(Reuters) – Houston-area schools want to borrow $1.9 billion to modernize most of the high schools, while Seattle says it needs $290 million to upgrade a seawall protecting the downtown waterfront so it can withstand an earthquake.

San Francisco wants to sell $195 million of debt to repair and improve worn-out parks and playgrounds that it says have been “loved to death”

Voters in these and a number of other big U.S. cities — some with already-high debt loads — will decide on Election Day whether to borrow even more or face prospects for reduced services or higher taxes.

The United States needs $2 trillion of infrastructure upgrades, according to a 2011 report by the Urban Land Institute and Ernst & Young. Many of these roads, bridges, dams, water and sewer plants serve major metropolitan areas, but the recession left many cities struggling to pay for capital projects and services.

Elected leaders are wary of asking voters to approve more borrowing.

“Politicians are very sensitive to the current economic climate and hesitant to go to the voters for anything that would incur additional costs for debt, but there’s also a recognition that revenues will not be enough to support our capital needs,” said Miguel Santana, Los Angeles city administrative officer.

Some cities are reaching levels of borrowing that fiscal monitors call critical, a no-go zone where high debt service costs can crowd out education, police and fire protection, or other priorities. A look at 10 prominent cities reveals markedly different debt profiles, according to data Moody’s Investors Service compiled for Reuters.

Many large cities, such as Boston, New York or Chicago, do not require voter approval to sell debt, relying on built-in policy safeguards. Boston, for example, limits debt service to 7 percent of expenditures. In other cities, voters must make the decisions on borrowings, as Seattle and Houston will do this November.

Voters have mixed records when it comes to taking on debt, with citizens in some cities more restrained than in others.

One measure used to assess whether a city or state has over-borrowed is debt service as a percent of operating expenditures.

“Anything between 5 and 7 percent is enough, as a general rule of thumb,” said Mark Tenenhaus, director of municipal research at RSW Investments, LLC, in Summit, New Jersey.

Seven out of 10 large cities have gone beyond that guideline, spending more than 7 percent of their annual budgets on repaying debt in 2011, according to Moody’s.

“Financial solvency has deteriorated significantly in seven of the 10 cities following the 2008 recession,” said Dan Flaming, president of the Economic Roundtable in Los Angeles.

POPULISM VS POLICIES

Many states restrict how much debt cities can issue, by tying it to a set percentage of property revenue or the tax base, for example. A number of cities added their own limits.

The purpose of requiring voters to approve new debt is to minimize over-borrowing by politicians who are eager to avoid tax hikes. Seattle’s voters, for instance, have helped keep public borrowing in check.

The city has a top Aaa credit rating from Moody’s, partly due to its low debt burden. Its debt service as a share of spending is 6.4 percent – the third lowest of the 10 cities on the credit agency’s chart.

Seattle voters must approve new debt as well as the taxes to pay it off, officials said.

In November, Seattle voters will be asked to approve selling $290 million of general obligation bonds to upgrade the Alaskan Seawall to safeguard the downtown waterfront, utilities and transportation. General obligations are backed by a government’s full credit and ability to tax.

The improvements would cost the owner of a home worth $360,000 about $59 a year, according to the City Council.

Seattle pays for more of its capital improvements with cash than many of its peers. Michael Van Dyck, the city’s director of debt financing, said about 70 percent to 80 percent of general government capital improvements are paid for with cash.

Seattle’s home state of Washington, which ranks in the top 10 states with the highest debt per capita in the nation, is trying to become more tight-fisted. Washington will ask voters to cut the amount of debt the state is allowed to sell, aiming to keep debt service from rising to 7 percent of state spending from around 6 percent now, according to a spokesman for the state treasurer.

Voters in San Francisco – like all localities in California – have considerable power over debt. A two-thirds vote is required for sales of general obligation bonds, according to Nadia Sesay, director of the city’s Office of Public Finance.

November’s ballot includes a $195 million bond sale for parks and recreation. Voters have approved the past four bond measures, Sesay said.

Moody’s, which rates San Francisco at Aa2, cited its “conservatively structured debt portfolio.” The city’s debt service as a percentage of spending is 8.2 percent.

Only 813,000 people live in San Francisco but its capital needs are staggering. The 10-year plan totals $24.7 billion – including improvements planned by independent entities, such as the airport, which sell their own debt, according to Sesay.

San Francisco caps the total amount of debt it can issue at 3 percent of the assessed value of the property tax base, according to Sesay.

By policy, the city has kept its property tax rate at the 2006 level, she said. That has compressed total debt outstanding to about 1.09 percent of the assessed value, she said.

