NEW YORK (AP) -- New York City's finances look pretty good for now, but Superstorm Sandy and other factors leave big uncertainties heading into next year, a watchdog agency said Thursday.
The Independent Budget Office sketched a picture of an economy poised to improve — at least by some measures — but predicted change in the nation's largest city, with Wall Street playing a smaller role in driving growth. Meanwhile, the agency portrayed a city government that has reined in multibillion-dollar deficits in the years since the financial crisis but hasn't taken some potentially expensive question marks into account.
While a deficit forecast for the next fiscal year is manageable and modest compared with gaps in recent years, City Hall's financial plan "sidesteps some crucial issues that could substantially alter the fiscal outlook for the city and present significant budget challenges," the agency said in a report.
Mayor Michael Bloomberg's office saw the report as confirmation that its "responsible budgeting has helped New York City recover from the economic downturn and spur record job creation." But former city Comptroller William Thompson — who's considered likely to run for mayor next year — said the report showed a bewildering "lack of planning and preparation."
The IBO projects the city will face an $811 million deficit in the next fiscal year, which starts July 1. That's less than 2 percent of the overall budget, considerably smaller than gaps in other recent years, and far smaller than $2.5 billion shortfall the mayor's office projects for next year. City agencies have been told to plan spending cuts to cover much of it. Proposals range from eliminating about 1,300 jobs, mainly through attrition, to ending vision screening in kindergartens.
But the budget-balancing plans could be rocked by the as-yet-unclear costs of recovering from Sandy and potential agreements with teachers and other employees now working without contracts, the IBO noted.
The Bloomberg administration estimates city agencies spent $4.5 billion responding to the Oct. 29 storm and has asked for federal aid. The Senate has been debating a $60.4 billion aid package for governments, residents and businesses affected by the storm in several states.
But "the possibility that the city will indeed have to shoulder some of the cleanup and recovery costs — as well as expenditures to mitigate devastation from future storms — remains very real," the IBO wrote.
As for the workers without contracts, the city has made some provisions for raises this year and next, but there's little set aside to cover retroactive raises — a potential budget hole if an eventual deal includes such raises, the IBO said.
Moreover, the city is counting on bringing in $790 million in the next fiscal year from selling new taxi medallions, or permits, although a court has blocked that plan. The city is appealing.
The IBO spotted mixed signals about the city's economy, with the number of jobs growing at a healthy clip but income growth lagging. That's partly because the economy is growing away from Wall Street, IBO spokesman Doug Turetsky said.
The IBO forecasts employers will add 51,000 jobs in the city in the next calendar year, on top of 76,000 this year. Education and health care are expected to show the most growth through 2016, with less than 2 percent of the new jobs coming in the securities sector, which has traditionally been a major factor in wage growth.
Meanwhile, City Comptroller John Liu said in a report Thursday that the city paid out more than $686 million during the last fiscal year in settlements and court awards in disputes ranging from slip-and-falls to lawsuits against police, down very slightly from the previous year.
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