Good afternoon. I am Maria Doulis, the Director of City Studies at the Citizens Budget Commission (CBC). CBC is a nonpartisan, nonprofit civic organization that serves as an independent fiscal watchdog on New York State and New York City governments. CBC recognizes that maintaining and improving New York City’s infrastructure is crucial to its continued competitiveness, and I thank you for the opportunity to testify today about the Ten-Year Capital Strategy for Fiscal Years 2016 to 2025.

The Strategy totals $83.8 billion—a $30 billion increase from the prior Ten-Year Strategy released in 2014. The Strategy funds new priorities that include the Mayor’s $8 billion affordable housing plan, energy efficiency investments that are part of OneNYC, a Neighborhood Revitalization Fund, accelerated repair and rehabilitation work on schools, roads, bridges, and parks, and a $2 billion increase for libraries, public transit, and the housing authority.

CBC has two overarching concerns about the Strategy:

1. There is insufficient information available to judge the investments; and
2. The investments will add to the City’s already high debt burden.

Insufficient Information

New Yorkers should be able to look at the capital strategy and understand how the investments will improve the infrastructure they rely upon every day. But, in four important ways the information in the Strategy is inadequate.

First, the Strategy is not directly linked to a needs assessment, and it is impossible to tell how much progress will be made toward achieving state of good repair. New Yorkers know their streets, bridges, parks, and schools need fixing – but how large is the need, and where is it greatest? There is no single, comprehensive source that describes all the city’s capital assets and their condition; agencies use different criteria and metrics, and many assets are not assessed at all. The Departments of Transportation (DOT) and Education (DOE) provide detailed annual assessments; other agencies should improve their reporting. The Strategy should incorporate information from those assessments and clearly spell out how much of state of good repair needs will be addressed by the proposed investments, and how quickly.

Second, details on $22 billion in new OneNYC investments are lacking. Some initiatives, such as alleviating flooding in Southeast Queens, are clearly linked to specific agency spending plans. But for many goals, the Strategy sets aside funds with uses to be decided later. Economic development spending will total $3.1 billion (including $2 billion for the Neighborhood Revitalization Fund) for projects which are not specified and for which no supporting cost-benefit analysis is available demonstrating the spending will be a worthy investment. Sustainability and resiliency measures will require $7 billion in new spending; $2 billion will be for building retrofits, but the remainder is described as “multiple sub initiatives” or “equipment purchases.” Specificity is necessary before dollars are appropriated.

Third, little performance information is available to assess spending. Even where spending plans are described in more detail, performance metrics and timelines with milestones are not provided. How many buildings will be retrofitted, at what per-building cost and at what pace? How many miles of sewer mains will be expanded or replaced for the $4.1 billion proposed? The DOT, which reports lane miles to be resurfaced and reconstructed, is the only agency to provide targeted performance measures. Without this information, it will be impossible to track performance and to hold agencies accountable for their management of capital projects.

Finally, operating costs (or savings) are rarely considered and incorporated in the operating budget. After assets are purchased, constructed, or rehabilitated, regular maintenance and routine repairs are funded from the operating budget; however, these costs are not identified publicly at any point in the capital planning or budgeting process. Failure to consider the full lifecycle cost of an asset can skew decision making and lead to underfunding maintenance in the operating budget. An example demonstrates how short-sighted this approach can be: the Department of Parks and Recreation spearheaded a citywide campaign to plant one million trees; however, the pruning budget was cut, leading to injuries and deaths from falling tree limbs that resulted in millions of dollars in claims awarded. The Council eventually added operating budget funds for tree pruning.

High Debt Burden

Unlike other state and local governments with large capital programs, the City borrows to pay for virtually all its capital projects. As a result, the City has more than $100 billion in debt outstanding, and will issue $30 billion more in the next four years to support this new capital plan.¹

Bond rating agencies typically judge debt affordability in relation to the adequacy of resources available to repay it. Under these metrics, the city’s debt burden is high. Debt outstanding in fiscal year 2016 is projected to be approximately 8 percent of the City’s real property values and 13 percent of its personal income – relative to affordability benchmarks of 5 percent and 6 percent, respectively.

Debt service has begun to crowd out other spending in the operating budget. It has grown 41 percent since fiscal year 2005 (despite aggressive refinancing in recent years) and is projected to grow another 40 percent by fiscal year 2019, totaling $7.7 billion annually. In contrast, all other city operating expenditures will grow 17 percent in the same time period.

Conclusion

Capital investment is critical to the City’s future. Investments should be undertaken based on clear analysis that demonstrates increased economic activity, improved operating efficiency, or enhanced service delivery. The Capital Strategy, the capital budget, and the other available documents do not provide a sense of whether this is the case. The Council should require improved reporting on the rationale for and performance goals of capital spending and should limit the capital budget to clearly defined projects with demonstrable benefits.

Thank you. I welcome any questions.