Popular Science Monthly/Volume 57/May 1900/The Most Expensive City in the World

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THE annual expenses of the city of New York are larger than those of any other municipality in the world, and the financial transactions of a year represent the receipt and expenditure of more than $200,000,000, counting temporary loans, sinking funds, and bond issues. The gross budget of the city for 1899 was $20,000,000 greater than the expenses of the city of London, $18,000,000 in excess of the budget of Paris, and only $1,000,000 less than the combined expenditures of Boston, Chicago, and Philadelphia.

The expenses of New York last year for local purposes, exclusive of bond issues, amounted to $19.56 per capita of an estimated population of 3,500,000. The combined annual expenditures of the six largest States in the Union are less than those of the city of New York, and the financial transactions of the latter are equal in amount to one seventh of those of the national Government.

The credit of the city, it may be stated at the outset, is second only to that of the Federal Government, and the property owned by the municipality, if sold at market value, would pay the entire funded debt several times over.

The consolidation of ninety municipalities with the former city of New York was the culmination of a sentiment so fixed upon an ideal that there had been little careful reckoning of the cost. The municipality, by taking in the extra territory and population, doubled its debt, added less than one fourth to its tangible assets, and increased the cost of local government $15,000,000 a year. This added cost is the price paid by the taxpayers for a sentiment and for haste and carelessness in the work of completing consolidation. The cost of government for the enlarged city was in 1899 approximately $15,000,000 more than the combined expenditures of the various municipalities for the last year of their separate existence. This increase was excessive and altogether unnecessary to the maintenance of thorough and progressive government.

The present charter of the city is supposed to provide a large measure of home rule, yet the salary of almost every officer and employee, from the mayor to the doormen of the police stations, is fixed by act of the State Legislature. The former cities of New York and Brooklyn had been so long regulated and governed from Albany that the commissioners who drafted the charter evidently overlooked the fact that a municipality might be trusted to regulate the pay of its own employees. To-day the pay of the school-teachers, policemen, firemen, heads of departments, and chiefs of bureaus is fixed at Albany, where the representatives of the city are in the minority. When the charter was prepared the commissioners agreed that taxation and salaries must be equalized. The members differed in their views on many questions, but they evidently agreed that the way to equalize salaries was to increase the lowest to equal the highest.

In extending the benefits of a great corporate government to the many suburban communities included in the consolidation a uniformed policeman, or five or ten of them, at fourteen hundred dollars a year took the place of a town marshal or constable at three hundred dollars a year, and high-priced trained firemen were substituted for unpaid volunteers. This method of equalizing salaries was extended to every section of the city and to every branch of the government. No attempt, apparently, was made to devise some system that would adjust salaries in various localities to local conditions and cost of living. The sentiment in favor of a great city was not disposed to quibble when the cost of maintaining the visible form of municipal government was increased fivefold in much of the outlying territory.

Aside from the extension of high-priced municipal service throughout the great area of the consolidated city, many useless offices were created and many salaries fixed at excessive figures. Authority was too much divided. The borough system is expensive, and so far useless. The entire charter is a series of compromises, and every compromise on a salary was at the maximum rate.

This method of arranging the expenses of the greater city increased the cost of government beyond the highest estimates of those who had advocated consolidation. The initial cost was further increased by reason of the fact that no precautions were taken to prevent the various municipalities to be united from increasing their bonded and contract indebtedness during the last year of their separate existence. The result of that oversight was that every municipality, the former city of New York included, issued bonds and entered upon contracts with somewhat reckless disregard of the future. In this way a heavy burden of unnecessary expense was added to the legitimate account charged against the consolidated city.

Greater New York began business in a condition of apparent bankruptcy, because the debts exceeded the constitutional limitation of ten per cent of the assessed value of taxable real estate. To overcome this and to meet the extra expense of government by the new system it was necessary to greatly increase the tax rate.

The financial condition of New York on January 1, 1900, was satisfactory except in the matter of current expenses. The gross accepted funded debt on that date was $358,104,307.11, against which there was a sinking fund of $105,435,871.70, leaving a net funded debt of $252,668,435.41. Considered in connection with the wealth of the city, this debt is not excessive. The city of Paris, with smaller available resources, has a debt in excess of $500,000,000. The gross expenditures of the city during 1899, exclusive of permanent improvements, paid for from the proceeds of bonds, were $93,520,082.03, and in 1900 the expenses will be some $3,000,000 less.

