NYC needs to build its way out of the pandemic recession hole, Stringer says
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Mayor Bill de Blasio should jumpstart pandemic-snagged plans to build affordable housing and schools, and repair aging infrastructure — even if it takes long-term borrowing to help pay for such projects, City Comptroller Scott Stringer declared Monday.
In a letter sent to de Blasio and obtained by THE CITY, the mayoral candidate argued that ample cash reserves, New York’s solid credit rating and historically low interest rates mean the city can afford to resume work on capital projects, despite serious budget problems.
Stringer argued the boost to the city’s economy, which has lost almost 700,000 jobs since February and whose 14.1% unemployment rate is almost double the national figure, would be vital to rebounding from the coronavirus crisis.
“Every billion dollars in construction spending creates nearly 5,000 direct construction jobs and hundreds of other indirect and induced jobs,” the letter says.
“With construction in the private sector forecasted to decline significantly over the next two years, increased city government capital construction projects are both needed to help boost construction sector employment, and will be competing against fewer private-sector projects for resources and labor.”
Last month, the New York Building Congress projected that construction spending this year would fall $10 billion below the $55.5 billion reached in 2019.
Borrowing, Not Burrowing
In June, City Council members Brad Lander (D-Brooklyn) and Vanessa Gibson (D-The Bronx) issued a paper making the same arguments as Stringer — that borrowing to pay for capital projects was sound policy and that pushing off projects would prove more costly in the long run.
Lander noted that a broad coalition is emerging that includes other Council members, as well as contractors — especially minority-and-women-owned businesses — with city work on hold.
“All across the city, our parks have been getting huge use during COVID-19, but the capital projects to fix the bathrooms, improve drainage, and repair paths have been frozen by” the city Office of Management and Budget, Lander told THE CITY.
He also pointed to a “shovel-ready” street safety improvement in his district, on busy Fourth Avenue, adding: “OMB won’t give the go-ahead.”
Both the comptroller and the Council members made distinctions between borrowing to finance major construction projects and the controversial idea of borrowing to cover red ink in the day-to-day operating budget.
“Borrowing to cover operating expenses is like a family taking out a loan to pay for groceries,” the Council policy paper said. “It might work for this week, but next week, you will still need to buy food, you still won’t have the income to cover it, and now you will owe the debt service for last week’s groceries in addition to this week’s.”
Some economists, including Nobel Prize winner and New York Times columnist Paul Krugman, have argued that long-term borrowing makes sense as long as the interest rate is less than the long-term growth rate of the economy, which is the situation now.
The comptroller noted that the mayor has reduced capital spending for 2020 and 2021 by $4.2 billion, including deferring $1 billion for affordable housing and $900 million in school projects. The total the administration committed was $8.06 billion — half of what had previously been planned and 36% below the amount for 2019.
The de Blasio administration did not immediately respond to a request for comment.
Biden Our Time
The city’s budget is precariously balanced, assuming state aid cuts are averted. The mayor achieved labor savings by deferring some payments to next year, increasing a projected deficit that is already at $4 billion.
The election of Joe Biden as president makes an infusion of federal aid into the city’s operating budget more likely than it would have been during a second term for Donald Trump, who had declared his hometown an “anarchist jurisdiction.”
It isn’t clear whether Washington will finally compromise on a major infrastructure package that would bring billions of dollars to the city for the kind of projects the comptroller wants to resume. But neither of those possibilities are part of Stringer’s argument, even as he acknowledged the city’s budget problems are serious.
“The city’s financial position obviously requires careful management, but the budgetary costs of financing the capital program are manageable,” Stringer said in a statement. “We should both responsibly manage our operating budget and re-start the critical capital projects that create jobs, jumpstart our economic recovery, and invest in our city’s future.”
The fiscal watchdogs at the Citizens Budget Commission agree the capital program should be revived — but only after a review of which projects should get the highest priority and what the city can afford.
“Disinvestment in infrastructure is a mistake of past fiscal crises the city should not repeat,” said Maria Doulis, CBC’s deputy director. “The city should rescope its capital program to ensure critical projects to improve and maintain the core infrastructure New Yorkers rely on can proceed within a plan that is affordable and can be effectively implemented.”
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