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Online Shopping


When my iPod portable music player was swiped on the N train one evening last month, I was left with a need to replace one of my more valued possessions.

There was a choice: I could go to the Apple Store on Prince Street, spend $399 and walk out of the store with my purchase in my hands, or I could go online from my apartment in Astoria, spend $394, and wait for PC Connection, an online computer store, to ship it from New Hampshire.

At first blush, the decision seemed to be that I could wait a week or spend $5 extra. But since PC Connection doesn’t charge New York residents sales tax, the difference in price was actually closer to $40.

I decided not to go downtown.

For various reasons, an increasing number of people are buying their iPods - and their dress shirts, their laptops, and their paperback novels - online. According to Jupiter Research, Americans will spend $65 billion on online retail purchases nationwide in 2004, four percent of the total retail sales for the country. They will spend $10 billion on personal computers, $7.5 billion on clothing and accessories, and $3.6 billion on personal electronics.

By 2008, the total will be $110 billion.

New York’s businesses are finding that online shopping poses advantages and challenges; it has also begun to raise some real policy issues.

SHOPPING AS AN "EXPERIENCE"

If online retailers have the advantage of convenience and, often, lower overhead, New York's "brick-and-mortar" stores have not lost their special appeal. There's cachet even in a shopping bag from a New York store.

“Any tourist coming into New York, they like to shop, but they also like to carry a nice bag, knowing that they actually have completed a purchase in New York City,” said Ivan Cardona, president of professional shopping service Lush Life Concierge. “That says a lot about vanity, and a lot about image, the need for fulfillment: the fact that we went in there, we purchased something, and we walked out with a bag.”

Perhaps in part as a response to the rise in online shopping, new stores like the Apple Store and NBC Experience are more like theme parks than traditional shops, so that the purchase is only one part of the whole experience. (Indeed, in the new Times Warner Center mall, "the Samsung Experience" is all experience and no purchase; their cell phones, MP3 players, video cameras, flat-screen TVs and other high-tech gizmos are all on display, but not for sale). But at the same time, even the best-known New York stores are going online, offering their New York image to shoppers far away. Tiffany’s and other luxury Manhattan businesses are reportedly doing an increasing amount of business through their Web sites.

Most online vendors nationwide have at least some presence in New York. But many of New York’s brick-and-mortar retailers believe that those that do not – like Amazon.com – have one unfair advantage: the ability to get around collecting sales tax. This amounts to a price difference that many see as a de facto subsidy, and some retailers are looking to the government for help:

“It’s only right that if you buy something on the Internet or through a catalog you pay the same sales tax that you do if you buy something on the street,” said Ted Potrikus, executive vice president of the Retail Council of New York State, a trade organization.

LOSING TAX REVENUE ON ONLINE PURCHASES

While customers may find online shopping more convenient and cheaper, state and local governments have discovered at least one major drawback: the loss of tax revenue. According to a recent study (in pdf format) by two professors at the University of Tennessee, New York lost $1.1 billion in state and local tax revenues in 2003 by failing to collect sales tax for online purchases; the study estimates that the state’s annual loss will rise to $1.6 billion by 2008.

New York is legally entitled to this money, but does not have the power to force certain Internet businesses to collect sales tax from their customers. This is the result of a 1992 Supreme Court decision on whether states could force mail-order retailers to collect local sales tax when selling to out-of-state customers. These businesses argued that it was too burdensome to calculate the sales taxes for the thousands of different jurisdictions where their customers lived, and the Supreme Court agreed. It ruled that unless a business had a physical presence in a state, it did not have to collect that state’s taxes.

So the burden of collection falls on the purchasers themselves. Technically, New Yorkers are required to pay a "use tax" on items purchased online but used in New York State, just as they are supposed to write a check to the state for the taxes they owe on furniture that they drive back from the Ikea in New Jersey.

This is not the most widely respected of responsibilities

"The only people I know who [pay this tax] are people who have had jobs as tax commissioners or something like that," said Marcia Van Wagner, the chief economist at the Citizens Budget Commission. "For the most part, normal people don’t do it, and how do you enforce it?"

HOW DO YOU MAKE PEOPLE PAY THE SALES TAX?

New York loses more from uncollected Internet taxes than almost anywhere else - last year only California and Texas lost more. But as a percentage of its tax base, it loses less than any other state. This is partially because New York’s economy is less reliant on sales tax than many smaller states, and partially because so many Internet retailers are located within the state itself.

Until recently, New York State has not made a big effort to collect this lost revenue, but the amount of money involved in the rise of Internet retail has sparked new attempts to do so. As part of the 2003 budget, the state legislature added a line to the income tax return form asking New Yorkers to estimate their online purchases and pay the appropriate amount of sales tax.

The state does not yet know how much money this will bring in, but there is a wide consensus that it alone will not do nearly enough.

