An Overview of Economic Losses In NYC Due To Terrorist Attacks on 9-11

1. An Overview of Economic LossesIn NYC Due To Terrorist Attacks on 9-11 Presented By Dr. Surendra K. Kaushik Research Assistance Provided By Jagadeesh Ambati

2. September 11, 2001The Day when terror struck New York and Washington, D.C.(Press Release from the City Hall on October 4, 2001) • Trade Center Attack Could Cost City Economy More Than $100 Billion Over 2 Years • The attack on the World Trade Center will likely cost the city economy between $90 billion and $105 billion by the end of fiscal year 2003, according to a preliminary report issued today by City Comptroller Alan G. Hevesi. • That includes $45 billion for the value of buildingsand people already lost and $45 billion to $60 billion for on-going costs, including lost economic activity over the next two fiscal years. • As a result, City taxes and other revenues will be $1.3 billionlessthan previously expected in fiscal years 2002 and 2003. Insurance is likely to cover only about a third of those costs, about $37 billion. • The City could lose 115,300 jobs this fiscal year, although there will be an offset with some new jobs from clean-up, repair, construction and security. • "You cannot reduce to dollars and cents the losses New Yorkers have suffered from the vicious World Trade Center attack, just as there is no way to put a dollar value on the heroism and determination of our response," said Hevesi.

3. "But to obtain the resources we will need to rebuild and create a better and stronger New York City, we must try to understand in dollar terms, what the attack cost our economy." • "New Yorkers are the toughest, smartest, most resilient people in the world. We will recover from this attack. • The federal and state governments have already proven that they are committed to helping us," said Hevesi. • "What this study makes clear is that what the President and Congress have committed so far is just a down payment on what it will take to ensure that the terrorists don't succeed in destroying not just the two towers, but also America's and the world's financial capital." • The report provides preliminary data and the Comptroller's Office will continue to update the information and will cooperate with other efforts to calculate costs, including the report being prepared by the New York City Partnership. • Loss of Buildings and People -- $45 billion • Rebuilding the World Trade Center as smaller buildings is estimated to cost $6.7 billion. Repairing and restoring other damaged buildings will cost about $5.3 billion, for a total cost of $12 billion.

4. Replacing and repairing infrastructure will cost about $9.4 billion, including $4 billion for subways, $3 billion for telephone, electric and other utility systems, and $2.4 billion in losses for the Port Authority, including the PATH train but excluding the Trade Center buildings. • The value of furniture and fixtures, employee property, computer systems,vehicles, inventory in stores, etc., is another $12 billion. For securities firms in the WTC complex, the technology losses alone are estimated to be $3.2 billion. • It is impossible to put a real value on a human life and the pain of losing a loved one. But for purposes of economic analysis, one way economists ascribe an economic value to human life us by calculating how much an individual would have earned over his or her expected working life. • On that basis, using the high average income for New Yorkers in general and financial workers in particular, the cost to the City economy of 5,600 deaths is about $11 billion. • Continuing Costs & Loss of Economic Activity in FY 02 -- $42 billion • The City is initially paying for clearing the area and the most visible portion of the cleanup, nearly half a million tons of steel, concrete and debris.

