New York’s Economic Future: A Strategic Discussion About How to Grow the City’s Economy

Event - January 2004

New York’s Economic Future: A Strategic Discussion About How to Grow the City’s Economy

In a follow-up to the Center's Engine Failure report on economic development challenges facing New York City, five esteemed panelists joined CUF research director and report author Jonathan Bowles on January 20, 2004 to discuss economic growth strategies for the city.

Tags: economic growth

Marc Jahr, Citibank Community Development: Thank you for joining us today on this nice frigid day. On behalf of the board of directors of the Center for an Urban Future and of Citibank and Citibank Community Development, I want to welcome you to the first of a series of four forums on New York City’s economic future. My name is Marc Jahr and I’m Citibank’s market director for its Community Development Real Estate Finance group. And, before coming here today, I checked with someone at the bank and found out that Citigroup has around 50,000 employees in the New York metropolitan area. And behind each of these individuals is a family, and relatives, and friends, and a community. It has financial centers--what we used to call branches--that range from the Southern Boulevard in the Crotona Park section of the South Bronx, to SoHo in Manhattan. And is a presence on Wall Street and it’s a presence on Main Street--in Flushing. In other words, as a corporation, as a financial institution, as a major employer and as a corporate citizen, Citibank has an enormous stake in the economic future of this city. So we’re pleased to be providing support to CIF for these forums. We hope that they’ll serve as a catalyst for marshaling the city’s extraordinary intellectual capital and help us focus it on the challenges that confront us if New York is to remain a great global city and a vibrant diverse place to live in. We have a terrific panel today, prepared to engage in a rich discussion about how to grow the city’s economy, and I’ll ask our moderator--Jonathan Bowles, the Center for an Urban Future’s Research Director--to introduce its members. Jonathan?

Jonathan Bowles, Center for an Urban Future: Thank you Marc, and thanks to Citibank for their generous support of this forum series and of the Center for an Urban Future. I hope you’re all familiar with the Center for an Urban Future. If not, I don’t want to spend a lot of time talking about us, I just want to urge you to take a look at two of our most recent reports that are inside the packets that you picked up at the door today. And all of our reports and publications can be viewed in their full extent on our website--www.nycfuture.org. And, I would encourage you, if you’re interested about finding out about future reports and being alerted about future forums that we’re having, to sign up for our monthly email bulletins.

This is the first of four forums that the Center for an Urban Future will be presenting over the next few months, with support from Citibank. They build on some of the findings of our most recent “Engine Failure” report. Our next forum, in early March, will specifically look at the enormous economic potential of the city’s growing immigrant population and examine how the city can do a better job of tapping this incredible natural asset as a stimulus for future growth. When we set that date and confirm all the panelists, we’ll be sending out information about that.

This forum today is going to focus more broadly--looking at the city’s economic future, discussing what New York City must do to grow its economy in the years ahead. Now, we’re fortunate to have an excellent group of panelists here today, and I can’t really do justice by just introducing them briefly, but I’m going to try just to say a few words about all of them, and I’m going to go in alphabetical order.

First of all, Chris Cumming--Kathy Wylde was actually supposed to be here today and she was called up to Albany in connection with the release of the Governor’s budget. Kathy’s very sorry she couldn’t be here, but we’re really happy and thrilled that someone of Chris’s caliber could pinch-hit for Kathy today. Chris is the Executive Vice President and Director of Research at the Federal Reserve Bank of New York, with responsibility for the Research and Markets Analysis Group. She’s been at the Fed for more than 20 years, and, I know, has had a lot to do with the consistently solid and useful economic research the bank puts out. Thanks to Chris for being here today.

Ernesto Cury, sitting next to me, is the President and Owner of E. Cury and Associates, a business in Elmhurst, Queens that provides business accounting and consulting services to small businesses. He’s the Immediate Past President and a Co-Founder of the Hispanic Chamber of Commerce of Queens, which represents over 20,000 Hispanic businesses in that borough. He’s also a member of the board of the Queens Economic Development Corporation and the 82nd Street Business Improvement District. Previously he served as an executive officer of several banking institutions, and executive director of the Queens Minority Business Development Center.

Gifford Miller--I don’t think I have to tell all of you here that Gifford Miller is Speaker of the New York City Council. Since succeeding Peter Vallone, he’s become one of the most visible and capable city officials. Among other things, he led the fight to increase education dollars for city’s schools, with the city’s Education First campaign. And he’s probably been the city’s most vigilant public advocate for getting the city its rightful amount of money from Albany and Washington. Under his stewardship, the Council has passed legislation severely limiting the practice of predatory lending, protecting the rights of domestic partners, and provide tax credits to build more energy-efficient buildings and improve air quality. We’ve had the pleasure of working with Speaker Miller and his excellent staff on a number of occasions, including the Council’s convening of the Small Business Summit, a little over a year ago.

Alair Townsend is the Publisher of Crain’s New York Business, which is a must-read for anyone interested in following the multitude of economic issues affecting New York. I know that we’ve cited their news coverage and statistics from their “Book of Lists” in several of our reports. Alair’s been Publisher since 1989, but she also brings with her quite a bit of experience within city government. She served as Deputy Mayor for Finance and Economic Development from February 1985 to January 1989, and was New York’s Budget Director for three years.

Rob Walsh--before Rob Walsh was appointed Commissioner of the New York City Department of Small Business Services, I think few people who follow economic development issues in New York had a lot of good things to say about the agency. But in a short time, a lot of people have been changing their tune about the agency, which was renamed the Department of Small Business Services soon after Commissioner Walsh took over. Among other things, he presided over the establishment of two new business improvement districts in 2003--one in Downtown Flushing and one at Sutphin Boulevard. And also the establishment of the NYC Business Solution Centers in Manhattan, the Bronx and Brooklyn, to provide small business owners with local access points to SBS’ services. In addition, Commissioner Walsh has led the agency’s integration of the Department of Employment’s Adult Workforce Development Programs into SBS after Mayor Bloomberg merged the two departments in July of 2003.