“We are mindful of how the debt affects the taxpayers,” Sesay said.

However, other taxing jurisdictions in San Francisco, such as the school district, have increased assessments. The tax rate has risen to $1.172 per $100 in fiscal 2012 from $1.141 in fiscal 2008, according to bond documents.

That compares with Seattle’s lower rate of $1.016 per $100 of assessed value, according to budget documents. That figure also includes overlapping tax districts.

HOUSTON’S HIGHER BURDEN

Requiring voter approval has not shielded some other cities, such as Houston, from running up debt. This year, Houston-area voters will decide on more than $2.7 billion of debt for the city, the schools and community colleges.

“That’s a monumental year around here in Houston,” said Ronald Green, controller. “We are definitely behind on our infrastructure; I think every big city has that issue.”

Steven Craig, an economics professor at the University of Houston, said if the bond sales are rejected, local governments could try again in a couple of years. But delays could prove costly, increasing the amount of repairs that are needed later.

Some cities in the metropolitan area might have to borrow more if voters reject a referendum by the Metropolitan Transit Authority of Harris County – which includes Houston – to keep diverting 25 percent of sales tax revenue to cities for road improvements instead of spending it on the transit system.

“This would presumably increase bond requests by cities in the future to build roads for which they will not have current tax money if it passes,” Craig said.

Houston’s debt service is already 16.5 percent of total spending, more than double that of either Seattle or San Francisco. Houston’s property tax rates are the lowest of the three. They have remained at $0.63875 per $100 of assessed value from fiscal 2009 to 2012.

Houston’s debt service in proportion to spending had not gone up between 2007 and 2011, but Craig said “the fact that debt is relatively high suggests there is not a lot of room to fix the big problems to come.”

Still, Moody’s gives Houston the same rating as San Francisco: Aa2, which is considered high-grade. One factor that helps Houston is its policy of limiting the average life of its bonds, currently to about 11 years.

Paying loans off swiftly saves money because debt with shorter maturities carries lower interest rates and the bonds are repaid more rapidly.

“It’s seen as way of keeping our AA rating on our debt,” said Green.

(Reporting By Joan Gralla; editing by David Gaffen and David Gregorio)

(Reuters) – Houston-area schools want to borrow $1.9 billion to modernize most of the high schools, while Seattle says it needs $290 million to upgrade a seawall protecting the downtown waterfront so it can withstand an earthquake.

San Francisco wants to sell $195 million of debt to repair and improve worn-out parks and playgrounds that it says have been “loved to death”

Voters in these and a number of other big U.S. cities — some with already-high debt loads — will decide on Election Day whether to borrow even more or face prospects for reduced services or higher taxes.

The United States needs $2 trillion of infrastructure upgrades, according to a 2011 report by the Urban Land Institute and Ernst & Young. Many of these roads, bridges, dams, water and sewer plants serve major metropolitan areas, but the recession left many cities struggling to pay for capital projects and services.

Elected leaders are wary of asking voters to approve more borrowing.

“Politicians are very sensitive to the current economic climate and hesitant to go to the voters for anything that would incur additional costs for debt, but there’s also a recognition that revenues will not be enough to support our capital needs,” said Miguel Santana, Los Angeles city administrative officer.

Some cities are reaching levels of borrowing that fiscal monitors call critical, a no-go zone where high debt service costs can crowd out education, police and fire protection, or other priorities. A look at 10 prominent cities reveals markedly different debt profiles, according to data Moody’s Investors Service compiled for Reuters.

Many large cities, such as Boston, New York or Chicago, do not require voter approval to sell debt, relying on built-in policy safeguards. Boston, for example, limits debt service to 7 percent of expenditures. In other cities, voters must make the decisions on borrowings, as Seattle and Houston will do this November.

Voters have mixed records when it comes to taking on debt, with citizens in some cities more restrained than in others.

One measure used to assess whether a city or state has over-borrowed is debt service as a percent of operating expenditures.

“Anything between 5 and 7 percent is enough, as a general rule of thumb,” said Mark Tenenhaus, director of municipal research at RSW Investments, LLC, in Summit, New Jersey.

Seven out of 10 large cities have gone beyond that guideline, spending more than 7 percent of their annual budgets on repaying debt in 2011, according to Moody’s.

“Financial solvency has deteriorated significantly in seven of the 10 cities following the 2008 recession,” said Dan Flaming, president of the Economic Roundtable in Los Angeles.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Please see related graphic on the debt burdens of 10 large

U.S. cities: link.reuters.com/keq23t

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

POPULISM VS POLICIES

Many states restrict how much debt cities can issue, by tying it to a set percentage of property revenue or the tax base, for example. A number of cities added their own limits.

