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Will New York Come Back?

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eye on the news

Will New York Come Back?

Yes, Richard Ravitch says—but “I don’t know whether it’s going to take two years or ten years.” April 28, 2021
New York
Economy, finance, and budgets

Richard Ravitch isn’t going anywhere. “I’ve lived in New York my entire 87 years,” he says. “I will never move myself. I love this city, and I’m tied to it emotionally, physically, in every which way.”

Ravitch, a middle-class-housing developer who built the Manhattan Plaza and Waterside Plaza developments four decades ago, has seen urban crisis before. Among other government-rescue roles he took on beginning in the 1970s, when New York was mired in fiscal and social crises, Ravitch served as chairman of the Metropolitan Transportation Authority between 1979 and 1983, saving the subways from decades of neglect and thus helping to create the conditions for New York’s revival over the ensuing four decades.

Though he’s committed to New York, he’s under no illusions that the city doesn’t face a difficult recovery from the past 13 months. Ravitch thinks that New York is in worse shape than it was in the 1970s. “There’s no similarity at all,” he told me in an interview last week. “What happened in the seventies was simply that the City of New York borrowed money to cover its operating expenses.” When the city had borrowed a worrisome amount—$7 billion, or $34 billion in today’s dollars—the banks cut it off. “So New York had to pay off close to $7 billion in debt, which required creative refinancing of the existing debt, plus federal aid. . . . The major problem was all this overhanging, inappropriately incurred debt. That’s not the problem now.”

Now, he says, “we’ve had hundreds of thousands of people move out” in just a few months, not over a decade, as happened back then. “We’ve had people learn that they can conduct their business or their lives now in ways that weren’t technically available to them in years past. So their dependency on physical proximity was diminished significantly.” Add to this realization the fact that New York has had a worse pandemic than “almost anywhere else in the country,” with a death toll of 384 per 100,000, more than twice the national average.

The fiscal implications of this upheaval aren’t good. For now, enormous federal aid insulates the city government, he notes, which can balance its budget this year. Longer term, though, the city’s property taxes—which, at more than $30 billion annually before the pandemic, constitute nearly half the city’s tax revenues—are at risk.

“It hasn’t been discussed very much that every property owner, if they have a restaurant, a store, or tenants that aren’t paying rent, is going to seek a reduction in the assessed value of their property,” Ravitch says. “The city won’t realize it over these next few years, but the property tax loss is going to be far more than is currently projected.” Given that current projections foresee a fall of 16 percent in commercial-property values, that is saying a lot. “I don’t know a property owner who isn’t going to seek a reduction of the assessed value of their property,” he adds.

The situation facing the MTA’s leaders now also differs from the situation Ravitch faced at the state-controlled transit authority in the early 1980s. “I think the generous money from the federal government”—$16.5 billion— “will carry the MTA for a couple more years,” he says, just as federal aid has temporarily relieved New York City of the need for deep budget cuts. “But after that, if ridership is anywhere near as low a percentage of what it was before Covid, the MTA is not going to be able to cover its expenses, let alone maintain the physical plant in an appropriate fashion.” Deteriorating service would make it even harder to rebuild New York’s commuting population.

New York would struggle even under the best leadership right now—but the state’s leaders are making bad decisions. Noting that 5 percent of the population pays 60 percent of the state’s and city’s income taxes, Ravitch observes that the state legislature, earlier this month, “unwisely in my judgement, decided to increase the tax burdens that the very rich would pay. It was an inappropriate and stupid time to do that. For New York’s recovery, we need capital, we need rich people.”

Indeed, a 24 percent tax hike on the top marginal earners will spur the rich to wonder if they need us as much as we need them. “I do not understand why New York is distinguished from all other jurisdictions in this country by imposing such a relatively higher tax burden,” he says. “We’ve tolerated it for a long time because of the greatness, the excitement, of New York City. But they really rubbed everybody’s nose in it by trying to extract more money from the same people.”

Though he worries about racial disparities in policing, Ravitch knows that complex cities need police, as well. “We need an effective police force,” he says. “We have to attract bright young people into wanting to become members of a law-enforcement system.” That won’t happen, he says, with “defund”: “We can’t get rid of a police department and expect the citizens to maintain law and order adequately.”

Among the mayoral candidates vying to solve these problems—or make them worse—Ravitch hopes that a competent leader will emerge. “I happen to like Ray McGuire,” he says of the former Citigroup investment-banking head. “Obviously he has no experience or background with the city. But neither did Mike Bloomberg, and neither did Ed Koch. When Ed Koch first ran for mayor in 1977, everybody laughed at him. . . . But Ed Koch turned out to be a pretty damn good mayor.” Shaun Donovan, the former Bloomberg housing official who went on to serve as President Obama’s housing and budget chief, “would be a superb mayor as well,” he believes.

Of the mayoral candidates proposing big new spending plans, he says, they “are not very realistic about what resources they will have available. New York is going to face a horrendous fiscal situation.” When federal relief money runs out, “it’s going to be tough as hell.”

His advice to de Blasio’s successor is simple: “First and foremost . . . understand the numbers. Second of all, reach out and make sure that you understood all the potential talent willing to commit to a few years of public service, and grab it. And I’d try to build a plan during the six months between June,” after this year’s primary election, “and the time you [take] office” in January 2022—a “fiscally realistic” plan, of course.

Eventually, New York will be fine, Ravitch predicts. “New York City is the greatest socializing institution in the world,” he says. Speaking of the 1970s, he remembers, “most of my contemporaries at that time moved to the suburbs. They’d get married and buy a house in Scarsdale, Greenwich, Connecticut, or Long Island. . . . But they all came back, because people want to be in this socializing context, as well as to experience all the cultural inducements that exist here: the opera, the movies, the concerts, the sports—basketball, hockey, baseball—but above all, the restaurants and bars.”

History will repeat itself, he believes. “New York City will come back,” but “I don’t know whether it’s going to take two years or ten years.” The key question, besides when, is how—and led by whom.

Photo by Gary Hershorn/Getty Images

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