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Event - November 2001

Retain, Rebuild and Revitalize: Planning Strategies for Manhattan and New York’s Economy

A panel of experts discusses possibilities and priorities for New York City as it begins the work of rebuilding downtown after the Sept. 11 terrorist attack.

Tags: economic growth 911 human capital

Retain, Rebuild and Revitalize: Planning Strategies for Manhattan and New York’s Economy ANDREW WHITE: Welcome to the New School and to our second post-September 11th forum on the economic future of New York. This one is titled, “Retain, Rebuild and Revitalize: Planning Strategies for Manhattan and New York’s Economy.” My name is Andrew White. I direct the Center for New York City Affairs at the Milano Graduate School, which is based across the street as part of the New School. I’m just going to start off by telling you a couple of very short things about the Milano Graduate School. And then we will get into the forum.

Milano is a professional school with deep roots in practice and we offer Master’s degrees as well as non-degree programs in nonprofit management, human resources management, organizational change management, urban policy and health systems management. Our programs include a very large component of work in the field. And many of our students are already working in the field. So if any of this interests you, feel free to contact us. Information is in the folders.

To start things off, I would like to introduce Alice Rivlin, who is the Henry J. Cohen Professor of Urban Management and Policy at the Milano Graduate School. She just joined us this fall and she is also a senior fellow in Economic Studies at the Brookings Institution and chair of the District of Columbia Financial Management Assistance Authority. So she has some solid experience with helping to try and rebuild an urban economy following years of crisis. Alice:

ALICE RIVLIN: Thank you very much Andrew. I’m just delighted to have an opportunity to welcome you on behalf of the Milano Graduate School, to this exchange of ideas and strategies for the future of Manhattan and New York City. Despite the tragedy, this is a very exciting time to be in New York. I, as a part-time New Yorker and newcomer to the scene, feel the energy here in New York. It is especially exciting for those who have spent a good part of their lives thinking about cities and how….and this city in particular….and devoting their creative energies to how cities could work better and be more livable and workable.

The catastrophe at the World Trade Center has given New Yorkers a chance to think and to dream and to act about how to make this city more what they want it to be. And the encouraging thing is that so many people are doing that. That almost no one has said, how do we rebuild exactly what was there before?

People are saying, how do we make it better? How do we build on our strengths but recognize that change is a constant in New York or in any city and that the catastrophe is a chance to accelerate the change in the right direction.

It’s clear that transportation is key. One of the lessons of 9/11 was that access and public transit are crucial. When you mess them up terrible things happen. And also that they can be much better than they were before. It’s clear that people want beauty and they want green space and they want residential areas as near work and neighborhood services as possible. They want opportunities for small as well as large businesses to thrive. And it’s clear that everybody is in this together. That revitalizing lower Manhattan is a job for business and the public and the government and for the region as well as the City itself. It’s a job for incentives and cooperation and consciousness of the role of the City in the economy of the region and the nation.

Here at Milano we are doing what we can to use the expertise and the non-expertise that we have. I firmly believe that rebuilding a city and thinking creatively about a city is partly a job for experts and we are going to hear from experts this morning. But it is also partly a job for non-experts. For people who live and work in the city and want to think about how it could be better. To that end, we are having a visioning session this very afternoon, right across the street at the Milano Graduate School. This is open to New School students and faculty. And it’s going to be a free-form adventure in thinking about what kind of a city would you really like this to be and how could lower Manhattan be more like your ideal of a downtown? That’s at 5:00 right across the street.

But we have assembled a very impressive panel of experts today who already have done an enormous amount of thinking and written things that you have all read about this city and it’s future. And to chair this panel, it’s my pleasure to introduce Jonathan Bowles, research director of the Center for an Urban Future. How appropriate can you get? He has authored studies about neighborhood development all over this city. About the failure of the city’s tax incentive program and other reports about key aspects of the city’s economy. So I will turn this over to Jonathan, who will introduce his fellow panelists and, I think, give us a very stimulating chance to think together.

JONATHAN BOWLES: Thank you Alice. Thank you all for coming today. We’ve got a great turnout. As many of you know, the Center for an Urban Future has been around for about 5 years now. For those who don’t know about the Center, we are a nonprofit public policy institute, which writes reports and articles and convenes panels on economic development, workforce development, education, the arts and other issues that are important to the future of NYC. You might see in the package of information that we put out today, the blue or gray packages out there, several of our recent materials, including 3 new reports that we have done since September 11th.

One recently, you may have seen a couple of articles about, was the impact of the September 11th attack and the subsequent decline in the economy on the arts and culture sector in NYC. We’ve also looked at a number of other sectors and the impact that those key sectors of NYC’s economy have felt from this economic fallout. One last thing also, in your packet, you’ll also find a signup sheet. If you would like to be on the Center for an Urban Future’s list of e-mail updates, please fill out the form or e-mail us and let us know if you’d like to be on the mailing list or if you would like to be on the actual mailing list to receive reports in the mail, please just contact us and let us know.

Today, the format of the panel: we are going to try to keep things moving and keep things lively. We are not going to have any opening statements from the panelists. And the last 30 minutes or so we’re going to open up questions from the audience. When we do so, please keep your questions short and please don’t use the time you have in front of the microphone to just go off for a few minutes on any kind of statement. We want to keep this interesting. (laughter)

To begin, Joan Bartolomeo, going from my left to right. Joan is president of the Brooklyn Economic Development Corporation, a nonprofit corporation dedication to business development and job creation and retention in Brooklyn. She manages the Regional Economic Assistance Corporation, a mini-loan program managed, that has disbursed 56 loans totally $1.4 million to small businesses. She is a founding member of the New York Industrial Retention Network and has served as Chair of the Advisory Council of the Business Outreach Center.