5. The Comptroller has already agreed to register four emergency contracts totaling $1 billion for cleanup, with an additional $5 billion projected for stabilization and remediation. • Another $7 billion in costs is expected for City government personal-service costs (such as police, fire, and sanitation overtime) and other-than-personal-service (OTPS) costs such as destroyed City vehicles, road rebuilding, and burial costs. • Finally, $1 billion is the estimate of spending by private owners for cleanup and repairs. • Treating those injured and the loss of work from trauma and the long-term effects of the attack for victims, their families, and countless other citizens could cost $3 billion. • Many companies lost business as a result of the attack and economic activity will be affected for a long time. • The total amount of lost business activity is projected at $21 billion for fiscal year 2002. Wall Street firms were severely affected by the closure of the NY Stock Exchange and many trading centers and are projected to lose $7.5 billion in economic activity over fiscal year 2002. • Hotels, restaurants and theaters lost an estimated $2.3 billion. • Retail and wholesale trade lost $1.7 billion, insurance $1.3 billion. • · Lost rent from destroyed and damaged buildings is about $1.75 billion. • About $700 million will be recouped as companies move to other locations • in New York City, so the net loss is about $1.05 billion. • · Wages lost to the City economy because businesses locate elsewhere will • be about $3 billion in FY 02. • · The City could lose 115,300 jobs this year, including 17,500 in retail and • wholesale trade, almost 15,000 in the securities industry, almost 29,000 in • service industries including 7,000 in airlines alone, 8,000 in restaurants and • 6,000 in hotels. • Continuing Costs & Loss of Economic Activity in FY 03 -- $3 billion to $18 billion • The long-term impact of the attacks depends on how quickly the national and local • economies recover and on the location decisions that companies make. There is • not enough space in Manhattan for all the firms displaced from the World Trace • Center. Some are moving out of the City. Some may return when there is new • space, others may not. The impact on the city's economy in FY 03 could range from • $3 billion to $18 billion. • Offsets • Insurance -- $37 billion • · Life insurance payouts could total $4 billion, slightly more than one-third of • the economic loss of $11 billion. • · Property/casualty Insurance payments are estimated at $17 billion, half the • total loss of $34 billion. • · Business interruption insurance may provide $11 billion of the $21 billion • lost. • · The remaining $5 billion will come from coverage such as unemployment • insurance, Workers' Compensation (which provides both death benefits and • disability benefits), and health insurance. • Federal and State Aid • The federal government has appropriated $20 billion for recovery aid for New York, • Washington and Pennsylvania, but it is still unclear how much of this the City will • receive. Clearly, given the costs, this will not be enough. The level of state financial • assistance is also unclear at this time. • "It is essential that New York City receive an appropriate amount of aid, given the • costs, and that this aid come quickly and with as few strings as possible," Hevesi • said. • Reduction in Taxes & Other Revenues -- $1.3 billion in FYs 02 and 03 • · Reduced economic activity will mean lower incomes for businesses and • residents and lower City taxes and other revenues. In FY 02, tax revenues • are projected to be $738 million less than currently projected, including • $338 million less in sales and hotel taxes, $189 million in business taxes, • $112 million in personal income taxes, $45 million in commercial rent tax • and $45 million in parking violations. • · In FY 03, taxes and other revenues are projected to be $567 million less • than currently projected, including $195 million in property taxes, $135 • million less in sales and hotel taxes, $95 million in business taxes, $50 • million in personal income taxes, $38 million in commercial rent tax and $37 • million in parking violations. • Recommendations • "Our goal must be to be the most business-friendly city in America," said Hevesi. • "We must help local businesses re-establish themselves as quickly as possible." • The study makes the following recommendations: • · Expedite payment of disaster grants and loans to help businesses get • back to normal operations as quickly as possible. • · Provide tax incentives and utility cost breaks to keep businesses in New • York City. • · Support and expedite microlending activities to help small businesses. • · Rebuild on the Trade Center site as quickly as possible. Establish a state • and city authority with the power needed to ensure that the site and • neighboring buildings are cleared or safely repaired and that • well-thought-out reconstruction plans are developed and implemented with • no delays. • · Establish a security commission led by the police commissioner. The • commission should seek to develop security procedures that balance the • need to protect New Yorkers and the nation, while also promoting an • efficient flow of people and goods necessary to conduct business. The • commission should foster cooperation among companies to share and • keep down security costs. As much as possible, technology should be used • to allow effective scanning for potential weapons while allowing New • Yorkers to go about their business as quickly as possible.

6. Retail and wholesale trade lost $1.7 billion, insurance $1.3 billion. • Lost rent from destroyed and damaged buildings is about $1.75 billion. • About $700 million will be recouped as companies move to other locations in New York City, so the net loss is about $1.05 billion. • Wages lost to the City economy because businesses locate elsewhere will be about $3 billion in FY 02. • The City could lose 115,300 jobs this year, including 17,500 in retail and wholesale trade, almost 15,000 in the securities industry, almost 29,000 in service industries including 7,000 in airlines alone, 8,000 in restaurants and 6,000 in hotels. • Continuing Costs & Loss of Economic Activity in FY 03 -- $3 billion to $18 billion • The long-term impact of the attacks depends on how quickly the national and local economies recover and on the location decisions that companies make. • There is not enough space in Manhattan for all the firms displaced from the World Trade Center. Some are moving out of the City. Some may return when there is new space, others may not.The impact on the city's economy in FY 03 could range from $3 billion to $18 billion.

