Communities across our nation are searching for ways to deal with the worst fiscal crisis we've seen in decades. And New York City is no exception. We're facing a $4 billion budget deficit. We've lost 50,000 jobs already, and it seems like every day we learn of more layoffs in the financial sector and beyond.
You may hear many competing theories on how to improve our economy, but one thing is clear: The surest way to guarantee that our economy gets worse is by allowing our basic quality of life to deteriorate.
If we let an economic downturn erode our commitment to things like education and safe streets, we'll see the middle class begin to flee our city, just as they did in the 1970s. And when they leave, they take their tax dollars with them. But it won't just be residents -– we'll see tourism decline as well, costing our city millions in revenue and countless related jobs.
Soon we'll find ourselves having to raise taxes on those who remain, making the city less affordable and doing little to dig ourselves out of our quality of life hole. And before long, it will become a vicious cycle that gets harder and harder to escape.
That's why it's so critical that while we look for ways to tighten city spending, we keep investing in strong schools, safe streets, efficient mass transit, clean parks and public spaces. Smart planning on the part of the City Council and the Bloomberg administration, like paying down billions of dollars in future debt, has prevented us from having to make more drastic cuts so far.
The council has already fought successfully to protect things like police classes and classroom funding. We are also going to need to do without some programs that may be good but have to give way to the services that are the most essential.
But if we're going to continue to fight for these shared priorities and core services, we'll need to find additional revenue somewhere. The first step is creating a balanced tax approach, coordinated with the state to avoid piling on any one group of taxpayers. To the greatest extent possible we need to avoid taxes that are too onerous on businesses and threaten to drive commerce outside of the city.
And we need to make sure we're not squeezing middle-class New Yorkers and that we keep money in the hands of those who are most likely to spend it on necessities, fueling economic activity. At the same time, we'll ask those who have benefited most from the opportunities New York City offers to give a little back while we weather this storm. That's why I've proposed reforms to the city's income tax structure to create three new tax brackets for New Yorkers making over $300,000 a year, while easing the burden on those making the least.
Additionally, we'll look to the federal stimulus funding that's been directed to states and municipalities for exactly this purpose to help us invest in our infrastructure, create jobs and avoid laying off police officers, firefighters and teachers.
We're currently working with the state to see exactly how much of that stimulus funding will be directed down to New York City. But we're hopeful that Albany will recognize the importance of giving New Yorkers their fair share. New York City is the main economic engine for New York State, and the state government has as much stake as anyone in seeing that we continue to thrive.
Now just as we're at the center of economic activity for the state, we are also at the epicenter of the fiscal crisis for the entire nation. As the home of Wall Street, New York City has felt both the rise and fall of high finance in recent decades, and we have as much of an interest as anyone in seeing Wall Street recover.
The Obama administration is working to reform the financial industry. We have great faith that it will create a regulatory system that strikes the necessary balance –- restoring stability and investor confidence in the market, without creating an environment that stifles innovation.
Wall Street will rebound, and the global economy with it. Meanwhile, we in New York City need to focus on diversifying our economy outside of finance. For too long, we've been overly dependent on Wall Street to fill our coffers and fund our growth. Now we're being forced to look around at areas we may have neglected.
New York City is home to 220,000 small businesses that account for 50 percent of all private sector employment. We need to make it easier for those businesses to stay afloat and for new ones to open. That's why I recently announced "Open for Business," a series of proposals to support the small business community that came out of the council's conversations with real business owners.
For example, we'll make it easier for new businesses to start up by streamlining the application process for city permits and waiving permitting fees for a 12-month period. We'll also better coordinate agency inspections, to keep business owners from waiting months before they can open their doors.
We'll support businesses that already exist by keeping more local dollars in our local economy. We'll work to change state contracting law, to allow us to give preference to qualified local businesses, and launch a campaign to promote hubs of retail, dining and entertainment around the five boroughs.
