Oct. 21 (Bloomberg) -- New York Governor David Paterson said the state may not have enough money in December to pay all its bills, as he urged legislators to quickly agree to plans to close a $3.1 billion deficit and raise cash.
Bond rating companies will be watching the state, and may reduce New York’s ranking if it drew money from its $1.2 billion rainy day fund or created a financial plan with unrealistic revenue forecasts, Paterson said at an Albany meeting with leaders of the Senate and Assembly.
“Based on current revenue trends, it is possible the state won’t have enough resources to meet its obligations,” said Matt Anderson, a spokesman for the Division of Budget. The cash shortage may exceed the state’s holdings of surplus funds held in the short-term investment pool, he said.
New York, the third-largest U.S. state by population, was hard hit by losses and firings on Wall Street, where bank and securities firms lost $42.6 billion in 2008 and year-end bonuses to workers fell 44 percent, to $18.4 billion, according to state Comptroller Thomas DiNapoli.
By December, the state’s cash balance could be “a little over $2 billion” Paterson said, or less than the $5.1 billion of payments due in December for property tax rebates, aid to school districts, counties and cities.
To close a $3.1 billion budget deficit for the year ended March 31, 2010, Paterson last week proposed a plan for $1.8 billion of spending cuts and $1.2 billion of one-time actions that would produce revenue this year, though not in later years. The plan would result in $2 billion of spending cuts next year.
‘Corrective Action’
“If no corrective action is taken, we will have to begin to make difficult choices about which payments to delay,” Budget director Robert Megna said in a statement issued before the meeting. Anderson said the state wouldn’t default on its debt.
John Sampson of Brooklyn, leader of Senate Democrats said the state could save $500 million by refinancing tobacco bonds. Paterson rejected that idea, denying that the savings would be possible.
Bonds backed by the state’s general obligation pledge are rated AA by Standard & Poor’s, which grades debt backed by 25 percent of its personal income tax collections at AAA and AA- for issues backed by annual appropriations of the Legislature.
No rating company has said the state’s debt is under review for downgrade or on any special watch list of troubled borrowers. Yields on existing New York bonds have not increased relative to AAA rated borrowers, Bloomberg data show.
Tobacco Bonds
The tobacco bonds are backed by remuneration from tobacco companies to settle lawsuits and appropriations by the Legislature if those payments aren’t sufficient, according to the official statement for bonds sold in 2003. The sale of the bonds, to close a deficit in 2003, led to a reduction in the state’s bond rating by Standard & Poor’s.
New York state has the ability to sell short-term notes to cover its cash needs, Lieutenant Governor Richard Ravitch, said after Paterson’s meeting. That temporary borrowing would be different than selling bonds to finance budget deficits, a practice he said allowed the state to keep spending high and contributed to the current problems.
Tax Receipts
New York’s Local Government Assistance Corp., backed by sales tax receipts, or the Tobacco Settlement Financing Corp., backed by tobacco company payments to settle lawsuits, have about $7.44 billion of debt outstanding. Bondholders are scheduled to receive payments of $891 million in the year ended March 31, 2010, according to the state’s annual information statement.
The Senate Democrats’ proposal for the tobacco bonds would have the state sell new bonds with a thinner cushion of excess payments from tobacco companies than exists for the bonds sold in 2003, said Travis Proulx, a spokesman for Sampson. That would allow the state to sell $500 million of additional bonds, with the exact amount depending on how much of projected payments by tobacco companies the state wants to pledge to bondholders.
Declining numbers of smokers, partly the result of higher cigarette taxes in New York, have led tobacco companies to reduce their payments to the state, and dispute the amounts they owe, according to the state’s July 29 updated annual information statement.
New York had $3.59 billion of tobacco bonds outstanding at March 31, according to Division of Budget documents.
Paterson’s plan to raise $1.2 billion to help close the budget gap and provide cash includes a plan to sell bonds for which the state wouldn’t be responsible. He has revived an earlier proposal for the Battery Park City Authority to borrow $250 million, backed by rent and other revenue, and turn that money, plus another $50 million of cash, to the state.
The authority, which operates a residential and commercial development in lower Manhattan, has $1.02 billion of outstanding bonds and needs approval from New York City officials for any bond sales, chief executive officer James Cavanaugh said at a Sept. 10 board meeting, where the proposal was mentioned.
To contact the reporter on this story: Michael Quint in Albany, New York, at mquint@bloomberg.net.
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La vivienda siempre baja, vende ahora que luego no podrás, al principio cuesta luego te jode la vida, alquilar es ahorrar el dinero
Mi aplicación DEFCON para seguir las vicisitudes de nuestra deuda.
Ya te digo. Yo fui hace año y medio a Nueva York, y joer, que gangas pillabas. Pasa que ahora mucha gente no se puede permitir el viaje, pero vaya, si no, iba a ir más gente a new york, que aquellas escapadas a Andorra de mi infancia.
Que devuelvan la pasta pública los bancos. Y si no, que se vayan a Wall Street en horario de trabajo y gaseen a los que están allí. Ellos y el resto del mundo lo agradecerán.
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"Mercados de mi vida, eres niño como yo, por eso te quiero tanto y te doy mi corazón, tomaló, tomaló, tuyo es mío no." - HastaLosEggs, 8-7-2011
No digo que la noticia sea falsa, pero a lo mejor sí que es exagerada teniendo en cuenta que viene de Bloomberg y que David Patterson es demócrata
New York está arruinada. Hay un montón de edificios vacíos que ya no pagan nada al ayuntamiento. Ya hicieron recortes a principios de año (y si un político recorta es porque no le queda más remedio) y a la vez subieron impuestos. Lo van a pasar mal.
Que le metan una tasas a los grandes bancos de inversión, y con lo que gana GS, en vez de retribuir ejecutivos, por lo menos que mantenga la ciudad a base de nuevos impuestos.
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