7. Offsets Insurance -- $37 billion·Life insurance payouts could total $4 billion, slightly more than one-third of the economic loss of $11 billion. • Property/casualty Insurance payments are estimated at $17 billion, half the total loss of $34 billion. • Business interruption insurance may provide $11 billion of the $21 billion lost.The remaining $5 billion will come from coverage such as unemployment insurance, Workers' Compensation (which provides both death benefits and disability benefits), and health insurance. • Federal and State Aid • The federal government has appropriated $20 billion for recovery aid for New York,Washington and Pennsylvania, but it is still unclear how much of this the City will receive. • Clearly, given the costs, this will not be enough. The level of state financial assistance is also unclear at this time. • "It is essential that New York City receive an appropriate amount of aid, given the costs, and that this aid come quickly and with as few strings as possible," Hevesi said. • Reduction in Taxes & Other Revenues -- $1.3 billion in FYs 02 and 03

8. Reduced economic activity will mean lower incomes for businesses and residents and lower City taxes and other revenues. In FY 02, tax revenues are projected to be $738 million less than currently projected, including $338 million less in sales and hotel taxes, $189 million in business taxes, $112 million in personal income taxes, $45 million in commercial rent tax and $45 million in parking violations. • In FY 03, taxes and other revenues are projected to be $567 million less than currently projected, including $195 million in property taxes, $135 million less in sales and hotel taxes, $95 million in business taxes, $50 million in personal income taxes, $38 million in commercial rent tax and $37 million in parking violations. • Recommendations • "Our goal must be to be the most business-friendly city in America," said Hevesi."We must help local businesses re-establish themselves as quickly as possible.” The study makes the following recommendations: • Expedite payment of disaster grants and loans to help businesses get back to normal operations as quickly as possible. • Provide tax incentives and utility cost breaks to keep businesses in New York City.Support and expedite microlending activities to help small businesses.

9. Rebuild on the Trade Center site as quickly as possible. Establish a state and city authority with the power needed to ensure that the site and neighboring buildings are cleared or safely repaired and that well-thought-out reconstruction plans are developed and implemented with no delays. • Establish a security commission led by the police commissioner. The commission should seek to develop security procedures that balance the need to protect New Yorkers and the nation, while also promoting an efficient flow of people and goods necessary to conduct business. • The commission should foster cooperation among companies to share and keep down security costs. As much as possible, technology should be used to allow effective scanning for potential weapons while allowing New Yorkers to go about their business as quickly as possible.

10. September 11, 2001The Day when terror struck New York and Washington DC 25 Million Square feet of commercial office space has been destroyed. Retail sales plunged 2.4 percent in September. Delays are a real threat to the U.S. economy. If it takes longer to move goods and people, the nation's productivity is likely to fall. The insurance industry estimates its costs alone have reached $30 billion. And in New York City, the costs of rebuilding, of lost jobs, and of lost revenues could reach to more than $100 billion over the next two years. An estimated $3 billion has flowed out of equity funds since the attacks. Wall Street firms expect to lose $1 billion in profits this year. More than 300 companies around the country have cut profit estimates since the attacks, blaming the terrorism for a slowdown in business. Claims for first-time unemployment benefits jumped by 71,000 in the latest week to 528,000, the highest in eight years. Retail sales plunged 2.4 percent in September, their biggest drop in nine years With occupancy rates nationwide still down nearly 12 percent last week, hotels are desperate for customers. Economies like Singapore, Malaysia and Taiwan rely heavily on shipments to the United States, their largest market. Japan is typically the key Asian trading partner and No. 2 destination for Asian goods.