And finally, we'll eliminate red tape and help keep government out of the way of business growth. We'll start to evaluate the effects of new rules and regulations on small businesses –- before they get passed –- and we'll create a temporary late fee amnesty for small businesses that are drowning in unpaid fines.
In addition to supporting our small businesses, we need to start investing in new and growing job sectors that can further contribute to the diversity of our economy. Many of these industries already exist in New York City, and with a little help, they have the potential to grow by leaps and bounds.
For example, we're already a home to cutting edge research for the biotech industry. But when it comes time to turn that new discovery into a new drug or a new medical device, biotech companies often leave our city for other places –- places with aggressive programs to court these companies.
Thanks to the Bloomberg administration, we've already started by creating more commercial laboratory space. And recently, I proposed a City Biotech Tax Credit that will help dozens of biotech companies equip their facilities and train their staff, encouraging them to locate, and stay, right here. By becoming more competitive, we'll create nearly a thousand new high-tech and high paid jobs.
We're not going to climb out of this recession overnight. But by targeting resources to key job sectors and maintaining our commitment to a high quality of life, we can begin to rebuild. We can ensure that New York remains an international city, one whose top-tier colleges and career opportunities attract the brightest talent from around the world. And we can help our city to emerge from this economic crisis stronger than ever before.
Christine C. Quinn has been speaker of the City Council since 2006. She represents Manhattan's 3rd district and is running for re-election.
Falling revenue has torn gaping holes in our city and state budgets, but our mayor and governor are wearing blinkers. Narrowly focused on the spending side of their fiscal plans, they see cuts in jobs and public services as the solution to the fiscal crisis. They're not looking at the revenue possibilities that would help them avoid these cuts -- cuts that are unwise, unjust and unnecessary.
The proposed cuts are deep and devastating. They want to chop hospital and school funding, raise subway fares, deprive vulnerable students of drug and alcohol counselors, shut free school dental clinics, cut ambulance service, contract out programs for seniors and youth, and eliminate thousands of jobs and set the stage for devastating cutbacks in our libraries and cultural institutions.
District Council 37, the city's largest municipal employee union, is fighting to defend our health care, our schools and our jobs. But, in doing so, we have decided that one of the first things we have to do is fight to reframe the role of government in New Yorkers lives.
Economist Jeffrey Sachs recently wrote that Americans are now paying the price for the Reagan-era-inspired rejection of "government solutions" to the problems of health, poverty, education and the environment. This, he continues, "kept our taxes as a share of national income lower than Europe's by focusing on the private sector."
So, if the current global economic crisis has taught us anything it should be that if government had played a larger -- especially regulatory -- role in our lives, the private sector might not have been able to trample millions of Americans' hopes and dreams.
To help with that reframing, we've researched and analyzed city spending only to find that under this mayor, the city has handed over some $9 billion to an unelected, unaccountable "shadow government" of private contractors and outside consultants. A number of these are no-bid, unregulated contracts. Given what's happening in America today, it should come as no surprise that this process undermines the transparency and accountability the public deserves from government.
We examined some 10 contracts between private companies and eight city agencies and identified a $130 million savings. And that's after a look at only a fraction of the 18,000 deals the city has made with private entities that, in many cases, provide the very same service city employees are paid to provide.
Frankly, that makes no sense. Especially when you consider that with city employees who are tested, investigated, fingerprinted and vetted the city and taxpayers know who and what they're getting. As far too many scandals have shown, the same cannot be said for private contractors and their employees.
In addition to this analytical approach, we're taking to the streets. Joining with other unions and our community-based allies we're reaching out and talking to our elected officials.
In New York City, on March 5, over 50,000 members of DC 37 and a broad coalition of unions joined community activists and took our fight to City Hall.
On March 17, scores of New York City Department of Education substance abuse counselors, who service some 1.1 million school children at 1,400 schools, went to Albany to tell lawmakers that the proposed state and city budget cuts would gut a critically important substance and alcohol prevention and intervention program, put city school children at risk and result in the layoff of some 300 experienced drug counselors. On March 31, thousands of AFSCME members from around the state will take their message to Albany again.
