An Online Debate About Economic Development

On Thursday, October 3, Gotham Gazette held an online debate with Bettina Damiani, project director at Good Jobs New York, and Steve Malanga, Contributing Editor of City Journal. Find out what they said during the debate as they answered questions about how the federal funds for rebuilding should be spent and other economic rebuilding issues.

Gotham Gazette: Why does rebuilding have anything to do with economic development? And what is economic development, anyway?

Steve Malanga: Given the amount of destruction downtown, and the fact that it included massive destruction to the infrastructure including transportation and streets, one needs some overview and planning with how to rebuild. It's not just a case of rebuilding a single building.

Bettina Damiani: I agree. It is more than just Lower Manhattan that needs to be "rebuilt." The issue of jobs and transportation and housing must be addressed in all of NYC.

GG: Ms. Damiani, what are Good Jobs New York and the Reconstruction Watch project, and what do they have to do with economic development?

Damiani: Good Jobs New York keeps tabs on economic development resources in NYC...specifically as they pertain to job retention deals. We are in a unique position to review the rebuilding effort.

GG: Mr. Malanga, how are the City Journal and the Manhattan Institute involved with New York City economic development?

Malanga: Strictly from a position of commenting on public policy. We are a think tank dedicated to urban policy, and urban economies, and as NYC is our home, we obviously have a great interest in Lower Manhattan.

GG: Mr. Malanga, you have written that the "terrorist attack has become an excuse to transform downtown from a center of finance into parkland." If not a memorial park, what do you think should be built at the World Trade Center site?

Malanga: I do believe that a memorial is appropriate, just not one that encompasses 16 to 22 acres, which is what several of the original proposals suggested. The WTC site, before it was turned into the trade centers, encompassed 12 city blocks. I think one can easily have a memorial or series of memorials down there encompassing two or three blocks and still have plenty of room left to address the commercial needs of lower Manhattan on the rest of the site.

GG: Ms. Damiani, what would you like to see built at Ground Zero?

Damiani: Clearly an appropriate memorial. But, to connect the area and make it a vibrant neighborhood, housing where all New Yorkers can live is necessary. Commerce is also critical, just not 11 million square feet.

GG: Mr. Malanga, you talk about a memorial and addressing the commercial needs. Ms. Damiani, you talk about a memorial and addressing housing needs. Is this a conflict?

Malanga: Our original proposal including the possibility of housing. If you divide up the site again into city blocks, you can build more, smaller buildings with diverse uses. Since lower Manhattan was becoming more residential during the 1990s, the rebuilding can help to make the site more integrated into the rest of the area. You can do that and still include a significant amount of office space. Moreover, our proposal includes putting the streets back into the area, so that you have a 24-hour commerical/residential neighborhood. With that approach, you bring the stores and restaurants that were in the underground mall out to the surface and draw people through the area. With that approach, the neighborhood does not die at 5 pm when the office towers empty out.

GG: Mr. Malanga, when you talk about "our proposal," to whom are you referring?

Malanga: City Journal commissioned architects to create a proposal, which was published in the Autum 2001 edition of City Journal accompanied by a piece from me at www.city-journal.org.

GG: Ms. Damiani, is there anything Mr. Malanga has said with which you disagree?

Damiani: There shouldn't be a conflict. Residential neighbohoods need business and vice versa. The real issue is how you market the residential area to include a variety of tenants. Every effort must be taken to ensure not only the wealthy can afford to live in housing that most likely will be financed with redevelopment resources. Equally important is to make sure small businesses in the area are not pushed out.

GG: Mr. Malanga, do you agree that neighborhoods downtown should have residents of a range of incomes?

Malanga: I don't believe that government should plan that, if that's what you mean, since once government gets into the process of trying to plan a community that specifically, you can argue endlessly over what gets built. Moreover, I don't think there is going to be so much housing built on the site that it alone would change the character of the area. Larger forces, such as the current recession, which has eliminated some of the technology jobs that were drawing techies to live downtown, will have a far greater effect on the composition of downtown.

Damiani: If the government and the community do not participate in the plan, then there is no guarantee that anyone other than developers will benefit. Techies living downtown is great. But what about figherfighters, teachers and nurses? There are fewer affordable places to lives in NYC for middle income people.

Malanga: Government needs to participate in that someone needs to design a plan for the whole area and create broad outlines for what gets built. However, it is always a question of how far government goes in its involvement. I would say that if we built six or seven buildings down there, it would hardly be a case of just developers benefitting. The difference is that I don't advocate government luring techies or anyone.

GG: How do you two think the $1.6 billion in Liberty Bonds - the federal money to finance new housing - should be used? Governor Pataki's proposal calls for 95 percent to be used to build market-rate housing, and 5 percent for affordable housing. The New York City Council says as much as 55 percent should go to affordable housing. The mayor has not yet said what he thinks. And should all of the money be used downtown or can it be used in other areas of the city?

Damiani: First of all, the 5% is not affordable, even by the State's standards. Legally, the housing portion, unlike the commercial portion of Liberty Bonds, must be allocated in Lower Manhattan. The state and city must find a creative way to utilize these historic resources.