Carl Weisbrod, established and is president of the Alliance for Downtown New York. The Alliance is a $15 million business improvement district, established to spearhead the revitalization of lower Manhattan. Prior to September 11th and since the Alliance began in 1995, the downtown commercial vacancy rate had been cut from more than 21% to 3.6%. And during that period more than 5,000 new housing units were added in the area and more than 800 information technology companies were attracted to the area, making it the heart of silicon alley. Prior to becoming the Alliance president, from 1990-1994, Mr. Weisbrod was president of the New York City Economic Development Corporation.

To my right, Ernest Tollerson, is senior vice president for Research and Policy at the New York City Partnership. He has also been a program officer and consultant for the Belden Fund, a foundation dedicated to environmental protection. Mr. Tollerson spent more than 2 decades in the newspaper business as a reporter and editor for a number of newspapers, including New York Newsday and the New York Times, where he served as the political editor on the Metro desk and a member of the editorial board.

Our final panelist, Elliott Sclar, should be arriving any minute now, we hope. And I will introduce him later and get right to the panel discussion.

Every day it seems that there are new bleak stories about New York’s economy. About $13 million square feet of office space in lower Manhattan were destroyed in the September 11th attack on the World Trade Center. Large financial firms have relocated out of lower Manhattan. Some to New Jersey and Connecticut. Many retailers and other small businesses downtown are struggling to survive. And throughout the 5 boroughs, companies in sectors from software to apparel manufacturing and air cargo are reeling. Transit links like the PATH station and a few stations on the 1 and 9 line, are going to be out of service for quite a while. Plus the national economy is in recession and the city and state face mounting budget deficits. There’s obviously a lot that needs to happen to get New York City’s economy back on track and it’s not going to be easy. I want to start by asking our panelists, what one or two things would you list as top priorities for New York City to do right now?

We can start with Carl as really in the heart of the trouble right now in lower Manhattan, who has really been dealing with these issues every day. What one or two priorities would you say, Carl?

CARL WEISBROD: I will list three actually. First and foremost and let me preface this by saying that I think that lower Manhattan’s economy is best described at the moment as precarious. And I think that the consequences of a disaggregation of lower Manhattan would have extremely severe repercussions for the City and the region. Far beyond anything that we have even seen to date. And given that precarious situation, I think that three immediate things are essential.

The first, I believe that there has to be a reaffirmation on the part of the City and State. I think we will get this but I think it has to be done quickly and decisively, that downtown is the financial core of the City, the region, the nation and indeed the world. And that public policy intends to keep it that way.

Second, I think that there’s got to be a concerted effort to try to get as much federal aid in as short a period of time as necessary. For all the reasons, Jonathan, that you just indicated about the City’s looming budget deficits and precarious economy, the availability of outside help is principally going to be limited to the commitment that the president has made to provide assistance to lower Manhattan. And I have no doubt the commitment will be kept but it is important that the commitment and the cash available be accelerated as quickly as possible. And I believe that we will need more than the $20 billion that has been committed.

And third, I think we have to start making some long-range plans right now for the infrastructure improvements that are going to be needed to not only restore lower Manhattan but to improve the economy of the City and the region as well. And those infrastructure improvements are twofold, really. One, is the obvious transportation. It’s a critical improvement but the second, as we’ve learned from the tragic events of September 11th, is also telecommunications, which we really have to rethink and address in a much more comprehensive and intelligent way than we have in the past.

JOAN BARTOLOMEO: I guess I don’t have a set of concrete proposals as Carl just proposed, although I would say….you might be surprised hearing this from someone coming from Brooklyn….that I do think we need to support the retention of lower Manhattan as the financial district of the City of New York. There’s been a decent amount of discussion about decentralizing office operations to the other boroughs. I think it’s important we retain a core that’s nationally and internationally recognized in New York City.

I would say that there are almost two issues. One is what happened at the World Trade Center and the economic issues. And while they work in concert with each other, one would have happened….the economic issues were happening before the Trade Center. And I think what I’m feeling is given the economy, the City has taken a traditional retrenchment role. As they often do. “Let’s cut budgets quickly. Let’s do this. Let’s do that.” And I think now is not the time for retrenchment.

I think now is the time to really reinvest in the areas of the economy that have some strength and have supported New Yorkers for over 150 years. I also don’t think it’s the time for grandiose schemes or to look for new paradigms to build new industries in New York City. Part of what we haven’t done is understand the strengths of what exists in the City of New York.

I was surprised in doing a little research for this presentation, that in Brooklyn the third largest employment category is in eating and drinking establishments. That means a lot of Brooklynites and there are 2.5 million of them, are working in the retail restaurant industry. So how can you avoid trying to support industries like that, which maybe don’t seem like very glamorous industries., when they are obviously a huge employment category for New Yorkers?

So I would say in general, we need to number one, not try to find ways to reduce funding for the nonprofit organizations and the social service organizations that have been the backbone of the City of New York and support New Yorkers and to support projects that support New Yorkers.

Even if you look at a lot of the office development that has happened in New York. The high-paying jobs are going to people who primarily don’t live in the City of New York. And the low-wage jobs are the jobs that are held by New Yorkers. We have to develop industries that support New Yorkers and support higher wage jobs for New Yorkers.

ERNEST TOLLERSON: First of all, I think I agree with a lot of what the two of you have said. I would just like to focus on something that Alice Rivlin said in her opening remarks. The opportunity is to build something better. And I think the huge question for New York, in terms of the future of the economy and the redevelopment of lower Manhattan, is exactly what does better mean? And I think our sense at the New York City Partnership, as we’ve just released an economic impact analysis of the impact of the terrorist attack on the economy and tried to look at things sector by sector….we really do believe that in rebuilding, that you want to rebuild things to 21st century standards. We think that’s really, really important and we think that the problems the terrorist attack exposed about the telecommunications system, transportation system and a third element that people don’t spend as much time thinking about as they should, but also energy. All those systems have to be at 21st century standards.

