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The Columbia University Libraries reserve the right to refuse to accept a copying order if, in its judgement, fulfillment of the order would involve violation of the copyright law. Author: New York (N.Y.), Mayor's Central Purchasing... operative centralized purchasing in the city... Place: [New York] Date: 1915 ^5 -SZ3^%-C MASTER NEGATIVE « COLUMBIA UNIVERSITY LIBRARIES PRESERVATION DIVISION BIBLIOGRAPHIC MICROFORM TARGET ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD fiL'SINCSS 685 K48 New York {City) Mayor's central purchasing committee. Co-operative centralized purchasing in the city of New York. Eesults of a year's practical test of central pur- chasing in the mayor's departments, conducted by the Mayor's central purchasing committee. rNew York, Press of C. S. Nathan, inc.] 1915. 49 p. fold, tables, fold, diagrs. 25i"". Henry Bniere, chairman. Wr" ^^<^^)r^*<;f v|d^Partments-Eqm^^^^ and supplies. 16-1415 Library of Congress JSI234.A15P8 RESTRICTIONS ON USE: TECHNICAL MICROFORM DATA FILM SIZE: ^Jjh-i REDUCTION RATIO: ' 2 =< IMAGE PLACEMENT: lA (ha) IB IIB DATE FILMED: ( h^nS^ INITIALS: D Q> TRACKING # : FILMED BY PRESERVATION RESOURCES. BETHLEHEM. 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Little & Ives CoaqMuoar McwYoriL FOREWORD When the Sub-committee on Budget, Finance, and Hevmie was organized in December, 1926, it was agreed that before we could formulate any recommendations we must have before us certain data on the problems falling within our terms of reference. This material, the Sub-committee decided, should include: (1) a de- w m fiT City of New York; (2) memoranda on previous recommendations by committees similar to ours; and (3) in connection with the problem of new sources of revenue, an analysis of some recent important developments in European municipal finance. With the permission of the Sub-ccnnmittee I ^trusted the task ctf directing the preparation of this material to Dr. Lindsay Rogers, Professor of PubUc Law in Columbia University. Dining the siunmer and autumn months the proofs of the sur- vey of "The Finances and Financial Administration of New York Cily " were eirculated among the members and were discussed at a full meeting of the Sub-committee. Thereafter the draft rec- ommendations which follow were formulated in frequent consul- tation with a group of the members of the Committee. In the preparation of these recommendations we have had the able as- sistanee of Pntfessors Lindsay Rogers, Howard Lee McBain and Robert M. Haig, all of Columbia University, to whom the Com- mittee and I are under much obUgation. I feel confident that those who read the following pages will find therdn an adequate explanation of the delay in the formula- tion of the Sub-committee's recommendations. The matters dealt with are extremely complicated and puzzling. No ftimilftr study of New York's finances has been attempted before, and even with hdpf ul and genmyus eo5peration f nnn city officials it was not possible to arrange for an earlier publication of the report. Hbbbbbt H. LraiiAN, Chairman. ••• m MEMBERS OF THE SUB-COMMITTEE Adamson, Robert Allen, Frederic W. Ames, Edwin A. Ashforth, Albert B. Baker, Stephen Baldwin, LeRoy W. Barrett, Edw. F. Becker, C. Adelbert Blodi, Maurice Boardman, William Borgstede, John G. Bosdien, Fred. Brady, Nicholas F. Bridgman, Edward C. Bright, Lcniis Y. Childs, Richard S. Clark, Archibald D. Clarice, Lewis L. Cleveland, Grover Conroy, James H. Gourtn^, William C. ♦Crane, Clarence A. Cunningham, Frank A. Curtin, John J. DeMoti, Harry M. Egan, James F. Eisner, Mark EUiman, Douglas L. Frankel, Dr. Lee K. Frankenthaler, Alfred Fraaee, H. H. Freschi, John J. Frew, Walter E. Erost, LeRoy Galla^r, Frank A. Giannini, Attilo H. Goldfogle, Heniy M. Guinsburg, Henry A. Harris, Overton Hatch, Edward, Jr. Hirsehman, Stuart Hurd, Richard M. Ingram, A. 0. Kahn, Otto H. Kenny, Wm. F. Kieran, James M. Kingeiley, Darwin P. Koelsch, Wm. F. H. McGuire, Lawrence McTfliigblin, George V. Man, Alrick H. Metz, Herman A. MitcheU, C. Stanley Namm, Benjamin H. Oestreicher, Sylvan Page, WiUiam H. PkffBons, EdgOTtcm Potter, William C. Quigley, WiUiam F. Bamsay, Claienoe J. Ricks, Jesse J. Biordan, James J. Boulston, TlKmiaB H. Rowley, Paik A. Sabin, Charles H. Bchulti, Jo0^ Schwab, Joseph S. Seligman, Edwin R.A. Sessa, Jo0^ Shientag, Bernard L. Straus, Dorothy Williams, H. Pushae Wolknitz, Ernest Ldunan, Herbert H., Chairmm ACKNOWLEDGMENTS It is not easy to apportion credit for the various chapters of this volume. In most cases the authors were several, and, as the text now stands, after considerable editing, responsibility is some- what confused. Contributors to the different chapters were as follows: Chapter I, The Fiscal Structure, Mr. Joseph McGoldrick, of the Department of Public Law, Columbia University; Chapter II, Expenditures, Mr. McGoldrick, Dr. Luther Gulick, Lecturer on Municipal Administration, Columbia University, and Director of the Institute of Public Administration, and Mr. A. E. Buck of the staff of the Institute; Chapter III, Salaries, Mr. R. 0. Beckman, Examiner, Civil Service Commission, Cincmnati, Ohio, and Dr. Gulick; Chapter IV, Purchasing, Mr. Russell Forbes, Lecturer on Municipal Government, New York University, and ex-Secretary of the National Association of Purchasing Agents; Chapter V, Revenues, Dr. Gulick and Mr. Beckman; Chapter VI, Taxes and Assessments, Mr. McGoldrick and Dr. Gulick; Chapter VII, Debt (in part), Dr. Paul Studensky, Lecturer on Public Finance, New York University, and Chapter VIII, Subway Finance, Dr. John Dickinson, Assistant Professor of Politics, Princeton Univeraty. Appendices B, C, and D were prepared by Mr. McGoldrick; Appendk H by Mr. Ernest Willvonseder, C.P.A., New York City; Appendix J by Mr. William Watson, of the staff of the In- stitute of Public Administration; and Appendix R by Dr. Robert M. Haig, PlxxfesBor of Business Organization and Dr. Donald H. Davenport, Assistant Professor of Business Statistics, of Columbia University. The Sub-committee also had before it memoranda (not published here) relating to recent developments of municipal finance in foreign countries. These were pr^>ared by Dr. George Bielahowsky , and by Miss Sarah Greer, of the staff of the Institute rt's conehisioius. The first draft of this Report was in galley proof for three months, and revised proofs were subject to correction for four Acknowledgments months before they were paged. Before the Report was ready for pubUcation the figures of the 1928 Budget were available. It was not considered possible, however, to substitute them for the 1927 figures, except in cases where there have been changes of procedure. The 1927 figures are just as forcible in illustrating the matters to which the Report calls attention. The proofs were submitted to all of the gentlemen mentioned above and many corrections and suggestions were received. Mr. Maclnnes was good enough to have his staff check all the figures so far as they were comparable to the figures i^pearing in Comptrollers' Reports. Especially valuable, homever, were the painstaking criticisms of Mr. Thomas P. Smith, Jr., who gave imstintingly of his time and who made available to the staff of the Sub-committee his exceptional knowledge of the city's fiscal structure. This prolonged and meticulous serutiny by many persons has probably not eliminated all errors, but it is reasonable to hope that it has kept them from being numerous. Lindsay Rogers. Columbia Universily, April 1, 1928. TABLE OF CONTENTS L RECOMMENDATIONS A. The Budqbt Problem PACU Change of the Fiscal Yeab The Mayor's Responsibility for the Budget Proposal xvi Content and Form of the Budget xix Revenue Items Departmental Totals Form of the Budget Terms and Conditions of the Budget xxiii Accruals jodv Reduction of Special Revenue Bonds xxiv Snow Removal xjdv Claims and Judgments xxv FiBB Department Relief Fund ....... jocvi Transit Commission , . xxvi Board of TRANSPiMirrATiON . . xacvi Armory Board xxvii Voting Machines. xxvii Capital Outlay Programme xxviii AcQinsmoNs of Land xziz Salaries xxxi Purchasing xxxii Property Accountability xxxiii • X Table of Contbmib B. The Revenue Psobleii Probable Future Financial Needs zndy EamiATB Based on Recent Budget Growth . . . xxxiv Public Improvements Excluding Subwat&— Budget Effect „__» XjuuX Subway Pinancb— Budget Effect ^1 Probable Future Coubse of Assessed Valuations . . xliii Adequacy of the Property Tax to Solve the Revenue Prob- ^ xly Possible Additional Sources of Revenue j General Considerations j The Real Estate Tax lii The Direct State Tax on Real Estate .... m ^^■ciAL Assessments The Pricing of City Services |yj| llX Gasoline Tax ^ Tax on Unincorporated Business and Aboution of Personal Property Tax The Proposal for a Tax on Out-of-Town Visitors . bdi Readjustment op Local Share in Various State-wide Taxes • . . . . i •• 1X11 Ttm Assessment op Real Estate Sepabatb Tax Bills fob Education ....... ixviii Tbe Constitutional Ten Per Cent. Debt Limit ... box Table of Contents xi n. REPORT CHAPTEB L The Fiscal Stbuctubb of New York Cnr ... l II. The Planning of New York City's Expenditures . 37 nr. New York Cnr's Expenditubes for Salaries . . 76 rV. New York City's Purchasing Agencies and Methods 103 V. The Revenues of New York Cmr i3x VI. The Assessment of Property for Taxation and Spe- cial Assessments 168 Vn. New York City's Debt Policies 135 VIIL Subway Finance 222 APPENDICES APPENDIX A. Bbdbf Financial Statement of New York City, 1926 . 248 B. Growth op New York City's Budget, 1838-1927 . . 256 Tax Budget Appbopbiations. Selected years 1915- 1«27 257 D. Depabtmbmtal Appbopbiations, New Yobk, 1926 . . 260 E. Terms and Conditions, Budget fob 1927 .... 264 F. Mandatory PoimoNS of the Budget 271 G. Work Programme Budget— 1914 Experiment . . . 272 H. Financial Requirements OF THE City OF New York for Pbbmanent Improvements as of January 2, 1927 . 279 I. Digest of Official and Unofficial Recommendahonb Rxlatino to the Bxtdgetary Procedure op New York City 290 J. Cash Receiptb of the City of New York, fob the TEARS 1915, 1918, 1921, 1924, 1925, 1926 .... 295 K Detailed Classification of Sources of Receipts of New York City L. Licenses and Permits in New York City .... 319 xii Table of Contents M. Digest op Official and Unofficial Reports since 1905, Relating to Revenues of New York Cnr . 326 N. FuNBBD Indebtedness and Assessed Valuations op Real Estate of the City of New York from 1830 TO 1927 336 O. Constitutional Debt and Tax Limits Imposed on Cities in New York State 339 P. Calcui^ation of the Debt-Incurring Power . . . 342 Q. Comparative Tables of the Finances of the Ten Laboest Cmss in the United ^ates 344 R. Future Course of Assessed Valuations . . . • 348 S. A Selected Biblioobapht 352 I. RECOMMENDATIONS A. THE BUDGET PROBLEM A segregated budget allocating a half billion dollars in thou- sands of Unes covering several hundred pages is a formidable document. This is inevitable. It is nevertheless the only photo- graph of the city's activities as a whole that is ever struck. It ouf^t, thmfore, to be as realistic and as complete a picture as possible. It certainly can be made more realistic and complete than it is. The elected officials who adopt the budget seldom have any expert personal knowledge of the city's finances. They need all the information they can get. The public also needs all possible information. Nobody imagines that the budget document, what- ever its form and content, will be popularly consumed. But it ought to contain all the information that is required for intdli- gent press comment upon its salient features. It should not be a documfflit the witire inwardness of which is intelhgible to only a few experienced budgetary ferrets. Such it is at present. Before considering, however, specific changes in the form and content of the budget your Committee reconmiends first a change in the date of the fiscal year, and second a relocation of respon- sibility for the preparation and presentation of the budget. Change op the Fiscal Ysab The fiscal year is now identical with the calendar year. As a result the detailed work of preparing and examining the depart- mental estimates falls in the summer months — the period of vaca- tions. This is highly mconvenient. The city's fiscal year, like that of the national and state governments, should run from July first to June thirtieth. The budget dates should be as follows: February 1— Last date for filing departmental estimates with the Dhwtor of the Budget. If the estimate of any de- partment is not filed by this date the appropriation of the pre- xiii xhr New York City's Finances and ceding year, if and as modified, shall be taken as the estimate for that departm^t. March 1— Last date (as at present) for the Board of Taxes and Assessments to certify the assessment rolls to the Board of Aldermen. Last date also for the Comptroller to file his estimates of the several revenues which go into the General Fund. March 15— Last date for filing supplonentary or mandatory departmental estimates. The practice of submittmg these during ahnost the entire period of budget-making should be abolished. April 1— Date ertne8S, the detailed knowledge of the city's financial oper- aticms and upon the courage of the Director. Needless to say, it would also depend in large measure upon and be assured by the skill and competence of the staff which would be tranrferred to his Department from the office (rf the Secretary of the Board of Estimate. Content and Form of the Budget For purposes of clarity the term "Mayor^s Budget^' is here used to designate the budget document which it is recommended shall be submitted by the Mayor to the Board of Estimate on April 1. The term "Proposed Budget'' is used to denote the same document with the alterations that have been made by the Board of Estimate prior to April 20, after which no items may be mcreased. The term "Budget^' refers to the document that is finally adopted by the Board of Estunate on or before April 30. Revenue I ferns.— When the budget is under public consideration by the Board of Estunate it is highly desirable, not to say indis- pensable, that estunates of probable revenues should be available, both to the Board and to the pubUc. The Mayor's Budget! therefore, should contain: (1) The Comptroller's estimate of revenues of the General Fund showing the source of each revenue and, in paraUel <»lumns, a comparison with the revenues of several preceding years. It was formerly the practice of the ComptroUer to sub- noat these estimates showing this comparison. The practice oiould be restored and made mandatory upon the Comptroller. XX New Yobk City's Financbs and In this connection your Ck>mmittee recommends that all special revenues, except such as are earmarked for rinking funds, should be abolished. Such revenues, for example, as the water revenues, bridge revenues, antitoxin fund, etc., should be converted into the Greneral Fund. From the viewpoint of budget-making it would also be advantageous to cover into this fund the state subvention for education. It is doubtful, how- ever, whether the legislature could be induced to enact a law to that end. It would certainly meet with considerable oppo- sition. (2) A statement of the amount which would have to be col- lected in taxes to meet the requirements of the Mayor's Budget. (3) A statement of the assessed valuations as finally fixed by the Board of Taxes and Assessments and confirmed by the Board of Aldennen in March. (4) A computation of the tax rates for the several boroughs based upon these figures. At the time of printing of the proposed budget for the taqiay- m' hearings on and after April 20, items two and four should be revised so as to account for the alterations made by the Board of Estimate. Departmental Totals. — ^In connection with the appropriations hr tibe several departments there are certain items properly dhargeable to the departments which ought to be indicated if we are to have anything like a true picture of the financial allowances that are made. These are: Debt Service charges; Eent charges; and Corporate Stock allowances. In the present budget the appropriatiartment. This diould be done by using Financial Administration: EficoMMBNDATiONB xxi the code niunber of the Debt Service item followed by the key letter "D" meaning distributed, together with the proper amount. This would not mean that this amount was actually appropriated at this point in the budget. It would simply indicate what por- tion of the amount that is appropriated under Debt Service be- longs to that d^mrtment. F^isely the same plan should be fol- lowed in respect of appropriations for Rent. For example, under the appropriations for Personal Service and Other Than Personal Service for the Department of Water Supply, Gas and Electricity there would fall such items as tiiese: 3005D Debt Service, Permanwit Debt Charges $12,665,168.00 d022D Debt Sa^ce, Special Revenue Bonds . 122,000.00 3037D Bent 58,620.00 Distributed Amounts— Total $12,845,788.00 The Corporate Stock allowance to the departments should also be indicated as hereinafter explained. The departmental total would then consist of three main items: (1) Tax levy allowance; (2) Distributed amounts; (3) Corporate Stock allowance. If the special revenue funds are not abolished as above recom- mended there would be for some d^artments, in addition to these items, an item indicating the special revenue allowance. Form of the Budget— Your Committee recommends that the budget document, from the time of its presentation by the Mayor to its final adoption, be divided into three parta. Part I diould consist of the code items appropriated, each line canying a lump sum appropriation. Part II should consist of the schedules in support of these code items. Lump sum appropriations without supporting schedules should be absolutdy prohibited, with the exertion of contingent funds to be expended with the approval of the Mayor. All appropriations should by law be required to be spent in accordance with the supporting schedules. Part III should be the Capital Outlay Programme hereinafter described. In the matter of Pmonal Service schedules the budget is xxii New Yobk City's Finances and already sufficiently detailed. In the matter of Other Than Per- sonal Service appropriations there should be additional itemiza- tion. To illustrate: Code 2209 in the budget for 1928 carries an appropriation of $85,400 for Motor Vehicles and Equipment in the Department of Water Supply, Gas and Electricity. This item should have a supporting schedule which should also indicate re- plaoement itons. For example, as followd: 2209 Motor Vehicles and Equipment General $15,880 Automobile, Touring (X) 1,700 Automobile, Sedan, 6 at $1260 (5X) 7^ Automobile, Runabout, 5 at $720 (X) 3,600 Trucks— 1 Ton, 18 at $720 (6X) 12,960 TrudB»— 1 T«i, 9 at $850 7,650 Trucks— 2 Ton, 12 at $3000 36,000 (X) — A replacement. $124,180.00 Recommended BT MaTOB $85,400.00 If, after the adoption of the budget, the department wishes ' ' for valid reasons to expend this money somewhat differently, the Director of the Budget should be empowered to authorize a i change, subject to approval by the Board of Estimate. The present form of the budget document that is used by the Board of Estimate while the budget is in the making need not be described here; but it is far from satisfactory. It is too difficult to follow comparatively. Your Committee suggests that the Mayor's Budget be set up in the following columns: (1) Appropriations for the previous fiscal year as modified. (2) Expeiditures for the previous fiscal year. (3) Appropriations for the current fiscal year. (4) Appropriations for the current fiscal year as modified to I March 1 or some other practical date. (5) Code number and title of appropriation. I Financial Administration: Rbcommendationb CTiii (6) Departm^tal request for the ensuing year. (7) Mayor's recommendation for the ensuing year. The proposed budget as fixed by the Board of Estimate on April 20 should contain an eighth colmnn as follows: (8) Board of Estimate's recommendatiim for the ensuing year. When finally adopted by the Board of Estimate columns 1, 2, 3, 4, 6, and 7 would be eliminated, leaving only columns 5 and 8. During the period of consideration by the Board the title of the appropriation would be near the center of the page with pre- vious figures on the Mi hand side and proposed figures on the right hand. If the budget document is set up in this form it is manifest that a comparison of present proposals with previous figures can be made at a glance. The reason for columns 1 and 2 is that they show the final figures for an entire fiscal year; the picture is com- plete. It is obviously impossible to present a complete picture for the current year. The amounts appropriated do not tell ihe whole story. This set-up of the budget document should be followed not only in Part I but also in Part II containing the fine-by-line sup- porting schedules. In the Personal Service items of these sched- ules some difficulty will be ^countered in presenting this line- by-line comparison where modifications have been made in the previous or current budget or changes are proposed in the new budget that affect the number and titles of positions. Your Com- mittee believes, however, that the Budget Director and his staff can in the course of time mm out this difficulty by the use of appropriate devices. If the fiscal year is changed as herein recommended there will also be difficulties m the transitional half year and in the first new fiscal year as to the figures m colmnns 1 to 4 and m the second new fiscal year as to the figures in columns 1 and 2. Such difficulties are not, it is beheved, insurmountable. They are in any event only temporary. Terms and CandiHana of the Budget.— The terms and condi- tions of the budget are a series of descriptive requirements which xxiy Nbw York City's Financss and tiie Board of Estimate lays down. The departments must ob- serve these requirements in making their expenditures under the authorized appropriations. These terms and conditions are not, however, binding upon the Board of Estimate. They should be made so by law. Moreover, the terms and conditions of the budget shmdd be completely revised. Accruals Savings in Personal Service appropriations which result from vacancies in office or from the filling of vacancies by appointments at a lower salary scale than that provided for in the budget, are in New York budgetary parlance known as accruals. In all of the departments employing a large personnel such accruals should be estimated and deducted from the departmental appropriation in the budget. It should be provided by law that all undeducted accruids should automatically go into the Tax and Appropriation DdSiciency and Surplus Account. The practice of - traiuif erring such amounts to be used for purposes not contemplated by the budget nor considered at the time of its making should be pro- hibited. Reduction of Special Revenxte Bonds Special revenue bonds are now issued for certain ipedfie pur- poses under authorization of Section 188 of the Charter as well as under other state laws. There is no question that the need for the issue of these bonds can be reduced. Snow Renmal. — ^Prior to the budget of 1928 snow removal penses have been met wholly by the UBue of special revenue bonds. In the budget of that year there is incorporated an item of $1,000,000 for snow removal and an item of $407,400 for snow removal equipm^t. The first item was based upon no kind of eslamate. Your Committee recommends that the budget in- clude an appropriation for snow removal based iQK>n an average of expenditures for this purpose over a number of years preceding. It should be strictly required, however, that the amount appro- priated should be used for actual snow removal and not for the Financial AnmrnsTRATiON: Rboommendations xxv purchase of equipment. If any equipment is needed, an appro- priation for this purpose should appear in the budget. It should also be rigidly provided that any balance in this appropriation should revert to the Tax and Appropriation Deficiency and Sur- plus Account. If, in the previous year, the appropriation proved insufficient and special revmue bonds were issued, the Debt Ser- vice for this purpose would be shown in connection with the new appropriation, as above indicated in respect of the distribution of Debt Service generally. The change of the fiscal year would throw the expeaditiires for snow removal in any winter season completely within one fiscal year, instead of in two fiscal years as at present. * Your Committee is impressed with the need for some furth^ check upon expenditures for snow removal We therefore recom- mend that a detailed report be submitted each year to the Mayor showing the cost of snow removal on a cubic yard basis, including the cost of overhead as well as the cost of direct labor. These unit costs should also be compared with the unit costs of pre- vious years. The requir^ent of such a report, it is believed, would go far toward correcting the loose use of snow-removal funds. The report could not, of course, be submitted in time for consideration when the budget was being made. It should, how- ever, be submitted not later than June 1. 'Claiim and JudgmetUa.—Fnor to the budget of 1928 claims and judgments were also paid wholly by the issue of special revenue bonds. The budget of this year includes an appropria- tion of $1,000,000 for this purpose. Your Committee is again of the opinion that an appropriation for this purpose should be based upon an average of expenditures over a niunber of years. In this connection we call attention to the fact that the Comp- troller is authorized by law to settle all claims and judgments against the city. This is a very large power to be placed in the hands of a single official. In respect of claims exceeding five thousand dollars the Comptroller should at least be required by law to publish in the City Record that he has such a claim under consideration. This notice should be published not less than ten days prior to the actual payment of the claiin. zxvi Nsw York City's Finances and Fvre Department Relief Fund. — ^An appropriation for the Fiie DqMurtment Relief Fund should be made on the same basis as the appropriations above proposed for snow removal and claims and judgments. Transit Commission. — The state pays the entire expenses of the Public Service Commission which performs for the rest ct the state functicms similar to those of the Transit Commission in the City of New York. Under the Pubhc Service Commission Law the Transit Commission may requisition the city for appropri^ tions at any time within its own choosing and have its d^nands met by the issue of special revenue bonds. There is in this ar- rangement not only discrimination against the city as compared with the rest of the state but also a quite unjustifiable imposition upon the city in respect of the manner in which it is required to meet the eaqienditures of this CcHninis8i0n. If the eHy is required to meet these expenses the Conmiission should certainly be re- quired to submit its detailed estimates at the regular time of budget-making and have them considered by the Mayor and the Board of Estimate and adopted as are other appropriations. The <^mations of the Transit Ccmmission are surely no more in the nature of state functions than are the operations of the De- partment of Education. It would be just as logical to require the city to make a lump sum appropriation in any amount demanded by the D^mrtment of Education and to meet the demand by the issue of special revenue bonds as it is to vest this unlimited finan- cial independence in the Transit Commission. In all fairness the legislature should be asked to amend the PubHc Service Com- mission Law so as to put the appropiiatiiKis for the Transit Ccnnmission either on the state budget or on the same basis as other city appropriations. Board of Transportation. — The Public Service Conmiission Law also apparentiy permits the city to issue special revenue bonds for the current expenses of the Board of Transportation. For some years the city has in fact been including the expenses of this Board in the tax budget. It can, of course, be plausibly argued that the expenses of this Board, which is engaged exclu- sively in subway construction, ^ould be a capitid charge against Financial Ahminibtbation: Recommendations zxvii the new subways and should therefore be met by the issue of corporate stock. Any proposal to defray these expenses out of corporate stock is not likely at the present time to meet with much consideration. Certainly, however, the expenaea of the Board diould be met either out of corporate stock or out of tax appropriations. The provision of the law, which apparently per- mits the issuance of special revenue bonds for this purpose, should be amended. Armory Board. — ^The provision of the law which has been con- strued to permit the issuance of special revenue bonds for the Armory Board should be amended so as to prohibit this. Voting Machines, — The purchase of voting machines for the entire city will probably be completed in 1928. As tiie law stands q>eeial revenue bonds may be issued for this purpose. This may have been advisable at the time of the enactment of the law. It should, however, now be amended. The purchase of replace- ments or of additional machines in the future should be met by appropriations in the tax budget. If these proposals that the annual tax budget shall include items for the expenses of Snow Removal, Claims and Judgments, Fire Department Relief Fund, Transit Commission, Board of Transportation, Armory Board, and Voting Machines becarried out, the necessity for the issuance of special revenue bonds would be considerably diminished. Such bonds would still be required for certain specific emergencies such as more-than^avmige snow removal, more-than-average claims and judgments, more-than- average needs of the Fire Department Relief Fund, the condem- nation of unsafe buildings, the payment of the expenses of officers who successfully defend themselves against removal, and unfore- seen expenses due to contagious diseases or epidemics. In addition to these specifically named purposes the Charter also authorizes the issue of special revenue bonds not in excess of two million dollars for general and presumably unforeseen pur- poses upon a concurrent vote of the Board of Estimate and three- fourths of the Board of Aldamen. Your Committee is of the opinion that this amount should be increased to three million dollars in order to give some additional elasticity. This is espe- r xxviii New York City's Finances and cially recommended in view of the above proposal that the transfer erf accruab be abolished. The issuance of special reveaue bonds firatioii of the exemptions granted under the emergency housing laws will add more than one billion ddlan of now exm^t property to the tax roll of 1932." * The figures of Table III give the assessed value and the full value of real estate in New York from 1898 to 1928. These figures diow that in recent years aBseesments have been incfeasmg at an unprecedented rate. The main cause for this is almost certainly due to extensive new construction attributable to the undersupply of buildings during the years of the war. They show also that assessment increases have been due more largely to building than to land values. In 1905 land values made up approximatdy three-fourths of the assessment rolls. Today they are slightly less than one-half. The question arises whether the abnormid stimulus to building tibat f dlowed the starved years of the war is about to dis- appear. It is true that for the last eight years^ (1921 to 1928) the average annual increment has been approximately 900 miUions. In the preceding seven years (1914 to 1920) the average increment was only 90 millions a year. In the more normal period antedating tibe war (1907 to 1913) assessments showed an average increase of 325 miUions per year. Increments of over 800 milUons have been recorded only six times since the date of c of a 2.66 Tax Raib and ths Amounts Necessabt to Bii Eaisbd Fbom Revenues Other Than ths Gbnbsal Pbofbbtt Tax if thb TmomiBm Subway Plan is Adopted. (Millions) (1) (2) (3) (4) (5) (6) (7\ (8) (9) Budget Budget Required Required to Meet to Meet Assessed Tax Tax Addi- Total General Resulting Subway ReBuItlnc Value of Rate Levied tional Budget Expenses Surplus Pro- General Assumed on Income Possible of or gramme Deficit Property to be General from the Under 1928 Deficit and (5)- (8) (See Fixed Property General These Level (6)-(6) Annual Schedule at a)x(2) Fund Condi- and Sub- Increase A) aM% (Esti- tions way Fko- of 15 mated)* <3)-K4) •nunme (Seheduk Million in General B) Expenses (Schedule C) 1928 $16,154 2.66 $429.7 $82.8 $512.5 $512.5 $ .0 $512.5 $ .0 1929 16,828 2.66 447.6 85.8 533.4 527.5 5.9' 542.5 9.1** 1930 17,501 2.66 465.5 88.8 554.3 541.5 12.S* 571.5 17.2** 1931 18,175 2.66 483.5 91.8 575.3 554.5 20.8* 599.5 24.2* 1932 19,848 2.66 £28.0 94.8 622.8 573.5 49.3* 633.5 TABLE V BRntAlSS OF THE YlELD OP A 2.75 TaX RaTE AfTER 1928 AND THE AMOUNTS NeCBS- SART TO Be Raised From Revenues Other Than thb Gsneral Pbopebtt Tax if Pboposed Subway Plan is Adopted. (Millions) (1) Value of General Property (See Sdiedule A) (2) Tax Rate Assumed to Re- main Constant at 2.7fi% (3) Tax Levied on General Property (l)x(2) (4) Addi- tional Income for the General Fund (Esti- mated)* (5) Total Budget Possible Under These Condi- tions (3)-f(4) (6) Budget Reauired to Meet General Expenses of 1928 Level and Sub- way Pro- gramme (See Schedule B) (7) Resulting Surplus or Deficit (5)-(6) (8) Budget Required to Meet Subway Pro- gramme and Annual of 15 Million in General Expenses (Schedule C) (9) Resulting Surplus or Deficit (5)-(8) 1928 $16,154 2.66 $429.7 $82.8 $512.5 $512.5 $ .0 $512.5 $ .0 1929 16,828 2.75 462.8 85.8 548.6 527.5 21.1* 542.5 6.1* 1930 17,501 2.75 481.3 88.8 570.1 541.5 28.6* 571.5 1.4" 1931 18,175 2.75 499.8 91.8 591.6 554.5 37.1* 599.5 7.9" 1932 19,848 2.75 545.8 94.8 640.6 573.5 67.1* 633.5 7.1* a. Estimated conservatively. 8. Surplus avaflafale for other puiposes. d Deficits fdiidi would have to be made up by revenues fnm other souroes. Financial ADiamsTRATioN: Recommendations xlvii SCHEDULE A Td MaxBOD0 or Bbtdiating the Value of Taxable Pbopbbty in New Yorx Cnr 1928-1932 (BitiiiirtesofliM^ TnamporttLUon.) (Millions) Assessed Value of Real Estate in N. Y. C. in 1927 « (2) (3) (4) • (5) (8) V^'^T J^^<"■eases m Assessment of Real Estate over 1927 Level on Basis of FiguKs Conmiled by Boitd of Tnuosport«tioa< (7) Assessed Value of Personal Property* CB) Total Assessed Value of Taxable Property 1928 1029 i«ao mi 1883 1928 $14,540 $1306 $308 $16,154 1929 14,540 1306 $673.5 308 16,828 1930 14,540 1306 673.5 $673.5 308 17,501 1931 14,540 1306 673.5 673.5 1673.5 308 18,175 1932 14^ 1306 673.5 673.5 673.5 $1,673.5* 306 19,848 a. bdndiog q)e(aal franehisn. b. Including I billion tar new baiMiiigs exempt untU 1932 .-1.^° the Board of Transportation estimated that the ineieM in real CBtat. w'^'Ih ".^ T.r'^r.^ " 1932 when the n^Z^^^ ^l^^^ ^A To^"*"^ the incremeSTf^^ STl^i^lf'Vli^-i'^ ass^ent figure was 1306 millions greater than in the 1927 asseasmmt tbs ASenoM between the estimated 800 miffions and 1306 T^"J£Sli°"**T^ four ^ to «d«oe the -noXof tl^ i^'^t ilviii New Yobk Citt's FmANcn and SCHEEILJLE B SBnMATED BxnxsKTS Rbquibxd to Mkst 1028 Lbyxl ofGsnuul Eobmbm Plus SOBWAT FlKMOUMHK OF THX BoABD OF TSANSF 1928 Budget Level Exduaiye of New Subway Items' (2) (3) (4) (5) (•) Annual IncreMes Above 1928 Levd to Meet Subway Prosnunme lEtaggerted in the 1027 ReiMrt of the Boeid of TramqxHrtation* (7) Total Bndf- et if Sub- way Expenses only were Allowed to Increase Above 1928 Level as Indieated 1028 1930 1080 1931 1932 Totia 1928 $497.5 15 15 $512.5 1929 497.5 15 15 30 627.5 1930 497.5 15 15 14 44 541.5 1Q31 497.5 15 15 14 13 57 554.5 1982 ^.5 15 15 14 13 19 76 573.5 a. Arrived at by subtracting from the 512.5 millioiie, tlie 13 million item and the 2 million appropriation for interest on new subway paper. 6. The 2 million for 1928 is the interest item (see footnote a). The other figures are those neceaaary should the 1927 programme of the Board of Transportation be put into effect* SCHEDULE C EsTiMATBn Budgets to Meet Requirements of an Annual Increase of 15 Mil- lions IN THE Amount Spent fob Gbnesal Pubposbs in Addition to Thoss NbBDBD lOS TBB PK»08BD SDBWAT PbOCOIAIIMB of Tim BOABD CXF TbANB- KMTATION. (Millions) ToiM from Schedule B Assumed Bud- get Required for New Subways but Allowing for no Otiaer Increased E]q>enditure8 (2) (3) (4) (5) At^wiinl Increases Above 1928 Level to Meet Minimum Estimate of Increases in Qmeral Eipenw («) Total Estimated Budget loao 1981 1988 1928 $512.5 $512.5 1929 527.5 15 542.5 1930 541.5 15 15 571.5 1931 554.5 15 15 15 599.5 1932 573.5 15 15 15 15 633.5 Financial ADiomsmATioN: Recommendations xlix Table IV assumeB: (1) appropriations to finance subway construction equal to the sums called for by the plan of the Boaiti of Transportatioii (see Schedule B). (2) a minimum increase in the tax budget for general ex- penses of 15 millions annually (see Schedule C). (3) increases in assessed values in accordance with the esti- mates of the Board of Transportatiim (see Schedule A). (4) a fixed tax rate of 2.66. With these assumptions the figures in Table IV show that addi- tional revenues wiU have to be found m the foUowing amounts: 1929 9.1 millions 1^ 17.2 millions 24.2 millions 1932 . 10.7 miUions Total 61.2 millions Table V contains precisely the same assumptions as Table IV, with the exception that the tax rate is figured at 2.76 in- stead of 2.66. The figures show that with this higher rate addi- tional revenues will not have to be found. Over the four years there will be a net surplus of 3.9 millions (13.2-9.3). These figures speak for themselves. If the programme of the Board of Transportation is to be carried out and if the conserva- tively estimated increase of 15 miUions a year is to be provided, a tax rate of 2.66 will be inadequate to meet revenue needs. 61.2 milhons of additional revenue must be found before 1933. Obvi- ously, therefore, either the tax rate must be forced above 2.66 or additional revenues in substantial amounts must be secured from other sources. This is the only alternative, unless the estimated mmunum annual increase of 15 millions for expenses other than subways is scaled further down. The highest tax rate ever imposed in New York City was the 1921 rate of 2.77. No doubt there would be bitter opposition to an mcrease m the tax rate above the 1928 level of 2.66. This opposition would come especiaUy from those who question the 1 Nkw Yobk Cftt's Finances and wisdom of a policy of subway financing which in eff eei amounts to defraying a large part of the cost of subway construction out of current revenues. An increase in the tax rate sufficient to meet both the programme of the Board of Transportation and the estimated increase of 15 millions for other purposes would, ATiom li importanoe of tiuMe considerations differ in each case. There is consequent y an opportunity for endless debate among persons with entirely sincere convictions. self interest on the part of those who receive speml benefits should prompt them to urge that the cost of the functions which give rise to the benefits be met by the adoption of a taxation rather than a price policy. (3) There are serious technical difficulties in' tracing special ^^^f'^'^^ There is probably no governmental ftinctKm that doeq not carry with it some benefits of a general nature as contrasted with special benefits. Moreover, withmany public services and improvements the total benefit, general and specific, is largely in excess of the cost. In such cases how the cost should be apportioned is a matter for consideration. Again in casw where the unprovements affect land values the fairness of attaching costs directly to the land depends largely upon the past pohcy of the community with respect to such charges. If the people of a community have come to expect and count upon cha^ of a certam type, such charges tend to become absorbed m the determination of the seUing value of the knd. Tlius a programme which would involve no distiesB in one dty mieht work out extremdy unfauiy in another. (4) The various repercussive effects of the lack of a uniform and definite pohcy m financing public services must be taken into ac count. A city which has been financing a given function by mea^ of a general tax and which changes its policy to that of pncmg virtuaUy unpoees a penalty upon those who must now a«sept a pnce basis. For example: where a city has through general taxes been paying the expense of bridges serving a certi^ section of the city, the adoption of a poOey of tolls for new bridges sei^a different section of the city may mvolve injustice to those yfbo are called upon to pay tolls to use the new bridges The juers of the new bridges have paid taxes on the old bridges, but the users of the old bridges will not pay taxes on the new bridges (6) Then IS a general tendency on the part of elected oflScials to Choose taxes rather than prices because it is nearly always po- tticaUy expedient to refrain from formulating proposi for Hi New York City's Finances and services and improvments in definite financial f onn. If the cost is brought h<»ne to the public in the fonn of a price, theie is apt to be much greater opposition to the improvement. (6) There is a vague but unsound conviction that taxes come from some vast economic surplus from which can be tapped al- most without limit the money needed to solve any public financial problem. It is unnecessary to labor this point, but it should be recognized that, as a general proposition, the money which the city collects and uses for pubUc purposes is diverted from the pod^ets of private individuals who, if not for the tax, would be in a position to utilize it otherwise. The scope of public expenditures can be determined in a soimd manner only when one has brought into the picture the "sacrifice cosf of the taxpayer. (7) Finally, as pubhc eiqpenditures increase and particularly in times €t finmdal pressure, the tendeiusy appears to be to devdop revenues which lie toward the price end of the scale rather than toward the tax end. In general the Committee feels that this is a sound tendency. Although these g^eral ecmsideratians cannot be precisely ap- praised, they are neverthdess of obvious importance in ooimeetion with any quest for new sources of revenue. The Real-Estate Tax, — Our first consideration is whether it is possible to increase the productivity of the real-estate tax. The general property tax, which is really almost a inue real-estate tax, is now responsible for about 80 per cent, of the total tax revenue of the city. Within the constitutional two per cent, limit it is possible to vary the rate with the needs for revenue. During the pmod 1914-1921 this rate on real estate increased rapidly — irom 1.78 to 2.77. During the past few years it has declined percepti- bly—to 2.66 for 1927 and 1928. This history gives little founda- tion for the conception of a fixed and invariable charge which the city may fairly make upon real-estate values. There is, howev^, in the community a general conviction that the real-estate tax is, to a very considerable extent at least, shifted to rent-payers, and that, in the case of home-owners, the burden of the tax with assessments at their present level has become so great that it is inadvisable to increase it. Financial Adionibtration: RBooMifaNDATiONB liii It senns searody possible that an increase in the rate on real estate above 2.75 would be attempted. Indeed, as has been said, it would be surprising if it should prove possible to advance the rate beyond 2.66. Furthermore, it must be remanbored that a housing policy of emnptmg new buildings has already been ad<^ted, and the poHcy of virtual exemption from the land tax in case of certain projects is now contemplated. It has not seemed wise to the Committee to recommend an mcrease in the rate of the real-estate tax to the point that would be required to meet probable needs. It should be said, however, that, since the proposed contribu- tions for subway purposes are to be inserted m the budget in the form of Debt Service, the Committee sees no lilralihood that the two per cent, constitutional limitation upon the tax rate will prove a smous embarrassment. The Committee has also made calcu- lations which indicate that with the additional authorization — ' O N w S ^ fH 1-1 + + 1 + 1 i-( 05 CO »0 CO CO CO Division of Yieli Shark of Localitii Other Local Units 1 ++ 1 1 00 lO CO lO • • • • • ^ «o «D OP a» + 1 1 + + CO CO a>^^ CO ^ ^ 1 ++ 1 05 O O 00 ^ CO CO ^ ^ New York City 10.0+ 12.4- 12.0+ 15.0+ 18.2- 1 1 1 1 + C5 CO CO CO CO "l ++++ CO 0> i-< ^ tH C9 C4 C4 Share of State •e •« •e + 1 + + 21.0 15.1- 22.3- 25.0+ 24.2- 1 ++ 1 1 CO 0) o 0) CO 0» <^ 00 00 £ >* Oi Oi o> Oi a ^ ^ ^ «H ^ 1922 19!23 1924 1925 1926 1927 M CO Tt< »0 CO CJ (N ^ S d a Oi Oi o> iH fH v-4 iH fH Basis for Division of Yield Localities }4 of re- mainder ac- cording to as- sessed valua- tions of real estate ^ according to location of tangible per- sonal proper- ty of corpora- tions taxed }4 of yield according to county of reg- istration 1 $250,000 for refunds plus }4 of remain- der ^ of yield plus all inter- est and penal- ties M of yield Title of Tax Personal income tax (Tax law Art. 16) Franchise tax on income of busi- ness corporations (Tax law Art. 9- A) 1 Motor vehicle taxes and hcenses of operators and chauffeurs (High- way law Arts. 11; 11-A, Sec. 282) i FiNANCUi. Administration: Recommendations Ixv 1 + 1 + Oi CO O 05 o CO O) O CSI CO 1-H »H »H 0 0.42 0.46- 0.61- 0.72+ 0 0.03 0.03 0.03- 0.03+ 81.0 90.2 95.5 111.7+ 120.3+ + 1 +++ ^ 00 O lO 1 CO ^ U3 o CO 1 + + _ ^ CO o CO O O 0) CO CO • • • o o o 1 < 1 1 1 ao to CO 1 £r ^ 1-H *H I O O O O O 1 • • « 1 ooo + 1 + OS 1-1 ts. ,H i-f CO o OS CO CO TJ4 1^4 lO + 11 + 1 1-1 O Tt< 00 1 »H 1-i csi f-i 12.1 14.8+ 16.5+ 19.8- 20.5- +++ 1 + 1 CO CO 1-1 r^ 1 csi csi CO 1^ O O fl^ 1 o o »- + + + 1 o CO o »-» eo 05 1-H Tfi Oi CO '-< CM CM CM CO 1 + + + 1 00 O Tjt »o 1 CO ^ «o «b CO 0 0.42 0.23- 0.30+ 0.36+ 0.03 0.015- 0.015- 0.016- O C4 K to 04 05 Ttt Tj^ tf) ^ lO CO CO . ^ ^ £J ^ Oi Oi Oi Oi Oi Oi «-4 1-4 f-4 «ir4 tpxl 1-1 CV| CO »C CO 1"* ^ *H ^ 11 14 of yield ac- cording to lo- cation of prop- erty mort- gaged H of yield ac- cording to county in which col- lected H of yield ac- cording to county in which col- lected H of yield ) o :^ Mortgage tax (Ta.\law,Art.li; Licenses of real estate brokers and salesmen (Real property law. Art. 12-A) Licenses on bil- liard rooms (Pe- nal law. Art. 31) Total I .a CO 2 ca vements and their financing by long term borrowings, and (4) the administration of the funded debt which results from such borrowing^. The following pages will deal in cimsidmble detail with these four major aspects of the city's fiscal system. That i^ystem is administered by different officers and organs of the municipal government and can hardly be understood without some explana- ti A poflsible ezceptioii— Ma, The Finance$ cf lite Qtk$4 Km York (Golambia Uaivcraity 8todiw>--WMi publiidMd in 1914. FiNANciAi. ADMiNumumoif: Fiscal SraucTURE 3 may be fanuliar, but it seems desirable to redraw them here for the picture is so compHcated that its details are frequently for- gotten. ^ The Financial Administration of Nmw York The Board of Estimate and Apportionment The Board of Estunate and Apportionment in one sense is the upper branch of the municipal legislature.^ Primarily, however !k u has sometimes been described as the board of directow of the Municipal corporation. What- ever the proper analogy, there is no question that during the last twenty years it has gradually acquired ahnost complete contiol of the city's finances. Pi^dir?.??*^*^,^.^^ Comptroller, ftmdentof the Board of Aldermen, and the five Borough Presi- dents. The terms of all members are four years, and their eleo- tion takes place at the same time. Membership in the Boaid is ex-oiiao and the members receive the salaries attached to ZZJ^ Z^'^'^'r. '^^ "'^^^ ^^^^ ^q^al voting power The Mayor, Comptroller, and President of the Boaid of Aldermen-the three members elected by the entiie dty- i^^R^!!^,''''!' "^il ^'^^ Presidents of Manhattan ^^^^"gh Presidents of the Bronx, Queens, and Richmond have one each-a total of sixteen. All action of the Board is taken by reaolutions adopted by a ^t^^ twl "'^^ "T'T °' '^^P* '^rtab financial matters, which require twelve votes or unanimity. A quorum of l<^5%"^r,t ^""t Enabling Act passed by the state legislature in 1924 fLaw, Of 1924 c. 363) created a local, bicameral legislative body toid^ tL^w * ordinate S bmnches of M^i&i^S T? "^P^' ^- functions untanaired A, o^J^J^ ^ *^ P'^t Charter A«mbly, tKLrf of bZ!^!