‘We’re at War’: New York City Faces a Financial Abyss

The pandemic has crippled tourism, retail and the culture sector. The damage could last years, and layoffs, service cuts and added debt are all on the table.At Manhattan’s major retail corridors, like Hudson Yards, business has been slow to recover.Credit…Spencer Platt/Getty ImagesSept. 28, 2020Updated 6:47 p.m. ETThe unemployment rate in New York City is 16…

‘We’re at War’: New York City Faces a Financial Abyss

The pandemic has crippled tourism, retail and the culture sector. The damage could last years, and layoffs, service cuts and added debt are all on the table.At Manhattan’s major retail corridors, like Hudson Yards, business has been slow to recover.Credit…Spencer Platt/Getty ImagesSept. 28, 2020Updated 6:47 p.m. ETThe unemployment rate in New York City is 16 percent, twice as high as the rest of the country. Personal income tax revenue is expected to drop by $2 billion this fiscal year. Only a third of hotel rooms are occupied, and apartment vacancies in Manhattan have hit a peak.New York, more than any large city in the world, has been forced to grapple with the coronavirus outbreak’s dual paths of devastation: The virus has killed 24,000 people in the city and has sapped it of hundreds of thousands of jobs and billions of dollars in tax revenue.And even as the city has contained the spread of the virus, it has been unable to exert control over its threat to the economy.Numerous economic indicators suggest that New York City will face an extended financial crisis, the likes of which has not been seen since the 1970s. The city has already slashed spending to make up for billions of dollars in lost tax revenue, but it may lose billions more.Mayor Bill de Blasio and Gov. Andrew M. Cuomo have repeatedly asked the Trump administration for help, but the president, a native New Yorker who openly scorns his city of birth, has instead threatened to cut its federal funding. Should he win re-election in November, it seems likely that the city will be forced to implement drastic layoffs and service cuts.New York City may even be compelled to borrow just to keep everyday services running; the mayor has asked state leaders to grant the city the authority to do so. So far, the state has resisted.Shootings are on the rise, some New Yorkers are fleeing for the suburbs, businesses are reconsidering their need for office space — structural changes reminiscent of those that preceded the city’s 1975 fiscal collapse, some budget hawks say.“We’re on the verge of a tragedy,” said Richard Ravitch, the former state official who helped engineer the rescue of New York City’s finances in the 1970s and thinks this crisis is worse. “I don’t know what’s going to happen to the city.”The city has taken steps to address its existing $9 billion, two-year revenue shortfall, though Mr. Ravitch questions whether leaders are underestimating the problem. He advocates significant cuts and the establishment of a financial control board in the 1970s model.The state, facing its own $14.5 billion revenue shortfall, is in no position to help. Governor Cuomo warned that without federal assistance, he would consider all options: “Taxes, cuts, borrowing, early retirement, all of the above,” he said earlier this month.“And all of the above will not fill that hole,” he added. The pandemic has forced New Yorkers to make fundamental changes in how and where they live and work and has deterred tourists from visiting the city, where many cultural and entertainment attractions remain closed. In the last year, the New York metropolitan region’s leisure and hospitality sector has lost 44 percent of its jobs, with a devastating effect on the city’s tax revenue.ImageMany cultural and entertainment attractions, like Town Hall in Manhattan, have remained closed because of the pandemic.Credit…Todd Heisler/The New York Times“It’s clear there are going to be hits for years to come, you can’t deny that,” said Bill Neidhardt, the mayor’s press secretary. “We’ve been calling for a stimulus, and Washington has done what they do, which is nothing.”The three pillars of New York City’s revenue stream are sales, personal income and property taxes, and sales tax revenue wa
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