New York City Mayor David N. Dinkins yesterday called the proposed fiscal 1992 financial plan released by the City Council last week "flawed" and "inadequate" and threatened to veto their proposed budget alternatives if passed.

With just 12 days to go before a city budget is due, Mayor Dinkins released a letter he sent to City Council Speaker Peter F. Vallone, admonishing the council's proposed financial plan for leaving the city $565 million short of a balanced budget. He also threatened to veto any budget passed by the 35-member council that does not have realistic revenues supporting spending programs.

Responding to the criticism, Mr. Vallone, who strongly opposes the bulk of Mayor Dinkins's proposed tax increases, said in a statement, "The mayor's letter today on the council's budget proposals totally misreads our document and our intentions."

Since Mayor Dinkins unveiled his $27.9 billion executive budget for fiscal 1992, which begins July 1 and contains $3.5 billion in budget gap-closing measures, the City Council has flexed its muscles with new powers on the City Charter by challenging the mayor and offering alternative budget proposals.

City Council members, including Speaker Vallone, have warned the administration that they would not tolerate most of the mayor's proposed property tax increases and some of the severe service reductions, which include plans to turn out street lights and close the Central Park Zoo.

Yesterday, Mr. Dinkins said the council's proposals could jeopardize the city's bond ratings, which could drive up the cost of issuance and further bleed the city's revenue coffers.

"If the council's proposed expenditures are not supported by real and recognized revenues, its adopted budget will be out of balance according to the City's Charter and the Financial Control Act," Mayor Dinkins said. "If the council proceeds in that direction and adopts a budget out of [generally accepted accounting principles] balance, it may encourage rating agencies to downgrade our bonds and, further, the city might lost control of its own destiny."

The mayor was referring to a takeover of the Financial Control Board, a state fiscal monitor created to oversee the city's finances if the city has a budget gap of $100 million at the end of its fiscal year or cannot meet debt service payments.

But in the letter, Mr. Dinkins made his position on the budget very clear, as well as his intentions if the City Council's version is inadequate.

"Please be assured that, if necessary, I will not hesitate to use my powers under the City Charter to disapprove any increased or added expenditures adopted by the Council which are not backed by recognizable revenues in order to insure that the city completes this fiscal year and enters the next fiscal year in a balanced condition," he states in the letter.

The council's proposed use of $330 million of money from the Municipal Assistance Corporation for the City of New York is a one-shot revenue gainer that would trouble fiscal monitors and rating agencies, the mayor said.

He also noted that Felix G. Rohatyn, chairman of the corporation, has tabled a $1 billion MAC plan to help the city because of the concerns raised by rating agencies. Therefore, the MAC money should not be considered a part of the budget until all objections to its use are resolved, the mayor said.

About $350 million in still undetermined or unsettled labor consessions are also included in the City Council proposal, the mayor noted. And a $100 million bond issue to finance the rental pre-payment by the city's Water Board may fail to meet GAAP standards and is not an authorized form of borrowing under current financial agreements and existing state legislation, the mayor said in the letter.

According to a city budget official, the three elements of the council plan that would cause the city budget to be out of kilter by $565 million in fiscal 1992 are: $350 million in proposed labor concessions; $165 million from the total MAC package, which would be deposited in a rainy-day fund that cannot be used; and $50 million of the $100 million from the Water Board deal, which would also be placed in the rainy-day fund.

Mr. Vallone challenged Mr. Dinkin's revenue conclusions about the council's plan by turning the tables and saying, "By the mayor's own definition, his own budget proposal includes over $1.3 billion in resources that cannot be counted on under his standards. The point is, his budget proposal, as well as ours, are just that -- proposals.

"Both plans depend on actions that have not yet occurred," Mr. Vallone noted.

By law, the budget is due by June 24, but can be legally passed and activated by midnight June 30. In addition, the state Legislature must approve about $335 million of proposed tax and fee increases in the mayor's fiscal 1992 budget.

If a city budget is not passed, the spending and revenue programs in the fiscal 1991 budget would carry into the new fiscal year. Such an event would probably burden the city even more, creating further cash flow problems.

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