WPCNR CAMPAIGN 2010. From The Wilson Campaign. July 28, 2010:
At a news conference at the Michaelian Buillding today, state comptroller candidate Harry J. Wilson (R) and state senate candidates Bob Cohen (R) and Liam McLaughlin (R) today warned Westchester residents face sharply higher property taxes if a plan of state comptroller Thomas P. DiNapoli is put into effect.
The secretive borrowing scheme, the brainchild of state comptroller Thomas P. DiNapoli (D), would allow the state to borrow money from the state pension fund to make constitutionally required payments to that very same fund, with interest. The plan attempts to hide the massive underperformance of the pension fund, relative to its 8% target return.
That underperformance Wilson alleges, will lead to dramatically higher taxes in Westchester County and statewide. Under New York State law, state and local governments are required to make up any shortfalls in the state pension fund, and that money is typically raised at the local level through property or other tax hikes.
“This plan is sheer madness, and the people of New York State need to be told about it,” said Mr. Wilson, a Scarsdale resident and a nationally recognized corporate restructuring expert. “What Mr. DiNapoli is proposing is akin to using a home equity line to make a mortgage payment. It is Albany fiscal gimmickry at its worst, and, as usual, the taxpayers of New York State are being left in the dark by the Albany politicians.”
“Westchester County families are struggling with the highest property taxes in America, and this ‘DiNapoli Tax’ is simply unacceptable,” Mr. Cohen said. “This is an election year gimmick that will make Westchester’s property tax crisis even worse. State Senator Suzi Oppenheimer (D) has said not a single word about this, just as she has passively allowed our property tax load to grow unbearable over the past two and a half decades.”
“Record-high property taxes in Westchester are at an emergency level, yet Andrea Stewart-Cousins and Tom DiNapoli are about to raise them even higher,” Mr. McLaughlin, a C.P.A. and a former Yonkers Council Member, said. “What’s worse, this DiNapoli Tax is coming under the cover of darkness – they don’t want Westchester taxpayers to know they are about to get socked again. Ms. Stewart-Cousins has an obligation to her constituents to stop the DiNapoli Tax.”
Mr. Wilson said that, based on the best available information, he estimates that under the DiNapoli scheme:
1. In just the first six years, the State will borrow over $4.5 billion, and local governments will be able to borrow in excess of $6 billion, totaling roughly $11 billion in actual or potential borrowing. Because the most recent version of the plan is an indefinite program, this massive borrowing will only grow in later years;
2. The associated interest expense, assuming the midpoint of the publicly stated range, or 5%, will be in excess of $3 billion for the state and local municipalities combined;
3. Over the next six years, the pension contributions of state and local governments will roughly triple — even assuming heroic but unlikely performance in the markets. For the average New York household, their share of these pension contribution costs will increase from just over $500 per household to over $1,800 per household – a $1,300 DiNapoli tax for every household outside New York City.
4. It has been reported that these scenarios are based on the State Comptroller’s expectation that pension returns going forward will mirror returns from the period after the 1987 market crash. If those reports are correct, based on the current portfolio mix of the pension fund, the Dow Jones Industrial Average would have to hit 80,000 by 2022. If, instead, the Fund is basing its projections on its current, but also overly aggressive, 8% return assumption, then the Dow would have to hit nearly 30,000 by 2022. Both of these return scenarios dramatically exceed recent history and the expectations of professional investors. This enormous disparity highlights how important the Comptroller’s assumptions are to the policy debate, and he should provide transparency so that voters can evaluate exactly what he is proposing.
5. Mr. DiNapoli’s sole defense is that his plan is a “smoothing” plan that creates reserve accounts in good times. Yet two facts underscore why this defense is misleading:
a) Under Mr. DiNapoli’s own projections, these reserve accounts don’t come into being for at least 15 years, and possibly much longer;
b) In the only other time in New York State history that such a plan was tried, Alan Hevesi’s “one-time-only” plan also created reserve accounts but borrowed a tiny fraction of the amount available here. Those planned reserve accounts never came into use, yet New Yorkers still owe 60% of the original borrowing and pay nearly $100 million per year to pay off that borrowing. As unsuccessful as the Hevesi plan was, Mr. DiNapoli incredibly is seeking to expand it by 20 times or more – creating the largest Ponzi scheme in New York State history.
“‘The DiNapoli Tax’ can be stopped in its tracks if the taxpayers of New York State demand it,” Mr. Wilson continued. “That’s why I am so pleased that Liam McLaughlin and Bob Cohen are here today to alert their constituents to this secretive plan. Every time Albany kicks the can down the road like this, it makes our taxes go up and our situation grow worse.”
Mr. Wilson further said that, “given the lack of transparency provided by the comptroller on key assumptions surrounding this pension borrowing plan, we are limited in our ability to exhaustively analyze it, but based on our best estimates and the best available information, we believe the Comptroller is walking New York State into a fiscal disaster. We first raised this issue well over a month ago, and the Comptroller has yet to come clean with New Yorkers on his assumptions. We await him living up to his responsibilities to taxpayers.
“I also challenge Mr. DiNapoli to show us other scenarios his office has run so we can see what happens to the Pension Fund if returns don’t mirror the best span the Fund has had,” Mr. Wilson continued. “For example, what happens if the Fund experiences returns similar to the last 10 years? Where is the responsible analysis, honest accounting and prudent management of our State Pension Fund? It’s Mr. DiNapoli’s job to do these analyses, but he is either asleep at the switch or hiding the truth about this plan from the public.”
Mr. Wilson said the unelected incumbent state comptroller, who first proposed the controversial Pension borrowing scheme in May 2009, needs to explain this questionable borrowing plan to the public. Mr. Wilson specifically urged him to make clear exactly:
· How much will be borrowed over the next 6 years, both by the state government and by local governments?;
· How much interest expense will that borrowing cost NY taxpayers?;
· How large will the contribution levels be in future years?, and
· How much worse will these problems be under more realistic market scenarios?
