NEW YORK (AP) -- The Wall Street meltdown and its fallout have caused city budget analysts to predict for the first time that revenue from business taxes will decline for three years in a row in New York City.In a report released Thursday, the Independent Budget Office blamed the grim forecast on the demise of New York City's major investment banks. Last year, the city had five, and now there are none -- forced out of business, sold off or converted to commercial banks.
The IBO predicted that business tax receipts, after dipping 9.6 percent in 2008, will plunge from $5.4 billion in 2008 to $4.1 billion in 2009, a record drop of more than 23 percent. The report forecasts a further slide to $2.7 billion in 2010.
"Never before have business tax receipts fallen for three consecutive years, nor has the loss of revenue been as large as the one now forecast: a cumulative drop of $2.3 billion, or 38 percent," the report said.
The alarming predictions were part of a larger report on the city's economy. The IBO is a public agency but provides policy and fiscal analysis independently of Mayor Michael Bloomberg's office.
The report contained even more sober predictions than Bloomberg delivered in his November budget update, when he announced budget cuts, job eliminations and tax hikes to help bridge growing gaps.
While Bloomberg has warned that overall tax revenues are on a downward slope, the IBO projects more dramatic drops than the mayor did in November.
The report forecasts that revenues will drop by 7.5 percent, to $34.7 billion, this fiscal year, and another 1.1 percent, to $34.3 billion, in fiscal 2010.
The IBO noted that a prediction of two consecutive years of declining tax revenues marks a "stunning turnaround" from recent years. Following the last economic downturn, revenues grew by nearly 74 percent from 2002 through 2007.
The report also projects that the budget gap for next fiscal year, which begins in July, has ballooned to $4.3 billion. In November, Bloomberg's prediction was $1.3 billion.
A Bloomberg spokesman, Marc LaVorgna, noted that the mayor has been warning about the worsening economic picture since the city's November update, and "will have a complete accounting of the city's budget" when he presents an updated plan in late January.
Last month, after already proposing unpopular cuts and tax hikes, Bloomberg ordered all city agencies to come up with plans to slash spending by another 7 percent next fiscal year. The results of those proposals are expected to be included in Bloomberg's next budget presentation.
He has hinted that more tax hikes might be necessary.
Even as the city tries to solve its own problems, some New York officials are hoping the federal government can help bail them out as Congress works on an economic stimulus package.
Sen. Charles Schumer announced Thursday he would push to get a provision in the package that would let cities and localities share in the state Medicaid relief expected in the stimulus package.
New York is one of 17 states where local governments, and not just the state, are required to share the cost of Medicaid services. Schumer says New York City would stand to get $1.1 billion in direct aid under this provision.
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