The total receipts of the city for the same period, from all sources and for all purposes, were approximately $108,000,000. The income was derived from three general sources, taxation yielding $84,000,000. The budget, which represents the money to be raised by taxation, was reduced $9,000,000 by income known as the general fund. The chief items of this were: Excise taxes, $3,000,000; school money from the State, $1,280,883.45; fees of various county and city offices, $246,576.65; interest on taxes and assessments, $979,185.35; and unexpended appropriations, $1,356,786.57.

Aside from the revenues classed as the general fund, New York has no income from any source that can be applied to current expenses for the reduction of taxation. The immensely valuable franchises heretofore granted to private corporations yield a revenue to the city that is insignificant, the total collected rarely exceeding $300,000 a year.

The gradual reduction of the city debt, except as it is maintained or increased by additional bond issues, is amply provided for by a steadily increasing and protected sinking fund. The total receipts of this fund in 1899 were $15,601,492.50. The Croton water rents, amounting last year to $4,590,502.55, are applied to this fund, as well as the dock and slip rents of $2,362,421.14. Some of the other chief items of this fund are: Revenue from investments, $3,573,519.34; ferry rents, $370,776; market rents, $251,500; interest on deposits, $520,526; installments included in the budget, $2,633,110.

More than $1,000,000 is derived annually from miscellaneous sources, including the sale of various odds and ends of property. The total interest charges on bonds in 1899 amounted to $11,275,822, leaving more than $4,000,000 of the sinking-fund income applicable to reduction of the funded debt.

Two features of the financial system of New York that increase expenditures can and should be changed. Taxes are now collected in the last quarter of the year upon an assessment made twelve months before. This compels the city to borrow large sums of money to meet current expenses. In 1899 the city borrowed, in anticipation of taxes, the sum of $48,027,450, on which the interest amounted to $755,704. If the taxes were collected during the first quarter of the year, the city would not only save this three quarters of a million dollars interest on temporary loans, but for six or seven months would have large cash balances in depository banks earning two per cent. This change would be worth approximately $1,500,000 a year to the treasury, but it must be made by degrees in order that taxes shall not be collected twice in a twelve-month.

Under the present constitutional restriction upon the borrowing capacity of the city, New York is placed in the contradictory position of getting richer and poorer at the same time and by the same process. The restriction of the debt limit to ten per cent of the taxable real estate is arbitrary, and makes no distinction of obligations. Every time the city acquires additional real estate for parks, docks, schoolhouses, or any other purpose its borrowing capacity and income from taxation are reduced, because the property acquired no longer yields a tax and it is not counted in the valuation upon which the debt limit is fixed. This is the most illogical and unbusinesslike feature of the present financial system.

The piers owned by the city are profitable investments, yielding a revenue in excess of interest and sinking fund for the bonds issued; yet if we should acquire $100,000,000 of additional water front now owned by private parties the borrowing capacity of the municipality would be reduced $10,000,000, and the income would suffer the amount of taxes on the land acquired. There should be adopted a constitutional amendment that would separate debts incurred for revenue-yielding investments, such as docks and waterworks, from those created for general public improvements. The former should not be a charge against the borrowing capacity of the city.

The budget of the city for 1900 is $90,778,972.48, which will be reduced $9,000,000 by the general fund, leaving some $82,000,000 to be raised by taxation. The magnitude of this outlay for current expenses may be better understood by comparison with the expenditures of other large cities. The approximate current expenses of London last year were $73,000,000; of Paris, $75,000,000; of Berlin, $23,347,600; of Boston, $35,454,588; of Chicago, $32,034,008; of Philadelphia, $27,075,014.

In 1899 the State tax paid by the city of New York amounted to $6,275,659, or nearly seventy per cent of the whole; interest on bonds absorbed $11,275,822, leaving $75,813,644 as the actual cost of the current expenses of local government. The gross budget represented a per-capita tax of $24.62 on 3,500,000 inhabitants, of which $19.56 was for local expenses. Of this enormous expenditure more than $35,000,000 is paid out in salaries and wages to 37,000 officers and employees. The Police Department cost $12,000,000 a year, of which $10,700,000 is for salaries. New York has 6,400 policemen. Philadelphia has 2,600, and the annual cost of the department in that city is $3,100,000 a year—much lower in proportion than that of the metropolis.

