That 70′s Show: Bloomberg Cuts Could Be Brutal

In search of a cure for the city’s looming deficit, senior advisers to Mayor Michael Bloomberg have privately floated an astonishing range of tax increases and budget cuts-including a property-tax hike of at least 20 percent, a cut of at least 15 percent to the city’s cultural institutions, and even the outright closing of some firehouses.

The ideas were raised in various exploratory discussions with people outside the administration, who described these conversations to The Observer . Ed Skyler, a spokesman for the Mayor, declined to discuss specifics, saying only: “There is no question there will be some bitter pills to swallow. The Mayor is going to be forced to make some very, very difficult choices.”

Although the ideas are only a sample of the taxes and cuts under consideration, the mere fact that such dramatic measures are being discussed indicates how bad the city’s fiscal situation really is. Mr. Bloomberg is struggling to close a projected budget deficit this fall of around $5 billion-the worst fiscal crisis in decades.

So get ready for higher taxes and cutbacks in government services. You’re going to pay more in taxes, fares and fees, and get less in return.

“This is going to be a lot more like the mid-1970′s than anybody expects,” said Dale Hemmerdinger, the incoming chairman of the Citizens Budget Commission, a business-backed group. “It would be nice if I were wrong, but the die is already cast.”

Mr. Bloomberg is going to be hard-pressed to avoid cutting into the services that keep New York livable, such as trash collection, police, park maintenance, museum funding and pest control. City officials are already considering reductions to sanitation pickups. They have even discussed retiring the city’s fleet of street-sweeping trucks. The streets will grow dirtier. Rats will live long and prosper. Museums will eliminate programs. Parks and subway stations in some neighborhoods will devolve into the bleak danger zones of the 1970′s and 1980′s. It may not be too alarmist to suggest that some of the quality-of-life gains that New York made in the 1990′s could be in real peril.

“Will it be the little things you don’t notice-garbage piling up and graffiti coming back, a kind of death of a thousand cuts?” asked City Council member Eric Gioia of Queens. “Or will it be more visible-homeless flooding the streets, libraries shuttered, people avoiding the subway at night out of fear? I think it’s more likely to be the first. But the first leads to the second.”

“It’s terrible,” added former Mayor Edward Koch. “The Mayor will have to engage in triage.”

Mr. Bloomberg’s aides are already readying the bandages and scalpels. Administration officials have privately conceded, for instance, that they could be forced to take the unpopular step of shuttering firehouses, according to people who have discussed it with them. “Obviously, 9/11 was catastrophic,” one of the sources said by way of explanation, “but the amount of fires has gone down dramatically.”

Such measures are merely ideas being floated in closed-door discussions. Still, the image of Mr. Bloomberg closing down engine-and-ladder companies is certain to revive bad memories of the 1970′s, when Abe Beame-a former accountant who, like Mr. Bloomberg, was elected to employ his fiscal acumen to rescue the city-closed firehouses and laid off firemen to deal with his fiscal crisis.

In some situations, Mr. Bloomberg has already begun to deliver the bad news himself. The Mayor, a generous donor to the arts, has been telling board members of high-profile cultural institutions around the city that they’d better get their private-sector patrons to dig deeper, because further reductions are on the way, sources familiar with those conversations say.

City Hall has already directed all agency commissioners to report back to City Hall with proposed cuts amounting to 7.5 percent of their budgets-a citywide total of $1.1 billion in savings. But the commissioners are falling well short of that goal, administration officials say. All told, they have come back with a total of $400 million in cuts, according to people who have discussed the situation with Mayoral aides.

“Agency heads are saying that the new targets are almost impossible,” said one administration official. “The cuts are not materializing. Cutting anything without going into muscle and bone is proving really difficult. It’s really bad.”

Protecting Pataki?

Mr. Bloomberg’s advisers know how bad things are. They just aren’t talking about it in public now, in part because the gubernatorial election on Nov. 5 has everybody at City Hall in a holding pattern. The last thing Governor George Pataki needs as he seeks re-election is for Mr. Bloomberg to be talking about higher taxes and dire economic times ahead.

So City Hall has been short on specifics of late. Asked on Oct. 7 what prescriptions are under consideration, Mr. Bloomberg said: “I could give you a whole list which would provide headlines and front pages.” He didn’t.

Once Election Day is passed, however, the debate over specifics will explode into public view, setting the stage for bitter wrangling between city and state officials and pitched political battles at City Hall between the Mayor and the City Council.

