Limits on financial power await new mayor

Bill de Blasio and Joe Lhota.

Bill de Blasio and Joe Lhota. (Credit: Charles Eckert; Getty Images)

Democratic mayoral candidate Bill de Blasio made the surprising claim last week before a business group that he's a "fiscal conservative." He said this despite months of running to the left to win his party's primary and demanding a new tax on the wealthiest New York City residents.

Now Republican candidate Joe Lhota says he's the "true progressive" in the race -- while expressing concern that over the past 11 years city government "has grown 56 percent over the rate of inflation," with taxes, fines and fees raised to pay for it, thus burdening the municipal economy.

Labeling games aside, these two major-party candidates do sound sharply different on money matters. But on Jan. 1, when the next mayor takes office, he will face practical and legal limits on where and how much he can tax, spend, cut, or even redistribute among agencies.

The New York State Financial Control Board has offices a few blocks from City Hall. Thirty-eight years after its creation to prevent the city's threatened fiscal collapse, this entity still monitors and reports on the annual city budget. If there's a $100 million deficit, or the city fails to pay a debt, or violates short-term borrowing restrictions, for example, the appointed board may seek a control of city finances from the state legislature.

Jeffrey Sommer, the FCB's acting executive director, said the city over decades has "institutionalized a lot of good behavior" such as legally requiring budget balance under generally accepted accounting principles, credible quarterly estimates, and four-year plans. When it comes to spending, city officials "use us as a reason to say no to people," Sommer says.

No sane mayor wants a state takeover -- though the governor for his own reasons may be reluctant to carry one out.

City leaders can hike property taxes to balance budgets -- as Mayor Michael Bloomberg and the City Council did significantly while de Blasio was a Councilmember. But other levies, such as income and sales taxes, require approval from state lawmakers.

Other monitors beside the FCB are assigned to look over the shoulders of mayors. Within government, these include the state and city comptrollers and the Independent Budget Office. Outside government, bond raters, the Citizens Budget Commission, and other nonprofit organizations make their presence known, sometimes to the annoyance of the elected officials.

Can a mayor force radical change in practices? "So much in the system depends on negotiations in one form or another," said a longtime municipal finance official who declined to be identified. "OK, you think the city has too much debt. But you're limited by federal law how much you can refinance . . . Which capital programs do you not do? Road repairs? Something else?"

Even a self-proclaimed supporter of labor unions like de Blasio couldn't give the municipal workforce fat raises without generating new revenue, winning cost-savings concessions at the bargaining table or imposing significant cuts on current programs.

Even a critic of overspending like Lhota would have to trim within limits. Fixed pension, health and debt costs make up a bigger-than-ever portion of city expenses. And some programs and agencies are charter-mandated, or tied to state and federal aid and mandates, fiscal experts note.

Mayors are powerful. But they don't always get what they want.