Despite a $2.7 billion budget gap, Mayor Bloomberg will announce today that the city will maintain a 7 percent property tax cut, as well as the annual $400 rebate to small homeowners, sources said.
“Bravo!” exclaimed City Councilman Lew Fidler, one of those who had fought for the property tax decrease when the city’s coffers were flush last year.
Fidler (D-Brooklyn) said there was “some fear” Bloomberg would try to retract the rollback because it was a one-year deal and there are signs of a national economic recession.
But he also noted Bloomberg would have had a tough time convincing the council to raise taxes.
“I have a feeling he knew he would suffer a great deal of resistance,” Fidler said.
The property-tax cut is worth $1 billion a year and the $400 rebate, $250 million.
In October, as revenue projections were lowered, Bloomberg ordered agency heads to come up with $1.5 billion in savings over two years.
He also instituted a temporary hiring freeze, which has since been lifted.
One source said the mayor took into consideration that the subprime-mortgage crisis was affecting families here when he decided to continue the tax cuts.
“The city has a budget crunch and so do families,” said the source.
“The mayor always said that we have to keep a constant eye on whether we can afford these tax cuts and, based on where we are right now, they’re still alive and moving forward.”
The source added, “The mayor feels that he can propose this, in part, because when the storm clouds were still distant on the horizon, he started making hard calls about cutting government spending.”
Bloomberg is expected to announce the decision at his State of the City speech, although his preliminary budget for fiscal 2009 isn’t due until next week.
One budget analyst said the city’s finances remain relatively stable, so Bloomberg’s move shouldn’t come as much of a surprise.
“You’re talking a $3 billion deficit on a $60 billion budget,” said the analyst. “It’s doable.”
The analyst warned that the mayor faces much bigger problems in fiscal 2010 – his last year in office – when the deficit is projected at $4.8 billion.
“There’s no blood in the water yet,” said the analyst.
Half jokingly, Fidler raised another issue that may have contributed to the mayor’s decision: his apparent interest in exploring a race for the White House.
“Clearly, if he’s going to throw his hat in the presidential ring, I don’t think he wants to be raising taxes – the congestion tax notwithstanding,” said Fidler.
While adamant about keeping taxes down for residents, Fidler said he’s prepared to ask the council’s finance staff to conduct a study on raising taxes on tourists.
“The dollar is so weak, people are coming here in droves,” he said. “If we’re going to be looking at increasing any tax during this recession period, a small – very small – increase in the hotel occupancy tax might be the best.”
The hotel tax currently generates about $337 million a year, or less than 1 percent of all the city’s tax revenue.