A major new report on the outlook for New York City concludes that, despite the retrenchment of the past few years, the city government and its political and budget priorities still "must be fundamentally reformed" before New York City's fiscal and economic problems can be solved.
Specifically, the report recommends that new policies concentrate on freeing financial resources through better management, reduced fringe and pension benefits and other new cutbacks in order to significantly reduce individual and corporate taxes, cut New York City's massive debt load and improve its still impressive but deteriorating physical plant.
Such steps are long-term investments in the city's future, the report argues, and are prerequisities for stimulating the privat investment that is needed to revive the city's flagging economy and lead to genuine recovery.
"Increased private investment ultimately holds the key to stability in the local economy," according to the 398-page study which is the culmination of nearly two years of work by the Temporary Commission on City Finances.
While the report considers bankruptcy as a radical solution for restructuring and indicates it still could occur in the future, it rejects this option.
The report says bankruptcy is neithre "constructive" nor "democratic" and "would prevent the city from reentering the credit market for an extended period of time."
The commission is a nonpartisan panel made up of 22 business, labor and community leaders headed by Owen McGivern, a retired New York appelate judge. It was appointed by Mayor Abraham D. Beame in 1975 at the height of the fiscal crisis.
The study's recommendations and its exhaustive analysis of the origins of the city's financial problems are sure to be a point of departure for political debate during this year's free-for-all election campaign for New York City mayor.
The report, titiled "The City in Transition: Prospects and Policies for New York," studiously avoids naming names and placing blame upon specific individuals or adminstrations for the city's problems. But it presents an implicit critique of many of the policies of the Beame administration.
These policies, it says, contemplate only gradual reform of practices that led to the crisis and depend too much on hoped for changes in federal and state policies - for example, assumption of the city's $1.1 billion welfare and Medicaid burden - as a long-term fix for the city, but with no assurance they will be enacted.
The report terms this "decremental" approach to the city's problems a "captive-of-events" theory of what went wrong, placing the blame on external socioeconomic changes and state and federal actions that were beyond the control of local officials.
The theory, it says, "is popular because it tends to absolve the local political process of responsibility for the fiscal crisis and buttresses the also-popular view that solution to the city's financial problems lies in increased state and federal aid rather than local political reform."
Even if the federal and state governments take over significant amounts of the city's current expenditures, "the critical issue is the use to which the city of New York would put slack resources resulting from increased intergovernmental assistance," the study says.
"If slack resources are used . . . as an attempt to maintain an inherently imbalanced local governmental system, the long-term potential of intergovernmental reform largely and quickly will be dissipated. However, if slack resources are invested to promote the economy, intergovernmental reform will have a positive and enduring impact."
Mayor Beame, who recently said the city has "made it" out of the crisis and "will continue to make it" as he submitted his crucial 1977-78 budget, declined immediate comment on the report.
The fiscal 1978 budget, the last in the three-year financial plan meant to restore New York City's finances to a balanced condition, does eliminate the last of the city's accumulated deficit. But critics claim the city has not made provision for future employee wage increases, which have been frozen for the past two years, and relies on questionable revenue sources to reach this balance.
There also is concern that after fiscal 1978 the city could quickly find itself in the red again.
Although President Carter has recommended an extension of the federal government's $2.3 billion annual loan to New York City to take care of short-term borrowing which is scheduled to expire on June 30, 1978, Congress has indicated it may not grant further assistance.
The commission also recommends extending the federal loans, but echoes many other concerns that have been expressed about the state of the city's finances.
As far as the New York City economy is concerned, the study concludes that there is no reason to assume that it will experience a major revival in the next decade.
But it also thinks that the decline "can be slowed significantly and perhaps even halted" during this period if there is an "improvement in the various conditions that determine the competitiveness of New York City as a location for business activity."
The report points out that between 1969 and 1977, overall employment in New York City fell nearly one-sixth from its historic high of 3.8 million to 3.2 million.
The commission's forecast of a slow recovery for the national economy from the 1973-75 recession and a small improvement in New York City's competitiveness puts employment in 1985 at 3.05 million for the city. But continued tinued rapid deterioration in the city's competitive position would put 1985 employment at 2.78 million, while a rapid improvement would boost employment to 3.32 million.
Noting the "considerable variance between the high and low employment forecasts," the report says the policies of New York City's government in determining local tax levels as well as the quantity of life in the city can go a long way in affecting employment levels.
To stimulate the local economy, the study recommends:
Tax reductions, including a five-year decrease in the corporate income tax from its present rate of 10.05 per cent to 5.05 per cent, "a substantial and immediate tax cut for manufacturers," a "phased elimination of rent control," elimination of "discriminatory real property assessment practices," and a five-year reduction of the state personal income tax, the highest in the nation, from its current maximum of 15 per cent on taxable incomes in excess of $25,000 to 10 per cents on taxable incomes above $15,000.
Reduction in the city's overall debt load of nearly $14 billion - up $1 billion since the fiscal plan went into effect - through retirement of more debt than is assumed each year. New borrowing should go toward capital expenditures, primarily repair of the city's capital plant which has deteriorated substantially since 1965 when maintenance began to be deferred so funds could be freed to pay for soaring operating costs. A drop in the debt load, the report argues, would not only cut debt service costs, but also reduce real estate taxes and hasten the city's return to the financial markets.
An improvement in the city's management practices so that the city can maintain its present level of essential services while putting into effect further payroll cutbacks. The result of the attrition policies pursued in the past few years, according to the study, has resulted in a work force that is 20 per cent smaller but which is also better compensated, older, less productive and more dominated by white males than it was before.
A cut of about $300 million in annual expenditures, primarily through reductions, where allowable, in the nearly $2 billion New York City spends each year on employee fringe and pension benefits.
Attempts to have the federal and state governments assume costs for New York City's welfare, Medicaid, courts and college systems. If all costs are assumed, the saving for New York City would be $1.2 billion each year.
The report recognizes the political difficulties involved in putting into effect the sweeping recommendations it makes.
"Reforming some of the city's key public policies and managerial practices involves the reordering of public priorities and, ultimately, the redistribution of public benefits and costs," the study states.
"It is not entirely clear that the political process in New York City has the capacity to reform itself in fundamental ways, but the consequences of not engaging in fundamental reform are all too clear."