With New York City officials preparing to present a revised four-year financial plan this week, state Comptroller Edward V. Reagan yesterday released a report warning them to refrain from any bonding gimmick that "piles up higher costs in future years."
Such financing measures used in the recent past are expected to cost city taxpayers up to $400 million a year after fiscal 1995, the comptroller's report says.
The report includes a review of a $1 billion revenue bond refunding by the Municipal Assistance Corporation for the City of New York that will provide the city with about $1 billion of funs over the next four years. While the deal is expected to reduce city debt service costs over that period, the comptroller's report says the additional costs of the financing to the city would be about $100 million a year from fiscal 1996 through 2008.
The report, which was prepared by Elinor B. Bachrach, the deputy state comptroller for New York City, was released two days before Mayor David N. Dinkins is expected to present his revised financial plan tomorrow.
"With Mayor Dinkins due to present his structurally balanced four-year year financial plan this week, the fate of the city's capital program is one of the many issues that hangs in the balance," said Mr. Regan in his report.
"It is vital that the city avoid the sins of the past and not starve the capital program to maintain current operations, as was done in the 1960s and '70s," the report says. "At the same time, it must refrain from further debt restructuring that piles up higher costs in future years."
The imbalance in the city's budgets is not due to the expansion of the city's capital program -- which was restarted in the 1980s after the fiscal crisis in the 1970s -- but by the city's "decision to postpone paying for that expansion," he wrote. The city postponed the timely repayment of debt service costs by embarking on a series of debt refundings and other financing methods that shifted costs to the future, the report notes.
"This postponement forced the costs onto future generations -- to the tune of at least $300 million to $400 million more a year after fiscal year 1995," Mr. Regan said.
The state and city comptrollers and the Financial Control board have made city officials aware that if left unchecked, the city's burgeoning capital program witll continue to drain its budget. Debt service costs are expected to rise to about $3.8 billion in fiscal 1996, from $1.8 billion in fiscal 1991, the comptroller's report notes.
Responding to these concerns, city officials have pared about $3 billion of the city's bonding commitment in the 10-year $67 billion capital plan covering fiscal years 1992 through 2001. The city expects to sell about $36.5 billion of general obligation bonds to finance the program during that period.
In addition, fiscal monitors have warned the city against using certain types of bond financings, such as refundings and capitalized interest payments, to finance projects not normally paid for with bond proceeds. for example, city Comptroller Elizabeth Holtzman has refused to allow the city to finance bridge painting with about $80 million of bond sale proceeds in fiscal 1992, which began July 1.
As for the Municipal Assistance Corp.'s proposed bond refunding, the state comptroler's report says that the potential costs to the city after fiscal 1995 would cause the refunding to "effectively continue the practice of rolling over the repayment of past debts."
Mr. Regan noted, however, that Felix G. Rohatyn, the chairman of the corporation, is delaying the refunding until Mayor Dinkins presents a credible, structurally balanced four-year financial plan.