Schumer: New Analysis - Lower Manhattan Rail Connection to JFK Could Be Paid for Out of $20 Billion Without State and City Money

SCHUMER: NEW ANALYSIS - LOWER MANHATTAN RAIL CONNECTION TO JFK COULD BE PAID FOR OUT OF $20 BILLION WITHOUT STATE AND CITY MONEY

Schumer to also propose new changes to Liberty Bonds program that could bring more jobs into the city at Crain's breakfast

Comprehensive outline of where we're at with the $20 billion, where we're going, and legislative changes necessary to making sure we get that amount

US Senator Charles E. Schumer released a new analysis Tuesday showing that the Lower Manhattan rail connection with John F. Kennedy International Airport and the Long Island Rail Road could be paid for out of the existing $20.2 billion in federal funds provided to New York after September 11 - without having to invest State or City money. In a major address on the status of the $20.2 billion package at a Crain's Business Breakfast Forum, Schumer also proposed new changes to Liberty Bonds program that could bring more jobs to New York City and outlined the legislative changes needed to ensure that New York is able to spend the full $20.2 billion that was provided to it.

The text of Schumer's remarks follows:

"Thank you for inviting me to speak at your breakfast today. I am very grateful both to Greg David for the invitation and to Melissa Russo of Channel 4 for helping to mediate this event.

I would like to share my thoughts on the Federal support that New York City has received to recover and rebuild after September 11.

Two days after September 11, I went to the White House with Senator Clinton and Virginia Senators Warner and Allen to ask the President for help dealing with the attacks on the World Trade Center and the Pentagon.

The President asked "What do you need?" and I said $20 billion. He said, "You got it," and my colleagues and I set off on a six month effort to secure Congressional approval of the money. We were successful and in March of 2002, when the $20 billion got final approval, the City set off down the road to recovery.

Now, nearly two years later, we are at a crucial time where we need to rethink, reexamine and reassess where we are with the $20 billion. I want to first provide an overview of how the money has thus far been spent. Then I will put forward two major proposals for using the remaining unspent dollars to remake Lower Manhattan and fuel sustained, long-term economic growth for the entire New York City region.

I. The $20 Billion Thus Far

After 9/11, working with Congress and the Bush Administration, especially then OMB Director Mitch Daniels, we were able to obtain unprecedented flexibility to spend our hard-fought $20 billion to speed New York's physical, emotional and economic recovery.

The funds were allocated into an extraordinarily broad array of programs which fall into four major categories: 1) immediate rescue and recovery; 2) compensation for disaster-related losses; 3) Infrastructure rebuilding and investment; and, 4) Economic Development.

A. Immediate Rescue and Recovery: When we were still reeling after the horror of 9/11, FEMA rushed to Ground Zero to search for survivors and assess the damage. And after the initial response and rescue effort was over at the scene, contractors worked for over nine months to remove, sort, and dispose of nearly 1.6 million tons of debris.

The City received about $2.9 billion for these efforts, and nearly all of that money has been spent, or will soon be spent, to good effect. FEMA used $1.3 billion on search and rescue, testing and cleaning efforts, and other response activities, including $800 million for debris removal. Another $566 million helped the federal agencies Downtown get back up and running as quickly as possible.

In addition, I also helped earmark $1 billion in FEMA funds to provide liability protection against lawsuits for the general contractors who immediately rushed to Ground Zero to start removing debris. I fought hard to ensure those dollars were there to protect those firms and those heroic men and women who worked day and night to clear the site ahead of schedule and under budget.

B. Compensation for Disaster-Related Losses: Congress allocated about $4.8 billion to help businesses, employees, residents, families and governmental agencies recoup their losses and repair their lives and livelihoods after 9/11.
Individuals and families received $807 million in everything from mortgage and rental assistance to crisis counseling. Businesses received $578 million to help make up lost revenues. The State, City, Port Authority, and non-profit institutions across Lower Manhattan received $3.32 billion to repair damaged facilities, including the World Trade Center itself, and $643 million to reimburse the New York City Police and Fire Departments for their heroic efforts.

As many of you know, we all worked very hard to get FEMA to understand the unique circumstances of 9/11 and of our City and I am pleased to report that nearly all of this funding has been spent and I compliment FEMA for all its efforts.

I was especially pleased that we were able to free the agency from some of its statutory constraints, meaning that $1.24 billion of the aid to public entities covered some very unique costs borne by the State and the City. This money helped cover items such providing immediate heightened security across the area, and the "I Love New York" campaign that was used to convince the American public that our City was still a safe and wonderful place to visit.