11. Effects Felt at Home and Abroad • The Philippines, Thailand and Indonesia have also yet to work themselves free from the effects of the Asia crisis that started in 1997. With structural problems at home and a worsening of already weak overseas demand, there will be little to help them, experts say. • Even the most robust economy in Asia, China, has been relying more and more on sales to the United States, particularly of electronics goods. Those will now take a sharp dip, as will other countries' key shipments, such as South Korean and Japanese car exports. • New York Gov. George Pataki pitched a $54 billion recovery plan to the White House and Congress that he acknowledged included items not directly related to the Sept. 11 terrorist attacks. But he told them he wanted to send them a proposal they could work on now so the money could get back to New York businesses as quickly as possible. • Under the governor's three-part plan, $34 billion would go toward rescue and rebuilding efforts, $20 billion to economic recovery efforts, including creation of a "Liberty Zone" for economic development in Manhattan, and $100 million for security measures. • Japan, the world's second-largest economy, has increasingly relied on the United States to lead it out of a prolonged slump. It is about to enter its fourth recession in a decade.

12. While officials at the meeting signaled their agreement that New York is entitled to more than the $20 billion in emergency money approved last month, two key questions came of the discussion: what costs were directly connected to the terrorism, and when New York should get the money. • The answer to the first question is dependent on insurance payouts, state officials have said. And Pataki requested that the money be approved as quickly as possible, • But Pataki argued that a quick payout could help hold off further economic damage to 9,000 small businesses destroyed by the attacks. and barred from reopening due to recovery operations. • Gov. George Pataki is proposing a $54-billion aid package to help pay costs related to the New York City rescue effort, rebuilding and economic revitalization. It includes $15 billion for basic rescue and response costs, $19 billion for rebuilding and redevelopment costs and $20 billion for economic recovery and revitalization costs.

13. Here's a breakdown: • RESCUE/ RESPONSE • $5 billion for construction costs including demolition, debris removal and re-mediation of the World Trade Center site. • $5 billion for emergency security measures. • $900 million for utility costs, including repairs to utility lines and buildings. • $378 million for victim assistance. • $323 million for other city costs, including burials, reimbursement to the city Board of Education, and miscellaneous personnel and nonpersonnel service agency expenses. • REBUILDING/ REDEVELOPMENT • $8.2 billion for replacement of the World Trade Center and hotels. • $2.4 billion for MTA capital costs to cover safety and security concerns. • $1.7 billion to fix infrastructure damage to the Metropolitan Transportation Authority.

14. $1.3 billion for Port Authority security enhancements. • $1 billion for cleanup of private buildings and debris removal. • $850 million for subway station reconstruction. • $250 million for reconstruction of city roads, water mains and sewers. • $245 million to cover MTA losses in toll and fare revenue. • $163 million to cover reduction of tax subsidies to the MTA because of economic disruption. • ECONOMIC RECOVERY/ REVITALIZATION • This part of Pataki’s plan does not include a specific breakdown of money requested in most cases, but lists types of costs, including: • Acceleration of the MTA's five-year capital program of railway track improvements, station rehabilitation, modernization and safety improvements. • Acceleration of work on East Side highway access, and preliminary engineering studies for the Second Avenue Subway. • Modernization of crossings at the border between New York State and Canada and improving security to enhance trade. • Acceleration of the state's five-year capital program of bridge rehabilitation, road paving and intelligent technology projects. • Creation of a "Liberty Zone" in lower Manhattan that would include tax incentives and grants for businesses as a way to rebuild 25 million square feet of commercial office space destroyed Sept. 11. • Payment of 100 percent of reimbursement of COBRA premiums for workers.

15. Creation of a "Liberty Zone" in lower Manhattan that would include tax incentives and grants for businesses as a way to rebuild 25 million square feet of commercial office space destroyed Sept. 11. • Payment of 100 percent of reimbursement of COBRA premiums for workers. • Extension of unemployment insurance benefits beyond the current 26 weeks. • Strengthening security to protect New York State water supplies, transportation, infrastructure, communications structures. • "Going forward, economic indicators will show the full ramifications of these attacks," Labor Secretary Elaine Chao said. "What that means is that [President Bush's] economic stimulus package will be a major factor in helping our economy.” • The loss of jobs — 199,000 last month — was the largest decline since 259,000 in February 1991, when the United States was fighting the Gulf War and its economy was in a recession. The unemployment rate was steady at 4.9 percent despite the huge number of job cuts, in part because the work force — the number of people employed or looking for work — grew by 840,000 people in September. • In a visit to the Labor Department Thursday, Bush pledged to provide $3 billion in aid for workers who were displaced or lost their jobs in the wake of the Sept. 11 attacks.

