New York City continued to see healthy job growth this year, according to a report issued by the New York State Financial Control Board.
In the first half of the year, 175,800 jobs were created in the city, a 3.9% increase, exceeding the national growth rate of 2.8%, the Control Board heard at its yearly meeting in Manhattan Tuesday.
While employment rates have recovered, the number of workers actually coming into the office remained significantly below pre-COVID 19 levels.
“The combination of hybrid working and high vacancy rate paints a grim picture for the commercial real estate market, which continues to remain depressed,” the report issued last month said. “On the other hand, tourism continues its strong recovery.”
The New York City Tourism + Conventions projected the number of visitors will surpass pre-pandemic level by 2024. The forecasts for the city’s sales and hotel room occupancy tax revenues also point to an expectation of a strong recovery in the tourism industry.
Still, unlike the rest of the county, which saw positive growth in all job areas, certain sectors in the city, such as utilities, information and transportation and warehousing experienced slight declines.
The Control Board was created in 1975 by the state Legislature during the height of the city’s fiscal crisis and gives the board powers of review and oversight of the city’s financial management and debt issuance.
New York City Mayor Eric Adams noted the obstacles the city faced and had overcome in recent years.
“By carefully managing the city finances, we overcame unprecedented and substantial challenges without raising taxes or resorting to layoffs and service cuts,” Adams told the board at Tuesday’s meeting in Manhattan.
But he also noted a huge obstacle remains.
“The most profound challenge has been the rapid and accelerated growth in shelters across our city related to the arrival of 107,300 asylum seekers since spring 2022,” he said. “Right now we’re housing, feeding and caring for 59,400 migrants across 200 shelter sites and 15 large scale humanitarian relief centers. The massive influx has doubled our shelter population, pushed us to capacity and is exhausting our resources.”
The city, he said, spent $1.5 billion in asylum seeker-related costs last year.
“Last month, we shared updated cost projections showing the crisis could cost more than $12 billion over three fiscal years and that we must add $7 billion to the financial plan to cover these expenditures,” he said.
At a town Hall meeting Wednesday night, Adams didn’t mince words and said the issue was ongoing with no end in sight.
“Never in my life have I had a problem that I did not see an ending to — and I don’t see an ending to this,” he said. “This issue will destroy New York City, destroy New York City. We’re getting 10,000 migrants a month … We’re getting people from all over the globe who’ve made their minds up that they’re going to come through the southern part of the border and come into New York City.”
Every community in the city was going to be impacted by this surge of people into the Big Apple, the mayor said.
“We have a $12 billion deficit that we’re going to have to cut — every service in this city is going to be impacted — that’s all of us,” he said. “The city that we knew, we’re about to lose.”
State Comptroller Thomas DiNapoli also noted the rising costs for a city dealing with an increasing number of arriving migrants.
“The cost of managing the influx of migrants is of great concern and will exceed the city’s initial projections of $2.9 billion this year. The most recent projected cost would fully exhaust the city’s contingency reserves in this year,” he told the board.
The city initially budgeted migrant costs to decline to $1 billion in fiscal year 2025, he noted, but it recently suggested costs will rise to $6.1 billion. The current plan includes no migrant costs in fiscal year 2026, an increasingly unlikely outcome given current trends, DiNapoli said.
“Immigration is a federal issue, and the federal government has to lead … the migrant crisis should qualify as a national emergency and is best suited for federal response,” he said. “That response should include providing matching funds to help shoulder the immense burden on the city and to provide policy solutions, including orderly review of cases for asylum. Any city or state action on the issue will remain incomplete without a federal policy response.”
To ease the pressure on the city’s shelter system and reduce homelessness, the City Council passed legislation to expand rental assistance vouchers to put more New Yorkers in shelters.
“While admirable, it is projected that the policy change will cost the city billions of dollars by the end of the financial plan period and likely continue to grow after,” DiNapoli said. “Considering the various risks we have identified, my office projects that budget gaps could grow to $9.9 billion in fiscal 2025, $13.4 billion in fiscal 2026 and $16.2 billion in fiscal 2027. That’s a cumulative budget gap of $39.5 billion over three fiscal years.”