So when you’re looking at energy, for instance, it has an impact on the kinds of buildings that you decide to build. If you’re going to attract new kinds of industries to lower Manhattan, in addition to trying to retain what is there, in terms of financial services, I think you want high-performance buildings. High performance in the way they use energy, water, light, everything. And that’s something that New York doesn’t do a lot of. If you look at midtown, the quality of buildings we have, we have a lot of very conventional construction. And this is a very, very rare opportunity to take a section of the City and really bring it up to the level of places elsewhere in the world that people rave about.

So anyway, that’s a really important goal.

The other thing I would say that’s really important to focus on, and this relates to the culture of the City and the culture of the state that we’re all familiar with. New York is really good at deliberating about a problem. We excel….we all have post-graduate degrees in deliberating about things. But here we have the third largest business district in the United States, right Carl? After midtown and Chicago. And we can’t afford to deliberate so long that we miss the opportunity to recover with the rest of the nation.

You can argue that when the national economy bounces back, New York’s recovery may not track with it. It hasn’t always tracked with it. We’ve made an aggressive assumption that there’s a possibility that we could track with the national recovery. So to take advantage of that, it means that we have to have deliberations over all the things we need. The transportation options, building 21st century standards, but we have to cut those deliberations off at a certain point and make decisions. And I guess our hope is that New York and all the stakeholders, can hold a really rich series of deliberations about the future of lower Manhattan and what is going to be good for the economy. But do it on a very, very tight timeframe and try to have a plan for the third largest business district in the country by mid-2002.

Now the reason for that is, we….in looking at this atrocity, we know that we can’t actually compare it to any natural disaster like a hurricane or earthquake. However, we found it instructive to look at the rate of recovery from earthquakes in California and we found that the recovery from the earthquake in Southern California, Northridge, proceeded at a much, much faster pace because they had a plan that allowed businesses and all sorts of institutions to make decisions, because they knew exactly what people wanted in terms of infrastructure and guidelines and development.

Northern California, it took longer because again, there really wasn’t a plan that people had finally reached consensus on. So it’s not only the quality of our deliberations but it’s coming to some set of decisions that allows investors to make decisions and allows government agencies to plan.

Let me make another point. We have a city and region full of huge public authorities that run huge systems. I think they do a pretty good job running those systems, given the very tight budgets they have to work with. However, these agencies have not built anything in many, many decades and they just have not been in the business of building. That’s also a new challenge. And the challenge is we need a way to bring the Port Authority, the MTA and these other huge agency stakeholders together to say, “Alright, you prefer this transportation option. But in 2030 and 2050, what’s the long-term economic value of that option to the City’s economy? And what are the synergies between the PATH and the other lines?” That same process has to go on in choosing energy and how much distributed energy you have for buildings. And the same process has to go on in having a telecommunications system that frankly is resilient and has alternate systems. I think you are going to find that businesses, and particularly universities that have very, very sensitive research projects, are not going to want to face the kind of interruption you get with either a natural or manmade disaster.

I think we all remember the labs up at Columbia were compromised by the loss of power in Inwood and Washington Heights. You can’t run an economy, you can’t run a research university, if you don’t have both reliability and the quality and quantity of power. These are all things we’ve got to work really, really hard on.

The last thing I’ll say is….and you can take this as kind of a biased kind of comment cause I live downtown and have since 1981 so if it sounds like I’m selling you a washing machine, just toss it out. But downtown, I think, was on its way to becoming this 24-hour, 7 day a week community. A lot of people who live in Battery Park City walk to work. And so when you are thinking about not only retaining part of the financial services industry that is there, but you’re thinking about what can locate there, you think about globalization, and you can think about companies abroad that may find downtown the kind of place where they want to be. And you may find, for instance, that an industry doesn’t have to be biotech, but an industry like biotech, where people want to be close. Want to work in one place and live close by. Maybe downtown has that kind of….that set of conditions. So I’m actually full of hope and quite optimistic about downtown. Obviously, I think our optimism has to be in the context of being very respectful of the lives that were lost and the sensitivies that the families of the firefighters and police officers. But this, in fact, is a great opportunity to do things correctly for once in New York.

JONATHAN BOWLES: Let me introduce Elliott Sclar. Elliot is a professor of Urban Planning and Public Policy at Columbia University. He holds appointments in the Graduate School of Architecture, Planning and Preservation and the School of International and Public Affairs. He is the Director of all graduate programs in urban planning. His areas of academic specialization include land use and transportation economics and planning. His book on privatization for the Century Foundation, published by Cornell University Press, titled, “You Won’t Always Get What You Pay For: The Economics of Privatization” has won two major academic prizes.

Elliott, I basically started this discussion by asking all of the panelists in the context that so much ahs gone wrong with the City’s economy in so short a time, there’s a budget deficit on both the City and state level, there’s been a huge loss of office space and so many layoffs and rising unemployment here, what are the one or two priorities that you would say to the next mayor or the governor? What are the priorities for going forward for New York City right now?

ELLIOTT SCLAR: I think I was a victim this morning of everything that could go wrong traveling here. I have a feeling that some of the financial analysts that work for Enron, that were laid off, just got hired to do transportation planning in New York. (laughter) Anyway, I’m glad to be here and I’m cooling off a little. I’m sorry I didn’t hear all the comments but I did hear my friend Ernest Tollerson’s comments and I wanted to pick up on them in a certain way and take them.

This notion that we have to plan deliberately but we really should hurry up and do it quick, is one that I would respectfully somewhat disagree with. I remember the week after the tragedy, picking up the New York Observer and looking at….I forget whose column it was…but it started off, “Even as the Twin Towers were collapsing, real estate developers were huddling with the Chairman of the Planning Commission to discuss ways to expedite rebuilding.” And I think that we need a little more deliberation. I think we have time for deliberation and I don’t think we’re going to solve the problems of downtown just by focusing on downtown. We really have to understand the regional economy and how it’s changed and the role of downtown in that regional economy.