A recent report by the Citizens Budget Commission (in pdf format) described better enforcement of the use tax as "the least harmful and most sensible tax measure" available to the state, and estimated that it would mean between $40 million and $590 million in annual tax revenue for New York.

"However, implementation of this change depends on cooperation with other states and development of interstate enforcement capacity," read the report. "Significant new revenues are unlikely for a few years."

To deal with this problem on a national level, a group of over 20 states have formed the Streamlined Sales Tax Project, which would coordinate state and local sales taxes, making them easier to navigate and thus removing retailers’ arguments that collecting sales taxes for so many jurisdictions is too complicated. This would pave the way to overturning the 1992 Supreme Court decision.

New York has agreed in principle to join the project, but the legislature has not yet officially approved it. Potrikus hopes that the state’s worsening fiscal standing will provide the inspiration to do so.

"Budget deficits," he said, "are the mother of invention."

 

 

 

Create Conditions for Business to Thrive



Mayor Michael Bloomberg's development plan will remake neighborhoods like Long Island City, Throgs Neck, and downtown Jamaica.

Articles in this Feature:
• Developing Affordable Housing and Jobs by Brad Lander
• Create Conditions for Business to Thrive by Sandy Hornick
• Reform the Building Code by Julia Vitullo-Martin

New York has the most extensive housing program of any city in the nation. If you add up what all the other municipalities in the nation do on housing, it does not even come close to what New York City does. In addition the Bloomberg administration has set out a five-year plan to build 65,000 homes.

Building on these things, the New York City Department of City Planning is implementing redevelopment strategies across the city that will create new commercial office and housing development.

Our first priority is to restore and enhance lower Manhattan and to create the kind of amenities that will transform the third largest business district, that was devastated in the terrorist attacks of 2001, into a desirable place to live and work.

We will also implement the Hudson Yards plan. This will transform an underused area on the west side of Manhattan characterized by rail yards, parking, and one-story buildings into a new central business district with 26 million square feet of office space. In addition, we will build 14,000 new apartments, 3,000 of which will be affordable, as well as parkland and an extension of the 7-subway line. A key aspect of this is the expansion of the Jacob Javits convention center and stadium for convention events as well as New York Jets football games.

We will strengthen regional business districts like Downtown Brooklyn, Long Island City, Downtown Flushing, and Jamaica, Queens.

We are facilitating housing production. We are doing this in part through a series of rezonings throughout the city in places like Greenpoint/Williamsburg, West Chelsea, East Harlem, Harlem, Park Slope, and North Corona.

We also must work to protect New York's neighborhood character. As the city's population has grown, housing production has surged. In many ways that is a good thing, but in some places, it is not because the new housing being built dramatically changes the neighborhoods landscape. When you build further from mass transit, car ownership increases which creates traffic and parking problems. So we are doing rezoning to help ensure that neighborhoods do not have a density of housing that they cannot handle.

Finally, we are working to retrain jobs and create an environment to attract new jobs.

Sandy Hornick is the director of strategic planning at the Department of City Planning

 

A New Stadium Authority Will Add to City Budget Woes


Mayor Michael Bloomberg faces a $3 billion deficit for the next fiscal year and Governor George Pataki a $6 billion deficit. Both men are also faced with the problem of how to fund the additional $5.6 billion a yearthat a state court panel in the Campaign for Fiscal Equity case says must go to city schools. In spite of Mayor Bloombergs claim that the city should not share the new expense with the state, a common assumption is that the city will need to take on a substantial share, at least 25 percent of the new funds.

But the mayor and governor seem publicly oblivious to their budget problems, at least in their current rush to judgment on a Jets stadium in Manhattan.

New information about the financing and governance of the stadium project raises serious questions about its costs to the city and the wisdom of the city' role in creating yet another unaccountable public authority. A November report from the governor's own economic czar (in pdf format) on the project reveals how the deal-making among the Jets, the mayor and the governor will generate actual and potential costs to the city beyond the city's initial $300 million capital commitment. And a new report from the Regional Plan Association(in pdf format) shows how the city could reap much higher tax revenues from a residential and commercial development at the stadium site.

The project report comes from the mega-public authority which controls the stadium deal, the Empire State Development Corporation (ESDC) ‚ parent already to over 90 smaller authorities and run by the governor's economic czar, Charles Gargano. The report spells out in mind-numbing detail the project's financing plan and the enormously convoluted financial and governance structures that will build and control it.

The stadium deal will not just cost the $300 million promised to build the stadium platform and roof. There is also the money promised to pay the interest on the debt, which could double the cost. And then there are tax breaks given the Jets on their construction bonds and their property taxes, as well as exemptions in sales taxes. No estimate of these costs is included in the Empire State Development Corporation's report.