-! r "PP« -»«»««> He 18 as aecretaiy to the Board, secretary of the New York City Em- Retirement Imt tliis aq>eet af his work is not pertinent here. t Jf^ -^"^ V^^?' ^ ^ ^''^ «f sendee and con- tract supervision operating m connection with the Board of Estimate and ApDortiaii- ment. These bureaus were created during the Mitchel administration and were ^?T^ fu*^^ campaign of 1917. The new Board of Estimate and ApportionmS •b^ed^ two bureaus and ftdded the employees W the sfoff qI the Aecretaiy 8 New York City's Finances and the Board does not even participate in the control which the Board of Estimate has over franchiseSy pubUc improvements, md street development. Only in a few restricted cases is its approval necessary for the selection of sites for public buildings. The more important powers of the Board of Aldermen are financial, but of these the crucial ones are shared with the Board of Estimate. Tbsee powers include approval of the dty budget, the authorization of the tax levy, the issuance of Corporate Stock for a few particular purposes and emergency Special Revenue Bonds, and the establishment of grades and compensation of positions in the municipal service. With the unanimous consent of the Board of Estimate, the Board of Aldermen may release contractors from Uquidated damages. Independently, the Alder- men have power to authorize purchases without pubhc letting for amounts in excess of $1,000. Besides these financial powers, the Board has a number of minor powers of considerably 1^ significance: the naming and renaming of streets, the establishment of markets, the granting of various permits for small arms practice, the construction of vaidts, the use of streets, and the holding of parades. Tlie budget is the most important subject over which the Board has jurisdiction. It may reduce or strike out items but cannot increase them. The Charter allows twenty days for the discussion of the budget and makes elaborate provision for its adoption without the assent d the Board at tiie ea^iratkm of this period. In actual practice, the Board of Aldermen passes a $500,000,000 budget in twenty minutes. This situation is not wholly the fault of the Aldermen. The actual preparation of the budget takes place during the summer months when they are not in session. It is true that the departmental estimates are available in August, but by the time the Aldermen resume delib- erations in the fall, the budget is in too crystaUized a stage for any criticism to be effective. The Board's power to fix the tax rate has dwindled into one of uncritical assent. The Comptroller's office not only prepares the information on assessed valuations and the amoimt required to meet die city budget and the state tax, but it actually pre- Financial ADMiNisTaATioN: Fiscal Structubb 9 pares the report of the finance committee of the Board of Alder- men. The members of the committee receive printed copies of the report less than half an hour before they are expected to sign it. The Department of Finance : The Finance Department is one of the largest departments in the city's government. It employs about nine hundred people and has a payroll of $2,500,000. It is the only city department headed by an official elected by the city at large. The Comp- troller, besides being the head of this sizable establishment, is a member (with three votes) of the Board of Estimate, the Sinking Fund Commission (which may not do business without him), the Banking Conmiission, and the Board of City Record. He has numerous minor assignments. The Charter prescribes the organization of the Finance De- partment. There are three major bureaus and four separate divisions of lesser importance. The Bureau of Accountancy headed by the Chief City Accountant has two divisions which audit receipts and disbursements. Each division audits items that run well over a billion dollars a year. The Bureau must approve the accounting procedure of all city departments. The Bureau of Audit has an even more burdensome task. Its Division of Audit and Examiners keeps track of the operation and accounts of all city departments. The Inspection Division checks all goods received or contracts completed. The Central Payroll Division supervises the city's payroll which has 115,000 names and amounts to $235,000,000 annually. The Pay Division handles all other disbursements. All bills presented to the city must be accompanied by a voucher from the department concerned certifying to the ac- ceptance of the supplies or services performed. This voucher is unmediately charged against the proper appropriation or other account. The Finance Department, however, must investigate or inspect the services represented by the voucher and satisfy itself as to the correctness of the bill. It has the power to reduce the amount if it deems it excessive. Having determined 10 N£w YoBK City's Finances and the amount which it will pay, the Department then prepareB a warrant pmiitlmg tiie money to be drawn from the city treach ury. Hie warrant must be signed by the Comptroller and the Mayor or his chief clerk. The check which is part of the warrant must be signed by the Chamberlain. The department heads are required by the Charter to keep within thdr appropriations.^ The Comptrc^^ sets up appropria- tion accounts on the basis of the budget. He reduces them as vouchers or warrants are presented against them and debits and eredits them as budget traosfero are made. Cantraets are also legiBtered with the Comptroller and the accounts are accordingly encumbered. Open market orders are reported to the Comp- troller, but are not entered on the accounts. It is possible for a d^iartment to exceed its approjniation through the issue of open market orders which are le^ daims against the city provided • the appropriation has not been paid out. Merchants may thus be forced either to wait until the department secures additional funds or to file a daim with the ComplaroUer.* The Bureau of City CoUecticms has reooitly been created by merging the offices of the former Receiver of Taxes, the Collec- tor of City Revenue, and the former Collector of Assessments and Arrearo into a new post, that of City Collector. This Bureau handles praoticidly all the cash which the dty receives in the course of the year. Finally, the office of the City Cham- berlain is in legal contemplation a Bureau in Finance Depart- ment.' The Chamberlain, however, is appointed by the Mayor and the functions of his office will be considered separately. The minor branches of the ComptroUer^i extensive department * Section 1542 of the Charter provides: "It shall be the duty of the heads of all departments and of all officers of said city, and of all boards and officers charged with the duty of expending or incurring obligations payable out of the moneys raised by tax in said city, or in any of counties contained within its territorial Umits, so to regulate such expenditures for any purpose or object, that the same shall not in any one year exoeed the amount i^ropriated by the Board of fistimate and Apportionment for such purpose or object; and no charge, claim or liability shall exist or arise against said city, or any of the counties contained wnthin its territorial limits, for any mm in WStm oi the amount appropri- ated for the several purposes. . . * See below, p. 116 * Charter, Section 195. Financial Administration : Fiscal Structure 11 include the Stock and Bond Division, the Bureau of Law and Adjustment, the Real Estate Division, the Division of En- gineering, the Pension Division, and the Bureau of Municipal Investigation and Statistics. Some conception of the extent and vdume of the work of these divisions may be gleaned from the fact that the Comptroller must approve all real estate pur- chases, and all market and other leases by or from the city. He has power to adjust and settle all l^al claims against the dty and he certifies all ill^l dahns to the Board of Estunate.* Notices of all law suits must be filed with the Finance Department. The Bureau of the CUy Chamberlain The City Chamberlain is appointed by the Mayor in the same manner and with the same tenure as a department head,' but his office is established as a bureau of the Finance Department.' The duties of the Chamberlam are fivefold: (1) to hold the moneys belonging to the city and to the various counties com- prised in the hmits of Greater New York; (2) to act as custodian and admmistrator of court and trust funds, generally known as equity mon^; (3) to act as fiscal agent for the Adjutant Gen- eral of the state in the distribution of military funds; (4) to act as fiscal agent for the State Board of Tax Commissioners in the collection and distribution of the mortgage tax; (5) to act as trustee of civil and criminal bafl and mechanics' hens paid on court order. The office staff is divided mto two divisions: the City Treasury Division and the Equity Division. As city tieasum, the Chamber- lain is the dty's banker and custodian of its funds. His work has come to be largely a matter of caring for bank deposits. The checkmg of warrants against appropriations is handled m prac- tice by the Fmance Department with some auditing by the r^lS^'S^'*' ^""^^"^ 261 and 246 respectively. In the case of legal claims the U)ny trolkw uwi^y pays them out of Special Revenue Bonds without any report to the BoMd of EBtmuite or any other body. Oaims thus settled have in instances •mounted to hundreds of thoimiick of ddkm; * Charter, Section 194. » Charter, Section 161, If 6. 12 New Yobk Crnr's Fimancss and Ckmunisffloner of Accounts on behalf of the Mayor.^ The Chamberlain has issued no separate published report since 1916, but the Comptroller's Report carries several statements pertaining to his work. All city revenues are received in ih» name c£ the CShamber- lain, but he is not the sole, or even the chief, receiving officer. Taxes and assessments are paid to the Bureau of City Collections of the Finance Department. Water revenues are collected by the Water Roister. Numerous license fees are received by the Department of licenses, and permit moneys are gathered in by bureaus scattered through the various departments. In a few cases these receipts are turned over directly to the Chamberlain; in most instances they are deposited to ttyd account of the city in banks selected by the Chamberiain. The Chamberlain has complete discretion as to the amount to be kept on deposit with any bank approved by the Banking Commission, of which he is a member, except that the amount may not exceed fifty per cent, of the capital and surplus of the institution. All these deposits must, according to the Charter, be subject to withdrawal on call except time deposits made with the approval of the Comptroller for six months.^ Schedule A of the ComptraUer'a Report* contains statements showing the amounts on deposit with various banks to the credit of the city and the sinking fimds. The daily balances vary considerably with the receipt of taxes and the sale or redemption of bond issues. In the course of a year the balances will run as low as S25,000,000 and as high as $125,000,000* On December 31, 1926, there was $35,265,604.88 in the various city depositories — $28,036,641 to the credit of the city treasury and $7,228,963 to the credit of sinking funds. The Banking Conmiission, consist- ing of the Mayor, Comptroller, and Chamberlain, meets each > The Commissioner of Accounts is required to make an annual examination during January or FekHruary osit8 are m practice kept m no more than half of these. The Chase National Bank is the city's clearing house bank. About half of the city's deposits are kept in this bank and all checks are drawn upon it.* All accounts bear two and one-half per cwit. interest on tl^ average daily balance which is paid at the end of the month, except that the Chase Bank pays two per cent, on the first $2,000,000 and two and one-half per cent, on all above this amount. The examination and checking of vouchere and the prepara- tion of warrants are the work of the Comptroller's oflSce. The Chamberlain does not receive the warrant until it is signed by the Comptroller and the Mayor. Attached to the warrant is a check which the Chamberlain dgns, and no city money may be drawn from the city treasury except on such warrant bearing these three signatures. The Chamberlain registers the warrants and controls their issuance in accordance with his bank balances. When the warrants are returned from the bank, they are listed by the Chamberlain and audited by the Finance Department. All these warrants aro drawn upon the Chase National Bank. Accounts with aU of the other banks are in the nature of re- serves, which the Chamberlain may, by his own check, transfer from one city depository to another, or to the Chase Bank if the money is to be paid out of the city treasury. The Finance Department, in addition to auditing the warrants paid by the Chamberlain, makes a monthly examination of the Chamber- lain's bankbooks and receives from each city depository a certifi- cate of the amount on de^t each month. The Chamberlain batances his books at the end of each week, month, and year a^ checks them with the statements received from the banks. The Chamberlam keeps about 3,000 ledger accounts showing the 1927?^!^^**'^ ^ Minutes of tbe Banking Commission, CUy Record, aih^^""^ ^^"^ ""^^ large accounts of two or more miDioiie eadi and several others over a miUion. Many of the accounts oontiined ksB than SSOlOOO and six Iteld but 110,000 (December 31, laaft). -wwan w^uuu ana six 14 New Yobk Crnr^s EWncxs and expenditures ckarged to the various departments, to bond issues, and to sinking funds. These are likewise subject to monthly audit by the Comptroller. As County Treasurer, the Chamberlain is trustee of various court funds and militaiy funds, and modyer and custodian ct cash bail.^ These funds are received and disbursed exclusively on court order. The Chamberlain is under special bond to the state for them. There are at present 15,000 of these separate trust accounts, aggre^ting $10,000,000. < The accounts and operations of time funds are not included in the ComptrMa^B Report About half of the money in these funds is in banks and the rest is invested in bonds or mortgages. The interest on these investments, of course, is not the proper^ of the citji but reverts to the proper trust account. There is some confusion in the public mind as to the utility of the Chamberlain's office. Former Chamberlain Bruere's much heralded and much misunderstood recommendation that his own office be abolished was not intended as a dnunatio gesture of economy, but as a step in the direction of sounder administrative organization. What he really urged was the inclusion of his office in the Finance Department. As the office now exists, its sole discretion relates to the distribution of de- posits. In re(q)ect of receipts and disbursements the Chamber- lain's duties are purely ministerial. The warrants are certified by the Comptroller and audited by the Conamissioner of Ac- counts. Mr. Bruere thought that the Chamberlain's duties could be better cared for by a peraiaiiipit wibflrdinate directly reqxjnsible to the Comptroller. I*^ Cmmiasiomen o/ ihe Sinking Fund The Charter provides for a board of Conunissioners of the Sinking Fund composed of the Mayor, the Comptroller, the Chamberlain, the President of the Board ol Aldemen, and the 1 Charter, Section 197. * This does not include numerous important city trust funds, e.g., the Police Pension Fund (of which the PoUce Cofnmiaaioner is trustee), the Fire Department Relief Fund, and various others. Financial AniiiNiwratATioN: Fiscal SratrcTDBB 15 S^firr°'?*,.^**^°^****°^*^^*''°dy ' The presence ^ ComptroUer is essential for the transaction of any bua- ness. These commissioners are entrusted with the admuustra- tion of all of the sinking fmids of the dty. The work is of course, of a relatively simple character. It consists largely of approvmg pohcies recommended by the ComptroUer. For ex- ample, on February 9. 1927, the Commission voted to accept three resolutions presented by the Comptroller. The first re- Med to the sale of certain aaeesmeDt bonds to the several retirement boards; another "recommended" the fixmg of four per cent, as the maximum interest on corporate stock issues to be sold to the Sinking Fund; the third dealt with the investment of «35.000,000 available cash of the sinking funds m Coiporate Stock and Serial Bonds of the city The ri^OTto^and the accompanying resolutions were ptomptiy More important than the duties pertainmg to the smkinK funds are the powers which this Board has over the city's red ertate holdings. The Commissioners may sell at auction land owned by the city except parks, wharves, and land under water or may lease land for ten years with the privilege of a ten-vea^ renewal.' The body has other ertensive powers ndatmg to bnd r^ZJ^' ^^"^ «*«»t8, the removal of structures on condemned hmd, clauns arising from such removals, tax cancella- tions for rehgious and charitable bodies, the sale of obsolete bud- phes and eqmpment, the designation of court houses and iaik and exchanges of land. ^ ' Rnt J*?*? ^- °^ ?f ""^"^ ^""^y ^ members of the Board of Estmiate Most of its functions are strictly financial and therefore involve matters and policies for which the Board rii-"^- responsible. Charter commissions and repeatedly recommended that vnese two bodies be consolidated. ^ Charter, Section 204. ^j^Craig Caam»«io«« of th. Sinkins Btod. 208 N. Y. Jtapp. 236 j^Charter.Seott«206. Tl« «u8t be umuuiwni. oaii«t to diiipo« New York City's Finances and The DiaredUjfr 0$ the Budget The office of the Director of the Budget was created in 1928. It is not a charter position but was estabUshed by mcluding the salary in the 1924 budget. The first Director was appointed in June, 1924. The office takes the place ci the q[>ecial subcom- mittee of the former Committee on Tax Budget of the Board d Estimate and Apportionment, which existed during the Mitchel administration and lapsed in 1918. That subcommittee con- sisted of a group of departmental eaqwrts repremting the mwor bers of the Board of Estimate and Apporticmmoit who composed tlie Tax Budget Committee. The pubUc hearings were held be- fore this spetAal subcommittee of staff experts. The subcommittee did not have authority over ext^isions of activities or certain salary increases. An appeal from their recommradations lay to the tax budget committee of the Board of Estimate and Ap- portionm^t itself.^ In some respects the hearings held by this subocnnmittee were more thorough than anything which now takes place. When, in 1918, this subcommittee passed out of existence, the Committee on Finance and Budget of the Board attempted to do much of the work itself. This never proved satisfactory. In 1922 the Committee on Finance and Budget was abolished, and the Committee of the Whole, with which it had been in conflict, came to function in its stead. Meanwhile the Secretary of the Board had hem assmning some of the functions of the subcom- mittee. It was in order to bring the work more eloeAy under the Mayor's control that the office of Director of the Budget was created. He now performs, in the name of the Mayor, much of the work that was formerly done by the subcommittee. » The personnel of this subcommittee in a typical year may be of some intowt M indicating its general character. In 1917, the subcommittee waa composed of: Robert B. Mclntyre, Sup^rvlsiiig Statistician and Examiner, Bureau of Mumcipal Investigation and Statistics, Department of Finance, Chairman; Leonard M. Wall- stein, Commissioner of Accounts; Albert E. Hull, Assistant to the President of the Board of Aldermen; Tilden Adamson, Director of the Bureau of Contract Super- vision; Mrs. Mathilde C. Ford, secretary to the Committee on Education, Board of Estimate; Paul C. Wilson, Assistant Secretary to the Mayor; J. W. P. Bennett. Consulting Engineer, Borough President of Bnmz, and Geoi|e W. TOlson, Oonmdting Emginew, Borough Ftead«it of Bnx^yn. Fdtakcial Adionistbatiok: Fiscal Structure 17 The Director of the Budget has no staff of his own other than one or two clerks and a stenographer. One of the examiners of the Board of Estunate and Apportiomnmt has be^ assigned to the office and makes it his headquarters. The Director of the Budget appears at all meetings of the Board of Estimate and its committees. In connection with all matters pertaining to the budget work he d^iends upon the staff (rf ezaminefs artmentSy there are a number of other fiscal agencies. Some of these are treated briefly here, not so much because they are less impor- tant, but because their work is explained in detail in later chap- i&C8 and has rdatively minor significance in connection with the work of the other financial oi^ans of the city's government. The Board of Taxes and Assessments is a bi-partisan body of seven Commissioners appointed by the Mayor. They are vested with complete power over the valuation of real and personal property in the city.^ The distribution of the cost of such local or general improvements as are to be borne by the benefited property, is assigned to three different offices. The Board of Assessors handles street improvements. The Bureau of Street Openings in the Law D^Mtrtment looks after the costs of acquiring streets. The general city or borough assessments, a feature peculiar to the financial system of New York City, are handled by the Board of Estimate upon the advice of its Chief Engineer, llie work of all three of these agencies is described below.' Purchasing The spending of the city's money for supplies is a task of considerable importance. It is divided among four distinct and independent agencies. The largest vdume of purchases is negotiated by the Department of Purchase. This is not strictly a purchasing department, but rather a price getting agency for tiie Mayor's departments which actually spend the appropriated money. The Board of Education has its own Bureau (d Supplies. » See Chapter VI, p. 169. « See p. 177 et seq. Financial Abiunibtration: Fiscal Structure 19 Printing and stationery is largely, but not completely, handled by the Board of City Record, an ex-officio body consisting of the Mayor, the Comptroller, and the Corporation Counsel. Finally, the various Borough Presidents' offices do their own purchasmg! A separate chapter is devoted to this subject.^ Tax Budget Expenditures The outline given above of the various agencies concerned with the financial admmistratiecial Revenue 13,250,000 17,750,000 19,000,000 Interest on the Temporary Debt 3,909,953 3,856,873 4,100,000 ToTAii Dam Sdivicb . . $103,497,232 $128,020,854 $137,356,554 $16,236,971 $17,564,808 $12,622,697 Tax Deficiency 2,990,000 2,880,000 3,250,000 Qasson Av^ue Sewer Assessment 387,943 388,003 387,973 Total Tax Budget . . $399,618,855 $437,000,000 $474,893,300 Financial Administration: Fiscal Structure 21 CHART n N»w ToBK Cmr's Tax Budget Appbopsiations fob Shjbctbd Yeabs, 1916 to 1927 Debt Service 1927 22 New York City's Finances and CHART III Ommrm or tbm Cm*B E3CPBNiTi7iiis bt FuNcnoNs, Silbcibd Ybabs 1915 TO 1927 Am i9iA 19^7 FiNANGiAL Abionibtration: Fiscal Stbuctube 23 TABLE n Gbnbral PiTND, 1925-27 1925 1 1926 » 1027 > CaaA balanee Jon. 1 1 9W,7HJB7o _ 810,S48,H» i0^7J88 City share of state lUM 15,040,733 18,186,433 6,552,933 6,887,426 Moneyed capital tax 1 1102 344, IKK C O 1 loo,bol Corporatioiis tax 7,562,092 7,641,698 Motor Tohide tax 2,409,464 f A A 1 \j ^# V-' 2,724.060 Keai estate brcMEMSr tex , 314,083 06,538 4,061,540 4,722,021 2,954,878 3,186.098 rvmnB and licenses ....... 1.061,714 1.718.308 water rates (Brooklyn, Queens, and Richmond) . 1,327,146 1,491,021 Penaltsr oo Taxes i 3.613.925 3,975.931 Interest on nnnnsBiiwinta 1,387,818 1.934,758 A 1,07«,381 1.876.007 w T oWMliiy rwuf Receipts iNTHBasT Sinking Fitnd E Com on hand Jan. t t,lS7,Slt 8,888,701 s Water rates and interest (Manhattan and Bronx) 11.881.580 12,472.664 T Municipal ferries, fares and privileges .... 3,149,344 3.299.985 I Peny leases ' \ 566.999 471,417 M Rents, house, ground, ete. 1 £08.450 iSAO cm 002,009 A Fees, fines, etc ' \ 3,114.213 2,250.773 T Intereat on Snking Fond balanoea 1 65,769 59,638 E Revenue from investment 1 11.250 17,260 D Let*, Payments and rounds . . * * 1 188,916 164,626 Cath balanee, Dee. 81 8,888,701 1,660,000 84188,881 f Suplui, transferred to Smldnc Fund No. 1 . 1 16,900,000 17,400.000 N RsDxifFnoN Sinking Fund No. 1 1 CuA on hand Jan. 1 . . . , 1 218.568 1,381,153 Dock and ship rents ••.••,,,,1 7.004,215 7,206.959 D Market rents and wagon fees ...*** 1 460,136 460.844 E 1 728,791 774,994 T "ewses 734,936 783,092 A Permits, street vaults 1 382,476 300,862 I Fines, privilei^ and miscellaneous ... 1 26,650 21.562 L Interest on Sinking Fund bank balances ... 1 151,715 40.124 Interest on City Treasury bank balances . ] ! 1 680,996 787,441 Revenues from investments ... * 1 532,449 579,892 Interest on General Fund Bonds ..... 1 14331.684 16,409,603 Surplus of Interest Sinking Fund . . . * | 16,900,000 17.400,000 Sale of investmoits 1.002.260 587,308 Lett, Redemption , 1 ijnojno 1,076,049 Refunds and Miecdlaneoiu ... 1 8JU8 17,343 Inteatmenta 1 Cash Balanee Dee. 31 . . 1 ^IVaiitf erred to Goieral Fund through purchase of General Fund Bonds Total General Fund i i ' Less Interest on General Fond TUMwil Cash Balance Dec. 31 1,881,188 41,000,000 270,000 2,120,442 43,250,000 47.000.000 100,266,226 14,831,685 10,342,113 1,600,000 108.188,642 16,409,603 9,567,239 1,500,000 18J988^ ABBobiw Tax Deduetioiit OaHAkAi. Fdxd aM>lied to reduotkm of f^Tntfon j 73,502,504 80,711.801 80,910,238 « * From Comptroller's Report for 1935, passim. in Fe W^'^S^'Soi.^S^ Note that theaefip«,««aatav«l.We«ita late •Ibid. ef i!L!?[??. i Sf ^^"^"^ Committee of the Board of Aldermen. March 1, 1927. The Boaid Of Brtiinate only Ite oim tii~ at theae fiw 24 New Yobk City's Finances and the lelatioii of the property tax to the other features of the fiscal system. In addition to the property tax, the city has various miscel- laneous revenues whose nature and relative importance are dealt with later. The annual total of these revenues and receipts is approxunately $125,000,000. Of this approximately $80,000,000 go either directly or indirectly into the General Fund of the City— "the General Fimd for the Reduction of Taxation."* The General Fund is deducted from the amount required to meet the tax budget and the property tax rate necessary to care for the balance is calculated in a manner to be described presently. The General Fund, as has just been said, is replenished directly and indirectly. The indirection arises from the fact that a large portion of the miscellaneous revenues of the city is pledged to two sinking fimds which antedate the establishment of Greater New York in 1898. Payments to these funds soon became far larger than was necessary for the amortization of the bonds which the sinking funds supported. In 1903, therefore, a system was worked out by which the surpluses of the sinking funds would be released to the General Fund in exchange for General Fund Bonds. The two sinking funds are the Interest Sinking Fund and Sinking Fund Number 1. The surpluses of the former are transferred to the latter. The ccanbined surpluses of both are exchanged from the latter for General Fund Bonds. Thus the General Fimd receives payments which are not direct and which are effected through certain bookkeeping transactions. What happens is indicated in Table II, which shows the amounts paid into the General Fund from miscellaneous revenues and incfi- rectly after transit through the sinking funds.* Assessment of Property; Tax and Debt Limit The property tax extends with certain exceptions to all real and pmonal property in the city.' The assessment is predi- cated on what is presumed to be full value. The calculation of values is the work of the Department of Taxes and Assessments. 1 The remaining forty millions go to special funds. See below, p. 63. » The transaction is explained more in detail below, pp. 195 S. •See below, p. 139. Financial Abionibtration: Fiscal Structube 25 The accuracy and completeness with which this task is carried out are of the utmost importance. The Department of Taxes and Assessment, through its determination of values, determines the proportionate amounts that individual owners must pay. MOTe important than this, however, is the fact that the total values thus established determines the city's tax and debt limits. The State Constitution^ limits the rate of taxes which may be levied for city and country purposes exclusive of interest and amortization charges on the funded debt, to two per cent, of the assessed valuation of real and personal property, subject to taxa- tion for county and state purposes. The same section of the Constitution fixes the net amount of debt which the city may incur (with certain exceptions) at ten per cmtJ of ibe assessed valuation of real property subject to taxation. The Fixing of the Tax Rate The Commissioners of Taxes and Assessnrat are required to complete thdr valuations by October 1. From this date until February 1 they are engaged in preparing tentative tax rolls and in considering taxpayers' protests.^ The tax roils are trans- mitted to the Board of Aldermen and pubMied in the COy Record about March 1. The Board of Aldermen is required to meet on the first Monday in March to fix the tax rate.* For this purpose a report is prepared for the Finance Committee of the Board of Aldermen by the Bureau of Accountancy of the Fmance Department. This report assembles the following items (1927 figures are used): 1. Total Budobt For State Tax $12,622,697.53 For principal and interest on city's long term debt 97,756,554.71 For all other city and county purposes . 364,514,047.76 ^^^^^ 474,893,300.00 » Article VIII, Sectioii 10. belo™' m • ~iii6irhrt dabomte caleulatioii and is explaiiied moie fuUy ' See below, p. 172. 4 Charter, Seetion W. 26 New Yobk Citt^s Finances and 2. The Couptbomje&'b EsmiATB aw ram General Fund ^ . ... . . 80,910,238.51 3. Subtracting this from the previous total leaves amount required to be raised by taxes 393,983,061.49 4. The assessed valuation of property liable to taxaticm for city and oofiinty purposeB and State Tax « 14,837,821,953.00 5. To this must be added the general city and borough assessments^ collected with the property tax, amounting to ... . 8,040|752.66 6. The necessary tax rates are obtained by di- viding the assessed valuations of prop- erty into the amounts required with the following result:^ Nsw YoBK Cmr Tax Rates— 1027 Fob Yumm 1027 Borough of Manhattan: (County of New York) Borough of the Bronx: (County of Bronx) Borough of Brookljm : (County of Kings) Borough of Queens: (County of Queens) Borough of Richmond: (Oo^ty of Richmond) Tax Ratb ON Pbbsonai. Ebtazb 0266 0266 0266 Tax Rate ON Ebtatb Non- Exempt 0266 0266 AaSKSSMBNT Ratbs worn Local Imfbovk- .0004 .0001 .0007 .0007 Total. Rates ON BMAMt EsTAra NOM^ .0270 .0270 .0273 .0273 Tax and AasxasMBNT Ratm on Rbai. Estate raoM Local Taxation .0013 .0013 .0016 .0016 .0012 * This General Fund for the reduction of taxation represents the aggr^ate of all miscellaneous revenues of the city not specifically pledged and therefore is deduct- ible from the amount required to be raised by the property tax. * There is also property (new dwellings) exempt from local taxation but subject to State Tax and Assessments. This is valued at $916,512,915. See below, p. 149. » Explained below, p. 181. The different boroughs have their own assessable projects so that the tax rate differs from borough to borough. * The tax rates are expressed in terms of cents on each dollar of valuation and ftre rounded upward to the nearest hundredth, Charter, Secticm 900. Financial Adminisibation: Fiscal Structubb 27 The tax rate on- real and personal property is calculated as described in order to balance the budget. An absolute balance is secured only if all the taxes are collected, and this in piactice is unattainable. Hence, tax dtf eienc^ appropriations are made in the budget to cover the estimated uncollected margin. * Temporary Borrowings In addition to the expenditures provided for by the tax budget, the city cares for certain needs from the proceeds of temporary borrowings. Strictly speaking, there are four forms of temporary borrowings. Two are in anticipation of taxes or of long-term bor- rowings. Two are supplementary appropriations. Taxes are not paid untU May, but in January the city needs money to care for expenditures that have been authorized. Revenue Bills ^ are issued in anticipation of the collection of taxes. They run for sixty to ninety days and bear interest ranging from 3J^ to 4J^% depending upon the money market. In 1926 the city issued Eev^ue Bills to the amount of S243,350,000. The interest on this sum amounted to approxi- mately $3,000,000. A substantial portion of this charge could, of course, be eliminated if taxes were due at the time the city began to spend the money. Offsetting this saving, howev^, would be the inconveni^ce to the taxpayer by reason of earlier payments. Too sharp an advance of the dates might give the city surplus funds which it would have to keep on deposit until needed for current expenditures.^ Corporate Stock Notes— the other form of anticipatory, temporary borrowing — are merely a conv^ent and economical method of furnishing money for proj- ects to be financed from long-term bonds pending the issuance of the bonds themselves.* The remaining two forms of temporary borrowings are of some budgetary importance. * See below, p. 57. « J!^"*®'' Section 187. The Charter permits the interchangeable designations of revenue bonds" and ''revenue bUls." The city now issues only the latter. The Camrter also provides (Section 186) for another type of revenue bonds to be issued to meet the city's paym^t of its share of the state tax and to pay certain chami against state school moneys. ' The tax dates were advanced to their present positions in 1916. * See below, p. 187. 28 New Yobk City's Financss and Special Revenue Bonds are issued to provide for what are essentially supplementary appropriations.^ Hie Charter re- quires that such temporary obligations must be redeemed out of tJie tax levy of the next succeeding year and that the necessary Impropriations must be made in the. budget. Special Revenue Bonds may be issued: 1. To pay the cost of condemning unsafe buildings. 2. To pay charges audited by the Board of Estimate.^ 3. To pay judgments recovered against the city. 4. To provide for the prevention of contagious diseases.' 6. To defray the cost of instalhng water meters.* 6. To meet deficiencies in the Street and Park Openings Fund.' 7. To pay lawful claims. 8. F(Nr general purposes up to $2,000,000; this requires the consent of three-fourths of tiie membmt of t^e Board of Aldermen. 0. To meet certain emergency appn^iiations for the Health DepsTtmmi.* 10. To replenish the Fire Department Relief Fund. Section 546 of the charter permits Special Revenue Bonds to be issued for snow removal purposes.^ They are also issued to meet certain mandatory expenditures, e.g., for voting machines as required by the Election Law and for the expenses of the Transit Commission and Armory Board. The most recent form of temporary indebtedness is Tax Notes which originated with the Pay-as-you-go Law in 1916.* It is a question whether the intention was to establish them as a permanent form of temporary borrowing. Tax Notes resemble Special Revenue Bonds in that they must be redeemed in the budget of the next succeeding year. They may be issued for any capital project which commends itself to the Board of Estimate.* 1 Charter, Sections 187, 188. * These relate to cost to public officer in defending himflelf in a trial involving his title to office. Charter, Section 231. * Charter, Section 236, limited to |80,00a * Caiarter, Section 475. * CSiaiter, Section 174. * Caiarter, SecticMis 1177 and 1178. » See p. 185. > Charter, Section 169. See discussion in Chapter YII, pp. 209-214. » See below, p. 70. Financial Administration: Fiscal Structure 29 It should be borne in mind in connection with all of these forms of borrowing, that otUhorizaMan is not followed immediately by the b«partmeut Head Staff of Secretary Board op Eftimate- Director of the Budget Sstimates prepared Ijy 165 (9 Departments, Boards Bureaus, Etc. Ventalwe Budget Before October lott October HOtfr Board of i idermexi^ rinancc Committee 1 C Hearing ) ( Adopfion A \>ePore November 25th/ Approval oP I The Mayor. ( T Cartificatlon before December XStil JkhAUyer.Comptraler IrCi^ 40 Nsw YoBK Crrr's Finances and tions. These instructions are quite simple and brief, because there are few changes in procedure from year to year. A pamphlet ciJled ''Budget Classification" was prepaied about twrive years ago and has been reprinted from time to time with minor changes. The latest issue is that of 1919. This pamphlet instructs the department heads on the meaning of the various classifications and gives some illustrations of what may or may not be included under each. Where a department head is in doubt concerning the proper classification, a ruling may be secured by application to the Secretary of the Board of Esti- mate and Apportionment. A sample set of forms accompanies the letter of the Secretary of the Board. The niunber of separate forms has been much reduced during the last ten years. The following forms were med far the 1927 budget: A. Personal service; B. Food suppUes; Supplemental, — Food supplies in detail; C. Supplies, 23 classes; D. Wearing apparel; E. Contractual services, etc., 14 classes; F. General r^airs and replacements; G. T^ephone service; if. Summary of other than personal service, and depart- mental summary. The larger departments have thdr own preliminary estimate blanks, which their bureaus and divisions fill out and discuss at departmental conferences. The Board of Education has the most elaborate departmental procediu-e. Since education re- ceives the largest single appropriation in the budget (1107,000,000 in 1927) the Board's method of prepaiing its estimates should be described. Department of Education Procedure In March or April the directors of the various bureaus and activities in the Department of Education are required to fill out and return complete estimate blanks for x)ersonnel and suppHes. Financial Administration: Expbnditubes 41 The department uses ei^^t sets of blanks in the preparation of its estimates as follows: Form 9. Personal service — supervisory salaries; (Permanent positions, vacancies, and new posi- tions showing period, schedule, rate, and amount.) Form 10. Personal service — teachers' salaries ; (same items.) Form 11. Personal service — salaries; (same items.) Form 14. Personal service; (positions by titles, rates, amount.) Form 15. Personal service — salaries; (position or subject, number of sessions, rate per session, amount.) Form 17. Personal service; (location of classes, number of classes, hours per day, days per week, number of weeks, aggregate number of days, rate per day, amounts requested.) Form 21. Supplies; (item, quantity, number of pupils, number of classes, cost per imit, amount.) Form 41. Classroom equipment; (item, quantity, number of classes, Aumber of pupils, cost per unit.) These tanm contain columns for the allowances for the currmt year in the case of salaries, and in the case of supplies the allow- ances for the current year, quantity used during the previous year, quantity used January to April of current year, and quantity in stock May 1 of the current year. This information is filled in bef(m the blanks are sent out to the duwtors of the various activi- ties. Forms 10 and 40 also contain columns for the distribution of new positions or new equipment, showing the school number and the amount requested. The blanks are furnished by and returned to the finance bureau of the D^artment of Education and the figures are checked by this bureau. The estimates are then examined by the Superintendent of Schools who goes over the items and conducts an informal hearing. His recommendar tions are entered in a special column on the forms. The Finance Committee of the Board of Education consists of five members. This Committee holds sessions ahnost daily during the months of June and July. Somethnes these sessions last the entire day or through the evening. The directors of the differ^t bureaus and activities are heard. An examiner of the 42 New York City's Finances and Board of Estimate and Apportionment is present during all these hearings and participates in the discussion. At the con- clusion of the regular sessions an executive session is held. The examiner is given an opportimity to reopen the discusraon of any decision which he does not approve. The examiner's report to the Director of the Budget and the committee of the whole . 48. 60 New York Gity^s Financbs and troller, the President of the Board of Aldermen, and the five Borough Presidents. Persons who are heads of large spending departments thus have a considerable share in determining the size of their own appropriations. The presence on the Board of Estimate and Apportionment of members who are administrar tors and in ^ect the spokesmen of thdr borough-comity or- ganizations is conducive to log-rolling and cooperative extrava- gance. The Mayor should assume full responsibility for the budget proposals, including those of the Boroi^^ Presidents, as submit- ted to the Board of Estimate and Apportionment. The Director of the Budget should continue directly responsible to the Mayor, and should be made a much more important official in the preparation of the budget. The entire budget preparing or- l^mization should be placed imder his control. The Mayor would then be responsible for the financial plan of the city. The Director of Investigations and the staff of examiners now at- tached to the Board of Estimate (but working, as stated above, in codperation with the Director of the Budget) should be trans- ferred to the budget office. This office should have the standing of a city department. This would permit the Director of the Budget to be vested with powers of subpoena similar to those possessed by the Commissioner of Accounts. The Director of the Budget should have broad powers of control subject to the Mayor ^s direction over the execution of the budget plan. He should be responsible for the examination and approval of the budget idlotments during the year. He should have supervision over expenditures of the proceeds from Tax Notes and Special Revenue Bonds. n. Revenxtes anb Exfenditubes The so-caDed budget document of New York City is not a real budget. It is little more than an itemized appropriation ordi- nance. It contains no estimate of the income that is anticipated to meet the expenditures proposed. This statement should not be interpreted as a criticism of the officials who are concerned Financial Administration: Expenditukes 51 with the preparation of the budget. They perform their work honestly and efficiently and in strict compliance with the provi- sions of the Charter. The criticisms expressed or implied in what follows relate to the procedure minutely prescribed by the Charter. Most of the improvements which seem desirable would require amendments to the Charter by the Municipal Assembly. New York City now derives approximately 75 per cent, of its revenue from the general property tax. The remainder — about $125,000,(XX) — comes from miscellaneous licenses, fees, subven- tions, etc. These revenues are considered in a separate chapter. They have, however, a connection with budget making, and must be briefly discussed here. The State Constitution limits the amount which may be raised by the property tax for city and county purposes to 2 per cent, of the assessed valuation of property in the city subject to taxation. In order to keep within this 2 per cent, limit, it is necessary for the budget making authorities to have some estimate of the probable assessed valuations. They should also know what may be ex- pected from miscellaneous sources of revenue. In practice, the Board of Estimate and Apportionment does have estimates of bothy but they are quite unofficial and are not made public. Of $125,000,000 of miscellaneous revenues, $80,000,000 goes to the General Fund, and the balance is pledged by law to specific objects. The amount available for the General Fund must by law be deducted from the amount to be raised by the property tax, and thus directly affects the city's status under the 2 per cent, tax limits The official figure for the General Fund is not presented by the Comptroller until March 1, the day the tax rate is to be established. Moreov^, in recent years the practice of furnish- ing a complete itemization of the revenues which go into this General Fund has been discontinued. The present practice is that only a total is presented. Failure to indicate in detail precisely how this total is obtained may be the cause of the sometimes rather considerable discrepancies that have arisen in the ^See above p. 24. 82 New York City's Finances and last decade between the amounts estimated and the amomits actually received.^ These estimates are made at the time the tax rate is fixed, and appear in the Report of the Finance Committee of the Board of Aldermen, which is prepared by the Department of Finance. They are gencaral estimates, unsupported by details to show iriiero increases or cbereases in revenue are likely to occur. Even the g^eral estimates, as has been said, are not available to the pubUc at the time of the adoption of the budget. BspendUurea from Special Funds The present budget includes certain expenditures recoverable fnmi specific funds or sources. It does this, however, in such a way as to obscure the actual apmJ&ooB of certain departments. Thus the 1927 budget includes the following items: ^ Hw fdlowiiig table oompareB the amountB ertmiated at the time of the fixing of the tax late with the baianeeB nsultiiig at the end of each year: GamBBAL Fmro and Gekkrai. Accotmr Estimated Actual Cash Balancb Net Gain (+) Ykab RSCKIPTS RSYKNUa AT End OB Loss (—) m Ymmm 1914 •tt,235,935 $40,707,859 $103,564 1915 40331.063 41,983.169 3,233,694 + 3,133,986 1916 41,203.238 1,540,101 - 1,696,849 1917 43.095.677 920,910 - 619,181 1918 »mm 48.937.880 3,575,258 + 2,654.338 1919 4S331.760* 55.827.764 7,145,657 + 3,570,489 1920 60.020.647 75,063.818 7,720,739 + 574,992 . 1921 03.216.718 72.123,390 0.709,341 - 953,398 1922 04.524.341 70.648.745 36,246 — 6,731.095 1923 •* 79.840,831 7,904,241 + 7,867,995 1824 04.609.241 83.371.228 10.711.275 + 2,807.034 1«SS 73,592.004 02,002.707 10342.111 - 309.103 1928 80.711.800 100.178,748 1927 80,910.238 • Note: The eatiinateB oi xeoeipts girm above were taken from the Proceedingt of the Board of Alders mm on the occasion of fixing the tax levy each year. The actual receipts maA eMh balsMM tn firm tfie Financial Summary for 1990 And the aamial Cim:flrMtr*» RtporU, (♦) Estimate itemized. (**) In 1923 no estimate was made and the entire 2% allowed by the Constitution was levied. Ttw 158,158,787 iimiiry to bakuiee the bwdeet was providsd item tbe Qeawal FwwL Financial Administration: Expenditures 53 Corporate stodc, tax notes, as- sessment bonds, and speatl umI trust funds. 1. Law Department $ 7Mfi2S Street and park openings fund. 2. Board of Assesson 59,200 Street improvement fund. 3. Borough President, Manhattan 730,312 ) 4. Borough President, Bronx 490,521 5. Borough President, Brooklyn 1,016,206 6. Borough President, Queens 1,488,285 7. Borough President, Richmond 286,913 8. Department of Education 23,806,954 State School moneys 9. Department of Parks, Richmond 3,500 Corporate stock or tax notes, la Departmoit ci Health 75,316 Antitoxin fund. 11. Dqtartment of Water Supply 2,895,581 Water Gas and Electricity 84,189 Gnporate stoek. 12. Department of Plant and Stnio- tures 290,000 Bridge revenue. 13. Department of Docks 196,035 Corporate Stock. Total $31,747,635 Of the thirteen items included above, 1, 2, 8, 10, 11 and 12 are to pay what are practically permanent staffs in the departments concerned.^ Failure to include these items in the budget totals operates to obscure departmental expenditures. Thus the 1927 budget really provides for expenditures by the departments ci $31,747,635 more than the total of $474,893,300.* > There is no good reason why special funds like the antitoxin fund, bridge tolls, water revenues and school moneys should not go into the General Fund. The state school moneys (item 8) formerly went into the General Fund, to be transferred later to the Department ct Education's appropriations account. This practice was aban- doned in 1921. * Departmental expenditures are also obscured in the so-called "budget sum- mary" which is issued at the time the budget has been completed by the Board of Estimate. The budget summary is a single sheet, appearing at the time of the "proposed budget" (see below p. 62). It presents the figures of the previous year's budget (as changed by transfers to July 1), the department requests, the "tentative" and "proposed" budgets for the 165 operating units of the city in parallel columns. The 1927 budget, for examine, shows a departmental total of 199,296 for the Board of Assessors, which is in charge of the assessment of improvements, as against $92,370 in 1926; yet the budget summary indicates a decrease. This is because the street improvement fimd allowance of the Department has risen from $46,840 to $59,200. The budget summary item of $40,096 for 1927 is less than half of what the Board proposes actually to spend. Ooeaaionany the esttmatea of revenue diffw greatly fimm tiie actual returns. • Thus in the eaae of the bridge toUs received by the Department of FUmt and Struc- tures, the 1925 budget deducted estimated receipts of ^20,000 (Code 2761 TB) but the Comptroller's Report for 1925 (p. 20) shows an actual receipt of $306,847. This is not a bad estimate, but the record certainly does not appear to justify the inclusion in the 1926 budget of an estimate of $390,000. That year the receipts fell to $289,462 (Jbid.f p. 20). In order to carry the Williamsburg Bridge employees (1926) the Department was forced to draw upon the receipts of the municipally operated tiQllqr line wUdi CRMMB tha bridge. 54 Nsw YoBK Cnnr's FnuMcn and 9m The present City Comptroller has gone even further. Accord- ing to his summary of the budget's shortcomings there are fifty millions of annual expenditures which should be included. To quote him, in his address before the New York State Chamber of C<»nmerce, December 2, 1926: "If all the moneys that will be expended in 1927 (with the exception of funds raised by bond issues) were provided for, the budget would read as follows: Present budget $474,803^ For salaries of Transit Commission (1927) 750,000 For snow and ice removal (1926-7) (estimated) 2,500,000 For claims and judgments (1927) (estimated) 1,250,000 For non-revenue producing improvements (1927) (estimated) 8,750,000 Making a total of $488,143,300 ''On the other hand, if the actual cost of every department, pension fund, or other city activity was shown, $41,793,806.18 would have to be added to this amount, because nineteen city activities expend annually $284,721,095.65 of which only a part is provided by budget appropriations, the balance of this amount being obtained by different city revenues which flow directly into the various departments, funds, etc. The De- partment of Education, for instance, receives more than $23,- 000,000 of an appropriation from the state. "The actual expenditure of New York City in 1927, outside of the cost of improvements financed by long-time borrowings — subways, hospitals, schools, etc., will be approximately $530,000,000 instead of $474,893,300 carried in the so-called budget of 1927." 