View Report 9/11: 3Years Later; Securing the Federal Pledge (pdf)

New York City might not receive as much as $5.2 billion in funds pledged by the federal government in the wake of the September 11 attack on the World Trade Center, according to a study released today by Comptroller William C. Thompson, Jr. Thompson’s report, “9/11: Three Years Later, Securing the Federal Pledge,” noted concerns about the potential shortfall in aid pledged to New York and offered recommendations to ensure that the full amount is realized.

In the three years since September 11, 2001, New York City has received $11.3 billion in federal aid to assist with clean-up, recovery and rebuilding efforts. This represents slightly more than half of the aid package that President George W. Bush promised following the disaster. The President originally made a $21.4 billion commitment, which was reduced subsequently to $20.8 billion in September 2002.

“The Federal aid that has reached the City to date has been essential in helping New York City recover and rebuild,” Thompson said in the report. “It is vitally important, therefore, that the Federal government adhere to its commitment and that all government entities work together to ensure that the entire aid package of $20.8 billion is realized.”

Some of the unreleased aid - $4.2 billion - is in the pipeline, and is expected to reach the City in the coming months and years. However, a greater portion of the aid - $5.2 billion, representing a quarter of the total aid package - is in jeopardy and may never reach the City.

Of the $5.2 billion, an estimated $4 billion may not reach the City because of longstanding programmatic delays and the Federal government’s failure to monitor the progress of large components of the aid package. At risk are: $870 million in unprogrammed Community Development Block Grant funding; $2.37 billion in unrealized tax benefits from the Liberty Zone program; and, $797 million in undocumented miscellaneous federal support.

Even if immediate action is taken with regard to this portion of the aid, the City will still face a projected shortfall of $1.2 billion, representing more than 5 percent of the $20.8 billion pledge.

“The potential shortfall is not only worrisome, but would further hold up New York’s recovery,” said Thompson.

In September 2003, Comptroller Thompson issued a report assessing the federal package two years after the attack on New York City. The 2003 report called for any unused benefits associated with the tax-benefit portion of the Liberty Zone program to be reprogrammed and for the Liberty Bond deadline to be reconsidered. In a recent development, the President has proposed a “swap” of $2 billion in Liberty Zone tax incentives for a corresponding amount in tax incentives associated with transportation initiatives. This change, if adopted by Congress and fully utilized, would alleviate a significant portion of the potential shortfall in the Liberty Zone program.

Legislation has also been introduced to extend the Liberty Bond issuance deadline to December 31, 2009. Bills have been approved in the House and the Senate, and are now in conference committee. If legislation is enacted, the deadline extension will go a long way toward enabling commercial developers to take advantage of the remaining bonding authority in the program.

“While these are welcome developments, it is critically important, however, that appropriate measures be taken to ensure that the City receives the full aid package,” said Thompson.

In the report, Thompson recommended that the Lower Manhattan Development Corporation act swiftly to develop action plans for all undesignated funds. He also recommended that, in addition to extending the issuance deadline for Liberty Bonds, the federal government address the Liberty Bond program’s projected shortfall of $352 million.

Comptroller Thompson further recommended that Federal aid received in exchange for unused Liberty Zone benefits should fully compensate the City for the unused portions of the allocation - $2.9 billion - rather than just the $2 billion currently proposed in the “swap,” and establish a mechanism for tracking the benefits of the Liberty Zone initiative and all programmatic funding.

“Given the impact of the World Trade Center attack on New York’s economy, New York deserves the entire amount of aid promised by the Federal government,” said Thompson.