The city's $300 million capital promise, it turns out, is tied up with the state's own $300 million promise in a joint bonding understanding that would have the city pick up the debt service cost of the state's share should the state legislature not fund the state's share. (The state would purportedly compensate any city cost with some negotiated substitute funding.) The city share of debt service would be paid for by an unidentified revenue source.

The city will also lose two major streets to the project, and all the stores on those streets, West 30th and West 33rd Streets, between 11th and 12th Avenues, to provide the entrances to the stadium. A pedestrian bridge over the West Side highway on 33rd Street will link the project to the Hudson River Park (controlled by another public authority jointly run by city and state). And a three-block section of the High Linewould be eliminated.

The Anatomy of a Public Authority

The stadium project depends on the creation of a new public authority, called a local development corporation, which will be jointly controlled by the city and state. The local development corporation's main job will be to issue bonds to finance the stadium. This will be done outside the control of the City Council, which normally has to approve the issuing of bonds for capital improvements in the city. The local development corporation will issue $600 million of tax-exempt "Public Sector Bonds" to pay for the platform and roof. This debt, like a mortgage, will be paid off over 25 or more years by future city and state revenues. The corporation will also issue tax-exempt Jet Bonds to help the Jets pay for the stadium itself. The Jets will build the stadium, but will be exempt from city property taxes. Any payment-in-lieu-of taxes (PILOT) they might negotiate with the city would be used to help the Jets pay off the Jet Bonds. In other words, the city will now be part of a deal that issues tax-exempt bonds for the Jets share of the construction costs.

What may be most troublesome about this arrangement is not simply its unaccountability but its presumption of joint control by state and city. In state law, cities are always creatures of the state, and in politics, cities are generally at the mercy of the state. This will not, on the record, be an equal partnership.

Moreover, such an unequal partnership can further blur solutions to and accountability for much bigger problems, such as the city's deficit and the $5.6 billion education-aid problem. Both problems will require complex negotiations between state and city. The existence of a new joint public authority in which huge city/state trade-offs can be negotiated outside the normal budget processes is not a healthy prospect.

The airspace that the new authority would lease back and forth has a value ‚ ignored by the Empire State Development Corporation ‚ that should be factored into any decision about land use on the West Side. The new report (In pdf format) from the Regional Plan Association shows that over a 30 year period the city would gain $510 million from rents, development fees and property taxes from a mixed-residential-commercial development over the rail yards rather than a stadium.

The stadium deal is moving quickly and the mayor and governor are intent to break ground in the spring of 2005. A hearing will take place on December 16 on the Empire State Development Corporation's project report. Thereafter, creation of the Local Development Corporation and state funding streams would seem to require state legislative approval. Assembly Speaker Sheldon Silver then becomes, potentially, the significant city counterweight to the mayor and governor's dealing. But in a world of secretive negotiations among various private and public interests involved in the stadium deal there is no telling what will happen.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Monitors Check And Balance The Mayor


Despite projected deficits of $3.7 billion, the mayor and the city council were not deterred from a $300 million tax-cut program (primarily a $250 property tax rebate to each residential owner). Tellingly, that exact same amount, $300 million, is what the mayor has quietly asked city agencies to cut during this fiscal year.

It is only one of the questionable actions taken by this mayor, using his extraordinary budget power under the city charter. But the mayor’s power is not absolute. The democratic checks and balances embedded in the charter and state law have actually been working in recent weeks.

The West Side Plan

The city comptroller has raised serious questions about the fiscal wisdom and the decision process of the mayor's West Side plan, calling the Hudson Yards part of the plan (the #7 subway extension and other infrastructure) "a backdoor financing schemethat not only is fiscally imprudent, but also flouts the principles of responsible government." It sets a precedent that any mayor could "divert funds from the city's operation without City Council consent."

At the same time, a combination of local activists and elected city and state officials has apparently blocked the use of Battery Park City Authority revenues for part of the plan. (See a report by State Comptroller Alan Hevesi, in pdf format, for details) The mayor will presumably come up with an alternative borrowing plan for the Javits part of the plan, but the decision re-opens questions raised by housing advocates about the use of Battery Park City Authority revenues.

Contracting Procedure Questioned

The consequences of cutting back on informationin recent mayor's management reports are evident again in recent questions about city contracting.

The contracting information -- much of which is now handled separately, for a much smaller audience, at the mayor's office of contract services -- is itself now suspect. At an October 18 city council hearing of the contract committee, Deputy City Comptroller Greg Brooks testified that the mayor's office of contract services September report on agency procurement indicators is inaccurate(in pdf format). He challenged its claims of "substantial improvement" in getting contracts registered faster.

On the number of contracts and transactions registered in 2004, the deputy comptroller testified that in fiscal year 2004 there were 3,978 contracts registered, as well as 8,210 transactions below the small purchase limits, totaling almost $10.3 billion. That is almost three quarters of a billion dollars more than the mayor's office reports.

