Ratings Firms Warn Albany Over Tax Extenders
June 27 2017 - 4:31PM
Dow Jones News
By Mara Gay
Albany lawmakers failed to approve a series of tax extenders
tied to an elusive agreement over mayoral control of public
schools, leading to stern warnings from the three major
credit-ratings firms.
Fitch Ratings, S&P Global Ratings and Moody's Investors
Service said Albany lawmakers had failed to approve a routine
measure allowing New York City to levy personal income taxes, a
critical source of revenue. That tax extender went unapproved when
lawmakers linked it to deadlocked legislation extending mayoral
control of New York City schools.
The legislature also failed to pass measures affecting tax
revenues in 53 counties and three other cities outside New York
City.
New York Gov. Andrew Cuomo has summoned Albany lawmakers back to
session to reach a deal on mayoral control. The ratings firms said
they expected the tax extenders would eventually be approved before
they were allowed to sunset in November and December. But they said
any lapse of the extenders could have a severe impact on local
governments.
If the measure allowing New York City to levy personal income
tax isn't approved by Dec. 31, when it expires, the city could lose
$2.9 billion in personal income tax revenue, Fitch said, leading to
an immediate budget gap. Moody's said Tuesday the city's personal
income tax revenue would decline by more than 60%.
Fitch said a lapse could also ultimately affect credit ratings
for New York City municipal bonds, and those of several other
cities across the state secured by personal income taxes.
"Fitch expects the extensions to ultimately be extended before
they expire, but Fitch will take any rating actions it deems
appropriate if this expectation is not met," the ratings firm said
June 23.
On Tuesday, S&P said it estimated revenues for the
Transitional Finance Authority, which funds the city's capital
projects, could decrease by 15% in fiscal year 2018 if the tax
extender is allowed to lapse. Fiscal year 2018 begins July 1 and
ends June 30 of next year.
Maria Doulis, a vice president of the Citizens Budget
Commission, a nonpartisan watchdog group, said it was unfathomable
Mr. Cuomo and lawmakers would allow the series of tax extenders to
lapse.
"The personal income tax is so essential to New York City and to
funding its operations that there is no way this won't be renewed,"
Ms. Doulis said. "We're not terribly worried about it. We think it
will be in whatever deal they come up with on mayoral control."
But Dick Dadey, executive director of the Citizens Union, a
good-government group, said it was "extraordinarily irresponsible"
for Albany lawmakers to use local taxing authority to gain
political leverage.
"It's these kind of shenanigans the legislature and governor are
able to participate in that puts the health at the state's economy
at risk," Mr. Dadey said. "It just shows how brazen our elected
officials have become in thinking they can play with taxpayer
dollars."
Write to Mara Gay at mara.gay@wsj.com
(END) Dow Jones Newswires
June 27, 2017 16:16 ET (20:16 GMT)
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