In a decidedly more diplomatic tone, but laced with deep concerns about New York City's fiscal health, the chairman of the Municipal Assistance Corporation for the City of New York yesterday said the corporation continues to offer billions of dollars to the city, but called for reforms, including a two year freeze on city taxes.
Felix G. Rohatyn, the chairman of the public corporation created to bail out the city during its fiscal crisis in the mid-1970s, also said the corporation could provide the city with $3.6 billion of new money through bond sales if the state approves such a plan.
He also said the corporation would be willing to provide "transitional financing" for proposed independent authorities in the city, either with bond proceeds or the placement of the proceeds in a trust fund if the entities are approved.
But while displaying such an array of support, Mr. Rohatyn's main concern was getting the city to prepare a credible four-year financial plan that includes tough measures to insure structurally balanced budgets.
Mr. Rohatyn chided the city for misusing about a portion of the $1.5 billion of surplus revenues turned over by the corporation last year. "The funds should have served as the linchpin" of a city, state, labor, and business restructuring plan.
"That opportunity was missed," he noted. "If MAC is to assist the city's budget again, this time by borrowing instead of by the use of surplus funds, the MAC board will have a legal obligation to be satisfied that the proper use be made of these funds."
He spelled out four main ways for the city to restructure its public and private sector economy.
The main "pillars" of restructuring are: a state takeover of Medicaid on a basis that provides gradual and predictable budgetary relief; a significant workforce reduction of up to 35,000 employees over four years; changes in the wage policy as well as labor and management relationships; a two year-tax freeze to maintain private sector activity; and continued capital investment to support both the public and private sector.
"New York City is in severe difficulties -- it is not a crisis," he said in a speech at a luncheon sponsored by the Citizens Budget Commission, a not-for-profit fiscal watchdog. "What we have today is worse than a crisis. Crises get resolved.
"The present difficulties seem to be feeding on each other to create a steady downward spiral," he warned. "This trend must be reversed soon, or it may be too late."
The corporation has delayed a $1 billion refunding of its first resolution bonds until the city comes up with a viable, four-year financial plan, and the Financial Control Board and rating agencies agree the plan is sound. Then the city could receive about $1 billion of revenues over the next four fiscal years. Mayor David N. Dinkins is expected to present his revised four-year financial plan on Nov. 8.
In additon, Mr. Rohatyn spelled out other ways the city could be helped. Funds released by the bond refunding could be earmarked for high-priority projects, such as school construction or other education related projects, like technology.
New borrowing powers for the corporation, which are supported by Gov. Mario M. Cuomo, could help reduce the city's debt service burden.
"Although MAC has neither the wish nor the borrowing capacity to provide all of the city's capital financing, it could participate as part of an integrated city and MAC program at significant savings to the city, while at the same time improving the city's market access by reducing its requirements," he said. The state Legislature would have to approve such a plan.
Over the course of the city's four-year financial plan, the corporation could issue $3.6 billion of new bonds at a total estimated savings to the city of $285 million, Mr. Rohatyn observed. The corporation has about $6 billion of borrowing capacity and could use the other roughly $3 billion for emergency financing. The new bonds would not exceed the 2008 maturity limit the corporation is required to comply with, and the corporation could provide financing at the shorter range of the maturities in order to stay within that guideline.