Some Bites Out of the Big Apple

New Yorkers will pay 50-c- instead of 35-c- to ride subways and buses--a painful increase for lower-income people. Drivers will be charged up to 25-c- extra to traverse most bridges and tunnels. Fewer schools and playgrounds will be built because of a $375 million cutback in the capital budget. City workers have agreed to put off their promised 6% wage raise, and come next summer, those who work in air-conditioned offices will have to stop leaving the job an hour early. These were some of the "slashing economies" that a grim-looking Mayor Abraham Beame announced last week, adding, "There is nothing I have done in public life that has been more bitter."

After months of resisting growing pressures and trying to avoid drastic cutbacks, the mayor finally produced a package of economies that he hopes will restore confidence in city bonds and stave off threatened bankruptcy. His cutbacks are estimated to save some $500 million in an expense budget of $12 billion for fiscal 1976. Even so, his reductions may not suffice to encourage investors to buy the $4 billion in notes the city will have to market before the end of the year to meet its pressing short-term debt. "I don't know," mused Investment Banker Felix G. Rohatyn, one of the members of the new Municipal Assistance Corporation (Big Mac). "It may be enough. You can't be sure." Adds Controller Harrison ("Jay") Goldin: "The mayor has taken some very important steps. I think other things may be necessary."

Fed Up. Just a month ago, Beame had announced that the city's fiscal crisis was largely over. His premature optimism was based on New York State's creation of Big Mac with the authority to convert the city's short-term notes into long-term securities. Few thought that the corporation's nine illustrious voting members would have trouble marketing its bonds. To their surprise, Big Mac members discovered that many investors were unwilling to buy their offerings. Even though Big Mac bonds were secured by revenues from the city sales and stock-transfer taxes, they dropped 10% in value after they were offered on the market. Investors were plainly worried that New York's chronic inability to control its spending would jeopardize the value of the bonds.

Teaming up, Big Mac members and city officials squared off against the city's union leaders. Representing about 65% of the 320,000 municipal workers, the unions have gained an estimated 129% salary increase for their full-time employees between 1961 and 1973, in contrast to an 85.2% increase in the city's private sector. For four days and almost as many nights, the negotiations rum bled on, punctuated by occasional outbursts that could be heard through the closed hotel room doors. "For Christ's sake!" ... "F___ that!" ... "I'm fed up with Gotbaum!" ... "If you think there's garbage in the streets now!" ... "No! I want to negotiate!" Finally, the door opened and out filed the combatants looking no grimmer than usual. "That's normal collective bargaining," remarked a labor consultant with a smile.

When the maneuvering and posturing came to an end--at least for the time being--an agreement had been hammered out between the city and most of the unions. The pact provided not exactly a wage freeze, as Big Mac had wanted, but rather a sort of partial freeze: a graduated deferral of the 5% to 6% pay raise that had taken effect July 1. It would be put off until the end of fiscal 1978 and then would be granted only if the city's budget is balanced and if its bonds are being accepted by investors--two big ifs. Lower-paid workers would fare better under the plan than higher-paid ones. Those earning $10,000 a year or less would have to defer only 2% of their increase until 1978; those between $10,000 and $15,000 would put off 4%; and those above $15,000 would have to wait three years for the entire raise.

In other respects, the city would act as if the raise had been granted. Any worker who wanted to retire would get a pension based on the increased wages. Future contracts would be negotiated on the assumption that the increase took place.

The idea behind the agreement came from Victor Gotbaum, 53, chairman of the union negotiators and local chief of the American Federation of State, County and Municipal Employees, the largest of the city unions (110,000 members). The complexities of the compromise were characteristic of Gotbaum, who knows not only the familiar cries of public rhetoric but also the intricacies of private bargaining. Born in Brooklyn, where his father ran a printing plant, he holds a master's degree in international labor relations from Columbia University and has worked for the Government teaching collective bargaining procedures to union leaders in Turkey. Even at the darkest moments, he is able to retain a sense of humor. When asked last week what would happen when the negotiators reached a midnight deadline that Mayor Beame had set, he answered, "I turn into a pumpkin, what else?"

Most Restive. In addition to Gotbaum, leaders of some 20 other unions agreed to the compromise, but three key labor chieftains refused to go along: Albert Shanker, president of the American Federation of Teachers; Ken McFeeley, president of the Patrolmen's Benevolent Association; and Michael Maye, president of the Uniformed Firefighters Association. Since the members of these unions are generally more highly paid than Gotbaum's municipal workers, they would be hurt the most by the arrangement. Their members are also the most restive; in fact, Maye, a boisterous former Golden Gloves boxer, was recently voted into office partly because his predecessor was not sufficiently militant. Said the Patrolmen's McFeeley: "The two decisions I had to choose from were 1) to sell out my membership and 2) to sell out my membership with my blessing." Neither he nor the other balking union leaders threatened a strike, though the devastation that could be caused by a walkout of police or firemen is apparent. Shanker, who was the most intransigent of all the labor leaders, left the negotiations before they finished, apparently because his local teachers' union contract expires next month and he will be negotiating for a substantial raise.

