Monday, November 26, 2012

We Don't Owe NYC Any Lost Profits

Are you and I responsible for New York City's lost productivity?

In his request for $9.8 billion in federal relief following Hurricane Sandy, Mayor Michael Bloomberg includes a line item of $5.7 billion in reimbursables for economic activity lost to the storm.

Five point seven billion.  Dollars.

Are you kidding me?

Along with more plausible expenses, like helping to provide temporary housing assistance for thousands of New Yorkers who've lost their homes, and efforts at rebuilding the city's battered shoreline, Bloomberg wants taxpayers across the United States to reimburse the Big Apple for money it estimates it lost from shoppers, hotel guests, car buyers, transit riders, and other taxable activities during Sandy's visit.

This assumes, of course, that tourists remained in their hotel rooms for free while the entire city was shut down, that stores won't sell - over this holiday season - the same amount of merchandise they would have sold had Sandy not blown through, and that car dealers won't actually experience a tremendous upsurge in business as New Yorkers flood their lots in search of new rides to replace their flooded-out ones.

What economic activity did the city actually lose?

Okay, so local transit authorities let riders ride for free after they had their trains and buses back in service following a down-time of several days, but doesn't mass transit receive only token funding from the fares passengers pay?  Most of it is heavily subsidized by local, state, and federal governments already.  Whenever they raise fairs, transit authorities try and tell the general public that higher fares aren't even beginning to cover the true costs of getting from point A to point B.

But how much of what the city lost in transit fares is already included in other line items, say, for transportation?

$5.7 Billion?  Fuhgeddaboudit!

Meanwhile, the rest of this $5.7 billion is smoke and mirrors.  It's like saying Black Friday actually adds to retailers' bottom lines.  But it doesn't, does it?  To be smart about this, you have to follow the same logic that makes Black Friday gimmicks a fallacy, since such over-hyped marketing doesn't take into account the likelihood that shoppers will spend whatever they will spend and will buy whatever they will buy, whether it's the Friday after Thanksgiving, or the week before Christmas.  The fact that New Yorkers weren't able to purchase stuff for a couple of weeks doesn't mean the city will forever miss out on the economic activity that sales during that time period would have generated.  And the destruction visited upon the southern shores of Staten Island and the Rockaways didn't permanently take out enough retail space to put any dent in the city's income.

About the only industry that, on the whole, probably lost money was the electricity provider, Con Ed.  And nobody's gonna feel sorry for Con Ed anytime soon.  Even though it looks like they did an amazing job getting the city back on its feet.  The next time Con Ed asks for a rate hike, though, you can bet Hurricane Sandy's impact will be all over their appeal.

New Yorkers are known for their brashness, but Bloomberg really has some nerve submitting this bill to the Feds.  Yes, we're all aware that this was a superstorm, the worst of its type in recorded history to hit the East Coast.  And we know that money is expensive in New York.  Considering the fact that each new skyscraper being built in Manhattan, for example, costs approximately $1 billion apiece, money is more relative in Gotham than perhaps most other places in the world.  But as I'm fond of saying, a billion here, a billion there, and pretty soon, we're talking about real money.

Especially when we're talking taxpayers' money.

Maybe Bloomberg fudged his numbers and exaggerated his request, knowing that the final check he receives from Washington will be lower anyway.  And yes, we all know that New York's union workers cost a pretty penny.  But being on the coast carries a certain degree of risk.  Don't any businesses and government departments have any safeguards or insurance policies on this kind of thing?  Yes, even though some Libertarian fundamentalists would claim otherwise, our federal government should provide relief funds to help communities get back on their feet after a natural disaster, and undoubtedly, we taxpayers will be helping to provide for New York City through a variety of budgeting mechanisms, such as federal transportation dollars, federal welfare dollars, federal home heating dollars, federal wetland dollars, federal parkland dollars, federal environmental dollars - the gravy train will keep chugging through Grand Central Station quite nicely on its own, thank you very much.

Legitimate Loss or Money Grab?

Don't get me wrong:  I love New York City.  I have friends still living there, and I'm glad all of them survived Sandy safe and sound.  The city is a vital component of our national economy, and even our national identity.

But lost productivity?  Doesn't that sound like a crass money grab by Hizzoner?  Even if lost productivity was a legitimate burden on the city, why foist it upon the rest of us?  Rents in the city have been astronomical for generations, and somebody is collecting all that money.  Where is it?  Can't whomever has it cough up a little if the city really needs a helping hand after this crisis?  Corporations keep offices in the city to remain close to key customers and advisers, and consider doing so to be financially prudent.  Is it not worth it to them to write-down some extra largess for the mayor?  Especially since it can only butter their own prospects if they need anything from City Hall?

And if the city and its businesses can't survive a week or so of lost - or even below-average - profitability, and the corresponding taxes generated by that profitability for the city's coffers, then everybody there should be far more worried about the state of the city's economy than demanding almost $6 billion from taxpayers to cover their losses.  If his request means the city is within a week or two of going into the red, should Bloomberg, the city's chief marketer, be trumpeting that fact for the whole world to hear?  After all, he may be on his last term as mayor, but it doesn't say much for his business acumen if he's been allowing the city to skate by on such thin ice all this time under his watch.

Let's not forget:  Bloomberg's is but one of many requests for taxpayer bucks that will be hitting Washington after Hurricane Sandy.  New York City is but one town in the state of New York that suffered a significant impact from the storm.  What about the towns out on Long Island?  What about New Jersey?  Some of those towns appear to have literally been washed away.  No doubt about it:  this is going to be an expensive storm for all American taxpayers.  But let's pay only what's prudent, and what benefits the affected communities, and do so in proportion to their contribution to America's overall productivity.

In terms of what New York City will be spending to relocate its newly-homeless residents and dry out its subway tunnels, the requests Bloomberg has made to help tide them over may be steep, but this isn't the time to insist on fixing that region's high cost of getting anything done.

In terms of its economic losses, however, that's what the city gets for kicking the can of prevention, infrastructure redevelopment, and emergency management down the road for so many years.  I remember that during my stay there in the early 1990's, then-Mayor David Dinkins was besieged by audits saying the city's infrastructure needed massive updating, not to mention all-new systems for dealing with flooding.  The city had maps for its flood zones, and it was a well-known fact that sea levels were rising before Sandy ever hit.  In addition, for decades, the city let development encroach onto its low, flat shoreline at ludicrously illogical densities.  Yes, there's a lot of blame to go around for why subway tunnels were left under-protected and barrier island neighborhoods had no substantive seawalls.  But that blame doesn't fall on the American taxpayer.

Bloomberg is a tough, smart guy.  He became mayor of the world's capital after making billions of dollars off of its finance industry.  After two terms, he was supposed to walk away from the mayor's office, but instead, he boldly asked New York's voters to change the city's charter so he could run for a third term.  They voted to change the charter, and they voted him back for his desired third term.  So we know he wants to be a hero for the city, and create a legacy that will far outlive him.

We also know he's personally worth an estimated $25 billion.

Subtract the $5.7 for his city's precious productivity, if it's truly necessary, and he's still worth $19 billion.  But being a hero?

Could that be, as they say, "priceless?"
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