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William C. Thompson, Jr.
Comptroller, City of New York
Remarks Prepared for Delivery
Association for a Better New York
September 4, 2002

Thank you, Bill, for that kind introduction. I would like to thank you and the Association for a Better New York for giving me the opportunity to address you this morning.

Next week, we will mark the one-year anniversary of September 11th. Like many New Yorkers, I find it hard to believe that a full year has passed since that tragic day, when our lives, and the life of our city, were forever changed.

Now is the time to remember the men and women who never came home on the evening of September 11th -- those who worked in the Twin Towers, those who responded to the scene and gave their lives saving others -- everyone who perished on that fateful day. It is a time to reach out and comfort those who lost loved ones, who are still grieving and still struggling to carry on.

Now is also a time to celebrate the spirit of New York, which remained undefeated in the darkest moments of that day, and which carried us through the past twelve months.

From the individuals who volunteered their efforts at Ground Zero, to the businesses that refused to close their doors, New York has sent a strong message to the world: we will keep going, we will rebuild.

We recognize that the process of recovering as a city is a challenge of staggering scale. And, when we look at the numbers, it would be easy to grow discouraged and think that we simply won't be able to do it.

New Yorkers, however, are not easily discouraged. We have a tremendous ability not only to overcome obstacles, but to grow even stronger in the face of adversity.

To overcome this greatest of challenges, we need to understand what we're up against. We need a comprehensive understanding of the impact of 9/11 on the finances of this city.

As President John F. Kennedy once noted, "To state the facts frankly is not to despair the future."

Today, we state the facts without despair; facing the facts is simply the most responsible way of ensuring that our city recovers fully and stands prepared for the future.

For this reason, my office has prepared a report entitled "One Year Later: The Fiscal Impact of 9/11 on New York City."

In order to understand where we find ourselves today, we must take a look at where the economy and our city's finances stood on September 10th, 2001.

At that point, our city, and the nation as a whole, were showing the first signs of recovering from a mild recession. There had been a downturn, but it was expected that the economy would continue to show signs of improvement.

And then, on September 11th, our city suffered a monumental loss, and in a single day, the economic picture was completely transformed.

Due to the magnitude of the event, and the complexity of factors involved in the long-term impact, it is difficult to attach a fixed number to the economic loss sustained by the city.

After an in-depth analysis, however, my office has estimated that the final calculations for the economic costs from the attacks will reach at least 83 billion dollars; and may escalate to as much as 95 billion dollars.

The true cost will depend, in part, on the number of jobs lost to business relocation, a figure we cannot pinpoint at this time.

And, in fact, many of you in this room today will have a hand in determining the final figure. The business decisions you make today -- whether or not you stay in New York City -- will directly affect our city's finances next year and beyond, and ultimately, our recovery as a city.

But let me return to the findings I am reporting today.

My office's estimate of the cost of 9-11 is based on two types of loss. The first involves the one-time loss of wealth, which includes damage or destruction of physical structures and loss of personal income.

The second type is the loss of goods and services produced and sold -- which is measured as Gross City Product, or GCP.

As the report indicates, the impact of the attacks on the City's wealth is estimated to be 30.5 billion dollars.

The attack destroyed 13 million square feet of Class A office space in Lower Manhattan. To understand the magnitude of that figure, consider the fact that this equals the entire office space inventory of the Central Business Districts of Atlanta or Miami. It will cost 21.8 billion dollars to replace the lost buildings, infrastructure and tenant assets.

We must also consider the economic impact of the loss of personal earnings.

There is no way to place a value on human life. A person's contribution to the world goes far beyond the workplace. The person who dies is denied his or her potential. A child is left alone. A mother, or a spouse, or a brother or a loved one must continue alone.

Economically, however, we recognize the financial impact of the loss of personal income on families, businesses and our city. And, in economic terms, at their present value, the loss of expected earnings is estimated at 8.7 billion dollars.

In addition to the one-time loss of wealth, New York will lose between 52 and 64 billion dollars in economic activity, or Gross City Product.

New York's Gross City Product averages 1.2 billion dollars per day. In the early weeks after 9/11, with so much business activity slowed or brought to a halt, the impact on the City's economy was drastic.

In the immediate aftermath, the New York Stock Exchange was closed, stores were closed, the airports were closed, the transportation system was disrupted and theaters were mostly dark. And that was only the tip of the iceberg.

Some downtown businesses were able to continue operating from other locations to varying degrees. Basically, however, for several weeks, our city lost the economic contributions of the 50,000 people who worked in the World Trade Center … the 50,000 more who worked in nearby buildings … and the 100,000-plus additional people who ordinarily passed through the downtown PATH hub and subway stations, and shopping areas.

