New York City’s property tax revenues are set to decline by $2.5 billion next year, the biggest drop in three decades, due to the coronavirus pandemic’s impact on the real estate and business sectors.
At least half the city’s tax revenue comes from real estate. Mayor Bill de Blasio has said that an anticipated budget gap of $5.25 billion would largely be driven by a projected drop in the value of office buildings and hotel properties, which have all but emptied out since the coronavirus broke out in the city in March 2020.
As for New York state, costs associated with COVID-19 and a massive decrease in sales-tax revenue have led to a more than $60 billion, four-year budget deficit.
Governor Andrew Cuomo has said the administration of US President Joe Biden and Congress need to provide the state with a direct aid package totaling $15 billion. If not, big budget cuts, tax hikes and more borrowing are coming.
While the city and the state are in the red, California－which has become a coronavirus hot spot－is reporting that it has more money than it did a year ago, before the pandemic. Massive stock market gains and income growth among residents have filled the state’s coffers.
The state’s wealthiest taxpayers, many in Silicon Valley, had a great year because of a soaring stock market, so the state saw more tax withholding during the last nine months of 2020 than in 2019.
Governor Gavin Newsom said the state has $34 billion beyond what it needs to balance its budget, and $22 billion will be put into various reserve funds.
In New York City, real estate deals plummeted last year. Sales of commercial and residential properties totaled $47.1 billion in 2020, down 46 percent from the year before, according to a report on Friday by the Real Estate Board of New York.
The drop in investment led to a 36 percent decrease in tax revenue, resulting in a $1.6 billion loss for the city and the state, the trade group said.
In 2020, tenants leased 20.5 million square feet of office space in Manhattan, the lowest level in at least 20 years, according to a recent report from Savills, a real estate services firm.
“This is a total economic dislocation for certain industries. We’ve never seen anything like what’s happened to the hotel industry,” the mayor said at a News conference.
The city is seeking to close the expected budget gap of around $5.25 billion, an increase from the $3.75 billion budget gap forecast in November 2020.
De Blasio said that the city planned to deal with the loss by raising income taxes. But that alone won’t be enough.
The lack of office workers has affected restaurants, retail and other businesses. In New York City, restaurants have lost even more revenue as they must close at 10 pm.
Melissa Fleischut, president and Chief Executive Officer of the New York State Restaurant Association, said in a statement: “We all know about the dire financial crisis facing the restaurant industry. And we all agree that we need to reopen the economy or there will be nothing left to reopen.”
Agencies contributed to this story.