The Lower Manhattan Development Corporation s HUD-Funded Projects and Programs:

Transcription

1 The Lower Manhattan Development Corporation s HUD-Funded Projects and Programs: Leading Economic Revitalization in Lower Manhattan APPLESEED In association with The Louis Berger Group, Inc. November 2004

2 EXECUTIVE SUMMARY Three years after the September 11th terrorist attacks, the revitalization of Lower Manhattan is well under way. Under the leadership of Governor Pataki and Mayor Bloomberg, and with the support of funding from the federal government, the Lower Manhattan Development Corporation has played a pivotal role in the recovery. LMDC S REDEVELOPMENT STRATEGY From the beginning, LMDC recognized that there was no single key to restoring Lower Manhattan s economy; recovery would by necessity be a multifaceted process. In collaboration with the City, the Port Authority, the Metropolitan Transportation Authority and other agencies, LMDC formulated an overall strategic framework to guide its redevelopment efforts. LMDC s strategy focused on: Strengthening Lower Manhattan s residential community through grants to residents, investment in parks and other quality of life improvements; Stabilizing businesses severely affected by the terrorist attacks; Retaining and attracting jobs; Supporting cultural activities that reinforce Lower Manhattan s identity as an attractive place to live and work, and at the same time attract visitors to the area; Long-term planning for development of the World Trade Center site; and Restoring Lower Manhattan s vital transportation infrastructure, and overcoming long-standing weaknesses in the area s connections to other parts of the metropolitan area. LMDC s use of the special allocation of Community Development Block Grant funds provided by the Department of Housing and Urban Development reflects this strategic approach. STRENGTHENING LOWER MANHATTAN S RESIDENTIAL COMMUNITY Following the September 11th attacks, residential occupancy rates in Lower Manhattan, especially in areas near the World Trade Center, fell sharply. LMDC s residential grant program helped stabilize the residential market through the provision of cash incentives for families to stay in or move into the area. LMDC allocated $280.5 million to this program; to date, $225.9 million in grants have been approved. Historically a business district, Lower Manhattan has lagged other communities in Manhattan in the availability of parks and open spaces. To improve the quality of life for Lower Manhattan residents, LMDC allocated $30.7 million in improvements to public parks, helping to make neighborhoods from Tribeca, the Lower East Side and Chinatown to the Financial District and the Battery more attractive places to work and live. LMDC also allocated $3.0 million in capital funds needed to finance the opening of Millennium High School the first public high school specifically intended to serve Lower Manhattan s growing school-age population. Economic Impact Overall, we estimate that LMDC programs aimed at strengthening Lower Manhattan s residential community have generated: A one-time impact of $270.9 million in citywide economic output and 2,063 jobs, as a result of the expenditure of residential grant funds and spending on construction; and 2.

3 An ongoing annual impact of $231.4 million in citywide economic output and 1,721 jobs, as a result of spending by families and individuals who, but for the initiatives undertaken by LMDC, might not be living in New York City. Thus, our estimate of the ongoing annual economic impact of the program is greater than the one-time total cost of LMDC s grants to residents. HELPING BUSINESSES RECOVER FROM THE EVENTS OF SEPTEMBER 11TH The September 11th attacks severely disrupted business activity in Lower Manhattan. Whether as a result of disruption of their own operations or because the decline in employment and population in the area sharply cut into their business, many firms faced dire economic conditions. LMDC helped stabilize Lower Manhattan s small business community by funding the Empire State Development Corporation s Business Recovery Grant program. Using LMDC s funds, ESDC has provided assistance to 6,858 companies affected by the September 11th attacks. LMDC also allocated $33.0 million in ESDC assistance to ten other companies that suffered disproportionate losses on September 11th. An additional $0.5 million was allocated to the World Trade Center Employment Training Assistance Program. Economic Impact We estimate that expenditure of the funds provided by LMDC for businesses adversely affected by the September 11th attacks generated a one-time impact of $388.9 million in citywide economic output, and 2,682 jobs. If we take into account the $339.5 million that ESDC itself allocated to the BRG program (over and above LMDC s contribution) the one-time impact of the total program has been $880.9 million and 6,346 jobs. Just as important in the long run, the Business Recovery Grant Program helped maintain the infrastructure of small businesses the retailers, restaurants and providers of other neighborhood services that are so essential to maintaining Lower Manhattan s attractiveness as a place to live, work and do business. RETAINING AND ATTRACTING JOBS Following the September 11th attacks, approximately 65,000 jobs were lost in Lower Manhattan. The PATH system, New York City subways and local streets were all severely damaged, making it difficult for those employees who remained to get to work. The destruction of Con Edison s World Trade Center substation and Verizon s facilities at 140 West Street severely disrupted Lower Manhattan s energy and telecommunications infrastructure of Lower Manhattan, and raised doubts about whether key financial service companies and institutions would remain in Lower Manhattan. LMDC s strategy for recovery of business confidence, and for attracting and retaining jobs, included several elements. LMDC allocated $150.0 million to ESDC s Job Creation and Retention Program. LMDC funds have been used to provide incentives to 30 companies that have committed to keeping or creating 30,230 jobs in Lower Manhattan. LMDC also allocated $50.0 million to ESDC s Small Firm Attraction and Retention Grant (SFARG) program. 3.

