The Streets Were Paved with Gold - Ken Auletta [37]
Reasonable people can debate what is and is not a capital expense. Obviously, some expenses—textbooks, for instance—have a longer-than-one-year life. But if the textbook or salary has a life of only one year, then each year you are borrowing—and paying interest. Costs multiply. The public paid in several ways. First, it cost more; taxpayers were required to pay interest for expenses normally paid from current revenues. Second, as interest costs mounted, fewer dollars were available to provide city services. Third, this trick—like others—contributed to a relaxation of budget discipline; city officials were given a cushion under which they could hide expenditures. Fourth, it robbed the capital budget of funds for needed capital improvements.
The shrinking capital budget drew public notice in the cold winter of 1978. During the first heavy snowfall, one of every three aged sanitation trucks was out of commission; half the 450 street sweepers were also out, as were half the snow blowers. More than 1 million axle-breaking potholes made city streets look like the surface of the moon; fifty-year-old streets that are supposed to be repaved every twenty-five years were scheduled to be repaved every 200 years. Many of the city’s 51 water-spanning bridges were literally crumbling, warned a Twentieth Century Fund study prepared by former Budget Director David Grossman. There was concern that the city’s water supply system, dependent on just two water tunnels, could be endangered. “We really don’t know how serious the problems really are,” Water Resources Commissioner Charles Samowitz told Arthur Browne of the Daily News in February 1978. “What we should really do is drag [clean] the entire system. Then we’d know how well the system actually works. We haven’t dragged the entire system in a decade. It might cost $1 million. We don’t have the money now, but it could be worth 20 to 40 times that amount.” During the past three years, a 1978 City Planning Commission report lamented, the city spent an average of “only $200 million a year on legitimate capital projects.”
And, finally, the public paid when investors became alarmed at the glut of city paper crowding the securities market. One day, investor confidence would collapse—just as the West Side Highway had done.
Mushrooming Short-Term Debt
Mayor Wagner had planned to present his final budget message before the full Board of Estimate and live television cameras in May 1965. Then word leaked out that he had schemed to close a $255.8 million budget gap by issuing short-term notes, payable within one year. All hell broke loose. Newspaper editorials screeched about “fiscal irresponsibility.” Comptroller Beame, normally a close Wagner ally, blasted the plan. “This borrowing proposal,” he warned, “is akin to a family man who lacks the will to earn a living, but prefers first to clean out his bank account to pay for his regular living expenses and then to continue to avoid working by borrowing to live in the same manner. Finally, he faces the day of reckoning. This will be the city’s blight under the proposal to borrow for current expenses.”
Wagner scratched the live-TV plans. Instead, on May 13, 1965, the same day John Lindsay announced his candidacy for mayor, he trotted out Deputy Mayor Edward F. Cavanagh, Jr., who meekly recited a six-minute message for the benefit of two Board of Estimate members. Wagner still proposed to close the gap by issuing short-term notes. It amounted, he said, to “borrow now, repay later.” The Mayor’s message echoed the boundless optimism and rhetoric of the day: “I intend that we shall press ahead with the war on crime, the war on poverty, the war on narcotics addiction, the war on slums, the war on disease and the war on civil ugliness.”
Such