1 It would seem, therefore, that the Comptroller is right in ques- tioning the title of a docmnent which neglects certain revenueSy and omits 10 per cent, of the city's current expenditures. The tentative budget fails to set forth the changes made in the previous year's budget by way of budgetary transfers. Special Revenue Bonds or Tax Note issues. Nor does the budget show what Tax Notes or Special Revenue Bonds the city proposes to iamie. During 1926, accruals resulting from vacandes and posi- tions filled at the minimum rates amounted to nearly $2,000,000. ' December Bvlletin, Chamber of Commerce, p. 28. It should be remarked that some of the items mentioned by the Comptroller are included in the 1927 budget in the form of debt service for the previous year's expenditures. Financial Administration; Expenditubes 55 This money is available for any purpose to which the Board of Estimate and Apportionment sees fit to devote, it. Some t service, and there is no indication of the purposes for which the issues were made. Thus during a winter as much as $5,000,000 may be spent for snow removal. This money will be obtained from Special Rev- enue Bonds, and will be included in the debt service items of suc- ceeding budgets. Secondly the practice of borrowing money and paying it back the next year adds an interest charge amounting to approxmately $2,000,000. New separate authorizations after the adoption of the budget frequently so result. There is a tendency to adopt separate personal service schedules, chargeable to these funds. Persons given employment on improvements paid for by Tax Notes and Special Revenue Bonds are not always impressed with the fact ^ Blany d^MurtmentB mpgaii permanent staffs through Corporate Stock funds. 60 New York City^s Finances and that their employment is purely temporary. They come to regard themselyes as permanent employees, and when the Tax Note or Corporate Stock fimds are exhausted, strong pressure is exerted to find new work for them to do.^ Many Special Revenue Bond items which appear trivial, involve permanent and occasionally large items in subsequent budgets. Frequently new activities are introduced through Special Revenue Bonds or the transfer of funds and become fixtures in the budget. For example, the Board of Child Welfare started with less than $100,000 (from Special Revenue Bonds) and now receives an appropriation of over $5,500,000. It is doubtful if the Board of Estimate gives Special Revenue Bond appropriations, transfers of funds, or modifications of schedules the same care and attention that it bestows upon the budget itself. If, however, tax-note and snow removal appropriations are to be provided for in the budget — that is, in the current year's budget and not in the following year's budget under temporary debt — it is particularly important that provisions be inserted in the Charter to prevent the diversion of these funds by transf ^ to oilier purposes. Such matters diould also be carefully sched- uled in terms of work proposed to be accomplished.^ 1 What should be done about this situation is not certain. A feasible plan might be the adoption of an elastic schedule in connection with the budget. Such a aehedule could be expanded to meet additional work as it becomes necessary. Perhaps some of the work could be done by contract rather than by the city and borough depart- ments themselves. The point here is not how efficiencies and economies may be secured. The point is simply that the budget document of the city fails to tell the whole stoiy in respect of expenditures. * Snow removal is a difficult budgetary problem. The amount of snow which falls in the city varies greatly from winter to winter. Weather conditions vary as well, so that the cost of snow removal may go as high as five miUion dollars (1925-26) or it may be as low as one million dollars. The snow period, moreover, includes parts of two fiscal years and the handhng of the problem is not centraUzed. The Borough Presidents have jurisdiction over it in Queens and Richmond and the Department of Street Oeaning in the remainder of the city. In recent years two Conmiissioners of Accounts have felt compelled to investigate these expenditiires. As has been said, no attempt is made to provide for snow removal in the budget. The cost both of the work and of the equipment has been financed solely through the issuance of Special Revenue Bonds under authority granted by Section 546 of the Charter. The only relevant provision in the budget relates to the redemption of ^Deeial Revenue Bonds issued during the previous year. No indication is giv«i in any of t^ budget documents as to the amounts whieh portam to snow lemovil. It should be noted that the eqaqHoont pureliMed wHh thsee bondi is Financial Administration: Expenditures 61 Some changes that might be made in the content of New York City's budget are indicated in the discussion above. The budget should estimate all miscellaneous leodpts of the city, and should show what tax rate will be necessary, on the basis of the assessed valuations, to meet the proposed expenditures. The budget should also indicate what projects it is proposed to finance from long-tenn bonds. All of these mattm should be f ormaUced and presented to the Board of Estimate so that the budget docmnent will give a complete picture of the financial situation at the time the budget is adopted. This question is discussed further in Section IV. III. The Bxtdqbt Document and the Appbofbiation Ordinance The puipose of a budget should be to furnish information and to serve as a means of planning the ^cpenditures and revenues of a givQn year so that they will balance satisfactorily. The purpose of an appropriation bill is to enact into law the general outlines of the final expenditure plans adopted, to establish re- sponsibility for their execution, and to control genmd policies. Though these purposes are closely related, they are distinct, and experience shows that they cannot be satisfied with a single document. Present Bvdget Documents The expenditure estimates for New York City appear in the following printed documents: (1) The departmental estimates. These are printed separately in the CUy Record^ though in the last few years the printing has frequently available the year round and in some cases it appears that the departments count on snow removal money to meet their equipment needs. Financing snow ranoval by one year bonds adds an interest charge that may run to $200,000. It is highly doubtful if it would be wise to i^jxropriate for snow removal in the Budget. If it is decided to do so, provision should be made that moneys not needed shall revert to the Tax and Appropriation Deficiency and Surplus Account. In any event an attempt should be made to report on snow removal in terms of the actual work accomplished and the circumstances of the weather. It would seem that the snow-removing departments should be required to make a detailed report to the Bowd of Estimftle some time in .^nfl or Bli^ of eadi 62 Nmw Yobk City's Finances and been almost too late to make the estimates available for scrutiny by the taxpayers in advance of the budget disouanon. As printed, these estimates show the allowances for the previous year and the requests for the coming year. These estimates do not show the previous appropriations as modified by transfers nor do they show what other money the departments may have had from Tax Notes or Special Revenue Bonds. (2) The ''tentative budget'' This adds to the departmental estimates an additional column showing the allowance tentatively recommended by the Board of Estimate. In pfactioe, these amounts are substantially the figures suggested by the Director of the Budget. The tentative budget must be prmted by October 10, and is subject to increase. PubUc hearings are held, revisions made, and the budget is then isEmd as: (3) The 'proposed budget.'' From this time on, according to the Charter, no further increases may be made. The proposed budget contains a fourth colimm. It now shows the last year's appropriations, the departmental requests, the tentative allow- ances, and the still further revised "proposed" allowances. The proposed budget is printed by October 20. In each copy is inserted a loose page containing an expenditure summary. The summary shows the same columns as the proposed budget, ^ving only the totals for each of the 165 operating units. In the 1927 "budget summary," the first column was altered to show the 1926 budget as modified to July 1, but not including accruals or spedal revenue bonds. The proposed budget is completed by October 31. It represents the final recommendation of the Board of Estimate and goes to the Board of Aldermen for final adoption. When adopted it becomes: (4) The budget, so called, which is the appropriation ordmance passed by the Board of Estimate and Apportionment. This budget is then printed in the City Record in pursuance of the charter requirement. The Board of Aldermen must act on the budg^, or ordinance, before Novemb^ 26. A month or so later a mnaller and handier edition of the budget is prepared. To this edition are added, in the front, tables showing the amounts for each of the budget classifications. As a forty-odd page appendix Financial Administration; Expenditures 63 to the volume there is added the Comptroller's debt service state- ment. This is not presented in detail at budget maJring time. An elaborate supporting schedule, however, arrives in time for inclusion in the final printing of the approved budget. The following tables are included: 1. Amount of bonds maturing in the current year. 2. Interest on existing debt and estimate for new debt. 3. Debt classified by purpose. 4. Debt classified by rate of interest. 5. Basis for the Tax Deficiency Appropriation or bad debt account. 6. Budget accounts since 1905 with operating sheet and balances. An effort should be made to have available, when the budget estimates are bemg discussed by the Committee of the Whole, data such as the above rather than the mere totals which must be included in the budget. Moreover, debt service is the second largest item in the budget. It amounts to $137,356,554 in 1927.i The statements which are included have not since 1921 shown the purposes for which Tax Notes and Special Revenue Bonds have been issued. Failure to show in detail the nature of this temporary debt which is being redeemed, and for which depart- ment and for what purpose it was issued, serves to obscure the puiposes o£ these dty expenditures. As has aheady been indi- cated, a considerable amount of this short term borrowing could be eliminated. It is nevertheless important to indicate what is bemg redeemed, for if attention is focussed on these items, greater care may be exercised in following years. It would be wise to include also in connection with each depart- ment's appropriation the debt service for temporary and perma- nent debt incurred in its behalf, e.g., ferry and trolley bonds in the Departmmt of Plant and Structures; dock bonds in the Dock Department; and school bonds in the Department of Education. This should not take the place of the active appro- priations for debt service which should be assembled at one place » That is, 97 millions for the long term debt and 40 millions for interest on and ledemption of tbe short^eim debt. See below p. 214. 64 New York City's Finances and in the budget, but should be added merely to show complete departmental operating costs. The 1926 debt service estimate aeenm to have exceeded the actual requirements by $550,000. This sum was subsequently transferred by the Board of Estimate to the Police Department.* It ^ould be noted that any estimate made for debt service on the permanent dd>t is not subject to the two per cent, oonstitu- tional tax limit. A number of years ago one of tlie debt service accoxmts was deliberately used to protect an appropriation from a hostile Board of Aldermen.^ This possibility offers an addi- tional reason for incorporating in the Charts restrictions upon transfm.* Any surplus resulting from an over-estimate d debt service needs should certainly go automatically into the Tax and Appropriation Deficiency and Surplus Accoimt. If there is one estimate that can be made in itemized form, it is that for debt service. The Comptroller no longer submits a detailed schedule of the $800,000 which the city pays out in rents. Such a schedule was rarely on hand when the estimates were being considered, but it was formerly included in the papers putdisbed with the Board (d Estimate minutes when the budget was adopted on October 31. This schedule should appear in full with the estimates and in the budget document. . It is important that the Budget Director shodd have mch information. It is not now available. The ^ Except for $50,000 which was transferred to the Finance Department. * The 1913 budget was somewhat mutilated by the Board of Aldermen. The City Administration knew that an aiypropriation for salary standardisation had no dbanoe of being approved, and so it was not included in the budget. At the first meeting of the Board of Estimate during the year 1913, the Committee on Standardi- lation of Salaries and Grades presented a communication which read in part: "No provision was made in the Budget for 1913 for continuing the work of the Conmiittee on the Standardization of Salaries and Grades, of the Board of Estimate and Appor- tionment. The work is now weUmider way and oonskknMeprogreflB has been made. hk eiiditure requiremrats of the city, borough and county governments, and the means of financing these requirements. The statement should show the expenditures of the operating imits of the city government for the previous year. Such a summary statement should then be supported by a number of detailed schedules showing the distribution of expendi- tures by funds, organization units, and objects. Such a budget should be widely distributed. It would attract public attention, and greater scrutiny could be given to the dty's fitiAi^^ iM prob- lems. The Appropriation Ordinance As an appropriation ordinance, the New York City budget is on the whole minutely detailed. But in this respect it is not com- pletely consistent. Thus the 1927 budget contains such items as the following: Code 3040, Board of Transportation, $5,000,000; code 3068, readjustment of salaries, $1,000,000; code 3069, equalization of wage rates, $1,500,000; code 3071, repaving, $7,000,000; code 2985, printing, stationery and blank books, and publication of CUu Record, $1,472,000. No information is given as to precisely how these large smns are to be distributed. Some county offices insist that since their appropriation is mandatory they are under no obligation to furnish the Board of Estiniate with adequate iiifonnation. Th&ce * The present budget documents cost more than $75,000 a year to piint. Mudi valuable information was formerly contained in the Financial Summary prepared by the Division of Accountancy of the Department of Finance. The pubUcation of this document, which appeared more than a year after the financial transactions with which it dealt, was abandoned under Comptroller Craig in 1921. The proper tone for the publication of mnnh a mimmary, however is in August or S^tember wbm the budget doemneBt is being prepared. 68 New Yobx Citt's Finangbs and are also large lump sums appropriated for various public and quasi-public educational corporations with which the city has contracts.^ All departmental appropriations, irreiEpectiye of their purpose or whether they be mandatory or discretionary, should, as long as the existing appropriating system remains, be accompanied by a schedule showing in some detail the manner in which it is proposed to sp^d the mon^. The present lump sum iqypropriations throw little or no light on the manner in which the money will be spent. Experience has shown that these limip sum appropna- 1 The relation of the city to the quasi-pubhc educational agencies to which it appropriates money, needs some darific»tkm and standaidiiation, partieolaily in the matter of budgetaiy oontioL Certain of tbese ocnporations leoeiye huge himp sums which are accompanied by no operating schedules. The f (blowing table from the 1927 budget ilhistiates the eonfusioa in tbis matter : Luitp Sum AppBOPRiAnoim Code 1070 Salaries and Expenses. New York Public Library $1,413,315.00 1186, 7 New York Public Library, Building Maintenance and Bcpain 87,500.00 1080 Brooklyn Public Library, Salaries and Expenses 787,270.00 1260 New York Botanical Garden, Salaries and Expenses 230,000.00 1000 College of City of New York. Personal Service 1.488,695.90 UBS Hmter CoUece of Oty of N«w Yofk: Tax levy allowance 1,218,155.24 Estimated fees 96,000.00 Befwmal SenriM $8,190,086.24 (Note: Appropriations for City and Hunter Colleges for other than personal servifl% MMMttAias to $168,067 and $157,850 i«epeotively» wwe made on the bem of itemised eetimafcee.) 1100-3 Metropolitan Museum uld indicate that more than the $500,000 will be necessary. A citizen desiring to know the significance of such an item should not be forced to make extended researches in order to discover its impor- tance. A budget, in short, should show the continuity of the cit3r'8 financial history to the extent that this is possible. The informational budget should earmark appropriations which will require future capital expenditures. Estimates of the probable total costs should be made and noted. Figures should begiveOi at the time the bill is prepared, of probable requirements on future dates for the capital costs of projects under way. Borrowing Procedure The procedure now followed in the authorization of capital expenditures and the raising of loan funds is briefly as follows: The various departments of the city ^ submit to the Board of Estimate, at various times during the year, and particularly in December, their requests for given amounts of Corporate Stock or Tax Notes for the permanent improvements which they desire. These items are placed either on the current calendar or else on a epecial annual calendar printed early each year. As the new items are added, the calendar is revised or supplements to it are prepared. Items are picked from the calendar and acted on by the Board from time to time during the year. No special order is followed in the consideration of the items, nor is the attempt made to formulate a programme or budget of capital e9q)endi- tures for the year.' Some items appearing on the calendar are never considered. Others are considered only in a modified form. The departments may revise their requests upward or downward or substitute new items for old. Authorizations are thus made in a piecemeal fashion, and not at one time as with tax budget expenditures. The authorization by the Board of Estimate is final in the case ^The MilHsiy Law proyides a spedal {Hooediire for the Amioiy Board. *BoiBm yeais a^o su^ an attenD|)i was made, bul it wtm fopii i b iajgii^ Financial Admxnistration: Expenditures 71 of corporate stock for new water supply, transit, and school purposes, for water distribution (up to $2,000,000), for dock purposes (up to $5,000,000), and for certain i^iecial purposes epecified in Section 169 of the Charter. The Board has final authority in issuing Serial Bonds, Tax Notes, and Assessment Bonds. In the few remaining instances, the concurrence of the Board of Aldermen is required. In no instance are authorizations of capital esqienditures and loans initiated in the Board of Aldermen. The Sinking Fund Commission, however, initiates long-term bonds for docks and for ferries. The Dock Department and Department of Plant and Structures submit such requests to the Sinking Fund Comis- sion and they tiien go to the Board of Estimate.^ The city is not required, as has already been pointed out, to issue bonds and have the cash in hand before proceeding with the execution of the improv^ent. The authorization itself is considered to be an appropriation and equivalent to a provision of funds. 2 Specifications may then be prepared and contracts awarded.^ The obligations under these contracts are charged against the authorizations of the issue of bonds and are included in the computation of the indd[>tedness <^ the city as '^ocmtract liabilities." * When these obligations become payable, i.e., when the bills are presented by the contractors, money is secured by the issuance of Corporate Stock Notes which mature within a period ^The requests of the Annoiy Board are also submitted to the fflwlrfng fVmd Commissioners whose decision is final. The bonds which they authorize, however, are Special Revenue Bonds as provided under the Military Law. This is the only case in which Special Revenue Bonds are issued in the city for capital improve- ments. The bonds are redeemable from the next year's taxes and are similar in their effect to the Tax Notes. * Under Section 149 of the Charter, no contract other than one payable from ■SBCMirjnients is yalid unless certified by the Comptroller to the effect that there is a balance of the aiqpropriations or funds applicable thereto sufficifflit to pay the estimated expense of executing such contract. * In a few cases the city is its own contractor and does the work by departmental labor. The procedure in these cases is somewhat similar to the one described below, except that no contract liabilities in these cases are entered. * The obligations under the acquisitions of land are charged against the indebted- ness only after title in the land has been vested in ibe city. The cost of the land is estimated on the basis of its assessed valufttkm. Interest on the estimftted Vlihw 72 Nsw YoBK Ccnr's Finangib ahd not to exceed one year. These, in tunii are oonvia-ted into long term stock. The entire procedure of authorizing capital expenditures and bond issues, other than those involving the aoquisition (rf land, may be summarized as follows: (1) requests by departments made to the Board of Estimate either directly or indirectly; (2) authorizations by the Board of Estimate alone, or with the concurrence of the Board of Aldermen; (3) awards of contracts and the incurrence of ''contract liabilities" tihereunder; (4) issu- ance of corporate stock notes in liquidation of these obligations, and (5) conversion of these notes into long term bonds. A somewhat different procedure is followed for the acquisition artmenty with few exceptions^ are indicated in detail in the annual budget togethw with the rates of pay. Because of the charter provisions calling for the "fixation" of salaries authoriza- tion in the budget has not been deemed sufficient, so that special lesdutions designating tt^ number of positions and rates of pay for certain types of employment in specified departments are passed from time to time by the Board of Aldermen upon recom- mendation of the Board of Estimate. These resolutions which usually deal with single positions or small groups of positions, without reference to other poritions of a comparable nature, have been largely responsible in recent years for causing in- equalities in compensation.' The "fixation" of salaries is in most cases in the hands of the Board of Aldermen upon the recommendation of the Board of Estimate. Salaries of Bronx County employees, however, are fixed by the Board of Estimate alone; Surrogate Court salaries are determined by the Board of Aldermen acting alone, and the salaries of oi&L&t court emplo3reeB are usually fixed by the judges. Pixjvision is made for emergency temporary and provisional ap- pointments for four months. These employees may not be re- appointed without civil service qualifications. A recent investi- gation revealed that there are now on the payrolls 1,500 such employees, some of whom have hdd thdr temporary appoint- ments for years. Apart from the special minimum rates for institutional em- i Charter, Section 56. * See below, p. 91. Financial AD]iiNiBi!BA*r[ON: SaiiArtbs 81 ployees, the Board of Estimate requires all vacancies, with a few specified exceptions, to be filled in accordance with a table of rates which it includes in the annual Terms and Condiiions, of the BudffeL Since 1921 each year's Budget has contained the fdlowing provisions: 3. (a) All other vacancies may be filled in the discretion of the department head at one of the following rates; the particu- lar rate in each case being the one next lower than the schedule line rate unless the schedule line rate is one of the rates enumer- ated below, in which case the vacancy may be filled at the schedule line rate, and provided that in departments under the jurisdiction of the Mayor the approval of the Mayor shall first have been obtained: Positions Governed by the Municipal Positions Governed by the Staxb Civil Service Rules Civil Service Rules Rates of Compensation (With and without Maintenanoe) $760.00 $760.00 960.00 901.00 1,260.00 1,201.00 1,560.00 1,501.00 1,860.00 1,621.00 2,160.00 1,801.00 2,460.00 2,101.00 2,760.00 2,401.00 3,000.00 2,641.00 3,500.00 2,701.00 4,000.00 3,001.00 4,500.00 3,500.00 5,000.00 4,000.00 5,500.00 4,500.00 6,000.00 5,000.00 5,500.00 6,000.00 Steps Involved in Appointing an Employee A department head demring to add new employees to his pay- roll applies to the Board of Estimate which sends out an examiner to ascertain the work involved, the number of positions needed, and the titles to be assigned them. The examiner then sends a report to the Budget Director who endorses thereon his recom- mendation and transmits it to the Board of Estimate. If the matter is approved by the Board of Estimate and Board of Aldermen, the department head fills the position from a list of 62 Nbw Yobk Crnr^s Financbs aNO digibles who have been duly examined and certified by the Civil Service Commission. The Commission checks the depart- ment's payrolls and certifies that no one is employed without being qualified under the Civil Service Law. The payroll is also audited by the Comptroller who examines it to see that the positions and salaries have been provided for in the budget and by resolution, and that the funds are available. The city has no authority with reference to the salaries paid in the Department of Education, which is authorized by state law to fix its own salaries. Although there are several thousand clerical and custodial employees in that department who are recruited by the Civil Service Conunission and classified so far as possible within the general classification scheme of the city, there is not necessarily any coordination between their salaries and those of employees doing similar work elsewhere in the city. Clamficatian of Posiiians Entrusted to Ciml Service Cammieehn The rules of the Civil Service Commission establish a classifi- cation and grading of the positions in the city's service. The present grouping of city employees is as follows: Exempt Class (not subject to examination) Competitive Qass: subdivided into the following classifica- tions: The Ungraded Service The Cleric^ Service The Engineering Service The Inspection Service The Legal Service The Attendance Service The Police Service The Fire Service The Prison Service The Street Cleaning Service Hie Ferry Service The Medical Service Non-Competitive Class Labor Class Financial Administkation: Salaries 83 These services are in turn subdivided into salary grades. Thus, the positions in the clerical service are graded as follows: Grade 1— $480 to S959; Grade 2 — S96(H(1559; Grade 3 — $1,560 - $2, 159 ; Grade 4 — $2, 160 - $2,759 ; and Grade 5 — above $2,760. Whenever an employee is awarded a wage increase which takes him over the maximum for the grade, he is required to take a promotional examination, since the state Civil Service Law has been interpreted to require salary increases beyond the grade limits to be considered as promotions. The grades of pay establicdied by the Municipal Civil Service Commission have remained unchanged for ten years. They'^wm originally intended to be the standard rates of compensation for all city employees. They do not now achieve that purpose, for the Board of Estimate and Board of Aldermen have the power, as indicated above, to establish the titles of positions and the salaries the incumbents shall receive. The result is that the grades established by the Civil Service Commission do not now consti- tute salary scales for city employees, but serve only to burden the Commission with promotion examinations whoever an employee is raised from one salary grade to another. Principles to he Recognized in Determining upon a Wage Policy With the large increase in the number of governmental enor ployees in states and cities in recent years, considerable atten- tion has been centered on the necessity of classifying positions and of equaUzing rates of compensation. Large corporations have also found it increasingly necessary to set up job specificar tions and establish definite rates of pay. Definite standards in governmental employment are the more important because a municipaUty is not subject to the competitive conditions pre- vailing in tihe private business field where rates can frequency be gauged by output or amount of sales. In competitive business, personal characteristics and initiative are reflected in profit and loss statements; in the public service, more attention must necessarily be given to the relative values of different kinds of work and to g^eral considerations of efficiency. Substantially equal pay for equal work has come to be recog- 84 New York Cmr's Finances and nized as a primary consideration. ^ Employees having similar duties, whether in the same or in different departments, should receive equivaleiit oompensation. Attention i^ould be given to tiie rdationship of the rates paid groups of employees engaged on different types of work. Hospital workers, for example, should not be markedly imderpaid in comparison with office employees. In datmnining rates of oompensation for municipal em- ployees, the position, with its duties and qualification require- ments, rather than the individual, must be dealt with if favoritism and discrimination are to be avoided. The range or scale of pay should naturally vary with the type of work. An employee's initiative and interest in his work can be recorded to a certain extent by means of rfSdency ratings and merit may be recognized by increasing compensation within certain limits. Cost of Living and Other Factors in Compensation The compensation of various groups of public employees should be related to the cost of living. Rates should provide an adequate living wage. The rates, furthermore, should be fair in relation to those paid by the best private employers for tl^ same class of work. City employees, except in a few departments, are not subjected to the strain and pressure found in competitive business, working conditions are more pleasant, tenure is more certain, and a liberal ^tem of retirement is provided. Other factors such as hours of work required, vacation and sick leave, working condi- tions, and opportunities for advancement are not to be overlooked. It is apparent that these factors should be substantially uniform tiiroug^out the city service. No conmst^t wage policy can be carried out unless definite standards for appointment and service are maintained. There 1 Tin Quffter provides that salaries need not be uniform throui^ttt the several boroughs but may be made to reflect differential rentals and expenses of living in the several boroughs. (Charter, Section 56. ) No distinction has, however, been made in recent years in the salaries of employees in accordance with this provision. With the exception of rentals, it has been felt that Uving costs are fairly uniform through- out the city, and it is assumed that an employee of a given type will spend about the same amount for rent regardless of wh^ he resides. National Industrial Gonferenoe Board, Cost epartment 15 960 2,750 Department of Health 62 960 2,160 B^eviie and Allied Hospitals .... 17 960 2,600 AccountarU Department of Finance 51 2,400 6,600 Conmussioner of Accounts . • « . . 38 1,900 4,000 Dqmrtment of Finance 20 1,560 2,890 Law Department 3 1,800 2,100 President, Borough of Manhattan . . . 16 1,625 2,790 Pkerident, Borough of Bronx 5 2,005 2,178 Pkeaident, Borough of Brooklyn .... 7 1,550 2,160 Department of Plant and Structuwa . . 7 1,537 2,159 Department of FUTGhaae 2 1,710 1,700 Amiikaii Enginm Board oi Estimate and Apportionment . . 22 2,750 5,800 Fkesidenti Borou|^ Manhattan . . . 42 2,432 5,250 Financial ABiONumtATioN: Salabobs 03 TABLE IV (CoiKtniMd) Bangs of Salabies in Various Departmsnts wsl Csbtain Types OF Positions NuMBBS or AIM V U M WHI «1 Ifomnm Assistant Engineer {Continued) 27 $2,760 $6,000 PMndent, Borough of Brooklyn .... 69 2,376 5,250 Department of Education 4 3,528 4,320 Department of Water Supply, Gaa, and El- 30 2,160 6,000 Department of Plant and Structures 28 2,460 7,500 14 3,000 6,000 Watchman Metropolitan Museum of Art .... 22 1,255 1,381 American Museum of Natural History . 12 1,288 1,683 10 1,200 1,500 Brooklyn Institute of Arts and Scienoes 5 1,317 1,317 D^Mfftment of Paiks, Queens .... 8 1,500 1,500 Statoi Island Institute of Arts and Scienoes 1 800 800 6 720 1,185 SatiABIIBIi Paid PMmAfioN Officebs and Related Social Wobksbs • Chibf Probation Officer DSFOTT Cnxmw Pbobatiok Officer FBOBASaOW OmcHB Special Sessions Children's Court City Magistrates' Courts General Sessions . . Parole Comminion ^ 1— $4,100 1— 6,000 1— 4,100 1— 7,500 1~ 3,600 3— $3,000 to $3,300 3— 3,250 to 3,500 2— 5,000 3— 2,613 21— $1,560 to $2,613 60— 1,800 to 2,700 74^— 1,560 to 2,613 27— 3,000 30— 1,880 to 2,200 and would not appear to warrant a salary range of more than $1,200 as shown by the table. Considerable variation is shown in the salaries for watchmen. A more exhaustive inquiry would undoubtedly disclose many inconsisteneies and inequalities. There is no definite standard in effect for paying many groups of employees. In some cases the titles are probably at fault. In others, where the character of the ^ Has parole instead of probation ofiSoos. 01 Nsw YoBx Crnr's Fin angis amd work varies, the salaries paid show a disproportioiiate variation.^ Some employees undoubtedly receive considerably less for per- forming work comparable to that of liigher paid employees. There are, however, relatively few oonspiouous instances of groups of employees being underpaid. Scientific and technical workers, as a class, do not appear to have benefited as much by recent salary increases as have mechanics and clerks. The highest rate apparently paid for bacteriologists is $3,350; out of 22 miployed in the Department of Health, 17 receive less than $2,500. The compensation of medical superintendents of the city hospitals is said to be lower than that paid by private institu- tions. The Department of Public Welfare contends that it is impossible to persuade x-ray and other laboratory technicians to alter the municipal service at the $1,260 rate provided. A regrading of engineers also appears necessary. Comparison of Kates with Those in Pbivate Employment The general adequacy of the compensation rates is suggested by the averages discussed above. The average is affected to a considerable extent by the rates paid certain large groups (rf employees. It is of interest to inquire how the compensation of employees in the more important groups compares with com- pensation for similar work outside the city service. There are nearly 15,000 patrohnen and more than 5,000 firan^ recdving from $1,769 to $2,500. Rates for these employees are ordinarily controlled, in part, by the influence which large groups of this kind can bring to bear upon the appropriating authorities, and by the fact that it is deemed advisable to provide rates which will attract married men or make it possible for single employees to marry. In connection with the compensation of hremen and poUcemen, although it is outside the scope of this discussion, attention diould be called to the policy of using large numbers of the » For example, clerks employed in checking and emiiiMliiiff aamnment liste an paid from $1,260 to $3,000 for work which ckMs not wana&t audi idUe vaaatknia in oompensation. FiNAKciAL AnifiNidTitiLTtoN: Salabies 95 uniformed forces on routine clerical work. Many policemen and firemen are unsuited for office work. They have not been selected with reference to such quahfications, and the^'' are performing tasks which could be much more economically undertaken by employing ordinary clerks and stenographers at lower salaries. This condition is not peculiar to New York. In the Police Department, such use of the uniformed force is apparently more prevalent than in the Fire Department. In the former only half as many civilian clerks are anployed, even though the Pdice Department is much larger. Rates of Pay for Mechanics Skilled mechanics of various kinds also serve to raise the general salary level of municipal employees, since the skilled rates are governed for the most part by those fixed by organized labor. Until about two years ago, the rates for the skilled trades were established in accordance with the prevailing rates, as indicated by a survey made by the Board of Estimate. The rates paid large groups of workers in various trades were ascer- tained and the municipal rate fixed in accordance with the pre- vaihng rate of the positions surveyed. Table V shows the rates paid in 1926 for the unportant skilled trade classes as compared with the union rates paid by the Build- ing Trades Employers' Association, the rates paid at the United States Navy Yard, Brooklyn, and the rates of a large number of New York employers belongmg to the National Metal Trades Association. The municipal rates will be seen to be lower than the estabUshed union rates recognized by the Building Trades Employm' Associ- ation, but increases in the scale are proposed for the coming year. The present rates, however, are fully comparable to the union rates when consideration is given to the fact that practically all of the city employees work the year round, receive a vacation with pay, and enjoy pulsion privil^es. The ordinary building trade mechanic in private employment works only from 225 to 250 days a year, so that his annual income is no greater than that of the city worker. It will be noticed that the municipal 96 Nsw YoBX City'b Financto and TABLE V COMPARATIVB RaTBS FOR SKILLED TbADSS (PBB DxKM) BUILDINO New York Trades Navy Yard, CiTT Rata Emplotkbs' Bbookltm, N. y. Automobile Machinist 10.00 • ■ • • $6.96 Blacksmith 9.50 $12.00 7M naekBmitli Helper 7.00 9.00 &04 Mdday«r 12.00 14.00 .... Carpenter 10.50 12.00 7.20 Dockbuilder 9.00 12.00 7.20 Electrician 9.50 12.00 7.60 Electrician Helper 6.60 8.00 4.96 House Painter 10.00 12.00 7.20 Ijifoonr (Cmnmm) 5.60 7.25 4.40 licensed Firamui 7.00 C OA Machinist 9.50 12.00 7.20 Machinist Helper 7.50 9.00 4.80 Marble Setter 10.00 12.00 • • • • Marble Setter Helper 7.00 9.50 • • • • Moulder ......... 8.00 • • • • 7.84 Niekillltltr 9.00 • • • • Oiler 7.00 6.00 Plumber 11.00 12.00 7.60 Plumber Helper 6.00 • • • • • • • • Ship Carpenter 9.00 • • • • 7.60 Ship Caiilker 7.20 • • • • 6.80 Stationary Engineer . . . 8.50 11.00 7.20 Steam Fitter 11.00 12.00 • • • • Steam Fitter Helper 8.00 8.50 Sheet Metal WoilDer 10.00 12.00 7.60 Stonecutter 9.00 14.00 • • • • Welder 9.50 7.20 Note: Municipal rates as riiown, in 1926 budget; buflding trade rates from Bmlding Tndm Employers' Association, 30 West 33rd Street; and Navy Yard rates from pamphlet, Schedule of Wages for CM Employees, 1926, pubUshed by the United States Navy Department. Hourly rates were converted into an eight hour day rate. Recent figures furnished by the United States Bureau of Labor Statis- tics corroborate the union rates generally paid in the building trades. rates are from 20 to 50 per cent, higher than those paid by the national government, which considers that a guarantee of permanent employment warrants a reduction in the union scales. Financial Administration: Salaries 97 Rates of Pay for Office Workers Comparisons between the rates paid for ordinary clerical ser- vice by the city and by private employers are difficult in the absence of a detailed analysis of the positions in question. Statis- tical data is lacking and the Civil Service Commission keeps no record of the number of clerks of various grades employed. The liberal maximum compensation provided for clerical positions has been shown in Table IV. Individual cases also appear to suggest that the city pays considerably more for clerical work than large private employers. Data was gathered from one of the largest clmcal organizations in the city. Here there was found a group of about 2,000 record or data clerks, mail readers, and typists, who do work involving some special training and requir- ing ordinary intelligence. The average compensation was $24.31 a we^ Althougjh there is a great deal of ordinary clerical work of this kind in the city service, it is readily apparent from an examination of the budget that the majority of clerks and typists comparable to the group in question are receiving in tiie ndgh- borhood of $30 to $35 per week. The avmge pay for the stenog- raphers in the private organization in question is $23 a week, which is apparently from 15 to 20 per cent, lower than the muni- cipal rate for similar work. liberal clerical salaries in the city service are particulariy to be found in the Department of Education. The budget for 1927 discloses 14 clerks receiving more than $4,000 a year, 25 receiving $3,528, and 152 who receive $2,000 or more. An isolated example of municipal rates that are considerably higher than those paid by private employers is the rate for Department of Plant and Structures ticket agents, who receive as high as $2,300 a year, as compared with a rate of about $1,500 on the outside. Breakdown of the Classification Scheme A definite plan of classifying the various types of employment was completed in ldl6, and the ^orcement of the clarification pbiQ was entrusted to a Bureau of Standards, attached to the 98 New Yobk City's Finances and Board of Estimate staff. As a part of its programme, the admin- istration eliminated a number of employees in the interest of eoonomyi and in the mayoralty campaign of 1917 this was made an issue. The new administration proceeded to abandon the classification scheme, and abolished the Bureau of Standards. Except as the Civil Service Commission has continued to use the classification as a basis for selecting new employees, the classification can no longer be said to be toily operative. Many instances may be cited where the titles of positions do not describe the duties of positions, although the state law specifies that "no person shall be appointed or employed under any title not a|ipiopriate to the duties to be performed." The title "medical inspector,'' used in the Health Department, applies not only to physicians engaged in conducting medical examinations of school children, but to a physician who serves as consultant to the health commissioner on various subjects and to the assistant chief of the Bureau of Child Hygiene. The title "hospital helper" which appears in the budget of the Department of Public Welfare is used for employees serving as garagemen, laborers, and clerks. Many so-called "clerks" are eith^ supervisors or accountants or auditors and are paid accordingly. Both mechanical draftsmen and topographical draftsmen are foimd employed on drawings of water main extensions. Some of the "clerks" are engaged in stenographical or secretarial work, and should be so classified. The Civil Service Commission endeavors to curb ibe use of mis- descriptive titles when such matters are called to its attention, but in the absence of a definite classification record, it does not possess the necessary informatioii. Revmm of ClassificaJtion Needed The revision of the old classification scheme is much needed. A workable classification of positions involving the same duties, requiring the same qualifications, and assigned the same salary limits, is just as essential in buying personal service as are defin- ite specifications in the purchase of commodities. If descriptive titles and specifications for various types of employment are adopted, the Board of Estimate and taxpayers interasted in the Financial Administration: Salaries 99 affairs of the municipality will be in a position to know something of the character of the work entrusted to an employee bearing a certain title. This title will indicate the kind of examination involved in obtaining an appointment to the position and will carry with it a definite salary range. Specifications of this kind are of value to the Civil Service Commission in informing pros- pective applicants of the duties, qualifications, and salaiy in- volved. Department and bureau heads will be provided with definite standards when they appear before the Board of Estimate and seek authority for the employment of additional workers of a given kind. The Board will know just what types of positkms are in question. Suggested Impravemenis in ClassificaHan Considerable progress has been made in recent years in the technique of personnd classification. Many improvements, theie- fore, can be made in the present plan. The nomenclature should be simplified. At present there is considerable confusion in the use of the words "class," "service," "part," "group," "grade," and "position." The bufge subdivisbns or classes set up under the state law have been subdivided into "services" but these have not been thoroughly worked out along functional lines. A large number of positions remain in the "ungraded service." One of the most serious criticisms of the present dassification is that it provides no scheme for showing, by the title of a position, its relative rank with regard to other positions which differ not in the nature of the work involved but in the degree of respon- sibility. If a series of titles such as, for example, under clerk, junior derk, s^or clerk, head clerk, and duef clerk, were used in subdividing the thousands of positions now Hsted in the budget merely as "clerk," the relative importance of the various positions would be more clearly indicated. Commercial practice now subdivides engineers into juniors, assistants, associates, seniors, chiefs, etc. Similar improvements can be made in the titles of inspectors and other groups. Very few of the titles at present in use indicate clearly «ifwigh dth^ the vocational specialissation of the work perforn^ or its 100 Nbw Yobk Crnr's Finangkb and place in the organization structure. Thus positions like those of Searcher, Attendant, Supervisor of Complaints, Measurer, Chief Inspector, or Assistant Engineer may involve work of almost any kind in any department. It is not enough to call an employee an Engineer. He is eith^ a Civil, Mechanical, Electrical, Auto- motive, or other Engineer. It is usually necessary further to subdivide even civil engineering into its numerous branches. Inspectors should be definitely tagged Building Inspector, Fire Prevention Inspector, and so forth, as the case may be. Many other descriptive titles should be employed, such as Purchasing Clerk, Psychiatric Nurse, or Assistant Occupational Therapist. The diortcomings of the present classification {dan have been recognized in part by the adoption of a few cumbersome though descriptive titles, such as "clerk with knowledge of card indexing.'