New York: The Road to Recovery

MR. HERMANT:

Ladies and gentlemen: The story is told of a Westerner who was visiting New York City. While walking down a side street, he was held up by a bandit.

"Give me your money or I'll blow your brains out," he was told. "Blow away," said the man from the west. "You can live in New York without brains but not without money."

Ladies and gentlemen, our guest of honour today is not a mugger--as a matter of fact, he probably feels a lot more like the muggee--but he is concerned about New York City and about the money that it needs to survive.

He is in the unenviable position of trying to do something concrete about one of the major problems surrounding life on the North American continent (if not in the rest of the world) in the latter half of the 20th century--how to make urban living financially viable for both citizens and the municipality.

The combination of increased population in cities and spiralling costs of social services are forces which every jurisdiction faces today. New York City, because of its pre-eminence among American cities, has probably been the hardest hit of any major urban organization.

Old solutions and traditional approaches have failed to deal with the new problems which have appeared. New York has been to the financial brink and then teetered back safely, but the situation is far from permanently corrected, and the city is now in the forefront of the fight to readjust urban economies in the light of social realities.

That fight is being organized and led by our guest of honour today, Mr. Osborn Elliott.

Os Elliott is a New Yorker. He grew up on East 62nd Street in Manhattan. His father was a stockbroker in Wall Street, his mother a successful real estate broker.

At Harvard, he played hockey (I'm not sure whether it was field or ice) and majored in Shakespeare and naval ROTC--the Reserve Officer Training Course.

"The Shakespeare was very helpful when I got aboard the USS Boston," he says.

He served aboard that ship during the war and afterward went immediately into journalism with the New York Journal of Commerce, later to Time magazine, and finally to Newsweek.

One of his closest friends, Richard Clurman, chairman of Time-Life Broadcasting Incorporated, says of Osborn Elliott, "Until he happened onto journalism, Os never really took anything seriously. Journalism changed his whole life. It has become the ruling passion of his life. If that had not happened, it would have been possible for Os to have worked downtown and succeeded. There's something in his genes that suggests he would never have been a dull fellow--a failure."

And he has never been a failure.

In his own words, "In twenty-one years at Newsweek, I had held just about every job there was to hold--senior editor, managing editor, editor-in-chief, president, chairman--and editor and editor-in-chief a second time around."

If that was not enough, he was chosen in 1959 by the U.S. Junior Chamber of Commerce as one of the ten outstanding young men of the year, he has been elected a Fellow of the American Academy of Arts and Sciences, and he holds an honorary degree in Humane Letters from Michigan State University.

So how does a man like Osborn Elliott end up as the deputy mayor of New York charged with the responsibility of attracting and holding employment-producing commerce and industry for the city?

As his nine-year-old stepdaughter, Mollie, told him when he was appointed, "I don't think you should take the job with the city, Os." "Why not?" "Well, I think you're climbing the ladder very nicely at Newsweek."

Ladies and gentlemen, he took the job because in his own words once again, "I had come to love the city--or come to realize my love for the place which has been hometown to my family for close to 150 years."

Ladies and gentlemen, it's a pleasure for me to introduce to you the only deputy mayor, or for that matter, probably the only municipal official whose salary amounts to one dollar per year--Mr. Osborn Elliott, the deputy mayor for economic development of New York City, who will address us under the title, "New York: The Road to Recovery".

MR. ELLIOTT:

Today's luncheon marks an historic event, not only for myself but for the City of New York as well. This is the first time that the city has extended its marketing efforts beyond the borders of the United States. I believe it is particularly appropriate that such an important step should take place in Toronto, one of the great business and financial capitals of the world.

Until a day or so ago, I thought that I was unique among city officials, having been sent by Mayor Abraham Beame on this northern trek. I have since discovered that I am really functioning as a scouting party for the Mayor, who will be coming to Hamilton next week. As some of you may be aware, the Mayor has close ties with Canada, his son being on the faculty of McMaster University in Hamilton.

When I told some of the staff members of my Office of Economic Development that I was going to Toronto to speak before the Empire Club, one or two of them thought I was coming up here to discuss baseball officiating. In many parts of New York, an "empire" is a man who stands behind the catcher and makes too many wrong calls against the home team, or so it often seems.

