Budget uncertainty could lead to cuts later

Sunday July 1, 2012

NEW YORK -- New York City officials have concluded their annual budget dance with an agreement that preserves child care, classrooms and other threatened programs, but un certainty surrounding parts of the plan could lead to more than $600 million in cuts midway through the year.

Mayor Michael Bloomberg and City Council Speaker Christine Quinn sealed their deal with a handshake Monday, and by the time the council formally approved the $68.5 billion budget on Thursday, advocates and legislators were crowing about the city services that had been saved. Low-income child care programs were restored, as was money to keep libraries open five days a week. Twenty fire companies were taken off the chopping block.

But the deal hinges in part on $635 million in income from the sale of taxi medallions this year and $825 million more in in come from sales over the following two years. That money may never materialize, depending on the outcome of a lawsuit accusing the mayor of illegally bypassing the City Council to get state lawmaker approval for a plan to sell more medallions and begin licensing livery cab drivers to allow them to accept street hails in less-trafficked areas of the city.

A judge has promised to rule on that lawsuit quickly, but a ruling in either direction could be followed by a lengthy appeals process. City officials have said they expect to ultimately win the case, but if it becomes clear the $635 million in sales won't happen before June 30, 2013, the budget will have to be adjusted through cutbacks or new revenue. The city adjusts its financial plan several times throughout the year to reflect changing fiscal realities.

If the taxi sales are allowed to move forward, there's some question whether the medallion auctions will bring in as much revenue as the city is anticipating. Originally, the city projected the sales would earn the city $1 billion for 2,000 medallions, but the budget deal raised the estimate to $1.46 billion. Offi cials said that by selling the medallions in separate auctions over three years, they expected to boost the price.

Randy Mastro, a lawyer representing the plaintiffs and a former deputy mayor, scoffed at the administration's projections, arguing that the plan to expand livery cab operations and add to the city's yellow cabs would skew the balance between taxi supply and demand.

City officials call their estimates conservative. They are expecting, on average, $730,000 per medallion. This year, owners reselling their medallions have been netting $700,000 to $1 million. Since 1937, only 1,450 new medallions have been sold, bringing the total number of city cabs to about 13,000.

The budget plan relies on another uncertain deal. The city has already planned how it will spend $300 million that it will get only if the city and its teachers union can reach a deal on teacher evaluations by January.

Budget experts suggested that any midyear cutbacks probably wouldn't be targeted at the programs said to be saved in this budget deal.

Instead, said Doug Turetsky, chief of staff at the city's Inde pendent Budget Office, Bloom berg has traditionally handled shortfalls through modest cuts of a few percent from each agency. Details of those slices are often announced in November.

A significant boost in revenue would help the city's coffers. The Bloomberg administration projects that for the budget that will be negotiated next year, the city is facing a shortfall of $2.5 billion.


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