Testimony of Richard T. Anderson
President, New York Building Congress at the New York City Council Executive Budget Hearings

May 17, 2000

Members of the New York Building Congress, who are leaders of the City's design, construction and real estate industry, are seriously concerned with many aspects of the ten-year Capital Strategy, four-year Capital Program and annual Capital Budget released earlier this year. Despite our current booming economy, capital spending faces more serious issues now than at anypoint in recent history. The City Council has a critical responsibility to examine the overall capital planning process in detail, and the Building Congress is prepared to assist your efforts in every way possible.

Without doubt, the $7.8 billion capital budget for fiscal year 2001 is encouraging in its increased scale and seems to be a serious attempt to address New York's massive infrastructure needs. The expected committment plan, however, is $5.4 billion, and actual spending will be under $5 billion. New Yorkers cannot not take comfort in this level of spending, especially when the overall planning approach is seriously flawed, financing is uncertain, and there is no acknowledgement or support for the City's long-term infrastructure needs.

In real dollars, the City's capital spending is actually being reduced - - especially beyond the coming year. The four-year Capital Program amounts to $23.5 billion, and the Ten-Year Capital Strategy is only $48.1 billion. As Comptroller Alan Hevesi pointed out in his recent infrastructure report, the City's capital needs far exceed these amounts, just to keep facilities in a state of good repair. Furthermore, the City's expanding economy requires that we invest now for future growth, and little in current capital planning addresses that urgent need.

The urgency of the moment is financing the City's capital program. In recent years, the reality of the City's debt limit has required the creation of the Transitional Finance Authority and use of a portion of the revenues from the tobacco settlement as a revenue stream to secure additional bonding. But these measures are not enough. The Building Congress supports the City's proposals to the State Legislature to increase the debt capacity of the Transitional Finance Authority and amend the State Constitution to modify the way the debt limit is calculated. It will be more effective to calculate the City's debt capacity through broader measures of wealth.

Most importantly, New York City should not constrain its capital program unnecessarily due to financing challenges. New funding must be considered for capital projects, particularly dedicated taxes and user fees, such as those used by the New York City Municipal Water Finance Authority, or through value-capture techniques. What especially concerns the Building Congress is that financing strategies are not being considered in a comprehensive fashion. We urge the City Council to take the lead in changing the way capital planning and programming is approached by the City.

To embark on such a new approach, the Building Congress has three recommendations to improve the current three-tier planning process:

1. Develop a regular and comprehensive capital needs assessment. New York urgently needs a continuous and objective assessment of its overall capital needs - building on Comptroller Hevesi's report - - to make the ten-year report a true capital strategy. We must move beyond a simple extrapolation of agency capital requests by setting goals and objectives, determining priorities, and establishing the results New York wants to achieve. The City Council should have a committee directly responsible for capital planning, and should convene a commission of public and private leaders to initiate an overall capital needs assessment.
2. Secure capital financing - The current City debt-limit crisis should convince us that a fresh look is needed at all aspects of infrastructure funding in New York City. Innovative financing approaches are being implemented all around the country, especially through privatization, and we need a review of these strategies. The City also should have a comprehensive capital overview, one that includes all construction authorities and agencies, since about half of all capital spending in New York is done by non-City organizations. The Building Congress has long called for a "Consolidated Capital Improvements Report," composed of all capital spending in the City. This should be prepared annually for the Mayor and City Council.
3. Build public support - The understanding and support of New Yorkers for capital programs seems to be at an all-time low, despite the importance of our infrastructure to every aspect of New York's economy and quality of life. With the institution of term limits for our elected officials, short-term pressures are prevailing more than ever before. Responsibility for infrastructure is shared by City, State and Federal agencies. Simply put, no one is in charge or planning for the long-term, and the results speak for themselves. We urge the City Council to take the lead in developing greater public understanding of infrastructure's importance and helping to build public support for improvements. New York needs a pro-active strategy more than ever, not simply an annual program that deals only marginally with the City's changing needs.

What alarms the Building Congress membership most is New York's inability to "build for growth" at a time when economic expansion must be supported by capital investment. This City simply cannot afford to continue its current approach to capital improvements, making only limited adjustments each year and attempting to patch together financing in the face of myriad obstacles. If this practice continues, soon New York will be increasingly less able to attract businesses and developers that create jobs and opportunities, and make improvements to the quality of life for all who live or work here.

We implore the City Council to take the lead in balancing today's needs with those of the future. Much of our success in recent years rests on the investments of our predecessors. Future generations are depending on us to build for the decades to come.