The purpose of requiring voters to approve new debt is to minimize over-borrowing by politicians who are eager to avoid tax hikes. Seattle’s voters, for instance, have helped keep public borrowing in check.

The city has a top Aaa credit rating from Moody’s, partly due to its low debt burden. Its debt service as a share of spending is 6.4 percent – the third lowest of the 10 cities on the credit agency’s chart.

Seattle voters must approve new debt as well as the taxes to pay it off, officials said.

In November, Seattle voters will be asked to approve selling $290 million of general obligation bonds to upgrade the Alaskan Seawall to safeguard the downtown waterfront, utilities and transportation. General obligations are backed by a government’s full credit and ability to tax.

The improvements would cost the owner of a home worth $360,000 about $59 a year, according to the City Council.

Seattle pays for more of its capital improvements with cash than many of its peers. Michael Van Dyck, the city’s director of debt financing, said about 70 percent to 80 percent of general government capital improvements are paid for with cash.

Seattle’s home state of Washington, which ranks in the top 10 states with the highest debt per capita in the nation, is trying to become more tight-fisted. Washington will ask voters to cut the amount of debt the state is allowed to sell, aiming to keep debt service from rising to 7 percent of state spending from around 6 percent now, according to a spokesman for the state treasurer.

Voters in San Francisco – like all localities in California – have considerable power over debt. A two-thirds vote is required for sales of general obligation bonds, according to Nadia Sesay, director of the city’s Office of Public Finance.

November’s ballot includes a $195 million bond sale for parks and recreation. Voters have approved the past four bond measures, Sesay said.

Moody’s, which rates San Francisco at Aa2, cited its “conservatively structured debt portfolio.” The city’s debt service as a percentage of spending is 8.2 percent.

Only 813,000 people live in San Francisco but its capital needs are staggering. The 10-year plan totals $24.7 billion – including improvements planned by independent entities, such as the airport, which sell their own debt, according to Sesay.

San Francisco caps the total amount of debt it can issue at 3 percent of the assessed value of the property tax base, according to Sesay.

By policy, the city has kept its property tax rate at the 2006 level, she said. That has compressed total debt outstanding to about 1.09 percent of the assessed value, she said.

“We are mindful of how the debt affects the taxpayers,” Sesay said.

However, other taxing jurisdictions in San Francisco, such as the school district, have increased assessments. The tax rate has risen to $1.172 per $100 in fiscal 2012 from $1.141 in fiscal 2008, according to bond documents.

That compares with Seattle’s lower rate of $1.016 per $100 of assessed value, according to budget documents. That figure also includes overlapping tax districts.

HOUSTON’S HIGHER BURDEN

Requiring voter approval has not shielded some other cities, such as Houston, from running up debt. This year, Houston-area voters will decide on more than $2.7 billion of debt for the city, the schools and community colleges.

“That’s a monumental year around here in Houston,” said Ronald Green, controller. “We are definitely behind on our infrastructure; I think every big city has that issue.”

Steven Craig, an economics professor at the University of Houston, said if the bond sales are rejected, local governments could try again in a couple of years. But delays could prove costly, increasing the amount of repairs that are needed later.

Some cities in the metropolitan area might have to borrow more if voters reject a referendum by the Metropolitan Transit Authority of Harris County – which includes Houston – to keep diverting 25 percent of sales tax revenue to cities for road improvements instead of spending it on the transit system.

“This would presumably increase bond requests by cities in the future to build roads for which they will not have current tax money if it passes,” Craig said.

Houston’s debt service is already 16.5 percent of total spending, more than double that of either Seattle or San Francisco. Houston’s property tax rates are the lowest of the three. They have remained at $0.63875 per $100 of assessed value from fiscal 2009 to 2012.

Houston’s debt service in proportion to spending had not gone up between 2007 and 2011, but Craig said “the fact that debt is relatively high suggests there is not a lot of room to fix the big problems to come.”

Still, Moody’s gives Houston the same rating as San Francisco: Aa2, which is considered high-grade. One factor that helps Houston is its policy of limiting the average life of its bonds, currently to about 11 years.

Paying loans off swiftly saves money because debt with shorter maturities carries lower interest rates and the bonds are repaid more rapidly.

“It’s seen as way of keeping our AA rating on our debt,” said Green.