The rest of the downtown area below 14th Street was closed off to allow free movement of the rescue and recovery workers.

In just the 16 weeks from the attacks to the end of 2001, the GCP lost 11.5 billion dollars.

Beyond this immediate economic impact, our GCP continues to suffer. This is particularly apparent in the effect of 9/11 on our job base.

The report indicates that the total number of lost or unrealized jobs exceeds 146,000. This includes 83,000 jobs that have been lost since the attack, and an estimated 63,000 jobs that would likely have been created if pre-9/11 city trends had continued.

The job losses alone have already cost our local economy more than 17 billion dollars in lost wages.

In short, 9/11 had a staggering effect on jobs in this city. However, I am encouraged by a small, but positive, trend in the past several months. As my recent job reports show, nearly 16,000 jobs have been created since April.

Indeed, we have found that the strength, the determination and resiliency of New Yorkers prevented the economic impact of 9/11 from being as bad as it might have been.

While some companies whose facilities were destroyed in the attacks relocated operations outside the city, others have shown their commitment by choosing to remain here.

For example, American Express and Merrill Lynch, whose World Financial Center headquarters absorbed tremendous damage from the World Trader Center collapse across the street, have returned home to refurbished facilities.

Others, like the United Federation of Teachers, are relocating to new quarters in lower Manhattan.

Some companies never left, even temporarily. They remained downtown and opened for business day after day, despite tremendous obstacles.

These include many small businesses, whose efforts may not grab headlines, but who are the backbone of our city's recovery.

Two of the many courageous business leaders who made the decision to "stay put" and keep their doors open were Y.M. Yang, President of Chinese American Bank, and Thomas Sung, President of Abacus Federal Savings Bank.

The two banks, both located in Chinatown, not only remained in lower Manhattan, they never completely suspended operations during the difficult days following 9-11.

On September 11th, Chinese American Bank offices remained open until 3 PM. They were closed the next day, September 12th, but have remained open ever since.

Abacus Federal Savings Bank was open until 11 AM September 11th. Due to its location below Canal Street, the bank had to close for a week. During that hiatus, however, Abacus bankers continued to conduct business every day by cell phone.

I am pleased that representatives of both banks are here today. Please join me in recognizing Thomas Sung, President of Abacus Federal Savings Bank, and William Hsiao, Senior Vice President of Chinese American Bank.

I applaud the loyalty and determination of New York businesses such as these. Their entrepreneurial spirit will help bring this city back, and make it stronger than ever.

Another crucial component in our rebuilding efforts will be our management of the city budget.

Unfortunately, when economic times were good in the latter part of the 1990s, the city engaged in some fiscal practices that have placed us in a particularly difficult position today.

When our revenue was high, the city increased spending, cut taxes and used budget surpluses from one fiscal year to pay off bills in the next one.

The city got into the bad habit of counting on economic boom-times and windfalls to close budget gaps.

Of course, we are far from realizing a surplus in the current fiscal year.

In preparing the current budget, the city administration estimated the budget gap to be 5 billion dollars. My office estimated the gap to be 6 billion dollars.

Approximately half of this deficit is the result of structural imbalances in the budget - the city simply continues to spend more than it gains in revenue.

The other half of the gap, an estimated 3.5 billion dollars, is a direct result of the damage incurred by the events of September 11th.

This estimate includes nearly 3 billion dollars in lost tax collections, primarily from a decline in the economically-sensitive non-property taxes.

It also includes hundreds of million of dollars in unreimbursed city expenditures such as overtime and capital costs.

Before I talk briefly about how the City is closing the budget gap, I think it is important to single out and give credit where credit is due. I think the Bloomberg Administration and the City Council under the leadership of Gifford Miller has done an extraordinary job from day one confronting a difficult situation when they first got here and dealing with it quickly and in a very intelligent fashion. So I applaud both Mayor Bloomberg and the City Council for the fine job they have done on this year's fiscal budget and the job that they have to do moving forward to close the budget gap.

The economic pressures brought on by the attacks have forced the city to borrow more than we would have otherwise.

Indeed, the city addressed this year's budget shortfall, in part, by borrowing 1.5 billion dollars. I accepted this action as necessary due to 9/11. However, the city cannot afford to repeat this measure without creating a debt service burden that would have a severely negative impact on our future growth.

After all, our debt service currently eats away 16 cents out of every city tax levy dollar, and this amount will increase to almost 20 cents of every dollar by Fiscal Year 2006. It's like using your credit card to buy groceries, month after month.

However, while we cannot borrow our way to a balanced budget, we also cannot completely cut our way to a balanced budget.

