Another NYC budget buster

Already, we’ve written about NY’s budget hell.  Adding to the pressure, estimated tax payments came in too heavy earlier in the year, necessitating $800 million worth of rebates through October.  According to the NYT:

New York City, grappling with the aftershocks of the global financial crisis, has been forced to refund more than $800 million to companies that overpaid their taxes this year based on expectations of a more robust business performance.

The refunds — three times the amount typically returned — have triggered deep unease among city budget officials, who are already struggling with weakening revenue and face pressure to slash services and raise taxes.

They come as the city, according to the Bloomberg administration, faces a budget shortfall that is expected to climb to $4 billion over the next two years. And having to give back such a large amount of money is certainly going to make the situation even bleaker.

And because cash is king in a credit crunch:

In a departure from previous years, when the companies would simply instruct the city to apply any overpayment to subsequent tax bills, they are demanding the cash now.

The amount the city must pay back is likely to surge again in the next two months, analysts who follow the city budget said, as companies stymied by tight credit markets scramble for additional money to pay for operating expenses and other needs.

The article notes that NY State is having a similar problem, having had to refund $1 billion so far this year, up from $581 million in the first 10 months of last year.

NY State/City will continue to be sources of cash for companies in desperate need of liquidity.

Posted in politics, taxpayer issues |