Having just completed my first year in office--which happens to coincide with my last year in office as well--I find myself looking back over a period that sometimes feels as if only a few weeks have passed while on other occasions I had the feeling that I was serving a life sentence.

At first, I thought I would find the transition from three decades of journalism a bit boring. Far from it.

It has been a fascinating period--fascinating, frustrating, frightening, frenzied, fruitful, fulfilling--and frequently funny.

One of the main reasons that I decided to accept the job of deputy mayor for economic development (against the advice of a number of friends and relatives, I might add), was the fact that during the past two years or so I had begun to sense a new spirit abroad in New York City--my hometown--a new spirit of co-operation; something that was not present before the fiscal crisis brought New Yorkers together.

For several months prior to joining city government, I had a chance to observe a new spirit at work in my town as I served as volunteer chairman of the Citizens' Committee for New York City, an independent group that functions at the grassroots level to help residents solve problems that are of particular concern to their immediate neighbourhoods. In that post, I witnessed a coming-together of business executives, labour leaders, government officials, representatives of the cultural and educational institutions--all of these people expressing, in one way or another, their commitment to making New York City well again.

Here in Toronto, such a spirit of co-operation may not seem very dramatic. However, as a lifelong resident of Manhattan, whose family has lived in New York City for four generations or more, I can assure you that such cooperation did not exist previously. It does now--and it is working to the advantage of New York City.

If there is one lesson that comes through loudly and clearly as New York City emerges from its painful purgatory of the past few years, it is this: never again can we afford to have the public and private sectors separated. No longer can we afford to have people outside of government saying "Let Abe or Ed (or whoever happens to be in office) do it." Those days are now behind us--and good riddance.

A great measure of the successful effort undertaken to restructure New York City's municipal government came about as a result of voluntary participation by top executives from the world of business, who became directly involved in the painful, but very necessary, process of turning around the entire city--with little in the way of help from Washington except snide comments.

The efforts of these volunteers, some of whom took on specific jobs in government, were born of a variety of motives, including a deep sense of public service. These people got into the struggle instead of standing on the sidelines, because they recognized that they, and their firms, have a stake in the future of New York City.

Economic recovery, or more accurately, economic development for New York City is not going to take place because of the actions of any one individual, or any particular segment of the population. Only by a joint effort on the part of the public and private sectors can there be any hope of regaining a reasonable portion of the 650,000 jobs that have been lost in New York City since 1969. That's a catastrophic statistic: 650,000 jobs lost.

Is there any magic formula that can be used to get everything turned right again? Only a fool or a charlatan would say so--and I do not accept either title.

The master plan adopted by New York City to achieve its fiscal salvation is spelled out in a document called the Economic Recovery Program. Issued by Mayor Beame at the end of last year, this instrument lists some fifty strategies for gaining jobs for New York City and for improving the city's economic lifelines over a five-year period--through 1981.

The Economic Recovery Program is not "pie-in-the-sky". It suggests three possible outcomes from the programs proposed: all three results require participation by the private sector.

In the first postulation, projecting a lack of vigorous response from the private sector to the business incentives provided by the city, the projected result is that unemployment would continue to rise. The second projection, assuming a mild response from the private sector, states that the city would remain in its present poor employment position. The third premise, in which a strong response is received from the private sector, predicts that 135,000 jobs might be regained.

What is notable about these projections is that they are based on a clear understanding that New York City is never going back to the "good old days". Nothing ever does. New York City's job market has changed markedly in the past decade and more. Our two major employing sectors, the garment and printing industries, have undergone extraordinary technological changes, changes that have dramatically altered the way in which jobs are created. Entry-level positions, that used to provide a means for unskilled and semi-skilled individuals to learn while they earn, have been wiped out.

One of the more prevalent myths is that New York is a major corporation town. Not so. Of the 190,000 business establishments operating in the five boroughs of the city, 98 per cent are officially classified as small business--having less than 100 employees each. More to the point, 90 per cent of the firms in New York City have less than twenty people on the payroll.

Stemming from these basic statistics is another important "myth dispeller". The 650,000 job loss in New York City did not result mainly from move-outs, as is so frequently reported. A study made by the New School of Social Research shows that only one out of ten jobs lost was due to companies that pulled up stakes and moved to the suburbs or the sunbelt. That figure makes sense when you realize that most small businesses, when they are in trouble, don't have the financial means to move: instead, they cut back, lay off, or go out of business.

