New York City homeowners are thrilled with this year’s $400 property tax rebate from City Hall which started arriving on Tuesday.

Resurrected by an unusually rebellious City Council, which pressured Mayor Bloomberg into backing off his threat to withhold them to help close a budget shortfall.

The rebate checks were at the center of one of this year’s most divisive debates at City Hall. On one side was Mr. Bloomberg, who created the rebate program in 2004, but abruptly announced in November that the city would not issue the checks this year because it could not afford to do so, in the face of an increasingly bleak financial situation. On the other side was the Council and its speaker, Christine C. Quinn, who at one point said that there was not “a snowball’s chance in hell” that she would acquiesce to the mayor’s decision.

Mr. Bloomberg may not necessarily have been motivated solely by good will. By law, only the Council, as it pointed out to the mayor, has the authority to withhold the checks.

In the end, both sides got something they wanted, though to homeowners, the deal was a wash, at best. The checks have gone out, but Mr. Bloomberg persuaded the Council to approve a 7 percent property tax increase, effective on Thursday, raising tax bills by hundreds and, in some cases, thousands of dollars a year.

Speaking to reporters on Monday at Rockefeller Center as a crowd of tourists looked on, Mr. Bloomberg seemed conflicted as to what homeowners should do with their rebate money. “If you ask me for financial advice, which I should not be giving, I would say be a little bit conservative, you know, wear that dress one more season, wear the cargo one more year,” he said. “But on the other hand, if you all do that, then we’re going to have the recession that I’m trying to prevent.”

There is no doubt that the rebate checks will arrive in mailboxes at a grim moment for the city. Wall Street, which accounts for 9 percent of the city’s revenue, has logged $500 billion in losses. The financial sector, the bedrock of the local economy, has shed about 150,000 jobs. And the municipal workforce has shrunk by 3,000, including 500 layoffs.

To top it all off, the city is facing a deficit of at least $1.3 billion in the fiscal year that starts July 1 and the mayor is legally required to come up with a way to balance the budget. He has ordered agencies to cut their budgets and on Monday, he signed bills authorizing the property tax increase, which will generate an additional $576 million in revenue, and an increase in the hotel tax, which could yield an extra $80 million between March and June 2010.

The property tax rebate will cost the city $256 million.

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(Source: NY Times)