* Need Jot Detailed Wage Survey The existing classifications and speeifications invite revision. Better titles should be selected. In some instances a finer sub- division of the classification will be foimd necessary. The same tities should be used throughout on payrolls, in ?»ftlg^"e appro- priations, and by the Civil Service Commission. The Commissioner of Accounts, recognizing the importance of having a definite record of all the positions in the city service, «ich as is not now in existence, has recentiy required every city employee to fill out a form giving a brief statement of his duties. These data will be of great value for a study of the city's wage problem. The questionnaire is hardly complete enough, how- ever, to provide a full record of the position and of the employeei audi as is needed and should be on file in eonneetkm witii em- ployment as distinguished from budget processes. Additional data are desirable. This should include the place of work, the place of the position in the organization, the amount of supervision involved, maintenance or other remuneration, uniforms, etc., hours of work, age, and home address, record of employment in the city service, and data from immediate superiors regarding the requirements of the position in respect of experience, special knowledge, mechanical skill, or physical attributes. A detailed Financial Administration: Salaries 101 description of the work itself is of primary importance, since it is obviously impossible to conduct a personal investigation of each of the seventy-five thousand positions in the municipal service. Definite Salary Scales Suggested The salary grades set up by the Civil Service Commission should be discarded and for each group of similar positions or "classification," a definite salary scale should be adopted by the Board of Estimate. Thus, for a new classification of junior stenographer there might be provided a scale of $1,200-$1,320- $1,440-$1,560. New appointees under such a scale would enter the service at $1,200, and be advanced one step each year until they reached the maximum for the class. Advancement within the salary scale should be withheld if the employees' efficiency records do not measure up to the required standards. Before receiving any further increases, they would have to qualify for the position of senior stenographer and be assigned to more difficult work. Part of the Civil Service Rules should be rewritten. The Civil Service Commission should exercise more authority over the use of payroll titles and the classification of positions. Since the Commission is required to fill the positions in question, it, rather than the Board of Estimate, should investigate the work to be performed and, in conjunction with tiie department head, de- termine the classification. The Commission should broaden its poUcy of promotion and make it possible for employees to transfer across departmental lines, especially when there are no further opportimities for advancement where they are. The preset policy of establishing promotion ehgible fists in every depart- mental unit is tending in the direction of countless examinations for individual positions rather than for a related group or dasaifi- cation of positions. A classification programme, such as is suggested, should prob- ably be undertaken under the direction of the Civil Service Com- mission since, after all, it needs to know a great deal more than does the appropriating agency regarding the duties of the positifms in the service. Personnel examiners of the Board of Estimate, 102 New Yobk Cmr's Finances and however, should cooperate in the work. New compensation schedules should be recommended by the classification agency- after the completion of the survey. The compensation plan should be adopted by the Board of Estimate for the classification as a whole. After the adoption of the new schedules, adjustments in rates of pay should be made only for groups of positions or an entire classification and in no instance for individual employees. From time to time, in connection with the preparation of the budget, systematic revisions of the entire compensation plan diould be made. A repetition of the present situation will be inevitable unless the Board of Estimate abandons its present plan of sporadic increases. CHAPTER IV NEW YORK CITY'S PURCHASING AGENCIES AND METHODS New York City is one of the biggest governmental buyers in the United States. Its expenditures for supplies, materials, 0 and equipment are exceeded only by those of the United States government. Its purchases comprise a vast array of articles ranging all the way from thumb tacks to steam rollers, and in- clude all kinds of sustenance conunodities for the thousands of inmates in the city's penal, charitable, and correctional institu- tions. In 1922, the Board of Purchase, acting for only the ''mayor's departments," bought 3,352,000 pounds of beef, lamb, and veal; 704,000 dozen eggs; 672,000 pounds of butter; 295,300 tons of coal; and 2,739,000 gallons of gasoline. These w«re some of the leading items on the city's "shopping list." * It is obvious that the methods followed in spending such huge amounts are of great importance in dollars and cents. It is obvious also that purchasing practices are intimately connected with the form and content of the city's budget and with the accoimting machinery. The budget of New York City, however, is not designed to show accurately and precisdy how much is spent annually for supplies, materials, and equipm^t. Appropriations are made to each spending agency for "supplies, equipment, and materials," but this does not tell the whole story. A separate budget allot- ment termed "contract or open order service" is made to each department for repairs, alterations, replacements, and new con- struction projects, and includes labor as well as commodities. Supplementary appropriations which are made throughout the >f\gixs^ quote^ from QrmOer Nm York, June 18, 1023, page 16. m 104 New Yobx City's Financbs and year by the Board of Estimate and Apportionment still further complicate the situation. For this reason, it is exceedingly difficult to secure definite figures on the total spent by each using agmcy, or by the entire mty gjoivmaomt lor supplies, materials, and equipment. The 1926 and 1927 budgets made the following appropriations: SuppKes $10,879,000 $11^,000 Equipment 4,042,000 4,055,000 Materials 3,035,000 3,306,000 Contract or open order service (includes both personal services and commodities) 21,026,000 28,902,000 $38,982,000 $48,728,000 The largest buyers in the city govemm^t spent, during 1926, the following sums for supplies, materials, and equipment: Dqpartimeiit of Eiliuai«ion $6,741,000 Department of Public Welfare 3,352,000 Department of Street Cleaning 2,212,000 Department of Plant and Structures 1,702,000 Bellevue and Allied Hospitals 1,360,000 Board of City Record 1,318,000 Department of Water Supply, Gas, and Electricity 1,032,000 Fire Department , . .. 904,000 Department of Health 802,000 Department of CorrectifHl 848,000 Police Department ............... ggg^OOQ These figures include not only the amount appropriated for sup- plies, materials, and equipm^t, but also approximately that im>porti(m of the appropriation for contract or open order service which was spent for commodities. Centralized purchasing has been adopted in pnnciple in over 200 dties of the United States and Canada. Escperience has demonstrated that a central purchasing agency, with a reasonable degree of freedom from political interference, can bring about a 10 to 15 per cent, reduction in the supply cost. The advantages, briefly summarized, are: Bulk orders, representing the consolidated requirements of several users, result in increased competition and lower prices. FiNAKOIAL AdMINI81!R4TI0N: PUBCHASmG 105 Reduction in cost of preparing and publishing the advertise- ments, and distributing to vendors the requests for quota- tions on pending orders. One advertisement and one notice to vendors can advertise the needs of ten or more departments as well as of a single department. Elimination of purchasing and inspecting staffs in the individual departments. Lessening of work in finance departments through reduction in number of deposits and surety bonds to be accounted for and returned, and fewer contracts to be approved and recorded. The work of the law department is similarly simplified, for it has to pass upon fewer legal notices and contracts. Volume of purchases in certain commodity fields becomes large enough to justify employment of sti^ of skilled bu3rers, each a specialist on methods and prices in Us particular line. For many years New York City has been making slow progress toward centralized purchasing. The Joint Legislatiye Committee, appointed to investigate the city's finances, recommended to the legislature in March 1909, that "the city should be required by law to establish a bureau for the purchase of supplies, which Eliould be under the general jurisdiction of the Board of Estimate and Apportionment, the head €i which should be charged, as far as practicable, with the responsibility for the purchase of all suppUes for the city." ^ The New York Charter Commission offered a provision for cmtralized purchasmg in the Adminia- trative Code which was presented to, but failed of passage by, the legislature in the same year. Comptroller William A. Prender- gast, in 1913, submitted to the Board of Estimate and Apportion- ment a plan for a central purchasing departmmt. The first definite step in this direction was taken by Mayor Mitchel in November 1914, when he appointed a centralized purchasing committee headed by Henry Bruere, at that time City Chamberlain. By the Mayor's order, the committee consolidated the contract pundiafiing at Hm 28 departments, boards, and offices whose heads wm appointed by the mayor (the so-called * 'mayor's departments"). In spite of the half- 1 UfUttthre Dooument No. 50, 1909, pige S5. 106 Nsw YoBx City's Finances and hearted co^ieration of the departments of the city goveminent, this voluntary and ex officio body, lacking legal sanction, func- tioned with marked success until 1919. In that year, the state legislatiu*e gave the Mayor discretionary authority to create a Board of Purchase of three or more commis- aoners of departments acting ex offi^o. This board appointed by Mayor Hylan continued until the creation, in 1923, of the present Department of Purchase. The Purchasing Agencies Since the establishment of the Department of Purchase, it is commonly believed that the city government has a centralized purchasing agency. Such is by no means the case. As shown below, the Department of Purchase is not a real purchasing agency; nor does its limited jurisdiction extend to all the city and oounly agencies within Greater New York. Some of these agencies piu-chase independently; others share that responsibility with the Department of Purchase. The main purchasing agencies now are: The Department of Purchase The Borough President's office in each of the five boroughs The Board of City Record The Bureau of Supplies of the Department of Education Department of Purchase The Department Charter, Section 111. Financial Adionistrateon: Pubghasing 109 sewers, street cleaning, public buildings, office buildings, con- struction and alteration, and engineering and topography. He is also in charge of the 14 separate storehouses and storage yards operated under the Borough President. Op^ market orders, in 1926, amounted to $1,220,631, while contract orders awarded by the auditor totaled $10,688,331. Purchasing has not been centralized in any one office in either the Bronx or Richmond. The Borough President's office of the Bronx, in 1926, spent $517,205 for supplies, materials, and equip- ment. The supply expenditure in Richmond, including street cleanmg, totaled $397,995 in 1926. The system of buying for the Presidents' offices is hit-or-miss. The Department of Purdiase is capable of buying for the borou^is the same supplies which it now furnishes to other branches of the city government. The purchasing functions of the Borough Presidents would be eliminated if New York City had really centralised purchasing. Board qf CUy Record The Board of City Record is established by Sections 1526, 1527, and 1528 of the Charter. The Board consists of the Mayor, Comptroller, and Corporation Counsd, acting ex officio. Its functions are summarized in the Charter (Section 1528) as follows: "All printing for said city and for the counties con- tained within its territorial limits, including the printing of the CUy Record, shall be executed and all stationery shall be supplied, under contracts, to be entered into by the said Board of City Record." The Board is thus given the power to purchase and distribute all printing and stationery supplies, in addition to publishing the City Record, the city's official daily newspap^. Tlirough the action of other confficting charter provisions or of special laws, the following agencies of the city buy their printing and stationery supplies independently: Department of Education, Board of Elections, College of the City of New York, Himter College, Board of Transportation, Transit Conmiis- sion. Board of Water Supply, and the supreme courts, museums, and libraries. 110 Nbw York Cmr's Finangbs and The work of the Board is carried on by the Supervisor and Deputy Supervisor of the City Record and 37 employees. The budgets for 1926 and 1927 were: IWnal senrioe $86,067 $88,828 OUi^ than pencmal service 7,88S 4,185 $93,952 $93,013 The Board of City Record is given a yearly lump sum appro- priation for publishing the Cily Record, and for purchasing and distributing the necessary stationery and printing suppKes. Charges are made to this fund when supphes are deUvered. In addition, separate appropriations are set up for printing Public Health EducaHon, bulletin of the Health Department, and for the stationery supplies needed by the county offices in each of the five counties. The 1927 budget appropriation to the Board was as follows: City Printing, stationery, blank books, publication of City Baoord , $1,313,000 Plintiiig, PMic HeaUh Education 13,000 Counties Purchase, storage, and distribution of stationery and supplies, county offices and courts other than the supreme courts New York $40,000 Bronx . . : 17,000 Kings 35,000 Queens 12,500 Richmond 5,000 Total $1,435,500 New York is the only city with a separate organizatioii for the procurement of printing and stationery. Centralized purchasing would confine the function of the Board of City Record to publi- cation of the City Record and the supervision of all official adver- tising for the city. All city and county offices, except the Depart- ment of Education, would then obtain their stationery through the Department of Purchase. There seems to be no valid reason why the supreme courts and certain other governmental units should continue to buy their printed suf^lies independently. Financial Administbation: PuBCHASiNa 111 Bureau of Supplies of the Department of Education Prior to 1917, the Bureau of Supplies and the office of Superin- t^dent of Supphes had been created undw the authority of Sections 1075 and 1076 of ihe Charter. These sections, however, were repealed by Chapter 786 of the Laws of 1917, which, under a general grant of powers applying to all cities, permits boards of education "to purchaae and furnish such i^iparatus, mapSi c^obes, books, furniture, and other equipment and supplies as may be necessary for the proper and efficient management of schools . . . " and "to provide text books and other supphes to all the children attending the schools." The Bureau buys all books, supplies, fud, scientific apparatus and equipment for the school system of the city with the exception of furniture installments, replacements, and repairs, which are furnished through the Bureau of Construction and Maintenance. The Bureau handles all postage stamps used by school officials, and all bus and trolley tickets needed for transporting pupils. Each of these two items totals about $70,000 per year. Himter College and the College of the City of New York, al- though a part of the educational ^t^ of the dty, buy itmr supphes independently. The Manhattan Trade School for Girls, a self-supporting institution, uses the official lists and contracts of the Bureau, but buys independently. The Bureau is headed by the Superintendent and the D^uty Superintendent of Supplies. It has a total of 218 anployees. Its budget for 1927 totals $525,530, of which $446,354 is for personal service, and $79,176 for service other than personal, including supphes. This force is necessarily larger than that of the Department of Purchase because it is a complete supply unit, receiving, examining and redistributing the goods it buys. The Department of Purchase has been described as merely a price- getting office. During ld25, the total expenditures of the Bureau oi Supplies amounted to $5,741,274. In addition, the school system spent $3,357,034 for furniture and equipment through the Bureau of Construction and Maintenance. The task of purchasing for the city's educational gfystem is 112 Nsw YoBK Citt's Finangbs and in itsdf vast encNigh for one office. The DQ>artment of Education maintains over 700 school buildings, and receives supplies at more than 800 delivery points. The Department is also, to a considerable degree, financially independent of the central govern- ment. This constitutes a further argumoit for a separate supply bureau. Hie Bureau of Supplies functions with marked effective- ness. It is capably administered, and unquestionably reduces supply costs by thousands of dollars annually. The cost, in 1925, for all books, supplies, equipment, and instruction materials, was only one cent per daUy attendaoioe of a pupil in the grades, and two and one-half cents per pupil in high schools. The Bureau might well purchase for Hunter Collie and the College of the City of New York. Other Ptarchasing Agencies Several other departments of the city maintain purchasing oflaces. The American Museum of Natural History has a pur- chasing a^t and storekeeper with a staff of assistants. The D^Murtmmts of Public Markets, Correction, Public Welfare, Plant and Structures, and Water Supply, Gas and Electricity maintain their own purchasing corps, although their supply expenditures must clear through the Department of Purchase. In fact, the Department of Public Welfare had a budget, in 1926, of $47,418 for the purchase, and $93,241 for the storage and distribution, of medical and surgical supplies. PuBGHAsiNO Methods DeternUning Beqmrementa qf the Using Agencies For budget making piuposes, all using agencies are required to submit lump sum estimates of their requirements for the next fiscal year. Detailed estimates are not submitted in advance of actual need. Requisitions for the suppUes, materials, and equip- ment as needed are sent to the respective buying offices. The Bureau of Supplies of the Department of Education keeps ac- curate consumption reoords for past years, dasEofied by com- modities and also by individual using agencies. It is thus en- FiNANCiAL Administration: Purchasing 113 abled to estimate with a fair degree of accuracy the total quan- tities of each article to be needed for the year, and accordingly to enter into contracts without consulting each individual using branch or school. The contracts, based on estimated total quantities, may be increased or decreased according to actual need. Hie Board of City Record also ke^ accurate consumption records of each article of stationery used by each departmmt and office of the city government. But, unlike the other buying offices, the Board receives detailed estimates of needs for the entire fiscal year. The contracts are awarded for definite total quantities, a necessary procedure in the purchase ot printing. The Department of Purchase receives annual estimates for coal; quarterly estimates for non-perishable staple articles; and monthly estimates for perishable foodstuffs. The quarterly esti- mates are submitted two months in advance of the required delivery date. The monthly estimates are filed in the current month for delivery on the first of the following month. The Department of Purchase cannot anticipate requirements and thereby take advantage of favorable market conditions, because it has no contact with store records and no account of stocks on hand in individual departments. In all cases the Department of Purchase, before proceeding to buy, must wait until requisitions are received. It should have authority to secure estimates at any time and to advise the individual departments and offices to order in advance of need when prices and markets are favorable. The Borough Presidents' offices, generally speaking, buy noth- ing until requisitions are rec^ved, and make no attempt to profit by favorable market conditions. Standardization Standardisation is essential to the success of centralized pur- chasing. "Without some degree of standardization, centralized purchasing results in the placing of many small orders throu^ one office. As long as each using office may demand and receive its own particular brand or variety or style, it is impossible to consolidate requirements of individual departmoits into large 114 New York City*s Finances and orders. Furthermore, standardization is an adjunct to careful and sdeiitific inspection. Unless definite standards are agreed upon and enforced, vendors often cannot be compelled to deliver exactly what was purchased. In 1910 a commission on standardization of supplies was set up und^ the supervision of the Board of Estimate and Appor- tionment. In 1913 the Board made it a regular bureau under the name of the Bureau of Standardization of Supplies and Equipment. This agency was merged with the Board of Purchase when the latter was estabhshed in 1919. The Bureau of Standardization of Supplies and Equipment divided the city's purchases into the following forty-two classes, which are still effective and are the basis today for apportionment of responsibihty among the various buyers in the D^iartment of Purchase: 1. Apparatus (laboratory, etc.) 2. Arms and supplies, ammunition and explosives 3. Athletic goods (incduding games, toys, etc.) 4. Books, publications, etc. 5. Qeaning materials and compounds 6. Cleaners' machines and suppUes 7. Clothing, etc. 8. Cordage, rope and oakum 9. Drafting and engineering tools, instruments and suppUes 10. Drugs, chemicals, etc. 11. Dry goods, notions, etc. 12. Electrical fixtures and suppUes 13. Fire apparatus and apphances 14. Food products 15. Forage (including all good for animals) 16. Fuel (including fuel oils) 17. Furniture and furnishings (including kitchen supplies and utensils) 18. Hardware (not otherwise classified) 19. Hois^ital supplies and surgical instruments 20. Iron, steel, and other metals (induding castings) 21. Leatiier, saddlery, belting, hose and hose fittings 22. live stock, (including horses and aU otiier animals) and laboratory specimens 23. Machinery and parts (not otherwise specified) Financial Administration: Pubchasing 115 24. Materials of construction (including Imnber, timber, and building material) 25. Materials for manufacture of prison goods 26. Miscellaneous 27. Nails, bolts, nuts, washers, rivets, and screws 28. Nautical suppUes (including boats and equipment) 29. Office equipment (other than furniture), mipphes, and stationery 30. Oils (lubricating and illuminating), greases, and all lubricants 31. Paints, oils, varnishes and painters' supplies 32. Pipe, valves, and pipe fittii^ 33. Photographic materials and suppUes 34. Plmnbers', steamfitters', and machinists' suppUes 35. Printed, Uthographed, engraved, and bound books and forms 36. Rubber goods (not otherwise classified) 37. Stable equipment and supplies 38. School supplies (not otherwise classified) 39. Seeds, plants, shrubs, trees, etc. 40. Tools and implements 41. Vehicles (including automobiles, trucks, wagons, carts, carriages, bicycles and motorcycles) 42. Wire rope and wire Although this Bureau succeeded in formulating over 1,600 iqiecifications, these covered not more than five per cent, of the different commodities used by the city. The work irf the Bureau of Standardization is being partially carried on by a staff member of the Department of Purchase. It is naturaUy impossible for one individual adequately to perform this duty; consequently, few, if any, additions or revisions have hem made. Practically all of the specifications of the United States Government, as they are issued, are adopted wholly or with modifications; in many cases tiiey supersede the city's old standards. Specifications are sometimes diiwn up by the Department of Purchase or by tiie engineering staff of the individual buying office concOTied, to cover an item not previously purchased. If no specification is available, purchases are made wherever possible on sample. Standard samples are kept in a special sample roam in the Department of Purchase and in the Bureau of SuppUes of the 116 New York City's Finances and Department of Education for the assistance of the inspectors and the testing laboratories in checking deliveries. Such a i^jrstem permits the using departments sometmes to plead the lack of specifications as an excuse for buying by sample the product of a favored vendor. New or revised specifications must be adopted by the Board of Estimate and Ai^rtionma[it before use. Alter adoption, the use of standard specifications is made mandatory by a resolution of the Board incorporated in the annual budget as follows: "In so far as practicable, all contracts and open market ordars for purchases to be charged against such appropriation shall be based upon specifications which are definite and cer- tain as to character and quality, and which conform with standard specifications for the various classes of supplies, materials, fuel, and forage already approved or hereafter to be approved by this Board. ''That, in so far as such standard specifications may be estab- Hshed by this Board, the Comptroller at the time of certifying to the sufficiency of appropriations out of which such contracts are to be paid, shall also certify that the specifications for such supplies or materials, fuel or forage or other articles for which standard specifications have been prescribed, are in conform- ance with such standard specifications. "That all open market orders issued by any department for suppUes and materials, for which standard specifications shall have been prescribed, shall contain a description of the goods ordered, conforming with such standard specifications. 'That the Comptroller shall, in auditing claims for goods ddivaned on open market orders, determine, through inspec- tion or otherwise, whether the goods delivered conform to mdk standard E^edfications." ^ The ^cpanding service of the city constantly creates need for new specifications. Existing specifications should be revised and kept up to date to meet changes in manufacturing and distribut- ing practices. Many of the city's standard specifications are obsolete. Hie city is the loser when a qiedficatkii is too rigid, and requires special manufacture or higher quality than necessary. It is equally the loser when the specification is too lax and permits ^ 1937 budlipet, p. 8. Financial Administration: Pubchasing 117 the substitution of articles of inferior quality. Purchase by trade brand or sample,. often necessitated by the lack of specifi- cations, is likely to stifle competition. The Department of Pur* chase should have a staff technically trained in specification drafting to cooperate with the using departments in the revision or formulation of standards. Purchase Negotiatum The procedure for soliciting and recriving bids and awarding contracts is prescribed by Section 419 of the Charter, and applies uniformly to all buying agencies of the city. One thousand dollars is established as a dividing line betwem open market and contract orders. All orders involving an expenditure of over $1,000 may be awarded only on a formal contract after advertis- ing for bids, ^'unless otherwise ordered by vote of three-fourths of the m^bers elected to the Board of Aldermen.'' AU orders in- volving less than $1,000 may be purchased in the "open market" without advertisement. The Board of Aldermen is very willing to exempt orders amounting to over $1,000 from advertising and pubUc letting upon request from a using department. In fact, such requests are seldom disapproved. During January and February, 1926, the Board of Aldermen granted exemptions which totaled $338,520.^ Some of these requests were undoubtedly justified. The city can often benefit from prompt purchase in the open market by waiving the delay and formality of advertising and public letting. But the Board of Aldermen frequently grants such requests when they are not accompanied by satisfactory statements establishing the need for open market purchase. Advertising for bids on all contract orders is in theory centra- lized in the Board of City Record, for the Charter (Section 419) provides that pending purchases shall be advertised in the City Record for at least ten days before the date of award (11 days if delivery is to be made in Brooklyn). At present, however, the Board handles less than 25 per cent, of the total advertising required by law. The Board of City Record has no jurisdiction » For the 192S the amoimt WIS $1,907,207. 118 New Yobx Cmr's Financbs and whatever over the legal notices the city, county, and surrogate courts, or the legal notices and contract advertisements of the Board of Elections, the Board of Water Supply, Transit Commifi- mon, or the Mayor's Office. These agendes may, or may not, as they see fit, use the City Record as an advertising medium. It would seem wise to centralize in the Board of City Record the responsibility for all legal advertisements. Economies could be effected by its staff, the members of which are trained in re- ducing an advertisement to the smallest possible compass. The annual lump-sum appropriation of $180,000 now given the Board for advertising in outside publications should be increased to include the separate appropriations now made for the same inirpoBe to the Board of Elections, the Department of Education, etc. The cost of publishing the City Record during 1926 was approximately $420,000; only one-twelfth of this cost, or $35,000, can be charged to advertisements. Yet the advertis^ents alone, if carried in outside newspapers at the prevailing rate, would have cost the city over one million dollars.^ On contract orders in 1925 the Bureau of Supplies, of the De- partment of Education, s^t out about 4,000 direct requests fot bids, to supplement newspaper advertisem^ts. The Depart- ment of Purchase sends post card notices to its mailing list, stating that a contract is pending and requesting the vendors to write or send for the specifications and bid sheets. The Board of City Record, on the othar hand, rdies entirdy on advertisements in the CUy Record. The Board has foimd that surety companies stimulate competition as a means for increasing their own busi- ness. It is believed, however, that the Board ebould send out notices and requests for quotations in addition to the advertise- ments. The Borough Presidents' offices depend solely upon advertisements in the City Record, or the ''corporation news- papers" in BrooklyTi,^ to solicit bids on contract orders. The trade papers are, however, alert and are the source of information for most contractors. Open market orders need not be advertised but competition ^ According to statement of Deputy Siqiervisor of the CUy Record. * See CSiarter, Section 1526. Financial Adionistbation: Pubchasing 119 is required wherever possible. Even patented articles with limited supply sources must be purchased under rules ^ ^permitting fair and reasonable opportunity for competition" as prescribed by the Board of Estimate and Apportionment.^ All gov&mmesitsl subdivisions of New York State are required to buy state prison products without competition, in accordance with Sections 182 to 184 of the Prison Law. Prison products are confined chiefly to wearing apparel, waste baskets, brushes, brooms, bendies, and furniture. The Department of Correction of the city also pro- duces and sells such articles as towels, drinking cups, brushes, brooms, and baskets. Before purchasing any commodities which are produced in the prisons, the buy^ must find out whether or not the order can be filled by the Department of Correction. The Bureau of Supplies, Department of Education, secures bids from commercial dealers and then asks the Department of Ccnrrection of the state or city, to meet the lowest price submitted. Prisons are thus compelled to match commercial prices. In case the city, for good reason, wishes to be released from pur- chasing prison products, a permit to do so can be secured from the State Departmmt of Correction at Albany. All buying agencies send out requests for quotations on open market orders. The Department of Purchase, the Bureau of SuppHes of the Department of Education, and the President's Office of Manhattan request quotations from the entire appro- priate mailing list. The Borough President's office in Brooklyn and Queens solicits bids from only five or six vendors on each order. A week or less is allowed for submitting bids, depending on the urgency of need for delivery. Bids on contract orders are received sealed, and must be accompanied by cash, surety bond, or certified check on a New York City bank for IJ^ per cent, of the amount of the bid. De- posits are recorded by the buying office and are turned over to the security deposit division of the Comptroller's Office. No deposit is required with bids on open market orders. Written open market bids are also received sealed. Except in the office of the Borough President of Queens they are not 1 Chtrter, Seotkm 1954, 120 New Yobx Citt's Finances anb opened until the date specified on the inquiry. In Queens open market bids are received unsealed. Bidders may change their quotations after they are submitted. The date for opening the iMds and the award of the order is sddom f^sedfied on the request sent to the bidder. Although more in line with the prevaiUng practice in private businesSi this procedure is unusual in govern- ment purchasing. Awarding the Order or Caniract Bids on contract orders must be opened in public, at the date and place specified in the advertisement, and in the preseMtt^v ectors who examine all deliveries of foodstuffs for the mayor's departments. Several other departmmts ^diidi are large users of supplies, material and equipment, have their own inspection staff on account of the inabihty of the Finance De- pertmeat adequatdy to perform the function. The Board wated by the Board. The advantages of this plan for a careful system of inspection are obvious. The Department of Purchase should have some jurisdiction over the departmental storehouses and should receive annual inv^tories and periodic reports on receipts, disbursements, and stocks on hand. The department could then keep consumption records and be in position to anticipate needs when market conditions were favorable for the purchase of certain commodities. Certain departmental storehouses which are especially equipped for storage of one or more commodities might be used as a central depository for the entire city govmunent, as in the case of the stationery storehouse operated by the Board of City Record. This survey makes no pretense to discussing and appraising the dly's storage system. Each of the Borough Presidents' offices maintains several storehouses. Manhattan has two; one is operated by the Bureau of Highways, the other by the Bureau of Public Buildings and Offices. Queens has a total of fourteen storehouses and storage yards, all supervised by the purchasing agent. Complete and compreh^isive storage eyBteam are also maintained by the Departments of Water Supply, Gas, and Electricity, of Health, of Pubhc Welfare, and several others. The Bureau of Supphes of the Education Department has four storehouses. Throui^ these pass annually about four million dollars worth of supplies and equipm^t. The remaining supphes are delivered by the vendors directly to the consuming branches. This comphcates the work of inspection^ reduces the quantities purchased at one time> and so tends to increase the imit cost. It is believed that one or two central storehouses large enough to care for all supphes, would be a sound investment for the city, and would enable the present storage staff to handle practically all the purchases at littie added overhead cost. The present annual expenditure of $61,000 for rental 00 iH « o <-< « c6 qS e« i-H S •oaoS oi d t- 00 S o> 00 « CO o 00 <-< ^ s, C4 00 >0 00 ^ «-< «-< o> t» ® eo ^ o> i-< ei 00 CO o So »0 05 »H . M p t>: CO d N CO CO 9 00 CO lO o o b- lO N O 58|a| : Ml 00 ^ o >fl o CI S1-I 1* _ 00 00 00 00 00 iH CO »>. 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Miscellaneous general earnings as from bank interest, pre- miums, and investments other than those of the sinking funds; 11. Miscellaneous accruals, charges, deductions, and refunds; 12. Sale of assets, such as unnecessary real estate and waste materials. The Growth of the CUy'a Revenues Since 1915 the cash receipts of the city have grown from 214 milhon dollars to 496 miUion dollars, or 131 per cent. This growtii has been gradual and persistent. In order to be under- stood the growth must be analyzed. This is done in the accom- panjdng charts and tables which are based upon tables presented in the appendix.* Table I shows by sources, in accordance with the revenue dassification, the amounts received by the city in each of the last three years compared with the receipts for 1915, 1918, and 1921. It covers a span of eleven years and includes the period of war inflation and subsequent readjustments The totals of Table I for each general class of revenues are diown graphically in Chart I. This chart is drawn on a ratio, or logarithmic scale, so that the upward slant of a lincy or of any part of a line indicates the rate of increase. From this chart it will be seen that the total has increased at a steady rate through- out the period, though the rate was slightly faster between 1918 and 1921. The general property tax, which furnishes some 70 per cent, of the city's revenues, has not increased as fast as has the total. The two lines, though abnost paralld, are slightly further apart in 1926 than they were in 1915, due chiefly to the fact that the increase of general property taxes was not quite as rapid from 1918 to 1921 as was the imarease fd the total revenues. The lower curves of Chart I show the rate of increase for each of the major sources. The most conspicuous increase recorded is that for subventions, which rose from $2,526,000 in 1918 to |17;190^000 in 1921. The only other rapid increases are for Financial Administration: Revenues 135 CHART I fm9 mi /s» 136 Nxw YoBX Cmr's Financss and departmental earnings and for the city's share of state taxes. The increase in the sales of assets is fortuitous and of little significance from a general revenue standpoint. The percentage increases (av&t the figures for 1915) shown in each of the major sources of revenue are set forth in Table II. This gives in percentages the matter expressed by the curves of Chart 1. TABLE n Percentage Growth op Revenues by Soubgss oveb Fiqubes fob 1915' Booms 1018 im 1024 1025 1028 1. General property taxes 21.5 65.9 92.0 102.1 121.8 2. State taxes (city's share) 75.4 196.3 226.3 279.3 321.4 3. Fees, licenses, etc. . .1 23.8 90.6 129.1 127.7 4. Assessments .... -22. 20.4 27.6 89.4 129.1 5. Fines and forfeitures -26.5 115.0 88.3 83.5 122.4 ft. Subvoitioiis and dona- 8.8 640.4 751.2 792.0 828.6 7. Rentals 12.13 83.82 40.21 45.5 44.66 S. Eamiogs of public serv- ice enterprises 4.1 28.7 56.4 68.8 78.7 9. Earnings of general de- partments .... 43.9 186.9 315.0 319.3 340.5 10. AlisoeUaneous genoral eamings .... -40.3 25.1 6.9 38.3 46.8 11. Misoellaiieous accruals. charges, deductioDif, and refunds . -39.8 -40.3 7.6 -31.8 43.6 12. Sale of assets . . . -57.8 40.4 100.6 117.0 720.1 Total 17.59 71.66 95.74 110.20 131.4 Comparable Importance of Revenue Sources The importance of the different sources of city revenue and the percentages of the total derived from each are shown in Table lU. The material of this table is presented graphically in Chart II. Hiis diagram brings out a number of facts unmistakably. In the furst place, the general property tax is the backbone of the > See Table 1, pp. 132 and 133. Financial AnMiNismAiioN: Revenues 137 TABLE m Pebcsntaob DsRBiBimoN OF New Yowt Citt's Cash Bacmm waxm Sncmm SouBCBS FOB Selected Ybabs Sooacni 1916 1918 1921 1924 AAV 1925 « AAA 1926 1. vienerai property jmjxo 76.06 71.10 72.16 70.74 70.51 2. State taxes (city'sshare) 4.51 6.73 7.79 7.53 8.15 8.22 3. Fees, licenses, etc. . .68 .58 .49 .67 .75 .67 4. Assessments . 4.18 2.77 2.93 2.72 3.76 4.14 5. Fines and forfeitures .40 .25 .50 JO .35 JO 6. Subventions and donar tions .... 1.08 1.00 4.66 4.70 4.59 4.34 7. Rentals .... 4.41 4.21 3.44 3.16 3.05 2.76 8. Earnings of public service enterprises 6.57 5.81 4.02 526 5.27 5.07 9. Eamings of general departments .54 .67 .01 1.15 1.09 1.64 10. Miscellaneous general earnings 2M 1.18 1.89 1.41 1.70 LOS 11. MIndlaneous accruals, charges, deductions, and refunds 1.37 .70 .48 .75 .44 .85 12. Sale of assets . . . .11 .04 .89 .11 .11 J3S Total . . . 100 100 100 100 100 100 city's revenue system. It is producing, and has for many years produced, 70 per cent, or more of the total revenues. In the second place, the general property tax is now bearing a slightly smaller proportion of the total burden than has been usual in past years. Thirdly, it appears that only two important sources of revenue show a marked increase in the proportion of the total which they are contributing. These are the city's share of state taxes and the subventions received from the state for the pubhc schools. The only proportionate increase among the minor sources is found in the earnings of general departments which now amount to 1.64 per cent, of the total, as against .54 per cent, in 1915. The decrease in the proportion falling upon real estate and other taxable property is thus to be attributed aknost entirdy to the growth of state aid for schools and to the development . CO ^ 05^ CO ""^^^ to a Oi C:i ZD 00 O 1-H (N C5 »k ffV *s 1^ 0 H H H 00 P3 pq >< < O H •4 CO i-H CO TJJ CO 05 . 00 »H CO CO CO 00 CO C4 C3 o S .2 a> CO 00 2J CO rt< 05 1-1 05 O Od 00 03 00 »p CO h- cp »0 CO i-< ^ CO «5 CO ^ «o O to 05 o 1-H 05 t-H CO 00 r-t 10 »0 10 O •s »x «3 CO CO N. t>. 00 O 00 O "0 r>- CO ^ *k ^ ^* CO i-> th a 00 00 00 8 Jt>; 1— J 00 o 00 00 8 CO t-H 05 »o CO o 1—1 ^ ^ o 3^ «° 00 -go- is TJH 'is •g.9 OQ ^ I* $ O o a si .2 « 05 > •a 08 TJ "-I § 85 a s o O J3 03 o 03 cr a o © Financial ADMiNisxaATiON: Ee venues 143 Chabt IV Assessed Valub and Full Value op Taxable Real Estate m Manhattan 1905 TO 1926 I O I 144 New Yobx City^s FiNAKCBd and they are the best mngle index available, especially if a considerable number of sales are examined. Chart IV is based on these figures. It shows the assessed value of real estate in Manhattan by years from 1905, compared with the full value of real estate as corrected by the sales ratios from the Record and Ouide. While the ''full value" curve is imdoubtedly inaccurate at certain points because of the nature of the information upon which it is based, it is probably substantially correct. It is based upon 22,900 individual transactions q>iead over the period of 22 years and involving considerations totalling over a billion and a quarter dollars. Table VI presents the basic figures. What would the tax rate in Manhattan have been each year if all property had been assessed at full value? In other words, what was the true tax rate? The legal, or actual tax rate and the true, or corrected, tax rate are shown on Chart V. The figures are drawn from Table VI. If one may accept the Record and Guide sales figures as trustworthy, it appears that from 1905 to 1912 the true rate was consistently below the l^al rate. In 1910, for example, the taxpayer was called on to pay $1.76 on each hundred dollars of assessed value, but, by and large, property was assessed at only 86 per cent, of its value so that the tax he paid was $1,517, which is equivalent to a tax rate of 1.517 on one himdred dollars of full valuation. From 1913 to 1918, according to the Record and Guide figures, the situation was reversed. Property was assessed so high that actual values were less than assessed values with the result that the legal tax rate was, as a matter of fact, lower than the true tax rate paid. Since 1918, the pre-war situation has been reestablished. In spite of the rapid increase of the legal tax rate up to 1921, and the increase of assessments in Manhattan, as shown on Chart III, the true tax rate has been consistently below the legal tax rate since 1919. The great decrease since the high point of 1922, has carried true tax rate to the lowest level reached since 1914, has been going down since, with the exception of the high point reached in 1922. This may appear contrary to the experience of property owners ^o are painfully conscious of their growing tax bills, especially if they are not conscious of the even greater increase that has Financial Adhinibtration: Revenues 145 05 s o OQ H Eh < CD OQ 6 s ID < H Pi S m < < g OD Z < H H < H 00 •J ■< H S lO (N (M lO O ^ ^ (N 00 QO CO CO QO o »o «o OS O r-f CO O (O C4 ^^^^^ ^ OS ^ ^ C3 (M ri m a >Q m m m * . * OS W5 CO 00 00 e» tH O 1-) 1-* O 00 00 O CO 00 rH N OS N 00 (N O CO « _ if5 CO Tj< CO os^»o ^ o Q O a <» ^ 00 1-4 CO >Q <0 CO V'? lO CO "5 Q 00 00 ^ OS « CD -^lO CO Iff of Q 1-1 M flb OS 00 OS N CO t^iO CO OS CO CO M t« O O ^ to OS OS CI 04 to N QO OS O (N OS g O ^ -H ^ S S CO S So lO OS 00 Tjl" M 00 OS •-• iH rH O O iH §00 o8 CO W 00 00 o t-4 00 O •-• 1-1 CO CO r« to o CO 00 1-4 00 lO - — - — ^ o C4 r« t» o a lo ta a » O 1-4 ) O CO i-t CO ^ CO O >o Id t« OS OS s OS 00 00 iH ^ ^ CD «P CO (N 00 b- ^ C« CO N 00 O O CO CO O b» CO CO CO t>. t* CO CD 9> w o CO CO OS CO e« o ^ CO »-t N ^ US C4 CO CO o *4 v4 m*wmw^r^ CI CO 00 1^ CO ^ CO >o • • • • • cS ^ s s s 8^ a o "f 00 « 00 C CI O O CI >o ^ a O) o 5 22 ^ ^ s CO c« »0 ^ 1-1 CI CI _'^CO 00 o ci CO lo i4« iC ^ CO CD »>• 1-* CO CO 00 CS CO CO C0_ O OS o O (N CS »H •O >Q CO CO 1-J^ OS »0 b- § S cS CD S »H CO CO a o -a o 9) V i 09 o> 00 »o CO C t>. OO iO 00 CI d IQ t» CO CO 00 CO OS CO CO lO CO If OS 00 o CI (N CO lO 00 1/5 CO lO Tf t» N S'ci eio CI <«• ^ m CD oo CI ^ OS 00 CP 00 00 ^ CO 00 CO OS 00 CO O O CO ^ CO 1-1 I CO CO>Oi-4cO00 CO^OSt^CO S1-4 1-1 OS 00 Tjt a t» t- CI r>I rH »-J «H *H v4 ^ CI 0 «0 t« 00 OS iH 1-1 1-1 1^ lH lH iH 1-1 I-I lH Ob OS OS Ob Ob OS OS OS OS OS O ^ CI CO ^ (N (N (N (N (N OS O OS OS OS »0 CO CI CI OS OS 3) I* 146 New Yobk City's Finances and CHART V Tax Batb and Tbue Tax Rate on Manhattan Rbaii 1905 TO 1926 4so K9 i < t, in excess of 2 per cent, of the assessed value of taxable real and peraonal property. The language of the constitution is as follows : "The amount hereafter to be raised by tax for county or city purposes, in any county containing a city of over one hundred thousand inhabitants, or any such city of this state m adchtion to providing for the principal and interest of the existmg debt, shall not in the aggregate exceed in any one year two per centum of the assessed valuation of the real and personal estate of such county or city, to be ascertamed as prescribed m this section in respect to county or city debt." » It should be noted that the 2 per cent. Umitation does not apply to all items entering into the New York City tax levy. The lArticfcVIII, §10. 148 New York City's Finances and levy for the interest and retirement of the permanent debt is excluded. The levy on account of the state tax is excluded. Special assessments against the city as a whole or against indi- vidual boroughs, under Section 247 of the Charter, are Ukewise excluded. For the 1927 New York City levy, the following items aie within and without the tax limit: Within the 2 per cent, limitation: For idty, county, and school purpoBes $283,603,809^ Outside tlie 2 per oeaat, Umttation: For state tax $12,622,697.53 For principal and interest of city debt 97,756,554.71 For assessments on the city at large . 5,190,881.72 For assessments on boroughs . . . 2,849,870.94 Total outside limit $118,420,004.90 Total kiry $402,023,814.15 It is these last four items which annually cany the tax rate wdl above 2 per cent. This constitutional limitation has had an important effect on municipal finance in Buffalo, Rochester, Yonkers, Utica, Syra- cuse, and Albany, all of which have found it difiGlcult, and in some cases almost impossible to keep within the limitation. Many unsound practices of evasion have been developed, especially by means of the issuance of indebtedness, the retirement of which does not fall within the tax limitation.^ Thus far New York City has not found the 2 per cent limit so great an embarrassment. In most years, the levy has been well within the constitutional maxi- mum, so that it has not been necessary to resort to devices of evasion. In 1927, the levy is only S13, 152,629.81 below a full 2 per cent, levy — not a large margin in a budget of half a billion. The statistics, however, do not tell the whole story, for the presence of that limit is constantly before officials in considering proposed e3q>enditure8. Tax Exemption Twenty-three per cent, of the real estate within New York City is tax exempt. This falls into three classes, as follows: ^ See die Report of Special Commieeim on Financinff Bdwealkm in CUiee, 199$. (The BO-cftlkd Friedsam Report), p. 17. Financial Administeakion: Bxvbnxtbs 149 Pbb Cent. Valttation of Total 1. PubUc property $2,292,328,000 60^ 2. Relieous, charitable, aod educational institu- tions, Uc. 557,873,000 14.8 3. Housing exemptions 916,512,000 2A.^ $3,766,715,000 100.0 Public property embraces the property of the federal, state, and city governments. It amounts respectively to $149,095,800, $21,424,825, and $2,121,807,750. This last item includes $855,- 000,000 for parks and $278,000,000 for city owned subways, $246,000,000 for docks, and $200,000,000 for schools. The property of churches, charitable organizations, schools, and colleges amounted (1925) to $544,314,000. There is also $13,558,- 000 of subway property exempt under Section 34, Chapter 4, Laws of 1891. The private property exempted is to be classified as follows: _ ^ PxB Cm*. Valuation or ToTAi* Religious . < $265,374,000 45.8 Charitable 162,402,000 29.1 Educational 71,347,000 12.8 Cemeteries 54,463,000 9.8 Transit (private) 13,659,000 2.4 PensionNB 728,000 .1 $567,873,000 100.0 Partial eicmption was allowed dwellings completed in accord- ance with the provisions of an ordinance approved Februrary 15, 1921, and amended in 1923. This is authorized until January 1, 1932, by Section 4b of the Tax Law. About 95,000 dwellings completed rince April 1, 1920, receive an exemption which, accord- ing to the 1926 valuation, amomits to $916,512,915. All but about 6,000 of these are one and two family houses; 75,000 of them are in Brooklyn and Queens. This exemption applies only to the building and not to the land. State taxes and special assessments are not affected. With the exception of the housing exemplions, there has been no important change in the situation during the past generation. Moet of the pioparty exmpt is dty owned. The ratio of exempt 160 New Yobx City's Financbs and property to total property has not been expanding rapidly, especially if private property alone be considered. Tax exemp- tion of real estate does not present an acute fiscal problem in New Yorkaty. It should be noted that the housing exemption automatically expires in 1932. On January 1 of that year, the tax base of the city will automatically expand by about a billion dollars, pro- vided the aggr^ate of assessed valuation of the buildings so exempted r^nains unaltered. This would add to the borrowing power of the dty $100,000,000, and to the taxing power at least $25,000,000 without any increase of the tax rate. Personal PnoPEjaTY Taxes When the tax on property was a true general property tax, personal property formed an important part of the assessment rdL In the borough €i Manhattan, in 1866, it reached 35 per cent, of the total roll. This percentage, however, has melted away under amendments to the tax law and under gradual economic changes which have made it almost impossible to assess personal property. At the present time the personal property amounts to but 2 per cent, of the tax roll. The situation during recent years is shown in the following tabulation: Pebsonal Pbopebty Assessed for Taxation in Pebcentaob of ToxaIi Assessments 1915 4.3 1918 3.0 1921 2.13 1924 2 17 1925 2.01 1926 1.95 1927 2.01 The shrinkage occurring between 1915 and 1921 was due to the change of the tax law which exempted certain dasses erf personal property at the time when the corporate and personal income taxes were adopted. The loss to the city from these exemptions has been much more than made up by the revenues Financial Adiiinisxeation: Revenuss 151 which the city receives from the state as its share of these new taxes. The cities, towns, and villages of New York State are required to assess personal property under the same state laws which affect New York City. A recent examination of the situation shows, however, that the enforcement of the law varies exten- sively from locality to locality.