Now, to frame the debate today, I’m just going to spend one minute talking about it, because I know we all are here really to hear the panelists. But let me start by saying that New York City’s economy finally seems to be turning a corner, after a long, dry spell. Among other things, Wall Street has been bouncing back after a couple of brutal years, and tourism has been strong. On top of all that, New York has a lot going for it today that it didn’t when coming out of previous recessions--like a continued low crime rate. But as the Center found in its “Engine Failure” report, New York City faces some significant structural challenges going forward. For instance, it is no longer just large manufacturing firms and Fortune 500 companies leaving the city for cheaper locales. Fueled by globalization and advances in technology and telecommunications, investment banks, advertising agencies, publishers, and many other high-wage service sectors are increasingly moving units out of the city, or opting to create the bulk of their new jobs elsewhere.

Given these challenges that confront the city, I want to start off by really asking all of our panelists, and let me just break for one second and say--the way we do panel discussions at Center for an Urban Future is we don’t have opening statements. We really want to encourage discussion and open debate, and so I really wanted to start it off by really asking all of the panelists--what kinds of things, given these challenges, what kinds of things must the city do over the long run to spur economic growth? Do we have to change our strategy for economic development--but basically, what do we need to do? What are the top priorities to really chart a course towards economic growth in the future? And I think if we can maybe start at the far end there with Commissioner Walsh.

Robert Walsh, Department of Small Business Services: Thank you very much. Good morning everybody. Some of the things that we could be doing, I think we are doing it. One is--there’s over 200,000 small businesses in this city. The Mayor has established an agency called Small Business Services, as Jonathan said. We put a good deal of emphasis on access. As Jonathan mentioned, we’re opening solution centers to deal with the small businesses. 98% of our businesses have 100 people or less, so it’s key for us to get out and be in the backyards of those small businesses. Another vehicle is through our Business Improvement Districts, which we have grown--we’ve given a lot more flexibility, a lot more creativity in growing. They provide over $70 million in services--sanitation, security, marketing, capital improvements. So it’s happening throughout the five boroughs. Anyone picked up the New York Times this weekend and saw the Real Estate section, you’re seeing zoning initiatives taking place not only in Manhattan but the other boroughs--Jamaica and Long Island City and the activity taking place in Downtown Brooklyn. Go up to the South Bronx where the new Fulton Fish Market is taking place--you see a good deal of activity. I think our emphasis on economic development has been on access, and providing access to large and small businesses so we can help them grow, navigate government and look for answers that they need in government.

Alair Townsend, Crain’s New York Business: I would just start by noting the obituary in the paper this morning of Philip Crosby. Who’s Philip Crosby? He’s one of Bing Crosby’s sons, and he died at the age of 69? Now, for you children in the audience, Bing Crosby was the guy who sang “White Christmas,” and he was in a movie or two, and to some of us, it just seems like yesterday, so the fact that one of his sons died at 69--there’s a moral to this story, and that is: the future becomes the past soon enough, before we’re ready for it. And so it’s a very good thing that organizations like the Center focus on the future.

With that, I would say a couple of things that we all need to keep in mind as we try to strengthen New York City’s economy. One area, Rob has mentioned and that is small businesses. It is the backbone of our economy--what Rob and his colleagues have been doing to try to streamline regulations and cut red tape, is very important. Lots of small businesses feel harassed by fines, for this or that. They feel they’re trying to run a business, and what is all of this aggravation? I think it’s very important that we keep the financial services sector as strong as we can. It is true we have a declining share of it. It is true it also throws off huge sums of money in taxes, and in wages for its employees. So just the fact that it is declining--to me--does not mean that we should turn our attention elsewhere. It is still terribly important to keep it. I think tourism remains a very important engine for us. We need to get serious about expanding the Javits Center. The Mayor has said he wants to double the size. There have been nice words from the Governor. I hope all of this talk turns into action, and a plan, very soon. And, finally, I would conclude with the fact that, despite what we’d all like to believe, that taxes and business costs matter. They matter a great deal. They will always matter. And we cannot act as if they don’t.

Christine Cumming, Federal Reserve Bank of New York: Good morning. I should probably mention that I speak for myself and not for the Federal Reserve system--as if you didn’t know that. I think that New York has enormous strengths on which it can build. The first is the workforce. We have a very high concentration of highly educated people. I would say on the flip side that one of our greatest needs is to ensure that in an economy that is based on high-knowledge, high-income jobs, that it’s important that education really reach all the corners of the city. And that’s something that I know that our Mayor is trying to work on. Second, I would echo what Alair said--the financial services industry is very important to New York. I think it’s notable that while the share of jobs nationally has declined in New York, the share of income has not declined, and that’s just another way of saying that the amount of money that’s thrown off by this financial business here in New York is very significant as a base for economic activity and for taxes.

The third thing is that New York has extraordinary amenities compared to most cities, and there’s a whole theme of economic literature that’s paying a great deal more attention to the amenities in a city and the impact they have on the kind of workers that are attracted to the city, and the kind of tourism that occurs, and the environment that is created. And here I would particularly point to the decline in crime that occurred over the ‘90s, which I think has had a profound impact on our city--a really important driver of renewed economic activity in the city. And the amenities go hand-in-hand--the quality of life, the things that are offered here, go along with the safety that people feel in taking advantage of those things. The last thing I’d mention is immigration. New York benefited enormously during the course of the ‘90s, because of immigration. I think it is a sign that there is great opportunity in our city, but I note, as this report noted, that we are not rated favorably on the innovative industries or high-tech industries scale, and I’d be very interested in knowing, myself, what more we could be doing to foster that kind of growth in New York, since we have the educational institutions here, and we have a lot of knowledgeable, high-knowledge people, what do we need to do to make sure we get our share of that technology investment? Thanks.