4 LMDC has committed a total of $750.0 million to ESDC s Utility Restoration and Infrastructure Rebuilding Program, to pay for the speedy restoration of energy and telecommunications services in Lower Manhattan after September 11th, and for improving the reliability of the area s energy and telecommunications infrastructure. After September 11th, workers access to the World Financial Center was complicated by the void at the World Trade Center site, and by the destruction of the pedestrian bridge that had connected the Trade Center to the Winter Garden. To alleviate this problem, LMDC funded the construction of a new pedestrian bridge at Vesey Street. In the months following the terrorist attacks, the physical barriers and other provisions required to secure the streets around the Stock Exchange created the impression of an area under siege. As enhanced security has become a continuing part of our daily life, it was critical to redesign and refine security provisions so that they would not be perceived as an imposition. To address this problem, LMDC has allocated $10.0 million in street and security improvements in the Stock Exchange area. LMDC has also allocated $4.0 million to support streetscape improvements along Broadway. Economic Impact We estimate that the LMDC-funded initiatives aimed at retaining and attracting businesses and jobs will generate: A one-time impact of $1.4 billion in citywide economic output, and 5,848 citywide jobs, through the expenditure of LMDC incentive grant, utility restoration and construction funds; and An ongoing impact of $2.6 billion in annual citywide economic output, and 11,784 jobs, through the retention of businesses and jobs in Lower Manhattan. If we include in our assessment of the program s impact ESDC s own commitment of $170.0 million to JCRP and $105.0 million to SFARG, the estimated short-term impact increases to $1.8 billion and 8,513 jobs; and the ongoing annual impact to $6.5 billion and 28,965 jobs. REINFORCING LOWER MANHATTAN S CULTURAL IDENTITY AND PROMOTING TOURISM Lower Manhattan was for hundreds of years the primary gateway for travelers to New York. Today, tourism continues to play a critical part of the life of the area, with an estimated 8 million visitors coming to Lower Manhattan each year. However, with the destruction of the World Trade Center and the temporary closing of the Statue of Liberty, some of the most popular destinations for visitors were no longer available. Given these realities, it was necessary to reinforce the area s cultural identity, and to increase awareness of that identity to attract visitors and to enhance Lower Manhattan s appeal as a place to live and work. To address this need, LMDC supported the creation of new cultural events, including the River to River Festival, the Tribeca Film Festival and the Splendor of Florence Festival. LMDC has also funded marketing programs aimed at promoting visitor traffic in Lower Manhattan, including the Museums of Lower Manhattan campaign and the Chinatown Tourism and Marketing campaign To date, LMDC has allocated $11.9 million to these programs and other communications outreach initiatives. 4.

5 Economic Impact We estimate that the economic impact of the above listed initiatives includes: A one-time impact of $76.8 million in citywide economic output and 991 jobs, as a result of direct spending on the events and campaigns themselves, as well as increased visitor spending; and An ongoing increase of $15.0 million in annual citywide output and 225 jobs, generated by a sustained increase in visitor spending resulting from these campaigns. Taking into account funds committed to these programs from sources other than LMDC, the one-time impact increases to $125.7 million and 1,511 jobs. The ongoing annual impact rises to $21.9 million and 325 jobs. PLANNING FOR LONG-TERM REDEVELOPMENT Since its founding in 2001, the Lower Manhattan Development Corporation has played a dual role: providing immediate assistance to residents, companies and communities affected by the attacks on the World Trade Center; and planning for the long-term redevelopment of Lower Manhattan. Planning is an essential first step in securing the public and private investments needed to ensure Lower Manhattan s future. The long-term payoff from those investments can be enormous. World Trade Center redevelopment In collaboration with the Port Authority of New York and New Jersey and the City of New York, LMDC sponsored the formulation of plans for the redevelopment of the World Trade Center site. The plan calls for the creation of the permanent World Trade Center memorial, and the development of 10 million square feet of office space, and space for retail, cultural uses, and a hotel. When the redevelopment of the site is complete and the newly-developed space is 90 percent occupied (assumed to occur by 2015), Appleseed estimates that businesses and institutions at the World Trade Center site will directly or indirectly generate $15.7 billion in citywide economic output, and 77,000 jobs (including 32,000 net new jobs on-site and 45,000 jobs elsewhere in the City created through the multiplier effect ). Improving Lower Manhattan s transportation infrastructure In the months following the September 11th attacks, LMDC recognized that the rebuilding of Lower Manhattan s transportation infrastructure was one of the most critical factors affecting the area s future. A team of agencies that included LMDC, the Metropolitan Transportation Authority, the Port Authority of New York and New Jersey, and city and state transportation departments set to work on formulating plans for use of funds made available for this purpose by the federal government. As a result of this effort, Governor Pataki in April 2003 announced a plan for improvements that are scheduled to be completed by Working with the City, the MTA and the Port Authority, LMDC subsequently financed a study of a 5.

