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METRO MATTERSUnpaid Pipers in a City Of Resilience
By JOYCE PURNICK
THERE were pessimists who were despairing and optimists who were encouraging, which makes perfect sense. Both were talking about New York City, which delights in eluding typecasting.
The event was a weekend conference of the Citizens Budget Commission, the civic watchdog and research group that is wont to shake its fiscally prudent finger at mayors who inevitably stray.
That in fact emerged as the unofficial theme of the event at the IBM
Palisades Conference Center in Rockland County: the stubborn inclination of mayors to spend in good times, making it tougher in the bad times. Even under Rudolph W. Giuliani, a Republican who promised fiscal prudence, the municipal work force expanded to 250,000 — 6,600 more than when he took office; city debt grew to 17 percent of the budget from 5 percent, and budget surpluses generated by a booming economy were rolled from one year into the next rather than being set aside for the inevitable rainy day.
Now, Mr. Giuliani leaves Mayor-elect Michael R. Bloomberg an anticipated budget gap projected to be $3.5 billion to more than $4 billion, more than any of the last four mayors have had to close in a single year. Economists blame the recession, exacerbated by Sept. 11, and the administration's policies. It spent when it had the money.
"It's just the way it is, unless something or someone changes it," said Eugene J. Keilin, chairman of the commission. "But if we keep doing what we've been doing, we'll ultimately have to pay the piper."
The pattern is the same going way back, the big crunch coming in the mid-1970's, with the fiscal crisis that banished the kind of egregious fiscal irresponsibility that brought the city to near-bankruptcy. But with the return of fiscal stability also came generous spending whenever the economy permitted.
No mayor has yet gotten elusive productivity savings from the municipal unions, or restructured property taxes or undertaken any other fundamental budget reforms favored by fiscal experts.
Mayors have their own priorities: Edward I. Koch jump-started the rebirth of the Bronx by building housing for the poor. David N. Dinkins, facing a crime wave, began expanding the police force. Mr. Giuliani spent on safety, education and tax cuts.
"It's called democracy: elections," said Alan G. Hevesi, the city comptroller. "It's an imperative of governing and decision- making, knowing you have to fix schools, subways, keep the city safe. It's not a question of bad faith but of a mindset. The mindset is short term." Especially now, with term limits. Why deal with long-term debt if it's not going to be your problem?
For optimism, the conference turned to history.
And Kenneth T. Jackson, president of the New-York Historical Society, noted that New York City has always reinvented itself, even as many other cities deteriorated, unable to adjust to the rise of suburbia, the decline in manufacturing, the competition of cheap labor and other strains.
NEW YORK has distinct strengths, said Mr. Jackson, a history professor at Columbia University and editor in chief of the "Encyclopedia of New York City." Contrary to its general reputation, the city is comparatively honest and safe, he said, citing its relative freedom from large-scale corruption, and the ability of mayors to find a "balance between freedom and order." The city also delivers basic services efficiently, he said, and has enough good private, parochial and elite public schools to keep the middle class and the affluent from fleeing to the suburbs.And, he said, it elects mayors every now and then who convey "a sense of leadership and enthusiasm," creating an atmosphere that draws and retains people and businesses. Mr. Jackson noted that a half-century ago, the city seemed unstoppable. Everything looked great. But the general impression was wrong. Big trouble loomed, from the decline of manufacturing and the port to racial strife and competition from the Sunbelt.
Today, things look dire. Or maybe not. Mr. Jackson cited a 1934 quotation from Charles E. Merriam, then a professor at the University of Chicago: "The trouble with Lot's wife was that she looked backward and saw Sodom and Gomorrah," he told the United States Conference of Mayors. "If she had looked forward, she would have seen that heaven is also pictured as a city."
Judging from a weekend in the Palisades, if heaven in New York is productivity enhancements, the city is in trouble. If it's defined as resilience, the place could make it through yet one more time.
NY TIMES
December 10, 2001
Ripples of Sept. 11 Widen in Retailing
By EDWARD WYATT
In West Eighth Street in Greenwich Village, shoe salesmen stand forlornly on the sidewalk in front of Leather&Shoes.com, smoking cigarettes and staring blankly into the distance, wondering where all the customers have gone.
Down the block, Raja Chaani, the manager of India Imports, and two of his employees sit on stools in a sprawling space chock-full of leather jackets, silk scarves and Indian curios — but devoid of customers.
Across the street, at Man Plus, Sonny Shahani and three other salesmen spend their time rearranging sweaters and calculating how much their commissions have fallen. And at House of Nubian, no one but a few Internet shoppers is buying Negro League jackets and hats, or buttons with pictures of black leaders like Malcolm X and Haile Selassie.
While it was expected that small businesses near the site of the World Trade Center would suffer from the terrorist attack on Sept. 11, which displaced 100,000 potential customers from office buildings in the area and thousands more from their homes, wider economic damage from the attack is still rippling outward from ground zero.
The national economy, of course, was already slowing before Sept. 11. But the attack sent shudders through small businesses, not only in New York City but also across the nation. Some economic forecasters say they believe a wave of business failures in New York and elsewhere could come soon after the first of the year, as retailers and other entrepreneurs succumb to the continuing lack of new business in what is traditionally their busiest season.
"I've been on this street for 15 years, and it's never been this bad," said Kawal Bhatia, whose family owns Leather&Shoes.com, a shoe and leather goods store at 22 West Eighth Street which, despite its name, does not have a Web site. "In past years, no matter how bad it was the rest of the year, at least you knew you would cover all your losses with the holiday shoppers." But on a recent Friday, he said, "I did $25 worth of business."
Last week, Mr. Bhatia put up a new sign: "Store Closing."