Gifford Miller, New York City Council: Well, I think the most important thing that the city can do to foster economic development is to, first and foremost, get the big things right. And what I mean by the big things are--to have a more competitive tax structure and do a better job of delivering services. And the single biggest problem that the city faces, from the point of view of both of those challenges, is the extraordinary unfair treatment which we receive from the federal and from the state government.

We send about six and a half billion dollars more to Washington every year than we get back. We send about three and a half billion dollars more to Albany every year than we get back. In one program, we have to pay 25% of the costs of Medicaid, that almost no other city in the country has to pay. And certainly, our raw dollar terms--a $4 billion budget for Medicaid locally--there’s nothing that anybody has to compete with in that sense. And what does that mean? That means that New York City taxpayers, before they provide education, cops, sanitation workers, parks, and any of the rest of it, New York City taxpayers have to come up with $4 billion which we send to pay for a federal program over which we have absolutely no control and which nobody else in the country is paying for. And put that in perspective for you--our entire personal income tax receipts, the highest local personal income tax in the country, are $5 billion. So, 80 cents on every dollar that all of you pay for the highest local personal income tax in the country goes to pay for a federal program over which we have absolutely no control, and which nobody any else in the country has to pay. And people wonder why New York City is a high-tax proposition. That’s just one program. Almost every single program that’s ever been written in Washington and Albany was written, it would seem, with the almost express purpose of taking money out of New York City and sending it somewhere else.

And, so, if we’re really serious, and I think frankly, sometimes, a lot of these discussions miss the real point. The real issues that we face, the real issue, the real possibility for solving these problems gets to finding a way to get better treatment from Washington and Albany. Because if we did that, we’d be able to have a more competitive tax structure and be able to actually provide our children with schools that have the tools that they need to learn, which would mean that people wouldn’t flee the city--if they can--to educate their kids, leaving those who either can afford private school or can’t afford to move out of the city to send their kids to public school. So that’s, in the big picture, we absolutely have to solve that problem, because we are literally swimming up an extraordinarily swift current every single day, and we are pretty successful because of all the other assets that have been mentioned by the other panelists.

But we’re nowhere near as successful as we have a right to be, if we were given something close to fairness. Just a little bit of the smaller picture, I would say that I think--some of the other folks said this--but it’s very important for us to focus on sectors of the economy that (a), have the possibility for real growth and (b), have the kind of jobs that we really need to provide in the city for a very diverse workforce. And I would suggest tourism is certainly one of them, as Alair said. It’s inexplicable to me that every single leader at every level of this state and city have been for an expanded convention center for, like, ten years, and yet time keeps going by and we don’t have a convention center that is even modestly competitive. And we are losing huge numbers of jobs and real opportunities. Every year, the Council struggles to restore funding to NYC & Co., which is the convention and visitors bureau.

We do almost nothing to market this city, despite the fact that we have one of the greatest products in the world. It makes no sense. We should be, right now, on every TV in Europe, telling Europeans to come here because the exchange rate is so good for them that they could fly here, buy all of their clothes for the year, and fly back, and save money. And some of them are, but not nearly enough. If we had a marketing budget, which we should, we would actually be investing in ourselves and we would be able to actually consider the opportunities for real jobs and tourism. Why tourism? Entry-level, mid-level, top-level jobs. That’s what we need. We need jobs that don’t require so much skills and we need to have transition above.

Not to take up the whole time, but I’ll just mention one other sector that I think gets very little attention in this city, and that’s health care. It gets a lot of attention as a delivery system--for the quality of the care, who’s getting it, how are they getting it? Nobody thinks about it from an economic development point of view, and that’s disgraceful, considering it’s probably our most important industry. I sat down with Herb Pardes a year ago, who’s the head of the New York Presbyterian Cornell conglomerate, which is the largest employer in the city of New York, by far. And I said to him--what has the city of New York done to help you? And he looked stunned. He was taken aback. And he thought about it, and he said, “nothing.” And I said, well, Herb, frankly, partly that’s an indictment of you and your industry, that you’re not thinking about what the city can do for you, because you’re not asking. But secondly, that’s a terrible indictment of our city, that we’re not considering these jobs. Because, again, health care jobs, there’s the possibility for real growth, and there are entry-level, mid-level and top-level jobs.

And there are some simple things that we could do, in fact, I’ve done a little bit of it with Cornell Columbia. We could use our capital budget to expand investment, support investment that would create more jobs--the way that we do very successfully with cultural industry, which is critical to the future of the city of New York. We could have a permitting office. We have it for film and TV, why don’t we have something for all these health care institutions who struggle constantly, to deal with the kinds of permitting problems that are enormous? We could do simple things to support the health care industry, but we should be thinking about it from an economic development point of view, rather than just from a service delivery point of view. I could go on, but I won’t. Thank you.

Ernesto Cury, E. Cury and Associates: Good morning. Obviously, as Commissioner Walsh has already mentioned, the city of New York, its growth and major employer are the small businesses. However, the city remains and has a reputation for being unfriendly to small businesses. I think, in order to grow in the future, the city must concentrate more of its resources and effort to encourage and create sufficient infrastructure to help those businesses grow. There are many things that can be done, and some things are already being done, but they are being done in limited capacity. You have the business incubators and micro-enterprise parks and the Business Improvement Districts. All of them, I think, are very good tools to help businesses grow. But all of them are being used for very limited capacity, they don’t have enough resources. Most of the BIDs cover a very small area. Personally, I’m involved with the BID in Jackson Heights on 82nd Street. It covers two blocks. You should stop by and see the rest of the area surrounding it--it’s larger. The BIDs ought to be given resources and the ability to expand beyond its present borders. It’s a way of having a community receive back its own tax money, to help itself.