6 potential new rail link serving Lower Manhattan. This new link will provide a direct connection between the Long Island Rail Road s Jamaica Station and Lower Manhattan, as well as a one-seat ride between John F. Kennedy Airport and Lower Manhattan. According to an analysis prepared for LMDC by Hamilton, Rabinovitz & Altshuler, new development occurring as a consequence of improved access will result in the creation of between 56,000 and 80,000 jobs in Lower Manhattan and Downtown Brooklyn and an annual output in the region of $9.0 to $12.0 billion generated by activity in Lower Manhattan and Brooklyn. When the overlapping effects of these two developments are taken into account, we estimate that by 2025 they will, in combination, increase total output in New York City by $16.5 to $18.5 billion, and increase citywide employment by 85,000 to 100,000 jobs. SUMMARIZING LMDC S IMPACT The near-term, one-time impact of initiatives undertaken to date by LMDC totals approximately $2.1 billion in citywide economic impact and 11,584 jobs. In the long term, we estimate that these same initiatives will produce an ongoing impact of approximately $1.3 billion annually and 6,468 jobs. In addition, we estimate that if completed as planned the redevelopment of the World Trade Center site, along with major improvements in transportation, would by 2025 increase citywide economic output by $16.5 to $18.5 billion, and increase employment by 85,000 to 100,000 jobs. Thus, the combined long-term impact of LMDC s current initiatives, World Trade Center redevelopment and major transportation improvements would by 2025 total $19.4 to $21.4 billion annually, and 98,700 to 113,700 jobs. When we take into account the additional impact of funding provided by other sources, the short-term onetime impact increases to $3.2 billion in citywide output and 18,974 jobs. Similarly, when additional funding from ESDC and other sources is taken into account, the combined long-term impact of these initiatives rises to a total of $23.2 to $25.2 billion in annual output in 2025, and 116,000 to 131,000 jobs. 6.

7 ** ** Does not include the $50 million allocated to the Affordable Housing Program. * Includes the cost of acquisition of 130 Liberty Street. ** LMDC funded portions of ESDC administered Business Assistance and Retention Programs. 7.

8 INTRODUCTION Three years ago, in the aftermath of the terrorist attacks that destroyed the World Trade Center and devastated the surrounding area, Governor George Pataki and then-mayor Rudolph Giuliani created the Lower Manhattan Development Corporation (LMDC) to lead a concerted effort to rebuild and revitalize Lower Manhattan. From the beginning, LMDC recognized that there would be no single solution to the challenge of restoring Lower Manhattan s economy. Recovery would require both a coherent vision of the area s future and a multi-faceted strategy for achieving that goal. It would also require immediate action to improve the quality of life in Lower Manhattan. The cornerstone of LMDC s vision was to preserve and enhance Lower Manhattan s position as a leading twenty-first century business district, while at the same time making the area one of New York City s most attractive places to live. In collaboration with the City, the Port Authority of New York and New Jersey, the Metropolitan Transportation Authority and other agencies, LMDC formulated an overall strategic framework to guide its redevelopment efforts. LMDC s strategy included a number of key elements: Strengthening Lower Manhattan s residential community; Stabilizing businesses severely affected by the terrorist attacks; Retaining and attracting jobs; Supporting cultural activities that reinforce Lower Manhattan s identity as an attractive place to live and work, and at the same time attract visitors to the area; Long-term planning for the development of the World Trade Center site; and Restoring and revitalizing Lower Manhattan s vital transportation infrastructure. LMDC s use of the special allocation of Community Development Block Grant funds provided by the federal government reflects this strategic approach. A review of the economic impact of the LMDC programs follows. 8.

9 WASHINGTON ST J.P. WARD ST J.P. WARD ST

10 STRENGTHENING LOWER MANHATTAN AS A RESIDENTIAL COMMUNITY Strengthening Lower Manhattan as a Residential Community LMDC s strategy for strengthening Lower Manhattan s residential community has had three key components: Stabilizing the area s resident population (and housing market), and encouraging new construction; Improving the quality of life enjoyed by Lower Manhattan residents, through improvement of parks and public spaces; and Supporting the creation of a high school to meet the needs of growing families. THE RESIDENTIAL GRANT PROGRAM The September 2001 attacks on the World Trade Center brought to a sudden halt more than a decade of vibrant growth in Lower Manhattan s resident population. Between 1990 and 2000, the number of people living below Houston Street had increased by 8 percent, to 156,086. New residential development was especially strong in the area below Chambers Street; between 1990 and 2000, the number of people living in this area rose by 67 percent, to 22,904. The gradual transformation of Lower Manhattan into a mixed-use, 24/7 community was widely seen as a major factor in the area s economic resurgence during the years before Family Grants offered $1,500 to each household with at least one child under 18 that committed to living in Zone 1 for at least a year; and $750 to each household making a one-year commitment to living in Zones 2 and 3. Two-Year Commitment Grants were provided to renters who signed two-year or longer leases on apartments in Zone 1 and Zone 2. Grants were calculated at 30 percent of housing cost. Existing owners of owner-occupied housing units who had completed the payment of their mortgages were similarly eligible to receive grants totaling up to 50 percent of their monthly maintenance costs and real estate and related taxes. In both cases, the grants were subject to a minimum of $4,000 and a maximum of $12,000 within Zone 1 and a minimum of $2,000 and a maximum of $6,000 within Zone 2. As Table 1 shows, more than 65,000 grants have been awarded to residents of Zones 1, 2 and 3. Two-Year Commitment Grants accounted for 83 percent of total spending, with grants averaging nearly $7,100 per household. In the days and weeks after September 11 th, however, thousands of families and individuals left the area. Occupancy rates below Chambers Street plunged. Battery Park City, which had led the re-emergence of Lower Manhattan as a residential community, was especially hard-hit. Three months after September 11 th, only 61 percent of Battery Park City s 6,167 apartments were occupied. Thus, one of the Lower Manhattan Development Corporation s earliest initiatives was thus to provide incentives for people to stay in or move to Lower Manhattan. September 11 Residential grants provided a one-time grant of $1,000 per household for people who were living in Zones 1, 2 and 3 in Lower Manhattan on the date of the attacks. As Figure 1 shows, residential grants were broadly distributed across the neighborhoods of Lower Manhattan. Residents of Battery Park City and the financial district benefited from these grants and so did residents of Chinatown. LMDC has provided $225.9 million in grants to more than 65,000 households The Lower Manhattan Development Corporation s residential grant program contributed in several ways to New York City s economic recovery and to the revitalization of Lower Manhattan. Most immediately, the infusion of $225.9 million in federally-funded grants provided a short-term stimulus that helped alleviate the adverse economic effects of the loss of jobs and the exodus of residents from the downtown area. 10.