Everywhere we go, we're urging lawmakers to focus more on the revenue side of the budget by canceling the most devastating budget cuts we've seen proposed in decades, and instead support public services with fair taxation.
The mayor and the governor want everyone to share the sacrifice except the ones who can best afford to pay, the richest New Yorkers.
Frankly, I simply can't see depriving the vast number of uninsured people of health care or letting teenagers fall into drug dependence, when modest tax increases for those who can afford it could replace these cuts. I can't see slashing services and cutting the jobs of those who know best how to deliver them when all we have to do is ask for a reasonable contribution from the extremely wealthy New Yorkers who can well afford to shoulder their fair share of the burden. It's a no-brainer.
After all that is what the 2008 presidential election was all about. After eight years of tax giveaways to the rich and negligent regulation of business, the American people demanded change. They voted to get rid of those who said "government is the problem, not the solution." They chose to acknowledge that government does things for us that we often can't do for ourselves. They voted against policies and a philosophy that threw our nation's and the world's economy into a tailspin and saw millions of families thrown out of their homes and millions of breadwinners thrown out of work.
Have our city and state leaders learned nothing? Their spending cuts would slow economic activity at a time when we need a speedup. Their budgetary attacks on the working class, the middle class and the poor are the exact opposite of what President Obama is trying to do. He is going all out to save jobs while they are wiping out jobs. I agree with the president that we must invest in one another and build up services like hospitals and schools that only government can provide.
I ask the mayor and governor to take a serious look at the modest tax increases I am talking about. The Fair Share Tax Bill proposed by progressive legislators in Albany would raise rates by less than 1.5 percent on those with incomes over $250,000. It would cost someone making $300,000 a year — who brings home almost $6,000 a week — just $88 a week more. It would bring in $6 billion to the state.
The fair tax plan would simply ask the people who have gotten all the tax breaks under both the Bush and Pataki administrations to pay their share to reduce the misery the broken "bubble" economy has dumped on the rest of us.
I am also reminding the mayor that the city is still squandering billions a year on contracting out public work to the private sector. We have shown the city how to save money by reducing some of this waste. No responsible government can in good conscience cut vital services and lay off hard working public employees while real savings are within reach.
Whether the economy is booming or in a bust, it’s best to know where your taxpayer dollars are going. But good luck if you want know how those tax breaks are allocated to businesses in New York City -- all in the name of job creation. As our city navigates the current financial crisis and prepares to distribute between $4 billion and $5 billion of federal stimulus monies, we can’t pretend it is business as usual.
Most New Yorkers are surprised to learn that it’s nearly impossible to know how much money is allocated to companies for job creation or even how many jobs are created in exchange for tax breaks. Different agencies have different criteria and reporting requirements. For example, the largest economic development tax incentive, recently reauthorized as the Industrial Commercial Abatement Program, gave $500 million in property tax breaks last year, but it has no job reporting requirements.
At Good Jobs New York we pay close attention to the Web New York City Economic Development Corporation and its Industrial Development Agency, which last year allocated more than $48 million to mostly large fortune 500 firms whose threats to leave New York City are highly questionable. Using tax breaks as corporate giveaways will not revitalize our economy nor prepare it for the future.
Moving forward, and using the American Recovery and Reinvestment Act as a launching pad, city officials need to tighten up how we award tax incentives to large corporations. By doing so, we can use efficiency and transparency to help create good jobs for all New Yorkers and a healthy business environment for all companies.
First, the city must make public the costs and benefits and outcomes of its job retention subsidies funded by the federal stimulus package as well as upgrade the online reporting for the city's incentive packages. Today there is no central database for keeping track of this information, but people are eager to know what is happening.
According to the U.S. Office of Management and Budget, the federal recovery website received 150 million hits in its first two and a half weeks -- even though there is little data there. New York City has proposed a “stimulus tracker,” but it’s unclear if it will include data on jobs, wages and subcontractors or include data on the city's incentive packages.