And in spite of our sponsor Citibank and the fact that we are a city famous for its finance industry, small businesses of all types still have difficulty, and its most important problem, if you asked and took a survey, is access to capital. Now, I don’t know how we can be the financial capital of the world and have a small business sector who can’t get loans. Now, I know there are problems in authorizing loans, and I’m familiar with them, and I don’t think this is the forum for it. But somehow, these problems must be dealt with, because I’ve been involved in one way or another, in small business consulting and providing services, and I heard the same problems 30 years ago, and I’m still voicing them out today. So, somehow, a way must be found to reach the small business a little more closely and a little more on a one-to-one or personal basis than it is now provided through seminars and information pamphlets and things. Thank you.

Jonathan Bowles: Thank you. And I just want to say that from now on, we don’t have a strict format here, so when I ask a question, feel free--anyone--to jump in. If anybody on the panel wants to ask a question, please feel free to do so. It’s a very loose format here. I want to pick up on something that Alair said, which is that we need to do as much as possible to keep our financial services industry strong, and I don’t think anybody here would disagree with that. But I want to ask, and a lot of people are talking about the need, a lot of people feel that New York City needs to diversity--that it needs to, while keeping the financial services industry strong, do we need to do more to groom growing sectors or other sectors of the economy? Do we need to do more to reach out to small businesses? And I think Commissioner Walsh is right that those kinds of efforts are seriously underway right now, and I hear that all the time from small businesses out there. But, do we need to diversify this economy and what kind of steps do we need to take to get there? It’s open to anybody.

Robert Walsh: I’ll jump in. I think one of the things when you look at economic development--I spent a few years in this neighborhood from 1989 to ’97, around Union Square Park, where we had vacant buildings for the longest time. I see the guys from Con Ed in the audience--you know what I’m talking about. You sort of had to push and work hard. A lot of economic development, fortunately or unfortunately, is based on land use. And coming up with creative, aggressive efforts in land use, that spurs economic development. And you’re seeing that in Jamaica, you’re seeing it in Long Island City, you’re seeing it in Downtown Brooklyn for the first time in a very long time. In the ‘90s, we saw--what was it?--12 million square feet of space built right across the river. Where were we on Downtown Brooklyn and Long Island City? I know where I was. I was in Charlotte, North Carolina.

Gifford Miller: That’s no excuse, Rob.

Robert Walsh: I know, but I am happy about the Panthers. Go Panthers. I was trying to figure out how I was going to work that in. But if you look at something like Downtown Brooklyn--

Gifford Miller: When you were there, Rob, they were really bad.

Robert Walsh: They were 1-and-15 my last year. Gifford, we’ve got to stop this. I said I left New York because I wanted to go to a place where the team won football, and they lost five years in a row. I left, they started winning, so you figure it out. But, you know, take Downtown Brooklyn for an example and some of the stuff that’s taking place. You’re talking about 5.4 million square feet of space. It’s tricky, though. And this issue will come up, because you’re talking about, how do you mix retail, manufacturing and residential? We’re seeing the same thing in places like Red Hook, Greenpoint, Long Island City. And I think that’s one of the challenges that we have ahead.

Alair Townsend: I’d make two points. One, having been very involved in the borough development strategy in the mid-‘80s in the Koch administration, I can tell you that very little of what is taking place there now and has taken place, which is a lot, would have happened without a financial incentive package as-of-right to lower cost and get those buildings built and get tenants there. There’s just no way that many of them would have decided to stay in New York City as opposed to going to New Jersey or some other place. I think, overall, it’s difficult to pick winners. And, so, I liked what Gifford Miller said, which is that we have to get the big things right. We have to create a climate that is conducive to new industries taking root. I think it would have been hard to predict the explosive growth of the new media industry here, a decade or so ago. But when you look back--and it’s too bad that most of it is gone--but, it was swell while it lasted. When you think about what made it happen here, it’s clear. One was density--the excitement, the exchange of ideas. Two was the vast university structure here. Three would have been the arts and culture panoply of institutions which fed that creativity. The ongoing ability of the city to attract talented and creative people. Those are the kinds of big picture things that we always need to keep in mind, because they worked in the past and one hopes they can continue to work again.

Gifford Miller: Well, let me say first off, the answer to the question is: absolutely, the city needs to diversify. And before I say anything else, I do want to acknowledge that there are a couple of my colleagues who are in the audience who are great leaders on this subject also--the chair of the Economic Development Committee, James Sanders, Jr., who’s here, and Councilmember Robert Jackson, who’s chair of the Contracts Committee. Both committees are very engaged in exactly this struggle from the point of view of contracting, actually, that’s an important area where the city can do more to support small businesses and local small businesses. We passed major procurement reform legislation a year and a half ago that significantly reduced the cost of doing business with the city. But we have a series of e-procurement proposals, which would really make contracting with the city so much more accessible to small businesses--automating Vendex, allowing an online contracting system, online RFPs and a lot of just simple procurement reform that could open up the enormous--what, $6 billion that the city spends on contracts every year?--much better to small businesses.

But I want to return to what Alair said--because it was very nice of her to say that she liked what I said, so I liked what she said--and say that this issue of fair share, I mentioned it once, but I think that all of you need to take it much more seriously. Every New Yorker needs to take it much more seriously. You should be enraged. You should be, you know, you should get a little bit of that Howard Dean fire--whether it works or not--you should develop a little bit of it. Because New York City gets such a short end of the stick and we get it because we expect it. And as long as we continue to expect it, we’re going to keep getting it.

I’ll give you an example, on economic development issues. Since September 11th, New York City lost 18% of the jobs in the entire country and 97% of the jobs in the state of New York were lost in New York City. Why? Because we were bombed by foreign terrorists. Since September 11th, the Governor announced seven Empire Zones for the state of New York--areas with lower taxes, to encourage economic development. Now, you’d figure, given the fact that we lost 97% of the jobs in New York State since September 11th, that we’d get all seven. You’d be wrong. So then you say, all right, how about if we get three? Since we’re about 40% of the population, we should get three. Wrong. We were told: get it together and apply for one, and you might get it. And we did it. We got all, you know, the administration and the Council got together. Every one of my colleagues, under Chairman Sanders’ leadership, they all came in and made really good arguments on why they should get an Empire Zone. But we said, we’re going to choose the one that no one could argue with, no one. And we chose Chinatown, which has lost jobs hand over fist. And we applied. And when the Governor announced the seven Empire Zones to be created in the state of New York since September 11th, the City of New York got none of them. Not one. And there was a whisper, and then it went away. Why? Because we expect this kind of treatment, and until we change our expectation, people are going to keep giving it to us.

