should not seek any exemptions from the State Comptroller’s guidelines regarding debt issuance.
The MTA should ensure that savings from refunding are not offset with shuffling and stretching of debt service payments.
Key Data
$32 billion
— Total long-term debt outstanding for the Metropolitan Transportation Authority.
$2.1 billion
— The amount of debt service due on bonds in 2012.
$2.6 billion
— Projected debt service cost by 2015.
$4.3 billion
— Estimated increase in future nominal debt service payments resulting from the 2002 refunding.
New York City's economic development reporting fails to account for the full costs of projects, specifically excluding capital commitments and the associated debt service from cost-benefit analyses. Including these figures would provide a more accurate assessment of whether government-funded incentives are financially justified.
Recommendations related to Debt Service
The Economic Development Corporation should include in its cost-benefit analysis the debt service associated with project-related capital commitments, in the same way it includes the costs of PILOTs, sales tax exemptions, and other incentives.
The methodology recommendation committee, created as part of Local Law 48, should be convened to discuss the inclusion of debt service in cost-benefit analyses.
The $500 million CityTime settlement should be utilized to defray capital program costs rather than for short-term budget relief. These funds should be applied to retire existing debt from technology projects or to support pay-as-you-go financing to minimize future borrowing.
Recommendations related to Debt Service
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.
It is important that the recouped funds be used, not for short-term budget relief and restorations, but to help defray the costs of the City’s capital program.
Key Data
$500 million
— The total value of the CityTime settlement recouped by the City.
The rental payment made by the water and sewer system to the city treasury has grown significantly, driven by a shift to a formula based on debt service rather than actual service costs. Establishing a more transparent, logic-based method for setting this payment would improve legitimacy for customers, though it would likely not result in lower overall costs.
Recommendations related to Debt Service
The City should adopt a method based on the payment of City-funded GO debt service plus payment for services rendered by the City to the water and sewer system.
The City should consider a model based on the payment of utility taxes, where the water and sewer system makes a rental payment equivalent to what it would pay in property and income taxes.
The City should move away from the current 15 percent of WFA debt service formula, as it is arbitrary and lacks a basis in the actual value of services received.
Key Data
$234 million
— The rental payment budgeted for the current fiscal year.
$102 million
— The rental payment amount in 2003.
$30 billion
— The amount of capital investment authorized by the Water Board since 1985.
$12.1 billion
— The amount of capital investment projected to be committed over the next ten years.
$73.8 million
— The amount paid by the Water Board to the City for judgments, claims, and street cleaning in fiscal year 2011.
$229.7 million
— The increase in rent that would have occurred in fiscal year 2011 under a property tax approach.
The City's fiscal health is threatened by the unchecked growth of health insurance, pension contributions, and debt service, which are projected to consume 33 percent of total revenues by 2015. To address these structural deficits and avoid future service cuts, the City must prioritize slowing the growth of these expenses, including by downsizing the capital budget to focus on essential infrastructure.
Recommendations related to Debt Service
The Mayor and City Council should make slowing the growth of debt service a higher priority.
The City should downsize the capital budget to reduce the growth of debt service.
Resources should be directed toward the rehabilitation of essential infrastructure, like schools, roads, bridges, water mains and sewer pipes.
Non-essential expenses, such as economic development projects, should be postponed or reassessed to ensure that a strong economic justification for undertaking each project exists.
Key Data
$11 billion
— Total spending on health insurance, pension contributions, and debt service in 2005.
$23.1 billion
— Expected spending on health insurance, pension contributions, and debt service in 2015.
22 percent
— Share of total revenues spent on health insurance, pension contributions, and debt service in 2005.
33 percent
— Projected share of total revenues spent on health insurance, pension contributions, and debt service in 2015.
The "All Other" budget category, which includes debt service, pension contributions, and fringe benefits, accounts for 39% of New York City's total city-funded spending but has seen minimal reductions. Because debt service is largely determined by past capital borrowing decisions, short-term savings in this area are primarily limited to refunding debt to secure lower interest rates.
Key Data
$18 billion
— Planned budget of the "All Other" category in fiscal year 2009, which includes debt service, pension fund contributions, and other fringe benefits.
39%
— Share of the City’s total City-funded spending comprised by the "All Other" category, which includes debt service.
$116 million
— Amount cut from the "All Other" category, which includes debt service, pension fund contributions, and other fringe benefits.
<1%
— Percentage reduction applied to the "All Other" category, which includes debt service, pension fund contributions, and other fringe benefits.
