New York City's fiscal picture is brighter than it has been in a long time, according to a new report that projects fewer job losses, higher revenues and "a dizzying U-turn" of profits on Wall Street after two years of unprecedented losses.
The report released Thursday by the city Independent Budget Office projects Wall Street profits of $59 billion this year, after losses of $11.3 billion in 2007 and $42.6 billion in 2008.
"The city's fiscal outlook for 2011 and beyond may be less fraught than previously thought," the report said.
The IBO said a number of factors contributed to Wall Street's gains, including greatly reduced interest expenses because interest costs are at "near historic lows," along with Federal Reserve backing for financial firms' securities and loans.
The number of financial firms also has been reduced, and work force and other operating costs were down, leading securities firms to enjoy "staggering profits" so far this year, the report said.
The IBO forecasts more modest profits in coming years of $12 billion to $16 billion.
The IBO is a public agency that provides policy and fiscal analysis independently of Mayor Michael Bloomberg's office.
The report said tax revenues also will be higher than previously projected, partly because of Wall Street profits, which the IBO predicts will lead to substantial bonus compensation and therefore higher personal income tax collections.
Total city tax revenues are projected to reach $35.5 billion this fiscal year, $649 million more than in 2009, the report said.
In addition to the boost from Wall Street, the IBO said its higher projection also reflects several tax policy changes like a sales tax increase and some business tax reforms that took effect last summer.
As the city's economy improves further by the end of calendar year 2010, tax receipts are expected to increase even more rapidly. The forecast is for $38.1 billion in 2011 and $40 billion in 2012.
Every industry except health and education continues to lose jobs, the report said, but the predicted losses aren't as devastating as they looked last spring.
Last May, the IBO forecasted the city would lose 254,500 jobs from its peak in the third quarter of 2008, but has now revised that to 157,200 jobs.
Employment is expected to resume growing by the third quarter of 2010, with a return to its recent peak of 3.8 million by the first quarter of 2013.
The report warns that the brighter economic picture does not necessarily mean the city is awash in surplus cash.
Large cuts in state spending, particularly in education and Medicaid, could force the city to either lay off workers or spend money it had budgeted elsewhere.
The city is also counting on savings from a new pension tier, which would have to be negotiated with the unions and enacted by the state, but there has not been progress on getting that done. Hopes for those savings might have to be shelved until later.
The mayor recently ordered another round of budget cuts. Most city agencies must slash spending by 4 percent this fiscal year and 8 percent next year.
On the Net:
Independent Budget Office of the City of New York: http://www.ibo.nyc.ny.us/