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Storm of Bad Economic News Slams N.Y.

Times Staff Writer

As the first blast of wintery weather hit Wednesday, bringing rain and slush, New Yorkers were already grappling with a different kind of gloom.

Just in time for the holidays, the city has been rocked by a blizzard of bad economic news, ranging from the biggest property tax increase in New York’s history, to stories about growing homelessness and the threat of a crippling subway shutdown.

The long-range forecast is for even chillier conditions, with the promise of more tax hikes, painful service cutbacks -- such as public schools, day care and senior centers -- and the possibility that the city’s bond rating might be downgraded.

“It sure seems like the bad old days are coming back,” said office clerk Anita Thompson, hurrying to catch a train out of town for the Thanksgiving holiday. “Everywhere you turn, there doesn’t seem to be much good news about New York.”

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For the first time in seven years, a majority of New Yorkers have a decidedly downbeat view about their city’s future, according to a Quinnipiac Poll released this week. More than 54% said they are dissatisfied with life here, and pollster Maurice Carroll, director of the survey, suggests it’s easy to understand why.

“The honeymoon is over,” he said, referring both to plunging ratings for Mayor Michael R. Bloomberg as well as the $6-billion budget deficit projected for next year. “When you combine tax increases with so much other bad economic news, people begin to get very unhappy, and the whole tone of the city can begin to change.”

New York’s fiscal problems mirror those of other cities and states, which are also struggling to plug record deficits. But the troubles plaguing the nation’s largest city are heightened by the lingering effect of last year’s terrorist attacks and the fact that 20 months ago the economic outlook was so sunny.

Under former Mayor Rudolph W. Giuliani, New York enjoyed a renaissance of economic growth, surging Wall Street profits and a plunge in the crime rate that outstripped all other big cities.

Crime is still down, but as the economy sours, so has the mood of New Yorkers who wonder if these bad times presage a return to the dark days of 1975, when the city flirted with bankruptcy.

For most residents, the most recent spate of bad news began last weekend, when Bloomberg reached a deal with the City Council to hike property taxes 18.5%. The increase will take effect Jan. 1, and it is part of a plan to help close a $1-billion budget gap in the fiscal year ending June 30. The mayor has warned that additional tax increases might follow if the city does not get help from Albany and Washington.

New York’s deficit was caused by the terrorist attacks -- which either ruined or drove many taxpaying businesses out of the city -- as well as a major downturn in the national economy and setbacks suffered by Wall Street firms, which traditionally generate fat tax revenues. Although the federal government has earmarked $20 billion in aid to New York, the money is intended mainly for the physical reconstruction of Lower Manhattan and has little to do directly with boosting the city’s fiscal condition.

To balance the budget, as required by law, Bloomberg opted for tax hikes instead of layoffs and huge reductions in programs. “New Yorkers won’t leave town due to a tax increase,” the mayor said, defending the property tax hike he once opposed. “But they will if services are cut.”

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The city can raise property taxes on its own, but the balance of Bloomberg’s bailout plan hinges on legislative proposals that may not pass. Given such uncertainty, the credit-rating agency Standard & Poor’s said it might downgrade the city’s bond rating, which would make borrowing costlier.

Bloomberg, for example, has asked legislators to reinstate a city tax on suburban commuters. Upstate officials have said that measure would be “dead on arrival.” He has asked state leaders to take over the city’s $4-billion annual share of Medicaid costs, an idea that has also been dismissed. Failing that, Bloomberg says New Yorkers may have to prepare for an increase in city income tax rates.

“No way!” said Rich O’Leary, a deliveryman fighting his way up Manhattan’s 6th Avenue on a bike. “There’s just so much pain that this city can take.”

For months, the city’s doomsday economic scenarios have seemed like abstract threats to many New Yorkers. But now that the property tax hike is real, everyday residents are beginning to feel the pain. Homeowners are looking at an average rise of $500 to $800 in annual payments; the increase could be closer to $1,000 for condominium and co-op owners, according to city statistics. Meanwhile, renters are bracing for hefty increases passed on by landlords.

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“I really didn’t expect anything like this,” said literary agent Lisa Queen, who recently purchased an expensive co-op on Manhattan’s Upper West Side, spent thousands of dollars refurbishing the unit -- and now is looking at a huge tax increase. “You make a lot of [economic] plans for your family, you plan ahead, but this tax increase is bad news for a lot of people.”

As Queen stood on Broadway, hailing a cab to take her downtown, Amereles Rosario wandered through the basement kitchen of the Church of St. Paul and St. Andrew a block away, eyeing shelves of groceries in one of the city’s largest food pantries. The West Side Campaign Against Hunger allows people like Rosario to pick out food, instead of pre-prepared bags of groceries, but the city’s stunning growth in homelessness and hunger has strained the agency’s resources.

“Some people think that, around the holidays, hunger is just a quaint part of the New York City landscape, like the Hudson River or the rocks in Central Park,” said Joel Berg, of the Coalition Against Hunger. “But this is the richest city on Earth, and the fact that so many people don’t get enough food here is an outrage.”

Last year, more than 350,000 people were turned away from New York’s estimated 1,000 kitchens and pantries for the poor, Berg said -- an increase of 45% over two years earlier. Most of the increase has come from working families teetering on the edge of homelessness as employment conditions worsen, he said.

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Rosario, a mother of two, lost her longtime baby-sitting job several months ago, and she has had to fend for her family in city shelters when she can’t stay with friends. Through a translator, she said it’s getting more difficult for her to make ends meet -- or make any long-range economic plans.

“There are a lot more of us on the streets now,” she said, referring to the city’s homeless population, which is estimated to be 37,000, an all-time high.

Rosario’s sense of gloom may soon spread to the subways and buses used by millions of New Yorkers. The Metropolitan Transportation Authority has said that a basic-fare increase from $1.50 to $2 is a virtual certainty, given the agency’s budgetary squeeze and city officials’ refusal to cut back daily services.

As if that weren’t bad enough, Transportation Workers Union representatives now speak openly of striking by Dec. 15. The mayor has warned that such a walkout would be a catastrophe.

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The idea of New York City subway and bus service disappearing 10 days before Christmas is “truly wild, it’s crazy, something that must never be allowed to happen,” said photographer Mike Castellano, standing in front of Macy’s department store on 34th Street.

As he spoke, final preparations were underway for the store’s famous Thanksgiving Day Parade, which will be broadcast live nationally this morning. The event traditionally projects an image of happy New Yorkers kicking off the holiday season, but the reality, Castellano concedes, is quite different.

“Life seemed to change here after 9/11, and it was great that people rallied together,” he said. “I’m hoping, really hoping, that we’ll come together once again.”

But rallying to plug a $6-billion budget gap may not be as easy as it was to fight back against terrorism, he added. And the city’s current economic problems are not likely to generate national sympathy as they did after the terrorist attacks.

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“This time,” Castellano said, “New York City is on its own.”


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