^ The per capita assessments by counties range from 30 cents, to as h^ as $44.00. This is, of course, absurd. The situation is of importance to New York City because state taxes are levied on the assessed valuation of personal property with no allowance or equalization as in the case of real property.^ In view of the fact that the New York City counties show an unusually high percentage of personal property assessment and the highest per capita assessments of any of the counties in the state, the result is a substantial discrimination against the city in the incidence of state taxes. It has r^)eatedly been reoommended by l^islative oommitteeB and others that the personal property tax be abandoned. Such a reform is surely desirable from many points of view. Neverthe- less, the personal property tax yields from $2,000,000 to $3,000,000 a year in New York City, and cannot be set aside lightly in spite of its many defects. The situation is also complicated by the fact that the repeal of the personal property tax would exempt the stock-in-trade and machinery of unincorporated businesses. This suggests the advisability of coupling the r^)eal of the p^sonal property tax with the establishment of a tax on the income of unincorporated businesses. The Legislative Committee on Taxation and Retrenchment has recommended that the personal property tax be abandoned at the same time that new revenues are made available for the city to take its place. That there is something basically wrong with the personal property tax or with the way in which it is administered must be apparent from the conditions of collections. The arrears now * Tax Exemption in the State of New York, Legislative Document 1927, No. 86, Chapter III. * For real property , the State Tax CommiaBMHi works out each year an equatisaAioii table adjusting the inequalities in the actual assessm^t ratios in the various ooumties. Hie state tax U one inill is collected on this adjusted basis. 152 Nkw Yobk CiTr's Financbs anp amount to fully $52,364,053. Of this, $47,731,293 is for 1925 and prior years, as compared with $26,840,627 for real property in the same period.^ Moreover, in the appendix to the 1927 budget, the Comptrdler estimates that $34,700,000 of the personal property arrears for 1924 and prior years is uncollectible. Unless a more equitable system of assessment and a more efficient method of collection can be provided, the wisdom of continuing this tax is adratndy doubtful. Licenses and P&bmftb Busine88 and OempcM&ml lAceMes The mimicipaEty, largely through its regulatory authority, licenses nearly seventy types of business establishments, trades, and occupations. The list ranges horn hotel runners and itinerant musicians, to theatres and gas plants. Only a very few of the trades are required to pay a Ucense fee. The more important sources of license revenue are as follows:* 1926 1926 Tlieatres $96,500 $101,750 loe dealers 72,680 72,606 Common shows 71,800 81,550 Auctioneers 51,500 54,700 Public dance halls and dances 54,044 60,184 Billiard and pool tables 49,730 49,755 Peddlere 44,544 43,822 Motion pictuies 39,445 37,301 Public cars (motor) 3^350 41,440 Electricians 37,968 77,239 Cnqiioyme&t agencies 26^350 27,960 The ratio of revenues derived from business and occupational licenses in New York City has gradually declined. On the other hand, the need for additional revenue has driven many other cities to transform then- licenses into veritable busineBs taxes, yielding revenues considerably in excess of the costs of inspection or similar sarvioes. Though there is considerable objection to petty license » Comptroller's Report for 19B6, p. 364. 'From CQmptroSk^9Bi8fimrl»,lM, t9$8. FiNANCiAii Admikiskration: Rbvbnubs 153 taxes, a source of income is here dtedoBed idiidi is capable IMi Ima IMS iMoona . $248,757 $223,145 . 197,238 192,053 . 165,962 143,645 . 159;261 163,618 In addition to these permits, more than 200 other types of permits and licenses are issued by the city, exclusive of the businesses and occupational licenses ab-eady described. The list of permits embraces authorization to keep goats and geese, for example, to maintain a houseboat or a day nursery, to carry a pistol, to solicit funds, to conduct a puMic dance or ludd a parade, to dump ashes, and to occupy a tenement basement. There are many types of permits in connection with street traffic or repair. They relate to the storage of building material on city streets, the crossing of sidewalks with a team for excavating purposes, and ibe installation of conduits, cables, or pneumatic tubes. As in ^ Compiroaer's BeportM, 19MS tmd 19$$. Tm ow PnmT Parks (laigely golf and auto paridng f eee) Tapping of street mains Sewer and drain permits Marriage licenses , , Financial Ajmonffrnknon: RavsmnBS 157 the case of occupational licenses, many of the permits are issued with no regard for the fact that other similar acts do not require a permit. Fees are charged in some cases and not in others. In the evmt that occupational licenses are made the subject of further study and standardization, permits should also be ex- amined. Some cities collect a substantial sum from building permits. In 1924, nearly one billion dollars of building construc- tion and alteration was authorized in New York City; had the scale of fees in effect in Newark been applied in the oase of New York, a million dollars would have been received by the municipal- ity. As in the case of business licenses, permit fees should be based for the most part on the cost of issuance and subsequent supervision. A iqiecial type of permit is that involving the use of public highways or public property. This is considered undo* the heading of highway privileges. Revision qf Ldcenses and Permits It is possible for the city greatly to increase its income from business and occupational licenses, fees, and permits. A more equitable system could be devised, and particular attention could be paid to the desirability of basing fees on the actual costs of regulation. Moneys appropriated for inspectional purposes could then be released for other purposes. The obsolete character of some of the existing regulations and the changes that seem de- sirable are indicated in an important report recently prepared in tiie office of the Commissioner of Accounts. This report analyzes the fees collected by various municipal departments and the costs to the city for the services rendered. It also gives interesting data on the fees charged for similar services in other cities. The facts are dear that, in frequent instances, New York is not unduly exacting. "It is apparent," wrote Commisrioner James A. Higgins, in transmitting his report to the Mayor, ''that in many cases the fees collected are lower than those charged in other dties for like services; and that many of the bureaus now operating at a heavy loss to the city could be made a source of revenue by an increase in the fees charged, or by charging fees in many cases where no fees are now required. This would put 158 New York City's Finances and the cost of the service on those directly benefited instead of upon the public at large.''^ Fines and Forfeits In this classification are moneys exacted as penalties for viola- tion of law, and forfeits accruing in accordance with the terms of contracts as penalties for non-observance of such contracts. Tabtes II and III indicate that these sources of revmne have apparently held their own during the past fifteen years in meet- ing the requirements of the city budget. Amounts received have more than doubled in volume. In connection with any more detailed investigation of revenue sources, it may prove desiiable to inquire into the adequacy of charges made for court costs, which, in some cases, have been unchanged for many years. Rentals and Franchises Rent items constitute an important minor source of revenue for the city. More than two million dollars are received from the rapid transit companies for the use of subway properties. The rental of other dty-owned property brings in over a million dollars a year. It is possible that in other cases, a readjustment of market charges or of rents exacted of city tenants may disclose some opportunity for increasing the city income. The Camj^roUer^s Report for 19i6 shows recdpts erf approxi- mately two million dollars from franchises. Although the in- come from this source has increased during the past ten years, the relative importance of the tax as a revenue producer for the city has decreased. Any ^ilargement of such revenues can be only slight imder the present state tax laws. Section 48 of the State Tax Law provides that any payment made by a pub- lic utiUty to a municipaUty in connection with franchise privi- leges, ' Vhich payment was in the nature of a tax,'' the amount 80 paid may be deducted from the crpeeial f randuae tax. iThe principal portioiis ol this importont npart an to be found in the kppan^ p. 319. FiNANCiAii ADMnaffTRATiON: Rbvknubs 159 Highway Privileges A recent investigation by the Joint Legislative Committee on Taxation and Retrenchment^ indicated an almost total neglect of minor highway privileges as a source of municipal revenue among the municipalities of the state, including New York City. The prevailing attitude of mind of municipalities was shown to be one which views the private use of street privileges as a private right rath^ than as an encroachment on pubhc property. The important sources of minor privilege revmues shown in the Comptroller's Report far 1926 are as follows: park privi- leges and concessions $241,706; illuminated signs $158,486; pipe lines and conduits $98,359; bridges connecting buildings $66,360; minor tunnels $64,524. The only income shown in the Cowip- iroller's Report from news stands is less ^bhan $4,000. In mtm instances permits are required for minor highway privileges, but no hcense fee is exacted. As in the case of occupational licenses and permit fees, a thoroughgomg examination of the various minor highway privileges would suggest methods of ior creasing the income of the city from this source. Sidewalk vaults are probably the most valuable minor en- croachment upon the subsurface of streets. For permission to construct a vault the city charges an initial fee of ten cents to two dollars for each square foot of area affected, but no annual charge is levied for the privilege of maintaining the vault. In Baltimore, and in a number of other cities, annual rental charges of this sort are now made. Such charges hi New York City would yield a considerable sum. In 1913, after a careful study of the situation on Broadway, Fifth Avenue, 14th, 23rd, 34th, and 42nd Streets, it was estimated that approximately one milhon dollars a year could be realized from vaults on those streets alone. This estimate was based on a rental rate of 5 per cent, of the value of the space, which was to be determined in accordance with the average value per square foot of the abutting property. The administration of such a revenue measure would be simple because most of the needed facts could be drawn from the permits, ^ LogislaUve Document, No. 86 (1827). 160 New York City's Finances and buildings plans, and tax books and maps. Collection could be handled with the real estate taxes. BtUboards Outdoor advertising is another encroachment upon public thoroughfares, either directly or indirectly, which investigation migjit show to be a ne^ected souice of revalue, niuminated signs now furnish an annual revenue of $158,486. It may be argued that signs of all types should pay an annual fee not only because of the exercise of a highway privilege, but for regulative purposes; they may become unsightly and in some cases danger- ous.* Subway, street car, ^vated train, and motor bus adver- tising could also be inquired into. Franchise privileges to operate transportation facilities rarely include the right to sell advertising spam in earn or buses. The Earnings op General Depabtmbnts Hie €»rniTigR of general departm^ts include the revenues from general administrative activities except public service enterprises such as the water supply system, docks, and markets. These revenue receipts are derived from fees, charges, and sales. The most important item is five million dollars m various fees. Sales of pubUcations and supplies brought in $430,000. A substantial enlargement of income from departmental earn- ings has taken place since 1915. These revenues now form a rdativdy larger part of the total city revenues than they did at that tune. Still further revenues could probably be derived from this source. The Department of Public Welfare several years ago installed a system of charges for hospital patients able to pay in part for their care. It emptoys a force of investigators to make the necessary collections. One possible method of increasing departmental earnings may be a change in the method of waste disposal. A preliminary sludy of ti^ waste disposal probl^ made in 1920 indicated that > The city of Baltimore has been a pioneer in working out plans for taxing out- door advertising. The city is districted and the levy upon advertiBing viiies with its size and location. Financial Administration: Rbvbnubs 161 collection and disposal costs amounted to $3,500,000 a year as compared with approximately $5,000,000 that might be derived from the operation of garbage reduction plants in place of the present sea dumping plan. Reduction plants in some dties are operated at a profit. Other cities sell the raw garbage at a figure that pays a considerable part of the collection cost. A recent investigation rt>aking. Earnings of Public Sbbvicb Entbbpbisbs Gross revenues from municipally operated public utilities con- stitute about 5 per cent, of the city's income — more than $25,000,000 a year. The past tm years do not show any start- ling increase in the revenues of these enterprises. They contrib- ute a slightly smaller percentage of city revenues than formerly. The city at present operates several bus lines, ten pubUc ferries, and a number of short trolley and trackless trolley lines. The water i^venues present a difficult situation. The city has made tremendous investments in its water supply system. Since 1905 $185,000,000 has been expended. The users of water diould be required to pay fully for thdr water. This is no more than fair and would encourage economy in the use of water. The raXe would then be based upon the amount used instead of front footage and the number of appliances, etc. Metering would bring in more revenue than the present system, but the practical difficulties of installation, for a city like New York, would be enormous, perhaps insurmountable. Metering would insure greater economy in use, but it may be argued that, with the > FV>r tbe Stzeet Qeaning DepartmoiVB estinyiteB of its future needs, see b»- kw, p. 162 New York City's Finances and available, untapped sources not numerous, a policy which forces the city to secure large additional water supplies, is not unwise. If the city waits too long, the available sources may be lost. Mean- while the fiscal problem could be satisfactorily solved by an intelligent, thoroughgoing revision of the present water rates. Whatever the city's policy in respect of municipal services — that is, whether it is desired to make a profit, to permit them to be conducted at a loss, or to have them self-sustaining — adequate cost records must be kept. The city should be able to tell whether a particular service is making a profit, suffering a loss, or doing neither. In the United States the accepted fiscal policy is usually that municipal services should be selfnsustaining. On the other hand, foreign countries, where municipal operation of transportation and other utilities is common, frequently attempt to secure substantial profits from these enterprises. These profits go toward the expenses of other mimicipal activities. Such a form of indirect taxation has been generally avoided in the United States. Crrr's Share of State Taxes The city receives over S per cent, of its total revenues from various state taxes. These combined are the second largest source of mimicipal revenue and represent the most important recent development in the finances of the city. Each of these taxes is discussed briefly in the following paragraphs. The State Income Tax The tax on personal incomes under a graduated scale, provided in Article 16 of the Tax Law, is administered by the State Tax Department, but one-half of the income, after the deduction of certain expenses, from this source reverts to the municipality.^ ^"FiSty per centmii shall be paid into the state tieasiuy to the credit of the goiieral fund. The remaining fifty per centum thereof shall, not later than the first day of July, and in case of moneys subsequently collected at least quarterly there- after, be distributed and paid to the treasurers of the several counties of the state, in the proportion that the assessed valuation of the real property of each county bears to the aggregate assessed valuation of the real property of the state." Tax Law (ConsoUdated Laws, Chi^ 61), (383. Financial Administration: Rbvenubs 163 Since its adoption in 1919, it has proved a valuable source of revenue, far in excess of earlier returns from the assessment of intangible personalty which was abandoned as a tax source in 1919. Although at present utilized by but a few of the states, the income tax has come to be recognized as one of the most equitable f omis of taxation. The Mortgage Recording Tax A state tax of fifty cents for each one hundred dollars of the amount of debt secured by mortgages on real property situated in the state is provided by Article 11 of the Tax Law. It is county administered, one-half of the revenue bring turned over to the city, the other half going to the state. The tax is collected when mortgages are recorded. The returns from this tax constitute an important part of the city's income. The size of the returns varies considerably from year to year, and, as will be seen by reference to Table I, depends upon the extent of building activity. In 1926, the tax netted New York Qty nearly five million dollars. The Corporation Income Tax The franchise tax imposed on the net income of corporations, at the rate of 43^ per cent, is prescribed in Article 9a of the Tax Law.^ It was inaugurated in 1917. No state tax is at present imposed on unincorporated businesses. Various proposals have been made that such businesses be taxed.* It should be borne in mind, however, that such enterprises do not share the limited lial:»lity and other privil^^ enjoyed by corporations for which it is not unreasonable to make some charge. If it should seem desirable to raise the corporation rate to 6 per cent, and impose a slightly lighter tax, e.g.y upon unincorporated business enter- prisesy the State Department of Taxation and Finance estimates that at least $13,000,000 can be derived from this source. Part of this amount might be shared by the municipalities. * In the case of corporations doing business more than a state-wide business the income ye apportioned. A minimum tax based on capital stock is imposed. * E.g., Report of the Joint LegisUUwe Committee on ths Finances of the City of New Yorkf 1922 (Meyer Committee). See bdow, p. 894. 164 New Yobk em's Fdcangss and Reed Estate Broker^ s License Tax The statCi under Article 12a of the Real Property Law^ charges an annual license fee for the privily of doing business as a real estate broker or real estate salesman. The rates range from two dollars to twenty-five dollars, and one-half of the tax reverts to the local conununities. As a leraiue piodiieer, the tax is not veiy important. Motor Vehide License Fees Fees collected by the State Conmiissioner of Motor Vehicles for the registration of motor cars, trudos, and motorcycles have been an important part of ihe state revenues for the past decade. From 1910 to 1916, the municipalities received no part of this revenue; from 1916 until 1919, 50 per cent, of the fees reverted to the counties; since 1919, the state has retained three-fourths and the coimties have received one-fourth. New York City is entitled to receive the amount payal^ to its five counties. In view of the heavy cost to which the city is put for traffic control and for maintenance of streets because of the wear and tear for which motor vehicles, particularly heavy trucks, are responsible, it may be proper to inquire whether the municipality should not be entitled to more than the 25 per cent, allowance at present made by the state. Subventions An important development in the dty revenues during the past ten years is the growth of state aid for education. State aid is not a gratuity. It is a method by which the state diflfthftygeft a part of its responsibility for free public education and endeavon to secure a f aire* distribution of the benefits and cost of education. The great productive taxes, with the exception of the real estate tax, must, under modem conditions, be administered by the state. In the United States, most educational functions are locally managed. This makes it necessary for the state to share the product of its taxes with the localities, either in the form of specific shares or in the form of state aid. Federal aid is usually awarded as an inducement to ^courage Financial Adminibiration: Rbvsnuss 165 certain activities which the states or cities might otherwise not be inclined or able to afford. This element of inducement has be^ ahnost entirely eliminated in the state aid policy of New York State. Otherwise, there would be a danger of encouraging extravagance and of giving large amounts of aid to the wealthy communities which can easily avail themselves of the proffered state aid. State Aid far SOiools In 1926, $21,560,670 was received by New York City from state aid. The whole of this amount went to the Board of Education for school purposes. Any increases in state aid revenues rest with the legidature rather than with the municipal assembly. It may be pointed out, however, that it is a com- monly accepted principle that the state should assist municipali- ties in finRTM»ing educational activities. The state should afford a satisfactory educational opportunity for every child. The equali- zation of educational opportunity and the question of state aid have been the subjects of much deUberation by the Legislative Committee on Taxation and Retrenchment and by the Friedsam Commission.^ The programme recommended by these groups has hem adopted by the legislature. New York City, th^ore, will, in the future, receive considerably more from the state for school purposes. New Sources of Revenue Commissions or committees have frequ^tiy been set up to seek new sources of revenue for New York City. Important new state taxes have been estabUshed. The state has shared these taaees with the locaUties, either in fixed proportions or through the channel of state aid for education. All important tax meas- ures which have been before the Legislature in recent years have presupposed further distribution to the localities. It is probable that this new policy is destined to be extended still further and that the city may look forward to receiving an even larger propor- tion of its revenues from state taxes. ^Legifllative Documents Nos. 97 (1925), and 68 and 92 (1926). New York City's Financbs and A Tax an "Unearned Increments" Varioiis commissions have recommended a tax on increments of land values. In 1913 the Commission on New Sources of Revenue outlined in detail a scheme for such an increment tax. It pro- posed a permanent tax of one per cent, per annum on all increases above the assessed valuation of the year previous to the enact- ment of the law. The tax would be not only permanent but also cumulative in the sense that the incremmts would be subjected to the one per cent, rate year after year.i The Commission did not propose to levy the tax upon any increments which could be shown to have r^ulted from the owner's efforts or expenditures, (NT from improv^ents for which he had been assessed. The tax was intended to reach only the unearned increment. The Com- mission estimated that during the preceding decade land values had increased annually by about $150,000,000. A one per cent cumulative tax would presumably have 3delded $1,500,000 in the firat jrear and by the tenth year would have been producing $15,000,000. The 1916 Conmaittee on Taxation repeated the recommenda- tion and concurred in the plan of asmall, cumulative, and annual collection in place of a large periodic collection along the lines of the English and German plans. The 1916 Commission also refined the project so as to take care of depreciating buildings on i^preciating land. It proposed that no land increment should be taxable in a normal case until the decreasing building value was overtaken by the increasing land value. . Conditions created by the World War have thrown new light on this problem. In England, the g^eral increase in prices was accompanied by increases in rents and in land values. It was evident that the money increases in land values were not true increases, and that it would be grossly unfair to apply an increment tax to them. The entire scheme was abandoned. In Gmnany, inflation was more serious. The rise of land prices was checked by rent restrictions, but the situation soon became so absurd that the tax could not be enforced. When the mark was ^Tbe CommMBkm'g eo^jIaoMacm tji its pbtk m pven ^i fuQ in tb? Appeoi^ Financial Administbation: Revenues 167 stabihzed, the increment tax, or Grundwert-Zuwdchs-Steuer^ was again enforced. The rate is five to fifteen per cent, of the accre- tion in value from one sale to the next. The tax is collected normally at the time of the sale. In Berlin in 1926, the increment tax amounted to about eight per cent, of the tax on real estate. The rise of real estate values in New York City during the past decade has been due in no small measure to changing price levds. The increase in sale piice of a given parcel of land may not have been an increase in the basic value of the land, but merely a decrease in the purchasing value of the dollar. On the other hand, individual properties, and even whole sections of a city, have increased in value to an extent quite out of proportion to any effort or investment by the property owner, but because of the growth of the city, and because of improvements, such as subways, for which no assessments are imposed. Should the city take back a part of this community-created value? The solution of the difficulty may possibly be found in a further refinement of the increment tax plan by the use of a price index. The actual and the apparent increases in land value might thus be separated. Ofher Suggesbione New major sources of revenue, however, are for the most part sources that must be tapped by the state for distribution to local governments. A gasoline tax, for example, would have to be administered by the state.^ Similarly, a personal income tax surcharge levied by the cities — this was suggested by the Joint Legislative Committee in 1925 — would have to be collected throughout the state and rebated to the municipalities. City revenues in Europe are based very largdy on this principle. In many cases the state taxes and then divides the proceeds among the smaller governmental units or these local governments im- pose additional increments of taxation on subjects already taxed by the central authorities. These European practices are there- fore of particular interest to students of American municipal finance. European methods are worthy of study in connection with new sources of revenue for New York City. iQn]^ Ifew Yoil( anfl lh|imebuse<^ f^il to impom taxes on gMoiiiie. CHAPTER VI THE ASSESSMENT OF PROPERTY FOR TAXATION AND SPECIAL ASSESSMENTS New York City collects almost three-fourths of its revenues from property taxes and special assessments. The adminis- trative organization and the operating procedure by means of which these assessments are levied and collected are therefore CaiMter, SeeClMui S94, 886, 897. Financial ADiONismATioN: Assbsbmbnto 173 blank, for example, asks a number of pertinent questions in respect of improvements and their cost, sale price, rentals, mortgages, etc. The power of the commissioners to prescribe such forms is not clearly set forth in the Charter and some tax- payers refuse to comply with these rules. It would seem obvious that the Board should have authority to adopt rules and regula- tions, not inconsistent with law, covering such matters. The State Tax Ciommission has such power.^ Pereonal Property Aeeessments The assessments of personal property are made public on October 1, also, and continue open until November 30. For 1927, 83,522 names were placed on the tentative rolls. Of these names 37,944 were cancelled on application. The original rolls amounted to $1,031,091,975, but more than two-thirds were cancelled, leaving a final assessment of $297,983,750. Much of this is inevitable under the present circumstances. The assessors are required to list the holdings without regard for exemptions. Names are taken from the telephone book, the social register, the United States income tax lists, directories, and miscellaneous sources. Residents are required to make no declaration of thdr own imless ai^iealiiig from assessm^ts made against them. The assessments are almost wholly arbitrary and the property actually listed is a motley mass of miscellaneous items. This assessment is presumed to include all chattels, with the exception of automobiles and household goods to the value of $1,000. The tax does not extend to any intangible personalty. The tax is leviable not at the situs of the property, but at the l^al residence of the owner if within the State. Moreover, persons assessed are permitted to deduct tiieir debts, including mortgage bonds which they have signed. The personalty of mercantile and manufacturing corporations is not assessed by the city but it is taxed by the State under Article d-A, the fran- diise tax baaed on net income. ^Laws of 1924, e. m, 13. 174 Nbw Yobx Csft's Finahcis and Annual Report of the Department of Taxes The annual report of the ConunissionerB of Taxes and Assess- mmts is one of the most inf onnaUve of the reports of the City of New York. It is the most important report dealing with the taxes, tax rates, values, and economic changes within the city. The present report is to be commended for its brevity, for its tables showing values, tas^s, and tax rates for previous yeaiB, for its maps, and for following the same general form from year to year. It is thus possible to turn from one report to another without confusion. The practice, however, of presenting statis- tical material dealing with sale values as compared with assessed values has been discontinued. Material of this sort is, neverthe- less, essential in the work of assessment, and should be presented in the annual report. As in the case of other city departments, it is important to have the annual report appear early in the year. Hie tax books are closed and the taxes levied by March 1, and the r^xxrt should be issued immediately thereafter. Special Assessments fob Locsal Imfbovsmemtb New York City secures from 3 to 5 per cent, of its revenues from special assessments. The amount differs from year to year be- cause it depends upon the amount of assessable improvements constructed. During the war years, for example, the amount was imusually low. The largest amount received in any one year is that shown for 1926, and amounts to $20,500,000.^ There should be added to this sum approximatdy $8,000,000, on account of general assessments collected with the regular taxes upon real estate. These citywide and boroughwide assessments are some- what peculiar to New York City, and are described below. In all tabulations of city revenues, tinesy appear as part of the general property taxes because they are so shown in the Comptroller's Annual Report and because they are, after all, a general burden upon real estate, levied in proportion to the value of land and building?, without any referaice to the individual beo^ts de- rived by the land, except as these are of a very general nature. Financial Administration: Assbssmbniib 175 If the total amount of assessments of all kinds is placed at $28,- 500,000 for 1926, this increases the proportion of revenues derived from assessments to 5.74 per cent, of the total revenues for the year, and reduces the amount from general property taxes to 68.90 per cent.^ Special assessments thus become the third largest source of city revenue in 1926. They are smaller than the general property taxes and the city's share of state taxes. Three Types of Assessments There are in New York City three well-defined kinds of special assessments. These are: 1. Assessments upon particular pieces of land for benefits arising from local improvements, such as temporary and perma- nent pavements, sidewalks, gutters, curbs, gradings, sanitary and storm sewers, disposal plants, traffic tunnels and steps, grade- crossing eliminations, viaducts, drainage, mosquito extermina- tion, and all similar improvements which do not involve the taking of private land by the city.* 2. Assessments upon particular pieces of land for benefits arising from the acquisition by the city of real property for the opening, widening, or straightening of streets, alleys, or courts, for parks, parkways, playgrounds, bridges, tunnels, docks, water- front improvements, or for any other purpose which will serve public utility, comfort, health, enjoyment, or adornment.' 3. Assessments upon the city at large, or upon one or more boroughs, or upon parts of boroughs, for improvements or the acquisition of property such as those involved in the Riverside Park development, or for a share of the cost of these improve- ments, to be levied and collected from the ta3q>ayers of the area assessed together with the regular real estate taxes.^ Each kind of special assessment has its own agency and pro- cedure of administration. Assessments for local improvements, the first class, are handled primarily by the Board of Assessors and the Board of Revision of Assessment. Assessments of the second class, involving condenmation, are made by the courts on 1 Cf, Table III, p. 137. ' Charter, Section 970 flf. •Charter, Seetkm 943 ff. « Charter, Section 247. 176 Nsw YoBX Ctet's Financbs and the basis of assessment roUs prepared ehie5y by the Bureau of Street Openings of the Law Department. Assessments upon the city or upon the boroughs are determined by the Board of Esti- mate and Apportionment, which has important functions also in each of the other cases, on the basis of recommendations of its Chief Engmeer. The levies are fixed automatically in accordance with the assessments made for the general property tax and are paid with that tax. This extremely complicated situation may be better understood through a dbcussion of eadi irf these ag^cies and its work. The Boasd of Assibssobs and ths Bqabd of Bbvibion or AflSESSlfSNT The Board of Assessors prepares the assessment levies for all local improvements, such as the building of sewers, grading and paving of streets, and the laying of curbs and sidewalks. The Board consists of three members appointed and removable by the Mayor. 1 The chairman receives $6,500 a year; the other two assessors S6,000. The Board of Revision of Assessment consists of the Comptroller, the Cori)oration Counsel, and the President of the Department of Taxes and Assessments, ex officio.* Initiation of Local Improvementa Ix>cal improvements originate with the local improvement boards of the various districts of the city, usually upon applica- tion of property owners in the district. There are about 30 such lystriets. They usually emlmoe three adjoining aldermanic dis- tricts and the board is composed of the three aldermen. These boards meet at stated intervals at the call of the secretary to the Borough President, and hear applications from property owners. The boards have poweap to instruct the Borough Presi- dent to proceed with improvements, costing less than $5,000 where the cost is to be borne by the local property owners. Such improvements may be proposed directly by the Borough Presir dent or the Board of Estimate waxy itself initiate them. When ^ Charter, Section 942. < Charter, Seetioa 944. Financial Administration: Assessments 177 an improvement has been authorized^ the engineers in the Bor- ough President's office prepare a report on the cost of die project and submit it to the Board of Estimate and Apportionment. The report is then referred to the Chief Engineer of the Board of Estimate and Apportionment for his report. On his approval, the Board of Estimate authorises the Borough President to let a contract for the work. In case of sewers, the Board of Esti- mate, at the time it authorizes the work, maps out the area to be assessed. Procedure of Special Assessment When the work is complete, the Borough President submits to the Board of Assessors a docket recording the action of the local improvement board, the decisions of the Board of Estimate and of the Chief Engineer, and a statement of the complete cost of the improv^ent and of the contract with the private contractor. The following items of cost are included: the contract, the cost of calculation by the Board of Assessors, interest, the expense of the Borough President's office for engineering, labor and inspection. The report is also accompanied by copies of the tax maps of the area adjacent to the improvement. On these maps are entered the house and lot numbers and a complete description of the work performed. The docket also includes a list of the lot and block numbers and the last known owner of each. This information IS obtained from the Department of Taxes and Assessments. The work of the Board of Assessors is largely one of calculation and computation. The Charter requires the full cost of the im- provement to be levied on the benefited property unless epedal provision has been made to the contrary. The assessment, how- ever, may not exceed the benefit to the property, nor may it exceed one-half of the fair valuation of the property (Charter, Section 947). The oomputorB in the office of the Boajxi of Assessors pre- pare a property list arranged by lot and block and apportion the cost. Special rules are apphed to pavements, curbing, sidewalks, sewers, etc. Upon the oompletion of the assessment list, notice is given to the public thiou|^ publication in the City Record and the cor- 178 New York City*s Financbs ani> poration newspapers in Brooklyn, and public inspection is in- vited at the Board's ofl&ces for 30 days. Objection must be made in writing within this period. At the expiration of the 30 days, a hearing is held. If there is no objection or if alterations aie made by the Board to suit the objectors, the Board has authority to confinn the list and transmit it to the Comptroller for collection. Where objection is made and the Board does not accept the changes asked by the objectors, the Board must present the assessment and the objections to the Board of Revision of Assess- ment. The members of this appeal board are in practice all represented by their deputies. The latter board may confirm or refer back to the Board of Assessors for correction. Unless the Board of Revision of Assessment acts within 30 days, it is deemed to have confirmed the assessment. Lists returned to the assessors are again certified to the Board of Revision of Assessment for confirmation.^ Few objections are actually made. In 1925 only 18 of the 591 lists prepared were reviewed by the Board of Revision. The courts have power to review assessments only in case of ^^fraud or substantial error."^ The Comptroller may, with the writt^ advice of the Corporation Counsel, compromise assessm^t claims, or with the latter's written advice and con- sent, cancel void assessments.' Nature and Volume of Work of Assessors During the year 1925, 656 assessment lists were prepared of which 591 had been confirmed by the close of the year. Of these 231 were for sewers, 131 for grading, and 229 for paving. There were pending 83 lists awaiting interest certificates from the Department of Finance and contracts aggregating $48,316,000 w&e in process of apportionment. The lists prepared and adver- tised during the year embraced 79,430 parcels of property. In 1926, the assessments confirmed amounted to $27,161,785. Local improvements were much neglected during the war and for some years to come the volume is likdy to be great. The Board of Assessors has a staff of about 36 clerks, drafts- men, etc., only a few of whom are paid over $3,000. All of its > Oiarter, Seetkm M4. > Cluurter, SeetioM 058^^ « Cauurter, Seetkn MS. Financial Adionibtbation: Assbssmenib 179 employees are under the merit system except the secretary, who receives $4,000. The total salary biU is $96,000. About $2,800 is allowed for supplies and expenses so that the total budget is $99,296. Of this, $59,200 is charged to the assessment lists pre- pared (in practice 3 per cent, of the amount of each contract) and is paid from the street improvement fund allowance.^ Damages by Reason of Grading of Streets The Board of Assessors also makes awards on claims for damages resulting from the establishment or change of the grades of streets, and in other instances on certificate of the Board of Estimate.2 Unless a claim m writing had been filed with the Board within 90 days after the completion and acceptance of the work by the Borough President, no award for change of grade damage can be made. Further, in order to obtain an award for change of grade damage, an owner must erect his building to the filed grade established by the Board of Estimate and Apportionment for the street in question, but, if a grade is changed subsequent to the erection of a building, an owner is entitled to an award for change of grade damage. In 1924, 66 such claims were disallowed and 360 granted to the amoimt of $291,000. In 1925, there were 435 awards which totalled $169,000. Bureau of Street Openings, Law Department Besides the local assessments arising from street improvemrats, there is another type of assessment involving the acquisition by the city of the title to land for streets and parks. The work is handled by a special force m the Bureau of Street Openings of the Law Department. This stafif, headed by an assistant cor- poration counsel, consists of 71 employees. There are three divisions of this bureau. The main office in Manhattan handles most of the work but Brooklyn has an entirely separate staff, and there is a division in Queens for trial work only. All of these forces are paid out of the Street and Park Opening fund. The 1 Budget of 1927; Charter, Seetioii 181. • Ghirter, Seetioii 05L 180 Nbw Yobk Citt'b Fof angu and present budget anticipates an aUowanoe of $224,623 for the salaries of this staff — more than twice the cost of the Board of Assessors. As in the case of local improvements the matters originate with the local improvement boards or with the Borough President or, in some cases, with the Board of Estunate itself. The Board authorizes the acquisition and directs the Law Department to begin condemnation proceedings in the courts. The Bureau of Street Openings thus acts first as the ag^t of the Board of Estimate to bring the proceedings under powers granted the city by section 970 of the Charter. The Supreme Court handles these cases without a juiy.^ Once the Court has taken juris- diction, the Bureau acts thereafter as the clerk or agent of the Court as well as of the city. The work involves two phases. The land has first to be ac- quired and the awards made for the damages sustained by the property owners who are forced to surroider. The Board jects and initiates the prooeedmgs hdore the Court. The Court must first be satisfied as to the merits of the project and approve the proposed condemnation. After advertisement fur- ther proceedings are then held and the property owners pvesent their claims for damages. The Law Departmoit i^^msentative presents the city's case and the judge, after a trial, and a personal viewing of the property makes the awards on the basis of the claims substantiated. This money is pi^aUe from the street improvement fimd after the final deevee. At the same time that street or park land is being acquired, the Court must distribute the full cost of the proceeding, or such > Cauffter, SeetioM MIMINIB. Financial Adminibibation: Assbssmentb ISl portion of it as is to be assessed upon the baiefited property. This applies not only to the amounts granted in damages but to the cost of preparing papers, instituting and conducting pro- ceedings, computing costs, and interest from the date of resting title to the date of the final decree of the Court. This is ccanr puted by the Bureau of Street Openings. The Bureau now prepares for the court a preliminary decree or proposal for distrib- uting the cost. A copy of this is placed in the County Clerk's office for examination by property owners. The Court then hc^ds a final hearing and later signs a decree or order assessmg upon the property benefited the whole cost of the project with interest to the date of the decree. The final sum included in this decree may not exceed the amoimt of the preliminary decree. In order to provide for interest and costs resulting from unduly protracted proceedings, a contingency item is included in the tentative calculations. The final decree, issued 15 days later, is prepared in tripHcate. One copy is placed on file with the county clerk, another goes to the Law Department, and the third is transmitted to the Bureau of City Collections in the Finance Department. Collection is thereafter handled in the same fashion as other assessments. If not paid within 60 days, these assessmmts become lims upon the property. Genebal Assessments The Board of Estimate and Apportionment has authority under Section 247 of the Charter, conmionly known as the Gerhart Law (1916), to provide that all or part of the cost of land or public improvements, mich as sewers, streets, bridge plazas, and water front developments, shall be a general assesonent upon one or more of the boroughs, or upon the city at large. The Board de- termines the percentage of the cost to be borne by the locality, by the borough, and by the city, and also whether these assess- ments shall be cdlected in one year or in annual mstallments, spread over not more than five years. This general assessment is a somewhat unique arrangement. These additional levies aie not legaided as subject to the tax limit. 182 New Yobk Cmr's Finangbs and Assessments of this character are certified to the Comptroller and reported by him to the Board of Aldermen for inclusion in the tax levy. In 1927, for example, $8,040,752.66 was added to the tax levy. In Manhattan, Bronx, and Queeaos this adedite the collection of assessmmts of this character. Assessments become a lien ten days after they are entered on the records of these offices.^ The Comptroller is permitted to issue ten year assessment bonds for the street improv^^^t fund to pay for assessable improvements; the moneys collected on assessments are therefore paid over to this fund.^ On December 31, 1925, there were $55,750,000 outstanding in assessment bonds. During 1925 it had been necessary to borrow $1,690,000 for this fund to meet assessmmt dtfmencies and to issue $20,000- 000 in assessment bonds (taken by city sinkmg funds. 3) On December 31, 1925, there were outstanding uncollected assess- 1 Charter, Section 159. • Qiarter, Section 181. * CampbroOer's Report far 19U, pp. 340, 8S0, and 165. 184 Nsw YoBK drr's Financbs nmts amounting to $24,234,500 of which over $10,000,000 dates back to 1923 or earlier. The fund had also made advances totaling $37,234,000 on contracts completed or partially com- I^eted. The total outlay in advance of ooUeetkm was $61,468|000.^ Bxe$89 Condemnation In 1913 the State Constitution was amended to permit excess condemnation. ''The l^islature may authorize a dty to take more land than is needed for actual construction in the laying out, widening, extending, or relocating parks, pubUc places, high- ways, and streets; provided, however, that the additional land and property so authoriaed to be taken shall be no more than sufficient to form suitable building sites abutting on such park, pubhc place, highway, or street. After so much of the land and property has been appropriated for such park, public place, highway or street as is needed therrfor, the remainder may be 9cAd or leased."* The Charter was amended in 1916, and this power was con- ferred upon New York City. The Charter provision makes it clear that the whole property must be acquired when the project is begun.' This power has been used numerous times, for ex- ample, in connection with the development of a civic center, about the new Court House, in connection with the Eighth Avenue Subway, and in the vicinity of the Sixth Avenue Extension. The latest proposal has been to use it to acquire land for the new housing projects. 1 Ibid., p. 349. * Constitution Article I, §7. * Charter. Sections 970-a and 970-b. This was added by Laws of 1916, Chapter 113. CHAPTER Vn NEW YORK CITY'S DEBT POLICIES On January 1, 1927, New York City's gross debt had reached $1,880,436,000.^ The mere size of the figure is arresting. As the city's debt has grown, it has become more and more compU- cated. Few othor, if any, govmimental units have outstanding obligations of so many varieties, amortized in such different ways. The city has a pre-consolidation debt, supported by three obso- lescent sinking funds. The largest of these fimds holds "General Fond Bonds "of the city. Interest is paid from the General Fund, but the transaction is merely on paper. The post-consolidation debt is distributed among three sinking funds. These funds are entirely invested in the city's bonds. The city also issues Serial Bonds. Three forms ot temporary indd>tedness are used. The dty incurs its pmnanent obligations in the shadow of a consti- tutional debt limit of 10 per cent, of assessed real estate valuations; it issues its temporary obligations in the penumbra of a 2 per cent, tax limitation. An emasculated "pay-aa-you-go" law fed>ly attempts to Umit long-tmn borrowing to sdf Hsustaining im- provements. liQgal perplexities and fiscal comphcations go hand in hand. The temporary debt of the dty embraces but 4 per cent, of the total outstanding obligati<»is. It is in three forms. Revmue Bills are issued m anticipation of taxes,^ to meet expenditures authorized in the budget, and are redeemable from the revenues of the same year. Special Revenue Bonds are issued to meet certain emergency and mandatory expenditures not included in the budget." Tax Notes, since 1915, have been issued in order to finance expenditures for permanent improvements. Special ^ Throughout this chapter, unless specifically noted, "Qeneral F\md Bonds" m not included in the totals. The reasons aie outlined below. See p. 19^ s Charter, Section 187. 