Things seem much worse than they were last spring, when Mr. Bloomberg floated a range of contingency cuts to city agencies to help close the deficit. In the end, he avoided implementing most of them in his first budget, relying instead on a combination of borrowing and hikes in peripheral taxes and fees.

But now, Bloomberg aides are looking at a bleak future. Borrowing options are all but exhausted, Wall Street is still tanking, and Washington and Albany are tapped out; both are unlikely to provide the city with any real help. The math problem is an unforgiving one: If Mr. Bloomberg doesn’t raise taxes, the cuts will be deeper, and the quality of life in the city will deteriorate. If he tries to spare services, he’ll be forced to raise taxes. (The city only controls around $15 billion of the city budget, meaning the $5 billion shortfall accounts for a third of the funds under direct city control.)

Now, administration officials are mulling a whole range of politically explosive tax hikes and cuts that go far beyond anything suggested last spring.

For instance, City Hall aides are looking towards the city’s cultural institutions to make huge savings. The institutions, which include the Metropolitan Museum of Art, the American Museum of Natural History, Carnegie Hall and more than two dozen other organizations, rely heavily on city funding. Bloomberg advisers are already looking to implement the 7.5 percent cut this fall, a reduction that has led some cultural leaders to predict that they’ll have to eliminate galleries and programs.

Elite in an Uproar

And in a move that is causing widespread panic among the city’s cultural elite, City Hall is making it clear that further cuts are coming. At a recent gathering of cultural leaders at the Brooklyn Museum of Art, cultural-affairs commissioner Kate Levin warned that the institutions should get ready for yet another cut of 7.5 percent in January, according to people who were present. That’s a total of 15 percent in just a few months.

Then there is the talk of hiking property taxes. People who communicate regularly with Mayoral aides say that the administration is mulling a huge increase, one that could easily rise over 20 percent.

“They’re wondering aloud how much of a property-tax increase they can get away with,” one person familiar with internal discussions between Bloomberg advisers said.

Top real-estate executives are resigned to the likelihood of a big across-the-board increase. “We think it should be an absolute last resort and may be counterproductive to a recovery,” said Steven Spinola, the president of the Real Estate Board of New York. “On the other hand, the city is now confronted with a multibillion-dollar budget deficit, and we have to continue to provide services.”

A whole host of tax hikes and cuts are on the way or have already been put in place. As Newsday detailed on Oct. 7, subway fares are likely to jump to $2, water rates rose in July, and parking-lot fees, cell-phone taxes and cigarette taxes all recently went up.

The prospect of new taxes has created a fascinating political dynamic at City Hall. Last spring, City Council leaders argued that an array of new taxes would better position the city for the future. But Mr. Bloomberg nixed any new taxes. The result, Council leaders note ruefully, is that the city’s fiscal hole is far deeper than it needed to be.

Chainsaw Mike?

Now Council officals are grumbling that Mr. Bloomberg is embracing many of the tax hikes that were pushed by the Council last spring-at a time when virtually the entire Council is up for re-election. And Mr. Bloomberg’s timing has created a rapid deterioration in the relationship between the Mayor and City Council Speaker Gifford Miller.

“We wanted to deal with this problem when we came in,” a Council official said. “But the Mayor participated in the Pataki-protection program instead. Now he wants to raise taxes when all the Council members are running.”

Mr. Skyler dismissed the criticism: “It’s so misguided, it’s not worth addressing. The Mayor has been focused on the budget and making tough decisions from Day 1.”

The big question for Mr. Bloomberg is whether he’ll live up to his billing as a creative financial thinker as he moves to rescue the city from financial disaster. The Mayor, a self-made billionaire, was elected because voters wanted access to the same financial acumen that enabled him to build a global media company from scratch. Will he simply tax and cut his way out of the mess, or will he find novel ways of restructuring the city’s finances, such as retooling the property-tax code?

Mr. Bloomberg has already made it clear that “traditional” approaches will carry the day, at least in the short term. “There are some things longer-term that we are looking at,” he told reporters on Oct. 7. “In the short term, to balance the budget through the rest of fiscal ’03 and ’04, I think you have to expect more traditional approaches.”

“To the best of my knowledge, Bloomberg has never run a business in an extended period of contraction,” Mr. Hemmerdinger said. “He built a business; he’s not Chainsaw Al. But he is going to learn the hard way.