I’ll give you what is even a more dramatic example, and that’s the $20 billion that we have been promised since September 11th. When the President promised $20 billion, everybody said--that’s great, that’s terrific, my goodness. And in the context of the sort of relationship that we have with Washington, it really is pretty good--$20 billion. Now, we’ve only gotten $5 billion of it, and we could argue about how well it’s been spent, all this, which is how the argument’s going now. But what other city in the country, if there was a $120 billion economic disaster that came, essentially, it was the federal government’s responsibility. What other city in the country, when the President comes to town, and says: “I’m terribly sorry, this is horrible, we’re all in this together. You have a $120 billion economic disaster, we’ll give you $20 billion, you shoulder $100 billion,” would say “that’s great, thank you.”? Not one. Not one. So as New Yorkers, if we’re going to get this, I would suggest to you, it’s not just about, you know, that we all acknowledge it and we say how important it is. It’s actually a responsibility on all of us to change this expectation. It’s not just our delegations in Washington and Albany, who are doing their best. But they have number problems. And they also have the problem that their leadership--the President and others say to them: you know, you guys should be happy, we’re giving you this, and nobody seems to be kicking up a fuss. We should be enraged. And until we are, until we really expect different treatment, we’re not going to get it.

Jonathan Bowles: Let me just interrupt, and just to try to keep the discussion going--someone had mentioned that it’s probably not a good idea to pick winners. And I definitely agree with that. But, at the same time, in the course of our research at the Center for an Urban Future, we’ve gone around and looked at different sectors of the economy that either continue to be important to this day, or that are relatively small, but seem like they have potential for growth, that they’ve been growing in other cities. Speaker Miller mentioned the health care sector and the Center has issued a couple reports about the biotechnology industry and the potential of our academic research institutions to do the kind of new job creation that we’ve seen in other cities like Boston/Cambridge or Silicon Valley/San Diego. But without picking winners, and let me start with Chris on this one, are there things that we could do to just give more attention to different sectors? Because we’ve noticed that a lot of sectors in the city feel like: “We never get the attention from City Hall, that we’ve got a lot of potential, we just need a couple little things. We need some attention, we need the tools to grow. We need people that understand our concerns.”

Is there more that can be done to really kind of groom other sectors of the economy without picking winners?

Christine Cumming: I’m going to probably not exactly answer your question, in that I share the view that you can’t really pick winners. I think that we’ve seen this at the national level and we’ve seen it at the regional level. It’s very difficult to know what’s really going to be successful. If you look to Japan, which is a country that, for a long time, tried to pick winners, some of the most successful industries were the ones that fell outside of the favor of the authorities there. But, starting with the basic question that you’re asking--what can we do more of?--I would say that, first, I think it’s very important to set a common base. That is, I thought that the question of “how do we treat the health care industry?” is a good one. In a sense, how do we treat every industry and create a fairly level playing field and let the economic forces in the city decide what really could be successful here and what can’t be successful here, but create a climate that really fosters economic development across the board.

The second thing is, I think there are lots of opportunities in today’s world for the public sector to learn from what’s been going on in the private sector, and that is, how to become increasingly more efficient and deliver services more effectively, such as the e-procurement initiative that was just mentioned. There are a lot of opportunities, I think, to reduce the cost of city services through productivity initiatives. And one of the reasons why that’s important is that New York City is a high-tax area, it’s important for us to manage that tax burden carefully and yet stay fiscally sound, which has also been a crucial thing that we’ve learned over the course of the ‘90s, is how much fiscal strength can really help us in managing the city. So, going back again, I think there are lots of opportunities when you get down to the micro-level. All of us, in our daily lives, experience contact with city agencies. There are probably lots of ways to make those more communicative, more open, more efficient, quicker to deal with issues, and that, I think, is one of the most important things that we could be focused on. Thank you.

Jonathan Bowles: Anybody else?

Robert Walsh: I think one of the challenges that I mentioned is--how do we focus on the growth areas? Whether it’s tourism, the motion picture industry is growing in this area, food production areas. You know, the industrial manufacturing area gets a big knock, but if you drill down deeper and you start looking at some of the areas where you see growth, and start focusing on those areas, and use the resources that we get--whether its from the state or the federal government--to provide training. Let’s use health care as an example. City University of New York has opened up an initiative up on the Grand Concourse and Fordham Road. They have the hospitals in the area training lab technicians, nurses, people who are providing support--tens of thousands of jobs that you’re talking about in this area. And how do we provide the linkages?

How do we use our workforce money that we get from the federal government--last year we got over $40 million in vouchers from the federal government--and apply that to where the real jobs are? And in Queens, it would be different. In Queens, you would be focusing on the airports. Councilman Sanders knows this. Take JetBlue, for example. They tell me that they’re going to grow from 2,500 people to 10,000 people out in that Jamaica center. Well, how many of those jobs can we get for New Yorkers? And how do we link with places like York College, so York College is providing the syllabus and the training for where the jobs are going to be. And I think that’s one of the things that has to happen, and I’ve been out in the various neighborhoods. You need to get ahead of the curve on this thing, and this is something new for city government, is linking our workforce development and economic development. We successfully did it up at the Mandarin Hotel, up at Two Columbus Circle. We’re talking about 387 jobs, I think we were responsible for close to 300 of those. That’s pretty good, but we need to do that on a larger level.