186 186 Nuw YoBK Ctpt's Finances and TABLE I Indebtedness of the City of New York as op Dbcembeb 31, 1926^ (In thousands of dollars) TllllBllSIMiaM Sinking Fund Ambts Nbt Long-Term Indebtedness (Coiporate Stock, Serial Bonds, and Corporate Stock Notes) General Purposes Water Docks Assessment Total Ten^Dotaiy Xndebtedneas Revenue Bonds Special Revalue Bonds and Bills Tax Notes Total Total Bonded Indebtedness . . Cantract and Land Liabilities and Miscellaneous Minor Items .... Giand Total $ 817,353 351,604 284,703 145,798 61,532 $171,079 5,838 34,856 24,035 53,886 $ 646,274 345,766 249,846 121,763 7,646 $1,660,993 $289,695 $1,371,298 $ 20,000 28,125 16,500 $ 20,000 28,125 16,500 $ 64,625 $ 64,625 $1,725,618 $289,695 $1,435,923 $ 164,818 $ 4,490> $ 160,328 $1,880,436 $294,185 $1,596,251 Revenue Bonds (with certain exceptions) and Tax Notes must be redeoned by appiopiiatioiis in the budget of the succeeding year.' Six per cent, of the city's indebtedness is unfunded, and is in the form of "contract and land habiUties." Contract liabilities are ''for work and labor to be performed or material to be fiir- niidied under contracts for public improvements," for the pay- ment of which Corporate Stock has been authorized. Land Uabihties are obhgations to pay for land which is to be condemned. They are not r^uxled as liabilities until title has vested in the > Compiled from the Comptroller's Statement on the Debt Incurring Power, as of Jamuary i, 1927, and AprU 1, 1927, pp. 6 and 13. This table does not include General Fund Bonds for the reason discussed in the tesrt on p. 196. * Gash available for the liabilities, not in Siiiking Fkmds. » See above, p. 28. Financial AniiiNiffiBATioN: Debt 187 city. The amounts involved in both cases are registered on the books as "contract and land liabilities." They are contingent obhgations and must be included in computing the city's debt margm. It is not necessary, however, to discuss them here, for as quickly as possible they are converted into Corporate Stock or Serial Bonds. The long-term funded debt of the city (90 per cent, of the total debt) consists of three kinds of bonds: Corporate Stock/ generally issued for a tmn of fifty years; Smal Bonds of some* what shorter terms, and Assessm^t Bonds with maturities of ten years or less.* The present study relates only to indebtedness incurred on account of expenditures for permanent improve- ments — that is, long-term indebtedness and Tax Notes required by the ''pay-as-you-go" law of 1916. For several years the annual borrowings of this character have exceeded $100,000,000. Such expenditures very largely condition the future growth and proq)erity of the city. Borrowing by New York City is usually preceded by the issuance of Corporate Stock Notes. Long-term obhgations, therefore, are not issued until the expenditures have been made. Such an arrangement is more economical than that obtaining in many cities which issue bonds when the project is authorized, and in advance of its execution. The practice followed by New York City makes unnecessary the maintenance of large cash balances, and the premature payment of interest on bonds. The dty also may choose the most favorable time for the issuance of its long-term stock or bonds. It may put its obligations on the market in large blocks of fifty or sixty miUion dollars which attract active bidding.' ^The term is confusing. Corporate Stock is nothing more than term bonds. Thioughout this discussion. Corporate Stock and Bonds {u e,, non-serial bonds) will be used interchangeably. * These Assessment Bonds are at present all being sold to city sinking funds. » Should no sale of long-term stock occur before their maturity. Corporate Stock Notes may be renewed and the roiewals rede^ed from the next sale of the stock. The total amount of sudi notes and renewals must at no time exceed four-fifths of the amount of Corporate Stock or Serial Bonds authorized to be issued (Section 189 of the CSiarter). There was $109,795,000 of these notes outstanding Jan. 1, 1927. TiMse wwe laisely retired from the proceeds of the bond sales early this year. 188 New Yobk City's Finances and The principal concern of the present discuasion is with the amount of the city's outstanding obligations, the purposes for which the indebtedness was incurred, the limitations imposed upon the city by the State Constitution, the extent to which the "pay-as-you-go" law has been followed, the borrowing policies which are being adhered to, and the tmns of the corpcmte stock or emal bonds which have been issued. The problems posed by New York City's debt can be better understood, however, if a brief review is given of the city's past experience. The purposes for which long-term indebtedness was incurred before consolida^ tion are a nice index ot the principal problons which confronted the city during the previous century. The city's services and needs are mirrored in the recurring periods of stringency and of large scale borrowing. The emergencies have dffiored, and the emphasis has shifted frcnn period to period. Growth of New Yobk City's Debt The city borrowed money as early as 1750. These loans were incurred for the construction of docks and public buildings, and the purchase of anps for the cok»ual wars and the War of Inde- pendence.1 The terms were relatively short; and the debts were regarded as tanporary expedients. The city, however, found itself compelled to renew the loans, and refund the bonds. The result was that at the close of the eighteenth caitury, the dty had an indebtedness which for that time was substantia. Special powers were therefore secured from the Legislature in 1812^ to facilitate the Uquidation of this debt. The city set up a sink- mg fund to which certain specific revenues were pledged. In the twenties, when the debt had been only partly Hquidated, the city incuned new obligations, principaUy for the construction of markets and the purchase of Blackwell's Island.* Up to this point borrowing had been sporadic. Since then it has been frequent, and on an increasing scale. The dty has be^ forced 'Act of June 8. 1812. • Aete of MMeh 24» 182(V and Ifarcli 26^ 1828. Financial Adbonibtration: Dxbt 189 to pile up a larger and larger indd[>tednes8. Hardly a year has passed without the incurrence of new obligations. CHART I Growth op New York City's Debt, 1860-1926 I I IILII ' III' IIIMJ '^^"^'^^ Chart I shows the growth of New York City's debt during the last hundred years. The increase has been by cycles. From 1835 to 1842 the Croton water S3r8tem was largely responsible. In 1835 the people of the State, through a popular referendum, approved a loan of $5,500,000 for the construction of the Croton water works. At the time, this seemed a staggering sum, but the amount voted proved to be insufficient, and only three years later additional loans had to be authorized. The total cost of six years' construction amounted to approximately $8,000,000. In the same year, 1835, a great fire occurred, and bonds were issued to offer aid to its victims. These bonds w&e redeemed before 1860. From 1860 to 1865, war expenditures required extraordinary outlays. These bonds, which were issued in aid 190 Nbw Yobx Crnr's Financbs ct the f amilieB of volunteers or for other purposes, were liquidated before 1897. The period from 1869 to 1874 was Tweed's heyday, and the debt was piled high. PubUc buildings were a favorite object of expenditure. A rdic of this period is, of course, Tweed's Ck>uiity Court House. Borrowing for school construction began in 1871. Prior to that time school buildings had been financed directly from taxation, but in 1871 a bond issue of $200,000 was authorized. Bridge construction appears in the late seventies. The years, however, which followed Tweed's '^liberalitsr" weie years of retrenchment; the taxpayer's pocketbook was being emptied and aversion to new debts was great. A new water supply system, and the necessity of providing transit facihties (1893-1914) strained the city's borrowing powers. The World War, as will be explained later, postponed many needed expendi- tures. Thereafter, up to within four years ago, major public improvements were almost at a standstill. Objkcto of Indebtedness The relative importance of the various purposes of indebted- ness is shown on Table II and Chart II, as of the years 1860, 1897, and 1926. In the outstanding indebtedness of 1860 the water supply was the principal item, with parks coming second. By 1897, docks and. pubhc buildings, streets and sewers, parks, schools and bridges all required substantial eq)enditures, but, water still held the leading place. By 1926, parks, which had been second in importance in 1860^ and third in 1897, held the eighth position. Rapid transit expenditures topped all others, with water, schools, streets and sewers and docks fol- lowing in the order mentioned. Such an order may be only temporary, but the differences in the amounts of indebtedness incurred for the different purposes are so great, and the city's borrowing margin is so limited, that some time must elapse before the relative positions are materially modified. It should be noted, in connection with the 1926 figures, that here, as through- out this chapter, no account is taken of changing price levels. 1 The expenditures for paiks began in the fiftiai with the aequisHion of land for the Gentna Park. CHART II Qbjbctb 09 Nmw Ygbk drr's Indbbtbdnsss in 1860, 1897 and 1926 192 New York City's Finances and 53 8 CO ^ O ;d o *. CO CO OQ eo M a n H U H Q o z M o z H !? H 00 CO 05 Tj< lO 00 OS CO J> Ttl CO 05 O CO 00 1-1 23 assisss" CO »o TT CO 1-1 aO Q to 00 iO »H CO 25 O Oi Oi 00 Q CO 00 00 o ^ 22 no O CO CO o 3 CO 3 • O .13 >, OQ >r5 ^51 I pq 00 OS to »o CO to OS to 00 1—1 o CO »o to CO o u 00 o 8 3 o -S - ^ , ^- ^ "1 1 o S-^ w 5 5 3 a ^ ~ o e o SB - o • CO o fc" « - o Financial Administration: Debt The total indebtedness of New York City, however, has not grown proportionately more rapidly than the indd[)tedne88 of other cities in the United States. The New York debt reached high levels earlier, but this was natural, for the city had a large population and many special problems. Three rivers that must be bridged and tunnelled, outlying boroughs that must be de- veloped, the geography of the principal borough, Manhattan— an dongated island which makes it impossible to converge on centers as may be done in Paris or London — the fact that ten miUion people live within a radius of twenty-five miles, and the demands of the greatest seaport in the United States have in- evitably forced continually mounting expenditures. Sinking Funds Eighty-five per cent, of the city's permanent debt is Corporate Stock. For its redemption the city maintains six sinking funds. Three sinking fimds are pledged to the retirement of the pre-con- soUdation debts. These will be liquidated within the next two to ten years, and the sinking funds will then be discontinued.^ The three funds which will remain will be the Sinking Fund of the City of New York, the Water Sinking Fund, and the Rapid Transit Smking Fund. Table lU shows that each of the sinking funds has accumulations in excess of its requirem^ts. Appropriations for the three permanent funds are made annually in the budget.* * The last bonds redeemable from the Sinking Fund No, 1 are due in 1933; the two other sinking funds (former city of Brooklyn indebtedness) terminate in 1937. ■ These three sinking funds have annual revenues amounting to approximately $18,560,000 of which $8,620,000 represents interest paid from the City Treasury on dty securities held by these ftinds and $9,160,000 the budget appropriation for amortization. The balance consists of subway rentals, interest on hmn^ balances, etc. Comptroller's Report for 1926, p. 324 The operation of these sinking funds in 1926 is shown in the following consoU- dftted statement which, however, does not include Sinking Fund No. 1. The opera- tion of this fund and its relation to the General Fund are discussed on p. 196. RECEIPTS EXPENDITURES CM «fi Jkoni, /m. 1 $2,481,109 Investment in City Securities. . $42,402,925 Surplus Water Rereuue (BTdjm) 3,067,851 Redemption 1,381,950 Subway Rentals 570,957 Accrued interest, refunds, etc. . 115116 btOTMt on Bank BaluMW 96,438 OMh tebuiee Dee. 31 6,846,965 Revenue from Investments 9,300,120 •4ft 7iB n Ket Securities redeemed or sold 25,040,297 •W./w.WQ Amofttntiott ApiiraiiritttioD, Bodsek. 9.105,000 •iO.746.9i6 194 Nsw YoBK Cirr's Financss and TABLE m Assets and Obligations of the Sinking Funds as of Decembbb 31, 1826* (In thousands of dollAn) Bonds Rba rrvirr RSQCIBSO A OTTT A T 1 U A U ASSSTS Permanent Sinking Funds Sinking of tbe CSty d New York Rapid Transit Sinking Fund of the City of New York . . . Water Sinking Fund of the City of New York 243,170 275,142 Si OA CAO 19,613 38,459 #196,697 20,945 39,818 $ 6,129 1,331 1,359 Total Pre-ConsolidaHon Sinking Ftmds (Soon to be Liquidated) Sinking Fund for the Redemption of the City Debt, No. 1 , . Siiikiiig Fund of the City of Broddyn Water Sinkms ¥vaiA of tbe C% 11,242,026 16,268 4,173 1,585 $248,641 15,194 3,010 1,187 $257,461 19,812 7,576 12,435 $ 8,820 4,618 4,565 11,248 Total $ 22,026 $ 19,392 $ 39,824 $20,432 Gnnd Total $1,264,953 $268,033 $297,285 $29,252 There is a seventh f und, the Sinking Fund for the Payment of Interest on the City Debt, which is not a true sinking fund. Its revenues are derived from water rates, ferry revenues, rents, and court fees and fines. The surpluses of this fund go into Sinking Fund'No. 1. These amounts have been increasing rapidly. In 1926, they amounted to $17,400,000 out of the fund's total revenues of $19,134,000.« The contributions to the pre-consolidation funds are not actu- arially determined. The most important of these funds is the Snking Fund for the Redemption of City Debt, No. 1. The remainder of the entire indebtedness of the old City of New York is to be paid from this fund, to which are pledged various misoel- * Excerpted from the Comptroller's Statement on the Ddd Incurring Power as of January 1, 1927, and April 1, IftW, pp. 11-12. ' * This fund will be disoositiiiiied when Smkiiig Flmd No. 1 m disoontiiiiMd in Financial Administration: Debt 195 laneous revenues such as rents from docks and markets, revenues from the franchises of street railroads and minor utihties, and various licenses and permits — in all, half of the city's miscellaneous revenues. Such a scheme of building up a sinking fund is charac- teristic of the early attitude toward amortization of municipal debts. The idea was borrowed frcnn the English practice of the eighteenth century, and was in great favor until about half a cen- tury ago. Today it is gradually being abandoned.^ Before con- solidation, New York on occasion accumulated sinking funds in excess of their actuarial requirements. These sinking funds contained surpluses which could not be used for the amortisatim and redemption of unconnected items of indebtedness, or for current expenditures.^ When consohdation took place, a line of demarcation was drawn between prior and subsequent indebted- ness. The eyisting sinking fund was left intact. Miscellaneous revenues were to be paid into it as before, and were to be used exclusively for the redemption of the pre-consolidation indebted- ness. It was feared that the holders of the old bonds might contest the legality of any oth^ arrangement. New and different sinking funds, however, were established for the amortisation of future bond issues. Oeneral Fund Bonds Sinking Fund No. 1 began at once greatly to exceed its require- ments. Calculation showed that by the time the last bonds were redeemed, there would be a surplus of more than $300,000,000. There was an embarrassment of unusable riches. A scheme was thmfore devised which would avoid litigation, but which would at the same time allow the surpluses to be diverted to other purposes. The city was to take the surplus each year and pay it * On the comparative merits of sinking funds and serial bonds there may be legitiiiiate differences of opinion (see below, p. 198). If, however, a sinking fund is used, its buildiiig up should take place by appropiiations from general revenues mther than by earmarking specific receipts. Such receipts are either too large or too small precisely to meet the sinking fund requirement. If certain sources of revalue are so pledged, the municipal authorities are prevented or discouraged from revising charges, for the increased revenues would simply go into the sinking fund. * The special legislation in 1878 did not relieve this situation. See E, D, Durand, The Finances of New York City (1898), p. 306. 196 Nbw Yobk Cmr*8 Financbs and into the General Fund for the reduction of taxes. In return, the city was to issue annually to Sinking Fund No. 1 bonds of an equivalent amoimt. These ''General Fund Bonds'' were to be held by the Sinking Fund as security against the possibility that its accumulations might not be sufficient to retire the debt redeemable from it.^ If the debt could not be so retired, General Fund Bonds of the required amount were to be sold^ and the other bonds redeemed from the proceeds of the sale. During the first year of the system, about $8,500,000 was tak^ out of the Sinking Fund, and appHed to the reduction of taxation. General Fund Bonds of this amoimt were issued. In 1926 the figure was $43,000,000 and at the dose of that year the total amount of General Fund Bonds was $576,250,000. The amoimts issued annually are shown in Table IV. These bonds have not been sold to the pubhc, and they do not represent an obhgation of the city in the accepted sense of the term. In 1926, the total outstanding indebtedness redeemable from the rinkmg fund amounted to 15 million dollars. The fund had investments and cash assets of $20,000,000, or an excess of 33 per cent. Yet the sinking fund had an additional "security" in General Fund Bonds of $576,250,000. These G^eral Fund Bonds bear interest which is paid from the General Fund into the Sinking Fund.^ Since the Sinking Fund is overflowing, the interest money flows back at once into the General Fund, and requires the issue of an equal amount of more General Fund Bonds — surplus, bonds, interest — more surplus, more bonds, more interest. . . . But the motion is not perpetual. These paper transactions will come to an end in 1933, when the bonds supported by Sinking Fund No. 1 will be retired. The city's debts will be more fused and less con- fused. 1 This scheme was embodied in an amendment of the Charter secured in 1903 (Section 222). Such a security was hardly necessary, because the accumulations at the time were already almost equal to the amount of the outstanding debt. * The total aeeimnilatioiis of interest now amount to $148,478,000. This inter- est is aetually paid by drawing a ivanant upon the Chamberlain as in the case of any other city payment. Later new warrants are drawn to pay the sim^us back to tbe Gmial Fmd in return for Genml Fond Bonds. Financial Administration: Debt 197 TABLE IV Gbhbbal Fund Bonds Issued in I9(»-1926» Yb^Emsbd DaosMBm 31 OmaauhWmwBcmm iHoed Duiinc tlM Yew Otttirfaiidiiic at End of Ymt 1903 $8,500,000 $8,500,000 9,500,000 18,000,000 1905 11,000,000 29,000,000 1906 11,750,000 40,750,000 1907 13,500,000 54,250,000 1908 14,500,000 68,750,000 1QOQ 16,750,000 85,500,000 1910 17,000,000 102,500,000 1911 17,500,000 120,000,000 1912 17,500,000 137,500,000 1913 22,000,000 159,500,000 1914 23,500,000 183,000,000 1915 23,000,000 206,000,000 1916 23,500,000 229,500,000 1917 25,000,000 254,500,000 1918 27,000,000 281,500,000 1919 28,500,000 310,000,000 1920 32,500,000 342,500,000 1921 34,000,000 376,500,000 1922 37,500,000 414,000,000 1923 38,500,000 452,500,000 1924 39,500,000 ^000,000 1925 41,000,000 533,000,000 1926 43,250,000 576,250,000 Serial Bonds versus Sinking Funds In 1915 the Charter was amended^ to permit the issue of Serial Bonds as an alternative to the regular Corporate Stock redeemable by sinking fund accumulations. Each issue of such bonds is divided into series, which are retired annually in d^mite and equal amounts. Of a twenty-year series one-twentieth is retired each year. An appropriation is included in each year's budget for this direct retirem^t. This corresponds to the annual appropriation that must be made to a sinking fund to care for 1 Compiled from the Annual Reports of the Comptroller. « Section 169, amended by Laws of New York, 1915, c. 309. 198 Nbw Yobs Crnr'a Finangbb ah© ihe amortization of nonnserial or term bonds. To this extent the two systems are not dissimilar. A portion of an issue of Serial Bonds, however, is retired annually. The total of outstanding obligations to be amortized by a sinking fund remains constant, Hioui^ the net debt diminishes as the sinking fund accumulates. Some sinking funds are invested in various interest bearing securi- ties.i New York's sinking funds, however, are all invested in the city's own obligations.^ This praclice makes New York's debt structure at once simple and complicated. As their assets accumulate, the sinking fimds purchase the city securities. The interest on these securities goes to the sinking funds. The sinking fimds purchase only the city's hew issues and do not buy in the open market. The outstanding obligations payable from the city's Sinking Funds on January 1, 1927, amounted to $1,264,962,000. Against this hability the City's Sinking Fund held $287,795,000 in miscellaneous city bonds. Of the bonds hdd by the Sinking Fund $157,039,980 were payable from the Sinking Funds thmnselves. Besides their investments the Sinking Funds had a cash balance of $6,013,249 plus items of accrued interest due them of $2,886,317. In addition to the bonds of the City the funds held $600,000 in Liberty Bonds. The aggregate assets in tiie Sinking Funds was, therefore, of $299,194,706. Authorities on pubUc finance have long debated the com- parative merits and demerits of serial bonds and sinking funds.* Administrative costs of sinking funds are scnnewhat greater, and the system is undeniably more complicated. On the other hand, there is one great compensating advantage. If a city of the size of New York uses sinking funds, it can, in times of stringency, assist in financing itself. New York City pa3rs itsdf , on the S287,795,000 of obligations which its sinking funds hold, $10,- 000,000 annually in interest. This amount — plus $10,000,00) which goes annually into the sinking fund for amortization — beocmies available each year for the purchase of Corporate Stock * For the pimctioe in different municipalities, see L. D. Upson, The Practice of MwUeipal Admmiairaiion, pp. 107-125. * Save for an exoeptioiud investment of $800,000 in liberty Boodk t for ref eiODoes, see Upstm, op. dL, Qiapter VL FiNANCiAii Administsateon: Dbbt 199 or bonds. Even in most stringent times, the city has this reserve for pubUc improvements. The city adheres very largely to the poHcy of sinking funds. Out of the total d^t of $950,000,000 incurred betwe^ 1915 and 1926, only $218,000,000, or less than one-fourth, represented serial bond issues (See Table IX). The Constitutional Debt Limit Before it was consolidated in 1898, the city was under the necessity of applying to the Legislature for authority every time it wished to borrow. The new Charter, adopted in 1898, gave to the city genaral pow&m to borrow for any municipal purpose, subject to certain limitations imposed by the Constitution. These powers have been continued in the present Charter (1901). Be- fore 1884 there was no limitation on the amount of indebtedness which the city could incur. When l^islative authorization was secured, the borrowing pow^ of tiie city was limited only by its abihty to market its bonds. Before the Tweed regime, the city borrowed quite conserva- tively. In 1870-71, howevw, the indebtedness rose almost to 12^ per cent, of the assessed valuation of real estate. Many of the bonds then issued were at the high rate of 6 per cent, and were made redeemable from taxation. When, in the early eighties, it became necessary to repay these bonds, the ta9q)ayers were severdy burdened. A demand arose for a constitutional check that would prevent the recurrence of such a situation. In 1884, therefore, the Constitution was amended to prevent the repeti- tion of such abuses. The borrowing capacity of the city was limited to 10 per cent, of the assessed valuations of taxable real estate. At the same time, the tax rate which the city could impose on real and personal property was limited to 2 per cent, of the assessed valuation. Debt charges on the permanent debt were exempted from this tax rate limit.^ Immediately after 1884, the 10 per cent, debt limit was some- what embarrassing. The debt was being reduced, but the gross ^The text of thk anwndmeiit as it developed b^weea 188i and 1926 is given in the Appendix, p. 889. New York City's Finances and TABLE Gbnbral Sottsces and Amount of Expansion of City's Dbbt- Fieparod by the Burara of AoeoontaiM^, Total Bonds Te.v (10) rui.T Amoumtb EmupTXD Per Cbnt. Appbopbiatiom r Rboemption EXPANUIIVO BT or AannBD OF Dbbt YSAB Cmr's Appbu^tb VALUAVMMf Dnv-lNcusuNo DmsioN, or OF Dbbt FBOIf Other Pomm Scrann Coxm Bbai. Ectatb (ExcLuaivB Off SOUBCBS (1) (2) (3) (4) (5) Fron 1 Januaiy 1, 1910 1910 383.048.208.43 A $43,868,326.18 $25,701,297.00 $1,036,629.91 $3,877,500.00 1911 99,882.290.47 A 3.614,400.00 81,464,749.00 915.029.91 179,600.00 1912 14,811,945.47 305,872.00 994.529.91 108,500.00 1913 94.745.941.93 B 69,943,063.65 14,474,897.00 761,051.51 1914 18,301,036.27 4,321.205.00 1,005.286.71 117,300.00 1915 19,650,108.15 5,890,087.00 662.686.71 402,600.00 1,114,479.49 1916 27,876,874.55 9,906,157.00 2,728.647.50 2,735,990.00 1917 23.064,876.56 4,672,664.00 4.358,450.00 1918 29,363,006.99 A iRt.536,9i».08 8,509,385.00 4,666.650.00 251,500.00 904,100.00 1919 29,529.089.56 8,867,990.00 5,051 150.00 231,600.00 1920 40.960,764.39 19,779,895.00 5,091,650.00 839,600.00 1921 155,985,384.65 134,686,339.00 4,876,150.00 $64,100.00 1922 50,200,820.12 27,700,673.00 5,134.350.00 624,224.08 1923 68,051,781.59 34,607,373.00 8,975,230.47 1924 82,257,195.06 65,274,592.00 9,616,652.84 339,600.00 1925 106.673,120.92 75,253,706.00 15,065,557.79 830,100.00 1926 145,768»646.35 109,623.228.20 18.430,900.00 467,600.00 341,334^ Ghrftnd Totah Sl.080.057.071.47 $120,956,778.41 $619,040,109.20 $89,160,503.26 $12,429,628.39 (A) R«pid TnuMt Bomb. (B) Doek Bonds. indebtedness exceeded 10 per cent, of the assessed valuation. Ihe question therefore arose as to whether the indebtedness referred to by the constitutional amendment was gross or net indebtedness. Could the accumulations of the sinking funds be deducted from the gross indebtedness in computing the difference between the amount outstanding and the amount permitted by the ten per cent, constitutional hmitation — that is, the annufd debt incurmig pow^ of the city? The question was submitted to the courts which ruled that the sinking fund accumulations WW deductible.^ »i'iuiio For the first decade after the adoption of the am«idment, the » See BMik for SmviDgit w. Giaoe, 102 N. Y. 313 (1900). Financial Administration: Debt 201 V IircuBBiNa PowBB DuBiNO Each Yeab fbom 1910 to 1926 Departmeiit of Finanoe SnrKZNO Fund Rbvsmuw Total op Sinking Fund RavxiruM (9) Less RS8£RVES (10) (6) Amortization of Debt (Budget Appropriations and Rapid Transit Rentals) (7) Revenue from Investments; Interest on Bank Balances; Surplus Water Revenue (8) Totals (9) Reserve for Amortisation of Enmpted Dd[>t (10) Ybab to Deoamber. 31 1026 $10,564,556.34 13,714,611.56 13,403,043.56 9,449,639.90 12,572,044.56 12,082,854.95 12,506,080.05 13,782,262.56 12,561,872.31 15,378,349.56 16,249,619.39 16,058,775.63 16,841,573.04 14,109,578.12 17,035,850.22 15,786,257.13 17,373,183.33 $7,650,494.63 8,290,672.83 8,973,905.57 9,238,149.90 7,965,079.58 7.913,871.79 8,714,164.35 9,215,386.71 9,767,942.41 9,740,516.14 9,229,234.54 10,276,907.41 9,852,794.00 7,661,305.71 8,816,741.91 8,819,776.50 0,720.966.66 $5,553,713.34 7,070.550.97 6,284, 167iJ7 7,580,756.38 7,901,906.66 7,779,186.86 7,646,067.76 8,585,123.12 8,502,060.36 9,870,700.52 10.317.364 J24 10.149,781.83 11.307,286.73 11.777,621.43 13.122.380.36 12,349,046.79 13,181.461.89 $13,204,207.87 16,361.223.80 15.268.093.24 16,818,905.28 16,866.986.13 15.693.058.65 16,360,232.11 17.800,509.83 18.269.992.76 19,611,216.66 19.646.688.78 20.426.680.24 21.160,080.73 19,438.827.14 21.939.122.24 21,161,823.29 22.902.418.64 $2,639,651.53 1.646,612.24 1365.040.68 7.369.266.38 3.294.941.67 3.610.208.70 3,854,152.06 4,018,247.27 5.708.120.45 4,232,887.10 4,296.969.39 4367.913.61 4,318,507.69 6,329.249.02 4,903372.02 6,375,566.16 5,629,23631 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 $238,470,162.21 $161,847,900.63 $168,972,076.76 $310,819,976.29 $72,349,824.08 dty borrowed oonservativdy. Its new issues correeponded to the amortization and redemption of the outstanding bonds. The assessed valuations of real estate were soon increased, and the ratio of indebtedness therefore declined. In 1893, demands for improvan^ts caused the city to borrow on a relatively larger scale, but the indebtedness still remained materially bdow the constitutional limit. Wh«i consolidation took place, however, ih» ten per cent, limitation again loomed up. The consolidated city took over the debts of the poUtical units which had been absorbed. While negotiations for consolidation were in progress, many of the smaller places, not subject to a constitutional debt limit, piled up obligations whose burden 202 New York City's Finances and Iff TABLE VI l4BaAii Dbbt-Incurmnq Power and the Non-exempt Bonds Each Year from 1898 to 1926, Inclusiyb* (In thousands of dollars) (1) 1898 IMO 1901 1902 1903 1904 1905 1906 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1921 1922 1984 1925 1926 1987 Lkqai. J>marr- Incunnro Pbwer at Beginning of Yew (2) S-20,131 -14,469 47,409> 20,534 7,551 6,009 103,646 72,844 45,953 31,143 27,695 48,605 58,764 78,886 125,684 88,814 51,373 56,792 54,326 51,501 50,270 73,892 70,478 63,513 175,266 173,180 148,323 123,423 101,747 127,143 Additionb to Dbbt-Incubring Powbb Dubinq thx Yxab 10 Per Cent, of Increase of Assessed Valu- •tuui oi Real (3) $6,429 40,501 23,610 6,923 9,286 142,088 26,391 20,611 51,600 50,199 48,193 8,476 23,701 81,464 306 14,474 . 4,321 5,890 9,906 4,672 8,509 8,867 19,779 134,686 27,700 34,607 56,274 75,254 109,623 154,226 Redemption of Non- exempt Bonds urom Taxation (4) $4,020 10,629 4,389 7,781 4,973 4,995 11,810 4,914 1,094 1,103 878 1,407 1,677 5,464 4,619 4,860 5,282 5,931 5,240 5,658 9,315 9,946 15,533 18,772 Revenaes ol Siiikii« Fnnililar Non-emnpi Bonds (5) $11,155 12,681 14,459 14,941 17,799 10,371 10,000 10,504 13,714 13,403 9,449 12,572 12,062 12,506 13,782 12,561 15,378 15,249 16,058 16,841 14,109 17,085 15,786 Total (6) $21,606 63^12 42,459 29,646 32,060 157,455 48,203 39,179 96,281 14,812 24,801 13,301 19,649 27,877 23,074 25,931 29,528 40,959 155,284 50,230 58,032 82,255 106,573 NOW-BXBMPT Bonds Issued (7) $21,965 27,137 31,198 24,920 14,751 27,356 61,092 31,220 39328 55,843 48,687 41,342 39,303 34,350 47,521 38,760 59,239 55,360 50,745 58,013 2,327 7,710 6,324 108,618 28,264 11,000 110,372 109,233 85,218 . iSounw: th* igm in oolniim 2 are taken for the yem 1898>19M fawk on the Debt Ineurrina Power of the City, October 1904; and for the later jmn from the annual reports of the Comptroller; thoae in column 3 are computed from the annual reporto of the Tax Department of like dtjr; thoae in oohunns 4 and 5 are taken for the years 1896-19M from the 1904 Report of the Comptroller mentioned above; those for the years 1910-1925 have been furnished by the Burm of Municipal Accounts; those in column 7 are computed as indicated in Table VIII, see p. 209. >The latie iiMsrease ia liw dsbt-iaeiiRiac power ftha* year wm doe lo the annmtions that year hr 'I Financial Adiunisibatioii: Debt could be shifted to the greater city. Moreover, the Corporation Counsel rendered an opinion requiring the inclusion of ''contract and land liabilities"^ in the computation of the indebtedness to which the constitutional limit appUed. Brfore conadidation, m€k a legal ruling would have been unimportant. After consolidation, any addition made a great difference.^ The resulting aggregate inddi>tedne68 was in excess of the constitutional Umit.^ No further borrowing, therefore, could take place, and it was feared that loans which had been authorissed, and under which ezpo&di- tures were being made, were illegal. In 1899, therefore, the State Constitution was amended to exempt the county debt of $29,000,000 from the debt limit, and the borrowing powers of the city were released to this esd^nt. Assessed valuations were largely increased in 1899 and 1900. A margin for the further exercise of the borrowing power was thus created. In 1901 and 1902, nevertheless, the borrowing powers of the city were low.* The asaeesed valuations were shaiply raised, and in 1904 there was a substantial margin. Such small measiues of relief were obviously futile where the city desired to borrow for the expenses of great improvements Uke the WiUiams- burg, Manhattan and Queensboro Bridges, the subways, and water supply projects. Another constitutional amendment was there- fore adopted (1906). It exempted from the debt Umit all water 1 The Ck)urt of Appeals later sustained this view. See l^svy m. McQdlan, 196 N Y 178 (1909) * « The amount of these liabiUtieB in 1807 wm $65,000,000. • The ntufttkm was xefioited by the Comptidler in 1888 as folJowB: Territory Consolidated Former Citt of with Fobmkb Citt of New York N«w Yomc XI * u^^A^ ^oKf . . . $188,856,361 $91,447,311 Net bonded debt • 25 122 351 1,041.804 Contract habibty • gj jgs gia 182,339 F^riSu :::::::: Vw/)ao $202,943,525 $93,563,288 TtolH»B«rt.«f««««dTiAiiitloo«ll«il«^ 178.718.679 67^389 Exoe« over conBtitotkmal Umit .... m^M*A mfiWM Aggregate exoew of New York City on Janu- $BMM^ ary 1, 1898 •• « Table V and Chart UL Nsw YoBK Onr's Financss and CHART in New York City's Bobbowinq Maboin, 1900-1927 /xo- bonds issued after Deeemb^ 31, 1903. This was justifiied on the theory that wat^ revenues would be secured in sufficient amount to care for interest and amortization charges, etc., — that, in other words, the improvements would be self-sustaining. The city was thus ^labled to borrow to the extent necessary to com- I^ete the water fitystem th^ und^ way, and to use for other great improvements the additional borrowing capacity created by the withdrawal of water bonds from the debt Hmit. During the next twenty years, water bonds to the amount of more than S270,000,000 were issued outside the debt limit. Substantial as this increase was, the city was again in diffi- culties by 1908. During the ten years which followed consolida- tion, $500,000,000 had been borrowed. $72,000,000 had be^ Bpmt for schools, and approximately the same amoimt for streets and sewers. Water, transit, bridges, and docks (including ferries) had required $50,000,000 each, or a total of $200,000,1 $38,000,000 had been spent for public buildings, and $29,000,000 fcHT local improvements financed by special assessments.^ In lllli » Figures given by the one-time Deputy Comptroller of the CSty, JSdfftr J. Levey in his communication to the Joint Legislative Committee appoiBted to the finances of the city of New York. (November, 1908) Financial Administration: Dbbt 205 SOTTBCn ABO CHART IV Which thh Dbbt-Incubrino Powbb Has Bbbn Fed qb R«x>n- STBUCTBD Annually AfO i20 \ SO 40 ToM of s// Sources— ^ - ^/0% of Increase : /far ex. Boneh fromTbx*/?' Sinkirrg Fund fyrAbfrexet PL So naHi ^ 1 J I I f 206 Nsw York City's Finances and January^ 1908, the borrowing margiii of the dty was estimated by the Ccmiptroller at less than $3,000,000. Yet there were out- standing at that time authorizations for the issuance of additional stock exceeding $180,000,000 in amount, and the city was about to let large contracts on the strength of these authorisations. The courts were appealed to. A taxpayer sought to enjoin the Board of Estimate and Apportionment from approving a contract for the construction of subways on the ground that the city's capacity to incur further indebtedness was insufficient to supply the funds necessary to complete constnieti See New York City's Debt, a brief submitted by the BuTOMi of M imi^p fJ Research before Referee B, F. Tracy, in Levy vs. McClellan. * Compiled from Comptroller's Statement on the Debt Jricurring Power, aa cff Jtmmry 1, 19S7, and April 1, 1927 , pp. 9 and 12. FiNANGiAL AmuNisiiBATioir: Dbbt 207 CHART y OmcANDiNG Indebtedness on April 1, 1927, Classified as Exempt and Non-exempt soo TOO ^400 I '^300 200' ZOO- Legend XZ^SHExempf miII3fibrf'exempf- ScfTOo/s, 3 f reefs, ^afvr Docks TPSmff sustaining.^ At the time there was no question but tiiat sueh improY^ents were sdfHgnistaining. If revenues, after deduction of repair and maintenance costs, were sufficient to pay interest and amortization charges, the bonds, on petition of the city, could be exempted from the debt limit by the Appellate DiviMon of the Supreme Court. In the course of the next few years (1910-18), an additional borrowing capacity of $120,000,000 was thus created! Assessments were again revised upwards in 1911, and the city proceeded with its transit, water supply, and other improvement programmes. The relief, however, was no more perman^t than before. The subways failed to be self Hsupporting. Out of a total of $300,000,000 of transit bonds, the Appellate Division exempted approximately $50,000,000 from the debt limit. The remainder See Appendix, p. 339. 208 Nbw Yobk City's Finangss and came to be and has remained a ''frozen credit" of the city. New schools now became a pressing need. By 1914 there was much overcrowding. Then came the War. Calculation of the Annual Dsbt-Incubbing Powbb Constitutional amendments and charter provisions fix the d^t limit, and therefore determine the extent of the city's annual debt incurring capacity. What amount the city may legally borrow at a particular time is aiithmetically a sunple problem in addition and subtraction. It is a problem, nevertheleeSy which presents many mysteries to the layman. The determination of the amounts to be subtracted and added is made by the Comp- troller, who acts in accordance with complex constitutional and charter provisions. These, however, have been definitely clari- fied by the courts by the decision rendered by them in the case of Levy vs. McClellan, in 1909, so that today there is no longer any controversy over the question as to which amounts should be included in the computation of the inddl^tedness and which should not, and what the amount of the debt margin really is. The computations are made January 1 each year, and again after March 1, when the new tax values become available. The basis of the calculation is, of course, ten per cent, of the assessed valuation of taxable real estate tas exempt real estate is excluded). This is the upper limit for non-exempt debt. The gross funded debt of the city is then set down, and from it certain deductions are made: (1) indebtedness exempt from the debt limit (county bonds, water bonds, etc.); (2) the sinking fund holdings, and (3) amortization appropriations in the budget. To the resulting figure must be added, the non-funded contract and land liabilities and open market orders. The sum is the total indebtedness wUhin the dM limit, and if this is subtraeted from the total debt-incurring power of the city within the debt Umit, (i.e., ten per cent, of the assessed valuation of taxable real estate) the difference is the constittdumal debt-incurring power of the city within the debt limit as of a particular date. The Comptroller indicates how much of this margin is reserved or unreserved. The method of calculation is shown in Table YIII. Financial Administration: Debt 209 table viii OAi^misfoir 09 Naw Yobk CJmr's Constitutionaii BoBBowma IV>wsb as of Mabch, 1, 1927^ L Total Debt-Incurring Power, ten per cent, of the wmfmd valuation of taxable real estate, 1926 $1,453 983 820 IL Gross Funded Debt, March 1, 1927 2^,W^ EXMMST FbOM XteBT LllfIT m. ^unty Bonds $2,142,114 IV. Water Bonds and Corporate Stock Notes 271,676,632 V. Rapid lYandt Bonds 51013 725 VL Dock Bonds 69i943;053 Total Exmpt Debt $SH,77^SM Dbductioxs VII. Sinking Fund holdings for non-exempt debt $883,176»537 VIII. 1927 Budget appropriation for amortization nil* IX. 1927 Budget appropriation for direct redemption . . . 13,728,250 Total deductions $1,022,430,084 Othkb Telln Funded Debts to be Added X. UndliabiUty $46,718,526 XI. Contract Liability in gQg ^33 XIL IieM Gash Available therefor \ \ MTS^TOS Total Net Additions $156,950,911 Xm. total indebtedness within debt limit . $1,179,380,995 Xnr. OONSTTTUTIONAL DEBT-INCURRING power, as of March 1, 1927 $274,602,825 The debt margiii, of course, fluctuates from year to year. An increase in assessed valuations increases the margin. On the other hand, the inauguration of new public improvements de- creases the margin. An increase is effected when the city pays required sums to the sinking fund or redeems bonds directly from taxation. If such bonds which are redeemed are in the «inlring funds, the debt margin k unaffected, since the sinking fund hold- ings are deductible. The War and the Introduction of the " Pay-as-you-go " Policy The outbreak of war in Europe, the temporary closing of the Stock Exchange, and generally unsettled banking conditions ^The complete statement as given by the Comptroller is leproduoed in the Appendix, see p. 342. •By March 1 these amounting to $11,350,000 had already been turned over to the silildiig funds. 210 Nkw York drr's Financss and here and abroad left the city unable to borrow for temporary needs or for permanent improvements. The city's bonds had hitherto been sold ext^ifflvdy in foreign markets. These were now dosed. An appeal had to be made to the banking insti- tutions of the city. A syndicate was formed to loan the city $100,000,000 for three years at 6 per cent. In granting this loan, the Q3nidkate stipulated that the city change its policies of financ- ing permanent improvements. The dty waa required to cease borrowing for permanent improvements that were not sdf- supporting. This change of pohcy was to be completed within three years. In 1915, one-fourth of the cost of improvements was to be financed by the issue of Tax Notes, redeemable in the budget of the succeeding year; the remaining three-fourths were to be in the form of Serial Bonds redeemable in one to fifteen years. In 1916, the cost of improvements was to be equally divided betwe^ these two methods of financing. In 1917, Tax Notes were to be used to the extoit of three-fourths. Beginning with 1918, all costs of non-revenue producing improvements were to be met by Tax Notes.* Thus the "pay-aa-you-go" policy was accepted by New York City. The policy was imposed by the syndicate of bankers. The financial stringency of the first months of the War furnished the opportunity. The change, however, had been agitated for some time, and there were some general arguments in its favor. One schod (rf thought in pubUc finance has maintained that pennanent improvements should be financed directly from taxation and that, long-term borrowing is unwise and uneconomical. This school triumphed when the ''pay-as-you-go'' policy was enacted in the City Charter. The pdicy, however, was never carried fully into effect, and the scheme set up soon began to be ndiittled down. iThe Board of Estimate and Apportionment, by a resolution, placed itself on record as accepting this policy, and in 1916, the State Legislature incorporated the scheme in the City Charter (Section 1G9), Laws of 1916, c. 615. Before the plan would have gone into full effect, it wae partially set aside by a special act per- mitting the issuance of fifteen millions of Corporate Stock annually until one year after tbe war, subject to various limitations as to terms (Laws of 1918, c. 668). In 1928 tlwre was a temporary suspension to the extent ol ten miDjoii doOara for im* prowments during tluKt year (Laws of 1988, c. 754)^ Financial Adiiini0!eration: Debt 211 The CoUapse of the ''Pay-as-you-go'' Policy The terms imposed by the banking syndicate were too drastic. A complete shift within three years irom long-term bonds to Tax Notes would have imposed too heavy a burden upon the tax- payers of the city. Expenditures for permanent improvements could not be added to the annual budget so quickly. The change should have been spread over a longer period. The city practically suspended further improvements. This appears from TaUe DL In 1915-16 new authorizations financed by Tax Notes amounted to only a few hundred thousand dollars. The maximum between 1917 and 1920 was $4,500,000. Bonds of classes not exnnpt from the constitutional limitation to the annual amount of $50,000,000 were issued in 1915, 1916 and 1917, almost entirely from authorizations made prior to the adoption of the "pay-as- you-go" policy. The total annual new authorizations for such non-exempt improvements dropped from more than $50,000|000 to less than $5,000,000. The result was that in 1920 further postponement of improve- ments could no longer be tolerated. Crowding in the schools had become extremely serious, and there was a widespread d^nand for the construction of new buildings. The city therefore appealed to the Legislature for a relaxation of the "pay-as-you-go'^ law, and asked that bonds for school construction be excepted from the Charter provision. The request was granted.^ A school construction programme was proceeded with at a cost in the next few years of $170,000,000. The door, having been unlocked, was now opened. Six miUions for the erection of a Municipal Building in Brooklyn were ex^pted, and there followed similar exemptions for the American Museum of Natural History (1921) ; the Metropolitan Musemn of Art (1922); a central hbrary in Brooklyn; the Brooklyn Museiun of Arts and Sciences (1922); the city-owned hospitals; and ten millions for street improvements (1923) ; and garbage and rubbish disposal plants and dumps (1924) There were also some liberal interpretations of the phrase ^LawBof 1920, e. 960. • Laws of 1920, c. 589; Laws of 1921, e. 618; Laws of 1922, e. 517; Lawa of 1923, e. 174; Law* of 1924, c 135. 212 New Yobk City's Finances and Financial Administration: Debt 213 TABLE IX AmruAL Borrowings and Issues of Tax Notes on Accoxjmt OF Expenditures for Permanent Improvements (In thousands of dollars) CHART VI Annual Long-Tkbm BoBBOwmos and Tax Note Issues YlUB^NPINQ Bonds Issukd Dubimo thx Ybab (Exclubivx of Gbmsbai. Fund Bonds, Ravwraa Bonds, Spb- ciAL Rxvxxm Bonds, and OoBMMua Stock Noras) Tax Nom ImxJMD Doting YUAM Total Long- Term Bonds AND One Ysab Tax Notes Issued During XHs Ysab NoiMSBBnv^ Total (1) 1898 1899 (2) $21,985 27,137 (3) ■ • • ■ • • » • (4) $21,985 27,137 (6) • • • • • • • • • • • • • • • • 1900 1901 1902 1903 1904 31498 24,920 14,751 27,356 61,092 $ 2,547 13,451 14,850 15,666 25,733 33,745 38,371 29,601 43,022 86,825 • • • • • • • « » • * • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 1905 1906 1907 1908 1909 31,220 39,828 55,843 48,687 41,342 9,990 17,224 23,257 24,653 31,224 41,210 57,052 79,100 73,340 72,566 • • • • « • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 1910 1911 1912 1913 1914 39,303 34,350 47,521 38,760 59,239 23,719 27,939 20,880 24,213 21,455 63,022 62,289 68,401 62,973 80,604 • • • • • • • a • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 1915 1916 1917 1918 1919 55,360 50,745 58,013 2,327 7,710 15,300 6,650 6,000 • • • • • « • 73,059 67,395 64,013 2,327 7,710 $ 361 538 4,600 3,000 2,060 $73,420 57,933 68,613 M27 9,760 1920 1921 1922 1923 1924 6,324 106,ei8 28,264 11,000 110,372 • • • • 2b,cido 26^135 6,324 108,618 48,264 11,000 136»507 4,250 5,000 3,100 3,700 7,000 10,574 113,618 51364 14,700 143,507 1925 1926 109,233 85,218 23^870 109,233 109,068 31,613 16,500 127,733 125,588 Nom: The fisureB in e *H QB ^ b. » CJ « 00 ^ (O 00 •Q C<3 >C ooSSSe? ec N »J5 » «5 eo •^Qi^ t-4 ^ ^ Oft CO » 00 C4 t« 0» • » «t » * 00 « 00 ^ 00 W N io ^ N «5 »o N CO CO »HO0 cp 10 00 ^ a If) M 00 10 O (N is •^O eo O M CO a .2 ♦a a e Pi M ^1 ■s « ft H 3> hi n m Q H H 6 a o a S t "3 "S ■c 9 v o O CQ I 10 «5 lO »0 N rH CD CI .H CO O 00 W ^ N N 06 o o 00 .H ^ >0 CO o tC CI wb >o o o CO ^ <— < I m V 00 00 d OJ >o >o «5 ^ t-i 10 CO X 00 CO N 55 o5 S3»»« sssaa sssss sci CO CO o If) t- Q O 00 o t-H «^ CO 00 CO w i«C0C9C« §t^ W5 «0 O 04 .-I O ^ ^ 'S* CO O S Cb 3 S » _ _y _ » CO M M CO CO §g g 10 10 £S S ,oo»825f2 oSoo §^5sss8 sis VipKidV coco'i* 10 CP CO CO C4 0> O 1^ A CO CD 01 CO CO CO t>» Q 00 ^ c» >5 00 0> 00 M c< o 1-* CO CO 00 go N 10 CO w w o 00 o> u5 Qo t>r «S .-T 00 00 CO CP SCOCOIOCO ^06>O ' CI O 00 CO I "-I CI ^ CO CO 09 ^ U5 CO CO i25 CO O) o o CD CO CO I CO icicecd ^ ^ ^ CI c< 00 CO 00 c> coco'colStC o CO « Q eo 1^ lO fiH o o o CI Cl M CI 3; 00 jyj 00 O ^ ^ ^ o •-J^ O W O !>. OS b- «5 O Q t>. »0 00 00 06 05 »fl CI CO 00 10 o" 10 00 CO »0 »-i CO - QO to QO ' COCO^OCQ O 06 >0 00 C« to U3 IQ 10 00 00 O) M 00 CO W 0> CO CO 00 CO CO CO a» 00 ^ a» ^ 10 ^ CI O 1-1 (N Q 10 lo u5 * » « »o o> OS ■-I CO O OS CD t>. C^"5 t>. O 00 CO "-I" CO 00 CO CI >o •H i>.eot*^ ^r''t««00^• ill: . _ O P O >0 CI CI CI S S § s s s e« ^co to a O CO CO CO CO « t>. CO i-< CO 00 00 00 CO CO "5 ^ lO T}< Tj< d 00 810 00 _ „ O OS OS 10 00 TjJ^ OS CI ^ 00 ^ i-H 10 o u5 00 ^ l-H CO 1-H OS CO OS ^ iM 10 O) 9 ^ CO CO ^ O 10" t^" 10 (N CO CO r« CI 00 OS 00 CO CO t>Q ^^UU^ 8S8«;t 9iS:$88 SSi O»-lCIC0^ >OCOt*00OS O'-* tl a s I / • • • • • • • • C4 tQ » 55 § 2 00 1% ^1 00 « «H CO o to 00 to o a < C3 ^* CO o 00 00 ?o bo t>. *H O 00 wo V o 2.2 po O O O »N to «o g o OiCOkCOOOCOCIO ^ lO »o ^ «0 CO ' t>- 1-1 ^ 00 CM OiCO^OOO^OO) iQ <0 ^ «0 '-t »o o k a ^ 05 txi^c^ o > cocopo ^ »v • • • * • i5 c« o 00 00 I 00 CO 00 1-H o u (TO «3 00 * «0 03 00 CO 8 OS 1— ( CO CO 1-H 00 Oi CO 00 CO CM CO 03 ^ ^ S * ^ ^ ^ « d »A 00 2 ^ (;0 03 I o to iS ■4^ cS c^ Q to ^ t i Nxw YoBX Crnr'a Financbs and CHART Vm Outstanding Indsbtbdniuss on April 1, 1927, Classified Accobding to thb Term of the Bonds ffOO I Term cf Yesrs surpluses from Sinking Fund No. 1 to the General Fund.