11 TOTAL NUMBER OF RESIDENTIAL GRANTS, BY TAX LOT: LEGEND BREAKDOWN OF EACH ZONE S NUMBER OF RESIDENTIAL GRANTS, BY RESIDENTIAL GRANT TYPE: RESIDENTIAL GRANT ZONES FAMILY GRANTS 2-YEAR COMMITMENT- BASED GRANTS SEPTEMBER 11, 2001 GRANTS Figure 1 Residential Grant Distribution 11.

12 Even more important than this direct spending impact, however, has been the residential grant programs contribution to the quick stabilization and subsequent recovery of the Lower Manhattan residential market. At a critical moment in time, LMDC s grants helped to reverse the outflow of residents, and re-establish Lower Manhattan s identity as the City s fastest-growing community. By the end of 2002, occupancy rates below Chambers Street had returned to pre-september 11 levels; and the occupancy rate in Battery Park City had risen to 97 percent. Occupancy rates have since remained high, despite the development of thousands of new apartments in Lower Manhattan. According to the Alliance for Downtown New York, the current population below Chambers Street is 31,984. By the end of 2002, the vacancy rate in Battery Park City had fallen to 3 percent The absence of these households, moreover, would have had an impact extending well beyond Lower Manhattan. In the near term, many of those who without LMDC s grants would have chosen not to live in Lower Manhattan would in all likelihood be living elsewhere in New York City instead. But some would have chosen not to live in the City. For purposes of this analysis we assumed that one-third of these 10,150 households (that is, 3,383 households) would not be living in the City without the residential grant program. The additional income and consumer spending associated with these households generates $231.4 million in annual citywide economic output and 1,721 jobs. The ongoing annual impact of the residential grant program is $231.4 million in citywide economic impact and the creation of 1,721 jobs in New York City A survey of residents conducted in May 2004 by the Alliance for Downtown New York found that nearly 32 percent of all current residents living below Chambers Street had moved to the area between September 2001 and May Among those new residents, 57 percent said LMDC s grants had been a factor in their decision to move to Lower Manhattan. More than 38 percent of these new residents said that LMDC s grants had been a very important factor and 19 percent said that the grants had been a somewhat important factor. For 57 percent of all new Lower Manhattan residents, LMDC s grants were an important factor in their decision to move into the area If we assume for the purpose of this analysis that 38 percent of all Two-Year Commitment Grant recipients would not have come to or stayed in Lower Manhattan without this incentive, we can estimate that without LMDC s grants there might today be 10,150 fewer households living in Lower Manhattan. In addition to the impact on spending and jobs, an increase of more than 10,000 in the number of households living in Lower Manhattan (over and above what the resident population would have been in the absence of LMDC s grants) will also have a long-term effect on residential property values in the area. LMDC s residential grant program, in combination with Liberty Bond tax-exempt financing, has played a major role stimulating the development of additional housing in Lower Manhattan. The grant program stimulated the decline in vacancy rates to less than 5 percent, creating an environment in which there was strong demand for additional units. The allocation of $1.6 billion of tax-exempt bond financing spurred the construction of new residential units as well as the conversion on under-utilized Class B and Class C office space. Starting in mid-2002, residential developers have announced and undertaken several major projects in Lower Manhattan. The Alliance for Downtown New York estimates that there will be 7,445 new residential units below Chambers Street by 2008, including 3,018 units currently under construction and 4,427 units in the planning stage. 12

