Giuliani takes liberties on his NYC record

Certain boasts of fiscal gains exaggerate role

As a presidential candidate, Rudy Giuliani recounts his eight-year stint as mayor of New York City as an era of tax-cutting and welfare-slashing, one long fight to tame the city's bureaucratic behemoth. That's basically true, but Giuliani and his campaign exaggerate some facts and ignore many others to hone the point.

Giuliani often suggests that he alone was responsible for cutting 23 taxes, but seven of those moves were state initiatives, according to the city's Independent Budget Office. Of the remaining 16 tax reductions, Giuliani actually opposed the largest cut, which was due to come with the expiration of a 12 1/2-percent surcharge on the city's personal income tax. Giuliani proposed extending the levy, generator of several hundred million tax dollars a year, but backed down in a clash with the City Council and the tax relief took effect.

Moreover, Giuliani had a large blind spot in his Republican tax-cutting orthodoxy - publicly subsidized stadiums for professional sports teams.

In 1998, he did an about-face on his plan to phase out the nation's only tax on commercial rent and proposed an extension of it to provide almost $600 million to subsidize construction of new stadiums for New York's Major League Baseball teams, the Yankees and Mets. A year later he proposed building a publicly assisted $1 billion domed stadium on Manhattan's West Side to lure back the Jets football team from New Jersey, but did not spell out the amount or source of the city's contribution.

Under Giuliani, the city built ballparks in Staten Island and Coney Island for minor-league affiliates of the Yankees and Mets - at a total cost of about $110 million, the Independent Budget Office calculated.

Joseph Lhota, former budget director and later top deputy mayor under Giuliani, argues that the administration instigated or lobbied hard for all of the tax cuts enacted in Albany and therefore deserves credit.

As an example, Lhota cited a law that expanded the state's tax relief program for single-family homeowners to include the city's renters and apartment owners. "If Giuliani didn't lobby [Governor George] Pataki and the Legislature . . . it wouldn't have happened," Lhota said. "Why shouldn't he get credit for it?" It was the largest of the seven state-approved tax cuts while Giuliani was mayor, and the state reimbursed the city for the lost revenues.

Lhota described Giuliani's willingness to extend the life of the surcharge on the income tax as a negotiating ploy during a five-month budget stalemate with the City Council. Giuliani eventually acceded to the council and its speaker, Peter F. Vallone Sr., and let the surcharge lapse.

Spending and taxes

Of the stadium plans, Lhota said the minor-league parks "were catalysts to rehabilitate two rundown neighborhoods" and the Major League stadium subsidy proposal was consistent with Giuliani's view that "stadiums and professional teams are tied to economic development. The last thing we wanted them to do is move somewhere else."

Nitpicking Giuliani's record and campaign boasts obscures a larger point, Lhota asserted. "No one even thought about cutting taxes in New York before Rudy Giuliani," he said. "Before Rudy Giuliani, New York was a 70-year experiment in socialism."

The conservative Club for Growth, an advocacy group that has critiqued the fiscal records of the Republican candidates for president, reached a similar conclusion in a 12-page analysis of Giuliani's fiscal policies. "There are undoubtedly some stains on Giuliani's fiscal record," the report said, but, in a city "dominated by liberal Democrats . . . Giuliani's fiscal accomplishments are remarkable."

Giuliani and his campaign often say that he "turned a $2.3 billion deficit into a multibillion-dollar surplus." But both the Citizens Budget Commission, a probusiness watchdog group, and the Independent Budget Office, a city-funded fiscal watchdog organization, said Giuliani left his successor, Michael Bloomberg, a projected budget deficit equal to or larger than the one Giuliani inherited from David Dinkins, the previous mayor.

"Even before 9/11, the Giuliani administration was projecting the next mayor would be facing a deficit of $2.8 billion the following fiscal year that would have to be remedied," said Ronnie Lowenstein, director of the Independent Budget Office. "Because of 9/11, it climbed to $4.8 billion."

Lhota said Giuliani's team made budget cuts that left city finances in good order when he left office at the end of 2001, and that projections of deficits in future years' city budgets are standard in New York.

