Two features of the financial system of New York that increase expenditures can and should be changed. Taxes are now collected in the last quarter of the year upon an assessment made twelve months before. This compels the city to borrow large sums of money to meet current expenses. In 1899 the city borrowed, in anticipation of taxes, the sum of $48,027,450, on which the interest amounted to $755,704. If the taxes were collected during the first quarter of the year, the city would not only save this three quarters of a million dollars interest on temporary loans, but for six or seven months would have large cash balances in depository banks earning two per cent. This change would be worth approximately $1,500,000 a year to the treasury, but it must be made by degrees in order that taxes shall not be collected twice in a twelve-month.
Under the present constitutional restriction upon the borrowing capacity of the city, New York is placed in the contradictory position of getting richer and poorer at the same time and by the same process. The restriction of the debt limit to ten per cent of the taxable real estate is arbitrary, and makes no distinction of obligations. Every time the city acquires additional real estate for parks, docks, schoolhouses, or any other purpose its borrowing capacity and income from taxation are reduced, because the property acquired no longer yields a tax and it is not counted in the valuation upon which the debt limit is fixed. This is the most illogical and unbusinesslike feature of the present financial system.
The piers owned by the city are profitable investments, yielding a revenue in excess of interest and sinking fund for the bonds issued; yet if we should acquire $100,000,000 of additional water front now owned by private parties the borrowing capacity of the municipality would be reduced $10,000,000, and the income would suffer the amount of taxes on the land acquired. There should be adopted a constitutional amendment that would separate debts incurred for revenue-yielding investments, such as docks and waterworks, from those created for general public improvements. The former should not be a charge against the borrowing capacity of the city.
The budget of the city for 1900 is $90,778,972.48, which will be reduced $9,000,000 by the general fund, leaving some $82,000,000 to be raised by taxation. The magnitude of this outlay for current expenses may be better understood by comparison with the expenditures of other large cities. The approximate current expenses of London last year were $73,000,000; of Paris, $75,000,000; of Berlin, $23,347,600; of Boston, $35,454,588; of Chicago, $32,034,008; of Philadelphia, $27,075,014.
In 1899 the State tax paid by the city of New York amounted to $6,275,659, or nearly seventy per cent of the whole; interest on bonds absorbed $11,275,822, leaving $75,813,644 as the actual cost of the current expenses of local government. The gross budget represented a per-capita tax of $24.62 on 3,500,000 inhabitants, of which $19.56 was for local expenses. Of this enormous expenditure more than $35,000,000 is paid out in salaries and wages to 37,000 officers and employees. The Police Department cost $12,000,000 a year, of which $10,700,000 is for salaries. New York has 6,400 policemen. Philadelphia has 2,600, and the annual cost of the department in that city is $3,100,000 a year—much lower in proportion than that of the metropolis.
The salaries and wages paid to all regular department employees, including policemen, firemen, street cleaners, and dock builders, are higher than those paid in any other city in the world, and almost without exception the rate has been fixed by act of the State Legislature, and not by the local authorities. In the matter of fixing the pay of officers and employees the city of New York has never known any degree of home rule.
The magnitude of the city in wealth and population has always operated against economy in local government. There has existed, apparently, an overwhelming popular sentiment in the city, as well as throughout the State, that such a great municipality should pay the maximum price for everything it might require. If this sentiment had been satisfied by the payment of high salaries and wages it might have been excusable from some points of view; but it was not, and the demand for more money from the public treasury has extended to every class of expenditure.
The city of New York is a purchaser in the open market of supplies exceeding in value $5,000,000 a year. This figure applies only to articles purchased without competitive bidding. There is in the charter a provision that all purchases of supplies and labor in excess of $1,000 shall be made by open competitive bidding. This leaves a wide field for fraud and favoritism, and it is an easy matter to evade the spirit and letter of the law relating to competition. If a department requires material and supplies amounting to $10,000, or even $50,000, it is often possible to make the purchases in lots of less than $1,000 from day to day, and thereby obey the letter of the law while permitting the grossest frauds against the city treasury.
Under the system that has grown up, protected by this imperfect legal restriction and opinions and decisions to the effect that the city has no defense against excessive claims unless fraud and conspiracy can be proved, robbery of the public treasury has not only been legalized, it has been made respectable. The comptroller, who is by law the auditor of accounts, may be able to show that the city has been charged double or treble the market rate for supplies purchased, yet under the legal opinions and decisions that have prevailed for two years he is not permitted to interpose any defense to an action to recover unless he can prove that there was a conspiracy or agreement to defraud. In the very nature of things it is next to impossible to secure legal evidence of such agreements; therefore the city has been robbed with impunity. The methods of the Tweed ring have long been out of date in the city of New York, and fraud upon the public treasury has become a respectable calling.
It is not easy—in fact, not possible—to determine accurately how much the expenses of the city have been increased in recent years by the lax interpretation of an imperfect law and the tolerance of a public sentiment that demands proof of crime on a large scale before becoming aroused to a condition of effective action. It is safe to say, however, that a perfect system of buying in the open market at the lowest prices obtainable, if honestly enforced, would save to the taxpayers more than $1,000,000 a year.