13 LMDC s residential grants played a central role in restoring occupancy rates to more than 95 percent, and in spurring new investment Overall, we estimate that LMDC s grants to residents have generated: A one-time impact of $221.7 million in citywide economic output and 1,604 jobs, as a result of the expenditure of grant funds by households that received them, and An ongoing annual impact of $231.4 million in citywide economic output and 1,721 jobs, as a result of spending by families and individuals who, but for the assistance provided by LMDC, would have left New York City. IMPROVING LOWER MANHATTAN S PARKS For much of its history, Lower Manhattan s residential neighborhoods have been underinvested, relative to other New York City communities, in parks and other public spaces. Particularly as more families move into the area, the need for public space improvements has become more pressing. LMDC has made a major commitment to improving and expanding parks and other public spaces in Lower Manhattan. LMDC s allocation of $30.7 million will be used to improve approximately acres of park land, as shown in Table 3. In assessing the return to the City s economy that results from LMDC s investment in the residential grant program, it is worth noting that our estimate of the ongoing annual economic impact of the program is greater than its total one-time cost. The ongoing annual impact of LMDC s residential grant program is greater than its one-time initial cost 13.

14 Figure 2 Park Improvements LMDC has contributed to a wide variety of improvements in sixteen parks and other public spaces, stretching from Sara D. Roosevelt Park on the Lower East Side to the Financial District and the Battery. For example, improvements have included new ball fields, a running track, new drainage systems, lighting, picnic tables and benches, and many others. Improvements to 16 Lower Manhattan parks could increase residential and commercial property values by $56 million The location of LMDC-funded park improvements is shown in Figure 2. Almost the entire population below Houston Street lives within a half-mile of at least one of the parks that are benefiting from LMDC s investment. This means that approximately 150,000 Lower Manhattan residents will have the opportunity to enjoy these improvements on a regular basis. LMDC s share of spending on parks improvements translates into a total of $44.4 million in economic impact and 419 jobs. Total spending from all sources will generate $51.8 million in citywide output and 489 jobs. Investments in parks and open spaces have quantifiable economic benefits over and above the spending impact. A study of the economic impact of public parks, conducted in 2002 by New Yorkers for Parks and Ernst & Young, found that: Parks are community assets, and as such, the potential impact of a neighborhood park is a strong consideration as part of the decision to purchase, invest or finance a property. Capital improvements can result in increases to both commercial and residential real estate value. Close proximity to a quality park is a positive site attribute that can enhance the curb appeal and value of adjacent real estate. It is too early to gauge the actual impact of the improvements financed by LMDC, since many of these investments are just getting underway. Based on experience elsewhere, however, we can estimate the potential magnitude of this impact. 14.

15 Studies conducted in New York City, Boston and elsewhere suggest that the premium attached to residential real estate adjacent to a park can be as much as 20 percent. For purposes of this analysis, we have assumed: An average value of approximately $450 per square foot in Lower Manhattan; That parkside locations increase property values by an average of 15 percent; and That LMDC-funded improvements increase this premium by an average of 20 percent (that is, 3 percent of the total value of the apartment). Based on these assumptions, we can estimate that the value of approximately 2.7 million square feet of residential real estate adjacent to the affected parks will increase by approximately $36.4 million. 1 Parks improvements also benefit the commercial properties in the area. As with residential properties, we can estimate the potential magnitude of this increase in value. There are 21 commercial office buildings with a total of 12.8 million square feet of office space bordering on the improved parks. If a parkside location increases office rents by 10 percent, we can estimate that in Lower Manhattan such locations will command approximately $3.20 per square foot in additional rent. If the improvements financed by LMDC increase this differential by 10 percent (that is, an additional 32 cents per square foot), we can estimate that improving the parks will generate an additional $4.1 million per year in commercial rents. Capitalized at 8 percent, this stream of revenue translates into an increase of $20.0 million in the value of buildings bordering the park. MILLENNIUM HIGH SCHOOL The continued growth of Lower Manhattan s residential community is creating new demands for a variety of community facilities. Perhaps most significant among these demands is the need for schools. Millennium High School, which opened in September 2003 in renovated space at 75 Broad Street, is the first high school in Lower Manhattan that is specifically intended to serve students living south of Houston Street. Millennium High School: Helping make Lower Manhattan a place for families to stay and grow LMDC helped lead the effort to create Millennium High School, and allocated $3 million toward the $16.9 million cost of converting several floors of office space into a school. LMDC s share of construction spending translates into a total of $4.8 million in economic impact and 40 jobs. Total construction spending from all sources will generate $27 million in citywide output and 228 jobs. The new school will aid the continuing evolution of Lower Manhattan as a residential community. In particular, it makes Lower Manhattan a more attractive place for families with children approaching school age. In 2000, 27,865 children lived below Houston Street; 23 percent of all households in the area included at least one person below the age of 18. The presence of a high-quality high school will help make Lower Manhattan neighborhoods more attractive both to parents and students. CALCULATING THE IMPACT OF PARK IMPROVEMENTS ON COMMERCIAL RENTS: 1) Average office rent per sf $ Value of parkside location (10% of line 1) $3.20 3) Value of park improvements (10% of line 2) Because several of the parks in which LMDC has invested are adjacent to publicly-owned or other subsidized housing, improvements will not in all cases be translated into increased market values. Nevertheless, assuming for purposes of analysis that improvements in these parks could translate into higher home values gives us a way to estimate the implicit value of better parks to residents, regardless of their incomes or the type of housing they live in. 15.

