November 14, 1908





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Vo!,  LXXXII.





NOVEMBER 14, 1008.





No,  212ii





EVERY taxpayer in New York City should ponder seri¬
ously the open letter which Mr. Edgar J. Levey has
a'ddressed to the committee of the Legislature, now engaged
in investigating the finances of the city. The Taxpayers'
Alliance would do well to have it printed and circulated as
a 'pamphlet. In this letter, which was published in a recent
number of the New York Times, Mr, Levey analyzes with all
the authority of a trained financier the danger which threat¬
ens the property owners of the city. Comparing the Budget
figures of 189S with those for 190S, he shows that in ten
years an increase in population amounting to 35 per cent,
has been attended by an increase in expenditure amountins
to 10(1 per cent. Expenses, that is, have increased three
times as fast as population. If the same rate of increase
continues for another ten years, New York City will be
spendiug ?370,000,000 every year, which will constitute a
per capita charge of $54 against a comparative charge of
$26 in 1908. A doubling of the amount of money spent
per capita would not mean a doubling of the tax rate, for the
increase in assessed valuation is likely to be larger than
the increase in population, but it would assuredly mean an
increase in the tax rate of more than a half—perhaps as
muth as three-quarters. Moreover, it is very probable that
a large proportion of this enormous increase in expenditure
would have to be paid by the property owners themselves.
Owners of real estate can shift their tax burden on their
tenants only in case those tenants have no escape, but are
obliged to-pay what the landlord demands. But in the case
of New York, it will be possible for hundreds of thousands
of people to meet any increase of rents by an exodus to New
Jersey. Consequently, an increase by an abnormal percent¬
age in the tax bills would diminish the value of New York
real estate by just so much. In certain parts of the city
its value would assuredly decline; and with the decline in
value would come, of course, a diminished increase in
assessed valuation, and consequently a relatively heavier
tax burden on the remaining property, A gradually accu¬
mulating increase in taxes becomes, consequently, equiv¬
alent practically to confiscation, aud the property owners of
New York in insisting upon a reduction in the municipal.ex¬
penses will be fighting, not merely for the saving of a little
of their money, but in a measure for the preservation of
the substance of their property. A continued increase in
the municipal expenditures amounting to three times the
increase in population will mean in the long run the prac¬
tical appropriation of private property for what are called
public purposes.





THB analysis made by Mr. Levey of the way in whicli
this increase of 100 per cent, in New York's municipal
expenditures is distributed brings out many significant facts.
In the first place, the money needed for the debt service in¬
creased from about $14,000,000 to over $40,000,000, an
expansion of 189 per cent. There can. consequently, be no
doubt that any thorough-going .reform in the city's finances
must begin with this item. N-6 city can go on mortgaging
the property at such a rate without coming to grief. Many
expenses for which bonds are issued, such as repaving,
should be charged to taxation and the increase so made in
the Budget raust be saved by other economies. If the in¬
creased cost of the debt service be subtracted- from the total





increase, there remains an expansion of only 78 per cent, in
the general expenses of the city, which is too much, but
by no means as much too much. Next to the debt service
Ihe most important increase in tbe Budget is to be found in
the Department of Education, which is actually receiving
and spending 122 per cent, more money than it did ten
years ago. "Well may Mr. Levey say that such an enormous
augmentation of expenditure, amounting to four times the
increase in population, fairly shrieks for some adequate ex¬
planation. The several Borough Presidents are receiving
about double" what tbey did ten years ago; and it may assur¬
edly be claimed that no corresponding improvement in ser¬
vice has accompanied this particular increase in expenditure.
Another case of a huge increase is that of puhlic libraries.
Since 189 8 the appropriations for this purpose have in¬
creased 425 per cent,, and the amount now devoted thereto
by the municipality would pay four per cent, interest on over
$23,000,000 of city stock. Are the libraries worth it? And
what are we to thinlc of Mr. Carnegie's extraordinary gene¬
rosity in getting the city to spend the equivalent of $18,000,-
000 in return for a gift of $5,000,000? We cannot follow
Mr. Levey's detailed analysis of New York's municipal ex¬
penditure any farther, and indeed, it is not necessary to do
so. The point is that these increases have been continual
and have tended even to be greater towards the end than in
the beginning of the period. It is obvious that a condition
of this kind calls for a .remedy as drastic as the disease; and
unless such a remedy is found, New York property owners
will be in the position of having their property appropriated
to a very considerable extent in order to pay for municipal
extravagance.





AS A RULE, real estate is a department of general busi¬
ness operations which is last to feel the effect of an
industrial and . commercial revival. It is not until after
business men have been making money for some time that
ihey begin to consider the investment of a certain proportion
of their proflts in new factories, warehouses and more ex¬
pensive dwellings. In the present instance, however, it
looks as if real estate and building in New York and in some
of the other large cities would participate almost immedi¬
ately in any general revival of business. In the first place,
it must be remembered that the period of dullness and in¬
activity, at least so far as Manhattan is concerned, has now
lasted for ahout two years. During 1907 general business
remained voluminous until the panic, but the real estate
business in Manhattan and the Bronx had already anticipated
the effect of the coming storm. The extreme diSiculty of
borrowing money except at very high rates and the great cost
of building had already diminished by a large percentage the
amouut of capital invested in new construction, and had con¬
sequently already reduced the effective demand for real
estate. For two years, consequently, Manhattan and the
Bronx have been adding to their stock of residence accom¬
modations only at a comparatively moderate rate; and with
a revival of business there will be room for a considerable
increase in the construction of the various cheaper classes
of housing. This is particularly so in the case of tene¬
raents. During 190S a considerable number of recent immi¬
grants returned to Europe and by their departure left a
larger proportion of vacancies iu Manhattan tenement houses
than had existed for many years. The erection of such
buildings iu Manhattan and the Bronx was unpopular in 1907
and fell almost to nothing in 1908. But there is now every
indication that these iramigrants will return in equally con¬
siderable numbers, and will rapidly fill up the vacancies in
the tenement house regions. A fair demand consequently
may be expected for unimproved property in all those parts
of Manhattan and the Bronx which are available for the
immediate erection of apartment and tenement houses. There
is also another reason for believing that a revival of
general business will have its immediate effect upon real
estate in New York. The deraand for real estate in this
vicinity is almost as much influenced by speculation as is the
demand for stocks. It is the function of speculators to an¬
ticipate any rise in prices that is likely to result from an
increase in population or business, and to begin their pur¬
chases before the legitimate business demand actually sets
in. It may be expected, consequently, that during the com¬
ing year an active speculative movement will take place in
those parts of Manhattan which will eventually be most bene¬
flted by a business revival. Speculators in this class of
property have been comparatively quiescent for a couple of
years, and it is improbable this will remain so much longer.