And I think there are a number of things out there that cross this. Senator Schumer’s committee on 35, is calling for 4 central business districts. And it would seem that if we are concerned about rebuilding downtown, where do we put the priorities on something like that? Senator Schumer’s report also calls for basically….I just want to start with that to come back around…it calls for basically wiping out industrial districts on the far West Side of Manhattan and Long Island City. It basically says that they should be given some relocation help because manufacturing jobs are important for immigrants. But we ought to subsidize by using condemnation assemblage, and then sell to developers at lower prices to build offices. Why offices? Nobody is really talking about what the industries are. And I think we have to start talking about how the whole New York economy fits together and we have to start talking about where they go.

I just looked up this morning….in 1987, which was the….you all may remember that as a peak year….the fire insurance and real estate industries, which were the driving forces employed in New York City something on the order of 550,000 people. In 2000, which was also even a bigger peak year, if you look at the dollar volume, they employed 490,000 people. Now some of that represents the fact that technology has changed, the way the industry has changed. And the way people use office space has changed. So if we’re talking about rebuilding for the next century, we ought to first understand how these industries operate. It’s not just all the daring young men in the red suspenders. A lot of the work that goes into the financial services industry is really done by clerical people, by low income people, by middle income people. There’s a range of jobs and they change the way they do these things.

If you wanted to start a mutual fund tomorrow. Let’s say you were a great stock picker. I won’t pick on Enron. But let’s say you were a great stock picker and you wanted to have a mutual fund. The companies that would run them.…all you need to do if you have the cash, there are companies all around the country that basically handle the FCC filings, handle the work on running your website, running your 800 number and you could call yourself a New York mutual fund. My point simply is, we don’t deal with….we’re not dealing with what that whole industry is and why it’s been disbursing. So the first thing I want us to do is start to look back at what the dynamics of these industries are and begin to talk about how they do their work and why they disbursed.

The second thing I want us to do is I would really like the public sector to get back into the business of being the public sector and not trying to guess which industries it ought to be subsidizing and which industries it ought to be crushing. And by that I mean what the public sector should be doing is….it’s amazing, when the manufacturing industries go down, it’s called the market but when real estate can’t come to market at prices that customers can bear, it’s called government’s fault. And I think we have to start changing that kind of mentality because the government is all we have and so what I would like to do downtown is to start with the fact that we need infrastructure and that’s something that government is supposed to do. Government is supposed to provide good police and fire protection. Good zoning and environmental protection.

The other thing that drove me nuts, the New York Times, your former employer, had an editorial a few weeks ago saying, “Look, we really have to get away from all this environmental and zoning red tape.” Listen, if it’s all red tape and junk, let’s get rid of it. If it serves a purpose and adds value, let’s talk about it. If there are problems, let’s talk about the specific problems with the environmental review or with zoning. As far as I can tell since 1975, with environmental review, with ???, with everything, the City has expanded enormously. So I would challenge people to talk about more specifically what needs to be done.

Downtown, they’re talking. The notion about what to do with the site. There’s going to be somewhere between $3.6 and $7.2 billion, depending on how many attacks it was, that are available. If I rent space from somebody and they go out of business and they can’t deliver the space, I’m not liable. Mr. Silverstein is not liable anymore. We ought to just release him from his obligations. Let him sign over the money to the Port Authority and then we have a big chunk of money to rebuild the system. The transportation system. Do the urban design work and let the real estate market sort out which industries are going to be there, what’s going to be a 24/7 neighborhood.

I guess my wish list is that government get back into business being government. As Ernie Tollerson said, “Government used to know how to build things.” I don’t think we’re any stupider now. And I think it seems to me we have to get back to those things and if we want to rebuild downtown, we’ve got to focus….the job of government is to focus on the infrastructure. Focus on the services. And basically focus on….I do believe….zoning and environmental rules add value, because it’s a living for me. (laughter)

JONATHAN BOWLES: Elliot raises an interest question that I want to ask the other panelists about. Before September 11th, a lot of people have talked about the migration of the financial sector, as Elliot alluded to, out of lower Manhattan. A lot of the companies were moving to midtown for several years and some to Jersey City and other places. And to Carl’s credit, lower Manhattan really over the last few years, as I explained in introducing him, has really transformed and evolved into much more of a 24/7 neighborhood with all sorts of small businesses, technology companies, a lot more people living down there. So I guess I want to ask you based on Elliot’s comment, does it make sense for the financial center of New York to be in lower Manhattan? How important is it for the financial center to be in lower Manhattan? Or can we say right now that we can do as the Schumer report suggests and help create new business districts in places like downtown Brooklyn, Long Island City and maybe even expand midtown over to the West Side? What do you all think of that?

CARL WEISBROD: I have several comments about that. First I think this notion of the disbursal of the financial district over the past 20 years is greatly exaggerated. Elliot cited the decline in financial services’ jobs citywide over the past 13 years. In fact, the percentage of financial jobs in lower Manhattan and the number of financial jobs in lower Manhattan over that period actually increased, despite a dramatic change in the nature of the industry and the consolidation of commercial banking, which had over that 13 year period, tens of thousands of jobs. And even that understates the importance of financial services. We categorize information technology jobs as a separate industry entirely and I think we are particularly proud of our role in providing a magnet for information technology in lower Manhattan and helping Silicon Alley grow and creating information technology center at 55 Broad Street, which grew out of work at the New York City Partnership as well as the Downtown Alliance.

But I think it’s important to understand that of the almost thousand firms that were attracted to lower Manhattan to make up that information technology cluster, the vast majority, 72% in fact, had as their primary customers financial services. And they were oriented to financial services.

Likewise with the design industry, the creative industry, which have been moving to lower Manhattan over the last several years, and likewise with the residents of lower Manhattan. As Ernest pointed out, and indeed 50% of the residents in lower Manhattan walk to work. 37% of them are employed in financial services. Of all the residents in lower Manhattan. The mutual dependence between financial services and other industries is crucial.