16 OVERALL ECONOMIC IMPACT OF RESIDENTIAL INITIATIVES Over time, the growth of the resident population will support the growth of retail, restaurants and consumer services. Moreover, the benefits of residential development will spill over into the commercial sector, by making Lower Manhattan a more attractive place to do business as well. As noted above, LMDC s direct spending on the residential grant program, on park improvements and on the renovation of the Millennium High School building will also ripple through New York City s economy, generating a citywide spending impact. Taking into account the multiplier effect, LMDC s spending on the Residential Grant Program, parks improvements and Millennium High School will generate a one-time impact of $270.9 million in citywide economic output and will support 2,063 jobs. In addition, we estimate that the increase in Lower Manhattan s resident population that results from the initiatives described above will result in an ongoing annual impact of $231.4 million (in 2004 dollars) and 1,721 jobs. Our estimate of the ongoing economic annual impact of LMDC s residential initiatives is thus greater than the one-time total cost of those initiatives. Park improvements will also have a long-term impact on both residential and commercial property values. 16.

17 HELPING BUSINESSES RECOVER FROM THE EFFECTS OF SEPTEMBER 11TH In the immediate aftermath of the September 11th attacks, Lower Manhattan s future as a major business center was in serious doubt. More than 65,000 jobs had been lost, more than 13 million square feet of office space had been destroyed, and millions of additional square feet had been damaged. Hundreds of companies that had occupied these buildings were forced to relocate, and thousands of others suffered at least temporary disruption of their business. Major elements of the area s energy and telecommunications infrastructure had been destroyed or severely damaged. Transit infrastructure had also been destroyed, making it difficult for employees of Lower Manhattan companies to get to work. As a result of these problems, some companies left Lower Manhattan. Others did not leave immediately but have seriously considered doing so whenever their current leases expire. LMDC-funded Business Recovery Grants helped stabilize 6,858 firms with more than 52,000 employees In the months following the attacks, the Empire State Development Corporation launched several business assistance programs that were funded in part from LMDC s allocation of Community Development Block Grant funds. These programs have made a notable contribution first to the stabilization of Lower Manhattan s battered economy, and then to its continuing recovery. The Business Recovery Grant program provided financial assistance to businesses that were located south of 14th Street 2 on September 11th and that had fewer than 500 employees. The amount of assistance each firm could receive was based on its proximity to the site of the attacks, and on estimates of direct losses incurred (property damage, temporary relocation costs, cleanup and repair costs, etc.) as well as lost revenues. Firms in the restricted zone (the World Trade Center itself and the immediately surrounding area) were eligible for grants equaling as much as 10 percent of the preceding years revenue; firms between Houston and 14th Streets were eligible for grants equaling 2 percent of the previous year s revenue. The Disproportionate Loss of Workforce Grant program aided companies that were located below Canal Street on September 11th, and that suffered a loss of at least 50 New York City based workers in the attacks or lost at least 20 percent of their New York City based employees. The World Trade Center Employment Training Assistance Program provided grants to companies located south of 14th Street to provide training opportunities for employees affected by the September 11th attacks. 2 The BRG program was administered by the Empire State Development Corporation, using a combination of funds provided by LMDC and funds that Congress allocated directly to ESDC. 17.

18 As Table 5 shows, 6,858 firms employing more than 52,000 people received assistance under the LMDC-funded portion of ESDC s Business Recovery Grant program. Most of this assistance went to small firms; 83 percent of all BRG recipients had ten or fewer employees. (When funds that Congress allocated directly to ESDC are included, the BRG program totaled $564 million, and provided assistance to 14,152 businesses.) Nearly 58 percent of all LMDC-funded BRG assistance went to firms located in the restricted zone. Moreover, the assistance provided to these firms was substantial the 2,118 firms located in this area received an average of $55,800 each. Firms that received assistance under the Disproportionate Loss of Workforce program were typically larger. Ten firms employing a total of 6,682 people shared a total of $33.0 million in grants. Ten firms also received grants under the Employment Training Assistance program, and provided training for 303 employees. ESDC s Business Recovery Grant program helped stabilize the Lower Manhattan economy by partially replacing revenues lost in the wake of the attacks on the World Trade Center. These programs helped local businesses keep paying their employees, as well as keep paying rent, utilities and other fixed expenses. And as these companies and their employees spent the money provided by LMDC, the effects rippled outward to other business districts and other neighborhoods throughout the City. The Business Recovery Grant program had a positive effect on the market for smaller office spaces. A total of 2,873 firms in office-based industries such as finance, insurance and business and professional services received BRG grants funded by LMDC. Together, these firms employed a total of 18,377 people. Assuming a ratio of four employees per 1,000 square feet of office space, we can estimate that these firms occupied approximately 4.6 million square feet of office space five percent of Lower Manhattan s office market. By helping these companies stay in business and keep paying rent, the BRG program helped to stabilize the Lower Manhattan office market. Just as important in the long run, the Business Recovery Grant Program helped maintain the infrastructure of small businesses the retailers, restaurants and providers of other neighborhood services that are so essential to maintaining Lower Manhattan s attractiveness as a place to live, work and do business. BRG recipients included 923 retailers, 433 restaurants, and 247 providers of health and social services. The failure of these businesses, which are vital to the fabric of life in Lower Manhattan, would have delayed the area s recovery. Office-based business that received LMDC-funded BRG grants account for 5 percent of all downtown office space We estimate that in addition to preserving thousands of jobs at the recipient firms, LMDC s business assistance programs produced a multiplier effect that generated $142.4 million in economic activity at other New York City businesses, supporting 994 full-time-equivalent jobs. As with the Business Recovery Grant program, LMDC s spending on the Disproportionate Loss of Workforce program and the Employment Training and Assistance Program generated an additional impact on the City s economy because of the multiplier effect. The three business assistance programs combined supported a total of $388.9 million in citywide output and 2,682 jobs. If we include that portion of the BRG program that was funded directly by ESDC, we estimate that these programs generated $936.8 million in citywide output and 6,629 jobs. 18.