Jonathan Bowles: Let me ask Ernesto--there’s been a lot of talk about small businesses here, and also there was a lot of talk about, as Commissioner Walsh mentioned, and I think he’s not the only one on the panel that has mentioned the opportunities outside of Manhattan. And clearly the city is making real progress. I mean, I can say that for the first time in a long time, we really see an interest coming out of EDC and DSBS in the other boroughs. What do you think about the initiatives now underway by this administration, to reach out to the other boroughs and to help small businesses? As a business on 82nd Street in Queens, what do you think of that, and what else do you think you’d like to see the city do in the future?

Ernesto Cury: Well, obviously, and if you’ve looked at “Engine Failure,” there is a great deal of mention about the city’s concentration on the central business districts. And the Bloomberg administration, as I heard in the State of the City speech, and I heard Commissioner Walsh on another occasion speak, seems to start concentrating more efforts on helping the economic development in the outer boroughs. However, I think this has to be more than simply a political strategy, a plan. I think it has to be done by action. I think the City of New York still concentrates and it still does most of its business in Manhattan. The outer boroughs have a tremendous amount of resources, capabilities, that are highly under-used. Besides the airports and the health industry, which are Queens’ major employers, there is a great deal of rail transportation that could move cargo around the city, which is highly under-utilized--in Long Island City, in Jamaica, and in other parts of the borough.

In addition, Queens businesses must all, for all licensing, for all business, for all resolution of business problems, must come into Manhattan. I’ve never understood why Queens Borough Hall, Brooklyn Borough Hall, Bronx Borough Hall and Staten Island Borough Hall could not have its own business services division that could issue licenses, provide services, and do the things that the Department of Business Services has been doing for many years. And I think if the city really wants to put to work its economic development of the outer boroughs, it must first, itself, do what it needs to do to show that it intends to do that, and expand some of the city services and the city business services to be provided outside of the borough, in the borough itself. I have for quite some time been speaking about, wherever I get the opportunity, of the difficulties small businesses have in acquiring licenses, in just going through the maze of regulations and things that you need to do in New York to do business. It is even worse when you have to do that in an isolated, small, highly-crowded office in downtown New York where it probably housed 90% of all the licensing agencies, not only for the city but for the state of New York.

Jonathan Bowles: Anybody else?

Gifford Miller: I don’t know whether it’s hard to pick winners, but I do know we should stop picking losers. And I think this is something the Bloomberg Administration has started to recognize--looking at these enormous individualized corporate retention deals and trying to stop that practice, there’s a growing consensus that that’s the right thing to do, that most of the companies that you see these deals with, they’ve already decided to stay in the city of New York and now it’s kind of a: here’s to make you feel better for not leaving deal. And yet, it’s sort of harder to put that into practice than just saying it. Just for example, we have a fairly historic opportunity with $2 billion worth of Liberty Bonds that are supposed to be invested outside of Lower Manhattan. And over half of them are already committed--to a midtown office building and to a power plant in Astoria, which is going to provide comparatively few jobs. So I think we really need to translate that into real serious focus on the outer boroughs, where there really is a tremendous opportunity. And I would say, also, that I think that we have to extend the sort of focus and attention on business districts in the outer boroughs that we do on Manhattan. I know the last year during the budget, I held a press conference in Flushing, which is very vibrant and a great opportunity as a business district for the city.


Robert Walsh: We put in a Business Improvement District there, didn’t we?

Gifford Miller: We did. We put in a BID, and we put the money back in for the wastebasket pick-ups and there’s more that could be done. It just struck me that no one would ever propose to cut garbage pickups for Midtown Manhattan. It’s unthinkable. We need to make it unthinkable for the business districts that are outside of the city as well--I mean, outside of Manhattan, as well.

Jonathan Bowles: I guess there’s been some things that have been said about the Bloomberg Administration. I want to give Commissioner Walsh a chance, because, you know, in “Engine Failure,” we really did try to credit the Bloomberg Administration, because there really are some serious accomplishments and in some sense there’s been a real change of direction in economic policy, not only in what’s been done, but some of the speeches recently given by Mayor Bloomberg. And so I guess I just want to give Commissioner Walsh a chance to say--and based on some of the things that Ernesto was saying--I know that small business satellite centers that you’re developing in the outer boroughs. Could you tell me a little bit more about what you’re doing, but also what more you think you still want to accomplish, what additional things. And then, since I’ve neglected some of the other panelists, after that, if everybody could kind of comment on, just in general, what things we still--coming from City Hall, from EDC and DSBS--what still needs to be done.

Robert Walsh: Sure. The business solution centers is not the end-all. No doubt about it. In a borough like Queens, which is so large and is defined by neighborhoods, and that’s something that, given limited dollars, you struggle in terms of how do you create business solution centers where small businesses will come? And we spent a lot of time on this issue, and we brought in businesses throughout the five boroughs to sit down and chat with us, around large conference rooms. I see people from KeySpan and I see people from Con Ed--they were part of some of those discussions, and some small business owners who are in the audience. The fact of the matter is that small businesses often do not come to government for help. And that’s something that we have to accept.

So we have to cast that net wide, bring in utilities, banks, accountants, lawyers, local development corporations, overall economic development corporations, business improvement districts. And when you start adding that up, you’re talking about hundreds of groups. And that’s exactly what we’ve been doing on a level like that. I think the business solution center--the one that we have in the Bronx, the one that we have in Brooklyn--is working. What we did was, we recognized the fact that groups--I’ll use Brooklyn as an example again. The Chamber of Commerce--they have relationships. Up in the Bronx, we’re partnering with the South Bronx Overall Economic Development Corporation. Queens is a complicated one. Because if we open in Jamaica, the people in Long Island City say “hey, what about us?” If we open in Borough Hall, the folks up in Jackson Heights--so this is one of the things that we’re struggling with. What we’re going to do in Queens is combine it with our workforce development center, and we’re going to open up in Jamaica and see what kind of impact we have.