Realizing the importance of small business to New York City's economy, many of the programs devised in the past year to spur economic development have been designed to provide the kind of assistance and incentives that are meaningful to small operators.

One of the first steps to get economic development going in New York City involved preparation of a package of new legislation that would provide the tools to do the job. Last spring, my Office of Economic Development sent to the New York State Legislature thirteen bills involved with business incentives or assistance in one form or another. Twelve of those passed and all but one was signed into law by the governor. This represented the largest package of business-oriented legislation ever received by New York City.

We are now able to move, in a modest way, toward matching some of the attractions offered to employers by other states and cities. New York operates under a very unique state constitutional prohibition against "gifts and loans" for anything other than a public purpose that has, until now, served as a stumbling block to creating business incentive legislation.

For the first time in the history of New York, we now have the power to provide inducements to attract firms that can bring jobs to the city. A new law allows a firm moving from out-of-state to receive tax credits to defray moving expenses, in amounts of $300 for each commercial job opportunity and $500 for each industrial job brought into New York. Companies bringing a hundred jobs or more from out-of-state can receive stabilization of property taxes for up to ten years.

Let me briefly recap some of the other benefits stemming from this recently-passed legislative package. Most of these latter items are concerned with eliminating or moderating what can only be termed "disincentives" to business--onerous taxes that have built up over the years.

The Corporate Income Tax rate was reduced.

Real estate tax rates were reduced, then capped for five years.

The Commercial Rent Tax, usually referred to as the "Occupancy Tax", was reduced.

The Stock Transfer Tax has been eliminated by providing offsetting credits against other tax levies.

The City Sales Tax of 4 per cent has been done away with for machinery and equipment used in production. This will be of considerable benefit to the printing industry, for example, where City Sales Tax could run to $10,000 or more on a single press.

The surtax that has been in effect for some time on New York State income tax has been repealed. This marks the first reduction in personal income taxes in our state in nearly sixty years.

How were we able to get this kind of business incentive package through the legislature? Because of another important "set of mind" that has played an important role in New York City's recovery.

Now, for the first time, it is politically expedient to be pro-business. This is important, for, without such an atmosphere, we could achieve nothing in the way of needed legislation.

One major change in the way New York City government handles economic development is seen by the fact that the top post now has the rank of deputy mayor. The job must have the "clout", to use a technical political term, to get things rolling.

For example, in restructuring the Office of Economic Development we created a Business Action Centre, which concentrates on seeing that government services, from every level, are delivered to business people quickly and efficiently. We provide a "one stop service" where a business operator can get all of the information required about licences, applications, permits, and the like that might be needed for his or her firm's operations. Our Business Action Centre often functions as an "ombudsman", to insure that other parts of government come through as they supposed to. This is one of the places where the "clout" of a deputy mayor can be useful.

Since financing a business is always a major problem for the small operator, we have put together a number of programs to help in this area. We now have a New York City Industrial Development Agency that can authorize the issuance of tax exempt industrial revenue bonds to underwrite job-productive expansion or new construction, at rates below the regular market, and provide tax benefits as well.

One new program, begun just last February, has demonstrated, very much to my satisfaction, that the concept outlined in the Economic Recovery Program of municipal government providing an attractive atmosphere for private investment will, indeed, encourage such job-creating expenditures by business. The New York City Industrial and Commercial Incentive Board, in ten months has authorized tax abatements for projects totalling nearly $250 million, creating almost 5,000 new, permanent jobs. Without costing the city a cent, this program has provided an incentive that has moved private capital into the marketplace. The tax abatements on the increased value of the real property involved, whether through renovation or new construction, provide significant, long-term savings for the companies undertaking the expansion.

One of the first shocks I received on coming to this post was to find that New York City, certainly the communications capital of the world, with more advertising agencies, public relations firms and media headquarters than anywhere else on earth--New York has never had a professional marketing program to sell itself.

For some reason, everyone thought New York was too big, too successful to need anything like a selling job.

We changed that, early on, by establishing the Business Marketing Corporation for New York City, a not-for-profit corporation, financed by public and private funds, to develop and conduct a professional marketing campaign on behalf of New York City. The corporation has an independent board of directors, so that it operates as an ongoing entity, unaffected by political changes or policy shifts.