(Reporting By Joan Gralla; editing by David Gaffen and David Gregorio)

(Reuters) – The long-awaited World Trade Center should be finished within its $14.8 billion budget, but the Port Authority of New York and New Jersey, the agency rebuilding the site, must raise tolls as it still faces major shortfalls in cash flow in coming years, a consultants’ report said on Wednesday.

As a result, the Port Authority not only must rely on planned toll increases, but also must find additional ways of raising money – from advertising to public-private partnerships – which could produce about $150 million a year, said consultants at Navigant Consulting Inc and Rothschild Inc.

The Port Authority, which runs the New York metropolitan area’s airports, ports, major bridges and tunnels and PATH commuting system, has $44 billion in expected capital needs, officials said. Its capital program for 2011 to 2020 totals $26.9 billion. Officials told reporters on a conference call that they would be “reprioritizing” their list of planned improvements. They did not name specific changes.

The report also said the bi-state authority will need to make significant repairs to its bridges and tunnels, many of which are at least 80 years old.

The Port Authority announced in 2011 that it would raise tolls on cars by $1.50 apiece in September – and by 75 cents each in December from 2012 to 2015. The increases were smaller than what was initially sought. But those toll hikes prompted such a public outcry that the governors of New York and New Jersey, Andrew Cuomo and Chris Christie, lowered the increases and commissioned consultants to analyze reforming the authority, which they jointly control.

The first consultants’ report issued in February faulted the agency for letting the cost of rebuilding the World Trade Center soar by nearly $4 billion – from $11 billion in 2008. That report described the agency as a “challenged and dysfunctional organization.”

Port Authority officials said the new report acknowledged the progress they have made since then by finding savings – including requiring non-union employees to pay for health insurance for the first time, which will save $41 million over 18 months.

Officials pledged to find hundreds of millions of dollars of additional savings, by squeezing soft costs, such as hiring lawyers and appraisers, and ensuring third parties pay in full, for example.

“We understand there are no blank checks,” Vice Chairman Scott Rechler said.

New initiatives include two to three hotels for John F. Kennedy International Airport and exploring more public-private partnerships for bridges, airports, and the World Trade Center.

“It’s across the board and we’re not excluding any opportunities,” said an authority official, who spoke on condition of anonymity.

LOSING MONEY ON EVERY RIDE

The agency’s financial problems are enormous.

The Port Authority’s free cash flow between 2007 and 2011 was a negative $2.5 billion. Free cash flow is roughly defined as operating cash flow minus capital expenditures. Only the aviation division contributed positive free cash flow in the past five years, while the ports and the interstate transportation systems lost money.

Mass transit systems around the nation usually lose money but the PATH system, which carries commuters across the Hudson River, is notable for its rich subsidy.

“PATH alone produced a loss of $3.11 for every passenger carried,” the report said.

Commerce in the ports generated a loss of almost $755 million – more than $28 per container – as the “income revenue stream from tenant rentals is insufficient to offset large, recurring capital projects, such as dredging,” the report said.

The Port Authority traditionally has focused on transportation, but it also has a role in economic development. The World Trade Center project, in the eyes of some critics, has pulled the authority too heavily into real estate development.

The latest report sets out “a number of steps to return the agency to its core mission as a key driver of economic growth for the region and as a provider of transportation infrastructure,” Chairman David Samson said.

In addition to the recommendations to cut costs and increase revenue, the report outlined a management overhaul to improve coordination. It also proposed updating a strategic plan that dates back to 2006, and revising compensation for the Port Authority’s 7,000 workers to differentiate between “merit and tenure.”

Cuomo and Christie, in a joint statement, said the “conclusions by two independent reviews show that the Port Authority is finally on the right track, and the necessary reforms put into place by the agency’s leadership are beginning to deliver results, just as we demanded,”

(Reporting By Joan Gralla; Editing by Andrea Ricci, Dan Grebler and Jan Paschal)

(Reuters) – The long-awaited World Trade Center should be finished within its $14.8 billion budget, but the Port Authority of New York and New Jersey, the agency rebuilding the site, still faces major shortfalls in cash flow in coming years, a consultants’ report said on Wednesday.

As a result, the Port Authority not only must rely on planned toll increases, but also must find additional ways of raising money – from advertising to public-private partnerships – which could produce about $150 million a year, said consultants at Navigant Consulting Inc and Rothschild Inc.

The Port Authority has $44 billion in expected capital needs, officials said. Its capital program for 2011 to 2020 totals $26.9 billion, and officials told reporters on a conference call that they would be “reprioritizing” their list of planned improvements. They did not name specific changes.

