Economic Troubles Bite Big Apple Unemployment, City Deficit Compound New York's Problems with Crime, Absorbing Immigrants

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NEW York City may still be "a wonderful town," as a group of sailors sang in "On The Town," Leonard Bernstein's 1940s musical tribute to the Big Apple. But for many of the 16 million or so tourists who visit here annually and the millions who live and work here, it is not quite as easy to sing an ode to the largest city in the United States as was the case a decade or so back.

"On the Town" liked tidy directions: "The Bronx is up and the Battery's down," cheerfully proclaimed lyricists Betty Comden and Adolph Green. Today, the most talked-about "directions" in this teeming metropolis of 7.3 million people are more likely to be sociological and financial than geographical. What's up includes immigration, and in recent months, unemployment. That has prompted friction between the newcomers and the oldtimers. Also up: Taxes. Crime. Homelessness. AIDS cases. Drug-related problems. What's down, along with jobs in the manufacturing sector, is public confidence, say many economists.

Experts disagree on the severity of New York's economic and social problems. "New York's problems are grossly exaggerated," says Lewis Altfest, president of L.J. Altfest & Co., an investment advisory firm. Mr. Altfest says economic problems here are "more cyclical than secular."

A prominent executive with close links to City Hall insists that "financial problems here are worse, far worse, than public officials are telling us."

Just a walk through Manhattan quickly underscores the city's challenges, from litter, to the ubiquitous potholes marring traffic-clogged highways, to homelessness.

Political leaders concede that the city's financial woes are bad. New York City's budget is around $27 billion - twice the size of the state budget of neighboring New Jersey ($13 billion), which has roughly the same population. Mayor David Dinkins just announced a series of layoffs - 556 city employees - to close a $388 million budget gap for the fiscal year ending in June. The mayor is also reducing city services and canceling plans to hire thousands of new workers.

Some executives predict that the budget shortfall for the fiscal year beginning July 1 will exceed the official projection of $1.6 billion. Mr. Dinkins is expected to seek additional taxes and lay off as many 10,000 public employees. Another 10,000 jobs could be lost through attrition. Little financial help can be expected from New York state or Washington, facing budget woes of their own. Albany just announced the city will lose $100 million in state aid this year.

Still, the layoffs only partially reverse the addition of over 50,000 jobs to the city government's payroll since the early 1980s. Nor are the city's money woes yet as grim as in 1975, when New York almost defaulted on its debt obligations. In recent weeks the city has been courting groups of well-heeled investors from around the US, hoping to build interest in two large new public debt issues. Observers worry that if the national economic downturn deepens, the city would find it hard to meet debt obligations.

New York's feisty public-employee unions seem eager to test the fiscal resolve of the Dinkins administration, which was elected with union support. …