Just to give you an idea of how important the city views this effort to be, in spite of our fiscal crisis, more than $1.5 million has been voted by the city to fund the Business Marketing Corporation, with another $2 million being solicited from the private sector.

Included in this Business Marketing Corporation is another important innovation that I believe will be of great value to the city. I am referring to our new "Ambassador Corps", composed of men and women from some of our top firms; executives who, in the course of their regular work, travel around the country and abroad. Bankers Trust Company devised a marvellous pilot indoctrination program that is being made available to other firms that join the program.

Selected executives are given intensive indoctrination about the city--no baloney, just the facts. Ambassador Corps graduates are then able to refute some of the myths and rumours about New York they encounter when they travel on business. This kind of one-on-one, face-to-face communication can be of great value to New York City.

One question often asked of me, especially by some of my former colleagues in journalism, is: "What has it been like, to switch from `crusading editor' to `pettifogging bureaucrat'?"

Being Deputy Mayor has been, to put it accurately, a totally fascinating experience. Certainly it has been educational. I have learned a lot over the past year--about my city and about myself. I have come to know what it is like to be on the receiving end of the media, instead of on the other side of the desk where I laboured for some three decades at Newsweek, Time, and the Journal of Commerce. As a result of my new experience, I now have a greater respect for many representatives of the media--and a lot less for some others. I realize that I am now in danger of sounding like Spiro Agnew. Spiro used to rant about the "elite eastern journalism fraternity" calling us "nattering nabobs of negativism". I am proud to say that I was the target of his jibes at that point in time.

I have been accused of sounding like an evangelist for New York City--and I accept the title. The main reason for my evangelism is that I am tired of reading and listening and watching the lamentable litanies about the ills of New York City that seem to have become part and parcel of news media coverage about New York City. The unfortunate result is that a great many people, especially those in other parts of the world, accept these exaggerations or out-of-context comments as gospel truth.

Realizing that it may appear impolite to boast about one's hometown while a guest, I think it is important to remind everyone, including ourselves, that there are inherent strengths in New York City that must not be forgotten. We have the world's greatest port facilities--575 miles of waterfront in the city alone. We have new marine cargo handling facilities that have helped to bring our cargo value in 1976 to a thirty-year high.

New York is the communications capital of the world, as noted previously. It is also the financial capital and the merchandising capital. It is, by any standard of measurement, the world business centre.

More and more overseas business executives are being attracted to New York, for a great many reasons. It is a convenient place in which to conduct a great deal of business, quickly and easily. In fact, one of our largest real estate operators pointed out to me that one out of every three leases his organization has signed in the past two years has been with an overseas business firm.

Perhaps this means that New York City enjoys a better reputation with foreign business executives than it does with our domestic business people.

This influx of overseas firms had a salutary effect on some of our corporate move-outs. Let me explain by noting that we have seen some companies coming back into New York City after spending five or six years in the boring, bucolic bliss of the suburbs. Several noted the difficulty of getting customers, especially those from overseas, to come out to Danbury or Saddle River or wherever the firm was located. One major paper company sales executive pointed out that in the nearly five years his firm has been based in New Jersey, not a single customer ever came to their office. The company finally got the message and moved back to Manhattan at the start of this year.

Not surprisingly, firms that deal with clients from overseas find that executives from abroad do not like the idea of spending time in a suburban motel, in contrast to being in mid-Manhattan. Telling a client from Europe that he should take a train to Stamford or Princeton can sound like telling him to travel to Butte, Montana. Customers won't go to places they don't like. It is that simple.

It all boils down to the fact that New York City makes sense as a centre for business. We have taken the needed steps to get the wheels of municipal government unclogged and back on the track. The recognition that economic development is a vital service, just as much as police and fire protection, health and education services, has been accepted by those elected officials in charge.

Let me conclude by saying that New York City has placed its welcome mat in a prominent location. There is a new, pro-business attitude abroad that makes companies feel welcome. We have the incentives, we have the financing mechanisms, we are ready to prove the slogan "New York City Means Business".

For those of you who want more details, I will be happy to speak with you anytime--call me at my office in New York City. Bernie Denmark, president of the Business Marketing Corporation, who is with me today, is also available to you for further details. In fact, we have brought along some literature with us today telling about some of the new programs we have described here.

That's not the end of our sales message. It's just the beginning.

The appreciation of the audience was expressed by Mr. Jerry Collins, a Director of The Empire Club of Canada.