NYC-WTC_000195490

NYC 9/11 Public Portal Document

The following policies shall collectively be deemed the Mayor’s Debt Policy for the City of New York. 3^ I. AFFORDAKLE LEVETS OF DEBT BURDEN: The Mayor’s Office of Management and Budget shall monitor trends in the City’s capital program in order to ensure that aggregate debt service of the sum of City General Obligation, lease and MAC debt does not exceed 15 percent of total City revenues and does not exceed 20 percent of City Tax revenues. Use ofstatutorily / limited debt Authority, sucfi as the TFA, will also be noted. i

The capital budgeting process of the City, managed by the Office of Management and Budget (“0MB”) on behalf of and with the active oversight of the Mayor, must balance the large infrastructure and other capital investment needs of the City against the cost of the debt used to finance the City’s capital program. In addition to reviewing the Capita) Commitment Plan quarterly, 0MB every two years coordinates a comprehensive review of agency requests and existing capital program culminating in the publication of a new Ten-Year Capital Strategy, in Preliminary form in January and in final form iti April. Also taken into account are the ' results of the Comprehensive Asset Condition and Maintenance Report also compiled annually. The capital planning process weighs the impact of debt service costs against (he costs of delaying or not implementing needed capital improvements on a ten-year horizon. i ' ' J \ Constitutional and statutory debt limits are too blunt an instrument to be used as a mechanism for fine- tuning the affordability of City debt issuance. The City also requires limits on amounts of affordable debt establisl)ed as a matter of policy, not law. Most commonly used yardsticks of debt burden overstate the relative burden of New York City’s debt relative to other large cities. This is because New York City funds a total capital program which in other cities is funded not only by the municipality, but shared among one or more counties, one or more school districts and various special districts. New York City has alarge population base and a strong and diverse economy; its resources easily sustain its debt burden. However, measures such as per capita debt or debt as a percent of personal income make New York City’s debt burden look disproportionately high. This is because in other cities the amount of debt incurred by the municipality is small relative to other “overlapping debt” of counties, school districts and special districts and relative to their population size and economic base. Data gathering to add such overlapping debt into the debt burden of other large cities is difficult, time-consuming and subject to error and interpretation. ' ' J ' ........ On the other hand, debt service as a percentage of either the total budget or in proportion to local taxes more accurately measures debt burden relative to the resources and responsibilities of each particular city. On these measures, the debt burden of New York City is not high. New York’s debt service is 8.1 percent of total budgeted revenues in 2001 rising to 9.6 percent in 2005 compared to a mean of 13 percent for the 15 largest cities excluding New York City. As a percent of local tax revenues. New York City’s debt service is 14.1 percent in FY2001 and will rise to approximately 15.8 percent in 2005, compared to a mean for the 14 largest cities of 17.4 percent.

’ These ratios appropriately exclude debt service on TFA bonds, which have their own statutory and I covenanted maximums on debt and debt service, debt service on TSASC bonds, which are self-supporting froin non-City revenues, and debt service on Water Authority bonds which are fee-supported revenue bonds i ' of the type excluded from the ratios for the other large cities. In addition, in calculating the debt ratio, the general obligation (GO) bond debt service is reduced by the amount of rental payments from the Water System to the extent equal to debt service on GO bonds issued for water and sewer purposes prior to the creation of the Water Authority. Pre-payments of debt service from prior or current year surplus, which has an effect of artificially reducing or increasing the annual debt service costs, are also excluded from the calculation. This methodology is consistent with the format historically usedby the Mayor’s Office of Management and Budget.

New York City’s debt ratios are particularly favorable compared to the largest cities when unfunded pension liabilities are taken into account. Many analysts view unfunded pension liabilities, which are

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