Small businesses, including many retail establishments, account for two of every five jobs in New York City and roughly half of all jobs statewide, so the drought among small-business owners presages economic pain that is likely to spread far beyond Lower Manhattan. And while numerous grant and loan programs have sprung up to help small businesses recover from the disaster, business owners have complained, in a growing chorus, that the grants are too small to stem their losses and that loan agencies are not approving loans.
On Eighth Street between Fifth Avenue and Avenue of the Americas, for example, roughly two miles north of ground zero, businesses that depend on people who travel into the city to shop have been devastated. The block, the professed shoe district of Manhattan, has for decades served as a crucible for small businesses, a place where shoe and leather goods shops have mixed with funky clothing emporiums serving an eclectic mix of college students, tourists and New Yorkers in search of bargains. But tourists have stopped coming, and retail sales not just in the Village but across the city have been suffering.
Economists say it is too early to tell just how many small businesses are likely to end up closing or in Bankruptcy Court, but they say that the signs are not good.
"I think there is a strong likelihood that come the first quarter, small businesses that are holding on by the seat of their pants may not be able to hold on anymore without some outside assistance," said Ian E. Novos, senior director for economic consulting service of KPMG.
A report assessing the economic impact of Sept. 11 that was prepared for the New York City Partnership, by KPMG and SRI International, another consulting firm, predicted that for the next two years, small businesses' sales would continue to fall short of what was expected before the trade center attack. Employment among small businesses will continue to fall through the first quarter of next year, the report said.
During the recession of the early 1990's, in a downturn that was short- lived by historical standards, business failures in New York State peaked at more than 6,000 companies per year, according to Dun & Bradstreet. The failures involved less than 1 percent of the small businesses operating in the state. In 1997, the most recent year for which data is available, there were roughly 1.2 million small businesses operating in New York State, according to state statistics. (Federal data on small businesses, using different measurement criteria, put the number at about half that.)
The 1990's recession lacked some of the ingredients of today's problems — most important a cataclysmic event that sent jobs streaming away from Lower Manhattan, immediately closed off spigots of corporate spending and sent consumers into a kind of anti-spending shock.
Since the disaster, the United States Small Business Administration has approved only about one in three applications for disaster loans. Those loans have provided $164 million to more than 2,000 businesses so far, but the approval rate is well below the rates of 50 percent to 64 percent that have followed other major disasters over the past decade.
Hector V. Barreto, the administrator of the S.B.A., told the House Committee on Small Business on Thursday that the loan approval statistics were a result of what was a very different disaster. But he also agreed to review all loan applications that had been rejected in New York so far, to see if the agency's loan standards, which often rely on cash flow and the value of tangible property, had been applied too rigidly.
Unlike earthquakes, hurricanes and floods, which inflict property damage mostly on homes and homeowners, the World Trade Center attack did most of its property damage in a small area around ground zero. Most of the loans requested and made have been for economic injury to businesses in a far wider geographic area, stretching over several counties near New York City.
Economic disaster loans to businesses account for three-quarters of the disaster loans approved so far, compared with 20 percent after events like the flooding of the Red River of the North, in North Dakota in 1997, and Tropical Storm Allison in Texas and Louisiana earlier this year. Economic injury loans require more documentation of losses and of a borrower's ability to repay them than property damage loans do.
A bill that would ease eligibility rules for disaster loans as well as create a grant program to go with the loan program was recently sent to the full House of Representatives by the House Committee on Small Business.
Representative Nydia M. Velazquez, whose district includes parts of Brooklyn, Manhattan and Queens and who is the ranking Democrat on that committee, said the current loan program needed to be revised as the bill would require because the existing loan program "is not suitable for the new reality of this disaster."
Some businesses that have been turned down for loans say they cannot fathom whom the loan program is supposed to help, if not them. Carla Behrle, who designs, manufactures and sells custom-made leather clothing from a shop on Franklin Street in TriBeCa, said she was told by S.B.A. officials that her application would be rejected because her business did not have enough cash flow to make the loan payments of $143 a month.
"Some people spend more than that on cigarettes," said Ms. Behrle (pronounced BURR-lee), who does not smoke. She said the agency did not seem to take into account her plans for the money, which included relocating her business, which had revenues of about $125,000 last year, and shifting her focus to wholesale sales, eliminating her retail store.
"I spent hours and hours filling out all this paperwork," she said. "If I had known what I know now, I would have put my energies elsewhere."
Other entrepreneurs complain that the city and state efforts to restore the economy are tailored to the needs of large corporations rather than to small businesses. They note that when Gov. George E. Pataki and Mayor Rudolph W. Giuliani appointed members of the Lower Manhattan Redevelopment Corporation last month, corporate and political interests were well represented, but no representatives of small business from downtown Manhattan were included.
Asked what he would say to people who operate small downtown businesses that are ailing, John C. Whitehead, the newly appointed chairman of the group, said: "I don't know what we say to them, but we want to keep them and we don't want them to be discouraged. I think there is assistance available for them."
Carl Weisbrod, president of the Downtown Alliance, which represents businesses in the financial district and around the trade center site, said the redevelopment agency's "primary mission is going to be repairing the infrastructure" and creating a physical environment that will draw customers back to small businesses downtown.
Whether small businesses downtown can wait for those improvements, which could easily take years, is uncertain. On West Eighth Street, merchants up and down the block who are not covering their expenses say their landlords have so far refused to give them a break on their rents.
At Mofa Shoes, Moses, the manager, who would not give his last name, spoke woefully of the outlook. "This used to be the shoe capital of the world," he said. "We'd get customers who came to Eighth Street from Italy, Brazil, Spain. Now, well, you see. The street is empty."
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