Here’s an interesting graphic from Comptroller Thompson’s annual report on the city’s capital debt and obligations released late last week, showing the rapid rise in debt service that the city will owe in coming years. Between 2008 and 2018, the report says that annual debt payments will increase from $4.8 billion to $8.1 billion—which comes out to 5.3 percent—a rate that assumes that the amount of debt the city issues will drop substantially in the next few years.
With glaring city budget gaps looming ($11.3 billion over the next two-and-a-half years), the long-term effects of Mayor Bloomberg’s massive capital projects are coming into better view. New York City, the comptroller’s report found, already has either the highest or one of the highest (depending how you measure it) municipal debt burdens of any major city in the country. During the fiscal year that ended June 2007, the city’s debt burden came out to $7,096 per capita, or “more than twice the average of a sample of large U.S. cities,” the report found.
When measured relative to the total property value in the city, only Philadelphia and San Antonio, among major cities, have a greater debt burden than New York.
The debt comes as the city has been relying heavily on capital spending, part of the Bloomberg administration’s broader plan to expand economic development efforts and modernize aging infrastructure, much of which was neglected during the 1970s. Even with a 20 percent reduction from what the mayor initially wanted, the city’s capital plan this year is over $11 billion, the highest ever.
One way the city could have avoided such a high debt burden: more “Pay-Go” spending, where capital projects such as new schools or streets are paid for not just with money out of the annual budget and are not completely reliant on debt. The comptroller’s report said that Pay-Go did increase a bit during the flush times—$200 million in the fiscal year ending mid-2006 and $300 million over the following years—but that type of spending has gone the way of budget surpluses.
One other note on debt payments: As revenues plummet, debt service stays the same, eating up an increasingly large portion of a shrinking budget.