Malanga: I am extremely reluctant to see programs based on 9-11 incentives used elsewhere in the city, because once you start that process, how far can you go in justifying a 9-11 impact beyond lower Manhattan. The state already embarrased itself by asking the federal government for $54 billion in aid that went way beyond Lower Manhattan, so I think that if that state wants programs for affordable housing beyond Lower Manhattan, it must use other resources.

GG: In general, should federal funds marked to help the city recover from Sept. 11 be spread out into the boroughs, or concentrated in lower Manhattan?

Damiani: The effects of September 11th are being felt all over NYC. Workers in Chinatown to Kew Gardens are impacted. 60% of those who lost jobs earned less than $11.00 an hour. Many of these workers don't live in Lower Manhattan. So yes, monies need to be spent outside Lower Manhattan.

Malanga: First of all there are already limits on how the money can be used. To argue that the feds should extend the city or state's ability to use the money elsewhere is very unpopular politically and hurts the city's chances for further aid. People in Washington on both sides of the aisle laughed when Gov. Pataki asked for money as part of 9-11 relief to finance a rail link from Lower Manhattan to upstate NY. We can't fix problems unrelated to 9-11 with money granted by the government for 9-11; it's political suicide.

Damiani: We're not referring to Pataki's effort for a rail link - we're talking about people here in New York City today. These people are DIRECTLY affected by the attacks. I think Washington should look down at funds going to American Express - allocated $25 million in cash. Even after American Express said they would return to NYC.

Malanga: Yes, but worker salaries in Lower Manhattan are an issue that have nothing to do with 9-11. It's one thing to provide help for those companies so that they can continue employing people after 9-11, but once you get into larger issues of wages and economic development, people outside of NY resist using federal money for already existing problems.

GG: Bruce asks, too much office space already exists. Why make more?

Malanga: I don't agree too much space exists. Just before the bombing, the Manhattan office market vacancy rate downtown was under 5 percent. We had big companies going to Jersey City not for cheaper space but because there were no more larger spaces left in Manhattan for development. Unless we believe that 9-11 fundamentally changed the NYC economy, that the city's economy will never revive to the level before 9-11, then we should build for the future. Right now it's chiefly real estate developers who own plots of land who are making the argument that there is too much space, based on this 9-11 induced recession. But when planning for downtown Manhattan, we must look beyond the current economic cycle. Everything about the recent past suggests that NYC will revive and perhaps even fashion a new economy with more jobs than ever.

Damiani: The issue is to diversify where and what type of office space. There are other areas of the city that we encourage development in. More jobs is great. But the quality of jobs is what will benefit the economy. Creating low-wage jobs with no benefits or job security will only cost us in the future.

Malanga: I agree with the need to diversify by planning new development in places like the far West Side and further uptown in Manhattan. Part of what made the last expansion so different from others is that suddenly companies were willing to go to places in Manhattan that they hadn't been willing to locate before, because we saw a more entrepreneurial type of company emerge. Those companies will locate in new business districts if the city creates them, offering the opportunity for a much larger economy.

Damiani: But we need to develop in a way that won't displace the current businesses.

Malanga: When we talk about places like the far West Side, or the Queens waterfront, we are talking about places where there is barely any current business. In previous expansions,like the 1980s, companies weren't willing to seek out areas like that, but I believe that companies are more willing to go to those sorts of areas now, and I believe we should plan for them to be 24-hour communities with a mix of office, residential and retail services.

Damiani: FALSE. There are nearly 19,000 workers in Long Island City alone.

Malanga: The era of the commercial only district should end with the old WTC model downtown, and we should move more toward Jane Jacob's notion of a 24-hour mixed-community in those places.

GG: To keep and draw companies to lower Manhattan, the city and state offered cash grants to 145 companies and other institutions. But, as the New York Times reported in Sept., only 40 companies have committed to staying in lower Manhattan. If grants don’t work, what will?

Damiani: Transportation, an educated workforce are what companies want. Not tax breaks. Even Mayor Bloomberg, a successful businessman agrees. Businesses don't locate based on the tax rate or incentives.

GG: Last question: what will you consider a successfully rebuilt New York City?

Malanga: I don't believe there will ever be one point where we will say, the rebuilding is complete. I worry about a planning process that emphasizes a few big projects--including a big memorial park--that takes years to complete. The plan we have advanced emphasizes a series of smaller buildings and a rebuilding that starts much sooner. It's not the end that matters so much as the beginning. Incentives won't keep companies in lower Manhattan over the short term if the hassles are too great; only a start to the rebuilding process, including successful work on the transportation infrastructure will do that.

Damiani: The beauty of NYC is we can reinvent ourselves. The goal would be to create Lower Manhattan with state of the art transporation, good jobs and mixed income housing. Smaller buildings are key as is public space.

GG: The two of you have agreed on more than we expected. Does this surprise you?.

Malanga: Well the devil is always in the details.

Damiani: Sorry to disappoint everyone!

Malanga: But I also think that right now, the fundmantal issues are not necessarily simply the ones we debated, but the issue we didn't discuss, which is, will there be a rebuilding at all.

Damiani: And how to finance the rebuilding too, and for whom.


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