C. Infrastructure Restoration and Investment: We were able to get nearly $5.8 billion in funding for transportation and utility infrastructure repair, rebuilding, and investment. About $750 million of this support will enable utility rebuilding in Downtown and keep costs down for the City's ratepayers. $456 million is being devoted to street repairs, ferry projects, and rail safety projects. And most importantly, $4.55 billion will be allocated to new transit infrastructure.
After September 11, one of my top priorities in my negotiations with the White House was to ensure that we could radically remake the transportation system of Lower Manhattan.

As many of you know, there are strict rules about the use of Federal disaster funds for transportation projects. Those funds are to be used only to restore the affected transportation infrastructure to its pre-disaster condition.

And while that may make sense in the case of a hurricane destroying part of a road, it made no sense at all for Lower
Manhattan, with its maze of disconnected and antiquated and sometimes redundant subway lines, lack of a centralized concourse linking the subways and PATH, and its lack of a connection to Kennedy Airport. To just rebuild to a pre 9-11 state would be a wasted opportunity.

So I am proud and grateful that I was able to help convince the Bush Administration and my colleagues in the Congress to change the rules for New York and provide us with an unprecedented total of $4.55 billion to be spent on new transportation projects.

The permanent PATH station at the World Trade Center site, the Fulton Street Transit Center, and the South Ferry station rebuild are all on track for completion between 2006 and 2007. These projects, which will cost about $2.85 billion, will significantly improve access and mobility in Lower Manhattan. And, we still have approximately $1.7 billion left for other transportation projects.

D. Economic Development: In many ways, the most important and most challenging programs we designed, in a partnership with so many of you in the business community, were those to spur new economic development in the dreadful aftermath of 9/11.

We designated $1.7 billion in grants for businesses to be used by the Lower Manhattan Development Corporation to retain and create jobs, attract and retain smaller firms. Thus far, approximately $500 million of those have been spent, with a fair
amount of success, and $1.2 billion remains.

We also designed a $5 billion tax incentive program, divided into two parts: a $1.2 billion Liberty bond program and a $3.8 billion potpourri of other tax incentives designed to help businesses recover what they lost, physically and financially, after 9/11, and to encourage them to hire new workers.

The $3.8 billion was specifically targeted to provide tax deductions for lost and damaged property and to encourage businesses to reinvest in their assets located in Lower Manhattan. We also included a modified Work Opportunity tax credit, which provided a $2,400 tax credit for each new employee hired in Lower Manhattan.

Unfortunately, the $3.8 package of tax incentives has proved to be the most difficult piece of the post 9/11 recovery efforts to evaluate. The IRS does not track how the tax credits and deductions are used and so we have relied on anecdotal evidence and have only our best guess that about $1.6 billion of these tax breaks have been used thus far, with little chance of using much more in the future.

The Liberty Bonds program, which has been the most successful of the economic development initiatives, was designed to provide triple tax-exempt financing for new commercial and residential development, three-quarters of which was to be built in Lower Manhattan. The programs costs $1.2 billion, but leverages $8 billion in bonding authority.

The City and the State have issued about $2.4 billion of these bonds for approximately 12 commercial and residential projects, with several more in the works.

Of the $8 billion, the largest portion of the Liberty Zone bonding - $1.2 billion-has gone to commercial development outside Lower Manhattan, with another $150 million pending for the New York Times project in Midtown. Nearly $900 million has gone to Downtown businesses, and $305 million to Downtown residential projects.

While we have used approximately one-third of the program - $400 million - giving us $2.4 billion in bonding authority, there is a much larger demand for this program and, should we chose to extend it, the remaining $800 million would certainly be used.

Of the approximately $5 billion that was allocated for tax breaks, we estimate we have used approximately $2 billion worth of the benefits - $400 million for Liberty bonds thus far and $1.6 billion for the other tax incentives, leaving as much as $3
billion "unspent."

And so, to summarize where we are on the $20 billion, we have already spent approximately $8.6 billion, especially on immediate needs, and are on track to spend another $6.7 billion. But nearly $5 billion has not been used, representing an opportunity to have a lasting impact on the region's economic future.

(For a comprehensive look at how much of the $20.2 billion is remaining for post-9/11 reconstruction please click on the following links):

II. Remaining Federal Funds

We are now at a critical juncture in the City's recovery, where we need to rethink, reexamine and reassess our plans for the remaining federal funds. We have had almost two years to spend the $20 billion and have been able to evaluate what has worked well and what still needs to be done. I believe there are important principles which must determine how we will spend our remaining Federal funds.

We must think big. Rarely does a City have the chance to remake itself, to make fundamental and long-lasting changes. We can continue to use our funds to pursue small, but worthy projects, or we can do something grand keep our City competitive for the next generation.

We must focus even more on job creation. We must not only regain the jobs we lost after 9/11, but keep pace with national job growth in the coming years, instead of lagging behind as New York does now.

With these two facts in mind, let me make two proposals.