The terrorist attacks of Sept. 11, 2001, combined with a recession, cut deeply into city revenues as jobs and tourists disappeared. In 2002, Bloomberg pushed through a record 18 1/2-percent property tax increase to help close the ballooning anticipated deficit for his first full budget year in office.

When Giuliani took office in 1994, he faced a deteriorating economic situation and a projected $2.3 billion deficit. He kept a tight lid on city spending, which declined in his first budget and grew at less than the rate of inflation during his first four-year term, the watchdog agencies' data show. But in the final years of his second term, as city coffers brimmed with taxes generated by the stock market boom, city spending soared well above the inflation rate and nearly all of the surplus in his last year was spent.

Giuliani generated annual surpluses in part by routinely lowballing revenue estimates.

Over Giuliani's eight years in office, city spending grew an average of 3.6 percent, or eight-tenths of a percentage point above the rate of inflation, according to the IBO, and municipal spending declined as a percentage of the gross city product - the measure of local economic output.

Workers and welfare

Under Giuliani the workforce in many departments was cut, but those reductions were more than offset by the addition of police and teachers. Overall, the number of full-time city employees increased slightly, by 1,098, to 247,681, according to the Citizens Budget Commission.

Giuliani talks often on the stump about steep cuts in the city's welfare rolls - one in seven New Yorkers were receiving public assistance when he took office - and revived private-sector job creation on his watch. That's true, but the city lagged the country somewhat in both areas.

In March 1995, Giuliani launched a tough Welfare Reform Initiative to cut deeply into the city's nearly 1.1 million-person welfare rolls. That was almost a year-and-a-half before Congress and President Clinton enacted welfare reform on a national level. The New York program included a "workfare" requirement and placement services for jobs outside government.

"We put 'workfare' in to a lot of screaming and yelping in the liberal community," said Peter J. Powers, Giuliani's first deputy mayor for operations. "Rudy took the political heat. I've never seen him buckle to political pressure when he believed he was right."

Giuliani's welfare overhaul was a success, reducing the number of New Yorkers on public assistance to the lowest in 35 years. But the results trailed those achieved by national welfare cutbacks. In eight years, New York's rolls plunged 54 percent, from about 1.1 million recipients to 493,000, compared with a 62 percent drop across the United States, according to the Citizens Budget Commission.

Tennis, anyone?

New York City has long used tax incentives to discourage big corporations from fleeing the city to less expensive sites in the suburbs, and to stimulate redevelopment. Giuliani continued the practice, with what the Club for Growth called "an alarming propensity for doling out corporate welfare . . . and his favorite pet project of all - sports stadiums."

The Jets stadium idea died in 2005, and under Bloomberg, both the Yankees' and Mets' stadiums are under construction near the ballparks they will replace, with a total city contribution of about $325 million, the city's Independent Budget Office calculates. That's about one-fifth of the total cost of the stadiums.

Paradoxically, while Giuliani was willing to put up city funds to ensure the city's two Major League ballclubs stayed in New York, he was eager to undo a major privately funded sports stadium deal, engineered by Dinkins in the waning days of his administration.

Fearful New York would lose the US Open tennis tournament, a major two-week international sporting event that generates hundreds of millions of dollars annually for the local economy, Dinkins reached agreement with the US Tennis Association on a 99-year lease of city parkland if the USTA paid for a new $250 million stadium and tennis complex near the Mets home, Shea Stadium, in Flushing, Queens.

Giuliani objected to the project, he said, because of a provision that could make the city liable for fines of up to $325,000 per tournament if too many aircraft from LaGuardia Airport passed over the center during matches at the US Open. That provision has never been invoked.

"Rudy said the thing is corrupt, it smells," recalled Vallone, the former City Council speaker, who said he went over the deal in detail with his staff and found it "clean as a whistle." "It doesn't cost us a penny, and we make all kinds of money from it," said Vallone, a Giuliani admirer who is now a lawyer in private practice.

While the privately built tennis stadium went forward, Giuliani refused to attend a single tournament while he was mayor.

A few months after he succeeded Giuliani as mayor, Bloomberg applauded Dinkins for enacting "the only good athletic sports stadium deal, not just in New York, but in the country" and ended what newspapers termed the mayoral "boycott" by giving a welcoming address at the tournament.