New York City's reliance on borrowing to fund capital repairs creates unnecessary long-term interest costs and disincentives for proper maintenance. By shifting to funding regular asset replacement through operating revenues, the city could reduce its debt service burden and free up capital for other strategic investments.
Recommendations related to Debt Service
The City should place all its capital assets on regular replacement cycles according to their useful lives to avoid the need for costly borrowing and associated debt service costs.
The City should allocate funds in its operating budget for regular replacement, which would eliminate the need for costly borrowing for regular replacement.
New, large capital projects should be selected based on a clear set of priorities rooted in the ability to provide a high rate of return on the investment of public funds, thereby ensuring that borrowed capital is used efficiently.
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 absorb replacement costs.
$24 billion
— Total new capital investments to be pursued by the City in the next ten years.
New York City's capital commitment plan for fiscal years 2010-2014 totals $43.5 Billion, contributing to debt service costs that are growing at an average annual rate of nearly 9%. To manage these rising pressures, the City should scale back its capital plan to prioritize essential infrastructure repairs over less urgent development projects.
Recommendations related to Debt Service
The City should scale back the capital commitment plan to address the growing pressures that debt service are putting on the budget.
The capital commitment plan should focus on key priorities, such as state-of-good-repair work on the City's aging infrastructure.
The City should trim back on development projects that are less urgent and that do not have demonstrable benefits for the City's continued prosperity.
Key Data
9%
— Average annual growth rate of debt service costs in the financial plan.
12%
— Portion of the City's budget that debt service will constitute by 2014.
$43.5 Billion
— Total capital commitment plan for fiscal years 2010-2014.
$13.4 Billion
— Record-high capital commitments in FY2010.
New York City's debt service is projected to rise from $6.2 billion to $8.7 billion, growing at an average rate of 9 percent annually. To mitigate these costs, the capital program should be downsized by prioritizing essential infrastructure repairs over non-essential projects and requiring credible economic analysis for development initiatives.
Recommendations related to Debt Service
The Council should downsize the capital program to lower debt service costs.
The City should scale back the ambition of the capital agenda to align with the current economic reality.
The City should preserve key priorities – such as repair of roads, bridges, water mains and sewer pipes – and limit non-essential items.
Neighborhood revitalization and development projects should only be pursued if there is credible economic analysis showing that the City will receive a return on its investment or improved service delivery by undertaking the project.
Key Data
$6.2 billion to $8.7 billion
— The projected increase in debt service costs.
9 percent
— The average annual rate at which debt service is increasing.
$13.4 billion
— The record high level of capital commitments for the current year.
$43.5 billion
— The total capital commitment plan for fiscal years 2010-2014.
$700 million
— The increase in the capital commitment plan compared to the January plan.
$10 billion
— The total capital commitments expected in fiscal year 2011.
New York City's debt service costs are rising rapidly due to an expanding capital program, with projections indicating they will reach $8.8 billion by fiscal year 2014. To restrain this growth, the city must implement significant reductions in capital spending, specifically by abandoning non-essential economic development projects while prioritizing critical infrastructure repairs.
Recommendations related to Debt Service
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, and should be made with an eye toward abandoning non-essential items, including over $1.0 billion in economic development projects, and preserving key priorities such as repairs of essential infrastructure like roads, bridges, water mains and sewer pipes.
Smarter, more targeted investment will also produce real savings in debt service by the end of the Mayor's term.
Key Data
$5.2 billion
— Current fiscal year debt service, representing 12.4 percent of all city-funded spending.
$6.5 billion
— Total debt service including $1.3 billion in costs serviced by the Water Authority.
$8.8 billion
— Total projected debt service costs by fiscal year 2014.
$24.8 billion
— Total capital commitments for fiscal years 2002 to 2005.
$38.6 billion
— Total capital commitments for fiscal years 2006 to 2009.
$14.5 billion
— Expected record high capital commitments in fiscal year 2010.
New York City must reduce its borrowing and debt service payments to ensure long-term fiscal health, as interest on debt is projected to reach $6.5 billion by 2013. To achieve this, the city should prioritize the maintenance of existing infrastructure over ambitious capital expansion and sacrifice less essential economic development projects.
Recommendations related to Debt Service
The City needs to borrow less money and reduce the amount of debt service paid out of its operating budget.
Current capital plans for less essential undertakings, such as poorly justified economic development projects, will have to be sacrificed.
A smarter, rather than bigger, capital budget will focus on better use and maintenance of existing assets rather than ambitious plans for expansion.
The City should continue to invest in the maintenance of sewers, roads, bridges and schools.
Key Data
$6.5 billion
— Projected interest on the debt by 2013 if borrowing is not reduced.