But to utilize and have a greater involvement of the local development corporations and Business Improvement Districts, this Mayor has made it very clear, from day one, that he was going to reach out to local development corporations, reach out to the Business Improvement Districts, and grow them, and that’s exactly what we’ve been doing. And let’s not forget 311, folks. Right? 25,000 calls a day come into 311--everything from potholes to business assistance. And that gives us a good sense of what is going on out in the five boroughs, with regard to businesses. And if people don’t think we pay attention to that, you’re dead wrong, because we get a list of those phone calls that relate to business assistance and services. And just to give you a sense of what people are asking, what small businesses are asking--often, the questions are about navigating government: “Help us, help us with other government agencies.” The second is about procurement opportunities and the third is to help us with incentives. How can you help in various areas, whether it’s Empire Zones or industrial parks or energy cost savings programs?

Jonathan Bowles: Would anybody else like to comment on some of the things that are already in progress that this administration’s pushing on economic development and what additional steps you think you’d like to see in the next couple of years?

Alair Townsend: I would just say, I think it’s true that the administration has had a number of successes and I certainly applaud everything that Rob Walsh has done. He is out there in all five boroughs, talking with people, letting them know that he will do, and his agency will do, whatever they can. Tone--tone is very important. And I think, unfortunately, at the top, there was, in conjunction with some of the studies about cost and who’s here and who’s going and who might go, and some of the tax increases themselves, what was taken by many to be a kind of cavalier attitude--if you can’t afford to be here, don’t let the door hit you on the back on the way out. That’s changed, but I think a lot of people remember it, and they don’t understand those comments.

I would also like to follow up on something Gifford Miller said, with respect to being enraged. We know that tourism and retail are terribly important for New York City, and yet, for that important holiday shopping season, which makes or breaks many retailers, you couldn’t get into their stores in Midtown. Why? Because the State Legislature refused to reenact legislation controlling vendors. So, here are people paying rent in stores, paying taxes, and they can’t, people can’t get in their stores because of all the vendors set up on some of the major streets. And further, pedestrians are walking in the streets because there’s no room on the sidewalk. To me, that inaction was unconscionable and we should be really mad and hold the two legislative leaders--one of whom is from New York City--responsible. Another thing that’s going on out there, locally, you could do something about is all that construction scaffolding that’s out there. Turns out that if you have a building that needs repainting or something, it’s cheaper to rent the scaffolding and leave it up there than to actually do the work and fix it. Right. And then you get advertising dollars. If you’re a little business, or a big one, but a lot of small businesses are hidden under that stuff, nobody knows you’re there, and it socks you in the nose, in terms of your business. We can do something about that.

Gifford Miller: I like it. People are getting angry. It’s good.

Jonathan Bowles: Let me say, we’re going to open the floor to questions from the audience in about five or ten minutes. I’ve got two more questions. Someone mentioned earlier the need to groom industries that have potential for growth, and let me kind of go off on that a little bit, and say that New York City has always been a town of amazing entrepreneurial vitality, and that when we deliver services to businesses, we’re often looking--I think--to existing businesses. And I’m curious, is there anything that can be done, or should there be anything done, to really help industries or help companies that really have growth potential? Help people start businesses that can grow. After all, we are talking here about looking for a growth strategy for New York City’s economy, and a lot of new enterprises, entrepreneurs often fill that role, and they have been filling that role in other cities. But then when we’ve been doing our research here in New York, a lot of people say it’s not a great environment for entrepreneurs to start their business. Is that a part of the economy that often gets short-changed or overlooked, and what kind of things can we do?

Gifford Miller: Well, I would suggest that, since I have the Commissioner here, that DSBS think about creating a particular office just for entrepreneurialism, that focuses on entrepreneurs. And in particular--and he has limited funds and I think, actually, Rob, you’re doing a terrific job and it’s incumbent on us to provide more support for it--in particular, I think we need to do a better job of providing DSBS with the resources that it needs in order to be able to have better language services--we talked about immigrants and immigrant companies and business owners opportunities, that there ought to be more focus and attention brought to bringing those services to immigrant entrepreneurs in languages in which they’re most comfortable, because that’s a major obstacle really, for a lot of successful business owners in this city, to access services.

I would suggest that, you mentioned it when you talked about some of the things that I’ve done, but I think that an industry that this city really needs to focus on and more could be done to support, is the green building industry. I believe, looking forward, that, in 40 years, people are going to look back and they’re just going to be horrified by how we used to build our buildings. You know, from an energy point of view, from an indoor air health point of view, in just so many different ways. I think we’re just on the cusp of sort of turning the corner, in terms of a lot of the standards that we assume to be appropriate for the construction of buildings, and if we get ahead of the curve, that’s going to be an enormous industry. And if the city can find a way to be at the forefront of it, then we’re going to do very well. And we have some real opportunities to do that. First is that actually the city can lead the way, in terms of building its own construction along high-performance guidelines, which the Department of Design and Construction has--absolutely excellent high-performance building guidelines, and it tries to convince a lot of the agencies to follow them, with limited success. And in the Council, actually, I have a bill to require us to phase in construction along high-performance guidelines. And I think if the city led the way, the second thing you’d see, there’d have to be a response to the city doing this.

And the second thing that we have--it’s a really great opportunity for doing this, is that New York is one of the great architect capitals of the world. And, so, I had an interesting--I went out and visited with a manufacturing company in Long Island City that creates blinds. And they do very well. And they do very well because they’re located in New York. And they’re located in New York because the key to their business is that whenever they get specified by the architects--whenever, you know, somebody builds a building in Hong Kong, the architects are here, they know this blind company, so they specify these blinds and these guys are shipping their blinds to Hong Kong. They want to be here. They want to stay here. The same thing could be true, I think, of the green building industry, if we can find a way to be at the forefront of that movement, we’ll spur, inevitably, responses from the manufacturing industry toward those needs and then it can build so that we can create real potential for real growth.

