NEW YORK CITY-The local economy is rebounding faster than thatof the nation as a whole, but not rapidly enough to close a budgetgap that could reach $5.6 billion in fiscal 2014, New York StateComptroller Thomas DiNapoli says in a report released Wednesday.The report says the actual shortfalls for FY 2012 and beyond couldbe significantly larger depending on the outcome of the statebudget, collective bargaining negotiations and how both state andcity replace expiring federal stimulus funds.

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Private-sector employment in New York City grew 2.5% betweenDecember 2009 and October of this year, more than double thenational rate. The city has now regained almost half of the privatesector jobs lost during the recession, although the unemploymentrate remains high. Eighty-eight percent of new jobs added in NewYork State during this 10-month period are based in the city, manyrelated to retail, health care and restaurants.

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“New York City has relied heavily on nonrecurring resources tobalance its budget during the recession,” the report states.“Maintaining core municipal services at current levels will becomeincreasingly more difficult as those resources are exhausted andthe state takes steps to balance its budget.” The state isprojecting a $9-billion budget gap for next year, a shortfall thatcould have major implications for the city.

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DiNapoli notes that the city’s debt service is expected to growfrom $5.2 billion in FY 2011 to $6.7 billion by FY ‘14, a 31%increase. He adds that this rate of growth exceeds that of the cityfund revenues.

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On a brighter note for the city, Wall Street earned $21.4billion during the first three quarters of 2010. That’s far lessthan last year’s record of $61.4 billion, but that tally was fueledby federal assistance, and DiNapoli says the securities industry ison track for the second-highest level of profitability on record asthe year winds down.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.