Now our strategy of diversifying lower Manhattan, transforming it into a 24/7 community, converting older commercial space to residential use, was not designed as an alternative to financial service. It was designed to enhance financial service and enhance the neighborhood as a first-class, premiere office district. That’s point number one.

Point number two is that the Schumer Report, which we helped author and housed actually, was based on a different time and a different place. It was a pre-September 11th report where, in fact, the City was looking for growth and needed to find alternative business centers and expend the business centers that exist. We are in a different world, at least in the short term. And we have to be cognizant of that. Business centers like downtown Brooklyn will not be able to survive, if lower Manhattan isn’t successful. Jersey City will not be able to survive if lower Manhattan isn’t successful. And doesn’t remain as a central marketplace for financial services. Downtown Brooklyn and the success of MetroTech is principally due to lower Manhattan’s role as a financial center.

Having said that we all recognize that companies themselves are reconsidering how they deploy their resources and their staffs in the post-September 11th era. Immediately prior to September 11th, the watch word, not just in financial services but in industries around the country was, “We want to create corporate campuses.” Whether that corporate campus was in lower Manhattan, in Queens, in New Jersey, in midtown Manhattan, where J.P. Morgan and Chase just before September 11th had decided to aggregate some 3.5 million square feet of space. I think that’s obviously being rethought today in this post-September 11th world and we may well see a disbursal of companies and their workforces as a means of hedging their bets in many different ways. In the market sense, response to their security needs, and the like.

And finally, I would just like to point out, going back to this issue of lower Manhattan being a financial center, one just has to look at the World Trade Center itself and what had transformed….the transformation of its tenancy over the 15 years that Elliot used as its timeframe. In the late 1980s, the majority of the tenants in the World Trade Center were government, not-for-profit enterprises. Heavily subsidized by the state. On September 11th, almost everybody in the World Trade Center, as we all have tragically and depressingly have been reading, was a financial services company.

In fact, in any business district, there is a dynamic movement of firms out. We lost some. J.P. Morgan Chase. We gained some. Guardian Life, Deutsche Bank and others. But that’s the nature of a financial center. If there isn’t a recognized financial marketplace in New York, the rest of the City will suffer greatly and as we’ve seen already in the post-September 11 era, 25% of those who have left lower Manhattan have left the City. And if there is no there there, I think we’re going to find companies moving in a very broad geographical area throughout the region. Not just in New York City. And I think that has profound consequences for us.

JOAN BARTOLOMEO: I think downtown Brooklyn has gotten a lot of attention in the last few years because it already had central business district that existed from the time when it was an independent city so with the building of the MetroTech complex, it became a natural magnet to look at Brooklyn as a place to increase the bulk of the office construction. And in fact, the Planning Commission has been talking about increasing the bulk zoning for downtown Brooklyn. And the Schumer Report, as well as the report that Mayoral Candidate Mark Green put out, both called for construction of several million feet of office space along the Willoughby Street corridor. That’s adjacent to the current MetroTech project. I think that all of those things represent the best aspirations of planning but probably not the best aspirations of quality of life issues.

Anyone who lives or works in downtown Brooklyn understands that we do have capacity issues that we haven’t even quite dealt with the existing office buildings. And that the construction of building along the Willoughby Street corridor will have been at the expense of hundreds of small businesses that would have been demolished and displaced, not knowing where they were going to go, if that were to happen.

I happen to agree that the financial sector or the sort of glamour sector of New York City’s office economy should stay in Manhattan. Brooklyn’s office buildings and MetroTech for example, are largely back office operations anyway. They were never really conceived as being the front line offices for major financial institutions and I may be wrong and I may be libeling Chase Manhattan but I think Chase keeps one staff position above the required number of people to enable them to keep their tax abatement they got as a result of the construction of the MetroTech construction.

So to me a more reasonable approach to making space available for the smaller firms, would be to talk to the office….to provide subsidies to the Class B office buildings in areas like downtown Brooklyn. The realtors will never admit this to you but the buildings along the Court Street corridor are probably running 20-30% vacancy rates. They never take down the directories in the lobbies so you never know when people have moved out. But the bottom line is if you were to go look for space at a building like 16 Court Street or 50 Court Street, which have been around since the 1920s, they are asking rents for those spaces anywhere from $30-40 a square foot. When you have subsidized office construction of new buildings where the rents can be brought down to $23 a square foot, how do those Class B buildings compete? Yet they do have a viable place in the economy of New York City. There are many nonprofit organizations, small businesses, that need 1,000 – 5,000 square feet. Those aren’t the kind of buildings you are putting up in areas like lower Manhattan or MetroTech.

So I think more attention has to be paid, again, to what we already have. And to see how we can improve what we already have. Downtown Brooklyn still remains a transportation hot spot and we’ve never resolved the air pollution issues. Building more offices is only going to exacerbate that problem. While it’s a great public transportation network, it’s well utilized. Millions of people, 1.5 million people pass through downtown Brooklyn every day. That’s an enormous number of people using public transportation. So I think we can concentrate on the rebuilding of lower Manhattan. That’s an appropriate action but it can’t be at the expense of looking at….as Professor Sclar said….looking at the rest of the City of New York and collateral things that we can be doing to help support the rebuilding of lower Manhattan, while we support existing industries and existing services that are here already.

ELLIOTT SCLAR: Can I just add to what Joan said. Probably the inevitable conclusion of what Joan is suggested and probably the one thing all of us in this panel would agree upon is that transportation infrastructure that is going to tie the city and all its neighborhoods closer together, is going to be essential to any sort of development or neighborhood strategy. Transportation is destiny, I believe, and how Brooklyn, downtown Brooklyn and lower Manhattan work better together and Long Island City work better together….will depend a lot on transportation. How the north/south development from the Bronx through to Brooklyn will work better together. Will depend on transportation. How a northern east/west access to the West Side of Manhattan out to Long Island City work better together, depend on transportation. And I think the issue really is going to be of the many transportation proposals on the agenda of the Transportation Planners, what the priorities ought to be given the limited amount of funding we have.

