Not paying our bills

whynot_31

Unable to sustain itself via small cuts and donations, NYC will attempt to shed $1.7 B in expenses:

http://www.nydailynews.com/new-york/nyc-plans-1-7b-budget-cut-years-article-1.1200360#ixzz2ByM2RmQa

whynot_31

This article focuses on attempts to raise some fees that do not come close to resolving the gap.

http://www.dnainfo.com/new-york/20121112/new-york-city/city-increase-school-lunch-costs-parking-fees-fill-budget-gap

whynot_31

All of this is in sharp contrast to what is happening at the NYS level, where the game is to show that you are not incurring a large deficit by merely moving your debt to an authority.

The public is too lazy to realize that these authorities are issuing debt that is backed by the state gov in the event that the authority ever defaults:

http://www.newsday.com/news/region-state/report-shows-151b-debt-by-ny-public-authorities-1.5686090

homeowner

Not all state authorities debt is backed by the state. Some debt is backed only by the authority's own revenues and do not have a full faith and credit pledge of the state. Some debt is backed by specific revenue streams (gas tax, federal funding, etc), and other debt is back by private parties on whose behalf the state is issuing debt (mostly schools, hospitals, and some private entities).

The report by the Authorities Budget Office notes almost $59 billion is state-obligated debt, an additional $41 billion is owed by the authorities themselves from their own revenues and $51 billion was issued for third parties.

From a practical perspective, if the Authority defaults, the State is NOT legally obligated to step up. Realistically, the state would not allow an Authority to default, which is why those that debt is considered moral obligation debt. In fact, states and cities that have allowed their public authorities to fail usually end up declaring bankruptcy (Orange County, CA & Jefferson Cty, AL being the biggest).

The good news in all of this is that NYS has a history of issuing fairly stable and reliable bonds (predominantly 30 year fixed rate debt) and hasn't seen fit to take on the kind of speculation that drove OC or JeffCo into the red.

whynot_31

That is reassuring. However, I remain concerned that authorities do not have more direct voter oversight and that bonds are being used too often to fund operating expenses instead of capital ones. In this instance, I view the difference between moral and legal obligations as largely an accounting trick, whereas some view it in terms of classic economic money creation.

http://en.m.wikipedia.org/wiki/Money_creation

I would prefer more user fees and taxes levied now, in order to save on the interest payments and create a sense of year-to-year accountability. While I understand the need for capital projects and investments, I am not as optimistic about our ability to pay these obligations back as some.

whynot_31

During Bloomberg's terms (reign?), non-profits were sworn to secrecy re: how much they were receiving from Bloomberg and from sources that he arranged. Because disclosing it often brought up questions of partiality, the secrecy was often self imposed.

As his term ends, NGOs are beginning to disclose how much they received, as well as publicly fret over whether DeBlasio will be able to provide them with such resources:

http://www.nytimes.com/2013/11/21/nyregion/mayor-bloomberg-lured-donors-for-city-programs.html?ref=nyregion&_r=1&;