This type of needed transparency -- uncovering the job creation, or lack thereof, of certain incentive packages -- is not unprecedented elsewhere.
Thanks to improved reporting at the New York City Industrial Development Agency, we’ve learned that some firms have received subsidies in the past even though they reduced their New York City workforce. Some never had to promise to create jobs in the first place. Pfizer, for instance, received a subsidy package, which could have been worth up to $47 million, from the city in 2003 but shut its Brooklyn plant in 2008. The city also failed to attach job creation guarantees on more than $1 billion in subsidies awarded to the Yankees and Mets for their new stadiums.
The city and state used similar tactics -- and had similar results -- with funding they received after September 11, 2001. Then, about $2.7 billion in Community Development Block Grants and $8 billion in tax-free Liberty Bonds were aimed at getting firms to stay or return to Lower Manhattan. But little of it benefitted the small businesses hardest hit, like those in Chinatown and the Lower East Side. After receiving these grants, large firms including American Express and HIP admitted they would have returned to Lower Manhattan without them.
The same year, Mayor Michael Bloomberg's own company, Bloomberg, L.P., turned down a subsidy for its headquarters in Midtown. The mayor said that businesses like his don’t make location decisions based on taxes, because they are such a marginal cost. Ironically, in recent weeks the mayor has waffled, saying just the opposite.
Prior to September 11th, community block grants and federally tax-exempt bonds were intended to benefit low- and moderate-income people and to create affordable housing but these requirements were waived by the Bush administration. The Bloomberg administration is hoping these rules will be waived again by leaders in Washington for the stimulus funds, creating an invitation for a replay of the 2001 corporate giveaways.
The city can spend less and get more by eliminating the silos that exist between its economic development and workforce development policies.
Tax breaks should be used as a leverage to place New Yorkers who need jobs at firms that get the tax breaks. For example, the New York City Economic Development Corp. and Industrial Development Agency have allocated hundreds of millions of dollars to companies, yet neither of them collaborate with training agencies like the city’s Workforce One Centers or private job training or readiness programs serving unemployed or under-employed New Yorkers.
When a firm accepts taxpayer subsidies, there should be an effort to connect them to potentially qualified New Yorkers who need jobs. There are plenty of New Yorkers who need jobs, and it’s about time we strengthen ties between companies that are hiring and our employment and training agencies.
The city should not only make sure jobs are created, but that good jobs -- those with an emphasis on helping those most in need -- are being created. Why give subsidies for jobs that keep people in poverty? Firms should pay employees a living wage and provide health benefits. Otherwise, taxpayers are paying twice: subsidizing the company and paying for social safety net programs.
It’s bad for the morale of responsible businesses to see low-wage companies receive tax breaks. Making sure New Yorkers have money in their pockets is a sure way to generate the economic activity we need.
Incorporating job quality standards won’t cause companies to flee New York City. In fact, we’re surrounded by places, including New Jersey and Pennsylvania, which have wage and health care standards attached to their subsidy programs.
Most likely the biggest threat to the creation of a rational economic development policy is the economic war among the states. The Obama administration should encourage regions to work together by discouraging the use of tax incentives that “poach” companies from one location to another. New York, New Jersey and to a lesser extent Connecticut and Pennsylvania are in a race to the bottom by reducing taxes for some companies who promise to relocate.
But as mentioned earlier, taxes aren’t the main reason a company moves or expands. Access to the necessary workforce, infrastructure, suppliers, customers, affordable housing and school quality are critical in the decision-making process. Investing in these will give taxpayers the best bang for their buck
If a company doesn’t have the business basics, giving it tax breaks is futile. The economic war among the states benefits secretive site location consultants who pit cities and states against each other. To make the region stronger, officials should work together to magnify individual and collective strengths, not belittle them.
Bettina Damiani is the project director for Good Jobs New York.