^ The rapid increase of sinking fund aoeumulatioxis was producing substantial additions to the ddbt margin of the city. In 1903, however, when these surpluses were released and the terms of the bonds were lengthened, the amortization payments were reduced. Since that time, tJie margin between gross debt and net debt has noticeably nanowed. Today a debt eight times the debt at consolidation is supported by sinking fund accumulations less than twice as large.' The first result of these changes of policy was to keep the tax rate from increasing. If the city is content to increase its debt service appropriations by the amount necessary to feed the sinking funds, the device of shortening the terms of the bonds would solve the problem of the debt limit. By issuing fifty-year bonds, tiie dty has frozen its credit so that its programme of permanent » See above, p. 217. « Table V. Financial Administration: Debt 221 improvements is seriously menaced. The city, for example, finds itself unable to ei^d $30,000,000 for the Tri-borough Bridge.' Shorter terms for city bonds would make the borrowed moneys revolve more quickly. The same amount of constitutional debt incurring capacity would therefore permit the city to perform double the amount of work. The ultimate effect might be a reduction of the debt substantially below the debt limit, for the taxpayer would find amortization charges a greater burden. A margin in the city's borrowing power would give it greater leeway in the devdopment of minor items in its programme of improvements. * The Board of Estimate has recently decided (See Proceedings of the Board of Estimate, May 25, 1927) to attempt to work out the financing of the Tri-borough Bridge without using pubUc credit through the creation of a Bridge Authority. Such an Authority would have power similar to that of the Port Authority to issue bonds to be paid from the tolls of the bridges. Inasmuch as most of the city's available credit is bong earmarked for its subway programme, it is difficult to see how bridges or tunnels or other major improvements can be financed without some such device. Such a solution, however, will not affect the general situation which is here described. CHAPTER VIII Subway Financb The largest single item of the existing indebtedness of New York City is its subway debt, which amounted on May 1, 1927, to $351,000,000 or a little over 21 per cent, of the city's gross outstanding funded debt. In view of the present importance of the problem of new subway construction and of the fact that work has abeady beeen progressing for a number of years on a building programme caUing for an ulthnate additional outlay by the city of $674,536,000/ no study of the city's financial position would be complete without a survey of the present status of the subway debt and of the drcumstaaees attending its I. Existing Subway Indebtedness The city has a direct investment in the existing subways amounting, as of June 30, 1926, to $344,400,000^ as compared with investments qf $166,824,000 by the Interborough Rapid Transit Company, and $49,232,000 by the New York Rapid Tranmt Ck>rporation.* The latter figures do not include the investments of these companies other than on accoxmt of subway lines. The sums invested by the city in subways are represented by issues of corporate stock, the earliest of which was made in 1900 OthCT issues from time to time have brought the total amount of corporate stock outstanding on account of subways to $351,- 000,000 by May 1, 1927. The growth of this debt by annual increments is shown on Table No. 1 and Chart No. 1. »Board of Transportation, Communication to Board of Estimate, July 12, 1927 p. 21. ' ^Summaiy of Annual Beport of Transit Gomminioii for 1926 p 31 •Ibid^ p. 32. 222 Financial AninNis'TBATioN: Subway Finance 223 TABLE I ScTBWAT Bonds Outstandino March 1, 1927 Redeemable from the Snking Fund of tlie City of New York Ybab ov Year of Amount or Annual Annual laaua R*.TE Matubity ISSUB Intehest Amortization 190G 4 1936 $ 500,000 $ 20,000 $10,509.63 1901 3^ 1948 4,000,000 140,000 48,766.69 3H 1949 1,000,000 35,000 11,698.11 1949 3,000,000 105,000 oO,094.3o 1901 3 1950 1,500,000 45,000 16,844.77 1901 1950 2,500,000 87,500 28,074.62 1902 1951 8,500,000 297,500 91,673.99 1903 1952 1,166,000 37,895 12,082.72 1902 1952 4,000,000 140,000 41,450.15 S'A 1952 6,000,000 210,000 62,175.23 3H 1953 2,000,000 70,000 19,921.01 1904 3H 1953 3,000,000 105,000 29,881.52 3H 1954 4,700,000 164,500 45,015.54 1904 33^ 1954 2,250,000 78,750 21,547.98 1954 2,500,000 87,500 23,946.44 31^ 1955 250,000 8,750 2,308.28 . .4 1956 36,000 1,440 331.67 1907 4 1957 1,500,000 60,000 13,298.24 1957 2,000,000 90,000 17,730.98 1908 4 1957 204,825 8,193 1,887.08 4H 1957 2,500,000 112,500 23,032.85 4 1958 632,500 25,300 5,988.54 4 1958 750,000 30,000 6,909.85 1908 4 1958 760,000 30,000 6,649.12 1909 4 1950 3,200,000 128,000 28,369.60 S58.439^ 12,117,828 $605,188.94 Redeemable from the Rapid Transit Sinking Fund 1910 4 1959 $ 188,500 $ 7,540 \ $ 1.967.15 4 1959 24,512 980/ 1911 4 1960 10,000 400 92.13 1910 4M 4,1^ 1960 6,000,000 255,000 53,192.97 1960 8,500,000 361,250 78,311.68 1912 4M 1962 20.000.000 850.000 177,309.89 1913 4 1963 973,079 38,923 8,626.83 4 1963 1,172,472 46,898 10,702.15 1914 4H 1964 10,000,000 425,000 88.654.95 1915 1965 30,000,000 1,350,000 265.964.84 4M 1966 27,130,000 1,153,025 240,520.87 1917 W2 1967 37,000,000 1,665,000 328,023.30 1917 4 1967 13,000 520 115.25 4 1969 500,000 20,000 4,432.74 1919 4H 1969 1,000,000 45,000 8.865.49 1920 1969 2,659,000 119,655 24,497.74 4H 1971 55,000,000 2,337,500 487,602.23 1924 AH 1974 15,000,000 637,500 132,982.42 1926 4H 1976 28,000,000 1,190,000 248.233.84 1927 1977 50,000.000 2,125,000 443,274.72 $293,170,563 $12,629,191 $2,603,371.19 Grand Total $351,609,888 $14,747,019 $3,208,560.13 224 New Yobk City's Finances and CHART I AoouMULATioii OF Tranbr ImmmoM tW^W7 With the exception of a small item of $500,000 due in 1936, all of these issues of corporate stock have maturities of forty-nine or fifty years from the dates of issua The interest rate varies from 3^ per Gent, and per cent, on some of the earii^ issues to 4^ par cent, and 4}/^ per cent, on some of the more recent ones. The total annual interest and sinking fund charges on this stock payable by the city in the year 1927 amounts to $17,955,579. Of this annual charge, slightly over $2,500,000 is chargeable to the cost of the so-called original subways, which were constructed by the city between 1900 and 1908, and were in operation prior to 1913. This annual charge is carried by the Interborough Rapid Transit Company, under the terms mpany provided that the future revenue from the "original subways" then in operation should be pooled with that accruing from the new Unes to be built and/or operated under the contract. From the total revenue thus obtained there were to be paid or withheld in the following order of priority: (1) The rentals due to the dty for the original sub- ways under the terms of Contracts Nos. 1 and 2 above referred to; (2) taxes; (3) operating expenses; (4) 12 per cent, of the total revenue for maintenance exclusive of depreciation; (5) a sum to be annually determined to be paid into a depreciation fund to cover such portions of the railroads as should not be repaired or replaced by the expenditures for maintenance; (6) an annual sum of $6,335,000 to be retained by the lessee ''as representing the average annual income" previously derived by the lessee from the operation of the original subways then CTsting; (7) interest at 6 per cent, to be paid to the lessee on the lessee's outlays under the contract toward the cost of constructing and eqiupping the new subways, the total of such contribution not to exceed $80,000,000; (8) annual interest payable by the lessee on sums expended for any "additional" equipment, as de- fined by the contract which might be needed for operation, 236 Nmw York Cmr's Finances and plus 1 per cent, on these expenditures to build up a sinking fund. After these deductions the city was to become entitled to re- ceive interest on its investment imder the contract at the rate of 8.76 per cent., this bdng the pefcentage of return which the above mentioned payments to the company were agreed to repre- sent on its total investment in the old and new subways. The investment of the company in the old subways was tiierefore fixed at approximately (47,112,000. After these payments the city was to receive the interest upon any amount expended by it as the cost of ^'additions" or extensions under the contract, to- gether with 1 per cent, annually as a sinking fund. Next, 1 per c^t. of the total rev^ue was to be paid into a fund to cover posfflble deficits in operation until this fund amounted to 1 per cent, of the total cost of construction and equipment. If after these deductions were made any revenue remained, it was to be divided between the city and the lessee, share and share alike. Contract No. 4 provided for substantially the same distribu- tion of revenue. The income from the new subways was to be pooled with that from the existing Brooklyn elevated system, and from the total thus obtained annual payments were to be made in the foUowmg order of priority: (I) Rentals for the use of property in connection witJi both the existing and the new parts of the system; (2) taxes; (3) operating expenses; (4) 12 per cent, of the total revenue for niaintenance exclusive of depreciation; (5) a sum to be annually determined for a depreciation fund for such por- tions of the railroads as should not be repaired or replaced by the expenditures for mamtenance; (6) an annual sum of $3,500,000 to be retained by the lessee "as representing the average annual income from the operation of the existing railroads''; (7) interest at 6 per cent, annually to be paid to the lessee on (a) its con- tribution toward the construction of the new lines; (b) the cost of the equipment furnished by the lessee for initial operation of the new lines; (c) the actual cost of the plant and property, ex- tensions and additions to its fflristing elevated properties uiider the ''rdated certificates" ; (d) the cost of reconstructing certain of the existing lines as required by the contract; (8) annual interest payable by the lessee on sums ejq;)ended for "additional" Financial Adminisiibatiqn: Subway Finangb 237 equipment for Hie new lines, as d^ned by the contract, plus 1 per cent, on these expenditures as a sinking fund. After these deductions, the city was to become entitled to receive an amoimt sufficient to defray the annual interest payable upon its share of the cost of c(»istruction of the new lines plus one per cent, for a sinking fund. Next, the city was to receive the interest upon any amount expended by it as the cost of additions or extensions under the contract, plus one per cent, for a sinking fund. One per of the total revmue was then to be paid into a sinking fund to cover deficits in operation until such fund amounted to one per cent, of the total cost of construction and equipment. If any revenue still remained, it was to be divided equally between the city and the lessee. Under both contracts deficits in eadi item were to be cumu- lative, "and payments of such deficits were to be made in full before deducting the amounts required in the paragraph succeed- ing the paragraph providing for the payment of the deductions as to whidi there has been such d^ydt." Interest on such deficits was to be charged at the rate payable by the lessee or the city and was to be compounded semi-annually. Recapture Clauses The recapture clauses inserted in the Dual Contracts are im- portant because of the insistence upon them at the time the contracts were made and because they were then thought to have gtvm the dty a lev^^^ to protect its position under the con- tracts. The contracts provided that the lease of the lines to the companies was to be for forty-nine years, from the commencement of operations, without the privilege of renewal; and that the lease of the old subways to the Interborough under Contracts No. 1 and No. 2 was to be 'levelled" so as to terminate at the same time. Under each contract the right to recapture the new lines was to accrue to the city ten years after the commencement of operations. In the case of Contract No. 3 the right might be exercised either as to the whole new system, or separately as to one or more of the four sections into which it was divided: (1) the upper-Lexington-lower-7th Avenue line, consisting of three 238 New York City's Finances and isolated links : (a) the Lexington Avenue line above Grand Central Station; (b) the lower 7th Avenue line to its connection with the old subway at Fulton and Joralemon Streets, Brooklyn; (2) the Brooklyn extension of the old subway east of Atlantic and Flatbush Avenues. The continuity of this line was broken between Grand Central Station and Times Square, and between Fulton and Joral^on Streets, Brooklyn, and Atlantic and Flatbush Avraiues, Brooklyn, by portions of the original subway which are not subject to recapture; (3) the 42d-Street-Stdnway Tunnel Une, with its extensions in Queens; (4) the White Plains Road extension. In the event of recapture of one of the separate sections, the ri|^t to such recapture was to accrue ten years after actual commencement of operations upon such separate line, while the right to recapture the system as a whole was to accrue ten years from the commencement of operations upon any part of the railroad. For exercifflng the right of reci^ture it was provided that the city must pay to the company a sum based upon the company's contribution to the cost of construction and equipment to be calculated in the following way. There was first to be added to the total of such contribution for construction and equipment 15 per cent, of such total, and of the 115 per cent, of the com- pany's contribution thus resulting, the amount to be paid by the city on recapture was to decrease by l-39th in each successive year oi the thirty-nine years that the contract was to run after the right of recapture accrued. Thus if operation visions of the contract are to be readjusted by arbitration if necessary. 1 See McAneny teBtlmony More Coinmiiwkwiffl' McAvo^ Mordand Act Investigar tiini,pp.25,89. 240 New York City's Finances and Extensions In addition to the provisions of Contracts Nos. 3 and 4 idating to the specific lines prescribed in the contracts, there are other provisions covering possible future extensions. The companies agree that if such extensions are determined upon by the city, they will operate them in connection with the lines built under the contract. The ocMnpanieSy however, have an option to decide whether or not they will operate such new extensions under the financial arrangements prescribed by the contract. If they refuse to do this, they may be required to operate the extension as a part of the i^rstem, but upon terms which would entitle them, in case the ext^isbns were not sdfnsupporting, to repay to them- selves interest and sinking fund charges on their investment in the extension out of the revenue of the entire system, and the deficits accruing from the failure (rf the extensions to meet such interest and sinking fund charges are to be cumulative preferred charges against the revenue of the whole system before any pay- ments may be made therefrom to the city. ni. Financial Results of the Dual Contracto Construction work under the Dual Contracts is still going on, but the main portions of the new Unes were brought into opera- tion in 1918. The so-called Centre Street "loop," whidi had been completed by the dty before the Dual Contracts were signed, commenced operation August 4, 1913, and a part of the so-called Steinway Tunnel line was placed in use June 22, 1915. The 7th Avenue line below Times Square was opened as far south as the Pen^lvania Station June 2, 1917, and in September ctf the same year the Manhattan Bridge route of the B. M. T. began to operate in Manhattan northward to Union Square. The main portions of the upper Lexington Avenue and lower 7th Avenue Unes of the Interborough were placed in operation July 17, and July 1, 1918, respectively, and m August 1, through north and south traffic on these lines began. The main Broadway line of the B. M. T. subway reached Times Square January 5, 1918, but the northern and southern links were not opened until IWK), Financial AnMimsffRATioH: Subway Financb 241 when the lines from Manhattan to Queensboiou^ Plaza, the Montague Street tunnel to Brooklyn, and the Culver line to Coney Island were completed. The eastern extensions of the Interborough subways in Brooklyn were opened in the spring of 1919 and the principal part of the 14th Street Eastern line m 1924. The eastmi end of the latter hne is still under construction, and work has not been commenced on the so-called Nassau- Broad Street subway of the B. M. T. Since 1918 the history of the Dual Contracts has been one of almost continuous friction and controversy, not merely between city and the companies, but between the different pubhc author- ities to which from time to time supervisory duties over the subways have been committed. The controversy betwe^ the companies and the dty has revolved about the contention of the fornix that the dty authorities have been dilatory in fulfilling then- obUgations under the contracts, principally in connection with the construction of certain yards and repau- shops, and also with appropriations of money and approval of contracts for the construction of uncompleted Imes. The resulting controversies have further delayed progress under the contracts, and as tune went on, these delays have been increased by a variety of sug- gestions as to plans for building additional subways. The control of subway construction was taken from the Pubhc Service Commission in 1919, and placed in the hands of a municipal official, the Transit Construction Commissioner, from whom it was in turn taken in 1921 and entrusted to a new state body known as the Transit Commisdon, a portion of whose duties WW in 1924 again transfmed back to a municipal body the present Board of Transportation. ' The history of these controversies hes outdde the fidd of the present discussion. The unmediate point of interest is the financial result for the city and the companies from the operation the rental cUuses of the Dual Contracts. This is shown on the table (Table III). From this table it appears that the year endmg June 30 1926 was the first in whidi any substantial surplus was produced over and above the preferential sums to which the companies were Ksw YoBK City's Fimancss and Financial Adminisibation: Subway Financb 243 § a » ** ©Hi Si i 8 3 o n «-i «o o 1-t eo lO 00 I N N. 00 OJ Q OS «o * ** * eo CO CO ^ N o 00 o> >0 CO « CO I ^ o o S ^ 00 1- -"l* 00 «D •o eo S S S O ei M est 00 W5 CO gas I OS to 00 ^ eo « 1 I I 8 9 3 o 3 Oi N « t» N et (D o »-l * (N CO Oft CO a 3 s 00 i Q M 35 o 8 § t-( CO CO 8 OS s 1-1 OS (N o 8 ■i»« OS H O S M • to 0» OS O do 00 So So SCO CO eo CO n 4 CO «0 eo 00 00 eo oo CO eo CO CO u 5: 8 1-4 CO 00 CO* CO to 00 ^ CO O N 00 o CO s § os_ o «0 O CO ^ »^ ^ § s • 8 * Q OS < o C3 O • r* (N O 8 CO CO • CO CO 00 § I— I Q OS 00 CI 00 eo B CO 5| ^1, ^8, 1— I 00 CO "3 CO 00 'O CO OS 3 8 CO C4 Q a> . « „ OS 73 a cS a a 3 11 Si e3 C S.2 " « V 0) 01 « « ATS *3 eS 00 p 0) « a 5 a o r— ^ • o ss S o o ^' 1 1 2 2«s; CO 00 00 a eo S CI o « CI t« M CI i eo eo CI CI I— I OS t-T OS CO Q OS CO r* OS 1-1 CD Q i CI at CO OS eo 10 CO CO 00 t» CO •H 00 5! 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OS t« CI 10 CO OS CI CO CD 00 OS OS 1^ CI eo CI CO !>. eo 00 p S ^ 00 pH i - 10 «^ p t>. CO eo CI Sc5 p OS CI « CO OS CO ^ OS P CI tomoofe*^ ^ CO CO CI »o CD CO 00 CO »0 CO t>» go cf p* CO CO 00 I S^8 00 A OS OQ OS 0 CI ^ »^«q P CI OstCciujodt^TgOCO "S'^'-ipiOb-OOCO »-i 00 S cn 1-4 00 CI o OS CO s CI (N CI (N OS* CI o p OS 00 b- 10 eo CI CO o •^P'-H p »o P CI CO 00 CO 00 P Si ^ (X) CO CI CI CI CO d to OS CO »c 00 CJ o OS to «o CI CO CO 00 eo CI CO ^ CI »«» CO ■^jT 00 1-7 3 CO OS 00 CO 10 CO >0 CI CO St^ O —I OS »H - OS 8 to p to 00 CO b- CO eo o CO 00 OS 00 OS 00 a» a 1 b a Itiaiilllli 00 33 i 8 e a o 0 at CO i m K H ► o o H o o •J ■< o H o o o ■< •< r 260 Nbw Yobk Ceft's Finances and Financial Administration: Appendix D 261 u K S o 5 o g S f< 8> Q ri 11 ^ o « 5 !=> » S o a, CQ « O O a o Q D n Ik e a eS u H 00 is' s WD 00 2S t-H s l-l 8 .SP £.2 O A 9 CO CO ^ ^ ^ ^ OS • CO ~ " OS « 3 as«o>0^'-00> fieO'^«oo5Wooocso>cocst^>o S CI •-) 06 esj o •-• CO » * «k <» ^ M *4 ^ M O s W5 M 00 o O s CO i Oils • • e i5 ^ W Q 95 O W O 00 06 t>. 1-H d «0 M 10 o 10 o : o g CO s as ;« «-• 90 r CO 1-4 5j 00 CI S t- 00 N 1-1 CI 00 o» 00 CO t-i lO >-< OS o CO CO OS OS o 8 s : o" O O Q (N OS Q iO "D CO O o CO CO 00 CO 1t% I CO ""J* d o Cl O CO CO «o CO CO s (N GO Q SU3 lO CO CO CO CO O ^ b-. Q « <0 C4 QD C4 CO t« >0 00 CO O « ^ S O CO CO CO ^ CO I gob t2 ( Cl >o I CO odi^ CO (N OS CO CO o 10 OS CO i CO ft ' CO CO CO CI OS 1*» eo g IN 00 i CO ' 00 SCI 00 Q O OS CO o . CI CI OS O CI ; 00 w g "H CO •<* »0 CO O 00 <-< ^ 0> <— ' CO 00 o CO 10 CI CI CO »H CO U5 10 CO ^ OS CI CI OS »0 OS 00 »o 00 io a» * » » » 00 CI 1-1 CO CO CO OS >o f-i CO t» 00 CO »-l CO ^ CO CO 00 CO f>^ OS ^ «H a ^ 06 ho Q CI r» N> ^ CI oc >c«ot<>>ooo«^ia A'Tt'ot^cotooo ;eo^«^o5 ^l^aS p< 35 o co t>. 00 o CO cf CO 00 OS lO CI 10 O >P CI 00 CO CO 00 OS <-! CI CO 00 a CO 00 00 3-^ CI CO CI I I 1. ^ ^ S 03 -S3 o g a I r 1 262 Nsw YoBK City's Finances and (B r; 0J a 0505 B< H H O 6 1*^ i s § gig M 5 e s t> S ? o S5 " o C> H 5 i •0 00 3 S3 8 651 CM (N i-H e<3 N CO iq CO cT -H »o --I N CO I I Si 10 IN 1—1 00 00 o g n E 01 ft ^ «3 SCO ^« (O 00 c« o a o "3 lo Q »-t ro • 1-4 «D Cb Tti • o is ^8 » ^Sg i 1^ v>4 vH 1-4 IQ OA • 10 1 SSSSS-'SS :S: ^ o CO « OS u5 5< ^ © 0 rH ■O fld lO 00 00 eo 00 CO OS Oi 00 fW5 CO 0» N ,0J CI S" lO" V eo o 00 o (N U9 10 0> Ok fi • 1 CO : g g. 00 . eo CO 9 o o> •«!f< eo CD o 00 K eo ^ -"^ 00 W CI T»< »>. OS "-^ Ok «0 CO O 00 to >-< N 00 N i-i CO 12" CO 00 w I OQ fllll o o c g •» -g 2 S Financial Administration: Appendix D 263 5 I "3 8 Ob I h « CO 2 d d III APPENDIX E TXBIfB AND CoNDmONSy BUDOOT FOR 1927 Resolved, That this, the Budget of The City of New York, for the year 1927, as hereby made in pursuance of section 226 of the Greater New York Charter, shall be administered under the following terms and conditions, to be changed only by the Board id Estimate and Ap- portionment: Changes in Schedules That no change shall be made by any Board or bead d an Office, Bureau or Department in the City or County Governments in the personal service schedules contained in this Budget, except when author- ized by the Board of Estimate and Apportionment. Modifications That requests for modification of the personal service schedules may be tnide by a Board or head of an Office, Bureau or Department to the Board of Estimate and Apportionment and shall be effective only if and in so far as approved by the Board of Estimate and Apportion- ment. No request for a modification of personal service schedules shall be made which contemplates the use of moneys already accrued or which will increase the monthly or other pro rata rate ci expeor diture from this Budget. Vacancies Tliat vacancies existing on Januaiy 1, 1927, or occurring thereafter, in the personal service schedules in this Budget for ''Salaries R^;ular Employees," "Salaries Temporary Employees," "Wages Regular Em- ployees" or "Wages Temporary Employees," may be filled as follows: 1. Positions in the uniformed forces of the Department of Polioe, Fire and Street Cleaning. Positions in the Labor Class as d^ned in civil service rules and classifications. 264 Financial Administration: Appendix E 265 Positions in the Exempt Class and Unclassified. Automobile Enginemen, Auto Truck Drivers, Foremen (over Skilled Trades) and Ambulance Enginemen, and all employees paid at a per diem rate or weekly rate. Copyist and Recording Clerks paid at the rate of 5 cents a foUo; Gardeners, Steam Roller Engineers and Electricians; and Positions involving the actual operation of ma c hiner y or mechani- cal plants. —may be filled by the head of the Board, Office, Bureau or Depart- ment in his discretion, as follows: provided, however, that in depart- ments under the jurisdiction of the Mayor, his permission shall first have been obtained: (a) Positions in the uniformed forces of the Departments of Police, Fire and Street Cleaning, and in the Bureaus of Street Cleaning in the Boroughs of Queens and Richmond may be filled at the rates provided in this Budget for their respective entrance grades; Provided that if a vacancy occur in the said uniformed forces by reason of the separation from such service of an individual who at the time of such separation receives more than the entrance grade rate, nothing in this resolution shall tend to prevent the reinstatement of such indi- vidual at the rate previously received by him or at any other rate or grade to which he may be entitled by law at the time of such reinstatement. (b) Positions in the Exempt Class and Unclassified and Automobile Enginemen, Auto Truck Drivers, Foremen (over Skilled Trades), Ambulance Enginemen, positions in the Labor Class as defined in civil service rules and classifications, positions of Gardeners, Electricians and Steam RoUer Engineers; all employees paid at a per diem rate or weekly rate; Copyists and Recording Clerks paid at the rate of 5 cents a foUo, and positions involving the actual operation of machinery or mechani- cal plants may be filled at the prevailing rates GfiT In 1915 an exhaustive analysis of that year's budget was made to discover how much of it was obligatory on the city authorities and how mudi was subject to their discretion.^ On the basis of this examination the expenditure requirements ol the, budget for that year wne divided into four dasses, as followB: I. Mandatoiy (Enet amount fixed by law) . . $31^407,889.01 25.9 IL Reasonable expense mandatoiy (ai^Moiniatkm must be reasonable) 7,492,794.28 5.6 III. Rate mandatory (Rate fixed by state law, though total is discretionary) 7,579,289.51 5.7 IV. DiscietioDaiy 83,505,339.34 02.7 Conditions have changed somewhat in this respect since 1915. The Home Rule Amendment of 1923 and the Enabling Act^ now give the city authorities some powers over matters which were formerly controlled exclusively by the State Legislature. The home rule powers do not, however, extend to county affairs, education, public utilities, and possir bly pensions. It should be noted also that in many instances the impro- priations are now in excess of the amount required by law, so that many of f^e mandatory expenses of Class II and Class III above have ceased to be important. 1 This was prepared by ConmuBBUMier of Aooounts WaUstein. * Chapter 363, Laws of 1924. 271 APPENDIX G WoEK Pbogrammb Budobt— -1914 EzmauNT In 1913, by way of experimwit, the appropriations for three of the bureaus under the jurisdiction - I 88 • • SS 8 8888888888 to eo 04 00 O O 04 to «0 t« 00 0» Q Financial Administbation: Appendix G 275 8 8 o o ? 1 8 CO • • 4.80 375.00 4.00 2.50 3.90 24.75 17.40 21.00 .06 2.82 8,064.00 70.00 737.55 165.00 325.00 250.00 43.50 27,300.17 110.70 86.63 1,500.00 $44,764.23 1,195.20 975.00 101.00 47.50 71 10 225.25 42.60 579.00 6,820.80 4,630.00 59.94 57.18 3,936.00 6,930.00 1,500.00 912.45 2,000.00 1,485.00 925.00 750.00 87.00 13,350.00 159.30 183.37 1,200.00 $87,666.48 1,200.00 1,500.00 105.00 50.00 75.00 250.00 60.00 600.00 8,526.00 5,700.00 60.00 60.00 12,000.00 7,000.00 1,500.00 1,650.00 2,000.00 1,650.00 1,250.00 1,000.00 150.00 49,150.17 270.00 270.00 3,000.00 j $146,726.17 • • • • .150 .500 .75 .50 .60 .60 2.03 .015 .12 .040 .04 • • • • .075 .022 .050 .003 1.25 1.00 1.50 .158 1.35 1.35 .40 « • • • 700 100 100 500 100 1,000 4,200 380,000 500 1,500 300,000 20,000 75,000 40,000 550,000 1,000 1,000 100 311,077 200 200 7,500 • • • • • • '44444 :4444444 444'^ '. '.&&&&& &^ o'-S & &'.&&&&&&& & & & & OQ (C m QD OQ OQ S OQ M QQ ^ CO »3 CO CO CO CO CQ 00 CO CO CO -3 New Yobk Citt'b Finances and o S s § 1 . J p o H n o O W Q O 1-4 b S a B £ Plant AND Equipment Charges S S S : : : :^ :S : : : :S • • • • ^3 • . • • Materials AND Supplies Charges $0.80 273.90 472.50 389.88 48.40 118.68 Personal Service Charges $15.20 990.42 1,777.50 209.10 72.00 2,805.00 520.12 2,151.60 285.66 Item Cost • • • • • • • • $16.00 1,440.00 2,250.00 242.00 72.00 2,805.00 910.00 2,200.00 460.00 Aver. Cost CO 3 o iO sa Q £2 Q o . Work Quan- tities • • • • • • • • 400 7,200 3,000 11,000 16 85,000 130,000 4,400 o » Sq. yds. Sq. yds. Sq. yds. Sq. yds. Sq. yds. Sq. yds. Miles Sq. yds. Sq. yds. Cu. yds. 3 S c 2 =3 '3 'S 2 to ^ a a a .3 -r -c •S O .3 .3 5 o3 oJ CO ^ 10 -^ CO S8SS CS| CO OS CO 8 o) C4 In to 9 «-< «H s o 00 o» «h«- fi 3 Ph 3 ^'>^'>^^ i2 & o d •I d O) a A W •£ bfl o j3 d .a bO boU to^ ^ -s .a .a ^ 278 New Yobk City's Finances: Appendix G 799TS . . y>l A TiTH /~kE> TT T/~^ IT TIT A 'VCf , . • CARE OF HIGHWAY o • . . $171,704.17 Tax Levy Allowance .... $140,7Z0.17 140,/^.if Special and Trust Fund AUowanoe OK ACQ Dt\ BUREAU OF HIGHWAY8 NUMBSR OF Posnnnf , Bujoet am Wami Basb 1 Superintendent, $3,000 per annum . . . Tax Levy 1 Chi^ Qeik, $2,000 per annmn .... Tax Levy 1 Senior Qerk, $1,320 per annum .... Tax Levy 1 Staiogn^[)her and Typewriter, $1,IS00 per Tax Levy 1 Stenographer and Typewriter, $800 per annum Tax Levy 1 Cashier, $1,500 per annum Tax Levy 1 Assistant Engineer, $2,250 per amram . . Tax Levy 1 Res. and Rep. Spee. Fd., $1,200 5 InspectoiB, $1,350, $1,500, $1,650 per amram 1 Impeeftmr, $1,350 per annum Res. and Rep. Spec. Fd., $1,350 1 Res. and Rep. Spec. Fd., $1,650 Unfimited Fmnan, $3, $3.25, $3.50, $3.75, $4, $4.26, $4.50 per diem Unlimited Assistant Foreman, $3, $3.25, $3.50 per diem Unlimited Laborers, $2, $2.25, $2.50, $2.75, $3 per diem Unlimited Steam Roller Engineers, $4.50, $4.75, $5 per Unlimited Stokers, $3, $3.25, $3.50 per diem . . . Unlimited Unlimited Horse and Vehicle, with DriTer, $3, $3.25, Unlimited Team and Vehicle with Driver, $5, $5.25, APPENDIX H Financial RsQUiBEiaBNTB of the City of New York fob PeBMANBNT iMPROVBIfBNlB AS OF JaNUABT 2, 1927 What foUowB Bummariies the pennaDent improvements projected by the various departments of the city for initiation or ocnnpletion within the next ten years, and shows the estimated costs of these projects. It was found that with the exception of the Board of Water Supply, not one of the city departments has a complete ten year programme. Only a few departments have plans extending beyond a single year. The reason for this is two-fold. In the first place, due to the city's financial condition, only the most urgent appropriations are made and the de- partments, therefore, plan only for an amount in dollars which they believe they have some chance of getting. Secondly, apart from the factor of replacements, future extensions must be predicated entirely on the growth of the city as to population, area, and type of development and the difficulties of estimating these factors discourage the depart- ment heads from making forecasts. Under the "pay-as-you-go policy,"* public improvements are financed f rron Corporate Stock, Tax Notes, or Assessment Bonds.* Wherever possible, ilie proposed indebtedness for projected improvements has been segregated along these lines. The following summary shows the requirements of the departments completed, the figures being for varying periods as outlined further on in this roport: AaSBSSlfBHT Ooarcnun GkrocK amd Tax Nont Board of Transportation $665,848,000 Board of Water Supply 347,034,000 Board of Bducatten 143,291,490 DeDartment of Docks ........ 20,175,000 B^ar^t of Health 2,355,000 ^^^^ Street Cleaning (3 departments) 9,950,000 ^^'^ Fire Department • • • • ?*Sn*?oK Police Department ^J*nnn'nnn Assessment projects 3S,WU,WW Total $1,089,563,490 $52,789,694 ^See aboTe, p. 28. 'See above, p. 30, 279 280 New York City's Finances and Figures from the Department of Plant and StructureB are not in- cluded. The Chief Engineer reports that the work of computing the cost of future requirements is now definitely under way but that it will be some time before it is completed. The Tri-borough Bridge project and the East River Tunnel are the most important and most costly improvements this department has under consideration. The following departments, which are not touched upon, had requests pending as of January 1, 1927, for funds as shown: Pending Requests Department of Public Markets $1,010,000 Hunter College 2,250,000 Cdlege of the Qty of New Yoric 1,069,756 DqMfftment of Public Welfare 3,»82,000 Bellevue and Allied Hospitals 4,518,000 Metropolitan Museum of Art 125,000 President, Borough of Manhattan 4,245,000 President, Borough of Brooklyn 4,770,000 President, Borough of Bronx 9,186,000 Presidmt, Borough of Queens (Other than Street Gleaning) . . . 2,370,000 Fkcsidmt, Borough of Richmond (Other than Street Qeaniiig) . . 1,639,000 Department of Correction 1,925,000 Department of Parks, Manhattan . 484,000 Department of Parks, Brooklyn 6,040,126 Department of Parks, Bronx 3,943,000 Department of Parks, Queens 3,922,001 Departoient of Parks, Richmond 120,000 Quemis Public lilHaiy 500,000 Aimoiy Board 501,500 Total $62,650,384 These two lists include all departments that make more or less regular demands upon the dty treasury for public improvements. There are in addition the county offices, the Museum of Natural History, and the Zoological Society which have demands at infrequent intervals for new structures. BOABD OF TrAKBPOBTAISDN The Board of Transportation operates under the Bapid Transit Law. It is charged with the duty of providing for the construction of new subways and of executing the obligations of the city under Contracts 3 and 4 with the existing rapid transit companies. The Board has estimated its capital requirements for new subways (to 1936) as follows on next page. Financial Administration: Appendix H 281 ESTIMATE OP Money Required for Present Subway Construction Programme TO BB C0Mn«BTBD BT 1931 AND INCLUSIVE OF FUBTHEB CAPITAL KeQUI&EMENTS to 1936 Cost of construction, acquisition of real estate for line, yards, shops, power houses, etc., recapture of existing Culver line, equipment, including rolling stock, power plants, signal and switching sys- tsBOB, etc., and administiatbn and enginerauig expense . . $506,765,000 Cost of capital prior to initial operatiiMi 76,015,000 Cost of additional equipment, 1932 10,095,000 Cost of additional equipment, 1933 17,217,000 Cost of additional equipment, 1934 17,217,000 Cost of additional equipment, 1935 26,473,000 Cost of additional equipment, 1936 32,066,000 $685,848,000 Amount heretofore appropriated, approximately 120,000,000 Estimated amount required for new system to 1936 $565,848,000 BoAKD OP Water Supply The per capita consumption of water in the various boroughs of New York City during 1925 was as follows: Manhattan and Bronx 151 gallons Brooklyn 113 " Queens 129 " Richmond 102 " All boroughs 136 " This represents an increase of 35 per cent, since 1916. The total consumption of water in New York City from 1916-1925, inclusive, is shown in the follawing tabulation: • TJm IS iMowiusB IN Usa Gaux>ns DahiT OVWB. 1916 1916 .... . . . 566,000,000 1917 .... . . . 585,000,000 19,000,000 1918 .... . . . 650,000,000 93,000,000 1919 .... . . . 660,000,000 94,000,000 1920 .... . . . 735,000,000 769,000,000 1921 .... . . . 731,000,000 165,000,000 1922 .... . . . 743,000,000 177,000,000 1923 .... . . . 762,000,000 196,000,000 1924 .... . . . 786,000,000 220,000,000 1925 .... . . . 847,000,000 281,000,000 282 New York City'b Fikancss and The total safe yield of ail the sources wfaieh now supply the dty m 1,100 miUioii gallons daily. This figure is made iq» as foUows: Galix>n8 Daily Catskill system induding the Bronx and Byram rivers .... 600,000,000 Croton system 336,000,000 Ridgewood system 90,000,000 Borough sources ^0,000,000 Fkiirate wat» oompanieB 44,000,000 1,100,000,000 Of the above sources, only the Bidgewood may be developed so as to produce more water. A complete utilisatbn of the ground waters of that system would yield about 30,000,000 gallons duly of additional water, but among the supplies furnished by the borough sources and the private water companies are some that are too hard for either domestic or industrial use. These will ultimately be abandoned. The complete development of the Bidgewood system on Long Island may be accom- plished whenever necessity requires. The quantity of additional water which can thus be secured is, however, so small as not to have a bearing on the general question of making adequate provision for future needs. During 1925, the city used water at the average rate of 847,000,000 gallons per day. The available margin, consequently, was 1,100,000,000 less 847,000,000 or 253,000,000 gallons daily. At the annual rate of increase of 31,000,000 gallons daily, this margin or reserve will meet the requizements for about eight years. It is proposed, therefore, to develop a supply from sources east of the Hudson River and north of the present Croton watersheds, at an estimated cost of $347,934,000. This total expenditure will be extended over a period of about 15 years, and the annual expenditures will be approximately as follows: Summary of Requirements Fint year , . $2,000,000 Second year . . 6,000,000 Third year , . 15,000,000 Fourth year . 35,000,000 Fifth year . . 50,000,000 Sixth year . . 45,000,000 Seventh year . . 40,000,000 Eighth year . . 30,000,000 Ninth year . . 25,000,000 Tenth year . . 20,000,000 Eleventh to fifteenth year (annually) . . 20,000,000 Financial Administration: Appendix H 283 BoABD OF Education The complexities of municipal financing problems are well illustrated in the Department of Education. Planning in advance is particularly important in providing proper school facilities. If sites for new schools aie not purchased as new sections are opened, the city may find it necessary to pay increased prices. On the other hand, tiie policy of purchasing in advance of actual need ties up capital, with a resultant loss of interest, and exempts the property from taxation at a date earlier than necessary with a resultant loss of city revenue. Such policy incurs a risk that the property m&y prove ultimately to be un- suited to the needs of the situation with a probable loss of at least the costs of acquisition. The Board is working on the basis of a three-year development pro- gramme. Tliis is recognized as being somewhat theoretical for the reason that each year's requirement will undoubtedly be pruned to meet the exigencies of the city's financial condition. As a concrete example, the tabulation below, which calls for upwards of $60,000,000 for the current year, is now before the Board of Estimate and Apportionment, but is being consideied on a so-called restricted basis. The Board of Estimate and Apportionment is considermg $36,916,000 to meet immediate re- quirements while the remainder, although still before the Boaid, will probably be eliminated. Sites acquired by condemnation proceedings are usually not imid for until several years after their acquisition.^ Thus the yearly require- ments are to some extent obscured by the necessity of making back payments. In the following table the sum of $3,000,000 is included to cover costs of sudi past acquudtions. The programme, while estimatmg the annual requnements for construction, does not allocate the costs of acquisition of sites by years for the reason that there is no way of telling when actual payments must be made. A further complication arises from the fact that the Board has sur- rendered school buildings in Manhattan to the Sinking Fund Commission and will continue to do so from time to time as residential sections be- come converted into business sections. These surrenders of valuable business properties constitute a credit for which the Board Reoommendations wiiieii mn obeolete (beoinw of dtaotn in budgetaiy pio- oeduie) aie omitted. 290 Financial Administration: Appendix I 291 Report of Joint Legislative Committee for the Investigation of the Finances of the City of New York. Submitted, February 7, 1916. The report is signed by Elon R. Brown, George Cromwell, Charles W. Wicks, Charles C. Lockwood, Robert F. Wagner, Thomas H. CuUen, William J. Moier, Walter W. Law, Jr., H. E. H. Brenton, Nathan D. Perlman, Nathan D. Shapiro. The committee condemned the practice of keeping large quantities of short-term paper on the market. In order to make this unnecessary, it presented a bUl making tax collections take place on Januaiy 1, and Julyl. Frederick A. Cleveland, Some Results and Limitations of Central Financdtd Control: Nine Years' Experience in New York City (Bureau of Munici- pal Research, January, 1917, 63 pp.)* Discusses defects in method of preparing annual appropriation bill (1) brings into review only part of city's activities and requirements; only 40 per cent, of total expenditures made subject of scrutiny; entire bill carries only 80 per cent, of all authorizations; (2) preparation of budget put into hands of staffs of Board of Estimate instead of requiring executive officers to prepare, subnut, explain, and defend proposals; thwarts efforts to force the executive to plan and render strict account of activities; (3) initiative is taken by an irresponsible staff of a central board, the conclusions reached are arbitrary, and the method of contiol is one of minute limitations and restrictions on management instead of critical review . . . with provisions for enforcing strict accountability as to manner in which public money is expended. The true budget process wholly reversed. The reviewing board becomes the proposer. Limitations and restrictions cannot take place of careful planning. There should be a definite work programme as well as a plan for financing. Arnold W. Lahee, New York City Budget^ (Bureau o£ Mumcqsal Re- search, 1917, 154 pp.). ''It is reasonable to suggest that the Board of Aldermen be given at least some critical power over tibe Imdget or that the present farce be abandoned." Strictly viewed. New York City's budget is no budget at afl. It is a highly itemized act of appropriations. A true budget should contain retrospect pictures of present conditions and a forecast of finances on a balance sheet basis. John F. Htlan, Testimony h^ore Joint Legislative CommiUtee on Taxch Hon and Retrenchment, (79 pp., typewritten). ''We believe that everything should be put in one conunon fund and disbursed." 292 Nsw YoBK Czzr!s FunAxcm AtiD It is better to adopt the budget prior to electicm; otherwiie the iQeoeeding admmistnilioB m f^pontkm might be embamuBed by insufficient appropriations, or if a& admimBtration of 1i» same party is elected, it mi|^t favor itself with a too liberal appropria- tion. The present budget is no more than detailed act of appropriation; it is only an expenditure programme; it does not attempt to balance estimated expenditures against expected revenues. llie budget does not contain all of the proposed expraiditures for current purposes. Certain expenses aie paid out of the levNiues of individual departments. It does not contain all proposed expenditures and payments, such as for water supply, bridge maintenance, debt service and pensions. Report of Joint Legislative Committee to Investigate Administration of the City of New York, 1921-22. (No. 107, 288. pp.). Schuyler M. Meyer, Chairman; Elon R. Brown, counsel. First report. Proposes that executive or spending power of city be separated from appropriating, recommending: A Board of Finance of nine manbera elected at large fcnr six years, three to be elected every other year; three to live in Manhattan, three in Brooklyn, and one in each other borough; that the Board of Estimate and Apportionment and the Sinking Fund Conunission be aboHshed and their powers transferred to the Board of Finance; that the Board, on recommendation of the Mayor or on its own motion, have the power to abolish, modify or consolidate tlie various departments of the dty; that tiie Board have power of confirmation over appointments to the Board of Taxes and Assessments whose tenure of office is to be the same as for members of the Board of Education; that the Board of Finance have power to remove city officers for cause by a two-thirds vote; that the Mayor transmit a budget for the support of the entire dty and county governments to the Board of Finance, and have the power of veto, subject to being overriddra by a two-thivds vote; that the office of President of the Board of Aldermen be abolished, and that the Bo«rd choose its own presiding officer; that all mandatory legislation fixing charges on city or counties for services of purely local nature be repealed and that such further legislation be restrained by constitutional amend- ment; that the Mayor, Comptroller, and Borough Presidents retain theur executive and administrative powm unimpaired^ The mioooiy report disagreed. Financial Administration: Appendix I 293 Report of the New York Charter Commission^ with a Draft of a Charter for the City of New York, 1923. (The members of the Commission were: Henry De Forrest Baldwin, Howard Lee McBain, Joseph M. Levine, J. J. Keller, George Cromwell, Herman A. Metz, Arthur S. Somers, Edward M. Bassett, H. Pushae Williams, Louis L. Delafield, William Barclay Parsons. The Commission's draft charter proposed (Sec. 31) the appointment by the Board of Estimate of a Commissioner of the Budget, who should be charged with the duty of preparing the proposed annual budget; ''and for that purpose every bcMUxi, department, and commission of the City and of each of the counties therein and every officer not subject to any board, department, or commission, and also the Board of Education, from time to time as the Commissioner of the Budget may require, shall furnish to the Commissioner all such reports, statements, and estimates as to actual and estimated expenditures and revenue of its or his office, board, department or commission and all other information pertinent to the actual or probable requirements of approfniationa therefor as the Commissioner may request." The draft charter contained detailed proviaons seeking to make New York's budget a full statement of receipts and expenditures. The Comptroller is required to transmit to the Conunissioner of the Budget before September 15 a statement setting forth in detail: " 1. Tax limit. A computation of the amount which, in conformity with the provisions of the State Constitution and of this Act, the City shall then be empowered to raise by taxation for the ensuing year and such estimate, as he may be able to make, of the amount it will be em- powered to raise as of the third day of March of the ensuing year, in each case, distinguishing between the amount which must be comprised in the constitutional limitation of a percentage of the assessed valuation of real and personal estate and amounts which may be raised in excess thereof. "2. Debt-incurring power within debt limit. An estimate, as of the third day of March of the ensuing year, of the amount, if any, for which the City consistently with the provisions of the Constitution and of this Act, may incur further indebtedness, otherwise than by the issue of revenue and Special Revenue Bonds and Tax Notes, which shall include a statement of the City's power in this respect as of the last date for which accurate or approximately accurate figures are available. "3. Bevenues. An estimate of the revenues of the City for the ensuing year, frcmi any and every source whatsoever and of every office, department, conunission or otlmr body and of eyer^r fund under its ccmtrol or to a beneficial interest in which the City is entitled, other than revenue from taxes, including the estimated receipts of the General Fund Ua the Reduction of Taxation or such fund or account of like 294 New York City's Finances: Appendix I nature as shall be maintained and including also the estimated receipts of the several sinking funds. In his statement the Comptroller shall set forth in parallel columns (a) the items of accrued and estimated revenue of the current year and (b) the items of estimated revenue of the ensuing year. "4. Expenditures. An itemized computation of the known and estimated amounts which the City will be required to expend during the ensuing year for all and every of the purposes enumerated in Sub- divisions 1, 2, 7 and 8, of Section 141 and of all other amounts which it will be required so to expend by reason of any law, contract, the judg- ment of any court or, in reasonable probability, under like compulsion. In such computation, iJlowance shall be made for any amounts of matur- ing indebtedness, the refunding of which the Comptrolkr may recom- mend, the items whereof shall be specified/' The budget prepared by the Conmiissioner of the Budget shall exhibit in parallel columns: "(a) tiie items and amounts appropriated by the Budget for the current year, (b) the departmental estimates for the ensuing year and (c) the items and amounts of the proposed appropriations for the ensuing year. The proposed Budget shall also exhibit in parallel columns: (a) aU items of accrued and estimated revenues of the current year, to the control or benefit of which the City may he entitledXh) the items of revenues as esti- mated by him for the ensuing year, and (c) the departmental estimates of revenues for the ensuing year. With such proposed Budget, the Com- missioner of the Budget shall transmit one original of each of the depart- mental estimates and one original of the Comptroller's statement above provided for." (Sec. 139). APPENDIX J Cash Receipts of the City op New York fob the Ybabs 1915, 1918, 1921, 1924, 1925, 1926 296 New Yobk Citt's Financbs and I 3 g CO .3 00 00 si So & pi IN 3 N S 9 ^ 9' In I :-S P «0 lO e5 00 1-1 lO Soo eo O O 8 OJ 1^ o 00 o> Ok U5 O CO ^ Q i«J o o o 00 d 3^ o eo ci 6 00 a» o CO o> oi S ® 00 S SI IN s S 8 00 eo «o *x "1 00 eo" «5 2( in CP i-H CO >0 CO CO 1-1 0» ci s s as s B ^ H 8-3 S ft.