New York City finances Premium

“Ladies and gentlemen, the Bronx is burning,” said the baseball announcer to a shocked national audience 31 years ago as flames ripped though the desolate South Bronx near New York’s Yankee Stadium. 1977 marked the low point for a city that had narrowly avoided bankruptcy two years earlier and had lost a million residents since 1969.

To the legions of financial professionals who work, live and play in the Big Apple, scenes of dangerous, graffiti-covered subways and burned-out tenements from the 1970s seem like ancient history. But with Wall Street’s money-machine sputtering, it is time to ask how much of this metamorphosis may reverse.

The prowess of mayors like Ed Koch, Rudy Giuliani and the incumbent Michael Bloomberg no doubt deserves some recognition. The main reason for New York’s renaissance though was the financial boom and the accompanying real estate frenzy. Property and real estate taxes make up 37 per cent of New York’s $59bn budget and have nearly doubled since 1996. Costs for services have mushroomed too, including some, like city schools, hardly used by Wall Street’s masters of the universe.

To his credit, former Wall Streeter Bloomberg anticipated the bonanza might end before the latest headlines. He has pruned billions in planned spending and asked aides to study more cuts this week while proposing higher property taxes. But the balance of tax hikes and cuts to services must be delicate.

New York desperately needs to remain safe and clean enough to retain the free-spending professionals that make Manhattan a world financial and cultural capital. Whatever those in the dowdier outer boroughs may think, these are the city’s dream residents. Each hotshot banker’s spending supports multiple jobs in the service sector while placing little strain on social services. During the lean years that lie ahead, New York must tighten its belt while avoiding a repeat of the abysmal 1970s when its wealthiest residents voted with their feet.

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