By Joe Palumbo
Here’s a riddle. What metropolis employs one-sixth the size of the federal government and more employees than the population of Miami and has one out of every 11 adults living in NYC on its payroll? Why, it’s New York City. Comprised of full- and part-timers, NYC boasts up to 350,000 employees. Is that bad?
It’s not employee numbers that make it a money-losing proposition but the rules and infrastructure which maintain a status of near-financial insolvency. Nine out of every 10 full-time employees are unionized.
With such protection, the employment of much needed reform, correction and discipline are the equivalent of striking a match on a cake of soap. Billions of dollars continue being spent with services being cut. Amazing! One example is the city’s welfare department. Welfare rolls in NYC have shrunk 50 percent in the last 12 years, but the welfare department remains the same size. Why?
One begins to wonder how many other city departments are run as inefficiently. Let’s look at those wonderful NYC pensions. The city maintains an annual pension budget of $2 billion. What is shockingly dangerous is that it is rising at the rate of 20 percent annually. Can we continue with this kind of overhead? We know who the winners are, but who are the losers?
For beginners, it’s the private sector. Higher fees and taxes lead to higher private overhead, resulting in the loss of jobs and failing companies. Then there are the residents of Queens and the rest of the city who are asked to foot the bill to the tune of this recent monumental 18.5 percent real estate tax hike. How’s business regarding our present city government? It’s bad business.
Mayor Michael Bloomberg can gamble on a 2003 strong market supplying these needed funds; however, if the market has just two more down years (and it can happen), look for the very strong possibility of a bankrupt city.
Bloomberg needs to face and address the unions. Private sectors curb costs and become lean in tough times to keep afloat, and Bloomberg will have to do likewise or his ship will sink. If not, we the residents of Queens may just be looking at average real estate taxes of $5,000 and up within the next three to five years, a situation that could only be classified as the result of bad business.
Joe Palumbo is the fund manager for The Palco Group, Inc. and can be reached at palcogroup@aol.com or 1-718-461-8317.
