BUDGET REPORT (pdf)

The attack on the World Trade Center will likely cost the City economy between $90 billion and $105 billion by the end of fiscal year 2003, according to a preliminary report issued today by City Comptroller Alan G. Hevesi. That includes $45 billion for the value of buildings and people already lost and $45 billion to $60 billion for on-going costs, including lost economic activity over the next two fiscal years. As a result, City taxes and other revenues will be $1.3 billion less than previously expected in fiscal years 2002 and 2003. 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 clean-up, repair, construction and security.

"You cannot reduce to dollars and cents the losses New Yorkers have suffered from the vicious World Trade Center attack, just as there is no way to put a dollar value on the heroism and determination of our response," said Hevesi. "But to obtain the resources we will need to rebuild and create a better and stronger New York City, we must try to understand in dollar terms, what the attack cost our economy."

"New Yorkers are the toughest, smartest, most resiliant people in the world. We will recover from this attack. The federal and state governments have already proven that they are committed to helping us," said Hevesi. "What this study makes clear is that what the President and Congress have committed so far is just a down payment on what it will take to ensure that the terrorists don't succeed in destroying not just the two towers, but also America's and the world's financial capital."

The report provides preliminary data and the Comptroller's Office will continue to update the information and will cooperate with other efforts to calculate costs, including the report being prepared by the New York City Partnership.

Loss of Buildings and People -- $45 billion

• · Rebuilding the World Trade Center as smaller buildings is estimated to cost $6.7 billion. Repairing and restoring other damaged buildings will cost about $5.3 billion, for a total cost of $12 billion.
• · Replacing and repairing infrastructure will cost about $9.4 billion, including $4 billion for subways, $3 billion for telephone, electric and other utility systems, and $2.4 billion in losses for the Port Authority, including the PATH train but excluding the Trade Center buildings.
  
• · The value of furniture and fixtures, employee property, computer systems, vehicles, inventory in stores, etc., is another $12 billion. For securities firms in the WTC complex, the technology losses alone are estimated to be $3.2 billion.
  
• · It is impossible to put a real value on a human life and the pain of losing a loved one. But for purposes of economic analysis, one way economists ascribe an economic value to human life us by calculating how much an individual would have earned over his or her expected working life. On that basis, using the high average income for New Yorkers in general and financial workers in particular, the cost to the City economy of 5,600 deaths is about $11 billion.

Continuing Costs & Loss of Economic Activity in FY 02 -- $42 billion

• · The City is initially paying for clearing the area and the most visible portion of the cleanup, nearly half a million tons of steel, concrete and debris. The Comptroller has already agreed to register four emergency contracts totaling $1 billion for cleanup, with an additional $5 billion projected for stabilization and remediation. Another $7 billion in costs is expected for City government personal-service costs (such as police, fire, and sanitation overtime) and other-than-personal-service (OTPS) costs such as destroyed City vehicles, road rebuilding, and burial costs. Finally, $1 billion is the estimate of spending by private owners for cleanup and repairs.
  
• · Treating those injured and the loss of work from trauma and the long-term effects of the attack for victims, their families, and countless other citizens could cost $3 billion.
  
• · Many companies lost business as a result of the attack and economic activity will be affected for a long time. The total amount of lost business activity is projected at $21 billion for fiscal year 2002. Wall Street firms were severely affected by the closure of the NY Stock Exchange and many trading centers and are projected to lose $7.5 billion in economic activity over fiscal year 2002. Hotels, restaurants and theaters lost an estimated $2.3 billion. Retail and wholesale trade lost $1.7 billion, insurance $1.3 billion.
  
• · Lost rent from destroyed and damaged buildings is about $1.75 billion. About $700 million will be recouped as companies move to other locations in New York City, so the net loss is about $1.05 billion.
  
• · Wages lost to the City economy because businesses locate elsewhere will be about $3 billion in FY 02.
  
• · The City could lose 115,300 jobs this year, including 17,500 in retail and wholesale trade, almost 15,000 in the securities industry, almost 29,000 in service industries including 7,000 in airlines alone, 8,000 in restaurants and 6,000 in hotels.

Continuing Costs & Loss of Economic Activity in FY 03 -- $3 billion to $18 billion
The long-term impact of the attacks depends on how quickly the national and local economies recover and on the location decisions that companies make. There is not enough space in Manhattan for all the firms displaced from the World Trace Center. Some are moving out of the City. Some may return when there is new space, others may not. The impact on the city's economy in FY 03 could range from $3 billion to $18 billion.

Offsets
Insurance -- $37 billion

• · Life insurance payouts could total $4 billion, slightly more than one-third of the economic loss of $11 billion.
  
• · Property/casualty Insurance payments are estimated at $17 billion, half the total loss of $34 billion.
  
• · Business interruption insurance may provide $11 billion of the $21 billion lost.
  
• · The remaining $5 billion will come from coverage such as unemployment insurance, Workers' Compensation (which provides both death benefits and disability benefits), and health insurance.

Federal and State Aid
The federal government has appropriated $20 billion for recovery aid for New York, Washington and Pennsylvania, but it is still unclear how much of this the City will receive. Clearly, given the costs, this will not be enough. The level of state financial assistance is also unclear at this time.

"It is essential that New York City receive an appropriate amount of aid, given the costs, and that this aid come quickly and with as few strings as possible," Hevesi said.

Reduction in Taxes & Other Revenues -- $1.3 billion in FYs 02 and 03

• · Reduced economic activity will mean lower incomes for businesses and residents and lower City taxes and other revenues. In FY 02, tax revenues are projected to be $738 million less than currently projected, including $338 million less in sales and hotel taxes, $189 million in business taxes, $112 million in personal income taxes, $45 million in commercial rent tax and $45 million in parking violations.
  
• · In FY 03, taxes and other revenues are projected to be $567 million less than currently projected, including $195 million in property taxes, $135 million less in sales and hotel taxes, $95 million in business taxes, $50 million in personal income taxes, $38 million in commercial rent tax and $37 million in parking violations.

Recommendations
"Our goal must be to be the most business-friendly city in America," said Hevesi. "We must help local businesses re-establish themselves as quickly as possible."

The study makes the following recommendations:

• · Expedite payment of disaster grants and loans to help businesses get back to normal operations as quickly as possible.
  
• · Provide tax incentives and utility cost breaks to keep businesses in New York City.
  
• · Support and expedite microlending activities to help small businesses.
  
• · Rebuild on the Trade Center site as quickly as possible. Establish a state and city authority with the power needed to ensure that the site and neighboring buildings are cleared or safely repaired and that well-thought-out reconstruction plans are developed and implemented with no delays.
  
• · Establish a security commission led by the police commissioner. The commission should seek to develop security procedures that balance the need to protect New Yorkers and the nation, while also promoting an efficient flow of people and goods necessary to conduct business. The commission should foster cooperation among companies to share and keep down security costs. As much as possible, technology should be used to allow effective scanning for potential weapons while allowing New Yorkers to go about their business as quickly as possible.
  

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