On the old problem of "retroactive contracts" -- contracts registered after services have begun -- the deputy comptroller said that in the last fiscal year the city registered 1,748 human services contracts totaling $3.8 billion. (Contractors don't get paid until contracts are registered.) Of these, 55 percent were over 30 days late. But the mayor's office says that only 25 percent of such contracts were over 30 days late. Finally, the deputy comptroller said the mayor's data on the comptroller's own timeliness in registering contracts are "grossly inaccurate."

Less Money For Schools

The other city checks-and-balances institution that helps monitor the strong mayoral power over budgets is the Independent Budget Office, now approaching its 10th year of charter-defined budget analysis. Illustrating its independent role, two new IBO reports help fill the vacuum created by a skeletal mayor's management report and a general reluctance to share important budget information.

The October 26 IBO study, "Go Figure: How a Bigger Education Budget Became Less Money for Schools"(in pdf format), shows how an increase of $570 million in this year's education budget translates - because of "rising costs and a complex allocation process" - into less money to individual schools. At a time when the mayor and council, like the state legislature and the governor, are dodging the future new education costs associated with the Campaign for Fiscal Equity case, the IBO study shows how state/city budget politics and city bureaucratic procedures delay and obfuscate school services and planning.

Transit Riders Shouldering More Of The Budget Burden

The other IBO study, the November fiscal brief, "Running on Empty: The MTA's 2005 Budget and Financial Plan"(in pdf format), helps explain the connections among the Metropolitan Transportation Authority’s current fiscal crisis, the mayor's West Side plan, and the city's own fiscal condition. The MTA's capital plan, for example, includes the mayor's $2 billion Hudson Yards funding plan for the #7 subway extension.

The study points out that the eastern and western rail yards at the heart of the mayor's west side plan, as well as their development rights, are owned by the MTA and the cost of their sale to the city is currently unknown. What's good for the MTA here is not automatically good for the city and vice versa. The closed negotiations in such authority-based discussions only add to the unknown consequences of the West Side plan.

The IBO fiscal brief shows how the average transit rider is paying an increasing share of the MTA budget and points out that one option to ease that burden would be using new revenue sources for the MTA, including a reinstatement of the city's commuter tax and tolling the East and Harlem River bridges.

The IBO estimates the commuter tax (with its old basic 0.45 percent rate) would raise $550 million a year by 2008 and the tolls nearly $700 million a year. These two sources together would wipe out the MTA's projected budget gap in 2006. But both these revenue sources, of course, have at various times been on the mayor's list of proposed city revenues. The city currently provides only about $190 million a year to the MTA's operating budget, so giving up these revenue sources to the MTA would substantially add to the city's long-term structural budget problems.

All this monitoring offers some hope of limiting, or at least highlighting, the mayor's fiscal powers. But then there is the recent news that the city has agreed to assume the state’s $300 million contribution for the Jets stadium deal, if necessary -- yet another reminder how much the governor and mayor use state and city authorities to get their way without any public participation.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

The Mayor's Management Report Skimps On Information About Education And Everything Else


Mayor Michael Bloomberg has put his own stamp on the semi-annual mayor’s management report, sharply reducing its size and its Giuliani-era political rhetoric. But smaller does not mean better. The 2004 Mayor’s Management Report (in pdf format), released in mid-September, dodges the key city-charter mandate – to show accountability by comparing policy goals with actual performance.

Its biggest feature – an endless accounting of the 311 calls into 38 city agencies – identifies a mayoral priority without providing much insight into managerial results. Yet the focus on this $25 million venture gets many more pages than the mayor’s other big priority, the overhaul of the $15 billion education department.

And the few pages of educational information are especially spotty. A reader has little sense of where the department’s money actually goes, or what it produces. The education database has been cut to the bone. What is left is often out of date. Most recent policy initiatives – new administrative and managerial hires, the re-organization of curriculum and teaching, and the extensive use of contractors to provide training, coaching, and tutorial help -- are simply ignored in the report.

As recently as 2001, the Mayor’s Management Report had 248 education indicators (including subcategories). Today it has 81. Of those 81 indicators, 41 have no 2004 data available in the September edition. Of the 23 indicators that measure general education performance, 20 have no current data. The result is that there is actual data from a grand total of three performance indicators for the school year ending in June 2004:

  • Students in grades 3 to 8 meeting or exceeding standards in English Language Arts (42.7 percent).
  • Students in grades 3 to 8 scoring below standards progressing from below standards to meeting standards (37.6 percent).
  • Students in grades 3 to 8 progressing from below standards to meeting standards in English Arts (14.6 percent).

That’s it for the 2003/2004 school year. (For the record, the first of these three indicators shows about the same result as the previous year, and the other two show declines.) The remaining 20 general education indicators have data for the fiscal year 2003, which ended 15 months ago.

