NYC mayor boosts reserves in budget plan; suggests luxury condo tax

By Hilary Russ

NEW YORK (Reuters) – New York City Mayor Bill de Blasio on Thursday laid out a $78.3 billion executive budget for the next fiscal year, a $600 million increase over his blueprint in early February.

Since then, the city has learned it would have a $1.6 billion surplus in fiscal 2015 and 2016.

The latest budget boosts the city’s general reserve fund to what de Blasio said was an “unprecedented” level of $1 billion, up from an average of about $300 million annually and the $750 million he suggested in February.

It also raises the retiree health benefit trust fund to $2.6 billion, enough to fund an entire year of employee healthcare costs, he said.

And it creates a brand new capital stabilization reserve fund of $500 million to “intensify capital spending” and allow the city to meet its debt service obligations in an economic downturn.

“We believe the reserves are going to be needed in the near term,” he said, echoing his warning in February that another economic slump or city-wide crisis could come at any time. “We’re trying to protect what we already have so we don’t lose it in a downturn.”

Even after nearly six years of economic recovery, 32 U.S. states still face budget gaps, Standard & Poor’s Ratings Services said in April. When the broader economy suffers, the state and federal governments often reduce aid to cities and towns.

“If problems occur, we do not expect anyone to come save us,” de Blasio said. New York City’s budget is bigger than those of all other U.S. cities and nearly all states.

The mayor also outlined an $83.8 billion, 10-year capital plan for the city’s water and sewer systems, roads and other infrastructure, a 24 percent increase over what he presented a year ago. That blueprint would keep debt service costs below 15 percent of revenues.

The city council must approve a budget by June 30.

Separately on Thursday, de Blasio said he is seeking to impose a “mansion tax” on sales of the city’s toniest apartments in order to build more affordable housing.

That plan would add a 1 percent tax on sales of condominiums, co-ops and other properties over $1.75 million, which would help generate $180 million to $200 million annually, he said.

The proposal, which requires state approval, would affect the top 10 percent of residential real estate transactions.

(Additional reporting by Edward Krudy; Editing by Richard Chang)

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