Toughest Talks. Much will depend on the civic-mindedness of the membership of the unions, which are eventually expected to ratify the agreement, however grudgingly. In the case of the police and firemen, the city may have to add some sweeteners to break down their resistance. Gotbaum, who describes the negotiations as the toughest he has ever witnessed, declared: "The workers are identifying with the city." Banker Rohatyn left the sessions with heightened respect for the men who sat across the table from him and only rarely pounded on it. "What impressed me most about those guys," he said, "was that they were very serious, not histrionic."

The unions' acceptance of what amounts to a salary rollback was indeed an unprecedented act of abnegation on the part of organizations that had known nothing but gains for the past several years. It thus may create an important pattern for future negotiations between city and unions, both in New York and elsewhere. Observed a member of Big Mac: "The union leaders have had no experience in bargaining anything away. It's an unnatural process, like a parent talking about selling a child."

Once the program of retrenchment was announced, the banks agreed to provide the city with a loan of $250 million to help it avoid defaulting on $741 million in notes that fall due on Aug. 22, the next critical debt payment deadline. To fill the rest of the city's cash needs for August, including payroll and other expenses, Big Mac expects to make a private sale of some $650 million in bonds to a variety of New York institutions: banks, insurance companies, pension funds, corporations. Thus, Big Mac will not have to return to the public market until investors have had a chance to study Beame's austerity program and, if all goes well, be encouraged by it.

New Yorkers, at least, seemed to take heart. New York Governor Hugh Carey, who had put pressure on Big Mac to take a tough stand with the city, called the mayor's program "an act of courage." Senate Majority Leader Warren Anderson, a Republican who had led the fight to prevent additional state aid to the city, said that Beame "has made a 180-degree turn, which is exactly what had to be done." But it would have been better if Beame had made his turnabout earlier. In the time-honored fashion of New York politicians, he had put off dealing with the crisis in the vain hope that it would somehow go away. At first, he tried to accuse the banks, as if they were to blame for incurring the city's debt. When that failed, he made a loud plea for more state and federal aid, when those governments were also hard-pressed for funds. Then despite the fact that New Yorkers pay the highest per capita taxes of any city in the nation, he tried to impose a "nuisance" tax on a variety of goods and services and increased the city corporation tax and real estate tax, even though delinquencies are rising at an alarming rate because landlords are unable to pay.

When Controller Goldin tried to persuade him to make more cutbacks in mid-July, Beame testily retorted: "Jay, you've got a death wish." Big Mac's members became increasingly exasperated with the mayor. "Beame had to be pushed on every issue," says one member. "The Mac group got positively uncomfortable watching him squirm. Some people in authority who get into tough spots rise to the occasion. Some don't."

Beame, moreover, has been making cuts in what many people consider to be the wrong areas. At a time when the crime rate is rising, the mayor reduced the police force from about 27,000 to 24,000, though attempts are being made not to cut back on the men on patrol. The fire department has been chopped by almost a thousand down to 10,000, even though arson is gutting vast sections of the city. Rubbish and garbage are piling up on the streets because of layoffs among sanitation workers. People are burning garbage in the streets --there were 292 fires within one 24-hour period last week--thus putting another burden on the fire department.

Other more vulnerable areas of government have escaped the full force of the budget ax. The tendency has been to lay off line workers while leaving the better-paid administrators alone. There is little discussion of sizable cuts in the city's bloated welfare program, which supports more than 1 million people. Or in such debatable health services as the methadone maintenance program.

Still not satisfied that Beame was going far enough, Big Mac last week issued a report, unanimously approved, calling for a three-year ceiling on city spending at current levels and a moratorium on city-tax increases to try to stem the exodus of businesses and middle-class people from New York. The members also urged a "tough skilled management apparatus" to monitor more sternly the city's inadequate accounting procedures and money-saving efforts--a proposal that Beame found "insulting and humiliating." All in all, said Beame, who was fighting these proposals, "we have cut to the bone, but we cannot and will not cut into the bone."

Outside Aid. Finally, Big Mac echoed Beame and other local politicians in asking for outside aid. No city is an island--not even New York. It had tried to demonstrate good faith in sharply cutting back; now it felt it deserved a sympathetic response from others. Big Mac urged New York State to take over the cost of the city and state courts and prison system. It recommended that the Federal Government buy Big Mac bonds and provide a guarantee for them, thus making them more attractive to investors. The Government, added the group, should also assume the cost of programs of "national rather than local origin": namely, welfare and health insurance. It would take a joint as well as a local effort to restore the shine to the Big Apple.

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