Mr. President, look how Downtown misspent $20 billion

By David Stanke

A disaster of unimaginable scale is wiping out businesses and destroying neighborhoods. Government needs to act quickly and decisively to turn the tide.  Perhaps “been there, done that” is too flippant, but the condition of Downtown following the 9/11 destruction is similar to the state of the country today.  A review of government revitalization efforts in Lower Manhattan provides a number of lessons that the president and Congress would be wise to consider. 

After 9/11, the Federal Government committed approximately $20 billion to repair, rebuild and enhance Downtown.  The money was divided into programs targeting emergency relief for households, loans to encourage private investment, and funds to subsidize infrastructure.  There was a little something for everyone, a mix of life support and investment.  Follow the trail of any specific program and you will find waste and misappropriation (of a moral rather than legal nature), the cumulative effect of which greatly diminished the effectiveness of the overall program.

Government programs flow through a system of patronage.  People and institutions too often compete not on the basis of return on investment, but on relationships and favoritism.  Spread money in every direction and no one complains. 

Before 9/11, I believed that government action was needed to solve the big problems of the country.  My experience with the post-9/11 rebuilding effort fundamentally altered my perspective.  I developed sympathy for small government libertarianism.  Now, in the destructive wake of a few years of irrational exuberance, it is hard to ignore flaws in the private sector.  But regardless of political philosophy, the breadth of America’s problems has shut down every sector of the economy.  Government stands as the only actor able to pull ourselves out of this hole.  

Looking Downtown, the area destroyed by the 9/11 attacks is a large ball and chain holding down an otherwise thriving Lower Manhattan.  A business cycle and a half later, the rebuilding is just getting going.  The World Trade Center is at least four years from providing a real boost to the local economy.  If the federal stimulus package proves to be this effective, the country is in trouble.  So what did $20 billion buy and where did we go wrong?

The climate of short-term progress and the promise the future brought in smart investors.  Early movers got subsidies, but investors kept coming strictly with private money.  The flow of private and subsidized investment covered up a lot of failures of government policy. 

But government failed to achieve its primary purpose. The Liberty Bond program is a perfect example of this failure.  I testified at a public hearing on the use of the last available Liberty Bonds.  Liberty Bonds were tax-free, but were also important because, as we have learned lately, they were a reliable source of funds when banks were not willing to lend.  Bank of America got Liberty Bonds to build a headquarters in Midtown.  Goldman Sachs got Liberty Bonds and prime Battery Park City property to wedge an oversized headquarters into slice of land between ball fields and other commercial buildings.  The list of waste is much longer.  At this hearing, government administrators were planning to dedicate bonds to yet another luxury hotel/condo building.  At the same time, Mayor Bloomberg and Dep. Mayor Dan Doctoroff were accusing Larry Silverstein of being too greedy at the W.T.C. while simultaneously claiming he would not have sufficient funds to complete the rebuilding. 

The misappropriation of Liberty Bonds should have been criminal; the people responsible had no interest in the development of Downtown.  I was reprimanded because I took longer than three minutes to explain to them their own incompetence in the management of billions of dollars of government funds.

Will federal support on housing go to people who made responsible decisions but were wiped out by the economic crisis or will it be diluted across a lot of people who are undeserving or not truly in need?

Households in Tribeca were offered three months of rental support after 9/11 even though most were never actually displaced from their homes.  I lived in a condo damaged by the falling towers and buried in the red zone, occupied by recovery personnel for months.  We had to fight through a myriad of public agencies.  After 18 months, FEMA cut off our support and blamed us for not getting ourselves up and running!  Huge amounts of money were thrown at the problem.  Masses of mildly affected people were subsidized, but it took a fight to get the funds to where they were needed the most.

Programs to support small businesses were insufficient.  The money to keep small businesses afloat was wasted because it did not get enough of them to the point of viability.  The hardest hit areas needed much more support and grants instead of loans.  In the Financial District, the business and residential population was so decimated that very few businesses near the W.T.C. survived.  The worst hit areas were still struggling right through the boom. 

After 9/11, all of the right public infrastructure projects were discussed, but there wasn’t enough money for all of them.  In addition to the W.T.C. Path and subway station reopenings and enhancements, Downtown and the city would have benefited from the 2nd Avenue subway and a direct train link to J.F.K. 

Vast infrastructure at the W.T.C. that could have been utilized to accelerate redevelopment has been wasted, supporting only the 9/11 museum.  A walkway to nowhere was built next to West St.  The Fulton Street Station is hoping for its second round of emergency funding.  A private school, Claremont Prep, has been in operation for four years while the first new public schools are still two years away. 

The 9/11 stimulus plan for Downtown was not a complete failure. The quick work of the recovery got streets and subways running again.  The promise that government projects would rebuild the infrastructure created confidence about the future.   The neighborhoods were not what they were before 9/11, but they were functioning and moving in the right direction.  Enough confidence was built that people went on trying.  But much of the promise is unfulfilled and the revival occurred in spite of the glaring failures.

Today, the country’s problems are much greater.  Downtown could look Uptown and across the United States for help.  The resources for our 2009 stimulus are borrowed from future generations.  Action is needed quickly, but it must be directed wisely.  In the end, this stimulus package has to create a faster growing, stronger economy that can generate what we need to pay back our debt.    

At the W.T.C., this was not accomplished.  There were public and private failures.   Today, as after 9/11, there is no time to argue between conservative and liberal theories of government. All sectors of our country need to rise to the challenge together to execute intelligently, effectively, and honestly. At some point, America will come out of this.  But how well our government programs perform will determine how many lives are devastated along the way and how strong we are tomorrow.  I am not confident that our human nature as reflected in our public or private institutions is up to this challenge.   But if the stimulus package is well executed, we can hope that the course of this crisis can be reversed.

David Stanke lives and writes Downtown. His email is destanke@gmail.com.