The New York Building Congress is testifying this afternoon on the Capital Budget component of the proposed Fiscal Year 2010 New York City Budget out of concern for sufficient funding of the City’s Capital Plan over the next decade.
After proposing, in January, a 30 percent reduction in overall spending as part of the City’s ten-year capital strategy, the Mayor’s revised executive budget plan instead proposes a more modest reduction that allows for overall capital spending at about $10 billion for the next two years. The Building Congress, which called the original proposal counterproductive to the City’s economic health, believes the revised plan is a significant improvement, much of it due to the efforts of the City Council. This was achieved by:
- reducing commitments financed by the City’s general obligation bonds to 27 percent rather than 30 percent;
- applying federal stimulus funds toward education projects; and
- reducing the non-City-financed portion of the plan by just 10 percent, including the Department of Environmental Protection’s capital projects, which are financed by dedicated water and sewer fees.
The Building Congress acknowledges the depth of the City’s current budget problems and the limited options available to close the deficit. For this reason, we appreciate and applaud the willingness of the City’s leaders to find ways to modify the actual reduction in commitments from 30 percent to approximately 17 percent in the ten-year plan.
This revised capital strategy, and the continuation of $10 billion annual near-term spending levels, is important for the construction industry as well as for the local economy.
While the initially proposed cuts, by our analysis, would have resulted in construction job losses of up to 10,000, the revised plan is expected to reduce that number to 5,800. Building Congress research shows the City lost 22,600 construction jobs between August of last year and February 2009 – a decline of 16 percent in just six months. Given that construction spending and employment generally lag the rest of the economy, it is likely that this alarming rate of job loss will continue until next year and possibly beyond.
By maintaining spending levels in the near term, the City will preserve thousands of jobs for working-class New Yorkers and significantly bolster economic activity during a period of rising unemployment.
Nevertheless, while the near-term outlook has improved, the forecast for fiscal 2011 and beyond is significantly more grim. The impact, most likely, will be felt starting in fiscal year 2012, when many current projects will be near or at completion. At the same time, the construction industry will likely be experiencing the severe impact of spending declines across the board. The Bloomberg administration is projecting that annual capital spending will drop to $8 billion by fiscal year 2013 and continue its decline through the end of the next decade where, absent revisions, spending would drop to about $6 billion annually. We must do everything possible to avoid this scenario.
As the Building Congress has long advocated, the solution to the City’s capital spending challenge is to identify and implement dedicated sources of funding – not to diminish spending on critical infrastructure needs.
The Bloomberg administration and the City Council deserve credit for their dedication to forward-looking investments in the City’s infrastructure. We have been impressed with the City’s commitment to school construction, transportation, environmental projects, and affordable housing – all comprehensive investments with long-term benefits. The Building Congress stands ready to continue working with the Mayor and the City Council, as well as the State Legislature and Governor, to identify dedicated sources of infrastructure financing and reduce reliance on debt while ensuring that the City’s physical needs are continually and efficiently addressed.