Alair Townsend: I would say that anyone who starts his or her own business is a hero. I can’t think of anything more difficult--to eschew the weekly or monthly or bi-weekly paycheck, and set up shop on your own. The rates of failure are very high, you have to be a jack-of-all-trades and do everything, and it’s interesting to me that more than half of the new business startups today are started by women. Here is an area, though, where I think the government has been quite responsive at all levels--federal, state and local, and the private sector, not-for-profit sector, as well. There are very many organizations and entities that offer training for entrepreneurs, networking, support, help with business planning and so on and so forth. So I think we should acknowledge success and trying hard where it exists.

Jonathan Bowles: Let me, I’m sorry, I know Ernesto wants to comment. I was just looking in Crain’s, just this past, I think the “Book of Lists” that came out a few weeks ago.

Alair Townsend: Thank you!

Jonathan Bowles: I’m sorry, that’s a plug there. But, I noticed in the list of fastest growing companies in the region, that I think 24 out of the 50 fastest growing companies in the region were outside of the five boroughs. And also we’ve done some research about where venture capital is going within the New York City region, and at least in the last year or so, the vast majority of it--you know, 60%, 65%--is going outside of the five boroughs. And notwithstanding the things that you’re talking about that the city has been doing for entrepreneurs, are there things that we can do to kind of help those companies with fast growth potential that we’re not doing right now? Okay, well, let me just let Ernesto talk then.

Ernesto Cury: Sorry, but, well, as an accountant, I would be remiss if I didn’t mention one of the issues which I think distinguishes New York from many other municipalities. As you all know, the most popular form of organizing a business today is the Sub-S corporation. Sub-S corporation simply avoids double taxation. As a business begins, and the early years has very low profits, or no profits at all, it is not an issue. As a business grows, and begins to show high profits, and those profits are then declared as income by the shareholders, it does become an issue, because the city of New York is the only municipality I know, certainly in the tri-state region, and probably maybe in the country, that doesn’t recognize the IRS Sub-Chapter S election to be treated as a small business corporation for tax purposes.

Now, this is a very key issue, because, along with high costs of real estate, and high costs of real estate taxes, high costs of labor and the other things that don’t sort of make us friendly to a growing business, we also have increased taxes when you show a profit. The city of New York will charge taxes on profits on small business corporations, when the federal government has accepted, has created the Sub-S and the state has accepted it and the city of New York in the tri-state area is the only municipality that does not accept that. I think this could be a very important issue in the retention of some of the growing businesses from moving to the suburbs and out of the city of New York.

Christine Cumming: I take a slightly contrarian view and say two things. One is, I think this is a question where, you mentioned 50 firms, a nice sample to ask more questions. I think we’ve heard some themes today about navigating government, about land prices, and zoning. Some very concrete things--it would be great to ask those 50 corporations: why are you located where you are? What went into that decision? To, in a sense, identify: what are the real things that hold back entrepreneurs, if there are such things, here in New York, and how do we address them? As I said before, on a pretty wide basis, not focused on one industry, but really looking across the board.

The second thing I’d say is that sometimes it’s tempting to think of the five boroughs as kind of, like, you know, this universe and then outside of it doesn’t matter. I think the vibrancy of our region is, again, one of the strengths that we have here in New York, and I don’t know that we’ve always thought as creatively as we can about how to work effectively with the others that are in our region. I’m sure there are many examples. I just mention, for example, this decision not to compete for every firm that’s here, is thinking about moving out of New York, and playing that game of trying to see who can give them the best incentives, say, between us and New Jersey, is something that can really help the region on the whole, since we’re mainly just taking away from each other in this process of bidding for these firms that, as is indicated, often intend to stay here as it is. And so I think thinking more regionally sometimes could be really helpful to us here in New York. Thanks.

Gifford Miller: I think part of the answer to meeting the needs of growing companies is something that Rob talked about, which is better connecting workforce development to the nsus the rest of the world. However, I mean, I have my views on which party is more likely to be responsive to the needs of cities and New York in particular. But, what I do think is important for us to recognize is that we will not solve this problem merely by sending a few elected officials up to Albany or down to Washington to try to cut a little bit of a better deal. I believe that we won’t solve it until we develop a consensus in every portion of the New York community--the business community, all of the editorial boards, organized labor, and average citizens.

And I’ll give you an example of how I think it can work better--and that is, for decades, everyone said we had to do something about the school governance. And what happened during that process was over a period, there developed a consensus that something had to be done. And this mayor, to his credit, got control of the school system. I think it’s one of the best things that he did. But he did it not just because he was so much of a better negotiator than anybody else; he did it because there was extraordinary consensus on the part of the business community, the labor community, average New Yorkers, parents, everybody said: the current state of affairs is totally unacceptable and something has to be done. That’s the kind of--we have to have leadership that recognizes that that’s the key to creating change in this area, and building that kind of a consensus, I think.

Jonathan Bowles: I would just respond quickly, Sumner, by thanking you for your question and comment and say that I would’ve liked to address a number of other issues that we didn’t really get to today. There was a little bit of talk about creative sector and arts and economic development here today, we probably could have had more. But I also want to mention to everybody that the Center has done quite a lot of research and writing about arts and culture as a sector in New York’s economy. I would check out “The Creative Engine”--it’s on our website. We’re actually doing a lot more research as we speak about this, but thanks for your comment, Sumner.

Robert Walsh: Jonathan, if I just could add--for the gentleman who talked about performing arts, my wife would be disappointed also--she works at the Brooklyn Center for Performing Arts. And we just held a conference on arts and economic development in Long Island City. Within the next 60 days, we should have a report that comes out on that. We didn’t just look at Brooklyn, Bronx, Queens, Staten Island and Manhattan. We looked at other parts of the country where arts have been used as an economic development tool, and I think that will be a valuable resource. We worked with the Alliance for the Arts, and many other organizations. The fact of the matter –I think this is a point that Alair made--is arts, coffee shops, greenmarkets, those things on the street are what tracks economic development. We saw this just a block up--I was proud to be part of what happened at Union Square. It happened because of the arts, universities, the greenmarket being involved and the community.

Alair Townsend