The Streets Were Paved with Gold - Ken Auletta [130]
Debt
New York’s debt and credit problems are also unique. No other city is shut out of the credit market (though my mid-1978 Cleveland—“the mistake on the lake”—was threatening to join). No other city has received federal loans. No other city has such a massive debt. And no other city was burdened with so much short-term debt—over $6 billion in the spring of 1975, about 30 percent of all the short-term municipal paper sold in the country that year, up from $1.3 billion in 1970. In the spring of 1975, the city’s total debt was $12.3 billion, up from $6.5 billion in 1970. This doubling of the debt contrasts with, say, the 1 percent growth in the city’s debt between 1842 and 1845, when the debt reached $12.7 million. And if you count the unfunded pension liability and public authority debt, the city’s true debt in 1975 was over $20 billion. In 1970, the city’s annual debt service payments were $676 million. Six years later, they nearly quadrupled to $2.3 billion.
Comparing cities in 1974, Thomas Muller discovered that New York’s interest payments on its long-term debt were four times greater than that of the average municipality—averaging $66 per resident, compared to $15 for all municipalities and $21 for declining cities. When contrasting total debt per person, Muller found declining cities averaged $351—59 percent more than the norm for growing cities. But New York stood alone, averaging $1,031. A federal Bureau of the Census report for 1976 suggests just how unique New York City’s debt portfolio is. New York, with twice Chicago’s population, had a total debt almost twelve times that of the Windy City. The Census shows that New York’s $12.8 billion debt (it is now considerably higher) came to $2,080.60 for every city resident. The next city was Atlanta, averaging $1,326.23—57 percent below New York. Boston was $887.13; Los Angeles, $869.06; Philadelphia, $806.93; Baltimore, $657.91; Newark, $503.84; Chicago, $449.50; New Orleans, $444.71. Peoria, Richard Nixon’s symbol of heartland America, averaged $69.02 per person.
New York’s uniqueness was the reason a Treasury official was at first despondent, in early 1978, about chances of winning Congressional support for city loan guarantees. “The real problem,” he said, “is that New York is the only city that needs it. Cities like Buffalo, Newark, Detroit, Pittsburgh, Youngstown and St. Louis are able to go to the market and borrow. They have truly balanced their budgets. Those cities are selling tax-free bonds at 2 percent less than if they were taxable Treasury notes.” Perhaps New York’s prospects would have then appeared brighter if it called itself the Republic of South Korea or some other pro-Western military dictatorship seeking a loan guarantee. Or Lockheed. But they would have initially appeared brighter if the city had, since 1975, truly balanced its budget. MAC Chairman Felix Rohatyn, Governor Carey and other prophets of doom who warn of the collapse of the bond market and of capitalism itself if New York goes broke, conveniently ignore some facts. Despite their scare rhetoric and New York’s market collapse, in 1977 the municipal bond market experienced its greatest surge in history—up $44 billion in sales, or 30 percent from the year before. And unlike most cities and states, New York’s debt as a percentage of revenues has risen since 1975.
Politics
The nation’s largest “Dial-A-Ride” mass transportation system was inaugurated in San Jose, California, in 1974. For 25¢ a ride—10¢ for senior citizens and minors—each of the county’s 1.2 million residents could telephone and receive door-to-door chauffeured service within a 200-square-mile radius. Not surprisingly, Dial-A-Ride was successful. Too successful. Six months after the inaugural, reported Robert Lindsey in The New York Times, the “county supervisors voted to kill the unusual