19 Figure 3 Business Grant Distribution Figure 4 BRG Grant Recipients by Industry 19.

20 RETAINING AND ATTRACTING JOBS Along with helping businesses overcome the immediate effects of the September 11th attacks, LMDC focused on the need to maintain Lower Manhattan s vitality as a major center of business and employment. LMDC s strategy for retaining and attracting jobs includes: Grants to major employers who retain jobs in (or bring jobs to) Lower Manhattan; Supporting the restoration and upgrading of the area s utility infrastructure; and Improving Lower Manhattan s pedestrian environment. JOB CREATION AND RETENTION ESDC s Job Creation and Retention Program, funded in part by LMDC, helps larger firms (those with at least 200 employees) that were located below Canal Street on September 11th and stayed in the area; firms that temporarily moved jobs out of Lower Manhattan after September 11th, and request assistance in order to move them back; and firms considering the creation of new jobs in Lower Manhattan. Firms must commit to maintaining jobs in New York City for at least seven years. LMDC-funded JCRP Grants: Aided and helped create or retain 30 companies, 30,230 jobs in Lower Manhattan Since 2002, LMDC funds have been used to provide aid to 30 firms. These grants helped retain and create 30,230 jobs in Lower Manhattan and an additional 4,524 jobs in the rest of New York City. (Including funds that Congress allocated directly to ESDC, the JCRP program totaled $320.0 million, and helped 74 companies create or retain more than 83,074 jobs 74,302 of them in Lower Manhattan.) Like LMDC-funded Business Recovery Grants, the Job Creation and Retention Program has helped stabilize the market for commercial office space in Lower Manhattan. For instance, the first 22 companies that received JCRP benefits occupy approximately 5.6 million square feet of office space in Lower Manhattan more than 6 percent of the area s total inventory of commercial office space. Without these tenants, the office vacancy rate in Lower Manhattan today could be as high as 19 percent. We also evaluated the one-time economic impact of the spending by the corporations that received these grants. LMDC s spending on the Job Creation and Retention Program generates additional economic activity due to the multiplier effect. We estimate that the spending of $150.0 million will generate a one-time impact of $217.5 million in citywide output and 1,170 jobs. Restoring Lower Manhattan s utilities has been critical to recovery Just as LMDC s residential grants will have a long-term impact through the annual spending of households that would otherwise have left the City, JCRP grants funded by LMDC will have a continuing impact as a result of the ongoing operations of businesses retained in New York City. Even if for the purpose of this analysis we assume that, without JCRP grants, only 20 percent of the 30,230 jobs retained by companies receiving JCRP grants would actually have moved out of New York City, this would have represented an ongoing loss to the City of $2.6 billion and 11,784 full-time-equivalent jobs. 3 Just as ESDC s Job Creation and Retention Program helped larger companies stay and grow in Lower Manhattan, the Small Firm Attraction and Retention Grant Program has done likewise for companies with fewer than 200 employees. LMDC and ESDC allocations for this program total $155 million. Including the impact of funds allocated directly to ESDC, we estimate that spending of grant funds by these companies will generate $230 million in citywide output, and 1,657 jobs. To date, funds have been awarded to 1,700 companies employing 26,000 people. UTILITY RESTORATION AND INFRASTRUCTURE IMPROVEMENTS The September 11th attacks on the World Trade Center had a devastating impact on Lower Manhattan s energy and telecommunications infrastructure. A major Con Edison substation at 7 World Trade Center was destroyed. 3 This estimate includes the 2,320 jobs that would have left the City, the economic output associated with those jobs, and the multiplier effect of the lost jobs and output. 20.