Barring a period of healthy economic growth and federal aid, this cost growth is not sustainable and could lead to the deterioration of city services or outright cuts, he said.
City Comptroller Brad Lander told the board the city remains in good shape, for now.
“A lot has changed since last year’s meeting of this board. While the city continues to face meaningful long-term fiscal challenges that we must thoughtfully address, we are now on stronger economic footing to do so,” he said. “Rumors of New York City’s demise, of a ‘doom loop,’ are greatly exaggerated.”
The city’s near-term finances saw some good news, he noted.
“Personal income tax revenues are well above 2019 levels, property tax collections in the past fiscal year were up 6.7% versus the prior year, and non-property tax collections were up 3.9%,” Lander said. “Strong pension returns of 8.0% for the past fiscal year will enable the city to reduce its contributions by $330 million through fiscal 2027.”
Still, he cited the problem of housing affordability, especially for younger people, as one of the biggest risks facing the city’s economy.
“We need an ambitious deal to expand housing supply across all incomes … while simultaneously protecting vulnerable tenants from eviction without good cause,” Lander said.
“We need to revive the Department of Housing Preservation and Development’s capacity to get housing deals moving and launch a modern-day version of the Mitchell-Lama program to provide permanently affordable cooperative homeownership opportunities to working-class families currently being priced out of the city,” he added.
This was echoed by John Hallacy, founder of John Hallacy Consulting LLC.
“Housing affordability is especially important for maintaining a healthy and diversified labor force,” Hallacy told The Bond Buyer. “Young people will turn to other locales if they believe it would be difficult to start a life here. For others, there are limits on how much disposable income may be dedicated to housing without impinging on other key spending categories.”
Lander continued to urge the adoption of a standardized framework for the city’s rainy-day fund to protect it from politics surrounding the annual budget process.
“While the city made significant deposits into the city’s long-term reserves in fiscal 2022, no deposits were made in fiscal 2023, nor was progress made towards establishing deposit and withdrawal rules,” he said. “We also continue to support state legislation to make the general debt service fund a permanent feature of the city’s financial and budgetary system.”
Hallacy said that having a specific targeted level for reserves was admirable, up to a point.
“I think the city is being cautious by not locking in a level for reserves due to the necessity to keep its options open,” he said. “However, there are so many variables that would affect draws on the reserves that it is better to have a soft target for the level. Rating agencies prefer a specific target for reserves, but it behooves the city to target goals.”
State law requires the city to turn in a four-year financial plan to the Control Board at the start of each fiscal year.
Before 1986 all plans and bond sales were subject to prior board approval. On June 30, 1986, the board terminated the control period and its approval powers sunset. During the sunset period, the board must review the four-year financial plan quarterly and notify the city if a financial plan doesn’t conform to the law.
In addition, the board must determine whether to reinstate a control period.
The board reviews some of the following: if the city fails to pay debt service on any of its obligations; if the city incurs an operating deficit of more than $100 million in a fiscal year; if the city issues notes in violation of the law; or if the city violates a provision of the law which impairs its ability to repay its notes or bonds or to adopt a balanced budget.
The board approved the city’s plans Tuesday, took no action and will remain in sunset mode at least until next year’s meeting.
Gov. Kathy Hochul is chair of the board. Members include Adams, DiNapoli and Lander, along with William Thompson, former city comptroller and senior managing director at Siebert Williams Shank William, Steven Cohen, former state Secretary of State and founding member of Blue Raven, and Rossana Rosado, former state Secretary of State and commissioner of the state Division of Criminal Justice Services.
The city is one of the biggest issuers of municipal bonds in the nation. Its general obligation bonds are rated Aa1 by Moody’s Investors Service, AA by S&P Global Ratings and Fitch Ratings and AA-plus by Kroll Bond Rating Agency.
In the second quarter of fiscal 2023, the city had about $39.3 billion of GOs outstanding. This doesn’t include the city’s Transitional Finance Authority which has $45.1 billion outstanding or the city’s Municipal Water Finance Authority’s $32.3 billion of outstanding debt.