The report also said the bi-state authority will need to make significant repairs to its bridges and tunnels, many of which are at least 80 years old.

The Port Authority announced in 2011 that it would raise tolls on cars by $1.50 in September – and by 75 cents each December from 2012 to 2015. The increases were smaller than what was initially sought. Those toll hikes had prompted such a public outcry that the governors of New York and New Jersey, Andrew Cuomo and Chris Christie, lowered the increases and commissioned consultants to analyze reforming the authority, which they jointly control.

The first consultants’ report issued in February faulted the agency for allowing the cost of the World Trade Center rebuilding to soar by nearly $4 billion, from $11 billion in 2008, describing the agency as a “challenged and dysfunctional organization.”

Port Authority officials said the new report acknowledged the progress they have made since then by finding savings – including requiring non-union employees to pay for health insurance for the first time, to save $41 million over 18 months.

Officials pledged to find hundreds of millions of dollars of additional savings.

“We understand there are no blank checks,” said Vice Chairman Scott Rechler.

The Port Authority traditionally has focused on transportation, but it also has a role in economic development. The World Trade Center project, in the eyes of some critics, has pulled it too heavily into real estate development.

(Reporting By Joan Gralla; Editing by Andrea Ricci and Dan Grebler)

Budget Director Robert Megna told state agency commissioners
that their 2013-2014 budget requests “must assume zero growth
from your 2012-13 cash ceiling” in his directive.

“In other words, 2013-2014 budget requests cannot achieve
zero growth through fiscal gimmicks or one-time actions,” Megna
wrote.

Excluded were two areas that are subject to different caps
on growth: school aid and Medicaid.

Megna’s directive, which also covers the 2014 budget , did
not cite any possible revenue shortfall. He wrote only that
Governor Andrew Cuomo is “committed to holding the line on state
spending while maintaining his pledge to increase support for
schools and healthcare in a sustainable manner.”

Many states have seen revenue increase since the recession,
but the latest data show that growth has slowed as the economic
recovery proceeds in fits and starts..

STATE TAX RECEIPTS SLIP

A new report on tax collections in New York state, which
starts its fiscal years on April 1, was not particularly
encouraging. Through August, tax receipts were $147 million less
than projected, and down $204 million from a year ago, the state
comptroller said on Wednesday.

“Almost halfway through the state’s fiscal year, the state’s
budget is still on relatively solid ground, but weak revenue
collections and slow economic growth signal a need for caution
going forward,” Comptroller Thomas DiNapoli said.

The state took in a total of $24.7 billion through August.
The main reason that collections underperformed was the decline
of $188 million in personal income tax revenue on a
year-over-year basis, DiNapoli said.

Cuomo, a Democrat, and the legislature agreed in late March
on a new $132.6 billion budget, which totaled $135 million less
than last year’s accord.

The state budget chief gave agencies until Oct. 16 to submit
their plans. Megna’s directive is less harsh than one issued by
New York City’s budget director, who ordered agencies last week
to cut spending by $2 billion over two years due to the
uncertain economy and the loss of revenue from a taxi medallion
sale that was blocked by a court ruling in August.

The new budget plan presented by County Executive Edward
Mangano on Tuesday is just slightly smaller than the current
$2.8 billion budget that ends on Dec. 31.

Mangano, a Republican, had fought for months to persuade a
state control board that a public-private partnership for the
sewer and waste water authority would help solve Nassau’s
long-term financial problems.

But some members of the state control board, created in 2000
to prevent the county from filing for bankruptcy, last month
said they would reject any budget that included the plan for the
sewer authority privatization. They say such a public-private
partnership would only provide a nonrecurring source of revenue.

In the past, the control board has favored deeper spending
cuts.

Nassau, located on the western half of Long Island, has
failed to capitalize on its wealthy tax base. Its finances have
been strained by its over-reliance on often volatile sales tax
revenue and hundreds of millions of dollars of property tax
refunds it owes due to a faulty assessment system.

Nassau has followed through on a novel strategy it has
explored in the last weeks to handle its backlog of property tax
refunds: having private investors purchase them, with the county
repaying the investors the principal plus interest over time.
.

Nassau over the years has issued hundreds of millions of
dollars of bonds to pay property tax refunds, but Democratic
legislators have declined to approve more borrowing.

Under the new arrangement, property owners stand to get
their refunds much sooner – if they voluntarily accept the
settlements – while Nassau cuts the interest payments it owes.

“This settlement provides homeowners with their rightfully
owed property tax refund while protecting all taxpayers,”
Mangano said in a statement.