311

With the exception of promoting his new 311 system, Mayor Bloomberg has shown little interest in the Mayor’s Management Report. He cut the print version by more than two-thirds, but he chose not to invest in alternative methodologies that would better measure performance. The 311 data get top billing, included in more than 16 percent of the report’s 237 pages on city agencies. The numbers show what kinds of complaints and requests for service New Yorkers have in 38 of 39 city agencies.

 

True, this information is mildly interesting in many cases. For instance:

  • 352 callers who wanted to sue the city were referred to the law department;
  • 3,079 people complained to the investigations department about discrimination;
  • and nearly 135,000 New Yorkers complained to the police department about noise from a neighbor.

(The one agency that registered no calls, the Economic Development Corporation, suggests that those businesses in search of tax-free loans and tax exemptions have a direct line!)

 

But the report’s shuffling of these 8 million-a-year requests and complaints doesn’t tell the public what the city is doing in response.

One common complaint about the 311 data is that it doesn’t translate into information that community boards or community organizations can use because it’s not disaggregated to discrete neighborhoods. And no one knows what’s now driving mayoral responses. Is it the “squeaky wheel” callers alone? If so, is that a good idea?

On the question of disaggregating information, the City Council’s Committee on Technology in Government has held hearings on a proposed law (Intro 174-A) which would require breaking down data on, say, noise complaints by specific blocks or neighborhoods.

Measuring Educational Performance

In education, the report is a skeletal version of the Giuliani documents, and most of it is out of date. It does include useful five-year comparative data, back to 2000, but here, too, there are gaps, as in the case of the new Regents exams. About the only performance data thus available are these:

  • Graduation rates, within 4 years of entering high school were 53.4 percent in 2003, up from 49.9 percent in 2000.
  • Graduation rates, within seven years of entering high school were 68.6 percent in 2003, down from 69.7 percent in 2000.
  • 20.3 percent of general education students dropped out within four years of entry into high school, up from 19.3 percent in 2000.

Not much of a performance record for either Rudy Giuliani or Michael Bloomberg. But more to the point, it’s not much of an information/analytic base for future measurement.

The one innovation in the education section is a set of five new indicators (no data until next year) that ostensibly will test the performance of the over 1,200 parent coordinators in the schools. They include the number of coordinator-parent phone calls, parent walk-ins, parent workshops, and parent-teacher contacts. This is hardly the stuff of serious fiscal and service analysis.

Interestingly, these soft indicators replace a Giuliani indicator which would seem to be a more useful accountability measure – the percent of parents grading their school “A” or “B”, which had only a two-year (2001-2002) lifespan. And why no indicators to track the performance of the many new administrators and managers whose power has raised some worries about excessive mayoral control over the schools?

Following the Money

One of the few pieces of fiscal information is in a pie chart (on page 24) that breaks down where the $12.708 billion of education went in 2003. (Not included is an additional $1 billion in pension and debt service costs.)

But here, too, the data beg for more detail. Dividing $12.708 billion by 1.1 million students means expenditures of $11,640 per student. But “Classroom instruction” is only 54.7 percent of that total, or just under $7,000 per student.

There is another wrinkle. Total expenditures for high school students were under $10,000 a year, while those for full-time special education students were nearly $48,000. Then there are huge non-classroom expenses in 2003, beyond the traditional expenses for food, transportation, and school safety ($1.82 billion in total):

  • District/superintendency costs were $394 million.
  • Leadership and supervision costs were $1.067 billion.
  • Student support costs were $1.474 billion.

Those three categories add up to nearly $3 billion, or about $2,700 per student. The mayor has said he has cut central administrative costs. But given the recent addition of new administrative, managerial, and training initiatives throughout the school system, it would be helpful to have some kind of staffing data base. (In the 2001 Mayor's Management Report there were 14 categories of administrators listed. Today there are none, leaving only an indicator that says there are over 134,000 education employees.) Further, there is no information in the latest report about the total value or kind of education contracting.

Accountability in the Future

Last November the mayor tried to eliminate the February Mayor’s Management Report (which covers the first four months of the new fiscal year) through a ballot proposal. Voters rejected that elimination, but the mayor apparently continues to show little interest in making the report a test of his accountability.

The City Council, whose oversight role on the report is required by the charter, has reduced its actions in recent years. Its Governmental Operations Committee holds hearings on the report, and until three years ago its several committees held separate agency hearings on the report; each committee prepared extensive analyses and recommendations on the report. In the past two years, those hearings have been replaced by joint hearings on the report and the preliminary budget.

What to do? One possibility is to add a review of the Mayor’s Management Report mandates to the agenda of the new charter revision commission the mayor named in August – what looks to be a more independent and representative group than last year’s commission.

