Gesundheit! Euro Zone Sneeze May Sicken NYC Economy

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German Chancellor Angela Merkel and French President Nicolas Sarkozy probably aren't thinking about New York City's budget as they try to save the Euro, but a new report indicates the city will feel the effects if they fail.

Photo by: Sebastian Zwez

German Chancellor Angela Merkel and French President Nicolas Sarkozy probably aren't thinking about New York City's budget as they try to save the Euro, but a new report indicates the city will feel the effects if they fail.

The crisis of confidence in the Euro Zone “must now be considered a material factor in the City’s economy,” according to a new report by Comptroller John Liu, which sees the potential fall-off in Euro-related business as one contributor to a possible $1.7 billion budget gap in fiscal 2012.

Liu’s office says it “has lowered revenue forecasts on personal income taxes to $8.63 billion from $8.72 billion in July, and business taxes to $5.48 billion from $5.52 billion also in July.” It points to all the connections New York’s financial and tourist sectors have to the European economy: “European banks have more than $1 trillion in assets in New York City offices, accounting for nearly two-thirds of all foreign bank assets in the City, according to Federal Reserve data. They also have extensive ties to other financial firms in the City, have thousands of employees here, and are active lenders in the City economy. Many of the City’s non-financial firms also have significant business relationships with European firms, and the City attracts millions of European business and leisure travelers each year.”

In other policy news:

  • Water rates in New York City have increased at double the rate of inflation for the past six years, leading the Citizens Budget Commission to ask, with apologies to Jimmy McMillan, whether the “”rent is too damn high?” The “rent” in question is a payment that the water system, which is independent of the city, pays to the city’s general fund under a 1984 agreement under which the water system was given control of the city’s water and sewer infrastructure. In order to compensate the city for debt that had been accrued when building that infrastructure, the water system agreed to pay rent. But as the value of that legacy debt decreased, the city switched to a different way of calculating the rental payment—one that has increased the payment dramatically since 2005, and is on track to rise substantially in coming years. Sure, it’s another source of revenue for the city—but since that revenue is coming from water fees, which are regressive, rather than the city’s more progressive general revenue stream, the payment raises fairness issues. CBC suggests not ending the rent, but mending it—basing it on services the city provides to the water system, like police protection, or on property taxes the water system would owe if it were privately owned.

  • America’s current pattern of immigration neither creates nor destroys jobs for native residents, a new report by the American Enterprise Institute and Partnership for a New Economy found. What’s more, a retooled immigration policy that prioritized highly-skilled immigrants could create 44 jobs for non-immigrants for every 100 people who emigrate. If the immigrants worked in the so-called STEM fields of science, technology, engineering, or math, the 100 newcomers could create 86 jobs for the rest of us.

  • The top 10 percent of city taxpayers receive 58 percent of income. This group, with average income of $387,000 a year, pays 71 percent of the city’s income tax revenue, according to an analysis by the Independent Budget Office.

  • Using a Chicago study as its model, the office of Manhattan Borough President Scott Stringer found that a WalMart in Harlem would lead to the closure of “up to 66 small, fresh food retailers within the first two years” or “approximately 202,000 square feet of fresh food retail.”
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