One of the issues I always find troublesome about transportation planning is that almost everyone will agree on good transportation projects and there can be a great consensus on what’s desirable. What tends to happen is that given the limited amount of money and we start saying what should be built first, that consensus unravels pretty quickly.

ERNEST TOLLERSON: Elliot and I may disagree on the issue of deliberations and timing but I do think we would agree about the regional economy and New York in the context of the global economy and an emphasis on trying to defend and restore the third largest business district in the country. It should be a national priority. But it’s not inconsistent with our desire to see the development of jobs in Long Island City and downtown Brooklyn and Elliot and I and Carl are old enough and have been in too many conversations over the decades about the future of downtown Brooklyn and Long Island City. But having said that, we found that in this report that we just released, in financial services, again, as a result of the terrorist attack, there is a greater interest in aborting business interruption, which means that you’re interested in having your office workers in nodes.

And that means now that in a lot of different industries they are looking at downtown Brooklyn and Long Island City and other areas with fresh eyes. That’s an opportunity. So again, redeveloping the third largest business district in the country is not incompatible with at the same time coming up with strategies that are really going to strengthen these places that everyone has wanted to develop for decades. So I think all that can go on and they are not incompatible or mutually exclusive.

ELLIOTT SCLAR: I’m amazed at how much we all agree on. We would like the financial service district, the heart of it to be where it’s historically been, in lower Manhattan. I don’t think anyone disagrees with that. The only caveat I would add to that is I don’t know that we have all that much control. I think firms make decisions in more complex ways and that may or may not happen. But we certainly should do what we can.

We all agree that transportation is key and Carl is correct. There are issues of priorities and if I had my druthers I would say you got to start with lower Manhattan right now. That’s very key to that. The problem that I have and I think will never….this is a problem we will never resolve….how much of what is going on now is a function of September 11th and how much is a function of trends that were in the works before? It wasn’t that the report in June was old history. If you picked up the Financial Times a few weeks ago, there was basically a report on worldwide net negative absorption of office space around the world. What was going on was the same thing that was happening here. People looked at the last 5 years and that’s basically all the Schumer report did, it said, “My God, look at what’s happened.” But if you read the footnote it said, “But we’re not looking at subleased space. We’re only looking at new space. And look at how the vacancy rate has gone down.”

But what was happening was firms were very optimistic, as we all were, and they were seeing the market get tight and basically, according to the report done by Torter Wheaton up in Boston, basically what was happening was, they were speculating in space themselves. Saying that space is going to get more expensive, we ought to take it now. So we have a problem that is not just in NY, that’s happening in a lot of places. The first question is how much office space are we going to have? We’re talking about all these financial districts but nobody is talking about how firms use financial space.

I know the consulting firms, were we have people who travel a lot, they don’t have offices anymore. They have addresses downtown but they have wheeling carts. They go into open spaces when they are in NY and they use them, with computers with the way we do things over the Internet, with email, a lot of business is different.

My example before, was just to make the point that the financial service industry is changing technologically. There is a place for the heart of it and the head of it being there but it seems to me that what I find missing is not the general stuff, because I think we agree on that, but the specifics. So in my mind, once you go and you say to the manufacturers in Long Island City and the industrial uses on the West Side, “We are about to rezone that.” And once that becomes common knowledge, the real estate values begin to work against them. And so you put a lot of people out of work to speculate about offices that you really didn’t do any studies to show that they were going to have to be there. So I guess my concern is in doing this, that we stop treating industries like black boxes and we actually look at how they fit together. That’s what I think we have to do in the planning process. I think there are obviously priorities and everyone agrees that lower Manhattan is the obvious priority and everyone agrees that the work that Carl and the Downtown Alliance are doing is outstanding and has been outstanding. But it seems to me there is this other New York and it all does mesh together and you can’t….lower Manhattan, this is the biggest rebuilding job since Robert Moses went and did all that work decades ago. So it really ties into everything and if we don’t deal with it and we don’t deal with equity as well as efficiency issues, first of all it’s all going to bog down anyway because of the political dissension, if we don’t put good processes in place. But secondly, it’s not going to work in its own terms.

CARL WEISBROD: Elliott, I agree with you to a point and disagree with you a little bit. I agree with you we’ve done an excellent job. (laughter) I agree with you that well before September 11th the market was changing and the office market was softening and the Schumer Report, which I think was a very, very useful document, was based on…or at least started during the time when the market was very hot and additional office space was needed and the need for that space was beginning to abate even before September 11th, as the national and local economy weakened. But I do think there has been a fundamental change since September 11th that we all recognize among the changes, which is the sense that companies….large companies….wanted, want to put all their space together. That’s really just a change in the way companies are looking at how their businesses function. And that will effect planning and office development in this region. It will effect it in some ways for good and some ways perhaps not for good. But I also think what I find interesting about this panel is that nobody….in a sense, talking about the Schumer Report but nobody really is saying that the development of new office space in lower Manhattan or elsewhere at the moment is the first priority of what we ought to be doing.

In fact, one of the most interesting things and I know Ernest has particularly been witness to a lot of this as I have, in the immediate aftermath of September 11th, you’re absolutely right that the real estate industry reacted by saying, “Oh my God, we’ve lost 13 million square feet of office space permanently. We’ve lost another 10 million square feet of office space temporarily. It is inconceivable that we’ll be able to house all of this office space and let’s start up zoning and fast tracking development on the far West Side and in Long Island City as quickly as we can.”

