NEW YORK, NY January 16, 2004 — In a remarkable turn-around from last year, Mayor Michael Bloomberg outlined a $45.7 billion dollar budget yesterday that includes tax relief for property owners, and even a surplus. WNYC's Amy Eddings has more.

With a row of city and American flags behind him, and a projection screen to the left of his podium, Mayor Bloomberg summarized the outlook for the fiscal year which begins this July.

Bloomberg: On balance, I am cautiously optimistic.

The mayor says he's cautious, because, in the long term, there are soaring costs the city has little control over. Bloomberg says, health and pension benefits for city workers, Medicaid, and debt service will grow 30 percent by fiscal year 2007, far outpacing revenue growth.

But, in the short term, Bloomberg's optimistic. Wall Street profits and tax revenues are up, tourism is on an upswing, and city agencies have found ways to save money, while maintaining services. The result: a one-point-four billion dollar surplus, the largest in several years. Bloomberg, ever the prudent businessman, wants to use it to help balance the 2005 and 2006 budgets.

Bloomberg: Now the benefits of raising taxes are coming home. And it's time to cut back the taxes, to some extent.

The political centerpiece of Mayor Bloomberg's budget is an annual $400 property tax rebate to the owners of homes, condos, and co-ops, people he said stepped up to the plate during last year's record property tax hike. It made Bloomberg's approval ratings plummet. The rebate is sure to be debated, even by good government groups. Diana Fortuna is with the Citizens Budget Commission.

Fortuna: I think from a tax policy perspective, the property tax is already inequitably skewed toward single family homeowners, also known as voters, and to give them a further break when the rest of the city's property tax base is still paying that huge 18 percent increase is a huge mistake.

The property tax rebate is already causing others to say, what about me? City Council Speaker Gifford Miller says he's disappointed the rebate won't help renters. And the United Federation of Teachers immediately issued a statement saying city workers should be treated fairly. The mayor's budget stubbornly holds the line on raises for city workers, stating they must be funded through productivity increases.

And, while the mayor found $250 million dollars annually to return to homeowners, he's still asking city agencies to find ways to save money. Bloomberg was asked why he was tightening city spending while offering a tax rebate.

55/Bloomberg: We're not cutting services. We are arguably increasing services by $381 million dollars, at the same time, $324 million dollars are being cut. The net is, we're increasing services by $50 million dollars.

But city councilmembers vehemently disagree with the mayor's calculations. They claim the cuts go deeper than he's proposing, because Bloomberg is not maintaining many programs the council fought hard to restore last year, such as summer jobs, child care, and infant mortality prevention programs. Councilwoman Christine Quinn says Bloomberg's budget will shut down 11 child health clinics.

Quinn: If you don't have somewhere to go to prevent your asthma from worsening, if you don't have somewhere to go to get your shot so you can go to school, that is a cut. The mayor can call it whatever he wants but it is a cut.

These are the priorities that will be fought over in the coming weeks, and the mayor's property tax rebate -though a small part of the overall budget - is sure to be raised in every negotiation. There are other risks. Bloomberg is counting on $300 million dollars in federal money. And he's seeking $400 million from the state. While it's a far cry from last year's request for almost two billion, the state may not be in any position to help. It's facing a multi-billion dollar budget crisis of its own. Then there's the contested issue of the state taking over the payments of the city's 1970s debt. If the courts rule in favor of Governor Pataki, the city could find itself with a half a billion dollar hole. In another moment of cautious optimism, Bloomberg says he thinks even this issue, eventually, will go the city's way.

For WNYC, I'm Amy Eddings.