The Streets Were Paved with Gold - Ken Auletta [62]
A similar scene took place the following spring. Samuels again visited City Hall and on the basis of a detailed analysis forecast profits of $43 million for fiscal 1973. Attending a public hearing of the City Council’s Finance Committee, the OTB President backed this estimate by noting that OTB was new and “still in the growing stage.” Finance Chairman Mario Merola, with no support other than a lively imagination, responded: “I can’t see why we can’t go to $70 million next year.” This warm, intelligent man then smiled and added, “I’ve got that much confidence in your operation.” Over OTB’s public protest, the $70 million was incorporated into the budget. That year, OTB earned half that amount—$34.3 million. In both years, OTB’s original forecasts were high. Since a budget, like a weather forecast, is based on educated guesses, the law permits mistakes—as long as they are backed by reasonably detailed projections. Such projections were absent from the calculations of City Council and Board of Estimate leaders.
When city leaders forecast revenues on the basis of nonexistent evidence, how different are they from Anthony DeAngelis, the great salad oil swindler? You remember DeAngelis. In the early sixties, he claimed as collateral for his loans 161,111,881 pounds of soybean oil, which he said filled 100 tanks in Bayonne, New Jersey. Almost all the tanks were empty. But no one knew it because DeAngelis would sneak into the warehouse to steal blank receipts, forge signatures, and produce these as proof that there was oil in the tanks.
The city’s budget-balancing process worked somewhat the same way. Mayor Lindsay, for instance, began the 1973 fiscal year budget process by predicting in the winter of 1972 that the city would face a $1 billion budget gap. Then he disappeared to run for President. In April, Deputy Mayor Edward Hamilton speculated that “temporary fiscal mechanisms” would be needed to close the gap. The next day, they invented one, with Lindsay proposing that the city count as “revenue” $400 million in federal revenue-sharing and welfare-reform funds—though Congress had approved neither and there was no realistic prospect that it would. Lindsay said he was merely copying the same device used by the state to balance its budget.
In May, the Board of Estimate made its contribution, suggesting Lindsay increase general fund revenues by $50 million. Good. Then the Mayor found there would be $120 million in projected “welfare inefficiencies”—a sum he would soon increase to $162 million. By June 3, the $1 billion gap vanished. Deputy Mayor Hamilton announced that since the PBA had rejected a retroactive wage offer going back to 1971, $49 million could now be applied to close the gap. But, he was asked, wouldn’t the city eventually have to reach a retroactive pay settlement with patrolmen? In that case, he said, the city could borrow the money. “The effect,” he stated, “is to spread the cost over five years.” Council Majority Leader Cuite objected, holding that the “savings” should be used to allow the Council to avoid raising city real-estate taxes by $65 million. “An additional $16 million,” Council sources told Maurice Carroll of the Times, “would be ‘found’ perhaps simply by restating a revenue projection somewhere and worrying about raising the money at the end of the fiscal year.