RPTF LLC, a Delaware limited liability corporation, on Sept.
14 signed a memorandum of understanding with Nassau for the
purchase of about 18,000 tax certiorari judgments valued at
total of $20 million.

One-sixth of the judgments – each of which is worth less
than $100,000 – will be paid each Nov. 1 from 2014 to 2019,
according to the memorandum.

Nassau will pay at 5.95 percent on the unpaid amount, twice
a year, starting from May 1, 2013.

That is just under half of the 12 percent interest rate that
Nassau risked having to pay the property owner, according to a
source familiar with the matter. But it is a much higher rate
than Nassau would pay if it had sold tax-free debt to pay the
tax refunds, according to a copy of a court settlement.

No approval by any state financial control authority is
necessary, the court document noted.

A spokesman for the county executive had no immediate
comment on how many judgments the investor might purchase.

In a statement, the county executive noted that his budget
plan paves “the way for continued economic growth by holding the
line on property taxes for a third year in a row and by
restricting spending.”

In July, Mangano unveiled a plan to close a projected $45
million gap in the current budget. The 2013 budget Mangano
unveiled was balanced.

Mangano’s multiyear financial plan projects that the 2014
budget will have a nearly $67 million gap, followed by a $74
million deficit in 2015 and a $92 million gap in 2016.

Privatizing the sewer system is expected to raise a total of
$80 million in 2014 and 2015 to help close those gaps, according
to the budget documents. Labor concessions would generate $12
million in both of those years.

Silver, who represents lower Manhattan, has been a forceful
advocate for students, unions, tenants and the poor since he was
elected speaker in 1994.

The 68-year old is known for his ability to come out ahead
in backroom deals reached by the three most powerful state
politicians – the governor, the speaker and the senate majority
leader. The secret decisions taken by these so-called “three men
in a room” have prompted much criticism from civic advocates.

But Shelly, as fans and rivals call Silver, has been hurt by
his agreement to keep confidential a $103,000 settlement -
mostly paid with public funds – of sexual harassment charges
against Assemblyman Vito Lopez, a Brooklyn Democrat. Lopez is
now facing new sexual accusations from two female interns.

None of the half a dozen experts interviewed expect Silver
to lose his position as speaker – unless the ethics probes
uncover criminal wrongdoing or lead to sanctions.

Such a development would be a shock – even in a state in
which former Governor Eliot Spitzer, a Democrat, resigned in
2008 amid a prostitution scandal – because the speaker is a
lawyer known for his caution and scrupulous attention to detail.

“At this point, nothing is going to happen to Shelly,” said
George Arzt, a political consultant.

But Governor Andrew Cuomo, a Democrat who eclipsed Silver’s
position as the state’s top Democrat after winning election in
2010, stands to gain further traction.

Senate Majority Leader Dean Skelos, a Republican, has less
to gain because he controls the Senate with only a two-seat
majority – and faces a possible upset in November’s election.

“To the extent that Shelly is weakened, I think it is
vis-à-vis the governor,” said Douglas Muzzio, a public affairs
professor at Baruch College/CUNY.

Over the years, Silver has had an immense impact on the
finances of the state and New York City.

This spring, he rejected Cuomo’s plan to offer public
workers an optional 401(k) plan. That reduced the amount of
savings in a new law, which cut benefits for future hires.

Last week, Cuomo publicly defended the speaker, telling TALK
1300 radio that the settlement was not “a secret deal done by
Sheldon Silver” because the offices of the attorney general and
state comptroller were also involved.

Experts said the support Cuomo gave Silver then created a
chit the governor at some point will collect.

“The governor provides support at a key moment and then
Shelly knows he has to deliver… that debt won’t be forgotten
and it won’t be forgiven,” said one analyst, who requested
anonymity because he was not authorized to speak publicly.

Silver has already compromised with the governor on key
issues – such as linking teacher evaluations to tests. Though
Silver wanted to raise income taxes for the wealthy, he agreed
to Cuomo’s bill that cut income taxes for the middle class.

The teacher evaluation measure, along with the pension cuts
for new hires and the failure to make the rich pay higher taxes,
were unpopular with the unions that are among the Assembly
Democrats’ most important constituencies.

Silver has been such a powerful speaker, partly because of
his tight control of the Democratic Assembly majority. He is
highly skilled at getting bills enacted and has an unparalleled
understanding of the arcane aspects of the state budget,
according to Hank Sheinkopf, a political consultant.

But at times, Silver has put election or other
considerations ahead of New York City’s interests, critics say.
For example, the speaker’s decision in a 1999 election campaign
to support abolishing a commuter tax cost the city $360 million
in annual revenue that has never been replaced.