And it turned out that office space, some sadly because people have left, some sadly because workers have been laid off and some…a larger amount than anyone had anticipated initially….because there was space, sublet space particularly, that could absorb a lot of these firms.

CARL WEISBROD: And plenty in the pipeline. That’s exactly right. So now we have this opportunity to really focus on infrastructure and that is what I think we should focus on. One thing that I would say is that we have over the years known how to build both private development and public development. We have some good examples of it. We may or may not like the strategy of the particular Port Authority plan for airport access but once it was agreed to, they are building it. And it’s being built very quickly and the Port Authority is an infrastructure agency that can get things done and their role here is quite important.

We may not find Battery Park City or MetroTech or 42nd Street perfect but the fact is that for the most part, they are urban redevelopment success stories and we do know how to do this and what is required, I think, is a degree of consensus and public will. And I happen to agree that we don’t need to change our environmental laws, at least on the front end, or our public approval process on the front end. I do think it would be extremely helpful to expedite the back end, the litigation process and limit the time in which people can bring lawsuits. Perhaps create special parts to hear those lawsuits and require courts to render decisions in much more expedited fashion. But I don’t think we have to change our environmental laws. I think what we have to do is achieve a fairly early consensus on what kind of infrastructure improvements are necessary and get on with the task.

ELLIOTT SCLAR: A quick question, would you say maybe that at this point the Schumer Report ought to be put on the shelf for the time being and that we ought to focus on the downtown and the priorities ought to be shifted? That’s a question.

CARL WEISBROD: Again, as someone who helped create that report and housed it, I thought it was a very thoughtful report, but I think that it was written at a different time for a different set of assumptions and it may well turn out that we will return to it but at the moment I think there is a general consensus that the conditions that existed pre-September 11th are not those that exist post-September 11th.

JOAN BARTOLOMEO: You can build buildings in NY but you can’t necessarily build a sense of place. And I think what the Schumer Report also talked about was just displacing the entire civic center in downtown Brooklyn. Relocating all the court-related jobs to some undisclosed location. If nothing…..the civic center in downtown Brooklyn probably supports about 25,000 civil service jobs and primarily people who live and work in NYC. And probably a lot of them live in Brooklyn, for that matter. And for better or for worse, downtown Brooklyn’s sense of place has been as a civic center and you can build…you could tear down the Supreme Court building and build a 35-story office building or whatever but that doesn’t mean….you’ll create a place where people work. It doesn’t mean you’ll create a place where people feel connected to. I mean people feel connected to lower Manhattan. There’s a quirkiness about the layout of the streets and the combination of the old buildings and the new buildings, that gives it a unique character that draws people to it. And I don’t think the tourists are just drawn to a gapping hole in the ground. I think there’s a sense of history and location about the place that is all part of why they go there. And they were going there before the World Trade Center disaster as well.

So I think that as we talk about what the city is going to be and how we are going to build new clusters of buildings, we have to think about that sense of place and that’s the problem Long Island City has been struggling with. It’s even been part of the problem that the MetroTech project in downtown Brooklyn has been struggling with. I don’t think the people who run the MetroTech Business Improvement District disagree with me when I say that they have been struggling to make that a place that doesn’t get deserted at 5:00 every afternoon and that people in the neighborhood and in the community see as part of the fabric of that community. And it’s a work in progress and they are working very hard at that. But as you start looking at more and more buildings, it’s going to take years to develop that sort of sense of place and to make it location. It’s a place where buildings are, that doesn’t mean it’s a location.

JONATHAN BOWLES: I want to seize on that a little bit. Up to this point, a lot of people have been talking about office development. Previous to September 11th, that was certainly the focus of the Schumer Report. I think even now a lot of people are talking about what is going to be built. But one thing I would like to ask about is, I just have a copy of the platform on economic development and rebuilding the city that Mike Bloomberg posted up on his website before the election and he says that people must want to live here. We must focus as much on the workforce, their health, safety and quality of life as on the employers’ tax and infrastructure needs. Creating an attractive, vibrant environment where people want to raise their families and work will yield economic returns that far outstrip the plethora of business incentives that exist today. And I want to ask you about that because we all agree here about infrastructure and the need for that. But that kind of thing takes a long time and I think no one wants to lose the quality employees, the human capital that we have in NYC. But what do we need to do to make sure that NY stays a great place for people to want to live and raise their families?

A: I think everyone recalls that before September 11th, the number one issue for most New Yorkers was public education. And I think as New York gets back to a place where it can focus on more than the atrocity that has occurred, I think people will return to the issue of trying to create a public education system that everyone is proud to use. And that serves kids of every economic level. So I think that continues to be the big issue and obviously with the pressures on the city and the state budget, both because of the recession and the atrocity, that’s a much tougher task but I don’t think that’s something we can turn our backs on. I don’t think we can say, “Alright, things are tough so we can just cut the schools.”

ELLIOTT SCLAR: I would second that. When people ask me, if you had your druthers, what’s the one thing you would do? I would make every neighborhood school in NYC the best schools in the country. We have a great transportation system, we have a great central business district and when you talk to people…if you read the stories about people struggling to decide to stay or leave lower Manhattan, they always come back to their children and their concerns about the kids. So if you want one economic development strategy, it seems to me it’s the schools in the neighborhoods. The real estate developers they will take care of the buildings and the neighborhoods if the demand is there for those buildings. And the demand will be there if the schools are there. That’s what people….it’s more complex but it’s also just that simple.

JOAN BARTOLOMEO: I think it….

JONATHAN BOWLES: You talk about education and I don’t think I’d argue or anybody here would argue about how important that is but again, like infrastructure, it’s not something that you can snap your fingers right now. We have people leaving and people who are afraid of terrorism attacks and you have people that are moving because their jobs are moving. Is there anything that we can do quickly to seize on the quality of life needs of the city right now?

