We’ve written before about the Redevelopment Assistance Capital Program before, whether it is the projects it has funded, the requests made to it by local governments, and, in a July 2010 blog how in its relatively short history (it was created in 1986) the state had upped the credit limit through the years to where it stood at a borrowing cap of $4.0 billion in 2010. Much acceleration on the cap occurred in the mid to late part of the last decade. Overall it took 26 years to get to that borrowing level.
Now the state House has passed legislation that would make a lot of significant changes to the program but its main thrust is that it would gradually decrease the cap that would begin with an immediate reduction of $550 million and then $50 million each year from 2012 through 2019. The amount would increase to $150 million in 2020 until the cap gets to $1.5 billion, or roughly the level it was at in 2002.
A quick calculation shows that the level would be reached in 2029 assuming a strict adherence to the schedule. Roughly 17 years, the same time frame it took the RACP to grow from its initial 1986 appropriation to its 2002 level.
Feeling that the City’s finances are in good enough shape, the Mayor has proposed a bond issue of $80 million to pay for capital needs in the City. Some members of Council say the time is not right, the amount is not right, etc. so it seems certain that the relative ease with which the operating budget passed might be absent from discussions over the capital budget.
As of year end 2010, the City had $633 million outstanding on its general obligation bonds. Nearly 40% of this is related to bonds 1998 A, B, and C which were "issued to fund the City’s pension fund" as noted by the Controller’s audit. There is $140 million outstanding on 2006 B which, with others the same year, was used to refund previous bonds. After those outstanding amounts are counted, what remains is $259 million (about 40% of the total) in various bond issues that date back to 1993.
In 1996 (the earliest historical number available on the Controller’s website) per capita debt was $1,507 and the ratio of debt to general governmental expenditures was a very low 9.33%. Last year the per resident amount was $2,058 and the debt to spending ratio was 14.80%, the lowest since the early to mid 2000s. Most of the past fifteen years per capita debt has hovered around $2,400 and the ratio of debt to spending around 18%. That’s why much of the future fiscal optimism of the City is predicated on the "debt cliff" when payments fall significantly, supposed to arrive somewhere around 2018.
Here is a story that could only come out of New York: there is a plan afoot to allow the state and its municipalities to borrow money from the pension fund in order to make pension payments into the pension fund and then repay the money back, at higher interest, beginning in 2013. In all the state would borrow somewhere in the range of up to $2 billion and local governments could take on $4 billion or so. According to the most recent Census of governments New York has 57 counties and over 1,500 municipalities.
The symptoms sound eerily familiar to what is going on in Pennsylvania: enhanced benefit packages and a declining stock market have caught up with each other to weaken the underpinnings of the pension system. Rate spikes are projected for the Commonwealth’s two plans for state workers and school teachers in the next few years as a result of deals brokered in the early part of the decade, and municipalities have been granted tax increases (Philly and Pittsburgh) and some time to get a breather from retirement contributions.
But no one has yet suggested dipping into the pension trough to take care of the obligations.