NYC’s fiscal years runs from July 1 to June 30. City Council can adopt a new budget anytime in June and must by July 1. The budget can be modified after it’s adopted and is typically assessed per quarter, just like any business after it starts collecting revenue. Though there was a temporary pause in restaurant inspections starting March 2020, the Department of Health collected $8.4M between July and October. Even with its focus on COVID-19 compliance rather than regular inspections, this still accounts for a normal quarter of its typical annual revenue. In 2019, the department collected $30M; in 2012 (two years after letter grades were introduced post-recession), it collected a peak $53.6M.

For FY 2022, the DOH has approximately 7K employees and a proposed operating budget of $2.05B, of which $980M is city tax levied dollars (CTL). The proposed budget got a boost in April from the federal American Rescue Plan ($151M for the next two years), an additional $144M in city tax, and a savings of $3.5M from 2021. The majority of this will go towards vaccination efforts, as well as $647M for expanded mental health resources and $1.4M for lead poisoning prevention. But since this is only a temporary boost, fines remain in the budget.

TAX VS. PENALTY

We’ve written a lot about the purpose of a tax versus a penalty. In case anyone tells you otherwise, the purpose of a tax is to raise revenue. A penalty is successful if it does not raise revenue. And yet, it has become customary for the city to expect revenue from fines — in many cases, more than it did the year before. All last year, all we heard about was the shortage of tax funds, yet collection far exceeded what was in the budget, $2.4B more than anticipated for FY 2021. Despite this, the city lost $74.5M in fines, so for FY 2022, it plans to collect $1.06B in fines. This is an increase of $114.2M from the $1.02B it expected for 2021. Where is the incentive for compliance education?

You won’t find this line in the DOH’s budget, even though we pay inspectors to go out and issue fines. The money is collected by the Office of Admin Trials & Hearings, where the summonses that are issued by the DOH are disputed and paid — along with those by other city agencies, listed here. Below you’ll find how much OATH charges for actual services that it provides ($11K annually) versus how much revenue it expects to take in from fines. In FY 2021, OATH only collected $110.8M. We say only because this is $40M less than expected when the budget was adopted last July. Remember the city collected more taxes in 2021 than it predicted it would. It also received funding from the federal American Rescue Plan. But that still doesn’t stop the fines.

For FY 2022, beginning this July 1, OATH has estimated that it will collect $134.9M, That’s $24.5M more than during 2021. We’ll phrase that another way. OATH expects to collect $134.9M more from businesses that were mostly shutdown last year and are still trying to make it through the next year.

During the first mayoral debate on May 13, Brian Lehrer asked our 2021 candidates for a single city regulation they would remove as an unnecessary financial burden on small businesses while keeping the public safe. Their answers in the clip below.

While De Blasio ran for mayor as our public advocate in 2012, he at least knew that these fines, as he put it, “belie the myth that New York City hasn’t raised taxes in recent years”. He even sued the Bloomberg administration for what he called a hidden tax. 2021 hopeful Kathryn Garcia recognized the burden of surprise DOH inspections, while others either focused on signage — which was actually the focus of a 2013 bill that completely left out the DOH — or a moratorium on fines for the next year. Yang, meanwhile, couldn’t name one, so he reached for criticizing delivery app fees.

We would like to be very clear about this. The city can put all the moratoriums it wants on this process but it still doesn’t pay the bill. If the city can do without these fines this year, then why do we have them at all?  

We hope that every candidate will take the time to understand the real effects of this imbalance. We’d like to move beyond the fear that big business will leave if it has to pay its share in tax (or any at all) and instead look at those we expect to pick up the tab. 

__

Learn more in our latest piece, The City Still in a Fine Mess. Join our campaign, Vendors for #Intro2233, the bill to end punitive fines from all city agencies.