First, we can and should build a rail link from Lower Manhattan to the LIRR and Kennedy Airport. Using the City's cost estimates for the project, in the $3-4 billion range, we have the Federal dollars available to build it without tapping into City and State coffers.

Second, we must extend and expand the Liberty Bonds program and focus on creative new projects that are the most likely to create new high-paying jobs.

Let me now elaborate on my proposals.

III. Kennedy Rail Link Proposal

As we all know, Downtown Manhattan has not grown like Midtown, or even Downtown Brooklyn, in part because of its inadequate transportation infrastructure.

Without easy connections to the major transportation hubs - Penn Station and Grand Central - or to the airports, Downtown has suffered seeing many of its businesses migrate to Midtown or out of the City. We must improve its transportation links to the rest of New York, with a connection to Kennedy Airport and the labor pool of Long Island, which is especially important to businesses considering staying or moving to Downtown.

With what remains of our 9/11 Federal funding, I believe we have a once-in-a-generation chance to connect Downtown to Kennedy Airport and Long Island, which will spur new business development, create jobs in Downtown, and ensure the entire New York City region's economic growth for generations to come.

And I believe we can potentially cover the entire estimated $3-4 billion cost of the project with our
remaining unspent Federal 9/11 funds.

We have nearly $3 billion in available Federal funding in hand - $1.7 billion in transportation funding, which was allocated for a purpose just like this, and $1.2 billion in economic development funding, in the form of CDBG funds ,which, thanks to our work with OMB Director Daniels, we are able to spend with great flexibility. These funds should cover most or all of the cost of the JFK link.

If the $3 billion isn't enough, we could then convert some small portion of our unutilized tax credits into more Federal funding to finish the project, with little or no cost to the State or City, provided the overall cost of the project does not grow much larger.

And while getting Congress to agree to convert tax breaks into direct appropriations for transportation projects will not be an easy task, if we are willing to put up $3 billion of our own funds in a show of commitment and good faith, I believe my colleagues will respond favorably.

III. Job Creation

As we all know, New York is estimated to have lost approximately 250,000 jobs after 9/11 and I made it my number one mission to help the City not only recover all the jobs lost after that horrible day, but to create even more jobs.

Two years later, my focus on job creation has only grown stronger, as I have seen too many New Yorkers still out of work. And those who need jobs the most, those who are often invisible in this City - the struggling families in the South Bronx, the new immigrants from Central America, Asia and Africa, older workers who have lost their jobs or could not find jobs after 9/11, are still suffering and need our help.

It is easy to respond when there is an immediate demand from a well-organized group, but until we regain the same job momentum we had in the 1990s, we will not yet have a City that is fair to the hundreds of thousands of New Yorkers who are underpaid or unemployed yet never raise their voices.

The main purpose of the Liberty Bonds was to recover our 9/11 job losses, and the City and State have done an excellent job so far with the program, but we now need to expand the program, extend the deadline from 2004 to 2009, and to provide more funding if we can, but remain, first and foremost, focused on maximizing job creation.

Furthermore, Liberty Bonds must not be used for any purpose, no matter how noble, that does not create jobs.

Let me make a couple of points here.

While Liberty Bonds were created primarily for Downtown development, job creation anywhere in the City is valuable.
And while I am a major supporter of building new power plants in and around the City to ensure we have the reliable and affordable power we need, I do not believe the proposed Queens power plants are the type of projects we intended for Liberty Bonds.

I also cannot help but wonder - Will such plants create jobs? Will they create affordable power? And why can't they be funded with private investment?

And I very much want to see Downtown become a vibrant, 24-hour neighborhood, with more residential development. We are well on our way there. Battery Park City is full, the neighborhood is once again lively and the residential market has stayed strong.

Furthermore, there has been an exciting renaissance of so many neighborhoods throughout the City, with new residents moving into areas from the South Bronx to Harlem to Williamsburg to Astoria to Ft. Greene, while job growth in our City has not kept pace.

I therefore feel strongly that the Liberty Bonds should be used primarily to create jobs by encouraging the construction of new offices and new businesses. I believe we need to be more creative and innovative and seek projects such as the development of a new biotech facility like the Novartis project in Cambridge, MA.

Today, New York's office buildings are its factories, they are where our jobs come from and they should be the primary focus of the Liberty Bonds.

I also want to ensure that New York doesn't pick projects that send the wrong message to my colleagues in Congress and may make it more difficult for us to get the legislative fixes we need for the Liberty Bonds program.

V. Conclusion

In conclusion, let me say that this is a crucial time to reexamine and take stock of our recovery efforts. Some of our programs have worked better than others, but if we join together we can create jobs and build the necessary transportation infrastructure to ensure our City and region's long-term economic growth and competitiveness. We should not miss this once-in-a-lifetime chance to turn the tragedy of 9/11 into something of lasting value for generations of New Yorkers to come."