The news on the City's finances lately has been pretty gloomy. The projected operating deficit for the year ending June 30, 2010 has swelled to the $142-160 million range. Mayor Parker just announced a budget that will draw down on reserves to their legal minimum next year in order to offset a deficit initially projected at almost $200 million.
However, in all of the doom and gloom there is one ray of good news. The City's sales tax collections, which had been in a free fall, appear to have stabilized. Sales taxes bottomed out in January with an 18% decline from the previous year ($34MM vs. 41.6MM). But ever since then the collections have been steadily improving. In the most recent report from the State Comptroller (May reflecting March sales) the City posted its first increase for the year, up 3.8% from the same month last year. This will still leave the City down by about 9% for the year, but the final number should come in fairly close to current projections, meaning that this year's deficit will
probably not be much worse than the current projection.
However, no one should be blowing the all clear signal. The City will still likely see pressure on its property tax collections as lower property values work their way through the appraisal process. The Mayor's proposed budget projects a 5% decline in property tax collections next year. With pension and retiree health benefits increasing at a 12% annual rate, it would take extremely robust revenue growth just to keep up with those mushrooming costs. Even though the City enjoyed record revenue growth from 2002-2007, we still ran substanial deficits. Add to that the fact that the City's infrastrutre is growing precariously old and you have financial straits that will likely be with us for many years.