The salaries and wages paid to all regular department employees, including policemen, firemen, street cleaners, and dock builders, are higher than those paid in any other city in the world, and almost without exception the rate has been fixed by act of the State Legislature, and not by the local authorities. In the matter of fixing the pay of officers and employees the city of New York has never known any degree of home rule.

The magnitude of the city in wealth and population has always operated against economy in local government. There has existed, apparently, an overwhelming popular sentiment in the city, as well as throughout the State, that such a great municipality should pay the maximum price for everything it might require. If this sentiment had been satisfied by the payment of high salaries and wages it might have been excusable from some points of view; but it was not, and the demand for more money from the public treasury has extended to every class of expenditure.

The city of New York is a purchaser in the open market of supplies exceeding in value $5,000,000 a year. This figure applies only to articles purchased without competitive bidding. There is in the charter a provision that all purchases of supplies and labor in excess of $1,000 shall be made by open competitive bidding. This leaves a wide field for fraud and favoritism, and it is an easy matter to evade the spirit and letter of the law relating to competition. If a department requires material and supplies amounting to $10,000, or even $50,000, it is often possible to make the purchases in lots of less than $1,000 from day to day, and thereby obey the letter of the law while permitting the grossest frauds against the city treasury.

Under the system that has grown up, protected by this imperfect legal restriction and opinions and decisions to the effect that the city has no defense against excessive claims unless fraud and conspiracy can be proved, robbery of the public treasury has not only been legalized, it has been made respectable. The comptroller, who is by law the auditor of accounts, may be able to show that the city has been charged double or treble the market rate for supplies purchased, yet under the legal opinions and decisions that have prevailed for two years he is not permitted to interpose any defense to an action to recover unless he can prove that there was a conspiracy or agreement to defraud. In the very nature of things it is next to impossible to secure legal evidence of such agreements; therefore the city has been robbed with impunity. The methods of the Tweed ring have long been out of date in the city of New York, and fraud upon the public treasury has become a respectable calling.

It is not easy—in fact, not possible—to determine accurately how much the expenses of the city have been increased in recent years by the lax interpretation of an imperfect law and the tolerance of a public sentiment that demands proof of crime on a large scale before becoming aroused to a condition of effective action. It is safe to say, however, that a perfect system of buying in the open market at the lowest prices obtainable, if honestly enforced, would save to the taxpayers more than $1,000,000 a year.

Honest and intelligent administration in every department of the city government would reduce expenditures, but the extent of the reduction that might be made would depend largely upon the proper amendment of certain laws, and to an even greater extent upon the development of a thoroughly informed public sentiment that would sustain retrenchment and economy. The expenses of the city are far greater than they should be, but it is going to be a difficult matter to make even an appreciable beginning in economy so long as the State Legislature is permitted to exercise practically unlimited power to regulate the financial affairs of the municipality. Persons and corporations, be they honest or corrupt, when they seek to obtain money from the city treasury for any purpose, are going to proceed along the line of least resistance, and the smooth and open way has long been the Legislature at Albany. Every session of that body adds something to the expenses of the city, and it is a short and dull one that does not add many thousands of dollars to the burden of the New York taxpayers.

The revenues of the municipality are so small in comparison with what they should be that it is a difficult matter to find any excuse for the theory of government that existed in the days when perpetual franchises were given away. It is small consolation that the policy of municipal ownership is at last to prevail after so much of the public property has passed into the possession of private corporations. If all the outstanding franchises that were the property of the people had been sold on short terms for percentages even as large as have been fixed in recent cases, the city to-day would drive from that source an annual revenue of more than $5,000,000, instead of the paltry $300,000 now collected.

The mistakes of the past, however, are beyond undoing, and the taxpayers must look to the future for relief from the burdens they bear. They are paying now $15,000,000 a year for the sentiment that demanded a city great in all save honesty and political wisdom. Consolidation in fact as well as sentiment must result to prove the material advantage of the arrangement. Public opinion and politicians must realize sooner or later that income and expenses are to be adjusted the one to the other upon sound and enduring principles of business, honesty, and intelligence. There must be a union of public and political interests. Every section of the great city must be brought into close touch with every other section by cheap and rapid transit.

The possibilities of the future are greater than the dreams of to-day, but new policies and new methods must and will prevail. The development of Greater New York must not be hampered by a financial system antiquated and imperfect. The city should have power to develop its material resources into revenue-yielding improvements, and then, with honest and intelligent government, the burden of taxation will be reduced to a minimum, and the ideal of the grandest municipality in the world will have been achieved.