Earlier this year, the city’s attempts to recover from the terrorist attack seemed stuck in neutral, with the redevelopment of Lower Manhattan mired in political wrangling, the economy sagging, and officials in Washington quarreling over how much aid to give New York. But the second installment of George Bush’s $21.5 billion aid package to the city, announced in early March, came among a cluster of good news that may mark a turning point in the recovery from the terrorist bombing. While daunting challenges remain, the city’s outlook is improving rapidly seven months after September 11.
The new federal aid should give an economic boost to Lower Manhattan and to the rest of the city. The package sensibly directs money into much-needed infrastructure work, including $1.8 billion targeted to help the Port Authority and the Metropolitan Transportation Authority realize their vision of not merely reconstructing downtown’s damaged transit system but improving it with a new super transit hub that will link PATH and subway lines. The proposed transit hub could even set the stage for further dramatic improvements, such as bringing the Long Island Rail Road, with its Nassau and Suffolk County commuters, down to Lower Manhattan. The new federal aid also fills in gaps in federal emergency funding, including money to help rebuild Lower Manhattan’s damaged telephone and electric grids. Former mayor Giuliani argued that the city badly needed a federal tax cut to stimulate its economy; in the absence of a cut, Bush delivered a consolation prize—$5.5 billion in tax credits and incentives to attract and retain businesses in Lower Manhattan. In effect, these are selective tax cuts.
Other encouraging signs are also starting to appear. The cleanup of the site itself has gone much more quickly than anyone expected, a temporary memorial has debuted, and the reconstruction of the Winter Garden has begun. Governor Pataki has given Mayor Bloomberg representation on the board of the Lower Manhattan Redevelopment Corporation, from which he had been excluded. Most important, all the major players seem to be reaching agreement about some basic elements of a new plan for downtown, especially the notion that the city should restore the street grid to the area and re-integrate the site into the rest of Lower Manhattan, including Battery Park City, as City Journal has suggested (see “How to Rebuild New York,” Autumn 2001). Developer Larry Silverstein, the leaseholder of the World Trade Center, has moderated his claims and seems willing to reconfigure Seven World Trade Center to allow Greenwich Street to run through it. The Lower Manhattan Redevelopment Corporation has promised a plan for the area by June. “There’s a consensus that the area should be redeveloped as a 24-hour neighborhood where people live and work,” says chairman John Whitehead.
All of this comes as the nation’s economic outlook brightens after a recession that proved much shorter and shallower than expected—which is good news for New York’s economy, whose bedrock is the securities industry. Venture capital has been returning to the city, along with tourists: hotel occupancy rates have nearly returned to normal, a stunning turnabout from just a few months ago. Broadway’s weekly grosses are running ahead of this time last year, and every theater in the city is booked, with more than a dozen new shows opening over the next six months. Meanwhile, several major office tenants that temporarily decamped to New Jersey after September 11 have already begun to move back into the city. And prices of residential real estate in Manhattan, a sure bellwether of Gotham’s economy, have rebounded.
Still, the city has huge obstacles to overcome. Its budget remains out of balance because of excessive spending and declining tax revenues. As the mayor and City Council leaders begin their debate on how to balance the city’s books, the mayor needs to keep resisting calls to raise taxes—a move sure to short-circuit any nascent recovery. And he should reconsider his risky plan to borrow heavily to fund the city’s operating deficit, a move reminiscent of Gotham’s budget gimmicks of the 1970s, when such borrowing helped plunge New York into a fiscal crisis that came within a whisker of bankruptcy.
September 11 marks the most infamous day in New York’s history. But the revival that seemed so remote that day is now clearly under way.
