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Q&A
Determining the appropriate size for NYC's reserve funds
5:49:02
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99 sec
Council Member Williams inquires about the appropriate size for NYC's reserve funds. IBO Director Chafee discusses various metrics and calculations to consider, emphasizing that there's no definitive answer but 'more is better'.
- Chafee mentions a general household finance principle of having six months of spending in savings
- For NYC, six months of operating costs would be around $50 billion
- Current reserves are estimated between $2 billion to $8 billion
- The discussion highlights the challenge of determining an ideal reserve amount given the city's complex financial needs and potential risks
Nantasha M. Williams
5:49:02
Thank you.
5:49:03
And what do you feel is the appropriate size for the reserve fund?
Louisa Chafee
5:49:10
Well, what a wonderful question.
5:49:12
So we have debated this question amply internally and we are quite sure that more is better.
5:49:19
We don't know we don't feel that there's a general number and the reality is there's no number that the city could set aside that would genuinely compensate for what might be cut.
5:49:29
But I'm gonna give a couple different ideas.
5:49:33
Best practices of household management, financial management, and the city's budget is not a household, but just a vague equivalent is to have about six months of general spending in savings.
5:49:49
Now as Councilman Brennan knows, because of the request of what does it cost to operate the city for a day, you basically take the city budget, divide it by $3.65 and there's each day's cost.
5:50:00
So that is significantly more money than we believe could be found to be put into reserves.
5:50:07
Another
Nantasha M. Williams
5:50:07
Do you have a dollar amount of that?
5:50:09
Because have six months.
5:50:11
How much would it cost us to run the city for six months?
Louisa Chafee
5:50:15
Half of $119,000,000,000
Nantasha M. Williams
5:50:17
Yeah, like $50,000,000,000 Okay.
Louisa Chafee
5:50:20
Another thing to think about is that six months of of the city's payroll is about $25,000,000,000 Right now we have give or take 2,000,000,000 to $8,000,000,000 in reserves.
5:50:33
We don't have an answer, but we're trying to think about generally what might be a better target.