Bonds to Underpin Capital Plan Sought By Gov. Cuomo For New York City
Bonds will finance the bulk of New York State's share of financing Gov. Mario M. Cuomo's sweeping $7 billion capital program to rejuvenate New York City, a spokesman for the governor said yesterday.
The Port Authority of New York and New Jersey will serve as the financing war-horse for a number of the proposed projects in the capital plan, including a proposed $1.6 billion light-rail system connecting the city's major airports.
Wall Street welcomed the plan, but offered some reservations as well.
All of the governor's proposals, which include fiscal reform measures to take over the city's Medicaid costs, require the approval of state legislators or Mayor David N. Dinkins and the city council.
City officials, while pleased with the proposed takeover of Medicaid expenses, said they were worried some of the program's massive costs may have to be borne by an already overleveraged city.
Mary Ann Crotty, a senior member of the Cuomo administration and director of policy management, said the city would be responsible only for capital projects already in its capital budget. Ms. Crotty, one of the principal architects of the capital plan, added that "a good deal of the $7 billion program will be [funded by] bonding."
Gov. Cuomo formally unveiled his blueprint for a "new New York City" at a packed breakfast meeting of the Association for a Better New York at the Waldorf-Astoria Hotel in midtown Manhattan. On Monday evening, he gave a private, one-hour speech describing the plan to members of the New York City Partnership at the Equitable Building.
Gov. Cuomo said the programs included in the capital program would create about 25,000 permanent jobs and 54,000 temporary construction jobs, and generate $8.2 billion in economic activity. The programs would address both serious budget problems and lay the groundwork for economic development.
"That is the kind of thinking the state and the region need right now," said Stanley Brezenoff, head of the Port Authority. But there are no definite start-up dates for the proposed projects falling under the auspices of the authority, he said.
Nevertheless, "the fact that the governor has taken the lead converts this from a nice concept to something imminently doable," he said.
The light railway, which would connect John F. Kennedy International Airport and LaGuardia Airport with commuter rail and subway lines, would be paid for by using the revenues generated by a $3 tax levied on passengers leaving the airports, Gov. Cuomo said.
The port authority would also provide $125 million of the estimated $2 billion total cost for a mixed-use development of Hunter's Point in the borough of Queens. The city will chip in $30 million and private investment is expected to finance the rest of the program.
The Metropolitan Transportation Authority would also play a role, providing financing for the renovations of Pennyslvania and Grand Central Stations in Manhattan.
Even the Dormitory Authority will get in on the act, and is expected to sell $55 million of revenue bonds to help finance the $80 million in construction costs for a large new business library on the site of the old B. Altman's department store on Fifth Avenue in Manhattan.
"I think [the governor] is onto something," said James A. Lebenthal, chairman of Lebenthal & Co. "Public works immediately create jobs. But this is more than just pump priming. These things are engines of productivity."
The projects create real wealth by building projects that generate revenues facilitating commerce as well as paying for social programs society cannot otherwise afford, Mr. Lebenthal said.
Robert W. Chamberlin, senior vice president of municipal research and marketing with Dean Witter Reynolds Inc., said the takeover of the city's Medicaid expenses "straightens out an imbalance in who pays for Medicaid."
The ambitious package serves as a "bold step moving in a good direction for the city's future," Mr. Chamberlin said. While he expressed concern about how much money will be needed for the economic development program and whether this amount could make access to the bond market difficult, he pointed out that "using the Port Authority is a sensible and a credible way of getting it done."
Market participants consider the authority to be an experienced long-term capital planner and veteran of large construction projects by market participants.
On the Medicaid proposal, Nicole D. Anderes, a vice president with Roosevelt & Cross Inc., said, "the Legislature is going to have to be convinced it is revenue neutral."
The takeover of all local government Medicaid payments throughout the state "is not a freebee and the state is not in a position to be giving out freebees these days," she said. Ms. Anderes noted, however, that if the state assumes responsibility for the cost of social services, it would make county finances more stable through various economic cycles. During downturns, counties are especially vulnerable because they are hit hard by falling revenue streams while the cost of social services increases.