Some cuts are inevitable, and indeed necessary, but excessive budget cuts to our basic services will do more harm than good.

If we defer routine maintenance of our resources too long, we are forced to undertake expensive new major capital projects to correct neglected problems. If we slash basic services too deeply, we compromise our quality of life and discourage people from staying in New York.

We cannot afford to let the solution become part of the problem.

That's what occurred during the fiscal crisis in the 1970s, and we spent decades recovering from the adverse effects of draconian cuts to education, public safety and other vital city services.

Simply stated, to address our future budget challenges, we will have no choice but to both control expenditures and seek ways to increase revenues.

This is particularly important in light of the fact that in Fiscal Year 2004, we anticipate a budget shortfall of at least $5 billion.

Fortunately, one of the city's most reliable sources of revenue appears to remain stable: real estate has held its value outside of lower Manhattan, and real property tax collections will be higher this year than last year.

People and companies still believe that New York is the place to be. This is a trend we obviously want to encourage.

Another positive trend, as indicated in the report, has been the city's proficiency at managing its cash flow despite the cash drain following 9/11.

Quick assistance from Washington certainly helped us. Specifically, since 9/11, the city received a total of 900 million dollars in direct federal assistance. We were, and are, grateful for that aid, and its timeliness.

And I would be remiss if I did not thank the New York State Congressional delegation, led by Congressman Charles Rangel and the two United States Senators, Sen. Chuck Schumer and Sen. Hillary Clinton. They have done wonderful work in helping to move New York City, advocate for New York City and get money into the city.

These dollars were part of a total of 2.7 billion dollars, including 2.3 billion through FEMA, that flowed from Washington to individuals, businesses, the city and the state in response to 9/11.

We are, however, mindful that the 2.7 billion dollars received represents only a small down payment on the 21.4 billion dollars in Federal economic assistance pledged to New York City, assistance that we need and deserve.

Delivery of the promised aid is particularly important in light of the fact that, due to restrictions in FEMA's regulations, the city will receive only partial reimbursement for the staggering costs related to 9/11.

Current estimates indicate that direct World Trade Center-related city expenditures, such as demolition, overtime, and disaster relief Medicaid, will total approximately 2.1 billion dollars. Expected federal reimbursement through FEMA will cover only 77% of these costs, leaving the City short by close to 500 million dollars, a cost taxpayers will have to bear.

On an encouraging note, the Federal government recently dedicated about 2.8 billion dollars in FEMA funding towards the construction of an intermodal transit hub in Lower Manhattan.

Once again I do applaud the Federal government for this latest development. It expanded the scope of FEMA funding and using the funds for a purpose that will stimulate recovery and long-term economic development in the downtown area.

The federal aid will help us rebuild, but ultimately it will be up to us to continue to chart our recovery and resurgence.

It will be up to businesses, large and small, and individuals, of all professions, ethnicities, and backgrounds, from all of our communities, to build our future.

There are thousands, indeed millions, of stories of New Yorkers who, with grit, with imagination and with the help of friends, neighbors and strangers, are fighting their way back.

In closing, I will leave you with just two of these business stories.

30 years ago, the Friedman family built J&R Music and Computer World, close to City Hall.

Since then, J&R has been a landmark for downtown shoppers. On 9/11, J&R was transformed into a triage center. For five weeks, J&R's doors remained closed to shoppers. Since its reopening in late October, business has slowly returned, although not nearly to pre-9/11 levels. Still, the Friedmans remain hopeful and determined to succeed.

(If a representative of J&R's is present, you will be handed a card)

And, finally, a much heralded example of New York spirit -- Century 21.

For years, a familiar sight greeted early morning arrivals in the vicinity of the World Trade Center: eager shoppers waiting for Century 21 to open. On September 11th, the doors closed, perhaps for good.

Century 21 shoppers are known for their loyalty, but, after several months shopping elsewhere, and after the transformation of lower Manhattan, no one knew if the store would reopen, or if the customers would return.

On March 1, 2002, the doors of Century 21 opened once more, and one more New York business was up and running again.

Eddie Gindi, co-owner of Century 21, is here with us this morning. Would you please stand, Mr. Gindi, so that we can recognize your efforts?

Century 21 is back in business. And, so is the City of New York.

New Yorkers have shown tremendous resiliency and determination in the past year. It is the same spirit that New Yorkers have demonstrated every day since the city was founded four centuries ago.

New Yorkers are survivors, yes - but we are more than that. Those who were born and raised here, those who come here from all over the world, are here not just to survive, but to succeed.

By working together, we will recover, we will succeed, and we will be stronger than ever.

Thank you - and God bless you all.