There are many technical questions they might consider.For instance, the commission might look at the so-called “units of appropriation,” or categories of spending, which are supposed to help trace the flow of money. The units are often so large ("UOA #301" in the education budget, for district instruction and support services, is $2.8 billion) as to be useless in analysis.

The larger, political question is how to give the public some assurance through mandated reporting that its elected officials can be held to account. The mayor now holds the reins. Perhaps more independent mechanisms could be considered, such as professional management firms and university-based evaluation teams.

Glenn Pasanen, former associate director of City Project, teaches political science at Lehman College of the City University.

The Mayor's West Side Gamble


The mayor's plan for the development of Manhattan's West Side rests on "expensive, shaky and undemocratic assumptions," according to several new reports by the city's official fiscal monitors. Glenn Pasanen supplies the details.

Federal Aid


Three Years of Rebuilding:
Ground Zero
Transportation
Economic Impact
Federal Aid
Security
Health and Environment

ITEM PAYS FOR TOTAL
Emergency Response emergency transportation projects, aid to individuals etc. $6.3 billion
Economic Development Tax benefits for businesses, residential grant program, etc. $4.4 billion
Long Term Rebuilding Memorial at Ground Zero, Transportation Projects, etc. $9.7 billion

Independent Budget Office Estimate of where aid money will go.

Soon after the attacks, President George Bush promised $21 billion in aid to help clean up and rebuild New York City. These funds were designed to come through a variety of channel s to achieve several goals. In a recent study, the city's Independent Budget Office outlined (in pdf format) where this aid was intended to go.

New York has received over half of this $20 billion. But some worry that the city is in danger of never getting the entire amount.

Because a lot of this money is tied to long-term projects, it will not be actually received for five to ten years. The Independent Budget Office believes that "the Bush Administration and Congress are now in the process of making good on the initial promise of $20 billion in aid"; the city comptroller's office, on the other hand, believes that over a quarter of the money promised may never show up. In a recent report (in pdf format), the comptroller decries the lack of any way to track the promised cash. (see chart, below right)

Of the $21 billion, there is about $870 million left in discretionary funding. The Lower Manhattan Development Corporation formally controls the money, but different groups have very different ideas of how this money should be spent. Governor Pataki has supported using the funds to build a rail link between lower Manhattan, JFK airport, and the Long Island Rail Road. Community groups would like to see the money directed towards housing and local economic development, which they feel have gotten the short shrift with previous spending.

Next Page: Security

Reforming a Tax on the Middle Class


Year after year, more than three million American families file their federal and state tax returns and learn a sad truth. Because of the Alternative Minimum Tax (AMT), and President George W. Bush's support of it, middle-class families - particularly New Yorkers - are being punished for not being millionaires.

Listening to President George W. Bush, one could be led to think his tax policies are good for the middle class. Nothing could be further from the truth. In August 2003, the Congressional Budget Office confirmed what thousands of New Yorkers have known -- that the Bush tax cuts are causing middle class families to shoulder a larger tax burden than the wealthy, reversing the way things were before Bush took office. And for New Yorkers, the biggest tax bite can come from the Alternative Minimum Tax (AMT).

The Alternative Minimum Tax was first created in 1969 when it was discovered that the super wealthy were avoiding paying any federal income taxes by using tax shelters and deductions. To reform this, Congress created the alternative tax to insure that all Americans pay their fair share of taxes.

However, the threshold for having to use the tax has never been indexed to keep up with inflation. This means that over the past 30 years, as incomes have gone up along with the cost of living, the number of families being drawn into this tax has gone up as well -- an estimated 400,000 more in 2003 than in 2002. So, a well-to-do family making $60,000 and paying the alternative tax in 1969 has today become a middle-class family making $60,000 and now getting unfairly slammed this tax.

Fixing the Alternative Minimum Tax is essential for New Yorkers because it hits New Yorkers at a higher rate than most other states. In fact, close to 10 percent of the U.S. taxpayers who earn $50,000 to $75,000 and must pay the tax live in New York City. This is because residents of the Empire State pay higher state income taxes than most states, and the Alternative Minimum Tax eliminates any federal deduction for state taxes.

President Bush came into office promising tax relief and continues to campaign across the country saying that he has passed tax cuts for average Americans. But, if the President and the Republicans in Congress really wanted to provide tax cuts for average Americans in New York and elsewhere, they would have dealt with the growing problem of the Alternative Minimum Tax. Instead, they made the federal deficit balloon by enacting tax cuts for millionaires and for corporations that use overseas office fronts to avoid paying their taxes here in the United States.

Looking at which Americans have benefited from President Bush's tax cuts paints a very clear picture of who this Administration is watching out for. Upon entering office, the Bush Administration advocated a permanent end to the estate tax that only affected 49,000 of America's wealthiest families rather than fixing the Alternative Minimum Tax that affects 3 million middle-class families.

