Capital Budget Cuts

April 2, 2009 Hon. Michael Bloomberg, Mayor City Hall New York, New York 10007 Dear Mayor Bloomberg, We are writing to you to urge you not to cut capital spending in the FY 2010 budget. This is just the wrong time for such a step. While we are mindful of the need to control our debt service, cutting capital budget spending in this recessionary period runs counter to the economic policies of President Obama and the Federal government which seek to stimulate our economy with critical infrastructure spending. We believe that the time to cut back on capital spending to reign in debt service is when the private sector is back at work and our economy has recovered sufficiently. Doing it now will only deepen our recession and put more people out of work. The Office of Management and Budget estimates that job losses in the local construction industry will be 23,000 over the next two years. Industry estimates are even higher. Further, OMB estimates that by 2011 construction permits in the City will drop by an astounding 80%. Cutting capital spending now by an additional 30% will only exacerbate this problem. During the past few years construction in this City was booming in the private sector. City projects had to compete with private entities for construction work. Now, with the private sector near dormant, the cost of construction is coming down fast. In fact, between last October and January of this year, the cost of construction dropped at an annual rate of almost 3%. As private sector construction work continues to slow, those costs to the City should drop even further. Simply put, this is the best time for the taxpayer to get the “most bang for the buck.” In addition, the Congressional Budget Office estimates that the “ripple” effect in the economy for a dollar of capital spending can be as much as $2.50. It is counterproductive for economic stimulus money to flow to this region and have the City cut

many times more from the capital budget. Even worse, this current plan to cut the capital budget comes on the heels of a 20% cut just last year. There is clearly a need to control rising debt service costs. In that regard, there are two points to consider. First, the Federal government is trying to open up credit markets and is working to reduce interest rates. If they are successful, we will be able to refinance City debt at lower rates, thus effecting savings in debt service. Secondly, even if they are not successful, this is not the time to take these steps which will only drive more people to the unemployment lines, to social services, and into foreclosure. Maintaining our current levels of capital spending will help us return to economic health. When that happens, and the private sector is once again at work, then reducing government spending to reign in debt will be more appropriate. Over the next months, you will present an Executive Budget and the Council will hold hearings and negotiate and adopt a budget for our City. Without a doubt, the greatest attention will be focused on Expense Budget issues. However, we are writing to you today so that attention is in fact paid to this critical issue. We strongly urge you to reconsider this planned cut to the Capital Budget. Sincerely,

LEW FIDLER Assistant Majority Leader ___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________

___________________

_______________________

_______________________