Tax

NYC tax revenue may be less than expected: report

Reuters News
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Posted: Jul 19, 2012 7:09 PM
NYC tax revenue may be less than expected: report

(Reuters) - New York City's business and income taxes may produce less revenue than expected in the budget year that began on July 1, creating a $150 million shortfall that could require the mayor to make more cuts to keep the budget balanced, a state monitor said on Thursday.

The report said a sluggish national recovery and a weakening local economy made fiscal 2012 different from the past. Contrary to prior years, "taxes added little to the surplus because uncertain and contradictory economic signals did not permit the city to significantly raise its tax collection forecasts".

Business and income tax collections were heavily hit by two consecutive quarters of Wall Street losses at the end of calendar year 2011, the New York State Financial Control Board said in a report that predicted this trend may continue in fiscal 2013.

"If we are correct, the city will either have to take additional actions before the close of the year or reduce its projected surplus roll," the report said.

The state financial control board outlined risks in the mayor's budget plan, which include a decision to deplete the Retiree Health Benefits Trust by withdrawing $1 billion a year in 2013 and 2014. "We believe that is shortsighted," the report said.

The debt service costs are expected to jump by 36.8 percent between 2012 and 2016, the report said. The costs of fringe benefits will increase 40 percent in the same period, it added.

Bloomberg, a political independent, is relying on selling 2,000 new taxi medallions to raise $635 million in 2013, $365 million in 2014 and $460 million in 2015.

However, "there are numerous lawsuits that have been started opposing the city's plan, and how and when they will be concluded is uncertain," the report noted.

(Reporting by Joan Gralla; Editing by Chizu Nomiyama and Diane Craft)