“That is one of the things that – being an old Roman
Catholic – that is a mortal sin, and there are no indulgences
for that particular mortal sin,” Baruch College/CUNY’s Muzzio
said.

Silver also felled two of Mayor Michael Bloomberg’s prized
initiatives – a football stadium on Manhattan’s west side and a
congestion pricing plan that would have raised revenue for mass
transit by charging motorists fees for driving into midtown.

The speaker’s decision to kill the new football stadium
pleased residents who feared the traffic it would create; the
congestion pricing fees Bloomberg wanted were deeply unpopular.

Silver’s spokesman declined to comment, but cited Silver’s
accomplishments, including winning a sharp increase in aid for
poor schools, boosting safety net programs, extending New York
City’s rent regulations that benefit tenants and helping
students afford tuition at public colleges.

Silver’s plan to push the Republican-led state Senate into
raising the minimum wage to $8.50 an hour from $7.25 after the
November elections probably has become more of an uphill battle,
the experts said.

(Reuters) – A new arts center on the site of the former World Trade Center in New York should be open by 2017 or earlier, despite delays in funding and design issues, a city official said on Thursday.

The Lower Manhattan Performing Arts Center, designed by Frank Gehry, is expected to be built where a temporary commuter railway station now stands on the 16-acre (6.5 hectare) World Trade Center complex.

Fundraising has proved challenging, with the center’s pricetag estimated at more than $400 million.

Construction of the center will be complicated because it will sit on top of underground railway tracks – and the 1,000-seat theater will have no columns.

Even with these obstacles, New York City’s cultural affairs commissioner said the center could open ahead of a 2017 target.

“That is depending on the final design of the building,” said Kate Levin, after a board meeting of the Lower Manhattan Development Corporation (LMDC), whose goal is to revive the downtown area devastated by the September 11, 2001 attacks.

Like all the World Trade Center projects – the skyscrapers, the memorial and museum, and the mass transit hub – plans for the cultural center have been contentious.

Only one of the four institutions initially offered space at the center still plans to move to the complex.

The LMDC unexpectedly failed on Thursday to include $1 million of funds the arts center sought to hire staff.

The Performing Arts Center is also waiting for the Lower Manhattan Development Corporation to turn over $155 million of funding that has been allocated for it.

“There is some concern about how the entire project will be funded and how the structure of the funding will be going forward,” explained David Emil, LMDC president. He added that the agency wanted to wait for a clearer financial picture.

Avi Schick, LMDC chairman, suggested the funding request might appear on the agenda for the October board meeting.

Officials say the size of the new theater will give artists, directors and producers an alternative to the only two options the city now offers: small theaters with around 450 seats or much larger venues with thousands of seats.

“I believe the performing arts center is a crucial plan for the building of the World Trade Center site because the attack on the World Trade Center was in essence an attack on American culture,” Emil said later.

(Reporting By Joan Gralla; editing by Andrew Hay)

(Reuters) – In the next fare hike, New York City’s bus and subway riders might lose some of the current discounts that cut the average cost of a ride to $1.63 from the $2.25 base fare, the chairman of the Metropolitan Transportation Authority said on Wednesday.

“Do we need a discount that deep?” asked MTA Chairman Joseph Lhota after addressing a Crain’s New York breakfast. Discounts are part of the city’s culture, he noted, but added: “I think we need to have a very good public debate about fare prices and discounts.”

The cash-poor MTA, which runs the city’s buses, subways, commuter railroads and some major bridges and tunnels, plans to increase fares and tolls in March 2013 to raise $450 million of revenue on an annual basis.

By mid-October, the MTA plans to release a brochure that will outline the new fare and toll options.

The MTA is the biggest U.S. mass transit agency, with 8.5 million daily riders. Its finances are strained by the costs of maintaining a system that dates back to 1904 and paying for spiraling debt service and pension benefits.

A spokesman could not immediately say how much it costs to keep the subway system in good repair.

Currently, bus and subway riders get 7 percent discounts on a $10 MetroCard. Unlimited MetroCards for a week or 30 days let users ride for free after a certain number of trips. All these discounts are being examined, officials said.

Lhota said the MTA’s savings should reach $1 billion a year by 2016. For example, he said subway station ceilings will no longer be repainted and instead the concrete will be exposed.

The MTA is expanding its network with a new $4.45 billion Second Avenue subway on Manhattan’s East Side and a tunnel that will bring Long Island Rail Road commuters to midtown’s Grand Central Terminal, a project that will cost $8.24 billion.