CARL WEISBROD: I think you’re absolutely right. We’re sort of talking about playing offense and playing defense and Elliott mentioned the schools. Lower Manhattan had the best public schools, has the best public schools in NY. Stuyvesant High School, P.S. 234, P.S. I.S. 89, these are premiere schools and I always said that the Economic Development Corporation, before my time was sort of brought kicking and screaming into building P.S. 234 as a community amenity for the Shearson Financial Towers on Greenwich Avenue and actually probably P.s. 234 was the single best economic development project that the Economic Development Corporation ever built. Because it helped create a magnet for the neighborhood. But it was a means of playing offense and not a means of playing defense. We all are at the moment in a defensive mode and we have some serious crises in lower Manhattan that have to be addressed right now and that can’t wait and that’s why incentives, cash incentives for residents, to keep residents downtown, I think is crucial. Because for all that the schools are terrific and will be terrific again, the vacancy rate now, the residential vacancy rate in lower Manhattan is at least 25% because parents are concerned about bringing their children back to this neighborhood. Some of these kids have….many of these children witnessed extraordinary horrors that none of us would like to see our children see. I saw a group of preschool children being walked outside of Trinity Daycare Center preschool program as the Twin Towers fell. It’s just heartrending. And it’s hard for families to bring their children back to this neighborhood with those memories and likewise for workers.

One of the things that is driving employers out of lower Manhattan today is not their desire to leave but the quality of life issues for their workforce and their ability to retain and attract a workforce and they need incentives as well, if we’re going to get past this interim period and once again be able to play offense, which is what we would all like to see and that’s why I very strongly supported both Senator Schumer and Senator Clinton’s desire to get tax incentives into the economic stimulus package, which unfortunately looks like it’s not going to happen now. But I think something along those lines are crucial if we are stabilize this neighborhood.

JOAN BARTOLOMEO: But I think you should talk about losing families in lower Manhattan, which is sort of a new residential community, you’re seeing tremendous out-migration of families from middle income neighborhoods in places like Brooklyn, Queens and Staten Island, because of the lack of affordable housing. We’re not just talking about low income housing. We’re talking about middle income housing. Matt Mitchell, who is in the audience, did a report for us this year about Brooklyn and it was kind of startling to see that the largest in-migration of people into Brooklyn are either childless couples or single professionals and the largest out-migration are people with more than two kids. And if you read those New York Times profiles every day, which are sort of compelling, you see that many of those people who have 2 and 3 kids, were born in Brooklyn or they were born in Queens, or they were born on Staten Island and they have no choice but to move to places like Middletown, New Jersey, because they can get a house there for $250,000, which you can’t get in NY anymore. And so I think yeah we have to talk about preserving that residential community that has its nucleus in lower Manhattan but not at the expense of realizing that we’re losing a tremendous amount of talent and people who are committed to this city.

There are a lot of people who don’t want to leave. You talk to them, they say, “I really don’t have a choice. I have no place else to go if I’m going to raise a family.” And their parents remain here or whatever and I think that’s another issue that we have to look at. It’s not just worrying about housing for low income people, which is a giant problem in the City of New York. It’s worrying about housing to keep that middle income group here, that has its historic roots in the City of New York.

JONATHAN BOWLES: Let me switch gears again and say that several studies that have come out recently have shown that low income, low skilled workers have disproportionately felt the pain of the declining economy of New York, post-September 11th. How do we help this segment of New York’s economy right now?

ELLIOTT SCLAR: The easy part of the answer is that Congress ought to be dealing wy can be used….probably Alice Rivlin has the best sense of that. And how smartly we can deploy them quickly, given the welfare deadlines that Elliott alluded to, I think that is going to be a very important issue.

JONATHAN BOWLES: I now want to ask a question where someone is going to disagree. Obviously resources are going to be scarce in New York City going forward and one project that seems to involve a lot of potential resources for the City is the stock exchange. And I want to ask what your feelings are. Two questions: should the stock exchange remain on Wall Street, going forward? And why? And should it include the development of a new trading floor, if that goes forward? Should that include significant state or city subsidies?

CARL WEISBROD: Well, I’ll wade in knowing that I am going to get a lot of opposition to this. First I personally believe that the stock exchange should stay on Wall Street. I think that it’s the least expensive alternative for the stock exchange. I personally think moving to the World Trade Center site is a lousy idea. Leaving aside the stock exchange’s interest one way or the other, in that I do not, given the stock exchange’s need for security, I do not believe this site is an appropriate site for the stock exchange because we want to make sure that that site, whatever it becomes, it has got to be at the very least, the central element of it is going to be hallowed ground and it has got to be a central open area, fundamentally, for New Yorkers and people from around the world and for the neighborhood and whether ultimately we rebuild the grid system or submerge West Street or use it as a transportation hub or make it a retail center or a performing arts center or whatever, it has to in my view got to be a place that is welcoming to the public and given the stock exchange’s security needs, I think that it is not an appropriate site for the stock exchange.

I think we’ve learned both symbolically and practically, that the New York Stock Exchange is a foundation of New York’s economy. And its ability to reopen 5 days after the September 11th was, I think, critical to the nation’s economy and critical to the City’s guts and determination as well. And it is….I always liken the stock exchange to the Erie Canal. It is really fundamental infrastructure. It is not a typical employer. It is what makes NY a financial center and what creates the 500,000 jobs that Elliot mentioned. And its health is essential to New York’s health and we should consider it in those terms. We should consider it in terms of not as a public subsidy but as a means of assuring that it is going to be efficient going forward so it will continue to dominate in the future as it does today, the world equity markets.

ELLIOTT SCLAR: I second that. You can’t believe how much Carl and I agree on things.

CARL WEISBROD: This does surprise me. (laughter)

ELLIOTT SCLAR: You’ve matured Carl. (laughter)

CARL WEISBROD: So have you. (laughter)

ELLIOTT SCLAR: What I would add to it. I think about this and for years I’ve watched as different firms have shaken down the City for tax incentives