* 6 6^ 4 i St3 tl.t If i III J9.0 •2 a jO eS ^3 CO 5 085 ••5 8 a> & 6, OQ Old Financial Administbation: Afpbndix J 297 9 10 r1 ^ 00 «-J oi S : § : S O 06 8 Oft CO CO ^ i s CO o eo to 00 • ■ • « • • • • • • • • SCO o 3 8 I 3 00 CO Si : 6 (N 00 CO ^ >0 00 « 00 d 6 < * ^ < 8 s S3 S CO i a> s ^ l>> CO O) O) 1-4 IH ^ |« b. 10 >o 00 « 06 CO odt^cf 00 CI 00 CO to ^ 10 o> 33 10 06 eo d «e5 t>I "5 1-H 50 t^oo 01 eJ OS 8 1-4 8S3 S $ oS S • ••••• » lA ^ ^ 10 HQ ^ O u5 r» >o 01 00 o) A to to '4' CO CO ^ 00 a t« S9 00 ^ O) 00 CO 1-7 eo 1^ 00 — I CO 11 CO to ' 06 a (N S N. eo ci CO* §8 cS s e< a; to to 83 3 1 3 • * « « CO ^ H o 4 O •3 S^l-S 4 C OB I IS Am ^ eo ai 8 1-1 00 00 I eo I »o ef S»0 (N cie6 !>■ « •I N » "? t>." C2 ^ «0 I-l 05 I 9S ^ U) oa eo >o •H t» Q, 8-* § ■ • 00 t« »o 0> cS 9 So S Sio eo SCO 00 00 lo « {2 ?: ^ a OB ^ I ss 00 eo ^ t- 00 o CO « ei s s 0) s a o 73 a 00 -..ill I 11 0 « » * is -■s 8 - OQ I C4 (N i .8 00 eo 0> 00 00 a> to ^ 8 § - 00 5 d 00 (O 00 I eo eo Is '9 3 '§ s 3 8 . »0 CO (N (O ci eo S § 8 C4 t« 00 ao o t>. o> <-< c» o> ^ eo 00 s s ii ^ ^ ^ eo ^ N CO p ci 1-* c6 OO <£> 0> »0 CO t>> 00 eo CO f-i o» to eo •o 1-4 e« CO eo 00 , t>I eo , o <-i IS I eo CO OO 4 s eo 9 ^ CO CO ^ «5 O N eo -^e< eo CO CO ^ N« «0 ic CO o» 04 csi 1-H 00 eo 00 lO "5 C< CO C« 00 N 00 eo CO lO CO e4" A a> >o <-< 00 w a» m >H c< oa 1-1 c< eo e« « eo eo o5 00 oT CO a» ^ 1-4 eo ^ ci eo N ^ CO 00 CO ci ci t>I O) O CO 00 i-J^ 6| do> ci ^ CO 8S Si's 00 CO CJ CI . M a> ^ --HO S' is . 6 ^ >o 00 iH • CO CO *H 00 *H ^ O to 00 fH r. 35 w "5 00 i-J" r— C9 to CO to I eo >o 1-1 Ci P3 00 »o q» •HOOcirj!' A' ' •4« ic d' CO ^ r« 00 CO CO t» CO 00 m 2 ^ CO O 00 8 U5 CO O to W5 "-I »0 q CO CO 00 to 00 CO CO ■'jJ d N ® ^ 00 t» 'ft CI cf 00 cf 00 d i-T 00 to g> n< CO CO 0> t» CI >o d ^ >o CD CO ei 00 00 IP o ^ »o CO »o 04 1-1 to w 5 ^ CI CO CO o «5 q q »d d d i6 to « » CO In. 00 r-i Ci CO CO eo i-« CO CO CO 1-I SU3 is dd CO CO CI 4^ 4 •J 4> CS C8 o a 5 S "> "* ft " d CI 00 CI ci" s § CI 00 CI u 3 o to s 00 CO 2 (3 I §^.s i C c - ^ S S '3 9^ 4'4 5 I a o a o 302 Nbw Yobx Cirr's Finances and Financial Administration: Appendix J 303 II II §55 •6 o I C4 id 2 g O H ^ Z b> < < O $ « :z S O M S5 0. S C3 o tj ■< 5§ o S QQ -I 00 CO I s CO O GO 04 eS a» o ro o «o »o 00 o> « (N o »o »0 00 CD CD '-T (N 00 t>. CO • I 3 Si 00 S w ^ 00 eo CO Oi N 00 OS T)* NO 00 f-( (N 00 ^ CO ^ »H t>I 00 qi CO ^ CI t» 00 •o ^1 •I I 00 00 O 00 C4 00 «o C4 0> O CO C>4 ^ « 00 ^ »-* CO »>. CO OS OS o O ^ ^ M 00 i-H OS OS ^ CO ^ CO OS CO CO o .-I "5 . CO (D t« * • 01 i s _ a o C so ^ 5 CO a) ej a o) 3 Is a 2 I • 2 -2-2 „ Sp OS > V CO 1^ OQ C 6lC o « b » ^ «, § te & * -§-3 no 00 ^ ^ m 8 It S 3 « •a •§1 S a S o o o OS s s OS eo ■ c« CO 00 CO 00 >6 . CO . eo 00 ■ '0» 1-1 CO OS ^ CO o> »-t OS «3 U5 O O M ^ • • • S . 1-1 CO 00 . >o • ^Oi t-i • O p» s OS o !o8 CO 00 CO CO CO to to 00 00 o CI © »H CO o CQ CO s s. 9 00 00 CO O SCO OS . ^ ^ CO »-« » «> * «H 01 M ^ to 8 OS i 5 eo CO 3 1^ CO OS »0 N O 1-J CD ^ "5 "O CO t>^ 1-H CO CO ^ CO CO CO <-< 00 CO »• C» CI o . OS OS . 't' • o-^ • 00 CI OS CO 00 t« 1-1 «d CO s CO s eo C4 55 00 CO OS O CI CO 00 "5 CI lO lO p t>; 00 CD CO ci OS CO >0 CJ 00 CO CO t-j_ CD CI <-< "5 00 M4P p4 CO CO >-< 00 cc5 T}< "5 Tt< CO O CO a CO K r« Oft 00 eC OS g CO M3 00 CI OS o _ p t-^ 00 00 »-J OS CI CO CO 00 CO 1< OS »o CI p eo ^ Sob CO >d CO eo CO 1^ |S { 1 GQ o • I •I i H :l: •■2 « as C u Oi °S o 9 Sol's 5 S as OS (3 B 0? M S.-^ CS •3 -2 •3 S5 c8 - OD « 2 M ^ "S '2 .§ oj S 3 g o 5 » 08 O SP 00 fl, O S 08 o 5J O 9) S ^ OS V S > 4) 0) la « . o ^ o o 00 « i.1 Q I; il s a 1 •s a 304 New Yobk City's Finances and Financial Aiwnistration: Appbndix J ao5 5 55 fa o 'II Hi I o r» C4 00 o s o & S B> g es 1-1 o o g M ' fa N m CI TfJ O >-H 1— I C5 I-H .-H OS O <© s s s S,QO Set 00 to 00 •-; 00 >-i Q CO C4 O) o «o O o »-< OS ^ «o ro 0> N 00 8N »g CO 00 (d >0 C4 eo «o I SO 00 >e 00 »H 1^ © f-i (O CO l-H O) C< 00 • • • ■ • • 3 S S CI CI >o CI q t>I t>^ ^ §00 Q ■>»< s CO >o o trs IS CI 3 v4 <4l •« ^ O W5 CO »o CI CO lO 00 Is =1 «0 00 Oft * a> 4^ 00 d ao 8 8S SSS CO O) 8 : S 1 »-f CO CO eo 6 CO CO s i 8 8 s CO 8 a • i 00 ^ f i is CO 5 CO CO CO o» ^ CO iO lO O ^ G» i-i ass 2? CO 00 1-1 00 s 00 1^ CO 0 C> O CI CD ^ OS O OS t>. 00 «-" CI ;3! * 1-1 § 'I o CQ MJ 11 a »5 O »0 04 CO o CO >'5 o a» • •••••• a O iO a CD •H 5 86 1^ S 5 CI S CO CO ©00 CO ^CO 00 CI ^o> to 'N 00 o a 9 • • • IS s S eS 2 S 5 II 3 $ 9 U? CO CO 05 o> 1^ CO 00 CI odd eogg M*0 00 00 kH CO CO 00 o CO 1 CO ^ (N 5 a - « S • •** es •3 -2 •2 as ^ia fii O rf> « C» j: 9 Pi • 0.5 is eS >> as • • • ^ • ••I?- I 3 .©"S «.2 I lO 3 i C J •2 -8 0) eS OiO 5ll i|s es . . s B a o 306 New Yobk CJity's Financms and Financial Administration: Appendix J 307 I • • • • I s :8 d (D 1-4 • • • • • • • • CO to TjJ CO 04 53 s CO •-' CO O O 00 00 O 05 t-; ci 6 Qo a eo N o> c2 »2 « "3 o S* of ^ « TjT « ^ o> « 1-1 to -< e«9 lO CO 00 o> « CS| O 00 w4 ^ e» 00 ^ M 00 • • • • « • lO K5 CI 00 O to 1-1 ^ Il« 8 CD CO 00 *o to So CO I CO ^ 00 to CO 00 OA s s s s OS OO »^ CO »o «c> odoi O C4 p 00 54 85 o to O CO CO 05 O 00 00 q OJ to O 00 to OS CO M OS CO lO q CO o CO ej" >-? ^ ^ w 04 ^ oa ^ i-l to CO to » * » • eo >o Q a» to 00 • • • 1-1 CO o «o 1-1 OS to 00 I Jo 1-t to <^ 9 to 00 M to I I 88 *8 • • * §1 IS i 85 « ll M (S ^ * "5 "3 "i 2 "i P CD 0) o a S « 1 . a OS ■ ^ CO -p^ |pqO 2 « S g 8 2 M •2 fl g :^ I « ^ «3 J « ^ £ M OQ t»I eo CO • 00 (N W o <© lO CO S :3 to to ^ s i i g ' ill to W5 O 00 1-4 lO . M lo lH . to ^ 2 o CO to OS 6 « (O CO to to CD OS 00 SP 01 * 00 to o lit to 8 o 1-1 04 oi OS 00 01 00 • • • • ■ • • • I 1 * 00 1-H «5 8 3 2 : :|5 o OS i-i 00 -^1 25 8 00 So 00 o to OS Si 00 o» i lO ^ o> o> ^ ^ o> § to CO OS ej , CO OS tp ^ ^ ■ 0) ^ 04 00 eo to 00 ^ SI o M 8 iS CO eo q 1^ OS to o SI ♦ • • • • • • §a to 00 >o OS O ^ i>4 ^ eo OS o OS to CO • • _ III «C5 »C CO CO 04 04 CD CO O eo eo S iH 04 00 CO O to 04 O ^ I-l -4 O "5 O So to to I-I to 00 g' OS to |o ^ 1-1 t^ OS 00 i I '■3 "I li o. a ^ s n M 0) •S « ° s ja O aa i I -1 es a o to T3 < O o 65 eS •S "O .fi u OD ii .21 -** So S3 « S * o I 1 •S a oJ -3 0) OS »« "E « C fi 8 ^ H ts e. Ground in itue several b(»oughs 2. Real estate and buildings a. Houses b. Park buildings 3. Halls and rooms in government buildings a. Armories b. Auditoriums in school buildings c Rooms in Municipal Building d. Rooms in Bergen Buflding 4. Miscellaneous structures, etc. a. Steeplechase Pier, Coney Island b. Stadium of City College e. "Property under jurisdiction of Board of Trans- portation" d. New Yoik Oonnecting Railroad e. Staten Island ferry bnett /. lifisoellaneous rentals of Dqwrtment of Water Supply^ Qas and Eleetrioity 5. 314 New York Cmr's Financbs and VIII. Earnings of public service enterprises A. Water supply a. "Frontage and meter rates" h. "Building purposes" c "Hose" d. "Shipping purposes" e. "Street sprinkling" /. Setting water meters B. Municipal ferries: tolls a, Astoria fei^y h, Classon Point feny e. Grand Street feny d. Staten Island ferry e. Rockaway Beach and Barren Island /. Greenpoint feny Q. 39th Street feny C Municipal railways, trolleys, and bus lines 1. Passenger receipts a. Staten Island and Midland Railroad Company 6. Trackless trolley system, Staten Island c. Williamsburg Bridge trolley line 2. Revmiue from advertising in cars a, Staten Island and Midland Railroad Company 6. Williamsburg Bridge trolley line 3. Car and station privileges: Trackless trolley system, Staten Island IX. Earnings of general departments A. Fees and commissions 1. L^alfees a. "Desk fees" City Clerk City Chamberlain Coflonty Clerk Public Administrator Register SheriflF Surrogate h. Notary fees c. Court fees d. Jury fees e. Subpoenas /. Fees on sale of city property Financial Adminibisaiion: Appendix K 315 g. Land tide registration h. Naturalization fees i. Marriage license fees j. Fees for performanoe of marriage cerranony 2. Inspectional fees a. Meat inspection b. Market wagon fees c. Examination of plumbers 3. Fees from non-inatiioulated students and non-resident pupils a. City College h. Hunter College c. Continuation schools 4. Fees for use of public facilities, and admission charges a. Municipal baths b. Comfort stations c. Camp sites d. Golf e. Tennis /. Croquet g. Lockers Miscellaneous 5. Chamberlain's commissions for collection of state taxes B. Sale of maps, transcripts, publications, and by-products 1. Sales of maps, plans, etc. a. By the Board of Elections b. By the Board of Estimate and Apportionment c. By the several borough presidents d. By the Transit Conmaission e. By the Board of Transportation /. By the Department of Bocks 2. Searches, transcripts, etc. a. By Collector of Assessments and Arrears b. By City Clerk c. By Tenement House Department d. By Health Department 3. Sales of publications a. City Record b. Bulletins of the Board of Standards and Appeals, Municipal Reference Library, etc. c. Registry lists of election enrollment 316 Nsw YoBx Citt'8 Finangbs and iu Sales of by-^nodaets a. Antitcndii and vaccine b, Artidea manufactured by Department of Cor- rection e. Articles manufactured vocational and trade schools d. Afiimala from ifllngiftal g^ivift^ X Miscellaneous general earnings A. Bevenme from investments 1. On investments other than those of sinking ftmds a. Interest on bonds and mortgages on account of sales of city property 5. Interest on mortgages under jurisdiction of the Board at T^am^rtation e. Interest on seeurities of the Louisa Mintum fund 2. On investments of the sinking funds B. Interest on bank deposits 1. Intmst on sinking fund deposits 2. Interest on dty treasuiy deposits 3. Interest on departmental deposits 4. Interest on security deposits 5. Interest on criminal bail deposits C. Other interest and penalty chaiges 1. Penalties on proper^ taaoes 2. Interest on miscellaneous taxes 3. Interest on assessments 4. Interest on water rates 5. Interest on tax sale liens 6. Accrued interest on Corporate Stock and Serial Bonds sold 7. Interest on judgments for costs 8. Interest and penalties on misceBaneous defened pay- ments D. 'Fmsskm on sale of Corporate Stock and Serial Bonds a. Miscellaneous aoemals, ehaigesy deductionSi refunds, and rrim- bursements A. Applicable to tax reductii 1. Board of inmates of institutions and conunitted children 2. Daniage to departmental property Financial Administbation: Appendix K 317 3. Reimbursements for labor and material furnished by various departments 4. Conadenee money 5. Miscellaneous lebates and rambunementi B. Restricted to specific purposes 1. Damage to departmental property 2. Reimbursements for labor and nrmtprift^^ furnished by various departments 3. Redemption of lands purahased for taxes or nsnrpn ments 4. Deductions from payroOs 5. Special deposits 6. Ekiforoed collections 7. Reimbursements on account of contractual agree- ment on ci^tal projects a. Bronx Parkway 6. Jamaica Bay improvement c New York and New Jersey bridge and tunnel d. City College e. Catddll aqueduct 8. MisoeOaiieous lebates and rdmbuisements XU. Sale ot assets A. City-owned real estate 1. Sold under Sec. 205 of the Charter 2. Property under jurisdiction of the Board of Transpor- tation 3. Sold at auction 4. Proceeds collected on account of judgments B. Waste materials^ etc. 1. Discarded ferry boats 2. Old buUdings 3. Discarded equipment 4. Miscellaneous waste materials XIII. Borrowings A. Revenue Bills B. Special Revenue Bonds C. Tax Notes 2>. Corporate Stock B. Serial Bonds 318 New Yobk City's Finangbs: Appendix K Note : The classification presented above is based upon the intomatioii contained in the Comptroller's Report for 1926. In general, the items of subclassification (those indicated by a, 6, c, etc., and some of those indicated by 1, 2, 3, etc.) are expressed in the OomptiQUer's tenninology. The other designations and the grouping of items bave been chosen largely in conformily with those suggested in Oakey's Principe <4 Gwemment Acemmting and BeparHng, but with some necessary modifications. It is also to be noted that the Comptroller's Report does not include certain departmental receipts that are not paid into the city treasury and sinking funds. To the extent of those omissions, the dassihcation presented is incomi^ete. It is to be borne in mind, also, that the dassification is one of receipts, not of income accrued. Hence it includes certain items, for example, "refunds" and "reimbursements" which are reductions of expendi- tures, not income. APPENDIX L Licenses jlsd Pebiots in New Yobk Cm' In May, 1927, the Commissioner of Accounts completed an important report on "Fees for Licenses and Permits Collected by various De- partments, Cost to the City for the Service Rendered, and Correspond- ing Receipts from each Source for the Year 1925." TTie survey covered bureaus in the following departments: Police, Licenses, City Clerk, Fire, Health, Mayor's Office, Parks, Examining Board of Plumbers, Water Supply, Gas and Electricity, Tenement House, Public Welfare, Street Cleaning, Plant and Structures, Public Markets, City Chamber- lain, Collector of Assessments and Arrears, Collector City Revenue, Borough Presidents, County C]^:kB, County Re^^sters, Sh^iffs, Public Administrators and Courts. The report included careful tables showing in detail the present fees charged, the dates on which they became effective, the receipts in 1925, the estimated cost of service, the approximate loss or profit, the number of permits issued and the corresponding fees charged in certain other cities selected for purposes of comparison. These tables are too elabo- rate to be published here. Their information, however, is sufficiently indicated in the text of the Commissioiier's report; the principal portions of which follow: Police Depabtmsnt Steam Boiler Inspection: Steam boilers are inspected annually by this Department and certificates of inspection are issued. Stationary engineers, firemen, and ice machine operators are examined and certifi- cates are issued to them renewable annually. The fee for boiler inspec- tion is $2; (^/ee^remofnedunc^fH/edmncei^^* No fee is charged far examining and licensing engineers, firmen, and ice machine oper- ators. The estimated cost of this service for the year 1925 was $48,094. ' The receipts amounted to $27,682, or $20,412 less than the cost of the service rendered. 13,841 boilers were inspected; 1,714 licenses and 11,949 renewals of licenses were issued. The charges in Philadelphia 319 320 New York City's Finances and aie, for boiler inspectioa $3 plus 20 cents per square foot of grate area, for origiiial licenses, $3, and for yearly r^wak, $1. Special Police Shields. These shields are issued to banks, trust companies, hospitals, and traction companies for use by special patrol- men in their employ. No fee is charged, but a deposit of $10 is re- quired. This is refunded when the shield is returned. The cost of this service for the year 1925, exclusive of the work of investigating prospective special patrohnen, was $694.76 and the number of shields issued was 741. In Jersey City a fee of $5 is charged for this privilege. Taxicabs. The licensing of taxicabs and hack drivers was transferred from the Department of Licenses to the Police Department on April 11, 1025. The rates for licenses, as fixed by oidiiiance amended March 6, 1S21, are as follows: Public Taxicab yearly $10.00 it J^tenn 5.00 « Coach [ . yearly 10.00 u ft 3^ term 5.00 Little Taxicab yearly 5.00 u it y2 term 2.50 Public Cab . \ \ yearly ^.00 ti it tenn 2.60 Sightseeing Ckr ! ! ! 7^7 ^0.00 " « 3^ term 6.00 Hackdrivers' Examination, certificate and equipment, tl.OO Hackdrivers' renewal, yearly Article 8, Chapter 14, Section 80 of the Code of Ordinances defiiifiB vehicles as follows: Cab, a public hack so designed and constructed as comfortably to seat, in the opinion of the Commissioner of Licenses, not more than 2 persons inside thereof. Coach, a public hack so designed and constructed as comfortably to seat, in the oiunkm w rate tax on intangiUe or tangiUe personal property. 4. Favors principle of tax upon increment of land values. 5. Opposes supertax on land values. 6. Favors unanimously following changes in the Tax Law to iniprove administaration and moderately increase revenue; (a) that real property shall not be exempt when vacant, thou^ owned by a charitable or other similar corporation: (6) tiiat proviaons for deduction of surplus and assessed value instead of actual value of real estate be omitted; (c) that the State Board of Tax Commissions be required to furnish local assessors with full particulars concerning real property of public service corpora- tions, exdusive of their special franchises; (d) that Sec. 48 of Tax Law which permits deduction from special franchise tax of amounts paid by owner as rental for the franchise and any sums paid for car licenses, 1 See also technical studies by R. M. Haig, The Exemption of Improvementa from Taxation in Canada and the United States (1915» 2W pp.) and PrtbMe Effects of Bxemptum of ImprmtemaUs from TagBoHim In Nms York CUif (1915^ 254 pp.), pn- pwed for this Gonmiitlee. Financial Administeation: Appendix M 331 taxeS; etc. be repealed; (e) that the Secretary of State be required to send duplicate reports of incorporations to the local assessors interested. 7. Favors appointment by tiie Mayor of a committee on the question of raising ad^tional revenue from special assessments and of possiUe improvements in laws relating to them. Report of the Joint Legislative Committee for the Investigation of the Fi- nances of the City of New York. Submitted February 7, 1916. (22 pp.) and appendix and Legislative Document No. 25, (56 pp.). The occaoon for the investigation was objection by the city adminis* tration to the amount asked of the city for the support of the state government (6 per cent, of the city budget). The report analyses the debt situation and shows that the city has consistently borrowed up to, and by various devices has exceeded, the debt limit. The committee condemned the practice of keeping large quantities of short term paper on the market and presented a WL making tax collections take place on January 1, and July 1. The report describes the embarrassed state of the city's finances in 1914, which necessitated the $100,000,000 loan from a syndicate of citizens. At that time the adoption of a " pay-as-you-go policy for public improvements was required by the syndicate, and the Board of Estimate and Apportionment accepted it. The committee recom- mends that this be made a part of permanent policy by being incorpor- ated in the City Charter.^ The committee also saw dangers in investing sinking fund accumula- tions in city bonds. It recommended that sinking funds be abolished and that serial bonds be substituted, and the diversion of city revenues to special funds for particular purposes or units be abolished. It recommended further that the question of mandatory charges on the city for the Department of Education should be submitted to a referen- dum in the city; that county administration within the city should be placed under elective boards; that the Board of Estimate should be put in charge of county finances, and that the Constitution should be amend- ed so that bills relating to a county wholly within a city should be city biUs.2 The committee felt that in general the contribution made by the city to the state government in direct and indirect taxes was reascmable and 1 See § 169 of the Charter, the so-called "pay-as-you-go" Law, Ch. 589 of the Laws of 1916 and above, p. 209. * Tlik refen to the lidbyor's veto idudi has onoe been abolidied by the Home Rnie AflMDidBMnt* 332 Nbw Yobx Crrr's Financbs and fair, but poiiited out some few cases of unfair taxation. It reooin- mended that certain state levies be shared with cities or counties, for example, the automobile tax (with the restriction that it be spent on roads). The committee also presented various bills: charging the state with the regulative expenses of the Public Service Commission of the First District; prohibiting further construction by the state of roads in cities and prohibiting the maintenance of county roads by the state; providing for the taking over of the dt^B normal schools the state; and requiring that any additional excise tax be divided between the state and the city. The committee estimated that its proposals might save the city over $10,000,000. Further savings would be possible if the Board of Esti- mate were given broad powers to consolidate and abolish departments. The administrative expenses of the city could be reduced without kssenr ing of public services. The ccmunittee reocMnmended that the p^iaon systems be revised and placed on a uniform basis. There was also a minority report signed by Robert F. Wagner, Thomas H. Cullen and Alfred E. Smith proposing: 1. Constitutional amendments providing for two-thirds vote upon aU i4>propriations where benefits sou^t were chiefly local, and giving New York City representation in the State legislaturo sufficient to protect a majority of the population of the state from finandal domination of the minority. 2. Legislation repealing the state aid law; 3. Exemption of state property from taxation wherever located; 4. Allowance to New York City of its proportionate share of state hi^way expenditures; and apportioimient of proceeds of stock transfer tax to the localities whero the tax is collected. Mitchel, John Purroy, "Reducing the City's Tbx Rate." New York State Chamber of Commerce BvUetin. (Felmiary, 1916, pp. 29-37). Points out limited jurisdiction of the Mayor and the Board of Esti- mate over finances. Discusses the financial relation of Board of Educa- tion to the city government and recommends greater control over educa- tional and other mandatory expenditures, particularly county eiqienses, 70 per cent, of which are mandatory. The ev^tual effects of the "pay-achyou-go" policy are considered. The Mayor asked that the state share the cost of vocational and industrial education, as in other cities; that the state bear the expenses of the Public Service Commission of the First District (as it did of the Financial Administration: Appendix M 333 Second) ; that the state government turn over the stock transfer tax to city, and that sixty-five per cent, of the automobile tax collected in New York City be given to the city. These and other changes would inTolve the saving of 313^ points on Ihe tax rato. He proposed further to give Board of Estimate absolute control over every expenditure made out of the New York City treasury and over the number and salaries of all employees, and jurisdiction over the construction forces of the Public Service Conmiission (since attained by the creation of the Board of Transqsortation). He also recommended that a Board of Purchases be creat^, that the dty be pymt finandal control over the Board of Water Supply and that the Board be sup- planted by a single commissioner; that a single Commissioner of Ac- counts be authorized as an aid to the Mayor; and that the Board of Education be made smaller. Baoort an ihe Tax Levies of the City of New York, 189^ Bureau of Municipal Ibivestigation and Statistics, Finance Depariment (1916, 103 pp.). (1) Considers the productivity <^ each dass of taxes, the probaMe pro- portion of receipts from current and prior levies within particular periods after imposition, the relative productivity of the several boroughs, and (2) The extent of probable deficiencies or losses through discounts and remissions and the cancellations of invalid or uncollectible taxes, especially marked in personal property tax. Report on the Apportionment of Direct State Tax, Bureau of Municipal Livestigation and Statistics, Finance Department. (1917, 27 pp.). Summarizes results of several investigations made for the purpose of determining the relation between actual assessment standards and the rates of equaUzation fixed for certain counties outside the City of New York, as a result of which the city's share of taxes to be paid the State was reduced from 69.27 per cent, in 1914 to 64.81 per c^t. in 1917, at a saving of over $500,000. He proposed to reduce the State Board of Estimate and Equalisation to three members. Report of Mayor^s Committee on Taxation and Inveetigatian of Mortgage Loans, 1918-1919, (86 pp.). Recommendations to alleviate tax burden on real estate. 1. Abolish courthouse board and remodel old courthouse. 2. Sell, if possible, or lease all unused property of city. 3. Impose moderate yeaily hcense on aU prolesBkmal and iHisines^ men in city. 334 New York City's Finances and 4. Investigate dock rentals; all leases or right with regard to water- front privileges should be sold. 5. Consolidate all dty departments affectiiig real estate; merge iiie I^ir^tion Bureau and Tenonent House DepartD^ Building Department. 6. Transfer Building Bureau and architectural staff of Board of Education to supervision of Building Department. 7. B^move pushcarts from streets or prevent them'from'inteifeiv ing with renting cxf stores. 8. Substitute income tax for unsatisfactory personal property tax; suggesting rates of }^ of 1 per cent., on incomes of mforied persons amounting to $1,200 or more; of 1 per cent., on unmarried persons; 1 per cent, on incomes of $10,000 or more, with 2 per cent, for unmarried persons. 9. Impose annual fee on all horse and motor trucks and auto- mobiles by weight. 10. Tax all real estate belonging to churches and charitable institu- tions and not used by them as such. Fwiher BecommendaHans Rdatim to TVmfton 1. Amend the Personal Property Tax Law. 2. Amend the franchise tax on mercantile and manufacturing corporations, increadng rate from 3 to 16 per cent., to be shared equally by city and state. 3. Amend Greater New York Charter: To provide for limitation of tax on real estate of 2 per cent., effective January 1, 1922. To reduce tax on personal property to }^ of 1 per cent. To compel all taxpayers having personal property of more than $2|000 to file reports with Deportment of Taxes, under oath. 4. Tax all insurance companies ^ of 1 per cent. 5. Tax all bank deposits 1 per cent. Report of the Joint Legislatwe Committee to Investigate the Finances of the City of New York, Schuyler M. Meyer, Chairman, March 9, 1922, (58 pp.). B^commendations : 1. Change tax dates gradually to January 1 and July 1. 2. Restore "pay-as-you-go" system as enacted in 1916. Financial Administration: Appendix M 335 3. Abolish Sinking Fund Commission and sinking funds as laindly as practicable. 4. Bepeal General Fund Bond provision and apply all sinking fund receipts to payment of interest and reduction of city debt; devote revenues of income-paying properties to debts created by acquisi- tion of properties. 5. Place mum'cipal public utilities on self-sustaining and indepen- dent basis, with separate profit and loss accounts. 6. Place payments on an actuarial basis on tma^ng debts, and employ serial bonds for new debt. Report of Special Joint Committee on Taxation and Retrenchmmt New York State Legislature (1925, 259 pp.), Thomas I. Sheridan, Chair- man. Smnmary of findings and recommendations: (1) Local taxation. Suggests putting municipal utilities on sdf- sustaixung basis and making special services (building, plumbing, elec- trical inE^)ections and permits) bear their own cost. Recommends revision of schedule of charges for all permits, licenses and fees. Proposes that the new state taxes necessary be distributed among cities; that a business or occupational tax be levied on rental value of premises occupied, and that a soiaU surtax be ackled to the itete inco^ tax. 1(2) Revision of state tax system. Recommends: A gasoline tax of two cents per gallon to be shared with localities; a tax of 5 per cent, on net income of unincorporated businesses to balance tax upon corporations; Revision of state inheritance tax to take full advantaip of federal credits; Abandonment of real estate to dties as tax source; repeal of tax on tangible personal property; increase of income tax on business corpora- tions to 6 per cent. APPENDIX N Funded Indebtednuss and Af^^-^^ Valuations of Real Estate OF THE City op New York from 1830 to (In thousands of dollars) Tbab Ending DaOUiBBB 3l8T (1) 1830 1831 1832 1833 1834 1835 1836 1837 1838 1839 1840 1841 1842 1843 1844 1845 1846 1847 1848 1849 1850 1851 1852 1853 1854 1855 1856 1867 1858 1859 1860 1861 1862 1863 1864 Total Fumbbd (2) ; 570 500 500 500 500 1,500 2,939 3,399 5,035 7,716 10,842 12,681 14,096 14,334 14,477 14,657 14,830 14,851 15,016 15,241 15,037 15,288 14,945 15,196 15,214 16,004 16,033 18,175 18,321 18,900 22,203 24,268 28,068 34,170 41,880 Sinking Fund (3) 227 257 398 206 254 261 340 382 618 831 1,018 1,266 1,500 2,065 2,285 2,485 2,994 3,690 3,583 4,052 3,896 4,631 5,171 5,594 4,936 5,093 5,277 6,364 5,107 6,262 7,233 7,985 8,767 56 Net Fundbd Dsbt' Assessed Valuation or Real Ebvatb* (4) $ 343 243 102 294 246 (5) 9 o7,oUo 95,594 104,160 114,124 123,249 1,239 2,599 3,017 4,672 7,098 1 AO TOO 14(5,7oZ 233,742 196,450 194,543 196,940 10,143 11,850 13,073 13,068 12,977 186,351 176,513 164,955 171,937 12,592 12,545 12,366 12,022 11,561 177,207 183,480 187,315 193,029 197,741 11,454 11,236 11,049 10,565 10,043 207,142 227,015 253,273 294,652 330,564 10,410 11,097 13,082 13,044 12,536 336,975 340,972 352,343 368,346 378,051 17,033 18,006 20,835 26,185 33,113 398,533 406,881 400,239 402,196 410,695 Financial Administration: Appendix N 337 Funded Indebtedness and Valuation— Cow^mw^d Yeab Ending Dbcsmbbb 3l8T Total Pcnded Dbbx> Sinking Fund A«UBra> Net Funded Debt* Assessed Valuation OP Real Estate* (1) 1865 1866 1867 1868 1869 (2) $43,366 44,191 46,501 48,981 63,626 (3) S 9,669 11,229 13,985 16 501 18,321 (4) $33,697 32,962 32,516 32 480 45,305 (5) $427,404 478,994 555,442 684,123 1870 1871 1872 1873 1874 79,523 102,182 110,700 121 41Q 139,098 18,115 20,182 23,348 94. R4.1 26,823 61,408 82,000 87,352 »70,0< o 112,275 742,103 769,306 797,125 o«5o,oyi 881,547 1875 1876 1877 1878 1879 140,378 142,002 142,769 130 600 136,407 27,748 28,296 31,120 «M,A^BO 33,021 112,630 113,706 111,649 ItVT AOA XV/ f^X/O 103,386 883,643 892,428 895,063 918,134 1880 1881 1882 1883 1884 133,534 134.400 130,474 130,680 126,870 32,993 36 110 34,332 38,134 34,823 100,541 08 200 96,142 92,546 92,047 942,571 V#D,#oO 1,035,203 1,079,130 1,119,761 1885 1886 1887 1888 1889 125,475 125,982 128,268 132,445 141,839 36,113 41,205 39,521 44,324 45,638 89,362 84,777 88,747 88,121 96,201 1,168,443 1,203,941 1,254,491 1,302,818 1,331,578 1890 1891 1892 1893 1894 146,371 150,298 155,161 166,460 173,991 48,513 52,783 56,532 65,708 69,912 97,858 97,515 98,629 100,761 104,079 1,398,290 1,464,247 1,504,904 1,562,582 1,613,057 1895 1896 1897 185,588 195,907 223,007 75,703 77,630 86,170 109,885 118,277 136,847 1,646,028 1,731,509 1,787,186 1HB consolidation OF GREATER WKW YORK BECAME EFFECTIVE JAMQART I, il^ 1806 1899 341,844 359,620 104,478 111,«SS2 237,366 248,196 2,533,730» 2,932,445 1900 1901 1902 1903 1904 384,794 412,047 434,339 469,123 534,954 119,251 125,524 138,317 142,762 141,088 265,543 286,523 296,022 326,361 393,861 3,168,533 3,237,778 3,330,647 4,751,550 5,015,463 338 Nsw YoBK City's Financbs: Appendix N Funded Indebtedness and Valuation— C^onttniied Ymmm Ending DIMMBBB 3l8T Total Fpkpm) Dm' Sinking Funds Abbxtb' Net Fundbd DXBT* Assessed Valttation or RsAii Estate* (1) 1905 1906 1907 1908 1909 (2) $565,056 617,484 672,396 730,691 794,930 (3) $141,545 153,467 146,335 145,000 151,259 (4) $423,510 464,017 526,061 585,691 643,670 (5) $5,221,582 5,738,487 6,240,480 6,722,415 6,807,179 1910 1911 1912 1913 1914 843,503 917,811 985,190 1,065,373 1,124,020 155,469 161,040 165,125 173,201 181,816 688,033 756,771 820,064 892,172 942,204 7,044.192 7,858,840 7,861,898 8,006,647 8,049,859 1915 1916 1917 1918 1919 1,155,483 1,191,317 l,214,9i8 1,225,095 1,238,260 181,749 183,822 194,466 199,078 210,449 973,734 1,007,495 1,020,481 1,026,017 1,027,811 8,109,760 8,207,822 8,254,549 8,339,638 8,428,322 1920 1921 1922 1923 1924 1,246,858 1,292,973 1,316,160 1,373,350 1,459,589 215,660 228,450 230,563 243,509 257,098 l,a31,198 1,064,522 1,085,596 1,129,841 1,202,490 8,626,192 9,972,985 10,2^,995 10,596,066 11,148,811 1925 1926 1,565,853 1,660,993 274,329 294,405 1,291,524 1,366,588 11,901,348 12,997,580 * Including Assessment Bonds, excluding Revenue Bonds, Special Revenue Bonds, and General Fund Bonds, the latter of which were first issued in 1903. The figures for tlie yma 1830-1897 aie oomputed from the figures given in E. D. Durand's Fimmeet ef the CUu of New York, 1898, p. 374; for the yeww 1898-1910, from Gbmp- troller Prendergast's The Business of the City of New York, How lite CUif OeU lie Money and How It Spends It, October 10, 1911. « Exclusive of General Fund Bonds. The figures in Column 3 are taken for the years 1830-1897 from Durand, op. cit.; for the years 1901 and 1905, and 1909-1926, from the Comptroller's Annual Report, 1926, p. 372. The intervening years are takm txom the OomptroUer's Annual Reports for those years. * Cmnputed from the figures in Cohmms 2 and 3. * The figures for the years 1830-1852 taken from the ComptroOei's Report, 1862, p. 68; 1854-1860, from the Comptroller'e Report, 1859, p. 164; for the years 1865-1871, from the Commission of Taxes and Assessments Report, 1873, p. 15; those for the years 1878-1896 from the Report of the Commiseion af Taxes and Assessments, 1896, p. 17; those for the years 1899-1925 from the Report of the Department of Taxee and Assessments, 1925; those for the intervening years, from the ComptroDer's Annual Reports for those yem, * AflnnmeatB of ^ooUj^, Queens, and Bidimo^ APPENDIX O CommmmvAL Dnr and Tax Limits Impobsd on Cmss in New Yobk State Showing the dates of approval by the people of the State of the various clauses (Matter in brackets [] is no longer in force; mattor in italics legmemtB additixms to preexisting text.) DM Limit. Article VIII. § 11 [Now numbered § 10]. No 1884 county, city, town or village shall hereafter give any money or proper^, or loan its money or credit to or in aid of any indi- vidual, association, or corporation, or become directly or indi- rectly the owner of stock in, or bonds of, any association or corporation; nor shall any such county, city, town or village be allowed to incur any indebtedness except for county, city, town or village purpc^. This section shall not prevent such county, city, town or village from making such provision for the aid or support of its poor as may be authorized by law. No county 1899 [containing a] or city [of over one hundred thousand inhabit- ants or any such city] 1884 shall be allowed to become indebted for any purpose or in any manner to an amount which, including existing indebtedness, shall exceed ten per centum of the assessed valuation of the real estate of such county or city subject to taxation, as it appeared by the assessment rolls of said county or city on the last assessment for state or county taxes prior to the incurring of such indebtedness; and all indebtedness in ex- cess of such Hmitation except such as now may exist, shall be absolutely void, except as herein otherwise provided. No 1899 [sudi county or such] 1884 city whose present indebtedness exceeds ten per centum of the assessed valuation of its real estate su1>- ject to taxation, shall be allowed to become indebted in any further amount until such indebtedness shall be reduced within such limit. This section shall not be construed to prevent the is Bu iiig of certificates or indebtedness or revenue bonds issued in anticipation of the collection of taxes for amounts actually con- tained, or to be contained in the taxes for the year when such certificates or revenue bonds are issued and payable out of such taxes. 339 340 Nsw YoBK Cmr's Finances and 1909 ; nor to prevent the city of New Yoik horn issuing bonds to be redeemed out of the tax levy for the year next succeeding the year of their issue, provided that the amount of such honda whidi may be issued in any one year in excess of the hmitations herein contained shall not exceed one-tenth of one per centum of the assessed valuation of the real estate of said aty subject to taxation. 1884 Nor shall this section be construed to prevent the issue of bonds to provide for the supply of water; but the term of the bonds issued to provide the supply of water, 1909 in excess of the limitation of indebtedness fixed herein, shall not e3Coeed twenty years, and a sinking fund shall be created on the issuing of the said bonds for their redemption, by raising annually a sum which win produce an amount e^ual to the sum of the principal and interest oi said bonds at their maturily . 1899 All certificates of indebtedness or revenue bonds issued in anticipation of the collec- tion of taxes, which are not retired within five years after their date of issue, and bonds issued to provide for ^e supply of water, and any debt hereafter incurred by any portion or part of a city if there shall be any such debt, shall be included in ascertaining Hoe power of the city to become otherwise indebted; 1905 except that 1917 debts incurred by [the] any of [New York] the first doss 1906 after the first day of January, nineteen hundred and four, and debts in- curred by any city of the second class after the first day of Janu- ary, nineteen hundred and eight, 1909 and debts incurred by any city of the third class after the first of January nineteen hundred and ten, 1905 to provide for ibe supply of water shall not be included; 1909 and except further that an^ debt hereafter incurred by the city of New York for a public improvement owned or to be owned by tiie dty, which yields to tiie city current net revenue, after fnitldng any necessary allowance for repairs and maintenance for which the city is liable, in excess of the interest on said debt and of the annual installments necessary for its amortization may be excluded in ascertaining the power of said city to be- come otherwise indebted, provided that a sinking fund for its amortization shall have been established and maintained and that the indebtedness shall not be excluded during any period of time when the revenue aforesaid shall not be sufficient to equal the said interest and amortization installments, and ex- cept further that any indebtedness heretofore incurred by the city of New York for any rapid transit or dock investment may Financial Administration: Appendix O 341 be so excluded proportionately to the extent to which the cur- rent net revenue received by said city therefrom shall meet the interest and amortization installments thereof, provided that any increase in the debt incurring power of the city of New York which shall result from the exclusion of debts heretofore incurred shall be avilable only for the acquisition or construction of properties to be used for rapid transit or dock purposes. The Legislature shall prescribe the method by which and the terms and conditions under which the amount of any debt to be so eacduded shall be detennined, and no such debt shall be ex- chided except in accordance with the detennination so i»e- Bcribed. The Legislature may in its discretion confer appropri- ate jurisdiction on the Appellate Division of the Supreme Court in the first judicial department for the purpose of determining the amount of any debt to be so excluded. No indebtedness of a city valid at the time of its inception shall thereafter become in- valid by reason of the operation of any of the provisions ci this section. 1899 Whenever the boundaries of any city are the same as those of a county, or when any city shall include within its boundaries more than one county, the power of any county wholly included within such city to become indebted shall cease, but the debt of the county, heretofore existing, shall not, for the purposes of this section, be reckoned as a part of the city debt. 1884 Tax Limit. The amount hereafter to be raised by tax for county or city purposes, in any county containing a city of over one hundred thousand inhabitants, or any such city of this State, in addition to providing for the principal and interest of existing debt, shall not in the aggregate exceed in any one year two per centum of the assessed valuation of the real and per- sonal estate of such county or city, to be ascertained as prescribed in this sectioii in req)ect to county or dty debt. Financial Aouinistbation: Appbndiz P 343 8 CO Eh -t^'SO .. o2q ■ 1 N 00 CO IN CS CO CO CO oT o t>. Q 0» CO S8 cos cqS coo P-4 00 CO 00 CO C! a I 00 O 2*' w CO ft 00 00 eoco 00»H 3 o CO 8g 8 to ^CO coS cpio OOO ■> •r; U hi *«<-" eS s a « g ° M Pag, S3 o o M 0) S i: S 3 O ea r-, A O s ^ >>§ L •*» O O, QQ ft o OS 3 3«t i eS |! a ^ h Q o pq M CO CO i Q CO IP h It 3 •<-> e« ■•-> OB O s CO 00 s CO o eOOib; »^o6o> ^CP.H oooci "»oo> CO o CI S-s S a I .ti r* o • _->.f*< oca o ^ u a ' 1 3 «B QQ C3 O 5 1 i § s g S (B 5 -S a « ■S 3 S L, n 5 o g 5 o 3 g S CO o co a Off •a o •a S ll i| a Eh m Q o 3 3 a § a ct i o Q hi c»co eooT 00"^ o o < 8, d o OK _ _ Eh.o ^ ^ ~ as6B|| ^ fli as a! a! P 2 V K « PS % 1^ '-•OS lO 05 irj o mw fp 8 5^ 3 o HI' COS APPENDIX Q CoiiPAB^TEVS Tables of the Finances of the Ten Largest CrnES IN THE United States^ Cirr Amma (Acrw) Ann HUH lilt YALUAnOM Cafita New York .... 5,877,251 191,360.0 $12,944,481,493 $2202 Chicago 2,995,239 125,430.2 1,873,921,764 625 Philadelphia . . . . 1,979,364 81,920.0 3,967,810,352 2004 Detimt . . • . • 1,218,069 76,245.4 2,757,664,010 2263 Cki^ntaod .... 936,485 43,929.0 2,168,243,440 2315 St. Louis 814,909 39,040.0 1,194,633,020 1465 Baltimore • • • . 796,296 50,560.0 1,476,386,372 1854 Boston 781,622 27,634.8 1,862,799,900 2383 Los Angeles .... 900,000* 262,896.0 1,374,750,565 1545 Pittsburgh .... 031,563 30,035.2 1,014,116,820 1605 » From Financial StaUtUa qf Cities (U. S. Bureau of the Census, 1926). > Estimated. New York Chicago . Philadeli^ Detroit Cleveland St. Louis . Baltimore Boston Los Angeles Fittiburgh Nn Baonrai $438,991,198 202,830,098 107,000,220 107,362,534 65,514,302 39,262,138 37,240,947 68,114,642 103,971,340 42,367,132 Per Cakta $74.69 67.71 54.05 88.14 69.95 48.17 46.76 87.14 115.52 67.08 CoBT or $523,756,518 223,724,124 165,247,709 123,956,775 80,445,651 44,647,750 48,019,840 73,066,363 129,584,638 48^1,728 Pbb Carta $65.75 46.13 47.19 64.06 53.04 38.69 40.35 72.16 143.96 57.06 344 Financial Administration: Appendix Q 345 Oat Tazm Imwod Tax Ratk Pkb Capita Nn Uwmr Pkb CAncA New York . . $327,951,701 25.33 $55.80 $1,250,438,056 $212.76 Chicago . . . 167,981,958 89.72 56.08 176,597,810 58.96 Philadelphia 84,727,392 21.35 42.81 300,166,122 151.65 Detroit . . . 69,842,204 25.32 57.34 176,516,040 144.91 Cleveland . . 60,649,517 23.36 54.08 132,645,624 141.64 St. Louis 27,938,245 23.39 34.28 22,931,592 28.14 Baltimore 29,928,177 20.53 37.58 101,343,043 127.27 Boston . . . 49,736,757 26.70 63.63 94,033,129 120.31 Lob Angeles . . 53,549,928 38.95 59.49 159,162,949 176.84 Pittsburgh . . 36,722,409 34.47 58.15 87,688»291 138.68 Revenue Eeceipts Cirr Total Gnnnui. Pbopertt Tax % OF Total Special Tazbs % OF Total New York . $464,535,361 $305,605,029 65.7 $26,861,072 05.7 Chicago . 205,024,118 130,932,953 63.8 97,182 00.04 Philadelphia 110,167,284 76,563,248 69.4 62,512 1 00.05 Detroit . 108,118,958 58,283,628 53.9 902,295 00.8 Cleveland 66,823,335 45,042,495 67.4 285,951 00.4 St. Louis 39,606,691 25,666,998 64.8 BsUliiMire 38,368,333 26,681,309 69.5 652,956 01.7 48,259,855 / 6,965,676 \ 337,721 1 10.0 \ Boston . . 69,649,744 00.4 / Los Angeles 106,672,005 56,057,559 52.5 Pittsburgh . 42,720,154 33,759,168 79.0 249,769 1 00.5 Business AND NON- BusnraM LicBinn $14,393,135 8,047,413 1,554,961 1,281,274 1,383,783 2,766,943 1,350,924 480,672 3,937,870 561,406 » PoU Tax CiTT % OF Total Spbcial Aammntmtm % of Total Fines, Fobfeits AMD EaCHBATS % OF Total StIBVBNTIONS AND GbANTB AMD DOMATIOm New Yoik . 03.0 $13,940,324 03.0 $2,441,563 00.5 $28,323,652 Chicago . . 03.9 28,074,695 13.6 1,349,402 00.6 5,378,875 Philadelphia 01.4 1,020,887 00.9 141,977 00.1 3,150,912 Detroit . 01.1 8,399,906 07.7 659,274 00.6 4,494,308 Cleveland 02.0 5,325,269 07.9 625,587 00.9 490,058 St. Louis 06.9 2,860,302 07.2 160,868 00.4 988,456 Baltimore . 03.5 1,074,607 02.8 29,876 00.07 1,107,229 Boston . . 00.6 550,632 00.7 391,384 00.5 782,105 Los Angeies 03.6 17,907,084 16.7 1,328,979 01.2 3,732,809 Fittsbiuji^ . 01.3 776,395 01.8 351,475 00.8 1,160,017 346 New York City^s Finances and Cm % OF Total HXOHWAT Rents and Interest % OF Total Earnings OF Gbnksal Dbftb. % OF Total Eaxninos of Pttbuc Service Enterprises %m TOKAL New York . 06.0 $34,351,452 07.3 $5,431,998 01.1 $33,187,136 07.1 Chicago 02.6 13,044,991 06.3 7,168,474 03.4 10,930,133 05.3 Philadelphia 02.8 16,156,830 14.6 4,133,143 03.7 7,382,814 06.7 Detroit (H.1 1,350,295 01.2 3,895,851 03.5 28,852,127 26.6 Qevdand . 00.7 2,675,861 04.0 2,660,712 03.9 8,343,619 12.4 St. Louis 02.4 2,389,752 06.0 1,258,354 03.1 3,515,018 08.8 Baltimoie . 02.8 2,904,607 07.5 502,368 01.3 4,055,457 10.5 Boston . 01.1 5,213,967 07.4 2,423,254 03.4 4,244,478 06.0 Los Angeles 03.4 2,673,939 02.5 2,694,357 02.7 18,339,408 17.1 Pittsburgh . 02.7 1,837,243 04.3 1,098,013 02.5 2,917,668 06.8 Cm Total QSNBRAL PMTBOnOlf 10 Person Ain> Fbopsbtt New York $295,464,720 $30,506,488 $57,016,718 Chicago 120,289,622 12,401,779 23,555,175 Philadelphia 77,370,593 8,284,989 15,764,179 Detroit 48,375,999 3,813,397 11,125,678 Caevdand 37,143,189 3,412,217 6,004,150 St hom ...... 27,916,839 2,876,019 6,792,046 Baltimore 25,106,259 1,736,905 6,404,386 Boston 45,764,065 4,161,937 9,036,812 Los Angeles 47,256,777 4,364,186 9,023,611 Pittsburgh . . . . . 29,968,106 3,619,001 4,827,382 Conservation or HSAIAB Samitatiom CHABITtM, Hospitals and Corrections New York $5,117,815 $26,547,487 $22,623,173 $18,835,392 Chicago . 3,572,272 12,616,970 8,150,732 5,776,688 Philadelphia . 1,218,986 7,174,641 3,627,903 4,964,444 6,182,902 3,688,008 Detroit . . . 1,859,659 1,226,451 3,892,919 2,965,314 CleTdaiid . . 2,596,039 2,002,674 St. Louis . . . 739,664 1,565,287 2,618,161 2,650,414 Baltimore 574,045 2,257,851 3,120,198 1,600,654 Boeton . . 1,213,872 3,805,060 3,088,550 4,350,571 Los Angeles . 1,208,975 1,601,873 4,619,368 3,493,741 3,209,021 2,089,893 Pittsburgh 669,801 2,674,088 Financial Administration : Apfindix Q 347 Citt Educattok Rbcbbatioh MutCnXANSOUB IxmuwT New York . . $104,776,966 $6,340,679 $21,627,585 $76,781,588 Chicago . . 40,505,403 5,889,659 6,181,076 11,199,006 Philadelphia . . 22,357,448 2,940,674 7,726,596 13,130,038 Detroit 14,884,501 2,127,167 2,087,517 9,742,468 Qeveland . . 14,596,907 555,001 2,110,573 8,484,917 St. Louis . . . 8,603,909 1,269,484 435,182 1,288,744 Baltimore . . 7,282,113 1,010,049 835,636 5,405,920 Boston 13,813,945 2,453,964 3,002,285 7,997,186 Los Angeles . 20,292,640 851,657 725,320 6,483,105 Pittsbuiigh . . 10,170,377 628,696 1,229,052 4,273,616 APPENDIX R FUTDBB COUBSE OF ASSESSED VALITAtlOlfB To ascertain the character of the general trend of real estate yaluatioiis and to study the estimates in the Board of Transpor- TABLE I Ammm ViLim and Fdu. Value of Taxamm Rbal EafXAin, 188S-1028 1898 1899 1900 1901 1902 1903 1904 1905. • * • • X906« • • • • 1907 1908 1900* '* • • • 1910..... 1911....*. 1912 1913 1914 1915 1916..... 1917 1918 X9X0* • > • • 1920 1921 1922 1933..... 1924 1925 1926 1927 1928 Assessed Value of Taxable Real Estate 2,533.7 2,932.4 3,168.5 3,237.8 3,330.6 4,751.6 5,015.5 5,221.6 5,738.5 6,240.5 6,722.4 6,807.2 7,044.2 7,858.8 7,861.9 8,006.6 8,049.9 8,109.8 8^.8 8,254.5 8,339.6 8,428.3 8,626.2 9,973.0 10,250.0 10,596.1 11,148.8 11,901.3 12,997.6 14,539.8 15,845.5 Annual In- creases in Assessed Val- ues of Taxable Real Estate in 1«w 398.7 236.1 69.3 92.8 1^420.9 264.0 206.1 516.9 502.0 481.9 84.8 237.0 814.6 3.1 144.7 43.3 59.9 96.0 46.7 85.1 88.7 197.9 1,346.8 277.0 346.1 562.7 752.5 1,096.3 1,542.2 1,305.7 Assessed Value of Taxable Land in Valne of New Build- ing Exempt until 1932 in 3,740.1 • • • 4 4,082.6 • • • 4 4,325.1 • • • « 4,666.3 • • • a 3,915.6 • • • I 4,033.7 • • • f 4,642.2 « • • « 4,650.9 • • ■ < 4,683.5 • • • « 4,699.9 • • • • 4,745.0 • • « • 4,717.2 • ■ • « 4,670.2 • • • • 4,660.0 • • • • 4,665.3 • • • • 4,722.8 • • • • 5,044.0 • • • • 3,099.9 5,210.2 248. 5,443.0 482. 5,695.8 804. 6,213.3 896. 7,139.5 917. 7,748.3 2 916. Full Value of Taxable Real Estate in Millions 3,839 4,312 4,660 4,762 4,899 5,384 5,635 6,867 6,446 7,011 7,553 7,648 7,915 8,636 8,640 8,799 8,750 8,721 8,826 8,876 8,872 8,966 9,177 10,610 11,142 11,909 12,119 12,938 14,128 15,804 17,038 ^ Includes Real Estate of corporations and special franchises. * Rriiminary figure. Financial Administration: Appendix R 349 tation Report ^ m relationship to that trend, Diagrams I and II were prepared. The data on which they are baaed are presented m Table I. Diagram I shows the variations in assessed values of real estate and projects the line to show the course of the Board's estimates. DlAIBUlf I Course of Assessed Values of Real Estate Since Consolidation ^ 4^ flUMMC Ml 1 w BuiUiac* lUll E»U t* AsMM«d^ Values / 1 1 1 1 ■till 1 1 1 1 . . . , If It IT W a M .» "o O » 10 IMS 1 Equation to lines of best fit. Period 1898-1914, y - 5.55 + 0.38 «, origm 1906, y in units of 1 billion dollars. Period 1898-1928 (exclusive d 1914-1921). y « 2.18 + 0.35 Xf origin 1897, y in units of 1 billion dollars. lines of best fit are inserted to indicate the general tr^d.' It is obvious that in recent years assessments have been increasing at an unprecedented rate. The main cause is almost certainly the undersupply of buildings accumulated during the war years. The assessment increase has come chiefly in building rather than * Communication from the Board of Transportation to the Board of Estimate and Apportionment, July 12, 1927. * lines descrilmig the aYoage or nomial \aio%*saoit \xmA fitted by the method of least equaies. 350 New York City's Finances and in land values. In 1905 land values made up approximately three-fourths of the assessment rolL Today they are slii^tly less than one-half. The question is this: How rapidly is the curve approaching a point when the abnormal stimulus of the starved war years will DlAGBAM II OocBSB OP Full Values of Rial Ebtaxb Since Consolidation ^ FuUVilu e of Real Estate taeof Ri tl Estai 1 r 1 1 1 1 1 1.1..L 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 -J-l-l-L. till O o ltM19M 1905 1910 1915 1920 1925 1930 195S 1940 194S * Equation to line of best fit. Period 1898-1928, log y = 0.91213 + 0.01764 9 Qfigin 1913, y in units of 1 billion dollars. disappear, and the line representing the assessed values again resume a more normal course? It is true that for the last cdght years ^ (1921-1928) the avmge annual increment has been »This was a penod of abnormally high prices for building materials and high ousts f