16. The "Back to Work" package, as Chao dubbed it, will extend unemployment benefits by an additional 13 weeks for individuals living in states directly affected by the attacks, and in states where unemployment jumps to more than 30 percent for three consecutive months. • 'Economy in Recession’ • The president is also calling for accelerating individual income tax cuts scheduled to take effect over the next few years and a stimulus package that will also include tax incentives to encourage businesses to invest. The total stimulus package is expected to be between $60 billion and $75 billion. The president Friday urged Congress to pass already-signed tax relief for individuals and businesses as quickly as possible. • Most economists now concede the U.S. economy is likely moving backwards rather than forwards. Gross domestic product — the most broad measure of an economy's strength — increased at a 0.3 percent annual pace between April and June, the slowest in eight years.

17. Estimated job losses announced in various industries • Aerospace • Boeing: 30,000 • Bombardier: 3,800 • Textron: 2,500 • Raytheon Aircraft: 750 • Goodrich: 450 • Rockwell Collins: 2,600 • Airlines • AMR (American, American Eagle, TWA): 20,000 • United: 20,000 • Delta: 13,000 • Continental: 12,000 • US Airways: 11,000 • Northwest: 10,000 • British Airways: 7,000 • Air Canada: 5,000

18. Swiss Air: 9,000 • KLM Royal Dutch Airlines: 2,500 • America West: 2,000 • Sabena: 2,000 • Midway (shut down): 1,700 • Virgin Atlantic: 1,200 • Scandinavian Airlines: 1,100 • Air Transat: 800 • American Trans Air: 1,500 • Frontier Airlines: 440 • National Airlines: 300 • Vanguard Airlines: 150 • Sun Country: 200 • Alitalia: 2,500 • Aer Lingus: 2,500 • Textron (Cessna,Bell Helicopters): 2,500

19. Travel • Mandalay Resort Group, Las Vegas: 4,500 • MGM Mirage, Las Vegas: 3,000 • Wyndham International: 1,600 • Park Place Entertainment, Las Vegas: 1,500 • Other Las Vegas Hotels: 3,000 • Navigant International: 800 • Rosenbluth International: 800 • Shedd Aquarium: 44 • Airline Service • LSG Sky Chefs: 4,800 • Gate Gourmet: 3,000 • Manufacturing • Fiat: 20,000 • Ford Motor Company: 5,000 • General Electric: 4,000

20. Honeywell: 4,000 • Alcatel: 3,000 • McLeod: 1,600 • Spheron: 500 • Terex: 500 • Brinton US Axminster: 300 • Goodyear: 1,400 • Technology • Motorola: 7,000 • WorldCom: 1,000 • Sun Microsystems: 3,900 • Nortel Networks: 10,000 • Corning: 4,000 • EMC: 2,400 • Advanced Micro Devices: 2,300 • Excite At Home: 500 • Sony: 5,000

21. Banks and Brokerages • Credit Suisse First Boston: 2,000 • Retail • Nordstrom: 1,600

22. September 11, 2001Effect on Small Businesses in Lower Manhattan • The city estimates that 14632 businesses in the area close to WTC were destroyed,damaged or significantly disrupted. • 50,000 people who worked in the wtc are no longer there as clients and customers. • Before Sep'11 only few enterprises have business interruption insurance and many didn't know it exists. • 1800 businesses have sought S.B.A loans. • 340 have been approved • 12000 businesses who requested applications did not even submit them. • The S.B.A should extend the grace period from 5 months to one year or two years. • Insurance will probably cover about $17 Billion of property damage,$4 Billion for loss of life and perhaps $18 billion in economic losses. Source:Fred P.Hochberg,“Small Business, Badly Damaged”, New York Times, October 17, 2001, p.A23.

23. SourcesThe information presented was compiled from the following publications • www.abcnews.com • www.cnn.com • www.nytimes.com • www.msnbc.com • www.google.com • www.nyc.gov • www.wsj.com • The New York Times

24. Ground Zero, Lower Manhattan