In August, a state court ruled that an MTA payroll tax was enacted unconstitutionally because it applies only to 12 downstate counties and not the entire state.

Lhota said he was confident the top state court will reverse the court ruling that could cost the MTA $1.8 billion of revenue a year. That estimate is $300 million more than earlier forecasts as it includes related funds that also would be lost.

Asked about contract talks with the Transport Workers Union – which called the last transit strike in 2005 – Lhota said only that the union does not want to accept his proposal for three years with no wage increases.

Some MTA board members complain of burdensome TWU work rules, which the union has resisted softening. Lhota underscored the difficulty of winning concessions, saying: “Clearly, incremental improvements would be transformational.”

The MTA chairman also called for removing statutory barriers that hinder the use of Tax Increment Financing. That is the financing strategy Mayor Michael Bloomberg used for an extension of the No. 7 subway from Times Square to West 34th St when the MTA could not afford the new link.

With this financing, bondholders are repaid by the extra tax revenue a capital project, such as a new transit link, is expected to bring to an area by spurring development.

(Reporting by Joan Gralla; Editing by Dan Grebler)

The property, called Site 5, could fetch $135 million to
$200 million, two of the sources said.

Site 5 is owned by the Lower Manhattan Development Corp, a
city-state agency created to rebuild that part of the city after
the Sept. 11, 2001 attacks. Across from the World Trade Center,
the land had been occupied by the Deutsche Bank building, which
was damaged in the attacks and later demolished.

The accord between the Port Authority and National September
11 Memorial & Museum announced on Monday obliges the Lower
Manhattan Development Corp to fulfill a 2006 agreement by
turning Site 5 over to the Port Authority.

In exchange, the Port Authority would give the museum title
to the eight acres of land it and the memorial occupy on the
16-acre (6.5 hectare) World Trade Center site. The memorial
honors nearly 3,000 people who perished as a result of the
attacks.

“Under the 2006 agreement, it (Site 5) is supposed to be
swapped for the eight acres on which the museum and memorial are
located,” Port Authority Vice Chairman Scott Rechler told
Reuters on Tuesday after a service for 84 Port Authority workers
who were killed on Sept. 11.

The land swaps were delayed by a political standoff over who
would run the annual Sept. 11 anniversary ceremonies held on the
memorial plaza, two of the sources said. The sources asked for
anonymity because they were not authorized to speak publicly
about the matter.

The governors of New York and New Jersey, who run the Port
Authority, wanted more control over the ceremonies.

The annual memorial has been managed by New York City Mayor
Michael Bloomberg because he chairs the foundation that runs the
museum and memorial, and the city’s police are responsible for
security.

The deal gives the two sides six months to finalize the land
swaps. One of the sources said that if only part of Site 5 were
to be transferred to the Port Authority, New York state’s Public
Authorities Control Board might have to approve the deal, which
could complicate the matter.

MORE MONEY FOR PORT AUTHORITY

The Port Authority owns the World Trade Center complex,
which it is rebuilding with developer Larry Silverstein. The
Port Authority’s projects include the underground museum.

Last year, Port Authority stopped building the nearly $1.3
billion museum because it was arguing with the museum foundation
over cost overruns.

Monday’s accord cleared the way for New York Governor Andrew
Cuomo and New Jersey Governor Chris Christie to attend Tuesday’s
11th anniversary ceremony by resolving the cost dispute and
creating a coordinating committee to handle such events.

In July, the foundation said politicians would be excluded
from speaking roles to focus on victims’ families.

The sources said this pressured Christie and Cuomo to reach
the accord with Bloomberg on Monday. The deal clears the way for
work on the museum to resume in October, Rechler said. The
project should be finished by late 2013 or early 2014, he said.

A spokeswoman for Bloomberg declined to comment. Cuomo’s
spokesmen had no immediate comment, and a spokesman for Christie
referred questions to the Port Authority. No politicians spoke
at Tuesday’s memorial.

Unlike the World Trade Center land, which can only be used
for commercial development, Site 5 can be used for apartments, a
hotel or offices.

“The site would be most valuable if it supported apartments
with a hotel on the lower floors,” said Robert Von Ancken,
chairman of Landauer Valuation & Advisory, a division of Newmark
Grubb Knight Frank.

A combined hotel and apartments could sell for between $135
million and $150 million, based on comparable sales in the area,
the height of the building and the market at the time, he said.

The Port Authority could use the cash as it struggles to
find funds for the World Trade Center and airport, bridge and
tunnel projects.