NYC Collateral Damage - 100,000 Jobs, $105 Billion, Years to Recover
July 7, 2008 - 8:19 PM
(CNSNews.com) - The $20 billion earmarked for New York City for rebuilding and adding security after the terrorist acts of Sept. 11 appears to be less than one-fifth of what is actually needed. The jobs lost in the New York metropolitan area, city and state tax and government losses, insurance claims, technology losses, and worker's compensation may end up costing $105 billion over two years.
"A significant amount of money -- significantly more than the first $20 billion in already approved federal funds," said Mayor Rudy Giuliani regarding the added costs. "But that won't be enough."
Estimates just for the removal of debris, cost of rescue and recovery worker overtime, and cleanup of the area may reach $4-5 billion. The work could take up to another 12 months to complete.
The cascading effect of the terrorist actions will reach heavily into real estate and tourism, and trickle down to everything from supermarket sales to street vendors, with the impact to be measured in years. Terrorism and Unemployment
Nearly 115,000 New Yorkers will be unemployed; their job losses either coming from their offices or buildings destroyed, or the numerous restaurant closures, hotel layoffs, and loss of jobs to window washers and janitors.
The State of New York has received $25 million in federal aid to provide temporary relief to those who lost jobs due to the attack, but that figure will barely scratch the surface of the overall need.
President Bush, saying terrorism has "sent a shock wave throughout our economy," pledged to extend unemployment benefits and provide $3 billion in emergency aid to workers laid off because of the assaults. While this money is to be spread nationwide to the state's most needy, New York will have to receive the lion's share as more unemployment claims are expected, on top of the claims already made. Insurance Costs Climbing
The American Council of Life Insurers estimates costs for life insurance payouts on the more than 5,500 people who perished in New York City, including those on the planes which crashed into the Twin Towers will be between $2-5 billion.
The federal government will pay $150,000 to each of the families of the more than 400 police, firefighters, and EMTs killed or missing as a result of the terrorist attack.
Wrongful death lawsuits may cost insurers more than $5 billion.
Alan Hevesi, New York City's comptroller who will leave office in January, noted that a variety of insurance payments from life insurance, property/casualty, and business interruption insurance will help offset the huge losses that will result from layoffs caused by plunging tourism and shuttered companies.
"Insurance is likely to cover only about a third of those costs, about $37 billion. The city could lose 115,300 jobs this fiscal year, although there will be an offset with some new jobs from cleanup, repair, construction, and security," according to Hevesi.
The expected insurance claims of $37 billion would exceed by more than 50 percent the amount paid out for losses suffered in 1992 during Hurricane Andrew in Florida and Louisiana. Real Estate Losses Staggering
The loss of the Twin Towers and adjoining buildings wiped out 15 million square feet of real estate. Nearly 14,000 businesses were affected in Lower Manhattan, either from the loss of electric, gas, and phone service to the complete loss of office space.
TenantWise, a research company that tracks real-estate transactions reported that several of those firms, "employing at least 10,000, including many white collar businesses such as brokerage houses, law firms, and other offices have signed long-term leases out of state, and therefore may not be coming back to New York City anytime soon."
"Property claims will be tremendous," said Bernie Heinze, spokesman for the American Association of Managing Agents. "In addition to the loss of life, how do you put a price tag on the 220 floors of office space in the twin towers with all the computers, valuable papers, and storage and backup systems?"
Residents who live near "ground zero" are slowly being allowed back to their homes, where rents for a typical two-bedroom apartment were well over $2,500 per month before the disaster. Health and psychological concerns now will keep people away, creating plummeting real estate values. One real estate agent for Douglas Elliman Realty in Manhattan said "values now for apartments are about 20-25 percent below what they were on September 10."
The twin towers implosion destroyed two key Con Edison substations and ruptured numerous gas and steam mains. Officials at Con Edison say 400 megawatts of power were knocked out, enough to power 400,000 homes. They also estimate the repair of the substations, along with replacing 33 miles of cable and pipelines to be $400 million. Replacement of computers and other technology products for businesses is expected to cost $3.2 billion
Verizon and ATT are still repairing service to nearly 200,000 customers. Repair costs are estimated at $1 billion.
The Small Business Administration has already given loans totaling $6.3 million, but that figure is expected to grow much larger. In comparison, after the 1994 earthquake in Northridge, California, the SBA gave out 125,000 loans totaling over $4 billion. The total in New York City is expected to be larger.
Political Promises Compromised
With elections for mayor in New York City and governor in New Jersey less than five weeks away, candidates who made any political promises may be unable to keep them.
In New Jersey, a projected $1 billion surplus for fiscal 2001 is now expected to be a loss of millions of dollars. Both Republican Bret Schundler and Democrat Jim McGreevey have promised tax cuts and specific money outlays for education. These cuts would cost about $1 billion, however, that money has already been diverted to emergency spending for added security and other measures since September 11.
"Promises can be kept, but priorities will change," said Schundler spokesperson Bill Guhl. "But it will take fiscal responsibility, and strong management of the state budget."
The candidates for mayor in New York City face the same dilemma. The economic rebound for the "Big Apple" may be several years. New York City's economy depends heavily on Wall Street, which produces about 20 percent of its tax revenues.
"Over the next two years, New York City will likely lose $1.3 billion in tax and other revenues," according to Hevesi.
The federal government's infusion of tax dollars will be generated for the most part by stripping projected budget surpluses.
"We were heading for rough times. They're just going to get a lot rougher," according to Hevesi. Straining School Budgets
Already beset with financial problems, cost overruns for school construction, a teacher shortage and the need to settle a new contract for unionized educators, the Board of Education now must deal with terrorism.
Buildings must be cleaned and safety issues, including asbestos levels addressed. Even outside of Lower Manhattan, the city's 1.1 million students will be in need of crisis counseling.
The Board of Education has asked for $110 million for counseling, planning on an average of $100 per child through the school system.
"If you have any worries about what took place at the World Trade Center, they will help you," Bush told a class of first-graders at PS 130 in Lower Manhattan, a school which had a direct view of the Twin Towers.
As Bush, Gov. Pataki, and Giuliani walked through the school's hallways, the evidence of how the terrorist attacks have affected the 1,200 students abounded. There were crayon drawings of burning planes and crumbling buildings hanging in some of the classrooms and in the hallways. Cleanup and Rebuilding
New York City is preparing for a long road to recovery, as the cleanup of ground zero is expected to take another year just to clear the estimated 1.25 million tons of debris.
Due to the cutback on air travel, the city's hotels are losing an estimated $7 million per day. This loss will directly impact restaurants, tourist attractions, taxi cabs, and retail stores.
Federated Department Stores, which owns Macy's and Bloomingdale's, reported nationwide sales were $65 million less than normal during the week of September 11.
The expectation of a full recovery will be at least two years off. The overall effects may show up years after, when the new mayor puts together the city budgets for fiscal 2003, 2004, and 2005. Now, with expected budget shortfalls and this huge bill to pay, even tougher times may be ahead for New Yorkers.