A Painful Step Toward Solvency

Whatever the immediate peril -- pow er failure or transit strike, water short age or race riot -- New York City, like Pauline, invariably manages a third-reel deliverance before crisis turns to catas trophe. The city's latest ordeal, a dearth of funds that has threatened imminent, crippling reduction of municipal services, was averted last week as usual at disaster's doorstep.

For years, the nation's biggest city has followed a Micawberish routine of using reserves and loans to meet ever-rising operating costs. When Republi can John Lindsay took office in January on a clean-up-the-mess platform (TIME cover, Nov. 12), he immediately pro posed a city income tax on both resi dents and commuters as the principal source of new revenue.

Rocky Role. Lindsay's fiscal program would be difficult to enact at any time, not only because of endemic popular opposition to any broad-based levy but also because of New York City's stepchild relationship to the state legislature, which controls its powers of taxation. Political divisions and election-year considerations have made matters worse than usual. The new Republican mayor had to contend with a Democratic city council, which nonetheless gave him reluctant backing on much of his program. In Albany, the Democrats dominate the assembly while the Republicans rule the senate. Moreover, Republican Governor Nelson Rockefeller and the entire legislature must run for re-election this year.

Each faction has had its own interests to defend. Rockefeller, facing a rough third-term campaign, cast himself disingenuously in the role of "honest broker," infuriating Lindsay by his lack of direct support. Lindsay's reformist zeal, in turn, only alienated upstate legislators, who instinctively recoiled from the prospect of taxing commuters in order, as they saw it, to finance the city's sacrosanct, heavily subsidized 150 transit fare. The wrangling forced two extensions in the city's deadline for enacting its 1966-67 budget; the second expired last week.

Toughest Ever. With that, Rockefeller called a meeting with Lindsay and city and state legislative leaders in his Albany' mansion. For three days and the better part of three nights, the stubbly, shirtsleeved negotiators gnawed at one another and the gristly issue of who should be taxed how much for what. During the second day, Rockefeller groaned: "These are the toughest negotiations I've ever been in." At 4 a.m. on the fourth day, an agreement was announced.

Mayor Lindsay had gone into the meeting with a minimal package of requests amounting to $520 million. He emerged with $283 million in new taxing authority and the assurance that the city would get sufficient additional income from existing taxes and state aid programs to raise the total to $385.5 million. Though the sum was far short of his goal, Lindsay scored a moral victory by winning a graduated income tax of up to 2% for city residents and a token "earnings tax" of from one-fourth to three-eighths of 1% on commuters.* The subway fare will almost certainly have to be increased.

While the city got less than it sought, the city council at week's end was at least able to enact a balanced budget that, with some relatively minor trimming, fell just $134 million under Lindsay's $4.6 billion request. "We have done the best we can," said the weary and wiser mayor. For those who live and work in the city, the pain of higher taxes was at least eased by the prospect that New York was finally on the road to fiscal responsibility.

-- The income and earnings levies will bring in $160 million. By contrast, a 25% increase won by Lindsay in the stock-transfer tax--a hike that attracted national publicity and caused the New York Stock Exchange to threaten to move to New Jersey--will be a minor source ($35 million a year) of new revenue.

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