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By Root 1037 0

Reserve Fund. The City Council dutifully rubber-stamped this gimmick, as did the state legislature. But Comptroller Abe Beame was unhappy. The man who years later would tell the SEC that he never got involved in revenue projections, called on Mayor Wagner to employ other tricks. The Mayor now had the power, he said, to unilaterally increase his revenue estimates. Beame’s proposal called for the creation of $13.75 million by inflating revenue estimates and changing the payment dates on state aid from one fiscal year to the next. Wagner, saying little, skillfully allowed the idea to germinate. “A way must be found to replace a $40 million loss from the out-of-city sales tax,” he solemnized on May 7, still offering no answer. Eight days later, he invented one. Foreseeing a “brighter economic outlook,” he announced that the city was increasing its revenue estimates by $26.3 million.

Alarmed, the Citizens Budget Commission and the state Chamber of Commerce accused the Mayor, in October 1963, of using the new charter as “an iron curtain to conceal manipulation of the budget.” Comptroller Beame joined in the condemnation, charging that Wagner overestimated general fund revenues by $38.4 million. Beame’s solution? The city would have to borrow $69.3 million from the Stabilization Reserve Fund, a kind of rainy day resource. Wagner was silent for a time, finally conceding later in the year that general fund revenues were overstated by $68.4 million.

“The significance of the charter change,” says Herb Ranchburg, Research Director of the Citizens Budget Commission, “was that when you had a mayor operating with a Budget Bureau which was creative, the sky was the limit. There were no checks. You had creative budget officials playing the fifth violin, the piccolo and the kettle drum all by themselves.”

Expense Dollars in the Capital Budget

A repair truck carrying asphalt lumbered south along the elevated West Side Highway on December 15, 1973, its frame groaning as it bounced over the bumpy, battered pavement. Suddenly, the highway roadbed—which the city government had banned to trucks and said it had no money to repair—collapsed. Not a chunk at a time, not by sagging. As if a trap door had opened, the truck plunged through the gaping hole and crashed onto the street below, injuring fifteen persons.

That hole is a symbol of many critical capital budget decisions tracing back to April 3, 1964, when Governor Rockefeller signed into law an amendment to the New York State Local Finance Law, Chapter 284, Section 11. The amendment permitted city officials to hide expense items in the capital budget. This was significant because, unlike the expense budget, which is financed through tax revenues, capital budgets are financed through the sale of bonds. A capital budget is used to repair and build facilities whose probable usefulness exceeds one year. Thus the benefit—and the costs—will be shared by future taxpayers.

There had always been a barrier between the capital and expense budgets, but in 1964 Mayor Wagner had difficulty balancing his expense budget. His friend, Nelson Rockefeller, wanted to be helpful without supplying more state aid. Solution? It was proposed that the Mayor charge the costs of administering a special census against the capital budget. The Governor’s Budget Bureau objected, warning in a memo to the Governor: “It would not seem that a nontangible service such as this should be classified … as a capital expenditure.” Rockefeller ignored the advice, and Mayor Wagner sneaked $26 million into his capital budget.

This broke the barrier. In 1967, for example, Governor Rockefeller approved a bill (Chapter 634 of the Laws of 1967) permitting “the costs of codification of laws and the fees paid to experts [lawyers], consultants, advertising and costs of printing and dissemination” to be called capital expenses because they had a “three year period of possible usefulness.” Expense money in the capital budget went from $26 million to $84 million in 1968. The following year, when Mayor Lindsay was seeking reelection, it almost