America's priorities should be just the opposite. This nation should reform the Alternative Minimum Tax before an estimated 41 million families are drawn into it in 2013. Sadly, the Republican-controlled Congress is using the income generated by the alternative tax to pay for tax cuts for the wealthy.

Our leaders in Washington should concentrate on relief for working people in New York and around the country. Today all over New York, middle-class families are feeling the squeeze of higher prices, unemployment, lower retirement earnings, and a strained economy.

Instead of using average Americans as a political football, President Bush should have provided real leadership during the past four years and ed the alternative minimum tax for good. That way, working would be keeping more of their earnings and our federal deficit would not be a burden on the backs of New York’s children and grandchildren.

Eliot Engel, a Democrat, is the U.S. Representative from the 17th Congressional District in the Bronx.

 

Economic Impact


Three Years of Rebuilding:
Ground Zero
Transportation
Economic Impact
Federal Aid
Security
Health and Environment

New York's economy had already been in recession for nine months by the time the Twin Towers were attacked. While it is difficult to separate the economic impact of the attack itself from the wider economic downturn, it is clear that 9/11 had a serious effect on the city's economy.

The Partnership for New York City, a business organization in the city, recently estimated that the city suffered an $87 billion economic loss because of the attacks.

In total, the city's tax revenue dropped $1.5 billion, or about 6.4 percent between fiscal years 2001 and 2002; personal income tax revenues dropped $1.2 billion, or about 26 percent over the same period. New Yorkers lost $2.8 billion in wages. And when the city's tax revenue rose above pre 9/11 levels in fiscal 2003, it had as much to do with the mayor's property tax hike in November 2002 as it did with a general economic recovery.

Lower Manhattan suffered most severely. Small retail businesses, which lost customers as foot traffic in the area declined and generally have more trouble than larger businesses taking losses, were hit especially hard. But the impact of the attack spread across the city. The outer boroughs, especially Queens with its heavy reliance on its airports, all lost jobs in the wake of the attacks.

In late 2003, the city pulled out of a two-and-a-half year recession but signs of recovery remain mixed. Eighty percent of jobs lost due to 9/11 have returned to the city, but the unemployment rate remains above pre 9/11 levels. According to the city's tourism bureau, in 2003 more visitors came to New York than ever before, even as the number of international visitors was the lowest number since records have been kept.

Many feared that after 9/11 businesses would be eager to leave Manhattan, or at least reluctant to start large new operations in the city. Indeed, few companies have expressed interest in the Freedom Tower on the World Trade Center site. But across the street, buoyed by federal Liberty Bonds designed to encourage development in the city, Goldman Saks is planning a new office tower. The New York Times and Bank of America are also using Liberty Bonds to construct office towers in midtown.

But the flow of jobs to New Jersey, one that existed before 9/11, has not ceased. Since the attacks, JP Morgan Chase, UBS Financial Services, and Citigroup, are among the companies that have crossed the river. While this has arguably made the financial system less vulnerable to terrorist attacks, it has also taken a significant amount of tax revenue from the city's coffers.

Meanwhile, the ongoing threat of terrorism has made doing business in the city more expensive. The Partnership for New York City estimates that major downtown businesses are spending up to ten times as much on insurance and security than they were before 9/11, even if, as a New York Times article recently reported, many companies are not actually paying for the plans that they draw up.

For more, see the Economic Rebuilding section of Rebuilding

Next Page: Federal Aid

Budget Dollars for the Neighborhoods: Community Development or Political Pork?


Last year, organizers of the West Indian-American Day Parade invited five New York City Council members on a "fact-finding" mission to Trinidad and Tobago's carnival to study what makes the event so popular and profitable. Based on New York City's annual budget, it appears the trip paid off — at least for the organizers.

Buried deep in the city's budget documents is a $100,000 allocation for the Brooklyn parade, twice as much as the group received last year.

While many New Yorkers would agree that events like the West Indian Day Parade, the city's largest ethnic celebration, are worthy of some funding from the city's $47 billion budget, the City Council is not exactly forthcoming about the details of such decisions and how members benefit from them.

Each year as part of the annual budget, the New York City Council doles out millions of dollars to community groups, arts organizations, Little League teams, and parades. (For a list of what more than a dozen council members say they received from the budget see related article.)

But when it comes to these initiatives, the City Council:

  • Negotiates the grants behind closed doors.
  • Does not disclose which officials requested the money.
  • Gives little explanation about how the money will be used.
  • And refuses to add up how much all of these efforts cost taxpayers.

 

And most council members defend the practice, arguing that the money goes to needy causes in their districts.

"They call pork the other white meat," East Harlem City Councilmember Philip Reed told the Daily News. "Meaning, it's good for you."

Where does the money come from? Who decides where it goes? And do these grants really help a neighborhood and its residents, or are they just taxpayer-funded efforts to help get officials re-elected?

