PEP, January 2011: Uncollected revenue could stop layoffs

Public Employee Press

Uncollected revenue could stop layoffs

By GREGORY N. HEIRES

DC 37 has shown the Bloomberg administration how to bring in $530 million in lost revenue - including taxes the city is doing little to collect - but instead, the mayor is moving forward with a plan to lay off thousands of municipal employees and gut public services.

The union proposal would provide the city with sufficient funds to scrap the November budget modification plan to lay off 2,000 DC 37 members by the end of June.

The union presented its plan to City Council members at a breakfast meeting at union headquarters Dec. 8 (see page 10). DC 37 Executive Director Lillian Roberts wrote Mayor Michael R. Bloomberg about the plan before he announced the midyear budget modification in November.

"It makes no sense - fiscally or morally - for the city to destroy jobs and careers when it can easily find the funds to keep our members on the payroll without increasing taxes. All they have to do is collect the taxes that are owed," Roberts said.

Union proposals

The union's recommendations include:

collecting taxes on all billboards licensed by the city and the Metropolitan Transportation Authority ($22 million);

collecting taxes on all cell phone antennas ($19 million to $27 million);

eliminating improper property tax exemptions for businesses and wealthy people who buy properties from nonprofits and religious institutions ($173 million), and

adopting a 15 percent "voluntary vendor rate reduction" program for personnel and technical services contracts ($316 million).

In December, the city announced a plan to crack down on scofflaws who owe $700 million for parking violations in order to help close its $3.3 billion budget gap. Roberts praised the city for the aggressive collection policy as she pressed the administration to target the $540 million in outstanding revenues identified in the union proposal.

No cost to taxpayers

"Our plan wouldn't cost taxpayers a dime. The union proposal involves collecting recurring revenues, not one-shots, which means it would help the city to address its spending gap for the long haul," said DC 37 Assistant Associate Director Henry Garrido. Garrido heads the union's white paper project, which in recent years has identified numerous examples of how the city could save hundreds of millions of dollars by eliminating wasteful expenditures on contracting out.

New York City spends more than $10 billion a year on more than 19,000 outside contracts with consultants and vendors - roughly equivalent to the entire budget of Los Angeles. The union's preliminary examination of city records has found that more than 330 consultants are averaging nearly $400,000 apiece, said Garrido.

When Bloomberg released the November budget modification, Comptroller John Liu said the city should "identify and trim fat around city contracts. Agencies should question whether contracts are truly necessary and ask for reasonable cost concessions from major contractors, as the MTA has successfully done."

The union proposal on contract concessions is modeled after programs implemented in Chicago and Los Angeles and the Metropolitan Transportation Authority's 2009 negotiations that won $40 million in concessions from its contractors in New York City.

In Chicago, an executive order required contractors to make concessions. In Los Angeles, a city council resolution called for "shared sacrifice" and asked contractors for 10 percent cost reductions. As the two cities grappled with crippling budget shortfalls, the concessions saved them several hundred million dollars.

Elaborating on DC 37's plan, Garrido noted that the city has failed to collect taxes on 3,500 out of 9,000 registered cellphone antennas. Annual fees for antennas range from $7,000 to $10,000.

The city has issued permits for 7,000 billboards, but only 3,400 are registered on the tax rolls. The city is also failing to collect taxes owed by the owners of another 500 billboards on MTA property, he said.

Since Mayor Bloomberg came to office in 2002, property tax exemptions have more than doubled, from $17 billion to $40 billion, according to Dept. of Finance reports. Tax-exempt private properties have increased from 20 percent to 25 percent of the total property value in the city, according to the Daily News. The growing exemptions deprive the city of revenue and increase the tax burden on working families.

The city could also save up to $173 million by capping exemptions under a program known as the Industrial and Commercial Incentive Program, which offers business tax breaks on construction and renovation. In November, Daily News columnist Juan Gonzalez revealed that ICIP is providing tax breaks for highly profitable strip clubs.

"Clearly, the city needs to examine its policies on revenue more closely," Garrido said. "You are looking at hundreds upon hundreds of millions of dollars in revenue that it should be capturing - money that should go toward services that are vital to the quality of life and the workforce that provides them."

It is no surprise that the city is losing millions of dollars in taxes on billboards and cell phone towers, since the Dept. of Finance relies on an "honor system" that asks building owners to make voluntary payments. The agency is also shirking its responsibility to begin collecting property taxes when churches and nonprofits sell tax-exempt properties to new owners who convert them to businesses or residences for the wealthy.

Downsizing

Under Mayor Bloomberg, the DOF has reduced the ranks of its Assessors and Assistant Assessors from 200 to 110 and chopped the number of Tax Auditors from 460 to 280.

Getting rid of employees who bring in revenue is foolish, because it deprives the city of funds that could prevent layoffs and service cuts," said Roberts.

In addition to the missed revenues identified in the current DC 37 proposal, the city's uncollected taxes and outstanding fines may total as much as $2 billion, according to a 2009 Daily News investigation. These included business, hotel, sales and other corporate taxes; property taxes; fines, penalties and interest on parking tickets; and uncollected penalties for dangerous construction sites, dirty restaurants and other code violations.

In May 2010, the Public Employee Press reported that the city loses hundreds of millions of dollars in revenue every year because the Finance Dept. has downsized its staff of Assessors, scaled back site visits and switched to a substandard assessment method.

Before Bloomberg became mayor, annual site visits were legally required, but now sites are visited only every three to five years. Under Bloomberg, the DOF secretly replaced the assessment method used by cities nationwide with a simplistic system that undervalues properties in affluent areas of Manhattan.

In a major victory that demonstrated the huge savings available through reducing contracting out, City Comptroller John Liu hammered out an agreement with the Bloomberg administration in September to have union workers take over CityTime, a contracted-out payroll project that went $780 million - about 1,000 percent - over budget. The city is cutting payments from its existing contract with Science Applications International Corp. by $80 million and will end the deal by June. After June, Local 2627 members will be assigned to the project.