21 Verizon s facilities at 140 West Street the central office through which most Lower Manhattan telephone traffic was routed was also severely damaged. Energy and telecommunications outages were a major problem in the days after September 11th and only the heroic efforts of thousands of workers kept the problem from being much worse. Ongoing annual impact of JCRP: $1.0 billion in output and 4,522 jobs Reliable energy and telecommunications services are essential to Lower Manhattan s continued attractiveness as a business center especially for the financial services firms that constitute the heart of the area s economy. In 2002, as planning for redevelopment was getting under way, the Lower Manhattan Telecommunications Users Working Group consisting of senior executives from such major downtown companies as AIG, Goldman Sachs, Deutsche Bank and the New York Stock Exchange asserted that: A state-of-the-art and resilient telecommunications infrastructure is essential to Lower Manhattan s vitality in the 21st century and must be a key component of the rebuilding process. Such a foundation will allow America s financial center to do what it does best act as the financial engine for ingenuity and economic growth around the world. In 2002, Congress authorized the use of up to $750.0 million in Community Development Block Grant funds for utility restoration and infrastructure improvements. LMDC s board subsequently approved a plan that prioritizes the use of these funds as follows: 1) Reimbursement for costs related to providing temporary and emergency energy and telecommunications services in Lower Manhattan after September 11th that were not recovered from insurance or other sources. 2) Reimbursement for costs related to permanent restoration of Lower Manhattan s energy and telecommunications infrastructure, and for critically important improvements to that infrastructure. 3) Payment for interference work the relocation of utilities required not for the companies own purposes, but by public infrastructure improvements and other Lower Manhattan redevelopment projects. 4) Funding for the installation of new carrier-neutral conduits connecting telecommunications companies fiber optic trunk lines to Lower Manhattan s side streets, for installation of redundant fiber optic connections to critical public and private-sector facilities in Lower Manhattan, and for other improvements mandated by new federal or state regulations. As of October 2004, eligible utility companies had filed claims for reimbursement under the first of these categories totaling $407.0 million; and had received $160.3 million in preliminary payments against those claims. Companies are also submitting requests for reimbursement under the second category, for which approximately $330.0 million is expected to be available. For purposes of this analysis, we have treated treat these funds as primarily an infusion of federal funds that (like grants to businesses) will ultimately be spent within the City in effect, treating them as a revenue stream financing a one-time increase in company expenses. We also assume that 40 percent of the total allocation is allocated for energy-related costs and 60 percent for telecommunication. Based on these assumptions, we estimate that over a period of several years these funds will add a total of $1.1 billion in economic output, and generate 3,681 jobs. In addition to the impact of local spending that the program supports, the Utility Restoration and Infrastructure Rebuilding program will benefit New York City and Lower Manhattan in at least two other ways. A portion of the funds made available under this program can be used to fund projects that will directly improve network reliability, such as redundant fiber optic connections to key facilities in Lower Manhattan. Because they will not have to absorb restoration costs out of their own resources, the companies will be better positioned to undertake still other improvements needed to enhance the reliability of Lower Manhattan s energy and telecommunications infrastructure, and to improve the quality of their services. 21.

22 AN IMPROVED PEDESTRIAN ENVIRONMENT Perhaps more than in any major business district in the U.S., the primary means of internal circulation within Lower Manhattan is walking. The ability of pedestrians to move around the area quickly and efficiently and the quality of pedestrians experience of the area is critically important to Lower Manhattan businesses of all sorts. The Vesey Street Bridge: Critical to World Financial Center and Battery Park City s recovery. The Vesey Street Bridge From the earliest days after September 11th, downtown residents and businesses have recognized the importance of keeping the World Financial Center and Battery Park City connected to the rest of Lower Manhattan. Particularly with the destruction of the World Trade Center, the World Financial Center complex provides a significant share of the Class A office space in Lower Manhattan. The destruction of the bridge that had once connected the World Trade Center and Battery Park City via the Winter Garden made it especially challenging for workers and residents to get to Battery Park City. The new Vesey Street bridge, which opened in November 2003, has been heavily used. According to a recent pedestrian count 4 by the State Department of Transportation, the number of people crossing West Street at Vesey and Liberty during peak commuting hours can be as high as 5,350. The bridge is not just a convenience for people who live or work in Battery Park City, it is a lifeline. 4 Pedestrian count on 9/20/2004 The project was critical for the ongoing occupancy at the World Financial Center. As one real estate executive put it: For Merrill Lynch and American Express, this project was incredibly important. After September 11th, coming across Vesey Street was how most of their employees got to work every day and it just wasn t a very pleasant experience. So this became a real issue for them. For companies that will within the next few years be deciding whether to renew their current leases and stay downtown, tangible short-term improvements in day-today working conditions are especially critical. Between April 2004 and September 2004, 1.6 million square feet of space has been leased at the World Financial Center. More than 90 percent of this space was leased after the completion of the bridge, with several of the leases being new rather than renewals. Like other capital projects, the connections across West Street can also be evaluated in terms of the impact of construction spending. We estimate that LMDC s allocation of $25.0 million for West Street Connections generated $40.1 million and 301 person-years of employment. Streetscape and Security Improvements In the months following the terrorist attacks, the physical barriers and other provisions required to secure Lower Manhattan created the impression of an area under siege. To overcome this problem, LMDC made a commitment to funding streetscape improvements in selected areas of Lower Manhattan. While ad hoc measures such as Jersey barriers and parked pickup trucks had provided immediate security in the months after September 11th, they also conveyed the image of an area still operating under emergency conditions, rather than one whose recovery was already well under way. 22.