MONEY FOR THE DISTRICT

At all levels of government, elected officials lobby for funding for projects in their home districts. For New York City Council members, who have less power to set policy than lawmakers in Albany or Washington, these budget allocations represent some of the most tangible evidence of what they have done for their constituents.

City Council members obtain money for their districts in four primary ways.

1. Member Items

Each of the 51 City Council members is given a sum of money — often called "member items" or "discretionary funds" — to spend in their districts.

This year, each member received a total of $240,000, of which $60,000 must go to programs for the elderly and $100,000 must go to youth programs. Officials allocate the remaining $80,000 in their districts as they wish.

Although each City Council member is given that same amount of money, many members take credit for obtaining these grants as a way of bolstering their accomplishments.

Riverdale City Councilmember G. Oliver Koppell, for example, recently sent out a press release announcing that he had "obtained an increased amount of funding" for senior programs. "The programs I am helping to fund provide much needed services to our most vulnerable citizens and add to the quality of life," Koppell said in the statement.

Koppell, however, did not mention that each of the other 50 City Council members also received the same amount of money. But when it comes to the specifics of how an individual council member divides his or her discretionary funds, elected officials often are less forthcoming.

When asked how he doled out his $80,000 in member items, Canarsie Councilmember Lew Fidler said he did not feel comfortable giving all of the details because community groups that did not receive funds may feel left out.

And Flushing Councilmember John Liu even rejected the idea that member items really exist, arguing that the council arrives at a budget as a body.

"I don't have anything that's called a member item," said Liu. "There are local initiatives that are suggested strongly by a council member."

2. Borough Delegation Money

In addition, each borough delegation — the group of council members representing each borough — is given a pot of money. For example, this year the Queens delegation received $250,000, which was split among the 14 Queens council members. With their money, Queens council members funded projects like the Queens Symphony Orchestra, which received $78,000.

To decide who is worthy of funding, borough delegations hold open meetings where individual non-profit groups come and "testify" as to how much money they need. These meetings are not widely advertised, and a group must know when and where these meetings occur.

3. The Speaker's Money

Another large sum of money belongs to City Council Speaker Gifford Millerwho, along with Mayor Michael Bloomberg, has the largest influence over what goes into the city budget. Miller can also dispense large grants on behalf of the legislative body.

For example, the New York Junior Tennis League, which offers free lessons to kids, received $486,500 from the city budget this year. And while the budget documents don't say that the money came from the speaker, the tennis organization's web site does: "Funded By Council Speaker Gifford Miller" the web site states prominently.

Miller's office refused to say how much money the speaker allocated this year, saying only that the grants "represent the City Council's priorities."

To get the speaker's support for projects within their district, individual council members must convince him that they have worthy projects. Politics also comes into play; the speaker can use his power to reward or punish certain council members based on their support for him in other matters.

"Some of us are good at this and some of us aren't," said one council member who did not want to be named. "Those of us who are good at it are supposed to keep our mouths shut."

4.Capital Budget

In addition to funds in the city's annual operating budget, each council member also lobbies for projects in the separate $6 billion capital budget, which covers the purchase, repair, or construction of physical items that cost over $35,000 and that last for at least five years.

These are often big ticket items, like computer equipment for schools, improvements to parks, or expansion of local libraries. It is also what City Council members often take the most credit for, since the projects cost millions of dollars and voters can see some tangible results.

But there are other factors that lead to funding beyond a council member's lobbying. For example, Brooklyn City Councilmember Diana Reyna said she obtained $1.6 million toward the development of almost 200 affordable apartments, but that project largely resulted from Mayor Michael Bloomberg's citywide effort to build more housing over the next five years.

FOLLOWING THE MONEY TRAIL

The argument for giving City Council members a substantial role in allocating money in their districts is that they know the community's needs.

"You elect council members locally because they know what is needed in their district," said Doug Turetsky of the Independent Budget Office, a watchdog group that monitors the city budget.

But the process of distributing this money is largely obscured from the public.

Most of the lobbying and negotiations takes place behind closed doors. This forces non-profit groups and arts groups into the role of lobbyists, writing letters to their council members, meeting council members in person, and even making trips to City Hall to make sure they are not forgotten.

Budget documents also do not say which City Council member requested which item, which can lead to confusion over who exactly should take credit for obtaining the funding.

The head of one Brooklyn community center, who asked not to be named, said that after receiving a grant for $30,000 this year, he received letters from three different council members all claiming credit for it.

And come election time, politicians go back to the same organizations and groups that they funded looking for campaign donations or help in getting out the vote.

"We are eager to give this money out," said Jack Freedman, chief of staff to Councilmember David Weprin. "But we're politicians, so we also want people to know where it came from."

For a look at what your individual council member obtained in this year's city budget, read What Did Your Council Member Get for Your Neighborhood?



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