9 percent
— Projected portion of the budget that will be consumed by interest on the debt by 2013 if borrowing is not reduced.
The Metropolitan Transportation Authority faces a growing fiscal crisis, with debt service costs projected to rise significantly as the agency relies increasingly on borrowing to fund capital projects. To achieve a balanced budget, the agency must implement structural changes, including increasing fares, raising tolls, and establishing new revenue streams like congestion pricing to cover operating costs and necessary capital repairs.
Recommendations related to Debt Service
The cost of bridge and tunnel facilities should be paid for entirely through user fees paid by motorists.
User fees paid by motorists should also generate a surplus large enough to cover one-quarter of the cost of providing mass transit services.
Mass transit users should pay fares sufficient to cover one-half the operating cost of those services.
State and local subsidies to mass transit should cover 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 due to a history of prior neglect.
Key Data
$22 billion
— Total MTA debt outstanding at the end of 2005.
$32 billion
— Projected MTA debt outstanding in 2010.
$1.8 billion
— Projected debt service in 2009.
$1.34 billion
— MTA 2006 Debt Service expense.
$1.382 billion
— Estimated annual net gain from a London-like congestion pricing plan.
New York City's rising debt service costs can be mitigated by using operating surpluses to pay off outstanding debt and by reducing construction costs through the repeal or exemption of the Wicks Law. These actions would help avoid burdening future generations with the costs of past services while freeing up funds for other budgetary needs.
Recommendations related to Debt Service
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.
The City can lower the amount of debt service due in future years by refinancing to convert high-interest debt to low-interest debt.
The City can lower the amount of debt service due in future years by reducing capital spending or building more efficiently.
Key Data
$290 million
— Annual savings in fiscal year 2009 from debt service reduction.
$2.0 billion
— Amount added to the City's debt by deficit financing after September 11th, 2001.
10 percent
— Estimated added cost to the City's capital projects due to the Wicks Law.
$4,228
— Debt service cost in millions in 2005.
$5,826
— Projected debt service cost in millions in 2009.
$9.1 billion
— Average annual capital spending for fiscal years 2005 to 2008.
The City of New York faced an $8.8 billion budget gap for fiscal year 2004, which was addressed through a combination of tax increases, one-time revenues, and reduced expenditures. While debt service savings and borrowing were utilized to manage the shortfall, the majority of the gap-closing plan relied on recurring revenue sources like property tax increases.
Key Data
$419 million
— Debt service savings achieved in fiscal year 2002.
$527 million
— Debt service savings achieved in fiscal year 2003.
$63 million
— Debt service savings projected for fiscal year 2004.
$262 million
— Debt financing flexibility utilized in fiscal year 2003.
$2.1 billion
— Amount of borrowing the City relied on in fiscal year 2003.
$229 million
— Planned borrowing for fiscal year 2004.
New York City's reliance on borrowing to cover operating expenses creates long-term fiscal burdens that unfairly shift costs to future taxpayers. To address the budget gap, the city must prioritize expenditure reductions and revenue enhancements while avoiding one-time gimmicks like excessive borrowing or asset sales.
Recommendations related to Debt Service
The City should not – and probably cannot because of creditor resistance – again borrow to close the coming budget gap.
The Mayor can control debt service in the long run by reducing borrowing and in the short run by refinancing debt.
Current efforts to balance the budget should eschew borrowing and other gimmicks.
Funds from asset sales should be reinvested in new capital projects or be used to pay off outstanding debt.
If a project will provide benefits over 20, 30 or more years, it is appropriate to have its costs spread over a similar period through borrowing.
Key Data
$598 million
— Amount the City borrowed in fiscal year 2001-02 to pay for operating expenses.
$2,054 million
— Amount the City borrowed in fiscal year 2002-03 to meet operating expenses.
$2.3 billion
— Portion of the City budget in fiscal year 2002-03 allocated to debt service.
8 percent
— Added interest expense incurred by the City for deferring pension contributions.
The City's fiscal management is criticized for failing to address long-term structural imbalances, including a lack of transparency regarding debt service and revenue trends. Furthermore, the City is urged to implement comprehensive debt reforms and set borrowing limits rather than relying on budget surpluses to balance the budget.
Recommendations related to Debt Service
The City should pursue a comprehensive reform of its debt practices to limit debt service growth.
The City should set effective limits on borrowing to ensure the capital plan meets the City's needs.
The City should use its budget surplus to finance capital spending on a pay-as-you-go basis or pay down debt.
Key Data
8 percent
— The projected annual growth rate of debt service payments over the next four years.
$36 billion
— The total value of the City's five-year capital plan.
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